g investment group vs afriq engineering construction company limited 2022 tzhccomd 146 11 may 2022

IN THE HIGH COURT OF TANZANIA (COMMERCIAL DIVISION)

AT PAR ES SALAAM COMMERCIAL CASE NO. 16 OF 2021 G-INVESTMENT GROUP (1990) LIMITED......................... PLAINTIFF

VERSUS AFRIQ ENGINEERING & CONSTRUCTION COMPANY LIMITED.............. ..................M.... DEFENDANT M IfK ■ i «¥ 1 /'rf /I / JUDG^ENTii Date Last Order 22/02/2022. Date ofJudgement 11/05/2022. Z.A MARUMA J. This is a suit resulting from a dispute on the validity of a deed of undertaking entered into by the plaintiff and the defendant in January 2017. The deed of undertaking is to clear the principal amount and interest of an overdraft facility from the Exim Bank resulting from the plaintiff's claim against the defendant of the payment of TZS. 76,629,202.60 being the amount for supply of motor vehicle tyres by the plaintiff and to the defendant. i The brief facts of the background of the dispute is that, the plaintiff is a limited liability company dealing in business relating to selling and manufacturing of all types of tyres and tubes in Tanzania while the defendant is a limited liability company incorporated in Tanzania. The parties had a contractual relationship since sometimes in 1995 which started with a construction agreement followed by supplies of the motor vehicle tyres. However, due to a shortage of funds, the plaintiff was not able to proceed with construction projects and left outstanding amount for the service provided by the defendant. As a result, through the oral agreement the plaintiff agreed to offset the outstanding amount for the service provided by the

defendant through the supply of motor vehicle tyres as per the defendant’s needs. The contractual obligation to offset the outstanding debt was fulfilled successfully gave a way for continuation of a business of lending motor vehicle tyres through cash or bank without any interest up to 19th February 2014 whereby the outstanding amount claimed by the plaintiff was TZS. 53,598,697/=. In 2017 the plaintiff entered into an overdraft loan agreement alleged to be caused by the defendant due to an outstanding amount. The parties based on their mutual trust established over the long business relationship, they entered into a deed of undertaking for the defendant to clear the principal amount of the overdraft facility and the interests which accrued therefrom. However, later on upon being revealed with the letter offer of the overdraft agreement from the Exim Bank, it was discovered that the terms were not like it was presented during the signing of deed of undertaking. The defendant discovered that there was a 2 misrepresentation of terms in the letter offer which resulted for him to clear only the principal amount of TZS. 53,598,697/=. In the result, the plaintiff instituted this suit before this Court claiming the payment of TZS. 76,629,202.60/= against the defendant. Before this Court, the plaintiff prays for the judgment and decree on the following that; 1. A declaration that the defendant pay claimed the payment of TZS. 76,629,202.60/= against the defendant.

2. Interest at a commercial rate per annum on the claimed amount indicated on paragraph (a) from the date it became due.

3. Interest on the decretal sum at this Court’s rate from the date of judgment till payment is full made.

4. General damages.

5. Costs of and incidental to the suit 6. Any other relief that the Court may deem fit, just and equitable to grant. This suit was argued in support and against for by the evidence from the witness statement of PW1 (exhibit PW-1) who did not appear in Court, the WSD by the defendant supported by affidavit, two witness statements from the defendant’s side DW1 and DW2 and their testimonies in Court. In determining the instituted suit, this Court framed four (4) issues on; 1. Whether the Court has jurisdiction?

2. Whether deed of undertaking entered between parties herein was valid? 3 3. If the answer is affirmative, whether the defendant complied with the deed of undertaking if any?

4. To what reliefs are parties entitled to ?. The hearing of the case took place in the presence of the Plaintiff’s advocate Mr. Jovnson Kangwila and the defendant was represented by Mr. Adrian Mhina, Advocate. Starting with 2nd issue which will determine the assessment of the issue of jurisdiction as raised in regard to item 5.0 of the deed of undertaking. On the issue of the validity of a deed of undertaking entered by the parties herein. It was a submission by the PW1 (exhibit PW-1) the plaintiff that, the validity of the agreement is a legal issue to be determined on the requirement of the law provided under section 10 of the Law of Contract Cap.345 R.E 2019 which sets conditions for an agreement to become valid. He further highlighted the said conditions which include free consent, competence of the parties, lawful consideration and lawful object. He clarified that as the deed of undertaking (Exhibit D1) tendered by the defendant, there is no dispute that the parties signed the deed of undertaking aimed at settling of the claimed amount which by then was TS 83,683,568.86/=. The only dispute over the deed is based on misrepresentation of facts by the plaintiff over the payment of 19% of interest of overdraft facility. The plaintiff said that the contention by the defendant is a mere afterthought employed for the purpose of evading its contractual obligations. To support his

argument, he referred this Court to the case of Thomas Antony Mbega & Another Versus Michael Herman Mrema & Another, Commercial Case No.119 of 2018, Before Magoiga J, which 4 discussed the issue of mispresentation in length having faced with similar issue. His main observations based on the definitions given therein was that, “In order the alleged untrue or statement or conduct to be operative must be a term in the contact or collateral contract for action on mis presentation to stand and where it is not an action for misrepresentation will not stand. It was further observed that statement of intention, opinion and law will not stand”. Therefore, it was the for plaintiff on the above for allegation of mispresentation to stand, the untrue or negative statement to be part of the contract. The position which is not in the present case. He cemented his argument that during the cross examination of the DW1, he confirmed that the issue of 19% was not in the contract but was communicated to them by the plaintiff. The fact that the contention was different from what was raised in the WSD that they received an advice from the lawyers that they were misrepresented. The plaintiff also argued that assuming the issue of 19% interest charged by the Bank was part of the contract, would it become misreprentation? The answer according to them is NO based on the fact that at clause 5 of exhibit

D2, the overdraft facility clearly states that the interest charged was 19%. Moreover, he argued that misrepresentation do not make the contract voidable as provided under section 19 of the Law of the Contract Act, instead a party has an option to discover the truth of the fact. Thus, since the issue of misrepresention raised in advance by the DW1 who later on acknowledged that the interest was charged by the Bank was 19% the issue of misrepresentation cannot be raised. 5 Contesting the submissions made by the plaintiff on the 2nd issue, the defendant argued that the plaintiff had failed to prove validity of the deed of undertaking and overdraft agreement facility from the Bank by tendering any document the burden which was in his shoes. To support his argument, he made reference to section 110 (1) and (2) of the Evidence Act, Cap 6 R.E 2019 on the principle governing proof of cases in civil suit. He also referred this Court to the case of Barelia Karangirangi Versus Asteria Nyalwambwa, Civil Appeal No. 237 of 2017. The Court of Appeal at page 7,8,9,10 and 11 it was held that; “The burden of proof in a suit lies on that person who would fail if no evidence at all were given on either side ”. Also, a case of Paulina Samson Ndawavya Versus Theresia Thomas Madaha, Civil Appeal No. 45 of 2017. At page 14,15 and 16 it was held that, “It is again trite that the burden of proof never

shifts to the adverse party until the party on whom onus lies discharges his and the burden of proof is not diluted on account of the weakness of the opposite party’s case” “... the burden of proving a fact rest on the party who substantially assert the affirmative of the issue and not upon the party who denies it: for the negative is usually incapable of proof.”…………. The Court has examined as to whether the person upon whom the burden lies has been able to discharge his burden. Until he arrives at such a conclusion, he cannot proceed on the basis of the weakness of the other party…” The counsel for the defendant submitted that in the present case, the burden of proof which was on the plaintiff’s side was not discharged and he 6 failed to tender evidence in support of his case. He said the said burden cannot shift to the defendant’s side and the credibility of the defendant is irrelevant. He further argued that during the trial the only witness of the plaintiff, Mr. Johnson Urassa failed to appear for tendering of exhibit and cross examination as a result his statement was admitted and given the lesser weight. Contrary to that defendant availed to Court two witnesses who tendered exhibits and were cross examined. The counsel submitted that since the plaintiff has failed to prove their case due to non-production of evidence during the trial and his witness appearing for cross

examination. Since no any deed of undertaking and the offer letter from the Bank was tendered as evidence, it was the submission of the defendant that the plaintiff has failed to prove his case hence the same should be dismissed. Addressing the issue of validity of the deed of undertaking, it was submission of the defendant based on section 19 of the LCA on the effect of an agreement caused by the misrepresentation. He argued that two witnesses (DW1 and DW2) testified the fact that defendant engaged into deed of undertaking (exhibit D2) after being notified by the plaintiff that they have taken an overdraft facility from Exim Bank as a result of the outstanding amount and the interest of 19% accrued therefrom. However, after being furnished with the letter offer for the overdraft facility (exhibit D1) they revealed that there are mispresentations of facts during signing of the deed 7 of undertaking. This includes that there is no interest of the loan amount, there is no amount for the loan taken, the loan was for the one year period instead of plaintiff’s charges of the interest for the year 2013,2014, and 2016, and there is no proof of fulfilling conditions drawn down. Also, item 16.3 of the offer letter states clearly that nothing constitutes a commitment on the part of the Bank to grant any facility and pages no. 2,4,6 and 8 are missing from the said offer letter. He said

the misrepresentation was collaborated by the plaintiff Principal officer’s witness statement under paragraph 9 that the plaintiff approached the Exim Bank and obtained TZS 150,000,000/= payable on demand or 12 months from the date of availment of enhancement while the defendant’s outstanding amount was TZS 53,598,697/=. Assessing the submissions made in respect to the first issue on whether the deed of undertaking entered between parties was valid?. It is very clearly made by the submissions from both sides that there is no dispute that the parties herein did enter into a valid agreement complied with the all conditions provided under section 10 of the Law of the Contract Act, Cap. R.E 2019. This was proved by the evidence of DW1 and DW2 as stated in the above paragraph and the witness statement of the plaintiff in paragraph 17. The only issue is that the alleged undertaking was procured through mispresentation of facts which were not revealed during the signing of the deed of understanding. 8 Considering the arguments raised in regard to the alleged mispresentation, the plaintiff’s submissions were much focused on the consequences of misrepresentation under section 19 of the LCA which do not render the contract voidable. However, the plaintiff insisted that the defendant failed to prove the alleged mispresentation. His argument was based on the evidence of DW1 who during the

cross examination he confirmed that the issue of 19% was not in the contract but was communicated to them by the plaintiff. On the other hand, the evidence from the defendant side has a weight on the alleged mispresentation based on the testimonies from DW1 and DW2 supported by the documentary evidence of the deed of undertaking (Exhibit D2), Offer letter (Exhibit D1). Going through the deed of undertaking (Exhibit D2), there is no doubt the claimed amount was TZS. 83,683,568.86/= being the total value of the motor vehicle tyres but not limited to their client’s banker (Exim Bank Tanzania Limited) interest on an overdraft Offer letter (Exhibit D1). There was no dispute that the offer letter of the overdraft facility was not produced during the signing of the deed of undertaking. Also, the facts of 19% was revealed later on after the execution of the deed. Then the question is on whether the non-disclosure of the overdraft facility was by design or by default? Upon the perusal of the offer letter of the overdraft facility (Exhibit D1), I found the interest clause referred by the Plaintiff is nowhere indicates the interest of 19%. Also, it was alleged that there were missing pages 9 including the one covers interest. However, the Plaintiff who claimed for the same did not produce any evidence to prove his claim of 19% interest in respect of the overdraft facility. It is a trite

law that the one who assets must prove as provided under section 110 of the Evidence Act, Cap 6 R.E 2019 that:- "110 (1) whoever desires any Court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts must prove that those facts exist. (2) When a person is bound to prove the existence of any fact it is said that the burden of proof lies on that person.” Based on the above legal position, the plaintiff’s claim of 19% interest has been failed to be established due to the lack of evidence to prove its existence. Moreover, the duty to prove otherwise could be shifted to the defendant if the plaintiff could discharge his duty. This duty is supported by the authority cited by the defendant in the case of Paulina Samson (Supra) that; “…… the burden of proving of facts rests on the party who substantially asserts the affirmative of the issue and not upon the party who denies it; for the negative is usually incapable of proof” . Coming to the issue of the outstanding amount of TZS 76,629,202.60 for the supplies of tyres. Notwithstanding to the undisputed outstanding balance of TZS. 53, 598,697.00 the plaintiff has failed to prove the claimed amount. The plaintiff’s argument that the defendant was contradicting 10 himself on the amount alleged to be the outstanding as DW1 said it was TZS. 53, 598,697.00/= while DW2 said it was TZS

33,000,000/= has less weight to prove negative. This is based on the fact that the witness statements of DW1 and DW2 established the outstanding amount of TZS. 33,000,000/= was by 2017 before the signing of deed of undertaking requested by the plaintiff to pay the outstanding amount together with a compensation of the interest of 19% paid to the Exim Bank for overdraft facility. Therefore, based on the trust on the long business relationship defendant believing the plaintiff and agreed to pay the outstanding principal amount together with 19% interest for the year 2013,2014,2015, and 2017 for seven months which made a total of TZS. 83,683,569/=. Out of the claimed amount TZS. 6,598,700.00/= (exhibit D3) was paid in March 2021 after the signing of the deed of undertaking. Looking into the witness statement of DW1 under para 7, it’s established the payment structure which was done to the extent of the claimed principal amount without inclusion of the interest of 19%. Although the documentary evidences were rejected by the Court as the reasons given hereunder as ordered during the cross examination of DW1. However, this does not affect the oral testimony given in the Witness Statement of DW1 and DW2 made under the oath. The reason given is based on the objection on non- compliance of procedure raised by the counsel for the plaintiff during the tendering of document by DW1. Mr.

Kagilwa for the plaintiff objected the document to be admitted under section 67(1) (b) of the Law of Evidence Act, based on the 11 ground that the contents of the documents were not admitted in writing by the parties as the law do require to do so. The argument made by the defendant counsel was that the document is on record and in the reply to written statement of defense under para 15 the plaintiff noted the annexure so, to amount its admission. However, in analysing the issue, the Court sustained the objection due to non-compliance of procedures as stipulated above which renders the document in admissible. Section 67(1) of the Evidence Act, provides that: “Secondary evidence may be given of the existence, condition or contents of a document in the following evidence cases— (a) Not Applicable (b) when the existence, condition or contents of the original have been proved to be admitted in writing by the person against whom it is proved or by his representative in interest”. On the basis of the position above and perusal of the record nothing has been done to prove the compliance of the stipulated position and no admission has been made specifically as required by the law. However, the rejection of the documents intended to prove the payment made does not affect the probative value of the oral evidence. This is said so because, first the Law of Evidence recognizes the oral

evidence and its value in proving the case as provided under section 61 of the Evidence Act (supra). Secondly, the rejection was based on the rules of admissibility in regarding the procedure of tendering documents. Nothing has been 12 challenged on the oral evidence in regard to the testimony of DW1 in respect of to the evidence adduced on the payment of outstanding established under para 7 of the witness statement of DW1. The rejection of the documentary evidence is therefore inconsequential. Based on the fact that there is an oral evidence sufficiently to prove that the payments were made and also the qualified Bank statement of CRDB which was admitted (Exhibit D3). All this together with the oral evidence which on the balance of probabilities established the payments paid by the defendant in respect of outstanding amount of TZS. 53, 598,697.00/=. On this basis there is no pending amount as outstanding in respect to the supplies of motor vehicle tyres. Moreover, since the undertaking agreement was based on mispresentation as provided under section 18 of the LCA, I produce hereunder; "Misrepresentation" means—(a) not applicable (b) any breach of duty which, without an intent to deceive, gains an advantage to the person committing it, or anyone claiming under him, by misleading another to his prejudice, or to the prejudice of anyone claiming under him…” the same is declared

voidable based on the proved facts that the deed of undertaking was signed based on non-disclosure of the facts of the loan taken, the amount of interest to be paid on the period of overdraft facility which is normally to be paid under one-year period. In the event, the consequence of voidable agreement vitiated all the liabilities under the agreement and nothing to make the defendant liable for 13 the breach of contract terms. Therefore, the 2nd issue is not answered in the affirmative that the defendant did breach the terms of the agreement which was made based on misrepresentation of facts. Based on the answer of issue number two, there is nothing to be discussed on the first issue in regard to jurisdiction of this Court over the present suit in respect to item 5.0 of the voidable deed of undertaking. In the same vein, if the answer is negative in the issues above automatically the issue of reliefs entitled to the parties also fails taking into consideration of the facts that the deed of the undertaking is found to be voidable and there was no pending outstanding in respect to the oral agreement before the signing of the deed of undertaking which did not include any interest. ' i On the basis of the aforesaid, the plaintiff has failed to prove his case and the only available remedy is to dismiss the suit, as I accordingly do, with costs to the defendant. It is so ordered. Dated at Dar es Salaam, this 11th day of May, 2022. Z.A. MA RUMA, JUDGE. 11/05/2022 14