20191115 TZHC Mbeya

-I

THE UNITED REPUBLIC OF TANZANIA

JUDICIARY

IN THE HIGH COURT OF TANZANIA (DISTRICT REGISTRY OF MBEYA)

AT MBEYA LAND APPEAL NO 81 0F2016 (From the District Land and Housing Tribunal for Mbeya at Mbeya in Land Case Application No. 72 of 2011) NDABILA AGRO CHEMICAL LTD................................................APPELLANT

VERSUS MARTIN AMON MWAKATEBA .................................................. RESPONDENT

JUDGEMENT Date of Last Order : 04/09/2019 Date of Judgement: 15/11/2019 MONGELLA, J. Dissatisfied with the decision of the District Land and Housing Tribunal (DLHT) the Appellant has appealed to this Court. The dispute arises from a loan issued by CRDB Bank (who, was the first Respondent in the DLHT) to one Waziri Mwakitalima (the 2nd Respondent in the DLHT). In this matter, the property in dispute was mortgaged as collateral for the loan and was sold by CRDB Bank to recover the loan following default in payment. The Appellant was also joined as the third Respondent in the DLHT because he was in possession of the certificate of occupancy over the disputed premises. At the end the DLHT ruled that the mortgage was invalid as there was no deed to signify the same. It also made a finding that DW2 one Michael Mwakabulufu Ndabila is the one who took the loan. However, the Tribunal made a ruling that the Appellant was the one Page 1 of8 responsible to pay the loan and if the security deposited by him is not enough to discharge the loan his other properties be found and those of its directors for purposes of discharging the loan. In the memorandum of appeal, the Appellant raised three grounds to wit: That the Hon. Chairman erred to lift a corporate veil of the company and pressed the Director of the Company under liability, without any legal reason or application of so doing. That the

Hon. Chairman erred in law and in facts when connected the Appellant in payment of the loan which was fully taken or fully protected by the security of the Appellant. That the Hon. Chairman erred in law and facts when held that the Appellant has to pay,,loan in full while in fact the Appellant did not guarantee a person who took the loan by using the Respondent's right of occupancy. Arguing on the first ground, the Appellant submitted that the Respondent sued the company and was dully represented by the director of the company. He argued that the company being a separate legal entity from its shareholders as directors should not be held liable for the debts of the company. He argued further that there was no ground advanced before the trial court in which the veil of incorporation could be lifted in order to hold the director of the company personally liable. In supporof Page 2 of 8 case supportive of his arguments on circumstances leading to lifting of the corporate veil. He quoted part of the case in which the CAT judges discussed the circumstances in which the corporate veil can be lifted. That part reads: .the court referred to the case of Solomon v. Solomon and Co. Ltd (1897) AC 22 where the Court of Appeal held the managing director, that is, Solomon liable, but the House of Lords reversed the decision holding that the company being a legal person, its members including

Solomon were not liable for its debts. However, in certain special and exceptional circumstances, the court may go beyond the purview of this principle by what was described in Solomon (supra) lifting the veil." I, in fact agree with the submission by Mr. Muya and the position set in the cases he cited that a corporate veil can be lifted where there is proof of fraud by its members/directors. This argument was also supported by the Appellant in his rejoinder submissions. The issue to be resolved on this ground then is whether in the DLHT fraudwas proven to warrant the Hon. Chairman to lift the corporate veil and charge responsibility of paying the bank loan to the directors of the Appellant. Mr. Muya relied on the passage he quoted from page 5-6 of the DLHT judgment in arguing that the some led the Hon. Chairman to lift the corporate veil as it signifies fraud. I have read that passage several times, but I have not found any element of fraud. The Hon. Chairman noted that DW2 admitted to have taken the loan. The question to be asked therefore is, does such admission amount to fraud? In my considered view, the Hon. Chairman was first supposed to make a finding of existence of fraud from the members/directors of the Appellant and explain the basis of such findipgs Page 4 of 8 in his judgment. Unfortunately this was not done and therefore I agree with the argument of the Appellant

that the corporate veil was incorrectly liffed,Gd thus uphold this ground of appeal. Arguing on the third ground, the Appellant raised as issue of law and fact that there was a change of assessors during the trial in the DLHT something which resulted into a problematic judgment. Mr. Muya challenged this argument arguing that the same was not raised in the Appellant's memorandum of appeal. To some extent I agree with Mr. Muya that facts not raised in the memorandum of appeal cannot be argued. However, my ceiif is with respect to the Appellant's argument that a problematic judgment was resulted from the change of assessors because this is a matter of fact. On the other hand however, while I was going through the record of the DLHT I also noted two issues of law which are very serious. First, like pointed out by the Appellant there was really a change of assessors in the process of hearing the matter. Second, the Hon. Chairman did not record the opinion of assessors in the proceedings even though at page 6 of his judgment he purports to have considered the opinion of assessors. The requirement that members of the Tribunal who are present at the commencement of the trial should be the onesup to the finality of the / case is a mandatory legal requirement provided under section 23(3) of the Land Disputes Courts Act, Cap 216, R. E.

2002. The provision directs that if one of the members happens to be absent then the remaining shall proceed with the matter. Non# adherence to this requirement is a serious / irregularity with an effect of vitiating the proceedings of the DLHT.his Pages of8 The other irregularity I pointed out is the non-recording of the opinion of assessors in the proceedings. This also is a serious irregularity as ruled out in various decisions of the CAT and this Court. The CAT in Ameir Mbarak and Azania Bank Corp Ltd. v. Edgar Kahwili, Civil Appeal No. 154 of 2015 (Unreported,) held that: "Therefore in our considered view, it is unsafe to assume the opinion of assessors which is not on the record by merely reading the acknowledgment of the Chairman in the judgment. In the circumstances, we are of a considered view that, assessors did not give any opinion for consideration in the preparation of the Tribunal's judgment and this was a serious irregularity." Other cases include that of Edina Adam Kibona v. Absolom Swebe (Shell), Civil Appeal No. 286 of 2017 in which the Court of Appeal (CAT) nullified the decision of the DLHT for basing on proceedings that did not contain the opinion of assessors. See also V. S. Chawalla & Co. Ltd v. Dr. Abbas Teherali (supra) in which the CAT ruled: "The other shortcoming is in the fact that the opinions of the assessors are not reflected upon record. The

non-compliance is, again, in breach of section 23(2) of the Act which provides: "The District Land and Housing Tribunal shall be duly constituted when held by a Chairman and two assessors who shall be required to give out their opinion before the Chairman reaches the judgment." We do not entertain a heck of doubt that the cumulative effect of the recited irregularities is to vitiate the trial proceedings as well as those of the first appellate cou 1 fJ Page 7of8 In the upshot I find the proceedings and judgment of the DLHT tainted ( with irregularities contrary to the requirement of the law. I therefore nullify a the proceedings and judgment of the DLHT and order the Resporident's.- case to be tried de novo. Each party to bear his own costs. 1? Order accordingly. Dated at Mbeya on this 1 5th day of November 2019 L. M. MONGELLA

JUDGE 15/11/2019 Right of appeal to the Court of Appeal has been duly explained. / L. M. MONGELLA

JUDGE 15/11/2019 Court: Judgement delivered in Mbeya in Chambers on this 15Th day of November 2019 in the presence of the Appellant and Mr. Daniel Muya for the Respondents. L. M. MONGELLA

JUDGE 15/11/2019 Page 8 of 8