Israel Kwayu v. TANESCO, Civ App no. 118 of 2006

IN THE COURT OF APPEAL OF TANZANIA

AT DAR ES SALAAM

CIVIL APPLICATION NO. 118 OF 2006

ISRAEL KWAYU ………………………………………………..……… APPLICANT

VERSUS

TANZANIA ELECTRIC SUPPLY COMPANY LIMITED ………. RESPONDENT

(Application to strike out Notice of Appeal from the Judgment of

the High Court of Tanzania, Land Division,

 at Dar es Salaam)

(Kileo J.)

dated the 1^st day of July, 2005

in

Land Case No. 73 of 2004

-------------

R U L I N G

18 September 2007 & 1 February 2008

MROSO, J,A.

        The applicant’s house was razed down by fire believed to have been caused by electrical fault.  The respondent company which supplied electricity to the house was successfully sued and was ordered to pay damages to the applicant.  When the respondent was sued in the High Court, Land Division, the Presidential Parastatal Reform Sector Commission, henceforth to be referred only as the Commission, was joined as a second defendant because the respondent had been declared a Specified Public Corporation under section 38 (1) of the Public Corporations Act, Cap. 257 of the Revised Edition, 2002.

        The respondent was aggrieved by the decision of the High Court and sought to appeal to the Court of Appeal of Tanzania.  It obtained leave of the High Court under section 47 of the Land Disputes Courts Act, No. 2 of 2002 to appeal to the Court of Appeal.  It did not join the Commission as a co-appellant.

        The applicant has lodged a Notice of Motion under Rule 82 of the Court of Appeal Rules, 1979 praying that this Court should strike out the appeal for incompetence, raising four grounds.  First, that the respondent should have joined the Commission as a necessary party.  Second, that no proper leave to appeal was obtained from the High Court.  Third, that it should have sought and obtained leave to amend the memorandum and record of appeal to join the necessary party.  Fourth, that the respondent lacks locus standi in the intended appeal.  At the hearing of the application the applicant was represented by Mr. Eli Uronu and the respondent by Mr. Jamhuri Johnson, the respective learned counsel who had also represented them before the High Court.  The said counsel respectively filed an affidavit in support of the case for their clients.

        In arguing the first ground Mr. Uronu relied on the provisions of sections 39 (1) and 43 (1) of Cap. 257.  Section 39 (1) provides that once a public corporation is declared a specified public corporation, the Commission shall be responsible for restructuring it.  The powers of the Commission are spelt out in section 43.  Under sub-section (1) of that section, the Commission acts as the official receiver of the specified public corporation and acquires the powers and all the rights of a receiver appointed in accordance with the Bankruptcy Act.  It follows that section 9 (1) of the Bankruptcy Act, Cap. 25 of the Revised Edition, 2002 would apply to such a specified public corporation, it was not competent appeal without joining its official receiver.  To support that argument Mr. Uronu referred the Court to the provisions of sections 77 (1) and 78 of the Bankruptcy Act.  He also referred the Court to a decision of the Court in Civil Appeal No. 67 of 1999 – The National Insurance Corporation v J. Mbuna (unreported).  He said that those provisions and the Court decision underscore the point that a specified public corporation could not take any court action on its own but that the official receiver, as trustee, would take such action either in conjunction with or on behalf of the specified public corporation.  That was the legal position, he argued, even though there was no specific legal provision which deprived a specified public corporation the capacity to take court action on its own.  He distinguished the decision in the J. Mbuna case from the decision of this same Court in Kampuni ya Uchukuzi Tabora (Ltd) v Praxeda Paulo and Another, Civil Application No. 45 of 1999 which decided that although the Commission becomes a receiver of the property of a specified public corporation, the latter still owned the property and that all that a creditor needed to do before proceeding against the property of such debtor was to obtain leave of the court.  According to  Mr. Uronu, the Praxeda Paulo case related to execution and had not dealt with the question of joinder in an appeal.

        Regarding the second ground, Mr. Uronu argued that although the High Court granted the respondent leave to appeal, that was done in error because the Commission, which was a necessary party in any court proceedings, had not been joined as a party.  It also followed in the third ground that even the memorandum of appeal which did not cite the Commission was defective and an application for leave to amend such memorandum of appeal was necessary but no such leave was sought and granted.  The fourth ground summed up the three preceding grounds in that the end result was that the respondent had no locus standi in the intended appeal which ought to be struck out for incompetence.

        Mr. Johnson on the other hand told the Court that there was nothing wrong with the filed Notice of Appeal, a copy of which was made available to Court.  He argued that at the hearing in the High Court both the respondent and the Commission were represented by two different advocates suggesting that the Commission was not acting for the respondent or as the official receiver of the respondent.  After the respondent lost in the suit the Commission did not bother to appeal or instruct the respondent to appeal.  He sought to distinguish the decision of this Court in the J. Mbuna case by arguing that the National Insurance Corporation was financially bankrupt and had been totally privatized and thereby became a new legal entity.  On the other hand, the respondent in the present matter still existed as a viable company.  Furthermore, the respondent was declassified on 2^nd November, 2005 so that as from then it was no longer a classified public corporation and the Commission no longer had anything to do with it.

        Mr. Johnson, however, conceded that at the time the Notice of Appeal in issue was lodged in Court, the respondent was still a classified public corporation and the fact of declassification was irrelevant in this application. Even so, on the authority of the decision of this Court in Kampuni ya Uchukuzi Tabora Ltd. v Praxeda Paulo and Another referred to earlier in this ruling, the respondent did not need to join the Commission as a co-appellant.

        Regarding the second ground in the Notice of Motion Mr. Johnson argued that the applicant cannot be heard in these proceedings to complain against the decision of the High Court to grant the respondent leave to appeal.  If the applicant was unhappy with that decision it should have appealed against it.

        According to Mr. Johnson, the reliance on the J. Mbuna decision in support of the third ground in the Notice of Motion was mistaken because that decision was given on 1^st June, 2006 whereas the respondent was declassified nearly seven months earlier.  It would have been a futile exercise to apply to court for leave to include the Commission as a co-appellant only to apply again to Court to remove the Commission as an appellant after the declassification.

        As regards the fourth ground since the respondent is no longer a classified public corporation, it cannot validly be argued that the respondent has no locus standi in the pending appeal.  He prayed that the Notice of Motion should be dismissed with costs.

        It is not disputed that when the Notice of Appeal was lodged in Court on 5^th July, 2005 the respondent was a classified public corporation.  The fact that it was subsequently declassified is not relevant in this application.  The question is whether the Commission was a necessary party in the intended appeal and that the omission to include it as a party rendered the intended appeal incompetent.  It is also not disputed that by virtue of the respondent then being a specified public corporation the Commission acted as the official receiver thereof.  See section 43 (1) of the Public Corporations Act, Cap. 257 of the Revised Edition, 2002.  The provisions of section 9 (1) of the Bankruptcy Act, Cap. 25 of the Revised Edition, 2002 therefore applied to the respondent.  But how, if at all, do all those legal provisions affect the capacity of the respondent to appeal on its own against a decision it considers prejudicial to its best interests?  It may be worthwhile to quote the provisions of section 9 (1) of the Bankruptcy Act which reads:-

“9 (1)         On the making of receiving order the official receiver shall be thereby constituted receiver of the property of the debtor, and thereafter, except as directed by this Act, no creditor to whom the debtor is indebted in respect of any debt provable in bankruptcy shall have any remedy against the property or person of the debtor in respect of the debt, or shall commence any action or other legal proceedings, unless with the leave of the court and on such terms as the court may impose.”

As I understand it, a receiving order is basically made for the protection of the estate of the debtor.  Thus, a receiver’s fundamental duty is to protect the property of the debtor for the benefit of both the creditor(s) and the debtor.  If appointed manager, then also manage the property of the debtor.  These fundamental duties of a receiver can be gleaned from sections 5, 10 and 12 of the Bankruptcy Act.  In section 5 it is underscored that a receiving order is made for the protection of the debtor’s estate.  In section 10 it is provided that before a receiving order is made the court may appoint the official receiver an interim receiver of the property of the debtor if it is shown that it is necessary to protect such property (estate).  Such interim receiver may be directed to take immediate possession of the property.  Section 12 provides that in an appropriate situation an official receiver may have to appoint a manager to manage the debtor’s estate until a trustee is appointed.

        I gather from all those provisions that when the respondent was declared a specified public corporation the Commission, as official receiver was, among other duties, expected to ensure that no one had access to the property of the respondent or took legal action against the property of the respondent except with the leave of the court.   That appears to be the import of section 9 (1) of the Bankruptcy Act.  With respect, I do not read it to mean that the respondent (as debtor) could not on its own initiative or in conjunction with the official receiver take action to protect its property, and without seeking leave of the court.  In other words, there does not appear to be a clear, specific provision either under the Public Corporations Act or under the Bankruptcy Act which deprives a specified public corporation of its capacity to take legal action in protection of its property.  That in essence was what was said in the case of Kampuni ya Uchukuzi Tabora (Ltd) v Praxeda Paulo and Another (supra) when Kisanga, JA said of section 39 (1) of the Public Corporation Act –

“I can see nothing in this provision which suggests that upon being placed under receivership a public corporation ceases to exist as a legal person or ceases to own property.”

Section 39 (1) referred to earlier provides as follows –

“39 (1) Where a public corporation has been declared a specified public corporation, the Commission shall from the effective date be responsible for the restructuring of that specified public corporation.”

Indeed, the said section 39 gives somewhat extra-ordinary powers to the Commission over a specified public corporation, including the power to “cause proceedings for the recovery of any debt owned to (sic) or by specified public corporation or for the winding up, liquidation or dissolution of the specified public corporation to be initiated; …..”  (See section 39 (2) (k) of the Public Corporations Act).  Even so, in my view, the legal capacity of the specified public corporation to take legal action against a third party is not thereby extinguished.

        The argument that a specified public corporation cannot on its own take any legal action against a third party without joining the Commission becomes even harder to defend when, as in the case of the respondent in this application, it was aggrieved by the decision of the High Court and intended to challenge it in an appeal.  According to the applicant, the respondent could not appeal unless it joined the Commission as an appellant.  But the Commission apparently was unwilling or uninterested to appeal!

        As indicated earlier in this ruling, Mr. Uronu relied on the decision of this Court in National Insurance Corporation v          J. Mbuna to bolster up his arguments that the respondent should have joined the Commission as a necessary party and that the appeal documents should have been amended to reflect the fact that the Commission was a party to the appeal.

        The J. Mbuna decision itself relied on another decision of this Court, Mathias Eusebi Soka v The Registered Trustees of Mama Clementina Foundation and Two Others, Civil Appeal No. 40 of 2001 (unreported).

        In Mathias Soka a preliminary objection was raised in an appeal against, among others, the National Insurance Corporation, which was a specified public corporation.  Mr. Maruma, who was counsel for the National Insurance Corporation, argued that the appeal against the NIC should be struck out because under section 9 (1) of the Bankruptcy Act “no creditor to whom the debtor is indebted ….. shall commence any action or other legal proceeding, unless with the leave of the court …..”  He said no leave of the High Court had been obtained.

        This Court upheld Mr. Maruma and said –

“The crux of the matter which concerns us is that on 12^th June, 1998, NIC was declared a specified corporation, and that on 28^th October it was joined as a party without there being leave under section 9 of the Ordinance” (now the Bankruptcy Act).

The Court upheld the preliminary objection and the notice of appeal was struck out.

        Now, in the J. Mbuna case, the National Insurance Corporation was the appellant in Civil Appeal No. 67 of 1999.  the advocate for the respondent in that appeal, Mr. Mafuru, raised a preliminary objection to the appeal, praying that it be struck out also because the National Insurance Corporation was a specified public corporation and, therefore, that the Commission ought to have been joined as a party, which had not been done.  He also argued that since the memorandum of appeal and the record of appeal had not been amended to include the Commission as a co-appellant the appeal was incompetent and should be struck out.

        Mr. Shayo, learned advocate for the appellant in that appeal, on the other hand argued and relied on the Kampuni ya Uchukuzi Tabora (Ltd) case, that a public corporation which was classified did not cease to exist as a legal entity which could sue and be sued on its own and, therefore, could appeal without joining the Commission.

        The Court upheld the preliminary objection saying –

“….. the reasoning by this Court in Soka similarly applies for purposes of this appeal.  Hence the point need not detain us much.  It will be observed that the record of appeal was filed on 4/12/1999, which was well after the appellant was declared a specified public corporation by virtue of the above GN.  That being so, it was necessary for the appellant to seek amendment of the record, as suggested by Mr. Mafuru, to join PSRC.  Since this was not done it will follow that the appeal is incompetent.”

I pose the question whether the Soka case was authority first, that in a case involving a specified public corporation whether as a plaintiff or appellant or a defendant or respondent the Commission has to be joined as a party.  Second, that leave of the court is necessary under section 9 (1) of the Bankruptcy Act even where a specified public corporation needs to take legal action, say by way of an appeal, against a party who had successfully sued it in court.

        In my considered view first, section 9 (1) of the Bankruptcy Act does not make any such requirement.  It says “no creditor ….. shall have any remedy against the property or person of a debtor ….. or shall commence any action or other legal proceedings, unless with the leave of the court …..”  So, where a specified public corporation is the debtor, a creditor will need leave of the court before it can proceed against it or its property.  It does not seem to say that the specified public corporation will also need leave of the court before it can appeal against a court decision which is adverse to its interests.  In the Soka case, the appeal was against the NIC, a specified public corporation.  The Court said Soka could not proceed against the specified public corporation by way of an appeal because that would be contrary to the provisions of section 9 (1) of the Bankruptcy Act.

        If it is accepted that the basic duty of a receiver (in this case the Commission) is to protect the property of the debtor for the benefit of the creditor(s), and even for the advantage of the debtor (in this case the specified public corporation while it awaits restructuring) it will be strained logic to say that even where the Commission is unwilling to appeal against a decision which is unfavourable to its “ward” as it were, then the specified corporation is rendered impotent to appeal.  I do not, with respect, think that was what Soka decided.  Consequently, it was not authority that the Commission has to be joined as a party in every proceeding in which a specified public corporation is a party.  In the Soka case, since the appeal was against a specified public corporation it was considered necessary to involve the Commission as receiver so that it would defend the interests of the debtor which was a specified public corporation.  I would say, therefore, that where a specified public corporation is an appellant against a decision which is adverse to its interests, such appeal is not incompetent merely because the Commission was not joined as a party.  It follows that the intended appeal is competent and there was no need to seek leave of the High Court as a requirement of section 9 (1) of the Bankruptcy Act.  It also follows that there was no need to apply for leave to amend the Notice of Appeal or any other appeal document in order to join the Commission as an appellant.  If I am right in deciding as stated above, I would say that the appellant has locus standi in the appeal.

        For the foregoing reasons the Notice of Motion is dismissed with costs.

        DATED AT DAR ES SALAAM this 28^th day of January, 2008.

J. A. MROSO

JUSTICE OF APPEAL

        I certify that this is a true copy of the original.

(F. L. K. WAMBALI)

SENIOR DEPUTY REGISTRAR

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