Automated Summary
Key Facts
The case involves an appeal by Italian companies (SCOVA Engineering S.p.A. and IRTEC S.p.A.) against the High Court of Tanzania's dismissal of their claim for unpaid goods and interest. The dispute centers on a contract clause (1.9.2) requiring disputes to be resolved in the Court of Rome, which the High Court upheld as ousting its jurisdiction. The Court of Appeal affirmed the High Court's decision but corrected the dismissal order to a stay, allowing the claim to proceed in Italy.
Transaction Type
Supply of irrigation machines with accessories under a supply agreement.
Issues
- Whether the first respondent, as a non-signatory to the Guarantee and Indemnity Agreement, was bound by its jurisdiction clause, and if the court's dismissal of the entire suit against all respondents was appropriate given the privity doctrine and the nature of the contractual obligations.
- Whether Clause 1.9.2 of the Guarantee and Indemnity Agreement, which designates the Court of Rome as the exclusive forum, is legally valid and enforceable under Tanzanian law, particularly in light of the High Court's jurisdiction as outlined in the Constitution and Civil Procedure Code.
- Whether the High Court of Tanzania, Commercial Division, had jurisdiction to hear the case despite the parties' agreement to submit to the Court of Rome, considering the High Court's constitutional mandate of unlimited jurisdiction and the non-derogability of its authority under public policy.
Holdings
- The High Court's ruling that its jurisdiction was ousted by Clause 1.9.2 of the Agreement was deemed correct in principle, as the clause effectively designated the Court of Rome as the exclusive forum. The Appeal Court affirmed this but noted the High Court erred in dismissing the suit outright rather than staying it.
- The Court of Appeal upheld the High Court's refusal to assume jurisdiction over the matter, finding that the parties' exclusive choice of the Court of Rome as the forum for disputes in the Guarantee and Indemnity Agreement was valid and binding. However, the Court corrected the High Court's error by substituting the dismissal order with a stay, pending resolution in the Court of Rome.
- The Court held that the first respondent, as a stranger to the Guarantee and Indemnity Agreement, was not bound by its exclusive forum clause. However, the entire suit was improperly dismissed against all respondents, and the correct remedy was to stay the suit in Tanzania pending action in the Court of Rome.
Remedies
- The Court of Appeal dismissed the appellants' appeal, upholding the High Court's decision that it lacked jurisdiction. The parties are to bear their own legal costs. No other remedies were granted.
- In light of the circumstances, the Court of Appeal ordered that the parties should bear their own costs. This replaces the original dismissal order with costs as issued by the High Court.
Legal Principles
- The court applied the Doctrine of Privity of Contract to determine that the first respondent (Mtibwa Sugar Estates Limited) was not bound by the forum selection clause in the Guarantee and Indemnity Agreement between the appellants and the second, third, and fourth respondents. The judgment clarified that privity limits enforcement of contractual terms to the parties directly involved in the agreement.
- The court held that where an exclusive jurisdiction clause designates a competent foreign forum (e.g., the Court of Rome), the local court (Tanzanian High Court) has discretion to stay the proceedings rather than dismiss them outright. The judgment referenced the High Court's duty to enforce such clauses while acknowledging its jurisdictional limits.
- The court emphasized that parties cannot oust the jurisdiction of a court that lacks competence to adjudicate a dispute (e.g., the Court of Rome was deemed competent to hear the matter, but the clause did not bar Tanzanian courts from jurisdictional consideration). This aligns with the principle of pacta sunt servanda (agreements must be kept), but the specific term is not listed in the enum.
Precedent Name
- Theodore Wendt v. Chhaganlal Jiwan and Haridas Munji Trading
- Ngoni-Matengo Cooperative Union Ltd. v. Alimohamed Osman
- Hakam Singh v. M/S Gammon (India) Ltd.
- Carl Ronning v. Societe Navale Chargeurs Delmas Vieljeux (The Francois Vieljeux)
- Britannia Biscuits Limited v. National Bank of Commerce Limited & 3 Others
- Tarlok Singh Nayar & Another v. Sterling General Insurance Company Limited
- Kayanja v. New India Assurance Company Limited
- Jamila Sawaya v. M/S Royal Marine Shipping of Dubai & 4 Others
- New Moga Transport v. United India Insurance Co. Ltd.
- British Aerospace Pic v. Dee Howard Co.
- Modi Entertainment Network & Another v. WSG Cricket Pte. Ltd.
- Afriscan Group (T) Ltd. v. Pacific International (T) Ltd.
Key Disputed Contract Clauses
Clause 1.9.2 of the Agreement, which stipulates that the Court of Rome shall have exclusive jurisdiction to settle disputes arising from the contract, was central to the dispute. The clause states: 'Without prejudice to cases when jurisdiction may not be derogated from, the Court of Rome shall have exclusive jurisdiction to settle any dispute which may arise from or in connection with it.' The parties contested whether this clause was valid and enforceable under Tanzanian law, particularly regarding its ability to oust the jurisdiction of Tanzanian courts.
Cited Statute
- Civil Procedure Code Act, Chapter 33 of the Laws of Tanzania, Revised Edition, 2002
- Judicature and Application of Laws Act, Cap. 358 RE 2002
- Law of Contract Act, Cap. 345 RE 2002
Judge Name
- G. A. M. NDIKA
- R. K. MKUYE
- J. C. M. MWAMBEGELE
Passage Text
- We recall that Ms. Bachuba fervently submitted that the catchphrase 'Without prejudice to cases when jurisdiction (competenza) may not be derogated from' in Clause 1.9.2 meant that the clause as a whole was ineffectual as the jurisdiction of Tanzanian courts could not be derogated from. With respect, we are unable to agree with her. Primarily, the effect of the entire clause is not to oust or derogate from the jurisdiction of Tanzanian courts but to choose any one of competent courts to decide the disputes in contemplation that the courts in both countries may have jurisdiction over a dispute for one reason or another.
- Applying the above legal position to the facts of the case, it is ineluctable that by Clause 1.9.2 of the Agreement the appellants, on the one hand, and the second, third and fourth respondents, on the other, chose in clear, explicit and specific terms that the Court of Rome, in exclusion of other courts, would be their forum for litigating any dispute between them in connection with the said agreement. That agreement bound the parties and it was not open for the appellants to resort to the High Court, Commercial Division.
- We endorse the above view by the learned author that the court in which the suit is instituted has discretion to stay the suit once it learns of existence of an agreement between the parties to sue in a particular forum, whether foreign or not. For, it neither can dismiss the suit because it has not heard and determined it on the merits nor can it strike it out because, except for the choice of a different forum, it is otherwise competent to try the matter.
Damages / Relief Type
- Payment of the outstanding sum of €1,278,148.60 for the supplied goods
- Payment of interest on the decretal sum at the court's rate of 7% per annum from the date of judgment until final payment
- Payment of interest at the commercial rate of 12% per annum from 30th September, 2014 to the date of judgment
- Costs of the suit