tanga petroleum company ltd and another vs crdb bank plc 2018 tzhccomd 2021 3 october 2018

IN THE HIGH COURT OF TANZANIA (COMMERCIAL DIVISION) AT DAR ES SALAAM MISC. COMMERCIAL APPLICATION NO. 182 OF 2018 (Arising from CommercialCase No. 118 of 2017) 1. TANGA PETROLEUM COMPANY LIMITED............ ..... 1st APPLICANT 2. NAS HAULIERS LIMITED ................ 2nd APPLICANT VERSUS CRDB BANK PLC ............ RESPONDENT RULING 11/09/2018 & 03/10/2018 SEHEL. J. By w ay of chamber summons filed under certificate of extreme urgency, the applicants are moving the Court for exparte and inter parties prayers. The Ex parte prayer was declined to be issued and the applicants were directed to serve the respondent. The inter parties prayer is for the Court to make an order that the applicants having paid USD 600,000 by 21st July, 2018 are in com pliance with judgm ent and decree resulting from the settlement deed and that the applicants have to pay USD 200,000 by 19th August, 2018 and USD 200,000 by 19th September, 2018 to have been fully satisfied the judgment and decree entered on 19th April, 2018 and that after satisfaction of the judgment and decree, the respondent will have to surrender title deeds and deeds for discharge of mortgages for: i) Plot Nos. 41, 42, 43, and 44 Title No. 974 Korogwe Road Tanga City; ii) Plot No. 3/3 Mwambani Beach Area in Tanga; iii) Plot No. 71 Mikocheni Light Industrial Area, Dar es Salaam City; and iv) Plot No. 27 Kartenblatt 10 Pangani Road in Tanga City. The applicants are also seeking for costs of the applicantion and any other orders as the Court may deem just and fit to grant. The application is made under Sections 38 (1); 68 (e); and 95 and Order XLIII Rule 2 of the Civil Procedure Act, Cap. 33 and it is supported by an affidavit of Ally Hemed Said, the director of the applicants. The hearing of the application was done orally and prior to the oral hearing the applicants filed their skeleton arguments in compliance with Rule 64 of the High Court (Commercial Division) Procedure Rules GN 250 of 2012. At the hearing, the applicants were represented by the learned advocate Frank Mwalongo while the respondent had the services of the learned advocate Norbert Chaula. In expounding the skeleton arguments, Counsel Mwalongo submitted that the gist of the matter is the settlement deed registered on 19th April, 2018 that required the applicants to pay USD 1,000,000 within five months, that is up to 19th September, 2018. He said the payment of USD 1,000,000 was categorized into five instalments. The counsel pointed out that by 2nd August, 2018 applicants had paid USD 600,000 and by 3rd August 2018 applicants had paid the remaining USD 400,000 making total payment of USD 1,000,000. The counsel was of the firm view that com pliance was completed a month and 17 days earlier than scheduled. He argued in spite of the already effected payments, the respondent put in action default cla u se thereby recalling the entire amount thus prompted the applicants to come to this Court seeking assistance to be declared that the applicants have fully complied. The counsel further argued that this being a court of justice and party having come a long w ay, justice requires matter to come to an end where terms have been generally complied with. The counsel therefore prayed for the court to grant their prayer made in the chamber summons. Counsel Chaula replied that the application is centred on settlement deed registered as judgment of this Court on 19th April, 2018. He said according to the settlement deed, specifically clause 4.0 the settled amount of USD 1,000,000 was supposed to be paid within 30 days, that is, first instalment of USD 200,000 was supposed to be paid by 19th May, 2018 but the applicants did not comply to the schedule. The counsel for the respondent further argued that the settlement deed under clause 7.0 provided for a grace period of further 30 days from the agreed date, that is from 19th May, 2018 thus making the first instalment to be paid by 19th June, 2018 but applicants made their first instalment on 13th July, 2018 after a series ofc- reminders and later on a default notice was issued. The counsel submitted that all these efforts were intended to make applicants to comply with the judgment of the court. He said the applicants having failed to comply, the respondent resorted to an agreed clause in the judgment/settlement deed, that is, clauses 7 and 8 which provide for circumstances of default that the respondent is entitled to recall the whole loan then outstanding and continue with recovery measures. The counsel argued that the respondent is a legal person whose existence is regulated by the Bank of Tanzania as such the respondent has to comply with the laid down rules and regulations. The counsel submitted that the waiver for the applicants to pay USD 1,000,000 instead of the then outstanding of USD 2,000,000 went through a series of approval and compliances. He said the failure of the applicants to comply with the agreement, the respondent was forced to provide for the loss as required under Rule 45 (a) read together with Regulation 51 (1) of the Banking and Financial institutions (Mortgage Finance) Regulations of 2015 GN 254 which requires an entity doing business as the respondent to pay 100% of unpaid loan falling under the category in which the applicants loan had fallen. The counsel concluded his submission by citing the case of Hydrox Industrial Services Ltd Vs CRDB (1996) Ltd and 2 Others, Civil Case No. 194 of 1999 (Unreported H.C) where it was held: “In order for a bank to continue being in banking business it must have funds to lend and which must be repaid by its borrower. If a bank does not recover loans it will surely be an obvious candidate for bankruptcy.” With these submissions the counsel for the respondent prayed for the application to be dismissed and the respondent to continue in executing the judgment as agreed. In rejoinder it was insisted that key time limit was five months of which the applicants complied with. It was also pointed out that the respondent does not dispute that USD 1,000,000 was paid. From the rival submissions made by the parties the Court is invited to determine as to whether the applicants complied with the terms and conditions of the deed of settlement that was entered between the parties and registered by this Court on 19th April, 2018. It is the case of the applicants that the applicants by paying the whole agreed amount, that is, USD 1,000,000 within the five months period then the applicants fulfilled the terms and conditions of the Deed of Settlement thus the respondent had no right to trigger a default clause. The respondent on her side argued that the payment of USD 1,000,000 was staggered into five instalments and the applicants failed to pay the initial deposit in time thus entitled the respondent to trigger the default clause. In order to fully appreciate the two opposing arguments it is pertinent to reproduce the relevant clauses as appeared in the Deed of Settlement. Part of the Deed of Settlement reads: “ 1.0 That the plaintiff shall pay USD 1,000,000 (United States Dollars one million only) to the defendant payable within five months from the date of recording this settlement. 2.0 The payment of USD 1,000,000 (United States Dollars one million only) shall be settlement of all outstanding debts of the plaintiff to the defendant and that after execution o^ this d eed and full payment of the settlement amount the defendant shall have no any claims against the plaintiffs unless a fresh loan is applied and granted after execution and satisfaction of this d eed of settlement. 3.0 The agreed USD 1,000,000 shall be paid in 5 equal instalments of USD 200,000 (United States Dollars Two Hundred Thousand only). 4.0 That the first instalment shall be paid within 30 days from the date this case shall be marked closed in court before the Judge and the instalments that follow shall fall due on the same date of every following month until full payment. 5.0 That after payment of USD 1,000,000(United States Dollars one million only) the plaintiff shall request for discharge and the defendant shall discharge the mortgages on the following plots i) Plots Nos. 41, 42, 43, and 44 Title No. 974 Korogwe Road Tanga City, ii) Plot No. 3/3 Mwambani Beach Area in Tanga, Hi) Plot No. 71 Mikocheni Light Industrial Area Dar es Salaam City, and iv) Plot No. 27 Kartenblatt 10 Pangani Road in Tanga City. 6.0 That the defendant shall hand and deliver title deeds and discharge of mortgages to the plaintiffs for each of the following plots i) Plots Nos. 41, 42, 43, and 44 Title No. 974 Korogwe Road Tanga City, ii) Plot No. 3/3 Mwambani Beach Area in Tanga, Hi) Plot No. 71 Mikocheni Light Industrial Area Dar es Salaam City, and iv) Plot No. 27 Kartenblatt 10 Pangani Road in Tanga City within thirty days from the date of full payment of USD 1,000,000 by the plaintiffs to the defendant. 7.0 That should the plaintiffs default in paying a single instalment within 30 days from the agreed date, the defendant shall recall the whole loan then shall be outstanding taking into account the payments that shall have been made by the plaintiffs and continue with the already started recovery measures4 9 8.0 That upon reinstatement of the whole loan the defendant shall proceed with the recovery measures and exercise her mortgage rights without any further notice to the plaintiffs.” It discerns from the above agreement that there are two time lines in making payments. The first time line is for completion of the payment of the whole amount agreed which is five months. The second time frame is the monthly installments. To such monthly installments there is a default clause in case of late payment. The question ensues is what importance have the parties expressly ascribed to this consequence and what consequences ought to be attached to it having regard to the contract as a whole. It is stated in the deed of settlement that should the applicants default in paying a single instalment within 30 days from the agreed date, the defendant shall recall the whole loan and continue with the already started recovery measures. It is contended by the counsel for the respondent that the applicants failed to pay the first instalment thus the respondent rightly invoked the default clause. According to the terms of the deed of settlement the first instalment was to be paid. 10 within 30 days from the date the case is marked closed in court before the Judge. The suit was marked settled by the Judge on 19th April, 2018 thus the first instalment was supposed to be made on 19th May, 2018. It is on records through Annexure CRDB attached to the respondent’s counter affidavit that on 16th day of May, 2018 the respondent reminded the applicants to make their payment in the month of May, 2018. It is also on records through Annexure CRDB 2 to the counter affidavit that a default notice was issued to the applicants and the said default notice notified the applicants as follows: "...should you fail to settle the overdue instalment of USD 200,000 within seven (7) days from and including the date of service of this notice to you the Bank will proceed with recovery of the whole outstanding loan balance which stands at USD 2,049,383.20 (United States Dollars Two Million Forty Nine Thousand Three Hundred Eighty Three; Cents Twenty Only) as at 25th June, 2018." ii From the above notice, the respondent unilaterally varied the agreed 30 days grace period upon default to seven days more. In Halsbury’s Laws of England, 5th Edition Reissued, Vol 9 (1) Para 931 at page 685 a general rule in respect of time was stated as follows: "The modern law, in the case of contracts of all types, may be summarized as follows. Time will not be considered to b e of the essence, excep t in one of the following cases: 1) where the parties expressly stipulated that conditions as to time must be strictly complied with; or 2) the nature of the subject matter of the contract or the surrounding circumstances show that time should be considered to be of the essence; or 3) a party who has been subjected to unreasonable delay gives notice to the party in default making time of essence." Further, A.C Moitra in his book “Law of Contract & Specific performance Relief” 5th Edition, Universal Law Publishing Co. 2006 Reprint at page 530 to 531 stated: 12 “a consent decree or order is only the order of the Court carrying out the agreement between the parties, and consequently, no greater sanctity can be placed upon a consent d ecree that upon the agreement itself; and if such an order names a specific time by which a particular term embodied in the order has to be performed, unless the language shows unmistakably that it was the intention of the parties to make the right of the parties depend upon the observance of the term shall be carried into effect within a reasonable time." It follows then that time is generally considered not to be of essence unless parties have specifically agree to strictly comply with the time; or according to the nature or the surrounding circumstances time should be considered to be of the essence; or there is a notice that time is of essence. In the matter at hand, though the parties agreed that the first instalment should be paid within 30 days but according to the circumstances of this case it seems that the time for payment of, 13 instalments was not very much of essence. It is not of essence because though there was a default on part of the applicants, the respondent agreed to extend more time to the applicants and waived its right to claim the whole amount on the due date as provided for in clause 7.0 of the deed of settlement. By agreeing to vary the timeline for making instalments and by not enforcing the default clause, the respondent is loudly speaking and expressing that the 30 days period of making payments by instalments does not have much importance to the parties. Going by the respondent's action, the clause that prescribe time for payment of instalments and for default are terms that parties are not required to strictly observe and carry into effect. Looking at the deed of settlement as a whole, parties have subscribed to two timelines. I have found herein that the timeline for payment of instalments is not of essence. Thus we are left with the timeline of five months for payment of the whole amount as adjusted by the parties, that is, payment of USD 1,000,000.00. As correctly submitted by the counsel for the applicants, the timeline of five 14 months period is crucial and should be taken as to be of essence. I hold so because having reviewed the facts and taking into account the action of the respondent, I take that this period of five months is the one that the respondent pegged her calculations and assumptions to settle into a lesser amount than actually due and not the monthly instalments. In the end, I allow the applicants’ application by holding that the applicants having paid USD 1,000,000 by 3rd August, 2018 are in compliance with judgment and decree resulting from the settlement deed and they have fully satisfied the judgment and decree entered on 19th April, 2018 and pursuant to Clauses 5.0 and 6.0 of the Deed of Settlement, the respondent have to surrender title deeds and deeds for discharge of mortgages for: i) Plot Nos. 41, 42, 43, and 44 Title No. 974 Korogwe Road Tanga City; ii) Plot No. 3/3 Mwambani Beach Area in Tanga^ 15 iii) Plot No. 71 Mikocheni Light Industrial Area, Dar es Salaam City; and iv) Plot No. 27 Kartenblatt10 Pangani Road in Tanga City. Due to the circumstances and facts of this case, each party shall bear its own costs. It is so ordered. DATED at Dar es Salaam this 03rd day of October, 2018. 03rd day of October, 2018. 16