Amana Bank Limited vs Arusha Urban Water Supply & Sanitation Authority & Others (Civil Appeal No. 140 of 2024) [2025] TZCA 1261 (12 December 2025)

IN THE COURT OF APPEAL OF TANZANIA AT ARUSHA (CORAM: NDIKA. J.A.. FIKIRINI. J.A. And MGEYEKWA. J.A.) CIVIL APPEAL NO. 140 OF 2024 AMANA BANK LIMITED APPELLANT VERSUS ARUSHA URBAN WATER SUPPLY AND SANITATION AUTHORITY 1 st RESPONDENT THE ATTORNEY GENERAL 2 n d RESPONDENT TANCHI BROTHERS CONSTRUCTION COMPANY LIMITED 3 rd RESPONDENT (Appeal from the Judgment and Decree of the High Court of Tanzania 6thNov & 12th Dec, 2025. FIKIRINI. 3.A.: On 9th October, 2018, the 1s t respondent, Arusha Urban Water Supply and Sanitation Authority (AUWSA), entered into a contract with the 3r d respondent, Tanchi Brothers Construction Company Limited, for the construction of AUWSA's main office at a cost of TZS 7,476,366,485.00. The project was to last sixteen (16) months. at Arusha) (Phillip, ,3., ) Dated 24th April, 2023 In Civil Case No. 13 of 2021 JUDGMENT OF THE COURT The 3r d respondent was required to secure both an unconditional Advance Payment Guarantee covering equipment, plant, and materials and a conditional Performance Guarantee. Accordingly, the appellant, Amana Bank Limited, issued Advance Payment Guarantee No. 000GUMB182950001 and Performance Guarantee No. 000GUMB182950002 to the 3rd respondent on 22n d October, 2018, which were valid for one year. Under the agreement, the 3r d respondent was obliged to maintain these securities throughout the contract period; failure to do so would constitute a breach, entitling the 1s t respondent to recall the guarantees before 22n d October, 2019. Following submission of the verified guarantees, the 1s t respondent disbursed TZS 1,106,450,788.00 as an advance payment to the 3r d respondent in November, 2018. By October, 2019, the 1s t respondent observed that the 3r d respondent had (i) failed to mobilize fully as required of it, and (ii) failed to maintain the securities or obtain an extension from the appellant. These failures, it was claimed, amounted to breach of contract. Consequently, the 1s t respondent demanded payment under both the Performance and the Advance Payment Guarantees. The appellant honoured the Performance Guarantee No. 000GUMB182950002, but refused to pay under the Advance Payment Guarantee. In this appeal, the Court's attention is directed solely to the Advance Payment Guarantee, which, under the terms of the contract, was to be recovered through deductions from interim payment certificates during execution. The principal issue before the trial court concerned the appellant's assertion that the Advance Payment Guarantee was conditional, and that the 1s t respondent had failed to fulfil the requisite conditions to justify payment of the amount demanded. The following issues were framed for determination by the High Court:- 1. Whether or not the 2n d defendant (now the J d respondent) was in breach o f the contract for failure to maintain securities, 2. Whether the Advance Payment Guarantee was unconditional. I f the 2n d issue is answered in the affirmative, 3. Whether the 1st defendant (now the appellant) was entitled to refrain from honouring the recall o f the guarantee on demand. I f the J d issue is answered in the negative, 4. Whether the 1st plaintiff (now the 1st respondent) had fulfilled the requisite conditions prior to the demand for payment o f the Advance Payment Guarantee, 5. To what reliefs are the parties entitled to. The trial court determined the suit in favour of the 1s t respondent. This was after hearing the 1s t respondent's two witnesses, Gaston Francis Mkawe (PW1) and Charles Thomas Lyamuya (PW2), and tendered nine (9) 3 Exhibits. The defendant, on the other hand, who had one witness, Denis Tagalile (DW2), and produced one (1) exhibit. From the testimonies and exhibits, the trial court held that the 3r d respondent had breached the contract with the 1s t respondent, resulting in liability to the appellant. Consequently, the court found the appellant liable to pay the full amount under the Advance Payment Guarantee. The court reasoned that although the guarantee was not unconditional, the 1s t respondent had satisfied the necessary conditions for payment. Specifically, the appellant had not issued a refusal as required under the Uniform Rules of Demand Guarantee, ICC Publication No. 758 (the ICC Rules). Consequently, the court ordered the appellant to pay TZS 1,106,450,788.00. The decision aggrieved the appellant, who preferred the present appeal, raising seven grounds of appeal, namely:- 1. That the learned trial Judge, having held that the Advance Payment Guarantee was not unconditional, erred in law and fact in holding that the demand letter (exhibit P5) had met the mandatory conditions stipulated in the Advance Payment Guarantee instrument for making a valid demand for payment 2. That the learned trial Judge erred in law and in fact in failing to make a distinction between mobilization works and performance o f construction works consequently arrived at a wrong decision by subjecting construction works to mobilization while the two are not the same thing. 3. That the learned trial Judge erred in law and in fact in applying and basing her decision on the Uniform Rules for Demand Guarantee, ICC Publication No. 758, despite the fact that the plaintiffs'suit was neither led along those lines nor were the Rules tendered in evidence at all. 4. That the learned trial Judge erred in law and in fact in holding that observations made by another court in an application for temporary injunction (Miscellaneous Commercial Case No. 28 o f 2020 admitted as exhibit P7) regarding the letter demanding payment (Exhibit P5) were conclusive proof that the demand had met the pre-requisite conditions stipulated in the Advance Payment Guarantee. 5. That the learned trial Judge, having noted that PW2 had admitted during cross-examination that the J d respondent (contractor) had done partial mobilization in the course o f utilization o f the advance payment money, erred in law and fact in failing to hold and find that, it was incumbent upon the 1st respondent to state in particular terms the extent o f such mobilization and its value both in the demand for encashment o fguarantee and in the claim in the suit and that such failure was fatal to the entire suit. 6. That the learned trial Judge having agreed that the advance payment guarantee was not for enrichment and the 1st respondent having conceded that there was partial mobilization by the J d respondent and the main concern was non-recruitment o f key-personnei for the project erred in law and in fact in entering 5 judgment for the entire sum o f TZS 1, 106, 450, 788.00 in the Advance Payment Guarantee. 7. The learned trial Judge generally erred in law and in fact by failing to properly analyse and evaluate the evidence on record, resulting in wrong findings and a decision. During the hearing, Mr. Denis Msafiri, learned advocate, appeared on behalf of the appellant. In contrast, Mr. Masunga Kamihanda, Senior State Attorney, assisted by Messrs. Kepha and Hance Mmbando, learned State Attorneys, appeared on behalf of the 1s t and 2n d respondents. Mr. Kapimpiti Mgalula, learned advocate, appeared for the 3rd respondent. Mr. Msafiri had, on 6th February, 2024, filed a written submission in terms of rule 106 (1) of the Tanzania Court of Appeal Rules, which he adopted as part of his oral submissions in support of the appeal. The Senior State Attorney had no written submission filed but had a list of authorities filed on 28th October, 2025. On the contrary, Mr. Mgalula neither filed a written submission nor a list of authorities, but was in support of the appeal. Amplifying on a few points, Mr. Msafiri, addressed us on the first, third, and fourth grounds of appeal, that the Uniform Rules for Demand Guarantee, ICC Publication No. 758 (the ICC Rules), were improperly introduced during submissions at the trial court. He emphasized that 6 submissions do not constitute evidence, and the Rules had neither been pleaded nor tendered in evidence by the respondent. Therefore, the trial court could not have taken judicial notice of the Rules under section 64 of the Evidence Act, Cap. 6 (R.E 2023) (the Evidence Act), as they are not among the facts subject to judicial notice. He maintained that this was a specific matter requiring proof. It was therefore erroneous for the trial court to base its decision on the ICC Rules, particularly since they are not part of the local legal framework. In his concluding submission in this regard, the learned counsel noted that Exhibit P2 expressly referred to an Advance Payment Guarantee. On the fourth ground, the learned counsel challenged the reliance on Exhibit P7, which had been tendered and considered by the trial court. He submitted that the suit concerned an Advance Payment Guarantee and not a Performance Guarantee, rendering Exhibit P7 irrelevant to the issues before the trial court. On the strength of the amplification, the learned counsel urged the Court to allow the appeal. In response, the learned Senior State Attorney, relied on Rule 106 (10) of the Rules and addressed the Court, submitting on first, third and fourth grounds jointly. He contended that Exhibit P5 illustrated that the 3r d respondent was to show how the advance payment was utilised in the 7 mobilisation exercise, which she could not. Failure to exhibit that led PW2, the Project Manager, to issue Exhibits P8 (Breach of contract due to poor mobilization and planning) and P9 (Notice to correct). To buttress his submissions the learned Senior State Attorney referred the Court to the case of Augustine Ayishashe v. Sabiha Omary Juma, (Civil Appeal No. 353 of 2019) [2023] TZCA 107 (13 March 2023; TANZLII) at pages 16 -17, in which we held that failure to call a material witness, entitles the court to draw an adverse inference. He further submitted that the intention of the parties was for the 3r d respondent to be issued with Advance Payment for mobilization works. Parties are bound by the terms of the contract they signed; failing to abide by those terms has indeed affected the performance of the contract. The learned Senior State Attorney cited to the Court the case of Precision Air Services PLC v. Masoko Agencies (T) Limited, (Civil Appeal No. 60 of 2021) [2024] TZCA 260 (16 April 2024; TANZLII), at page 26. Since the 1s t respondent's issuance of an Advance Payment to the 3r d respondent was to be guaranteed by the appellant, failure by the 3r d respondent to complete its mobilization work warrants the recall of the remaining amount of the guaranteed sum. 8 On the issue of whether the ICC Rules governed the Advance Payment Guarantee issued by the appellant, the learned Senior State Attorney submitted that the fact was pleaded under paragraph 11 of the plaint and was reflected in Exhibit P2. He relied on section 65 of the Evidence Act, which provides that facts admitted need not be proved. With respect to the fourth ground, regarding Exhibit P7, the learned Senior State Attorney argued that the decision in the Miscellaneous Commercial Case No. 28 of 2020 had never been challenged. The trial court had thus properly taken cognisance of it as relevant. He referred the Court to section 46 of the Evidence Act, stressing that reference to the ICC Rules was justified and that the appellant was precluded from denying their applicability. He further cited Ephraim Joram v. Director Tanga Cement Company Limited, (Civil Appeal No. 235 of 2020) [2024] TZCA 154 (4 March 2024; TANZLII), at page 16, in support of his position. The respondent also submitted that the appellant had a contractual obligation under Clause 6:14 to provide evidence showing how the advance payment had been utilized, yet no such evidence was provided. The learned Senior State Attorney referred the Court to the case of Patrick Edward Moshi v. Commercial Bank of Africa (T) Ltd, (Civil Appeal No. 376 of 2019) [2023] TZCA 18044 (4 April 2023; TANZLII), at pages 15-16, noting that the appellant, as guarantor, acted upon notification. Addressing the second ground of appeal, he argued that execution of the contract could not occur unless mobilization was completed, as stipulated under Clause 4:14.2. He stressed that execution of the contract and mobilization of materials were inseparable. On the fifth ground, the 1s t respondent referred the Court to page 518 of the record, where the testimony of PW2, is found concerning mobilization and management duties, including supervision, monitoring, and reporting. On Exhibits P8 and P9, he asserted that it was the contractor's responsibility to demonstrate utilization of the advance payment and not the 1s t respondent's. He maintained that the court could not assume or quantify the amount of work completed without evidence. Replying to the sixth ground, he contended that the third respondent's failure to file a written statement of defence amounted to an admission of the facts, and further noted that no invoices had been produced. Finally, in relation to the seventh ground, he submitted that the trial judge had properly evaluated the evidence, emphasizing that the ICC 10 Rules were expressly featured in the pleadings as reflected on page 529 of the record of appeal. Mr. Mgalula, for the 3rd respondent, was in support of the appeal. He noted that the proceedings had continued ex parte against her. Whereas, he acknowledged that the mobilization undertaken was less than 10%, he argued that, in the absence of a certificate or other evidence demonstrating the extent of the initial mobilization, it was erroneous for the trial Judge to award the full contractual amount, given that there was partial mobilization work performed. With respect to the ICC Rules, the learned counsel contended that their application was improper, as the rules were conditional in nature and the requisite conditions had not been satisfied. In rejoinder, counsel for the appellant submitted that although paragraph 11 of the plaint pleaded the existence of ICC Rules, the suit itself was not instituted in reliance upon those Rules. He argued that the Rules expressly stated and additional documents could have been produced to support them. He further contended that the appellant was not a party to the contract marked as Exhibit PI, insisting that the only relevant contract was Exhibit P2. On that basis, he distinguished the case of Patrick Edward Mushi v. Commercial Bank of Africa (supra), li maintaining that it was inapplicable to the present matter. Counsel also argued that the principle of estoppel could not apply, as the appellant was a stranger to Exhibit PI. Having considered the grounds of appeal, the record, and the submissions of the parties, we are of the view that all grounds of appeal ultimately boil down to a single issue: whether the trial court was justified in deciding in favour of the 1s t respondent for payment of 1,106,450,788.00. In determining the issue, we find two questions arising. First, whether the assertion contained in Exhibit P5 (the demand note for payment) can be construed within the conditions stated in Exhibit P2 (the Advance Payment Guarantee), which encompasses grounds one, two, five, and six. Second, whether the trial court erred in considering the ICC Rules, together with the decision in Miscellaneous Commercial Case No. 28 of 2020 (Exhibit P7), which relates to grounds three and four. Before addressing these questions, it is important to note that, as the first appellate court, this Court is obliged to re-evaluate the evidence and reach its own findings. It must also be borne in mind that in civil cases the standard of proof is on the balance of probabilities, meaning that a party who wishes the Court to believe in the existence of specific facts 12 must prove those facts. This principle is enshrined in section 119 of the Evidence Act, and has been affirmed in cases such as Pauline Samson Ndawavya v. Theresia Thomas Madaha, (Civil Appeal No. 45 of 2017) [2019] TZCA 453 (11 December 2019; TANZLII), and Paskali Nina v. Andrea Karera, (Civil Appeal No. 325 of 2020) [2023] TZCA 35 (21 February 2023; TANZLII). We commence our determination with the second issue, namely, whether the trial court erred in its consideration of the ICC Rules, together with Exhibit P7. We find no fault with the trial Judge's application of the ICC Rules. Exhibit P2, issued by the appellant, expressly stated that the guarantee was subject to these Rules. Although the appellant was not a party to the contract between the 1s t and 3r d respondent (Exhibit PI), it acknowledged the contract's existence in its letter of 22n d October 2018. It confirmed the guarantee being subject to the ICC Rules. Therefore, the appellant, being aware of the Rules' applicability, cannot now dispute their reference. The appellant's contention that the Rules were not pleaded is equally without merit. As the learned Senior State Attorney rightly observed, the 1s t respondent pleaded the applicability of the Rules in her pleadings. Moreover, DW1, the appellant's employee, when being cross-examined by 13 Mr. Musseti, at page 529 of the record of appeal, admitted that the appellant had actually issued a notice of rejecting the demand as required in ICC Rules, even though he could not tender a copy of the said notice issued. Mr. Msafiri's argument that the principle of estoppel cannot apply because the appellant was a stranger to Exhibit PI is not entirely correct. While it is true that the appellant was not a party to the contract between the 1s t respondent and the 3r d respondent, the principle of estoppel is capable of extending beyond the contracting parties. It may apply to the appellant who references and relies on contractual rules in carrying out their obligation as exhibited in Exhibit P2. Although estoppel does not confer full contractual rights, it can nonetheless bind a party's conduct where reliance and resulting detriment are established. With respect to Exhibit P7, the appellant's fourth ground of complaint is similarly unfounded. The trial court did not rely upon Exhibit P7 as the basis of its decision; rather, it took judicial notice of the document, which we think was incorrect. The trial Judge could have referred to it, given that Exhibit P5, which was in issue in Miscellaneous Commercial Case No. 28 of 2020, related to the disputed project. On page 986 of the record of appeal, the trial court held that Exhibit P5 constituted a sufficient instrument discharging the obligations under the ICC Rules, as the demand letters from AUWSA adequately disclosed the grounds upon which the demand was made. We are of the view that the trial court rightly decided in favour of the 1s t respondent regarding payment under the Advance Payment Guarantee. Based on the analysis and evaluation of the witnesses' testimonies and the exhibits tendered by both parties, the trial Judge could not take into account the alleged 10% mobilization by the 3r d respondent, as the actual value was not stated. Exhibit P5, the demand letter, reinforces our position. Since the appellant failed to observe the ICC Rules, which they had admitted governed the Advance Payment Guarantee, as evidenced by Exhibit P2, the trial Judge was justified in awarding the full sum under the Advance Payment Guarantee rather than a lesser figure selected at random. Turning to the first question, the complaint centres on the condition for encashment or repayment of the guarantee as stated in Exhibit P2. For ease of reference, Exhibit P2 provides: "Upon receipt by us o f your first demand writing accompanied by a written statement stating that the contractor is in breach of its obligation 15 under the contract because the contractor used the advance payment for purposes other than the cost o f mobilization in respect o f the work. "[Emphasis added] The appellant argued that these exact words ought to have appeared in Exhibit P5. However, Exhibit P5 on page 970 of the record of appeal states "Since the performance o f the contractor is unsatisfactory compared to the time elapsed (time elapsed is 70% while the progress is less than 10%), and the repayment is not yet done, the employer hereby officially demands payment o f the above-mentioned amount as per the above guarantees." [Emphasis added] The central issue for determination is whether the wording contained in Exhibit P5 conveys the same meaning as the conditional statement set out in Exhibit P2. Convinced, as was the learned trial Judge, that although Exhibit P5 does not reproduce the exact words of Exhibit P2, it nonetheless carries and conveys the same meaning. This conclusion is consistent with the undisputed evidence at trial that there was only partial mobilization, a fact substantiated by Exhibit P9 found at page 971 of the record of appeal. Exhibit P9 comprised letters from the Project Manager to the 3r d respondent, highlighting poor mobilization of work. The appellant's 16 contention that partial mobilization proved the advance payment was properly utilized is therefore unfounded. Exhibit P9, written a year after the advance payment, clearly demonstrates poor mobilization and supports the conclusion that the funds were not used as intended. This finding directly contradicts the allegation raised in the fifth ground of appeal that the extent of partial mobilization was not stated. In our view, both Exhibits P5 and P9 sufficiently elaborate on the point. Consequently, the complaint in the first ground is without merit, and the trial court was correct in construing Exhibit P5 as a valid encashment demand, thereby fulfilling the condition stipulated in Exhibit P2. Similarly, the second ground fails, as the trial court did not conflate mobilization works with construction works. Ground six also lacks merit, since the evidence established a fundamental breach, entitling the 1s t respondent to encashment under the Advance Payment Guarantee. As for the last ground, which challenges the trial judge's analysis and evaluation of evidence, we are not persuaded by Mr. Msafiri's submissions. The discussion we have carried out above has equally addressed this point. It is our considered opinion that the trial judge did analyse and evaluate the evidence touching on Exhibit Dl, which collectively comprised a letter from the Bank of Tanzania dated 18th December, 2020 and an undated letter from the appellant to the Bank responding to the payment delay query, without specifically mentioning them. Therefore, nothing to fault. In conclusion, we find the appeal lacking in merit and consequently, we dismiss it entirely with costs. DATED at DAR ES SALAAM this 12th day of December, 2025. G. A. M. NDIKA JUSTICE OF APPEAL P. S. FIKIRINI JUSTICE OF APPEAL A. Z. MGEYEKWA JUSTICE OF APPEAL Judgment delivered this 12th day of December, 2025 in the presence of Mr. Denis Msafiri, learned counsel for the appellant, Mr. Masunga Kamihanda, learned Principal State Attorney for the 1s t & 2n d respondents, Mr. Kapimpiti Mgalula, learned counsel for the 3r d respondent and Ms. Jenikisa Bukuku, Court Clerk via virtual Court; is hereby certified as a true c c ~ . *•> --------- — ■'