godfrey hosea ayo vs christopher michael gee and 2 others 2014 tzca 267 23 september 2014

IN THE COURT OF APPEAL OF TANZANIA

AT ARUSHA fCORAM: KILEO, J.A., ORIYO, J.A.. And MMILLA, J.A.) CIVIL APPEAL NO. 48 OF 2014 GODFREY HOSEA AYO................................................................. APPELLANT

VERSUS 1. CHRISTOPHER MICHAEL GEE 2. M/S TRANSIT CO. LTD.

3. REGISTRAR OF COMPANIES .RESPONDENTS (Appeal from the Ruling and Order of the High Court of Tanzania at Arusha) (Sambo, J.^ Dated the 5th day of June, 2012 in Misc. Civil Cause No. 11 of 2010

JUDGMENT OF THE COURT 18th & 24th September, 2014 ORIYO, J.A.: Initially, the appellant instituted Miscellaneous Civil Cause No. 11 of 2010 before the High Court. The application which was brought under the provisions of sections 121 (1), (2), (3), (4) and 400 (6) of the Companies Act, No. 2 of 2002, sought two orders, namely:- (i) That, the Honourable Court be pleased to issue an order restoring M/S AFRICA TRANSIT COMPANY LIMITED to the register of companies. i (ii) That, the Honourable Court be pleased to issue an order rectifying the register of members of M/S AFRICA TRANSIT COMPANY LIMITED to include the name of the applicant. (iii) Any other relief. (iv) Costs. The application was supported by an affidavit of Godfrey Hosea Ayo, the applicant. The matter was lodged in the High Court on 5th November, 2010. A counter affidavit of the first respondent, Christopher Michael Gee, was duly filed on the 20th April, 2011, followed by that of the third respondent sworn by one of its officers, namely, Rehema Kitambi, on 4th July, 2011. At the closure of the pleadings, the hearing was scheduled for the 9th of August, 2011, and on the same date, the first respondent lodged a NOTICE OF PRELIMINARY OBJECTION contending:- "The applicant la c k s lo c u s s ta n d i to institute th is Application . " The preliminary objection which was argued by way of written submissions was found to be

meritous and upheld by the trial High Court. Consequently, the application for orders was struck out with costs on 5/6/2012; hence the appeal before us, which is pegged on three grounds 2 of appeal, but we think that ground one (1) thereof canvasses the remaining two grounds. Ground 1 of appeal states:- "That the learned judge erred in law in deciding the issue o f lo c u s s ta n d i as a prelim inary objection . " When the matter came before us for hearing, Mr. Elvaison Maro, learned counsel appeared for the first respondent and Mr. John Materu, learned counsel appeared for the appellant. The Registrar of Companies, the third respondent in this appeal was absent, though duly served. By consent both counsel, we ordered the hearing of the appeal to proceed notwithstanding the absence of the third respondent, in terms of Rule 112 of the Court Rules, 2009. Both counsel duly complied with the requirements of Rule 106 (1) and (8) of the Court Rules, by filing their respective written submissions. Arguing in support of the appeal, Mr. Materu, learned counsel submitted that the trial High Court upheld the preliminary objection on two grounds. One in holding that the applicant was not a member of the second respondent company and therefore had no locus standi to apply for the orders sought. Two, that since the second respondent company had been struck off the register of companies,

there was no register of members in existence which could be rectified by the court order sought. It was Mr. Materu's forceful submission that the issue of whether the applicant was or was not a member of the second respondent company was a contentious issue raised in the affidavit of Godfrey Hosea Ayo in support of the application. He further submitted that in such circumstances, the trial court ought to have realized that the issue before it was not fit to be decided upon as a mere point of preliminary objection. He asserted that the trial court should have proceded to look into the merits of the allegations by the applicant and the denials by the respondents, so as to arrive at a reasoned, fair, decision. Regarding the other limb of the objection against the restoration of the second respondent company to the register of companies, in terms of section 400 (6) of the Companies Act, Cap 212, it was Mr. Materu's contention that the application had been made under two distinct provisions, namely, Section 121 (1) (a), (2), (3), (4) and Section 400 (6) of the Companies Act. However, it was observed by the learned counsel that in disposing of the second limb of the application, the trial High Court wrongly relied on section 400 (6) only and ignored the existence of the other provision cited as section 121 (1) (a), (2), (3) and (4) of the Companies Act. The learned counsel further

submission was to the effect that for the purposes of determining the locus standi of the applicant, in terms of section 24 (1) of the Companies Act, the subscribers to the memorandum of a company automatically become its members upon the company's registration. He concluded that the appellant was entitled as a member, under section 24 (1) of the Companies Act, to bring the action as he did. On the time limit of ten (10) years prescribed within which a member, company or creditor who feels aggrieved by a company struck off the register, may apply for its restoration, the leaned counsel submitted that the application was timely because the second respondent company was struck off the register on 15/2/2002 while the application was filed in court on 5/11/2010 which was within the prescribed period of time. On his part, in rebuttal, Mr. Maro, learned counsel, prefaced his submission with observations to the following effect. One, that counsel for the applicant did not raise the issue in the High Court that it was not proper to dispose the issue of locus standi as a preliminary matter. Two, that in arguing the first ground of appeal, Mr. Materu merely stated the legal principles and cited case law, without testing those principles and the facts obtaining in the present case. Three, that the approach made by Mr. Materu, learned counsel, towards the entire decision of the High Court

was not proper; the trial court having disposed the matter only on the basis of section 400 (6) of the Companies Act. He contended that, instead, counsel for the appellant belabored on the applicability of sections 121 and 24 (1) of the Companies Act, provisions which, the trial High Court did not rule upon, either way on the appellant's right to bring an action as a member of the company. It occurs to us that the appellant's complaints revolve around the trial court's decision in treating, determining and sustaining the issue of the appellant's locus standi to institute the application in the High Court as a mere point of preliminary objection. In our consideration of the learned counsel rival arguments on this matter, we propose to begin with what in law is a preliminary objection. Fortunately, there is a plethora of authorities on this. The law on preliminary objection as set down in the celebrated case of Mukisa Biscuit Manufacturing Co. Ltd vs West End Distributors Ltd (1969) 6 EA 696 is yet to change, at least in our jurisdiction. A preliminary objection is raised on a pure point of law, on the assumption that the facts are not in dispute and no exercise of judicial discretion is involved. LAW, J.A., put it thus at page 700:- a prelim inary objection consists o f a point o f law which has been pleaded, or which arises by dear im plication out o f pleadings, and which,

if argued, as a prelim inary point may dispose o f the suit. " And at page 701, SIR CHARLES NEWBOLD stated:- "A prelim inary objection is in the nature o f what used to be a demurrer. I t ra is e s a p u re p o in t o f la w , w h ich is a rg u e d on th e a ssu m p tio n th a t a ll th e fa c ts p le a d e d b y th e o th e r s id e a re co rre ct. I t ca n n o t b e ra is e d i f a n y fa c t h a s to b e a sc e rta in e d o r i f w h a t is so u g h t is th e e x e rc ise o f ju d ic ia l d is c re tio n ." (Emphasis ours) In the affidavital evidence of the applicant found in his Rejoinder to the counter affidavit of the first respondent, the applicant states in paragraphs 4 and 5 the following:- "4. That the contents o f paragraphs 7 and 8 o f the counter affidavit are seriously disputed and .... I further state that the B o a rd R e so lu tio n A n n e x tu re A - l is a fo rg e d d o cu m e n t w h ich I n e v e r sig n ed .

5. That paragraph 9 o f the counter affidavit is denied. I never wrote a letter annexture A-2 to the counter affidavit and I put the first respondent to strict proof o f the allegation thereof. " These two paragraphs are loud and clear that the applicant is alleging fraud in the transfer of his share in the second respondent company to the wife of the first respondent. Similarly, regarding the letter allegedly written by the applicant to the Regional Revenue Officer, Arusha, with notice of the closure of the business of the second respondent company; was another incident of fraud played on the applicant. We find these two pieces of evidence from the applicant as contained in his rejoinder in paragraphs 4 and 5 above, to be serious evidence upon oath on the criminal activities perpetuated within the operations of the second respondent company; namely in the transfer of the applicant's shares and in the closure of the business of the second respondent company. In our view, we think that it was upon the trial court, upon receipt of the rejoinder, to stop everything else to inquire into and ascertain on the allegations of fraud or otherwise. That did not happen here and the court proceedings proceeded to finality on 5/6/2012 when the decision was delivered to parties. The court found the preliminary objections to have been meritous and consequently the application in Miscellaneous

Civil Cause No. 11 of 2010 was struck off with costs. The immediate issue arising from the decision of the High Court is whether the preliminary objections before it were based on pure points of law, and not based on facts to be ascertained, as per the definition of a preliminary objection by Sir Charles Newbold in Mukisa Biscuit Manufacturing Co. Ltd, (supra). As to whether the appellant had the requisite locus standi, the learned trial judge said the following:­ .... I am satisfied that a t the time when the 3 d respondent was struck out (sic) o f the register o f com panies the company known as M/S AFRICA TRANSIT WORKSHOP COMPANY LIMITED, on the 15th day o f February, 2002, th e a p p lic a n t w as n o t am o n g th e m em bers. I t fo llo w s to 9 s ta te h e re th a t u n d e r se ctio n 4 0 0 (6 ) o f th e C o m p an ies A ct, No. 1 2 o f 2002, h e h a d n o c o lo u r o f rig h t to b rin g an a p p lic a tio n in th is h o n o u ra b le c o u rt fo r th e re s to ra tio n o f th a t co m p a n y in to th e re g is te r of com p an ies. O nce th e p ra y e r u n d e r ( i) o f th e ch a m b e r su m m on s h a d (sic) cru m b le d dow n, th e p ra y e r u n d e r ite m ( ii) o f th e sam e b eco m es a b so lu te ly m e a n in g le ss a n d c a n 't b e g ra n te d ..." Making reference to and relying on the English decision, In the matter of the Petition of

Michael John Morris and Jane Elizabeth Rush, the learned judge stated "In the like manner, M/S AFRICA TRANSIT WORKSHOP LIMITED or the second respondent was struck o ff the register on the 15th day o f February 2002, and todate the same does not e xist It means its register o f members which ought to be rectified is not available, hence this court cannot make any order for the rectification o f the register o f members o f a company which has ceased to exist." 10 We have already alluded to the existence of unascertained matters within the preliminary points of objection raised by the first respondent. Paragraphs 4 and 5 of the Rejoinder to the counter affidavit of the first respondent make it quite obvious that the membership of the applicant in the second respondent company was contentious and should not have been part of a preliminary objection in the absence of the issue having been ascertained, whether the applicant was fraudulently deregistered as stated in paragraph 4 of his affidavit (supra) or not. The trial High Court should have proceeded to inquire into the membership status of the applicant so as to arrive at a just decision. The learned judge merely believed the allegations made by the respondent in his counteraffidavit at paragraph 7 thereof where it was stated:- "7...... The first respondent states that, the Applicant ceased to be a shareholder in the second

respondent company as from 25fh day o f May, 1998 by transferring his one share to Mrs. Indrowtie Gee via a Board Resolution duly executed." It is established trite law that a preliminary objection has to raise a point of law based on ascertained facts, (as per Mukisa Biscuits), (supra). This Court has, consistently followed this approach in its decisions since then, including the case of COTWO (T) OTTU UNION and Another vs Honourable Iddi Simba Minister of Industries and Trade and Others, [2002] TLR 88; which was raised in similar circumstances as the case under consideration. This was an application by the applicants to restrain the first respondent from issuing business licences to private entities. The learned Attorney General raised a preliminary objection that the said objection had been overtaken by event in that the said licences had already been issued. In overruling the preliminary objection by the Attorney General, the Court held:- "(i) A prelim inary objection should raise a point o f law which is based on a sc e rta in e d fa cts, not on a fact which has not been ascertained and, if sustained, a p re lim in a ry o b je ctio n sh o u ld be ca p a b le o f d isp o sin g o f th e case. (ii) The prelim inary objection in this case is based on some facts which are not ascertained and, even if sustained, the objection cannot dispose o f the matter; as su ch it fa ils to

m e e t th e la id dow n te s ts fo r a p re lim in a ry o b je c tio n . " 12 In another decision of the Court, in the case of Anthony Leornard Msanze and Another vs Juliana Elias Msanze and 2 Others, Civil Appeal No. 76 of 2012 (unreported); the Court was seized with an issue which arose from similar circumstances; on:- "Whether the tria l court was correct to sustain a prelim inary objection and dism iss Land Case No. 26 o f 2010 fo r want o f cause o f action and lo c u s s ta n d i." In allowing the appeal, the Court made the following observation:- "It seem s to us that with the claim m anifested in their Plaint that they are legal adm inistrators o f the estate o f a deceased person, the H ig h C o u rt s h o u ld not h ave co n clu d e d at th a t p re lim in a ry sta g e w ith o u t fu rth e r e vid e n ce th a t th e a p p e lla n ts h a d n o cau se o f a ctio n a n d lo c u s s ta n d i in Land Case No. 26 o f 2010." (Emphasis ours). See also the Court's decision in the case of Sharifa Twahib Massala vs Thomas Model and Others, Civil Appeal No. 67 of 2011 (unreported). We have yet to be given sufficient cause to depart from this consistent approach in similar matters. In conclusion, and for the reasons we have given, we allow the appeal by quashing and setting aside the judgment of the High Court delivered on 5/6/2012. We direct that the record be remitted to the High Court to be heard on merit before another Judge. The appellant shall have his costs. DATED at ARUSHA this 23rd day of September, 2014. E. A. KILEO

JUSTICE OF APPEAL K. K. ORIYO

JUSTICE OF APPEAL B. M. K. MMILLA

JUSTICE OF APPEAL I certify that this is a true copy of the original.

DEPUTY REGISTRAR

COURT OF APPEAL 14