Juma v Manager, PBZ Ltd and Others (Civil Appeal No. 7 of 2002) [2003] TZCA 4 (12 November 2003)

The appellant Juma Jaffer Juma, was the owner of a right of occupancy registered under Title No. 325 A-3 of 1987. On the 24.5.1994 the appellant executed Mkataba wa Mkopo wa Fedha (Loan Agreement) under which the first respondent, Secretary, Peoples' Bank of Zanzibar (the Bank), granted to the appellant overdraft facilities amounting to Shs. 1.5 million which was to be repaid within six months. As at 24.11.1994/^

apparently the appellant had not discharged his contractual obligation under the said Loan Agreement. Consequent upon this default in the repayment of the loan, the Bank appointed the second respondent, Caravan Limited, (the Auctioneer) to sell by public auction a number of mortgaged houses belonging to defaulters of the Bank, including that of the appellant. The appellant's house was sold to the third respondent one Mr. Said Khamis Hemed El-Gheity (the purchaser) for Shs. 2.5 million pursuant to powers conferred upon the Bank by the Loan Agreement and powers of sale under the Mortgage Deed registered on the 31.5.1994 as No. 33 of 1994 in Vol. 1 Book A-l. The Mortgagor, of course, was the appellant. The appellant then instituted Civil Case No. 52 of 1998 against the Bank, the Auctioneer and the Purchaser in the Regional Magistrate's Court at Vuga. On the 25.10.2000, the Regional Court (Mwampashi, R.M.) dismissed the suit. The appellant was dissatisfied with this decision and preferred an appeal to the High Court where it was also dismissed, hence the appeal to this Court.

The learned Judge erred in law and facts and ought to have held the Magistrate wrong in law and facts for not holding that the Court intervention was required compulsorily by the 1^st respondent in the professed sale of the suit premises by public auction.

The learned Judge erred in law and facts and ought to have held the Magistrate wrong in law and facts for not holding that the 1^st respondent had fundamentally breached the terms of the Mortgage Deed as supplemented by Mkataba ya (sic) Mkopo by charging compound interest rather than simple as permitted by the said Deed. Further he ought to have held that the ambiguity between the two documents should be held against the 1^st respondent.

The appellant will also plead that both the learned Judge and the Magistrate erred in law and facts for not holding that the sale, of the suit premises .was not sold .by public auction but by private treaty contrary to section 18 of the Auctioneer's Decree, Cap. 165.

The learned Judge erred in law and facts and ought to have held the Magistrate wrong in law and facts for not holding that the sale of the suit premises was void as the conditions advertised for the sale of the suit premises by the professed public auction had not been complied with.

The learned Judge erred in law and facts and ought to have held the Magistrate wrong in law and facts for not holding that the 1^st and 2^ndrespondents had breached their statutory duty of care owed to the appellant to obtain fairer price possible of the suit premises.

As already indicated at the hearing of the appeal, Mr. A. Patel, learned advocate represented the appellant; Mr. Abdulhakim Ameir, learned State Attorney represented the Bank and Mr. Ussi Khamis Haji, learned advocate represented the Purchaser. The Auctioneer did. not enter appearance though was duly served with notice of hearing on the 6.10.2003.

For the sake of convenience and clarity we shall deal with the first three grounds of appeal together as the issues are closely related. We shall also combine the sixth and seventh. The fifth and eighth grounds will be considered separately.

Mr. Patel's first complaint in the appeal is to the effect that the Mortgage Deed executed by the appellant and the Bank was a simple mortgage as defined by section 58 (3) of the Transfer of Property Decree, Cap. 150 of the Laws of Zanzibar. He forcefully submitted that possession of the property was never given to the Bank. In his own words "possession was the bedrock of a simple mortgage". Mr. Ameir, however, was of a different view. He argued that the Mortgage Deed read together with the Loan Agreement was an anomalous mortgage which would bring into play section 87 of Cap. 150. As regards the second and third grounds of appeal, Mr. Patel submitted that section 69 (1) and (3) of the Transfer of Property Decree Cap. 150 was not complied with since the intervention of the court was necessary and the requisite three month's notice before sale was not given and that the sale was not by public auction. Mr. Ameir, however, submitted that the

Mortgage Deed read together with the Loan Agreement was an anomalous mortgage under section 87 of Cap. 150. Under the circumstances there was no need for the intervention of the court before sale. On the question of notice, the learned State Attorney was of the opinion that clauses 10 and 11 of the Mortgage Deed were complied with. The appellant was given enough notice before the sale and the house was sold some seven months later after service of notice. Mr. Ussi K. Haji, learned advocate for the purchaser had nothing to add save to concur with the submissions of the learned State Attorney.

" 58 (3) Where, without delivering possession of the mortgaged property, the mortgagor binds himself personally to pay the mortgage-money, and agrees, expressly or impliedly that, in the event of his failing to pay according to his contract, the mortgagee shall have a right to cause the mortgaged property to be sold and the proceeds of sale to be applied, so far as may be necessary, in

The question we ask ourselves is, was the Mortgage Deed executed on the 24.5.94 a simple .mortgage in terms of section 58 (3) above? With the greatest respect to Mr. Patel, learned advocate, we*do not think so. The essence of section 58 (3) is the personal obligation of the mortgagor to pay the mortgage-money and the power, express or implied to cause the mortgaged property to be sold through the intervention of the court. In-other words, the power of sale cannot be exercised without the intervention of the court. (See: MULLA on Transfer of Property Act, 1882, 5^th edition (1966) at page 383.). What was the position under the Mortgage Deed? This takes us to clause 11 (a) of the Mortgage Deed which reads as under:

" 11 (a) At any time after the principal moneys and interest hereby secured have become payable either as a result of a lawful demand by the Bank (or under the provisions of clause 10 hereof) the Bank shall thereupon immediately be entitled without any previous notice to or concurrence on the part of the Mortgagor

to exercise all statutory powers conferred
on Mortgagees by the Transfer of Property
Decree, Cap. 150 including the power to
appoint a Receiver and the power of sale
but without the restrictions imposed by
the provisions of the said Decree and
PROVIDED that the right of sale shall not
affect the right of the Bank to foreclosure
and PROVIDED FURTHER that any
Receiver appointed thereunder shall after
the statutory application of all monies
received by him apply the balance in or
towards the discharge of the principal
-moneys hereby secured before paying any
residue to the person who but for the
possession of the Receiver would have
been entitled to receive the income of the
mortgaged property." (emphasis

Under clause 11 (a) above, there is a stipulation that the Bank is empowered to exercise all the statutory powers conferred on Mortgagees by Cap. 150 including the power of sale but without the restrictions imposed by the said Decree. This means the restrictions on the power of sale under Section 69 referred to by Mr. Patel are inapplicable to the case at

" 69 (1) A power conferred by the mortgage-deed on the mortgagee, or on any person on his behalf, to sell or concur in selling, in default of payment of the mortgage money, the mortgaged property, or any part thereof without intervention of court, is valid in the following cases and in no others, namely:

(a) notice in writing requiring payment of the principal money, has been served on the mortgagor, or on one of several mortgagors, and default has been made in payment of the principal money, or part thereof, for three months after such service; or

The power of sale under section 69 (1) above is a power of sale without the intervention of the court and is restricted to the two cases mentioned therein. The argument by Mr. Patel is that since, in his view, the Mortgage Deed under discussion is a simple mortgage, it is not covered by section 69 (1) and therefore the conditions in section 69 (3) are applicable. We think the answer to this is sufficiently clear in Clause 11 (a) of the Mortgage Deed. The Bank is entitled to exercise all the statutory powers conferred on Mortgagees by the Transfer of Property Decree, Cap. 150 including the power of sale but without the restrictions imposed by the provisions of the said Decree. This means that the Bank could exercise the power of sale without the intervention of the court, but under what circumstances? Again, under Clause 11 (a) the Bank and the appellant had agreed that all the statutory powers conferred on Mortgagees by the Transfer of Property Decree, Cap. 150 shall become exercisable without any previous notice only

receiver is levied upon any part of
the mortgaged property or against
any of the chattels "or other
property of the Mortgagor situate
on or about or belonging to the
Mortgaged property and the debt
for which levy is made or
appointed is not paid of within
seven days; or ......

(d)

The appellant in the amended plaint had averred that the Bank on the 24.5.94 advanced to him a loan of Shs. 1.5 million upon the terms and conditions contained in the Mortgage Deed and the Loan Agreement. The Bank, on its part, in the written statement of defence to the amended plaint averred that the Bank sold the mortgaged property since the appellant had defaulted in the repayment of the loan. Thus, from the parties' pleadings, the Bank only alleged that the

The question then that arises for consideration and determination is whether or not the Bank made a lawful demand upon the appellant in terms of clause 10 (a). DW3, one Michael Mangondi, General Manager of the auctioneers (second respondent) testified that on instructions from the Bank, the appellant on the 28.8.97 was served with notice to the effect that his mortgage house would be sold within seven days if he. failed to repay the loan advanced to him. Indeed, the appellant's name is contained in exhibit D2, which was admitted in evidence without objection from the learned advocates for the parties. DW3. added that the appellant paid a-number of visits to the auctioneers seeking postponement of sale. It was not until the 25.2.98 that names of defaulters, including the appellant were announced over Radio Zanzibar that his house was scheduled to be sold by public action on the 14.3.98. It was however sold on the 19.3.98. We are of the settled view that the Bank made a lawful demand upon the appellant on the 28.8.97 and that the appellant had defaulted

in the repayment of the outstanding loan thus resulting in the sale by public auction of the mortgaged house. There is evidence including that of PW3 that not less than twenty \ people were present at the auction on the 19.3.98 when he went there.

On the evidence and circumstances of the case, we reject the unsubstantiated allegation that the house was sold to the purchaser (third respondent) by private treaty. To conclude, the first three grounds of appeal must fail. The Mortgage Deed executed by the appellant and the Bank was not a simple mortgage in terms of section 58 (3) of Cap. 150; there was no need under the Mortgage Deed for the Bank as Mortgagee to cause the mortgaged property to be sold through the intervention of the court since the provisions of section 69 of Cap. 150 were not applicable to the matter at hand and lastly, a valid notice under the Mortgage Deed had been served upon the appellant before the sale of the mortgaged house. In view of this, we do not think it is necessary to consider and determine whether or not the Mortgage Deed was an

The fifth complaint by Mr. Patel related to the charging of compound interest instead of simple interest on the loan. During the trial, the question of whether it was compound or simple interest that was chargeable under the Mortgage Deed was not one of the seven issues that were framed by the court. It was therefore not an issue that was canvassed by the parties during the trial. Order XVI rule 1 (5) of the Civil Procedure-Decree, Cap. 8 provides -

"(5) At the first hearing of the suit the Court shall, after reading the plaint and the written statements, if any, and after such examination of the parties as may appear necessary, ascertain upon what material propositions of that or of law the parties are at variance, and may thereupon proceed to frame and record the issues on which the right decision of the case appears to depend".

We now turn to the sixth and seventh grounds of appeal. Essentially, the combined complaint was to the effect that the mortgaged house was sold privately and as a result the best possible price was not obtained. There was a faint attempt by Mr. Patel to raise the issue that the sale of the house was done secretly and by collusion of the three respondents. At the trial before Mwampashi, R.M. the issue was framed as follows -

The learned trial magistrate held that there was no evidence adduced at the trial to establish the appellant's conspiracy theory, a finding which was upheld by the learned appellate judge. On our part, we have carefully perused the evidence on the record and have found no scintilla of evidence even remotely linking the three respondents to have colluded,

hopefully to enable the third respondent to purchase the mortgaged house. On the contrary, the procedure was very transparent. A valid notice under the Mortgage Deed was duly served upon the appellant; there was even an announcement of the sale over Radio Zanzibar and there was a public auction conducted which was attended by a number of would be purchasers. Surely, these factors did not indicate that the sale was conducted secretly and in collusion by the three respondents. We find no merit in this complaint.

Lastly, the complaint as regards the purchase price of the house being on the low side, is equally baseless. This was a sale at a public auction and as explained above, there is no thread of evidence of foul play. The purchase price that the third.respondent paid was the market price at the auction.

Tanzania: Court of Appeal

Juma v Manager, PBZ Ltd and Others (Civil Appeal No. 7 of 2002) [2003] TZCA 4 (12 November 2003)