Happy English Medium Schools Limited and Another vs Grofin Africa Fund Limited and 3 Others (Civil Appeal No. 591/16 of 2023) [2024] TZCA 897 (17 September 2024)

IN THE COURT OF APPEAL OF TANZANIA AT PAR ES SALAAM CIVIL APPEAL NO. 591/16 OF 2023 HAPPY ENGLISH MEDIUM SCHOOLS LIMITED ............... DEODAUTS R. PANGANI ..................................... . ............ 1st APPELLANT 2 n d APPELLANT VERSUS GROFIN AFRICA FUND LIMITED ...... PRIMUS PANGANI ................. . ........... JULIUS RUTASHUMULUWA PANGANI CLARA JULIUS ................................... . , 1 st RESPONDENT 2 nd RESPONDENT 3 rd RESPONDENT , 4 th RESPONDENT (Application for stay of execution of the decree of the High Court of Tanzania, Commercial Division at Dar es Salaam) For a reason that the 2nd , 3rd and 4th respondents were, on 10/9/2024, served with the notice of hearing of this application today but, without assigning reasons did not feature in Court, the hearing proceeded in their absence in terms of Rule 63(2) of the Tanzania Court of Rules, 2009 (the Rules). Dr. Onesmo Kyauke, learned counsel, represented the 1st respondent and Hr. Deodatus R. Pangani, the 2n d applicant who is also fMruma. J.1 ) dated the 24th day of July, 2018 in Commercial Case No. 79 of 2017 ORDER LILA.:

the Executive Director of the 1st applicant, was linked to the Court through video conference from the High Court of Tanzania at Bukoba building. At the outset of the hearing, Dr. Kyauke, who had formerly and initially raised a point of objection a notice of which he lodged in Court on 10/9/2024, opted to withdraw it and was granted and the hearing of the application proceeded. The more so, Dr. Kyauke, intimated to the Court that he was not opposing the application provided the applicants deposit security for due performance of the decree in the form of a Bank Guarantee of the amount equal to the decreed amount, that is TZS 535,420,403.25 as required by law. Mr. Pangani was quite opposed to the Court issuing an order of depositing security in the form of a Bank Guarantee arguing that it is difficult for the applicants to secure it for various reasons relating to the affairs of the school and was ready to deposit the Title Deed of the school landed properties which secured the loan located on Plots Nos. 588 and 589 Block "DD" Kashai area Bukoba municipality and the school located in Plot No. 36 Block "A" Nyanga area Bukoba which are now in the hands of the 1st respondent. He also committed himself to being ready to undertake the duty of taking care of those properties until the intended appeal is determined insisting that the properties belong to the school and 2

are immovable which will be available to the respondents for attachment and sell in the event the intended appeal will not succeed. He pleaded to the Court to consider the situation faced by the school and accept those properties as security. Repeatedly, he argued that the appeal has an overwhelming chances of success such that letting execution to proceed will defeat the purpose of the appeal. Dr. Kyauke pressed for depositing a Bank Guarantee as a proper nature of security arguing that the school properties which were mortgaged are a subject of the case and therefore not legally permitted to be a security unless their value exceed the decreed amount for which there is no current valuation report has been lodged in court by the applicants to prove so. Arguing further, he said the applicants had committed themselves under paragraph 13 of the supporting affidavit to furnish security as may be directed by Court. He wondered how then the applicants now urge the court accept as security the mortgaged assets and he took issue that the applicant, in Civil Appeal No. 580 of 2024 before this Court, is not appealing against the decree in Commercial Case No.79 of 2017 (Hon. Mruma J.) which ended by a settlement order, the subject of the execution process, but is appealing against the order for execution dated 17/3/2022. 3

After a sober consideration of the parties' arguments, I have found it convenient to first address the last issue raised by Dr. Kyauke about the nature of appeal by the applicant in Civil Appeal No. 580 of 2024 now pending in the Court. I fortunately had opportunity to peruse relevant record of appeal. It is evident in both the record of application and the record of appeal in Civil Appeal No. 580 of 2024 that the learned Hon. Judge Nkeha dealt with execution of the decree issued in Commercial Case No.79 of 2017 by Hon. Judge Mruma and granted the application for execution issuing various orders intended to allow the respondent realise the fruits of litigation. On the face of the record in Civil Appeal No. 580 of 2024, it is not indicated, as Dr. Kyauke rightly argued, that the applicant has appealed against the decision by Hon. Judge Mruma. But, looking at the complaint in ground 11 of appeal and relief (b), it is plain that the challenge in the validity of the execution proceedings touches the decision in Commercial Case No.79 of 2017 by Hon. Judge Mruma. They are couched thus: - "11. That the entire proceedings o f the executing court and trial court as well were conducted and decided with a lo t o f irregularities and illegalities in so far the Commercial Case no. 79 o f 2017, such a suit involved enforcement o f the loan agreement and mortgage by way o f recovery o f the secured

debt and the contract o f guarantee against borrowers and guarantors. Something that constitute two different cause o f action which the iater claim does not fa il under any o f the categories o f suits which are supposed to be instituted by way o f summary procedure therefore there is no sound decree to be executed." And, relief (b) sought states: - "To give an order declaring that Commercial Case no. 79 o f 2017 and the entire decisions and proceedings o f the executing court and tria l court are nullity and a total mess and the only convenient option over the m atter is to have them nullified and set aside." In view of these assertions, it cannot be said that the applicant's appeal is restricted to the order by Hon. Judge Mkeha alone. It is vivid that the appeal, in one way or another, touches on both decisions of the High Court. Whether or not the manner adopted by the applicant in raising such grounds is proper, this is not a proper forum to decide. I stop there. I have, next, to consider the appellants' contention that the appeal (Civil Appeal No. 580 of 2024) stands better chances of success hence a reason for granting a stay order. The argument need not hold me long as the Court's position on such a contention has not changed over time, that 5

it is no more a good ground and its consideration may result in predetermining the intended appeal. For instance, in Richard Kisika Mugendi vs Sofia Bhoke Maryogo, Civil Application No.3 of 2003 the Court, citing other previous decisions on the matter, maintained that: - "the trend now is that chances o f success o f a pending appeal are not a ground for granting stay o f execution. See , for example, Ia n a zio M e ssin a a n d A n o th e r v. W illo w In ve stm e n t a n d A n o th e r C ivil Reference No. 8 o f 1999 (unreported); D e u sd e d it K is is iw e v. P ro ta s B ita u ri. C ivil Application No. 13 o f 2000 (unreported) and K am o u n i va U ch u ku zi Tabora Ltd . v. T.M .K. M rem a C ivil Application No. 43 o f1999 (unreported)." Another issue calling for deliberation is whether a mortgaged property can stand as good security for the due performance of a decree. In the instant application, the applicants' option is to let the respondent treat as security, the Title Deeds of the applicants' properties used to secure the loan and which are held by the 1st respondent to which the respondents are in opposition on the ground that, in law, it cannot be used as security and particularly because no recent valuation report has been done to show that they have a higher valued than the decreed amount. Although Dr. Kyauke did not cite any authority, I think, he had 6

in mind the Court's position in the case of Africhick Hatchers Limited vs CRDB Bank PLC, Civil Application No. 98 of 2016 (unreported) cited by the applicant in the written submissions in support of the application. It is common knowledge that in that decision there was a dissenting decision which was to the effect that a mortgaged property, irrespective of its value exceeding the decreed amount, cannot form a good security for due performance of the decree. Otherwise, the Court was of the firm position that, where the mortgaged property is in excess of the decreed amount hence able to satisfy the decree, the respondent will not be at risk if it is used as security and the Court will accept such property as sufficient security. It is obvious therefore that, for an applicant to rely on a mortgaged property as security (a collateral to the loan), as is the case herein, he should furnish with the Court a valuation report, as rightly argued by Dr. Kyauke, for the Court to satisfy itself that its value is over and above the suit decree hence able to satisfy the decree as may ultimately be binding upon the applicant. It is unfortunate that the applicants have not availed the Court with a valuation report of the collaterals as required. In view of such firm Court's position, the applicant's wish to resort to furnishing security by way of depositing the said Title Deeds is untenable. 7

I now turn to consider the merits of the application. The Court's mandate to grant application for stay of execution are provided under Rule 11 of the Rules. Among the conditions for grant, in terms of Rule 11(5) of the Rules, is that the applicant must make an undertaking to furnish security for the due performance of the decree, (see Mantrac Tanzania Limited vs Raymond Costa, Civil Application No. 11 of 2010 (unreported). The Court has gone further to caution that there must be fairness to both sides when the Court is called upon to determine the nature of security to be deposited, that is, interests of both parties should be considered and preserved. Cementing on this need, the Court stated in Africhick Hatchers Limited vs CRDB Bank PLC, (supra) in these words: - "Before we proceed to consider the subm issions o f the counsel for the parties however, we wouid like to make an observation that in dealing with the question o f security for performance , the Court has to balance the interests o f the applicant who is seeking the order for stay and those o f the respondent who is required to be paid his money in the event the decree becomes binding. O f course, m ost im portant is the fact that the respondent should not find it difficult to realize the decree in case the intended appeal fails. This is 8

the cornerstone o f the requirement for security, In such circumstances the Court is principally obligated to figure out whether or not any one particular mode o f security vouches risks on the part o f the respondent" In the instant application, in their undertaking to deposit security for due performance of the decree, the applicants, in paragraph 13 of the supporting application, categorically averred that: - "13. That, in addition to what have been stated above, the 1st and 2nd A p p lica n ts a re p re p a re d to fu rn ish s e c u rity a s m ay b e d ire c te d b y th e C ou rt, or in the alternative the properties which secured the said loan and which currently their certificates o f right o f occupancy are In the hands o f the 1st Respondent be accepted as the security for the due performance f the decree sought to be stayed . " Having made a finding as above, the remaining option for the applicant is to furnish security as the Court will direct. Dr. Kyauke prefers a security in the form of a Bank Guarantee without proposing an amount. It is common knowledge that the property earmarked by the respondent for execution by sale are the properties the Titles of which are now held by the respondent as collateral. They are school buildings hence the 9

applicant's fear is that, if sold to a third party and the applicant's appeal succeeds, restoring the status quo may be difficult. This is irreparable loss which may not be atoned adequately. The fears are therefore valid and cannot be taken lightly. In view of the above and considering that the Titles of the collaterals are with the 1st respondent and to balance the interests of both sides and as such, justice demands, I hereby order the appellants to deposit a Bank Guarantee of the value of TZS 100 Million (Say Tanzania Shillings One Hundred Million) only or to deposit a Title Deed of any immovable property of such value. And, I further direct that the applicants shall take care of the collaterals and ensure that they are in good order until the intended appeal is determined. Given the circumstances of this case, I order each party to bear own costs in this application. DATED at DAR ES SALAAM this 17th day of September, 2024. S. A. LILA JUSTICE OF APPEAL I certify that this is a true copy of the original.