NOVA

IN THE HIGH COURT OF TANZANIA (COMMERCIAL DIVISION) AT DAR ES SALAAM MISC. COMMERCIAL APPLICATION NO. 14431 OF 2024 NOVA ESPERANCA SERVICES LIMITED......................................... APPLICANT VERSUS OQTIS INVESTMENTS SERVICES LIMITED....................................RESPONDENT RULING Date of last order: 04/09/2024 Date of Ruling: 16/10/2024 MKEHA, J. The applicant is praying for orders that this Honourable Court be pleased to: order the lifting of corporate veil of the respondent; hold the Directors of the respondent responsible and liable for all the debts in respect of Commercial Case No. 22 of 2023; costs of the suit and any necessary order as the court deems fit and right to grant. The application is preferred by a chamber summons under sections 38, 68(e), and 95 of the Civil Procedure Code, Cap. 33 R.E. 2019 (CPC) as well as section 2(3) of the Judicature and Application of Laws Act, Cap. 358 R.E. 2019 (JALA). In support of the application is an i affidavit of Mr. Frank Kifunda, the applicant's counsel. On the other side, the application is contested through a counter affidavit affirmed by Mr. Sufian Lugendo, Director and Principal Officer of the respondent. In terms of the submissions made by Mr. Benedict Magoto Mayani learned advocate for the applicant, which were in line with the contents of paragraphs 5 to 8 of the applicant's affidavit, the parties had executed a deed of settlement which resulted into issuance of consent judgment in favour of the applicant. In the said deed of settlement, the respondent's Directors committed themselves to pay USD 20,000 to the applicant/decree holder by instalments whereby, the whole of the decretal sum had to be paid latest by October 2024 if there would be no default in paying the agreed monthly instalments on part of the respondent. That, despite such undertaking on part of the respondent's Directors, the decretal amount was not paid as per the Directors' commitment. That, efforts of the decree holder to trace attachable properties belonging to the judgment debtor did not yield any positive results. In view of the learned advocate, the judgement debtor had neglected paying while having means of doing so. On her part, the respondent did not specifically dispute the facts contained in the applicant's affidavit. Existence of the deed of settlement; directorship 2 of Mbaraka Mohamed Abdallah and Sufian Bakari Lugendo and failure on part of the respondent to honour the deed of settlement were neither challenged in the counter affidavit nor in the submissions by Mr. Mosha learned advocate for the respondent The learned advocate for the respondent submitted that, the two Directors had not been made to be actual respondents in the application. While admitting that he was representing the two Directors, to him it was improper for the two Directors to be condemned in an application in which they had not been specifically impleaded. According to the learned advocate for the respondent, the requirement to join the Directors was held in the case of Stephen Mahendeka Mganga v. Best Way Capital Management Limited, Misc. Application No. 2779 of 2024 (Unreported). He thus argued that, the applicant ought to have impleaded the two Directors as parties to this application. Additionally, the learned advocate submitted that, the respondent had already paid USD 1000 out of the decretal sum of USD 20,000. By so submitting, the learned advocate conceded that the respondent was in breach of the terms of settlement requiring to effect monthly instalments to clear the decretal sum. 3 The issue for determination is whether the application has merits. In terms of the decision in YUSUPH MANJI VS. EDWARD MASANJA & ANOTHER (2006) TLR, 127, before the decree holder succeeds in having the veil of incorporation lifted for purposes of execution of a decree, he has to prove that, according to the circumstances prevailing at the time of making an application for execution of his decree, there is no real separation between the company and its owners. The decree holder has also to prove the company's actions which are wrong and fraudulent, say, concealing assets of the company or doing other acts calculated to obstruct execution of the decree against it and that, unless the veil of incorporation is lifted, the decree holder stands to suffer for not enjoying what the court decreed in his favour. There was no dispute to the fact that the respondent's directors had committed themselves to pay the decretal sum latest by October 2024. See Annexture A2. In terms of Clause 5 of the terms of settlement, a single default in paying the agreed monthly instalments would entitle the decree holder to execute the whole of the decretal amount. According to the respondent's counsel, out of nine instalments expected to have been paid between October 2023 and June 2024, the respondent had only paid one instalment of USD 1000. The respondent's commitment was 4 done when the respondent's directors appended their signatures to the deed of settlement on 12/06/2023 resulting into issuance of consent judgment against the respondent. Commitment to pay on part of the respondent's directors was a signification that the company had ability to pay under the agreed terms. The respondent's directors have not disclosed the whereabouts of the funds they undertook to pay between October 2023 and June/July 2024 when the present application was filed. It is therefore correct to hold that the respondent's directors have neglected paying while having the means of doing so. This in my view is an act justifying lifting of corporate veil to hold the Directors liable. For the foregoing reasoning, the application is granted. Veil of incorporation is hereby lifted so that execution proceedings in respect of the decree in Commercial Case No. 22 of 2023 can be preferred against the respondent's directors named hereinabove. It is so ordered. Dated at DAR ES SALAAM this 16th day of October, 2024. 5 C.P. MKEHA JUDGE 16/10/2024 Court: Ruling is delivered this 16th day of October 2024 in the presence of the parties' advocates. C.P. MKEHA JUDGE 16/10/2024 6