MABAMBA INVESTMENT

IN THE HIGH COURT OF THE UNITED REPUBLIC OF TANZANIA IN THE SUB-REGISTRY OF MWANZA

AT MWANZA CONSOLIDATED CIVIL APPEAL NO. 13 & 32 OF 2023 (Originating from Civil Case No. 6/2022 of Geita District Court) MABAMBA INVESTMENT CO. LTD……..………..……………………….…APPELLANT

VERSUS LUCAS MLEKWA……..….…..…………………………………………..1ST RESPONDENT ATHUMAN KASSIM……………………………………………………..2ND RESPONDENT YAHYA RASHID PUYAGA……………………………………………..3RD RESPONDENT

JUDGMENT Kilekamajenga, J. The appellant was the defendant in Civil Case No. 6 of 2022 in the District of Geita. The dispute between the appellant and respondent arises from failing to honour some contractual obligations. On 1st January 2021, the appellant hired the first respondents to supply explosives and conduct explosions in mineral sites. In the contract, the respondents would receive 10% of each month out of the net profit which could be gauged after payment of taxes and running expenses. However, before reckoning the final profit the respondents received a monthly upfront payment of 2% from the agreed 10% of the final profit. According to article 3(1) of the agreement, the contract was expected to last for one year. As a result, on 30th November 2021, the appellant expressly notified the respondents on the intention of not renewing the contract as the business seemed unsuccessful. On 31st December 2024, the contract ended though the appellant had not effected the payment of the remaining 8%. 1 On 07th March 2022, the respondents served the appellant a demand notice claiming Tshs. 183,569,623.47/= as 8% of the whole contractual period. The amount was reckoned based on the 2% which was paid by the appellant each month. In response, the appellant objected to the claim alleging that the actual amount would be ascertained after the auditor’s report. The response seemed

less meaningful to the respondents who filed the instant case on 26th May 2022 in the District Court of Geita. The respondents sought the following orders: 1. The acts and conduct of the defendant amount to a breach of contract; 2. Payment of the claimed principal debt of Tshs. 183,569,623.47/=; 3. Payment of interest at Bank rate (22%) over the principal debt in (ii) above from the date of filing the suit till the date of full payment; 4. Payment of general damages of Tshs. 60,000,000/= for breach of contract terms or any sum that may commensurate assessed by the court for breach of contract; 5. Interest at court rate (7%) over the decretal sum from the date of judgment till the date of payment in full; 6. Costs of this suit; 7. Any other relief. The trial court decided, among other things, that the claim was prematurely filed. However, the court condemned the appellant for breach of contract; and ordered the payment of general damages at a bank interest rate of 22%. Disgruntled with the decision, the appellant filed the following grounds in this court: 1. That the trial court erred in law and fact to determine the matter in favour of the respondents while the case brought before it was pre-mature 2 according to the requirements of the agreement entered between the appellant and the respondents; 2. That the trial court erred in law and fact to determine the matter in favour of the respondent by misleading itself when it awarded the respondents relief of general damages while the specific damages were denied; 3. That the trial court erred in law and fact to determine the matter in favour of the respondent without taking into account the reason of force majeure given by the appellant which led to the appellant failure to heed to the agreement.

4. That the trial court erred in law and fact to determine the matter in favour of the respondent by failing to take into account that the respondents failed to prove their claims. Also, the respondents filed a cross appeal with one ground that: 1. That, Honourable Magistrate erred both in law and facts by finding that the appellants claims of Tshs. 183,569,623.47/= was brought prematurely before the trial court. When invited to address the court on the grounds of appeal, the counsel for the appellant, Mr. Vian Mbuya argued that, the appellant and respondents entered into a one-year contract that required the appellant to pay the respondents 10% of profit every year after the deductions of all running expenses and payment of taxes. However, the respondents were paid 2% monthly out of the agreed 10%. The contract further required the appellant to deduct the revenue and other running expenses before payment of 10%. An audit was supposed to be conducted 3 and approved by the Tanzania Revenue Authority. After the audit, the appellant could be in a position to discern whether there is any profit or loss. In this case, the appellant instructed the audit after the year and the respondents were informed accordingly. The audit was done in line with section 91(1) of the Income Tax Act, Cap. 332 RE 2019. Soon after the appellant initiated the audit process, the Tanzania Revenue Authority

took some of the necessary documents from the appellant. On the other hand, the respondents filed the instant case on 25 May 2023 i.e. before the revenue authority returning the documents. Therefore, the audit process was interrupted and it is not clear whether the appellant was running on profit or loss. As the agreement required the appellant to pay 10% of the annual profit and as long as the case was filed before the actual profit was ascertained, the case was filed prematurely. It is very unfortunate that, the trial court decided in favour of the appellant but went further awarding the respondents’ prayers. On the second ground, the counsel argued that, the trial court erred in granting general damages to the respondents after declaring the dispute premature. As stated in the case of East Africa Cables v. Kayua GNK Enterprises, Civil Case No. 105 of 2016, evidence must be given to account for the general damages. He cemented his argument with the case of The Board of Trustees of Public Service Social Security Fund v. African Focus Tourism and Hospitality Consult Limited which quoted the case of Reliance Insurance Company Limited and two others v. Festo Mgomapayo that: “if the damages be 4 general then it must be averred that such damages has been suffered but the quantification of such damages is a Jury Question.” When addressing the third ground, Mr. Mbuya submitted that,

the Tanzania Revenue Authority crippled the appellant from completing the audit process after taking the necessary documents. The appellant had no authority to prevent the revenue authority from taking the documents. On the other hand, the appellant could not have reckoned the profit without such documents. Hence, the trial court erred in deciding in favour of the respondents. When addressing the fourth ground, the counsel argued that, it was an error to award an interest of 22% for the general damages which was not proved. The decision is non-executable because there is no base for the interest of 22%. Furthermore, it was erroneous for the trial court to award costs after declaring the case premature. In response, the respondents’ advocate objected to the allegation that the case was prematurely filed. The contract between the appellant and respondents was entered in January 2021 and was supposed to end on 31st December 2021. The appellant served notice on 30th November 2021 to end the contract. However, the notice did not state how the respondent was going to pay the remaining 8%. The 5 appellant only paid 2% and therefore breached by terminating the contract without paying the remaining 8%. On the second ground, the counsel argued that, general damages is awarded at the discretion of the court. Therefore, based on the evidence, the trial court was justified to award the

general damages. The counsel stressed that, the appellant breached the contract hence the award of general damages was desirable. The counsel further objected to the allegation that it was force majeure when the revenue authority took the documents from the appellant. In his view, the appellant was not prevented from conducting the audit despite dearth of the documents. On the fourth ground, the counsel argued that, there was a breach of contract because the appellant has not paid the remaining 8%. When rejoining, the appellant’s counsel stressed that, the appellant could pay the 8% after ascertaining the profit. The payment of 2% was not actual but based on estimation. He insisted further that, the award of general damages must be coupled with evidence. Also, the act of the Tanzania Revenue Authority taking the document was unforeseeable and amounted to force majeure. Having considered the submission from the parties, I now consider the grounds advanced by the appellant and the respondents. On the first ground, the appellant argued that, it was wrong for the trial court to decide in favour of the respondents 6 whereas, according to the agreement, the case was brought prematurely. When addressing this ground, the appellant’s counsel stressed that, the case landed in court before the appellant discerned the actual profit to reckon the remaining 8%. On the other hand, the

respondents’ advocate blamed the appellant for breach of contract. The appellant breached the contract without paying the remaining 8% of the profit as agreed by the parties. This argument propelled the revisit of the contested agreement between the parties. It was agreed by the parties that, the appellant shall pay the respondents according to the actual profit after payment of all expenses including taxes due to the government. See, item 1(ii) of the agreement. The parties further agreed that, the appellant would pay 10% of the total profit. However, the respondents were entitled to a monthly pay of 2% from the agreed 10%. See, item 1(iii) of the agreement. The parties further covenanted that, for the smooth operation of the company, the respondents’ pay would depend on the monthly audit report. See, item 1(iv) of the agreement. The agreement further stipulates; that after the year, the appellant would pay taxes to the Tanzania Revenue Authority and thereafter ascertain the actual costs of running the company. See, item 1(vii) of the Agreement. Also, the payment of 10% depended on the performance and the respondents’ productivity which shall be established after an audit. See, item 2(iv) and (v) of the agreement. It is therefore evident, according to the agreement, the payment of 10% of the annual profit depended on a number of factors. First, the actual profit could not 7 be

established without an audit; both the monthly and the annual audit. Second, the profit could only be reckoned after the payment of all running expenses and taxes. Third, the payment of 10% could be affected if the respondents’ performance was not productive to the company (appellant). Precisely, the payment of 8% could not be actual in absence of the annual audit report which could display the income, expenses and taxes payable by the appellant. I entirely subscribe to the appellant’s view that, the case was premature because the respondents it without the final audit report. As the agreement provides, the monthly pay of 2% was not actual because it depended on other factors. I find merit in the first ground and allow it. Now, having found the case to have been prematurely filed, the other grounds become less relevant. For instance, on the second ground, the appellant assailed the trial court’s decision to award general damages to the already declared premature matter. Going through the decision, on page 14 of the decision, the trial magistrate concurred with the appellant’s defence reasoning that the claim of Tshs. 183,569,623.47/= was brought prematurely. The trial magistrate found no evidence to establish the stated claim. However, the trial magistrate further condemned the appellant for breach of contract, payment of general damages at the interest rate of 7% and awarded

costs to the respondents. Before this court, the appellant’s counsel assailed the trial court's decision for being erroneous because one cannot award general damages where the specific damages was not 8 proved. With respect, the trial court could not have awarded general damages to a case where the case was premature and special damages were not proved even on the mere balance of probability. There is merit in this ground as well. On the third ground, the appellant argued that, the act by the Tanzania Revenue Authority of taking the documents which enable the audit amounted to force majeure. On the other hand, the counsel for the respondent objected to this argument. I understand, in one way or the other, the documents held by the revenue authority might have been significant for the audit process. However, there is no evidence to suggest whether the audit was completely prevented due to the absence of such documents. I believe, the revenue authority required the documents for a short period and later returned to allow the appellant to complete the process. I entirely find no merit in the argument that the act amounted to force majeure. I therefore dismiss this ground. I find no reason to address the fourth ground and the one advanced by the respondents because are addressed in the above analysis. Generally, I find merit in the first, second and third ground advanced by the appellant. I hereby set aside the decision of the trial court and direct the appellant to complete the audit process within six months for calculation of the remaining 8% due to the respondents. No order as to costs. DATED at Mwanza this 17th Day of July 2024. 9 Ntemi N. Kilekamajenga.

JUDGE 17/07/2024 Court: Judgment delivered this 17th Day of July 2024 in the presence of the counsel for the appellant, Mr. Bernard Benson and the counsel for the respondent, Mr. Alex Luoga. Right of appeal explained to the parties. Ntemi N. Kilekamajenga.

JUDGE 17/07/2024 10