TANGA CEMENT PUBLIC CO

IN THE HIGH COURT OF THE UNITED REPUBLIC OF TANZANIA COMMERCIAL DIVISION AT PAR ES SALAAM COMMERCIAL CASE NO.90 OF 2023 TANGA CEMENT PUBLIC COMPANY LIMITED.... .................... PLAINTIFF VERSUS NUNU LOGISTIC COMPANY LIMITED.................................... DEFENDANT RULING Date of Last Order: 03/04/2024 Date of Ruling: 21/06/2024 GONZI, J. The Plaintiff sued the Defendant for breach of contract between them entered into on the 1st December 2021 by virtue thereof the Defendant was allowed to purchase cement on credit from the Plaintiff up to a maximum limit of TZS 4,000,000,000/= (Tanzanian Shillings Four Billion only). It was agreed that upon the Plaintiff raising invoices, the Defendant would effect payments as agreed within a stipulated time, after the lapse thereof the unpaid sums would attract interest at the rate of 15% per annum calculated daily from the due date. It was alleged in the Plaint that whereas the Plaintiff fulfilled its obligation by supplying the Defendant with cement on credit, the i Defendant defaulted to effect payments which at the time of institution of the suit amounted to TZS 2,700,420,284. That was the claim in the suit. In the Written Statement of Defence, the Defendant, inter alia, raised a preliminary objection to the effect that: i. The suit is premature for failure of the Plaintiff to exhaust dispute resolution as provided in the contract. The Defendant therefore prayed that the Plaint be rejected and or be struck out with costs. This Ruling is in respect of that Preliminary Objection. With leave of the Court, the preliminary objection was argued by way of written submissions. The Defendant was represented by Mr. Edwin Somoka Nkalani, learned advocate while the Plaintiff was represented by Mr. Wilson Kamugisha Mukebezi and Robert Lawrence Mosi, learned Advocates. The Court is thankful to both counsel for their insightful arguments. Mr. Nkalani, learned advocate for the Defendant, submitted that the basis of the preliminary objection is annexture NUNU-1 to the Written Statement of Defence which was a Distribution Agreements executed on 2nd, 3rd, and 4th December 2021 that superseded the parties' agreement of sale of cement on credit signed on 1st December 2021. Mr.Nkalani, learned advocate submitted that, unlike the agreement for sale of cement on credit, 2 the Distribution Agreements contained a dispute resolution. Mr. Edwin Nkalani, learned Advocate, argued that the relationship between the Plaintiff and the Defendant for buying, distributing and marketing the Plaintiff's cement is entirely governed by the Distribution Agreements dated 2nd, 3rd and 4th December 2021 as per Terms No. 12.1 and 15.9 of the said distribution agreements which agreements superseded all previous agreements between the Plaintiff and the Defendant and therefore the Plaintiff cannot rely on two separate agreements on the same matter. Mr. Nkalani, learned advocate, submitted that the parties agreed in their Distribution Agreements that in case of any dispute/claim arising out of or in connection to the distribution agreements, the same shall be settled by way by way of amicable negotiation between the Plaintiff and the Defendant and that in the event a resolution is not reached within 15 business days, either party may refer the matter for final resolution by way of arbitration in accordance with the Tanzania Arbitration Act of 2004 (sic) and that the arbitral award of the arbitrator selected in terms of the said agreement shall be final and binding to the plaintiff and the defendant. Therefore, he argued that in terms of section 7(1) of the Civil Procedure Code, CAP 33, the Court lacks jurisdiction to entertain the matter as its cognizance of the matter is 3 either expressly of impliedly barred by the dispute resolution clause. He submitted that the sanctity of the agreement should be respected. Mr. Nkalani, learned advocate referred to several cases to support his arguments including the cases of Sunshine Furniture Co. Limited versus Maersk (China) Shipping Co. Limited and another, Civil Application No.98 of decided by the Court of Appeal of Tanzania; Oryx Energy and Mo Assurance Company Limited and another Commercial Case No.95/2022 decided by the High Court; Leisure Tours and Holidays Limited versus Market Insight Limited, Commercial Case No.93 of 2022 decided by the High Court; J.E Construction Co. Limited versus Permanent Secretary Ministry of Agriculture and another, Civil Case No.07 of 2023 decided by the High Court. Mr. Nkalani, learned advocate submitted that the rule from all those cases is that where parties have a dispute resolution clause in their agreement, the court should stay the case and refer the parties to their agreed dispute resolution process or strike out the case for contravening the dispute resolution clause. He concluded by praying for the suit to be struck out with costs. Mr. Wilson Mukebezi and Mr. Robert Mosi, learned Advocates for the Defendant filed their reply submissions. They submitted that the Preliminary 4 objection is misconceived as it does not qualify to be treated as such. They argued that the preliminary objection raised is based on a contentious matter as to whether the distribution agreement superseded the earlier sale on credit agreement. Also, they argued that the preliminary objection is introduced by the Defendant pursuant to the Annexture NUNU-1 to the Written Statement of Defence. They submitted that the Plaintiff's suit is not founded on breach of the distribution agreements rather on the Sale on credit agreement dated 1st December 2021. They submitted that under the Agreement of sale on credit, dated 1st December 2021, the parties have no forum choice clause preferring another forum apart from the High Court of Tanzania. They referred to the Agreement of Sale on credit between the parties herein which forms Annexture TPC-1 to the Plaint. They argued that under Clause 10.2 of the said agreement, both the Plaintiff and the Defendant irrevocably agreed that: "The High Court of Tanzania shall have jurisdiction to settle any dispute or claim that arises out of or in connection with that agreement or its subject matter or formation (including non-contractual disputes or claims)" 5 They argued therefore that the preliminary objection offends the principles set in Mukisa Biscuits Manufacturing Company Limited versus West End Distributors Limited (1969) EA 696. Mr. Wilson Mukebezi and Robert Mosi, learned Advocate submitted further that the Plaintiff's cause of action is seen in the Plaint and it arises from the Sale on Credit agreement dated 1st December 2021 and not the Distribution agreements as alleged by the Defendant. They submitted that it is the plaint and anything attached to it which should be looked at when ascertaining on objections relating to cause of action and time limitation. In support of their foregoing argument the cited the case of Mashado hame Fishing Lodge Limited and Two Others versus Board of Trustees of Tanganyika National Parks (T/A Tanapa) (2002) TLR 319. Also, they cited the case of John Mwombeki Byombalirwa versus Agency Maritime Internationale (Tanzania) Limited (1983) TLR 1. They relied on the case of Karata Ernest & Others versus Attorney General, Civil Revision No.10 of 2010 decided by the Court of Appeal of Tanzania. On the other hand, the learned counsel for the Defendant submitted that in the event the Court finds merit in the preliminary objection raised, the available remedy to the Defendant would have to be filing an application to 6 stay the suit pending referral to Arbitration and not striking out of the suit. They cited section 15(1) of the Arbitration Act, 2020. They prayed for dismissal of the preliminary objection with costs and that the civil case No. 90 of 2023 be ordered to proceed with hearing on merit. By way of rejoinder Mr. Edwin Nkalama learned advocate remained adamant to his position. He argued that the preliminary objection raised in this case is a pure point of law that fits under the rule in Mukisa Biscuits Manufacturing Company LTD v West End Distributors LTD (1969) EA 696, where at page 700 Law, J.A observed as follows:- "So far as I am aware, a preliminary objection consists of a point of law which has been pleaded or which arises by dear implication out of the pleadings, and which, if argued as a preliminary objection may dispose of the suit. Examples are an objection to thejurisdiction of the court, ora piea of limitation, ora submission that the parties are bound by the contract giving rise to the suit to refer the dispute to arbitration." Mr. Nkalama learned advocate submitted that the present preliminary objection is based on an implication or agreement between the parties to 7 refer their dispute, if any, to amicable settlement before resorting to court proceedings. Mr. Nkalama, learned advocate submitted that the argument by the learned counsel for the Plaintiff that the two agreements are different is misconceived and intends to mislead the Court because the distribution agreements superseded the Sale by credit agreement of 1st December 2021. He argued that the agreement of 1st December 2021 was superseded by the subsequent distribution agreements hence the Plaintiff cannot say that he has filed a suit based on the sale by credit agreement alone. Mr.Nkalama, learned advocate submitted that the argument advanced by the Plaintiff's counsel that in the event the court finds that there is a valid arbitration agreement, the remedy should have been for the Defendant to apply for staying the suit pending referral to arbitration, is misconceived. He submitted that the prayer made by the Defendant to have the matter struck out is judicially settled. He relied on the case of Oryx Energies Tanzania Limited versus Mo assurance Company Limited and another. Mr.nkalama, learned advocate reiterated his submissions in chief and prayed for the suit to be struck out with costs. 8 The determination of the present application is straight forward. I should state at the very outset that after hearing the arguments by learned counsel for both sides, the outcome is that the Plaintiff is right and the Defendant has got it wrong. The position of the law is that since the matters complained of by the Defendant in this preliminary objection do not arise from the plaint and are contested between the parties, they could not be disposed of by way of a preliminary objection. The Defendant is required to bring evidence to substantiate his allegations as to which version of agreement applies to the relationship of the parties herein as between the Sale by credit agreement and Distribution agreements. The Defendant is required to bring evidence to prove that the Distribution agreements superseded the sale by credit agreement. Where an issue depends on evidence for its determination, it cannot be raised and disposed of as a preliminary objection. To quote the Court of Appeal for Eastern Africa in the case of Mukisa Biscuits Manufacturing Company LTD v West End Distributors LTD (1969) EA 696, at page 701, Sir Charles Newbold P., had this to say: - A preliminary objection is in the nature of what used to be a demurrer. It raises a pure point of law which is argued on the assumption that all the facts pleaded by the 9 other side are correct. It cannot be raised if any fact has to be ascertained or what is the exercise ofjudicial discretion. In the case at hand the Plaintiff has filed a suit enforcing the Sale by credit agreement dated 1st December 2021. The Defendant says that the sale by credit agreement of 1st December 2021 does not exist anymore as it has been superseded by subsequent distribution agreements executed between the parties. So, who is correct between the two? Evidence is needed. Where evidence is needed, the issue cannot be disposed of as a preliminary objection even if it touches matters of time limit, cause of action, jurisdiction or an obligation to refer the dispute to arbitration. Once issue needs evidence to be resolved, it fails the test of being a pure point of law which passes the test of self-proof. It may be a point of law but not purely so, since it involves evidence for its determination, hence failing the test of self-proof. Therefore, as the preliminary objection raised in this matter does not qualify as a pure point of law, the learned counsel for the Plaintiff is correct. The preliminary objection is misconceived. I dismiss the preliminary objection with costs. The suit shall proceed to hearing on merit where evidence will be tendered so as to substantiate, amongst other things, the io contested allegations which were brought by way of preliminary objection. It is so ordered. 21/06/2024 Ruling is delivered in Court this 21st day of June 2024, in the presence of Ms. Agness Uisso advocate learned Advocate for the Plaintiff, and Mr. Robert Mosi and Tumaini Michael Advocates for the 1st Defendant. 21/06/2024 li