imperial insurance company ltd vs anisha 2004 tzhccomd 16 3 september 2004

IN THE HIGH COURT OF TANZANIA (COMMERCIAL DIVISION) AT PAR ES SALAAM COMMERCIAL CASE NO. 273 OF 2002 IMPERIAL INSURANCE COMPANY LIMITED....PLAINTIFF VERSUS ANISHA’S LIMITED................................................ DEFENDANT TANZANIA REVENUE AUTHORITY.................. THIRD PARTY JUDGMENT KIMARO, J, The plaintiff and the defendant executed a bond binding themselves jointly and severally to pay to the Commissioner for Customs the sum of T.shs 23,390,137.00. The bond was executed after the defendant disputed the amount of import duty payable on a consignment of guy grips and pole top imported by the defendant. The Defendant declared the goods as falling under Harmomsed System Code (H.S.Code) number 7308.90 attracting an import duty of 5% and VAT 20%. The Tanzania Revenue Authority (The Third Party joined into the proceedings) did not agree with the plaintiff’s declaration. An Entry query Notification was raised informing the defendant that the correct H.S.Code was 7326.20.90 attracting 25% import duty and 20% VAT. 2 The dispute was referred to the Commissioner for Customs and Excise. While the dispute remained pending, the defendant considered it wise to take possession of the goods without payment of duties so as to avoid payment of demurrage charges. The Third Party (Commissioner for Customs) allowed the defendant to take possession of the consignment without payment of duties pending determination of the matter upon a condition that the Defendant executed a security bond guaranteeing payment of the duties if a final decision was made on the matter. It was under those circumstance that the bond between the plaintiff and the defendant was executed. The bond was issued by the plaintiff in favour of the Customs Commissioner and it was signed by both the plaintiff and the defendant. The amount of the bond was T.shs 23,390,137.00. The life span of the bond was 21st March 2001 to 20th June 2001. The plaintiff is now suing the defendant for recovery of the amount of the bond (T.shs 23,390,137.00) on the ground that the Commissioner assessed and demanded the payment of T.shs 23,390,137.00 from the Defendant on 12th June 2001 within seven days from that date. The amount had to be paid by 20th June, 2001. The defendant did not pay. Consequently, the Commissioner called upon the plaintiff to fulfil its obligation and pay the amount demanded. The Commissioner realised the assessed amount of T.shs 23,390,137.00 on 30th July 2002 through issuance of a notice to the plaintiffs bankers (Agency Notice) constituting the bank an Agent 3 instructing them to collect the specified amount on behalf of the Commissioner. All the above facts are not disputed. The plaintiff is praying for the following orders: “ i) Declaration that the Defendant have breached the terms of the Security Bond and is liable to indemnify the Plaintiff. ii) An order that the Defendant pay the amount ofTshs. 23,390,137.00 to the Plaintiff. Hi) Interest at commercial rate of 38% per annum on the outstanding amount in (ii) above, from 29th July 2002 to the date ofjudgment. iv) General damages for breach of contract contained in the Security Bond. v) Interest on the decretal sum at Courtis rate of 12% per annum from the date ofjudgment to the date offull satisfaction. vi) Costs of the suit. 4 vii) Any other orfurther relief(s) as the Court may find just to grant.” The issues framed are - “ i) What were the terms of the Security Bond? ii) Whether the Defendant defaulted on the terms of the Security Bond. iii) Whether the Third Party’s acts of enforcing and encashing the Security Bond were lawful. iv) To what reliefs are the parties entitled. ” On the first issue, my considered view is to have the document reproduced in full because it is a short document. The bond was tendered and admitted in Court as exhibit P2. It reads: “ BOND TO SECURE THE ULTIMATE PAYMENT OF CUSTOMS DUTIES. BY THIS BOND M/S ANISHA’S LIMITED OF P.O. BOX 5240 DAR ES SALAAM (hereinafter called “The Taxpayer”) and IMPERIA INSURANCE COMPANY LIMITED OF P.O. BOX 21228, DAR ES SALAAM, TANZANIA, (hereinafter called “The Surety”) are held and firmly bound unto Imperial Insurance Company Limited 5 THE COMMISSIONER OF CUSTOMS & EXCISE, TANZANIA REVENUE AUTHORITY OF P.O. BOX 9053, DAR ES SALAAM, TANZANIA (hereinafter called “The Commissioner”) in the sum of TANZANIA SHILLINGS TWENTY THREE MILLION THREE HUNDRED NINETY THOUSAND ONE HUNDRED THIRTY SEVEN ONLY (TSHS. 23,390,137/=) be paid to the Commissioner for which payment well and truly to be made we bind ourselves and every of us jointly and severally for and in the whole of our heirs, executors, administrators and assigns and overly firmly by these presents. Dated this 21 day of March in the year two thousand and one (2001) WHEREAS the Taxpayer requests to have delivery of goods imported under Bill of Lading No. MSCUF2878368 of 3/12/2000 and the particulars of the said goods as declared through the customs single Bill of Entry No. R.08197 dated 19/2/2001 without payment of extra customs duties while awaiting the Commissioner’s final determination of customs duties payable thereon. THEREFORE the condition of this obligation is such that after determination of customs duties by the Commissioner, the Taxpayer pays the whole duty Telephones liability required of him to the Commissioner within seven days from the (255-) 12018 Commissioner’s such determination. In case of any default on the part of 120189 120191 Taxpayer, the surety shall be bound to satisfy and discharge the duty liability accruing there from to the Commissioner up to a total sum of TANZANIAN Fascimile SHILLINGS TWENTY THREE MILLION THREE HUNDRED NINETY (255-51) THOUSAND ONE HUNDRED THIRTY SEVEN ONLY. (TSHS.23, 120193 390,137/=) Then this obligation shall be null void otherwise it shall remain in fullforce and virtue. 6 Period ofBond : 21st March 2001 to 20th June 2001 SIGNED AND DELIVERED BY SIGNED BY P. V.RAJANI. PRADIP. V. RAJANI. ............................... ANISHA’S LIMITED MANAGING DIRECTOR In our presence this 21st day of March 2001 NAME: SAID MTARAZAKI - SIGNED. POSTAL ADDRESS: P.O. BOX 5097 DAR ES SALAAM Qualification C & F OFFICER SIGNED AND DELIVERED BY: S.J. NAIK SIGNED: GENERAL MANAGER For and on behalf of IMPERIAL INSURANCE COMPANY LTD. In our presence this 21st Day of March 2001 NAME: R. S.RIDHAR- SIGNED. POSTAL ADDRESS: BOX 21228 DARES SALAAM Qualification Financial Controller APPROVED BY: Commissioner of Customs and Excise” 7 In his final submissions Mr. Kibuta, Learned Advocate who appeared for the defendant said the bond is a contractual document. He cited the case of Gural V Engle, 128 NJL 252, 25(a) referred to in Blacks Law Dictionary at pp 257 and 260. He argued that a bond is a conditional contract. The conditions to trigger the obligation of the plaintiff to pay were - “ i) The quantum of duty had to be determined by the Customs Commissioner. ii) A demandfor payment of the duty determined had to be made to the defendant. iii) The Defendantfailed to pay off the demanded duty within seven days.” He said the analysis of the evidence shows hat the plaintiffs witness, Mr. Srivasan (PW1) and the Third Party’s witness - Mr. Premi Telesphori were not able to tell the court that customs duty was determined and a specific amount to pay notified to the defendant. Mr. Kibuta conceded that a demand for payment of duty was made and payment was not received within seven days as per the terms of the bond. However, Mr. Kibuta’s opinion is that the plaintiff had no obligation to pay because the duty was not finally determined and the quantum payable to the defendant was not categorically and 8 unequivocally communicated to the defendant. There was therefore, no ground for default in paying in terms of the bond. Mr. Kibuta submitted further that even if it is assumed that the quantum of custom duty was determined and a demand for payment made, as long as the payment was not made within seven days, the question which arises is whether the payment was made within the lifespan of the bond. It was further submitted by Mr. Kibuta that the testimony of PWi - Mr. Srivasan was that the bond is not a standard document. It was a document specifically designed for the defendant. The validity of the bond was from 21st March 2001 to 20th June 2001, Mr. Kibuta said this is the period within which the plaintiff stood bond to satisfy any customs payment required to be made by the defendant. This being the term of contract, it is binding the parties. In terms of the testimony of PWi the surety (the plaintiff) chose the maximum quantum to be paid and the time within which the liability of the insurer (Plaintiff) will subsist. Mr. Kibuta observed that the demand for payment was made on 12 June, 2001 within time. This demand for payment was admitted in Court as exhibit P3. According to Mr. Kibuta there was nothing that prevented the plaintiff (Insurer) from paying before the expiry date. The expiry date was on 20th June 2001. Another letter was sent to the plaintiff on 20th June, 2001 requiring payment because the defendant had not paid. This reminder was tendered in court as exhibit P4. The 9 evidence shows that the plaintiff received the reminder on the same day. Mr. Kibuta argued that there was no reason why the plaintiff did not proceed with payment on the final day of the life of the bond. Mr. Kibutas strong argument is that so long as payment was not made within the lifespan of the bond all correspondences that followed thereafter requiring the plaintiff to pay were irrelevant for purposes of determining the liability of the defendant to the plaintiff because the plaintiff made payment long after the bond had expired. The payment was made on 30th July 2002, more than a year after the expiry of the bond. The letters which were written by the Commissioner for Customs after 20/06/2001 were dated 14/9/2002 (Exhibit P5) 22/09/2001 (Exhibit P6). The others were written by the plaintiff requiring clarifications on the payment. These were admitted in court as exhibits P7, P8, P9, P11 and P12. Receipts issued by the Third Party showing that the plaintiff did pay the amount of the bond were admitted collectively as exhibit P13. Mr. Kibuta said even the receipts do not generate a right to recover under a bond which expired. The facts of this case are similar to that of the case of Imperial Insurance Ltd Vs Nikki Telecom & Power Technologies and Tanzania Revenue Authority Commercial Case No.274 of 2002 (unreported) decided by My Brother Judge- Kalegeya. Mr. Kibuta does not agree with the decision of my Brother Judge Kalegeya. 10 Mr. Kibuta’s view is that the plaintiff can only recover from the defendant if payment was made within the lifespan of the bond. Since it was not made within the lifespan of the bond, then the loss falls where it lies. Mr. Kibuta also made a submission on a procedural matter. He said this is a suit which has been filed by a company. There is nothing on the court record to show that the suit was sanctioned by a resolution of the Board of Directors of the Company. He cited the case of Bugerere Coffee Growers Ltd Vs Sebaduka and another [1970] EA 147. With greatest respect to Mr. Kibuta this submission cannot be considered by this court. Apart from being raised at the wrong time, the submissions lack basis. A person cannot be heard on what he has not pleaded. In the case of Vidhyarti V Ram Rakha [1957] EA 527 the court held: “... It is now established, that evidence and arguments in legal proceedings must be confined to proceedings.” The issue was also addressed by the Court of Appeal in Agro Industries V A.G. [1994] TLR 43 where the court held that "... evidence and arguments in legal proceedings should be confined to pleadings.” 11 The defendant did not plead that the plaintiff has no authority to institute the suit. It has no right to make submissions on the point because there is no foundation laid for the argument. Mr. Chipeta, Learned Advocate for the plaintiff submitted that the defendant’s defence that the Commissioner has not determined the import duty payable and demanded the same from the defendant cannot be true because the letters produced in court are very clear. I totally agree with Mr. Chipeta that the Commissioner determined the amount of import duty payable and communicated the same to the defendant. Mr. Kibuta submitted correctly that exhibit P3 is one of the main documents relied upon by the plaintiff. Exh. P3 is addressed to the defendant. It reads: “ TANZANIA REVENUE AUTHORITY TRA/CE/C.50/6/HSC.73 12th June, 2001 The Managing Director, Anisha’s Ltd Plot No.51 Chuma Road, P.O.Box 5240 Dar es salaam. Attn. Pradip Rajani RE: H.S. TARIFF CODE, TARIFF RATES FOR GUY GRIPSAND POLE TOP MAKE OF AND SURGE ARRESTERS 15 that the plaintiff is not entitled to be refunded the amount of duties paid on its behalf because the payment was not made within the bond period. The cause of action could not have accrued within the bond period in this case because the demand was made on 12/06/2001. The expiry date of the bond was on 20/06/2001. On that day, payment was not made. The failure to pay by the last date of the lifespan of the bond made the cause of action accrue for the Third Party and the surety and also the surety against the defendant as the plaintiff has done after payment of the amount of the bond. I am in total agreement with my Learned Brother - Justice Kalegeya in Imperial Insurance Co. Ltd Vs Nikki Telecom & Power Technologies Limited and Tanzania Revenue Authority where he said. “That said, with respect, I am surprised by Mr. Rweyongeza’s submission that the bond could not be enforced after the expiry date. While I did not fully comprehend the ambit of his arguments, what is obvious is that a breached right matures after the accrual of a cause of action. The defendants( and for that matter the plaintiffs) were at liberty to meet their obligation of paying anytime within 7 days after 13/6/2001. That is when the cause of action accrued. Obviously therefore any recovery measures as were taken by the Third Party had to be undertaken after 20/06/2001 and not before.” 16 As stated before, the above case is in all fours with this case except for the parties and the amount claimed. Following what has been discussed above, there is no doubt that the defendants did not honour the terms of the security bond. They defaulted, hence making the Third Party’s acts of enforcing and encashing the security bond lawful. Regarding the relief, I grant prayers (i) and (ii) as prayed. As for prayer (iii) I do not think that 38% p.a. interest is the commercial rate currently prevailing. The plaintiff did not even bother to tell this court where the figure of 38% p.a. is pegged. I consider 23%p.a. being within the normal commercial interest rates currently prevailing. I grant 23% interest on prayer (iii). On general damages, (prayer (iv)) the plaintiff seems to have abandoned the prayer because PWi only prayed for the refund of liability, interest and costs. I also grant interest at the normal court rate of 7%p.a from the date of judgment till full satisfaction on prayer (v) plus costs. N.P.KIMARO, JUDGE 2/09/2004 17 Date 3.9.2004 Coram: Hon. N.P.Kimaro, J. For the Plaintiff - Mr. W. Chipeta. For the Defendant - Absent. For the Third Party - Mr. Lugaiya. CC: R. Mtey Court: Judgment delivered today. Order: Judgment for the plaintiff as stipulated in the judgment. N.P.KIMARO, JUDGE 3/09/2004 3578 - words is a Crcre and correct r; :SlnaVj/der Judgement Ruffing jd ■y §n_______ **»»••» J‘“.......