Juma vs Manager, Pbz Ltd & Others (Civil Appeal 7 of 2002) [2003] TZCA 11 (12 November 2003)

JUDGMENT OF THE COURT

NSEKELA, J.A.

The appellant Juma Jaffer Juma, was the owner of a right of occupancy registered under Title No. 325 A-3 of 1987. On the 24.5.1994 the appellant executed Mkataba wa Mkopo wa Fedha (Loan Agreement) under which the first respondent, Secretary, Peoples' Bank of Zanzibar (the Bank), granted to the appellant overdraft facilities amounting to Shs. 1.5 million which was to be repaid within six months. As at 24.11.1994, apparently the appellant had not discharged his contractual obligation under the said Loan Agreement. Consequent upon this default in the repayment of the loan, the Bank appointed the second respondent, Caravan Limited, (the Auctioneer) to sell by public auction a number of mortgaged houses belonging to defaulters of the Bank, including that of the appellant. The appellant's house was sold to the third respondent one Mr. Said Khamis Hemed El-Gheity (the purchaser) for Shs. 2.5 million pursuant to powers conferred upon the Bank by the Loan Agreement and powers of sale under the Mortgage Deed registered on the 31.5.1994 as No. 33 of 1994 in Vol. 1 Book A-l. The Mortgagor, of course, was the appellant. The appellant then instituted Civil Case No. 52 of 1998 against the Bank, the Auctioneer and the Purchaser in the Regional Magistrate's Court at Vuga. On the 25.10.2000, the Regional Court (Mwampashi, R.M.) dismissed the suit. The appellant was dissatisfied with this decision and preferred an appeal to the High Court where it was also dismissed, hence the appeal to this Court.

(abandoned)

The learned Judge erred in law and facts and ought to have held the Magistrate wrong in law and facts for not holding that the 1^st respondent had fundamentally breached the terms of the Mortgage Deed as supplemented by Mkataba ya (sic) Mkopo by charging compound interest rather than simple as permitted by the said Deed. Further he ought to have held that the ambiguity between the two documents should be held against the 1^st respondent.

The appellant will also plead that both the learned Judge and the Magistrate erred in law and facts for not holding that the sale of the suit premises . was not sold .by public auction but by private treaty contrary to section 18 of the Auctioneer's Decree, Cap. 165.

4. The learned Judge erred in law and facts and ought to have held the Magistrate wrong in law and facts for not holding that the sale of the suit premises was void as the conditions advertised for the sale of the suit premises by the professed public auction had not been complied with.

5. The learned Judge erred in law and facts and ought to have held the Magistrate wrong in law and facts for not holding that the 1^st and 2^nd respondents had breached their statutory duty of care owed to the, appellant to obtain fairer price possible of the suit premises.

As already indicated at the hearing of the appeal, Mr. A. Patel, learned advocate represented the appellant; Mr. Abdumakim Ameir, learned State Attorney represented the Bank and Mr. Ussi Khamis Haji, learned advocate represented the Purchaser. The Auctioneer did. not enter appearance though was duly .served with notice of hearing on the 6.10.2003.

For the sake of convenience and clarity we shall deal with the first three grounds of appeal together as the issues are closely related. We shall also combine the sixth and seventh. The fifth and eighth grounds will be considered separately.

Mr. Patel's first complaint in the appeal is to the effect that the Mortgage Deed executed by the appellant and the Bank was a simple mortgage as defined by section 58 (3) of the Transfer of Property Decree, Cap. 150 of the Laws of Zanzibar. He forcefully submitted that possession of the property was never given to the Bank. In his own words "possession was the bedrock of a simple mortgage". Mr. Ameir, however, was of a different view. He argued that the Mortgage Deed read together with the Loan Agreement was an anomalous mortgage which would bring into play section 87 of Cap. 150. As regards the second and third grounds of appeal, Mr. Patel submitted that section 69 (1) and (3) of the Transfer of Property Decree Cap. 150 was not complied with since the intervention of the court was necessary and the requisite three month's notice before sale was not given and that the sale was not by public auction. Mr. Ameir, however, submitted that the Mortgage Deed read together with the Loan Agreement was an anomalous mortgage under section 87 of Cap. 150. Under the circumstances there was no need for the intervention of the court before sale. On the question of notice, the learned State Attorney was of the opinion that clauses 10 and 11 of the Mortgage Deed were complied with. The appellant was given enough notice before the sale and the house was sold some seven months later after service of notice. Mr. Ussi K. Haji, learned advocate for the purchaser had nothing to add save to concur with the submissions of the learned State Attorney.

A convenient starting point is section 58 (3) of Cap. 150. It provides as follows -

" 58 (3) Where, without delivering possession of the mortgaged property, the mortgagor binds himself personally to pay the mortgage-money, and agrees, expressly or impliedly that, in the event of his failing to pay according to his contract, the mortgagee shall have a right to cause the mortgaged property to be sold and the proceeds of sale to be applied, so far as may be necessary, in the payment of the mortgage-money, the transaction is called a simple mortgage and the mortgagee a simple mortgagee."

The question we ask ourselves is, was the Mortgage Deed executed on the 24.5.94 a simple.mortgage in terms of section 58 (3) above? With the greatest respect to Mr. Patel, learned advocate, we do not think so. The essence of section 58 (3) is the personal obligation of the mortgagor to pay the mortgage-money and the power, express or implied to cause the mortgaged property to be sold through the intervention of the court. In other words, the power of sale cannot be exercised without the intervention of the court. (See: MULLA on Transfer of Property Act, 1882, 5^th edition (1966) at page 383.). What was the position under the Mortgage Deed? This takes us to clause 11 (a) of the Mortgage Deed which reads as under:

" 11- (a) At any time after the principal moneys and interest hereby secured have become payable either as a result of a lawful demand by the Bank (or under the provisions of clause 10 hereof) the Bank shall thereupon immediately be entitled without any previous notice to or concurrence on the part of the Mortgagor

to exercise all statutory powers conferred on Mortgagees by the Transfer of Property Decree, Cap. 150 including the power to appoint a Receiver and the power of sale but without the restrictions imposed by the provisions of the said Decree and PROVIDED that the right of sale shall not affect the right of the Bank to foreclosure and PROVIDED FURTHER that any Receiver appointed thereunder shall after the statutory application of all monies received by him apply the balance in or towards the discharge of the principal moneys hereby secured before paying any residue to the person who but for the possession of the Receiver would have been entitled to receive the income of the mortgaged property." (emphasis supplied.)

Under clause 11 (a) above, there is a stipulation that the Bank is empowered to exercise all the statutory powers conferred on Mortgagees by Cap. 150 including the power of sale but without the restrictions imposed by the said Decree. This means the restrictions on the power of sale under Section 69 referred to by Mr. Patel are inapplicable to the case at hand. What are these restrictions? Section 69 provid part as follows -

" 69 (1) A power conferred by the mortgage-deed on the mortgagee, or on any person on his behalf, to sell or concur in selling, in default of payment of the mortgage money, the mortgaged property, or any part thereof without intervention of court, is valid in the following cases and in no others, namely:

(a) where the mortgage is an English mortgage;

(b) --

(2) --

(3) The powers conferred by subsection-
(1) shall not be exercised unless and until

(a) notice in writing requiring payment of the principal money, has been served on the mortgagor, or on one of several mortgagors, and default has been made in payment of the principal money, or part thereof, for three months after such service; or

(b) some interest under the mortgage amounting at least to seven hundred and fifty shillings is in arrear and unpaid for three months after becoming due."

The power of sale under section 69 (1) above is a power of sale without the intervention of the court and is restricted to the two cases mentioned therein. The argument by Mr. Patel is that since, in his view, the Mortgage Deed under discussion is a simple mortgage, it is not covered by section 69 (1) and therefore the conditions in section 69 (3) are applicable. We think the answer to this is sufficiently clear in Clause 11 (a) of the Mortgage Deed. The Bank is entitled to exercise all the statutory powers conferred on Mortgagees by the Transfer of Property Decree, Cap. 150 .including the power of sale but without the restrictions imposed by the provisions of the said Decree. This means that the Bank could exercise the power of sale without the intervention of the court, but under what circumstances? Again, under Clause 11 (a) the Bank and the appellant had agreed that all the statutory powers conferred on Mortgagees by the Transfer of Property Decree, Cap. 150 shall become exercisable without any previous notice only when the principal money and interest hereby secured have become payable. Clause 10 provides the circumstances under which the principal moneys and interest secured become payable as under-

" 10. The principal moneys and interest hereby secured shall become immediately due and payable:-

4. if a demand is made by the Bank for the repayment of the principal moneys and interest hereby secured under the provisions hereof and if the Mortgagor shall make default in repaying such sums in full within two days of such demand being made; or

5. if the Mortgagor shall make default in the performance or observance of any of the covenants or obligation herein contained or implied (other than for payment of money); or

6. if distress or execution either by virtue of any Court order decree or process or by appointment of a receiver is levied upon any part of the mortgaged property or against any of the chattels or other property of the Mortgagor situate on or about or belonging to the Mortgaged property and the debt for which levy is made or appointed is not paid of within seven days; or

7. if a receiving order is made or any effective bankruptcy petition is filed against any of the Mortgagors; or

8. if the title of any part of the mortgaged property shall for any reason be terminated."

The appellant in the amended plaint had averred that the Bank on the 24.5.94 advanced to him a loan of Shs. 1.5 million upon the terms and conditions contained in the Mortgage Deed and the Loan Agreement. The Bank, on its part, in the written statement of defence to the amended plaint averred that the Bank sold the mortgaged property since the appellant had defaulted in the repayment of the loan. Thus, from the parties' pleadings, the Bank only alleged that the appellant had defaulted to repay the loan advanced to him which is a breach of clause 10 (a) of the Mortgage Deed.

The question then that arises for consideration and determination is whether or not the Bank made a lawful demand upon the appellant in terms of clause 10 (a). DW3, one Michael Mangondi, General Manager of the auctioneers (second respondent) testified that on instructions from the Bank, the appellant on the 28.8.97 was served with notice to the effect that his mortgage house would be sold within seven days if he failed to repay the loan advanced to him. Indeed, th