IN THE HIGH COURT OF TANZANIA (LAND DIVISION) AT DAR ES SALAAM LAND CASE NO. 4 OF 2011 BRITANIA BISCUITS LIMITED. PLAINTIFF VERSUS NATIONAL BANK OF COMMERCE LIMITED 1 ST DEFENDANT SILVANUS BENEDICT MLOLA..2 ND DEFENDANT SENI SONGWE MALIMI. 3 RD DEFENDANT DOSH HARDWARE (T) LIMITED 4 TH DEFENDANT R U L I N G NGWALA, J: The Plaintiff has instituted this suit against the Defendants jointly and severally with prayers as follows:- (a) That the honourable Court be pleased to make a declaration that the purpoted sale of the Plaintiffs property located at Plot 31/1 Port Access Road, Tabata Area, Dar es Salaam CT No. 47867 by the 1 st Defendant is illegal, unlawful and void; (b) That the honourable court be pleased to make a declaration that the Plaintiff is entitled to sell the property to a purchaser with a highest purchase price; (c) That the honourable Court be pleased to make a declaration that in as much as the mortgage deed was not registered the 1 st Defendant is a mere equitable mortgagee and does not have a right to unilaterally sell the plaintiff s property without an order of the Court of law or without consent from the plaintiff; (d) That the honourable Court be pleased to make a declaration that the purpoted appointment of the 2 nd and 3 rd Defendants 1
as joint receivers and managers of the Plaintiff s assets charged under the Debenture Instrument dated the 21 st November 2005 is illegal, unlawful and void ab initio; and that their presence at the Plaintiff s factory amounts to trespass and tortuous interference with the Plaintiff s business affairs; (e) That the honourable Court be pleased to make a declaration that the 1 st Defendant is not entitled to charge any interest on the credit facilities advanced to the Plaintiff with effect from the 14 th December 2008 to the date of judgment; (f) That the honourable Court be pleased to make a finding on the quantum of monies lawfully payable to the 1 st Defendant under the credit facilities availed to the plaintiff by the 1 st Defendant; (g) That the honourable Court be pleased to order the 4 th Defendant the sum of TAS 100,000,000/= being damages for breach of agreement to purchase the Plaintiff s property located at Plot 31/1 Port Access Road, Tabata Area, Dar es Salaam CT No. 47867 within the agreed period; (h) That the honourable Court be pleased to order the 4 th Defendant to pay interest on (g) above at the commercial rate of 20% per annum from the 1 st May 2010 to the date of judgment; (i) That the honourable Court be pleased to order the 1 st Defendant to pay the Plaintiff the sum of TAS 3,824,981,904.24 as loss or revenue for frustrating the sale of the Plaintiff s landed property and assets to CHOICE FOODS LIMITED as per paragraphs 19, 20 and 21 herein above; (j) That the honourable Court be pleased to order the 1 st, 2 nd,and 3 rd Defendants pay general damages to be assessed by the Honourable Court as per paragraph 26 herein above for unlawful and illegally placing the Plaintiff Company on receivership; (k) That the honourable Court be pleased to issue a permanent injunction restraining the 1 st, 2 nd and 3 rd Defendants from taking any receivership action against any of the assets of the plaintiff s allegedly charged under the debenture instrument or any of the chattel mortgages which are null and void; 2
(l) That the honourable Court be pleased to issue a permanent injunction restraining the 1 st Defendant from unilaterally selling the Plaintiff s property on the basis of the mortgage deed which was not registered; (m) That the honourable Court be pleased to order the Defendants jointly and severally to pay interest on the decretal sums at the Court rate of 12% per annum from the date of judgment to the date of satisfaction of the decree; (n) That the honourable Court be pleased to condemn the Defendants to pay the costs of this suit; and (o) Any other relief the honourable Court may deem fit and just of grant. There is a Preliminary Objection on point of law raised by the 1 st and 4 th Defendants that this Court lacks jurisdiction to try this case. The parties agreed to dispose of this preliminary objection by way of written submissions and leave to that effect was granted. In his submissions Mr. Kesaria, the learned advocate for the Defendants vehemently referred to clause 11 of the loan agreement between the Plaintiff and the 1 st Defendant that the clause dispute clause where both the Plaintiff and the 1 st Defendant expressly covenanted to irrevocably submit themselves to the Commercial Division of the High Court of Tanzania for adjudication of disputes between them. He submitted that the relationship between the lender and the borrower is a contractual one, and therefore the loan agreement executed by the Plaintiff and the 1 st Defendant binds the parties. Mr. Kesaria contended further that pursuant to section 7(1) of the Civil Procedure Code [CAP 33 R.E. 2002] this Court is barred to hear and determine this suit under the provisions of section 28 of 3
the Law of Contract Act [CAP 345 R.E. 2002] and the commentary of Pollock and Mulla in Indian Contract and Specific Reliefs Acts, 11 th edition at page 454 where it is propounded that: Limiting jurisdiction to one or more competent Court where two or more Courts have jurisdiction to try a suit the agreement between the parties limiting the jurisdiction of the Courts is neither opposed to public policy nor a contravention of section 28, Contract Act. So long as the Parties to a Contract do not oust the jurisdiction of all the Courts which would otherwise have jurisdiction to decide the cause of action under the law it cannot be said that the parties have by their contract ousted the jurisdiction of the Court. Mr. Kesaria further referred to this Court a number of decided cases in support of his argument. He cited the case of Afriscan Group (T) Ltd vs. Pacific International (T) Ltd, Civil Case No. 14 of 2001(H.C) where Kimaro, J., (as she then was) reiterated that restriction in the contract which expressly or impliedly bars jurisdiction of the court is not contrary to the law or public policy. He also referred to the cases of American Express Services Europe vs. Mary Shirima t/a Star Arts & Craft Co. Civil case No. 74 of 2004 (H.C); Friendship Container Manufacturers Ltd vs. Mitchell Colts (K) Ltd [2001]2 EA 338; Jamila Sawaya vs. M/S Royal Marine Shipping of Dubai & 4 Others, Comm. Case No. 30 of 2006 and the case of Printo Wrappings Ltd vs. Safmarina (T) Ltd, Comm. Case No. 35 of 2009. Both of these cases dealt with ouster clauses to jurisdiction of Courts. 4
The learned Counsel insisted that there is no cause which has been shown by the Plaintiff for departing from the jurisdiction clause which was expressly and irrevocably covenanted. Besides the ouster clause in the loan agreement, Mr. Kesaria submitted that this suit does not relate to a land dispute. With this, he referred the court to the case of Rashimi Mangaldas Taichura & Others vs. Lavender Villas Ltd & Others, Comm. Case No. 197 of 2002 where Kalegeya, J. (as he then was) held that a transaction involving the selling and buying of property is by its very nature commercial. In reply Mr. Matunda, learned counsel for the Plaintiff argued that the jurisdiction clause found in the loan agreement is confined to disputes arising in connection with the loan agreement other than disputes of land nature. He argued that at the time of execution of the loan agreement, the Land Act [CAP 113 R.E. 2002] vide section 167 and the Land Disputes Courts Act [CAP 216 R.E. 2002] vide section 3 vested exclusive jurisdiction regarding all manners of disputes concerning land to the High Court Land Division. He cited the case of Anselimo Minja vs. Supa food Corporation Ltd., Comm. Case No. 5 of 2005 where Massati, J., held that:- There is no doubt that before the enactment of the Courts (Land Disputes) Settlement Act No. 2 of 2002 which came into operation on 01/10/2003, the Commercial Division of the High Court had jurisdiction in all matters of commercial nature. But after that, and in view of section 167(1) of the land Act 1999 and Section 3 of Act No. 2 of 2002 the 5
jurisdiction on all land disputes defined to include any case where a person complains of and is aggrieved by the action of another person is exclusively vested as far as the High Court is concerned, to the Land Division. Mr. Matunda further referred the court to the book Principles of the English Law of Contract by the Learned author Sir William P. Anson, 22 nd edition where it is propounded at page 322 that:- An agreement which purports to oust the jurisdiction to the Courts is contrary to public policy and void He concluded that the loan agreement is void in as much as it purports to divest the specific Court of its jurisdiction vested by statue. He cited Dr. V. Krishnamachani and Surender K. Gogia The law of Contract and Tenders Vol. 1, 9 th edition, at p. 332 where it in enunciated that parties cannot by agreement oust the Courts from their jurisdiction. Mr. Matunda further argued by referring the English case of Leigh vs. National Union of Railway Men [1970] Ch. 326 where it was held that since Court s jurisdiction cannot be ousted, the Court would not be bound by the provisions in the rules of a trade union that domestic remedies should be exhausted first. He also cited to the Court for reference the cases of East African Breweries Ltd vs. GMM Company Ltd. [2002] TLR 12; Shinyanga Region Transport Company vs. NBC [1997] TLR 78; and Asha Soud Salim vs. Tanzania Housing Bank [1983] TLR 270. 6
He lastly submitted that any attempt to dissect and severe the documents attached to the plaint so as to pursue or to consider the Preliminary Objection as raised will entail a scrutiny of facts so as to make a decision either way which is not a procedure in harmony with principles governing preliminary objections. As authority, he cited the case of Citibank (T) Ltd vs. Tanzania Telecommunications Co. Ltd & 4 Others, Civil Application No. 64 of 2003 [CAT] (unreported). In this case the Court of Appeal of Tanzania had this to say:- In order to resolve most of the so called preliminary objections raised herein, the Court would have to embark upon a close scrutiny of the affidavits and counter affidavits filed in order to ascertain the facts and then make a decision. This as far as we know, is not the purpose of the preliminary objections In his rejoinder submissions, Mr. Kesaria averred that the enactment of the Written Laws (Miscellaneous Amendments) Act 2010, No. 2 of 2010 replaced all references to the exclusivity of the jurisdiction of the Land Division in section 167 of the Land Act, 1999 and the Land Disputes Courts Act No. 2 of 2002. With regard to ousting of Courts jurisdiction, Mr. Kesaria insisted by referring the Court to the extract from Pollock & Mulla on Indian Contract and Specific Reliefs Acts (supra) which gives a commentary on section 28 of the Indian Contract Act which is in pari materia with section 24 of our Contract Act. 7
Before I move into the merits of the preliminary objection raised, I had to satisfy myself on the nature of the objection the Plaintiff had purported to object the scrutiny of the documents annexed to the plaint on the basis that this is not the principle of preliminary objections. In my opinion the nature of the preliminary objections as it was laid down in the celebrated case of Mukisa Biscuit Manufacturing Co. Ltd vs. West End Distributors Ltd (1969) E.A. 696, is not to ascertain any fact or any fact or any matter involving or requiring evidentiary proof. What is for the Court to look is the pleadings, that is the Plaint and its annexures but not affidavits. Looking at the Plaint/Pleading should not mean to put the facts alleged and documents annexed thereto into scrutiny and challenge, but to put the same into a thorough check up so as to satisfy if they establish a prima facie case without affecting the jurisdiction of the Court, limitation of actions, cause of action, locus standi and any other procedural requirement. In this scenario, this case is quite different with the cited case of Citibank vs. TTCL (supra). Consequently, I am not attracted with the Plaintiff s claim that the mortgage transaction is void because the Mortgage Deed was not signed. To me, this is a pure evidentiary averment which need proof of facts and evidence, thus it ought not be raised. On the issue of ouster clause found in the loan agreement, I agree with Mr. Kesaria that the Plaintiff did not show cause why he did not abide with the mandatory required procedure. For avoidance of 8
doubt I here under reproduce clauses 11 and 12 of the loan agreement, annexure BBL-1 to the plaint. 11. DISPUTE CLAUSE In case of any dispute arising out of interpretation, performance or non performance of the terms and conditions contained herein, the parties thereto shall irrevocably submit themselves to the Commercial Division of the High Court of Tanzania for adjudication of the dispute. 12. GOVERNING LAW The laws of Tanzania shall govern this agreement In view of the above quoted clause, I agree with Mr. Kesaria that the ouster clause in the loan agreement did not intend to deny the jurisdiction of the Courts. It is my considered view that the Plaintiff s counsel is not aware that the parties to the loan agreement did not wish to ouster the jurisdiction of all Courts, but had made their choice to one jurisdiction the Commercial Division of the High Court. This choice is not against public policy and the law. Their choice is in accordance with the principles enunciated by the learned authors Pollock & Mulla on Indian Contract and Specific Reliefs Acts (supra) as referred to by Mr. Kesaria. These authors give their reasoning as follows:- Where two or more Courts have jurisdiction to try a suit the agreement between the parties limiting the jurisdiction to one Court is neither opposed to public policy nor a contravention of s. 28 of the Contract Act. so long as the parties to a contract do not oust the jurisdiction of all courts which would otherwise have jurisdiction to decide 9
the cause of action under the law, it cannot be said that the parties have by their contract ousted the jurisdiction of the Court and where the parties to a Contract agreed to submit the dispute arising from it to a particular jurisdiction which would otherwise also be a proper jurisdiction under the law, their agreement to the extent they agreed not to submit to other jurisdictions cannot be said to be void as against public policy. On this I am also fortified by the holding in the case of Jamila Sawaya vs. M/S Royal Marine Shipping of Dubai & 4 Others, (supra) where Bwana. J. (as he then was) held inter alia:- In the instant case, the Bill of Lading confers exclusive jurisdiction to the High Court of Justice of England. There is no other provision to the contrary. This ousting of jurisdiction of our Courts is not, in my view, in conflict with the provisions of section 7(1) of the Civil Procedure Code, 1966. It is my considered opinion therefore, that clause 11 of the loan agreement did not intend to oust the jurisdiction of the Courts, but rather intended to choose an appropriate jurisdiction of choice. This is in compromise with section 7(1) of the Civil Procedure Code [CAP 33 R.E. 2002]. It is clear from the pleadings that this dispute arose due to non performance of the loan agreement between the Plaintiff and the first Defendant. Here, I do not see any reason as to why the Plaintiff failed to observe the covenanted forum of dispute settlement. He has so far failed to show cause why he opted to choose a different forum than the agreed forum. 10
I now move to the exclusivity of jurisdiction of the High Court (Land Division) over disputes concerning land. Mr. Matunda has relied his argument to the reasoning of the Court in the case of Anselimo Minja vs. Supa Food Corporation Ltd (supra). In the due cause, it is my view that land matters and commercial matters touching land should be dealt with in the Land Division and the Commercial Division of the High Court respectively. I follow the holding of Kalegeya, J. in the case of Mangaldas Taichura & Others vs. Lavender Villas Ltd. (supra) in this case the learned judge had this to say: provided that the transaction involving selling and buying, whether for profit or for any other reason, even if it be a sole transaction, is commercial... What is important is the nature of the centre-piece of the controversy. The question is who, flowing from the series of these commercial transactions, has a paramount title to the premises. And the alleged flaws and illegalities cannot be separated to form separate actions as indeed there are the veins and blood that make these commercial transactions controverted. He went on:- There is no doubt whatsoever that the Land Act, No. 4 of 1999, at High Court level, vests exclusive jurisdiction of determination of land disputes to the Land Division of the High Court. S. 167 of the said Act is very clear on this. The Act however did not repeal the establishment of the Commercial Division nor inhibit its jurisdiction 11
As the pleadings have the nature of commercial transaction and the claims are commercial in nature, I proceed to term the relationship between the Plaintiff and the Defendants a contractual relationship. The transactions, from the beginning of the loan agreement and the subsequent mortgage are of the commercial nature. Moreover, I agree with Mr. Kesaria that this Court s exclusive jurisdiction has been abrogated by Act No. 2 of 2010. This Act, indeed, has uplifted the exclusive jurisdiction of the Land Division of the High Court on disputes over land matters. Jurisdiction of Courts over land matters is now run concurrently in all High Courts of Tanzania as per the provisions of the said Act [the Written Laws (Miscellaneous Amendments) Act, 2010 Act No. 2 of 2010. G.N. No. 13 of 26 th March 2010] which amended various laws. Parts VII and VIII of this Act have amended the Land Act and the Land Disputes Courts Act respectively. These amendments have replaced the word 'Land division' with the term 'High Court'. It goes without saying therefore that the Written Laws (Miscellaneous Amendments) Act, 2010 ousted the exclusive jurisdiction of the land Division of the High Court over Land matters. The jurisdiction of the Land Division of the High Court over land matters as specialized Court remains in fact as it was established under the Judicature and Applications of Laws Act [CAP 358 R.E 2002]. In this matter, the cause of action accrued from a pure commercial transaction. The reliefs claimed arise from performance or non performance of contractual obligations. 12
Lastly, it must be understood that any litigation whose cause of action accrued from a mortgage transaction or a commercial contract, regardless of its aftermath to landed property/real property, is not a matter of the land Division of the High Court. It is a result of commercial transactions and it has to be dealt with by the Commercial Division of the High Court, not the Land Division unless the transaction was a conveyance or the Commercial contract was discharged by performance but thereafter fraud took its effect. The aim of the Plaintiff and the 1 st defendant in this case was ab initio not to change ownership of the land. So, what is to be looked upon in determining jurisdiction of the Court is the prima facie intention of the parties to a transaction. A mortgage transaction is not a transfer of ownership over land but mere transfer of interest over land. In proceedings and/or pleadings of a similar nature like in the present matter I have warned and cautioned myself on the certainty of jurisdiction of this Court as regards the 2 nd, 3 rd and 4 th Defendants who were not parties to the loan agreement and the subsequent mortgage. The questions which arise here are whether the jurisdiction clause in the loan agreement is confined only to disputes relating to the loan agreement other than disputes of land nature, and what is the effect of the ouster clause in the loan agreement. 13
On this I am certain that the jurisdiction clause is clear. Its aftermath affects third parties too. In this case there are third parties who were not parties to the loan/mortgage agreement. Here, I do not hesitate to say that the Plaintiff who is a party to the sale/mortgage agreement had and has no intention to create legal relation with the 2 nd, 3 rd and 4 th Defendants. The parties' relationship is from the very beginning hostile. Their hostile relationship has been brought about by the non performance of the sale/mortgage agreement. In other words the sale/mortgage agreement directly affects the relations of the parties. In reality it cannot be separated from the status and relation of the parties because it goes to the root of the contractual relationship of the Plaintiff and the first Defendant. There was no performance of the loan agreement and the subsequent mortgage. The mere fact that landed properties were mortgaged will not turn the matter to a land dispute. The matter is purely commercial in nature and it is an outcome of unperformed commercial transaction which is far away from the jurisdiction of the Land Division of the High Court. This position is fortified with the holding of my learned brother, Mziray, J., in his ruling in Exim Bank (T) Limited v. Agro Impex (T) LTD & Others, Land Case Appeal No. 29 of 2008 where he held as follows:- Two matters have to be looked upon before deciding whether the Court is clothed with jurisdiction. One, you look at the pleaded facts that may constitute a cause of 14
action. Two, you look at the reliefs claimed and see as to whether the Court has power to grant them and whether they correlate with the cause of action The claim therefore against the first defendant is found on a credit facility. On the part of the second and third Defendant the cause of action in founded on a contract of guarantee He went on:- On looking at the prayers you will find that none is related to land. The mere fact that the second and third Defendants have put some security for the loan does not turn the suit to be a land dispute. Additionally, in my view, suing on an overdraft facility per se does not turn the suit to a land dispute and give this court the necessary jurisdiction this suit is squarely based on a contractual relationship between a banker and customer whereby the customer has overdrawn and failed to pay. In this case, I have no doubt that the dispute between the parties has arisen out of a commercial transaction and a contractual relationship between a banker a customer. And in anyway, this Court, the Land Division of the High Court as established under the High Court Registries (Amendment) Rules 2001 as per rule 5E of the said rules, has no jurisdiction in matters relating to debenture instruments and charges on credit facilities as prayed in paragraphs d and e of the plaint. This Court has never entertained 15
any of the above named credit facilities ever since it was established. In the case of East African Breweries Ltd vs. G.M.M. Company Ltd. (supra) cited by the Plaintiff's counsel, Mroso, J. (as he then was) ruled out that the parties to a contract cannot in law agree to oust the jurisdiction of Tanzania Courts. I am in line with the learned judge, but the case is distinguishable from this case because the ouster clause in this case does not intend to oust the jurisdiction of Tanzania Courts but it specifies the forum where settlement of disputes between the parties is to lie. In my view there is quite a difference between a clause referring the matter to arbitration and a clause referring the matter to a Court of law. The difference comes to the effect that reference to arbitration leads to stay of proceedings while reference to Court of law leads to adjudication of the matter to its finality, striking out the case or dismissing the same if the Courts jurisdiction is ousted. This is to mean that the Court upon which the suit is placed may determined the matter or declare to have no jurisdiction to entertain the same. In the end result, I see nothing which would give jurisdiction to this Court to entertain this suit. I hold so because, firstly the jurisdiction of this Court was ousted by the parties, secondly the cause of action and the claims thereof are purely the result of commercial transactions and that this court has no exclusive jurisdiction to deal with land causes. For the said reasons I hold that the proper forum for adjudication of the dispute between the 16
contracting parties in the loan/mortgage agreement cannot be vacated, unless there are clear and express provisions of law providing otherwise. I therefore proceed to uphold the Preliminary Objection on point of law raised by the 1 st and 4 th Defendants. In the end result I strike out this suit with costs. A.F. NGWALA JUDGE 17