Mountain Hill Nursery and Primary School Limited vs International Commercial Bank (Tanzania) Limited (Civil Application No. 810/16 of 2023) [2024] TZCA 915 (20 September 2024)

IN THE COURT OF APPEAL OF TANZANIA AT PAR ES SALAAM CIVIL APPLICATION NO. 810/16 OF 2023 MOUNTAIN HILL NURSERY AND PRIMARY SCHOOL LIMITED.............. .................................... APPLICANT VERSUS INTERNATIONAL COMMERCIAL BANK (TANZANIA) LIM ITED .......................... .............. ................ RESPONDENT (Application for stay of execution of the Decree of the High Court of Tanzania (Commercial Division) at Dar es Salaam) (AgathoJL) dated the 06th day of October, 2023 in Commercial Case No. 38 of 2023 RULING 10th & 20th September, 2024 ISSA, 3.A.: The dispute between the parties arose out of breach of term loan facility of TZS. 900,000,000.00 granted to the applicant and which was payable over the period of 6 years. The applicant mortgaged her property located at Plot No. 2112 Block A at Kimara King'ong'o area within Ubungo Municipality in Dar es Salaam Region (the property) as security for the loan. The property was a school with dormitory to accommodate boarding students. On 28th January, 2019 a fire occurred and damaged the property.

In 2023 the applicant instituted at the High Court (Commercial Division) (the trial court) a Commercial Case No. 38 of 2023 seeking among others, a declaration that the respondent was obliged to process insurance for the applicant and pay for insurance premium of the mortgaged property, and that the respondent should pay the applicant TZS 3,681,200,000 as the loss of income from 28th January, 2019 to the date of filing the suit. The respondent, on the other hand, filed a counter claim of TZS. 1,573,472,069.31 as the outstanding balance from the loan facility. The trial court dismissed the applicant's case and ordered the applicant to pay the outstanding loan amount. Dissatisfied, the applicant filed in the Court a notice of intention to appeal to challenge the decision of the trial court. Then, it came to applicant's knowledge that the property pledged as security was to be sold by public auction. Therefore, by a Notice of Motion filed under rule 4(2)(a) and (b), 11(3), 11(4), 11(4A), ll(5)(a),(b)/ 11(6), 11(7) (a),(b),(c) and 48(1) of the of the Tanzania Court of Appeal Rules, 2009 (the Rules) the applicant had sought to move this Court to order a stay of execution pending hearing and determination of the intended appeal. The application is supported by an affidavit sworn by Gasper Joseph Shayo, the director and principal officer of the applicant company. The applicant is represented by Mr. Victor Kikwasi, learned advocate. The application was

not resisted by the respondent as she did not file an affidavit in reply. The respondent had the services of Ms. Bora Aifredy Nicholaus, also learned advocate. Mr. Kikwasi adopted the affidavit and submitted that the applicant has complied with rule 11 of the Rules. On the issue of security for the performance of decree, the respondent on paragraph 15 of the affidavit undertook to furnish the security if the Court directs so. But Mr. Kikwasi changed his stance during oral submission and he submitted that, the property which was pledged as security for loan should be used as security for performance of the decree. He argued that, the land is still mortgaged to the respondent, hence, if the appeal is not successful the respondent will be able to realise the amount by dealing with the property the way she sees fit. To support his argument he cited the Court's decision in Africhick Hatches Ltd v. CRDB Bank Pic, Civil Application No. 98 of 2016 [2019] TZCA 148 (15 March 2019, TANZLII) in which the Court allowed mortgaged property to be kept as security. He prayed for the Court to grant the application. Responding to the issue of security, Ms. Bora submitted that the respondent had no objection for the property to be kept as security, but insisted that the applicant should add a bank guarantee to cover the

additional amount in case the sale of the property does not fetch the decreed amount. In the short rejoinder, Mr. Kikwasi insisted that the value ofthe property is sufficient to cover the decreed amount and theissue of insufficiency should not be discussed at this juncture. In the instant application, the Court has been called to determine the grant of stay of execution in general and what is at stake is the issue of security for the due performance of the decree. The pertinent question is whether an applicant for stay of execution can use the security pledged to secure a loan facility as the security for the due performance of the decree. Before embarking on that task, it is prudent to state the law with respect to the application for stay of execution. Rule 11 of the Rules deals specifically with the stay of execution and the applicant is required to comply with sub-rule (3), (4), (5) and (7). Rule 11(3) of the Rules provides: (3) In any civil proceedings, where a notice o f appeal has been lodged in accordance with Rule 83, an appeal shall not operate as a stay o f execution o f the decree or order appealed from nor shall execution o f a decree be stayed by reason only o f an appeal having been preferred from the decree or order; but the Single Justice may upon good

cause shown, order stay execution o f such decree or order" In numerous decisions of the Court it has been held that, for the Court to exercise its powers under rule 11 (3) there must be a valid notice of appeal which clothes the Court with jurisdiction to entertain the application. Further, rule 11(7) also provides that in the application for stay the application must be accompanied by a notice of appeal, a decree or order appealed from, a judgment or ruling appealed from, and a notice of the intended execution. In the absence of a valid notice of appeal and the decree or order sought to be appealed against, the application becomes incompetent and liable to be struck out. (See - Awinia Mushi v. Tropical Pesticides Research Institute, Civil Application No. 2 of 2006 and National Housing Corporation v. Ettienes Hotel, Civil Application No. 175 of 2004 (both unreported). In the present application, the applicant has complied with the above sub-rules. The application was accompanied by a notice of appeal, a decree, a judgment appealed from and a notice of the intended execution. Further, the notice of intended execution was served on the applicant on 12th October, 2023 and the instant application was filed on 26th October, 2023 within 14 days as required by rule 11(4) of the Rules.

Lastly, the applicant was required to comply with rule 11(5) which provides: "No order for stay o f execution shall be made under this rule unless the Court is satisfied that (a) substantial loss may result to the party applying for stay o f execution unless the order is made; (b) security has been given by the applicant for the due performance o f such decree or order as may ultimately be binding upon him." The Court in Joseph Antony Soares @ Goha v. Hussein Omary, Civil Application No. 6 of 2012 [2013] TZCA 328 (8 May 2013, TANZLII) and Mantrac Tanzania Limited v. Raymond Costa, Civil Application No. 11 of 2010 (unreported) has stressed that these conditions must be complied with cumulatively. In the present application, the applicant has demonstrated that she stands to suffer substantial loss if the order for stay of execution will not be granted because the respondent may end up selling the property, which is a school in which the applicant is doing her business. The crux of the matter is on the second issue, which concerns the security for performance of the decree. The applicant is contending that the security kept to secure the loan facility is sufficient and should be used as the security for the due performance of the decree. Mr. Kikwasi urged

me to follow the path taken by the Court in Africhick Hatchers Limited (supra) (the majority view) where the Court allowed the use of charged property as security for the due performance of the decree. The respondent accepted the property, but she asked for additional security in the form of a bank guarantee. With due respect to Mr. Kikwasi, the majority view in Africhick Hatchers Limited (supra) is no longer the position of law. In Sinani Building Contractors Limited and Others v. CRDB, Civil Application No. 662/16 of 2022 [2024] TZCA 196 (19 March 2024, TANZLII) the Court took the dissenting position held in Africhick Hatchers Limited v. CRDB Bank Pic., Civil Application No. 98 of 2016 [2019] TZCA 149 (15 March 2019,TANZLII) as the correct position of law. The minority position was to the effect that: "In an application for stay o f execution, an encumbered property, irrespective o f its value, cannot stand as good security for the due performance o f the decree as may ultimately be binding upon the applicant in case the appeal fails . This includes a charged property which secured the loan the subject o f the decretal sum. In such an applicationa different security must be given to hold even for parties...

The Court in minority view relied in the Court's earlier decision in Hydrox Industrial Services Ltd and Another v. CRDB (1996) Ltd and 2 Others, Civil Application No. 87 of 2015 [2018] TZCA 348 (27 December 2018, TANZLII) where the Court stated: "This Court agrees with the 1st respondent that, even if the original title deed o f the said property is in its hands , , the applicants ought to furnish other form o f security to ensure that, the respondents would not be deprived of the fruits o f the decree in the event the appeal ends in disfavour o f the applicants. Also, the impugned decree says that the mortgaged property with Certificate o f Title No. 45667 should be sold by 1st respondent to realise the outstanding debt. That means that, the property cannot be security for the applicants because it is the subject o f the decretal order. Hence, the property is no longer in the hands o f the applicant, it cannot therefore be used to furnish security o f the due performance o f the decree . " In the instant application, the security intended to be used as security for due performance of the decree suffers from two anomalies. One, we know the decreed amount in which the applicant ought to pay which is TZS 1,573,472,069.31, but we do not know the value of the property. The parties have not attach any document showing the value of

the property, hence, the Court cannot determine if the property will be able to cover the decreed amount. The purpose of keeping security is to safe guard the rights of both the applicant and respondent. In Africhick Hatchers Limited (supra-majority view) the Court adopted the view expressed by the Court of Appeal of Kenya in Nduhiu Gitahi v. Warugongo [1988] K.L.R. 621 to substantiate the proposition. The Court of Appeal of Kenya stated: "The aim o f the Court in this case was to make sure, in an even-handed manner, that the appeal will not be prejudiced and that the decretal sum would be available if required. The respondent is not entitled, for instance, to make life difficult for the applicant, so as to tempt him into settling the appeal. Nor will either party lose if the sum is actually paid with interest at Court rates." Two, the security intended for the due performance of the decree is a charged property. It has been pledged as security to secure a loan granted to the applicant. Therefore, the security is no longer in the hands of the applicant and cannot be used as a security for the due performance of the decree. Therefore, in the circumstances of this application where the value of the property is uncertain and the property is encumbered, the Court is of

the view that the applicant should provide a different form of security. In that respect, I order that the stay of execution is granted on the condition that the applicant should provide a bank guarantee constituting the decretal sum which is TZS 1,573,472,069.31 and that, the same be furnished to the Court within 60 days from the date hereof. Costs to be in the cause. DATED at DAR ES SALAAM this 20th day of September, 2024. The Ruling delivered this 20th day of September, 2024 in the presence of Mr. Victor Kikwasi, learned advocate for the Applicant and Ms. Halima Semanda, learned advocate for the Respondent, is hereby certified as a true copy of the original. A. A. ISSA JUSTICE OF APPEAL 1$L W. A. HAMZA DEPUTY REGISTRAR / COURT OF APPEAL W. A. HAMZA 10