WILLIAM KIMARO & 475 OTHERS v COOPERS & LYBRAND AND ANOTHER 1996 TLR 252 (CA)

 

WILLIAM KIMARO & 475 OTHERS v COOPERS & LYBRAND AND ANOTHER 1996 TLR 252 (CA)

Court Court of Appeal of Tanzania - Dar es Salaam

Judge Ramadhani JJA, Mnzavas JJA and Mfalila JJA

B

CIVIL APPEAL NO 5 OF 1995

23 October, 1995

(Appeal from the judgment of the High Court of Tanzania, Dar es Salaam, Bahati J.) C

Flynote

Company Law - Winding up - Creditors' claims against company in liquidation -

Proof of debt on affidavit is required for cause of action - Companies (Winding Up)

Rules, 1929. D

-Headnote

The First Appellant filed a representative suit on behalf of the other appellants against

the Respondents. The First Respondent is the liquidator of Zambia Tanzania Road

Services Ltd, the Second Respondent. The Appellants were all employees of the

Second Respondent. E

During August 1985, the Second Respondent was placed into liquidation. The Second

Respondent then informed the Appellants that their terminal benefits could not be

paid immediately, owing to the financial state of the now liquidated Second

Respondent and bearing in mind the order of preference of the various creditors.

After obtaining a 'loan' from the Government of Tanzania, one of the shareholders,

the Appellants were paid F Shs 32,761,927/= in total and in full and final settlement

of their claims. This payment was made in July 1987, some two years after their due

date in August 1985.

The Appellants duly filed a suit in the court below for Shs 84,779,770/05, being in

respect of `repatriation costs, luggage allowance, outstation allowance and a

subsistence G allowance for 664 days' based on the devaluation of the Tanzanian

shilling, increased transport costs and outstation allowances which had taken place

over the two-year period since the company's liquidation when the benefits were due

and payable.

The trial Judge found that the claims were valid, but dismissed them on the basis that

the claims had not been proved as required by the Companies (Winding Up) Rules, H

1929, and that therefore the entire claim was premature.

The Appellants appeal on the ground that the trial Judge erred in holding that the suit

was premature and that therefore there was no cause of action.

Held: I

(i) For the trial Judge to have determined the validity of the claims after

1996 TLR p253

A finding that they were premature was incorrect, since he was thereby

virtually pre-empting the decision of the liquidator.

(ii) The Companies (Winding Up) Rules, 1929, require any debt to be

proved by affidavit; and until this is done, there can be no cause of action.

(iii) The two claims in this suit were thus prematurely lodged. B

(iv) The appeal is dismissed in its entirety, with costs.

Case Information

Ordered accordingly.

Semgalawe, for the Appellants.

Nguluma, for the Respondents. C

[zJDz]Judgment

Mfalila, JA:

The appellant William Kimaro filed a representative suit in the High Court, on behalf

of himself and 475 other fellow ex-employees of Zambia Tanzania Road Services Ltd.

The D suit was filed against the liquidators of the said company because it was then

under liquidation. The liquidators are Coopers & Lybrand, the present respondents.

The appellant demanded a total of Shs 84,779,770.05/= being the difference between

repatriation costs paid in July 1987 but calculated at the rates obtaining on 8 August

E 1985 when the company was wound up and those actually obtaining in July 1987.

Perhaps a brief background to the claim would clarify the position. Zambia Tanzania

Road Services Ltd was a limited liability company incorporated in Zambia and was F

registered in Tanzania as a branch of a foreign company, but the shareholders of the

company were the Governments of Tanzania and Zambia and an Italian company

named Intersommer Condrad Spa. The appellant and his colleagues were employees

of the Tanzania branch of the company. In August 1985 the shareholders passed a G

resolution to liquidate the company. On 26 August 1985 the respondents as

liquidators terminated the employment of all the employees except a few. But due to

financial difficulties, the liquidators could not pay the employees' terminal benefits

immediately. All H that the liquidators could do in the circumstances was to ask all

employees to leave for their respective homes but to leave their contact addresses

behind through which they could be reached. The appellant said that he and his

colleagues could not leave for their homes because they had no money to pay for

themselves and their families as well as I freight for their personal belongings. They

therefore remained at their respective stations in Dar es Salaam, Iringa and Mbeya.

The

1996 TLR p254

MFALILA JA

respondents were faced with the problem of paying the appellants who were

classified A as unsecured creditors ahead of other secured creditors of the company.

To get round the problem, the respondents approached one of the shareholders, the

Government of Tanzania for a loan equivalent to the sum claimed by the appellants.

The Government of B Tanzania agreed and advanced the amount needed to the

respondents through the National Transport Corporation. On receipt of this loan, the

liquidators paid the appellants all their entitlements which included salaries and/or

allowances and repatriation costs. All these amounted to Shs 32,761,927/=. These

payments were C effected in July 1987, ie two years after the payments were due in

August 1985 when the company was liquidated. The appellants accepted these

payments as representing their full claims and that they had no further claims against

the respondents. However, the appellants later became of the view that these

payments fell far short of their actual D requirements and lodged fresh claims with

the respondents who rejected them, maintaining that the appellants no longer had

any claims against them, they having been paid in full all their entitlements.

Following the rejection of their additional claims by the respondents, the appellants

lodged this claim in the High Court and in para 14 of their E plaint, they stated:

`14. That the plaintiffs are claiming from the defendants a total of Shs

84,779,770/05/= being repatriation costs, luggage allowance and outstation allowance.

The plaintiffs are entitled to be paid the same by the defendants because the

defendants failed and/or neglected to pay F them their terminal benefits

immediately after serving them the notices of termination as required by the law and

had a duty to pay them the repatriation costs, luggage allowances and outstation

allowances taking into account the devaluation of the Tanzania shilling, increased G

transport costs and outstation allowances.'

The appellants also claimed an interest of 30 per cent per annum on the sum claimed

from the date of filing to the date of final judgment plus costs. H

We agree with the Trial Judge that the claim as framed was vague although it appears

to have been drawn up by a very brilliant lawyer, the late Malingumu Rutashobya.

However, in the course of the hearing, the evidence revealed that the appellants were

actually I claiming the difference between the repatriation costs including luggage

allowances which were paid in July 1987 but calculated at

1996 TLR p255

MFALILA JA

1985 rates when the company was wound up and the actual costs of repatriation in

July A 1987 at the time of payment. The appellants also made it clear that this figure

of Shs 84,779,770/05/= includes subsistence allowances for 664 days which they spent

while waiting at their respective stations to be paid their entitlements.

At the commencement of the trial, three issues were framed, issues on which would

B depend the outcome of the case. These were as follows:

(1) whether the defendants assured the plaintiffs that all terminal benefits

would be paid immediately C

(2) whether the defendants requested the plaintiffs to remain at their

respective work stations after issuing them with notices of termination

(3) whether the defendants neglected to provide or pay the plaintiff's

terminal benefits D

(4) to what reliefs are entitled.

With regard to issues (1) and (2), the appellant who gave evidence as PW1 told the

Trial Court: E

`We were informed that the company had been wound up and we were given

two weeks' leave. After that the General Manager announced that their services were

being terminated and that they would be paid their terminal benefits . . . it was the

liquidator who was actually terminating our employment. We were required to leave

an address for the purposes of future correspondence. But we did not F leave any

addresses because we had not been paid our benefits as employees.'

It is clear that this statement does not contain any suggestion that the respondents as

G liquidators promised the appellants that all their terminal benefits would be paid

immediately, and also that they were told to remain at their respective stations after

being issued with notices of termination pending the payment in full of their claims.

In the circumstances, the Trial Judge answered both these issues in the negative. H

With regard to the third issue, the Trial Judge accepted the evidence given by the

liquidator Mr Mundolwa, that the respondents as liquidators did not pay the

appellants' terminal benefits sooner because of negligence, he said that the appellants'

terminal I benefits could not be paid immediately because there was no money, the

company was insolvent. He produced documents to establish this

1996 TLR p256

MFALILA JA

and that on the contrary every effort was made to secure the necessary funds from

one A of the shareholders, efforts which enabled the appellants to be paid even

ahead of secured creditors. In the circumstances, the judge held that it could not be

said that the respondents neglected to pay the appellants their terminal benefits,

because there was B no money available for this purpose until after the same was

borrowed from one of the shareholders. Accordingly he also answered this issue in

the negative.

Having answered all the main issues in the negative, the Trial Judge then proceeded

to deal with the last standard ancillary issue, namely to what reliefs are the parties

entitled? C In answering this question the judge asked himself whether the

appellants' two pronged claim is maintainable in law. The first prong concerned their

claim for the difference between the rates of fare and freight charges obtaining on 26

August 1985 when they were computed and July 1987 when the payments were

made, arguing that D between these two dates the fares to their homes as well as

freight charges had almost doubled. The second prong concerned their claim for

subsistence allowances for 664 days they spend waiting to be paid their terminal

benefits. The judge held that both these E claims were properly made and are

supported by s 53 of the Employment Ordinance, but he dismissed them because they

had not been proved as required by the Companies (Winding up) Rules, and that

therefore the entire claim was premature.

In this appeal, Mr Semgalawe who appeared for the appellants, filed only one ground

of F appeal, namely that the Trial Judge erred in law in holding that the suit is

premature and that therefore there was no cause of action. At the hearing of this

appeal and in support of this ground, Mr Semgalawe argued that there was no need

for further proof of the debt G made up of additional claims because the liquidator

was merely being asked to pay what he had already paid particularly when what was

being asked were statutory claims.

On our part we think it was not correct for the Trial Judge to determine the validity

of these claims after saying that they were premature. This was virtually pre-empting

the H decision of the liquidator. The liquidator should be left free to determine the

validity of each debt submitted to him. In our view, the Trial Judge should have based

his decision on the reasons he gave at p 131 of his judgment and should not have

discussed the validity of the claims in law. In this passage, the judge stated: I

`I agree with Mrs Maajar that whatever claims there may be they

1996 TLR p257

must be brought in accordance with the Companies (Winding Up) Rules 1929.

In para 15 of the A plaint, it is stated that "plaintiffs have repeatedly demanded the

aforementioned amount from the defendants but the defendants have refused and/or

neglected to pay them the same". This may be so, but that would not be enough

because the Companies (Winding Up) Rules 1929 require any debt to be proved by an

affidavit verifying the debt. The plaintiffs do not claim to have done so. Therefore B

until such proof is done there cannot be any cause of action.'

We agree, and say that the Rules do not make any distinction between debts arising

out C of different claims. The original claims were subjected to proof and paid, and

additional claims must be treated separately and subjected to the same process of

proof under the Rules. This was not done, accordingly we agree with Dr Nguluma,

counsel for the respondents that the two claims in this suit amounting to Shs

84,779,770/05/= were D prematurely lodged in court. There is no need to go further

than this lest we prejudice any proceedings that may come from the liquidator for

proof of these claims.

For these reasons we are satisfied that this appeal has no merit and we dismiss it in its

entirety with costs. E

1996 TLR p257

F