Surprise Technologies vs National Microfinance Bank Ltd

THE UNITED REPUBLIC OF TANZANIA JUDICIARY IN THE HIGH COURT OFTANZANIA IRINGA SUB-REGISTRY ATIRINGA LAND APPEAL NO. 43 OF 2023 SURPRISE TECHNOLOGIES CO. LIMITED............ . APPELLANT VERSUS NATIONAL MICROFINANCE BANK LTD........... ......... RESPONDENT (Appeal from the decision of the District Land and Housing Tribunal for Njombe) (Hon. G. F. Ng'humba (Chairperson')) Dated the 13th day of July 2023 in Land Application No. 21 of 2019, JUDGMENT Date of last order: 12.11.2024 Date of Judgment: 13.12.2024 S.M, KALUNDE, J,: in this appeal, the appellant, Surprise Technologies Company Limited, is impugning the decision of the District Land and Housing Tribunal for Njombe sitting at Njombe ("the trial tribunal") dated the 12th day of June 2023 in Land Application No. 81 of 2020. He has preferred a single ground of appeal. The brief factual background of the matter as may be gleaned from the record may be stated thus. Before the trial tribunal the appellant lodged Land Application No. 21 of 2019, against the appellant. In the said application the appellant sought for, inter alia, a declaratory order that he was the lawful owner of the suit property; a declaration that the intended sell of the suit property by the respondent is unlawful; a permanent injunction against the respondent; and costs of the application. Together with the main application, the appellant filed a chamber summons under certificate of urgency seeking for the following orders: an ex-parte interim injunctive order restraining the respondent, her agents and any other person acting on her behalf from selling a house situated on Plot No. 8, Block G, Makambako ("the suit property"); and inter parte injunction against the respondent or her agents or any person acting on her behalf from selling the suit property pending determination of the main application which was pending at the trial tribunal; and costs of the application. The court herd the exp'arte application and on the 29th day of March 2019, an order restraining the respondent from selling the suit property. Thereafter, the respondent was duly served with the main application: and miscellaneous application. Upon being served, the respondent filed a written statement of defence and counter affidavit resisting the main application. However, on the 18th day of December 2019, the counsel for the respondent conceded to the application for temporary injunction. Consequently, the application was granted and the matter proceeded to trial. 2 The records bears that almost one year and six months later, on the 01st day of June 2021, issues were framed and hearing of the applicant's case commenced. On that day, the testimony of Albert Philimini Mlowe (SMI) was recorded. The matter was then adjourned on several occasions. Thereafter, on the 01st day of September 2022, after the trial tribunal had commenced hearing of the application, the respondent filed a notice of preliminary objections. According to the records, the notice of preliminary objections contained the following points of law: one, that the suit was filed in contravention of section 147(1 )(a)(b) of the Companies Act [Cap. 212 R.E. 2002); and two, that, in terms of section 33 of the Land Disputes Courts Act [Cap. 216 R.E. 2019], the trial tribunal did not have jurisdiction to entertain the matter arising of breach of a contract. By consent of the parties, the trial tribunal ordered the preliminary objections be argued in writing. Schedules for filing submissions were complied with as ordered by the court. On the 13th day of July 2023, the trial tribunal delivered its ruling upholding the first preliminary objection and striking out the application. Dissatisfied, the appellant filed the present appeal disputing the decision of the trial tribunal on a single ground that, the trial tribunal made an error of law and fact in upholding the first preliminary objection and striking out the application. 3 To argue the appeal, the appellant was represented by Mr. Tumaini J. Mman, learned advocate while the respondent enjoyed the services of learned counsel Mr. Steward Ngwale. In support of the appeal, Mr. Tumaini argued that a board resolution was only necessary where there was an internal dispute within the company. The learned counsel added that, there was no need of a board resolution when a company is dealing with outsiders. To support his position, the learned counsel cited the decision of the Court of Appeal in the case of Simba Papers Converters Limited vs Packaging & Stationery Manufacturers Limited & Another (Civil Appeal Case 280 of 2017) [2023] TZCA 17273 (23 May 2023) (TanzLII) at page 17 -18. Relying on the above argument, Mr. Tumaini insisted that the appeal be allowed with costs by quashing the decision of the trial tribunal and remitting the Case file for the matter to proceed on merits. Mr. Ngwale replied that appending a board resolution before instituting a case was a requirement of law under section 147(l)(a)(b) of the Companies Act. The learned counsel: placed reliance in the decision of this court in the case of Kati General Enterprises Limited vs Equity Bank Tanzania Limited and Another (Civil Case 22 of 2021) [2021] TZHC 5756 (13 August 2021) (TanzLII) for an argument that a 4 board resolution authorising the appellant to institute civil proceedings was relevant before instituting the case. The learned counsel added that the trial tribunal was correct in holding that a board resolution was a mandatory requirement before instituting a case because that was the position of the law before the decision of the Court of Appeal dated the 23rd day of May 2023 in the case of Simba Papers Converters Limited vs Packaging & Stationery Manufacturers Limited & Another (supra). In view of the above, the learned counsel concluded that the trial tribunal was correct in upholding the preliminary objection and striking out the application. He prayed that the appeal be dismissed with costs. In his brief rejoinder Mr. Tumaini insisted that the dispute between the appellant and respondent was not an internal dispute within the company therefore there was no need of a resolution of the board of directors. He contended that while the Court of Appeal, in the case of Simba Papers vs Packaging & Stationery Ltd. & Another (supra), noted that "whoever wishes to institute a similar suit on behalf of the company is at the liberty to do so, subject to obtaining the authority of the company", the Court was hesitant to extend the rule to every scenario when it stated that "a resolution would be necessary where the suit involves a dispute between a company and one of its shareholders or directors."That said, the learned counsel insisted that .5 the appeal be allowed, and the matter be remitted to the trial tribunal for it to proceed with hearing of the case. For my part, having considered the records and submissions of the parties, the question for my determination is whether the appeal is merited. I also gather that responding to the issue whether or not the present appeal is merited hinges on the question whether the application before the trial tribunal was improperly instituted for lack of the authority of the company. However, before indulging into determination of the merits of the appeal it is helpful to understand the dispute between the parties at the trial tribunal. It is apparent from the records that the appellant sued the respondents for allegedly attempting to auction the suit property in exercise of their right under a mortgage. The substance of the application is reproduced hereunder: "1. Name and address of the Applicant: SURPRISE TECHNOLOGIES COMPANY LIMITED C/O ZINGER ATTORNEYS, (ADVOCATES), P.O.BOX 989, NJOMBE. 2. Name and address of the Respondents: NATIONAL MICROFINANCE BANK LIMITED MAKAMBAKO BRANCH- NJOMBE. 3. Location and address of suit premises: Properties on Plot No:8 Block G, located at Makambako. 4. Estimated value of suit premises: (In aggregate estimated at) TZS. 120,000,000/=. 6 5. Where arrears of rent are an issue, state Monthly rent N/A 6. a) Cause of action/ brief statement of facts constituting the claim: The Applicant is a lawful owner of the suit premises. The Respondent has issued a notice of default and intention to sell the suit premises on pretext of breach of loan agreement between the Respondent and one Patrick Kyando whom the Applicant guaranteed by mortgaging the suit premises. It has transpired that the Respondent had promised to top up the said loan to Patrick Kyando a promise which was not fulfilled, b) List o f relevant documents to be annexed, if any: • Copy of notice of default for each of the suit premises, 7. Retiefs claimed: (i) . declaration that Applicant is the lawful owner of the suit land. (ii) . [^14 declaration that the Respondent's intent to sell the suit premises is unlawful. (Hi). -$?>An order to permanently restrain the Respondents to deal with the suit premises in any way whatsoever* (iv). TAAn order for payment of costs of this application," From the above excerpt what may be gleaned is that the appellant provided security by mortgaging his property in favour of a loan advanced to one Patrick Kyando by the respondent. At one point the said Patrick Kyando defaulted. Upon default, the respondent issued a notice of default to the said Patrick Kyando and proceeded to exercise 7 their right to redeem the loan from the security. In response to the intended sale, the appellant lodged a suit at the trial tribunal seeking for a declaration that he was a lawful owner of the suit property and a declaration that the intended sale was void ab initio. She also sought for permanent injunction restraining the respondent or person acting on the respondents' behalf from interfering with her enjoyment of the suit property. The question I ask myself is whether a board resolution was necessary to commence suit of the above nature? It is true that in tight of the Court of Appeal decision in the case of Simba Papers vs Packaging & Stationery Ltd. & Another (supra) a resolution would be necessary where the suit involves a dispute between a company and one of its shareholders or directors. In the said case, the Court cited with approval the case of case of St. Benard's Hospital Company Limited vs Dr. Linus Maemba Miula Chuwa, Commercial Case No. 57 of 2004 (unreported) which relied in the case of Bugerere Coffee Growers Ltd vs. Sebaduka [1970] 1 EA 147 (HCU) to hold that "Having carefully considered the matter, I have reached a settled conclusion that, indeed the pleadings (plaint) should expressly reflect that there is a resolution authorizing the filing of an action. A company which does not do so in its pleadings, risks itself to the dangers of being faced by any insurmountable preliminary objection as is the one at hand. I should hurriedly add however that in my view the resolution should be o f a 8 general nature, that is, it is not necessary that a particular firm or person be specifically to do the task. It suffices if the resolution empowers the company management to take the necessary action. I am making this insistence because from the wording in Bugerere case one may be led to believe that the resolution should point out a particular person or firm." Having said that, the Court took cognisant of the danger for extending the requirement of the board resolution when dealing with the company's capacity to sue or be sued on its own name. In its own words, the Court stated: "IVe subscribe to the said position to the extent that it relates to the institution of a suit by one or more directors in the name of the company whereas in the present matter, it revolves oh the internal conflict within the company. In any other case we will be hesitant to extend the rule any further mindful of the legal position relating to the power of the company to be sued in its own name." [Emphasis is mine] In arriving at the above position, the Court was inspired by the wisdom of the author Robert Pennington in his book Pennington’s Company Law, 15th edition, London, Butterworths. In the said book, the author affirmed that the courts have been liberal in implying powers. He added that courts have implied powers to do acts obviously appropriate to the carrying out of any business such as appointing 9 agents and engaging employees; and instituting, defending, and compromising legal proceedings. Guided by the above authority it can be safely concluded that while a board resolution is necessary where the suit involves a dispute between a company and one of its shareholders or directors, the situation is different when a dispute does not involve an internal squabble. In the latter case, there are implied powers of a company to institute, defend and compromise legal proceedings. Where a dispute does not involve an internal squabble a board resolution is not necessary. The question then is what is the appropriate or applicable procedure for instituting, defending, or compromising: legal proceedings for corporate entities? Under Order III Rule 1 of the Civil Procedure [Cap. 33 R.E. 2019] ("the CPC") requires that all court motions, appearances, and other court-related actions to be done by a party in person save "where otherwise expressly provided by any law for the time being in force," Order III Rules 1 and 2 read: "1. Any appearance, application or act in or to any court, required or authorised by law to be made or done by a party in such court may, except where otherwise expressly provided by any law for the time being in force, be made dr done by the party in person or by bis recognised agent or by an advocate duly appointed to act on his behalf or, where the Attorney-General is a party, 10 by a public officer duly authorised by him in that behalf: Provided that, any such appearance shall, if the court so directs, be made by the party in person. 2. The recognised agents of parties by whom such appearances, applications and acts may be made or done are- (a) persons holding powers-of-attorney, authorising them to make appearances or applications and to do such acts on behalf of such parties; (b) persons carrying on trade or business for and in the names of parties not resident within the local limits of the jurisdiction of the court within which limits the appearance, application or act is made or done, in matters connected with such trade or business only, where no other agent is expressly authorised to make and do such appearances, applications and acts." [Emphasis is mine] However, for purposes of corporate entities such as the appellant in the present case, such express permission is to be found in Order XXVII Rule 1 of the CPC. The respective provision expressly permits any pleading in respect of a corporate entity to be signed or verified on behalf of the said corporation by its secretary, director or other principal officer that can depose to the facts of the case. The provision reads; "In suits by or against a corporation, any pleading may be signed and verified on behalf of the 11 corporation by the secretary or by any director or other principal officer of the corporation who is able to depose to the facts of the case." In the case at hand, there is no dispute that the appellant is a body corporate. In terms of Order XXVII Rule 1 of the CPC the pleadings and verifications ought to have been done, on behalf of the company, by the secretary or by any director or other principal officer of the corporation, However, it is glaring from the records that the application in the present case was not signed by the secretary or by any director or other principal officer of the appellant. Conversely, the records show that the application was signed and verified by Ms. Irene Thomas in her capacity as the advocate representing the appellant. At the trial tribunal, the respondent questioned whether the suit was competent for lack of a board resolution. In essence, the respondent challenged Ms. Irene Thomas competence to commence civil proceedings before the trial tribunal without a written authorisation from the Board of the appellant's company. The trial tribunal accepted the respondents view and struck out the application. For my part I cannot fault but agree with the decision of the trial tribunal. I pointed out earlier that there are implied powers of a company to institute, defend or compromise legal proceedings. In terms of Order .12 XXVII Rule 1 of the CPC such powers may be exercised without written authorisation when it is done through the company secretary or by any director or other principal officer of the company. Any other person outside the above stated company representatives requires written authorisation of the company in the form of a board resolution to institute, defend or compromise legal proceedings. In the case under consideration, advocate Ms. Irene Thomas was not the appellants' secretary or director or principal officer. I have also carefully examined the pleadings and records before the trial tribunal, and I could not find any reference therein to Ms. Irene Thomas as the appellants recognised agent or principal officer. She was therefore not qualified to sign or verify documents to initiate proceedings on behalf of the appellant company. Faced with a similar situation, the Court of Appeal (Mwarija, J.A), in the case of Ursino Palms Estate Ltd vs Kyela Valley Foods Ltd & Others (Misc. Civil Application No. 28 of 2014) [2018] TZCA 48 (20 June 2018) TanzLII, at page 4 relied in the case of Bugerere Coffee Growers Ltd v Sebaduka and Another (supra) which was cited with approval by this Court in the case of Pita Kempap Ltd v. Mohamed I, A. Abdulhussein, Civil Application No. 128 of 2004 c/f No. 69 of 2005 (unreported) to hold that: 13 "In order to qualify to represent a company therefore,, an advocate has to be appointed by a resolution. It was for this reason that in that case,, after having' found that the firm of advocates, Messrs Parkhiji & Co. had acted without having been appointed by a resolution of the company, the suit was dismissed. " Equally, in the case of Kabale Housing Estates Tenants Association vs Kabale Municipal Local Council [2013] UGSC 19 (18 December 2013) ULII, the Ugandan Supreme Court, (Kitumba, JSC), the Court held that: "Where a wrong has been done to the company and an action is brought to restrain its continuance, or to recover the company's property or damages or compensation due to it, the company is the true plaintiff. See: Gray vs Lewis [1873]8 Ch. App, 1035. The appropriate agency to start an action on behalf of the company is the board of directors, to whom the power is delegated as to manage the affairs of the company. See: United Assurance Co. Ltd v A.G [1995] KALR 308." In arriving at its decision, the Supreme Court was inspired by an English decision in the case of Danish Mercantile Co. LTD vs Beaumont & Anor [1951] Ch C.A 680 where Jenkins L.J at page 687 stated the position as follows: "X think that the true position is simply that a solicitor who starts proceedings in the name of a company without verifying whether he has proper authority so to do, or under an erroneous assumption of authority does so at his own peril, and that, so long as the matter rests 14 there, the action is not properly constituted. In that sense, it is a nullity and can be stayed at any time, provided that the aggrieved party does not unduly delay his application; but it is open at any time to the purported plaintiff to ratify the act of the solicitor who started the action to adopt the proceedings, to approve all that has been done, then in accordance with the ordinary law of principal and agent and in accordance with the ordinary doctrine of ratification." [Emphasis is mine] I accept the above authorities to be expressing a correct exposition of the law. Turning to the issue at hand, the suit at the trial tribunal was instituted by advocate Ms. Irene Thomas who was not authorised by a resolution of the board of directors. She was also not delegated with the powers to manage the affairs of the company. Obviously, the situation would have been different if, for example, the pleadings before the trial tribunal were signed or verified by a director, executive officer or manager of the company or any other principal officer of the company. The actions of these officers would bind the company without a need for written authorisation as they have powers to either sign pleadings, file an application or sign a sworn statement in support thereof. 15 For the above reasons, I uphold the decision of the trial tribunal in sustaining the first preliminary objection. The present appeal is dismissed with costs for lack of merits. It is ordered accordingly. DATED at IRINGA this 13th day of DECEMBER, 2024. S.M. KALUNDE JUDGE 16