CIVIL CASE NO

IN THE HIGH COURT OF THE UNITED REPUBLIC OF TANZANIA DAR ES SALAAM SUB REGISTRY AT DAR ES SALAAM CIVIL CASE NO. 134 OF 2023 ______________________ THE REGISTERED TRUSTEES OF CORNELIUS CHRISTIAN AID TO CHURCHES AND THE NEEDY FOUNDATION..…..….….PLAINTIFF VERSUS EQUITY BANK (TANZANIA) LIMITED………………..…………..DEFENDANT JUDGEMENT Date of last order: 31st October 2024 Date of Judgement: 7th November 2024 MTEMBWA, J.: As can be discerned from the Plaint, the Plaintiff's claims against the Defendant are for declaratory orders that the Defendant is in breach of the loan agreement executed by the parties on 3rd July 2014 and its rescheduled agreement dated 15th September 2017; an order canceling all penalties and interest charged on the Plaintiff's Loan Account No. 3007511008766 from September 2017 to date which arose from the Defendant's inactions; an order for reconciliation of the account; general damages and costs of the suit. Briefly, in 2013, the Defendant became the Plaintiff's tenant in respect to a landed property registered as Plot No. 573/1 Block 43, located 1 at Kijitonyama area in Kinondoni Municipality and executed a lease agreement for ten (10) years from the date of execution for a rental fee of USD 25 per square meter for 411 square meters. Immediately after the execution, the Defendant noted that the leased property was mortgaged to CRDB Bank PLC to secure a term loan. As such, having given it thoughtful attention, the Defendant decided to buy the facility from CRDB Bank PLC to itself in the year 2014. To reinforce the agreement, the parties herein agreed to that effect. The facts reveal further that the parties herein agreed that the rental income should be assigned in favor of the Defendant. The Defendant was to pay the rental fee payable to the Plaintiff at the due date directly into the loan account to offset loan installments through the Plaintiff’s Bank Account No. 3007511008766 until the debt is liquidated. In September 2017, the loan was rescheduled and this time, the outstanding amount became Tanzanian Shillings 725,876,773/=. As per the Plaintiff, the Defendant defaulted on perfecting rental payments into the Plaintiff’s loan account. As a result, the Plaintiff's loan account fell into default, thereby attracting penal interest. There, a misunderstanding arose between the parties resulting into this battel. When this matter came for the final PTC on 15th February 2024, Ms. Benadetha Fabian, the learned counsel, represented the Plaintiff, while 2 Ms. Anastella Selestine, the learned counsel, symbolized the presence of the Defendant. With the help of the learned counsels, the following issues were framed: one, whether there is a breach of the loan agreement executed by the parties; two, if issue number one is answered in affirmative, whether the Plaintiff is entitled for payment of penalties and interest by the Defendant; and three, reliefs to which parties are entitled to. The Plaintiff brought two witnesses during hearing and tendered four (4) exhibits. The Defendant Bank relied on the sworn testimony of one witness and tendered one (1) documentary exhibit. In the conduct of this matter, Mr. Daniel Ngudungi, assisted by Ms. Benadetha Fabian, both learned counsels, represented the Plaintiff. In contrast, Mr. Kelvin Kidifu, assisted by Ms. Anastella Selestine and Mr. Erick Mark, both learned counsels, appeared for the Defendant. Therefore, I will briefly examine the evidence of the parties adduced during hearing. PW1, PETER AUZEBIO, introduced himself as a board member of the Plaintiff. He testified that the Board was established to help vulnerable and needy persons. Among the duties of the Board is to establish churches in various places and engage in a number of economic activities to help people. He identified the Defendant as the Plaintiff’s tenant and banker. Examined by Mr. Ngudungi, PW1 testified that in July 2014, parties herein 3 entered into a business loan agreement where the sum of Tanzanian Shillings 700,000,000/= was advanced to the Plaintiff repayable within eight (8) years (repayable come July 2022). The same was secured by two landed properties to wit: Plot No. 573/1, Block “43” Kinondoni, Dar es Salaam and Plot No. 175 Block “D” Kunduchi, Dar es Salaam. It was also secured by the rental fee payable to the Plaintiff by the Defendant. He tendered the Loan facility Contract dated 3rd July 2014 and was admitted as Exhibit P1. PW1 continued to testify that the Defendant bank was the first to be the Plaintiff’s tenant before the loan was applied for. Before that, the Plaintiff had an overdraft loan facility with CRDB Bank PLC secured by the same property (Plot No. 573/1, Block “43” Kinondoni, Dar es Salaam). Having been aware of the said overdraft loan, the Defendant approached the Plaintiff with the view of buying it. Having agreed, the Defendant bought the overdraft loan with CRDB Bank PLC. PW1 insisted that the rent payable to the Plaintiff was one of the securities payable to the loan account. The total rental fee per annum was Tanzanian Shillings 274,000,000/= payable quarterly (after every three months) in the sum of Tanzanian Shillings 68,000,000/=. PW1 noted further that, according to the loan agreement, the Plaintiff was supposed to pay a yearly installment of Tanzanian Shillings 4 171,671,052.00/=. However, the Defendant approached the Plaintiff and required a change in the repayment schedule in view of the instructions given by the Bank of Tanzania. The Parties then agreed that the repayment installment should be made quarterly and then entered into the second agreement. The Agreement dated 3rd July 2014 was tendered and admitted as Exhibit P2. Examined further, PW1 testified that, in view of Exhibit P2, the Plaintiff was supposed to make quarterly installments of the sum of Tanzanian Shillings. 41,694,237.32/=. The securities remained the same. The rental fee payable quarterly was Tanzanian Shillings 68,000,000/=. The Defendant was supposed to pay rent first so that she could remit the installment to herself. Later, it was learned that the rental fee income was paid late, which attracted penal interest on the facility loan and that is where the dispute arose. The Plaintiff was charged with penal interests because the quarterly rental fee could not be deposited in time into the loan account for quarterly remittances to the Defendant. Exhibit P2 rendered Exhibit P1 inoperative. Exhibit P1 was no longer binding to parties. PW1 testified further that a misunderstanding arose regarding the failure to remit some of the installments by the Plaintiff. To settle that, parties herein engage in the exchange of correspondences and conducting 5 meetings unsuccessfully. A letter dated 28th December 2021 was tendered and admitted as Exhibit P3. Explaining further on the exhibit, PW1 testified that Exhibit P3 related to delays in rental payment. The Plaintiff resisted the argument asserting that the Defendant was supposed to deposit the rental fee payment into the loan account. It was revealed that the total outstanding amount stretched to Tanzanian Shillings 511,607,819/=, being the principal sum and interests. The Defendant was indebted to the Plaintiff the sum of Tanzanian Shillings 206,219,250/= being unpaid rental fee. Upon reconciliation, the Plaintiff did not know where Tanzanian Shillings 86,000,000/= came from. It was noted further that there was penal interest of Tanzanian Shillings 33,385,569/=. According to PW1, the undisputed outstanding balance of the loan was only Tanzanian Shillings 186,000,000/=. The Plaintiff disputed the sum of Tanzanian Shillings 511,607,819/= as an outstanding balance. However, the Defendant continued to send the demand notices to the Plaintiff. All the time, the Plaintiff admitted to have been indebted to the sum of Tanzanian Shillings 186,000,000/= and not Tanzanian Shillings 511,607,819/=. He tendered the Plaintiff’s letters dated 8th February 2022, 28th March 2022 and 23rd May 2022; and Defendant’s letters dated 5th April 2022 and 4th July 2022 and were admitted as Exhibit P4 collectively. 6 PW1 further narrated that, according to the Defendant, the outstanding amount stretched to Tanzanian Shillings 556,546.503.04/= by 5th April 2022. Previously, in December 2021, as per Exhibit P3, the balance was Tanzanian Shillings 511,607,819/=. This means the interest accrued and penalties continued to be charged. He insisted that the correct outstanding loan amount was supposed to be Tanzanian Shillings 186,000,000/=. The Plaintiff discussed the issue with the Defendant’s bank officers (Mr. Elihuruma Mlay and Mr. Kissanga Peter) and told them to adjust the outstanding amount by posting the rental invoices. However, surprisingly, by the letter dated 4th July 2022, the Defendant denied to know the Plaintiff’s claims and wanted to separate the loan and the rental fee claims. The misunderstandings culminated into none payment of the quarterly remittances to Defendant. As a result, in view of Exhibit P2, the Defendant managed to sell Plot No. 175 Block “D” Kunduchi, Dar es Salaam. By then, it was valued at Tanzanian Shillings 1,000,000,000/= based on the valuation report by Defendant. The Plaintiff was seriously affected as the said property was lost as it was sold at a low price. The Defendant also stopped paying rent from September 2021 to date. The Plaintiff denied to have been in breach of the loan agreement. 7 In the end, PW1 implored this Court to declare that the Defendant breached the loan agreement. He also prayed for an order to remove the interest and penalties so that the Plaintiff can only be indebted to the Defendant to the sum of Tanzanian Shillings 186,000,000/=. Cross-examined by Mr. Kidifu, PW1 testified that he had been a board member of the Plaintiff since 2019. As a board member, he can understand several issues, including those happened before 2019. When referred to Exhibit P1, PW1 admitted that the purpose of the loan was to liquidate the outstanding facility with CRDB Bank, and thus, it was for business purposes. Cross-examined further, PW1 changed the story. This time, he testified that the loan was taken to repay the outstanding loan with CRDB Bank PLC. He mentioned the securities to be Plot No 175 Block D Kunduchi Area, Kinondoni, Dar es Salaam; Plot No. 537/1 Block 43 Kijitonyama area, Kinondoni, Dar es Salaam; and deed of assignment of rentals from building elected on the two Plots above. He stated further that the parties agreed that the rental fees payable to the Plaintiff would be used to offset the loan by depositing the same into the loan account. Under cross-examination, PW1 also insisted that the first loan agreement is not disputed. The loan contract price was Tanzanian Shillings 725,876,773.96/= payable quarterly a year in the sum of Tanzanian Shillings 41,694,237.32. The interest rate in case of default was 6% per 8 annum. PW1 admitted to have not tendered the Deed of assignment in Court. The rental fees to offset the loan was in respect to Plot No 175 Block D Kunduchi, Kinondoni, Dar es Salaam. The Defendant was a tenant in Plot No. 537/1 Block 43 Kijitonyama area, Kinondoni, Dar es Salaam. He also admitted to have not tendered the Tenancy agreement with the Defendant. Cross-examine further, PW1 admitted to have not tended the Bank Statement. When referred to Exhibit P2, PW1 testified that the Defendant was a tenant in the House located at Plot No. 537/1 Block 43 Kijitonyama area, Kinondoni, Dar es Salaam and not a tenant in the House located at Plot No. 175 Block D Kunduchi Area, Kinondoni, Dar es Salaam. Having been referred to Exhibit P3, PW1 continued to note that the Defendant used to deposit lately the rental fees into the Plaintiff’s loan account and as such, the Plaintiff was charged with penal interest wrongly. The Plaintiff submitted the invoices demanding the Defendant to deposit the rental fees to the loan account. The reply was such that, the Defendant deposited the USD into the loan Account but was withdrawn by the Plaintiff before offsetting. This payment was to cover the period between June – September 2017. Cross-examined further, PW1 admitted that the Plaintiff defaulted payment during such period, and as such, the penal 9 interest was correctly applied/charged. Apart from that, there were many other non-remitted installments resulting in default by the Plaintiff. PW1 also testified that the deed of assignment was in respect to Plot No. 537/1 Block 43 Kijitonyama area, Kinondoni, Dar es Salaam and not Plot No. 175 Block D Kunduchi Area, Kinondoni, Dar es Salaam. When referred to Exhibit P4 collectively, PW1 observed that a letter dated 5th April 2022 from the Defendant was a demand notice of payment of Tanzanian Shillings 30,711,186.47/= being normal and penal interests. By that time, the outstanding amount was Tanzanian Shillings 556,546,503.04/=. According to the letter dated 4th July 2022, the outstanding amount was Tanzanian Shillings 581,969,580.36/=. The Plaintiff did not pay this amount and thus failed to honour the terms of the contract. The letter also explained that, in case of other claim related to the building should be treated separately from the loan. PW1 denied to have been indebted to such amount. He added that the Defendant bank did not listen to them. He admitted that the Bank Statement is an important document and, as such, it was important for it to be part of the exhibits. He also admitted that in case of default, the bank normally charges penal interest and may recover the outstanding amount by selling the collaterals. When this matter was filed, the Defendant bank had already served the Plaintiff with a notice of default. 10 To date, there is no outstanding balance that the Plaintiff is supposed to pay to the Defendant. This is because the Defendant sold one of the collaterals, Plot No. 175 Block D Kunduchi Area, Kinondoni, Dar es Salaam, and the claim was offset. Re-examined by Mr. Ngudungi, PW1 testified that there is no unpaid amount by the Plaintiff to the Defendant because Plot No. 175 Block D Kunduchi Area, Kinondoni, Dar es Salaam was sold by the Defendant. Having sold the same, the amount was deposited into the loan account and the claimed sum was settled. The remaining balance was deposited into Plaintiff’s current account. When referred to Exhibit P3 collectively, PW1 testified that Plaintiff required the Defendant's bank to remove the penal charges and interest, but she did not. Exhibit P3 collectively shows that some issues needed to be resolved, but none were attended to. Re-examined further on Exhibit P4 collectively, PW1 observed that the Defendant informed the Plaintiff that the rental fee claims should not be related to the loan. Such a stance was incorrect because the rental fee was pledged as one of the collaterals to the loan. Thus, rental fees and loan repayment had a close relationship. While reconciling the accounts, Plaintiff noted an additional amount of Tanzanian Shillings 85,000,000/=. When referred to the letter dated 23rd May 2022, which is part of Exhibit P4 collectively, PW1 testified that the Plaintiff required the Defendant to 11 adjust the outstanding sum by offsetting the sum of Tanzanian Shillings 206,000,000/=. In a letter dated 4th July 2022, the Defendant resisted the claim, asserting that the rental fee should not be related to loan issues. The misunderstanding was actuated by the defendant’s failure to remit the rental fee to the loan account on time. As a result, penal charges and interest emerged. PW1 clarified to the Court that the Defendant bank sold the said collateral at Tanzanian Shillings 1,320,000,000/=. By then, the outstanding loan balance was Tanzanian Shillings 786,700,307.36/=. The remaining balance of approximately Tanzanian Shillings 533,299,692.64/= was deposited into the Plaintiff’s current account. However, after reconciliation, the outstanding loan amount was supposed to be Tanzanian Shillings 278,032,833/= as of October 2023. ROBERT EPHRAHIM SHEMHILU testified as PW2. Examined by Mr. Ngudungi, PW2 testified that he had known the Defendant bank since 2013 when she rented a house located at Plot No. 537/1 Block 43 Kijitonyama area, Kinondoni, Dar es Salaam. Being the tenant, the Defendant wanted to satisfy herself regarding the original certificate of title. It was learned that the title deed was under the custody of the CRDB Bank PLC, which was a lender to the Plaintiff by then. They were worried. As such, the Bank proposed to buy the loan, and they agreed to that 12 effect. The outstanding balance by then was Tanzanian Shillings 700,000,000/=. Thus, the collaterals were shifted to the Defendant Bank. PW2 continued to testify that it was agreed that the rental fee for Plot No. 537/1 Block 43 Kijitonyama area, Kinondoni, Dar es Salaam be used to repay the loan. By then, there was only one annual or yearly loan installment. Similarly, the rental fee was payable to the Plaintiff annually in one installment. When referred to Exhibit P1, PW2 testified the Defendant bank was supposed to pay the rental fee before offsetting the loan installment. The purpose of the loan was to liquidate the loan by CRDB Bank PLC so that CRDB Bank PLC could not sell the House in which the defendant was the tenant to recover the loan. The annual loan installment was Tanzanian Shillings 171,671,052/= while the Defendant bank paid the rental fee annually in the sum of Tanzanian Shillings 274,959,000/=. Thus, the Defendant was paying more than the disbursement the Plaintiff was supposed to pay in installments. Having offset the loan installment, the sum of Tanzanian Shillings 103,287,948/= remained as a balance in the Plaintiff’s Bank account. It was, therefore, not possible to fall into default because the Defendant was the first to remit the rental fee into the loan account. PW2 identified Exhibit P2 as the development loan facility of Tanzanian Shillings 725,876,773.96/=. It was a continuation of Exhibit P1. 13 It was executed on 15th December 2017. In 2017, the Defendant bank informed the Plaintiff that there was a need to amend the first contract (Exhibit P1) in view of the directives from the Bank of Tanzania. The amendment was that the rental fee be paid quarterly. The Parties, therefore, had to amend the loan agreement so that the loan could be repaid quarterly. The purpose of the loan, as per Exhibit P2, was to change the payment period. The Defendant Bank was the one first to deposit the rental fee before offsetting the loan installment. The agreed currency to be deposited in the operating account was Tanzanian shillings. The agreed currency for the rental fee was USD. The Defendant Bank, therefore, was supposed to convert the USD into Tanzanian Shillings before depositing the rental fee into the Plaintiff’s loan account. As per Exhibit P1, the rental fee was assigned to pay the loan. This is in view of item 2 of Annexure 2 (security), which deals with the deed of assignment of the rental income receivable from the building elected on Plot No. 537/1 Block 43 Kijitonyama area, Kinondoni, Dar es Salaam and Plot No. 175 Block D, Kunduchi Area, Dar es Salaam. However, Plot No. 175 Block D, Kunduchi Area, Dar es Salaam had nothing to do with rental issues because the Defendant was not a tenant on that Plot. When referring to Exhibit P4 collectively, specifically a letter dated 4th July 2022, PW2 testified that it was agreed that in case of any further 14 claim or query concerning the leasing of the property, the previous lease agreement should be treated separately and shall not affect the servicing of the outstanding loan. Further examined on Exhibit P3, PW2 observed that Tanzanian Shillings 68,739,750/= seemed to have not been deposited into the Plaintiff’s loan account. The Defendant maintained that the same amount was deposited into their USD Bank Account which the Plaintiff never maintained. Similarly, in item 4, the Plaintiff complained about failure by the Defendant to pay rental fee from 1st June 2017 up to 1st September 2017. The Defendant responded that the money was paid in the Plaintiff’s USD Bank Account and was spent by the Plaintiff before offsetting was made. PW2 denied to have owned the USD Bank Account. PW2 continued to testify that by June 2021, as per the Defendant, the outstanding amount was Tanzanian Shillings 511,607,819/=. As per their records, the outstanding amount was Tanzanian Shillings 186,100,000/=. The repayment period was eight (8) years from 2017 to 2025. The difference was due to the failure of the parties to reconcile the issues presented. This was caused mainly by penal interest due to the inability to deposit the rental fee into the Plaintiff’s loan account. Also, some rental fees were not deposited, and thus, no installments were made. 15 Examined further by Mr. Ngudungi, PW2 testified that Plot No. 175 Block D, Kunduchi Area, Dar es Salaam was sold by the Plaintiff in October 2023. It was sold at Tanzanian Shillings 1,320,000,000/= to Jessy Co. Limited. There is no information as to where the sale price was deposited. At the time of sale, as per the Defendant’s records, the outstanding balance was Tanzanian Shillings 786,000,000/=. According to the Plaintiff, the outstanding balance was Tanzanian Shillings 278,000,000/=. There is a difference of Tanzanian Shillings 508,000,000/=. PW2 admitted that the sum of Tanzanian Shillings 533,299,692.64/= as the balance from the sale price is traceable from the loan Bank account. He added that Plot No. 537/1 Block 43 Kijitonyama area, Kinondoni, Dar es Salaam is still under the possession of the Defendant. PW2 also testified that the buildings on Plot No. 175 Block D, Kunduchi Area, Dar es Salaam, were for school businesses under the Plaintiff's supervision. The school has been closed because the land was sold to a third party. The Plaintiff suffered loss, and her image was tarnished. The school had fifteen (15) teachers and ten (10) other staff. There was no other option but to terminate their employment contracts. Based on that, PW2 implored this Court to enter a verdict in the Plaintiff’s favor due to the loss suffered. 16 Cross-examined by Ms. Selestine, PW2 testified that the two contracts signed by the parties are binding concurrently. He added that the Defendant desired the Plaintiff to take the loan. The Plaintiff never requested or applied for the loan. The purpose was to liquidate the loan between the Plaintiff and CRDB Bank PLC. There was no money movement directly from the Defendant to the Plaintiff’s bank account. The purpose of the second contract was to change the payment period. When referred to Exhibit P1, PW2 observed that the loan was supposed to be paid by the Defendant because she was supposed to deposit the rental fees into the loan account so that the loan installments could be deducted therefrom. The facility amount on the first contract was Tanzanian Shillings 700,000,000/=, and on the second, Tanzanian Shillings 725,876,773.76/=. The two contracts had different loan amounts. For the first contract, the annual disbursement was Tanzanian Shillings 171,671,052, while for the second, Tanzanian Shillings 42,917,764/=, payable quarterly. From 2014 to 2015, the disbursements were correctly made to the Defendant, equal to Tanzanian Shillings 343,342,104/= including interest and principal amounts. After the change of payment in 2017, the principal sum plus interest stretched to Tanzanian Shillings 725,876,773.76/=. He denied to have defaulted to pay the loan. 17 Cross-examined by Mr. Kidifu, PW2 testified that in view of Exhibit P1, the purpose was to buy the loan at CRDB Bank PLC. As such, the liability to CRDB Bank PLC shifted to the Defendant. The Plaintiff’s properties secured the loan. Another security was added, not initially one of the securities with CRDB Bank PLC. This was in respect to the assignment of the rental fees. The rental income receivable from the two buildings located at Kijitonyama and Kunduchi were to pay the loan. Cross-examined further, PW2 observed that the Deed of Assignment had already been executed in favor of the Defendant Bank. He, however, admitted to have not seen it in Court. He also admitted that the bank normally realizes the collaterals when a default occurs. He denied to have been in default by not remitting the installments to the Defendant. The Defendant used to offset the loan directly from the rental fee bank account. Regarding page 12 of Exhibit P1, PW2 testified that the Loan Bank Account should be full of funds to enable the Defendant to offset the amount (loan installment). The Plaintiff was supposed to ensure the Bank Account was full of funds when the loan installment became due. The penal or default interest rate would be chargeable when the bank account was empty at the time of loan installment. He admitted to have not tendered the Lease agreement. When referred to page 14 of Exhibit P1, 18 DW2 noted that the rental fees assigned were in respect to Plot No. 537/1 Block 43 Kijitonyama, where the Defendant was a tenant. What is on the Plaint is not the same. Before signing the second contract, parties went through it first. But it could appear there was a slip of the pen. The actual Plot on the title deed is Plot No. 537/1, Block 43 Kijitonyama. However, typing errors are not an issue. Cross-examined on Exhibit P2, PW2 observed that the purpose was to change the payment period. The parties restructured the loan's repayment period from annual to quarter payment while the loan term remained the same. The Defendant delayed in depositing the rental fee into the loan account and remitting the money into the loan account. He, however, conceded that he had no evidence to that effect. He implored this Court to order the parties to sit together to reconcile the records. He also reiterated that the Plaintiff maintained no USD rent Account. When referred to Exhibit P4 collectively, PW2 testified that it was incorrect for the Defendant to disassociate the rental fee from the loan. Cross-examined by Mr. Mark, PW2 testified that up to when the matter was filed in Court, there was an increase in the outstanding amount due to nonpayment or interest. The lease agreement has something to do with this case. The Court will only refer to the documents tendered in Court. 19 Re-examined by Mr. Ngudungi, PW2 observed that the building where the Defendant was the tenant had not been returned to the Plaintiff because the Defendant still holds the entrance keys. The Building is on Plot No. 573/1 Block 43 Kijitonyama. According to the contract, the Defendant was supposed to renovate the building before the same was handled back. To date, some of the Defendant’s properties are there. The 2017 loan Agreement is the continuation of the 2014 loan contract. The 2017 loan contract had never been made inoperative by the 2014 loan contract. When referred to Exhibit P2, PW2 noted that the Deed of Assignment was executed in view of the terms of the Contract (exhibit P2). Under the contract, one of the listed documents is the deed of assignment. Re-examined further, PW2 testified that the lease agreement has never been in dispute between the parties, which is why the Plaintiff never considered it an important document for tendering in Court during hearing. That was all about the Plaintiff’s case. The Defendant brought one witness. I shall now briefly examine the Defense case. SIRIANA BONIFACE LEWANGA, the branch manager at the Defendant’s Mbagala branch, testified as DW1. Examined by Mr. Kidifu, DW1 testified that she had been employed by the Defendant since 2012, holding several positions. She recognized the Plaintiff as a client at 20 Mwenge Brach who was advanced a loan in 2014, which was restructured in 2017. The original loan was Tanzanian Shillings 700,000,000/=. The purpose was to take over the facility loan with CRDB Bank PLC, repayable within eight years. There was one annual installment (yearly installment) of Tanzanian Shillings 171,671,052.00/=. Two securities secured the loan, which were located at Kijitonyama and Kunduchi. It was a requirement that the Plaintiff’s Bank account be full of funds to pay the installment. DW1 continued to note that when the client fails to pay the loan, the Bank normally gives him or her a demand letter. The Bank can also call the client for negotiation. Restructuring happens when the Bank and the client negotiate to that effect. According to the contract, there were three securities: Plot No. 573/1 Block 43 Kijitonyama, Dar es Salaam, Plot No. 175 Block D Kunduchi area, Dar es Salaam and the Deed of Assignment. He told this Court that the Deed of Assignment had never been signed or executed by the parties. In 2017, the parties agreed to restructure the loan, thereby changing the mode of payment from yearly to quarterly installment because the Plaintiff was not paying the installment properly. When referred to Exhibit P2 (the 2017 Loan Agreement), DW1 testified that the outstanding loan was Tanzanian Shillings 725,876,773. 66/=. The purpose was to change the repayment period. The loan would be paid in full within eight equal to the quarterly installment of Tanzanian 21 Shilling 41,694.237.32/=. In case of default, the bank was obliged to remind the client by serving him the Demand Notice. The securities were Plot No. 537/1 Block” 43” Kijitonyama, Dar es Salaam, Plot No. 175 Block D Kunduchi area, Dar es Salaam and the Deed of Assignment in respect of Plot No. 175 Block D Kunduchi area, Dar es Salaam. DW1 insisted that the parties never executed the Deed of assignment. According to the contract, the borrower (the Plaintiff) was required to ensure that 90% of his sales/ proceeds passed through the Plaintiff’s Bank Account maintained by the Defendant. This is in view of the conditions of sanctions under clause (b) of the Agreement. There were no other sources of funds for the loan repayment under the Agreement. The 2017 facility was a continuation of the 2014 facility. The loan was not serviced perfectly, so there was an additional amount in the 2017 facility. The rental fee for Plot No. 537/1 Block” 43” Kijitonyama was not the source of funds for the loan repayment. When examined on Exhibit P3, DW1 observed that the lease and loan agreements were different agreements, each with its terms. DW1 recognized Exhibit P4 collectively as correspondence between the parties regarding the loan payment and the building handover. Specifically, on the letter dated 4th July 2022, the Bank clarified that the loan should be treated separately from rental fees. The loan was supposed to be repaid 22 regardless of whether the Plaintiff paid the rent or not. DW1 tendered a Default Notice (Land Form No. 54D) and was admitted as Exhibit D1. Finally, DW1 implored this Court to dismiss this suit with costs. Cross-examined by Ms. Fabian, DW1 admitted to have not submitted or tendered documents showing that she was an employee of the Defendant Bank. She also admitted to have been in a business relationship with Plaintiff. Similarly, the parties were in a tenant-landlord relationship. She added that the loan term was eight years and was supposed to be paid by 2022. There were three securities to secure the loan, one of which was the rental income from the buildings owned by the Plaintiff. The Defendant was also one of the tenants. There were two separate contracts, the Lease Agreement and the Loan Agreement. Cross-examined further, DW1 noted that there was no reconciliation on the Accounts between the parties because there was an automatic quarterly installment from Plaintiff’s Bank Account to Defendant after restructuring. When referred to Exhibit P3, DW1 admitted not to know whether the building was handed over to the Defendant. She added that Exhibit D1 (statutory notice) was served to the Plaintiff through a registered mail. The Defendant Bank sold the security and paid for the loan. 23 Re-examined by Mr. Kidifu, DW1 observed that the rental income Agreement was supposed to be registered and then assigned to repay the loan. Restructuring was done by referring to the 2014 loan agreement. On 7th October 2024, I ordered the parties to file the final Written Submissions. Having passed through the records, I am satisfied that only the Defendant’s counsel complied with the order. Unjustifiably, the Plaintiff’s counsel did not file the final submissions as ordered. I will briefly examine the final submissions filed by the Defendant’s counsel. For obvious reasons, I will not replicate the evidence as adduced by the parties. Addressing on the first issue as to whether there was a breach of the Loan Agreement executed by the parties, Mr. Kidifu contended that there is no dispute that there was a loan facility agreement between the parties. This is evidenced by the two loan agreements admitted as Exhibits P1 and P2. In view of Exhibit P1, the sum of Tanzanian shillings 700,000,000.00/= was advanced to liquidate the outstanding loan with CRDB Bank PLC. There was a yearly instalment of Tanzanian Shillings 171,671,052.00/=. In 2017, there was a restructuring, and at this time, the parties introduced and agreed upon a quarterly installment of Tanzanian Shillings 41,694,237/=. PW1 and PW2 mentioned the collaterals as Plot No. 573/1, 24 Block 43 Kijitonyama Area, Kinondoni Dar es Salaam, and Plot No. 175, Block D Kunduchi Area, Kinondoni Dar es Salaam. Mr. Kidifu cited Section 10 of the Law of Contract Act, Cap 345 RE 2019, which states that all agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not expressly declared to be void. To fortify, he also cited the case of Roband Village Council vs. Ngome Safari Camp Limited, Civil Case No. 21 of 2018 (unreported). Based on the testimonies of PW1 and PW2 and Exhibits P1 and P2, the learned counsel observed that there was a valid contract between the parties. By referring to PW2, Mr. Kidifu faulted the Plaintiff for not tendering the Lease Agreement between the parties and thus denying this Court an opportunity to understand the terms of the agreement. On the other hand, the learned counsel observed that in view of the testimony of DWI, the Lease Agreement and the Loan Agreement are two distinct agreements, each with its terms. He contended that each agreement must be treated separately. On further note, Mr. Kidifu observed that the loan agreement tendered does not indicate that the only source of funds is rental income from Plot No. 573/1, Block 43, Kijitonyama Area Kinondoni, Dar es Salaam. 25 It was further submitted that the Plaintiff breached the terms of the agreement by not remitting the agreed installment to the Defendant. The testimonies of PW1, PW2 and DW1 seem to support this assertion. As a result, she was served with several demand letters, a default notice, and, ultimately, the sale of collateral to recover the claimed sum. He cited page 235 of the Book titled “Contract Law” Macmillan Professional Masters (1990), the Macmillan Press Ltd. He also cited the case of Abul Alibhai Azizi vs. Bhatia Brothers Ltd 12000] T.L.R 288. Mr. Kidifu also submitted that parties are bound by pleadings and that evidence and testimony should support them. It should be noted further that parties to an agreement are bound by the terms they explicitly agreed therein. He cited the case of Joseph F. Milizn vs. Kowa Mohamed Liesel Sukuma (Legal Representative/Administratrix of the estate of the late Rashid Mohamed Liesel), Civil Appeal No. Civil Appeal No. 227 of 2019 Court of Appeal of Tanzania at Tabora, where it was observed that parties are bound by the terms of the agreements they enter on their free will. He was of the view that the Plaintiff hopelessly failed to prove her allegations on the balance of probabilities as per sections 110 and 111 of the Law of Evidence Act, Cap 6, R.E 2022. 26 Addressing the second issue, Mr. Kidifu observed that the Plaintiff breached the loan agreement in view of the terms of Exhibits P1 and P2. He added that the Plaintiff's failure to settle the claimed sum resulted in the imposition of interest and penalties. As of 2nd May 2022, the Plaintiff was indebted to the Defendant in the sum of Tanzanian Shillings 660,103,366.84/=, comprising the principal sum, interest, and penalties. Regarding the reliefs parties are entitled to, Mr. Kidifu submitted that since the Plaintiff, on her own volition, decided to stop servicing the outstanding loan balance even after several demand notices were issued to her, the Defendant was entitled to recover the outstanding loan by realizing the collateral. In such a situation, the Defendant is entitled to damages for the breach of the contract. He cited the case of Robinson vs. Harm (1848) I Ex 850, 855). The learned counsel viewed that by selling the collateral, the Defendant compensated herself and returned the remaining amount to Plaintiff’s Bank Account. Based on the foregoing argument and cited authorities, Mr. Kidifu implored this Court to consider that the Plaintiff breached the terms of the agreement. He lastly prayed to this Court to dismiss the suit with costs. Having candidly and dispassionately considered the evidence adduced by the parties and the final submissions by the learned counsel for the Defendant, the question before me is whether the claim by the 27 Plaintiff has been proved to the required standards acceptable in civil cases. It must be understood that whoever alleges the existence of any fact in civil cases bears the duty to prove it, and the standards of proof are on the balance of probabilities. Therefore, the Plaintiff is dutifully bound by law to prove her case to the required standards if she wants the Court to fall into her prayer clause in the Plaint. This principle is gathered from sections 110, 112, and 115 of the Evidence Act (supra) and judicial precedents, including the case of Manager NBC Tarime vs. Enock M. Chacha [1993] TLR 228. In Anthony M. Masanga vs. Penina (Mania Mgesi & Lucia (Mana Anna), Civil Appeal No. 118 of 2014, Court of Appeal at Mwanza the Court observed that, in civil proceedings, the party with legal burden also bears the evidential burden and the standard in each case is on the balance of probabilities. As said before, with the help of the learned counsels for both parties, the following issues were framed: one, whether there is a breach of the loan agreement executed by the parties; two, if issue number one is answered in affirmative, whether the Plaintiff is entitled for payment of penalties and interest by the Defendant; and three, reliefs to which parties are entitled to. I will now determine the raised issues while examining the evidence on records. 28 The first agreed issue is whether there is a breach of the loan agreement executed by the parties. At the outset, I should state that considering the evidence adduced during the hearing, the following facts are not disputed. One, that parties in 2013 entered into a tenancy agreement in which the Plaintiff leased his building on Plot No. 573/1 Block 43, Kijitonyama Area, Kinondoni in Dar es Salaam to the Defendant; Two, having realized that the leased property is mortgaged to CRDB Bank PLC for a term loan, the Plaintiff decided to buy the loan; three, in consequence therefore, in 2014, the parties entered into the loan agreement in which the sum of Tanzanian Shillings 700,000,000/= to liquidate two outstanding facilities with CRDB Bank PLC, repayable within eight years in view of Exhibit P1. It is not in dispute also that, four, there was one annual installment of Tanzanian Shillings 171,671,052.00/= comprising of the principal sum and interest commencing on or before July 2015; Five, the following collaterals secured the loan to wit; Plot No. 175 Block D, Kunduchi Area, Kinondoni, Dar es Salaam, Plot No. 537/1 Block 43, Kijitonyama Area, Kinondoni in Dar es Salaam and a Deed of Assignment of rental income receivable from buildings erected on both Plots mentioned above; Six, by a letter offer dated 15th September 2017 (Exhibit P2), the first loan agreement (Exhibit P1) was restructured and the outstanding amount 29 became Tanzanian Shillings 725,876,773.95/= repayable within eight years by a quarterly installment of Tanzanian Shillings 41,694,237.32/= and Seven, the securities remained the same. PW1, PW2, and DW1 agree that one of the securities, Plot No. 175 Block D, Kunduchi Area, Kinondoni, Dar es Salaam, was sold in the realization of the claimed sum. While PW1 and PW2 maintained that it was wrong for the Defendant Bank to sell the said property, DW1 was confident that the collateral was sold to recover the claimed sum due to the failure by the Plaintiff to remit to the Bank the agreed quarterly installments. PW1 testified that a misunderstanding arose regarding the Plaintiff's failure to remit some of the installments. To settle that, the parties herein engaged in the exchange of correspondence and conducted meetings unsuccessfully. PW1 testified further that according to the agreement, the Defendant was supposed to deposit the rental income into the loan account. As a result of the failure to do that, the outstanding balance stretched to an unbearable amount, resulting into default. He referred this Court to Exhibits P1 and P2, where the Deed of Assignment of rental income from the two landed properties is one of the securities pledged to secure the loan. 30 PW2’s testimony was a replica of PW1. He testified that the Defendant Bank was required first to deposit the rental fee before offsetting the loan installment. The agreed currency to be deposited in the operating account was Tanzanian shillings. The agreed currency for the rental fee was USD. The Defendant Bank, therefore, was supposed to convert the USD into Tanzanian Shillings before depositing the rental fee into the Plaintiff’s loan account. He added that, as per Exhibit P1, the rental fee was assigned to pay the loan; however, Plot No. 175 Block D, Kunduchi Area, Dar es Salaam, had nothing to do with rental issues because the Defendant was not a tenant on that Plot. According to DW1, the loan was secured by three securities: Plot No. 573/1 Block 43 Kijitonyama, Dar es Salaam, Plot No. 175 Block D Kunduchi area, Dar es Salaam and the Deed of Assignment. He told this Court that the Deed of Assignment had never been signed or executed by the parties. In 2017, the parties agreed to restructure the loan, thereby changing the mode of payment from yearly to quarterly installment because the Plaintiff was not paying the installment properly. The loan would be paid in full within eight years, equal to the quarterly installment of Tanzanian Shilling 41,694.237.32/=. In case of default, the bank was obliged to remind the client by serving her the Demand Notice. DW1 insisted that the parties never executed the Deed of assignment. 31 DW1 observed further that the borrower (Plaintiff) was required to ensure that 90% of his sales/ proceeds pass through Plaintiff’s bank account, which the Defendant maintains. This is in view of the conditions of sanctions under clause (b) of the Agreement. There were no other sources of funds for the loan repayment under the Agreement. The 2017 facility was a continuation of the 2014 facility. The loan was not serviced perfectly, so there was an additional amount in the 2017 facility. The rental fee for Plot No. 537/1 Block” 43” Kijitonyama was not the source of funds for the loan repayment. When examined in Exhibit P3, DW1 observed that the lease and loan agreements were different agreements, each with its terms. From what I have endeavored hereabove, it could appear that the Plaintiff agrees to have been in default to service the loan, camouflaging on the failure by the Defendant to pay the rental fee for Plot No. 537/1 Block” 43” Kijitonyama, Dar es Salaam. According to the Plaintiff, the rental fee for the said landed property was assigned to pay the loan with the Defendant. The Defendant was first to deposit the rental fee before she remitted the agreed quarterly installment to the Plaintiff’s loan Account. PW1 and PW2 heavily rely on the Deed of Assignment, which has been pledged as one of the securities to secure the loan. 32 DW1 did not find the purchase of PW1 and PW2’s testimonies. She insisted that the loan and the lease agreement are two distinct agreements, each with its terms. She supported the assertion that although the parties pledged the Deed of Assignment on rental income for two properties, they have never executed it. She also observed that rental income was not the only source of funds to repay the loan. She observed that, in view of the contract, 90% of the sales or proceeds were supposed to pass through the Plaintiff’s Bank Account maintained by the Defendant. The Plaintiff’s Bank Account was supposed to be full of funds enough to enable the Defendant to remit the agreed quarterly installment to the Plaintiff’s Loan Account. Given the above testimonies and tendered exhibits, I am constrained to agree with my findings that the midpoint of contention is the deed of Assignment on the rental income on two properties owned by the Plaintiff pledged as one of the securities. The question would be whether such a thing existed. Before doing that, I find it apposite, albeit briefly, to look into what the Deed of Assignment entails. A Deed of Assignment is a legal document that transfers the rights and obligations of one party to another. In most cases, it is used to transfer property or interests in property from one person to another. It is an agreement in which an assignor declares a promise that from the 33 assignment date or any date stated within the contract, the assignor allocates the entirety of its stake in that land or property to the assignee. It is a legally binding document and is often recorded in the local land registry as proof of property transfer or specific right to the new owner. According to the Property Shark Website, such a document is needed when a mortgaged property is rented. It enables the lender to collect the rent if the mortgage is defaulted upon. The document protects the lender mainly since, without it, the owner might continue to collect revenues even after having stopped making the mortgage payments. In some cases, the Assignment of rent is a full document, while in other cases, it is just a mortgage contract clause. It becomes null and void when the entire debt is paid to the lender or the lease period is over. According to the Dlegal Law Office Website, an assignment of rent refers to a legal agreement in which a property owner (usually the landlord or the owner of a property) assigns or transfers their right to receive rental income from tenants to another party, often a mortgage lender or a financial institution. This assignment typically occurs as collateral for a loan or mortgage. It is a strategic move that serves as a risk mitigation mechanism primarily for lenders. It offers a layer of financial protection against potential borrower defaults. If the borrower defaults on the loan, the lender can step in and collect the rental income 34 directly to help satisfy the debt. It’s important to note that the specifics of the rent assignment can vary based on the terms negotiated between the lender and borrower. Some agreements may allow the borrower to continue collecting rent until a default occurs, while others may require the automatic transfer of rental income to the lender. In such circumstances, rent assignment encompasses two primary types: absolute assignment and collateral assignment. These distinctions significantly impact the level of control a mortgage lender has over rental income and the conditions under which they can assert that control. It’s important to note that both absolute and collateral assignments can be integrated into either a general assignment of rents, where the lender is granted a security interest in all rental income from the property, allowing them to collect rent from all tenants in the event of default, or a specific assignment that assigns the right to collect rental income from a particular property or tenant to the lender. From the above, it is crystal clear that a Deed of Assignment is a serious legal document entered into between the parties. When duly executed, it transfers the rights and obligations of one party to another. It enables the lender to collect the rent if the borrower defaults when pledged as a collateral assignment. It should be registered at the land Registry under the Registration of Documents Act to give effect to its 35 terms. When the borrower is the corporate entity, it is advised that the same be registered with BRELA. In this case, the Defendant denied breaching the Agreement on the pretext that she failed to remit the rental income to the Plaintiff. DW1 maintained that no Deed of Assignment had been executed by the parties. PW1 and PW2 relied heavily on Exhibits P1 and P2 that listed a Deed of Assignment on rental income on two landed properties owned by the Plaintiff as one of the securities. From my observation, I agree with the Defendant that no Deed of Assignment has been executed by the parties. Even if it is there, the Plaintiff never laid the terms and conditions. PW1 conceded that the parties have never executed the Deed of Assignment. PW2 maintained that the parties executed it but it was not tendered in evidence. For this reason, I agree with DW1 that although it was listed in the loan agreements, the parties never executed it. As such, the Plaintiff cannot rely on the document, which was never executed and tendered in Court. According to DW1, 90% of the sales and proceeds of the Plaintiff were supposed to pass through the Plaintiff’s loan Account to enable the Defendant to remit the agreed quarterly installments. In such circumstances, I agree with the Defendant that rental income was not the 36 only source of income for quarterly remittances. According to the schedule to Exhibit P1, the Plaintiff was required as follows; You should, therefore, ensure that your Account holds sufficient funds to meet the above obligations. Under the agreement, the Plaintiff was supposed to ensure that her bank Account holds enough funds for the agreed quarterly remittances. There is nowhere indicating that the rental income was the only source of funds for loan repayment. The Plaintiff was at liberty to deposit all of her sales and/or proceeds into the loan Accounts to be safe when the agreed installments became due. It is my further observation that, much as the Deed of Assignment on rental income on two properties was listed as one of the securities to secure the loan, it was a collateral assignment of rents usually realized when the borrower (Plaintiff) defaults to pay the loan. As said before, the terms of the Deed of Assignment were never laid. However, the fact that it is listed as one of the securities, even if it was executed, the Defendant could only enjoy its benefit after the Plaintiff defaults to remit the agreed installments. As a matter of banking practice, securities do not pay loan installments, but they are realized when the borrower falls into default. It was not listed in Exhibit P1 and P2 as an absolute assignment where 37 usually the lender is assigned to collect the rental fees from day one up to when the claimed sum (loan) is fully settled. Having so resolved, the question would be whether the Plaintiff breached the loan agreement. Clause 4.2.2 of Exhibit P2 provides as follows; The Borrower shall pay to the Bank all amounts outstanding on the date of payment together with interest thereon and all other costs charges and expenses due payable to the Bank hereunder or under the security. Under cross-examination, PW1 admitted that Plaintiff defaulted to remit the agreed installments between June – September 2017. As such, the penal interest was correctly applied/charged. He testified further that apart from that, there were many other non-remitted installments resulting in default by the Plaintiff. DW1 testified that Exhibit P4 collectively as correspondence between the parties regarding the loan payment and the building handover. Specifically, on the letter dated 4th July 2022, the Bank clarified that the loan should be treated separately from rental fees. She added that the loan was supposed to be repaid regardless of whether the Plaintiff paid the rent or not. According to Exhibit D1 (Notice of Default), the Plaintiff was indebted to the Defendant for Tanzanian Shillings 660,103,366.84/= as of 2nd May 2022. 38 In such circumstances, the Plaintiff fell into default, and, as such, she breached clauses 11.1 of Exhibits P1 and P2, thus blatantly violating section 37 of the Law of Contract Act, which provides that the parties to a contract must perform their respective promises unless such performance is dispensed with or excused under the provisions of the Act or any other law. Black's Law Dictionary, 8th Edition of 2004 defines the term “breach of contract” to mean any violation of a contractual obligation by failing to perform one's own promise by repudiating it or by interfering with another party's performance. In the case of Philipo Joseph Lukonde vs. Faraji Ally Said Civil Appeal No. 74 of 2019, Court of Appeal at Dodoma, the court observed that; Where parties have freely entered into binding agreements, neither courts nor parties to the agreement, should interpolate anything or interfere with the terms and conditions therein Based on the evidence above and in a bid to answer the first issue, I am of the considered opinion that the Plaintiff breached the terms of the loan agreement by failing to remit to the Defendant the agreed quarterly installments. The defendant, therefore, was entitled to execute or apply the recovery measure under the law by realizing the collateral pledged under the contract. Therefore, Plaintiff should blame herself for not honoring the terms of Exhibits P1 and P2 and as a result, recovery 39 measures were applied by the Defendant. This Court has no mandate to interfere with what the parties agreed to be bound with. Having so observed, the Plaintiff cannot recover the interest and penalties from the Defendant. This is because the Plaintiff defaulted on the loan agreement, and thus, the interest rate chargeable was correctly applied in view of Part 5 of Exhibits P1 and P2. Since the Plaintiff breached the terms of the Agreement as aforesaid, she cannot benefit from her wrong by recovering the normal and penal interests. In the premises, the second issue is answered in the negative. Regarding what relief parties are entitled to, Mr. Kidifu submitted that the Defendant had already realized one of the collaterals by selling it. He further stated that the remaining balance of the sale proceeds had been deposited into the Plaintiff’s Bank Account. PW1 clarified to the Court that the Defendant bank sold the collateral at Tanzanian Shillings 1,320,000,000/=. By then, the outstanding loan balance was Tanzanian Shillings 786,700,307.36/=. The remaining balance of approximately Tanzanian Shillings 533,299,692.64/= was deposited into the Plaintiff’s current account. P2 also was not far from testifying that Plot No. 175 Block D Kunduchi area, Dar es Salaam, was sold by the Defendant in realization of the claimed sum. In the circumstances, the Plaintiff was discharged 40 from the obligation. This Court, therefore, has nothing to grant as reliefs to the parties. To that end, this suit is hereby dismissed. Considering the circumstances, the Defendant shall recover her costs arising from this suit. It is so ordered. Right of appeal explained. DATED at DAR ES SALAAM this 7th November 2024. H.S. MTEMBWA JUDGE 41 42