Set offs in civil procedures in Tanzania.

 SET OFFS

In law of banking – one account can be used to set off a debt in another account.

Generally: Is a mutual extinction of mutual debts in which two people (defendant & plaintiff) stand reciprocally as creditors and debtors.

Under the doctrine of Set Off: A defendant who stands in a position of creditor to the plaintiff, has a right to raise a defence of set off against the plaintiff.

“In case he is found liable to the plaintiff then the sums that will be found owing to him from the plaintiff should be set off against his liability to the plaintiff.”

“What is owed by the plaintiff is cancelled by what the plaintiff owes him.” In the final analysis he will be required to pay the balance.

2 Types of Set Off

Legal Set Off & Equitable Set Off

A Legal Set Off exists when there is a liquidated sum of money and the plaintiff must owe the defendant the liquidated sum of money.

An Equitable Set Off – The amount owing is not liquidated. It will be settled by adjudication.

The Whole Doctrine In Essence

It is found under Order VIII rule 6. It is a doctrine under which here is an extinction of debts of which 2 persons are reciprocally debtors to one another.

The two debts are extinguished by creditor of which these two people are creditors reciprocally to one another.

Under the doctrine – a defendant in a suit for recovery of money, who holds a position of creditor against a plaintiff, may claim a set off against the plaintiff.

5 Conditions to be met before Order VIII rule 6 comes into operation:

The suit must be for recovery of money.

The defendant has to have the monetary claim against the plaintiff and this must be recoverable claim. It it is a debt it must be due.

The defendant’s claim must be for a liquidated sum of money.

Both parties must be in the same capacity – i.e. Where the plaintiff is suing in a representative capacity and owes the defendant a certain amount of money in his personal capacity, that money cannot be set off because the liability of the plaintiff to the defendant is not in a representative capacity. The defendant did not lend the money to the plaintiff’s child.

   The sums sought to be set off should not exceed the pecuniary limit of the court’s jurisdiction.

Note the following:

1. A set off in its nature is an independent action. But for avoidance of multiplicity of suits there should not be two suits.

2. Order VIII rule 6 is a legal set off. CPC does not have provisions for equitable se off. However, Order VIII does not take away the right to an equitable set off.  Where it can be shown that a defendant will have a right to set off independently of the Code the Order VIII will not be used to prevent him from exercising that equitable right.

Difference between Legal and Equitable Set Off:

1. A court is bound to entertain and adjudicate upon a legal set off once it is pleaded. However, where an equitable set off is pleaded the court has a discretion to entertain it and adjudicate on it or order that it be brought in separate suit.

NB:  Whereas a legal set off is a matter of right an equitable set off is not a right but discretional.

2. The amount recoverable. In a legal set off the amount must be liquidated. One the other hand in an equitable set off the amount is not ascertained.

3. In a legal set off it is important that the crossed demand should have arisen in the same transaction while in the equitable set off the cross-demand need not have arisen in the same transaction.

Note:  1. Section 2(2) of the Judicature and Application of Laws Ordinance (JALO) provides for the application of Equity in TZ.

2.  Section 95 of the CPC provides for the inherent powers of the Court.

What Happens When There is a Set-Off?

According to Rule 6 of order VIII a decree may be passed against the plaintiff in respect of a set-off. Where there is a set-off the WSD is deemed to be a plaint to the extent of set-ff. In the reply to the WSD the defendant will be required to raise defences against the set-off.

A COUNTER-CLAIM – Order VIII Rule 9

It is in its nature different from set-off.

Whereas rule 6 relates to a claim for a liquidated amount of money, a Counter-Claim is general. It relates to any suit.

Under rule 9(1) A defendant may raise a counter-claim against the plaintiff when any cause of action vests in the defendant at the time of presentation of the WSD.

What should be established is: the fact that one of the parties is the defendant and the other is the plaintiff. Also one has got to establish that they occupy the same position – personal or representative capacity.

Distinction Between a Set-Off and a Counter-Claim

Set-off in its nature is a statutory defence. The statute allows raising a defence by set-off.

A counter-claim in its nature a cross-suit – because it embraces any cause of action which can be legally sustained. In that cross-suit the defendant becomes the plaintiff and the original plaintiff becomes the defendant.

Is actively avoiding service of the summons or he has failed after exercising all efforts to discover the residence of the defendant or for any other sufficient cause.

The sufficient cause should be ejusdem generis to other things under rule 5.

Note:

Dismissal in all instances i.e. rules

 1, 2, 3, & 5 cannot be res judicata because – no evidence & no hearing.

Where the defendant has been served and he is not in court

If the suit is in the High Court and summons is proved to have been properly served the plaintiff will be allowed to prove his case ex parte.

Ex parte hearing does not mean that the plaintiff must win. He must give sufficient evidence to convince the court.

Where the defendant is in court and the plaintiff has been allowed to proceed ex parte, the defendant will not be allowed to produce any evidence or cross-examine.

Ex-parte proof may be made in two ways:-

1. By way of affidavit by the plaintiff.

2. By way of oral evidence by the plaintiff.

You cannot proceed ex parte unless granted leave by the court. On the day of hearing the plaintiff prays the matter to be heard in chamber by the judge so that he can get leave of the court.

The Procedure in the RM’s and DM’s Court (Subordinate Courts)

- Where summons issued was for producing WSD the court may proceed ex parte.

- Where summons issued was summons to appear the court may enter judgment.

Ex parte procedure is penal; it should be exercised where the defendant refuses intentionally to appear or to submit to the jurisdiction of the court.

It must be proved that the summons was duly served.

Summons to appear is a summons for direction both in the High Court and in the Subordinate Courts.

Summons for disposal of the suit constitute the first day of hearing and it requires no proof like in the High Court where there should be ex parte proof.

Where the court is not sure whether the summons was duly served it will issue a fresh summons.

Since rule 6 to Order IX is intended to punish a disobedient defendant, it can be shown although the summons was duly served the defendant has not failed to appear because of his abstinence the court will not proceed further. Order IX rule 6(1) O where it is proved that the summons was not served to give defendant sufficient time to appear the court will fix another time and adjourn the hearing. If it was the plaintiff’s fault he will be ordered to pay the costs of adjournment.

Where the Defendant appears after the order for adjournment

Order IX rule 7 – where the court has ordered ex parte proof under rule 6 but proof is not taken on that day then the defendant may, on the day to which the hearing has been ordered adjourned, make application under rule 7 to make an order to set aside the ex parte orders. The application must be by way of a chamber summons supported by an affidavit.

In the application the defendant must show his sufficient causes for his non-appearance. The court has discretion to set a side the ex-parte judgment. The court must be satisfied that the non-appearance was due to sufficient reasons.

Where the Plaintiff and the Defendant do not Appear

The Court shall dismiss the plaintiff’s claim and if the defendant has a counter-claim the court will proceed ex parte in respect of that counter-claim.

Where the defendant has not admitted part of the plaintiff’s claim but admits part of it.

Order IX rule 8 – the dismissal under this rule is res judicata. 

Order IX rule 9 – the plaintiff may apply to the court which dismissed the suit for an order setting aside the ex parte decree passed against him. This is by way of chamber summons supported by an affidavit with sufficient grounds to persuade the court to set aside the dismissal order.

NB: An order to set aside the dismissal under order IX rule 8 cannot be made unless the defendant has been notified.

An order to set aside the dismissal order cannot be made ex parte.

Difference between ex parte judgment and ex parte decree.

An ex parte decree is a decree which arises out of judgment which was entered against the defendant either after failing to file WSD or for his non-appearance on the first day of hearing.

 Where the defendant appears on the first day of hearing but does not appear on the day of judgment he cannot be said to be given an ex parte judgment but an ex parte decree.

Remedy for ex parte judgment

Refer Order IX rule 13.

Sufficient Cause depends on the material circumstances of the case e.g. ignorance of procedure, 

Illness of the party or his advocate, Lack of transport etc. 

T.M. Sanga V. Sadrudin G. Alibhai & Ors [1977] LRT 51

It points out circumstances under which the rule (rule 13) can be applied.

1. Uncertainty of the service of the summons is sufficient reason for allowing an application to set aside an ex parte judgment and decree thereof.

2. It is important to consider whether there are any triable issues in case the judgement is set aside.

When the court sets aside the ex parte judgment it sets a date for proceeding with the suit and hearing will continue as if no judgment had been entered.