ibm tanzania limited vs sunheralex constulting co ltd 2021 tzhccomd 3433 2 december 2021

IN THE HIGH COURT OF UNITED REPUBLIC OF THE TANZANIA (COMMERCIAL DIVISION) AT DAR-ES-SALAAM COMMERCIAL CASE NO. 9 OF 2020 IBM TANZANIA LIMITED.................................... PLAINTIFF VERSUS SUNHERALEX CONSULTING CO. LTD .^DEFENDANT Last order: 10th September 2021 Judgment: 02nd December 2021 JUDGEMENT NANGELA, J: The hearing of/this l:ase took longer than expected due to the raging/Covid-19 pandbmic. Even so, thanks to the Virtual-Court .technology that, at last the witnesses could ,, _ .... , testify while away frpm the Courts vicinity. The sole Plaintiff'srxwitness testified while in Kenya, and the Defendant's\witness testified while in Nigeria. Vxlruthis suit, the Plaintiff herein prays, for judgement and decree against the Defendant as follows, that: 1. a declaration be made to the effect that the Defendant is in breach of the terms of the agreement between the Plaintiff and the Defendant. 2. An order be made requiring the Defendant to pay USD Page 1 of 19 507,603.03 or its equivalent in TZS, being the sum for unpaid invoices. 3. Interest be imposed at a commercial rate of 25% on the outstanding amount stated in (no. 2) above, from the date of filing this suit to the date of - judgement. 4. Interest be imposed on the: decretal amount at the rate of 12% from the date of judgement- to the date of full satisfaction. 5. General damages-to-bejassessed, by this honourabie^urL^^^ 6. Cost of this suiband, vZ 7. Any other relief* as me^Court U A\ Tihd just to grant? The jDrief fac^^leading t0 °f this suit, as ascertained^^^the^pleadings, are as follows: the parties her^jjr^re linffid^Iiability companies duly registered and incorporatedX under the laws of the United Republic of \\ y TanzaniQ^The Plaintiff is suing the Defendant, claiming from the latter, a sum of United States Dollars (US$) 507,602.03, being a sum for outstanding invoices in respect of hardware and software support services supplied by the Plaintiff to the Defendant. From the year 2016, the Plaintiff and the Defendant entered into a business relationship which was governed by a contract - numbered TA0183. Under that contract, the Page 2 of 19 Plaintiff supplied to the Defendant hardware and software support services. In consideration, thereto, the Defendant used to pay for such services. In their arrangement, it was one of the agreed terms that, invoices for such services were to be due upon receipt. It is averred, however, that, while such an express term applied to their relationship, the Defendant contravened it, by defaulting payment demands for the services rendered, leaving a number of invoices ranging as far backxas August, 2017, unpaid. On the 26th of July 2019 the Plaintifnssbed,VDemand Notice to the Defendant. The Defendant responded to the Demand Note on the 9th da£of August 2019 promising to issue a payment pianino trte Plaintiff. However, the Defendant failed to issue such, a <plan to the Plaintiff. The A \\ V Plaintiff lost its -pateice^Q^could not wait any longer. On the 29th of August 2019,the Plaintiff issued a final Demand X V V Notice to the^Defendant. September, 2019, the Defendant responded to theMjnal demand notice, but that response was in the form of a query "and, thus, necessitating the Plaintiff to provide further clarifications. Despite the Plaintiff’s efforts to engage with the Defendant and, having clarified its query on 10th September 2019, the Defendant took no steps to settle the claims. According to the Plaintiff, the Defendant's conduct has occasioned damages on the Plaintiff, the particulars of which are as follows: Page 3 of 19 (a) Loss of business due to Defendant's failure to settle the outstanding invoices as agreed in the terms of the parties' agreement; (b) Loss of profit from the outstanding interest due to the breach of the terms of the agreements entered between the Plaintiff and the Defendant. Having been duly served with the^PIaint, oq\27^May 2020, the Defendant filed its written sta^nfenkowdefence A v'S/ and denied being in breach of contract. Furthermore, the Defendant averred that, she^nly<s^ned:£gptract agreement with the Plaintiff, at Dar-es^Sal^am and^Nairobi, was the one titled No.TA0183 an/c^e^2^une 2019, valued USD 381,595.10. Other ^than "that admission, the Defendant denied to be aware^of three-other contracts alleged to have been agr;eed^jpoj^by/the two parties. The Defendant, therefore^dispuS^the Plaintiffs claims, arguing that, the Plaintiff is^ot entitled to any of the prayers sought. Unfortunately, the parties could not resolve their dispute through mediation. Consequently, on the 23rd February 2021, they appeared before me for a final Pre-trial Conference. On the material date, the Plaintiff enjoyed the services of Mr Philip Irungu, learned advocate, while Mr Adolf Francis, as well learned advocate, represented the Defendant. Page 4 of 19 On that date, this Court, in agreement with the learned counsels for the parties, drew up the following, as issues to be proved in this Case: 1. Whether the Defendant was aware of the three disputed agreements alleged to be entered between the Plaintiff and the Defendant. 2. If the 1st issue is in the affirmative, whether there was any breach of the Vsaid agreements. 3. Whether the Plaintiff owes the Defendant USD'5O7~6O3Jo3^as z alleged. 4. Whethertite Plaintiff is.entitled to ft interest on^late ^payment of A \\ V /invoices x. sewed on the —x Defendant. M \V ^pjo^wpjat relief if any are the sXTparties entitled. hAs Instated earlier, the hearing of this case was assisted^^^technology since some of the witness were outside the country and unable to travel due to the ravaging Covid-19 pandemic. The Plaintiff had only one witness who testified while in Kenya. Equally, the Defendant had one defence witness who testified while in Nigeria. At the end of the hearing of the witnesses, both parties filed their closing submissions. I will, along with the testimonies of their witnesses, take into account such closing Page 5 of 19 submissions filed by the learned counsel for the parties as I address the issues raised in this case and render my verdict on each of them. To begin with, the first issue which I am called upon to tackle is: Whether the Defendant was aware of the three disputed agreements alleged to be entered into between the Plaintiff and the- Defendant, In her testimony in support of the l^aintiff^case, Ms Doroth Matovu, who testified as Pw-1, told rhis<ourt that she works with the IBM (the^Baintiffpas IBM East Africa Business Leader. She pro^uced^and was admitted as X \\ V « Exhibit.P-1, a contract No.TA0183 dated 1 September JI X 2016, and duly signedvby botbparties. Pw-1 stat?d\^t/iin^the course of business, the Defendan^^i^ested^fo^some changes in their agreement andJhe^^ihtiff^TS§nted to such changes coming up with three replacement contract(s) - numbered TA0266. These wereTendereci and admitted as Exhibit P-2. According to Pw-1, although the replacement contracts were not signed by both parties as they were only a confirmation of the original contract, they maintained the same initial terms and conditions of the original agreement and, the parties continued with their business whereby the services originally contracted were billed though invoices sent to the Defendant under the replacement contracts for Page 6 of 19 smooth administration. She tender into Court as exhibits invoices raised pursuant to services rendered and the same were admitted as Exhibit-P.3. I have had a careful look at Exhibits P.l, 2 and 3. Although the Defendant's witness, Dw-1, denies to have any knowledge of Exhibit P-2 and that, the same was not disclosed to the Defendant, and, even if such replacement contracts were not signed by both parties, there is no dispute that the Plaintiff continued to render^efvices tokthe . W )> Defendant and invoices were raised under?Exhibit<P=2 and sent to the Defendant. Besides, in his testimon^aridjwfijle also^under cross­ examination, Dw-1 did not^^ute^:that invoices were sent to the Defendant. He ^en^acKnowledged and identified four of them. It is also^the^testimony of Dw-1 that the Plaintiff supplied products^ndSendged'services to the Plaintiff, and, that, son^/ihvoyces^^e not settled. There is, as well, Exhibit F’4^w^ch/^was a letter by the Defendant which ackn^wfedgeda^outstanding amount of USD 255,075.25 (VATxexclusive) in respect of Invoices No.6813400003 and 681340006. The letter was dated 13th July 2018. In that letter, the Defendant was regretting for being unable to settle the Plaintiff's invoices. Furthermore, Exh.P-5 was another letter from the Defendant concerning settlement of the invoices with an assurance that the Defendant was going to make good its commitments to pay. Exhibit P4 is further supported by Exh.P7 and Exh.P-8, which are e-mails and demand letters Page 7 of 19 received in Court without objection, regarding payment of the outstanding amounts and responses from Dw-1 which, in totality, indicates that the Defendant was well aware of the Plaintiff's claims. All these exhibits were received without objection. As it may be seen from Exh.P.6, the Defendant did also make a partial payment of TZS 114,200,000.00 as With all such facts which are not disputed, I find it part ofto settlement difficult of claims under the agree with the^pefendanl^that Invoice No. replacement 6813400003. Duringq cross-examination, a Dvv^l admitted contracts, under which^all sucrutransactions and claims were as well, being premised/^Fere unknownpaid that, the Defendant parti^bpaymentsJtothe to them. I quite agree with Plaintiff amounting to USD 50,000.00\fdf^goods and the PlaintiffS'Gounselxsubmission that, under section 123 of services supplied. the EvidencevAct^Gap.6 R.E 2019, the conduct of the DefendahCareXsufficient to prevent the Defendant from h \\ denying any Knowledge of the replacement contracts. did admit that the terms and conditions under those contracts (Exh.P-2) are same as those under Exh.P- 1 and, never disputed the fact that the Defendant was the one who had asked for the changes in the original contract (Exh.P-1). I noted, in his closing submission, the learned counsel for the Defendant has tried to controvert the admissibility of Exhibit P-2 on the ground that it was in Page 8 of 19 breach of Rule 50 (1) (d). However, this remains an afterthought and I cannot entertain it either. Perhaps what may need to be answered is whether not signing Exh.P-2 but proceeding to transact under it had any effect. Essentially, the lack of a signature would suggest that the parties had not yet reached the point where they wished to be bound. But that is not always the case where there is evidence to the contrary. Courts do not just look at one aspect but look at all the evidence relating to the intention of the parties, including their conduct. Several cases within and outside our jurisdiction have discussed such situations. In the English case of Brogden v Metropolitan Railway Company (1876-77) LR. 2 App. Cas. 666, for instance, the House of Lords was of the firm view that, in circumstances where^thejjarties had acted in accordance with a draft unsigned contract for the delivery of consignmehfexof^cgal^t^ere was a contract on the basis of that^iraft G) Percy Trentham Ltd. vs. Archital Luxfer Ltd. And^Others [1993] 1 Lloyd’s Rep. 25, Lord Justice Steyn was of the view that, where the contract had been fully or substantially performed, it may be implausible to suggest that there was no binding contract, unless there was an express term requiring the contract to be binding upon execution. The Court was of the view, therefore, that: "the fact that a transaction was performed on both sides will Page 9 of 19 often make it unrealistic to argue that there was no intention to enter into legal relations." Likewise, in the case of Wananchi Group Tanzania Ltd vs. Maxcom Africa Ltd, Commercial case No. 120 of 2019 (unreported), this Court, Phillip, J, held that, "a contract is not only established by presence of a written and signed document but can be established from the conduct of the parties...." this Court is the Court of Apge|IJ|c^^n jn> the case of Zanzibar Telcom Ltd vs^^etrofuettanzania Ltd, Civil Appeal No.69 of 2014J^nreporte^^This later case of Zanzibar Telcom's^ase^sup^)^ seems to be directly responding to ^t^^quegfon^I had raised here above regarding unsigned contract and the effect of acting upon it. In^tnatyCase^the Court of Appeal considered the "issu^Sf^cce'pbnce by conduct", and, citing the case of Revilie Independent LCC vs. Anotech International (UK)^Ltd^[2015] EWHC (Comm) observed as hereunder regarding the facts of that English case: "the claimant, a US-based television company, had entered into a "deal memorandum" with the defendant cookware distributor, pursuant to which the former was to licence to the latter certain intellectual property Page 10 of 19 rights pertaining primarily to the Master-Chef US brand, and promote the defendant’s products in its television series. It was expressed in the "deal memorandum" that, that understanding was not binding until signed by both parties, also that it was intended to be replaced by a long form^ agreement which in fact, was never because- concluded A \ > negotiations broke down. When the matter w^Hn^cqur^the^ defendant claimed that itwas'not bound by\the terms of'the "deal memoranduiriyfbecause they did K A\ not sign that document, therefore Thatx^^terms^herein were not accepted.^ The question for consideration by the court was , ■whether the claimant's conduct was sufficient to amount to waiver of requirement for signature, and whether acceptance by conduct had occurred. At the end of its deliberations, that court ruled that even where a contract clearly contains completion formality requirements, the conduct of the parties amounted Page 11 of 19 to a waiver of those requirements/ and that it constituted acceptance. We are convinced that this is a sound principle, which we accordingly approve. " I am fully convinced that, the decision of the Court of Appeal does squarely apply to the situation at hand. The Defendant herein was supplied with goods and services on based on the services rendered-werejapknowledged, with commitments to settle the^ajms^being^lven as per Exh. As noted in the Zanzibar Telcom case (supra) at X \\ )7 page 23, evidence\was.^adyanced to show that products were receiyedband, sorhe^of the invoices were paid for. The Court hel^^t:^^ In our firm stand, therefore, that conduct constituted sufficient acceptance ..., hence that, there was a binding contract capable of being enforced." The above holding by the Court, equally applies in this case where evidence has been led to show that goods and services were supplied and acknowledged by the Defendant's witness (Dw-1) and, some invoices were paid. The rest of invoices were also acknowledged by Dw-1 as still Page 12 of 19 constituting outstanding claims. In view of all these, the first issue is proved in the affirmative. The second issue is predicated on the first issue being responded to affirmatively or not. If the first is respondent to affirmatively, then the next is: whether there was any breach of the said agreements. I think that I need not be detained by this issue. The response to it is in the affirmative. The evidence indicates that the products were supplied anovse^ices^ere rendered, invoices were billed to the Defendantxand the defendant did not pay for all that jr^fuli. Exhibjt^P-6 only indicates a partial payment and ,Dw-l did acknowledge while being cross-examined, that/'spmebofthemvoices (Exh.P3) were not settled. In paragraph 6<\pf hisC^stimbny in chief, Dw-1 did admit services having beenjsupplied and in paragraph 10 of the same testimony/itM^admitted that the Defendant owes the PlainHf^I&m^GOnvinced; therefore, that there was breach^the agreement because, it was the condition under Clauses 2 off Exh.Pl that payments were to be effected immediately upon receipt of invoices. Clause 3 of Exh.P-2 was also express that the terms and conditions of Exh.P.l remained intact. Failure to settle the invoices constituted a breach. And, since any breach of contract will attract damages, the Plaintiff is also entitled to damages as prayed by the Plaintiff. In law, where breach of agreement has been established, it goes with the award of damages. Section 73 Page 13 of 19 (1) of the Law of Contract is very instructive on payment of damages resulting from breach o a contract. It states that: "73.-(1) Where a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from ^such breach, or which the knew, when they rnade the from the breach of it."< ''v . In law, damagesxmay.be specific or general in nature. In this case the Plaintiff hasxprayed to be paid general /C \\ # damages to be^assessed^by the Court. Unlike specific damages wKiCh^eedxtOxbe pleaded and proved (see Zuberi Augustino^Mugabe^vs. Anicet Mugabe [1992] T.L.R. \\ 137/), general damages need not be proved. This particular principle is yyell supported by numerous decisions of this Court and the Court of Appeal. (See the cases of Cooper Motor Corporation Ltd vs. Moshi/Arusha Occupation Health Services [1990] TLR 96 and Fredrick Wanjara, M/S Akamba Public Road Service Limited A.K.A Akamba Bus Service vs. Zawadi Juma Mruma, Civil Appeal No. 80 of 2009 CAT (Unreported). Since general damages are assessed by the Court as compensation for losses which would naturally flow in the ‘ Page 14 of 19 usual course of things from such breach, taking into account the testimony of Pw-1 as well as the exhibits tendered and relied upon by the Plaintiff in proof of her case, all supported the claims by the Plaintiff that, the Defendant was in breach of the contracts for having failed to honour its obligations there under. As a matter of principle, an obligation to honour what was agreed by the parties to a contract is a fundamental or cardinal principle in the law of contract. ^This^was^also emphasized by the Court of Appeal in the..caseohSimon Kichele Chacha vs. Aveline M.4Kil^^^vil Appeal No. 160 of 2018 (unreported)./In^thaKcase^the Court of Appeal of Tanzania was of ansemphatic view that: agreements they freely entered .into ^ahd thisYis the cardinal principle df-the law of contract. Thatis/^there should be a sanctity of the contract as lucidly stated in Abua/y Attbhai Azizi v. Bhatia Brothers Ltd [2000] T.L.R 288 at page 289 thus: - 'The principle o f sanctity of contract is consistently reluctant to admit excuses for non-performance where there is no incapacity, no fraud (actual or constructive) or misrepresentation, and no principle of public policy prohibiting enforcement." Page 15 of 19 Since it has been established that the Defendant was in breach of her obligations, the Plaintiff suffered and was entitled to general damages, it is my considered views, based on the evidence available that, payment of TZS 10,000,000 as damages would bring justice to the Plaintiff. The third and fourth issues agreed upon by both parties and drawn by this Court for determination are: "Whether the Plaintiff owes the Defendant USD 507, 603.03 as alleged" and, "Whether the PlaintifNs.entitled to interest on ^afterpayment qfZ ■ ■ invoices Z ^served x^on the Defenjiarjt^ In my considered view, these two issues can and should be discussed\and disposed of together. It is undoubted thatxDw^expressly admitted in his testimony in chief that^the^Defendant owes the Plaintiff USD ($) 330^46S5xH(Aeyer, according to paragraph 17 of Pw-l's testimony, under Exh.P3 (the four invoices tendered and whici$wfere*not disputed), amounts to USD ($) 399,792.85. Furthermore, according to the testimony of Pw-1, a 2% interest charge was also levied on late payment in respect of Invoice No.100304 (amounting to USD ($) 60,379) and Invoice No.100374, dated 17/5/2019, (amounting to USD ($) 47,431.18) which, together with the undisputed invoices brings one to the sum of USD ($) 507, 603.03. Page 16 of 19 However, in paragraph 7 of Dw-1 testimony in chief, Dw-1 disputed invoice No.100304 amounting to USD ($) 60,379 and Invoice No. 100374, dated 17/5/2019, amounting to USD ($) 47,431.18 on the ground that the parties had not agreed on whether interest should be charged or not. However, what Dw-1 admitted to have paid was the USD ($) 50,000, which was part-payment in respect of Invoice No.6813400003t and whose original amount was USD ($) 167,071.01. "xX b It is clear from the invoices (Exh.P^3),jTO^ev^r/that, a clear stipulation was made on them to the^effect that, in case of a late payment, late paymenbiqter^st? could apply. The invoices read as hereunder: contract. Late 'ent interest/fees Dw-l's argument isThat there was no agreement on that facUI^g^ not think that averment has any merit^In^usin^^realm overdue or unpaid invoices can frustrate the business normalcy or create cash flow inconsistencies with a potential to threaten business sustainability. It is no secret, therefore, that, as an incentive to ensure that invoices are paid on time, some businesses include measures such as charging on interest on overdue invoices. In Greenwood Trust Co. v. Massachusetts, 971 F.2d 818 (1st Cir.1992), cert, denied, 506 U.S. 1052, 113 S. Ct. 974, 122 L. Ed. 2d 129 (1993), the United State First Page 17 of 19 Circuit Court of Appeals considered an issue relating to payment of late charges and sated that, "late fee is sufficiently related to the use and forbearance of money or damages for its detention that it can appropriately be classified as interest." (Emphasis added). From the above case, it is also my finding, therefore, that, since the stipulation that late payment would attract - XX J/’”' interest/fees, was very clear on the invoices submitted to the Defendant, and given that the Defendant "detained" the monies which ought to have been paid promptly upon receipt of the invoices, the interest charged whether agreed or not, was appropriate. Otherwise, the Defendant ought to have heeded to the requirement to pay promptly. The 3rd JS. XX T7 and 4th issues are, therefore, responded to affirmatively. The last issue is in regard to the relief, if any, which the parties^e^titlgd^to. The party entitled to relief is the Plai^^^v^o, has managed to prove its case on the preponderance of probability. In that regard, judgement is entered ih'favour of the Plaintiff as follows: 1. That, the Defendant is hereby ordered to pay USD 507,603.03 or its equivalent in TZS, being the sum for unpaid invoices to the Plaintiff. 2. That, the Defendant shall pay interest be imposed at a commercial rate of 14% on the Page 18 of 19 outstanding amount stated in (no. 1) above, from the date of filing this suit to the date of judgement. 3. That, the Defendant shall pay interest at the rate of 7% on the decretal amount from the date of judgement to the date of full satisfaction. 4. That, the defendant shall General damages amounting to TZS 10,000,000. 5. Cost of this suit follows the event. It is so ordered DATED at DAR-ES-SALAAM, this 02™ Day of DECEMBER 2021 HON. DEO JOHN NANGELA JUDGE Right of Appeal Explained.