Poly-Med (TANZANIA) Ltd vs Bagco Ltd (Civil Case 360 of 1998) [1998] TZHC 2007 (1 December 1998)

IN T H E H IG H C O U R T O F T A N Z A N I A D A R F.S S A L A A M D I S T R I C T R E G I S T R Y AT D A R ES S A L A A M CI V I L C A S E NO. 360 O F 1998 P O L Y - M E D ( T A N Z A N I A ) L I M I T E D .............P L AI NT IF F V E R S U S B A G C O L I M I T E D ....................................................... D E F E N D A N T R I L 1 N c K A L E G E Y . V .)■: 1he Defendant represented by Mr. R\ e\ on ge /. a & Co, Advocates. laised a preliminary objection that the " mu it I m ilc feel i vc f or n o n - j oi iu l cr < > J l lie F R I - . S l l ) l . \ I l . l l . I ’.l k . l S 1A I A I. SE( ’TOR R EFO R M ( ' OM M ISSIO X " (^cncriilly know n i/v FSR( ) I he plaintiff is represented by Mr. Jade.ia. Advocate. Arguments were presented by way o f written submissions. The defendant, in brief, argued that as it bought the -business formerly carried on by P O I. Y S A C K S C O M P A N Y from the P S U C . which is an official R e c e n c r under the Public C o r p o r a t i o n s Act No. 2 of l ‘W2 as amended b\ act No. lo o f 1W v its liabilu> is limited as per section 2 and 7 of the I RANSI I K ( >f BCSINI SS ( P R O 11 C I K )N <>1 CRI D1 I OR S) OR I). CA P that on those premises the plaintil! has no cause ol action against the Defendant as the latter is not liable for an\ debts that accrued belore the business was acquired. I he Defendant's (. ounscl. on another front, insisted that though o 1. Rule of the C i \ il Procedure Code provides that no suit should be defeated bv reason of non-iomder. that rule does not a p p h because the substantive laws show that their (parties) rights interests cannot be determined in this situation without inclusion ot PSRC. 1le relied on a commentary appearing on page 526 ol S A R k A R S I. AW O f C l \ ' l l . 1’Rt K T D l R l ;. S'” I d. 1le added that. a> plamtifl has not bothered to nun

2 P S R C despite raising the objection the suit should be dismissed, and. again called to his aid S A R K A R ' S comm en tar y on page 526 where it is slated. " I f in s u c h a s u i t t h e p l a i n t i f f , in s p i t e o f t he o b j e c t i o n r a i s e d i n s i s t s o n p r o c e e d i n g w i t h t he s u i t w i t h o u t j o i n i n g a l l t he n e c e s s a r y p a r t i e s , w h o a r e the W f .'7 Ji\nriv<cd". In response. Mr. Jadeja for the plaintiff argued that as preliminary objections '"must assume the tacts pleaded in the plaint to be correct there is nothing in the plaint which suggests that PS R C is relevant hence the preliminary objection raised is not supported: that defendant acts on an erroneous belief that Bagco L.td bought assets from Polvsacks Coy l.td and that these are two different companies when the truth is that it is the same company which upon change ol shares ownership assumed just a new name and that it is not possible for a coy to transfer its own property to itself and therefore Cap. is inapplicable. Clarifying. Mr. .ladeja stressed that PSRC was .simply acting lor the Cioyeminent and would h a \ e been made a party il the (. ompany was under liquidation ot in the process o f restructuring. He maintained that the process was perfected under the latter but that bv the time the suit was filed the exercise had already been exhausted: that in any case PSR C may be a proper party but not a necessary party such that the Court can easily pass an eff ec li\ e decree (referred to a nu mb er o f Indian decisions), and. more particulars in this case because the defendant s liability remained a li \c undci S. _•) (5) of the Co m pa nie s Ord. after change ol name. In o r d e r to a p p r e c i a t e t he gisi of t he a r g u m e n t s w e s h o u l d e q u i p o u r s c i \ cs. al bei t b r i e f h . w i t h fact s b e h i n d t he c o n t r o \ c r s \ . A c c o r d i n g to t he m a t e r i a l ' b e f o r e m e ( p l e a d i n g s a n d s u b m i s s i o n s ) t he f o l l o w i n g t act s ar e not d i s p u t e d . I hc plaintiff i P o h - M e d i I ) l.td) and P o h sacks Co. I id. both limited liabilities Co m pa nie s and incorporated in l a n / a n ia . in the p a s t , used to lia\e trading transactions between them. The Cun ernment o f the 1 ’nited Republic ot I a n /a n ia o w ne d shares m P ol \sa c ks Co. l.td. In quest for pri\atisalion p o l i o the ( i o\ e m i ne nt ol 1 a n / a n i a formed

3 the PRESIDENTIAL PA R A S T A T A L SECTOR REFORM COMMISSION (PSRC). This is a body corporate established by S. 21 o f the Public Corporation Act. No. 2 ot 1992 as a m en de d by Act 16 o f 1993, A m on g others. Act 16 93 bestowed powers o f an "official Receiver" unto PRSC. Also, among other duties PSRC could liquidate or restructure an\ corporation designated a "specitied public Corporation b\ the Minister upon P S R C ' s recommendations. P o h sacks Co. I td was designated as such and in the privatisation exercise that followed, a foreign C o m p a n \ . Pl.!RE BO N D 1.1MI 111). acquired some shares therein. Polysacks Co. Ltd changed name and acquired a new name o f B A G C O Ltd. the Defendant in this matter. The p lai n tif fs claim is tor shs.2 9 . 5 3 5 .0 0 0 '“ being unsettled account for goods allegedly supplied to Polysacks Co. Ltd during their trading transactions before PSRC came unto the scene. It is on those facts that Defendant argues that h a \ i n g bought the property from the official Receiver. PSRC. under Cap. 39X. S. 7. it is not liable for any debts, and in the alternative that PSRC should have been joined as a party, while the plaintiff counters bv maintaining that mere change o f name did not amount to "selling property" and at the same time, that it could not sell properly to itself. I nder S. 2 o f the Transfer of Businesses (Protection o f Creditors) Cap. 39,S. a law designed to protect creditors on the transfer o f Businesses, anv person who acquires, am on g others. "the u h o l e o r s u b s u t n l i a l l v the u ho le oj the p r o p e r t y ot a n y t ra il ing or n h i n u n i e t u r t n ^ b us i ne ss es or lm\ b u s i n e s s ot a like nature, shall.

u>t\ uhstandiiv.i an\ t/^v, uu nt to the e o n t r w x 'v l iable t or a l l t'ne a e ’'ts unit i ibh^iiitons u > r u fueh m e trans \ n>r uu > K n ' :s /;, ih w in /vvn i / ot Unit bns;n t * >\ ( snino pro\ is, > s arc then indicaied but which for our purpose arc not rcicv ant i 1 he abo\ c howcv cr is subject to S upon which Defendant hinges Us argument 1he said section provides.

4 ' 7. N o th in g in this O rdinance shall affect a n y p e rso n a c q u irin g the goodw ill or the w hole or su b sta n tia lly the w hole o f the p ro p e rty of a m b u sin ess - ( at f r o m t h e O f f i c i a l R e c e i v e r o r a n y t r u s t e e in b a n k r u p t c y ; (bt from the liquidator of an\ company, fci from an cxccuior or ihi’nin:^iriiii>r. n h b\ operation of law As 10 the C o m m is s io n 's (PSRC) capacity as an ''oltieial R e c e i\e r S. 4..> (1) ot the Public Corporation Act. No. 2 as amended bv Act No. 16 ot I'M.' provides: ' 4 3 i 11 Not w i t h s t a n d i n g i in\ o t h e r law to t he c o n t r a r y u ith ef f ect f r o m t h e d a t e < > f p u b l i c a t i o n o f a n O r d e r d e c l a r i n g a p u b l i c c o r p o r a t i o n l o b e a s p e c i f i e d p u b l i c c o r p o r a t i o n t he ( o m m i s s i o n s h a l l la) w illioiil f u r t h e r a s s u r a n c e o n a p p o i n t m e n t h a v e th e p o w e r t< > i i d a s t he of f i ci al >\ c i v c r of the s p e c i f i e d p u b l i c c u r p o rt tl io ii . a n d lb) have the pow-cr iiih l a ll the rights' of it receiver app<nnted in accordancc with or pursuant to the Bankrupt O rihnan cc H a v i n e c a r e f u l l y a n a l v s e d t h e l a w. t h e p l e a d i n g s a n d s u b m i s s i o n s I h a \ e r e a c h e d a c o n c l u s i o n t h a t t h e p r e l i m i n a r v o b j e c t i o n h a s n o b a s i s t o h o l d il a n d s h o u l d c o n s c q u o n t l v b e t h r o w n o u t 1 h a w so c o n c l u d e d b e c a u s e ol t h e l o l l o w m g \ \ ith r e s p e c t to t he C o u n s e l for the De f e n d . m i . S 7 ol ( a p WX. as ri ght l v ' U ^ m i t t e d b \ t he C o u n s e l for t he IMaintill. is lotallv o ut ot p l a c e o n t he ( act s ol t hi s c a s e I he s e c t i o n p r o t e c t s a " p e r s o n a c q u i r i n g w h o l e or subst ant i al ! } t he w h o l e p i o p e r ' v ol a n \ b u s in e s s f r o m t h e " o f f i c i a l R e c e i v e r " A s s u m i n g that in s u p e r v i s i n g t he t r a n s a c t i o n P S R C w a s a c t i n g as a n of f i ci al R e c e i v e r ( a n d for o u r p u r p o s e a n d o n t act s ol t hi s c a s e it is not n e c e s s a rv t o c o n s i d e r w h e t h e r S 4 3 o ' \ c t 1<< o I l 1)').' a p p o i n t e d P S R ( an a u t o m a t i c ” o! i i c : a i R e c e i v e r " o! anv c o r p o r a t i o n d e s i g n a t e d a s p e d Sled p u b h c

" . . . i f the w o rd s o f an A ct are clea r y o u m ust f o llo w them even though they lea d to a m anifest absurdity. The cou rt h as n oth in g to do w ith the qu estion w h ether the leg isla tu re has co m m itted an absurdity'. " H e sought further support o f his v iew from V ach er and Sons Ltd v s. L on d on society- o f C o m p o s it o r s (191 3) A C 107, 121, where it wa s observed, " . . . a cou rt o f law has nothing to d o with the rea so n a b len ess o r u n reason ablen ess o f a p ro v isio n o f a statute, except so f a r as it m ay h o ld it in in terpretin g w h at the L egislatu re m ust be taken to have m eant a n d in ten ded w h at it has p la in ly expressed, a n d w h atever it has in clea r term s en a cted m ust be en fo rced though it sh o u ld le a d to a b su rd ity a n d m isch ievo u s results. " Rega rd ing attaching copies o f notices to the reply to the 3,d party s written statement o f defence he insisted also that it wa s an after thought regard b e in g had to the dates w h e n he (plaintiff) approached the Tanganyika l.aw Society, the a s si g n m en t o f the matter on legal Aid basis to Mr. Marandu by the former and the dates indicated on the said notices. He c o n c lu d e s by maintaining that they should have been attached to the e plaint. Finally, whi le supporting the rest o f the 3rd Party s su b mi ss io n s, the 1 Def en dan ts de plo re s its su bmissions which tend to dispute the existence o f any Insurance ;ontract b etw een t h e m on allegations o f no n- production o f relevant d o c u m e n t s and brands this as b or der in g fraud because he believes that the 3rd party is su p p o s e d to keep the records o f its customers. F.nouuh for the synopsis o f the argu m en ts presented. 1 should howe ve r, at this point, c o m m e n d the counsel, tor the preparation and presentations o f their r e s p e c m e submissions. N o w . tor the merits and the lavs pci taming thcieto. I will deal first with the preliminary objection regarding the dete cti ve \ e r i h c a t i o n clause. Parties ha ve c on ced ed that the verification clause is detective. Indeed it is. I his. and w hich leaves a lot to be desired, runs as under. w h a t is s ta te d herein a b o ve is true to the best o f m \ know ledge, in fo rm a tio n anil belief.

T h is g o e s counter to w hat O.V1, R ule 15(2) provides. The sam e provides, "The p e r so n verifyin g sh a ll specify, by referen ce to the n u m b ered p a ra g ra p h s o f the p le a d in g w h at he verifies o f his ow n kn o w led g e a n d w h at he verifies upon inform ation r e c e iv e d a n d b e lie v e d to be true. The d etect notw ithstanding h ow ever 1 am not persuaded that the con seq u en ces are to have the plaint d ism issed . W hile I appreciate that theV lP E ngineering case and " M ajum der on Plaints' insist that procedural requirem ents are not m eant to be mere decorations in leg isla tio n s. I am also aware that the sam e authorities clearly state that a procedural d efect w h ich d oes not go to the core o f the matter is a curable irregularity. Further to the above authorities there are many others to the same ettect. h x a m p les ot these are: Fortunatus Lwanyantika M asha vs D r.W illiam Shija & another (C A ) C ivil A pplication N o .6 o f 1997 (M w anza Registry); I lam ed Rashid Hamed v M w anashcria M kuu na W en /a k e watatu. (C A ) C ivil A pplication N o .9 o f 1996 (Zanzibar, R egistry) and not forgetting various treatise by learned authors including M oeh a's Law ot Pleadings and M ulla on cod e o f C ivil Procedure. For clarity, let the latter, also cited by Plaintiti in support o f the proposition o f curability and w hich m akes persuasive guidance as it relates to p rovisions in the India C ode o f C ivil Procedure w hich are sim ilar to those in our CPC. take the floor. a p l e a d i n g w h ic h is not p r o p e rly verified in the m a n n e r re q u ir e d by the ru le rnav be verified at a later stage o f the suit, even aftei the exp iry o f the lim ita tio n period. I he o m issio n to verify a p l e a d i n g is a m e re irreg u la rity a n d w here a verification o f a p la in t or p e titio n is defective, that s h o u ld not n o r m a lly be re fe c te d but a n o rd er s h o u ld be m a d e f o r its a m en d m en t " - (M ulla on C o d e o f ( 'ivil P rocedure, vol. I I 15 th E d . p a g e 11 I am also awar e that there are conflicting view s ot this court regarding the effect o f a defective verification clause. As examples, we have \la s s a w c and C oy vs. J a c h ib h a i P atel and 18 o th e rs, civil ease N o .3 9 /9 5 (H C ) D SM R eg istry , where it was held that such defect is incurable hence the pleading should be dismi sse d. In H ilal H a m ed R a sh id & 4 o th ers v T h e P erm a n en t S ecretary (E sta b lish m e n t) and A tto rn ey G en era l, (H C ), D SM civil case No. 129 o f 1998 the holding w as the opposite. There could be in ex istence man> more others but lack ot j u d g m e n ts rulings ot other 6

judges inhibit m y otherw ise thirst and hunger to digest and compare the sam e. H ow ever, as 1 had an occasion to hold in many others, including, M setti auction M art (T) Ltd >s SIDO , C om m ercial case N o .l o f 1999, and as 1 am now holding in this case, such defects are curable by ordering just an amendment. The G eorgia case cited by Mr. M sem w a for the third Party did not decide on the defective verification clause but rather on a written statem ent o f defence signed by unauthorised person. I he tw o cases are clearly distinguishable. The above disposed and regard being had to the nature of the remaining preliminary objections w hich are clearly interwined, 1 will deal with them together. 1 should start by associating m y self with p la in tiffs proper directions quoted above regarding what preliminary' objections should contain. I need not reiterate the same. tor. that is a clear legal stand know n to every legally trained mind. N ow , starting with a com plaint regarding the purported tailure to com ply with S. 10 (2) o f Cap 169 1 should say outrightly that it has no base on w hich to stick. The answer w as provided by B y o m b a lirw a ’s case cited by both parties. A gain, 1 am in agreement with p lain tiff that although in that case the court was dealing with a different provision o f the law , s.6 o f the Sale o f G oods Ordinance, the analogy attached there-to fits the one w hich should be accorded s. 10 (2) o f cap. 169. I he Court ot Appeal (K 1SA N G A . J.A) negatively reacting to the finding o f the High court on the matter (the High Court had upheld the preliminary objection that the plainti11 had disclosed no cause o f action by not d isclo sin g that he had com plied with section 6 o f the Sales o f G oods - Ordinance) had the follow in g to say, " H e have given m uch thought to Mr I zanda s argument, hut tie have not been p e r s u a d e d by it Hi’ do no think that the req u ire m e n ts u n der section 6 a m o u n t to facts constituting cause of tiction li e think, as a rg u e d by Mr Raithatha. that section 6 only p ro v id e s a sp e cia l defence w hich a defendant m ay rely on if he so wishes. It s h o u ld he p o in te d out h ow ever that where a defendant w ishes to a va il h i m s e lf o f that defence, he has to raise it on the pleadings. The rea so n for this is clear It is to a v o id taking the o ther p a r ty by surprise at the trial It is d esig n ed to give the opposite p a r ty sufficient notice of the case which he is to meet at the trial Once tiv hold that the requirem ents louler scctnin 6 only

crea te a s p e c ia l defen ce open to a defendant, it lo g ica lly fo llo w s that a p la in tif f is under no o b lig a tio n to a ver in the p la in t com plian ce w ith a n y such requirem ent. N or d o es he have to an ticip a te it. H is ob lig a tio n in rela tio n to it a rises only i f a n d when the d efen dan t has r a is e d it. So that sh ou ld the defendan t choose n o t to ra ise it a t all, f o r instance, the tria l is lo p ro ceed ; the p la in tiff h as no d u ty to refer to it a n d even the court is not bou n d to lake ju d ic ia l notice. It is a sp e cia l defence d esig n ed for the benefit o j a defendant, hut i f the defendant d o es not w ith to a va il h im se lf o f it, the m a tter is to re st a t that. " S. 10(2) o f Cap. 169, w h ose alleged non-com pliance embitters the 3 rd Party, provides, ’ N o sum sh a ll be p a y a b le b y an insurer under the fo reg o in g p ro v isio n s o f this section: ' (a) in resp ect of an y judgem ent, unless before or w ithin fou rteen d a y s after the com m encem ent o f the p ro ceed in g s in w hich the ju d g em en t w as given, the insurer h ad notice o f the b rin g in g o f the p ro c ee d in g s " I he w ording above reproduced clearly show s that this is a special defence accorded to the insurer. The Court o f Appeal observations in B yom balirw a’s case cannot have a better bearing. Again, the hulla baloo raised by 3 rd party regarding the third party N otice and replies thereto cannot get support from any legal circle. The Third Party attacks the notice irom two fronts - first, that it does not "state the date, place and time when the accident happened" and also “cannot constitute a cause o f action without establishing contractual relationship with the third party." I fully appreciate that a third party notice stands in the same position as a plaint and that it has therefore to d isclose a cause o f action. O .l. Rule 15 CPC prescribes what should be contained in a third party notice as follow s: - / 5. livery th ir d p a r ty nolicc sh a ll stale - a) the nature of the p la in t iff's case against the defendants: h) the nature of the defen d a n t s claim against the th ir d party; 8

c) the reliefs cla im ed by the defendant against the th ird p a rty; d) the p e r io d within which the th ird p a r ty m ay p resen t his defence , a n d e) the consequences o f the fa ilu r e by the third p a r ty to presen t his defence w ithin such a period. I agree that the notice did not item ise what is prescribed under O.I, Rule 15 CPC. N evertheless, 1 am convinced that it com plied with what was required o f the I'1 Defendant. Again, putting aside the p lain tiff s argument that the 3rd party does not dispute that it was not served with a copy o f the T 1 Defendant's written statement ot defence, the contents o f the notice and what was attached thereto satisfies me that it com plied with the law. In part, the notice reads. " T AK E N O T IC E that this action has been brought by the p la in t if f against the I s' Defendant In it the Plaintiff claims against the T ' Defendant special a n d g eneral dam ages arising out o f injuries su ffered by the P la in tiff in a ro a d accident involving the First D efendant's m otor vehicle T Z F 9381 that was being driven by the se co n d D efendant as appears by the endorsem ent on the statem ent o f claim a copy w h e r e o f is delivered herew ith." Not only that. I'he notice goes on. " The fir s t Defendant claims against y o u to be indem nified against the P l a in tiffs claim a n d the costs o f this action to the extent o f the p l a i n t i f f s claim on the grounds that at the time a n d date of the said accident the First D efendant's sa id m otor vehicle was Liimprehensivelv insured with y o u against the risks a n d rem edies cla im ed by the p la in tiff which y o u undertook to p a y p ursu a n t to the term s of the Insurance p o licy given a n d issued by y o u in respect there<>f Now. can the 3tJ party genuinely and honestly come up with an argument that the notice disclosed no cause o f action ? The notice is categorical that a copy o f the claim is attached. I take a copy o f the claim to be a copy o f the plaint. It cannot mean any other claim tor. we are not told that any other claim had so far been lodged by any party let alone l ’! Defendant. The plaint shows the date o f accident, the place, the parties i n v o k e d and their relationship in relation to the controversy. With respect to Mr. Msem wa. who 9

no doubt has dutifully prepared and gallantly fought for his client, to uphold an argument that the notice does not disclose sufficient particulars port-laying a cause o f action would tantamount to defeating comm on sense and this court is not prepared to be debased for blindness. The other arguments regarding, copies o f notices being a hatchment o f 2nd thoughts, and 1st Defendant not being the owner o f the accidented vehicle, as rightly argued by plaintiff, are matters o f evidence prematurely featured at the stage o f preliminary objections. Indeed, in determining whether or not a cause o f action does exist in a particular action we only have to look at the four corners o f the plaint. This was squarely put in JO RAJ SHARIFF & SO N SD S VS CHOTAI FA NCY STORES (I9 6 0 ) E.A at 375 where a principle which has been approved by our courts w as declared and which runs as under, " The question w hether a p laint discloses a cause o f act ion m ust he d e term in ed upon a perusal o f the plaint alone, together with anything a tta ch ed so as to fo rm p a rt o f it a n d upon the a ssum ption that a n y e xpress or im plied allegations of fact in it are true. ” In our case therefore, looking at the plaint as presented by plaintiff, and the third part\ notice as presented by the P 1 Defendant, what we unobtruetively see is an impeachable cause o f action by both plaintiff as against Defendants and by 1st Defendant as against, the third Party. The 3rd Party's Counsel is aware that only material facts constituting a party's case and not evidence in support thereof, are given in pleadings. On the last preliminary objection concerning the alleged incapacity o f plaintiff to institute a case on his own, again, with respect, this observation is far fetched. The D octor’s report which is an annexture to the plaint, runs in part; "... he g a in ed consciousness with severe headaches, p o o r speech, p o o r memory, a n d p o o r personality. This m eans the do m in a n t brain was affected more than the rest He is dependant person Before accident he was sales ho\ with private enterprise ....... Because o f these p erm a n en t disabilities he has to get Sj'-htcightv five p e r cent) as com pensation. " 10

A casual glance at the w ording may indeed lead one to conclude that p lain tiff is a useless being now but deep analysis leads to a contrary finding because merely being “dependant,” and b ein g entitled to 85% “com pensation” does not brand one as being o f “unsound m ind.” In any case, O .X X X I, Rule 15 CPC requires that in order for persons to fall in that category they should have been “adjudged to be o f unsound m ind or though not so adjudged they should have been "found by the court on inquiry by reason o f unsoundness o f m ind or mental infirmity, to be incapable o f protecting their interests w hen suing or being sued.” Clearly therefore the Defendant is duty bound to prove the existen ce o f this condition and this is after he has made a specific application under O.XX1. Rule 2 CPC. Mere assertions or preliminary objections as is the case here is not enough. In any case, if the third party has evid en ce in support o f the conten tion it can still present an application and adduce evidence in support thereof. f o r reasons discussed above the preliminary' objections save the one ot detective verification clause stand dismissed. The one upheld is qualified that the defective v erification clause be a m e nd e d so as to comply with the law. L.B.Kalegeya, JUD G E, O r d e r Me anw hil e, as 1 am now attached to another division o f the High Court. Co m m er c ia l Division, after delivery o f the ruling, the record to be placed before the Judge-ln charge for re-assignment and fixing o f a mediation date. L.B.Kalegeya. JUDGI-l

9 L.B. K A L E G E Y A J U D G E