Kcb Bank Tanzania Limited vs Exim Bank Tanzania Limited & Another (Civil Application 331 of 2018) [2022] TZCA 480 (26 July 2022)

IN THE COURT OF APPEAL OF TANZANIA AT PAR ES SALAAM (CORAM: NDIKA, J.A., MWANDAMBO, J.A., And KENTE, J.A.^ CIVIL APPLICATION NO. 331/16 OF 2018 KCB BANK TANZANIA LIMITED ................................................. APPLICANT VERSUS EXIM BANK TANZANIA LIMITED ........................................ 1 st RESPONDENT M & R SPEDAG ............................................................... 2 nd RESPONDENT (Application for revision from the Ruling and Order of the High Court of Tanzania, Commercial Division at Dar es Salaam) (Sonqoro, J.) dated the 15th day of May, 2018 in Commercial Case No. 61 of 2017 RULING OF THE COURT 19th & 26th July, 2022 NDIKA, J.A.: By this application, KCB Bank Tanzania Limited, the applicant herein, moves the Court pursuant to section 4 (3) of the Appellate Jurisdiction Act to examine and revise the proceedings, ruling and order of the High Court of Tanzania, Commercial Division at Dar es Salaam (Songoro, J.) dated 15th May, 2018 in Commercial Case No. 61 of 2018. The application is made against Exim Bank Tanzania Limited and M & R Spedag, the first and second respondents respectively. In particular, the applicant challenges

the said court's ruling and order that struck out her written statement of defence and directed the first respondent to prove her claim ex parte on 20th June, 2018 at 10:00 a.m. The context in which this matter arises is as follows: while the applicant and first respondent are licensed commercial banks based in Dar es Salaam, the second respondent is a sole proprietorship owned and run by a certain Tanil Mangal Das. The first respondent instituted Commercial Case No. 61 of 2018 in the trial court against the applicant and the second respondent for damages amounting to TZS. 1,747,277,254.24 for loss allegedly suffered on account of the applicant's negligence and or failure to use reasonable skill, care and diligence in opening and operating a bank account for the second respondent. The first respondent claims in her plaint that her customer, a limited liability company registered as BC Mining Limited, instructed her on five occasions between 27th February and 31s t December, 2014 to transfer from her account a total of TZS. 1,528,400,455.99 to a bank account at the Bank of Tanzania in favour of the Tanzania Revenue Authority (henceforth "TRA") so as to meet her tax obligations. The transfers were effected as instructed but the first respondent learnt and established subsequently

that a part of the money so transferred, that is, TZS. 1,292,079,655.21, was fraudulently diverted and paid into the second respondent's bank account number 3300885957 maintained and operated by the applicant. Since it was subsequently established that BC Mining Limited as a taxpayer had discharged her obligation to pay tax and that she was not to blame for the fraud, TRA prevailed on the first respondent to pay the diverted funds (that is, TZS. 1,292,079,655.21) plus interest in the sum of TZS. 455,197,599.00. The first respondent paid the principal sum on 30th June, 2016 and later settled the aforesaid interest on 7th February, 2017. In essence, the first respondent blames the applicant for the aforesaid loss claiming that the applicant's officials were unwarrantably negligent as they failed to "use reasonable skill, care and diligence" and, consequently, facilitated the second respondent to open a bank account into which the diverted funds were remitted before they were swiftly withdrawn. In her written statement of defence, the applicant robustly denies liability. She asserts, in the main, that she appropriately opened and operated the second respondent's bank account according to banking practice. That when the remittances in dispute were received, her officials cross-checked with the first respondent's officials who, in turn, confirmed

that the transferred amounts in favour of the second respondent were genuine. She then casts the blame to the first respondent and the said BC Mining Limited on the ground that they ought to have discovered the alleged fraudulent transactions much earlier, not two years thereafter. The alleged loss, it is further asserted, was occasioned by the first respondent's own negligence and fraudulent transactions committed by her officials with the connivance of the officials of BC Mining Limited. It seems the second respondent was indifferent to the proceedings before the trial court. Having been served with summons by publication after personal service proved futile, he neither appeared nor filed any written statement of defence. Accordingly, the trial court ordered the matter to proceed ex parte against him. It must be observed that since the proceedings before the trial court were still at the pre-trial stage, they were governed, in particular, by rule 29 of the High Court (Commercial Division) Procedure Rules, Government Notice No. 250 of 2012 (henceforth "the Commercial Court Rules"). The said provision stipulated, at the material time, as follows: " 29.-(1) Without prejudice to sub-rule (1) o f rule 24, at any time before any case is tried; the Court

may direct parties to attend a pre-trial conference relating to the matters arising in the suit or proceedings. (2) The Court may, at the pre-trial conference, consider any matter including the possibility of settlement o f all or any o f the issues in the suit or proceedings and require the parties to furnish the Court with any such information as it considers fit\ and may give all such directions as it appears necessary or desirable for securing the just, expeditious and economical disposal of the suit or proceedings. (3) The court may, having made directions under this rule or rule 24, on its own motion or upon the application by any party, if any party defaults in complying with any such directions, dismiss such suit or proceedings or strike out the defence or counterclaim or enter judgment or make such order as it considers fit. (4) to (5) [Not applicable]. "[Emphasis added] Briefly, the above provision was intended to enable the High Court, Commercial Division to control and manage the conduct of a pre-trial conference on matters arising in the suit or the proceedings. In terms of

sub-rule (2) above, the court is enjoined to consider, at a pre-trial conference, any matter including the possibility of settlement of all or any of the issues in the proceedings and require the parties to furnish the Court with any such information as it considers necessary. The court is empowered to issue all such directions as it appears desirable for just and expeditious disposal of the suit. Sub-rule (3) above vests the court with the power to, among others, dismiss the suit or strike out the defence if any party defaults in complying with any of its directions. It is apparent from the record that despite the pleadings having been concluded upon the applicant filing her written statement of defence and the trial court having ordered the first respondent to prove her case ex parte against the second respondent, the envisaged pre-trial conference was, rather inexplicably, not conducted to conclusion. It occurred that while the applicant filed against the first respondent a notice to produce documents dated 19th August, 2017 pursuant to Order XI, rule 12 of the Civil Procedure Code, Cap. 33 R.E. 2002 (henceforth "the CPC") in respect of five money transfer authorization forms referred to by the first respondent in paragraphs 6 and 9 of her plaint, the first respondent also lodged a similar notice on 13th April, 2018 requiring the 6

applicant to produce the bank statement on the second respondent's account. The trial court ordered the first respondent on 14th November, 2017 and subsequently on 13th March, 2018 to serve the applicant with the requested documents but it is evident from the record that the two orders were not complied with. On 18th April, 2018, the suit came up yet again for the pre-trial conference. While Ms. Christina Ilumba and Mr. Elisa Abel Msuya, both learned counsel, appeared for the first respondent and the applicant respectively, there was obviously no appearance on the part of the second respondent. Before the conference commenced in earnest, Mr. Msuya took issue with the first respondent's failure to serve the applicant with the requested five money transfer authorization forms contrary to the court's orders. In response, the trial court ordered as follows: "The order o f this court dated 13/03/2018 was that the suit was fixed today for the first pre-trial conference. However, Mr. Elisa Abe! Msuya has raised issues that they were not served with the list of additional documents which were ordered on 13/03/2018. The court finds the issues raised by Mr. Elisa Abei Msuya for the [first] defendant may be addressed upon when the

suit is due for hearing or in the course of the hearing since the court order was to conduct the first pre-trial conference the court orders that the pre-trial conference proceeds as scheduled without wasting time. "[Emphasis added] The presiding judge went ahead and opened the pre-trial conference whereupon Mr. Msuya notified the court that the applicant intended to amend her written statement of defence and apply for leave todeliver interrogatories. He stated further that the applicant would file another notice to produce documents requiring the first respondent to serve certain documents. On that basis, he argued that the pleadings were not completed for the pre-trial conference to proceed as scheduled. In response, the presiding judge ordered as follows: "... Mr. Msuya has reported that his pleadings are not complete. Since this is the second session of the first pre-trial conference, Mr. Msuya is granted 12 days from today to ensure that pleadings are complete before I make an order of going for arbitration (sic). The parties must take into account that this is the second time Mr. Msuya is reporting that the pleadings on his part are not complete. The court grants him the second

chance to ensure that he completes his pleadings so that they go to mediation. The matter is fixed on 14/05/2018 at 9:00 a.m. The duty of completing pleadings is on the party himself. "[Emphasis added] When the matter came up on 14th May, 2018 as scheduled, it was Ms. Regina Kiumba, learned counsel who appeared for the applicant. She notified the presiding judge, at the very outset, that the applicant had lodged a notice of preliminary objection to the effect that the life span of the suit had expired and, accordingly, prayed to be heard on the point before the matter proceeded to the pre-trial conference. However, apparently at the court's prompting Ms. Kiumba also acknowledged that: "We have not complied with the court order of completing our pleadings [as] there are documents which the plaintiffs have." It is manifest on the record that Mr. Emmanuel Nasson, learned counsel who appeared for the first respondent, did not address the court on the issue or any other matter. Having heard Ms. Kiumba's concession, the presiding judge rendered the following order: "The [first] defendant, through Ms. [Kiumba] has reported that [she has] not complied with the court

order which gave [her] a second chance to comply (sic) with [her] pleading. Since the [first] defendant has failed to complete (sic) the court order o f completing [her] pleading , the court hereby orders the parties to appear before the court at 3:00 p.m. for necessary orders." Although the presiding judge did not pronounce any order at the appointed time on the day, he handed down a ruling the next day, striking out the applicant's written statement of defence and directing the first respondent to prove her claim ex parte, as hinted earlier. For clarity, we extract the relevant part of the ruling, shown at page 84 of the record, thus: "Taking into account that on 14/05/2018 the court did not hear from the defence counsel a report on completion of the [first] defendant's pleadings, certainly the [first] defendant and her counsel have not complied with the court order which compels them to complete their own pleadings." He then concluded that: "In the light o f the above, the court pursuant to rule 29 (2) and (3) o f the High Court (Commercial Division) Procedure Rules, G.N. No. 250 o f 2012 10

and Order XVII, rule 3 of the Civil Procedure Code, Cap. 33 [R.E. 2002] hereby strikes out the [first] defendant's written statement of defence for failure on the part of the [first] defendant to take measures of completing her pleadings for furtherance o f progress of the first pre-trial conference and the su it" [Emphasis added] At the hearing before us, Mr. Elisa Abel Msuya and Ms. Regina Anthony Kiumba, both learned counsel, appeared for the applicant whereas Mr. Makarios Justin Tairo, also learned counsel, stood for the first respondent. The second respondent did not appear as the notice of hearing intended to be served on him was returned unserved. In the circumstances, Mr. Msuya urged us to dispense with his appearance on two grounds: one, that his whereabouts are unknown; and two, that the proceedings in the High Court were going on in his absence after he had defaulted appearance and failed to file any written statement of defence. Mr. Tairo, on his part, initially pressed for the second respondent to be served with the notice of hearing by publication, expressing his concern for the second respondent's right to be heard being fully observed. l i

However, on reflection he agreed with the course suggested by his learned friend. On our part, we duly considered the concurring submissions of the learned counsel with whom we agreed that in the circumstances of this matter it was in the interests of justice that the appearance of the second respondent be dispensed with so as to secure expeditious disposal of the dispute. It is common cause that the second respondent's whereabouts are unknown, meaning that he cannot be reached to accept service of the notice of hearing without undue delay. We considered resorting to service of the notice by publication but we felt that it would involve an unwarranted adjournment of the hearing. As rightly submitted by Mr. Msuya, the proceedings in the High Court were going on in the second respondent's absence after he was served with summons by publication but he defaulted appearance and elected to file no written statement of defence. Most importantly, we have taken into account that whatever decision this Court takes in the present proceedings will not be adverse or prejudicial to his interests. Essentially, the contest is between the applicant and the first respondent. Accordingly, invoking rule 4 (1) of the Tanzania Court of Appeal Rules, 2009, we directed a departure from the rules and 12

dispensed with the second respondent's appearance. The hearing, therefore, proceeded as scheduled in the absence of the second respondent. The applicant predicated these revisional proceedings on six grounds of grievance. Having reflected on them in the light of the contending submissions made at the hearing, we took the view that the sticking issues for our determination are two: first, whether it was proper for the trial court to reject addressing the preliminary objection raised by the notice filed on 14th May, 2018 questioning the competence of the suit; and secondly, whether the trial court afforded the parties an opportunity to be heard on the issues it raised and decided in the ruling. We begin with the first issue. On this question, Mr. Msuya criticized the learned trial judge for not dealing with the preliminary objection despite being invited to do so by Ms. Kiumba. He vigorously contended that the course taken by the learned judge prioritizing dealing with the purported failure by the applicant to "complete her pleadings" was an error calling for this Court's attention. On the other hand, Mr. Tairo disagreed with his learned friend. He argued that the applicant's learned counsel fronted the question of expiry of speed track as a device to deflect 13

attention from the applicant's failure to comply with the court's order. The issue of the lifespan of the case was, according to him, irrelevant. We would agree with Mr. Msuya that the approach taken by the learned judge was plainly erroneous. It was not in accord with the established practice that once a preliminary objection is raised questioning the competence of a suit or any proceedings before a court of law, the court is enjoined to hear the parties on the objection and determine the point before it deals with the other substantive aspects of the suit or proceedings. This is so because a preliminary objection consists of a point of law which has been pleaded or which arises by clear implications out of the pleadings and which if argued as a preliminary objection may dispose of the suit or result in the termination of the proceedings - see Mukisa Biscuits Manufacturing v. West End Distributors Limited [1969] E.A. 696. When such a point of law is raised, the court is obliged to hear the parties and resolve the objection so as to determine not only the competence of the action or proceeding but also to affirm its own jurisdiction in the matter. It is on record that Ms. Kiumba drew the learned judge's attention to the preliminary objection but the judge, rather inexplicably, turned a 14

blind eye to the point. In our view, by selecting to deal with the alleged failure by the applicant to "complete her pleadings" instead of determining the preliminary objection, the court abrogated the applicant's right to be heard on the point and forsook the opportunity to determine and affirm the competence of the suit. With respect, we are unpersuaded by Mr. Tairo that the preliminary objection was a cunning device to distract the court from attending to the applicant's failure to comply with its order. We stress that once the preliminary point of objection was raised, the court was obligated to hear the parties on it and determine it before dealing with the substantive matter. Turning to the second issue, Mr. Msuya censured the trial court for not affording the parties an opportunity to be heard effectively before the provisions of rule 29 (3) of the Commercial Court Rules and Order XVII, rule 3 of the CPC were invoked to strike out the applicant's written statement of defence. On his part, Mr. Tairo submitted that the trial court properly struck out the defence upon Ms. Kiumba's concession that the applicant's "pleadings" were incomplete contrary to the previous court's order. 15

Addressing the learned rival submissions, we should, at first, recall that the proceedings of 14th May, 2018 before the trial court that we have excerpted in part earlier on indicate that after Ms. Kiumba who appeared for the applicant had acknowledged that the applicant had not completed her pleadings, the learned trial judge promptly reserved the case for necessary orders and adjourned the pre-trial conference. The next day he delivered a six-page considered ruling, which is the subject of these proceedings. In our considered view, the learned judge appears to have lost grip of the proceedings and rushed to adjourn the hearing so as to compose a ruling. That approach was plainly injudicious primarily because he had not heard the parties on the matter. In fact, Ms. Kiumba may have acknowledged the alleged non-compliance but that was not enough. It is manifest on the impugned ruling that it contains no argument for or against the position that he took. It all contains his chronicle of the proceedings as well as his decision thereon. As rightly argued by Mr. Msuya, the learned judge should, instead, have accorded the parties an opportunity to address him on the effect of the alleged non-compliance particularly in the light of the dictates of rule 29 (3) of the Commercial 16

Court Rules. Their submissions should have been the basis of his decision but in the instant matter the learned judge made a unilateral decision without the benefit of any submissions. Settled is the principle that any adverse decision arrived at without affording the affected party a fair hearing is a nullity. In Abbas Sherally and Another v. Abdul S.H.M. Fazalboy, Civil Application No. 33 of 2002 (unreported), the Court held that: "The right of a party to be heard before adverse action or decision is taken against such a party has been stated and emphasized by the courts in numerous decisions. That right is so basic that a decision which is arrived at in violation o f it will be nullified\ even if the same decision would have been reached had the party been heard\ because the violation is considered to be a breach o f natural justice." In Mbeya-Rukwa Auto Parts & Transport Limited v. Jestina George Mwakyoma [2003] T.L.R. 251, the Court accentuated that the right to be heard is not just a principle of natural justice but a constitutional imperative in Tanzania: 17

7/7 this country natural justice is not merely a principle of common law; it has become a fundamental constitutional right Article 13 (6) (a) includes the right to be heard amongst the attributes o f the equality before the law, and declares in part: (a) Wakati haki na wajibu wa mtu yeyote vinahitaji kufanyiwa uamuzi na Mahakama au chombo kinginecho kinachohusika, basi mtu huyo atakuwa na haki ya kupewa fursa ya kusikilizwa kwa ukamiiifu." The text of Article 13 (6) (a) of the Constitution of the United Republic of Tanzania cited in the above quotation loosely translates in English as follows: "(a) when the rights and duties of any person are being determined by a court of law or any other agencythat person shall be entitled to a fair hearing and to the right o f appeal or other legal remedy against the decision of the court or other agency concerned." See also: National Housing Corporation v. Tanzania Shoe Company and Others [1995] T.L.R. 251; and Director of Public 18

Prosecutions v. Sabinis Inyasi Tesha and Another [1993] T.L.R. 237 on the right to be heard as a peremptory principle. For the reasons we have assigned, we are decidedly of the view that the impugned ruling and order of the High Court dated 15th May, 2018 are a nullity. Accordingly, we find merit in the application, which we hereby grant. In the premises, we nullify the aforesaid ruling and order. As a consequence, we remit the case to the High Court for it to continue from where it ended on 14th May, 2018. Considering the circumstances of this matter, we make no order as to costs. DATED at DAR ES SALAAM this 25th day of July, 2022. The Ruling delivered this 26th day of July, 2022 in the presence of Ms. Mariam Ismail, learned counsel for the 1s t Respondent and also holding brief for Ms. Irene Mchao, learned counsel for the applicant is hereby certified as a true copy of the original. G. A. M. NDIKA JUSTICE OF APPEAL L. J. S. MWANDAMBO JUSTICE OF APPEAL P. M. KENTE JUSTICE OF APPEAL J. E. FOVO DEPUTY REGISTRAR COURT OF APPEAL 19