Eco Bank (T) Ltd vs Rz Electrical Tech Ltd and 3 Others (Commercial Case 167 of 2018) [2021] TZHCComD 3463 (19 November 2021)

Key Facts

Transaction Type

Issues

• If the 1st issue is answered in negative whether the 1st defendant illegally paid the alleged loan. The court dismissed this issue as moot since the first issue was resolved in the plaintiff's favor, making the payment legal.
• Whether the suit is maintainable for want of board resolution from plaintiff to sue defendants. The court ruled the suit maintainable, rejecting the defense's argument that a board resolution was required to initiate legal action.
• Whether there was any legal and binding credit facility agreement between the plaintiff and 1st defendant. The court found the agreement valid despite the defense's claims about a missing board resolution and typing errors in the resolution document.
• If the 1st issue is answered in affirmative whether the 1st defendant has paid all the amount in the said contract. The court determined that the 1st defendant had not fully repaid the outstanding balance of TZS 417,017,103.23 as of 1st November 2018.
• If the 1st issue is answered in affirmative whether there was any legal and binding guarantee agreement between the plaintiff and the 2nd, 3rd and 4th defendants. The court affirmed the validity of the guarantees, including corporate and personal guarantees, despite the defense's arguments.
• Whether there was board resolution from the 1st defendant to borrow money or enter into the agreement. The court confirmed the board resolution existed, concluding it was a valid document signed by the 1st defendant's directors despite the defense's claims of forgery.
• To what reliefs are the parties entitled. The court ordered the defendants to pay the outstanding loan amount, late charges, general damages (TZS 10,000,000), interest at prevailing commercial rates, and the plaintiff's costs.

Holdings

• The court did not rule on the maintainability of the suit due to lack of board resolution from the plaintiff, as this issue was raised post-hearing and deemed an afterthought.
• The court held that the 1st defendant had a valid board resolution sanctioning the loan, as the directors' names and signatures in exhibit P1 matched those of the 1st defendant, despite a typographical error referencing Unifreight Tanzania Limited.
• The court confirmed that there were legal and binding guarantee agreements between the plaintiff and the 2nd, 3rd, and 4th defendants, as the guarantees were executed after the loan agreement and supported by board resolutions.
• The court found that there was a legal and binding credit facility agreement between the plaintiff and the 1st defendant, as the board resolution and acceptance of the offer letter established a valid contract.
• The court determined that the 1st defendant has not fully repaid the loan amount, leaving an outstanding balance of TZS 417,017,103.23 as of 1st November, 2018.
• The court granted the plaintiff several reliefs, including payment of the outstanding loan (TZS 417,542,659.03), late payment charges at 2% monthly, general damages of TZS 10,000,000, interest at prevailing commercial rates, and costs of the suit.
• The court dismissed the claim of illegal payment, as the validity of the credit facility agreement was affirmed in the first issue, rendering the third issue moot.

Remedies

• The defendants are ordered to pay the plaintiff general damages to the tune of TZS 10,000,000.00 for the disturbance caused to the plaintiff by the defendants' failure to discharge their duties and obligations as agreed.
• The defendants are ordered to immediately pay the plaintiff the entire outstanding amount of the credit facility, which is TZS 417,542,659.03 (Tanzania shillings Four Hundred Seventeen Million Five Hundred Forty Two Thousands Six Hundred Fifty Nine Shillings three cents only), being the principal amount of the outstanding credit facility and interest as of 1st November, 2018.
• The 3rd and 4th defendants each breached the joint and several personal guarantees by failure to comply with the agreed terms, conditions, and covenants of the guarantee, especially on payment of the entire amount of the outstanding credit facility following default by the 1st defendant.
• The defendants are ordered to pay late payment charges and interest on the unpaid sum at the rate of 2% per month in addition to late payment charges from the date of the breach.
• The 2nd defendant breached the Corporate Guarantee and indemnity by failure to comply with the terms, conditions, and covenants of the guarantee, especially on payment of the entire amount of the outstanding credit facility following default by the 1st defendant.
• The defendants are ordered to pay the plaintiff interest on the decretal amount from the date due to the date of full payment thereof at the prevailing commercial rate.
• The defendants are condemned to pay the plaintiff the costs of this suit.
• The 1st defendant breached the credit facility agreement by its failure to discharge its duties and obligations in accordance with such agreement.

Contract Value

Monetary Damages

Legal Principles

Key Disputed Contract Clauses

• The 1st defendant argued the loan agreement was invalid for lacking a board resolution, but the court found exhibit P1 to be a valid resolution signed by its directors despite a typographical error referencing 'Unifreight Tanzania Limited'.
• The court confirmed the 2nd defendant's corporate guarantee was valid and binding, noting the guarantee was executed after the loan agreement and supported by a board resolution (exhibit P4a-b).
• The 3rd and 4th defendants' personal guarantees were found breached due to their failure to pay the outstanding loan amount after the 1st defendant defaulted, as outlined in the court's findings.
• The court analyzed the repayment terms of the credit facility agreement, determining that the 1st defendant failed to discharge its obligations, leaving an outstanding balance of TZS 417,542,659.03 as of 1st November 2018.

Cited Statute

• Law of Contract Act [Cap 345 R.E. 2019]
• Law of Contract Act [CAP 345 R. E. 2019]

Judge Name

Passage Text

• In totality of the above reasons, the first issue must be and is hereby answered in affirmative that there was legal and binding credit facility agreement entered between plaintiff and the 1st defendant.
• This issue must be and is hereby answered in negative that the 1st defendant paid all the amount in the said contract.
• The defendants are ordered to immediately pay the plaintiff the entire outstanding amount of the credit facility which is TZS 417,542,659.03... being the principal amount of the outstanding credit facility and interest as of 1st November, 2018.

Damages / Relief Type

• General damages of TZS 10,000,000.00 for disturbance caused by defendants' failure to discharge obligations
• Late payment charges and interest at 2% per month on unpaid sum from the date of breach
• Payment of outstanding loan amount of TZS 417,542,659.03 (principal and interest as of 1st November, 2018)
• Interest on decretal amount from date due to full payment at prevailing commercial rate
• Defendants to pay plaintiff costs of the suit