AS

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

AT GEITA CIVIL CASE NO. 1397 OF 2025 MARTINE MASHAURI AMANI………..............................................PLAINTIFF

VERSUS A.S LULILA LIMITED……………………………………………………..DEFENDANT

RULING Date of last order: 21/03/2025. Date of Ruling: 08/04/2025. MWAKAPEJE, J.: This ruling arises from the point of preliminary objection raised by the defendant regarding the fact that the case has been brought prematurely before this court. Before delving into considering the preliminary objection, it is prudent to provide a background to this case as far as the pleadings are concerned. The plaintiff filed this suit to claim Tanzanian Shillings 495,000,000/= from the defendant, representing 25% of the profits generated from the Defendant's gold processing plant, as per their Gold Processing Equipment Lease Agreement. According to his plaint, the agreement, executed on 1 May 2022, required the Plaintiff to lease Page 1 of 9 machinery, including a Ball Mill, Conveyor Belt, Jaw Crusher, and Hammer Crusher, to the defendant's plant in Nyarugusu, Geita Region. In return, the defendant was required to remit 25% of the plant's monthly profits to the plaintiff. The plaintiff fulfilled its obligations by supplying the agreed machinery, and the plant commenced operations in October 2022, generating profits through leasing to third parties. However, the defendant failed to remit the agreed share of profits from March 2023 onward, prompting the Plaintiff to issue demand notices, which went unanswered. The plaintiff claims that despite partial payments of Tshs. 100,000,000/= was made

in July 2023, covering only profits from November 2022 to February 2023. It was further contended that the Defendant continued to withhold payments while earning substantial monthly profits of Tshs. 90,000,000/=. The Plaintiff, having exhausted attempts to resolve the dispute amicably, now seeks a court declaration confirming the defendant's breach and payment of Tshs. 495,000,000/= plus accrued profits, permission to repossess the leased equipment, general damages, commercial and court interest, and costs of the suit. In his written statement of defence, the defendant raised a preliminary objection that this case was prematurely filed in this Court. When the case was called for the hearing of PO, the plaintiff was Page 2 of 9 represented by Mr. Erick Rweyemamu, while Mr. Kevin Mutatina appeared for the respondent. Arguing the preliminary objection, Mr Mutatina submitted that their preliminary objection was based on paragraph 5 of the plaint, which was accompanied by annexure M-1, the disputed contract. He argued that under Clause 11 of the contract, the parties had expressly agreed to submit any disputes to arbitration, as the clause contained an arbitration agreement. As a result, he contended that filing the matter before the Court without first resorting to arbitration rendered the case premature. He further submitted that the only appropriate remedy in such circumstances

was to stay the proceedings to allow arbitration to take place, in accordance with the Court's directives. In support of this position, he cited the case of Shamji vs. Treasury Registrar, Ministry of Finance [2002] 1 EA 273, which established that whenever an arbitration clause exists, the parties must first proceed to arbitration, regardless of the nature of the claim. In light of these circumstances, he urged the Court to uphold the preliminary objection and stay the proceedings with costs. In reply, Mr. Rweyemamu, counsel for the Plaintiff, opposed the Preliminary Objection, arguing that the case was properly filed before the Court, as Annexure M-1, referred to in paragraph 5 of the plaint, did not Page 3 of 9 impose a mandatory obligation to refer disputes to arbitration. He contended that the validity of the arbitration agreement must be carefully examined, as established in Phoenix of Tanzania Assurance Co. Ltd vs. Callyxtus Paschal Mponzi & Another (Civil Appeal No. 000001061 of 2024) [2024] TZHC 6593, which cited with approval Dominion Oil & Gas Ltd vs. Logistics T. Ltd (Civil Appeal No. 132 of 2008) [2015] TZCA 272. Referring further to the Supreme Court of India's decision in Jagdish Chander vs. Ramesh Chander and Others (2007) 5 SCC 719, he submitted that the mere presence of the word "arbitration" in a contract does not automatically establish a valid arbitration

agreement unless the clause expressly mandates arbitration as the exclusive dispute resolution mechanism. In the present case, Clause 11 of the disputed contract merely presents arbitration as one of several options, lacking the mandatory character necessary to preclude court proceedings. He further argued that the Defendant had waived its right to arbitration through its conduct. As per Annexure M-6 and paragraph 13 of the plaint, the Plaintiff issued a demand notice inviting amicable settlement, to which the Defendant failed to respond or take any steps to resolve the dispute. He asserted that this inaction amounted to estoppel from raising the preliminary objection, citing Phoenix of Tanzania Assurance Co. Ltd vs. Callyxtus Paschal Mponzi & Another (supra) Page 4 of 9 at page 14. Additionally, Mr. Reyemamu distinguished the case of Shamji vs. Treasury Registrar, Ministry of Finance (supra) from the present matter, submitting that while Shamji involved a clear and unequivocal arbitration clause, Clause 11 of the disputed contract was vague, providing multiple dispute resolution alternatives rather than an obligatory arbitration process. Consequently, he prayed for the preliminary objection to be overruled with costs. In rejoinder, Mr. Mutatina submitted that the Plaintiff had improperly introduced matters of evidence, particularly regarding the demand notice (Annexure M-6).

He pointed out that the document did not bear any signature or acknowledgment from an authorised representative of the Defendant, thereby raising questions about whether it was ever served. Additionally, he contended that the alleged signature on the document closely resembled the handwriting of its author, casting doubt on its authenticity. He urged the Court to disregard this argument as it prematurely introduced evidentiary issues. On the arbitration clause, Counsel argued that the Plaintiff had misinterpreted its contents. He maintained that Clause 11 of the disputed contract stipulated that, in the event of a dispute, the applicable law would be that of the United Republic of Tanzania, followed by the appointment of an arbitrator. It was only upon the failure of arbitration that recourse Page 5 of 9 to litigation was permitted. He asserted that the intention of the clause was to prioritise arbitration as the primary method of dispute resolution. He further submitted that the Plaintiff, upon realising a breach of contract and issuing the demand notice, which was never served, ought to have formally notified the Defendant of the intention to appoint an arbitrator. This would have provided the Defendant an opportunity to accept or reject arbitration before initiating court proceedings. In view of the Plaintiff's failure to properly invoke the arbitration process as stipulated

in the contract, Mr. Mutatina reiterated that the preliminary objection should be upheld, and the proceedings should be stayed to allow arbitration in accordance with the parties' agreement. Having considered the rival submissions by the counsels for the parties herein, the issue to be determined is whether the present matter is before this court prematurely. As stated, this suit originates from the contract signed by both parties on 01 May 2022, where Mr. Mutatina contended that the matter ought to be stayed to allow the parties to resolve their dispute via alternative means as per their agreement. On the other hand, Mr. Rweyemamu vehemently argued that the matter was properly before this court, considering that the clause requiring them to resolve the dispute in other means was not mandatory and hence a party could opt to even Page 6 of 9 come to court. In order to grasp the contents of paragraph 5 of the plaint, which refers to the disputed clause in Annexure M-1 of the plaint under its clause 11, I have to reproduce its stipulation as follows: “Kwamba, mkataba huu umefanywa kwa kuzingatia sheria za Jamhuri ya Muungano wa Tanzania na kama kutakuwa na mgogoro wowote kuhusiana na mkataba huu, pande zote mbili kwa pamoja watakutana na kuutatua mgogoro huo, ikishindikana watateua msuluhishi wa mgogoro na ikishindikana mgogoro huo utaamuliwa kwa kuzingatia sheria za Jamhuri ya

Muungano wa Tanzania” This clause could loosely and in context be interpreted as follows: “This agreement is made in accordance with the laws of the United Republic of Tanzania, and in the event of any dispute arising from this agreement, both the parties shall meet and attempt to resolve the dispute together, if the dispute cannot be resolved through mutual agreement, the parties shall appoint an arbitrator to resolve the matter and should arbitration fail, the dispute shall be determined in accordance with the laws of the United Republic of Tanzania.” From the above excerpt, it is evident that the parties expressly agreed to resolve their disputes through a structured, step-by-step process. I respectfully disagree with Mr. Rweyemamu's interpretation that the wording of the clause provides an option for either party to bypass this agreed mechanism and unilaterally file a suit. On the contrary, the clause imposes a sequential dispute resolution framework, requiring the parties to exhaust each stage before resorting to litigation. Specifically, it outlines a three-tier approach: negotiation between the parties, Page 7 of 9 arbitration, and, as a last resort, litigation. The language used is conditional, stipulating that if one step fails, the next must be pursued, rather than granting the parties an unrestricted choice between arbitration and court proceedings. The rationale

behind such a clause is clear: it promotes efficiency, reduces costs, and expedites dispute resolution while preserving contractual harmony. See the case of Registered Trustee of Cornelius Christian Aid to Churches and The Needy Foundation v. Equity Bank (Tanzania) Limited, Land Case No. 241 of 2022, [2022] TZHCLandD 12722 (30 November 2022), where Mwenegoha, J., drawing inspiration from the English case of Heyman v. Darwins Ltd. [1942] AC 356 at 375, which underscored the fundamental nature of arbitration clauses, emphasising that: "I venture to think that not enough attention has been directed to the true nature and function of an arbitration clause in a contract. It is quite distinct from other clauses. The other clauses set out the obligations which the parties undertake towards each other, but the arbitration clause does not impose on one of the parties an obligation in favour of the other. It embodies the agreement of both parties that if any dispute arises with regard to the obligation which the one party has undertaken to the other, such dispute shall be settled by a tribunal of their own constitution." Page 8 of 9 Accordingly, this Court cannot disregard an arbitration clause unless it is demonstrated that the defendant is unwilling or uncooperative in engaging in negotiations, circumstances have rendered negotiation or arbitration impractical or futile, or the clause is ambiguous or otherwise unenforceable. In the absence of such a showing, the Court must uphold the parties' agreement to resolve disputes through arbitration. For these reasons, I find merit in the defendant's objection and accordingly sustain it. Consequently, this suit is struck out with costs. It is so ordered. DATED at GEITA this 08th day of April 2025. G.V. MWAKAPEJE

JUDGE Page 9 of 9