Juma vs Manager, Pbz Ltd & Others (Civil Appeal 7 of 2002) [2003] TZCA 4 (12 November 2003)

Jurisdiction: Tanzania
Citation: Juma vs Manager, Pbz Ltd & Others (Civil Appeal 7 of 2002) [2003] TZCA 4 (12 November 2003)
Media Neutral Citation: [2003] TZCA 4
Court: Court of Appeal of Tanzania
Case number: Civil Appeal 7 of 2002
Judges: Lubuva, J.A., Munuo, J.A., Nsekela, J.A.
Judgment date: 12 November 2003
Language: English
Type: Judgment
Download: Download PDF (362.6 KB)

Link to pdf of original judgement

IN THE COURT OF APPEAL OF TANZANIA

AT ZANZIBAR

(CORAM: LUBUVA, J.A., MUNUO, J.A., AND NSEKELA, J.A.)
CIVIL APPEAL NO. 7 OF 2002

BETWEEN
JUMA JAFFER JUMA         APPELLANT
AND
1.      MANAGER, PBZ LTD.
2.      MANAGER, CARAVAN LTD.    RESPONDENTS
3.      SAID KHAMIS HEMED EL GHEITY

(Appeal from the judgment of the High Court for Zanzibar at Vuga)(Oredola, DCJ.)dated the 8^th day of May, 2002inCivil Appeal No. 5 of 2000

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.

The amended memorandum of appeal. filed on the 21.10.2002 contained in all eight grounds of appeal, but Mr. Patel, learned advocate, abandoned the fourth ground of appeal, thus leaving the following seven grounds, namely that

1. 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 Mortgage in
question was a simple mortgage as
defined in Section 58 (3) of the

. * Transfer of Property Decree, Cap. 150.

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 Court intervention was required compulsorily by the 1^st respondent in the professed sale of the suit premises by public auction.

The learned Judge erred in law and facts and ought to have held the Magistrate wrong in law and facts for not holding that a valid notice in law

had not been served on the appellant prior to the professed sale of the suit premises by public auction.

(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.

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.

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^ndrespondents 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. Abdulhakim 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 provides in 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;
(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

I • )

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:-

(a) 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

i ) sums in full within two days of
such demand being made; or

(b)

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

(c)

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

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Juma vs Manager, Pbz Ltd & Others (Civil Appeal 7 of 2002) [2003] TZCA 4 (12 November 2003)

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