NBC Ltd v Milo Construction Co. Ltd and Others (Civil Application No. 129 of 2005) [2005] TZCA 58 (30 September 2005)

The applicant, the NBC Ltd., was the unsuccessful plaintiff before KIMARO, J. The bank claimed to recover shs. 261,217,282/= from the respondents: The loan was given to first respondent while second and third respondents were guarantors of the loan. KIMARO, J., and an assessor sitting with her, were not satisfied that the debt was proved. On the contrary, the court found that the respondents, at the time of the hearing of the case, overpaid the applicant by shs. 141,145,126/45. The learned judge gave the following order:

The plaintifffs suit is dismissed with costs. The Plaintiff to refund the 1^st Defendant T shs 141,145,126.45 which was over paid by the 1^st Defendant to the Plaintiff. The securities are discharged.

The applicant now seeks to stay the execution of the orders of KIMARO, J. and was represented by Mr. Aloysius K. S. Mujuluzi, learned advocate, who sought an adjournment because the respondentsf joint counter-affidavit referred to the judgment and not to the decree as was the case of the applicantfs affidavit. The learned advocate said that he needed to refer to the judgment to make an effective reply. However, Mr. Mujuluzi conceded that since the judgment is a court record then he can produce it for my reference in writing this decision and, so, the hearing of the application continued.

Mr. Mujuluzi argued that as the learned judge ordered that the securities be returned to the respondents then the loan became unsecured and that the applicant would have no remedy should its appeal succeed and hence the applicant would suffer irreparable injury. The learned advocate also argued that the learned judge gave an order for the payment of shs. 141,145,126/45 which amount was not contained in the pleadings. Mr. Mujuluzi pointed out further that the respondents themselves have conceded in their counter-affidavit that if that sum is not refunded then the respondents cannot do business. Mr. Mujuluzi saw that as a clear admission of insolvency by the respondents and that they cannot repay that sum should the appeal succeed.

The respondents had the services of Mr. Dennis M. Msafiri, learned counsel, who contended that the applicant has made mere allegations of irreparable injury if stay of execution is not granted but that it has not substantiated the claim as required by some decisions of this Court. Regarding shs 141,145,126/45, Mr. Msafiri pointed out that that sum was paid to the applicant during the hearing of the suit and after pleadings had been finalized. So, he argued, that sum could not feature in the pleadings.

Admittedly, this Court has said in a number of decisions that the claim of irreparable injury should be substantiated and that mere assertion will not do (Tanzania Cotton Marketing Board v. Cogecot Cotton Co. SA [1997] T. L. R. 63). However, in the instant case I am prepared to borrow the expression in the law of tort of res ipsa loquitur. It is self evident that a bank takes securities to secure a repayment of a loan. Now if securities are discharged and if a debt is proved, then the bank will have no security for repayment. I am totally convinced that those facts speak for themselves and that they do not require any substantiation.

As there is no evidence to prove that the principal debtor has failed to pay the debt, there is no question of a liability arising on the part of the guarantors to the plaintiff.

It obvious to me that if it is proved that the first respondent has failed to repay the loan, then the guarantors will be liable. The intended appeal seeks to prove that failure and if that succeeds, then I am of the decided opinion that the surrender of those securities should be stayed pending the determination of the appeal.

Now, let me turn to the order for the refund of shs 141,145,126/45. First of all, it is abundantly clear to me from the judgment that the issue of that sum of money cropped up after pleadings had been completed. All that I can say at this juncture, and without prejudicing any decision in the appeal on this matter, is that the learned judge is supported by decisions of this Court that though the matter was not pleaded, as it had been canvassed before her by both parties, she was justified to make a decision on it. The issue before me is whether I should stay that order of repayment.

c if stay of execution is granted the Respondents particularly the 1^st Respondent shall suffer great inconvenience in that the amount ordered to be refunded is its operating capital in the construction industry and businesses and it has been deprived of its use since the 1^st day of April 2004 when the Receiver and Manager decided to pay it to the Applicant while and or even though the suit was pending c

Mr. Mujuluzi has taken that to be an admission of insolvency. I do not think so. By any standards, that is a substantial amount of money to be taken from a building contractor and obviously cripples its operation which is essential if it is to be in a position to meet its credit obligations, if any. The most important thing is that the debt, if any, is secured as was agreed at the time of the loan.

So, I order a stay of execution on the order of the return of the securities but I decline to stay execution on the order of the refund of shs 141,145,126/45. I order that costs to follow the event.

Tanzania: Court of Appeal

NBC Ltd v Milo Construction Co. Ltd and Others (Civil Application No. 129 of 2005) [2005] TZCA 58 (30 September 2005)