CIVIL APPEAL NO 455 OF 2022 NATIONAL BANK OF COMMERCE LIMITED VS SAOLIGO HOLDINGS LIMITED ANOTHER

IN THE COURT OF APPEAL OF TANZANIA

AT PAR ES SALAAM fCORAM: MWARIJA. J.A., KHAMIS. J.A.. And MGEYEKWA. J.A.1) CIVIL APPEAL NO. 455 OF 2022 NATIONAL BANK OF COMMERCE LIM ITED............. ...................... APPELLANT

VERSUS SAOLIGO HOLDINGS LIM ITED .................... ......................... 1st RESPONDENT MAGRETH JOSEPH......... ................. ..........................2 nd RESPONDENT (Appeal from the Decision of the High Court of Tanzania, Land Division at Dar es Salaam) (Mgeta, J.) dated the 30th day of September, 2014 in Land Case No. 79 of 2006

JUDGMENT OF THE COURT 24th April & 24th May, 2024 KHAMIS. J.A.: TTie appeal before this Court is against the entire judgment and decree of the High Court, Land Division in Land Case No. 79 of 2006 rendered on 30th September, 2014. The first respondent had filed a plaint for declaration that, the second respondent had continuously breached a lease executed between them on 17th July, 2002 and sought special and general damages for the materia! breach, specific performance and costs of the suit. The cause of action was founded on a lease in respect of Plot No. 161/2/3, Kurasini Trade Service Area, Dar es Salaam, in which the second respondent rented out her interest in the right of occupancy for the period of forty - five (45) years commencing from 17th July, 2002. Subject to payment of the agreed rent, the first respondent was to use the demised premises as per its licensed business. Two days after execution of the lease, the first respondent made arrangements with a Chinese company, M/S Henan Richy Commercial and Industry Co. Limited, to form a joint venture company (JVC) in the name of China Commercial Centre (E.A) Limited for the purpose of re-developing the demised land by erecting bonded warehouses, shop outlets, exhibition halls, restaurants, hotels, recreational areas and other facilities befitting a commercial complex. The first respondent pleaded that, despite its

payment of USD $ 30,000.00 as advance rent for five years, the joint venture investment plan was frustrated by the second respondent's failure to handover vacant possession of the demised land, which occasioned specific and general damages. The second respondent filed a written statement of defence denying liability and blamed, the National Bank of Commerce (the NBC), the appellant herein who was not yet a party to the case, on the ground that had knowingly and recklessly sold the suit land without disclosing its encumbrances. It was further averred that, at the time of purchase in a public auction the second respondent was not aware that other persons who claimed ownership were in occupation of the sold property. Subsequently, the second respondent obtained leave to join the appellant as a third party on the ground that, it was abound to indemnify her should she be found liable as per the plaint. The appellant filed a defence to the third party notice disputing liability and relied on the principle of sale 'a s is where is bastt. It averred that, before the public auction was conducted, the second respondent had visited the suit property and familiarized herself of its status. During the hearing, the first respondent as a plaintiff enlisted one witness, Otty Igogo. The second respondent testified as DW1 and one Avitus Kyaruzi (PW 1) led evidence for the appellant. The trial

Judge (Mgetta, J) found the appellant liable for failure to deliver vacant possession of the suit property to the second respondent which resulted to her failure to fulfil the terms of the Lease. 3 Consequent to the findings on the appellant's liability, the trial Judge ordered the appellant to refund the sum of TZS 3,000,000/= being the purchases and interest thereon at unspecified commercial rate. Alternatively, the appellate was to ensure immediate vacant possession of the suit land to the second respondent. Having found the second respondent liable for the payment of USD 1,915,000 as special damages and 15% interest thereon per annum from the date of filing the suit to the date of judgment and further interest at the court's rate of 12% per annum from the date of judgment to the date of full satisfaction, the trial judge held the appellant accountable to identify the second respondent for the same. Aggrieved by the whole judgment and decree, the appellant instituted this appeal premised on eight grounds that can conveniently be rephrased as hereunder: 1. That trial court erred in law in finding the judgment and decree against the appellant, without considering that the appellant's interest in the property ceased upon payment of the purchases price by th second respondent who also inspected it prior to the auction.

2. The trial court erred in law in not finding that the rule 'buy as is where is' applied in the circumstances of this case and failed to consider that the second respondent had filed Civil Case No. 164 of 2003, at the Resident Magistrates Court, of Dar es Salaam at Kisutu against the trespassers.

3. That the trial court erred in law in failure to conduct a hearing on the application for leave to present a third party notice.

4. That the trial Judge erred in the law and fact in granting leave for the purported third party notice without considering that the second respondent had no claim against the appellant.

5. That the appellant was condemned unheard by the trial court on refund of the purchase price, interest and costs to the second respondent without presence of a suit between the second respondent and the appellant.

6. That the trial Judge erred in law for entertaining the suit in absence of mandatory mediation between the appellant and the respondents.

7. That the trial court erred in law and in fact in awarding special damages without sufficient evidence and general damages without being pleaded and proved by the first respondent. Further, the orders by the trial court against the second respondent and the appellant on the amount payable is vague as to when the appellant becomes liable, if at all.

8. That the interest rates of 15% and 12% on USD are on the high side and without legal basis. On the basis of the above grounds of appeal, the appellant moved the court to allow the appeal with costs. In accordance with rule 106 of the Tanzania Court of Appeal Rules, 2019 [the Rules], the appellant and the first respondent filed their written submissions prior to the hearing of the appeal but the second respondent did not file any such submissions. When the appeal came before us for hearing on 24th April, 2024, Messrs. Donald L. Chidowu assisted by Makarious J. Tairo, learned advocates, appeared for the appellant. Ms. Miriam Majamba and Mr. William Hassan, learned advocates, appeared for the first respondent. Mr. Alphonce Katemi, also learned advocate, acted for the second respondent. As the lead counsel, Mr. Chidowu adopted the appellant's written submissions and grouped the eight grounds of appeal into two sets. The first limb relates to legality of the third party procedure as enumerated 6 under the third and fourth grounds of appeal. The second appendage relates to legality of the High Court findings as signalized on the first, second, fifth, sixth, seventh and eighth grounds of appeal. Focusing on the first category of the issues, Mr. Chidowu submitted that, leave granted to the second respondent to present a third party notice against the appellant was legally wrong on

account of lack of an exparte hearing prior to the order of the court dated 5th February, 2007 which allowed the filing of a third party notice. He submitted that, the omission contravened Order 1 rules 14, 15 and 16 of the Civil Procedure Code, Cap 33 R.E 2002 [R.E 2022] [the CPC]. Further, the appellant's lead counsel submitted that, prior to the issuance of the disputed order, the trial judge was duty bound to satisfy herself on whether the second respondent's claim and relief sought against the appellant were related to the first respondent's claims against the second respondent. The learned counsel made great play on the distinction between the first respondent's claim against the second respondent as opposed to the second respondent's claim against the appellant. He strongly submitted that, the appellant could not be held liable for the breach of a lease whereas its relationship with the second respondent was limited to the sale of the suit land which was concluded in a public auction. Secondly, Mr. Chidowu faulted the trial court for failure to fix a date for giving directions following the filing of a written statement of defence by the appellant as a third party. He submitted that the omission contravened Order 1 rule 18 of the CPC. The learned counsel contended that the omission resulted to the trial court's misdirection's on a number of issues which include

its treatment of the appellant as a defendant and not a third party. He also asserted non observance of a privity of contract doctrine and relied on Austack Alphonce Mushi v. Bank of Africa Tanzania Ltd & Another, Civil Appeal No. 373 of 2020 [2021] TZCA 521 [27 September 2021] in which the Court pointed out that, a contract as a juristic concept, is the intimate if not the exclusive relationship between the parties who made it. The learned counsel submitted that the infraction of Order 1 rules 14, 15, 16, 17 and 18 of the CPC went to the root of justice and vitiated the entire proceedings of the trial court. Relying on the decisions of this Court in The Registered Trustees of Vignan Education Foundation, Bangalore India & Others v. National Development Corporation 8 & Others, Civil Appeal No. 88 of 2020 [2022] TZCA 513 [19 August 2022]; Metropolitan Tanzania Insurance Co. Ltd v. Frank Hamad Pilla, Civil Appeal No. 191 of 2018 [2019] TZCA 281 [28 August 2019]; and; Hasnain M. Mulji v. Abdulrahim A. Salum t/a Abdulrahim Enterprises, Civil Appeal No. 6 of 2012 [2012] TZCA 13 [29 June 2012], he put forward that, the entire third party procedure was pervated. Addressing the first, second, fifth, sixth, seventh and eighth grounds of appeal, Mr. Chidowu generally submitted that the entire findings, judgment and decree of the High Court were debased and moved us to allow the

appeal. Focusing on the first ground of appeal, he censured the trial Judge for failure to consider that the appellant's obligation under the sale agreement ended when the second respondent fully paid the purchase price. Banking on Denis Keenan, Smith & Keenan's Law for Business [British Library Cataloguing in Publication Data, 13th Edition, England, at page 343]; Professor Margaret Griffiths and Ivor Griffiths [the HLT Group Ltd, 2nd Edition, 2001, at pages 21 - 22]; Cheshire, Fifoot and Furmston's Law of Contract [M.P Furmston, 1992, Butterworth & Co. (Publishers) Ltd, ELBS, 12th Edition, at page 31]; and; The Law of Contract in East Africa [R.W Hodgin, Kenya Literature Bureau, 1997, at page 36], Mr. Chidowu argued that, the sale by public auction was completed when the auctioneer announced the fail of a hammer an act that discharged the appellant from any further obligation. He asserted that, rule 25(1) of the Government Notice [G.N] No. 363 of 22/09/2017 as amended by G.N No. 106 of 1/2/2019 had cemented the appellant's position as it requires a person declared the winner at a public auction to immediately deposit into the court's account twenty - five percent of the purchase price, which requirement was abided to by the second respondent. On the second ground of appeal, Mr. Chidowu contended that, the rule 'buy as is where /s'was inadequately dealt with by the trial

Judge who failed to hold the second respondent accountable for eviction of the trespassers whereas she had filed Civil Case No. 164 of 2003 at the Resident Magistrates Court of Dar es Salaam at Kisutu for vacant possession. He submitted that the filing of the suit statement that the second respondent was fully aware of her obligations. On the fifth ground of appeal, he submitted that, the appellant was condemned unheard by the trial court's decision for the refund of the 10 purchase price, interests and costs whereas no valid suit existed between the second respondent and the appellant. Under the sixth ground of appeal, Mr. Chidowu faulted, the trial Judge for entertaining the suit that did not undergo a mandatory mediation procedure. He contended that, mediation was simply ignored contrary to the requirements of Order VIIIA rule 1 of the CPC. Ground seventh relates to the award of special and general damages. In support thereof Mr. Chidowu faulted the trial court for awarding general damages without being pleaded and for awarding special damages without sufficient proof. In asserting that the trial judge failed to demonstrate on how the first respondent was awarded special and general damages, he alluded to James Funke Gwagilo v. Attorney General [2004] T.L.R 161; Hosia Lalata v, Gibson Zumba Mwasote [1980] T.L.R 154; Zuberi Augustino v. Anicet Mugabe [1992] T.L.R 137; Judge

in Charge, High Court at Arusha and Attorney General v. N.I.N Munuo Ng'uni [2004] T.L.R 44; Masolele General Agencies v. African Inland Church Tanzania [1994] T.L.R 192; and; Mwita S/O Mhere and Ibrahim Mhere v. Republic [2005] T.L.R 107 at page 108. li On the eighth ground of appeal, the lead counsel for the appellant submitted that, the 15% and 12% interest rates awarded on the decretal sum and expressed in United States Dollars (USD $) was on the high side and without legal basis. He contended that, such interest rates contravened Order XX rule 21 of the CPC and did not tally with the legal stance established in Said Kibwana and General Tyre E.A Limited v. Rose Jumbe [1993] T.L.R 175 - 176. Displaying considerable skills in resisting the appellant's arguments, Ms. Majamba equally grouped the grounds of appeal on two headings: legality of the third party procedure and legality of the findings of the High Court. On the third party notice which covers the third and fourth grounds of appeal, she contended that, the wording on the face of the application suggested a ruling thereon was made by Longway, J on 5th February, 2007 and presumably preceded by a hearing. She argued that, the appellant's inability to get hold of the proceedings and the ruling did not mean that, it did not exist. She asserted that, contrary to the appellant's contentions, the second respondent filed a third

party notice in compliance with the order 12 of the trial court and the requirements under Order 1 rules 14, 15, 16, 17 and 18 were duly complied. On the nature of the claims, the counsel contended that, it was uniformly founded on the failure to surrender vacant possession of the suit land. She submitted that, such claim was within the ambits of Order 1 rule 14 of the CPC and it was a misconception to differentiate between a long term lease from the sale agreement as both focused on the vacant possession of the suit land. On the allegation that the appellant was treated as a co-defendant, Ms. Majamba differed with the appellant's counsel and assersed that the appellant was regarded as a third party throughout the lower court's proceedings. In a bid to demonstrate the appellant was treated as a third party and not co-defendant, she asserted that: the appellant was not a party to the original suit filed by the first respondent; the first respondent did not lay any claim against the appellant; the issues framed defined the parties distinctively; the appellant was joined in the case through a third party notice; the evidence adduced by the first respondent was against the second respondent only and not the appellant as a third party; and; that the second respondent sought to prove her case against the appellant. 13 Ms. Majamba strongly supported the trial court's findings which

she referred to as precise in the sense that it found the appellant liable to indemnity second respondent and not the first respondent. On legality of the findings of the High Court, Ms. Majamba submitted that, following the sale of the suit land and issuance of a certificate of sale, the appellant was contractually bound to surrender vacant possession to the purchaser which includes eviction of illegal occupants. Ms. Majamba submitted that, it was illogical to think the property could be sold on "as it is basis" with occupants who claim to be owners. She moved us to find the second ground of appeal as of no significance. On the fifth ground of appeal, she refuted claims that the appellant was condemned unheard on the award of interests and costs and submitted that, the two reliefs were well pleaded in the plaint, and sufficiently proved by the second respondent before the trial court weighed it against the other evidence on record. The learned counsel termed the sixth ground of appeal as a misconception allegedly because it was the appellant who moved the trial court to mark mediation failed. 14 On the seventh ground of appeal, she submitted that, the award of special and general damages was properly made based on the pleadings and the evidence on record which was properly evaluated. Respecting the eighth ground of appeal, the learned advocate for the first respondent

submitted that, the interest rates claimed and awarded by the trial court were in line with the nature of parties' business which involved enormous sums of money subjected to periodic fluctuations at the international arena. On his part, having briefly recounted on the chain of events leading to the parties' dispute, Mr. Katemi, addressed the first ground of appeal thereby contending that, sale of the suit property in a public auction did not exonerate the appellant from the duty of handing over handover vacant possession. He backed his submissions with the parties' correspondences as reflected in the record. On the second ground of appeal, he submitted that, the rule 1as it is where is b a sis' does not apply in the case since the appellant was impliedly bound to hand over vacant possession to a successful bidder immediately after the sale. Relying on the record, he contended that, at least three illegal occupants resisted the eviction that ought to be carried by the appellant and not the second respondent. 15 Responding to the third ground of appeal, the learned counsel drew our attention to pages 138 and 332 - 333 (inclusive) of the record to impress that, the trial court had conducted an exparte hearing on the application for leave to present a third party notice and allowed it on 5th February, 2007 and submitted non-compliance of the third party procedure was on

afterthought allegation. On the fourth ground of appeal, Mr. Katemi faulted the appellant for advancing general accusations on the third party notice whereas it had limited itself on the non-compliance of Order 1 rule 14 of the CPC. The counsel strongly opposed the fifth ground of appeal and submitted that, the reliefs granted were well founded in the pleadings. On the sixth ground of appeal, he briefly submitted that, mediation was attempted in compliance with the mandatory requirements of the CPC as reflected in the record and implored us to disregard the appellant's assertion. Regarding the seventh ground of appeal, Mr. Katemi submitted that, sufficient evidence was poured during trial to prove both special and general damages and asserted that the appellant failed to lead credible accusation against the trial court's finding. 16 On the eighth ground of appeal, he submitted that, the award of 15% and 12% interest rates on the decretal sum was done in accordance to law and procedure and both, the judgment and decree extracted therefrom were not vague clearly established the rights and liabilities of the parties. In conclusion, he moved the Court to dismiss the appeal in its entirety with costs. In rejoinder, Mr. Tairo ushered us through pages 333, 334 and 335 of the record which reflects the initial third party proceedings and insisted that, the trial court failed to conduct

an exparte hearing on the application for leave to present a third notice as per the requirements of the CPC. He also drew our attention to page 6 and 122 of the record featuring the plaint and parties' correspondence in submitting that, the dispute between the first and second respondents rested on a lease which had nothing to do with the appellant's sale of land to the second respondent. On further rejoinder, Mr. Chidowu reiterated the appellant's earlier submissions and maintained that, the trial court had granted leave to present a third party notice without conducting an exparte hearing on the application. In the light of the parties' submissions, it can be figured out that, the eight grounds of appeal were properly grouped into two main camps: 17 issues relating to the legality of the third party procedure which touches on the third and fourth grounds of appeal; and; issues relating to legality of the findings of the High Court which is the footing of the first, second, fifth, sixth, seventh and eighth grounds of appeal. We intend to adopt the same approach. On the first limb, the grounds of complaint which straddle between the appellant and the respondents is the procedure on the joining of the appellant as a third party and the subsequent steps taken by the trial court to determine the suit involving a third party. The assertion by the appellant's counsel was that leave

granted to the second respondent to present a third party notice was legally wrong for failure to conduct a prior exparte hearing. It was also contended that the order for joining the appellant as a third party omitted to state the terms and conditions thereof. The third party procedure forms an integral part of our country's legal system and its main purpose is to avoid a multiplicity of actions. It is a mechanism in a civil suit whereby a defendant is allowed to join another person who is not a party to the case as a co-defendant on the grounds that, he/she has a legally recognized claim against the person to 18 be joined as a third party. This procedure is covered under Order 1 rules 14 to 23 of the CPC. A defendant in a suit is not authorized to join another person as a third party unless it is cumulatively shown that: the person to be joined is not a party to the suit; the defendant who seeks to join the third party has a claim against that other person by way of contribution or indemnity; and; the relief or remedy sought by the defendant against the third party in relation to or connected with the subject matter of the suit is substantially the same as a relief or remedy claimed by the plaintiff [See Order 1 rule 14 of the CPC and Corporation of City of Glasgow v. Robertson or Cameron (1936) 2 ALL ER 173]. It is important to note that the defendant who intends to

join another person as a third party into the suit is bound to apply to the court for leave to present a third party notice. Order 1 rule 14 (2) of the CPC provides that, an application of that nature is made exparte by way of chamber summons supported by an affidavit. The affidavit is expected to disclose: the nature of the claim made by the plaintiff in the suit; the stage which proceedings in the suit have reached; the nature of the claim by the defendant against the third party and its relation to the plaintiff's 19 claims against the defendant; and lastly; the name and address of the third party. In January Nshimba v. the Registered Trustees of Daughters of Mary Immaculata and Collaborators, Civil Appeal No. 127 of 2018 [2022], TZCA 225 [28th April, 2022], this Court cited with approval a decision of the High Court in Mandani v. Suchale [1971] HCD 10 which scored the importance of disclosing sufficient facts in an affidavit to prove that it is necessary to join the third party. In the instant matter, it is not disputed that a competent formal application for leave to present a third party notice was lodged by the second respondent. The appropriateness of the third party notice was rather attacked from the lack of a hearing before an order for leave to present the third party notice was made. This is the import of Order 14 rule 3 of the CPC which provides that: "Where, upon

an application made under subruie (1), the court is satisfied that the defendant's c/aim against the third party is in respect o f a m atter referred to in paragraph (a) or (b) o f that subruie and that, having regard to a il the circum stances o f the case, it is reasonable and proper to grant leave to the defendant to present 20 a th ird party noticef the court shall, upon such term s and conditions as it m ay think ju st, make an order granting the defendant leave to present a third party notice." In Sango Bay Estates Dresdner Bank [1971] E.A 307, the defunct East Africa Court of Appeal discussed the discretion of a trial court in determining an application for leave to present a third party notice and adverted that, such discretion can only be exercised upon evaluation of the allegations of the plaintiff in terms of his or her claim and the orders sought from the court and upon evaluation of the defendant's allegations against the third party. In January Nshimba (supra), this Court found out that, the failure of the trial court to ascertain as to whether the defendant was entitled to indemnification or contribution from the third parties was a misdirection that vitiated the entire proceedings of the trial court. Our examination of the record shows an omission by the trial court to conduct an exparte hearing before it granted leave to present a third party notice. This is

reflected at pages 133 to 137 of the record where on 9th August, 2006 the first respondent filed the chamber summons for leave 21 to present a third party notice supported by an affidavit of one Magreth Joseph. However, when parties appeared before Long way, J on 5th February, 2007, the counsel for the defendant briefly expressed the wish to file a third party notice without express reference to the already filed application. Thereafter, the learned Judge, without disclosing reasons for the decision, made an equally hasty order that: ''"Third party notice to file by 13/03/2007. " The third party notice was accordingly filed on 13th February, 2007. In these circumstances, it is apparent that no hearing was conducted prior to issuance of an order for leave to present a third party notice as there was neither submissions by the parties nor evaluation of the parties' claims. As the law stands, before a trial court allows or denies an application of that nature, it is imperative to evaluate the allegations of the plaintiff against the defendant and the allegations of the defendant against the third party in terms of the reliefs sought. Since a court of law is enjoined to exercise its discretion on sound judicial grounds or principles, we are of the firm view that, the trial Judge's failure to conduct an exparte hearing before she allowed the defendant 22 to present a third party

notice in tandem with the requirements of the law was a fatal omission that prejudiced the appellant. Associated with this anomaly is the allegation that no directions were given by the trial court following the filing of a defence by the third party. This is the stipulation of Order 1 rule 18 (1) of the CPC which reads: "Where a third party has presented a written statem ent o f defence the court sh all on the application o f the defendant presenting the third p arty notice or on the application o f the third patty or, where the third party has disputed the p la in tiff's claim against the defendant, on the application o f the plaintiff, or on its own m otion, fix a date fo r the giving o f directions and m ay on such date, if satisfied that there is a proper question to be tried as to the lia b ility o f the third party in respect o f the claim made against him by the defendant, order the question o f such lia b ility to be tried in such manner, a t or after the tria l o f the suit, as the court m ay direct, or if the court is not so satisfied, pass such decree or make such order as the nature o f the case m ay require . " Directions referred to in Order 1 rule 18 (1) of the CPC are instructions, guidelines or orders made by a trial court on how to determine the liability of the third party as far as the defendant's claim is 23 concerned. In so doing, the court is also

required to consider the plaintiff's claim against the defendant. This is because the defendant and the third party stand in relation to each other as if the defendant had brought a separate suit or action against the third party. It is trite law that in such proceedings, judgment cannot be given before directions are given. In January Nshimba (supra) the first third party had filed a written statement of defence and disputed the defendant's claim but the trial court did not fix a date for giving directions. On appeal, we regarded the omission to give directions as a fundamental breach of the law which vitiated proceedings. In the present case, record show that upon filing of a defence by the third party and on completion of the pleadings, parties appeared before the trial Judge who presided over the first pre-trial conference. Thereafter, the suit proceeded to a failed mediation which paved way for the final pre-trial conference, it is also on record that trial started immediately after the final pre - trial conference. In between, no directions were given by the trial Judge as per the requirements of the law. Under these conditions, the non-compliance of the mandatory requirements of Order 1 rules 14 and 18 of the CPC debauched the entire proceedings of the trial court. In view of that finding, the first, second, 24 fifth, sixth, seventh and eighth grounds of appeal which

relates to legality of the findings of the High Court are redundant and therefore, we see no need of addressing them. For the aforestated reasons, we nullify the proceedings of the trial court, quash the judgment and set aside the decree. We further make an order for an expedited retrial of the suit by another Judge. Bearing in mind the outcome of this appeal, we order each party to bear own costs. DATED at DAR ES SALAAM this 21st day of May, 2024. A. G. MWARIJ A

JUSTICE OF APPEAL A. S. KHAMIS

JUSTICE OF APPEAL A. Z. MGEYEKWA

JUSTICE OF APPEAL The Judgment delivered this 24th day of May, 2024 in the presence of Ms. Mariam Ismail, learned counsel for the Appellant and Mr. Alphonce Katemi, learned counsel for the 2nd Respondent who is also holding brief for Ms. Mariam Majamba, learned counsel for the 1st Respondent is hereby c W. A. HAMZA

DEPUTY REGISTRAR

COURT OF APPEAL