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When a matter in mortgaged property causes confusion

THE Court of Appeal has resolved the controversy on which, between the High Court’s Commercial Division and Land Division has jurisdiction to determine a suit arising from the mortgaged property, or real property.

A panel of Justices of the appeals court made such decision when determining an appeal in a case involving the National Bank of Commerce (NBC) and National Chicks Corporation Limited and four others.

Our Staff Writer FAUSTINE KAPAMA revisits the proceedings of the case and reports… Way back in the year 2014, National Bank of Commerce (NBC), the appellant, instituted a summary suit against the National Chicks Corporation Limited, the respondent, and four others, claiming for payment of the sum of 1,435,630,742/30 being the outstanding amount on account of an Overdraft Facility.

The appellant bank also demanded a sum of 988,877,113/-being an outstanding balance for a loan facility advanced to the respondent company.

Alternatively, in the event the respondents failed to pay the claimed sum, the appellant prayed for an order appointing Mr Sadock Magai as receiver manager with powers to sell mortgaged properties in Dar es Salaam and Mbeya and act as receiver manger over assets charged under debenture.

A credit facility agreement was entered between the appellant Bank and respondent Company, loan agreements were also entered between him and other four respondents, which were supported by legal mortgages over the said properties and a debenture over the Company’s fixed and floating assets.

Such summary suit was filed before the High Court’s Commercial Division. The respondents successfully sought and obtained leave of the court to defend the suit and consequently lodged a joint written statement of Defence accompanied with a notice of five preliminary objections.

In the ruling, two grounds sailed through with one having the effect that the High Court (Commercial Division) had no jurisdiction to try a mortgage suit as a commercial case. The trial Judge held that the High Court (Commercial Division) was not the parties’ priority as against the High Court (Land Division).

Aggrieved by the ruling, NBC lodged a two point memorandum of appeal. One of the grounds suggested that the trial judge erred in law in holding that the High Court (Commercial Division) does not have jurisdiction to hear and determine the matter.

A panel, comprising Justices; Shaban Lila, Gerald Ndika and Barke Sahel was assigned to determine the appeal. The nub of parties’ grievance was on whether or not the High Court (Commercial Division) has jurisdiction to adjudicate the matter.

In resolving the issue, the justices started by discussing general mandate of the High Court, a creature of the Constitution of the United Republic of Tanzania, 1977 as amended. The High Court is established under Article 108 of the Constitution.

They said that the High Court is one in this country and derives its jurisdiction or mandate from either the Constitution or any law to that effect. It is also absolutely clear that it has unlimited jurisdiction and High Court judges are mandated to exercise all or any part of the powers conferred on the High Court.

According to them, the narration of the historical background of each of the two divisions -the High Court (Land Division) and the High Court (Commercial Division) with particular concentration on their respective establishments and prescribed mandate will be of great help in determining that crucial issue.

The existence of the Land Division of the High Court is a result of the enactment by the Parliament of the Land Act, and the Village Land Act, in 1999 which took, under sections 167 and 62 respectively, cognizance of the hierarchy of courts vested with jurisdiction to determine land disputes.

The justices found nothing expressed or implied in the Rule to the effect that the High Court (Commercial Division) is a distinct and independent court from the High Court. It was their view that the Commercial Division is equally part of the High Court.

“It enjoys and exercises the jurisdiction and mandate as stipulated by the Constitution and the Judges presiding over cases thereat, like any other Judges of the High Court, exercise the powers as stipulated in the Judicature and Applications of Laws Act (JALA). However, the justices pointed out that as that court is designated to hear cases of a commercial nature only the judges thereat try those cases only because other categories of cases are not registered there. “One may be prompted to ask whether the High Court (Commercial Division) has jurisdiction to adjudicate on matters other than commercial matters. It is obvious that as part of the High Court it has jurisdiction because its substantive mandate is provided by the Constitution,” they said.

When determining the ground of appeal, therefore, the justices noted the obvious that the trial judge was driven by the parties’ choice in the contract of guarantee of the court to adjudicate their dispute to hold that the Commercial Court had no jurisdiction to adjudicate the dispute.

Basing on the parties’ choice of the court to adjudicate any dispute arising from the guarantee agreement, the Commercial Court was not the parties’ preference against the Land Division of the High Court hence the former court had no “jurisdiction”.

“That being the case and contextually read, it seems to us that the learned judge misapplied the word “jurisdiction”. There seems the learned judge misapplied the word “jurisdiction” in lieu of preference. The words preference and jurisdiction bear different meanings and are two distinct matters,” they said.

Parties to a dispute may prefer their dispute be determined by certain court but they cannot vest that court with jurisdiction it legally does not have or vice versa. Preference has something to do with the parties’ choice but jurisdiction is a creature of Constitution or law and parties cannot agree otherwise.

In the end, the justices said, reading of the constitution, the JALA and the rules which establish the two Divisions of the High Court dispel the doubt that both Divisions of the High Court established to expedite dispensation of justice have jurisdiction to adjudicate the matter.

Since the matter had already been lodged in the High Court (Commercial Division) it should proceed to hearing in that court. However, they advised the responsible authorities to put a mechanism in place.

Such mechanism, according to the justices, will ensure that litigants are appropriately advised to lodge in other registries matters not specifically assigned to a particular division so as to ensure that the purpose for which the divisions are established are not paralysed.

“In the event a case not of the division’s specialization is instituted in any other divisions, the parties should not be thrown out on pretext of lack of jurisdiction. Instead, (they) be advised to withdraw and file the case in a competent court; otherwise, it should be heard to its conclusion,” they counseled.

The justices concluded their judgment by ruling in favour of the appellant bank that any litigation whose cause of action accrued from a mortgage transaction or a commercial contract, regardless of its aftermath to the landed property or real property, is not necessarily a land matter.

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Author: FAUSTINE KAPAMA

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