kimotco intertrade company ltd vs ecobank tanzania ltd 2023 tzhccomd 295 25 august 2023

IN HIGH COURT OF THE UNITED REPUBLIC OF TANZANIA (COMMERCIAL DIVISION) AT ARUSHA COMMERCIAL CASE NO. 4 OF 2022 BETWEEN KIMOTCO INTERTRADE COMPANY LIMITED............. PLAINTIFF Versus ECOBANK TANZANIA LIMITED.................................... DEFENDANT Date of last order: 11th July, 2023 Date of Ruling: 25th August, 2023 JUDGMENT MKEHA, J: The plaintiff is a limited liability company engaged in transportation business. On the other hand, the defendant is a limited liability company engaged in the business of banking. In terms of the plaint, the plaintiff's claim against the defendant is for a declaratory order that the outstanding Page 1 of 15 loan amount of TZS 362,943,644/= claimed by the defendant bank is excessive and exaggerated, contrary to the repayment schedule of the outstanding loan amount. According to the plaint, the defendant availed a term loan facility amounting to TZS 627,750,000/= to the plaintiff for purposes of purchasing two brand new buses through a Credit Facility Letter with reference No. ETZ/101/09/2017 dated 5th December 2017. The credit facility was payable within 36 months. The loan term facility was secured by a mortgaged property located in Arusha with Certificate of Title No. 24136 registered in the name of Benedict John Mbelesero. The credit facility was later on restructured on 15th November 2020 and the resultant facility of TZS 362,943,644 was to be repaid within three (3) years from the restructuring date at an interest rate of 18% as reflected in the Restructured Credit Facility letter with reference No. ETZ/048/11/2020. According to the plaint, a dispute arose when the defendant failed to honour terms and conditions agreed upon through an online meeting between the plaintiff and the defendant. In said meeting, the plaintiff had asked for three months grace period to clear unpaid back payments of the accumulated amounts and reduction of the loan interest from 18% to 15%. Page 2 of 15 The said agreement was subject to terms and conditions proposed by the defendant and agreed to by the plaintiff, including payment of TZS 29,000,000 within three months. In view of the plaintiff, the defendant, in contravention of what the parties agreed, issued seven days' notice demanding payment of the whole loan amounting to TZS 362,919,685/= regardless previous payment of TZS 178,222,414/= by the plaintiff. Specifically, the plaintiff prays for judgment and decree against the defendant as follows: (a) That, this honourable court be pleased to order and hold that the defendant breached the agreement dated 15th March 2022; (b) That, this honourable court be pleased to order suspension of enforcement of the loan facility and waiver of all interest for the period between 15th March 2022 to the date of judgement and decree of this court; (c) That, this honourable court be pleased to order and compel the defendant to reconcile the loan amount with the plaintiff to ascertain the actual outstanding loan amount; (d) That, this Honourable court be pleased to order the reconciled outstanding loan amount to be paid within three (3) years from Page 3 of 15 the date of judgement and decree or from the date of finalization of reconciliation; (e) That, the honourable court be pleased to order that the seven (7) days' demand notices by the defendant dated 8th June 2022 and 5th July 2022 were unlawful and wrongly issued for containing incorrect outstanding loan amount of TZS 362,919,685/= (f) That, this honourable court be pleased to order and compel the defendant to pay general damages for breach of the agreement dated 15th March 2022; (g) Costs of the suit and (h) Any other order this honourable court may deem fit, appropriate and just to grant. On the other hand, through her written statement of defence, the defendant admitted existence of the restructured Credit Facility Agreement dated 15th November 2020. She further admitted that claiming the outstanding amount of 362,919,685 was a human error hence, she filed a counterclaim amounting to TZS 291,963,215.78. The defendant denied the allegation of breach of contract on her part. In view of the defendant, the Page 4 of 15 plaintiff had failed to honour the terms and conditions of the loan facility agreement including payment of TZS 29,000,000 within the agreed time. Before commencement of hearing, the following were framed as issues for determination: (1) Whether the plaintiff was indebted to the tune of TZS 362,919,685.11/= to the defendant when the latter issued demand letters. (2) Whether the act of the defendant to claim TZS 29,000,000/= from the plaintiff constituted breach of loan facility agreement. (3) Whether there was a loan facility agreement dated 15th March 2022 between the parties and if the issue is answered in the affirmative, whether the defendant breached the agreement. (4) Whether the defendant had a claim of TZS of 291,963,215.78/= against the plaintiff. (5) To what reliefs are the parties entitled. Page 5 of 15 Mr. Mnyiwala Mapembe learned advocate represented the plaintiff. One witness appeared in court for cross examination on part of the plaintiff's case. On the other hand, Ms. Martha Renju and Mr. Allen Godian learned advocates represented the defendants. Two witnesses appeared in court for the purposes of cross examination on part of the defendant's case. Mr. Benedict John Mberesero appeared as the sole witness for the plaintiff's case. He commenced his testimony in court by tendering his own witness statement as evidence in chief. The said statement was admitted without objection on part of the defendant. In the said statement, the witness stated that, having a business company and being the Managing Director of the plaintiff company, he once approached the defendant bank for a loan facility in the sum of TZS 627,750,000/=. The plaintiff managed to secure the said loan at the interest rate of 20% per annum payable within thirty six (36) months. Credit Facility letter dated 5th December, 2017 was admitted and marked as Exhibit Pl. According to the witness, to obtain the loan facility for purchase of two brand new buses, he mortgaged to the defendant his property with Certificate of Title No. 24136 within Arusha City, registered in the name of Benedict John Mberesero. The said loan agreement was later on varied on 25th May 2018 to enable Page 6 of 15 purchase of three (3) buses. The Variation of Credit Facility dated 25th May 2018 was admitted and marked as Exhibit P2. The witness stated in his statement that, at some point later, the loan was restructured at the request of the plaintiff. Following the said restructuring, the plaintiff had to pay a sum of TZS 362,943,644/= at the interest rate of 18%. The restructured loan amount was to be paid within three years from the date of restructuring. The Restructured Credit Facility dated 15th November 2020 was admitted into evidence and marked as Exhibit P3. It was further stated by PW1 that, pursuant to the restructured credit facility dated 15th November 2020 the plaintiff managed to repay the loan to the extent of TZS 178,222,414/=. Bank statement of the plaintiff company for the period between 15th November 2020 and 30th March 2022 was admitted into evidence and marked as Exhibit P4. According to PW1, sometimes in March 2022, the plaintiff requested for a grace period of three (3) months to settle outstanding loan instalments and reduction of interest rate. The request was accepted by the defendant with a condition that, the plaintiff had to pay the arrears in respect of unpaid loan instalments of TZS 29,000,000/= within three months between Page 7 of 15 23rd March 2022 and 23rd June 2022. Minutes of a Meeting held between the plaintiff and the defendant in March 2022 were admitted and marked as Exhibit P5. The witness statement indicates further that, through a letter dated 18th May 2022 and before lapse of the three-months period agreed, the defendant demanded payment of the said TZS 29,000,000/= within 10 days contrary to what the parties had agreed. The defendant's letters to the plaintiff dated 30th March 2022 and 18th May 2022 together with a demand notice dated 8th June 2023 were admitted and marked as Exhibits P6, P7, and P8 respectively. PW1 stated in his witness statement that, in spite of the follow-ups and negotiations between the plaintiff and the defendant, the defendant still demanded payment of TZS 362,919,685/= ignoring payment of TZS 178,222,414/= by the plaintiff. Correspondences between the plaintiff and the defendant were admitted and marked as Exhibit P9 and PIO respectively. Upon being cross examined, PW1 told the court that, having paid TZS 178,222,414/= out of TZS 362,919,685/= , he was still indebted to the extent of TZS 184,000,000/= and not TZS 291,963,215.78/= as claimed by Page 8 of 15 the defendant. The witness admitted that, it was agreed that penalties would be added on interest in case of default. Upon being re examined by Mr. Mapembe learned advocate, PW1 maintained that the defendant breched the terms of the agreement when she demanded for payment of TZS 29,000,000/= before the agreed time. To that end, the plaintiff's case was marked closed. Mr. Devis Sichela, appeared as the first witness on part of the defence case. This witness happened to be the Recovery Officer with the defendant Bank. His witness statement was admitted and adopted in court as his evidence in chief without objection. His witness statement indicates that, the plaintiff applied and was granted a loan facility to the extent of TZS 627,750,000/=. A loan statement dated 18th November 2022 was admitted and marked as Exhibit DI. The statement indicates that, the plaintiff defaulted in repaying the said loan facility. Following the said default, the plaintiff requested to restructure the loan facility and waive the penal interest amounting to TZS 31,422,414.72. A letter dated 24th October 2020, from the plaintiff to the defendant requesting for restructuring of the loan facility was admitted and marked as Exhibit D2 Page 9 of 15 According to DWI, in a bid to prevent the plaintiff from further breaching the credit facility, the defendant approved the plaintiffs request for restructuring the existing loan amount of TZS 362, 943 644/= within a period of 36 months. DWI further stated that, the alleged payment of TZS 178,222,414/= by the plaintiff between December 2020 to March 2022 was disputed by the defendant. According to DWI, the plaintiff had only paid TZS 142,776,547.92. Statement of account of the plaintiff between 21st September 2019 and 3rd November 2022 was admitted and marked as Exhibit D3. According to DWI payment of the arrears and interest to the tune of TZS 29,000,000/= by the plaintiff was one of the conditions for restructuring the loan facility. In view of the witness, since the plaintiff failed to pay the said arrears on demand, she lacked the requisite qualification for the sought restructuring. When DWI was cross examined, he admitted that it was wrong on part of the defendant to treat TZS 362,943,644/= as the outstanding debt on part of the plaintiff. He further admitted that, when the defendant demanded Page 10 of 15 payment of TZS 29,000,000/=, the three months' time earlier given to the plaintiff for payment of the same had not expired. Mr. Ivan Abdon Kahwa appeared as the 2nd witness on part of defence case. He commenced his testimony in court by tendering his own witness statement as evidence in chief. The said statement was admitted without objection on the part of the defendant. In the said statement, the witness stated that, as a Relationship Manager, he was among the persons who attended the online meeting conducted on 15th March 2022. The plaintiff, having defaulted in repaying his loan, he approached the defendant for a grace period of three months to clear the unsettled outstanding instalments. He stated further that, for restructuring of the loan facility to be accepted by the defendant, the plaintiff had to comply with some terms and conditions, including payment of arrears of TZS 29,000,000/= within three months, which was not done. To that end, the defendant's case was closed. Answers to the framed issues are somewhat straight forward. The first issue is whether the plaintiff was indebted to the tune of TZS 362,919,685.11/= to the defendant when the latter issued demand letters. Page 11 of 15 It was testified by PW1 that, at the plaintiff's request, the previous loan amount was restructured on 15th November 2020 whereupon the plaintiff became indebted to the defendant in the sum of TZS 362,943,644/= at the interest rate of 18% per annum. The Restructured Credit Facility dated 15th November 2020 was admitted into evidence as Exhibit P3 without objection. It was testified by PW1 that, pursuant to the restructured credit facility dated 15th November 2020, the plaintiff managed to repay the loan to the extent of TZS 178,222,414/=. Bank Statement for the period between 15th November 2020 and 30th March 2022 was admitted into evidence as Exhibit P4. It was stated in the written statement of defence that, demanding payment of TZS 362,919,685.11/= when the demand notice was issued, was wrong and a human error. DW1 and DW2 admitted during their respective cross examination that, even after restructuring of the loan, the plaintiff made some payments in respect of the restructured loan amount. The foregoing is sufficient evidence dictating that the first issue be answered as I hereby do, in the negative. The second issue is whether the act of the defendant to claim TZS 29,000,000/= from the plaintiff constituted breach of the loan facility agreement. There is no dispute that the plaintiff was in default of repaying Page 12 of 15 the loan amount. That is the reason the plaintiff had to request for a grace period to settle the instalments which were then in arrears. That being the position, claim of TZS 29,000,000/= by the plaintiff, which was in arrears at the time of issuing the demand notice, could not amount to breach of the loan facility on part of the defendant. The third issue is whether there was a loan facility agreement dated 15th March 2022 between the parties and if the issue is answered in the affirmative, whether the defendant breached the agreement. As far as the record provides the plaintiff's loan was subject to two Credit Facilities namely, the Credit Facility letter dated 5th December 2017 (Exhibit Pl) and the Restuctured Credit Facility dated 15th November 2020 (Exhibit P3). There was nothing like a Loan Facility Agreement dated 15th March 2022 from the plaintiff's side as earlier alleged by the plaintiff. In the absence of such an agreement, an issue regarding breach of the terms of the non­ existent agreement cannot arise.The third issue is therefore answered in the negative. The fourth issue is whether the defendant had a claim of TZS of 291,963,215.78/= against the plaintiff. It was the testimony of PW1 that out of the restructured loan amount of TZS 362,943,644/= the plaintiff Page 13 of 15 repaid TZS 178,222,414/= only as evidenced by Exhibit P4. In the written statement of defence, the defendant counter claimed TZS TZS 291,963,215.78 from the plaintiff. Upon being cross examined DW1 told the court that as on 28/06/2022 the plaintiff was indebted to the tune of TZS 283,187,476.26 and not TZS 362,943,644/=. However, Exhibit D 8, which was admitted into evidence without any objection from the plaintiff's part indicates that, as on 27/07/2022 the plaintiff's debt had raised to TZS 291,963,215.78 being the principal amount plus interest. The fourth issue is therefore answered in the affirmative. For the foregoing reasoning, the plaintiff's claim succeeds to the following limited extent: 1. A declaration is made that, the amount of TZS 362,943,644/= claimed by the defendant as the outstanding loan amount was wrong and exaggerated. 2. The plaintiff shall pay to the defendant TZS 291,963,215.78/= being the outstanding loan amount comprising of the principal amount and interest. 3. The plaintiff is ordered to immediately pay the said TZS 291,963,215.78/= to the defendant in lump sum. Page 14 of 15 4. The plaintiff shall pay to the defendant the contractual interest of 18% per annum on the decretal sum from the date of judgment to the date of full payment. 5. The decree shall attract a court rate interest of 7% per annum from the date of judgment to the date of full payment. 6. The contractual interest rate is ordered to be waived from the date of filing of this suit to the judgment date. 7. Each party shall bear own costs. DATED at ARUgMAsthis 25th AUGUST, 2023. x C.P MKEHA JUDGE 25/08/2023 Court: Judgement is delivered on this 25th day of August, 2023 in the presence of Mr. Mnyiwala Mapembe learned advocate for the plaintiff and Mr.Bjie^M^gkJearned advocate for the defendant. C. P MKEHA JUDGE 25/08/2023 Page 15 of 15