PREMIUM AGROCHEMICAL VS TANGANYIKA FARMERS ASSOCIATION LTD COMM CASE NO

Page 1 of 11 IN THE HIGH COURT OF TANZANIA (COMMERCIAL DIVISION) AT PAR ES SALAAM COMMERCIAL CASE NO 121 OF 2015 BETWEEN PREMIUM AGROCHEMCAL LIMITED -....................................... -.......... PLAINTIFF VERSUS TANGANYIKA FARMERS ASSOCIATION LIMITED------------------ DEFENDANT JUDGMENT SONGORO, J The Premium Agroehemicals Limited filed a plaint claiming that, is claiming a sum of Tshs. 1 18,782.925 as outstanding balance for the accrued interests and exchange loss suffered by the plaintiff on the debt accrued as a result of supply of fertilizers to Tanganyika Farmers Association, the plaintiff. In his claim the plaintiff is applying for following orders and reliefs;- 1) Payment of shs 118.782,925 as outstanding balance and interests there on. 2) Interest on item (a) above at the rate of 18% from the date of filing the suit to the date of judgment. 3) Interest on the decretal sum at court rate of 7% from the date of Judgment till payment in full. 4) General damages at the discretion of the court. 5) Costs. 6) Any other relief the honourable court may deems fit to grant. In response to the plaintiff suit and claims Tanganyika Farmers Association the defendant filed a written statement of defence and opposed the plaintiff claim and stated that, the amount due from the supply of fertilizers has been fully repaid and the final payment was made on the 9/9/201 5. The plaintiff was therefore put to strict proof. Page 2 of 11 In the light of the plaintiff claims and defendants denial of the claims, the court in consultation with the parties drew the following as matters for determinations; 1) Whether or not the plaintiff suffered any financial loss on the business transaction. 2) Whether or not the aspect of interest was agreed upon by the parties in their business transaction. 3) What reliefs are parties entitled too. Therefore the plaintiff suit was determined on the basis of the above mentioned following agreed issues. During the hearing the plaintiff was represented by Mr. Gabriel Mnyelee and Mr Msengezi Learned Advocates while the defendant was represented by Mr Mjemaas, Learned Advocate. In pursuing his claim, the plaintiff called Vinesh Shah who testified as PW1 and relying on his witness statement told the court that, he is the Director of the plaintiff s company which deals with the supply of agricultural materials including fertilisers to different places in Tanzania. PW1 then explained in his witness statement that, in 2010 the Defendant's company approached the plaintiff s company and placed an order for the supplier of fertilisers on credit basis. The witness explains that, the defendant order was placed by email which was received by the plaintiff on 15th February 2011 which requested a 60 days credit. PW1 then explained upon receipt of an order the plaintiff issued defendant with invoices for orders placed and proceeded to supply fertilisers as per placed order. Mr Shah then explained that, the defendant delayed to pay the amount due of shs 297,789,000 as from 25/6/2011. PW1 then stated that, as per email communication which the plaintiff send to the defendant it was the plaintiff intention to charge an interest of 18% on the amount due from 21/6/2011 to accrued interest and foreign exchange losses and defendant never protested. In the light of their understanding PW1 stated that, on 21/5/2014 the plaintiff and defendant signed a Memorandum of Understanding where the defendant agreed to pay a sum of shs 100,000,000/- in three instalments. The witness explained out of shs 100,000,000 a sum of shs 51,470,000 was the principal sum and the balance was part payment accrued for exchange loss and interests. PW1 1 despite the Page 3 of 11 fact that, the plaintiff and defendant signed the Memorandum of Understanding the defendant refused to pay any sum as per the agreed terms of the Memorandum of Understanding. Instead PW1 explained that, the defendant company deposited a sum of shs 1, 870, 000 as final payment on the principal sum and defendant neglected and refused to pay the accrued interests and exchange loss suffered by the plaintiff while the fertiliser supplied was procured by loan from financial institutions to satisfy the defendant demand. PW1 claim in paragraph 15 of his witness statement that, previously the defendant admitted the claim of paying accrued interests and exchange loss suffered by the plaintiff but refused and neglected to honour his promises. It was part of the testimony of PW1 that, by 20/9/2015 the total outstanding sum which was due and payable was shs 118,782,925. To support his claim PW1 tendered the following exhibits;- 1) Tax invoices from the plaintiff to the defendant were admitted as Exhibit Pl. 2) Email letters which were admitted as Exhibit Pl and P2. 3) A Memorandum of Understanding dated 21/5/2014 was admitted as Exhibit P3. 4) A letter from Mnyele Advocate s dated 4/11/2014 was admitted as Exhibit P. 5) A demand letter was admitted as Exhibit P5. 6) A document with title of Tanganyika Farmers Association showing an interest sum of shs 81,029,775 which was admitted as Exhibit P6. 7) A document of Bank of Tanzania Indicative Foreign Exchange Market Rates was admitted as Exhibit P7. Next PW'l was cross examined by Mr Mjemas and he maintained in his testimony that, his company had a written contract with the defendants which is also supported by invoices, and email correspondences which shows supply of goods was on credit basis. Then PW1 closed his testimony and the plaintiff case was closed and defence case opened. Thus on the 31/5/2018 after the plaintiff case was closed it was the turn of the defendant to call his witnesses and pursue his defence. So, Mr. Mjemas Learned Advocate of the defendant company informed the court that, he intend to call two witnesses Mr Stanley Mwanri and Mr Kimaro. The Page 4 of 11 defence counsel also notified that, the two witnesses they did not file witness statements. The counsel applied for extension of time to file witness statement as soon as possible. The defence prayer of filing witness statements was objected by Mr. Mnyelee Learned Advocate of the Plaintiff and the objection raised was uphold on the ground that, Under Rule 49(2) of the High Court Commercial Division Procedural Rules GN 250 of 2012 witness statements are required to be filed within 7 days from the date mediation was completed. In that, regard since mediation was concluded on 6/5/2016 then witness statement was supposed to be filed within seven days which is on or about 23/3/2016. In deed Rule 49 (1) of the High Court Commercial Division Procedural Rules GN 250 of 2012 provides as follows In any proceedings commenced by plaint, evidence in chief shall be given by a statement on oath or affirmation Further, Rule 49(2) of the High Court Commercial Division Procedural Rules of GN 250 of 2012 provides as follows; The statement shall be filed within seven (7) days within the completion of mediation and served as directed by the court Take into account that, the mediation was completed on 26/5/2016 before Hon Mruma J and the defendant did not file his witness statement within 7 days after completing the mediation and no witness statement of the defendant was filed and the court decline to grant an extension of time to file a witness statements. So failure on the part of the defendant to file a witness statement within the prescribed requisite time amounted to failure to defend the suit because there is evidence in chief of the defendant. Due to the fact that, the defendant failed to defend the suit I make an order that, effective from 375/2018 the plaintiff suit proceed ex-parte and the plaintiff counsel was ordered to file closing submissions and submissions were timely filed. Submitting on the plaintiff claim, Mr. Mnyelee pointed out that, the plaintiff claim is essentially based on loss which occurred as a result of foreign exchange rate and local currency and interests which originated from commercial debt. The counsel then submitted that, since the Page 5 of 11 defendant did file witness statements to oppose the plaintiff claims certainly his evidence has proved that, the plaintiff sold fertiliser to the defendant on credit basis and defendant failed to pay for the ordered consignment of goods and that, delay in payment caused the plaintiff to suffer loss occasioned by foreign exchange rates and interests. Mr. Mnyelee further explained that, the plaintiff used United States Dollars (USD) to buy fertiliser abroad and the defendant paid in Tanzanian shillings in buying fertilisers from the plaintiff. Further the plaintiff counsel explained that, during material time there was depreciation of Tanzanian shilling in the sense on 30/12/2010 the value of USD 100 was shs 146,792. Which mean one USD was shs 1,467, and when the defendant deposited the final payment one USD was shs 2159 that, is to say USD 100 was equivalent to Shs 215,972. It was the views and submissions of Mr Mnyelee that, since the defendant did not pay his debt in full by September 2015 is liable to pay loss which arose due local currency fluctuations and interests. Mr. Mnyelee also submitted that, even if the loss which occurs as result of currency fluctuation was not set up and agreed as one of the terms of the contract between the plaintiff and defendant still the court may imply it, that, it existed in the contract because according to trade and usage in Commecial transaction which involves importation of goods that, term was supposed to be included. In view of the above the plaintiff s counsel prayed to the court to grant the payment of shs 118,782,925 as outstanding interests and relief claimed from paragraphs (1) to (6) of the plaint. The court has considered the plaintiff claim of interests and exchange loss of shs 118,782,925 prayed in the plaint and find Since, it is the plaintiff who alleges that, has suffered loss as a result of currency exchange loss and is entitled to reimbursement of such loss and interests, I find that, it is trite law derived from Section 110 (1) and (2) of and he Evidence Act, 1967, Cap 6 R.E. 2002 that, whoever request a court to give judgment in his favour as to any legal right on the existence of any fact which he asserts, must prove that, the fact exist, and the level of proof is that, of the balance of probability. Page 6 of 11 Guided with the above mentioned legal position, and for convenience purposes I will first address agreed issue No 2 of whether or not the aspect of interest was agreed upon by the parties in their business transaction. straight went to determine the first issue of whether or not the plaintiff is entitled to claim interests, the court find paragraph 3 of the plaint raises two types of claims in the following words; The plaintiff claim against the defendant is for sum of Tshs 118,782,925 being outstanding balance for the accrued interest and exchange loss suffered by the plaintiff for the late payment of debt Therefor reading between the lines paragraphs 3 and 4 of the plaint, the plaintiff s claim is divided into two main claims. A claim of interests arising from late payment of debt, and a claim arising from foreign exchange loss due the purchase of fertilisers in United State Dollars and sell it into Tanzanian Shillings. For convenience purposes I will start to address the plaintiff claim of interest arising from foreign exchange loss arising from purchase of fertiliser from United States Dollars and selling the product into Tanzanian Shillings. In addressing the first claim of interests arising from foreign exchange loss the court find from the testimony of PW1 which is supported by Tax invoices Exhibit Pl there is no dispute that, plaintiff sold and delivered fertiliser to the defendants. The above cited Tax invoices Exhibit Pl proves that, the purchased fertilisers were delivered at defendant depots / shops in Moshi, Mbeya, Njombe, Morogoro, Mbozi, Babati, between 9/11/2010 to 12/3/2011. Further, the court find from Exhibit P2 which is email letter from Evarist Epimarki Kauki , the defendant officials that, thedefendant'scompany acknowledged that, there was outstanding debts arising from supply of fertiliser. Mr. Evarist further stated in his email that, from 27/6/2013 Page 7 of 11 the defendant planned to pay a sum of shs 18,000,000 every months to settle the principal amount of shs 100,000,000/=. Furthermore, I noted from Memorandum of Understanding signed by the plaintiff and defendant that, on 21st May, 2014, it was agreed that, in order to reduce the long outstanding balances the defendant will pay the outstanding debt by three instalments that, is to say Shs 40,000,000 on the 15th June, 2014, The second instalment of shs 40,000,000/= will be paid on 25th July 2014. The third instalment will be shs 20,000,000 on the 15th August 2014. However, close scrutiny of testimony of PW1 and all plaintiff exhibits which were admitted, the court did not find any evidence which proves if the supplied fertilisers were purchased in United States Dollars to warrant and justify a claim of foreign exchange loss. Also the court did not find any evidence which proves that, the consignment of fertilisers supplied to the defendant was imported from abroad to justify a claim of interests arising from foreign exchange loss. The court takes a position that, for a claim arising from foreign exchange loss to been successful established the plaintiff would have lead evidence which proved that, he purchased and imported a consignment of fertilisers delivered to the defendant in the United States Dollars. And such proof was supposed to be done by producing Telegraphic Transfer of USD from the plaintiff to any company or supplier of fertiliser or by producing as Exhibit a Bill of Lading or any relevant documents which proves importation of the consignment in the country In the absence of proof which shows the plaintiff purchased the consignment in United States Dollar, and absence importation documents of the alleged fertilisers, it follows that, the plaintiff s claim of interest arising from foreign exchange loss remained to be unsubstantiated. The court noted the details of documentary Exhibit with title of “Bank of Tanzania Financial Markets Indicative Foreign Exchange Markets Rates” Exhibit P7 and find it say nothing Page 8 of 11 on payments of fertilisers in United States Dollar also it say nothing on importation of fertilisers and a country under which importation of fertilisers. It is also my view and finding that, the plaintiff claim on interest arising from foreign exchange would have been valid and legally justifiable once there was a credible evidence that, the plaintiff purchased the consignment of fertilisers by using United States Dollars or any foreign currency. Taking into account that, such evidence was not adduced during the hearing and is missing the plaintiff claims of interests arising from foreign exchange loss was not proved and it summarily fails. Turning to the plaintiff claim of interest arising from the late payment of purchase price or outstanding debt, the court find there is a “Memorandum of Understanding” Exhibit P3 which was signed on 21st May, 2014 by Vinay Shah on behalf of Premium Agro Chem Ltd of P.O.Box 2937 Dar Es Salaam and Mrs Anna Mfinanga, Director of Tanganyika Farmers Association Ltd. In Exhibit P3 the defendant acknowledges that, there is an “old outstanding debt of shs 100,000,000 which he committed himself to pay the sum in three instalments as explained above. The court upon close scrutiny of the Memorandum of Understanding and other plaintiff s exhibits, it did not find if there was any contractual term imposing interests on outstanding debt. However, I find from business efficacy, trade and usage, always debts arising from “commercial transactions like the one entered between the plaintiff and defendant of sale of fertilisers if are not paid within the agreed period or “reasonable period” which in my view is within six months periods such debts attracts interests like bank debts The main reasons of assuming that, the outstanding debt attracts interest is due to the fact the business efficacy and the nature of trade always requires prompt payment of purchase price and failure to that, the retained sum attracts interests. Eminent authors in Law of Contact Cheshire , Finfoot & Urmston’s 13th Edition Butterworth at page 147 quoting Scrutton LJ stated that, way back in 1918 that, it is a rule that, a contract term can be implied if it is necessary to give efficacy to the contract. From the views Page 9 of 11 expressed above by Learned Authors, it seems to me that, the court has also duty of giving efficacy to a Memorandum of Understanding which appears was a contract and it firmly established that, there has been old outstanding debt of the defendant. To conclude on 2nd agreed issue of whether or not the plaintiff s claims of interests is justifiable, I find a claim of interest arising from foreign exchange loss was not proved and it fails. While I find and decide that, the plaintiff claim of interests arising from outstanding debts arising from commercial transactions attract interest is due and payable. Reverting back to the 1st agreed issue on whether or not the plaintiff suffered any financial loss, the court find the plaintiff is claiming for a sum of Tshs 118,782,925 as interests as a result of loss on monies which were retained by the defendant. However in the Memorandum of Understanding, Exhibit P3,1 find that, it was agreed that, the outstanding debt is shs 100,000,000/=arising from outstanding debt of purchase of fertiliser a business which commenced way back on 9/11/2010. Next the court find from Exhibit P3 that, by 21/5/2014 there was outstanding loan of shs 100,000,000/=. Definitely the defendant's act of retaining a sum of shs 100,000,000/= which was due and payable as purchased price certainly caused the plaintiff to suffered financial loss for three consecutive years. It is certain that, had the sum of shs 100,000 000 be paid within a reasonable period of time let say within 6 months, the plaintiff would have invested the sum it into his own business and make profit. Since that, was no done, I find and decide that, the plaintiff suffered loss. Turning to the 3rd agreed issue of what reliefs are parties entitled too, the court find since the plaintiff has proved that, the has commercial debt with the defendant of shs 100,000,000/= which was even acknowledged in the memorandum of Understanding Exhibit P3 the court find the said commercial debt as a matter of business efficacy, trade and usage attract interests. The interest which may be granted in such claim may be based on percentage per annum. In that, regard I find and decide that, a sum of shs 100,000,000/= which was a debt due and payable by 2014 being a debt arising from commercial transaction it attracts an interests. However the interest applied by the plaintiff of shs 118,782,925 appears to the court to be exorbitant and is claim as lump sum and pegged on percentages of debt itself. . Page 10 of 11 It seem to me that, “interest claims are as a matter of practise are based on the debt itself and is calculated on percentages. And as it appear in the plaint and in this judgment the claimed interests was based on two clusters. The first cluster of interests was on foreign exchange loss which I have found and decided that, was not proved. The second cluster of interest is based on outstanding debt which was due for payment that, I have decided was proved. So I found a lump sum claim of interest of shs 118,782,925 to exorbitant. It is established practise that, “interest” is payable on the basis of percentage of outstanding debt. The legal and commercial point is that, the claimed interest must have a bearing or connection with the debt which is due and payable.. In that, regard, the court set aside the claimed sum and makes an assessment of interest to the rate of 10 % of the outstanding debt per annum from a period when the debt was due for payment that, 2014 to the date of Judgment which is 14/9/2018 thus the granted sum is shs Taking into account the debt has been outstanding of shs 100,000,000 has been due since 2014 and I granted an interest of 10% per annum that, brings an interest of 10,000,000/ per annum and for 3 years that, makes a sum of shs 30,000,000 (Shs Thirty Millions) Further the court pursuant to Rule 21 of Order XX of the Civil Procedure Code Cap 33 grant an interest of 12 % percent per annum on the decretal sum which is shs 10,000,000 from the date of Judgment to the date decretal sum will be paid in full.. The court did not see any claim of outstanding debt. The entire plaintiff claim was on interest which I have decided. So no order was made on the outstanding debts. The court also orders that, the defendants pays the plaintiff the costs of pursuing the suit. The plaintiff claim of interests arising from foreign exchange loss fails because there was no proof if purchase of fertilized supplied to the defendant was made by United States Dollars. Page 11 of 11 Finally the court decides that, the plaintiff suit succeeds as explained above and right of appeal is fully explained to both parties Signed and Dated at Dar es Salaam on the 14th September 2018. H.T. SONGORO JUDGE.