JUNACO T LTD VS MANTRAC T LTD MISC

IN THE HIGH COURT OF TANZANIA (COMMERCIAL DIVISION)

AT DAR ES SALAAM MISC. COMMERCIAL APPLICATION NO. 95 OF 2018 JUNACO TZ LIMITED............................................................ 1st APPLICANT JUSTIN LAMBERT................................................................... 2nd APPLICANT

VERSUS MANTRAC TZ LIMITED......................................................... RESPONDENT 26/10&06/11/2018

RULING MWANDAMBO, J This ruling seeks to address whether the Applicant has disclosed facts for the grant of leave to appear and defend in a summary suit in Commercial Case No. 3 of 2018 preferred under Order XXXV of the Civil Procedure Code, Cap [33 R.E 2002]. Briefly, the Respondent entered into a contract known as Credit Sale Agreement with the company as Marungu Plantation Limited for the sale of Dozer - D6R Caterpillar Machines. Apparently, the 2nd Applicant is a director of the 1st Applicant who is a shareholder of the buyer of the said machines. Although the Applicants were not privy to the Credit Sale Agreement, the 1st Applicant issued five (5) cheques drawn in favour of the Respondent. Other than drawing the cheques, there is nothing to suggest that the said cheques were issued in connection with the machines the Respondent supplied to Marungu Plantation Limited. Be as it may, the said cheques were dishonoured with endorsement R/D which simply means "Refer to Drawer". That prompted the Respondent instituting the suit under summary procedure against the drawer of 1 the chaques and the signatory thereto now the 1st and 2nd Applicants respectively. It is the Applicants' averment's in the affidavit annexed to the chamber summons made under Order XXXV rule 3 (1) (a) and (b) of the Civil Procedure Code, Cap.33 [R.E 2002] (The Civil Procedure Code) that they were not privy to

any contract for the sale of the said machines. It is the Applicants' further averment that at any rate, the Respondent did not fulfill its contractual obligations by conducting maintenance and repair for a period of one year after delivery of the machines. All in all, the Applicants contend that I eave to appear and defend should be granted because Marungu Plantation Limited to whom the machines were supplied is a distinct l egal person from them. In response, the Respondent opposes the application and avers that the Applicants cannot escape from the liability arising from the dishonoured cheques because it i s the legal owner of Marungu Plantation Limited, initiated the process of purchasing the machines and guaranteed the payment of purchase price by issuing postdated cheques which were subsequently dishonoured. The Respondent avers through a counter affidavit deponed to by Mohamed Shawki that the 1st Applicant and Marungu Plantation are one and the same and since it issued cheques in consideration of machines supplied to Marungu Plantation Limited in pursuance of a Credit Sale Agreement signed by the 2nd Applicant, they should not be granted leave to appear and defend. The learned Advocate's skeleton arguments filed pursuant to rule 64 of the High Court (Commercial Division) Procedure Rules, 2012 were anchored on the contention made in the affidavit and counter

affidavit. The learned Advocates did alike during the oral hearing and I will highlight the arguments as brief as I can. Mr. Muhammadou Majura learned Advocate for the Applicants had two main arguments. One, the Applicants were not privy to 2 the contract for Credit Sale Agreement on the basis of which the 1st Applicant could have issued cheques as the two (1st Applicant and Marungu Plantation Limited) are two separate legal entities from each other. The learned Advocate argued that the Respondent l acked legal capacity to sue the Applicants and that constituted a triable issue fit to go to trial warranting grant of l eave to appear and defend. To reinforce his argument, the learned Advocate brought to his aid a decision of this Court in David Sasson And Corporation Limited vs. Navichandra Patel and Others (1972) HCD n 148 in which it was underscored that the Court's role in a application for leave to appear and defend is limited to deciding on the basis of an affidavit filed by the Applicant whether it discloses any issue fit to go to trial and no more regardless of chances of success at the end of the trial. The second issue was pegged on the arbitration clause on which counsel contended that the suit has been filed prematurely without exhausting the dispute resolution mechanism spelt out under the arbitral clause. However, the learned Advocate abandoned that argument at the

Court's prompting. For his part, Mr. Humphrey Mwasamboma learned Advocate for the Respondent submitted in principle that the fact that the 1st Applicant issued cheques in favour of the Respondent for machines supplied to a company owned by the Applicants was sufficient proof of consideration. According to the learned Advocate, it i s immaterial under the law of contract that consideration must have come from the promiser, in this case Marungu Plantation Limited. What was important was, he submitted, that the 1st Applicant issued cheques towards payment for the machines supplied to a company purchased by the 1st Applicant whose director, 2nd Applicant signed both the cheques and the Credit Sale Agreement on behalf of Marungu Plantation Limited in which he is a director and 3 cannot be heard disputing the transaction that gave rise to the cheques. On account of the foregoing, counsel invited me to find no triable issue disclosed in the affidavit fit to go trial warranting granting of l eave to appear and defend as prayed in the chamber summons. The law relating to the court's power to grant leave to appear and defend in suit filed under summary procedure as it were is fairly settled and I do not think I should belabor the point more than necessary. I have had the occasion to discuss a similar application involving the Respondent in facts which are somewhat similar to the facts in

the instant application in Stamigold Company Ltd vs. Mantrac Tz Limited& 3 Others, Misc. Commercial application No. 31 of 2017(unreported) relying on a statement extracted from Kundanlal Restaurant vs. Deshid Company Limited (1952) 19 EACA 77 followed by the Court of Appeal for Eastern Africa in Souza Fiqueredo & Company vs. Moorings Hotel [1959] EA 425. This Court has applied has applied referred to the said statement in a number of cases including CRDB Bank Limited vs. John Kagimbo Lwambagaza, Commercial Case No. 10 of 2000 (unreported), Mohamed Enterprises Tanzania Limited V. Biashara. Consumer Services Limited [2002] TLR 159, Tanzania Telecommunications Co. Limited V. Timothy Luoga [2002] TLR 150 and National Bank of Commerce Limited vs. Nyanda Construction Co. Limited and Iddi Mohamed Masasi, Commercial Case No. 194 of 2002 (unreported). The relevant passage from Kundanlal Restaurant's case (supra) which was found to reflect a settled law in CRDB Bank Limited vs. John Kagimbo Lwambagaza(supra) and Tanzania Telecommunications Co. Limited V. Timothy Luoga (supra) runs as follows:- "The principle on which the Court acts is that where the defendant can show by affidavit that there is a bona fide triable issue, he is 4 to be allowed to defend as to that issuewithout condition. A condition of payment into court ought not to be imposed where a reasonable ground of defence is set

up. The condition of payment, or giving security, is seldom imposed, and only in cases where the defendant consents or there is good ground in the evidence for believing that the defence set up is a sham defence and the master is prepare very nearly to give judgment for the Plaintiff in which case only the discretionary power given by this rule may be exercised. It should not be applied where there is a fair probability of a defence nor where the practical result of applying it would be unjustly to deprive the Defendant of his defence." The principle deduced from the cases referred to above is that the Court should be loath to decline granting leave to appear and defend unless there is good ground to believe that the defence set up is a sham defence. The principle goes further that discretion of the Court to deny leave to appear and defend should not be applied where there is a fair probability of a defence or where the practical result of applying it would be unjustly to deprive the defendant of his defence. Applying the foregoing principle to the instant application there is no gainsaying that the drawer of the dishonoured cheques was not privy to the Credit Sale Agreement neither is the 2na Applicant. That means, regardless of the reasons behind the 1s Applicant drawing cheques in favour of the Respondent, prima facie, the Respondent has to prove consideration and this can

only be done at the trial in the main suit and not i n this application as Mr. Mwasamboma appeared to suggest. Indeed, the fact that there is a contention about the justification for the drawing of the cheques is itself 5 proof of existence of a triable issue fit to go to trial warranting the grant of leave to appear and defend in the main suit. Furthermore, the second Applicant i s neither a party to the credit sale agreement nor is a drawer of the dishonoured cheques. He is a stranger to the cheques regardless of the contention that he is a signatory to the said cheques and director of the 1st Applicant. The Respondent will have to prove consideration at the trial and that i s sufficient to warrant the court exercising its discretion granting leave to appear and defend in the main suit. In the upshot, I find merit in the application and grant unconditional leave to appear and defend in the main suit as prayed in the chamber summons. Costs shall be in the cause. Order accordingly. Dated at Dar es salaam this 9th day of November 2018 6