Automated Summary
Key Facts
The case involves a USD 1,000,000 loan from the defunct Bank M(Tanzania) Limited to SMX Limited, guaranteed by Hasnain Gulam Hussein with two office premises. The plaintiff challenged the bank's (now Azania Bank) intended sale of his properties without notice. The court dismissed the original suit, finding the plaintiff failed to prove the loan wasn't disbursed or that an auction was intended. The counterclaim was partially granted, confirming SMX Limited defaulted on the loan, and Azania Bank is entitled to recover the outstanding amount from the mortgaged properties.
Transaction Type
USD 1,000,000 term loan from Bank M(Tanzania) Limited to SMX Limited with guarantees and collateral properties.
Issues
- Whether the intended sale of the suit property is lawful.
- Whether the plaintiff in the original suit has discharged his obligation in the guarantee Agreement of the loan of USD 1,000,000 issued to the 3rd Defendant in the original suit.
- To what reliefs are the parties entitled.
- Whether the Defendants in the Counter Claim are indebted to the plaintiff/counterclaimant in the Counterclaim the amount of USD 1,760,840.65.
Holdings
- The counterclaim is granted to the extent that the defendants defaulted in payment of the USD 1,000,000 loan, breached the loan agreement, and the counterclaimant is entitled to recover the outstanding amount from the mortgaged properties and claim costs.
- The original suit is dismissed with costs as the plaintiff failed to prove his discharge of obligations in the guarantee agreement and the intended sale of the mortgaged properties.
Remedies
- The counterclaimant is entitled to the costs of the counterclaim.
- The defendants in the counterclaim have defaulted in payment of the loan and thus breached the loan agreement.
- The original suit is dismissed with costs.
- The counterclaimant is entitled to recover the outstanding amount from the mortgaged properties.
Contract Value
1000000.00
Legal Principles
- The court applied section 78 of the Law of Contract Act regarding contracts of guarantee, establishing that a guarantor (surety) is liable to perform the principal debtor's obligations if the debtor defaults. This underpinned the counterclaimant's entitlement to recover the loan from the guarantors.
- The court emphasized the legal principle that the party making an allegation bears the burden of proving it, as outlined in section 110(1) of the Evidence Act. This principle was applied to dismiss the plaintiff's claims due to insufficient evidence and to determine the validity of the counterclaim based on evidence provided.
Precedent Name
- Barclays Bank (T) Ltd v. Jacob Muro
- Yara Tanzania Limited vs. Ikuwo General Enterprises Limited
- International Commercial Bank(T) Ltd v. Yusuf Mulla and Shahidi Mulla
Key Disputed Contract Clauses
- The Guarantee clause in the loan agreement, which obligated the plaintiff (Hasnain Gulam Hussein) to perform the principal debtor's (SMX Limited) obligations in case of default. The court examined whether the plaintiff had discharged these obligations.
- The Default provisions in the loan agreement, which allowed Azania Bank to demand repayment and initiate recovery actions after SMX Limited failed to service the USD 1,000,000 loan. The court analyzed whether the bank could lawfully enforce these terms against the plaintiff as a guarantor.
- The Indemnity clause in the guarantee document, which bound the plaintiff and other co-guarantors to indemnify Azania Bank for the outstanding loan amount. The counterclaim centered on the bank's right to enforce this indemnity after the principal debtor's default.
Cited Statute
- Law of Contract Act, [Cap 345 R.E 2019]
- Evidence Act, [Cap.6 R.E 2019]
Judge Name
L. Hemed
Passage Text
- According to exhibit D3, by 17th June 2019, the amount due was USD 1,165,829.39.
- The counter claim is granted to the extent that- i. The defendants in the counter claim have defaulted in payment of the loan and thus they have breached the loan agreement; ii. The Counterclaimant is entitled to recover the outstanding amount from the mortgaged properties; and iii. The Counterclaimant is entitled to costs of the counterclaim.
- The plaintiff in the original suit has failed to prove that his obligation in the guarantee Agreement of the loan of USD 1,000,000 issued to the 3rd Defendant has been discharged. He has also failed to prove that the 1st Defendant intended to auction the mortgaged properties.
Damages / Relief Type
- Counterclaimant awarded costs of the counterclaim.
- Declaratory relief that the defendants in the counterclaim breached the loan agreement and are indebted for USD 1,165,829.39 as of 17 June 2019.
- Specific performance allowing the counterclaimant to recover the outstanding amount from the mortgaged properties.