jcr enterprises ltd vs tanganyika investment oil and transport co ltd another 2011 tzhccomd 2033 5 july 2011

IN THE HIGH COURT OF TANZANIA

COMMERCIAL DIVISION

AT DAR ES SALAAM COMMRCIAL CASE No 77 OF 2007 JCR ENTERPRISES LIMITED.................................... PLAINTIFF Versus TANGANYIKA INVESTMENT OIL & TRANSPORT CO. LTD........................................... 1st DEFENDANT ENOC SUPPLY & TRADING (LLC)............................ 2nd DEFENDANT

JUDGMENT Mruma, J. The undisputed facts of this case are as follows: In September, 2005 a Congolese company known as Kijemba Transport Limited (hereinafter Kijemba), entered into a supply agreement with Tanganyika Investment Oil and Transport Company Limited, (hereinafter TIOT) a Tanzanian company under which the Tanzanian company undertook to supply 2,000,000 litres of Petroleum products to Kijemba. The agreed price was USD 0.65 per litre therefore the total price payable for the entire supply would be USD 1,300,000.00. Further to that it is also not in dispute that in order for the agreement between Kijemba and TIOT to operate smoothly, JCR Enterprises Limited (hereinafter JCR), the plaintiff herein which is a Ugandan company created a bank guarantee in favour of Enoc Supply & Trading i Company, a Dubai based company who was to supply petroleum products to TIOT who in turn would supply to Kijemba under the said supply agreement. JCR furnished a bank guarantee to the tune of USD 1,200,000.00 with her banker in Uganda, the Crane Bank of Uganda in honour of the signed agreement. It is stated in the plaint that in total breach of the agreement instead of supplying 2,000,000 litres of petroleum products in 45 days as agreed, form 1st October, 2005 to 15th November, 2005 TIOT supplied to Kijemba 300,000 litres only. That notwithstanding, TIOT and Enoc Supply & Trading Company (the

defendants herein) severally and jointly on the due date of the validity of the guarantee invoked the entire sum guaranteed. The plaintiff states further that the bank guarantee having being invoked her account started to be penalized by attracting an interest of 36% per annum and upon her failure to service her account the account was transformed into a loan account. She could not be able to repay the loan so her properties pledged as security under mortgage were sold to recover the debt due. The plaintiff states that for defendants7 act she has suffered loss to the tune of USD 2,478,000.00 at the time she preferred this suit. The plaintiff is now asking this court to order the defendants jointly and severally to pay her damages for the loss she has suffered so far interests both at commercial rate from the date of filing to the date of Judgment and at court's rate from the date of judgment till full payment. The plaintiff also wants to be paid costs of this suit. Upon being served, the defendants filed their written statement of defence denying any liability. Together with its written statement of 2 defence the 1st defendant Tanganyika Investment Oil & Transport Company (TIOT) filed a counter claim claiming against the plaintiff JCR Enterprises and Kijemba Transport for a declaration that the defendants (in the counter claim) have defaulted the terms of supply agreement for

non payment of the purchase price for products supplied. TIOT is also claiming from these two defendants in counter claim for payment of USD 3,477,840.00 or its equivalent in Tanzanian money being the balance after setting off the guarantee. TIOT further claims for payment of USD 780,000.00 or its equivalent in Tanzanian money being compensation for loss of use of trucks at the rate of USD 300 per day per truck for 10 trucks for the entire period her trucks remained idle at Kasumbalesa border. They also pray to be paid interest at the rate of 20% per annum for the amount claimed as principle sum and another 20% chargeable on the amount claimed as compensation for loss of use, general damages as can be assessed by the court, interests at court's rate of 12% per annum and costs of the suit. At the commencement of hearing parties filed a statement of agreed issues which runs as under:- I. What were the terms and conditions of the fuel supply contract II. Whether or not there were any breach of the said contract; III. Whether the acts of the 1st and 2nd defendant (in the main suit) of invoking the guarantee was lawful IV. Whether or not the defendant (in the counter claim) paid for petroleum products supplied to it V. Whether or not the defendants (in counter claim) defaulted the terms of the supply agreement between the parties. VI. Whether or not the plaintiff (in the counter

claim) suffered any loss recoverable from the defendants therein 3 VII. To what reliefs are the parties entitled. In this case four (4) witnesses testified for the plaintiff while three (3) testified for the defendants. The first plaintiff's witness is Captain Joseph Charles Roy PW1, a vastly experienced businessman and retired Pilot. Explaining how he came to know the 1st defendant's company Captain Roy told the court that for quite a long time he has been doing business in Congo DRC. In the course of his business he met one Ambassador Didi Kazadi and they formed a company called Kagoda. Ambassador Kazadi introduced to him one Mr. Islam Balhabou who happened to be the Managing Director of TIOT the 1st defendant herein. Ambassador Kazadi told him that Mr. Islam was a businessman dealing with fuel supplies and that he is a man he could trust as he had worked with him in another company in Congo DRC, in which he was a Managing Director. He said that earlier on his company, the plaintiff herein had business arrangements with Kijemba Transport Company the second defendant in the counter claim in which they imported and supplied petroleum products in Congo and shared profit. Kijemba was getting its supply from TIOT. In one of those transactions TIOT agreed to supply 2,000,000 litres of petroleum products to Kijemba. In order to facilitate this agreement Mr. Islam requested the

plaintiff to open a letter of guarantee in favour of a Dubai based company called ENOC Supplies & Trading Company (LLC) form which TIOT was importing its supplies. Now having being assured by ambassador Kazadi that Mr. Islam was a trust worth person he did not hesitate to Mr. Islam's request to open that guarantee letter in favour of the second defendant in the main suit Enoc Supplies & Company (LLC). The guarantee letter was for a period 4 of one year. He said that under the terms of that guarantee, he had no power to revoke it after it was had been opened. Under that guarantee only the first and the second defendants had rights to invoke the said guarantee. According to this witness after the plaintiff had opened a guarantee letter in favour of the second defendant an agreement was signed between the first defendant in the main suit (TIOT) and the second defendant in the counter claim Kijemba. Under that agreement TIOT agreed to supply to Kijemba two million litres of petroleum products for the total sum of USD 1.3 million within 45 days after the signing of the agreement. He said that contrary to the agreement, the first and second defendant went ahead and cashed the guarantee before the expiry of guarantee letter which was to expire in April, 2005. After realizing that the defendants had cashed the guarantee money, PW1 accompanied by Ambassador Didi Kazadi contacted Mr.

Islam, the Managing Director of the first defendants company. They met Mr. Islam in Dar es Salaam and he told them that he was very sorry because it was a mistake and oversight on their part. He however, did nothing substantial to rectify the error despite paying him USD 20,000.00 as part payment of the guarantee monies which he conceded to have been wrongly cashed. The witness said that on top of USD 20,000.00 and the apology Mr. Islam also paid for PW1 and Ambassador Kazadi return tickets for that trip and told them that he was very sorry about the incident. It is further evidence of PW1 that following the encashment of the guarantee by the defendants the bank revoked the guarantee letter and charged the plaintiffs account a punitive interest of 36% per annum which was in line with their previous agreement. He said that according to their agreement the chargeable interest was 12% per cent 5 per annum. However, upon default the bank was entitled to charge 36% per annum. Regarding the terms of the agreement between the 1st defendant (TIOT) and Kijemba, it is the evidence of PW1 that the 1st defendant agreed to supply 2,000,000 litres of petroleum products to Kijemba in 45 days. The total amount payable under the agreement was USD 1.3 million or USD 0.65 per litre supplied and the 1st defendant was to be paid through the plaintiff for every one million litres supplied. It

was also the term of their agreement that the 2 million litres were to be supplied in 45 days from 1st October, 2005 to 15th November, 2005. Parties further agreed to renegotiate the price after the supply of the first 2 million litres is complete. It was also a term of their contract that the agreement and money involved were guaranteed by a bank guarantee in favour of ENOC Supplies the second defendant herein raised by JCR the plaintiff herein. Regarding the supply, it is PW1 evidence that the 1st consignment was supplied to Kijemba on 9 November, 2005 which was a delay of about a month contrary to the terms of the agreement which provided that the 1st consignment should have been dispatched on the next day after the signing of the agreement. The witness further testified that TIOT supplied a total of 350,000 litres out of 2000000 agreed. He said that because the terms of the agreement provided that payments would be after 1 million litres delivery, Kijemba did not pay for the consignment delivered. Furthermore PW1 told the court that the defendants did not honour their obligations under the agreement but went ahead to cash the guarantee. He said that his company (the plaintiff) borrowed money 6 from the bank in order to open that letter of guarantee in favour of Enoc Supplies (the second defendant) in compliance to the agreement entered between his company (the plaintiff)

and the Directors of TIOT. He said that he sued TIOT because it is TIOT's directors who requested his company to open a letter of guarantee in favour of Enoc Supplies and it is the same TIOT who cashed the guarantee despite the fact that they did not supply petroleum products to Kijemba as per their agreement. Albert Kijemba Jojoma DW2 is the majority share holder and apparently the proprietor of Kijemba Transport Limited the second defendant in the counter claim. He told the court that he knows TIOT (the 1st defendant in the main suit) as a company dealing with importation and distribution of petroleum products in the whole region of Eastern and Central Africa. He said that he started to deal with TIOT in the year 2004. Initially he used to order petroleum products from TIOT on cash bases. In his first dealing with TIOT he purchased 2 million litres of petroleum from TIOT. TIOT supplied all products as agreed. In one occasion in 2004 while he was in Dar es Salaam at Mr. Islam's office he met with Captain Roy (PW1) and Ambassador Didi Kazadi, a Congolese diplomat. Ambassador Kazadi introduced Captain Roy to him. Kazadi told him that Captain Roy was a big businessman with whom they can do big business. They visited Mr. Islam's residence with Ambassador Did Kazadi and Captain Roy. At Mr. Islam's residence they negotiated a deal and entered into a sort of joint venture agreement.

In that agreement TIOT agreed to supply 2 million litres of petroleum products to Kijemba on understanding that payments were to be made through Captain Roy or JCR. The first and second transactions were executed smoothly. Problem started in the third agreement. In that 7 agreement which was entered into in April, 2005 TIOT agreed to supply 2 million litres of petroleum products to Kijemba. TIOT was to get its supply from a Dubai based company called Enoc Supplies. In order for Enoc Supplies to supply the products, Captain Roy through his company the plaintiff herein opened a letter of guarantee in favour of Enoc Supplies. The witness testified further that TIOT did not supply the products as agreed as it supplied about 300,000 litres ONLY out of 2,000,000 litres agreed. According to this witness Mr. Islam, the director of TIOT called him on phone and informed him that he was very sorry he could not supply the products as agreed. He nevertheless requested him to ask Captain Roy to renew his letter of guarantee at Mr. Islam's costs. Captain Roy refused. Regarding the total petroleum products supplied under the third agreement, it is in the evidence of PW2 that at the time he was testifying a total of 981,000 litres had been supplied to Kijemba and there was a balance of USD 417,000 which was due to TIOT but to his knowledge had not been paid to TIOT due to the dispute regarding

the encashment of the guarantee. Sylvester Iranga PW3 is another witness who testified for the plaintiff. He is an accountant working with Kijemba Transport (the 2nd defendant in the counter claim). He told the court that his company is dealing with transport, importation and distribution of petroleum products in Congo DRC. He said that in that company, Mr. Albert Jojoma Kijemba PW2 is a majority share holder. He mentioned the other share holder as Mr. Joseph Kibanda. He told the court that he is aware of the relationship that existed between Kijemba Transport Limited (KTL), Tanganyika Oil Investment 8 and Transport Limited (TIOT) and Joseph Charles Roy Enterprises (JCR). He said that there was an agreement between TIOT and Kijemba under which TIOT had agreed to supply 2 million litres of petroleum products to Kijemba through JCR. This is because JCR had no license to supply and distribute petroleum products in Congo. Under the arrangement JCR was supposed to pass the products to Kijemba who would sale it on commission basis. He said that his role was to make sure that the product has been delivered and calculate Kijemba's commission. He said that up to October, 2006 (which was outside the contractual period) he had received about 1981 litres of the petroleum products out of 2 million litres contracted. Ali Reza Kalan PW4 is the last witness who testified for the plaintiff.

He is the Managing Director of the Crane Bank Limited of Uganda. He told the court that JCR Enterprises is one of his bank customers in Uganda. He remembers that he was approached by Captain Roy PW1 who is the Managing Director of JCR with a request to issue an open ended guarantee. He refused as that was contrary to banking practises. Captain Roy told him that he had no doubt about his customers because he was introduced to them by Ambassador Didi Kazadi a Congolese famous diplomat. He mentioned the customer as Mr. Islam and TIOT. He said that Captain Roy (PW1) requested PW4 to speak to Mr. Islam over the phone. They spoke and he informed him that it was totally against banking practises to issue an open ended guarantee. After some discussions with Captain Roy, a guarantee letter (not open ended) to the tune of USD 1.2 million was opened by JCR in favour of a company called Enoc Supplies. That was sometimes in the year 2004 and the guarantee was for one year. According to this witness the guarantee was cashed before it expired. The bank contacted Captain 9 Roy PW1 and informed him that the guarantee had been cashed. Captain Roy (PW1) contacted Mr. Islam and they asked the bank to renew the guarantee which the bank did in April, 2005 and the funds were returned back but sometimes latter the guarantee was cashed again. The bank contacted Captain Roy (PW1) again and informed

him that the guarantee had been cashed once again. Captain Roy contacted Mr. Islam but he did not give any feed back to the bank. According to this witness the bank converted the plaintiffs account into a loan account with an outstanding amount from April, 2006 and they had been charging interest since then. The witness testified further that the bank wrote to JCR (Exhibit P3) informing them about the amount due and interest chargeable which is 36% per annum. It is the evidence of PW4 that up to 12th October, 2009 a day before he testified in this court the outstanding amount against JCR's account was USD 4,329,250.00. PW4 tendered in evidence a bank guarantee (Exhibit P4) issued in favour of ENOC Supplies. For the defendant Mr. Abdallah Said Abdallah DW1 was the first witness in line. He is a Director of Operations of TIOT since 2001. He knows both JCR Enterprises (the plaintiff in the main suit) and Kijemba (the second defendant in the counter claim). He said that there was an agreement between his company and the 2 defendant in the counter claim Kijemba transport in which his company was to supply to Kijemba Transport 1.2 million litres of petroleum products. The agreement was guaranteed by JCR by a letter of guarantee in favour of Enoc Supplies of Dubai. He said the formal agreement between the parties was signed in 2005, but prior to that agreement the parties were doing

business on mutual trust. io Regarding the consignment delivered to Kijemba DW1 testified that although he cannot recall properly but he is sure that a total of 5,256,000 litres were supplied Kijemba. On whether any payment was made for the supplies DW1 said that he cannot recall any payment being made by Kijemba. When asked what steps they took after seeing that no payments were forthcoming despite the supplies, DW1 replied that unfortunately when they were still doing their reconciliations JCR instituted this suit. He said that there were negotiations between TIOT, Kijemba and JCR and in that negotiations there were no dispute that 950,000 litres were supplied to and received by Kijemba. That notwithstanding, it is the evidence of DW1 that no payments were made for the supply which was not in dispute. He said that they could not pay to Enoc Supplies for the supply therefore ENOC supplies decided to cash the guarantee now in dispute. The witness said that despite the encashment of the guarantee, Kijemba had not paid the balance to date. The witness further told the court that in their business arrangement with Kijemba their duty was to clear the consignment and to transport it to Kasumbalesa border where upon Kijemba would take over and clear the consignment through the DRC border. He said that in one of those transactions two of the first defendant's trucks were gutted

by fire at Kasumbalesa border as a result of Kijemba's delay in clearing them. According to DW1 there were also other 8 trucks which were equally delayed at the border but which escaped the fire accident. The defendants are now claiming for compensation for loss of use of the 10 trucks at the rate of USD 300 per day for the period of 30 days beyond ii the required time. Under this head the defendants are claiming USD 180,000.00 in total. The defendants are also claiming USD 600,000.00 being compensation for the trucks gutted down by fire at the border. It is further evidence of DW1 that Kijemba is indebted to TIOT in the sum of USD 4,257,840 being unpaid balances for the petroleum products supplied. Aden Yussuph Mwakyonde DW2 is an employee of Freight Meridian at Tunduma border who was dealing with documentations of TIOT petroleum products which were heading to Zambia and Congo. He said that in 2004 he was instructed by the Director of TIOT to handle petroleum products belonging to Kijemba. He said that he handled about 5,256,000 litres which were on transit to Kijemba Transport Limited. He said that he was responsible to deal with the products on Tanzanian side of the border while on Zambian side an agent called Zuna was responsible. At Kasumbalesa border it was the responsible of Kijemba itself to handle the cargo. He said that the last consignment for Kijemba crossed the

Kasumbalesa border on 18th June, 2006. Another witness who testified for the defendants is Mr. Simon Ganizan Mwanza DW3 the Director of Zuna Enterprises of Zambia. He told the court that TIOT has been the customer of its company for quite a long time. He also told the court that at the times he was handling TIOT's consignments he used to deal with consignments belonging to Kijemba. He said that between 2004 and June 2006 he handled about 150 trucks belonging to the plaintiff but carrying Kijemba's consignments. Each truck was carrying between 30,000 to 40,000 litres. He said that normally they were receiving documents from TIOT representatives and they were processing and hand them over to Zambian Revenue Authority. After clearing the consignments the documents are handed 12 over to truck drivers. The trucks are given five days to cross through Zambia to Kasumbalesa border on Zambia/Congo border. He said that although their duty was to facilitate clearance from Nakonde to Kasumbalesa but he is sure that all 150 trucks he handled delivered to Kijemba. That was the evidence adduced in this case. The first issue is about the terms and conditions of the supply agreement between Kijemba Transport Limited and the defendant TIOT Company Limited. From the evidence on record it is undisputed evidence of PW1 that the following were the terms and conditions of the agreement:- 1. That TIOT agreed to supply to Kijemba Transport Limited 2,000,000 litres of petroleum products at the price of USD 0.65 per litre or USD 1.3 million for the entire consignments.

2. That the whole consignments were to be supplied within 45 days after signing the agreement or from 1st October to 15th November 2005.

3. That the parties may renegotiate the price after the supply of the said 2,000,000 litres agreed.

4. That TIOT would supply to kijemba the said products in not less 35,000 litres trucks 5. That the money involved was guaranteed by a bank guarantee in favour of ENOC Supplies Limited raised by JCR Enterprises Limited valid for a period of one year running from April, 2005.

6. That Kijemba were to pay through JCR for every one million litres supplied 13 7. That any deviation from the terms of the agreement could automatically cancel the letter of guarantee I therefore find as a matter of fact that the terms and conditions of the said agreement are as stated in the testimony of PW1 and as stipulated in exhibit P2 and reproduced hereinabove. The second issue is whether there was any breach of the contract between the parties for supply of petroleum products. From the evidence of both sides this issues must be answered in the affirmative. In the first place it is the evidence of PW1 that according to their agreement the first consignment was to be dispatched on the following day after the signing of the agreement and the entire consignments was to be supplied within 45 days. Contrary to what was agreed the 1st consignment was delivered about 40 days after the signing of the said agreement. Secondly, while the contractual period according to the evidence (Exhibit Pl) was 45 days from 1st October, to 15th November, 2005 the last delivery was done sometimes in June, 2006 well beyond the contractual period. Finally on this issue, while under the agreement the TIOT was obliged to supply two million litres of petroleum products to Kijemba it is not disputed that up to the end of the contractual period in November 2005 about 300, 000 litres only were

supplied and in total less than one million litres were supplied up to and including June, 2006. These are clear breach of the terms of the supply agreement (Exhibit P2). Violation of a contractual obligation by failing to perform one's 14 own promise is what constitutes a breach of contract. In the present case the 1st defendant in the main suit, Tanganyika Oil Investments and Transport Company Limited (TIOT) had failed to supply two million litres of petroleum products to Kijemba Transport Limited (Kijemba) as agreed in their supply agreement (Exhibit P2). In my view this is an active breach of the supply agreement. I therefore answer the second issue in the affirmative. That is to say there was breach of the contract of supply between the parties. The third issue is whether the 1st and 2nd defendants' act of invoking the plaintiff's guarantee was lawful. It has been established from the of PW1 and PW2 that for the entire contractual period the 1st defendant delivered about 300, 000 litres of the products. Other 600, 000 litres were supplied outside the contractual period of 45 days so that in total about 900, 000 litres were supplied out of 2 million litres agreed upon. In his evidence PW1 told the court that Kijemba did not make any payment to the 1st defendant because under the contract payment were to be made for every one million litres delivered and TIOT did not do

that. He referred this court to clause 6 of the New Supply Agreement (Exhibit P2) which provides that:- "It is agreed that KTL will pay through JCR Enterprises Ltd for every one million litres supplied" We have seen that under the supply agreement, the money involved (that is USD 1,200,000.00), was guaranteed by Bank guarantee raised by JCR Enterprises the plaintiff herein in favour of ENOC Supplies, the second defendant therein. The guarantee (Exhibit P4), clearly 15 stipulates that M/S ENOC Supply and Trading (LLC), could cash the guaranteed money in the event that JCR Enterprises Limited fails to comply demand for payment of the service rendered. Explaining the encashment of the guarantee Abdallah Said Abdallah (DW1) told the court that although there were 950,000 litres the delivery of which was not disputed, Kijemba did not make any payment and this resulted into the 1st defendant's failure to pay for the supply it was getting from ENOC Supplies and Trading (LLC) and while they were still negotiating with ENOC Supplies invoked the guarantee. However, there is no evidence that JCR failed to comply with any demand for payment from TIOT. From the testimonies of DW1 there is no dispute that the defendants invoked the guarantee on the ground that Kijemba had failed to pay for at least 950,000 litres admittedly supplied. However, as stated hereinabove there is no evidence that

there were any demand for payment for the services rendered before the defendants resorted into invoking of the guarantee. The defendants did not tender any invoice or any other document suggesting that there was any demand for payment sent to Kijemba and I think there is none. I think so because under the new supply agreement signed by the parties (Exhibit P2) first payments were upon supply of 1,000,000 litres. TIOT did not supply 1000,000 litres as agreed therefore it could not legally raise any invoice to demand payment from Kijemba. This is evident from the testimony of both sides. For instance PW1 and PW2 said that in total the first defendant supplied about 981,000 litres and DW1 said that they had supplied over 5 million litres but the amount which was not in dispute was about 950,000 litres. This means that parties were agreeing that less than 1 16 million litres were supplied and not disputed. But whichever was the correct figure (between 981,000 and 950,000) would not entitle the TIOT to claim for payment under the contract. Thus, because under the provisions of the guarantee (Exhibit P4) ENOC could only invoke the guarantee upon JCR's failure to comply with demand for payment of the services rendered, and because under the new supply agreement (Exhibit P2) payment by JCR was upon supply of 1 million litres by TIOT to Kijemba which TIOT did not supply, then it

follows that the act of the defendants to invoke the guarantee without first, TIOT supplying 1 million litres to Kijemba and thereafter raising an invoice, and JCR's failure to comply to the invoice so raised the act of the defendants invoking the guarantee was unlawful. This answers the third issue in the negative. That is to say the defendants' act of invoking the plaintiff's guarantee was unlawful. Before discussing the issue in respect of the reliefs in the main suit, I find it pertinent to resolve issues raised in the counter claim so as to have one conclusion for the entire matter. The first issue raised in the counter claim is whether the defendant in the counter claim paid for petroleum products supplied to it by the plaintiff therein (the 1st defendant in the main suit). Evidence analysed above had revealed that actually no payment was made to the plaintiff in the counter claim for the petroleum products supplied to the defendant therein. It is in the evidence of PW1 that the plaintiff in the counter claim did not comply to the terms of their new agreement therefore he was not entitled to any payment. PW1 and PW2 testified unchallenged that the plaintiff supplied about 300, 17 000 litres within the contractual period and in total it supplied about 981, 000 litres of petroleum products until the date they gave their testimonies in this court. Under the agreement

(Exhibit P2) the plaintiff in the counter claim had rights to demand payment after supplying 1 million litres, which it did not. And as a result of which no payment was made. This answers the 1st issue in the counter claim in the negative. That is to say the defendant in the counter claim did not pay for the petroleum products supplied to it by the defendant therein which is 981, 000 litres. The second issue is whether the defendant in the counter claim defaulted the terms of fuel supply agreement. As it has been demonstrated above the new supply agreement (Exhibit P2), is very clear on the mode of payment. It is stated under clause 6 that:- “It is agreed that KTL will pay through JCR every 1 million litres supplied" Admittedly the plaintiff did not supply 1 million litres of petroleum products to entitle him to demand for any payment under the contract. Moreover, as correctly submitted by Mr. Madega, the plaintiff did not lead evidence to prove that it submitted any invoice to the defendant for payment and that the same was ignored by the defendant. I therefore answer the second issue in the counter claim in the negative. That is to say the defendant in the counter claim did not default the terms of the supply agreement. It has been submitted for the plaintiff in the counter claim that PW1 in his testimony admitted severally that he did not pay for the fuel supplied to the

second defendant (in counter claim) as required or at all despite the fact that DW1 and DW2 testified that they supplied to 18 i Kijemba 5,256,000 litres of petroleum products. I do not subscribe myself to this approach in resolving the dispute between the parties in this suit. The evidence adduced by both sides show clearly that the transaction in contentious is in respect of the new supply agreement (Exhibit P2) signed by the parties in September, 2005. This was not the only transaction between the parties. There is ample evidence to show that Kijemba Transport Limited and TIOT (the first defendant in the main suit) had business relationship prior to the signing of the agreement now in dispute According to both PW1 and DW1 they were doing business on mutual trust. The pleadings, oral testimonies and exhibits tendered all point out to the fact that the dispute under consideration is confined to the new agreement (Exhibit P2) signed by the parties in September 2005. In this new supply agreement (Exhibit P2) TIOT agreed to supply to Kijemba 2 million litres of petroleum products in 45 days from 1st October to 15th November, 2005. Even the guarantee raised (Exhibit P4) was confined to this particular transaction. This agreement was very clear and had nothing to do with the 2004 transactions. I therefore reject the testimonies of DW1 and DW2 in connection with the supply of

5,256,000 as being irrelevant to the dispute under consideration. It has been submitted for the defendant that since the guarantee (Exhibit P4) which is the agreement "that forms the subject matter of this suit" confers exclusive jurisdiction as to its construction and interpretation to English courts, then this court has no jurisdiction to entertain the matter at hand. To support this position counsel for the defendants has cited the decision of this court Kimaro J, as she thenwasinthe case of Afri Scan Group (Tanzania) Limited Vs Pacific 19 i International (Tanzania) Limited Civil Case No 14 of 2001 and the High Court of Kenya Decision in the case of Friendship Container Manufacturers Limited Vs Mitchell Cotts (K) Ltd [2001)2 EA p 338 and finally the decision of this court in the case of Jamila Sawaya Vs Royal Marine Shipping of Dubai and others Commercial Case No 30 of 2006 Massati J, as he then was. In all these three authorities cited the court was of the view that where the document which governs the agreement confers exclusive jurisdiction to a foreign court, courts in Tanzania do not have Jurisdiction to hear that case. While in principle I do agree with that position taken by my sister and brother judges in the cited authorities, but I think each case should be determined on its own facts. The cited authorities are distinguishable with the present case. In the first

place in the case at hand the plaintiffs case is not solely based on the guarantee (Exhibit P4) but rather on the new supply agreement between TIOT and Kijemba (Exhibit P2). The court in the present case is not called upon to construe the terms of the guarantee but the new supply agreement (Exhibit P2). The guarantee document was tendered not as the basic foundation of the plaintiffs case, but as evidence in support of the plaintiffs claims which are based on the new supply agreement (Exhibit P2). Secondly, there is no dispute that the agreement now under consideration (Exhibit P2) was signed herein Dar es Salaam within the United Republic of Tanzania. In Afriscan's and Jamilia's cases (supra), the documents under consideration which were Bills of Lading contained a clause which excluded Tanzania courts from entertaining any dispute arising there from. Bills of Lading are 20 standard documents which are normally prepared and executed outside the jurisdiction of our courts. In my view it is unconstitutional for the parties to enter into an agreement which is executed within the United Republic of Tanzania to transact partly or wholly within the United Republic but which contain a clause which excludes the jurisdiction of the courts of the land over the matter. My views are pegged on Article 107 A (1) of the Constitution which provides that:- "The Judiciary shall be the authority

with final decision in dispensation of justice in the United Republic of Tanzania" -r-i . ... • । । • . । .■ ~th — .... The term justice is defined in the Black s Law Dictionary, 7 Edition as the fair and proper administration of laws. It is the fair treatment of peoples' rights therefore it would be repugnant to our Constitutional and embarrassing to have the rights of the people who negotiated and signed an agreement in Tanzania be exclusively determined by the English courts. There was also an attempt to tie the new supply agreement (Exhibit P2) with the clearing and transportation of the petroleum products from Dar Es Salaam Port across Zambia to DRC. DW1 and DW2 diverted most of their testimonies towards explaining the clearing and transportation procedures. I do not find any nexus between the clearing and forwarding procedures for on transit goods and the agreement under consideration. It is not disputed that Kijemba Transport Limited is a company based in Congo DRC. It is further not an issue that TIOT is based in Tanzania but deals with the supply oil petroleum products in the entire region. Clause one of the new supply agreement (Exhibit P2) states clearly that:- 21 "TIOT agrees to supply to KTL (Kijemba Transport Ltd) 2 million litres and KTL agree to pay TIOT 0.65 USD per litre. A total of USD 1.3 Million" The issue of importation, clearing and forwarding of

the consignment was not among the issues considered in that agreement and probably for obvious reason that it was the core business of TIOT to import and supply petroleum products within the region as readily conceded in paragraph 1 of its written statement of defence. Lastly I wish to discuss albeit the conduct of the second defendant in the main suit ENOC supplies and Trading (LLC) of Dubai in United Arab Emirates. Originally, there were three defendants in the main suit namely Islam Balhabou, Tanganyika Oil Investments & Transport Company Limited and ENOC Supplies. On 28 December, 2007 this court (Massati J, as he then was), ordered ENOC Supplies to be served by courier service through DHL. ENOC were served and there is no dispute about that. On 22nd July, 2008 this court Werema J, ordered the name of the first defendant Islam Balhabou to be strike out of records and the case proceeds as against the remaining defendants. The remaining defendants were Tanganyika Oil Investments and Transport Company Limited (TIOT) and ENOC Supplies & Trading (LLC). ENOC supplies did not enter appearance. The first defendant called its last witness on 26 October, 2010. Thereafter Ms Kirethi counsel for the defendant intimated that she had one more witness and prayed for an adjournment which was 22 dully granted. The matter was rescheduled for further defence hearing on 2nd December, 2010. On

that day Ms Kirethi could not procure the attendance of her witness whom he mentioned as Mr. Arshid Manji, the representative of ENOC Supplies and Trading (LLC) in Dubai therefore she asked for another adjournment. The matter was yet adjourned to 3 March, 2011. When the matter was called for further hearing of the defence case on 3 March, 2011 Ms. Kirethi informed the court that she has failed to procure the attendance of Mr. Arshid Manji because she was in India attending his sick mother. Counsel could not produce any supporting document to convince the court to grant yet another adjournment. I refused to grant the prayer and requested Ms. Kirethi either call the next witness or close the defendants' case. She opted to close the defendants' case. What can be gathered from this trend is that although ENOC Supplies were aware of this matter but they were prepared to give evidence for TIOT but not for themselves. Now the reliefs; It has been proved not only on the balance of probability as required in civil cases, but beyond doubt that there was a breach of the terms of the supply agreement on the part of the 1st defendant in the main suit (the plaintiff in the counter claim). I have also found as a matter of fact that the guarantee was unlawfully invoked. There can be no doubt that the plaintiff has suffered loss equal to the amount of guarantee plus the interest and costs

chargeable thereafter. The loss suffered by the plaintiff is confirmed by the testimony of Alireza Kalan PW4, the Managing Director of the Crane bank of Uganda. This witness testified unchallenged that following the invocation of the guarantee by the defendants in the main suit, (the 23 act which I have found to be unlawful) the plaintiff's account No 0245020131300 was debited and consequently the said account was overdrawn. PW4 testified further that the under their agreement the plaintiff was liable to make good the amount paid ( i. e. USD 1.2 Million) together with all costs and charges. The witness said that the bank was entitled to charge punitive damages at the rate of 36% per annum. The plaintiff is now claiming for payment of USD 2, 478, 207.00 being the amount payable on the day the suit was filed. On the basis of the evidence analysed above I find that the plaintiff is entitled to judgment to that extent (As this is the amount claimed in the suit). The plaintiff is also entitled to punitive interest charged by the bank in its account at the rate of 36% per annum from the date of filing this suit to the date of Judgment. Furthermore the plaintiff shall be paid all costs and charges chargeable as a consequence of its account being overdrawn. Further interest at the court's rate of 3% per annum shall be payable from the date of this judgment till payment in full. Regarding the counter-claim for reasons stated in this judgment hereinbefore it is dismissed with costs. In summary therefore Judgment is entered for the plaintiff jointly and severally against the defendants in the main suit to the extent explained above. On the other hand the counter claim is dismissed. The plaintiff in the main suit will have its costs. Order accordingly. A. R. Mruma

JUDGE 24 5/7/2011 Coram: Hon. A.R.Mruma, Judge. For the Plaintiff- Mr. Madega for Plaintiff. For the 1st Defendant'] Mr. Chipeta for the Defendants. For the 2nd Defendant CC: J. Grison. COURT: Judgment delivered this 5th day of July, 2011 in presence of Mr. Madega, Counsel for the plaintiff and Mr. Chipeta W. Counsel for the defendant. A W A a’WvU A. R. JVIruma

JUDGE 5/7/2011 7,040 - words 25