20180727 TZHC Mwanza

CY; ~~. , · IN THE HIGH COURT OF THE UNITED REPUBLIC OF TANZANIA I , • (MWANZA DISTRICT REGISTRY) ATMWANZA LAND CASE N0.11 OF 2017 LWEMPISI GENERAL COMPANY LTD ··••e ■ e ■■■ • ■ -•PLAINTIFF VERSUS THE NATIONAL HOUSING CORPORATION ................ DEFENDANT - - - - - - - - ----- ---_-_____ JUDGMENT BEFORE: MAI GE, J The dispute at hand revolvE;?s around the performance of the Joint Venture Agreement between the plaintiff and the defendant e·xecuted on 24th May 2008 (exhibit P-1) .. The parties blame each other for non performance of the fundamental terms of exhibit P-1. The institution of the suit, it seems to me, was prompted by the notice of termination of . exhibit P-1 issued to the plaintiff by the defendant on 6th December 2016 ("Exhibit P-9"). The intended termination was on account of the alleged ) fundamental breach of exhibit P-1 by the plaintiff. Contrary to the expression in exhibit P-9, the plaintiff attributes her failure to discharge her obligation under exhibit P-1 with the inaction of the defendant to perform her fundamental contractual duties. She has thus instituted the above ·suit against the defendant claiming for the following ·reliefs. First, for declaration that the failure by the defendant to legalize her ownership. on the property at plot No. 25 Block "T" .Rwegasore Street (''the suit Property No. 1'') is in fundamental breach of exhibit P-1. Two, for declaratory order that the notice of intention to terminate exhibit P-1 is - - - ~ ~~ premature and illegal. Three, for an order of payment of TZS 4,500,000,000/- as the actual costs for construction of 6 storey building on the suit property. Four, for an order of payment of USD 807,120 which is equivalent to TZS 1,845,076,20 at the current bank rate of 2286 per one dollar being actual loss suffered on the lease agreement entered between the plaintiff and companies named in paragraph 11 of the Plaint. Five, for payment of TZS 4,143,034,382~95 as the outstanding liability emanating from omission and inaction of the defendant to comply with the terms of the· contract in paragraph 12 of the plaint. In the alternative, the ~~ c~ ~1-/t~Jzs , ' plaintiff claimed for payment of TZS 15,000,000,000/ = being compensation for the costs incurred for construction, loss of income and general damages. In view of the factual contentions reflected in pleadings, the following issues were framed for determination. First, whether the plaintiff complied with the terms and conditions of the -JVA. Two, who between the parties herein is in breach of the JVA in question. Three, whether the defendant was justified to issue the notice of termination of the -JVA. Four, whether . . the defendant made any act or omission contributing to non-performance of the JVA. Five, whether the plaintiff suffered any damages as a result of the breach. Six., what reliefs are the parties entitled to. Before I direct my mind on the issues raised, I find it important to . . narrate albeit briefly the material facts giving raise to the instant suit. In 2008, the parties executed the joint venture agreement in P-1. It was for construction of nine (9) -storey mixed uses building. . It was express in , exhibit P-1 that upon completion of the construction of the building, the defendant would surrender 50% of its interests in the property to the plaintiff-and that; during the initial ·period of 12 years, the plaintiff would hold 25% shares that belong to the fendant in_ surrogacy to recover her investment costs. In accordance with clause 6 of the contract, the ) obligation to finance the project to its completion was on the plaintiff. The plaintiff had guaranteed, in Recital F, to be absolutely capable of financing the project to its completion. Parties are not in dispute that; until the date when the plaintiff was served with a notice of intention to terminate P-1, · she had only constructed a six (6) storey building. The contention by the plaintiff is that; for the reason of non-compliance by the defendant with the terms and conditions of the contract, the performance of the contract has been rendered impossible such that the plaintiff is entitled to treat the contract repudiated at the instance of the defef}dant. With the above factual exposition of the case, it is appropriate to address the issues. The first issue is whether the ptaintiff complied with the terms and conditions of exhibit P-1. The answer is certainly no. The reason being · that by the express provision of clause 6 of exhibit P-1, the obligation of the plaintiff was to construct a 9 storey building to its completion. In her own pleadings and evidence through PW-1, as afore stated, the plaintiff admits to have constructed only 6 storey building. _She has not adduced any evidence of variatio~ terms and co~di~ions of . . ~z_(J 4 .0--~-- IP exhibit P-1 whether expressly or implicitly. Therefore, regardless of the merit or otherwise of the justification pleaded and testified upon, the above facts suffice establish non-compliance of the plaintiff with the contract. . . Issue number one is therefore answered negatively. This now takes me to the fourth issue which is whether the defendant.contributed to the non-performance of the contract in question. In a bid to address the issue, the plaintiff through the oral testimony of her executive director-Mr~ Richard Rweyamba Rugalabamu (PW-1) as well as the documentary evidence in exhibit P-8 has used two propositions to establish the contribution of the defendant in non-performance of the- contract. I will consid~r the two propositions gradually as I proceed. In the first place, the non-performance is associated with the omission on the part of the defendant to facilitate the eviction of the sitting . . tenants from the suit property. For the reason of failure of the defendant to offer cooperation in the eviction in question, PW-1 testified, it took as long as two years for the plaintiff to evict the tenants. The plaintiff had to execute an agreement with the tenants with the effect that they would · vacate the suit property within 6 months from th~ date thereof, it is further in the testimony of PW-1. PW-1 testifies further, it was not until 2010 when the plaintiff was able to commence construction. In his evidence in rebuttal which has not been materially contradicted, the defendant, through its senior legal officer one Endrew Adidas Rugalabamu (DW-1) refuted the proposition. He said that contrary to the claim by the plaintiff, the defendant fully cooperated with the plaintiff in evicting the tenants from the suit property. By way of . cross examination of PW-1, the defendant was able to produce four c_opies of the 60 days notice to vacate the suit property issued by the defendant to the sitting tenants. The notices in exhibit D_-1 were issued on - - ·~ . ·-~ 26.12.2011. From the evidence exposed above, I entertain no doubt that, the plaintiff has not been able to establish, in the required standard, that his failure to construct 9 sto'rey building was on account of the delay on the part of the · defendant to evict the tenants. I have two reasons to substantiate my position. First, in view of the irrefutable evidence in exhibit D-1, · the defendant had, few months after the execution of the contract, taken necessary steps to evict the tenants by issuing them notice to vacate. The plaintiff has not adduced any c crete evidence to establish 6 that; prior or after the issuance of the notices in exhibit D-1 had she ) requested the defendant to offer assistance to evict the tenants without a success. Second, although the plaintiff clafms that the tenants vacated the . . suit property in pursuance of an agreement executed between them and the plaintiff, for undisclosed reason the said agreement has not been exhibited qespite its relevancy and materiality .in establ_ishing this ·proposition. The unreasonable omission to produce such a material evidence would lead to an in~erence that the agreement does not exist or if exists it is against the case of the plaintiff. There are many judicial =- - -~- - --pronoun-cements- in•- support· of-this-:position. S~e .for instance,_(HEMED - - ISSA· VS. MOHAMED MBILU, 1984, TLR, 113). I will in the circumstance draw a negative inference against the plaintiff for failure to produce the claimed eviction agreement. In the. second place, the non-performance is associated with the qelay on the part of the defendant to release the certificate of title in respect to the property at plot 25 Block "T", Rwegasore street, Mwanza. It is the testimony of PW-lthat;_ as a result of instruction from the relevant authority, the plaintiff had to amend the structural drawing of · the project· to_ include a r car parking which was not 7 contemplated in exhibit P-1. With this unforeseeable event, PW-1 testified, the construction costs had increase from TZS 2.5 billion to TZS 4.8 billion. The NBC which was ready to give an advance of TZS 2.5 billion, changed its mind after the plaintiff had failed to produce a . certificate of title for respective plot, PW-1 clarified. The plaintiff places reliance on the correspondences in. P-8. The first correspondence is a letter dated 7.7.2010 from the plaintiff to the defendant wherein the former was requesting the latter to, among others, $peed up the release of the certificates of title of the suit property for mortgage purpose. · In clarified the ownership status of the suit property and the joint venture agreement. It notified the Bank that the responsibility to finance the project was on the plaintiff. It also made it_ clear that it was in the process of transferring the same in its name. In its written statement of defence and the oral testimony through DW-1, the defendant, much as she admits that the certificate of title in respect to plot number 25 had expired and that, she was in the. process of procuring a new one; she refuted there bein$J any probable nexus between the expiry of the. period of the title deed and failure of the plaintiff 8· to discharge her obligation. DW-1 clarified that, according to exhibit P-1, ) the duty to finance the project to its completion was solely imposed on the plaintiff. He testified further that; while exhibit P-1 did not permit the . . plaintiff to mortgage the suit property before completion of the construction, exhibits P-8 and D-1 indicate that the plaintiff intended to use the title deeqs of the_ suit property as collateral to secure loa~ from NBC_- On my assessment of the evidence on this issue, I arn inclined to agree with the defendant that the non-completion of the project construction by the plaintiff was not a direct consequence of the delay on -- -•______.:.;.::.-- ---- -.,.- . the part of the defendant to process the certificate of title on Plot No. 25 Block "T" Rwagasore street, Mwanza. The documentary evidence in exhibits P-8 and D-1· clearly establishes that ~he motive behind the request of the certificate of title by the plaintiff was to make use of it to procure bank loan. In my view, that was not the intention of the parties in exhibit P-1. For, under the express provision of clause 6 · thereof, the obligation to finance the project to its completion was solely on the plaintiff. Indeed,. the plaintiff had guaranteed in Recital F . of the contract 9 More so, while the plaintiff claims that, the costs of construction had raised as a result of the alteration of the structural building from TZS 2m5 billion to TZS 4.8 billion, the proposed costs of construction is neither . . expressed nor implied in exhibit P-1. In any event, the plaintiff has not produced any bill of quantity or any other documentation from which the Court would infer the alleged increase of the_ costs of construction. Notably, Recital I of exhibit P-1 envisages of there being a project proposal in accordance of which the construction would be done. Perhaps, that might have been the source of the proposed costs of construction. Nevertheless, the plaintiff has not bothered to produce the project proposal. Nor has she bothered to exhibit the initial drawing and the amended one. This Court therefore cannot assume from the bare testimony of PW-1 the claimed controversial ir:,crease of the construction costs and its account to non-completion of the construction. _ In my opinion therefore,_ the plaintiff has not been able to prove, on balance of probability that, the defendant. contributed for the non performance in question. As . a result, issue number 4 is answered negatively. 10 I will now pass to issue number 3 as to the validity of the notice in exhibit P-9. This is a notice to terminate the contract. It was issued by the defendant on 8.12.2016. It seems to have been made under Recital I of exhibit P-f. Parties do not, according to the documentary evidence in exhibit P-10, doubt the power of the defendant so to do. Neither do they doubt the fact that th~ circumstance of this case entitles the defendant tq exercise such option. The claim by the plaintiff on that issue is two fold. First, the respective clause does not entitle the defendant to terminate the contract. Two; the option was exercised prematurely as it was not preceded by a valuation report from an independent qu_antity surveypr. In the notice of termination and th~ oral testimony of DW-1, it is suggestive that the termination of the contract was based on the provision of Recital I of the contract. It is to the effect that; wher~ the partner does not, without justifiable- reason, complete the contraction within 2 years from the co_mmencement of the construction, the NHC may terminate the contract. There was a serious debate between the parties as to whether the Recital formed party of the contract. The claim by the plaintiff through the testimony of PW-1 is that a preamble is not in contract. For the ~ ·. ~~-(t~ 11 CcJl--~~:=t-\ -~· I . ' •. ! .J b ':.--- defendant, the claim is that, the same has been incorporated into the contract. Recital I of the contract provides as hereunder:- Upon obtaining vacant possession of the project land, the 11 construction work shall be commenced and completed within a period of two (2) years as provided for in the project proposal submitted by the Partners for NHC' approval' . . The period bf two years envisag_ed in the respective recital clause is "as provided for in the project proposal'. This means that the said period cannot be ascertained in· isolation of the relevant provisions of "the· project proposal". Though the parties seem to have intended to incorporate the proposal to read as part of exhibit P-1, the omission to attach it in the - -· _ _J contract was unexpected, so to speak. The defendant who relied on the said provision in her defense, did not bother to tender the said proposal . into evidence. ·1n my opinion therefore, in the absence of the proposal, this Court will not be vested with sufficient factual. materials to determine the relevancy of the clause in the termination in question. The above not withstanding, the proposal envisaged in the respective provision is that which was submitted to the defendant for approval. It means therefore that its applicability was subject to approval· by the defendant. The certainty, predictability and therefore highly questionable. It is for those reasons that, I will agree with · the plaintiff that the recital I of exhibit P-1 in its isolation is unenforceable. Assuming, without deciding that the recital clause was certain and enforceable, yet it would, in the circumstance, not be applied for the reason of being contradictory in effect with the substantive part of the contract. I say so because, going through the contract, non-completion of the construction would not amount to an event of repudiatory breach of contract. It would only amount to an ~vent of default. Under clause 10(2) of the contract, a party would be in default if she remained in non- compliance of the due performance of the contract notwithstanding expiry - - - ---=---- ---~~ .-----..rl of 60 days nc;>tice of default. Under item 3 thereof however, the contract does not automatically phase out of existence by the reason of commission . of any of the events of default under the respective clause. The qefault would however entitle either of the parties to pursue an action in a competent court. The relevant provision that covers events for premature termination of contract is clause 16 · of the contract. It is opened by the following words. "16.1 This Agreement shall-be deter_mined if any or all of the following circumstances occul'. The ?d~ng of the opening clauSe in my . - -ti) - -_ -- - -- c--;,,.._.._. u--- - j 13 rLT - ,;l .... reading, suggests that the intention of the parties was to make the events enumerated in the clause to constitute the only grounds for premature determination of the contract. Had the parties intended the event stated in . . Recital I to be an additional ground for termination of the contract, it would have expressly stated so. The event contemplated under clause 16.1 in my reading,· are those which entail a total failure of the performance of the contract. It does not cover a situation, like the ·instant one, where the construction has comm·enced. This, if read together with the clause 10 (3) of the contract, would imply that the intention of the parties was that the contract would only be repudiated where then~ is a total failure of performance. What . would happen where there was a failure of performance alter the contract had been partly performed, seems to have been addressed by the provision of the Recital J of the contract which provides as follows "In the event that the Partier shall not be able to complete the project a~ per the schedule of work provided in Clause I above/ thereby causing undue dela½ the NHC shall have the right to take-over and complete the project in the manner it shall deem fit and appropriate. In this case/ the cost already expended by the partner shall be ascertained against the bills of quantities by a professional quantity survey9r and these costs shall constitute his shares in the property'~ In accordance with the above provision, the NHC would be entitled to take over and complete the project in the manner it deems appropriate if the partner is unable to complete the project. Nonetheless, for this option to be exercised, the costs incurred by the partier must be ascertained against the bills of quantities by a professional quantity surveyor so as to constitute the ratio of the partner1s share in the project. In this case, valuation of the project has not been done. The defendant admits, through the testimony of DW-1 and her letter in exhibit P-10 that, what was presented to the plaintiff as a valuation report was a mere draft proposal for discussion. In my opin_ion therefore, the failure of the plaintiff to complete the construction of the proposed project does not amount to an event of repudiatory breach of the contract under clause 16 of exhibit P-1. Therefore, the notice in exhibit P~9 to the extent that it seeks to terminate the contract without there being committed an event of repudiatory breach of contract is in itself violative of the terms of the contract. Besides, to the extent that it relates. to succession of the · financing of the project construction by the defendant, the same was premature ·for not being preceded by valuation of the building. Issue number three is thus ) answered affirmatively. Turning to issue number two, as to who between the parties is in breach of contract, my answer would be that each of the parties breached the contract as per my determination of issues number one and three. It is my finding however that neither of the breaches is repudiatory as to Justify termination of the contract, although may justify variation of the term of contract as to the parties shareholding interest in the suit property and the financing of the same. ----=---------=~----" This now takes me to the fifth issue which is whether the plaintiff suffered any loss as a result of the· breach. I am preparing myself to answer the question negatively for the reasons that I am going to unveil. The loss claimed by the plaintiff are of two categories. In the first category, the plaintiff claims for the costs involved in the construction. Without . wasting much time, this claim does n9t stand. It would have perhaps stood had the contract been repudiated, which is not the case. The taking over of the project by the defendant does not in my understanding amount to determination of the contract _so long as the costs expended by the plaintiff is incorporated into her share .in the ~ect. The effect of the taking over . . 6 ' . "· 16 . . ~~/27hrfrn,--(f ,~/ <</ 1·---- \:.J ,,,.s-y·.. · · ;-➔-- c ~~·::7 ------ . / \ . . __ ~- 1 (,- ~ ;X of the financing of the project in my view is to vary the terms of the contract. In the second category, the plaintiff claims to have suffered loss as a result of the frustration of the various lease agreements she had executed with prospective tenants. The defendant is blamed for the failure on account among others, for his contribution ·into the delay of the completion of the project. I have however held, in respect to issue number four, to the _contrary. The defendant is also associat~d with the frustration of the said lease agreements for her omission to speed up procurement of -certificate-of title-on-plot-number-.25-Block_"T.:...Rwagasor:e_Str:_eet. Ag~iQ,_I___ _ have dismissed a sirr:iilar claim in my determination of issue number four. On top of that, I have taken time to study the lease agreements in exhibits P-2. I -have satisfied myself that the rented premises in all the agreements is described as part of plot number 24 Block "T'. As that in not·enough, in the said agreements, the plaintiff represented herself to posses 75% share in the building, while under exhibit P-1 the plaintiff would acquire share in the building after completion of the construction. In my opinion, the_ .execution of the lease· agreements in exhtbit P-2 was not only premature but in violation of the express ~ s - o f exhibit P-1 as well. - -if?.r'~~-u~ 17 f/-:l_J .~-~J,..-- IJ __!J(l \_Y ' . The claimed loss resulting from failure to pay loan much as it is premised on the same propositions that I have dismissed herein above, is without merit and I will not accept it. There was also a complaint as to loss . . . relating to failure to pay bank loan. I have made it very clearly in relation to issues number 1 and 4 that, as the obligation to finance the project to · its completion was solely on the pl~intiff, the defendant cannot be blamed for any loss relating to the failure of the plaintiff to discharge her contract with the bank. For those reasons therefor~, issue number 5 is answered negatively. Let me wind up with the issue as to what relief are parties entitl~g to. In tl)e first place, the plaintiff prays for decla~ation that the failure by. the defendant to legalize her ownership on the property at plot No. 25 Block "T" Rwegasore Street is in fundamental breach of exhib_it P-1. For the reason of my determination of the first and fourth issue, I will not grant it. In the second place, the plaintiff prays for declaratory order that the notice of intention to terminate exhibit P-1 is premature and illegal. I will grant it for the reason of my determination of the third issue. In_ the third place, she claims for an order of payment of TZS 4,500,.000,000/- as the actual costs for construction of 6 store~ng on the suit property. Since I . ~err· . 18 ~~~-J ·--~ ' . have already declared the intended termination of contract illegal, this prayer shall not be granted. In any event, in the absence of bill of · quantities or any documentation substantiating the asserted costs, this Court would not have factual basis to determine the claim. Besides, the plaintiff has prayed for payment of USD 807,120 which is equivalent to TZS 1,845,076,20 at the current ·bank rate of 2286 per one dollar being actual loss suffered on the lease agreement entered between the _plaintiff and companies named in paragraph 11 of the Plaint. This claim cannot stand since I have held that the loss if any, has no nexus with the contract in dispute. In the final result, the suit partly succeeds to the extent of the legality ·of the Notice of Intention to terminate the Agreement of the Joint Venture Project which is hereby declared null and void. Since the plaintiff concedes in paragraph 3 of the plaint inability to complete the construction and · because the defendant has expressed, in exhibit P-10, her willingness to take over the project and finance it to its completion, I will give the following further consequential orders under order _ VI 6 rule 7 of the Civil Procedure Code, Cap. 33, R.E. 2002:- 19 1. The defendant is ordered to take over the project and finance it to its completion. 2. Before exercising the option above mentioned, the parties should appoint an independent quantity surveyor to make a valuation of the costs involved against the bills of quaties. 3. The costs expended by the plaintiff in construction of the. building shall constitute ratio of its shareholding on the suit property. 4. I will not give an order as to costs in the circumstance. It is so ordered. ATMWANZA 27/7/2018 20 Date: 27/7/2018 Coram: Hon. Maige, J Plaintiff: Ester Charles, Director of plaintiff Defendant: Japhet Shedrack, Principle officer of defendant Court: Delivered in the presence of Easter Charles, the director of the plaintiff and Japhet Shedrack, the principle officer of the defendant this 2ih July 2Q18~. C, r GE JUDGE 27/7/2018 21