Civil Application No

IN THE COURT OF APPEAL OF TANZANIA AT PAR ES SALAAM CIVIL APPLICATION NO. 80 OF 2002 In the Matter of an Intended Appeal BETWEEN LALAGO COTTON GINNERY AND OIL MILLS COMPANY LIMITED.....................APPLICANT AND THE LOANS AND ADVANCES REALIZATION TRUST (LA R T ).................... RESPONDENT (An Application for Stay of Execution a Judgment and Decree of LART Tribunal at Dar es Salaam) (Msoffe, J.) dated the 12th day of June, 2002 in LART Tribunal Case No. 13 of 2001 R U L I N G Mroso, J. A.: On 28th August, 2002 I upheld a preliminary objection by the applicant to a counter-affidavit which was sworn by one Pascal Gasper Chuwa on behalf of the respondent. I struck out the improper counter affidavit and made the following directions “Unless the respondent wishes to file a proper counter-affidavit, the substantive application will be set for hearing” Two weeks later two counter-affidavits, one by Juvenel Motete and the other by the Gregory Leopold Ndamu, were filed on behalf of the respondent. The applicant responded by filing two affidavits, one in reply to Motete’s counter-affidavit and the other against Ndamu’s counter-affidavit and it again filed a preliminary objection to the counter-affidavits. The application was fixed for hearing and on the date of hearing the applicant applied to have the preliminary objection marked withdrawn. Professor Fimbo who was leading a team of advocates, including Mr. Rweyongeza, for the applicant, said they took that course because they thought it was important for the substantive application to be heard without any further delay. Mr. Mselem, learned advocate, who was appearing for the respondent together with Mr. Kesaria and Mr. Chuwa, would not accept that proposition. He was of the opinion that if, in fact, the counter-affidavits were not properly before the court then they should not be used at all. It was, therefore, necessary that their status be decided, which meant that the preliminary objection be argued first before the application is heard on merit. I agreed with Mr. Mselem and the applicant was required to argue the preliminary objection. After hearing arguments from both sides I dismissed the preliminary objection and reserved the reasons. I then proceeded to hear the substantive application. In this ruling, therefore, I shall give the reasons both for dismissing the preliminary objection and for the decision in the application. Mr. Rweyongeza in arguing the preliminary objection advanced three reasons why the counter-affidavits should be struck out. First, that the court had not really granted leave to the respondent to file a counter-affidavit. I have no doubt that the respondent was given the option to file a proper counter affidavit. The words in the court ruling which were cited at the beginning of this ruling: “Unless the respondent wishes to file a proper counter-affidavit...” leave no doubt about the option which was given to the respondent. There was no need, therefore, for the respondent to make application to file a counter-affidavit. Mr. Rweyongeza further argued that even if it were accepted that the respondent was granted leave to amend the defective counter-affidavit, the counter-affidavits which were filed were time-barred. He said the provisions of Rule 47(2) of the Court Rules which were applicable were not complied with. According to him, since the court did not specify the period within which the counter-affidavits were to be filed, then they should have been filed within 48 hours. But they were filed in 14 days, which was well beyond 48 hours. Mr. Mselem on the other hand submitted that Rule 47 should be read together with Rule 18 which has provisions on the form amendments should take. He said that the court did not infact order amendment to the counter-affidavit which was struck out. It allowed the respondent to file a counter- affidavit, if it wished to do so, and the effect was that if the respondent chose to file a counter-affidavit it would be treated as if no counter-affidavit had been filed previously. In that case there was no fixed period for filing such documents and since the counter-affidavits were filed in 14 days, that was soon enough. Again, with respect, Mr. Mselem is correct. The counter- affidavit which was struck out did not survive to be amended. The counter-affidavits which were subsequently filed on behalf of the respondent were entirely fresh and not amendments as suggested by Mr. Rweyongeza. Rules 47 and 18 of the Court Rules were therefore inapplicable. There was no need to apply for leave to amend that which could not be amended. Mr. Nyangarika, learned advocate, who also appeared for the applicant, argued that the court allowed the respondent to file a counter affidavit but instead two counter-affidavits were filed. That was contrary to Rule 53(2), he said. According to that provision, leave of the Judge or the consent of the other party was needed before more than one counter affidavit could be filed. With respect, Mr. Nyangarika misconstrued the situation. Rule 53(2) deals with supplementary affidavits by an applicant. The second counter-affidavit in this case was not a supplementary counter-affidavit to come under the purview of Rule 53(2). The term “Supplementary” is defined in Chambers Twentieth Century Dictionary, New Edition, as “added to supply what is wanting”. That was not the purpose of the second counter-affidavit which was filed for the respondent. It is obvious that the second counter-affidavit was filed under the authority of sub-rule 1 of Rule 53 which says- “Any person served with a notice of motion under Rules (sic) 52 may lodge _ one or more affidavits in reply...” The respondent was therefore entitled to file without the need for leave, more than one counter-affidavit in reply to the applicant’s affidavit in support of the notice of motion. It is for the above reasons that the applicant’s notice of preliminary objection was dismissed with costs. I will now proceed to consider the merits of the applicant’s application. The applicant made its notice of motion under Rules 3(2) (b) & (c), 9(2)(b) and 46 (1), asking for two orders as under:- “(a) The judgment and decree of the LART, Loans Recovery Tribunal dated 12th day o f June, 2002 be stayed pending final determination of the appeal pending before this court. (b) Costs of and incidental to this application abide the result of the said appeal. Brief facts which provide the background to this application are as under. The applicant and the respondent entered into a contract in which the applicant was to buy the Musoma Textiles Ltd (MUTEX). It is alleged that the applicant breached terms of the contract whereby the respondent together with one Gregory Leopold Ndamu, the Liquidator, filed a case, Tribunal Case No. 13 of 2001, in the LART Loans Recoveiy Tribunal. The LART Loans Recovery Tribunal, hence forth referred to only as the Tribunal, was asked to order the applicant to hand over back to Respondent possession of MUTEX and pay special and general damages. After hearing submissions from both parties the Tribunal found that the applicant had been in breach of the sale agreement and, therefore, that the agreement had been “automatically terminated”. The applicant was to “hand back the factory to the liquidator” and pay among other things, special damages to the tune of shs.5,768,588,350.95. It was also to pay liquidated damages to the tune of shs. 10,000,000/= and general damages amounting to shs.5,000,000/=. Dissatisfied with that judgment the applicant filed an appeal to this court which is pending as Civil Appeal No. 51 of 2002. In the -meantime it filed the notice of motion for stay of the decree of the Tribunal. The notice of motion is supported by the affidavit of Abdul Hillal Ally, a principal officer of the applicant, while the respondent resisted the application. Two counter-affidavits, one by Gregory Leopold Ndamu and the other by Juvenel Motete, were filed in support of the respondent. As mentioned earlier in this ruling, Mr. Abdul Hillal Ally filed a reply affidavit each to Ndamu’s and Motete’s counter- affidavits. The applicant, through its advocates, has argued several grounds in support of its application but these can be put into two main categories. The first category comprises the claim of high chances of success of the pending appeal. In this category I shall consider the issue o f jurisdiction of the Tribunal in the dispute and the claim that the Tribunal judgment was problematic. In the second category I shall consider the issue of balance of convenience. I must warn myself that in discussing the issue of chances of success of the pending appeal, I must not appear to pre-empt or prejudice the appeal itself. Mr. Rweyongeza has argued that the jurisdiction of the Tribunal is to adjudicate on disputes relating to non- performing assets between a lender and a borrower, in this case the Bank and LART, but that that is not the relationship which exists between the applicant and the respondent which led to the case in the Tribunal, on alleged breach of contract by the applicant. If the court upholds the contention that the Tribunal might not have had jurisdiction to adjudicate on the dispute, it would be sufficient ground for granting stay of execution. He cited the case of Ami (T) Ltd (DSM) v. OTTU on behalf of P. L. Asenga and 106 Others, Civil Application No. 51 of 2000 (unreported) in which this Court, Lugakingira, J. A., said that the Court of Appeal had on various occasions held that where an application for stay of execution involves a question of jurisdiction of the High Court, it was logical to grant stay of execution. Mr. Mselem on the other hand submitted that the Tribunal had jurisdiction and that at any rate during the trial at the Tribunal, jurisdiction was not raised as an issue. Both parties had submitted to the jurisdiction of the Tribunal. On reflection, however, Mr. Mselem conceded that the mere fact that parties submit to the jurisdiction of a court does confer to the court jurisdiction it does not have. Section 19 of the Act provides for the jurisdiction of the Tribunal. It says that the Tribunal has exclusive jurisdiction to adjudicate on all matters arising under the Act or relating to any non-performing asset transferred to the Trust under the Act. The Act, of course, establishes the Loans and Advances Realization Trust and provides for an expeditions machinery for the recovery of overdue debts of banks and financial institutions. It is gleaned from the judgment and decree of the Tribunal (the one which is pending appeal) that the applicant bought MUTEXT from the respondent. It was known that MUTEX had borrowed money for the National Bank of Commerce but failed to repay the loan. The debt was assigned to LART for realization. The dispute between the applicant and the respondent which led to the filing of Tribunal Case No. 13 o f 2001 was that the applicant failed to live up to the terms of the sale agreement between itself and LART. Consequently the applicant was sued in the Tribunal for breach of contract. It was sought that the Tribunal declare the sale agreement “automatically terminated”, order the applicant to hand back the factory to the respondent and to pay special and general damages. There is a valid question therefore whether that kind of dispute between the parties comes under the exclusive jurisdiction of the Tribunal within the meaning of Section 19(1) of the Act. Mr. Rweyongeza also argued that the Tribunal judgment is problematic. He explained that the Tribunal in its judgment made findings of fact in the absence of witnesses evidence; that the Tribunal having decided to rely on written submissions only somehow proceeded to receive evidence by way of affidavits attached to submissions without having given prior leave to the respondent to provide such evidence. It was also submitted by Mr. Rweyongeza that the Tribunal granted very substantial reliefs like special damages amounting to 5,868,558,350/95 and liquidated damages amounting to shillings 10,000,000/=, even though those reliefs were not pleaded or proved by evidence and had been disputed. But when the applicant made a counter claim and* had claimed that it had invested over 2 billion shillings to rehabilitate the mill, the Tribunal, using double standards, said there had been no proof, obviously by way of evidence, for such expenditure on the part of the applicant. Mr. Mselem explained that both parties before the Tribunal had agreed that there was no need to call evidence because the relevant facts were contained in the affidavits filed and that at any rate a lack of recorded evidence would not make the pending appeal acquire overwhelming chances of success^ I note from the judgment of the Tribunal that, indeed, both parties consented to the Tribunal proceeding on the basis of submissions without calling for evidence. This is what the Tribunal said:- “After exchange of pleadings, learned Counsel were both of the view that the matter before us could be disposed of without calling for factual evidence. As we were also of the same view we ordered by consent of the parties that in line with the spirit and intent of the provisions of Rule 16 of the LART Loans Recovery Tribunal Rules 1977 (GN. No. 309/97) Counsel shall address us by way of written submissions on issues...” The question is whether the Tribunal having apparently realised that certain matters required proof by way of evidence, was it appropriate for it to make findings o f fact on disputed matters without such evidence? Rule 16 of the Tribunal Rules stipulates that where the Tribunal requires any evidence to be produced or witness to be called, it shall record its reasons for doing so. It was permissible, therefore, for the Tribunal to call evidence or witness to enable it ascertain the amount of special damages and liquidated damages which are grantable upon hearing evidence proving them. Yet the Tribunal apparently relied on submissions only. Indications are that the Tribunal judgment in this area is indeed problematic. It has not been possible for me to agree or otherwise th a t- special and liquidated damages had not been pleaded because the record available to me does not contain a copy of the pleadings. If it is true, and this Court when hearing the pending appeal should be able to ascertain that fact, that special damages as well as liquidated damages were not pleaded, that would be contrary to the rules of pleadings and an appeal on that ground would stand a good chance of success. Mr. Rweyongeza pleaded that unless stay of execution is granted the existence of the applicant will be so precarious as to lead to imminent demise. He said the award of nearly six billion shillings as special damages and ten million shillings as liquidated damages, plus the fact that it will not be able to continue the production of textiles because the respondent is alleged to have taken over possession of the mill unprocedurally, are serious factors which threaten the existence o f the applicant and that such consequences cannot be adequately remedied in the event it succeeds in the pending appeal. It was submitted by Mr. Rweyongeza that the balance of convenience requires that stay of execution of the decree of the Tribunal be granted. Mr. Mselem and later, Mr. Kesaria, argued that the decree of the Tribunal is in two parts, the first part is damages and the second part is the handing over of the factory. Mr. Kesaria said that as regard the monetary part of the decree, stay of execution could be granted on condition that the amount be paid into court pending the result of the appeal. As for the factory it was explained that the respondent already sold it and put the buyer in possession before the applicant applied to the High Court for stay of execution. By the time application for execution was made there was nothing that was awaiting execution which could be stayed. He cited several cases including Civil Application No. 2 of 1997 of the Court o f Appeal - National Bank of Commence v. Justo Msechu and Sons Ltd (unreported) in which this court, Lubuva, J. A., held that where a decretal amount has already been paid to the decree holder an application for stay of execution would be futile, as that which was to be stayed had already been accomplished. Mr. Nyangarika for the applicant has challenged that submission. He argued that the Tribunal decree in which the applicant was ordered to hand over possession of the mill to the respondent had not been executed. The applicant had not handed over possession todate and stay of execution could be ordered. But Mr. Kesaria said that repossession of the factory did not really depend on a court decree. It was a contractual term between the parties that the respondent would repossess the factory in the event of breach of a term of the sale agreement. Since the applicant had breached terms of the sale agreement the respondent could and did exercise his contractual right to repossess it and subsequently passed on possession to the new buyer. Mr. Nyangarika said that could not be true. If the respondent believed it had a contractual right to repossess the mill and that it actually exercised that right independently of the Tribunal decree, why then did it find it necessary to sue for an order of repossession leading to the decree by the Tribunal ordering the applicant to give back possession of the mill to the respondent? I agree with Mr. Nyangarika that first the respondent must be taken to have accepted that possession was in the applicant. Second, that for some reason the respondent believed that to regain possession it needed an order of the Tribunal. That is the logical reason why it prayed for such an order and the Tribunal obliged by decreeing that “the Respondent shall hand back the factory to the liquidator”. It should be noted, however, that the liquidator who was the first petitioner before the Tribunal had been struck out from the case. The Tribunal in considering the locus standi of Mr. Ndamu who was the first petitioner said - “We are therefore not satisfied that he _ (the liquidator - Mr. Nandu) can competently petition here. We therefore strike out his name as first Respondent in this petition”. Be it as it may. The respondent having sought and obtained a Tribunal order for repossession cannot now be heard to say it did not need that order. It follows that if the applicant did not hand over possession of the mill as ordered by the Tribunal it was not for the respondent to disregard the order and take the law into its own hands. It should have gone back to the Tribunal to ask to have its order executed in the same manner a High Court decree is executed or as the Tribunal would direct. It must be taken, therefore, that in law, execution by the respondent taking lawful possession of the mill is yet to be effected and it could not pass on lawful possession to the new buyer. This Court cannot condone high handedness by a government institution, and the rule o f law requires that every one abides by the dictates of the law and lawful orders. The applicant said it had substantial tax liabilities of shs.410,000,000/= to settle. It would need to produce goods to earn an income with which to help pay up such liabilities. It claimed to have spent US. Dollars 1,400,000/= and shillings 632,000,000/= for which, it would appear, no credit was given to it. On the other hand, the new buyer of the mill which was given possession contrary to the Tribunal order has made a part payment of USD. 480.000 only. Assuming the facts in paragraph 10(b) of the applicant’s affidavit and in paragraph 19 of Motete’s counter-affidavit to be true, the applicant has more to lose than the respondent if the application were refused than if it were granted. For all the reasons which I have attempted to give, I think that the balance of convenience and the existence of good chances of the pending appeal succeeding, it is appropriate to grant stay of execution of the Tribunal judgment and decree until a decision in the pending appeal is given. I so order. The applicants will also get their costs and I certify for three counsel. - _ DATED at DAR ES SALAAM this 25th day of April, 2003. J. A. Mroso JUSTICE OF APPEAL I certify that this is a true copy of the original. F. L. K. WAMBALI DEPUTY REGISTRAR