20191111 TZHC Dar es Salaam

J IN THE HIGH COURT OF TANZANIA (DAR ES SALAAM DISTRICT REGISTRY) AT DAR ES SALAAM CIVIL CASE NO. 169 OF 2014 HELENA RICHARD MOSHA ...................................... .... PLAINTIFF VERSUS EQUITY BANK TANZANIA LIMITED ............................. DEFENDANT JUDGEMENT MASABO, J. :- This suit emanates from a banking relationship between the Plaintiff and the Defendant whereby on 22 nd April 2013 the Defendant advanced the plaintiff a credit facility at a tune of Tsh 30, 000,000/= to boost her business capital to wit, a mobile telephone shop at Kariakoo area in Dar es salaam. It is pleaded that on 5th June 2014 the Defendant's officials maliciously and without complying to legal procedures raided the plaintiff's shop whereby they took all the business assets worth Tshs 200,000,390/= on allegation that the Plaintiff had failed to service the facility and that as of to date it has retained the chattels living the Plaintiff with no source of income. Her claims against the Defendant are for following orders: declaration that the· Defendant's act of taking commodities, money and closing of the Plaintiff business premises are unlawful and illegal; specific damages at a tune of Tshs 200, 000,390/= being value of the business chattels unlawfully taken by the Defendant; a commercial rate of 35% on the sum above from 5th ,$' 1 J' June 2014 to the date of judgment; general damages of Tshs 100,000,000; a court interest on the decretal sum from the day of judgment to the date of full judgement, cost of the suit and any other relief that the court may dee just to grant. The plaintiff called 4 witnesses in support of her case. PWl, Helena Richard Mosha (the plaintiff herein) testified that on 12/04/2013 she took a loan facility of Tshs 30,000,000 from the Defendant for boosting her working capital for her mobile phone shop at Kariakoo area in Dar es Salaam and that she secured the credit with a house with residential license number ILA007848 Plot No. ILA/TBT/MBZ4.46 registered in the name of Lawrence Thadei Gwakila and a personal guarantee of the said and personal guarantee of the said Lawrence Thadei Gwakila. That, she was servicing the facility with a monthly deposit of Tshs 2,016,000/= which she consistently paid for 10 months. Later, her business dropped such that she could not consistently repay the loan whereupon she negotiated with the Defendant and the repayment was rescheduled to Tshs 1,016,000 monthly and as part of their agreement on 26/05/2014 she paid Tshs 2,500,000 being arrears for three months. That on 05/6/2014 while on family trip at Moshi she was informed by her husband (PW2) that the defendant's officials raided the shop whereby they took all the goods worth Tshs 236,000,000/= and locked the door to the shop. PW2 who was at the material time acting as sales person for the shop notified her that upon the goods and the padlock keys were taken to unknown place. On return from Moshi she made inquiries over the whereabouts of her goods but received no answers from the defendant. She 2 told the court that at the material time she had an arrears of Tshs 13,000,000/=. PW2 (George John, husband to PW1) testified that on 5th June, 2014 while at PW1 shop she was invaded by the people who introduced themselves as employees of the Defendant who told her the PWl has defaulted payment of a loan advanced to her. He recalled that the said employees collected all the business chattel, to wit, mobile phones of different make and types, packed them in boxes and loaded them in vehicle whereupon they took them to unknown place. To buttress his testimony, PW2 tendered two exhibits: 'Exhibit P3A' an exercise book and Exhibit P3B a personal diary containing lists of goods allegedly taken by the Defendant officials on the fateful date. PW3 (Lawrance Thadei Gwakila), testified that he acted as a guarantor for loan and also placed his residential licence for his house located at Msimbazi Tabata as security. He stated that at no time did he receive any notice from the defendant to show that the plaintiff had defaulted payment. He accounted that he only became aware of the Plaintiff's default on the date after the defendant bank had taken the business the Plaintiff's business assets and closed her shop. He also accounted that while the instant case was still pending in this Court, the Defendant Bank attempted to sale his house but they could not as he obtained a court order. On his part, PW4 (Joel George Nzowa) accounted that he is businessman and that his shop at shop at Aggrey street in Kariakoo area was situated next to PWl's shop. He recalled that on 5th June, 2014 he witnessed the officials of the defendant 3 • I taking goods from Plaintiff's shop to unknown place. He testified that he witnessed the whole event. The Defendant paraded only one witness, DWl one Omari Namahala, a loan manager for the defendant bank testified. His testimony was to the effect that the Plaintiff took a loan from the Defendant bank and that at first she diligently repaid her loan as per the schedule but she later defaulted. That, the defendant bank reminded the plaintiff of her obligation and after several reminders and statutory notice, the Defendant bank instructed an Auctioneer in the name of Ultimate Auctioneer to collect the Plaintiff's business assets which were pledged as security for the loan. He testified that he was present at the scene on the material date and the goods recovered were mainly, mobile phone accessories, phones (small phones); memory cards, earphone, cover and batteries all worth Tshs 15,000,000/= at most. He testified that prior to seizing the goods they served a default notice on the plaintiff but the same was not tendered in court as evidence. He also testified that the Auctioneer prepared an inventory of the things recovered from the Plaintiff's but he never tendered the inventory in court. He testified that at the material time the plaintiff's indebtedness was Tshs 17,000,00/= . When cross examined, DWl testified that he is not sure where the assets are currently kept. All he knows is that they were taken to store at Buguruni area and attempts to have them sold has turned futile. He also testified that he did not know the actual value of the assets taken from the Plaintiff's shop on the material date and no evaluation was done prior or after the seizure. In 4 addition to his oral testimony, DWl tendered one exhibit, exhibit Dl, the loan facility letter executed by the Plaintiff and the Defendant Bank. The court framed the following issues for determination: - 1. Whether the Plaintiff was in breach of loan facility agreement. 2. Whether the Defendant's act of invading and collecting Plaintiff's commodities from the shop was lawful. 3. To what reliefs are the parties entitled. Before delving into these issues, let me start by asserting that it it is a settled principle of law that "he who allege must prove". The principle is contained under section 110(1) of the Evidence Act, Cap 6 R.E. 2002 which provide that: "whoever desires any Court to give judgment as to any legal right of liability dependent on the existence of facts which he asserts must prove that those facts exist." It is submitted that to prove these issues the Plaintiff expected to produce evidence proving the existence of the breach of lease agreement, and this is by production of the lease agreement showing terms and conditions of the said lease agreement that has been breached". In this context, the duty to prove the existence of the facts alleged in any of the four issues above rests on the plaintiff. This being a civil case, the standard is balance of probabilities. 5 Regarding the first issue it is not in dispute that the Plaintiff and the Defendant entered into a contractual relationship on 22/4/2013 through which the plaintiff was advanced a loan of Tshs 30,000,000 (Exhibit D1). According to Exhibit D1 the loan together with an interest of 22% and 5% loan processing fee was to be repaid in 18 months in equal monthly installments of 2,216,667 /=. In other words, the loan was to be fully repaid by 22/12/2014. It is equally not in dispute that the Plaintiff did not repay the loan as per the repayment schedule. In her testimony she admitted that having paid the first 10 monthly instalment consistently her business dropped and she requested to have a repayment schedule revisited whereby the bank allowed her to deposit 1,016,000 monthly. She also recounted that she had some arrears and that she had started servicing the same and that at the fateful date, she had an arrears of Tshs 13,000,000/= What is in question is whether, the Plaintiff was in breach of loan agreement? The answer to this question can be discerned from Exhibit D1, a loan agreement which contains the terms and conditions agreed upon by the parties. Clause 10 of Exhibit D1 contains the following words: "the following events will constitute default and any cause any amount outstanding under the proposed facility to become immediately due and repayable and any commitments made hereunder by the lender cancelled: • The failure of the borrower to observe or perform any of its obligation under this letter and/or the security documents 6 Further, this clause states that under this clause that, a Borrower's indebtedness not paid on the due date constitutes default. Obviously from this clause, the failure by the plaintiff to service her loan on the due date constitutes default. The assertion by the Plaintiff as regards rescheduling of the payment schedule does not hold water as they are not accompanied by any evidence in support. Considering that that the agreement between them is written, it was imperative that the rescheduling if any be in writing. The absence of any document or evidence to the contrary presupposes that there were no changes to the initial agreement. Even if I were to hold otherwise, this would not exculpate the Plaintiff because as alluded to earlier, she plainly admitted to have defaulted when she stated that on the fateful date she had an arrears of Tshs 13, 000,000/=. This question is therefore answered in the affirmative. Regarding the second issue it need not to be overemphasized that the Defendant has a right to recover the loan advanced to the plaintiff. As held in Agency Cargo International v. Eurafrican Bank (T) Ltd, High Court of Tanzania at Dar es Salaam, Civil Case No. 44 of 1998(unreported) the bank has a right to recover loans so as to continue with its business. The court held that: " ... The Respondent to continue being in banking business must have funds to lend and which [h] as to be repaid by its debtors. If a bank does not recover its loans it will seriously be an obvious candidate for bankruptcy .... It is only fair that banks and their customers should enforce their respective obligations under the banking system" (at pp. 5 and 6). 7 • I . PW1 does not repudiate the Defendants right to recover its loan. Her major complaint in her testimony is that the defendant committed procedural irregularities in that it did not issues any default notice. The defendant part from asserting that it issued notes, it contended that it had no obligation to issue notice. The defendant apart from contending that it issued notice, it brought no evidence in proof which presupposes that the notice was not issues. Having established that, the next question would be, did the failure by the defendant to issue notice contravene the law. Our laws impose a legal notice only where the recovery of loan involves sale or disposition of the mortgage. In this case, under section 127 of the Land Act, 1999, the mortgagee is required to issue a 60 days' notice prior recovering a loan by selling a Mortgaged Landed property. This requirement, is only applicable to mortgages as opposed to other securities. Thus, in loans secured by securities other than mortgage, default notice is a contractual issue. In the instant case, the loan was secured by 4 securities namely: First Legal Charge over the land property with Residential License Number ILA007848, Plot No. ILA/TBT/MBZ4/46 registered in the name of Lawrence Thadei Gwakila, Personal Guarantee by Lawrence Thadei Gwakila; household chattels and business assets. From the import of the provision above, it goes without say that the Defendant had no legal obligation to issue the notice save where the requirement for notice was stipulated under the loan agreement. Having scrutinized the content of Exhibit Dl, it would appear to me that the loan agreement is silent on the issue of notice. It is a settled principle of law that when parties enter into agreements at their free will, they undertake to 8 comply with their promise in the said agreement. The principle is provided for under Section 10 of The Law of Contract Act Chapter 345 R.E 2002 provides that ''all agreements are contracts if they are made by the free consent ofparties competent to contract for a lawful consideration and with a lawful object ... '~ The law always attaches greater weight to parties' autonomy in the choice of contractual parties and in deciding the content and the form of contract. The role of the courts while dealing with contracts is notably constrained to interpretation and application of the terms/parties bargain so as to accord them legal effect (Caledonain Insurance Co v Rankissoon [1985] LRC 143). An interference would only be justified in cases of public policy, where the other party in in presumably inferior bargaining position ( example a minor), where there was undue influence or duress, where the terms of the agreement are against the law and molarity. Considering that in this case there is no allegation let alone a proof that the contract was procured under undue influence, this court cannot impute the requirement for notice as in doing so it would be tantamount to rewriting the agreement which is not the duty of this court. The Court of Appeal when dealing with the issue of notice in Exim Bank {Tanzania) Limited versus DASCAR Limited and Another (2017) TLR, 120 held that considering that the time within which the Appellant Bank should have issued a default was not one of the terms of the contract, the Appellant bank was for this reason, not bound to issue demand notice within specified period. The defendant can therefore not be defaulted for not issuing the notice. 9 Having stated the position of the law, I wish to comment that the banking relationship is based on trust and confidence, hence it is in the interest of the lender and the borrower that defaulting borrowers be issued with default notice even where the requirement for notice is not stipulated in the loan agreement. A glance at the best practices in loan recovery all over the world . consider issuance of a default notice as an imperative step in loan recovery process. It provides an opportunity for the lender and the borrower to ascertain the borrower's actual indebtedness and less-evasive loan recovery processes if any. In my view, even in cases where provision of default notice is not a legal requirement, the lender is naturally expected to abide to certain ethical stands or best practices in the banking industry one of them being the need to an ascertain the borrower's actual indebtedness and ensuring that the recovery measures are proportional to the borrower's indebtedness. As I have already hold, the defendant being a lender, has full right to recover its loan from the plaintiff. However, it need not to be overstated that this right does imply an unlimited right on the party of the lender. The extent of recovery is naturally limited to the borrower's indebtedness. Surplus if any is an entitlement of the borrower. Holding otherwise would be tantamount to condemning the borrowers by giving lenders an unimpeded right to rob defaulting borrowers of all their entitlements. 10 In the instant case, it is undisputed that the Plaintiff had repaid part of the loan. Accordingly, it was imperative for the lender and the borrower to establish the actual indebtedness but this was not done. PWl and PW2 consistently testified that on the fateful day the defendant's officials did not take any inventory and that since 2014 they have been following up with the bank at no avail, hence they are not aware as to whether the assets were sold or not and how much was realized from the sale. Their allegation was confirmed by DWl who told the court that the goods recovered from the Plaintiff's shop were never evaluated and that he does not know whether the goods were sold and, if sold, the amount realized from the sale. Considering that the seizure of the assets and their respective value was at the centre of the conflict, it was expected that the defendant would render evidence of the inventory of the assets or the value of the assets vis-a-vis the Plaintiff's indebtedness. Failure to produce an inventory presupposes that the same does not exist. Thus, the value of goods taken from the same vis-a vis the plaintiff's indebtedness is unknown. On the third issue, the Plaintiff's claims from the defendant a total of Tshs · 200,000,390/= being value of the commodities and assets taken by the defendant to wit mobile phones, flash disks and memory cards worth Tshs 186,123,390/=; furniture and fixtures such as chairs, tables and card boards, DVD player, microphone and speaker worth Tshs 13,877, 000. She also claims for general damages at a tune of Tshs 100,000,000/ for loss of profit, goodwill, inconveniences, metal structure and disturbances, the cost of the suit and any other relief defendant took the assets to the date of judgement 11 and interests thereto at a commercial rate of 35% from the date of judgement. In proof of specific damages tendered two documents exhibit P3A an exercise book and a P3B a diary both containing a list of assets. She claimed that the shops leger/sales book showing the assets which were in the shop on the material date was taken by the defendant officials in the course of seizure. Exhibit P3A contains a list of flash discs which shows that as of 20/3/2014 there were a total of 1000 flash discs in the plaintiff's shop. I have chosen not to accord any weight to this evidence on two accounts: First, the list was prepared two months prior to the date of seizure. Second, the trend of sales in previous dates shows that there was high turnover. For instance, on 2/1/2014 a total of 2800 pieces of battery chargers worthy Tshs 12,200,000/= were sold and on 10/3/2014 a total of 1400 pieces of flash disks were sold. The fact that the said flash discs were in a shop presupposes that some if not all of them might have been sold off. With the trend of sales above indicated it would be irrational to assume that the 1000 pieces of flash discs remained unsold for two months. On the other hand, Exhibit P3B Shows that on 10/5/2015 there were a total of 1110 unsold phones (simu zilizobaki dukani) worth Tshs 22,300,000/=; on 15/5/2014 a consignment of 305 phones worth Tshs 13,111,000/= was added to the shop (simu zilizoongezwa dukani) whereas on 20/5/2014 a total of 305 phones worth Tshs 13,111,000/= were sold. On 30/5/2014 a consignment of 400 phones worth 26,854,000 was added to the shop; on 12 1/6/2014 another consignment with a total of 200 phones worth Tshs 7,000,000/= was added to the shop and on 4/6/2014 a total of 50 pieces worth Tshs 10,900,000/= were added. From the figures above, it is evident that on the material date the shop had a consignment of 1,760 phones worth Tshs 67,054,000 (being 2,065 phones worth Tshs 80,169,000/= minus 305 phones worth Tshs 13,111,000 which were sold on 20/5/2015. No proof was rendered in respect of the claims on furniture, fixtures, DVD prayer and speaker. The claims in this category, being specific damage need to be proved. They can not be awarded in the absence of proof, as in the said. The above figure when compared with the Plaintiff's indebtedness on the material date, demonstrates that what was recovered from the Plaintiff was far above her indebtedness. Paragraph 9 of WSD and annexture Eb2 thereto shows that as of 5th June 2014 the Plaintiff's indebtedness was 17,126,259.70. This implies that the value of the goods recovered was higher by Tshs 49,927,740.30. Regarding the prayers for general damages the Plaintiff pleaded that the confiscation of her assets and the closure of her shop has occasioned her general damages in terms of loss od business. Profit, goodwill, mental torture and disturbance as well as inconveniences, as a general rule the general damages need not to be pleased. In the instant case, the plaintiff apart from pleading that she suffered damages she has ably established that on the material date the defendant officials discriminately collected all the assets and closed the shop and that the shop remained closed until 24th December 13 2014 (about six months) when it was opened per order of the court as per exhibit P2. The indiscriminate confiscation of the assets and the closure of the shop which was on her testimony the sole source of income might have occasioned her the damages claims. Accordingly, judgment is entered in favour of the plaintiff for the following orders: (i) Payment of Tsh 49,927,740.30/= being a surplus value of the assets recovered by the Defendant (ii) A commercial interest of 22% per annum on the above sum from the date when the good were taken to the· date of judgment (iii) The amount in (i) and (ii) above will attract an interest of 7% from the date of decree to the date of full payment (iv) A general damage of 20, 000, 000 Tshs (v) Costs of the suit. DATED at DAR ES SALAAM this 11 th day of November 2019. J.L. MASABO JUDGE 14