Litigation and key cases: A welcome decision on mortgage suits
Tanzania’s apex court, the Court of Appeal of Tanzania, delivered several landmark judgements verdicts in 2019. While some of these judgments were in cases dating back many years, some others helped pave way for better functioning of the judicial system in its quest to dispense justice. Starting today, in this weekly column, we will review some of the landmark judgements of the Court of Appeal of Tanzania in 2019 that will have a huge impact. The first of those judgments to be reviewed here is the one delivered in National Bank of Commerce (NBC) versus National Chicks Corporation Limited and 4 Others, Civil Appeal No. 129 of 2019.
But first, a quick question: As between the Commercial Division and the Land Division of the High Court of Tanzania, which is the proper Court to adjudicate on suits relating to mortgaged properties? In September 2019 the Court of Appeal of Tanzania (“the CAT”) issued a decision in the above judgment—a welcome decision—concerning this important question, unravelling the contradicting views from “the bar” (advocates) and “the bench” (judges). The judgment was issued on an appeal from the ruling and decree of the Commercial Division of the High Court of Tanzania at Dar es Salaam (Hon. Nyangarika, J) in Commercial Case No. 11 of 2014 between the same parties.
By way of a brief background, NBC filed a summary suit to recover outstanding amounts on loan and overdraft facilities against National Chicks Corporation Limited (“National Chicks”) and its the guarantors (together, “the respondents”). The respondents secured leave of the Court to defend the summary suit and then filed a joint written statement of defense, along with a notice of preliminary objections (POs), one of which was that the Commercial Division of the High Court had no jurisdiction to try a mortgage suit as a commercial case. On this PO, the presiding High Court Judge (Hon. Nyangarika, J) held that the Commercial Division of the High Court lacked jurisdiction to entertain the suit since the suit concerned mortgaged property and there is the Land Division of the High Court.
Being dissatisfied with the ruling, NBC opted to appeal to the CAT on the ground that the presiding Judge erred in law in holding that the Commercial Division of the High Court does not have jurisdiction to adjudicate the suit.
Sitting as a bench of three, the CAT started with a discussion on the general mandate of the High Court and the historical background and role of the two divisions, and subsequently ruled in NBC’s (Appellant’s) favour, stating that a cause of action emanating from a mortgage transaction or a commercial contract, irrespective of effect to the mortgaged property (landed property), is not inevitably a land matter just because it results from a commercial transaction and thus can be adjudicated by the Commercial Division—and not only by the Land Division, except if the nature of the transaction is a conveyance. NBC’s claim arose from a loan agreement which gave rise to a contractual relationship between NBC and the National Chicks and the guarantors and over which the Commercial Division of the High Court had jurisdiction.
The CAT noted that the Commercial and Land Divisions were created to accelerate the adjudication of respectively, commercial and land disputes. Noting further that land and commercial suits are of a sensitive nature, the CAT called on the responsible authorities to find a way to ensure that future litigants are well advised on how to file their cases not specifically designated to a particular division of the High Court. But what if a suit does not relate to a specific division’s specialization and is filed in another division, should the suit be dismissed for lack of jurisdiction? No. The CAT directed that in such a situation the parties should be advised to withdraw the suit and re-file it in another Court with jurisdiction to adjudicate it, or failing that, the suit should be heard and determined to its conclusion.
The implication of this decision is that lending banks and financial institutions are at liberty to file recovery suits at the Commercial Division of the High Court of Tanzania.
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Lilian Kyaruzi is a Legal Director in Isidora & Co and an international development enthusiast. The views expressed here do not necessarily reflect those of Isidora & Co.
