TAN FRECO CONTRACTORS LTD VS HOME INVESTMENT CORP

IN THE HIGH COURT OF THE UNITED REPUBLIC OF TANZANIA (COMMERCIAL DIVISION) AT PAR ES SALAAM COMMERCIAL CASE NO. 829 OF 2024 TAN-FRECO CONTRACTORS LTD.....................................PLAINTIFF VERSUS HOME AFRICA INVESTMENT CORP. LIMITED.................DEFENDANT RULING Date of hearing: 06/06/2024 Date of ruling: 07/06/2024 AGATHO, J.: Briefly the suit is based on the breach of partnership agreement. The plaintiff and the defendant executed a partnership agreement in which they prepared tender documents, lodging tender documents and execution of the project of construction of Ngara District Council Headquarters case is that. The plaintiff alleges that on 6th September 2023 the defendant received the money for execution of the project. But he failed to transfer it to the plaintiff after retaining 3% of the said sums as agreed. The defendant having served upon with the plaint filed the WSD refuting the claims. The WSD was predicated by the notice of Preliminary Objections (POs). The POs were two as shown below: 1. That the Court lacks jurisdiction to entertain the matter as the parties explicitly agreed to subject themselves to the exclusive jurisdiction of the Tanzania Institute if Arbitration (TIArb). 2. That the suit is unmaintainable and incompetent for having a defective verification clause. i The parties had legal representation of advocates. Whereas Adrian Mhina, Advocate who h/b of Dickson Matata, Advocate for plaintiff with instruction to proceed, Rico Adolf, Advocate appeared for the defendant. The hearing of the POs was conducted orally on 06/06/2024. In this ruling I will refer to the submissions made by the counsel for the parties. However, I will not repeat in verbatim their submissions. Both statutory law and case law will also be cited. In submission in chief Mr Adolf for defendant submitted that they have raised two POs. It is undisputed that the dispute between the parties arises out of a contract which is marked as annexture - A to plaint. It was Mr Adolf's submission that clause 18 of that contract provides that the Tanzania Institute of Arbitration (TIArb) shall have exclusive jurisdiction in so far as any matter arising from this agreement is required to be referred to arbitration or Commercial Court. It was his view that the intention of the parties under this clause was to submit themselves to arbitration tribunal in the event of any dispute. Mr Adolf blamed that the plaintiff for failure to observe the contract and the principle of sanctity of contract as stated in the case of Simon Kichele Chacha v Aveline Kilawe, (Civil Appeal No. 160 of 2018)[2021] TZCA (16 February 2021) which stated that parties are bound by their contract, therefore, the plaintiff ought to have referred the matter to the Tanzania Institute of Arbitration. However, he conceded that the dispute resolution clause might have issues. But in such cases where the dispute resolution clause has issues, the remedy is to file an application for revocation of such clause before court. That was held in the case of Deogratias Ndemasi Tarimo v AVIC Coastal Development Limited, Misc. Land Application No. 646 of 2020 HCT Land Division. In that case the 2 applicant was seeking revocation of the arbitration clause for same being in operative. Looking at rule 63 of the Arbitration Rules of procedure G.N. 126 of 2022, the room for revocation is also provided. The plaintiff ought to have referred the matter to arbitration and if he had issues with the clause he ought to have applied for revocation of the same. Coming to the second PO which is verification, it was Mr Adolf submission that the verification clause does not indicate the date and place where the verification was done. That contravenes the mandatory requirement of Order VI rule 15(3) the CPC. He went on submitting that the consequence of having defective verification is clearly stated in TOP TASTE Spare Parts Companies Limited v Sunshine Transportation Limited, Commercial Case No. 125 of 2023 HCCD at page 3. In that case the plaint was struck out for containing a defective verification clause. On the basis of that case, he prayed that the suit be struck out with costs. Mr Mhina for the plaintiff respondent against the submission made by the counsel for the defendant. He began responding to the counsel for defendant's submission on the first PO that there is arbitration clause that the matter ought to be referred to arbitration because there is arbitration clause in the contract of the parties. He cited Clause 9.2 of the contract stating that if the dispute arises between the parties and they fail to settle, they shall refer it to the arbitration or commercial court. He also submitted that even in clause 18 of the contract it states that the dispute shall be referred to arbitration/commercial court. Mr Mhina submitted that in the circumstances of the case at hand the court has jurisdiction to try this suit. He argued that there is no institution which is known as arbitration/commercial court. He was of 3 the opinion that if the forum was not clear, the remedy is to follow the law of the country as held in Hass Petroleum (T) Limited v UKOD Internation Company Limited Commercial Case No. 68 of 2022 HCCD. In that case the forum for dispute resolution was not clear. And the court ruled that if the forum for dispute settlement is not provided clearly in the contract, the proper remedy is to follow the law of the country. The Court added that the institution of the case before the HCCD was a right decision. Consequently, the PO raised was overruled. Mr Mhina submitted in alternative that if the Court will find that there is arbitration clause between the parties herein, the proper remedy is not to strike out the suit but rather to stay the proceedings as per Section 25 of the Arbitration Act [Cap 15 R.E. 2024]. The plaintiff's counsel suggested that the defendant was supposed to apply for stay of the proceedings if there is arbitration clause in the contract that led to the institution of the suit. That was held in the Honda Motors Japan and Another v. Quality Motors Limited, Misc Commercial Cause No. 25 of 2019 HCCD where the defendant had applied for stay of proceedings because the contract leading to the suit had arbitration clause. Mr Mhina also cite another case of Scova Engineering v Mtibwa Sugar Estates Limited, Civil Appeal No, 133 of 2017 CAT at DSM it was held that if there is arbitration clause in the contract the proper remedy is to order stay of proceedings and not to struck out or dismiss the case. Regarding the revocation of arbitration clause as referred by the defendant's counsel, because the rule cited applied to arbitration proceedings and Arbitration Act and not proceeding at the High Court Commercia Division. In such circumstances Mr Mhina submitted that this court has jurisdiction to try the matter. 4 As for the second PO the plaintiff's counsel was of the view that it lacks merit. He submitted that the case of Top Paste Company Limited (supra) is irrelevant to the case at hand because the same is about Order VI Rule 15(2) of the CPC while the defendant PO is about Order VI Rule 15(3) of the CPC. He invited the court to look at the plaint, the date and place is stated after the prayers or relief sought. And the same is followed by the verification clause. Mr Mhina submitted in alternative that if the court finds there is defect on the verification clause the remedy is to order amendment of the same as per Ramadhani Mikidadi v Tanga Cement Limited, Civil Application No. 275/01 of 2019 CAT at DSM. He concluded his reply submission by submitting that the plaintiff verification clause has no defect at all. And if it has defects, he prayed that the principle of overriding objective be applied. Mr Adolf for the defendant made a rejoinder on the stay of proceedings. He rejoined against the cases cited (Honda and Scova), it was his view that in all these cases there was no defect in the plaint. He posed a question whether the Court can stay proceedings where there is an incompetent and defective plaint. He pointed out that the plaintiff counsel has attempted to convince the Court that the plaint has date and place in its prayers/reliefs section. However, Mr Adolf rightly observed that the requirement of the law under Order VI Rule 15(3) of the CPC is that the verification clause should indicate that it is verified at certain place say Dar es salaam and dated on... He clarified that verification is usually placed below the signature of the person verifying the plaint. Mr Adolf decried that since the same is not provided in the impugned plaint, it was his submission that the said plaint is defective 5 and the overriding objective cannot be used blindly to rescue the situation. He thereafter turned to the case of Ramadhani Mikidadi v Tanga Cement Company Limited, (supra) cited by the plaintiff's counsel. In that case the matter in issue was not verification, rather the issue was competence of the application. Mr Adolf also rejoined on the issue of forum clause 9.2 of the contract cannot be read in isolation of clause 18.0 of the same contract. They have to be read together. He submitted that clause 18 ought to be read as whole and not partially. The clause clearly mention the Tanzania Institute of Arbitration shall have exclusive jurisdiction. He further rejected the application of the case of Hass Petroleum in the case at hand because if one looks at page 12 of that case the Arbitration forum referred was the Tanzania branch of Chartered Institute of Arbitrators of the United Kingdom which was non-existent. That is why the Judge regarded the clause to be inoperative. In contrast to that position Mr Adolf argued that the Tanzania Institute of Arbitration does exist, and it is operative. He referred to page page 13 of the same case where the Judge as obiter dicta held that the court may even refuse to stay proceedings and strike out the suit with leave to refile especially when it is clear to the court that the suit will unnecessarily create a backlog of cases. He eventually prayed that the plaint being defective is worthy not staying but rather striking it out with costs. Having heard the submissions by the counsel for the parties, the court is requiring determining whether the POs raised have any merits. In my view, the first PO that the Court lacks jurisdiction is rather controversial because the parties cannot oust jurisdiction of the Court by contract. Moreover, and even if there is an arbitration clause, the court 6 has no mandate to strike out or dismiss the suit for failure to submit themselves to the arbitration tribunal they have intimated in their contract. Although the arbitration clause 9.2 and clause 18.0 indicated Tanzania Institute of Arbitration or Commercial Court, that creates ambiguity. However, that is cleared when one reads clause 18.0 as a whole and between the lines. Thus, it becomes apparent that the parties appointed Tanzania Institute of Arbitration as the arbitral tribunal to arbitrate their dispute arising out of their contract. The law as per Scova Engineering S.p.A and Another v Mtibwa Sugar Estates Limited and 3 Others, CAT decision, this Court has no power to strike out or dismiss the suit simply because there is an arbitration clause. That being the position of the law, the first PO has no legs to stand on. It is thus overruled. Aside from the first PO, there was a second PO, that the plaint contains a defective verification clause. This should not detain us because it is conspicuous that the verification clause does neither contain a place it was verified nor dated. The court distances itself from the argument of the defendant's counsel that the Ramadhani Mikidadi's case (supra) was about incompetent application and did not deal with defective verification. That is because looking at page 5 of the said case makes it clear that the issue of defective verification clause was touched upon. And the CAT held that defective verification clause is amenable to amendment by the applicant upon being granted leave by the Court. But it is explicit that in the case at hand no leave was applied for or granted. Furthermore, the plaintiff's counsel cited Raimond Nicholauis and 11 Others v Nambogo Village Council and 3 others, Land case No. 9 of 2022 Hight Court of Tanzania, Sumbawanga sub-registry where the court 7 allowed amendment of the verification cause after the hearing of the PO by virtue of overriding objective. In my view that case will not apply in the circumstances of the case at hand because while in Nambogo's case leave to amend the verification clause was given here no leave has been given or applied for. The plaintiff merely asked the court to apply overriding objective principle. Contrary to such view, this Court rightly held in Top Paste's case (supra) that where Advocate was engaged and prepared the plaint if the said plaint contains a defective verification clause such folly cannot be excused. Moreover, the overriding objective principle cannot be applied blindly and in contravention of mandatory rules of procedure. In the end since the verification clause is defective and leave to amend it was never sought the PO is sustained. Consequently, the suit is struck out for being instituted by a plaint containing defective verification clause. The defendant shall have her costs. Order accordingly. DATED at DAR ES SALAAM this 7th Day of June 2024 JUDGE 07/06/2024 8 Court: ruling delivered today 7th June 2024 in the presence of Mngumi Samadani, Advocate h/b of Dickson Matata, Advocate for the plaintiff and Rico Adolf, Advocate for the defendant. 9