CIVIL APPEAL NO

IN THE HIGH COURT OF THE UNITED REPUBLIC OF TANZANIA (DAR ES SALAAM SUB-REGISTRY) AT PAR ES SALAAM CIVIL APPEAL NO. 139 OF 2023 (Arising from the judgment of the District Court of Kinondoni in Civil Case No. ' 216 of 2020) K-FINANCE LIMITED..................................................... 1st APPELLANT MAJEMBE AUCTION MART........................................... 2nd APPELLANT VERSUS OMBENI L. SANDA......................................................... RESPONDENT JUDGMENT 26th June & 2nd August, 2024 DYANSOBERA, J.: x This appeal is against the decision of the trial District Court of Kinondoni District in Civil Case No. 216 of 2020 delivered on 6th July, 2023. Before the said trial court the respondent, by way of an amended plaint filed on 5th March, 2021, sued the two appellants on a loan agreement entered between the parties praying for an assortment of reliefs. Brief facts of the case as stated are that sometime in November, 2019, the 1st appellant advanced to the respondent a sum of TZS 20, 000, 000/= which attracted an interest to the tune of 7, 000, 000/=. It is on record that the respondent managed to pay TZS 13, 000, 000/= only. The 2nd appellant who was engaged by the 1st appellant did, on 2nd November, 2020, attach two motor vehicles, that is Reg. No. T.604 Toyota Harrier and T 138 DQR Toyota Crown for recovery of the unpaid outstanding loaned amount of TZS 17, 948,057/= and recovery costs of TZS 3, 351, 805/= making a total of TZS 21, i 099, 862/= which included accruing interests and penalties every day as the respondent was delaying in servicing the loan facility. The respondent then sued the two appellants in Civil Case No. 216 of 2020. After hearing the parties and their witnesses, the learned Principal Resident Magistrate, in her judgment, made the following findings: One, that at the time of entering into loan facility agreement, the 1st appellant had no capacity of charging interest in terms of section 10 of the Law of Contract Act [Cap. 345 R.E.2019], Two, that given the fact that the loan facility agreement was concluded in total contravention of the law, the same is rendered void ab initio in the sense that the court is not open to enforce a void agreement which means that the parties' agreement is deemed as not having existed. On this finding she relied on section 23 (1) of the Law of Contract Act. And three, that no remedy can stem from a void contract. She concluded that the attachment and seizure of the respondent's motor vehicles was not justified in the eyes of law. She reasoned that the attachment and seizure of the plaintiff's collaterals was a continuation of an illegal undertaking of which the court is unable to embrace as was stated in KIG Bar Grocery and Restaurant Ltd v. Gabaraki & another (1972) EA 503 that, no court will aid a man to drive from his own wrong. In relation to the reliefs, the learned Principal Resident Magistrate observed that wherever there is a legal right the law provides a remedy: Latin 2 Maxim Ubi Jus Ibi Remedium. She took into account that the parties into the disputed loan facility agreement concluded the same in total contravention of the law governing the same and thought it prudent to invoke the provision of section 65 of the Law of Contract Act which provides, 'When an agreement is discovered void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it, to the person agreement from whom he received'. She then, at pages 9 and 10 of the judgment, made the following orders, and I quote: 'The plaintiff should refund the amount of money to wit; TZS 20, 000, 000/= advanced to him by the 1st defendant as a loan. However, since the plaintiff at paragraph 7 of his amended plaint has averred that he has managed to pay back TZS 13,000, 000/= to the 1st defendant and the same has not specifically denied by the 1st defendant neither in her Written Statement of Defence nor in her testimony, I wish to couch the same as admission of the pleaded fact. This is in line with Order VIII rules 3, 4 and 5. Thus, since payment of TZS 13, 000, 000/= has been impliedly admitted by the 1st defendant as such, the plaintiff is hereby ordered to remit to the 1st defendant the remaining balance of TZS 7,000, 000/=. The 1st defendant is hereby ordered to surrender the seized motor vehicles to wit; Toyota Harrier with Reg. No. T 604 DNW and Toyota Crown with Reg. No. T 138 DQR to the plaintiff or pay the plaintiff TZS 34, 000, 000/= in lieu of which shall attract interests. Further I proceed to order general damages to the tune of TZS 5, 000, 000/= to be paid to the plaintiff. It is so ordered'. 3 The said findings and orders aggrieved the appellants, hence this appeal. According to the record, the memorandum of appeal is comprised of seven grounds of appeal as follows: - 1. That the Honourable Magistrate erred in law for determining Civil Case No. 216 of 2020 without having pecuniary jurisdiction to entertain it and hence ended up with pronouncing illegal judgment. 2. That the trial Magistrate erred in law by holding that voluntarily loan agreement entered by the first appellant and respondent is void in the pretext that the first appellant was not licenced to conduct financial business while there is no any proof of coercion, fraud nor misrepresentation caused by the first appellant during the entering the loan agreement. 3. That the Honourable Magistrate erred in law for failure to appreciate that by the first appellant and the respondent was duty bound by principle of sanctity of contract and the respondent was supposed to perform his duties as agreed on the Ioan agreement. 4. That the Honourable Magistrate erred in law for ordering the first appellant to pay the respondent the general damages to the tune of TZS 5, 000, 000/= on the contract which the same court have already declared to be void and enforceable, failed to take into consideration the inconsistence of prosecution witnesses especially on the exact time and day when the alleged incident occurred. 5. That the trial Magistrate erred in law for failure to enter judgment in favour of the appellants after noticing that the respondent did violate the loan agreement for failure to pay the first appellant the remaining outstanding loan amount of TZS 7, 000, 000/=. 4 6. That the Honourable Magistrate erred in law for holding that the attachment of the respondent's motor vehicles Toyota Harrier with Reg. No. T 604 DNW and Toyota Crown with Reg. No. T138 DQR by the appellants is illegal while the said motor vehicles were placed by the respondent to the first appellant voluntarily and without coercion to be used as the security for the loan agreement. 7. That the Honourable Magistrate erred in law for ordering the first appellant to pay the respondent TZS 34,000, 000/= while there is no any proof before the court record which shows that the rightfully confiscated motor vehicles were valued at that amount. Before me, parties were duly represented as follows. Both appellants were represented by Ms. Herieth James, learned counsel while Mr. Adili Isacka Semeon Kiiza, learned advocate, acted for the respondent. The hearing of this appeal was, by leave of the court, canvassed in writing. In her submission in support of the appeal, counsel for the appellants abandoned the 1st and 7th grounds of appeal. She separately ground 2 as the 1st ground of appeal while grounds 3, 4 and 5 were consolidated and argued together as the 2nd ground of appeal. Likewise, the appellants' counsel argued ground 6 as the 3rd ground of appeal. Submitting in support of ground 2 which she termed as the first ground of appeal as indicated above, counsel for the appellants criticised the finding of the trial court that on 17th January, 2019 when the 1st appellant advanced a loan of TZS 20, 000, 000/= to the respondent she had no business licence from the Bank of Tanzania, she having obtained it from the Bank of Tanzania two years later and that the 1st appellant had no capacity to enter into the contract with the respondent by virtue of section 10 of the Law of Contract Act, Cap. 5 345 R.E.2019 and therefore, the agreement between the 1st appellant and the respondent was illegal and void ab initio. She argued that such findings are misconceived and misleading. According to her, the 1st appellant being a company incorporated by the laws of Tanzania had two licences: a business licence issued by the Kinondoni Municipality whereby the 1st appellant was registered as a tax payer and the other licence issued by the Bank of Tanzania for conducting financial services which has life time and renewable. It was counsel's argument that the respondent failed to discharge the burden of proof that the 1st appellant was conducting financial services in 2019 without a business licence from the Bank of Tanzania. Advancing her argument further, counsel for the appellants pointed out that even if the 1st appellant had no licence for conducting financial services, still that alone could not, in the absence of coercion, undue influence, fraud or misrepresentation, vitiate the contract that was freely entered into by parties during the advancement of the loan. In support of this argument, counsel for the appellants placed reliance on the case of Simon Kichele Chacha v. Aveline M. Kilawe, Civil Appeal No. 160 pf 2018 which insisted on the principle of sanctity of contract. With regards the 2nd ground of appeal (grounds 3, 4 and 5), counsel for the appellants submitted that the cardinal principle of law of contract is that parties are bound by the agreement they freely entered into which is aimed at preserving the sanctity of the contract. To buttress her argument counsel called in aid to the case of Abualy Alibhai Azizi v. Bhatia Brothers Ltd [2000] TLR 288 at p. 289. 6 Respecting the trial courts order of payment of TZS 34, 000, 000/= by the 1st appellant to the respondent, counsel for the appellants contended that the value of the attached motor vehicles was not ascertained and proved to the required standard taking into account that such assets unclergo depreciation in value after being used. In relation to the order of payment of TZS 5, 000, 000/= as general damages, counsel for the appellants asserted that the trial court having found that the contract between the 1st appellant and the respondent was illegal, it was an error on its part to make an award of general damages to the respondent based on the illegal contract which was unenforceable. • On part of the respondent, Mr. Adili Isacka Semeon Kiiza made the following submission. He at first criticized the approach adopted b^ the appellants counsel of attaching annextures to the written submission on the allegations that there was a pending case at Ludewa District Court. He! said that such attachment vitiates proceedings and denies the adverse party an । opportunity of being heard. To substantiate his argument, counsel fori the respondent made reference to the cases of Mathia John Mwimbilizye and I 3 others v. M/s G.M. Dewji and Company Ltd, Revision No. 2019, Labour Division at Dar es Salaam and Vocational Training Authority v. Ghana t Building Contractors Ltd, Civil Case No. 198 of 1995 and Moses Stephen l v. Commercial Bank of Africa, Revision No. 163 of 2018. Submitting in reply to the first ground, counsel for the respondent urged I the court to find that ground misconceived and lacking in merit in thatj the finding of the trial court was correctly reached and well justified it having been based on the law which imposes the mandatory requirements for the financial I 7 institutions to have financial activities licenced. Counsel for the respondent was of the view that since the 1st appellant admitted to have been a financial institution registered under the laws of Tanzania and that at the time of the transaction between her and the respondent was already registered as a financial institution and was undertaking banking activities including lending money, it was incumbent upon her to prove that she was in possession of a licence for that purpose. To bring the point home, counsel for the respondent contended that money lending business in Tanzania is governed by different legislations enacted by the Parliament of the United Republic of Tanzania. In elaboration, counsel for the respondent made reference to the Banking and Financial Institutions Act No. 5 of 2006, section 3 in particular, which defines microfinance company and section 6 (1) which obligates a company which undertakes banking business to be registered by Bank of Tanzania. The other legislations referred to by counsel for the respondent were the Business Licencing Act Cap. 8, the Microfinance Act No. 10 of 2018 and the Law of Contract Act [Cap. 345 R.E.2019], section 10 in particular. Counsel for the respondent also argued that the position of law is that money lending by individuals on interest not licenced to carry on business of lending is illegal and not enforceable because it contravenes the mandatory provisions of section 7 of the Banking and Financial Institutions Act, 2006 and Business Licencing Act, Cap. 208. To buttress his argument, counsel for the respondent cited and reviewed various case laws including David Charles v. Seni Manumbu, Civil Appeal No. 31 of 2006, Mauri-Tan Holdings Limited and another v. Azania Bank Tanzania Ltd and others, Misc. Commercial 8 Cause No. 33 of 2020, Cathmary Hudson Nyella v. Lisouslight Service Company Ltd, DC Civil Appeal No. 24 of 2022 and Twiga Feeds Ltd and another v. National Investment PLC, Civil Appeal No. 295 of 2021. It was the further argument of counsel for the respondents that the attachment of the licence in the Written Statement of Defence is not by ipso fact that the court should rely on. According to him, for it to have evidential value, the same had to be tendered and admitted in court so as to form part of the record and that the submission that the 1st appellant had two licences appeared to the respondent as a new fact. Mr. Adili Kiiza, relying on the provisions of section 112 of the Tanzania Evidence Act, contended that the 1st appellant was duty bound to prove to the trial court that she had the requisite licence in the sense that the financial activities were legally conducted. On the absence of coercion, undue influence, fraud or misrepresentation, counsel for the respondent asserted that the trial court, after declaring that the contract was void ab initio for lack of capacity on the part of the 1st appellant, the parties were restored to their original position to the effect that the respondent had to pay TZS 7, 000/= as the outstanding balance and the respondent was ordered to pay TZS 34, 000, 000/=or in the alternative, the seized motor vehicles be remitted to the respondent. Respecting to the case of Simon Kichele Chacha v. Aveline M. Kilawe (supra), counsel for the respondent argued that the cited case is distinguishable from the case on hand. According to him, that case concerned a mere personal loan between the one person and another and both parties 9 had capacity to enter into the said contract whilst in the case at hand the 1st appellant is a financial institution which described herself to the whole world to undertake banking activities in which the licence from BOT was a requisite condition as per laws of land governing financial institutions. Counsel for the respondent pointed out that the distinction was well elaborated by the High Court of Tanzania sitting at Dodoma in the case of Cathmary Hudson Nyella v. Lisouslight Service Company Ltd (supra). Having gone through the trial court record, grounds of appeal and the submissions of the parties thereof, I am satisfied that on the available evidence and the law, the decision of trial court cannot be sustained. My course for this finding is clear. There is no dispute that the plaintiff secured a loan facility from the 1st appellant and has defaulted to fully service it. Equally not disputed is the fact that the loan facility was secured by three motor vehicles make Toyota Harrier with Reg. No. T 604 DNW, Toyota Crown with Reg. No. T 138 DQR and Mitsubishi Pajero with Reg. No. T. 782 DER and the 1st applicant retained the original registration cards. This admission is reflected under paragraph 6 of the respondent's amended plaint. It is also an undeniable fact that the 1st appellant, in her endeavour to recover her rights under the contract, engaged the 2nd appellant who attached the said collaterals. It is trite that parties intend legal consequences to follow from their arrangements for, if parties reached agreement, they clearly intended it to be legally enforceable and the court should not assume that the respondent will cut off her nose to spite his face and evade his legal obligation. io As correctly observed by this court in General Tyre East Africa 4 Ltd v. HSBC Bank PLC [2006] TLR 60 and SME Impact Fund CV and 3 others v. Agroserve Company Ltd, Civil Appeal No. 9 of 2018, this court is not a bush where defaulters from lending institutions will hide to escape their responsibilities. According to the record respecting the business transaction between the 1st appellant and the respondent, there is no any suggestion leave alone indication that the latter secured the loan with his assets as collateral while with unsound mind. This means that the respondent was aware that the 1st appellant had legal capacity to enter into contract with him (the respondent). Indeed, it is the argument by the 1st appellant that she is a company incorporated by the laws of Tanzania and had two licences: one, business licence issued by the municipality whereby she was registered as a tax payer and has a business licence issued by the Kinondoni Municipal Council. Two, she had a licence for conducting financial services issued by the Bank of Tanzania and the same is renewable. This strong argument was not substantially controverted by the respondent. There is also the principle of sanctity of a contract as enunciated by the Court of Appeal of Tanzania in the case of Simon Kichele Chacha v. Aveline M. Kilawe, Civil Appeal No. 160 pf 2018 cited and argued at length by learned counsel for the appellants. On the other hand, respecting the said case of Simon Kichele Chacha v. Aveline M. Kilawe (supra), counsel for the respondent argued that the cited case is distinguishable from the case on hand. According to him, that case concerned a mere personal loan between the one person and another ii and both parties had capacity to enter into the said contract whilst in the case at hand the 1st appellant is a financial institution which described herself to the whole world to undertake banking activities in which the licence from BOT was a requisite condition as per laws of land governing financial institutions. Counsel for the respondent pointed out that the distinction was well elaborated by the High Court of Tanzania sitting at Dodoma in the case of Cathmary Hudson Nyella v. Lisouslight Service Company Ltd (supra). With due respect, the respondent's counsel has gone off tangent. In the first place, it is my view, the case of Simon Kichele Chacha v. Aveline M. Kilawe (supra) is in four corners with the case under consideration. I will explain. The brief facts in that case were that on 14th May, 2012 the parties entered in a loan agreement whereby the appellant extended a loan of 2.6m/-to the respondent. The loan was secured with a Certificate of Title No. 35994 on Plot No. 579 Block U Mutex area in Musoma Municipality. The loan was to be repaid within three months with an interest of 30%. The appellant managed to repay part of the loaned money. The respondent then filed Civil Case No. 02 of 2013 claiming judgment and decree against the appellant for 2.6m/- being a principal sum of a loan amount plus interest of 7.8m/- as a contractual interest on the loaned amount. In its judgment, the trial court found for the respondent and awarded him 2.2m/- as principal sum, 30% contractual interest, interest at court's rate and costs of the suit. 12 The appellant's first appeal to this court was partly allowed in that the appellant was ordered to pay the respondent 2.2m/- being principal, interest rate at 5% per month from September, 2012, till payment in full and costs. Still aggrieved, the appellant appealed to the Court of Appeal. In the first ground of appeal, the learned High Court appellate judge was criticized for granting the respondent 5% interest per month from the date of signing the loan contract when the respondent is not the legally authorised and or licenced registered money lender. In ground 2, the same learned High Court appellate judge was criticised for condoning and or legalising loan contract tainted with illegality of the respondent on unauthorised money lender to grant loan upon charge or shylocks exorbitant loan interest. It was argued on part of the appellant that there was contravention of section 7 of the Banking and Financial Institutions Act, Cap. 342 R.E.2002 in that the respondent had no valid licence to advance loan with interest to the appellant. The Court of Appeal, after revisiting the agreement concluded by the parties and the evidence, made the following observation: - Tt is settled law that parties are bound by the agreements they freely entered into and this is the cardinal principle of the law of contract. That is, there should be a sanctity of the contract as lucidly 8 stated in Abualy Alibhai Azizi v. Bhatia Brothers Ltd [2000] T.L.R 288 at page 289 thus: - ’The principle of sanctity of contract is consistently reluctant to admit excuses for non-performance where there is no incapacity, no fraud (actual or constructive) or misrepresentation, and no principle of public policy prohibiting enforcement" 13 With the same spirit of the principle of sanctity of contract and being mindful with the clauses of the Exhibit PI, we are reluctant to accept the appellant's excuse for non-performance of the agreement which he freely entered with sound mind. On our part, we are satisfied that the contract entered between the appellant and the respondent had all attributes of a valid contract. It was not prohibited by the public policy and it is on record that the appellant was not complaining about his consent to the agreement being obtained by coercion, undue influence, fraud or misrepresentation in order to make it voidable in terms of the provisions of section 19 (1) of the Law of Contract Act, Cap. 345 R.E 2002. We therefore wish to emphasis here that since the appellant at the time he concluded Exhibit PI with the respondent was a free agent and he was of sound mind, he must adhere and fulfil the terms and 9 conditions of it..... ' In the case under consideration, the respondent was questioning the competence of the 1st appellant at the time of entering the loan agreement in the same footing as was the appellant in Simon Kichele Chacha case. Besides, in Cathmary Hudson Nyella v. Lisouslight Service Company Ltd, this court was clear at p. 5 of the judgment that 'during hearing in the trial court the respondent admitted that on the 14th day of April, 2017 while advancing loan to the appellant, the respondent had no business licence' and at pp. 7 & 8 of the same judgment this court observed that 'it is obvious that at a time, she operated a money lending business without having a valid business licence contrary to section 3 of the Business Licencing Act Cap. 108 which prohibits a person to carry on a business without a valid business licence as well as section 6 of the Banking and Financial Institutions Act, Cap. 342 which also prohibits a person from carrying business or accepting deposits 14 from the general public unless that person has a licence issued by the Bank of Tanzania. The circumstances in the case under consideration are quite different in that the 1st appellant did in nowhere, during hearing in the trial court, admit that while advancing the loan to the respondent, she had no business licence and no finding to that effect was^made by the trial court. 11 Clearly, in filing the suit before the trial court, the respondent was trying to seek the court make a contract for the parties or go outside their contractual terms, the fact to which the trial court, unfortunately, succumbed to. This cannot be accepted. It is my finding that the fact that the 1st appellant was a registered financial institution licenced in the business of lending money was not disproved in evidence either by testimonies or evidentiary evidence. The findings by the trial court and the orders made thereon were not borne out by the record but based on the learned Principal Resident Magistrate's pigment of her own imagination which, as observed hereinabove, cannot be sustained. In that respect, this appeal is meritorious and I so find. I, in consequence and for the reasons stated, allow the appeal, quash and set aside the decision of the trial District Court. 15 This judgment is delivered under my hand and the seal of this Court this 2nd day of August, 2024 in the presence of Mr. Adili Kiiza, learned counsel for the respondent and also holding brief for Ms. Herieth James for the appellants. 16