KISASI FINANCE CO

IN THE HIGH COURT OF THE UNITED REPUBLIC OF TANZANIA (COMMERCIAL DIVISION) AT DAR ES SALAAM COMMERCIAL CASE NO. 021730 OF 2024 KISASI FINANCE COMPANY LIMITED ………………….…………..PLAINTIFF VERSUS CELLULANT TANZANIA LIMITED………………….......................DEFENDANT DEFAULT JUDGEMENT Date of Last Order: 19/02/2025 Date of Default Judgment: 27/03/2025 GONZI, J. This is a Default Judgment under the provisions of Rule 22(1) and (2) of the High Court (Commercial Division) Procedure Rules GN No. 250 of 2012 as amended by the High Court (Commercial Division) Procedure (Amendment) Rules GN No. 107 of 2019. The Plaintiff instituted this suit against the Defendant and prayed for the following reliefs: 1 “(a) A declaration that the Defendant has breached the Contract entered into with the Plaintiff. (b) Payment of specific damages principal sum to the tune Tshs. 1,402,550,508/=(ONE BILLION, FOUR HUNDRED AND TWO MILLION, FIVE HUNDRED AND FIFTY THOUSAND, FIVE HUNDRED AND EIGHT SHILLINGS) which the defendant has withheld the same unjustifiably until to date. (c) Interest at commercial rate i.e. 21% on the decretal sum from the date of filing the suit until the date of payment in full. (d) An order for the payment of general damages to the Plaintiff for the financial loss, inconvenience, and loss of business suffered as a result of the Defendant’s breach of the Contract, the amount of which shall be assessed by this Honourable Court. (e) An order for the payment of the costs of this suit, including but not limited to legal fees, court fees, and any other costs incurred by the Plaintiff in pursuing this claim.” The Defendant defaulted to file a Written Statement of Defence despite being duly served. The Plaintiff therefore made an application for Default Judgment under Rule 22(1) and (2) of the High Court (Commercial Division) Procedure Rules GN No. 250 of 2012 as amended by the High Court 2 (Commercial Division) Procedure (Amendment) Rules GN No. 107 of 2019 by filing Form No.1 and an Affidavit in proof of the Claim. According to the affidavit in proof of the Claim sworn by Mr. Pastory Anthony Manyama, Principal Officer of the Plaintiff, the parties entered into a contractual relationship. The plaintiff being the provider of microfinance services through online money lending business contracted the defendant as the provider of financial service through payment gateway (fintech) and system back-end to facilitate the plaintiff's customers’ payments on behalf of the Plaintiff. The parties' business relationship started to blossom so well; thus, they saw the need to formalize their business relationship through a written agreement on 12/7/2023. They signed an Agreement for Provision of Payment Solutions. A copy of the Agreement was appended and marked as annexture KS1to the Affidavit of proof of claim. As per the business practice, the plaintiff being the Merchant had the obligation of prefunding the defendant a specific amount of money so that the latter could credit the potential plaintiff's customers (borrowers). The Defendant had an obligation to collect plaintiff's credits from her customers after settling their loans and remit the same to the plaintiff. The aforementioned practice was adopted by the parties in their written 3 agreement mentioned as per Clause 1(a), (b) subtitled Merchant Disbursement Service and Clause 1(c), (d) subtitled Merchant Payment Collection Service. It was testified that the Plaintiff duly complied with all the terms and conditions of the Contract, including but not limited to integrating the Defendant’s payment gateway and system back-end (TINGG ONLINE CHECKOUT API) into her mobile applications; fundflex@Mkopofasta, Rapidfinance, Swiftfunds, Smartcredit, Fexiloan and Google Meeting Links and directing her customers to make payments through the Defendant’s gateway. It was testified further for the Plaintiff that throughout the lifetime of the contract, the Plaintiff has been fully discharging her obligation of prefunding her disbursement wallet account to the defendant for the latter to facilitate the merchant's credits to her customers, making a total of principal sum of TZS. 1,318,345,000/= (One Billion Three Hundred Eighteen Million Three Hundred Forty-Five Thousands of Shillings only). Copies of deposit slips showing different amounts of money deposited into the defendant's bank account by the plaintiff were appended collectively and marked as annexture KS2 9 to the affidavit of proof. 4 Sometimes in early May and June, 2024, the Plaintiff started to experience technical glitches to track her funding in the disbursement account and the payments which were made by her customers in her window (online dashboard; TINGG) which was facilitated by the defendant by providing Application Programming Interface (API). As per the contract and business practice, the defendant was obliged to provide API and dashboard to the plaintiff for the latter to be in a position to track in real-time all the disbursements, payouts and collections which are collected and processed by the defendant for purposes of transparency and accountability. To address this anomaly, the plaintiff through her representatives addressed the concern to the defendant via a number of email correspondences as shown in the email-printouts which were collectively appended and marked as annexture KS3 to the affidavit of proof of the claim. On 11/6/2024, the defendant through her principal officer Ann Waweru informed the plaintiff through the email address of ann.waweru@cellulant.io that after their thorough investigation of the plaintiff's concerns, they had found a technical glitch in the defendant's end namely that there was a duplication of the UUID (Universal Unique Identifiers) and she attached a report of that investigation. Copies of the email-printouts and investigation 5 report were appended collectively and marked as annexture KS4 to the affidavit in Proof of the Claim. Following the aforementioned software bug on the defendant's end, the latter, through her official representative named Kellen Kinyua, via her official email address of “kellen.njoroge@cellulant.io” wrote an email to the Plaintiff detailing all the collection, disbursement, settlement and cash settlement as of 30th June, 2024. Copies of the email-printout and report were collectively appended and marked as annexture KS 5 to the affidavit in proof of the claim. On the 3rd day of July, 2024, the Plaintiff replied the aforementioned email by disputing the defendant's report as of 30/6/2024. The plaintiff further stated that, according to her records, the total amount available in the collection account maintained by the defendant was TZS. 34,181,641,028/= (Thirty-Four Billion One Hundred Eight One Million Six Hundred Forty-one Thousand Twenty-Eight Shillings Only) contrary to the defendant's record of Tshs. 33,699,311,861/=, (Thirty-three Billion Six Hundred Ninety-Nine Million Three Hundred Eleven Thousand Eight Hundred Sixty-One Shillings). More so, the plaintiff further attached her conciliation report of the due sum as requested by the defendant. Copies of the email- 6 printouts and the Plaintiff’s reconciliation report were collectively appended and marked as annexture KS 6 to the affidavit of proof of claim. On the 30th day of July, 2024, the defendant through her official representative Kellen Kinyua, acknowledged receipt of the plaintiff's reconciliation report and outstanding amount and she promised the plaintiff to review her report and that she would communicate back. However, she has not done so until to date. A copy of the email-printout was attached and marked as annexture KS 7 to the affidavit of proof of the claim. Until 30th June, 2024, the Plaintiff's wallet account (disbursement and collection accounts) which is maintained and processed by the defendant, had the principal amount of TZS. 1,402,550,508/= (One Billion, Four Hundred and Two Million, Five Hundred and Fifty Thousand, Five Hundred and eight Shillings Only) which the defendant has withheld for reasons which are best known to her. The Plaintiff’s Witness testified further that following what is stated above in respect to the identification of the software bug on the defendant's end to wit duplication of UUID, the Plaintiff had no role or involvement in the technical operations or security measures of the defendant's payment 7 gateway including but not limited to the System Back-end, Application Programming System (API) and TINGG Online Checkout system or any Pay bill generated, created or reactivated by the defendant and or her third part contractor(s). It was testified that the responsibility for ensuring the security and integrity of the defendant’s financial operations rested solely with herself and her third-party contractor(s) like Vodacom Tanzania PLC. It was testified that the plaintiff referred her concerns to her lawyer Paul Kaunda, who on the 24/7/2024, wrote a demand notice to the defendant regarding the settlement of the aforementioned claim. A copy of the demand notice was appended and marked as annexture KS 8 to the affidavit in proof of the claim. On the 13/8/2024, a law firm styled as Lior Attorneys representing the defendant, replied via email to the afore stated demand notice in which, amongst others, the defendant conceded and admitted that she had frozen the plaintiff's wallet account which had such due sum and undertook to release the funds after conclusion of the investigation by the Police since they had already referred the matter to Police. A copy of the reply to the demand notice was attached and marked as annexture KS 9 to the affidavit in proof of the claim. 8 It was testified for the Plaintiff that the defendant's unjust withholding of plaintiff's funds as a means of addressing her security breach and losses, is not only unfair but also legally questionable. It was testified that this action has been taken under the pretext of awaiting the completion of an investigation by the Police Force of Tanzania on the incident as averred above. It was testified that this retention of plaintiff’s funds is entirely unjustifiable and has no legal or contractual basis. The funds in question are legitimately owed to the Plaintiff and should not be subjected to unilateral withholding by the defendant. It was testified that the plaintiff has fulfilled all her obligations under the agreement and she expected the defendant to honor her commitments as well. The retention of plaintiff's funds constitutes a breach of contract. The retention of such due sum has severely impacted plaintiff's business operations as she relies on these funds for day-to-day transactions, payment of employees’ salaries and other critical expenses. It was testified by the Plaintiff’s witness that the delay in accessing her funds is causing an irreparable harm to her reputation and financial stability. This situation is creating undue hardship and jeopardizing the trust and business relationship between the parties herein. 9 The Plaintiff’s Witness testified that the Plaintiff has been deprived of the use of the funds collected by the Defendant on its behalf which has adversely affected its cash flow and operational activities. The Defendant’s breach has caused the Plaintiff to lose business opportunities, customers and revenue which it would have otherwise earned had the Defendant duly performed its obligations under the Contract. It was testified that in early August, 2024, the Board of Directors of the Plaintiff Company appointed Advocate Paul R. Kaunda of Kaunda & Company Advocates to file a lawsuit against the defendant in a court of competent jurisdiction and hence the present suit. That marked the end of the testimony through affidavit in proof of the Claim by the Plaintiff. After going through the application for default Judgment and the Affidavit in proof of the Claim sworn by Pastory Anthony Manyama, Principal Officer of the Plaintiff, the only issue is whether the Plaintiff has proved the claims? The application for default judgment was made under Rule 22(1) of the Commercial Court Rules GN No. 250/2012 as amended by the High Court (Commercial Division) Procedure (Amendment) Rules, 2019 which provides that: 10 “(1) Where any party required to file written statement of defence fails to do so within the specified period or where such period has been extended in accordance with sub-rule (2) of rule 20 within the period of such extension, the Court may, upon proof of service and on application by the plaintiff in Form No. 1 set out in the Schedule to these Rules accompanied by an affidavit in proof of the claim; enter judgment in favour of the plaintiff.” It follows therefore that in the Commercial Court it is the affidavit in proof of the claim which is filed in support of the application for default Judgment that stands as the evidence in proof of the claim. That is to say despite the default by the Defendant to file his defence to the claims brought against him by the Plaintiff, under Rule 22(1) of the Commercial Court Rules, the Plaintiff is still required to prove his claims against the Defendants before a Default Judgment could be entered, if at all. Proof of claims presupposes the Plaintiff bringing evidence to substantiate his claims contained in the Plaint. The evidence supporting and forming the basis of the default judgment should stem from the affidavit in proof of the claim. 11 An affidavit is a substitute for oral evidence or rather, it is oral evidence in a written form. The use of affidavits to tender evidence in courts is, inter alia, governed by Order XIX Rule 1 of the Civil Procedure Code CAP 33 of the Laws of Tanzania which provides that: “A Court may at any time for sufficient reason order that any particular fact or facts may be proved by affidavit, or that the affidavit of any witness may be read at the hearing, on such conditions as the court thinks reasonable.” As a general rule of practice and procedure, an affidavit, for use in court, is a substitute for oral evidence. This principle of law on affidavits was set out in the case of Uganda v. Commissioner of Prisons, Ex parte Matovu (1966) E.A.514 at page 520. In Uganda vs Commissioner of Prisons, Exparte Matovu case (supra), the rule on the making and use of affidavits for use in court was stated that: “…as a general rule of practice and procedure, an affidavit, for use in court, being a substitute for oral evidence, should only contain statements of facts to which the witness deposes either of his own personal knowledge or from information he believes to be true.” (underlining added for emphasis). 12 Thus, where the Plaintiff files an affidavit in proof of the claim under Rule 22(1) of the Commercial Court Rules GN No.250 of 2012, it is taken that he is testifying before the court proving his claims contained in the in the plaint. The annextures to the affidavit are taken to be admitted as exhibits. In other words, all the evidence that would have been necessary for the Plaintiff to give in court in order to establish his entitlement to the claims and their quantum as claimed in the Plaint, should be reduced into writing under oath in the form of an affidavit in proof of the claim. Where the Plaintiff had annexed copies of documents to the Plaint, he is required to produce or tender the same by annexing them to the affidavit in proof of the claim as Exhibits. He is proving his claim or his case by way of an affidavit in proof of the claim. In the case at hand, the Plaintiff has filed an application for Default Judgment vide Form No.1 and an affidavit in proof of the claim. He has also tendered Annextures KS 1 to KS 9 which the Court does hereby admit as Exhibits P1 to P9 respectively. In the case at hand there is no Written Statement of Defence from the Defendant to dispute the factual allegations contained in the Plaint. Equally, there is no counter affidavit to deny the truthful of the evidence given by the 13 Plaintiff through his Affidavit in proof of the Claim. Whereas failure to file a Written Statement of Defence by the Defendant would tantamount to an admission of the claims contained in the Plaint, the absence of a counter affidavit would tantamount to an admission on the truthfulness of what is stated in the affidavit in proof of the Claim. It follows therefore that as it stands, the factual allegations and claims contained in the Plaint are not disputed by the Defendant and that the evidence in the affidavit is not contested. I have asked myself whether, if all what is stated by the Plaintiff in the Plaint is not disputed by the Defendant and that all what is stated in the Plaintiff’s Affidavit in proof of the Claim is not contested, the Plaintiff would have proved his claims to the required standards. My answer is in the affirmative. The Plaintiff has proved the existence of a valid contract between the Plaintiff and the Defendant and the obligations of the parties under it. The Plaintiff has proved that whereas the Plaintiff has fulfilled his contractual obligations, the Defendant has breached his. As a result of such breach, the Plaintiff has substantiated loss suffered by him in both specific damages and general damages. I find that once all the factual averments by the Plaintiff in the Plaint and the evidence given in the Affidavit in poof of the Claim are accepted as the truth, then the Plaintiff has proved the claims based on 14 breach of contract on the balance of probabilities. I, therefore, in terms of Rule 22 of the Commercial Court Rules, enter default Judgment in favour of the Plaintiff as prayed in the application for default Judgment and proved through the affidavit in proof of the Claim. Since the parties had a commercial arrangement, the withholding of the Plaintiff’s funds by the Defendant inevitably must have caused the Plaintiff financial losses for not commercially utilizing his money and, in addition, the Plaintiff must have suffered great inconvenience as it was testified by the Plaintiff in the affidavit in proof of the claim. In this regard, the Plaintiff is entitled to interest at commercial rate and general damages respectively. In fine, I do hereby enter Judgment and Decree in favour of the Plaintiff against the Defendant and proceed to issue the following Orders: (a) The Court does hereby declare that the Defendant has breached the Contract entered into with the Plaintiff. (b) The Defendant is ordered to pay the Plaintiff TZS. 1,402,550,508/= (Shillings one billion, four hundred and two million, five hundred and fifty thousand, five hundred and eight shillings) as specific damages which the defendant is unjustifiably withholding from the Plaintiff. 15 (c) The Defendant is ordered to pay the Plaintiff interest at the commercial rate of 21% per annum on the amount in (b) above from the date of filing the suit until the date of Judgment. (d) The Defendant is ordered to pay the Plaintiff general damages of TZS. 50,000,000/= (Shillings Fifty Million Only) for the financial losses, inconvenience and loss of business suffered by the Plaintiff as a result of the Defendant’s breach of the Contract. (e) The Defendant shall bear the costs of this suit. It is so ordered. A. H. GONZI JUDGE 27th March, 2025 Judgment is delivered virtually in Court this 27th day of March 2025 in the presence of Mr. Paul Kaunda, Advocate for the Plaintiff and Mr. Shalom Msaki, Advocate for the Defendant. 16 A. H. GONZI JUDGE 27th March, 2025 17