CIVIL APPEAL NO 477 OF 2020 PHILBERT KRISANTUS MPEPO VS NATIONAL MICROFINANCE BANK PLC ANOTHER

IN THE COURT OF APPEAL OF TANZANIA AT PAR ES SALAAM rCORAM: NDIKA. 3.A.. KEREFU. J.A., And NGWEMBE, J.A.^ CIVIL APPEAL NO. 477 OF 2020 PHILBERT KRISANTUS MPEPO.......................... .........................APPELLANT VERSUS NATIONAL MICROFINANACE BANK P L C ............................I st RESPONDENT MIRAJI TRADING CENTRE LTD......................................... 2nd RESPONDENT (Appeal from the decision of the High Court of Tanzania Land Division at Dar es Salaam) (Maiae. J.1 ) dated the 21st day of February, 2020 in Land Case No. 297 of 2017 JUDGMENT OF THE COURT 9th & 24th July, 2024 NGWEMBE. J.A.: In this appeal, Philbert Krisantus Mpepo, (the appellant) is seeking to quash the judgment delivered by the High Court of Tanzania at Land Division, which dismissed his suit against the National Microfinance Bank PLC (NMB) and Miraji Trading Centre Ltd, the first and second respondents respectively. Before the High Court, the appellant sued the respondents claiming that the legal mortgage on Plot No. 182 Block B i Kimara area bearing Certificate of Title No. 53188 (the suit property) is void for operative mistakes; special damages of TZS 100,000,000.00; declaration that the loan agreement between the respondents was illegal; general damages; and costs of the suit. Albeit briefly, the facts of the case may be retrieved that, the second respondent, a Limited Liability Company applied for a loan of TZS 500.000.000.00 from the first respondent by submitting duly prepared documents for purchase of various crops. In that loan, the second respondent used a third-party mortgage that is; the suit property of the appellant as security. The bank ably extended to the second respondent a loan of TZS 250,000,000.00 instead of the requested amount of TZS 500.000.000.00. However, upon receipt of that loan amount, the second respondent failed to honour the repayment schedule. In turn, the first respondent served the appellant with a notice of default intending to sell the mortgaged property by public auction in order to realise its money. The efforts by the first respondent were perceived by the appellant as unlawful. Thus, he instituted a Land Case No. 297 of 2017 before the High Court of Tanzania at Dar es Salaam seeking the above alluded orders. The basis of his complaint was on the ground that the mortgage was fraudulently procured. In his plaint, the appellant averred that the 2 loan agreement between the respondents was void for uncertainty, misrepresentation and mistake. He contested further that, the mortgage was contrary to the loan agreement entered between the respondents. Those averments were mainly admitted by the second respondent but vehemently contested by the first respondent by stating in its written statement of defence that the letter of offer for the said loan was duly accepted by the second respondent's director one Juma Abdallah Hanti in the acceptance form. Therefore, according to the first respondent, the mortgage was valid and thus there was neither uncertainty nor mistake in both, the loan agreement and the mortgage deed. Therefore, issues for determination before the High Court were four that: whether a valid contract existed between the respondents; whether the mortgage between the appellant and the first respondent was illegal; whether the appellant suffered any damages; and what reliefs are the parties entitled to. After a full hearing, the High Court dismissed the appellant's claim after having found that the appellant was aware of the transaction and that the second respondent applied for and was granted the loan, thus the said mortgage was not illegal. The appellant remained displeased by the High Court's findings. He thus seeks this Court to quash the judgment and decree of the High Court. In the instant appeal, the appellant, in his memorandum of appeal, has tried to fault the trial court by raising five grounds reproduced hereunder that: 1) The learned High Court Judge erred in law for holding in favour of the respondents while in fact the deed of guarantee tendered as exhibit PI was uncertain, hence void in the eyes of the law. 2) The learned High Court Judge erred in law for holding that there was a valid loan agreement tendered as exhibit P2 between the first and second respondents while in fact there was no acceptance in the eyes of the law. 3) The learned High Court Judge erred in law for reaching into conclusion that the appellant cannot rely on misrepresentation because the loan granted was lesser than the said amount of TZS. 500,000,000.00. 4) The learned High Court Judge erred in law for failure to exercise his duty to evaluate the evidence tendered before the trial court, hence arriving in a wrong conclusion. 5) The learned High Court Judge erred in law in holding in favour of the respondents while in fact the appellant proved his case on the balance of probabilities. On the hearing date, Mr. Victor Kikwasi, learned advocate appeared for the first respondent, while the appellant and second respondent were present in person. However, the appellant filed his written submission which he adopted to form part of his oral submission. When the Court invited him to amplify his grounds of appeal, he solely relied on his grounds of appeal and his written submission. He then prayed the Court to consider them and allow the appeal. The second respondent had nothing viable evidence to the contrary, mainly he conceded to the submission given by the appellant. On the first, second and third grounds, the appellant argued that, the loan agreement had specific conditions of acceptance (within 14 days), but the second respondent accepted the same out of the prescribed time and thus there was no acceptance at all. The appellant further maintained that the loan agreement had uncertain terms and conditions on the amount of loan. He insisted that failure to ascertain the loaned amount of money, invalidates the contract which affects the mortgage deed in respect of the suit property. Thus, the security placed on the suit property is unenforceable in law. He bolstered his submission by citing the cases of Hotel Travertine Ltd and others v. National bank of Commerce, Civil Appeal No. 82 of 2002) [2006] TZCA 16 (27 October 2006); Brogden v. Metropolitan Railway Co. (1876 -77) L R 2 APP Cas. 666; and Juma Ibrahim Mkoma and 2 Others v. Association of Tanzania Tobacco Traders, Miscellaneous Application No. 4 of 2016 (unreported). He concluded the first three grounds of appeal by insisting that, since there was no acceptance of the offer of the first respondent by the second respondent, then there was no valid contract, consequently, the mortgage deed was likewise invalid. Submitting on the fourth ground of appeal, the appellant was brief, that the trial court failed to evaluate the evidence adduced by the parties. Hence, he invited this Court, as a first appellate Court to reevaluate the whole evidence and arrive at its own findings. He buttressed his argument with a case of Bugumia and others v. Tibebaga [2004] 2 E.A 17 and D.R. Pandya v. Republic [1959] E.A 336. Finally, he argued on the fifth ground that parties are bound by their pleadings, but a person with heavier evidence than the other is the one to win. He also raised the issue of lack of board resolution of the second 6 respondent to borrow the said amount of money from the first respondent. He thus, urged the Court to allow his appeal because of his strong evidence compared to the respondents and the faults committed by the first respondent. When it came to the first respondent, Mr. Kikwasi exhibited his opposition to the appeal as unmerited. He commenced his submission by addressing the Court in the first ground in which the appellant lamented that the deed of guarantee admitted as exhibit PI was uncertain, hence void in the eyes of the law. He countered it by submitting that, the agreement was clear in all purposes. He observed that the appellant and second respondent do not dispute the fact that the second respondent secured a loan subject of this appeal. That, there was also no dispute for the whole period of contractual relations between the parties, until when the second respondent defaulted to repay the loan and the appellant went to court challenging the first respondent's efforts to realise its debt by selling the suit property. Next, Mr. Kikwasi addressed briefly on the second ground that, the agreement between the respondents was clear and binding. In essence the appellant was a stranger to the loan agreement, hence the complaint is unmerited and invited the Court to dismiss it entirely. Submitting on the third ground, Mr. Kikwasi was brief that the second respondent requested for a loan of TZS. 500,000,000.00 but she was granted less than the requested amount which favoured the appellant because his liability was equivalent to the amount of loan granted to the second respondent. As such there was no prejudice to him as a guarantor and the fact would not dispense his duty as a guarantor or release his security surrendered in the mortgage deed. The learned counsel, argued jointly grounds fourth and fifth that the High Court properly analysed the whole evidence adduced during the trial and evaluated it properly before arriving to the final conclusion. Having perused the record of appeal and respectful consideration of the submissions by the parties, we find the critical issue to be resolved by the Court, is whether the High Court was correct in its decision when it dismissed the appellant's claim against the respondents, mainly the first respondent. This being the first appellate Court and since the appellant, among other complaints, has raised the issue of failure to evaluate the evidence, then the principle regarding the duty of the first appellate court to re-evaluate the whole evidence is of significance. Under Rule 36 8 (1) (a) of the Tanzania Court of Appeal Rules, 2009 (the Rules), this Court is entitled to re-evaluate the evidence on record and draw its own inferences and findings of facts. We did the same in the cases of Tanzania Sewing Machine v. Njake Enterprises Ltd (Civil Appeal No 15 of 2016) [2016] TZCA 2041 TANZLII (27 October 2016); Leopold Mutembei v. Principal Assistant Registrar of Titles, Ministry of Lands Housing and Urban Development & Another (Civil Appeal No. 57 of 2017) [2018] TZCA 213 TANZLII (11 October 2018); and Paulina Samson Ndawavya v. Theresia Thomasi Madaha (Civil Appeal No. 45 of 2017) [2019] TZCA 453 TANZLII (11 December 2019). Regarding the first ground, the appellant maintains that the deed of guarantee was uncertain, hence ineffectual in the eyes of law. The second ground which is much related to the first, the appellant suggests that the agreement was void as there was no acceptance of the offer by the second respondent. Having reviewed the exhibits, the loan agreement together with the mortgage deed (exhibits PI and P2), we have noted that the deed of guarantee was not tendered in evidence. Nonetheless, it was an undisputed fact that it existed and that based on it the mortgage deed (exhibit P2) was created and registered for the sum of money of up to 9 TZS. 483,000,000.00. It was also undisputed fact that the second respondent was offered an overdraft facility up to TZS. 250,000,000.00. Considering those undisputed facts, our duty is to answer the question above which is much attributed to interpretation of law of mortgage and the law of contract, albeit briefly. We are alive to the fact that the appellant sought refuge to section 29 of the Law of Contract Act, which provides that an uncertain agreement is void. To begin with, section 7 (b) of the Law of Contract Act provides the relevant principle regarding acceptance and the effect thereof. As a general rule created under the section is that an acceptance must be absolute. Where an offer is given with a prescribed mode of acceptance, it must be accepted in that prescription. For clarity the section is reproduced hereunder: Section 7. "In order to convert a proposal into a promise, the acceptance must- (a) be absolute and unqualified; (b) be expressed in some usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted; and if the proposal prescribes a manner in which it is to be accepted, and the acceptance is not made in such manner, the proposer may, within a reasonable time after the acceptance is communicated to him\ insist that his proposal shall be accepted in the prescribed manner, and not otherwise, but if he fails to do so he accepts the acceptance." [The emphasis is ours] From the above provision, the remedy against an acceptance which contravenes the offeror is a one-way remedy only for the offeror to revoke his offer by rejecting the contravening acceptance and it is within reasonable time, before the other stages of formation of the contract. The appellant who was not a party to the agreement or even standing on the offeree's position for being a guarantor, and the second respondent being the offeree are not accorded such a leeway to invalidate the agreement. In this appeal, the appellant seeks to invalidate the agreement after the second respondent had defaulted to repay the loan worth TZS 250,000,000.00 which the first respondent had granted to the second respondent under the appellant's mortgage guarantee. Such claim is improper in law to the first respondent whose money is still in the hands of the second respondent. 11 It is on the above reasons, we find no ground to fault the High Court decision, which in our view was a correct interpretation of the law governing agreements and mortgage. We therefore dismiss the first ground for lacking merit. The second ground is much dependent on the first. It contents that the deed of guarantee was void for not stating the amount of the loan secured by the second respondent. As we have decided on the first ground that the agreement entered between the two respondents was valid and enforceable in law, therefore part of this ground fails to that extent. The remaining part is on the complaint that the deed of guarantee did not state the extent of the guaranteed loan. The appellant placed his reliance on section 29 of the Law of Contract Act, which declares all uncertain agreements void. It has been the appellant's stance throughout this case that all undertakings were void for failure to ascertain the actual amount of loan. However, it is undisputed fact that the appellant signed the mortgage deed as shown in page 126 of the record of appeal indicating that the charge was for the sum of money up to the forced sale value of the mortgaged property of TZS. 483, 000,000.00. Moreover, in paragraphs 6, 7, and 10 of the plaint, the appellant took cognizance of the fact that the 12 second respondent applied for an overdraft facility up to TZS. 500,000,000.00, though the first respondent extended that loaned facility to the limit of TZS. 250,000,000.00. Also, the second respondent in his Written Statement of Defence (WSD) did not dispute the above facts in paragraphs 2 and 3 and nowhere in her WSD denied the existence of the mortgage deed and a loan agreement. Further, the evidence of PW1 (the appellant) is clear that he signed the mortgage deed for the loan advanced to the second respondent. That, he was aware that eventually the loan granted to the second respondent was up to TZS. 250,000,000.00. In this appeal the appellant has submitted that the contract was void for not showing the specific amount of the loan. Moreover, the mortgage deed which the appellant entered with the first respondent stated that the mortgagor (appellant) agrees to create a legal charge for security of the loan as per the loan agreement. The loan agreement (exhibit P2) stated clearly that the overdraft facility advanced to the second respondent was up to TZS 250,000,000.00. It goes therefore that the liability of the mortgaged property was equivalent to the limit of its value of TZS. 483, 000,000.00. It is logical under the circumstance that a mortgage deed should be read together with the loan agreement for the purpose of the amount granted to the second 13 respondent. The issue of invalidity of the mortgage deed for uncertainty of the loan amount would hold water if both exhibit PI and P2 did not state the amount of a loan. Under the prevailing circumstances, there is no invalidity which the appellant claims. This ground is likewise barren of merits, we dismiss it. The third ground is in respect of the appellant's claim of misrepresentation. Among other grounds for the appellant's allegation of invalidity of the loan agreement, was that the first respondent had misrepresented on material facts to the agreement particularly on the amount of loan secured. This complaint was raised and dismissed by the High Court on the reason that the appellant was aware that the second respondent applied for a loan of TZS 500,000,000.00, therefore, he cannot claim misrepresentation when the loan actually granted was less than the amount applied for. The appellant being dissatisfied the same ground is gauged in this appeal. But having gauged the evidence of the case in totality as we have done, we find no better reasoning than that given by the learned trial judge, we will therefore dismiss this ground as well for the very reason that the appellant was fully aware of the undertakings. We therefore go along with Mr. Kikwasi's submission that granting an amount lesser than the actual amount in the contract did 14 not in any way erode the guarantor's duty, but actually benefits him for his security is pegged on the actual amount taken by the second respondent. We now turn to consider jointly grounds four and five on whether the trial court properly evaluated the evidence and arrived into a proper finding. It is settled law in our jurisdiction on the burden of the plaintiff as provided for under sections 3, 110 and 111 of the Evidence Act as sufficiently illustrated in a number of cases by this Court, including Agatha Mshote v. Edson Emmanuel & Others (Civil Appeal No. 121 of 2019) [2021] TZCA 323 TANZLII (20 July 2021); Ikizu Secondary School v. Sarawe Village Council (Civii Appeal No. 163 of 2016) [2018] TZCA 444 TANZLII (14 December 2018). In all our decisions we have stated that the burden of proof never shifts to the adverse party until the party on who the onus lies, discharges it. In this appeal, the appellant was the plaintiff at trial. He had the primary duty under the law to prove his claim. We pointed out earlier, that the appellant in his plaint had a number of allegations. The most serious allegation was found at paragraph 4 which we think is useful to reproduce: "That the plaintiff's claim against the defendants jointly and severally is for the declaration that the 15 purported legal mortgage between the Plaintiff and the first defendant over the plaintiff's property with Certificate o f Title No. 53188 dated 7th August 2015 is void for misrepresentation and mistake; declaration that the purported guarantee agreement between the Plaintiff and the first defendant over the loan advanced to the second defendant is void for operative mistake as the subject matter o f the guarantee agreement and mortgage to the loan between the first and second defendant is non-existent." In other paragraphs the appellant amplified the above claim by alleging that the first respondent fraudulently omitted some important information in the mortgage deed. Considering that there was no dispute of the undertaking, but what was being challenged was the procedure, it was the appellant's duty to prove that the said undertaking was fraudulently procured and the special damages he claimed to have suffered. But to the contrary, when adducing evidence as PW1 he appreciated the main facts which the first respondent relied on in her defence. He did not dispute any of the documents relied by the first respondent including exhibits PI and P2 which constitute the first respondent's right against the appellant and the second respondent. DW2 (on behalf of the second respondent) in his evidence supported the 16 findings of the High Court that there was a loan agreement between the respondents and that he received TZS 250,000,000.00 instead of TZS 500,000,000.00 he applied for. There is no place in his testimony that the second respondent defaulted the loan. Also, there is no evidence suggesting that the first respondent was not entitled to exercise her right against them for recovery of the loaned money. Having reviewed the whole evidence adduced during trial, we have failed to see any proof of the appellant's complaint. It is evident that the loan agreement which culminated in the first respondent's action intending to auction the collateral was, in law enforceable. The appellant does not dispute the existence of such loan agreement and does not dispute the fact that he guaranteed the second respondent's loan by surrendering the suit property, while knowing that, in case of default, as provided under clause 6 of the mortgage deed, the mortgagee (herein the first respondent) will have the powers to hold and dispose the mortgaged property, among others. In absence of any evidence negating the default, the appellant and the second respondent cannot challenge the first respondent's rights to exercise those powers. Even the argument by the appellant that acceptance was made without board resolution is not relevant in our jurisdiction. It is settled 17 that failure to follow internal procedures by the corporate bodies in entering into an agreement with a third party, cannot affect the third party. The internal procedures are meant for internal management of the body. The persuasive old English case of Royal British Bank v. Turquand [1856] 6 E & B 327; [1843-60] All ER Rep 435 is somehow similar to this case; the respondent company issued a bond to the Royal British Bank. The bond was under the company's seal, signed by two directors and the secretary. Having been sued, the company came up with a defence that the amount £. 2,000 secured in the bond was beyond the powers of the directors. That it was subject to a board resolution but no resolution was passed. In dismissing the defence, the court developed what is currently known as the doctrine o f indoor management That people transacting with companies are entitled to assume that internal company rules are complied with, even if they are not. The doctrine has been followed and it is part of the common law. See Mahoney v. East Holyford Mining Co (1875) LR 7 HL 869 and Morjaria v. Kenya Batteries (1981) Ltd and others [2002] EA 479. In this matter as well, we find that the appellant and the second respondent were bound by the doctrine. 18 Having evaluated the evidence on record, we are satisfied that we would have reached to the same conclusion reached by the learned trial judge. We also find that the trial court properly evaluated the evidence and arrived into a proper conclusion. This takes us to dismiss the fourth and fifth grounds entirely. In the event, we dismiss the appeal with costs. DATED at DAR ES SALAAM this 23rd day of July, 2024. G. A. M. NDIKA JUSTICE OF APPEAL R. J. KEREFU JUSTICE OF APPEAL P. J. NGWEMBE JUSTICE OF APPEAL The Judgment delivered this 24th day of July, 2024 in the presence of appellant in person, Mr. Victor Kikwasi, learned counsel for the 1st Respondent and Mr. Juma Hanti, Director for the 2nd Respondent, is hereby certified as a true copy of the original. 19