first national bank tanzania limited vs lulu salehe masasi 2021 tzhccomd 3441 4 august 2021

IN THE HIGH COURT OF THE UNITED REPUBLIC OF TANZANIA COMMERCIAL DIVISION AT DAR ES SALAAM COMMERCIAL CASE No 62 OF 2019 BETWEEN FIRST NATIONAL BANK TANZANIA LIMITED........ PLAINTIFF Versus LULU SALEHE MASASI......................................... DEFENDANT JUDGMENT MRUMA J, The Plaintiff the First National Bank Tanzania Limited (hereinafter to be referred to as the Plaintiff), by a Plaint dated 28th May, 2019 and presented for filing on 12th June, 2019 seeks for the following orders: i. That the Defendant be held liable and ordered to immediately pay T.shs 400,602,331.98 being the amount due and outstanding plus interest and other charges as of 6th May 2019 pursuant to a Home Loan Agreement entered between the parties on 31st March 2017; ii. Eviction, delivery of Vacant possession and an order for sale of landed property registered as Plot No. 894 with Certificate of title No. 122542 situate at Lukanzi area in Kibaha township in the name of Lulu Saleh Masasi; i iii. If the Plaintiff will not be able to recover the whole amount, court to issue an order for recovery of any balance after the sale of the mortgaged property from any other properties of the Defendant; iv. Payment of interest on the decretal sum at the rate of 22% as per loan Agreement from 6.5. 2019 to the date of judgment; v. Interest on the decretal sum at the rate of 7% per annum from the date of judgment till the date of full satisfaction of the decree; vi. Costs of and incidentals to the suit and the traditional prayer of; vii. Any other reliefs that this honourable court may deem just and equitable to grant. According to the Plaint, Lulu Saleh Masasi (hereinafter the Defendant), did on 31st March 2017 apply for a credit facility commonly known as Home Equity Release Loan of T.shs 320,000,000.00. The Application was duly approved by the Plaintiff's bank and the requested facility was availed to the Plaintiff on 4th April 2017. It is further statement of the Plaintiff that the Credit Facility granted to the Defendant was secured by first ranking mortgage over a property with a Certificate of Title Number 122542 on Plot No. 894 Land Office No. 303984 situated at Lukanzi area, Kibaha Township registered in the name of the Defendant, a Comprehensive Insurance Cover for an adequate amount over the property and Credit Life Cover of the borrower. 2 The Plaintiff states further that in breach of the terms of the Agreement, the Defendant for unknown reasons and without any justification neglected and/or refused to conduct her loan accounts to the satisfaction of the Plaintiff and in compliance with the Facility Agreement as a result of which the outstanding facility including interest and other charges as at 6th May 2019 stood at T.shs 400,602,331.98 the amount which the Plaintiff is claiming in this suit. In her Written Statement of Defence, while admitting existing of the Facility Agreement (Exhibit Pl), which according to her had a life span of twenty years, she states that the challenges she faced in meeting monthly installments payments constituted sufficient and justifiable cause in her failure to conduct and manage her loan account to the satisfaction of the Plaintiff's bank and. that they do not constitute sufficient cause on the part of the Plaintiff to call upon the whole amount of the loan plus interest to be paid immediately. Otherwise she denied to have breached the agreement and contended that she repeatedly informed the Plaintiff about the challenges she was facing and requested her to re-negotiate the terms of the Agreement, lower the interest and the monthly installments payable, but the Plaintiff turned deaf ears to her. According to the Defendant, she faced business and financial dodgems and her attempts to advise the Plaintiff to sit and review the Loan Agreement were not accorded any weight. At the trial each party called one witness. The Plaintiff called its Recovery Manager Retail at the Head office in Dar Es Salaam, Mr. Francis Mangula (PW1), while the Defendant Lulu Saleh Masasi testified for herself as DW1. 3 In the witness statement of Francis Mngula (PW1), he stated that the parties signed the Agreement on 31st March 2017 and 4th April, 2017 respectively, therefore according to him the Defendant's averment that he didn't understand the terms of the said Agreement is an afterthought. When he was cross-examined by Mr. Roman Masumbuko, counsel for the Defendant, PW1 conceded that he doesn't know the date the last installment will be due and that according to the repayment schedule the loan period was 20 years. He also admitted that he doesn't know how much had been paid up to the time he was giving his testimony in court. He however contended that the Plaintiff was entitled to take legal action even for a single month default. He stated that at the time he was testifying the outstanding amount was T.shs 538,000,000/=. He said that the agreed rate of interest was 22% per annum and the Defendant had never complained about it. When asked whether in one year period (i.e. from the time he made and filed his witness statement to the time when he was giving his evidence in court), the outstanding amount could shoot from T.shs 400,602, 331.98 to T.shs 538,000,000/= PW1 maintained that what he knows is that at the time he was giving his testimony the outstanding amount was T.shs 538,000,000/=. On her part the Defendant admitted existence of the Agreement (Exhibit Pl). She stated that as the Agreement had a life span of twenty years and in view of the financial and business doldrums she encountered during that period, the Plaintiff couldn't have any justification to call upon the whole amount of the loan plus interest to be paid immediately. She said that she 4 serviced her loan account to her level best and that she made several attempts to pursued the Plaintiff to have the terms of the Agreement renegotiated but the Plaintiff didn't want to hear her. On the plaintiff's prayer that in the event the mortgaged property fails to realize the loan amount her other properties should be attached and sold, she stated under the loan Agreement (Exhibit Pl), the loaned money was secured by a property located at Luianzi Area in Kibaha township with Certificate of Title No 122542 and Land Office No. 303984 standing on Plot No. 894 and not any other property therefore only that property should be liable. She put the Plaintiff to strict proof of its claim and prayed this court to dismiss it with costs because the Plaintiff has failed to establish the outstanding amount against her. At the final pretrial conference court framed three issues for determination. The first issue is whether there was loan agreement between the parties. As correctly submitted by both counsel, parties agree that there was a credit arrangement between them. According to PW1, the Plaintiff signed the said Agreement on 31st March 2017 and the Defendant signed it on 4th April 2017. The Agreement was tendered in evidence as Exhibit Pl. The Defendant didn't lead any evidence to challenge it. I therefore resolve the first issue in the affirmative, that is to say there was Loan Agreement between the parties. In his closing submissions, counsel for the Defendant has raised an issue to the effect that there was no consensus of minds between the parties 5 regarding what kind of the loan agreement they signed. This issue will not detain me much. Exhibit Pl is very clear that it was a "home loan Agreement". The Defendant signed it before a Commissioner for Oaths one Peter J Utafu and on the evidence adduced she actually utilized the monies credited in her loan account and made some repayments as scheduled only that subsequently for reasons she had explained as business and financial dodgems she found herself being forced to approach the Plaintiff with the view of having the terms renegotiated. She can, therefore not be heard saying that she didn't understand the loan she was taking from the Plaintiff's bank. The second issue is; if the first issue is answered in the affirmative, whether the Defendant breached the terms of the said Loan Agreement. Testifying on this issue PW1 gave general statement to the effect that the borrower (i.e. the Defendant) had failed to pay the agreed installments. He however, didn't specify how many months she did fail to repay the installments and how much she did fail on each installment. In terms of the facility agreement (Exhibit Pl), the date on which repayment of the installments were to be made by the Defendant was on 30th of every month. In his evidence PW1 stated simply that at the time of instituting the suit, the outstanding amount against the Defendant was T.sh 400,602,331.98 and when he was asked to clarify how that figure was arrived at he couldn't. In this circumstance, and in view of the parties' pleadings, evidence and submissions I answer the second issue in the negative. The allegation of breach of the terms of the Agreement by the Defendant has not been established. 6 At this juncture let me remind the bankers and other lending institutions that currently there is a recurring nightmare for borrowers who took loans from lending institutions few months prior to the outbreak of corona pandemic which has resulted into deadly decease of COVID 19. COVID 19 is not only a global pandemic and public health crisis but it has severely affected country economy and definitely the financial markets. In the case at hand for instance, according to the parties' Home Loan Agreement (Exhibit Pl), the borrower Lulu Saleh Masasi, took a home loan facility of T.shs 320,000,000/= A home loan facility is a short-term loan that allows the borrower to use his/her current home's equity as collateral. It is the evidence of PW1 that on 31st March 2017, the Defendant requested and was granted that loan. She had intended to use it for construction of another new home or structure (i.e. without making that new structure contingent on selling the existing one). Despite servicing her loan account, one year down the line, the Plaintiff's bank dropped a bombshell of a demand for the immediate payment of a colossal sum amounting to T.shs 351, 655,373.22 which apparently could have bankrupted the Defendant, if not confining her to a hospital bed due to depression. The main bones of contention on her part are invariably; uncertainty of lending terms and documentation, fluctuating rates of interest, penalty interest, default charges, interest on arrears among others which may or may not have been part of the written contract. All these calm down to economic and business crisis as a result of corona and its COVID 19 sibling. Banks and lending institution should take that into consideration and perhaps allow renegotiations and review of terms of repayments, interest 7 rates, charges and penalties payable under the ■ pre-corona loan agreements. Forcing to enforce pre-corona loan terms as they are, may in my considered view result into drastic effects to borrowers and adverse effect to the banks' economies and the economy of the country as a whole. Certainly some adjustments of a kind are necessary. The last issue is about reliefs. The Plaintiff is claiming T.shs 400,602,331.98 being the outstanding amount interest and charges against the Defendant. From the evidence adduced in this case the Defendant, borrowed Sh. 320,000,000 in 2017 but in 2018 the amount had ballooned to Sh. 351,655,373.22, and had rose further to Sh. 400,602,331.98 at the time of instituting this suit in 2019 and according to PW1 it had continued to rise to T.Shs. 538,000,000/=at the time he was giving his testimony in court in May, 2021. In the claim filed on 12th June, 2019 it was simply stated in paragraph 8 of the plaint that for unknown reasons and without any justification the Defendant has neglected and/or refused to conduct her loan accounts to the satisfaction of the Plaintiff and in compliance with facility agreement as a result of which the outstanding facility including interest and other charges thereon as of 6th May 2019 stood at Sh 400,602,331.98 which amount the bank is seeking to recover with interest thereon at 22% as per loan agreement from 6th May, 2019 to the date of judgment and court's rate of 7% from the date of judgment until payment in full. The Defendant denied ever owing such amounts to the Plaintiff's bank and dared it to produce any periodic statements of accounts to show how much was outstanding or a repayment schedule indicating any breach of the 8 terms of the agreement. She attached to her written statement of defence dated 25th July, 2019 a bank statements showing monthly payments to the Plaintiff with respect to loan facility. On the other hand the witness statement testimony given by the bank’s sole witness, Francis Mangula, was, rather revealing a slightly different story. Mangula's witness statement was short and geared towards establishing existing of Home Loan Agreement (Exhibit Pl) only. He relied on the documents made available by the bank, among them were the Credit Facility Letter (Exhibit Pl), the Mortgage Deed, the Defendant's Certificate of Title (Exhibit P2), and the Defendant's consent to the mortgage. He asserted that a loan of Sh. 320,000,000.00 was approved and disbursed to the Defendant and that the Defendant had defaulted in repayments but there was no support for that assertion, hence his concession in cross examination that he doesn't know the date of payment of final installment, and/or the amount repaid by the Plaintiff. In cross examination, he made some crucial concessions and confirmations of his evidence in chief. I may sample some of them: that he doesn't remember which months the Defendant had defaulted; that a Home Loan is a loan for purposes of constructing a house and that at the time he gave his testimony the outstanding balance was Tshs 538,000,000/=. The Plaintiff didn't tender any evidence to show how that amount of T.sh 400,602, 331.98 claimed was arrived at. It didn't produce bank statement which would show all the transactions of the Plaintiff's loan accounts including payments made towards settling the debt. 9 The next question would therefore be whether the legal burden of proof which is on the Plaintiff's bank had been discharged in this circumstances. Only upon proof by the Plaintiff's bank could the Defendant be called upon to discharge any evidentiary burden. There is none. In law a person who makes an allegation must lead evidence to prove the fact. She or he bears the initial legal burden of proof which she or he must discharge [See Section 110(1) of the Evidence Act Cap 6 R.E. 2019]. The legal burden in this regard is not just a notion behind which any party can hide [See also Section 111 of the same Act]. It is a vital requirement of the law. On the other hand, the evidential burden is a shifting one, and is a requisite response to an already-discharged initial burden. "The evidential burden is the obligation to show, if called upon to do so, that there is sufficient evidence to raise an issue as to the existence or non-existence of a fact in issue" [See Cross and Tapper on Evidence, (Oxford University Press, 12th ed, 2010, page 124)]." As correctly submitted by Mr. Roman Masumbuko, counsel for the Defendant, in terms of regulation 26(1) of the Bank Of Tanzania Regulations, 2019 (Financial Consumer Protection) Regulations, 2019 the Defendant had to be informed total costs of credit with a breakdown of all costs of each installment payable. As the above analyzed evidence would depict, the Plaintiff didn't provide such information not only to the Defendant but also to this court for inspection. Information and particularly bank statement showing how the Defendant's loan account was being conducted was crucial in establishing the extent of her indebtedness. In Commercial Case No 81 of 2017, between Grofin Africa Fund io Ltd Versus Furniture & Electronics Ltd and 3 Others, this court (Fikirini J, as she then was), held inter alia that production of documents showing how the account was transacted was crucial to establish the borrowers' indebtedness. I have anxiously considered the suit, the evidence as well as the submissions of counsel. On the basis of the foregoing analysis of evidence and the law, I find and hold that the Plaintiff has failed to prove that she is entitled to the amount of Tshs 400,602, 331.98 claimed in the suit. Accordingly the Defendant suit is dismissed with costs. However, for purposes of clarity, the dismissal of the Plaintiff's suit in this case does not-bring to an end the contractual relationship of the parties in respect of the Home Loan Agreement (Exhibit Pl), which as rightly submitted by the counsel for the Defendant [at page 2 of his final submissions], both parties agree that it exists. What this judgment mean is that the Plaintiff has failed to prove on the balance of probability that as at 6th May, 2019 the outstanding amount against the Defendant was T.shs 400,602,331.98. It follows therefore that all consequential prayers which were intended to facilitate recovery of the alleged outstanding amount also fail. A. R. Mruma, Judge. Dated a Salaam this 4n' day of August, 2021. A. R. Mruma, Judge. ii