makriman trust fund ltd vs national bank of commerce and others 2020 tzhclandd 117 27 april 2020

IN THE HIGH COURT OF THE UNITED REPUBLIC OF TANZANIA (LAND DIVISION)

AT DAR ES SALAAM LAND CASE NO. 215 OF 2016 MACKRIMAN TRUST FUND LTD.............. ...... PLAINTIFF

VERSUS NATIONAL BANK OF COMMERCE LTD..... 1st DEFENDANT LESHEYA INVESTMENT CO. LTD............. 2nd DEFENDANT SADOCK DOTTO MAGAI.............. .......... 3rd DEFENDANT

JUDGMENT S.M. MAGHIMBI. J: The plaintiff's claim against the defendants jointly and severally is for declaratory orders that the defendant's intention to auction the plaintiffs property situated at Plot No. 29/1 Kunduchi Salasala Area, Kinondoni District Dar-es-salaam is unlawful, unjustified and therefore null and void. She also claims for permanent injunction against the Defendant jointly and severally for reasons that the act of auctioning the above stated property is against the law, and for orders of payment of damages in favor of the plaintiff. In her plaint, the plaintiff prayed for judgment and decree as follows: i. A declaration that the 1st and 3rd defendants' intention to auction the plaintiff's property situated at Plot No. 29/1 Kunduchi, Salasala Area, Kinondoni Municipality, Dar-es-salaam is unlawful for reasons that the plaintiff was not involved in the extended banking i facility and/or alternatively no formal legal notice was issued as required by the law. ii. Alternatively; this honorable court issue an order that the plaintiff was not involved in the extended banking facility therefore no contractual obligation existing between the plaintiff and the 1st defendant and in the event the same do exist, is to the extent of Tshs 400 million guaranteed by the plaintiff at the first instance. iii. The plaintiff be released from contractual liabilities between

the defendants. iv. The defendants be ordered to jointly and severally pay general damages to be assessed by the Honorable Court. v. That an order for permanent injunction be issued to retsrain the defendants jointly and/or severally from interfering the plaintiff's enjoyment to the suit premises. vi. Costs of this suit be paid by the defendants. vii. That any of the relief the court deem fit to grant. In their Written Statement of Defence, the 1st and 3rd defendants maintained that under Clause 2(a) of the Mortgage Deed (EXD1), the plaintiff agreed that the moneys intended to be secured by the mortgage included all liabilities incurred to the 1st defendant by the 2nd defendant notwithstanding any irregularity in incurring such liabilities hence the plaintiff agreed to secure the extended liabilities. On the part of the 2nd defendant, she disowned liability for damages suffered by the plaintiff throwing the burden of informing the plaintiff about the extension to the 1st defendant All the defendants prayed for the dismissal of the suit with costs. From the gathered facts and evidence, brief background of the matter dates back to 29th November, 1999 when the first defendant advanced to the second defendant an overdraft facility at the tune of Tshs. 400,000,000/-. The facility was for a period of one year to the 30th November, 2000. The facility was secured by collateral in form

of a landed property described as Plot No. 29/1 situated at Kunduchi Salasala with Certificate of Title No. 49024 owned by the plaintiff (herein referred to as the "suit property"). Before the expiry of the facility period, on the 25th November, 2000 the 1st and 2nd defendants entered into another agreement varying the facility as well as its securities extending it to another period of one year. This is where the current dispute arose as the plaintiff alleges that as the guarantor, she was not involved in the extension of the facility nor did she agree in the extension of the suit property to act as security to the extended facility. Upon conclusion of the pleadings and mediation having failed, the following issues were deliberated and agreed to be framed for determination: 1. Whether the mortgage deed executed by the plaintiff covered the extension of overdraft facility granted to the 2nd defendant by the 1st defendant in the year 2000.

2. If the answer to the first issue is in the affirmative, whether the plaintiff's mortgage property secured an amount of Tshs 400,000,000/“ only.

3. Whether the 1st and 3rd defendants intended sale of mortgaged property is lawful 4. To what relief(s) are the parties are parties entitled to. 3 In order to prove their case, the plaintiff had one witness to call, so did the 1st and 3rd defendants, on her part, the 2nd defendant also had one witness. Beginning with the first issue, whether the mortgage deed executed by the plaintiff covered the extension of overdraft facility granted to the 2nd defendant by the 1st defendant in the year 2000. On para 10 of her plaint, the plaintiff alleges that on 25th November, 2000 the 1st and 2nd defendants entered into another agreement (EXP2) whereby the terms and conditions of the previous agreement into which the plaintiff had issued guarantee and its property secured were varied without notice and/or involving the plaintiff. The extended facility was for another period of twelve months to expire on the 30th November, 2001. In his testimony to support this issue, PWl's evidence was that in 1999 the 2nd defendant approached the plaintiff requesting for her guarantee to secure a loan from the 1st defendant (EXP1). That the plaintiff's responsibility was to ensure that the 2nd defendant fulfills the conditions in the mortgage and upon the plaintiff's satisfaction that the 2nd defendant will be able to pay the loan as the conditions of the mortgage showed that it will cover any deposit

made by the borrower, she guaranteed the facility through the disputed property as a security (EXD1). Further that the plaintiff was more certain that the 2nd defendant will service the loan as the bank had an obligation to conduct quarterly inspections and that on para 3 of the EXP1, the overdraft facility is covered by account receivables and inventories and they are required to be at 30% margin. EXP1 also requires the monthly statement of the receivables to go to the bank and on quarterly basis, the branch manager was obliged to do inventory taking in the borrowers business. 4 PW1 also testified that they were satisfied that the facility is a short term because paragraph 9 of EXP1 reads: "Guarantee by Mackriman Trust Fund Limited, supported by L/M over CT No 49024 Plot No. 29/1 Kunduchi Saiasaia area, Kindndoni District Dar-es-saiaam. I.N.L Ms Mackriman Trust Fund Limited valued at Tshs. 766.6 million to be created as collateral to secure the overdraft facility o f Tshs 400,000,000/- registered in Bank's favor and remain in force during the currency o f the facility". He elaborated that the words "remain in force during the currency of the facility" meant one year hence it was a short term facility not a long term one. He also testified that after the lapse of the year without hearing any notice of default of the borrower by the bank, the plaintiff was satisfied that the

borrower serviced his loan accordingly. PW1 also testified that he came to learn about the extended facility in the year 2016 while in his office when a Dalai! called Komred came to him with a piece of The Guardian Newspaper for June 30, 2016 saying that he intends to sale the suit property (EXP3). Upon seeing EXP3, PW1 went to see the 3rd defendant to know what was going on and was informed that the plaintiff has defaulted the facility and he was surprised because he knew that the first facility was paid. He got conformation of the extension of the facility from the 2nd defendant saying that after the 1st facility they met with the bank and agreed on another facility (EXP2) and didn't need to inform the plaintiff. The EXP2, a document extending the facility, is from the first defendant to the CEO of the 2nd defendant and the amount is the same Tshs. 400,000,000/-. Further that the perfection of the papers were 5 also done, aggrieved by the omission to be informed, that is when he came to this court to seek redress. When cross examined by Mr. Rajab Mrindoko, PW1 admitted that he has worked for the plaintiffs from the year 2014. This is an implication that the PW1 was not testifying on direct evidence, rather on what he founds on records when he joined the company. When further cross examined by Ms. Salah for the 1st and 3rd defendants, PW1 testified that there is no document

showing that there was a relationship between Lesheya(2nd defendant) and Mackriman (plaintiff) to have asked for guarantee and that he didn't know of any personal relationship within the directors of the two companies. However, in the same cross examination, the PW1 admitted that one of the directors who executed the EXD1 was Emiii Owiso, who was a director then, and that it was possible that it is his signature on EXDl. The core of PWl's contention during cross examination was that Mackriman was not involved in the extension of the loan that took place in 2000. On his part, DW1 testified to be aware of the transactions in dispute that the plaintiff happens to be the guarantor of the second defendant Lesheya Investment Limited, who is the bank customer and who has been enjoying various credit facilities granted by the bank from time to time. On the facility contained in EXP1, DW1 testified that the facility was fully utilized and because it was being serviced satisfactorily, the bank, the borrowers and the guarantors agreed to extend the utilization of the facility for a period of another year from November 2000. The renewal of the overdraft was subject to meeting all the terms and conditions of the previous agreement and all the parties to first agreement were aware of the said 6 extension whereby the borrower and the guarantor had full knowledge of the extension of the

overdraft facility. DW1 also testified that the plaintiff and the second defendant are sister companies and at all material times the bank has been dealing with the Emily Woiso and Anna Emily Woiso who are the directors and main shareholders of the second defendant and also the directors of the plaintiff. He also pointed out that as per the EXD1, the plaintiff and the 2nd defendant are affiliate companies. Further that the bank has been dealing with one person who was the executive director of the second defendant and also the director of the plaintiff. Therefore at all material times all the information regarding guarantor ship was duly complied with one Emily Woiso, a director of both the plaintiff and the second defendant. DW1 also pointed out that the second defendant defaulted payment way back in June 2001 and that both the demand notice and a Notice of Default were sent to the 2nd defendant (EXD2 & EXD3). Mr. Mrindoko's cross examination of DW1 mainly focused on the involvement of the plaintiff in the extension of the facility. DW1 admitted that one of the conditions that discharge the guarantor from liability is the presence of any changes in the facility which did not involve him, and that change of time was a change in the facility. DW1 further admitted that in the loan issued to the 2nd defendant, the first facility was for one year, renewable, the renewal was not

automatic. Time was one of the fundamentals of the facility extended to the 2nd defendant and that the guarantor is usually brought by the borrower and by signing the mortgage it means he knew what he was guaranteeing. 7 On his part, DW2 didn't have much to say. As a Financial Director of the 2nd defendant, he testified to support the plaintiffs evidence that the 2nd defendant extended the overdraft facility without involving the plaintiff. He admitted that the allegations are true and the facility was extended without involving the plaintiff. From the evidence analysed above on the first issue, there are some emerged facts that are to be first analysed by this court before the framed issue is answered. The evidence establishes a contention that there is an existing or rather overlapping relationship between the plaintiff company and the 2nd defendant company. The relationship, as alleged by DW1 is on the human personality of the directors of both companies which according to the 1st defendant, the directors and shareholders of the two companies are the same as these are the same people, Emily Woiso and Anna Emily Woiso. DW1 also attempted to establish that since they were dealing with one Mr. Emil Woiso who is a director in both companies, the implication is that the plaintiff was aware of, and involved in the extension of the facility. Now let us see what the prevailing

evidence is saying on this fact because once it is successfully established that the directors are the same, then we can make a conclusive presumption that the plaintiff was aware of the transaction and the current suit is just an attempt to play a cat and mouse game in delaying to discharge their liability. In his closing submissions, Mr. Issa Mrindoko for the plaintiff strongly argued that the facility in EXD1 did not cover any extension of the overdraft facility (EXP1). He referred the court to Section 85 of the Law of Contract Act, Cap. 345 ("The Contract Act") which provides: 8 "Any variance, made without the surety's consent in the terms of the contract between the principal debtor and the creditor, discharges the surety as to transactions subsequent to the variance." He elaborated that in his testimony, DW1 relied on clause 4(a) of EXD1 that the property mortgaged was a continuing security and that by signing the mortgage deed, the plaintiff agreed her property to cover all debts present and future notwithstanding any irregularity incurred by such liabilities. Further that DW1 relied on clause 11 of the EXP1 that the plaintiff is the affiliate company of the 2nd defendant and they have been dealing with one Emili Woiso the director of the 1st defendant. He then argued that under the Contract Act, a continuing security in guarantee means a guarantee which extends to a

series of transactions. Further that the DW1 admitted that there was no any documentary evidence to prove that the plaintiff was involved in negotiation of the extended overdraft facility. Mr. Mrindoko also pointed out that DW1 admitted that EXD1 and EXP1 are two different documents not to be read together and that the conditions for discharging the guarantor is when there is any variance between the principal debtor and the bank or creditor without seeking the consent of the surety or guarantor. Further 4:hat DW1 admitted that time which was stipulated in EXP1 was one year, which he argued to be the fundamental term under the facility agreement. He submitted further that the law does not stipulate that a continuing security is for indefinite period, but that any variance made between the principal debtor and the creditor, the surety's consent has to be sought and the legal consequence of failure is to 9 discharge the guarantor as to the future transactions which in this case is the extension of the facility. I must elaborate at this point as I have pointed earlier, in answering this issue, it seems that between parties, it is undisputed that in extending the facility, the 1st defendant was dealing with a director of the company one Emil Woiso who is alleged to be a director of the both the plaintiff and the 2nd defendant. The issue here is therefore, by having the same

individual being the director of both the 2nd defendant and the plaintiff, does it suffice to conclude knowledge of the plaintiff of the extension of the facility rather that Mr. Issa's lengthy and robust submissions on the meaning of continuing security, which I appreciate to be precise. I must admit that I totally agree with his submissions that under the Contract Act, any variance of terms of contract between the principal debtor and the creditor must be made known to the surety otherwise the surety is discharged from liability. I also subscribe to the holding of Lady Justice Kimaro (as she then was) in the cited case of National Bank of Commerce Vs. Mustapha Issa Singh & Another, Commercial Case No. 221/2002 (unreported). However, with respect, the situation in the two cases is distinguishable. In the current case, there is still an argument to be resolved on whether by having Mr. Emil Woiso negotiating the extension, the plaintiff had knowledge of the extension, something which the 1st defendants argue that she had, being the director of both the plaintiff and the second defendant. The question to be determined at this point is whether or not, the presence of one Emily Woiso who happens to be the director of both the 2nd defendant, the borrower, and the plaintiff, the mortgagor is sufficient to 10 make a conclusion that the plaintiff was aware of the extension of

the facility. It must be noted that in his evidence, PW1 disowned any knowledge of any relationship between the plaintiff and the 2nd defendant. Well, that did not surprise the court considering that DW2 admitted that the plaintiff was not involved, while both the PW1 and DW2 joined the plaintiff and 2nd defendant companies respectively, long after the transaction was both concluded and extended. Maybe as they were going through the records for purpose of testifying in this court, they both accidentally skipped the part where the structure of the company, including the directors and shareholder, was elaborated. More surprisingly however, is the PWl's confident denial of existence of any relationship between the two while the evidence available on record suggests the existence of that relationship as I will elaborate. Starting with the same PW1, he admitted that one of the directors then who executed the EXD1 was Emili Woiso, and that it was possible that it is his signature on EXD1. Looking at the signature, it does not take a signature expert to see that one of the persons who executed EXD1 was the said Emil Woiso who stood as the director of the company, and this is the same signature that appears on EXP1, the facility letter not in dispute. Further look at EXP2, it is the same person who signed the extension of banking facility with the official stamp of the company (2nd

defendant) reading the address as Box 60740 as in EXD1. In the EXP2, the said Emil is accepting the extension with the words "terms and conditions accepted" then signed the document. Clause 10 of the EXP1 reads: ii "The major shareholder's guarantee in respect o f this facility, to be signed by Mr. Emil Woiso and Mrs Anna £ Wo/so to be obtained and submitted to the Bank". From this document, it is undisputed that the major shareholders of the 2nd defendant are Emil and Anna Woiso. Now looking at the three documents (EXDl, EXP1 and EXP2), it is the same signature that executed all the documents. Therefore from the evidence of PW1 that admitted that Mr. Emil Woiso signed the mortgage deed EXDl as the director then, and here we have undisputed and unshaken evidence of DW1 that the plaintiff and the 2nd defendant are sister companies; also corroborated by PWl's admission that the signatures in ail the 3 documents are the same, it is safe at this point to make a conclusive finding that Mr. Emil Woiso was a director of both the plaintiff and the 2nd defendant, and that the bank at ail times, as testified by the DW1, was dealing with Mr. Woiso as the director of both companies. Furthermore, by having the same fiesh and blood who is a director of both the plaintiff and the 2nd defendant present and have knowledge of the extension, it precludes the plaintiff to come and claim lack of

knowledge while the physical presence of one of its directors was always at the 1st defendant's offices. Then there is Clause 7(a) of the EXP2, the extended facility, which reads: "Guarantee by Mackriman Trust Fund Ltd, supported by L/M over CTNo. 49024, Plot No. 29/1 Kunduchi Saiasaia Area, Kinondoni District, Dar-es-saiaam i.n.o M/S Mackriman Trust Fund Ltd valued at Tshs. 766.6 Million stamped to cover the overdraft facility o f Tshs. 400 million at 130% coverage, registered in bank's favor and 12 is to remain in force during the currency o f the facility." (Emphasis is mine) The document is signed by the same Mr. Emil Woiso, which means that as the director of the 2nd defendant, he agreed on the terms and conditions of the extension which terms included a guarantee by the plaintiff, which he had knowledge of and consented to by conduct as a director of the plaintiff as well. The issue here is then, should the absence of mere letter sent to the plaintiff whose director had full knowledge and actually spearheaded the extension (EXP2) to inform them of the extension, discharge the plaintiff from liability as a guarantor/mortgagor? The answer is definitely NO! The plaintiff just wants to play with words and procedures to avoid liability. Even by conduct as I shall further elaborate, a conclusion can be reached that the plaintiff had full knowledge of the extension. When he was

testifying, PW1 said that he came to learn about the extended facility in the year 2016 while in his office when a Dalali called Komred came to him with a piece of The Guardian Newspaper for June 30, 2016 (EXP3) saying that he intends to sale the suit. At this point, I have posed to ask myself with no answer; if the plaintiff deposited the title deeds to the 1st defendant in the year 1999 for a facility of one year to end in November 2000, and the same person denies knowledge of the extension of the facility (EXD2), and here is PW1 saying that the plaintiff came to the knowledge of extension in 2016 when he was served with (EXP3), how is it possible then for someone to leave their Certificate of Title in the hand of the Bank for more than 16 good years without making any follow up and demand for its return? By implication, the plaintiff's story and conduct do not make any sense, hence supporting the 1st defendant's 13 evidence that since it was Mr. Emil Woiso who negotiated the extension of the facility and being a director and shareholder of the 2nd defendant, the plaintiff had knowledge of and consented to the extension of the facility. The current suit is just another way of the 2nd defendant's mode of avoiding her liability to pay the outstanding amount as she and the plaintiff are one and the same people in terms of flesh and blood. Am saying so because what I have

gathered from the evidence adduced are many attempts of the 2nd defendant and the plaintiff avoiding liability to settle the outstanding amount while yet keeping their own interest, the mortgaged property. For instance, after the default to pay, the bank was not silent, and when confronted, the second defendant ran to the court, High Court Dar Zone and filed a Civil Case No. 442/2001 attempting to defend himself from paying the money. The case was dismissed in February 2012 (This fact is also admitted by Mr. Issa Mrindoko in his closing submissions). There was also another case filed by the plaintiff's neighbor Gipro Mawala in 2007 on the dispute of the boundaries to the mortgaged property, the case was settled in 2014 and it successfully bought time for the 2nd defendant to avoid liability. The bank's hands to precede with any legal recovery measures were tied by virtue of the two cases pending finalization of the two matters and in 2016 when they came across the notice of auction, they again ran to this court and filed the current suit. The fact that the 2nd defendant was running around filing different cases corroborates the mysterious fact as to why the plaintiff was silent from the year 2000 when she alleges that her liability was discharged to the year 2016 to claim his property by this suit, 16 years later. Therefore coming to 14 this court is a 3rd attempt to avoid

liabilities to pay which they have successfully done so by having the bank's hands tied for another four good years. From the way it is framed and the evidence adduced, the first issue is not capable of being answered in a yes or no manner. Rather, from the evidence adduced, although the mortgage deed executed by the plaintiff (EXD1) did not expressly cover the extension of overdraft facility granted to the 2nd defendant by the 1st defendant in the year 2000 (EXP2), the plaintiff had full knowledge of the said extension and could not be discharged from liability as a mortgagor. That said, the first issue is answered in favour of the 1st and 3rd defendants, the extension of the facility is not illegal as the plaintiff was aware through her director, of the extension. Having answered the first issue in favor of the 1st and 3rd defendant the second issue is automatically answered against the plaintiff as the plaintiff's mortgage property is also liable as a security to the extended facility and the outstanding amount. As for the fourth issue, since the extended facility is well secured by the disputed property, the 1st and 3rd defendants' intended sale of mortgaged property is lawful as both the demand notice and notice of default (EXD2, EXD3 and EXD4) were served to both the plaintiff and the 2nd defendant. They may therefore proceed with the sale as per the requirements of

the law. As for the last issue, the reliefs that the parties are entitled to, looking at the above findings, I must point out that the outstanding amount of 9.7 billion (as it was then) is such a huge amount to be played around with. I 15 should also not ignore the fact that the 1st defendant is partly Government owned Bank and it is through the profits made from these businesses that the Government makes its revenues to run the economy. In the Monetary Policy Statement 2018/2019 issued by the Governor o f the Bank of Tanzania in June 2018, ISSN 0856-6976, on page (ix) of the Executive Summary the Governor wrote: " The Bank continued to implement prudential measures to strengthen risk management practices in the financial sector, by reviewing relevant regulations and guidelines to take into account new developments. The Bank also made use o f credit reference bureau report mandatory during loan appraisal process, directing all banks and financial institutions to develop and implement strategies that strengthen credit application processing, credit management, monitoring and recovery measures On that note therefore, the policy of the central bank of the country is to strengthen recovery measures of the banks and financial institution so as to ensure that the banking sector remained sound, stable and profitable, impacting the positive prosperity of our economy. This cannot be

done by the banks and financial institutions in isolation; it needs a robust intervention from other stakeholders especially in the recovery measures. Therefore as the court, we cannot sit there and let people take advantage of the court processes like the plaintiff and the 2nd defendant are attempting to in a struggle to avoid their liability. Indeed such conducts like the one in question are catalysts in loss of Government revenue which may impact on the rate of economic growth. The courts cannot be a part of 16 such conducts at the risk of becoming a shield to people who hinder growth of the economy in order to fulfill their personal gains and interests, forgetting the larger picture, the society. Therefore since the plaintiff has failed to prove her case, let the 1st defendant proceed with its recovery process as prescribed by the law. That said, and as per the findings above, since all the other issues are decided in favour of the 1st and 3rd defendants whose prayers were for the dismissal of the suit with costs, the suit is hereby dismissed with costs. Dated at Dar es Salaam this 27th day of April, 2020. r 17