Land Appeal No

THE HIGH COURT OF THE UNITED REPUBLIC OF TANZANIA

LAND DIVISION

AT PAR ES SALAAM LAND APPEAL NO. 9341 OF 2024 (An Appeal from the decision of the District and Housing Tribunal ofliaia at Kivukoni in Land Application No. 89 of2020 dated 29thJanuary2024 before Hon. A. R Kirumbi, Chairperson) NATIONAL MICROFINANCE BANK...................... APPELLANT

VERSUS ADAM WILLIAM MWAMBO..................................................... .....1STRESPONDENT ANTHONY CONSTANTINO MAHUNDI........................................ 2ndRESPONDENT BALTIDA MAHUNDI KAMBI........................................................ 3rd RESPONDENT MWAFRICA GROUP LIMITED...................................................... 4THRESPONDENT

JUDGMENT Date of last Order: 07/10/2024 Date ofJudgment: 15/10/2024 LALTAIKA, J The Appellant herein NATIONAL MICROFINANCE BANK is dissatisfied with the decision District and Housing Tribunal of Ilala at Kivukoni in Land Application No. 89 of 2020 dated 29th January 2024. He has appealed Page 1 of 23 to this Court by way of a Petition of Appeal containing 8 grounds. I take the liberty to reproduce them bellow for ease of reference: 1. That the Tribunal erred in law and fact in declaring that the 1st Respondent was the lawful owner of the suit property while the latter failed to prove his case to the required standard.

2. That the Tribunal erred in law and fact in not holding that at the time of sale of the suit premise no good title passed to the 1st Respondent as the suit premise was still mortgaged with the Appellant and its disposition was done without Appellant's prior consent.

3. The Tribunal erred in taw in not holding that the 1st Respondent could not benefit from his own wrong in not adhering to the Buyer Beware principle.

4. The Trial Tribunal erred in law in holding that the re-structuring of the former Loan(s) facility with the subsequent loan facility by the Appellant made on 2012 terminated the loan facility dated 2011 thus redeeming the collateral "the suit premise".

5. That the Tribunal erred in law and fact in holding that the residential property located at Tabata Segerea, Ugomborwa Street, Ilala District, Dar-es-Salaam was not mortgaged to the Appellant at the time the 2nd Respondent sold it to the 1st Respondent.

6. That the Tribunal erred in law and fact in not holding that the property in dispute was not properly described by the 1st Respondent in his pleadings to avoid locality confusion between Tabata Kimanga, Ugomborwa Street, Ilala District, Dar es Sa/aam thus issuing unjust decision against the Appellant. Page 2 of 23 7. That the Tribunal erred in law and fact by concluding that the Appellant's inability to produce the original certificate of ownership for the suit house was a conclusive proofthat the suit house was not under mortgage, white the suit premise was surveyed land.

8. That the Tribunal erred in law and fact in issuing a perpetual injunction order restraining the Appellant to interfere with the suit property while the suit premise was wiiiing/y placed as collateral by the owner, the 2nd Respondent to secure loan facility. When the Appeal was called for hearing on 4/9/2024 Mr. Makori Lucas Makori, learned Advocate, appeared for the Appellant. Whereas the 1st Respondent enjoyed the legal services of Mr. Michael Mkenda learned Advocate albeit holding brief for Mr. Frank Kilian, learned Advocate, the 2nd 3rd and 4th Respondents were absent. Having been satisfied with compliance with this Court's order for substituted service by way of publication in a widely circulating Tanzania Daily (See Mwananchi, May 25, p. 20) leave was granted to proceed ex-parte against the said Respondents. Parties opted to dispose of the appeal by way of written submissions. Accordingly, the following schedule was ordered: Appellant's written submission in chief to be filed on 17/9/2024, Respondent's Reply 30/9/2024, Rejoinder if any 7/10/2024, Mention for necessary orders to schedule for the Page 3 of 23 date of Judgment on 07/10/2024 at 10:30.1 take this opportunity to register my commendations to the learned Advocates for spotless compliance to the scheduled order. The next part of this Judgment is a summary of submissions by both parties. Mr. Mkumbukwa, Counsel

for the Appellant, submitted in support of the appeal by providing an introduction and background to the case. He explained that the Appellant was challenging a decision delivered by the District Land and Housing Tribunal of Ilala (presided over by Hon. A.R. Kirumbi) in Application No. 89 of 2020, dated 29th January 2024. The origins of the dispute, he noted, trace back to 2010 when the 2nd Respondent mortgaged his unregistered property in Ugombolwa, Tabata Segerea Ward, to secure a loan for the 3rd Respondent from the Appellant, National Microfinance Bank (NMB). Mr. Mkumbukwa elaborated on the series of loans the 3rd Respondent received from the Appellant. The first loan of Tanzanian Shillings Two Million (TZS 2,000,000.00) was taken on 11th June 2010, and before it was repaid, the 3rd Respondent was refinanced with an additional loan of Tanzanian Shillings Fifteen Million (TZS 15,000,000.00), still secured by the 2nd Respondent’s property. This second loan ran from 23rd April 2011 to 23rd Page 4 of 23 April 2012. The 3rd Respondent's positive relationship with the Appellant continued, leading to another refinancing with a further loan of the same amount on 24th February 2012. However, unlike the previous loans, the 3rd Respondent defaulted on this agreement, and as a result, the Appellant initiated recovery efforts by issuing notices to the 2nd and 3rd Respondents through the

4th Respondent. The notice prompted the 1st Respondent to file Land Application No. 89 of 2020, seeking declarations from the Tribunal, including ownership of the disputed property and a permanent injunction against the Appellant and other Respondents from claiming the property or disturbing his occupation. Additionally, the 1st Respondent challenged the mortgage agreement between the Appellant and the 2nd and 3rd Respondents as unlawful. Counsel explained that the 1st Respondent's claim was based on a sale agreement dated 25th November 2011, by which he allegedly purchased the suit property from the 2nd Respondent with the 3rd Respondent's consent. After hearing the matter, the Tribunal declared the 1st Respondent the rightful owner of the property. The Appellant was aggrieved by this decision and lodged an appeal on several grounds, including errors in the Tribunal's Page 5 of 23 findings regarding the 1st Respondent's ownership and the failure to recognize the Appellant's mortgage rights over the property. In his submissions, Counsel sought to abandon one of the grounds (Ground 6) and proposed addressing Grounds 2 and 3 together, followed by a joint discussion of Grounds 4 and 5, with Ground 7 addressed separately. Grounds 1 and 8 would then be dealt with collectively. Regarding Grounds 2 and 3, Counsel submitted that it is a settled principle of law that one cannot pass a

good title unless they possess such title. He referred to case law to support the argument that the 1st Respondent was aware of the mortgage on the property but failed to conduct proper due diligence before purchasing it. Counsel contended that the 1st Respondent's failure to inquire with the Appellant regarding the status of the mortgage meant that he could not benefit from his own wrong, citing legal principles related to buyer beware and constructive notice. Counsel further argued that the Tribunal erred in failing to hold that no valid title passed to the 1st Respondent as the property was still under mortgage. He pointed out that the 1st Respondent was obligated to ensure the Appellant's consent was obtained for the sale, which was not done. Page 6 of 23 On Grounds 4 and 5, Counsel submitted that the Tribunal misinterpreted the refinancing of the loan as terminating the mortgage, which was not the case. He argued that the property remained under mortgage at the time of the sale to the 1st Respondent and that the Tribunal erred in holding otherwise. Additionally, he challenged the Tribunal's reasoning that the 3rd Respondent's delivery of a title deed to the 1st Respondent discharged the mortgage, arguing that the property was unregistered, and no formal title deed existed. He submitted that the sale agreement between the 2nd and 1st Respondents did not extinguish

the Appellant's rights over the property. Mr. Mkumbukwa proceeded to address the court on the 8th ground of appeal, where he argued that the tribunal made an error in both law and fact by declaring that the first respondent was the lawful owner of the disputed property, despite the latter's failure to meet the required standard of proof. He added that the tribunal also erred by issuing a perpetual injunction preventing the appellant from interfering with the property, despite the fact that the second respondent, as the owner, had willingly placed the property as security for a loan. Page 7 of 23 Mr. Mkumbukwa then explained that, according to the law, the standard of proof in civil cases is established by a preponderance of probability, as stated in section 3(2)(b) of the Evidence Act. The burden of proof, as per sections 110(1), (2), and 111 of the same Act, lies on the one making the allegation, summarized as "he who alleges must prove." To support his argument, Mr. Mkumbukwa referred to the case of Paulina Samson Ndawavya v. Theresa Thomas Madaha (Civil Appeal No. 45 of 2017), where the Court of Appeal reiterated that, in civil cases, the court will accept the evidence which is more credible on a particular fact to be proved. He further cited Miller v. Minister of Pensions [1937] 2 All. ER 372, where Lord Denning emphasized that if the evidence is evenly balanced, the

benefit of the doubt must go to the man, unless the evidence against him is sufficient to tip the scale in a civil case. Applying these principles to the present case, Mr. Mkumbukwa contended that the first respondent failed to prove that he purchased the disputed land free of any encumbrances by the appellant's bank. He pointed out that the first respondent did not present evidence to demonstrate that the land had been redeemed by the mortgagor at the time of purchase. Although the first respondent's witness (SMI) claimed that he had been Page 8 of 23 informed about the discharge, no supporting evidence was submitted, and no witness from the NMB Branch was called to corroborate the testimony. He argued that, given the circumstances of the case, the first respondent was required to prove that he had verified the discharge of the mortgage before purchasing the land on 25th November 2011. This verification was not done, as evidenced by the absence of any document confirming the discharge. Instead, the respondent's witness simply stated that they had visited the appellant's Morogoro Branch, but no supporting evidence was presented. Mr. Mkumbukwa further argued that at the time of the sale, there was an existing mortgage between the appellant and the second and third respondents, rendering the sale, as indicated by Exhibit Pl, illegal. He urged the court to declare the sale void ab

initio, as was the case in National Microfinance Bank PLC v. Ismail Said Mpambahi & 2 Others (Land Appeal No. 12 of 2023), where the court found a similar sale unlawful due to an ongoing mortgage at the time of purchase. He emphasized that the trial court erred in declaring the first respondent the lawful owner of the disputed land without proper Page 9 of 23 justification, as the first respondent had failed to prove the discharge of the mortgage. This failure undermined the tribunal's decision. Moreover, Mr. Mkumbukwa noted that all the exhibits, including Exhibit D6, demonstrated that the property had been placed as collateral to secure a loan, with a clause preventing the owner from transferring the property without the appellant's consent, which was not obtained. Finally, Mr. Mkumbukwa submitted that the tribunal's decision to declare the first respondent the lawful owner and to issue a perpetual injunction against the appellant was unjustified. He pointed out that there was no evidence that the loan had been repaid or that the mortgagor had been discharged, meaning that the appellant bank still had an interest in the property. Permanently restraining the bank from exercising its mortgagee's rights without proof of loan repayment was, in his view, an irrational and detrimental decision for the appellant and financial institutions generally. Therefore, he urged the court to

find merit in the appeal and allow it. In conclusion, Mr. Mkumbukwa requested that the court, as the first appellate court, reconsider and re-evaluate the entire evidence, as established in the case of Peters v. Sunday Post Ltd, [1958] EA 424. He Page 10 of 23 also asked the court to apply the principles from the case of Ruwa/a v. R. (1970) EA 263, where an appellate court was urged to review the evidence to determine whether the original conclusion should stand. He cited Tanzanian case law, including Leopold Mutembei v. Principal Assistant Registrar of Titles and Jamal A. Tamim v. Felix Francis Mkosamali & The Attorney General, to further support his argument that the burden of proof rests with the party making the allegation. He concluded by asking the court to allow the appeal with costs. Mr. Killian, Counsel for the 1st Respondent, stated that the 1st Respondent had reviewed the appellants submission and found that its content largely consisted of allegations that were not part of the pleadings submitted before the District Land Tribunal. He noted that the appellant alleged there had been a loan top-up in 2011, but this issue was not raised in her Written Statement of Defense, Had the appellant pleaded this issue, it could have been framed as a point for determination, and the 1st Respondent would have had the opportunity to challenge it. For clarity, Mr. Killian expressed

the 1st Respondent's intention to trace the historical background of the dispute, starting from the application filed Page 11 of 23 by the 1st Respondent and the Written Statement of Defense filed by the appellant. This, he believed, would assist the Court in reaching a fair decision. Mr. Kilian narrated that the 1st Respondent's cause of action, as stated in the application, was that he claimed to be the lawful owner of a parcel of land located in Tabata, Ugomborwa, Segerea Ward, Dar es Salaam, which he had purchased from the 2nd Respondent on 25th November 2011 forTZS 15,000,000/=. However, on 24th February 2012, he discovered that the house he had bought from the 2nd Respondent with the consent of the 3rd Respondent, his wife, had been illegally mortgaged. This mortgage was part of a loan agreement between the appellant and the 3rd Respondent, who had secured a personal loan of TZS 15,000,000/=, which was not fully repaid. Mr. Killian further submitted that the appellant's Written Statement of Defense, filed on 23rd June 2020 and verified by Consolatha Resto, a principal officer of the appellant, admitted in paragraph 4 that the 3rd Respondent had secured a personal loan in 2012, under the guarantorship of the 2nd Respondent, and had defaulted on repayment. However, the Page 12 of 23 appellant did not plead that there had been a prior loan with repayment issues. Mr. Kilian

emphasized that notices of default from the appellant and the broker, Mwafrica Group, only mentioned the 2012 loan, with no reference to a loan top-up in 2011. Mr. Killian argued that had there been such a loan top-up in 2011, the appellant should have included it in the pleadings rather than surprising the Respondents with this claim. He emphasized that parties are bound by their pleadings and cannot depart from them, a principle reinforced by the case Paulina Samson Ndawavya vs. Theresia Thomasi Madaha (Supra). Mr. Killian pointed out that the allegation of a loan top-up only arose during the appellant's testimonial evidence, and the documentary evidence did not support it. He noted inconsistencies in the appellant's defense and evidence, ultimately leading to the decision in favour of the 1st Respondent. He opposed the appeal, particularly grounds 2 and 3, which claimed that no valid title passed to the 1st Respondent because the property was still under mortgage, and that the 1st Respondent could not benefit from his wrong in failing to adhere to the "buyer beware" principle. Page 13 of 23 Going deeper into the counterarguments, Mr. Killian stated that there was no evidence to show that, at the time of the purchase on 25th November 2011, the appellant had registered a mortgage over the property. He argued that Exhibit P-8, the loan agreement dated 24th February 2012, showed

that the appellant advanced the 3rd Respondent a loan, but by that time, the property had already been sold to the 1st Respondent. Moreover, Counsel averred, Exhibit D-9, titled Hati ya Kuhawi/isha Nyumba, indicated that the appellant conducted due diligence to verify the ownership of the property, but still incorrectly assumed it belonged to the 2nd Respondent. He argued that this was further complicated by the involvement of a local government leader, Mariam Machicha, who had witnessed both the 2011 sales agreement and the 2012 transfer, misleading the appellant. Mr. Killian disputed the appellants claim that loan No. NMB PLC/SME/L.95/11/12 of 23rd May 2011 was the same as loan No. NMB/SME/MOR.RD/12/12 of 24th February 2012, asserting that the loan taken in 2010 had been fully repaid. He emphasized that no evidence of a loan top-up in 2011 was ever submitted to the Tribunal. Page 14 of 23 Addressing grounds 4 and 5 of the appeal, Mr. Killian reiterated that there was no connection between the 2010 and 2011 loans, and that if there had been a top-up in 2011, it would have been included in the loan agreement, which was not the case. He repeated the point that parties are bound by their pleadings and cannot depart from them, again referencing the Paulina Samson Ndawavya case. He argued that the fresh loan granted in 2012 was taken after the disputed property had already been

sold to the 1st Respondent. Regarding grounds 7, Mr. Killian responded to the appellant's claim that the Tribunal erred by concluding that the lack of an original certificate of ownership was proof that the house was not mortgaged. He argued that the 1st Respondent had submitted the original sales agreement from 2011, while the appellant failed to present the original document, which weakened their case. Lastly, addressing grounds 1 and 8, Mr. Killian countered the appellant's challenge to the Tribunal's standard of proof, asserting that the decision was based on probable cause, as the appellant had not demonstrated that the earlier loan was still outstanding. He concluded that Page 15 of 23 the Tribunal's decision should be upheld, as the appellant had not provided adequate evidence to support their claims. In his rejoinder submission, Mr. Mkumbukwa, explained that after reviewing the 1st Respondent's reply, the Appellant had identified several key misconceptions that required clarification for the sake of justice. Mr. Mkumbukwa argued that the 1st Respondent had claimed that the issue of loan refinancing was not pleaded and therefore could not be discussed or decided by the tribunal. However, the Appellant held a different view, stating that this argument was an afterthought by the 1st Respondent. He noted that the 1st Respondent had not challenged this matter through a

cross-appeal or objection if it were true that the tribunal had considered un-pleaded facts. Mr. Mkumbukwa further stated that when the trial tribunal dealt with the dispute, it formulated two issues: whether the Applicant was the lawful owner of the disputed land and whether the 1st and 2nd Respondents had executed a mortgage agreement. He argued that the grounds of appeal stemmed from the judgment and decree of the trial tribunal, not just from the pleadings, as the tribunal had considered evidence presented by the parties but had failed to analyze it properly. Page 16 of 23 The Counsel also emphasized that any aggrieved party could seek appropriate recourse based on reasonable grounds, and the Appellant had filed a petition of appeal based on the Court's judgment, not merely on the pleadings. He contended that the Court could not resolve the dispute solely by relying on the pleadings, as hearings and the presentation of evidence were necessary in such cases. While acknowledging the principle that parties are bound by their pleadings, as cited by the 1st Respondent, Mr. Mkumbukwa argued that this principle did not apply in the current matter. He clarified that this rule was relevant during trial, preventing a party from introducing un­ pleaded issues, but in appellate courts, the prohibition was on determining facts not discussed by the trial court. He submitted that the 1st

Respondent had misunderstood this aspect, as the grounds of appeal originated from the tribunal’s discussion and analysis. On the second and third grounds of appeal, Mr. Mkumbukwa challenged the 1st Respondent's claim that there was no proof the Appellant had a registered mortgage over the suit property at the time of its sale. He explained that the 1st Respondent had been aware that the property was used as security for a loan taken by the 3rd Respondent and that the loan Page 17 of 23 repayment period had not yet matured when the 1st Respondent purchased the property. He contended that the 1st Respondent had failed to conduct due diligence, which resulted in an invalid transfer of ownership over the mortgaged property. He further asserted that the mortgage in question was an informal mortgage, which did not require registration, as the 1st Respondent had claimed. He cited the definition of a mortgage from Black’s Law Dictionary, emphasizing that for a mortgage to become void, the terms of payment or performance had to be fulfilled. Since the loan had not been repaid, the Appellant argued that the sale of the property without obtaining the Appellant's consent was void. The Counsel then discussed the restructuring of the loan, stating that the tribunal had erred in concluding that the refinancing of the loan terminated the previous mortgage. He argued that no justifiable reason

had been provided by the tribunal to support this conclusion. Regarding the issue of ownership, Mr. Mkumbukwa noted that the 1st Respondent had mistakenly relied on the Appellant's inability to produce the original certificate of ownership as proof that the property was not mortgaged. He argued that this reasoning was unjustified, as the property Page 18 of 23 was unsurveyed and thus did not require such a document. The Counsel contended that the trial tribunal had erred in formulating its conclusion on this matter. In conclusion, Mr. Mkumbukwa urged the Court, as the first appellate court, to re-evaluate the entire evidence on record and subject it to objective scrutiny. Based on this re-evaluation, he requested that the appeal be allowed with costs. I have dispassionately considered the rival submissions and thoroughly examined the lower Tribunal's records. The appellant advanced multiple grounds of appeal, which can be grouped into three key issues for determination: 1. Whether the Tria! Tribunal erred in law and fact by holding that no valid title passed to the 1st Respondent at the time of the sale.

2. Whether the Tribunal erred in not finding that the property was subject to a valid mortgage when sold to the 1st Respondent.

3. Whether the Trial Tribunal erred in issuing a perpetual injunction restraining the appellant from interfering with the suit property. On the first issue, the principle that parties are bound by their pleadings is well-established. Although I agree with Mr. Mkumbukwa's Page 19 of 23 construction on a slight departure in the applicability of the principle at appeal level, the results remain the same. In Paulina Samson Ndawavya vs Theresia Thomasi Madaha, (Supra) the Court of Appeal emphasized that pleadings serve the purpose of informing the opposing party of the case they are to meet, preventing surprises at trial. If that is done at the trial level, the effects cannot be avoided in the analysis of evidence by a first appellate court which is in the form of a rehearing. In the present case, the appellant raised the issue of a loan top-up during testimonial evidence without having pleaded it in their defense. This departure from the pleadings violated the procedural fairness required in civil litigation. Without prejudice to the above, the primary issue in this appeal revolves around whether the property in question was subject to a valid mortgage at the time of sale to the 1st Respondent, and whether, as a result, no valid title could pass to the 1st Respondent. I entertain no doubt whatsoever in holding that in this case, the appellant failed to provide sufficient evidence

that the property was encumbered by a mortgage at the time of sale. The principle in Miller v Minister of Pensions (supra) places the burden of proof on the appellant to show, on the balance of probabilities, that the mortgage was still valid. Page 20 of 23 However, the appellant did not tender any documentary evidence, such as a mortgage deed, demand notices, or loan statements to substantiate the claim that the property was mortgaged. I also find it very difficult to accept the notion of an "informal mortgage" in the context of probative value of evidence. Moreover, the evidence on record, including the sales agreement (Exhibit P2) and the transfer document (Exhibit D9), strongly supports the conclusion that the 1st Respondent lawfully purchased the property and obtained good title as of 25th November 2011. These documents were not successfully rebutted by any contrary evidence from the appellant. It follows that, in the absence of compelling evidence of an outstanding mortgage, the Tribunal was correct in finding that the 1st Respondent acquired valid title to the property. I think there is no harm in repeating that no documentary evidence was tendered to support the claim that the 3rd Respondent applied for a loan top-up in 2011. The appellant failed to produce a letter of request for the loan top-up or any supporting bank statements, leaving the Tribunal with no

substantive proof of the existence of a prior mortgage that could affect the sale of the property in 2011. There is a Kiswahili saying MaliBiia Page 21 of 23 DaftariHupotea BHa Habari(Without documentation, wealth vanishes). I think the Appellant, a bank, should have banked on documentary evidence than so many unsubstantiated narratives. Going back to the claim that the property was still under mortgage at the time of sale, the evidence suggests otherwise. The 1st Respondent presented credible documentary evidence showing that he purchased the property on 25th November 2011. Exhibit P2, the sales agreement, and Exhibit D9, the transfer document, were sufficient to establish the 1st Respondent's ownership. Additionally, the appellant failed to produce the original Certificate of Title or other documents to prove that the property was mortgaged at the time of the sale. In the upshot, I find no merit in this appeal. The decision of the Trial Tribunal is upheld, and the appeal is hereby dismissed with costs. It is so ordered. .1. LALTAIKA ^\JUDGE 710/2024 Page 22 of 23 Court Judgment delivered this 15th day of October 2024 in the presence of the Appellant and Ms. Digna Anicet Jumanne, Counsel for the Appellant and Mr. Frank Kilian, Counsel for the Respondent. Page 23 of 23