MATHIAS EPHRAIM HANAI VS NBC LTD MISC

IN THE HIGH COURT OF TANZANIA (COMMERCIAL DIVISION) AT PAR ES SALAAM MIISC. COMMERCIAL APPLICATION NO. 23 OF 2015 MATHIAS EPHRAIM HANAI (t/a HANAI WHITE HOUSE h o t e l ............................................................... APPLICANT VERSUS NATIONAL BANK OF COMMERCE LIMITED RESPONDENT RULING Mansoor, J: Date of Ruling- 29th MAY 2015 The Plaintiff filed a suit under Order XXXV o f the Civil Procedure Code, Summary Procedure for recovery of THz 503,274,064.56 being outstanding amount o f the term loan facility and the overdraft loan. That the Applicant was granted a Term Loan Facility of THz 400,000,000 on 11 October 2011 to 1 clear the Applicant’s liabilities with Mkombozi Commercial Bank and for furnishing and finishing the Hotel, and an overdraft facility o f THz 150,000,000 as working capital in hardware business and the hotel. The Term Loan was to be repaid within 60 months and the period expired on 31 st October 2012. Both loans carried the interest o f 17% per annum and an automatic rate o f 5% per annum on the excess balance if the loan amount is found to be in arrears or has expired. The Plaintiff also prayed as an alternative for appointment of a Receiver Manager with powers to sell the mortgaged property over CT No. 87282 on Plot No. 2068, Block J at Tegeta Wazo Area, Kinondoni Municipality. To the above claim o f the plaintiff, the defendant, having been served, filed appearance and thereafter filed an application under Order 35 Rule 3 (1) (b) o f the CPC seeking unconditional leave to defend the suit. This prayer was made by the applicant supported by an affidavit o f Mathias Ephraim Hanai, who is the Applicant on the ground that there are contentious issues to be tried by the Court. That the conditions of the Term Loan granted to the Applicant on 11/11/2011 were amended on 28/12/2011 and the repayment period was extended to 60 months from 28/12/2011, and the Term Loan had a grace period o f 6 months, and thus the facility was to expire in 2017, and that the plaintiff/respondent has recalled the loan prematurely. The Applicant also argued that the contract for repayment of the 2 loan facility was frustrated by force majeure that DAWASCO had dug out a big trench at the entrance of the hotel, and that made the work at the Hotel to be difficult to be performed. The Applicant said that the plaintiff was notified o f the force majeure and agreed to chat the way forward. The plaintiff asked the Applicant to prepare a fresh repayment schedule, which he did, but before the same was replied with, the Applicant was summoned to appear before this court in answer to this case. Learned counsel appearing for the defendant/Applicant Mr. Lugaziya argued that the defendants has made out an arguable case which would entitle the defendants for grant of unconditional leave. Counsel for the respondent, Ms. Linda Bosco, who along with the Skeleton Arguments filed in court, had argued that the law in summary suit is to the effect that the defendant has no automatic right to defend the suit unless leave is sought and obtained. She said under Order XXXV Rule 3 (c ) as amended by s 25 (b) o f the Mortgage Financing (Special Provisions) Act, 2008 in order to obtain leave to defend, the Applicant’s affidavit must demonstrate that the loan or portion of the loan claimed was indeed discharged, or the loan was actually not taken. The Applicant in his affidavit admits that he has taken the loan, and also admits that he has not paid the loan or even a portion of the loan. To support her arguments, the Counsel for the respondent referred me to the case of Amoni Augustino Mchomvu & Margret Amoni Mchomvu vs. National Bank of Commerce Misc. Commercial Case No. 121 of 2013, (unreported). The facts of this case are more or less similar to the facts of the present case where the applicant admits to have taken the loan, and also admits to have defaulted. The judge dismissed the application for leave to defend on the grounds that the application did not satisfy the grounds stated in the law. Coming to the facts of the present case, I would say that the defense taken by the defendant in leave to defend the suit is totally unacceptable and does not qualify him to be given leave to defend the suit. The law requires that the Applicant has to satisfy the conditions given in the law. He has to either deny that he has not taken the loan, or he has to show that he has paid either all or part o f the loan. The Applicants in the present case admits to have taken the loan, and also admits that he has not paid any portion o f the loan due to the act o f force majeure, and due to the reasons that the loan was recalled prematurely. The Applicant has not demonstrated that he actually paid at least the initial periodical instalments of the loan amount which fell due since July 2013. The Applicant has failed to give the circumstances coupled with facts which prima facie raise some doubt about the outstanding amount of loan remained unpaid as at the date the plaint was 4 filed in Court which might have created some credence to the defense taken by the defendant that the outstanding loan amount in question, and the interest, plus the penal interests did not take into consideration the amount o f payment already made to the bank. It is settled rule of law that wherever the defense put forth by the applicant/defendant is bonfine, raises triable issues and is not a moonshine, the applicant/defendant would be entitled to leave to defend conditional or unconditional depending upon the facts and circumstances of each case. In this case the defendant has failed to show that his defense is bonafide, raises triable issues or not a moonshine. The fact that the loan was recalled prematurely was not established. The applicant ought to have filed a statement showing that the loan which was granted on 28/ 12/2008, whose grace period expired sometimes in June 2013, thus the first repayment instalment was to be paid in July, 2013 was actually paid. The bank does not have to wait until 2017, when not a single payment was made towards servicing the loan amount to exercise recovery measures. The defense on force majeure is a matter to be discussed between the parties to a loan agreement, and that force majeure is not a defense covered under Oder XXXV Rule 3 (c) as amended by Mortgage Financing (Special Provisions) Act, 2008, entitling the Applicant/defendant leave to defend the summary suit. 5 Evaluating the facts deponed in the Applicant’s affidavit, if these facts are duly proved, will not afford a good answer to the plaintiffs claim. The fact that the loan was recalled prematurely since the loan period expires in 2017 will not afford a good answer to the plaintiffs claim because the Applicant admits failure to pay the monthly installments which were due since July 2013. Since the Applicant has failed to satisfy the conditions set in Order XXXV Rule 3 o f the CPC as amended by the Mortgage Financing (Special Provisions) Act, 2008, leave cannot be granted to the Applicant to defend the summary suit. As provided in Subsection 2 of Order XXXV of the CPC, which section, reads as follows: (2) In any case in which the plaint and summons are in such forms, respectively, the defendant shall not appear or defend the suit unless he obtains leave from the judge or magistrate as hereinafter provided so to appear and defend; and, in default o f his obtaining such leave or o f his appearance and defense in pursuance thereof, the allegations in the plaint shall be deemed to be admitted, and the p la in tiff shall be entitled- (a) where the suit is a suit, referred to in paragraph (a), (b) or (d) o f rule 1 or a suit fo r the recovery o f money under a mortgage and no other relief in respect o f such mortgage is claimed, to a decree fo r any sum not exceeding the sum mentioned in the summons, together with interest at the rate specified (if any) and such sum fo r costs as may be prescribed, unless the p la in tiff claims more than such fixed sum, in which case the costs shall be ascertained in the ordinary way, and such decree may be executed forthwith; And under the powers given to this Court by Order XXXV o f the CPC, I refuse the grant of conditional leave to defend, the suit, by the defendant. I shall therefore dismiss the application, and the allegations in the plaint shall be deemed to be admitted, and the plaintiff shall be entitled to prayers (a), (b), (c), and (d) of the plaint. The application is dismissed with costs. DATED at DAR ES SALAAM this 29th day of May, 2015 MANSOOR JUDGE 29t h May 2015 7