Tanzania Electric Supply Company Ltd vs Muhimbili Medical Centre (Commercial Case No. 35 of 2000) [2000] TZHC 98 (8 September 2000)

• IN THE HIGH COURT OF T\NZ/\NiiV ( COMl'J:RRCIAL -Dl!/4,X:i-0-,N-)-::,>,-', AT DAR ES SALA \M COMMERCIAL CASE NO , OF 2000 TANZANIA ELECTRIC SUPPLY COMPAJ"·'Y LTD ............ PLAINTIFF VERSUS MUHIMBILI MEDICAL CENTRE ................ DEFENDANT COUNSEL: Mr. Mwandambo. for Plaintiff Mr: Shauri. for Defendant RULING BWANA,J. The defendant has raised a prclimina1'y objecti01iYVhich. whei1 carcft1lly' turnlysed

• as I will do hereunder - is but a st'ci"rni li1'a tfrio·l."··T•iit}f('l ;;ra in. fim'inc lilis :stat~~ - " .... that the plaint[lfbeing a .1pccificd ,,uh!/c corpornlion under the Public Corporntions ('l111enl1!J1·111) Act No. 16 <f 1993,· haFe no locus sru: 1 di In .111(' in their 011 1 11 name in respect olthe said ;'rc111ises" Rclev;mt to this pica is Section 43 (I) of the said Act. That provision of the law states - S. 43 (i) Notwithstanding any other law to the- contrary, with effect from the date of publication of an Ori.kT dccl:11:ing a public corporation to be a specified public corporation the Commission shall - (a) without further assurance on ,1;1pointmcnt have the power to act as the offici<1_l receiver of the specified public corporation; ;,rid · (b) have the powe1: and ail tlc r.ig!;{s of ;;";'-civ;r appointed in accordance \Vitli i'l" pursuant to the . \

\ ; 2 By "the Commission'' is meant the Presidential Parnsi:11:11 Sector Reform Commission (hereinafter to be referred to by its acronym, "the PSFC''). Further to the above provision, it is important fnr rurposcs of clarity. to quote as well the provisions of Section 42. That Section state~: - S. 42. "Notwithstanding that a public corpor:ilion may be declared ns specified public .corporation, _it shall be the duty 01· the Board of every public corporation - (a) to ensure that the corpon1tion continues lo carry out its functions in accori!:mcc wilh its statement of corporate strategy. ,1ild (b) to cooperate with and ensure th:1t the ollicers and employees of such corpor:11 ion cooperate with the Commission in order to facilit,1tc that the restructuring of the public corporation is successfully achieved. The PL1intifT - hereinafter referred to as TANESCO - became a specified public corporntinn by virtue of GN 543/97. However, it is my view that its rights - as a creditor to a third party (such as the Defendant in the instant suit). arc not in anyway fettered by the provisions of Section 43 (1) supra and Section 9 ( 1) of the Bankruptcy Ordinance, Cap 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 No. 14 7, Mag ore Street. Upanga, Dar es Salaam. The parties hacl entered a lease agreement on 27 July 19n.

l 3 In support of the applictition, Counsel for the ,l:·l'cndunt submitted in writing that the plaintifflrns no locus standi in the instant case for 11 ,c following reasons which I quote en extcnso -

1. Section 2 ! of the said Act 16 of 1993 cst,11 ·i ished the Presidential Pc1rastatal SectOl' Reform Commission (to the referrd to as the "PSRC") which ... has been granted powers to act as official recc 1 \ er of any specified public corporation,
2. Since the plaintiff lws already been declared ,i specified public corporation by the Mii1ister of Finance, then it is the PSRC who is ti,e:official receiver. The plaintiff therefore has no locus standi to institute this suit in its own name (emphasis mine) as stipulated under Section 43 (1) (a) and (b) of the said Act. A suit of this kind cnn be instituted by the official receiver. The judgment of Mapigano, J (as he then was) in the case of Mukubaganyi Mul'ume vs Tanzania Railways Corporation is cited thus:

" In view o/the provision r!lpara (b) o(rhe .rnhsection ( l \ by which the JJSNC has vis-d-vis TRC rhe JJ011·ers and all righ!s of a receiver appointed in occordance with or p11rsurmi to the /Jankruptcy Ordinace. ii is correct to treat the order of the 111inister as equivalent or tantamo1111ting lo a receiving order 1111der the Bankruptcy Ordinance. It is also correcr ro treat TRC as an insolvent boc(y, irrespective of the possibility that what the PSRC may ultimately do to the corporation is ' just to restrucr11re it or lease out its ctssefs " ... 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 rd [d) at p. 436: " ... when a recef,,er and manager is ap;)()inred over the underraking rhe board ofdirecrors 11·ilffor oil practical purposes, become fimcf11s o/!il'io ... " ' . . . :·· ' ~ .,, , ,; . '-.:-:, '· .. ~:,·

,I 4 · The sa111e principle is cited by 1.orcl Atkin in Moss Sk,1111ship Company vs Whinney (1912) ,\c 254. Therefore, it is submitted, this suit is wrongly brought up by directors whose poH 1 crs arc already put 011 nbeyancc or had bcrnrne fu11ctus officio by virtue of the plaintiff Company being put under receivership. Further more, Counsel relics on the provisinns of Section 288 of the Company's Ordinance to support his avermcnts, provisions which after careful examination, I do not f111d their relevance to the instant issue. In reply, Counsel for the plaintiff while controverting the above averrncnts, has 1 1 given \h;1! I consider lo be a detailed examination of'thc stale of the law in respect of this issue. everal decided cases arc cited in support of the submission. I will therefore examine the issues involved and refer to several other cases as well. In deed by virtue of Section 43( I) ot Act 16/9,. the PSRC is the official ·receiver, Tanescn being a specified corporation. Functions of the PSRC are clearly anl.widely defined llildcr Section 22 of the Act. They arc further amplified by Bubeshi .. 1 (in the case 01· r-:rnprcsso Bureau de Ch;mgc vs Tnnzani:1 Cot!()11 Lint and Seed Board - Civil Case No. 272/98 unreported); Kalcgeya, .I (in Saidi J-1 nimbo and Others vs State Travel Service~ and Others - Civil Case No. 296/97 unrepor1cd); Kisanga, J.A. (in Minister of labour ,ind UDA vs Gasper Swai & 67 Others - Civil Reference No. 3/99, also unreported), plus Mapigano, J. (in Cogccot & Cotton Company Ltd vs Tanz.inia mar,keting Board) a case cited by both Counsel. It is equally important to go hcyond the above cited cases. H. Picarda st:-ites at pp. 61 and 62 llf his hook The Law Relating to rs and Managers [1984, Butterwortb.s] as follows - "A receiver appointed under the statutory power does not enjoy any powers ofmonagement of a company. His receh•ership cannot, iherefore, intl'r/'ere with the managerial powers exercised by ihe !3nard (( Directors ... the pmPer given to the receiver ro bring 1,roceedings was an enahling provision so that he could realise the company's assets and carry on business ... the pr01·ision did not divest the Directors of the company of their po11·er to pursue a right of action i{ir 1110s in the Com1Hmy '.1· illferest ". ·.:·.v ·· ·, :,. ---- ... - . -

I l ) 5 A1c author was, in no doubt, citing the judgement in the case of Newhart Developments /Ltd vs Cooperative Commercial Bank [19781 2 All. E.R. 896 wherein it is l'urther stated: " Furthermore, the directors were under du(J' to bring on action which was in the COll1/JC111y 's interest since such action would not stu/tifj1 the receiver's fimction ... the p!aint[[fs were not required to obtain his consent lo bring the action ... " The foregoing views seem to have been adopted as well by P.J.S. Hewett, Jin a recent Kenyan High Court case of Flagship Carriers Ltd vs Imperial Bank Ltd<--~ 2 Others, [Civil Case No. 1643 of 1999]. Therefore it is clear l'rnm the above authorities and indeed it is trite Law that the appointment of the PSRC as a receiver, docs not divest the Tancscn management of their power to file the instant case the views of Gower cited above by Counsel for the defendant not:vithstanding. 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 l:l\v cited by Counsel fnr the defendant is distinguishable from the present case in the follO-ving manner -

1. The defendant in this case is not a specified corporation. Tanesco is not the debtor.
2. Neither Tancseo 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 cl,1imed. The Newhart case (supra) shows that the instant plaintiff is empowered to take such steps. In deed it is the duty of the T ANES CO leadership to do so by virtual of S. 42 (a) of the Act. -Section 9(1) of Cap 25 has been relied upon. It is su i'fice to state here that the said provision does not march with the facts before the Court. r ;.j,. . ...... .

6 I will now consider whether - all the above said - the plaintiff has a locus standi or not. In submitting that TANESCO has no locus 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 Comi (relying on S. 43 (a) & (b) of the Act).
3. The views of Mapigano, Jin the Mukubaganyi case. I have shown above that the Mukubaganyi case is materially distinguishable from the 1 ) present case. Hence the ratio decidendi therein is inapplicable here. I have also cited at greater length the views of both Picarda and the judgement in the Newhart case. I consider those views to be not only relevant to this case but also representing a con-ect interpretation of settled principles of the law in respect of the powers of an official receiver and/or his relationship which Board of Directo1's 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 Cap 25 differs with the views submitted by Counsel for the defend;mt. 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 by Section 9(1) of Cap 25 in respect of debtors is the need for a Court's !cave prior to commencing legal proceedings. And that will be relevant only for debtors whose debts are pro'able in bankruptcy. The foregoing is not an issue in the instant case.and therefore, that submission is untenable: The above, considered in its totality, I am of the considered view that the plaintiff has a locus standi. I now return to the issue of whether the PSRC should be joined as a plaintiff. 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 privatised in the near future. In the Mukubaganyi case, Mapig:mo, J concluded thus: . . . --- __ ..........

7 "I understand, however, that the prac:i,·e ol this Court has been to have the PSRCJoined as a party and allow proceedings to i1, 011. In see no good reason.from making a <· 1 </)(lr/ure from the procedure ... " In see no :,ound reason to depart from those views. In f.1ct if not in aim, the law of Civil Proced11rc (Section 95 and Order 1 R 10-2) allow the r·ourt to make necessary orders for the end of justice. In so doing, the Court may add or rlclctc a party to a suit. A~ stated above, therefore, being mindful of the role of the PSRC. I invoke the provisions of Order 1 Rule I 0(2) of the CPC and order that the PSRC be ,1d,Jed as a plaintiff as well. In summary therefore -

1. The reasoning in the preliminary objection a:; raised by the defendant is faulty and approach to the issue wanting. Theref~ ire it is dismissed with costs.
2. PSRC be added as a plaintiff to the suit. 1-<ccessary amendments to the pleadings be effected soonest. I rule accordingly. :,' . - ·~ ·.•-··-· 4 •••• • ,. ' S.J.ANA .JUDGE 8/9/2000