Tanzania Electric Supply Company Limited v Muhimbili Medical Centre (Commercial Case No. 35 of 2000) [2000] TZHC 680 (8 September 2000)

164 TANZANIA LAW REPORTS [2002]T.L.R a TANZANIA ELECTRIC SUPPLY COMPANY LIMITED v. MUHIMBILI MEDICAL CENTRE (NUMBER 1) HIGH COURT OF TANZANIA B (Commercial Division) AT DARES SALAAM (Bwana, J.) C COMMERCIAL CASE No. 35 OF 2000 Public Corporations — Specified public corporation - Whether a specified public corporation has locus standi to sue in its own name — Sections 42 and 43 D of the Public Corporations (Amendment) Act Number 16 of 1993 and section 9 (i) of the Bankruptcy Ordinance Chapter 25. Civil Practice and Procedure - Joinder of parties - Suit instituted by a specified public corporation — Order 1, rule 1 - Whether the Parastatal Sector E Reform Commission must be joined as plaintiff - Order I rule 1 of the Civil Procedure Code. The plaintiff, in its own name, brought a suit against the defendant claiming arrears of p rent. The defendant raised a preliminary objection that being a specified public corporation under the Public Corporation (Amendment) Act Number 16 of 1993, the plaintiff did not have locus standi to sue in its own name. Relying on section 43(1) of Act Number 16 of 1993 and section 9(1) of the Bankruptcy Ordinance Chapter 25, G the defendant contended that the appointment of PSRC as a receiver has divested the plaintiffs management of the power to do so. Held: (i) The rights of a specified public corporation as creditor to third parties are, by virtue of section 42 of Act Number 16 of 1993, not in any way fettered by section H 43(1) of Act Number 16 of 1993; (ii) Section 9(1) of the Bankruptcy Ordinance (iii) The joinder of PSRC as plaintiff to suits filed by specified public corporations is good practice. Preliminary objection overruled

TANZANIA ELECTRIC SUPPLY COMPANY LIMITED v. 165 MUHIMBILI MEDICAL CENTRE (NUMBER 1 1 Cases referred to: (1) Mukubaganyi Malume v. Tanzania Railways Corporation (Case Number and venue not given, unreported) (2) Moss Steamship Company v. Whinney (1912) AC 254 (3) Express Bureau de Change v. Tanzania Cotton Lint and Seed Board HC, Civil Case number 272 of 1998 (unreported) (4) Saidi Mnimbo and others v. State Travel Services and others [1999] T.L.R. 233 (5) Minister of Labour and UDA v. Gasper Swai and 67 others, CA, Civil Reference Number 3 of 1999 (unreported) (6) Cogecot and Cotton Company Limited v. Tanzania Marketing Board [1997] T.L.R. 165 (7) Newhart Developments Limited v. Cooperative Commercial Bank [1978] 2 All ER 896 (8) Flagship Carriers Ltd v. Imperial Bank Limited and Two others, HC (Kenya) Civil Case Number 1643 of 1999 Statutory provisions referred to:

1. Bankruptcy Ordinance Chapter 25, section 9(1), 22, 43(1), 43, 42
2. Public Corporations (Amendment) Act Number 16 of 1993
3. Civil Procedure Code, Order I, rule 1 Mr Mwandambo, for the Plaintiff Mr Shauri, for the Defendant RULING (Dated 8 September 2000) Bwana, J.: The defendant has raised a preliminary objection which, when carefully analysed as I will do hereunder - is but a storm in a tea pot. The said plea in limine litis states:

166 TANZANIA LAW REPORTS [2002]T.L.R. A ... that the plaintiff being a specified public corporation under the Public Corporations (Amendment) Act Number 16 of 1993 have no locus standi to sue in their own name in respect of the said premises. Relevant to this plea is section 43(1) of the said Act. That provision B of the law states: Section 43(i) Notwithstanding any other law to the contrary, with effect from the date C of publication of an Order declaring a public corporation to be a specified public corporation the Commission shall: (a) without further assurance on appointment have the power to act as the official receiver of the specified public corporation; and D (b) have the power and all the right of a receiver appointed in accordance with or pursuant to the Bankruptcy Ordinance ... By “ the Commission ” is meant the Presidential Parastatal Sector E Reform Commission (hereinafter to be referred to by its acronym, “ thePSRC ” ). Further to the above provision, it is important for purposes of clarity, to quote as well the provisions of section 42. That section F states: Section 42 Notwithstanding that a public corporation may be declared as specified G public corporation, it shall be the duty of the Board of every public corporation: (a) to ensure that the corporation continues to carry out its functions in accordance with its statement of corporate strategy, and (b) to cooperate with and ensure that the officers and employees of such corporation cooperate with the Commission in order to facilitate that the restructuring of the public corporation is successfully achieved. The plaintiff - hereinafter referred to as Tanesco - became a specified j public corporation by virtue of G.N. 543 of 1997. However, it is my

TANZANIA ELECTRIC SUPPLY COMPANY LIMITED v. MUHIMBILI MEDICAL CENTRE (NUMBER 1) 167 view that its right - as a creditor to a third party (such as the defendant in the instant suit), are not in anyway fettered by the provisions of section 43(1) supra and section 9(1) of the Bankruptcy Ordinance Chapter 25. The above said, it is important also to state albeit briefly, the main issue at this stage. The plaintiff sued the defendant for a specified sum of money being unpaid rent in respect of a house situate on plot number 147, Magore Street, Upanga, Dar es Salaam. The parties had entered a lease agreement on 27 July 1998. In support of the application, Counsel for the defendant submitted in writing that the plaintiff has no locus standi in the instant case for the following reasons which I quote in extensor'.

1. Section 21 of the said Act 16 of 1993 established the Presidential Parastatal Sector Reform Commission (to be referred to as the “ PSRC ” ) which... has been granted powers to act as official receiver of any specified public corporation.
2. Since the plaintiff has already been declared a specified public corporation by the Minister of Finance, then it is the PSRC who is the official receiver. The plaintiff therefore has no locus standi to institute this suit in its own name [emphasis supplied] as stipulated under section 43(1 )(a) and (b) of the said Act. A suit of this kind can be instituted by the official receiver. The judgment of Mapigano, J. (as he then was) in the case of Mukubaganyi Malume v. Tanzania Railways Corporation (1) is cited thus: “ In view of the ^fovision of paragraph (b) of the subsection (a) by which the PSRC has vis-a-vis TRC the powers and all rights of a receiver appointed in accordance with or pursuant to the Bankruptcy Ordinance it is correct to treat the order of the Minister as equivalent or tantamounting to a receiving order under the Bankruptcy Ordinance. It is also correct to treat TRC as an insolvent body, irrespective of the possibility that what the PSRC may ultimately do to the corporation is just to restructure it or lease out its assets ” .

168 TANZANIA LAW REPORTS[2002]T.L.R. A 3. Issuance of a receiving order is to completely oust the company ’ s powers through its directors, as stated by Gower in the Principles of Modern Company Law (3 ed) at page 436: ... when a receiver and manager is appointed over the undertaking JJ the board of directors will for all practical purposes become functus officio. The same principle is cited by Lord Atkin in Moss Steamship Company c v. Whinney (1). Therefore, it is submitted, this suit is wrongly brought up by directors whose powers are already put on abeyance or had become functus officio by virtue of the plaintiff company being put under receivership. Furthermore, Counsel relies on the provisions of section 288 of the Company ’ s Ordinance to support his averments, D provisions which after careful examination, I do not find their relevance to the instant issue. In reply, Counsel for the plaintiff while controverting the above E averments, has given what I consider to be a detailed examination of the state of the law in respect of this issue. Several decided cases are cited in support of the submission. I will therefore examine the issue involved and refer to several other cases as well. F Indeed by virtue of section 43(1) of Act 16 of 93, the PSRC is the official receiver, Tanesco being a specified corporation. Functions of the PSRC are clearly and widely defined under section 22 of the Act. They are further amplified by Bubeshi, J. in the case of Empresso G Bureau de Change v. Tanzania Cotton Lint and Seed Board (2); Kalegeya, J. (in Saidi Mnimbo and others v. State Travel Services and others (3); Kisanga, J.A. (in Minister of Labour and UDA v. Gasper Swai and others - (4), and Mapigano, J. (in Cogecot and Cotton Company Ltd v. Tanzania Marketing Board (5) a case cited by both Counsel. It is equally important to go beyond the above cited cases. H. Picarda states at pages 61 and 62 of his book The Law Relating to Receivers and Managers [1984, Butterworths] as follows: j A Receiver appointed under the statutory power does not enjoy any powers of management of a company. His receivership cannot, therefore, interfere

TANZANIA ELECTRIC SUPPLY COMPANY LIMITED v. 169 MUHIMBILI MEDICAL. CENTRE (NUMBER 1) with the managerial powers exercised by the Board of Directors the power given to the Receiver to bring proceedings was an enabling provision so that he could realize the company ’ s assets and carry on business ... the provision did not divest the Directors of the company of their power to pursue a .right of action if it was in the Company ’ s interest. The author was, in no doubt, citing the judgment in the case of Newhart Developments Ltd v. Cooperative Commercial Bank (6) wherein it is further stated: Furthermore, the directors were under duty to bring an action which was in the company ’ s interest since such action would not stultify the receiver ’ s function... the plaintiffs were not required to obtain his consent to bring the action... The foregoing views seem to have been adopted as well by page J.S. Hewett, J. in a recent Kenyan High Court case of Flagship Carriers Ltd v. Imperial bank Ltd and others (7). Therefore it is clear from the above authorities and indeed it is trite law that the appointment of the PSRC as a receiver, does not divest the Tanesco Management of their power to file the instant case, the views of Gower cited above by Counsel for the defendant notwithstanding. As to whether PSRC should have been joined as a plaintiff, I will return to that at a later stage. It is, however, important to note at this stage that the case law cited by counsel for the defendant is distinguishable from the present case in the following manner:

1. The defendant in this case is not a specified corporation. Tanesco is not the debtor. •»
2. Neither Tanesco nor Muhimbili Medical Centre are shown to be insolvent.
3. From the pleadings it is apparent that the whole case is one of enforcement of contractual obligations with the plaintiff trying to recover rental money not paid by the defendant. The defendant admits the debt in the written statement of defence although it contests the sum claimed. The Newhart case (1) shows that the instant plaintiff is empowered

170 TANZANIA LAW REPORTS [2002]T.L.R. A to take such steps. Indeed it is the duty of the Tanesco leadership to do so by virtual of section 42(a) of the Act. Section 9(1) of Chapter 25 has been relied upon. It suffices to state here that the said provision does not march with the facts before B the court. I will now consider whether - all the above said - the plaintiff has a locus standi or not. In submitting that Tanesco has no locus c standi counsel for the defendant relies on the following points:

1. It is a specified corporation.
2. PSRC is the official receiver and as such only PSRC is empowered to bring this action before this Court (relying on section 43(a) and D (b) of the Act)
3. The views of Mapigano, J., in the Mukubaganyi case(l). I have shown above that the Mukubaganyi case(l) is materially E distinguishable from the present case. Hence the ratio decidendi therein is inapplicable here. I have also cited at greater length the views of both Picarda and the Judgment in the Newhart case (1). I consider those views to be not only relevant to this case but also F representing a correct interpretation of settled principles of the law in respect of the powers of an official receiver and/or his relationship which Board of Directors of a corporation/company. My further examination of this issue (of locus standi) vis-a-vis section 43(1) of the Act read together with section 9(1) of Chapter 25 differs with the views submitted by Counsel for the defendant. Those provisions, to me, do not prevent a specified corporation from suing or being sued in its own name, sections 288 of the Companies Ordinance notwithstanding. It would appear that the only limitation imposed H by section 9(1) of Chapter 25 in respect of debtors is the need for a court ’ s leave prior to commencing legal proceedings. And that will be relevant only for debtors whose debts are provable in bankruptcy. The foregoing is not an issue in the instant case and therefore, that 1 submission is untenable. The above considered in its totality, I am of the considered view that the plaintiff has a locus standi.

TANZANIA ELECTRIC SUPPLY COMPANY LIMITED v. MUHIMBILI MEDICAL CENTRE (NUMBER 1) 171 I now return to the issue of whether the PSRC should be joined as a plaintiff. I am mindful of the special role entrusted to the PSRC in the economic restructuring currently taking place. I am also mindful of the fact that Tanesco is one of the specified corporations to be privatized in the near future. In the Mukubaganyi case (1), Mapigano, J., concluded thus: I understand, however, that the practice of this Court has been to have the PSRC joined as a party and allow proceedings to go on. In see no good reason from making a departure from the procedure ... In see no sound reason to depart from those views. In fact if not in aim, the law of Civil Procedure (section 95 and Order 1, rule 10(2) allow the court to make necessary orders for the end of justice. In so doing, the court may add or delete a party to a suit. As stated above, therefore, being mindful of the role of the PSRC, I invoke the provisions of Order 1, rule 10(2) of the Civil Procedure Code and order that the PSRC be added as a plaintiff as well. In summary therefore:

1. The reasoning in the preliminary objection as raised by the defendant is faulty and approach to the issue wanting. Therefore it is dismissed with costs.
2. PSRC be added as a plaintiff to the suit. Necessary amendments to the pleadings be effected soonest. I rule accordingly.