VENERANDA CHOCHA VS BEST MICROFINANCE COMM CASE NO

IN THE HIGH COURT OF TANZANIA (COMMERCIAL DIVISION) AT PAR ES SALAAM. COMMERCIAL CASE NO. 126 OF 2016

BETWEEN VENERANDA CHOCHA BACHUNYA----------------------PLAINTIFF

VERSUS BEST MICROFINANCE SOLUTIONS LIMITED -—1st DEFENDANT BEST SALE BUREAU DE CHANGE LTD.--------------------------- 2ndDEFENDANT GEOFREY WILLIAM MALAMILA---------------------------------- 3rdDEFENDANT ALOYCE KISSENGA MCHILI------------------------------------- 4thDEFENDANT VERONICA ALOYCE KISSENGA----- ------------- 5th DEFENDANT REDIMNA GINWAS HAMAY-------------------------------------- 6thDEFENDANT

JUDGMENT B.K. PHILLIP, J The plaintiff herein instituted this case praying for Judgment and Decree against the defendants jointly and severally as follows; i. The immediate payment of the principal sum of United States of America Dollars One Hundred and Fifty Four thousands (USD 154,000) only. ii. The payment of the interest at the Commercial rate of the sum of money in prayer (i) above, from the date of the acknowledgement of the receipt of the said sum of money that is on the 25/10/2014 to the date of judgment. i iii. An order for the payment of the interest at commercial rate for the sum of money in prayers (i) and (ii) herein above from the date of judgment to the date of full payment. iv. An order for the payment of general damages to the tune of Tanzania shillings 100,000,000/=. v. Costs of this suit. vi. Any other order and/or reliefs) as this honourable court may deem fit any just to grant. It is the Plaintiff's case that from the 25th - 31st October, 2014 the 1st and 2nd Defendants received a total sum of Tshs. 261,338,000/= from the Plaintiff for changing the same into US Dollars at the exchange rate of Tshs. 1,697/= for 1 US Dollar which was equivalent to USD 154,000/=. The 1st and 2nd Defendants did not change the money as agreed. After receiving the money they started avoiding communicating with the Plaintiff. On the 12th March, 2015, the 1st and 2nd

defendants entered into an agreement with the plaintiff for the payment of said sum of Tshs. 261,338,000/= upon failure to change the money into US Dollars as agreed. The terms of the agreement were that, by 12th May, 2015 the whole amount that is Tshs. 261,338,000/= to be paid back tQ the Plaintiff. The money was not paid back to the Plaintiff as agreed, thus the plaintiff decided to lodge this case. It is stated in the plaint that the plaintiff is a business women. Both 1st and 2nd defendants are registered companies. The 1st defendant involves itself in granting loans to various persons while the 2nd defendant deals with currency exchange services. The 3rd,4th, 5th and 6th defendants are shareholders and directors of the 2 1st and 2nd defendants. Furthermore, the plaint reveals that the plaintiff decided to sue the defendants jointly and severally because, the 3rd,4th,5th and 6th defendants are the Directors, signatories, shareholders and brain behind the operations of the 1st and 2nd defendants. It is alleged in the plaint that any act of the directors/shareholders binds them jointly and severally. Furthermore it is stated in the plaint that this suit is fit for lifting the corporate veil of the 1st and 2nd defendants. The 1st 2nd 3rd and 6th defendants did not file any defence despite the fact that they were duly served with summons to appear and defend the claim. On the

22nd November, 2017, this Court (Songoro, J as he then was) entered a default Judgment against the 1st,2nd, 3rd and 6th defendants. Therefore this judgment is specifically in respect of the 4th and 5th defendants. When the case was called for hearing the learned advocate Erick Kamala who appeared in Court for the 4th and 5th defendants prayed for an adjournment of the case. The prayer was not granted. He declined proceed with the hearing, thus, court ordered the plaintiff's advocate Francis Makota to proceeded with hearing the case exparte. The issues framed for determination by the predecessor Judge, Hon. Songoro, J as he then was are as follows; (i) Whether or not the Plaintiff deposited a sum of USD 154,000 to the 1st and 2nd defendants for the purpose of exchanging in Tanzanian shillings. If issue No. 1 is answered in the affirmative. 3 (ii) Whether the 1st and 2nd defendants failed to pay back the deposited sum. (iii) Whether the 4th and 5th defendants are liable for the act of the 1st and 2nd defendants against the plaintiff. (iv) What reliefs the parties are entitled to. To prove the claims against the 4th and 5th defendants, the plaintiff's advocate brought in court two witnesses. The first witness (PW1) was the Plaintiff, Veneranda Chacha Bachunya. In her testimony in chief she stated the following, that she had been engaging in business transactions with the 3rd

defendant, Aloyce Kissenga Mchili alias Kimbari since 2011. Between 25th -31st October, 2014, she gave the 1st and 2nd defendants Tshs. 261,338,000/= being amount of money for exchange from Tanzanian currency to United States Dollars. The exchange rate agreed was Tshs. 1,697/= per US Dollar. The acknowledgement for receipt of the money was signed by one Ilampa Enock Tuza on her behalf. Upon failure of the 1st and 2nd defendants to fulfill the agreement, on 12th March, 2015 she entered into an agreement with the 1st and 2nd defendants in which they agreed on the time frame for payment of the money she gave them. Furthermore, PW1 stated that, the agreement for payments of the money was executed on behalf of the 1st and 2nd defendants, since it has a rubber stamp of the 2nd defendant, Best Sale Bureau de change Ltd affixed thereon. The agreement was signed by the 4th defendant, Aloyce Mchili who is also a director of the 1st and 2nd defendants and the directors of the 1st and 2nd defendants had knowledge of the transaction. 4 In addition to the above, PW1 stated that, she decided to sue the defendants jointly and severally because the 3rd ,4th , 5th and 6th defendants are the brain behind the 1st and 2nd defendants as well as share holders. She stated further that as a business woman she has suffered severe loss due to the defendants' failure to honor the terms of the contract

which can only be remedied by payment of general damages and the principal sum due. Furthermore, she stated that the money outstanding would have been invested in business and generate income. PW1 tendered two exhibits. Exhibit Pl is an agreement between Geofrey. W. Matamia and PW1 dated 12th March, 2015 and Exhibit P2 is a document dated 29th October, 2018 showing that one Joseph Mwacha received Tshs. 261,338,000 from one Ilampa Enock Tuzo on behalf of Best Sale Bureau De Change Ltd (2nd defendant). Exhibit P2 was signed by Ilampa Enock Tuza and Joseph Mwacha and witnessed by Habil Aman and Justia Mlay. Also, a rubber stamp of Best Sale Bureau De Change Ltd is affixed thereon. The second witness, (PW2) was Ilampa Enock Tuzo. In his testimony in chief, PW2 stated that, he is a businessman working with PW1 (Veneranda Chocha Bachunya). On 25th - 31st October, 2014, he was instructed by PW1 to exchange Tshs. 261,338,000/= into US Dollars. He complied with the instructions by going into the office of the 1st and 2nd defendants with Tshs. 261,338,000/= for exchanging them. He stated further that the agreed rate was Ths. 1,697/= per US Dollar, thus, the amount was equivalent to USD 150,000 and the document for acknowledgement of receipt of the money is exhibit P2. 5 PW2 testified further that, the 1st and 2nd defendants had no enough US Dollars, so, he was asked to come latter to

collect the sum of USD 150,000/=, however the 1st and 2nd defendants never paid that sum of USD 150,000 as they promised. On 12th March, 2015 the plaintiff entered into an agreement with the 1st and 2nd defendants on the mode of payments of the money and he witnessed that agreement. It was PW2's testimony that up to date the defendants have not paid back the Plaintiff's money. PW2 tendered in court exhibit P3 which is a letter from Brela, dated 1/8/2016, showing that the 3rd, 4th, 5th and 6th defendants are the directors of Best Microfinance Solutions Limited and each one of them owns 250 shares. Now, let me start the determination of the issues. Starting with the first issue, that is whether or not the plaintiff deposited a sum of USD 150,000/= to the 2nd defendant for the purpose of exchanging into Tanzania Shillings. It is my considered view that under the circumstances of this case where by this court (Songoro, J as he then was) entered a default judgment against the 1st , 2nd , 3rd and 6th defendants for all of the plaintiff's claims, it means that the first issue automatically has to be answered in the affirmative by virtue of existence of the default judgment, likewise the second issue, which is whether the 2nd defendant failed to pay back the deposited sum, the answer is that the 2nd defendant failed to pay back the deposited sum. The explanation behind the above

findings is that by entering the default judgment against the 1st, and 2nd defendants it means that this court has already made a determination of all of the allegations/claims 6 against the 1st and 2nd defendants. Therefore the next issue that I have to determine is whether the 4th and 5th defendants are liable for the acts of the 1st and 2nd defendants against the plaintiff. In determining this issue, it is important to take into the consideration the legal relationship between the 1st and 2nd defendants on one side, and the 4th and 5th defendants on the other side. The 1st and 2nd defendants are registered companies. This fact is alleged by the plaintiff in the plaint and supported by exhibit P2, which is a report from Brela, showing the status of the 1st defendant, to the effect that 4th and 5th defendants are directors and shareholder of the 1st defendant. Therefore, the relationship between the 1st and 2nd defendants on one side and the 3rd and 4th defendant on the other side is that of directorship/ownership of the companies. Exhibits Pl and P2 show that the money in question were received by the companies through their chief executive officers/directors. Under the circumstances, I am compelled to revisit the principles of company law as far as the liabilities of directors and shareholders are concerned. One of the fundamental principle of company law is that, a company

is a legal entity distinct from its share holders and directors capable of being sued (see the case of Saloman vrs Salomon (1897) AC 22). Therefore, a company is solely answerable and responsible for its acts. In the instant case, likewise the 1st and 2nd defendants are liable for their acts. It has to be noted that, despite the fact that companies do act or work through their directors, managers and chief executive officers, these officers or directors cannot be held liable for the acts of the company except under special circumstances where by the corporate veil can be lifted. 7 In the instant case, the plaintiff has stated in the plaint that this is a fit case for this court to lift the corporate veil of the 1st and 2nd defendants, but during the hearing she neither brought any evidence nor stated sufficient reasons which can move this court to lift the corporate veil. Under the circumstances, I don't see any sufficient reasons to embark on lifting the corporate veil of the 1st and 2nd defendants, so as to determine the liabilities of the 4th and 5th defendants personally if any. For avoidance of confusion, I wish to make it clear that, the finding of this court in this judgment is specifically for the 4th and 5th defendant since, as I have repeatedly said earlier, there is already a default judgment entered against the rest of the defendants by the predecessor judge, Hon. Songoro, J as he then was. In the upshot, the claims against the 4th and 5th defendant are dismissed. No order as to costs. Dated at Dar es Salaam this 7th day of December, 2018. 8