stanbic bank t limited vs road towers international limited others 2016 tzhc 2285 18 february 2016

IN THE HIGH COURT OF TANZANIA (COMMERCIAL DIVISION) AT PAR ES SALAAM COMMERCIAL CASE NO. 109 OF 2014 STANBIC BANK (T) LIMITED........................................... PLAINTIFF VERSUS ROAD TOWERS INTERNATIONAL LIMITED I JOSEPH SIMONE NYIRENDA I ................. DEFENDANTS JOYCE ALTO NYIRENDA I 2, d December & 18fh February, 2016 JUDGMENT MWAMBEGELE, J.: This suit was filed by the plaintiff, a licensed banking institution to claim against the defendants jointly and severally for payment of a sum of Tshs. 216,820,899/53 as loan balance availed to the 1st defendant, interest at the rate of 28% as well as court interest, general damages and costs hereof. The story behind the suit can be stated briefly thus: On or about 02.10.2009,. the plaintiff issued a credit facility of USD 328,904 to the 1st defendant's acquisition of the Motor vehicles (herein the Vehicles) namely IX New Caterpillar 140 Motor Grader, IX New Caterpillar CS-533E Compactor and IX New Nissan Hard body Turbo Diesel 4WD. Subsequent thereto, as stated, a lease agreement in connection thereof was executed between the plaintiff and first defendant whereas the latter's obligations were guaranteed by the 2nd and 3ra defendants. That the 1st defendant defaulted to repay the monthly installments due per the lease agreements whereas demand notices were sent to her to no avail. Having received no positive response from the 1st defendant, the plaintiff filed this suit praying for reliefs against the defendants jointly and severally as follows: 1. Judgment in favour of the plaintiff Tshs. 216,820,899 (sic!); 2. interest on the aforesaid amount accruing at the Plaintiff's default interest rate of 24% per annum from the date of institution of this suit until judgment or sooner-payment; 3. Interest as above on the decretal sum post-judgment; 4. Such further orders or reliefs this Hon. Court deems just, equitable and convenient; and 5. The defendants be ordered to pay the costs of and incidental to this suit. Each defendant entered her respective defence. However, apart from the 2nd and 3rd defendants' denial of responsibility as guarantors for alleged absence of the deed thereof, the defence basically controverts the claim for the reason that failure to repay was caused by frustration of the contract between the first defendant and the Tanzania National Roads Agency (TANROADS) and extension of that contract a fact which deferred payment due to them. Both defenses save for the 3rd further states that it is the plaintiff who had breached the lease agreement by secretly and fraudulently selling the said equipments without notifying the 1st defendant per clause 18 of the said lease agreement. Particulars of fraud as stated in the two defensive pleadings are lack of reason by the plaintiff to ignore clause 18 and selling the said property, failure to notify the 1st defendant about the-sale proceeds within 14 days after the sale, failure to state whether the amount claimed as outstanding is a deficit or excess from the sale as well as failure to notify the 1st defendant whether the sale proceeds was less than the residual amount specified in the iease agreement to warrant the demand of the Tshs. 216,820,899/53 A reply to the said defenses contains mainly reiterations of the pteint with additions to the effect that the 2nd and 3rd defendants executed the deed of guarantee and that the plaintiff complied with the provisions of Financial Leasing Act, 2008. I have noted that though the plaint; makes reference to annexure PI, P2, P3 and P4 which are allegedly true copies of the said documents, there are only two of them, nameiy a Credit Facility- and Lease Agreement which are nevertheless unmarked and uncertified as being true copies as alleged. This is noteworthy so as to alert parties and their counsel to avoid such obvious pitfalls in pleading which diminishes the veracity of their claims. Pleadings having been completed and parties having indicated to have no any other preliminary matters save for their intended filing of documents to be relied upon; the matter was set for mediation which nevertheless failed. Thereafter, four issues were agreed upon by the counsel for the parties and adopted by this court for determination of the suit. The framed issues were: 1. Whether there was breach of the terms of the credit facility by the 1st defendant; 2. If yes, what is the outstanding amount under the said facility, if any; • 3. Whether the second and third defendants are jointly and severally liable to the plaintiff; and 4. To what reliefs are the parties entitled? Both plaintiff and defendants had only one witness to testify. Their testimonies in chief were given through the witness statements as required by rule 49 (1) of the High Court (Commercial Division) Procedure Rules, 2012 - GN No. 250 of 2012, which dictates that in any proceedings commenced by plaint in this court, evidence-in-chief shall be given by a statement on oath or affirmation. I will refer to their testimonies as well as documentary evidence tendered in the due course herein as I tackle issues in their order of their formulation. The first issue is whether there was breach of terms of the credit facility by the 1st defendant. The claim in this respect is to the effect that the 1st defendant had failed to effect instalments for loan repayment at the tune of Tshs. 2.16,820,899/53. On the other hand, the defendants allege that there was neither breach nor any claim of such amount because the plaintiff decided to sell the equipment which were in the 1st defendant's custody under the Finance lease Agreement. At this juncture, since the breach alleged is in respect of failure to pay the loan facility in terms of the Lease Agreement, the court is 1st defendant to the plaintiff in respect of the said Credit Facility and the Finance Lease Agreement. Before I delve into answers to the above questions, suffice it to summarize the said Agreements as gathered from the pleadings, testimonies and exhibits tendered in Court. The plaintiff issued a liquidating facility of USD 328,904 to 4 the 1st defendant in order to acquire the Vehicles. The amount was disbursed in form of lease finance whereby an agreement (Lease Finance Agreement) was executed between the plaintiff and 1st defendant under the guarantorship of the 2na and 3rd defendants. By virtue thereof the amounts issued were composed of the purchase price of each vehicle separately but the amount repayable comprised, on top of the purchase price, the interest thereon. The repayment terms particularly modality of payment were that the facility was repayable in monthly instalments conveniently termed as rentals, each for different total instalments depending on the purchase price of the vehicle preceded by a 20% of the purchase price for each vehicle which was repayable immediately upon signing of the Lease Finance Agreement. Thus, for the Nissan Hard Body vehicle, the monthly rentals were Tshs. 1,059,841/21 payable in 58 instalments, as well as the first rental of Tshs. 9,668,388/— to make up total rentals of Tshs. 72,440,729/09 per month. For the Motor Grader vehicle, the monthly rentals payable were Tshs. 8,238,104/10 payable in 58 installments as well as first rental of Tshs. 75,152,0001- to make up total rentals of Tshs. 563,078,941/90 per month. Finally for the Compactor vehicle, the' monthly rentals were Tshs. 2,817,459/34 payable in 58 instalments as well as the first rental of Tshs. 25,612,000/= to make up total rentals of Tshs. 192,482,401/06 (see exhibit P5 collectively). Further to the above terms was an understanding between them that the lessor (plaintiff) could take possession of the Lease Property upon occurrence of event of default such as failure to effect an instalment on due date. Through their respective defences, the defendants mount a claim that their failure to effect rental payments per the Lease Agreement was actuated by the frustration of the contracts between the 1st defendant and TANROADS due to the rains which obstructed the works and necessitated extension of the time. It was Joseph Simone Nyirenda's (DWl's) testimony that having been so informed by TANROADS to stop works, he requested for extension of the repayment time but the plaintiff declined. On the other hand, the defendants jointly and severally claims that the plaintiff secretly and fraudulently sold the leased assets and failed to adhere to the terms and conditions in so far as the sale was concerned particularly failure to notify them of the sale and the sale proceeds. It is for this reason that they allege that the plaintiff is the one liable for breach of the terms of the Agreement and that there was no any outstanding claim. Flowing from the above and in relation to the first issue, I gather the following facts are undisputed facts: 1. The 20% purchase price for each vehicle was paid as first rental upon signing of the Lease Agreement; 2. The 1st defendant defaulted to make some payment in respect of the rentals as agreed in the Lease Agreements; and 3. That the plaintiff took possession of, and indeed sold two of the said vehicles; namely the Motor Grader and the Compactor. Accordingly, on the basis of undisputed fact No. 2 above, can be affirmed. This notwithstanding, the immediate sub-question to assist further in so far as repayment obligations were concerned is whether the plaintiff complied with 6 the terms of the Lease Agreement in taking possession and selling the lease property. Through the written statement of defence, the defendants allege that the plaintiff breached the terms as it took possession and secretly sold the said equipments at a throw away price without involving the 1st defendant and without declaring the sale value so as to either pay to her the excess or demand from her the balance within 14 days of receipt of the sale proceeds as dictated by the Lease Agreement. On the other hand, the plaintiff agrees that the vehicles were sold. In essence, through the testimony in chief, John Lukiko PW1 states that the plaintiff having failed to obtain neither the market value nor the forced value per the valuation report, the vehicles were sold at Tshs. 200,000,000/= only. His further testimony in this respect was after valuation of the said assets, their forced sale value was Tshs. 215,000,000/= and accordingly the plaintiff made several attempts through the public auctioneer to sale the same without success whereby the plaintiff decided to sale it at less but an economic value at the said amount in order to avoid the then escalating storage charges. As a matter of fact, I gather from the terms and conditions in the Lease Agreement that the plaintiff was entitled to take possession of the leased assets only upon occurrence of an event of default (see: clause 12.2.2 of Exh. P2). As can be gleaned from the said clause, repossession of the said assets on ground of default does not entitle the plaintiff to sell the same. This is what is provided under section 13 (2) (c) and (3) (a) of the Financial Leasing Act, 2008. To the contrary, sale of the assets in terms of clause 18.2 is only upon termination of the lease by expiry and not default, and only upon failure by the Lessee (1st defendant) to exercise his option of buying the said assets 7 (see: clause 18.1). According to the Lease Agreement, upon default, the plaintiff/lessor is entitled to cancel the agreement, demand repayment of the unpaid rentals, re-possess the assets repair and or renovate them in order to bring them into sound working condition or enhance their resale value. No more, no less. Contrary to such terms, it is undisputed that upon obtaining repossession, the plaintiff proceeded to make valuation of the said assets and sale the same knowing that repossession was not as a result of expiry of the lease agreement but as a result of default. That apart, PWl's statement to the effect that the assets were sold at a lower value due to failure to fetch even forced value indicates, apart from evidence to back them up, nothing but failure to adhere to the terms in respect of taking repossession of the assets. Thus, in terms of clause 12.2.3, it is implicit therein that the plaintiff was obliged to enhance its sale value through repair and or renovation whereby the said costs were supposed to be claimed from the lessee. The plaintiff and its witness has not shown in court the reasons as to why the assets were sold at lower value or what caused the difficulties in fetching buyers of the assets by public auction. In my considered opinion the decision to sale the assets was premature and therefore an obvious contravention of the terms of the Lease Agreement. I hold this view further due to the fact that it was neither pleaded nor proved as to whether the sale took place before the expiry of the Lease Agreement or cancellation of the same. Though there is no mention of specific dates of the sale, the pleadings and testimonies points to the fact that sale was during pendency of the agreement since it was actuated by 1st defendant's default to repay the installments. Assuming that the said sale was in accordance with the terms and conditions of the Lease Agreement, the same leaves much to be desired in so far as the terms of the lease agreement in that respect are concerned. I shall demonstrate. The plaintiff claims that they took repossession of the assets and endeavoured to sale the same by public auction but the attempts proved futile. On the other hand, the defendants state that they were not notified of the sale or at least as to the sale proceeds particularly in respect of the balance or excess of the sale proceeds. Despite claiming that the plaintiff complied with the Financial Leasing Act and despite making mention of having decided to sell the assets, nothing was said in relation to how the same was conducted. No advertisement of the auction, no dates of sale, no proof of receipt of sale proceeds, neither were the buyer produced in court. When asked for the details of -the said sale during cross examination, PWl's response was to the effect that he could not recall who the auctioneer was, or even the date and place where the auction was conducted, and not even the buyer of the assets could be remembered. In my considered view, and on the basis of principle of he who alleges must prove embodied in section 110 of the Evidence Act, Cap. 6 of the Revised Edition, 2002, the plaintiff has not been able to establish the existence of the said sale which led to fetching only Tshs. 200,000,000/=. On the basis of the principle that parties are bound by their own pleadings [see: Peter Karanti and 48 others Vs Attorney General and 3 others, Civil Appeal of No. 3 of 1988 (Arusha unreported) the decision of the court of appeal and Mohamed Rr Shomari Vs Principal Secretary, Ministry o f Defence And National Service & 2 Ots, Civil Case No 37 of 2009 (unreported); the decisions of this court.], and given the undisputed fact that the assets were sold, the plaintiff has totally failed to prove that indeed the same were sold at the alleged price and in terms of the Lease Agreement, which omission constitutes a breach of the term of the lease agreement. Assuming that all the required sale details as per the Lease Agreement were made available to the court to show that indeed the sale took place, still a conclusion that the plaintiff breached the terms of the Lease Agreement is inevitable in the circumstances. I state so because, in terms of clause 18.3 of the Lease Agreement, the plaintiff was obliged to declare the sale as well as the proceeds thereof to the 1st defendant particularly with a view of either demanding the balance of the residual amount of unpaid rentals or paying the excess thereof to the 1SL defendant/lessee in the event of either less amount or excess amount of the sale proceeds respectively. The plaintiff has not tendered any evidence to prove compliance with the said term and neither has he, as rightly stated by DW1, shown whether indeed the amount claimed was after deduction of the sale proceeds obtained from the sale of the said vehicles. All these untied knots go to showing without much ado that indeed the plaintiff breached the terms of the Lease Agreement by selling the Lease Property prematurely and without following proper procedure. Up to this juncture, the question is whether, the conclusions hereinabove to the effect that each party has committed breach of the terms of the agreement puts them on equal footing in so far as liability is concerned. In my considered opinion, inasmuch as the plaintiff was entitled to taking possession of the lease assets and any other recourse available in claiming his unpaid rentals per the terms of the Lease Agreement and the law (see 10 section, he was not justified to prematurely sell the Lease Assets more so clandestinely and unprocedurally to the extent shown. Accordingly, claiming further payments in relation to the said Lease Agreement without substantively and specifically showing how much was gained as sale proceeds to the satisfaction of this court inclines to the conclusion that it is the plaintiff who has to shoulder the liability of breach of the terms of the agreement. I shall explain shortly. The terms of the Lease Agreement, breach of which is in question in this suit, are in relation to repayment of the facility. The same are provided in the credit facility as well as the Lease Agreement. Accordingly, in my considered opinion, breach of the same would be inferred from the 1st defendant's acts or omissions that would result into the plaintiff's inability to recover the monies spent in financing acquisition of the lease assets as loan facility. Therefore, in the event that there was no punctual instalment payments, and where the plaintiff sought to hold the defendants liable in breach should have, in terms of the lease agreement, took possession of the assets and proceed to either take any available remedy and or institute this suit. However, proceeding to sale the assets without first taking recourse to recouping the unpaid rentals from the defendants signifies the plaintiff's readiness to obtain or recover the said monies issued as loan from such sale thereby exonerating the defendants from any further liability subject to the amount released there from. This is why,'in my well considered view, clauses 18.3.1 and 18.3.2 were to the effect that the plaintiff would, upon sale, pay to the 1st defendant the excess of the residual, value specified in the Lease Agreement within 14 days of receipt of the proceeds, or if less, then the first defendant to pay the amount of the shortfall to the plaintiff within same 14 days of demand by the plaintiff. This clause and conclusion in this respect is further footed by section 8 of the Financial Leasing Act, 2008 which provides that "The payment for use of d assets in a financial lease agreements shall be calculated primarily on the basis of harmonization the whole or substantial part of value of the leased asset and a * profit for the lessor thereof, and the manner of rental payment may be determined or agreed between the parties". Essentially the law as couched above is to the effect that the Lessor in a finance lease agreement cannot expect to obtainmore than the value of the asset (purchase price) plus his expected profit (interest chargeable on the credit facility). Henceforth, proceeding to sale the said assets was in contravention of the said clause, that is without indicating with concrete proof of the sale and the actual proceeds thereof, it cannot be concluded with certainty, not even on a balance of probabilities, that the 1st defendant had breached the terms of the credit facility by failure to repay the loan amount issued through the finance lease agreement. This is because, the nature of their transaction is to the effect that the loan amount issued by the plaintiff to finance acquisition of the said property was recoverable through instalments payable as monthly rentals, failure thereafter, the same was recoverable through other available remedy including sale of the property, in which event, any excessive amount was repayable back to the first defendant and any shortfall was claimable from the latter. Thusly, the remedy of sale of the lease assets disentitled the plaintiff from claiming further repayment for the rentals or loan and or loan amount, save where the saie proceeds were inadequate to cover the full amount issued under the finance lease agreement as credit facility. To put it more simply in business terms, lending of any type, be it lease financing or direct credit facility is always not aimed at double enrichment of either the lender or borrower, and therefore, the law regulating business relationship cannot allow either party to take advantage of its bargaining power or business comparative advantage so as to squeeze out another from business. This is because, both entities - lender and borrower are interdependent and therefore existence and operation of either is at the advantage of another. Therefore, such transactional agreements cannot be interpreted in favour of either party in order to obtain more than what is contemplated therefrom. In the instant case, the parties contemplated loan repayment at a specified interest which formed the value for each equipment making a total of repayable outstanding amount allegedly at the tune of Tshs. 216,820,899/53. That amount, as intimated earlier, was contemplated, in terms of their lease agreement to be repayable either through punctual payment of the instalments or sale of the equipments and demand the balance in the event that the proceed was less the specified amount. In the light of the foregoing discourse, I will therefore not hesitate to answer the first issue partly but conclusively in the negative to the extent shown hereinabove. -The second issue as to what is the outstanding amount under the said facility, if any, will not detain me. First, on the basis of the analysis and conclusion in 13 respect of the first issue, apparently the plaintiff has not been able to establish in terms of evidence, an amount outstanding as pleaded and claimed. I have already found and held that the said repossession of the lease assets which undisputablly were the suit property was not a justification of selling the same. That apart, in the event that the same were sold, as was the case in the present suit, the sale was basically in order to realize the total outstanding amount under the credit facility issued through the said loan and accordingly it was the terms and conditions of the said Lease Agreement that the plaintiff should account for the amount realized from the sale. The plaintiff has so far failed to do so both before the trial commenced; that is to the 1st defendant, and during trial of the suit. It therefore goes without saying that in the absence of concrete evidence as to the outstanding amount nothing can be affirmatively stated here by this court that it is indeed an outstanding amount. This court is aware to a bundle of bank statements (Exh. P5) tendered in court by PW1 in order to prove that there was an outstanding amount of Tshs. 496,958,166/53. Unfortunately, I have found out this evidence to be insufficiently elaborated so as to demonstrate how the amount was arrived at through the said bank statements (Exh. P5). At this juncture, it should suffice to observe that the duty to clarify a piece of evidence or substantiate the same lies on the party seeking to tender or rely upon it to establish existence of a fact he alleges. That is the scope of the onus of proof in terms of section 110 of the evidence Act. As was held in a Nigerian case of Adetoun Oladeji (Nig) Ltd Vs Nigeria Breweries Pic (2007) LPELR-SC.91/2002 (sourced through http://niqeria- law.orq/Adetoun%20Qladeii%20%28Niq%29%20Ltd%20v%20Niqerian%20B 14 reweries%20Plc.htm); also cited as Adetoun Oladeji (Nig.) Ltd. Vs N. B. P/c (2007) 5 NWLR (Pt.1027) 415] a case with which I find to be of high persuasive value: "Where there is a contract regulating any arrangement between the parties, the main duty of the court is to interpret that contract to give effect to the wishes of the parties as expressed in the 'contract' document." [Per TOBI, J.S.C. at page 14] Accordingly, it is not the duty of the court to explain and clarify the contents of a document tendered in proof of a case so as to establish the veracity of the allegation as that would amount into turning itself into a witness or a party to litigation and thereby vitiating an element of partiality in the process of administering justice. Thus, where, as here, the plaintiff tendered a bank statement without adequately explaining its contents, or indicating the specific entries making up the total amount which is pleaded, the same remains irrelevant to this court. As intimated hereinabove, PW1 in this court referred to Exh. P5 which are bank statements containing various entries with varied amounts in respect of the account of the first defendant. He did not bother, in my view to his detriment, to substantiate the same by indicating when did the said amount accrue or it was the balance up to which dates. I have endeavoured to single out the said total amount of Tshs.4 96,958,899/53 purportedly outstanding as at 2011, but the exercise proved futile as there is no such amount as a 15 cumulative one in respect of the leased assets, and neither was it explained as to how the said amount was arrived at as an outstanding. That apart, I have discovered further contradictions between the pleadings, testimonies as well as the said exhibits tendered by the plaintiff in respect of the total outstanding amount. For example, under paragraph 3 of the plaint, it is stated: "The plaintiff's claim against the defendants jointly and severally is for payment of the sum of TZS 216,820,899.53 being the balance of the loan availed to the 1st plaintiff, interest at the rate of 28% from the date of filing this suit, interest at court., general damages and costs". Yet, at page 12 of the witness statement by PW1 it stated: ''After the assets were repossessed the plaintiff made a valuation of the assets and their forced value was estimated at Tshs.215,000,000.00 However, the Plaintiff through public auctioneer [without mentioning specifically their name or trade name] attempted public auctions to dispose them which proved futile while the costs for storage were escalating. The plaintiff decided to dispose them at a less amount but of economic value rather than retaining them indefinitely without potential buyers for the valuated amount. 16 The plaintiff disposed the assets at a total sum of Tshs. 200,000,000.00. (I refer to ... the valuation report)". And at paragraph 14 of the same statement it is stated: "The amount realised from the sale did not satisfy the amount of rhea 1st defendant's indebtedness. The amount outstanding was Tshs. 496,958,166.50 which the plaintiff has not applied interest since 2011 until the date for institution of this s u it..." The said valuation reports (Exh.-P4) in respect of the said assets indicates that the forced sale value for the Vibrator Soil Compactor (which was referred to as IX New Catepillar Compactor in the Lease Agreement) was Tshs. 150,000,000/= whereas the forced value for the IX New Motor Grader was stated to be Tshs. 165,000,000/=. The contradictions here are, first with respect to actual amount claimed as outstanding. Whereas the plaintiff indicates an amount of Tshs. 216,820,899/53, PW1 states that it was Tshs. 496,958,166/50. In light of his testimony with regard to the amount of the sale proceeds; it would seem that the pleaded amount as outstanding was arrived at after deducting said sale proceeds. This is because; he stated that the amount realized from the sale did not satisfy the amount of the defendant's indebtedness which he stated to be Tshs. 496,958,166/50. However, mathematical calculations of subtracting the sale proceeds (Tshs. 200,000,000/=) from the allegedly total outstanding 17 amount (Tshs. 496,958,166/50) would bring the total amount to Tshs. 296,958,166/50. The obvious variance between these amounts and the amount claimed was not adequately explained in evidence neither did the plaintiff bother to straighten up this aspect of the composition of its claim through the pleadings. Secondly, there is also a great difference between the amounts said to have been the total forced sale value for the equipments. Thus, whereas PW1 states that the same was Tshs. 215,000,000/=, the totals of the amounts indicated in the valuation reports (Exh. P4 collectively) for each equipment was Tshs. 315,000,000/=. This too was neither clarified in evidence or at least PW1 did not testify as to have been referring to a different valuation report which indicated such amount. All of these contradictions which remained unsubstantiated to the closure of the plaintiff's case leaves nothing but one conclusion that the plaintiff bank was not sure as to how much was outstanding or if there was any at all. It is for this reason, I take wholesale the denial of any liability by the defendants as expressed through their defence, as well as testimony by the DW1. Thus the plaintiff has failed to establish the outstanding amount and therefore the second issue is answered in the negative. The above being the stance of this court, I find nothing cogent from the pleadings, or the plaintiff's case as a whole from where the 2nd and 3rcl defendants can be held jointly and severally, liable. It is for this reason that the third issue is also answered in the negative. 18 As for the last issue, certainly none of the prayers put up by the plaintiff can still stand following the findings in the above issues. Apparently, this case is fit for dismissal in its entirety for being seriously wanting in merit. As the maxim of equity goes; he who goes to equity, must go there with clean hands. Since the plaintiff's hands have been proved to be soiled, it should be the one to bear the consequences of instituting this court. It is for this reason that I enter judgment for the defendants jointly and severally and condemn the plaintiff to pay costs. Order accordingly. DATED at DAR ES SALAAM this 18th day of February, 2016. J. C. M MWAMBEGELE JUDGE 19