Oysterbay Villas apartments tussle refuses to end in court

Dar es Salaam. The legal tussle over the mode of ownership of residential apartments pitting real estate dealer, Oysterbay Villas Limited, and Kinondoni Municipal Council for nearly ten years is far from over.

The two have accused each other of breaching a joint venture agreement for construction of residential apartments at Oysterbay at the ownership of 25 percent for the local authority and 75 percent for the firm.

And the recent decision of the Court of Appeal to set aside a 2019 decision of the Commercial Division of the High Court that cleared the municipality of breach of contract triggered new anxiety to the parties and real estate dealers who keenly await the outcome of the case.

Recently, the apex court directed that the case file be returned to the Commercial Division for determination of a complaint that a judge did not give Oysterbay Villas opportunity to be heard when she decided that the certificate of approval for transferring the land to the dealer had expired.

The court agreed with the firm that the judge who heard the case condemned them without hearing their side but raised the issue of certificate of approval of transfer of the land and concluded it had expired.

10-year-old legal wrangle

The dispute started in 2010, three years into the joint venture agreement sealed in December 2007 for the development and ownership of two properties situated at Mawenzi and Ruvu Roads, Oysterbay, Dar es Salaam.

It was the term and conditions of the contract that Oysterbay Villas would construct two blocks of 24 units of residential apartments on plot no 322 and four blocks of 40 units on plot no 277.

Four more apartments were added on plot no 277 to make the total number of units to be constructed to reach 68.

According to Oysterbay Villas the deal turned sour after the municipality refused to issue a certificate of title bearing joint names of both parties as per the terms of the contract. It accused the municipality of refusing to transfer the right of occupancy.

Undaunted, the company filed a suit in the Commercial Division of the High Court in 2011 in which it sought, among other things, a declaration that the authority was in breach of the joint venture agreements.

It asked the court to order the authority to comply and abide by the contract by issuing a new certificate of title in the joint names of the parties.

Municipality’s defence

The local authority has throughout the case denied to have breached the terms of the agreement. Instead, it accused the company of creating circumstances that frustrated implementation of some of the terms of the agreement by imposing conditions which were not in the contract.

According to the municipality, the firm was pushing to secure certificate of right of occupancy for each apartment, and claimed for permanent joint ownership.

The case was initially presided over by Lady Justice Agnes Bukuku but later taken over and concluded by Judge Agathon Nchimbi (retired) who decided the case in favour of Oysterbay Villas Limited.

The municipality was dissatisfied with the verdict and took the case to the Court of Appeal for consideration.

Back-and-forth

When the appeal came up for hearing, the highest court discovered that the suit was handled by more than one judge and there was no explanation why the case file was transferred from one judge to the next.

It was the finding of the court that the omission was fatal and impaired the legal validity of the proceedings. It quashed the decision of judge Nchimbi and directed that the case to be placed before another judge for continuation from where the anomaly was occasioned.

This time the file was placed before Judge Barke Sehel who proceeded to hear and determine the suit.

Judge rejects company’s case

It was Oysterbay Villas’ case that the municipality refused to transfer the right of occupancy into joint ownership.

It also contended that the Commissioner for Lands refused to issue certificate of title because the defendants failed to pay capital gain tax.

But the municipality claimed to have complied with all the procedures in transferring of the right of occupancy but the move was halted by the Commissioner for Lands on discovering that one of the owner was not a Tanzanian.

Deciding on the refusal to transfer the right of occupancy into joint ownership, judge Sehel said she was satisfied that the municipality had surrendered the original certificate of titles to the Commissioner for Lands on February 2011 for him to proceed with other arrangements.

“It is on record that on February 18, 2016 the Commissioner for Lands approved the disposition of the right of occupancy. Taking into account efforts taken by the defendant (municipality), it is clear that the defendant adhered to the terms and conditions of the agreements,” said the judge.

According to the joint venture agreement, Oysterbay Villas was to provide the financing for the construction the residential apartments while the local authority was bound to provide land.

The property developer submitted at the hearing of the case that had made it clear that upon completion of the construction, they would own 75 percent of the interests in the venture agreements while the municipality would own 25 percent as a tenant in common.

It was Oysterbay Villas’s view that each party has a right to deal with its properties as he wished without interference from the other since the agreements provide for the ownership of the parties’ rights and benefits as tenant in common.

The municipality insisted that the agreements provided for the property dealer to build the apartments, rent them and recoup its money from rental in the ratio of 75 percent for the plaintiff and 25 percent for the defendant.

It said the agreement was conceptually intended for Build Operate Transfer arrangement (BOT).

On whether the agreement was of joint ownership of properties or BOT arrangement, the judge rejected submission that the parties intended for BOT arrangements.

“I do not subscribe to submission because at the time parties executed the agreements the concept of BOT was not in place. The concept was introduced through enactment of the Public Private Partnership Act in 2010 some years later after parties have concluded their agreement,” said the judge.

The judge finally declared that Kinondoni Municipality was not in breach of joint venture agreement and that the agreements though valid were unenforceable. She entirely rejected all the prayers made by Oysterbay Villas.

With the case file been sent back to the Commercial Court for determination, the real estate industry and observers waits are anxious to hear whether this will be the end of the protracted legal dispute that has badly impacted both side.

CAG report

According to the latest financial audit report of the Controller and Auditor General (CAG) the Kinondoni Municipality has only collected Sh28.million out of 246.9 million it was expected to collect from the project since September 2010.