JAMAL ABDULLAH SULEIMAN VS AMRAN MOHAMED TALIB COMM CASE NO

IN THE HIGH COURT OF TANZANIA

COMMERCIAL DIVISION

AT DAR ES SALAAM COMMERCIAL CASE N0.40 OF 2012 JAMAL ABDULLAH SULEIMAN..........................................PLAINTIFF

VERSUS AMRAN MOHAMED TALIB....................................... 1s t DEFENDANT AKRAM AMRAN MOHAMED TALIB.......................... 2n d DEFENDANT LAKE INJENCTION SERVICES LTD..........................3r d DEFENDANT Date of the last Order: 14/05/2012 Date of Ruling: 10/07/2012

RULING MAKARAMBA, J.: This is a ruling on a preliminary point of objection the 1st Defendant and 3rd Defendant jointly raised in their Written Statement of Defence, that the plaint lodged in this Court on the 11th April, 2012 does not disclose a cause of action against the 1st Defendant and 3 rd Defendant. The preliminary point of objection by consent was disposed of by way of written submissions, Mr. MWAKAJINGA, learned Counsel for the Plaintiff and Mr. FRANK MWALONGO for all the Defendants. The background to the matter briefly is that on the 17th July, 2010 the 1st Defendant and 2nd Defendant being members of the Board of Directors of the 3rd Defendant resolved as follows:- Page 1 of 10 "MR. AKRAM AM RAN MOHAMED TALIB be authorized to borrow, raise or secure money in such manner on behalf o f the Company, as we shall think fit, and in particular by the issue o f debentures or security bond or mortgaged charged upon all or any o f the property o f the company (both present and future) including its uncalled capital." Accordingly, on the 24th day of March, 2011 the 2nd Defendant and the Plaintiff executed an agreement whereby the 2nd Defendant was to supply automotive gasoil to the Plaintiff. The Plaintiff transferred United USD 150,000.00 to Areeq Amran Mohamed Talib in Dubai for and on behalf of the three Defendants. On the 24th March 2011, the 1st Defendant handed over to

the Plaintiff a photocopy of the title deed No.54020 in the name of the 3rd Defendant as security for the loan of USD 150,000.000, the Plaintiff transferred to Areeq Amran Mohamed Talib. The Plaintiff alleges further that, despite of the payment of USD 150,000.00 to the Defendants through Areeq Amran Mohamed Talib in Dubai by the Plaintiff, the Defendants have not honoured their part in the bargain. The 1st and 3rd Defendant vehemently dispute the Plaintiff's claim. They have therefore raised a preliminary point of objection that the plaint discloses no cause of action against the 1st and the 3rd Defendant, and hence this ruling. In his submissions, Mr. Mwalongo argues that the plaint in this matter does not disclose cause of action against the 1st and 3rd Defendant contrary to order VII Rule 1(e) of the Civil Procedure Code Cap.33 R.E 2002. According to Mr. Mwalongo, a cause of action in a plaint is not an Page 2 of 10 option but a compulsory requirement, whose absence may lead to the Court rejecting the Plaint under Order VII Rule 11(a) of the Civil Procedure Code Cap.33 R.E 2002. In buttressing his point, Mr. Mwalongo cites to this Court the case of NKALUBO V. KIBIRIGE (1973) E.A 102, FATMA SALMIN AND DR.MAUA DA FTARI Civil Case No. 34 of 2008 (HC) (Unreported) by Hon. Mwarija, J. and the famous case of JOHN M.

BYOMBALIRWA VERSUS AGENCY MARITIME INTERNATIONALE (TANZANIA) LTD (1983) TLR 1. In John M. Byombalirwa's case, the Court explored the meaning of cause of action as envisaged under Order VII Rule 1(e) of the Civil Procedure Code Cap.33 R.E 2002 and expounded that: "...an expression "cause of action" is not defined under the Code, but it may be taken to mean essentially facts which it is necessary for the Plaintiff to prove before he can succeed in the suit." Mr. Mwalongo also sought recourse to the Black's Law Dictionary, 8th Ed, Bryan A. Garner, 2007 on the definition of the term "cause of action" thus: " a group o f operative facts give rise to one or more bases for suing, a factual situation that entities one person to obtain a remedy in Court from another person " Page 3 of 10 This suit is based on the contract between the Plaintiff and the 2nd Defendant, Mr. Mwalongo reiterates. The Plaintiff has sued the 1st Defendant and the 3rd Defendant as well who are not privy to the contract between the Plaintiff and the 2nd Defendant, Mr. Mwalongo points out. From the plaint, the source of the claim is the contract between the Plaintiff and the 3rd Defendants, Mr. Mwalongo revisits. The 1st and 3rd Defendants are not parties neither are they beneficiaries, Mr. Mwalongo reminds. The elements of a contract which includes offer and acceptance, intention to create legal relation and

consideration which ultimately creates privity to contract and legal rights and obligation under contract do not touch the 1st and 3rd Defendants, Mr. Mwalongo reiterates. There are no any other contract apart from the contract between the Plaintiff and the 2nd Defendant, Mr. Mwalongo points out. The 1st and 3 rd Defendants are third parties/strangers to the contract between the Plaintiff and the 2nd Defendant, Mr. Mwalongo avers and cites the case of M/S MUSILANGA ENGINEERING V. P.F NYAKUTONYA NYAMGESERA AND ANOTHER [1986] TLR 115 (HC) where it was held that: "Third Parties are not bound by the contract unless the doctrine o f novation applies in which one party to a contract can release the other and substitute a third person who then undertakes to perform the released person's obligations." Mr. Mwalongo submits further that the obligation is under Section 62 of the Tanzania Contract Act, Cap.345 R.E 2002 which reads that: Page 4 of 10 "If the parties to a contract agree to substitute a new contract for it or to rescind or alter it, the original contract need not be performed." In this matter neither the obligations of the Plaintiff nor of the 2nd Defendant has been transferred to the 1st or 3rd Defendant, Mr Mwalongo further avers and cites the case of Civil Case No. 106 of 2009 between MPS OIL TANZANIA LTD AND OASIS ENERGY CO, LLC (unreported) by Hon. Makaramba, J., on the

cause of action where it was held that: "for a cause o f action to exist that which ought to have been done or that which ought not to have been has been done." Looking from the plaint and all annextures there is nothing that ought to have been done by the 1st and 3rd Defendants, Mr. Mwalongo surmises. In opposition, Mr. Mwakajinga submits that the 1st Defendant is the Chairman of the Board of Directors of the 3rd Defendant. It is the 1st Defendant who chaired the Meeting of the Board of Directors of the 3rd Defendant. The meeting of the Board of Directors of the 3rd Defendant resulted into a resolution which empowered the 2nd Defendant to enter into contract with anybody with money as a loan. Mr. Mwakajinga submits further that wrongly paragraph 7 of the Plaint states that the 1st Defendant entered into an agreement with the Plaintiff. It is supposed to read the second Defendant. In paragraph 8 of the Plaint the 1st Defendant handed Page 5 of 10 over a photocopy of Title Deed No.54020 (the property of the 3rd Defendant) to the Plaintiff as security for the amount of USD 150,000.00 as agreed by the parties, Mr. Mwakajinga reminds. By the resolution of the Board of Directors, the title deed No. 54020 of the 3rd Defendant was to be used to secure money. By paragraph 8 of the plaint the 1st and 3rd Defendants are drawn into the train of events initiated by the 2nd Defendant in

executing an agreement with the Plaintiff, Mr. Mwakajinga surmises. In rejoinder, Mr. Mwalongo submits that the Board Resolution attached to the Plaint does not relate to the contract at issue between the Plaintiff and the 2nd Defendant. The contract at issue concerns the 2nd Defendant in personal capacity but not on behalf of the 3rd Defendant, Mr. Mwalongo reiterates. In that regard there is no connection between the resolution of the 3rd Defendant and the Contract between the Plaintiff and the 2nd Defendant, Mr. Mwalongo avers. There is no point for the company to resolve for the 2nd Defendant to enter into a contract in his individual capacity. The 3 rd Defendant is incapable of making a resolution for personal and individual affairs of the 2nd Defendant. The 1st Defendant cannot be sued by virtue of being the Board Chairman of the 3rd Defendant who is not a part to contract at issue, Mr. Mwalongo further submits and wonders how a photocopy of the title deed can stand as security. The provisions of Order VII Rule 1(e) of the Civil Procedure Code R.E 2002 are crystal clear. The plaint shall contain facts constituting the cause of action and when it arose. It is settled law as per the case of JOHN M. BYOMBALIRWA v AGENCY MARITIME INTERNATIONALE Page 6 of 10 (TANZANIA) LTD [1983] T.L.R. 1 (CA) that for purposes of deciding whether or not the plaint discloses cause of action,

the plaint together with its annextures should be looked at. It has also been restated by Dr. Bwana as he then was in the case of NBC HOLDING CORPORATION VERSUS SHIRIKA LA UCHUMI NA KILIMO LTD (SUKITA) AND 63 OTHERS, Commercial Case No. 24 of 2001 that: "1/7 deciding whether a plaint discloses a cause o f action or not the Court needs to examine the issue within the four perimeters o f the plaint and its annextures, i f any, with any assumption in the process, that allegations made therein, be they factual or not, express or implied, are true. I have had a look at the Plaint on record. Paragraph 6 thereof shows that the Plaintiff relied on the Resolution of the Board of Directors of the 3rd Defendant's company to transfer USD 150,000.00 to the Defendants for the supply of automotive gasoil. The resolution was made by Mr. Amran Mohamed Talib (Chairman), Mr. Akram Amran Mohamed Talib (Managing Director) and Ms Asile Sleyum Masoud (Director/Secretary). It is not disputed that all these persons are competent persons to bind the 3rd Defendant's company. It is also established under paragraph 8 of the plaint that the 1st Defendant handed over a photocopy of the Title Deed No.54020 in the name of the 3rd Defendant as security for the USD 150,000.00 advanced by the Plaintiff to the Defendants. As correctly submitted by Mr. Mwakajinga, if you examine the plaint on the face of it,

it Page 7 of 10 seems that at paragraph 6 and 8 of the Plaint it draws the 1st and 3rd Defendants unto the train. The validity and authenticity of the board resolution and the contract in itself requires scrutiny of evidence at the trial and cannot be taken at the preliminary objection point. Furthermore, the Plaintiff is now protected by the doctrine of indoor management as provided for under section 37 of the Companies Act, Cap.212 of 2002 that: "a party to a transaction with a company is not bound to enquire as to whether it is permitted by the company's memorandum or as to any limitation on the powers o f the board o f directors to bind the company or authorize others to do so." In my considered view, the persons dealing with the company are presumed to have read the memorandum, articles of association and the Board Resolution. Once they are satisfied that the company has powers to enter into the proposed transaction, they are required to do no more. They are entitled to assume that as far as internal proceedings of the company are concerned, everything has been regularly done. The outsider is presumed to know the constitution and resolution of a company but not what may or may not have taken place within the doors that are closed to him. This trite legal position has been succinctly restated in the case of ROYAL BRITISH BANK V. TURQUAND (1856) 6E & B 327. It is for these

reasons that this Court finds that in terms of paragraphs 6 and 8 of the Plaint and annextures "A" and "B" to the plaint, the plaint sufficiently discloses a cause of action against the 1st, 2nd and 3 rd Defendants. Page 8 of 10 In the event and for the foregoing reasons the preliminary point of objection that the Plaint do^/s not disclose a cause of action against the 1st and 3rd Defendants fails and is hereby dismissed with costs, which costs shall be in the cause. It is accordingly ordered. R.V. MA KARAM BA

JUDGE 10/07/2012 Page 9 of 10 Ruling delivered this 10th day of July 2012 in the Absence of the Plaintiff and Mr. Kessy for Mwalongo, Advocate for the 1st, 2nd and 3rd Defendants R.V. MAKARAMBA

JUDGE 10/07/2012 Page 10 of 10