HAMZA SEIF AND OTHERS

IN THE HIGH COURT OF THE UNITED REPUBLIC OF TANZANIA (DAR-ES-SALAAM SUB-REGISTRY) AT DAR ES SALAAM CIVIL CASE NO. 01 OF 2024 HAMZASEIF.. AUSTIN MWOGHA AND 301 OTHERS PLAINTIFFS VERSUS TANZANIA CIGARETTE PUBLIC LIMITED COMPANY 1^ DEFENDANT GODSON KILIZA 2**^ DEFENDANT JOSHUA FOLKERTH 3^° DEFENDANT SIMON MPONJI 4TH DEFENDANT JUDGMENT S.M. MAGHIMBl,J: In this representative suit, the Plaintiff herein claims against the Defendants for a declaration that the Plaintiffs were the lawful beneficiaries of 241,070 unallotted shares and that the decision by the defendants to distribute the proceeds and dividends of the unallotted shares to persons other than lawful beneficiaries of the Trust (Plaintiffs herein) was in violation of the Trust Deed. The Plaintiffs further moved the court for a declaration that the Defendants designed and operated the scheme/the Trust illegally to defraud the Plaintiffs and the Defendants be ordered to make payment of TZS 4,098,190,000/= (Tanzanian Shillings Four Billion Ninety Eight Million One Hundred Ninety Thousand Only) being proceeds realized after disposition of the unallotted shares. Furthermore, that the Defendants be 1 ordered to make payment of TZS 1,744,623,590/= (Tanzanian Shillings One Billion Seven Hundred Fourty Four Million Six Hundred Twenty Three Thousand Five Hundred and Ninety Only) being dividends accrued from the unallotted shares. The Defendants be ordered to make payment of general damages to be determined by the Court. The Plaintiffs also pushed for the Defendants to be ordered to pay interest of the specified claim amounts above at commercial rate of 25% per annum from the date the cause of action arose to the date of judgment and a further interest of the specified claim amounts above at the court's rate of 12% per annum from the date of judgment till the date of payment in full. The Plaintiffs also claimed for costs of this suit and any other reliefs as this Honourable Court may deem proper and just to grant. The dispute beforehand arises out of an employer-employee incentive plan to enhance the income of the employees (Plaintiffs being former employees)and the Defendants(employer)in which the Registered Trustees of Tanzania Cigarette Company Employees' share Option scheme ("Trust") was established on 26''^ September, 2000. The Trust was registered to facilitate purchase of shares of the 1=* Defendant for its beneficiaries (employees then), including the Plaintiffs herein. The main objectives of the Trust were two first was to acquire shares of TCC on behalf of the beneficiaries of the Trust (the plaintiffs) and second was to provide incentives to all workers, including selected senior managers. The Trust being an independent legal entity borrowed from the 1^ Defendant(the Employer)the total of Tanzanian Shillings Eight Hundred and Twenty Million (TZS. 820,000,000/=). The said loan was granted in full to the Trust hence a total of two Million shares (2,000,000) were purchased and acquired by the Trust. Hence, the entire loan of Tanzanian shillings Eight Hundred and Twenty Million (TZS. 820,000,000/=) was fully exhausted. The options given to the Plaintiffs as beneficiaries of the Trust, were locked for three years. The Plaintiffs were allowed to exercise their options up to one third of their options after every twelve months. That, upon exercise of their options, the Trust sold equivalent shares to the Dar es Salaam stock exchange. Thereafter the Trust handed over the proceeds of the said options to the Plaintiffs less a certain amount that was deducted by the Trust and directed towards the loan repayment. Through this arrangement the Plaintiffs went on paying for the full loan of Tanzania Shillings Eight Hundred and Twenty Million (TZS. 820,000,000/=) by exercising their options from time to time. Thus, the Plaintiffs allege to have liquidated the whole loan of Tanzanian Shillings Eight Hundred and Twenty Million (820,000,000/=) which was used to acquire the Two Million (2,000,000/-) shares vested to the Trust. This, according to the Plaintiffs, owed to the fact that during its life span, the Trust never applied for any business license nor engage into any business. The Trust did not get any additional loan, funds or grant from the 1^ Defendant or any financial Institution apart from the initial loan of Tanzanian shillings Eight Hundred and Twenty Million (820,000,000/=) which was alleged paid by the Plaintiffs (beneficiaries) wherever the shares were sold by the Trust to the Par es Salaam Stock Exchange. It Is from this background the plaintiffs, terming themselves as the beneficiaries of the Trust, claim for the proceed of the shared sold upon dissolution of the Trust. They have therefore knocked the doors of this Court claiming for the abovementioned. Their prayer before the Court is for judgment and decree against the Defendants as follows: - (a) A declaration that the Plaintiffs were the lawful beneficiaries of the unallotted 241,070 shares. (b) A declaration that Defendant's decision to distribute illegally the process and dividends of the unallotted shares to persons other than lawful beneficiaries of the Trust (Plaintiffs herein) was In violation of the Trust Deed. (c) A declaration that the Defendants designed and operated the scheme/the Trust illegally to defraud the Plaintiffs. (d) The Defendants be ordered to make payment of TZS. 4,098,190,000/= (Tanzanian Shillings Four Billion Ninety Eight Million One Hundred and Ninety Only) being proceeds realized after disposition of unallotted shares. (e) The Defendants be ordered to make payment of TZS 1,744,623,590/= (Tanzanian Shillings One Billion Seven Hundred Fourty Four Million Six Hundred Twenty Three Thousand Five Hundred and Ninety Only) being dividends accrued form unallotted shares. (f) The Defendants be ordered to make payment of general damages to be determined by the Court. (g) The Defendants be ordered to pay interest of Item (d), (e) and (f) at commercial rate of 25% per annum from the date the cause of action arose to the date of judgment. (h) The Defendants be ordered to make pay interest of item (d),(e) and (f) at the Court's rate of 12% per annum from the date of judgment till the date of payment in fuii. (i) The Defendants be ordered to pay for costs of this suit; (j) Any other reliefs as this Honourable Court may deem proper and just to grant. Upon conclusion of the pleadings, the following issues were framed, agreed upon and approved by the Court for the fuii determination of this suit: 1. Whether the Plaintiffs, being ex-employees of the 1^ Defendant, were beneficiaries of the residual and proceeds of the sale of the unallotted shares of the de- facto Trust at the time of its liquidation. 2. Whether the Plaintiff fully paid the loan to the tune of TZS. 820,000,000/= (Tanzanian Shillings Eight Hundred and Twenty Million Only) advanced by the 1®* Defendant to the de-facto Trust. 3. Whether the Defendants fraudulently and illegally paid the residual assets of the Trust to the then-existing employees of the Defendant instead of the Plaintiffs, thereby breaching the terms of the Trust Deed and Rules made thereunder. 4. To what reliefs are the parties entitled to. In a bid to prove their case, the Plaintiffs marshalled three witnesses while the Defendants had three witnesses too. Before this Court the Plaintiffs were represented by Mr. Reginald Martin, learned Advocate whereas the Defendants had a noble legal services of Mr. Senen Mponda and Mr. Luciu Peter learned Advocates. To begin with, my determination will start by combining the first and second issues together as I find them, they are intertwined. They go thus, the first issue is whether the Plaintiffs, being ex-employees of the Defendant, were beneficiaries of the residual and proceeds of the sale of the unallotted shares of the de facto Trust at the time of its liquidation. The second issue is whether the Plaintiffs fully paid the loan to the tune of TZS. 820,000,000/= (Tanzanian Shillings Eight Hundred and Twenty Million Only) advanced by the I®' Defendant to the de facto Trust. I have decided to determine the two issues in tandem because the Plaintiffs claim that the Trust was purchasing the shares on behalf of the employees but from a loan facility in which the employees were responsible to repay that loan through the Trust from the proceeds of their shares. They alleged further that the refund of the said loan was through the shares that were distributed to them in a manner that in the first year, each employee's shares were sold by the Trust and the yield were managed by the Trust. Some amount was deducted from the proceeds and a part of It was used to go and repay the said loan, some amount to pay taxes and the remaining sum becomes the take home of the employees. This fact was not disputed by the Defendants, their argument being that the Plaintiffs did not make any initial monetary investment to the Trust, hence, the net payment they received after taxes and the said loan repayment was the Intended incentive by the employer. There was also a vigorous argument on the Plaintiffs' right to bring an action since they had since ceased to be the employees of the Defendant or beneficiaries of the Trust. In my determination, I will commence to determine whether the Plaintiffs' being ex-employees were still the beneficiaries of the Trust within the meaning of the term employee in the Trust Deed. Thereafter, I will venture into further resolving whether they did contribute in repayment of the said loan which would have made them entitled to the residue of the Trust, whether they remained employees or not, since they will still be entitled to the capital invested. The definition of an employee according to the Registered Trustees of the TCC employees' share option scheme C'The Trust") admitted as EXP2 defines an employee at Article I Clause 1.1 to mean a person who is a full- time employee or Manager or Executive Director of TCC. The catching words in this definition is "full time employee" of the Defendant. The question Is whether at the time of dissolution of the Trust, the Plaintiffs were the employees of the Defendant. The Plaintiffs maintained that the Share Option Scheme was established for the benefits of only employees of TCC who were In the 1^ Defendant's employment during IPO. In their closing submissions, Mr. Reginald submitted that the Plaintiffs where employees of the 1^ Defendant and were present during the listing up to sometime 2013. That the articles of the Trust Deed crystal clear establish the beneficiaries of the defunct Trust as per the timelines indicated therein. That under Article 8.1 of the Exhibit P2, the Trust Deed states that every employee shall be granted options on the date of listing of TCC's IPO on the DSE. His argument was that, the only eligible persons which could enjoy the purchased shares during IPO are the then employees (Plaintiffs) who were present during the date of listing of TCC's IPO on the DSE. He further succumbed that, as per Article 8.2, the share options granted must be exercised by the end of fifth year, from 26"" September 2000, when the Trust was registered, the options were supposed to be exercised by 2005. He added that. Article 23 of the Trust Deed put a limit to any additional dispositions which Include disposition of assets (unallotted shares Inclusive). He cited the wordings of the above stated Article as hereunder: "The perpetuity period appiicabie to any disposition made by or pursuant to this Deed shaii be for a period of10 years from the date hereof." He then argued that should the Trustees (Defendants) abide to the Articles of the Trust and exercise the options according to the 5 years' timeframe provided and disposition of assets of the Trust Including disposing unallotted shares within lOyears(that Is by 2010),the Plaintiffs herein would have been the beneficiaries of all the shares under the Trust. That Is to say, 10 he continued that, the Trustees breached the terms of the Trust by allowing the Trust to operate beyond the time provided under the Trust along with dividing the assets of the Trust (proceeds of the unallotted shares) to the current employees of the 1=* Defendant. So, the said act was not the intention of the settlor as nowhere in the Trust it was indicated that the Trustee could deal with the Trust and shares as per their wishes as they pleased. Mr. Reginald went on submitting that there is nowhere in the Trust Deed which gave mandate to the Trustees to give their shares to the current employees since Article 8.1 already stated employees on the date of listing TCCs IPO at DSE. Therefore, he argued that, the Defendants as Trustees have failed to exercise due diligence and neglected mandatory provisions of the Deed by extending the lifespan of the Trust purposely to eliminate the Plaintiffs as beneficiaries of the Trust. That, they went ahead ignoring the rightful beneficiaries and gave the proceeds of unallotted shares to the current employees. He emphasized that, it is from that role played by the Trustees (Defendants), the Plaintiffs are suing them under section 13 of the Trustees Incorporation Act, Cap 318 for their rights/interests. 11 He elaborated that, the above cited provision Is still intact regardless of whether there exists an incorporated body corporate of Trustees or not, meaning neither the changes to Cash Option Scheme made in January, 2006 nor the dissolution that occurred in 2019 affect the rights of the Plaintiffs. The said provision also entails that anyone aggrieved by the acts, receipts, neglects and defaults of the Trustees Including former employees of TCC who are the beneficiaries of the Registered Trustees of the TCC Employees Share Option Scheme have a right to bring an action against such act or omission. He concluded that, the Plaintiffs are the rightful beneficiaries of the residual assets and the proceeds of sale of unallotted shares of the defunct Trust at the time of liquidation. In reply, the Defendants contended that In defining who are the beneficiaries of the scheme, one must simply read Article 6 of the EXP2 on the beneficiaries of the scheme particularly 6.1 which defines the beneficiaries of the scheme as TCC employees as defined therein. From that article, an employee Is defined as a person who is a full time employee or Manager or Executive Director of TCC. He claimed that there is nowhere in the plaint the Plaintiffs are alleging to be the employees at the time the Trust was liquidated. That instead, at paragraph 17 of the plaint 12 they admit that the proceeds of sale of unallotted shares were distributed to current employees as opposed to ex-employees. It was the Defendants argument that they discharged their obligations set out In the Trust Deed and the rules to the deserved beneficiaries as there Is no article In the said Trust Deed which extended beneficiaries of the assets of the defunct Trust to Include ex-employees. Mr. Mponda went on succumbing that based on their own pleadings, the Plaintiffs admit that they were not employees of the I®' Defendant at the time when the proceeds of the Trust were distributed to the 'current employees' In terms of the said Trust Deed and the Rules. As such, he maintained that, the Plaintiffs were not the rightful beneficiaries as alleged. Citing the provisions of Rule 3.2.4 which provides for the employee to exercise his Shares Option in accordance with Article 8, Mr. Mponda further argued that, the Plaintiffs fully exercised this right before their employment with the 1^ Defendant ended, referring to the evidence adduced by DW-1 and DW-3. Having considered the submissions and along with the testimonies of the witnesses hereof, the definition of the term employee Is of the utmost Importance In this matter. As undisputed by both parties, the employee as 13 defined under EXP2 connotes the full time employees of the Defendant. It Is undisputed from both their pleadings and testimonies that at the time of dissolution of the scheme, the Plaintiffs had long left employment with the Defendant. The question which pops up, Is whether there was a perpetuity in beneficiaries beyond the termination of their employment. I have gone through the said EXP2 and the Rules therein and I did not manage to see any place where that provision was featured or incorporated. When cross examined by Mr. Mponda, PWl testified to the effect that, as per Article 5, the person who issued the said loan to the Trust is TCC and that loan was not advanced to the said employees. Regarding the use of that loan, he further testified, it is the Trust that bought the shares of the employer when it went to IPO and that the employees did not use their single sent to gain those shares. He furthermore testified that, after the Trust purchased the shares. It was Issued with a procedure upon which the employees will benefit from the Trust. The procedures were prescribed in the EXP2. After gaining the shares, each employee was allocated his/ her shares equivalent to 25% of his/ her annual gross salary. During the same cross examination, PWl admitted that the purpose of the Trust is embodied in Article 4 of EXP2 which specified that it is an incentive of the employees 14 of TCC. He also evidenced that, Article 6 defines the beneficiaries to be employees of the TCC and that at page 2 the employee Is so defined to mean "a person who is a full time employee or manager or executive director of TCC". He further admitted that the definition meant the employees of TCC and more so Importantly, he acknowledged that In that definition there Is no place written ex-employees. On his part, DWl also testified that the plaintiffs were not the rightful beneficiaries of TCC when the Trust was being dissolved because they were no longer employees of the Company. That, they are also not identified or stated as beneficiaries under Article 6 of the Trust Deed which asserts that employees of TCC will be the beneficiaries of the scheme; by virtue of them being ex-employees have been defined In the deed as full-time employees of the TCC. Mr. Mponda then reasoned that the Plaintiffs being ex-employees of TCC had already exercised their one-off option which they were granted and had already matured by the year 2005 whilst the scheme was being dissolved In the year 2019. Since there Is an argument on whether the Plaintiffs were employees, I had to borrow leaf on the definition of who Is an employee beyond the 15 EXP2, that is under Section 4 of the Empioyment and Labour Relations Act, [Cap. 366 R.E 2019] which describes an empioyee as: "employee"means an individual who— (a)has entered into a contract ofempioyment; or (b)has entered into any other contract under which— (i)the individual undertakes to work personally for the other party to the contract; and (ii) the other party is not a client or customer ofany profession, business, or undertaking carried on by the individual; or (c) is deemed to be an empioyee by the Minister under section 98(3);" As aiiuded to eariier, it is safe to draw a conclusion that the definition of employees under Article 1, clause 1.1 of the EXP2 and the definition of beneficiaries of the Scheme under Article 6 of the same EXP2 did not cover the Plaintiffs. One may pose a question, at the time of departure from empioyment, what were the options available to the Plaintiffs in continuing to be beneficiaries of the scheme if any, since the definition of employees did not shelter them. I have grasped this important point in the EXP2 and the testimony of witnesses herein. In answering it, I will begin with analyzing 16 the option that was Initially granted to the employees in the Trust Deed. This is stipulated under Article 8.2 of the EXP2 which reads: "Every Employee shall be granted one-off share option for a total number equivalent to 25% of his salary divided by the IPO price, on the date ofthe listing of TCC's IPO on the DSE" In the light of the quoted excerpt, it is crucial that I ponder as to what Is a one-off share option. In general terms, a one-off share option refers to a single opportunity to purchase a specific number of shares in a company at a predetermined price (in this case it is the 25% of his salary divided by the IPO price). The said option is usually offered as part of an employee incentive in terms of stock option plan where the employee only has one chance to exercise this option to buy shares at a set price within a specific timeframe. For the case at hand, under Article 8.2 of the EXP2, the timeframe was set in three periods, one third of the option after 12 months of the date of grant, another one third at 24 months and the final one third after 36 months from the date of grant. The Article put forth an obligation for the employees to exercise all options by the 5"^ year of the grant. Ergo, what was initially provided was a single instance of buying shares at a discounted rate, unlike 17 a recurring option within a share scheme. Article 8.5 further provided an option for an employee who has been granted by not exercised his share option to be entitled to dividends which are to be paid after tax deductions received on the shares by the Trust. As per their testimonies, the Plaintiffs' exercised their options within the five years provided in the Deed. The Deed was therefore clear that the Plaintiffs exercised their one-off share option schemes as provided for under the said Deed. Rule 12 of the EXP2 reads thus: "If an employee ceased to be an employee of TCC by reason of serious Incapacity disability or retirement and termination without cause, he may be written notice delivered to the trustees within 30 days after such cessation of employment, elect to exercise his share option In accordance with the scheme as Ifthe employee had not retired, terminated or been disabled." Consequently, the Rules in the Deed stipulated an option for the employees who cease to be employees by reason of incapacity, disability or retirement and termination without cause; to continue to exercise their share option in accordance with the scheme as if they had ceased employment. It 18 would appear that the Plaintiffs did not exercise that option and are here now coming to claim entitlement over somethings which they had lost eligibility to claim for. In furtherance to the afore stated, while cross examined by Mr. Mponda, PWl admitted that: "(Pg 5 of EXP2) Article 8,1 each employee was allotted once;shares equivalent to the 25% ofhisannualgross salary. Article 8.2 has given the procedure upon which each employee shall benefit and the period of5 years was given for the shares to be sold and the employees is given the dividend. The minimum was three years that is correct. The Trustees were the ones responsible to sell those shares and make deductions oftaxed and the net value given to the employee. There is no employee who was allocated shares in the hands, aii the shares were controlled by the Trustees. AsperArticle 8.7It was the Trustees who were responsible to pay the loan and this is not disputed because they were the ones connecting the 19 beneficiaries to the empioyees. The Articie 8.7says the Trustees wiiipay the ioan in accordance with Articie 11. Although PWl attempted to convince the Court payment of the said loan ought to be by employees through Trust, he admitted that his assertions were not featured In Article 11 and that in the EXP2 there Is no place which requires the employees to pay the said loan. On his part, PW2 also conceded that he retired in the year 2017 and that at the time the Trust was dissolved, he and the other Plaintiffs had left the TCC and that they are ex-employees at the time of liquation of the Trust Fund. He further accepted that In that Deed the word ex-employee is not mentioned in the definition of an employee and that Article 6.1 Is on beneficiaries of the schemes which are the employees of the TCC as defined thereof, so, the word ex-employee Is not there. PW3 also testified on cross examination that, he and the Plaintiffs were ex-employees at the time of liquation of the Trust Fund. Further to that. In the Deed the word ex-employee Is not mentioned In the definition of an employee and that Article 6.1 is on the beneficiaries of the schemes who are the employees of the TCC as defined thereat, thus, the word ex-employee Is not there. Moreover, under Article 11, it was the Trust, the entity that had 20 the legal duty to pay the said loan. Again, Article 11 does not specify from where the Trust would draw its earnings. The only method is when its assets (shares) were prudential surplus over its obligation to its employees. He averred that, there were shares and the shares were sent to DSE and sold there and upon selling, the Trust came back after deducting tax and other expenses and the employee was paid the remaining amount. It was his evidence that, if the cash was there then the assets would include cash. He therefore admitted that the loan advanced to TCC was paid by the Trust. From all the evidence gathered and the analysis above, it is decisive that the at the time of dissolution, the Plaintiffs were not employees as defined under the EXP2. Not being the employees, they cannot be said to be beneficiaries of the residual and proceeds of the sale of the unallotted shares of the de facto Trust at the time of its liquidation. As it has been admitted by the witnesses through their evidence, it was the Trust that was repaying the loan to the Defendant and not the employees. To a greater extent, the Defendants have proved that it was the duty of the Trust to pay the said loan facility from its various sources other than the recoveries made from the share options. EXDl shows thatTZS. 30,000,000/= (Tanzanian Shillings Thirty Million Only) was authorized by the Trustees to be paid to TCC. 21 In the final analysis of the two issues, both of them are answered in the negative. Having find the aforesaid wanting in merits, then the third issue also crumbles, since the Plaintiffs were not entitied to the residue of the Trust at the time of dissolution and having faiied to prove that the Piaintiffs paid the said loan to the Defendant. It cannot be said that the Defendants fraudulently and Illegally paid the residual assets of the Trust to the then existing empioyees of the I®' Defendant instead of the Plaintiffs, thereby breaching the terms of the Trust Deed and Rules made thereunder. The last issue is on the reliefs that the parties are entitled to, since the Plaintiffs failed to prove their case on the balance of probabilities, they have no claim against the Defendants to be entitled to any reliefs. On the other hand, it was the Defendant's prayer that the suit be dismissed with costs. Since, the Plaintiffs faiied to prove their claim, the suit is hereby dismissed with costs. It is so ordered. Dated at Dar-es-salaam this 03"" day of March, 2025 € I /S.M. NT/TGHIMBI JUDGE 22