Prestige v Standard Security for costs

1 IN THE HIGH COURT OF THE UNITED REPUBLIC OF TANZANIA COMMERCIAL DIVISION AT DAR ES SALAAM MISC. COMMERCIAL APPLICATION NO. 31642 OF 2024 (Arising from Misc. Commercial Cause No. 30612 of 2024) IN THE MATTER OF THE ARBITRATION ACT, ACT NO. 2 OF 2020 AND IN THE MATTER OF APPLICATION FOR LEAVE TO REVOKE A CLAUSE FOR SUBMISSION TO ARBITRATION BETWEEN PRESTIGE INVESTMENT SA……………………………………. APPLICANT AND STANDARD PETROLEUM LLC………………………………….. RESPONDENT RULING February 4th & 28th, 2025 Morris, J This ruling is in respect of an application for orders that: this Court be pleased to compel the respondent (the petitioner in Misc. Commercial Cause No. 30612 of 2024) to deposit in court the sum of USD 653,016 as security for payment of all costs incurred and likely to be incurred by the applicant herein in defending the petition; costs of this application be paid by the respondent; and the applicant be granted other reliefs at the discretion of the Court. 2 The application was preferred under Orders XXV Rule 1(1) and XLIII Rule 2; sections 68(e) and 95 of the Civil P rocedure Code , Cap. 33 R.E. 2019 (CP C ); and section 480 of the Com panies Act , No. 12 of 2002. In support thereof, Lee Clewis Nimfura, Principal Officer of the applicant deposed and filed an affidavit. However, this application was resisted by the respondent. A counter affidavit affirmed by Sheikha Moaza Obaid Suhail Buti Al Maktoom, Principal Officer of the Respondent was lodged in Court in that regard. Facts relevant to this matter are to the extent that, the applicant is the respondent in Misc. Commercial Cause No. 30612 of 2024 (Commercial Cause). Therein, the respondent - a legal entity registered in United Arab Emirates; petitioned the Court to waive the invocation of a “Submission to Arbitration Clause” allegedly contained in a contract between the parties above dated 02.05.2024 and its addendum of 27.06.2024 (elsewhere, the contracts). According to the applicant, apart from being a foreign company, the respondent does not possess any and/or sufficient immovable property within Tanzania. Hence, in the event the Commercial Cause was unsuccessful, the applicant would likely suffer irreparable loss arising 3 from her resistance against the Commercial Case. Amongst such costs, the applicant stated that he had engaged lawyers from K&M Advocates to represent him and defend her interest in the Commercial Case. In opposition to the application at hand, the respondent’s counter affidavit indicated that the respondent had sufficient security in the jurisdiction of the Court. The deponent hereof named the security as being the cargo which was the subject of dispute in the Commercial Cause. And that, the said cargo was not only in the hands of the applicant but also the holder thereof had not paid for the same. Further, the respondent deposed that the claimed sum of USD 653,016 was excessive. Hearing of the application was by way of written submissions. The applicant was represented by Messrs. Dennis B. Maganga and Nabory Cosmas Mdemu, both learned advocates. The respondent was under representation of Mr. Hillary Kuzenza, also learned counsel. The applicant commenced his submissions in support of the application by praying to adopt the affidavit thereto. He went on to argue that, the amount of USD 653,016 was calculated from USD 21,767,201 - the latter amount being the respondent’s claim in the Commercial Cause. 4 To the applicant, the foregoing amount was computed basing on item 8 of the Nineth Schedule to the Advocates R em uneration Order , 2015 (the R em uneration Order ) which was well within the statutory 3% range. The claimed security amount, according to the applicant’s counsel, was inclusive of the costs already incurred and likely to be incurred in defending the Commercial Cause. The unreported cases of R ajiv Bharat R am ji v P ow er Generation M iddle East Fze , Misc. Civil Application No. 37 of 2023 (pages 2-3); and Pravindchandra Girdharlal Chavda & 2 Others v Gopalji Vallabhdas & Another , Misc. Commercial Application No. 138 of 2023 (pages 7- 8) were cited as authority to support the subject argument. To the applicant, both cases stipulated conditions for grant of an application for security for costs to be: the respondent must be residing outside Tanzania; and he who does not possess sufficient immovable properties in Tanzania other than the suit property. In line with the above stated conditions, the counsel for the applicant argued further that, the respondent did not dispute the fact that she does not reside in Tanzania (paragraph 5 of the counter affidavit). That, it is not disputed that the respondent is incorporated in the United 5 Arab Emirates with no immovable properties in the United Republic of Tanzania. That, the property in dispute (cargo) is a movable property and the subject of dispute hence, does not meet the requirements of being pledged as security in accordance with the law. On the quantum of costs, the counsel acknowledged that the same is under discretionary powers of this court; but such powers should be exercised judiciously under Order XXV Rule 1(1) of the CP C . He then cited the case of Abdul Aziz Lalani & 2 Others v Sandru M angaji , Misc. Commercial Cause No. 08 of 2015 (unreported), in which it was held that, “courts have not been hesitating to allow an application for security for costs if the applicant has proved existence of two ingredients of Order XXV rule 1(1) of the CPC.” Going by the principle laid down in the above case, the counsel contended that, in the Commercial Cause, the applicant engaged the lawyers who had already entered appearance in court on all occasions; they had filed defence pleadings; pursued the preliminary objection; and paid for the documents filed in Court. Thus, to the counsel, such factors justified the deposit of USD 653,016. In this respect, he made reference to the case of Target I nternational (T) Ltd v Godrej Consum er 6 P roducts Ltd , Misc. Commercial Cause No. 86 of 2019 (unreported, pages 7 & 8), in which this Court held that; “……once the court is satisfied that security for costs should be given, it would consider various factors in determining the quantum, including the complexity of the case, research workload involved, costs incurred up to the time of the application and after.” On that position, the applicant asserted that, his affidavit (paragraphs 8 and 9) substantiated how USD 653,016 was arrived at. That is, the same represented 3% of USD 21,767,201 which was presented by the respondent as the value of the disputed property. Conclusively, the counsel prayed that, the application be granted. On his part, the respondent’s counsel also commenced his submissions by praying to adopt the counter affidavit. He then asserted that in principle, the security for costs must be realistic, reasonable and fair. To buttress this position, reference was made to the case of Target I nternational Case (supra). He thus submitted that, the matter at hand seeks leave to revoke a submission clause and injunctive orders with no liquidated sum pleaded. As such, he insisted that the claimed costs were too exorbitant and exaggerated. 7 He continued to state that, without sufficient evidence, it was difficult for the Court to fairly, reasonably and realistically determine the application. On this regard, he maintained that the quantum of USD 653,016 as security for costs was unsubstantiated and not specifically proved. To the respondent, there was no pending suit claiming 25,344,018 metric tons of petroleum as alleged in paragraphs 2 and 3 of the applicant’s affidavit. As such, the quantum prayed by the applicant was unjustifiable. It was also argued that, the Commercial Cause sought to be defended by the applicant was governed by the 11th Schedule particularly item (k) as opposed to the 9th Schedule of the R em uneration Order , because the same was a claim for unliquidated sum. The respondent thus, prayed for dismissal of the application with costs. On another line of defence, the respondent argued that each case should be decided on own merits. In this regard, he invited the Court to consider the fact that the applicant was allegedly holding both the cargo and the purchase price thereof. It was submitted further that; the applicant was deploying this matter for him to benefit from his own wrong. That is, his hands were far from being clean in so far as the claims 8 in the Commercial Cause were concerned. Hence, the respondent prayed that the application was a fit case for dismissal with costs. I have considered the parties’ affidavits and their rival submissions in support and opposition of the application. The issues for determination are: whether the respondent is liable to deposit the security for costs in favour of the Commercial Cause; and whether the quantum of USD 653,016 as security for costs is justified in the matter at hand. It is undisputed that the respondent is not a resident of Tanzania. Further that, she does not possess any immovable property in Tanzania. From the parties’ pleadings and submissions, it overt that the centre of the serious controverse between them was on two pillars: the cargo allegedly in the applicant’s possession being used in lieu of the deposit of the security; and the quantum of USD 653,016 claimed by the applicant as security for costs in the Commercial Cause. Regarding the first pillar above, the respondent argued that the unpaid cargo forming the dispute in the Commercial Cause was in the possession of the applicant. Hence, if the proceedings in the main application were to terminate in his favour, the applicant would recover the applicable costs from the unpaid price. The applicant however, did 9 not support such approach. To him, the alleged cargo was not only movable but also subject of the dispute. I am in agreement with this line of contention. The philosophy behind payment of security for costs is to ease the applicant’s subsequent recovery of costs after they are awarded to him against a foreigner. It is logical to me, that when orders for costs are given by the court, they are meant to be effectual. The beneficiary thereof must be able to recover such costs through taxation. If for the reason of geographical hindrance, the beneficiary applicant is unable to get access to his cost from a foreigner litigant; the court order thereof would achieve a cosmetic objective. Further, the subject matter in dispute is excluded in the equation because at the end of the trial, the winner thereof may turn out to be the very party who applied for the security. As such, he would get his due rights (the property in dispute) but will not recover the attendant costs, should they be awarded to him. Applying such analysis in the present matter therefore, if the cargo were to be used in lieu of the security; and the outcome of the prospective suit is that the applicant is not liable anyhow, his chance to recover the costs (if any) would be nix. 10 In line with the examination rendered above, it is the finding of the Court that the respondent falls squarely in the conditions of eligibility to deposit the security for costs. For clarity of arguments, the respondent is evidently a non-resident to Tanzania; and he does not possess sufficient immovable properties in this country. Even if the purported cargo (movable) was to be equated to the envisaged (immovable) property, as resolutely recommended by the respondent; it would fall short of the statutory excellence as it is the property in dispute. On this conclusive note thus, the first issue is answered in the affirmation. I now turn to the second pillar of the defence against deposit of security for costs. According to the applicant, the amount claimed in this application was reasonable because it represented 3% of the liquidated sum of USD 21,767,201 claimed by the respondent in the Commercial Cause. Nonetheless, respondent refuted this position by maintaining that, the claimed quantum of USD 653,016 as security for costs was unreasonably excessive. To him, the Commercial Cause is not for claim of liquidated sum but for declaratory orders regarding revocation of submission to arbitration by the parties. 11 The foregoing rivalry draws the Court to consider the tenability of USD 653,016 as security for costs in the matter at hand. Outrightly, the Court hold the firm view that, the Commercial Cause is for declaratory orders as aforementioned. This is evident under paragraph 3 of the applicant’s affidavit as well as paragraph 2 of the respondent’s counter affidavit. Thus, the respondent is right that the Commercial Cause is not for claim of liquidated sum. Fundamentally, through the Commercial Cause, the respondent is seeking to waive the invocation of the arbitration clause contained in the contracts. As such, basis of the quantum of USD 653,016 purportedly being 3% of 21,767,201 is wanting. I ably recall that the Court has been invited by both parties to consider the claimed amount on the basis of the fees chargeable under the R em uneration Order . With adequate respect, I desist such invitation. I have the reasons. Firstly, the present application is not a taxation matter. The ideals of the R em uneration Order are legitimately invocable during taxation proceedings. Secondly, even if the application at hand was due for taxation, I would have no requisite jurisdiction. Undeniably, taxation falls under the realm of the Taxing Officer. Thirdly, if I was to be allured by the parties’ 12 invitation hereof, I would be dragging the Court in the tenets of functus officio in future should any of the parties win costs in the Commercial Cause and eventually become aggrieved by the decision of the Taxing Officer. In other words, if I presently determine the suitable amount of costs, the Court would set a precedent to be followed by the Taxing Officer in the taxation, should that stage occur in these proceedings and/or in the Commercial Cause. Thus, the applicability of the 9th Schedule to the R em uneration Order , as claimed by the applicant is irrelevant in this matter. Besides, applicability of item (k) of the 11th Schedule to the said Act as argued by the respondent is equally inappropriate. Correspondingly so, the submissions in support or negation of the liquidated or unliquidated claims will be rather insignificant at this stage. Consequently, the Court’s discretion hereof is not fettered by the R em uneration Order . On the foregoing basis and in line with the principles laid in Target I nternational Case (supra); together with the undisputed fact that the Commercial Cause is merely for declaratory orders, the second issue raised above is not answered in the affirmative. 13 In the upshot, I find merit in the present application and proceed to grant it with the necessary limitation. Accordingly, USD 3000 is hereby granted as security for costs in respect of Miscellaneous Commercial Cause No. 30612 of 2024. The subject security should be deposited in Court by the respondent within 14 days of this ruling. Other costs shall follow the outcome of the main cause. It is so ordered. C.K.K. Morris Judge February 28th, 2025