RULING SECURITY FOR COSTS LAKE OIL AND PRESTIGE

IN THE HIGH COURT OF THE UNITED REPUBLIC OF TANZANIA (COMMERCIAL DIVISION) AT DAR ES SALAAM MISC. COMMERCIAL CAPPLICATION NO. 4874 OF 2024 (Arising out of Commercial Case No. 130/2023) BETWEEN LAKE OIL LIMITED …………………………..……………..…..………. APPLICANT VERSUS PRESTIGE INVESTMENT SA ……………………………..……………… RESPONDENT RULING Date of Last Order: 28/08/2024 Date of Ruling: 11/10/2024 GONZI, J. In the Chamber Summons, the Applicant prayed for orders that: 1. This Honourable Court may be pleased to issue an order compelling the Respondent who is the Plaintiff in Commercial Case No.130 of 2023, to deposit in Court the sum of USD 556,494.62(United States Dollars Five Hundred Fifty-Six Thousand Four Hundred Ninety-Four and 1 Sixty-Two Cents only) as security for payment of all costs incurred and likely to be incurred by the Applicant herein respectively in defending the suit. 2. Costs of this application be provided for by the Respondent. 3. Any other Orders as this Honourable Court deems just and fit to grant. The application is supported by an affidavit of Stephen Adam Mtemi, Principal Officer of the Applicant Company. In his affidavit, briefly, he stated that the Applicant is the 4th Defendant in Commercial Case No.130/2023 instituted by the Respondent and which is pending in this Court wherein the Respondent is claiming against the Applicant and other persons jointly and severally for, among other things, release of cargo (diesel) amounting to 20685.61MT gasoline. He stated that the Respondent had also successfully instituted and prosecuted Misc. Commercial Application No.164 of 2023 seeking release of the fuel cargo. He stated that at the prevailing market prices, the fuel cargo is worth about USD 18,549,820.77. The Applicant stated that she has assessed the likely legal costs to be incurred in defending 2 the Commercial Case to be 3% of the value of the disputed cargo hence USD 556,494. 62. The Applicant stated that since the Respondent is a company incorporated under the Laws of Burundi which carries on business in Burundi, and does not own any fixed assets in Tanzania, it should deposit in Court USD 556,494. 62 as security for costs before its Commercial case No.130/2023 can proceed. The Respondent resisted the application through the counter affidavit of Mr. Janvier Sinzumunsi, a Principal Officer of the Respondent Company. In essence the Respondent admits to be a foreign national without fixed assets in Tanzania and that it has sued the Applicant. The Respondent, however, stated that the Commercial Case No.130/2023 is not principally against the Applicant but against two other companies namely Nomura Trading PTE Limited and Lamar Commodity Trading DMCC but that the Applicant is merely a necessary party. The respondent stated that there is no the requirement to deposit security for costs in the circumstances of the present case. The Respondent stated that it has a hospitality agreement with the Applicant for use of Applicant’s facilities in Tanzania and Burundi and that the gasoline in question was discharged and stored in the Applicant’s 3 storage facilities in Dar es Salaam. Hence, it was stated that the Respondent is not a stranger to the Applicant and that the Applicant can easily reach the Respondent. The application was disposed of by way of written submissions. Mr. Thobias Laizer and Ms. Oliver Mark, Learned Advocates, represented the Applicant. The Respondent was represented by Mr. Seni Songwe Malimi, Learned Advocate. Both sides had also presented skeleton arguments prior to the hearing of the application. I thank the Learned Counsel for both sides for their written submissions. The Learned Counsel for the Applicant submitted that under Order XXV Rule 1(1) of the CPC the Court has discretion to order the deposit of security for costs if the Court is satisfied that: (i) The Plaintiff resides outside Tanzania, (ii) The Plaintiff does not possess any sufficient immovable property in the country other than the property in dispute. They argued that in the case at hand both conditions have been satisfied. They relied on Bharat Ramji versus Power Generation Middle East FZE, Misc. Civil Application No.37 of 2023 decided by the High Court of Tanzania at Dar es Salaam. 4 The Learned Counsel for Applicant submitted that an order for security for costs involves determining two simultaneous issues namely whether an order should be issued requiring the Respondent to deposit the costs and, if an order is issued, what amount of costs is adequate. On residence outside Tanzania, The Applicant’s Counsel submitted that the Respondent is a limited liability company incorporated under the laws of Burundi and carrying its business in Burundi with no assets in Tanzania. The Applicant submitted that it is not true that there is in existence a hospitality agreement between the parties herein rather under paragraphs 7.2 and 7.3 of the affidavits in reply to the counter affidavit, the Applicant disputed that allegation and pointed out that the hospitality agreement is with another company called Nomura Trading PTE Limited. They submitted further that even though the Applicant was sued as a necessary party, the orders sought in Civil Case No.130/2023 will also impact upon the Applicant as the Applicant had purchased part of the cargo for its clients outside Tanzania. The Learned Counsel for the Applicant submitted that the amount of costs awardable under security for costs is the discretion of the Court. 5 However, they submitted, the costs should be realistic, reasonable and fair in relation to the matter at hand. They submitted that the Applicant has already incurred expenses in hiring the counsel, drafting pleadings, making objections and submissions. The submitted that USD 556,494.62 is proper amount of costs. They relied on the case of Zulfikar Haiderali Njessa and Another versus Diamond Trust Bank (T) Limited, Misc.Commercial Application No.58 of 2019, which held that the Court’s discretion under Order XXV Rules 1 and 2 should be exercised judiciously in accordance with rules of reason and justice. They also relied on the case of Target International Limited versus Godrej Consumer Products Ltd (Misc. Commercial Cause No. 86 of 2019) decided by the High Court Commercial Division. In that case the relevant factors to be considered in determining the amount of security for costs were mentioned to include complexity of the case, research workload and costs incurred up to the time of the application. The Learned Counsel for the Applicant submitted that the aim of awarding an order of security for costs is to protect the Defendant in a suit who, in the event of success, may have difficulties to realize his costs. They prayed for the Application to be granted with costs. 6 Mr. Seni Malimi, Learned Advocate, adopted the Counter Affidavit of the Respondent’s Principal Officer and submitted in response to the application for security for costs. He argued that Order XXV Rule 1 of the CPC uses the word “may” which signifies discretion in granting an order for security for costs. He relied on section 53 of the interpretation of laws Act and the case of UAP Insurance Tanzania Limited versus Noble Motors Limited, Civil Application No.260 of 2016 by the Court of Appeal of Tanzania. Mr. Seni Malimi, learned advocate for the Respondent, argued that judicial discretion must be exercised judicially and not arbitrarily or capriciously. He referred the Court to the case of MZA RTC Trading Company Limited versus Export Trading Company Limited, Civil Application No.12/2015 decided by the Court of Appeal. He urged this Court, in the exercise of its discretion, to evaluate all circumstances of the case as set out in the pleadings in Commercial Case No.130/2023 and the Ruling in Misc. Commercial Application No.164/2023. The learned counsel for the Respondent submitted his view that the circumstances of the case do not warrant imposition of the order of security for costs. 7 Mr. Malimi, learned advocate submitted that in Misc. Commercial Application No.164/2024, the Court found that the supply contract is fully secured by irrevocable and confirmed letter of credit. He also submitted that there are serious allegations of fraud in against the Applicant and the other defendants in Commercial Case No.130/2023 hence making a prima fascie case in that case. Hence, he submitted that security for costs is not necessary in the circumstances of the case. He relied on Shah versus Mbogo and another (1967) EA 116 for the rule that discretion must be exercised judicially not arbitrarily. He urged the Court to treat each case on its own merits. He submitted that being a foreigner without landed properties in Tanzania is not the only factor to consider in granting security for costs order. He submitted that the main case is not against the Applicant but against Lamar Commodity Trading DMCC and Nomura Trading PTE Limited and that the Applicant is only a necessary party and has raised a counter claim therein. He submitted that as there is no direct claim against the Applicant, there is no justification to grant security for costs order in favour of the Applicant. On the quantum of costs, Mr. Seni Malimi, Learned Advocate, submitted that the 3% claimed is not fair in the circumstances of the case. 8 He submitted that the supply agreement which is the basis of the dispute is secured by an irrevocable and confirmed letter of credit to which more than USD 15 million has been deposited for the last consignment. He relied on the decision of this Court in the Misc. Commercial Application No. 164/2023 between the parties herein where the Court also unearthed serious imputations of fraud against the Applicant and others. He said that the amount of costs is also discretionary imposed by the Taxing Officer as the purpose of taxation of costs is to reimburse the successful party and not to punish the loser or enrich the successful party. He cited the case of Maasai Wanderings and 2 Others versus Viorica Ilia and 2 Others, Misc. Civil Application No.19 of 2021 decided by the High Court. He submitted that in that case the Court held that the amount awarded is the discretion of the Court which will fix such sums as it thinks fit, having regard to all circumstances of the case. He argued that it is not always the practice to order security on a full indemnity basis and that the purpose of security for costs order is just to protect the Defendant from being dragged into a case which he is not able to recover his costs. He argued, relying on the foregoing decision, that the aim of security for costs is not to stifle the claims by the Respondent nor counter claim. He argued 9 that the Applicant has not brought any skeleton Bill of costs to show how he arrived at the claimed costs. Mr. Malimi prayed for dismissal of the application with costs. he also relied on the case of Wambura Chacha versus Samson Chorwa, (1973)LRT 4. Mr. Malimi, Learned Advocate, submitted that in the event the Court grants the Applicant security for costs, the costs should be nominal as there is no substantial claim against the Applicant in the main suit. He submitted that in similar applications namely Misc. Commercial Application No.172/2023 between Nomura Trading PTE Limited and the Respondent and Misc. Commercial Application No.184/2023 between Lamar Commodity Trading DMCC and the Respondent this Court imposed orders for deposit of USD 20,000.00, as security for costs. He submitted that the amount in this case, however, ought to be lesser than that. He prayed that in the interest of justice, the Application be dismissed with costs. I will now proceed to determine the application at hand. As regards the order of security for costs sought by the Applicant, the law is straight and settled under Order XXV Rule 1 of the Civil Procedure Code. The provision of Order XXV Rule 1 of the Civil Procedure Code, [Cap 33 R.E 2019] reads; 10 “...Where, at any stage of a suit, it appears too the Court that a sole plaintiff is, or (when there are more plaintiffs than one) that all the plaintiffs are residing out of Tanzania, and that such plaintiff does not possess any sufficient immovable property within Tanzania other than the property in suit, the Court may...order the plaintiff...within a time fixed by it, to give security for the payment of all costs incurred and likely to be incurred by any defendant...” As correctly argued by Mr. Laizer and Ms. Mark, Learned counsel for the Applicant, there are two cumulative conditions before the Court may order deposit of security for cost; these are: (i) that the plaintiff is residing outside Tanzania; (ii) that the Plaintiff possesses no sufficient immovable property within Tanzania, other than the property in dispute. The Respondent has not disputed being a resident of Burundi. Also, the Respondent has not disputed the fact that it has no sufficient immovable properties in Tanzania. The Respondent has argued that though it doesn’t possess immovable properties in Tanzania, it has a hospitality agreement 11 with the Applicant and that it performs its activities largely in Tanzania and that the fuel in dispute is stored in the facilities of the Applicant. In other words, the Respondent was trying to advance an argument that it possesses some other type of property in Tanzania and that the property is the fuel in dispute in the main suit and which is under control of the Applicant. I asked myself whether Order XXV Rule 1 of the Civil Procedure Code allows any other type of property other than immovable property, for a foreign plaintiff to be excused from an order to deposit security for costs? My answer is in the negative. In the case of Prismo Universal Italiana s.r.l vs Termcotank (T) Ltd (Commercial Case No. 42 of 2004) [2007] TZHCComD 32 (3 August 2007), at page 2, this Court held that: “... Construction equipment’s, however heavy and/ or costly they may be, do not constitute “immovable property” within the legal meaning of the words ...the lack of possession of immovable property within Tanzania would work to its disadvantage, in so far as applications of a similar nature are concerned...” The above case is an authority for the legal position that under Order XXV Rule 1 of the Civil Procedure Code, the only properties which are 12 acceptable so as to excuse the foreign plaintiff from the order of security for costs are immovable properties in Tanzania. Therefore, the argument by Mr. Malimi, learned advocate for the Respondent that the Respondent has a hospitality contract with the Applicant or that the Respondent is easily accessible to the Applicant does not hold water in law. The argument that the Respondent possesses property namely fuel that is under control of the Applicant, is not relevant in law. That fuel is not landed property. Also, it is in dispute in the main case and as such it does not qualify as security for costs. I find that the Respondent herein as the Plaintiff in the Commercial Case No.130/2023, is liable to pay security for costs. I stand by the rule in the case of Maasai Wanderings and 2 Others versus Viorica Ilia and 2 Others, Misc. Civil Application No.19 of 2021 decided by the High Court that the purpose of security for costs order is just to protect the Defendant from being dragged into a case in respect of which he may eventually not be able to recover his costs when he triumphs. In that regard, as the Plaintiff in Commercial Case No.130/2023 is a foreigner who owns no immovable properties in Tanzania, the Applicant herein who is the Defendant in Commercial Case No.130/2023, deserves to be secured in respect of possible 13 costs in that case. It is fair that the Respondent be ordered to deposit security for costs. On the quantum of costs, the parties are again at logershead. The Respondent’s learned counsel has argued that the Applicant is sued only as a necessary party in the Commercial Case No.130/2023 and thus no substantive claim exists against the Applicant. I have looked at the plaint in Commercial Case No.130/2023 at paragraph 7. The Respondent as the Plaintiff therein is claiming for the reliefs against all the 4 Defendants jointly and severally. The Applicant is the 4th Defendant in that case. This means that the Applicant is independently or severally fully exposed to the whole claim in the main case. This calls for equality of treatment between the security for costs in favor of the other Defendants and in favour of the Applicant. I will therefore award the same amount of USD 20,000.00 as security for costs in this case just I did in the other 2 cases referred by the Respondent’s learned counsel. In determining whether or not to grant the order of security for costs and of quantum of costs, the Court has discretion. 14 In the case of Zulfikar Haiderali Njessa and Another vs Dimond Trust Bank T. Ltd (Misc. Commercial Application 58 of 2019) [2020] TZHCComD 2009 (9 July 2020), at page 10, where the Court held that; “...the Court’s discretion bestowed upon by Order XXV Rules 1 and 2 of the CPC, should be exercised mindful of acting judiciously and in accordance to the rules of reason and justice and not in accordance to private opinion or arbitrarily...” In the case at hand, I have taken into account the facts that already the Applicant, as the 4th Defendant in Commercial Case No.130/2023, has filed pleadings and entered appearances therein. Also, the amount involved in that case is colossal United States Dollars 18,549,820.77 which is the estimation of over Tanzanian Shillings is Tshs.46,374,551,925/=. The case involves complex contractual dispute based on a contract executed outside Tanzania by parties who are not Tanzanian but performed in Tanzania for a product intended to be consumed in Burundi. While I see the need for the Respondent to deposit security for costs before his Commercial Case No.130/2023 can proceed, I am also mindful that the Plaintiff has a constitutional right to be heard. Regardless his being a foreign national not resident in Tanzania and regardless of not having 15 immovable properties in Tanzania, his access to Court to remedy what he considers to be his rights should not be curtailed. I understand also that when the Commercial Case No.130/2023 is ultimately finalized, the person entitled to costs will present its Bill of Costs where the correct amount will be assessed. In my Ruling I do not attempt to impose an order of security for costs on an indemnity basis as it is improper at this stage and there is no material to help the Court to embark on that exercise. In the exercise of my discretion therefore I find that USD 20,000.00 (Twenty Thousand United States Dollars) or its equivalent in Tanzanian Shillings as per the prevailing exchange rates of the date of this Order is a reasonable amount for the respondent to deposit in Court as security for costs in Commercial Case No.130/2023. As parties are still engaged in proceedings in the main case, I exercise my discretion to order no costs inn this application In the end, I grant the application and make the following orders: (a) I do hereby to issue an order compelling the Respondent to deposit in Court security for costs amounting to USD 20,000.00 (United States Dollars Twenty Thousand only) or its equivalent in Tanzanian Shillings as per the prevailing exchange rates of the date of this 16 Order in respect of Commercial Case No. 130 of 2023 between the parties herein. (b) The Respondent shall deposit the costs in (a) above within 14 days from the date of this Ruling. (c) Each party to bear its own costs in this application. It so ordered. A. H. GONZI JUDGE 11/10/2024 Ruling is delivered in Court this 11 day of October, 2024 in the presence of Mr. Sabas Shayo, Learned Advocate for the Applicant and Mr. Ibrahim Kibanda, Learned Advocate for the Respondent. A. H. GONZI JUDGE 11/10/2024 17