CIVIL APPEAL NO 290 OF 2022 TANZANIA PHAMARCEUTICAL INDUSTRIES LIMITED ANOTHER VERSUS DHARAM SINGH HANSPAUL SONS LIMITED

IN THE COURT OF APPEAL OF TANZANIA AT ARUSHA fCORAM: MKUYE. 3.A., RUMANYIKA, J.A And MDEMU. 3.AA CIVIL APPEAL NO. 290 OF 2022 Reference No. 20220701000431746 TANZANIA PHAMARCEUTICAL INDUSTRIES LIMITED...... 1st APPELLANT RAMADHANI RASHID MADABIDA....................................2nd APPELLANT VERSUS DHARAM SINGH HANSPAUL & SONS LIMITED....................... RESPONDENT (Appeal from the Judgment of the High Court of Tanzania, at Arusha) (Gwae, J.T dated the 24th day of November, 2020 in Land Case No. 04 of 2019 JUD G M EN T OF THE COURT 19th February & 4th March, 2025 RUMANYIKA. J.A.: In Land Case No. 04 of 2019, before the High Court of Tanzania at Arusha ("the trial court") the respondent sued the appellants for breach of a sale agreement. It was alleged that, sometimes in the year 2015, Ramadhani Rashid Madabida, the second appellant successfully offered to sell a parcel of land to the respondent. He did it as Chief Executive Officer of, and on behalf of Tanzania Pharmaceutical Industries Ltd, the first appellant company. That piece of land is measured 20,235 square meters, i Plot No. 34 under Certificate of Title No. 2727 located atThemi Industrial area in the city of Arusha ("the suit land). It is also alleged that the respondent knew that it was encumbered and that, if the need arose, the third party would release the respective title deed without any reservation. Then the parties executed the sale agreement on 18/03/2015 for TZS. 1,800,000,000.00 to be paid in four instalments. The respondent paid the first two instalments of TZS. 460,000,000.00 as agreed, but the appellants withheld the title deed, therefore, the respondent did not release the last two installments. He thus, could not take possession of the suit land. Following the appellants' default, the respondent sued them jointly and severally before the trial court seeking the following reliefs: i) A declaratory order that the appellants breached the sate agreement; ii) An order compelling the appellants to pay TZS. 460,000,000.00 being refund o f the monies paid as part o f the purchase price; iii)Payment o f TZS. 360,000,000.00 being liquidated damages for breach o f contract; iv) Payment o f interest at the rate o f 18 % per annum on items (ii) and (iii) above from the date o f filing the suit to the date o f judgment; v) Payment o f interest at the rate o f 7 % per annum in (ii) above from the date o fjudgment to the date o f full satisfaction o f the decree; vi) Genera! damages; vii) Punitive damages; and i/Hi) Costs of the suit In their joint written statement of defence/ the appellants acknowledged the existence of the sale agreement. They alleged that, from its inception, the respondent knew that the suit land was incumbered by the defunct PSPF and Badays Bank Ltd. as creditors to the appellants. In the same breath, however, they blamed the respondent for having refused to take possession of the suit land. From the outset, three main issues were set out for determination by the trial court as follows: one, whether there was a valid sale agreement between the parties, two, if any, whether the first appellant breached it; and three, reliefs that the parties were entitled to. At the end of trial, the respondent won the battle as it was held that there was a valid sate agreement between the parties, but it was breached by the first appellant. Consequently, the appellants were ordered to pay the respondent TZS. 460,000,000.00 being refund of the first two instalments paid, payment of interest at the rate of 2.5% on the first instalment per month from the date of payment to the date of the judgment and interest at the rate of 7% per annum on TZS. 460,000,000.00 from the date of judgment to the date of payment in full 3 satisfaction of the decree. They were also condemned for the costs of the suit. Aggrieved, the appellants are assailing that decision on the following paraphrased points: 1. That, the trial court erred to find that, the appellants did not disclose to the respondent the incumbrances on the suit land from the outset; 2. That, the learned trial Judge misconstrued Clause 3.1.3 o f the addendum contract to mean that the suit land was not encumbered; 3. That, the trial court's finding that the appellants did not facilitate the respondent's possession of the suit land was against weight o f the evidence; 4. That, the trial court's finding that the appellant was in breach o f the contract was against the evidence; 5. That, in absence o f an order lifting veil o f incorporation o f the first appellant, to hold the second appellant personally liable the trial court was in error; 6. That, the interest at the rate o f 2.5payable to the respondent monthly was unreasonable and on the high side; and 7. That, the learned trial Judge improperly evaluated the evidence arriving at the wrong decision. At the scheduled hearing of the appeal, Messrs. Denis Msafiri and Salim Mushi, learned advocates appeared representing the appellants and the respondent respectively. They had filed written submissions for which they sought leave of the Court to adopt as part of their oral submissions. Mr. Msafiri chose to argue the 1st and 2nd grounds of appeal together on the issue of disclosure or non-disclosure of the incumbrance by the appellants to the respondent. He contended that, the variance between Clauses 3.1.3 in the addendum contract and 5.1.1 apart, the respondent knew about the existing registered mortgage on the suit land right from the word go. To say otherwise, he argued, the respondent contradicted himself, just as the learned trial Judge misconstrued those clauses. He urged us to find the two grounds merited and allow the appeal. About the 3rd ground of appeal, Mr. Msafiri contended that the respondent did not prove that the appellant refused to facilitate his possession of the suit land, as wrongly held by the trial court. He beseeched the Court to also allow this ground. On the 4thground of appeal, Mr. Msafiri asserted that, by purchasing the incumbered suit land, the respondent risked it all and therefore, he cannot be heard complaining about it. If anything, Mr. Msafiri argued, the respondent is to blame for his failure to exercise due diligence with respect to the existing status of the suit land. Too, he prayed to this court to allow that ground. As regards the 5th ground of appeal, Mr. Msafiri faulted the trial Judge for holding the 2nd appellant liable for breach of the contract. He asserted that, whether or not the 2^ appellant was privy to contract the point was wrongly and prematurely determined by the trial court, without an order lifting the veil of incorporation of the 1st appellant. He added that, if anything, only a director, one Benjamini Kato accompanied the respondent in search of a land for sale, as testified by himself as PW1. He added that, the 2nd appellant was not proved to have signed the contract in his personal capacity so as to hold him personally liable, as wrongly decided by the trial court. Mr. Msafiri urged us to also allow this ground of appeal. It is recalled that, the 6th ground of appeal assailed the monthly chargeable 18.0% interest annually as being exorbitant. On this, Mr. Msafiri contended that, the rate did not reflect the court's discretion being exercised judiciously because 2.5 % interest per month meant 30% per annum which was far beyond the acceptable commercial rates of the day. Lastly is on the 7th ground of appeal, about the trial court allegedly analysing the evidence improperly. Mr. Msafiri contended that, the learned trial Judge did not consider the evidence adduced in its proper perspective versustho. law applicable. For instance, he argued, it was evident that the respondent took no trouble to consult the said creditors with the view to satisfying himself about availability of the certificate of title withheld by the creditors. Additionally, he contended that, the parties were to share the blame save for the trial court's erroneous conclusion. He therefore urged the Count to re-evaluate the evidence and come to its own conclusion and allow the entire appeal. Replying on the 1st and 2nd grounds of appeal, Mr. Mushi began by referring to Clauses 3.1.3. of the addendum contract. He contended that, the respondent signed the sale agreement while guaranteed and assured that the suit land was incumbrance free. He urged us to stop the appellant from denying that truth and to dismiss the two points of grievance. With regard to the 3rd ground of appeal, Mr. Mushi contended that it was not the respondent's will not to take possession of the suit land. He argued that, a verbal green light given by the appellants did not guarantee the respondent free possession of the suit land while the third party continued to withhold the respective certificate of title. He beseeched the Court to dismiss this ground of appeal. As for the 4th ground of appeal, about the appellants being held liable for breach of the contract, Mr. Mushi argued that, the trial judge held so correctly. He argued that, had the appellants revealed the said third party's interest in the suit land, the respondent would have not suffered loss, which rendered the contact voidable at the instance of the Innocent respondent. He cited the Court's decision in Leonard Dominic t/a Rubuye Agrochemical Supplies V. Yara Tanzania Ltd. (Civil Appeal No. 219 of 2018) [2022] TZCA 419 (13 July 2022; TanzLII). Further, Mr. Mushi asserted that, the respondent was not made aware of the incumbrances on the suit land much as the appellants contradicted themselves on their undertaking under Clause 5.1.1. of the contract. They guaranteed the respondent a no objection responce from any possible third party. With regard to the 5thground of appeal on the 2ndappellant not being privy to the contract, Mr. Mushi referred us to paragraphs 5 and 9 of the plaint showing the role that was actively prayed by the 2nd respondent for and on behalf of the 1st appellant company. Therefore, his take was that, by all means, the 2nd appellant could not escape liability. On the 6th ground of appeal which challenged the 2.5% interest chargeable monthly as being unrealistic and on the high side, Mr. Mushi s referred us to the common law principle that parties are bound by the terms of the contract freely entered by them. To reinforce his point, he cited, among others, our decision in Lulu Victor Kayombo v. Oceanic Bay Ltd. & Another, Consolidated Civil Appeal Nos. 22 & 55 of 2020 [2021] TZCA 228 (7 June 2021: TanzLII). Moreover, he referred us to Clause 3.1.6 of the sale agreement to justify the interest rate charged, as ordered by the trial court. For the 7th ground of appeal, Mr. Mushi contended that, this complaint was also out of place. He argued that, in fact the learned trial Judges' analysis was based squarely only on the issues presented for trial. That the appellants, no doubt they abdicated their contractual obligation. He urged us to dismiss this ground and hence, the entire appeal for want of merit. Upon hearing the learned counsel's submissions and considering the record of appeal, the pivotal questions for our determination are whether the appellants breached the contract. And, if it is answered in the affirmative, whether they are liable to pay interest at the rate of 2.5%, as decreed by the trial court. We choose to determine the 1st, 2nd, 3rd, 4th and 7th grounds of appeal together as they are inter-related revolving around the issue of evaluation of the evidence. As such, like it was rightly held by the trial court, it is an undeniable fact that there was a valid sale agreement between the parties. As such, gauged from the sale agreement and the respective addendum (exhibit PI), it is also not disputed that, upon the parties executing it, the respondent paid the first two instalments of TZS. 460,000,000.00 upfront. It is worth noting under clause 3.1.6 of the addendum contract that, the third instalment of TZS. 440,000,000.00 would be paid upon the first appellant playing his part. Then the appellant would surrender the existing certificate of title to the Arusha City Land Officer, for the authorities to issue a new title, possibly within one month of the signing of the addendum. We think, there is no harm also for us to refer to Clause 3.1.7 of the sale agreement which stated that, the last instalment of TZS. 630,000,000.00 would be paid upon the first appellant presenting the respective capital gain tax clearance certificate within the first two months. Therefore, the contract under scrutiny tells all aloud, the more an allegation that, the part payment made by the respondent apart, the appellants did not facilitate the release of the certificate of title by the creditors. Just as the respondent could not take possession of the suit land in the circumstances, as said, the omission abrogated section 37(1) of the Law of Contract Cap, 34 R.E. 2019 (the Act). Our look of Clauses 5.1.1, 5.1.3, 5.1.7 and 6.1.1 of the sale agreement on pages 28-39 of the record of appeal spoke volumes about the appellants' liability. As such, it was not clear to the respondent, from the inception that the suit land was necessarily incumbered and that he was duty bound to overcome the incumbrances. Therefore, the parties so agreed and the terms remained binding on them. These are the dictates of the Common Law Principle on sanctity of contract which we have to follow. As such, the present case is not exceptional to what we reiterated in Exim Bank (Tanzania) Ltd. v. Dascar Limited and Another (Civil Appeal 92 of 2019) [2016] TZCA 564 (24 February 2016; TanzLII). Rather, our emphasis would be that, in all cases, courts of law shall respect all the contracts that are freely and legally entered by the parties. As alluded to before, it is not disputed, in the present case that, upon payment of the first two instalments, the appellants would release the existing certificate of title to smoothen its transfer to the respondent. However, we cannot underate the appellants' none-disclosure of the names of the said creditors and the sum involved to the respondent at the earliest opportunity. It was neither stated in their joint written statement li of defence nor in the sale agreement. They just talked about it so remotely and sparingly in paragraphs 9 and 11 of the written statement of defence and in Clause 6.1.1 of the sale agreement but casually. Let alone the appellants' failure, in that regard, to file a third-party notice so as to take the alleged two creditors also on board. As such, the appellants' promise under Clause 5.1.1 of the sale agreement that the two creditors would not have any issue with the suit land, it was a deliberate misleading statement causing loss on the respondent to say the least. As a matter of fact, the appellants did not disprove it seriously that the respondent undertook to bear consequences of the said incumbrances. After all, it defeated logic and common sense, if at all, the respondent could risk the unknown adverse consequences of such a serious condition precedent. We note that, the names of the creditors were not even disclosed to the respondent, let alone what the said credit was all about. In any case, therefore, we are settled in our minds that the appellants should have solely removed the incumbrances for the contract to run swiftly. In any event, that could not be the respondent's duty as the appellants urged us to hold. As such, the appellants' complaint that the trial court evaluated the evidence improperly is respectfully unfounded and it is discounted. Therefore, the 1st, 2nd, 3rd, 4th and 7th grounds of appeal lack merit and they are dismissed. The need to compensate a victim of breach of contract cannot be emphasized than it is necessary. It is as automatic as day follows a night. As such, Section 73(1) of the Act entitles the victim to get compensation. Also, see Fauzia Jamal Mohamed v. Lilian Onael Kileo (Civil Appeal 448) [2024] TZCA 628 (23 July 2024; TanzLII). In the present case therefore, we are unable to fault the learned trial Judge for having awarded the respondent the impugned damages. We recall that, the 5th ground of appeal concerns the learned trial judge holding the 2nd appellant also liable for breach of the contract and on the order of specific performance, among other orders. This ground will not task our minds greatly, given our earlier on discussion. It is so for one main reason, that it is evident and clear that, the 2ndappellant signed the sale agreement in his capacity, as the Chief Executive Director of the 1st appellant company. Not only the 1st appellant was not a biological person capable to sign the contract by herself, but also, the 2nd appellant solely and actively dealt with it as the key player in the circumstances, unlike one Benjamini Kato who signed it as a mere witnessing Executive Director. We hold so being aware of the cardinal principle in Salomon v. Salomon & Co. Ltd [1897] A.C 22 where it was held that, shareholders of a company cannot be personally liable for debts or liabilities of the company. Also, see our decision in Yusuf Manji v. Edward Masanja & Another, (Civil Appeal No. 78 of 2002) [2005] TZCA 106 (15 November 2005; TanzUI). We do not think, in all fairness that it was intended in Solomon Solomon case (supra) and in the subsequent Court's decisions that in any judicial proceedings the Companies' Chief Executive Directors shall use the requirement of lifting veil of incorporation of the parties, wholesale and as a sword. If they can use it as a shield so much the better, depending on a case-to-case basis. In other words, and for this case, the second appellant was privy to the contract by necessary implication. Moreover, no evidence was led to show that, the 1st appellant company was either limited by shares or limited by liability. The 2nd appellant while under oath as the sole defence witness on pages 93-96 simply stated it to be a limited company, without any further and better detail to qualify it. Therefore, it cannot be said that, the suing of the appellants jointly and severally was a mere coincidence. As such, the respondent's onus of proof was on the balance of probabilities required of him. With respect, we unable to accept Mr. Msafiri's invitation to fault the learned trial judge for holding as such. This ground also is dismissed. As regards the 6th complaint that the award of 2.5% monthly interest on the first instalment is excessive and on the high side, we would equate it to one screaming on a wound inflicted by himself on himself. As such, the interest rate is consonant with Clause 3.1.6 of the addendum of the sale agreement which, in blacks and whites reads as follows: "That should the Vendor fall to accomplish what is provided under Clause 3.1.6 above within specified time frame, shall be penalized by the Purchaser to pay an interest of Two-point Five percent (2.5 %) o f the First instalment per month". It has to be recalled that, the common law principle of sanctity of contract requires that, whether or not solicited by the parties, a court of law can never ever assume an editorial role on the terms of such a legally binding contract. Holding so, we are backed up by the Court's decisions in Mariam E. Maro v. Bank of Tanzania (Civil Appeal No. 22 of 2017) [2020] TZCA 1789 (30 September 2020: TanzUI) and in Unilever Tanzania Ltd v. Benedict Mkasa t/a Bema Enterprises (Civil Appeal No. 41 of 2009) [ 2016] TZCA 111 (9 March 2016: TanzLII). Therefore, the 6th ground of appeal is also devoid of merit and it is dismissed. In the upshot, and for the reasons given above, we find no merit at all in the appeal which we hereby dismiss entirely with costs. DATED at ARUSHA this 28thday of February, 2025. R. K. MKUYE JUSTICE OF APPEAL S. M. RUMANYIKA JUSTICE OF APPEAL G. J. MDEMU JUSTICE OF APPEAL The Judgment delivered this 4th day of March, 2025 in the presence of Mr. Denis Msafiri, learned counsel for the Appellants, and Mr. Ngereka Miraji, learned counsel for the Respondent; through video conference from High Court Arusha, is hereby certified as a true copy of the original.