JUIN CO

IN THE HIGH COURT OF THE UNITED REPUBLIC OF TANZANIA COMMERCIAL DIVISION AT PAR ES SALAAM MISC. COMMERCIAL APPLICATION NO. 10104 OF 2024 JUIN COMPANY LIMITED.................................................................... APPLICANT VERSUS SIMBA PIPE INDUSTRIES LIMITED (FORMERLY KNOWN AS DPI SIMBA LIMITED)............................ RESPONDENT RULING Date of last Order: 17/05/2024 Date of Ruling: 27/05/2024 GONZI, J. The applicant filed this application by way of Chamber Summons and an affidavit under Order I Rule 14(2) and Rule 15 of the Civil Procedure Code Cap 33 of the laws of Tanzania seeking for orders that: a) This Honourable Court be pleased to grant the Applicant leave upon which to file a third-party notice against Justice Ephraim Kato alias Mr. Justice Kato who is also a Director of the Applicant in Commercial Case No. 2928 of 2024. 1 b) Costs of the Application. c) Any other relief and or direction the court shall deem fit to grant. The application was supported by an affidavit of Innocent Bernard Mwampinge, Principal Officer of the Applicant Company. In his affidavit, Mr. Innocent Bernard Mwampinge stated that all the claims of the Plaintiff in Commercial Case No. 2928/2024 arise from sale agreement of 1st August 2017 that involved the Applicant, the Respondent and Lushoto District Council. He stated further that Mr. Justice Kato personally signed and witnessed that agreement and therefore he can be liable to indemnify or contribute to the liability of the Applicant towards the respondent in the Commercial Case No.2928/ 2024 in case the Applicant is found liable. He concluded by stating that if Mr. Justice Kato is not joined as a third party, the Applicant is likely to suffer economic loss. The application is not opposed by the Respondent's counsel. Order I Rule 14 of the Civil Procedure Code provides that: 2 (1) Where in any suit a defendant claims against any person not a party to the suit (hereinafter referred to as "the third party")- (a) any contribution or indemnity; or (b) any relief or remedy relating to or connected with the subject matter of the suit and substantially the same as a relief or remedy claimed by the plaintiff, the defendant may apply to the court for leave to present to the court a third-party notice. (2) An application under sub-rule (1) shall, unless the court otherwise directs, be made ex parte and be supported by an affidavit stating- (a) the nature of the claim made by the plaintiff in the suit; (b) the stage which proceedings in the suit have reached; 3 (c) The nature of the claim made by the applicant against the third party and its relation to the plaintiff's claim against the applicant; and (d) The name and address of the third party. (3) Where, upon an application made under sub-rule (1), the court is satisfied that the defendant's claim against the third party is in respect of a matter referred to in paragraph (a) or (b) of that sub-rule and that, having regard to all the circumstances of the case, it is reasonable and proper to grant leave to the defendant to present a third party notice, the court shall, upon such terms and conditions as it may think just, make an order granting the defendant leave to present a third party notice. (4) An order granting leave to present a third-party notice shall contain directions as to the period within which such notice may be presented and as to such other matters as the court may think just. 4 The present application is brought under Order I Rule 14(2) of the Civil Procedure Code. Firstly, the applicant is supposed to disclose the nature of the claim made by the plaintiff in the suit. This has been disclosed by the Applicant by stating that in Commercial Case No.2928/2024 the Respondent herein as the Plaintiff therein, is suing the Applicant herein as the Defendant therein, for breach of a sale agreement dated 1st August 2017 between the Applicant, the Respondent and Lushoto District Council. Secondly, the law requires the applicant to show the stage which proceedings in the suit have reached. In the instant application, the Applicant has disclosed that the Commercial Case No.2928/2024 in respect of which the 3rd Party Notice is sought is before Hon Agatho, J., and is now at the stage of First Pre-Trial Conference as of 8th May 2024. Thirdly, the law requires the Defendant to show the nature of the claim made by the Defendant against the third party and its relation to the Plaintiff's claim against the Defendant. The applicant herein who is the defendant in Commercial Case No.2928/2024 has shown that the intended third party used the name of the Applicant to unilaterally sign the agreement dated 1st August 2017 without mandate of the Applicant Company. That as a director, the intended third party witnessed himself his signature to the sale 5 agreement and that it is the same contract on which all the claims by the Plaintiff against the Defendant in Commercial Case No.2928/2024 arise and therefore the Applicant claims for indemnity and contribution from the third party in the event the Applicant is found liable towards the Respondent, in the main suit. Order I Rule 14 of the Civil Procedure Code, Cap 33 has two alternative requirements by which the claim of the defendant against the 3rd party can be brought under third party proceedings. Under Order I Rule 14(l)(a) of the Civil Procedure Code, the Defendant is required to prove being entitled to the right to "any contribution or indemnity" from the Third party. In alternative, under Order I Rule 14(l)(b) the Defendant is required to prove that he is entitled as against the third party to any relief or remedy relating to or connected with the subject matter of the suit which is substantially the same as a relief or remedy claimed by the plaintiff against the Defendant. In the case at hand the Applicant has stated in the affidavit that the Applicant is entitled to indemnity and or contribution from the Third Party and that all the claims of the plaintiff against the Defendant arise from the Sale Agreement dated 1st August 2017 which agreement allegedly was signed unilaterally by the Third party and which forms the basis for the Defendant to claim against the Third 6 party. Before the court orders that a third-party notice be issued, it must satisfy itself that there exist material facts to bring the case within the ambit of the requirements of Order I Rule 14 of the Civil Procedure Code. Whereas the requirements are put in the alternative, the Applicant in the present case has tried to use both avenues to bring his case within the ambit of Third-party procedure. I will assess the application accordingly. In Parry v. Carson (1962) E.A. 515, 517-8 it was held that: In order to bring himself within the ambit of Order 1 Rule 14 the applicant must show upon the face of the pleadings and upon his supporting affidavit that he would be entitled to indemnity from the third party in respect of the amount which the plaintiff claims from him in the event of that claim be successful. In Wyne v. Tempest [1897] ICh.llO at 113, Chitty, J; held that: A right to indemnity may arise under express or implied contract or by reason of an obligation from the relation of the parties, such an obligation arises 7 in equity from the relation of the parties when two trustees are liable for a breach of trust and one has applied the trust fund to his own use; in that case the trustee who has so dis-applied the fund is liable to indemnify his co-trustee; so where a man has requested another to hold as a trustee for him shares upon which there is liability for calls or the like the trustee is entitled to an indemnity not merely out of the trust property but by the cestui que trust i.e. the beneficiary." Therefore, in essence the right to indemnity is a contractual right or one that may emanate from the relation of the parties, such as an obligation which arises in equity. I asked myself whether there was any contractual or equitable relationship between the Applicant herein and the Third Party as to give the Applicant herein the right to indemnity? My answer is in the affirmative. A director is an agent of the company, hence there is agency agreement/ contract whether express or implied. The Law of Contract Act Cap 345 of the Laws of Tanzania provides that: 8 134. An "agent" is a person employed to do any act for another or to represent another in dealings with third persons and the person for whom such act is done, or who is so represented, is called the "principal". 138. The authority of an agent may be express or implied. 163. An agent is bound to conduct the business of his principal according to the directions given by the principal or, in the absence if any such directions, according to the custom which prevails in doing business of the same kind at the place where the agent conducts such business, and when the agent acts otherwise, if any loss be sustained, he must make it good to his principal, and, if any profit accrues, he must account for it. Under section 163 of the Law of Contract Act, Cap 345, the agent has an obligation to indemnify the principal for the loss caused. In the case at 9 hand therefore, the Third-Party director as an agent could be made liable to indemnify the Applicant company. In the case of Hely-Hutchinson v Brayhead Ltd, [1968] 1 QB 549 Lord Denning MR held: I need not consider at length the law on the authority of an agent, actual, apparent, or ostensible... It is there shown that actual authority may be express or implied. It is express when it is given by express words, such as when a board of directors pass a resolution which authorises two of their number to sign cheques. It is implied when it is inferred from the conduct of the parties and the circumstances of the case, such as when the board of directors appoint one of their number to be managing director. They thereby impliedly authorise him to do all such things as fall within the usual scope of that office. Actual authority, express or implied, is binding as between the company and the agent, and also as between the company and 10 others, whether they are within the company or outside it. Taking cue from the above, it goes without saying that a company is a legal person who is living only in the eyes of law. It is a formulation of law which lacks both body and mind. It cannot act on its own. It can act only through some human agency. Directors are those persons through whom a company acts and does business. A company is an artificial person and it functions through human agents i.e. the directors. The Third-party Director in this case, can properly be held liable to indemnify the applicant company as the principal. Hence, issuance of third-party notice on the basis of indemnity under agency contract is perfectly justified. On the other hand, from the relationship of a Director and a Company which exists between the Third party and the applicant company, in equity, the Applicant company could also be entitled to indemnity. As it was held in Wyne v. Tempest [1897] ICh.llO at 113, that: A right to indemnity may arise under express or implied contract or bv reason of an obligation from 11 the relation of the parties, such an obligation arises in equity from the relation of the parties..." The Companies Act, Cap 212 in respect of the relationship between a director and the company, provides that: 183.-(1) The matters to which the directors of the company are to have regard in the performance of their functions include, in addition to the interests of the members, the interests of the company's employees. (2 ) The duty imposed by this section on the directors is owed by them to the company (and the company alone) and is enforceable in the same way as any other fiduciary duty owed to a company by its directors. 184. A director must exercise his powers for proper purposes. 12 185. A director owes the company a duty to exercise the care, skill and diligence which would be exercised in the same circumstances by a reasonable person having both - (a) The knowledge and experience that may reasonably be expected of a person in the same position as the director, and (b) Any special knowledge and experience which the director has. As the third party in the case at hand is a director, the relationship between him and the applicant company which he manages, brings him to the fiduciary relationship. In case the director is found to have breached his fiduciary duty towards the company, the company may become entitled to indemnity from the director. The most effective way for the company to recover the indemnity from the director in the case at hand would be by joining the director as a third party on the basis of the company being entitled to the right to indemnity which is among the grounds for the defendant in a suit to join a third party under Order, I Rule 14 of the Civil 13 Procedure Code, Cap 33 of the Laws of Tanzania. Hence, the application at hand is grantable under the ground of the Defendant's right to indemnity from the Third Party. In the affidavit in support of the application for third-party notice, the Applicant has also raised the ground of compensation. No facts were adduced as to why the applicant considers herself entitled to compensation from the third party. While the right to indemnity is contractual or equitable, the right to compensation on the other hand would arise in different settings such as under the law of torts where a tortfeasor has a duty of contribution towards the loss occasioned by his co-tortfeasor. The Applicant in the affidavit has shown that the claims by the Plaintiff arise from the alleged breach of contract dated 1st August 2017. In this regard, the ground of contribution, is out of scope in my view. The Applicant cannot join the Third Party as a contributory to the loss whereas the loss emanates from a contract of sale which gives rise to the right to indemnity and not to contribution. The Applicant's affidavit also has alleged the connectivity between the claims of the plaintiff against the Defendant and the claims of the 14 Defendant as against the Third party, that they both emanate from and are based on the sale agreement dated 1st August 2017. In the Case of Bhamji Laxman Limited V. National Sisal Authority & the NBC, Civil Case No.60 of 1993, High Court of Tanzania at Dar es Salaam (unreported) the Court (Hon. Mwaikasu J.,) held that: "At this juncture let it be pointed out that a Third- Party Notice is for all practical purposes, a form of a claim by the defendant instituted against the third party, for the reliefs sought. As the defendant's claim against the third-party hinges on the nature of the claim of the plaintiff against the defendant, it is for a fair and just adjudication of the dispute imperative that the third party should be supplied with sufficient facts as to make him know adequately the nature of the claim as to be in a position to prepare a proper and adequate defence. (emphasis supplied) In the case at hand, I find that there is nexus between the claim of the plaintiff as against the defendant and the claim of the defendant as against 15 the Third party which hinges on the claim of the plaintiff as against the Defendant. The fourth requirement in law is that the applicant should disclose the name and address of the third party. In this case the Applicant has pointed out that the third party is also a Director in the Applicant company and hence they share the same address with the applicant. I am satisfied therefore that all the necessary conditions for the grant of an order for the Applicant to present a third-party notice are satisfied. It is fair that the said Mr. Justice Ephraim Kato be joined to the Commercial case No. 2928 of 2024 as a third party so that the claims of the Respondent herein against the applicant can be determined in tandem with the claims of the Applicant as against the third party. This will avoid multiplicity of proceedings. In fine, I grant the application and order that: (a) The Applicant is granted 7-days leave from the date of this Ruling, to present a third-party notice in Commercial Case No. 2928 of 2024 against Justice Ephraim Kato alias Mr. Justice Kato who is a Director of the Applicant company. 16 (b) The Third party shall present his Written Statement of Defence within 21 days from the date of being served with the Third- Party Notice. (c) As the application for issuance of 3rd Party Notice was done exparte the said Third party, and was not opposed by the Respondent herein, I make no order as to costs. It is so ordered. A. H. GONZI JUDGE 27/05/2024 Ruling is delivered in Court this 27th May, 2024 in the presence of Mr. Daniel Nsulwa learned advocate for the Applicant and in absence of the learned advocate for the respondent who was duly notified. A. H. GONZI JUDGE 27/05/2024 17