IN THE COURT OF APPEAL OF TANZANIA

AT PAR ES SALAAM
a-

(CORAM: MUGASHA. 3.A., MWANDAMBO. 3.A. And MAIGE. 3.A.T

CIVIL APPEAL NO. 280 OF 2017

SIMBA PAPERS CONVERTES LIMITED....................... .............. APPELLANT

VERSUS
PACKAGING AND STATIONERY
MANUFACTURERS LIMITED............................................ 1st RESPONDENT
DR. STEVE K. MWORIA.............................................. 2nd RESPONDENT

[Appeal from the 3udgment and Decree of the High Court of Tanzania
(Commercial Division) at Dar es Salaam]
(Nvanqarika, 3.)

dated 3rd day of December, 2013

in
Commercial Case No. 52 of 2010

JUDGMENT OF THE COURT

3d & 23dMay, 2023

MUGASHA. 3.A.:

This appeal arises from the decision of the High Court in

Commercial Case No. 52 of 2010. In the said case, PACKAGING AND

STATIONERY MANUFACTURERS LIMITED, the 1st respondent sued

SIMBA PAPERS CONVERTES LIMITED, the appellant and Dr. Steve

Mworia, the 2nd respondent who was the 2nd defendant at the trial. The

claim was in respect of a machine known as Biolematic, P 590 (the

machine) alleged to have been sold to the appellant by 2nd respondent

in the name 1st respondent for USD 92,000 which was below the agreed
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price of USD 315,000 without involving any other Director of the

respondent It was also alleged that while the proceeds of sale of

the machine were not deposited in the respondent's account,

subsequently the 2nd respondent allowed the appellant to access the

respondent's premises, dismantled the machine and took it away. Thus,

the 1st respondent prayed for judgment and decree against the appellant

and 2nd respondent on the following orders; One, annulment of the

purported sale of the machine; Two, an order that the appellant return

the machine to the respondent's premises on Plot No. 28 and 29 Block

JJJ Industrial Area, Bonite Road Moshi and re-assemble it in the manner

it was before; Three, general damages, costs and other reliefs which

the court may deem fit to grant.

The 1st respondent's claim was disputed by the appellant and the

2nd respondent who both contended that, the machine was sold at the

agreed price of USD 315,000 and that the 1st respondent was duly

notified. Having heard the case, the learned trial judge entered a

judgment in favour of the 1st respondent herein. The appellant and the

2nd respondent were ordered to deposit the proceeds of sale of the

machine into the respondent's account, and in case of default, to pay a

compound interest at a rate of 2% per day till full and final payment.

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Aggrieved, the appellant and 2nd respondent each, filed a separate

notices of appeal expressing desire to fault the judgment of the High

Court. Whereas the respondent did not proceed to pursue any appeal,

the appellant filed an appeal contained in the Memorandum of Appeal

comprising nine grounds of complaint as hereunder paraphrased:

1. That the high court misdirected itself to frame the issue as to

whether the Bielomatic P-Machine was sold to the 2nd defendant
(the appellant) at the agreed price in the wake o f the plaintiff's
admission on its sale at (USD) 315,000, and the 1st defendant's
confirmation on receipt o f the sum on behalf o f the respondent
from the appellant.

2. The High Court erred in law and not holding that there was
completely no cause o f action by the respondent against the
appellant because the Director had notified the respondent on the
receipt o f the purchase price and had requested that a general
meeting be convened to determine how the proceeds o f sale of
the machine would be shared among the shareholders o f the
respondent, whose outcome was not disclosed at the trial.

3. The High Court erred in law and fact for ordering appellant to pay
what is called the balance o f USD 315,000 to the respondent in
the absence evidence to dispute that the appellant had paid the
purchase price to the respondent through the 1st defendant

4. The High Court erred in law and fact in holding that, Dr. Steve
Mworia's alleged involvement in fraudulent transactions warranted
 the suit on behaif o f the company to be filed without general
meeting or even a board o f director's resolution whereas
shareholding and directorship in the respondent (plaintiff)
company shows that the respondent had 5 directors and 6
shareholders.

5. That the High Court erred in law and fact for holding that
Commercial Case No. 52 o f 2010 as a case whose decision is being
challenged in the present appeal was a case o f minority
shareholders.

6. That the High Court erred both in law and fact by holding that the
agreement for the consideration o f USD 92,000.00(PE2) for which
no stamp duty had been paid was a lawful\ recognizable, and
enforceable document for action in court and any lawful excuse in
the present case excluding it from the requirement o f being
stamped.

7. That the High Court erred in law and in fact for awarding the
respondent a compound interest at the rate o f 2% every day for
which the judgment debt would remain unsatisfied.

When the appeal was called for hearing previously, having

gathered that although 2nd respondent was not pleaded in the appeal,

was mentioned severally in the Memorandum of Appeal, the Court

invoked Rule 97(2) of the Tanzania Court of Appeal Rules, 2009 (the

Rules) and ordered that he be served with a copy of the record of

appeal so as to apply to be joined in the appeal or to have the appeal

consolidated so that he is not condemned unheard. Upon being served

with the record of appeal, the 2nd respondent filed a notice of cross

appeal dated 24/12/2021 seeking to have the impugned Judgment and

Decree of the High Court set aside. We have not reproduced the

grounds in question on account of what will become apparent in due

course.

The notice of cross appeal was confronted with a preliminary

objection challenging its competence on ground that; One, it was filed

in contravention of Rule 94 of the Rules, which avails such right to a

respondent in an appeal which is not the case for 2nd respondent as no

appeal has been preferred against him; Two, the notice of cross appeal

was filed in contravention of the Court order which had directed that the

2nd respondent may apply to be joined or for consolidation of the

appeals. As is the practice, we had to determine first the preliminary

objection before proceeding to determine the substantive appeal.

In amplifying the grounds of the preliminary objection, advocate

Ezra Mwaluko for the respondent, submitted that since no appeal has

been preferred against the 2nd respondent, he does not qualify to file a

notice of cross appeal and instead, he ought to have complied with the

Court order directing that he apply to be joined or have his appeal

consolidated. In the premises, Mr. Mwaluko contended that on account

of the ground of incompetence, the notice of cross appeal is not

competent and deserves to be struck out with costs.

On the other hand, advocate Philemon Mutakyamirwa for 2nd

respondent opposed the preliminary objection and sought the

indulgence of the Court to dismiss it with costs. On this, he argued that

as the 2nd respondent had filed a separate notice of appeal on

12/12/2013, he deserves to be treated as a respondent in terms of Rule

88 (1) of the Rules, and as such, he qualified to lodge a notice of cross

appeal. To support his proposition, Mr. Mutakyamirwa cited to us the

case of JOHN SIRINGO AND TWENTY OTHERS VS. TANZANIA

NATIONAL ROAD AGENCY AND ANOTHER, Civil Appeal No. 171 of

2021 (unreported).

On the part of Mr. Audax Kahendaguza for the appellant, besides

supporting the course taken by Mr. Mutakyamirwa, he added that the

2nd respondent's notice deserves to be treated as notice of address of

service in terms of Rule 88 (1) of the Rules which, entitles him to file a

notice of cross appeal in order to challenge the decision of the High

Court being a judgment debtor. Ultimately, he urged us to find the

preliminary objection misconceived and proceed to strike it out.

 In a brief rejoinder, it was Mr. Mwaluko's argument that, since the

notices of appeal were filed on the same day, the 2nd respondent's

notice of appeal cannot be treated as a subsequent notice of appeal so

as to be taken as notice of address for service. He thus, reiterated his

earlier submission that, as the intending appellant, it was incumbent on

2nd respondent to comply with the Court order and apply to be joined in

the appeal or seek to have the appeals consolidated instead of lodging a

notice of cross appeal.

Having heard the contending submissions, in disposing of the

preliminary objection, the issue for our determination is the propriety or

otherwise of the notice of cross appeal. It is not in dispute that; one,

the impugned judgment was entered against both the appellant and the

2nd respondent who are judgment debtors and each had filed a separate

notice of appeal on the same day; two, the appellant herein did not

implead the 2nd respondent who had also filed a separate notice of

appeal and three, it is the Court which ordered that, the 2nd respondent

be served with the record of appeal having gathered that, he was likely

to be affected by the outcome of the appeal. The contentious issue on

which parties locked horns is whether the 2nd respondent's notice of

appeal deserves to be treated as a subsequent notice in terms of Rule

88 (1) which stipulates as follows:

"Where two or more parties have given notice o f

appeal from the same decision; the second and
ail subsequent notices to be lodged shall be
deemed to be notices for address o f service
within the meaning o f rule 86 and the party or
parties giving those notices shall be respondent".

[Emphasis supplied]

The catch word here is "deemed" which in law has been aptly

described as a legal fiction. Commenting on the notion, Justice G.P

Singh in his Book titled Principles of Statutory Interpretation, page 301,

8th Edition, 2001 has this to say:

"The legislature is quite competent to create a

legal fiction, in other words to create a deeming
provision for the purpose o f assuming existence
o f a fact which does not realty exist provided the
declaration o f non-existing facts as existing does
not offend the constitution"

The learned Author further observes at page 302 that, legal

fictions may also be created by delegated legislation, as is the case here

and in interpreting a legal fiction, the Court is to ascertain for what

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purpose the fiction is created and subsequently to assume the facts and

consequences which are incidental or inevitable to the giving effect to

the fiction without extending the purpose for which it was intended.

See: EMIR WILSON DAUD AND ANOTHER VS TANZANIA POSTAL

BANK [ 2009] TLR. 144.

The Court had the occasion of discussing the fate of the notice of

appeal filed subsequent to the other both arising from the same decision

in the case of JOHN SIRINGO AND TWENTY OTHERS VS.

TANZANIA NATIONAL ROAD AGENCY AND ANOTHER (supra). The

Court observed as follows:

"When the appeals were placed before us for

hearing, we reflected on rule 88 (1) o f the
Tanzania Court o f Appeal Rules; 2009 (henceforth
the Rules), which provides that where two or
more parties have given notices o f appeal from
the same decision, the second and all
subsequent notices to be lodged shall be
deemed to be notices o f address for service
within the meaning of Rule 86 o f the Rules
and the party or parties giving those
notices shall be respondents in the appeal.
The said rule in our view, is intended to
avert the possibility o f multiplicity of

9
 appeals being lodged by different parties
arising from the same decision. AH
aggrieved parties whor having lodged the
subsequent notices become respondents by
dint o f rule 88 (1) o f the Rules, could still
seek redress by lodging a notice o f cross
appeal within thirty days in terms of rule 94
(1) and (2) o f the Rules after being served
with the memorandum and record of
appeal lodged by the party who lodged the
first notice o f appeal"

[Emphasis supplied]

In the present matter, the separate notices of appeal were both

filed on the same day, there is no evidence as to which one was filed

first; it cannot be safely vouched as to which notice of the two notices

was filed subsequently. At this juncture, it is upon the Court to ascertain

for what purpose the deeming provision under rule 88 was created and

subsequently to assume the facts and consequences which are

incidental or inevitable to the giving effect to the deeming provision

without extending the purpose for which it was intended. In this regard,

we are satisfied that indeed, what was envisaged under rule 88 was the

existence of two notices of appeal or more filed separately all intending

to appeal against the same decision and the manner in the subsequent
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notice should be treated. Since no appeal was preferred by the 2nd

respondent even after the current appeal was filed, the scenario is

indeed incidental to what was envisaged under rule 88 (1) of the Rules

on the existence of two separate notices of appeal from the same

decision. In the circumstances, the 2nd respondent's notice of appeal is

as well, deemed to have been a notice of address of service in terms of

Rule 88 (1) of the Rules and as such, he became the respondent which

entitled him a remedy to lodge a notice of cross appeal in terms of Rule

94 (1) of the Rules. Therefore, the cross appeal is properly before the

Court as it enables the 2nd respondent and one of the judgment debtors

to be heard in this appeal against the impugned decision. In the

premises, we find the preliminary objection not merited and we proceed

to dismiss it.

We now proceed to deal with the main appeal beginning with the

4th and 5th grounds complaint as earlier paraphrased. The High Court is

faulted in entertaining the suit filed on behalf the respondent company

without its authority by way of the Board of Director's resolution and

holding that the involvement in fraudulent transactions by 2nd

respondent warranted the suit to be filed without a Board of Director's

resolution. Mr. Kahendaguza submitted this to be irregular adding that,

li
as the respective plaint was neither signed nor verified by the

respondent, is an indication that the company did not give authority to

institute on its behalf any case against the appellant. In this regard, he

argued that besides the suit not being competent for lack of authority of

the respondent company, it was not in order for the learned trial Judge

to treat the respondent as a minority shareholder entitled to institute a

case without the resolution of the Board of Directors merely because of

the alleged fraudulent transactions which were not pleaded at all.

On the other hand, it was submitted by Mr. Mwaluko that, in terms

of sections 182 of the Companies Act [CAP 212 R.E.2002], a company

being an artificial persona operates through its the Directors who must

act honestly and in good faith to conduct and transact business in the

manner which is in its best interests. This, he argued, was not the case

in the present matter because besides the absence of proof that the

machine was sold at USD 315,000, the purchase price was not paid in

full and yet, the proceeds of the purported sale were not deposited in

the company's account. Thus, Mr. Mwaluko urged the Court to lift the

corporate veil so as to proceed personally against the respective

directors. Upon being probed by the Court, he conceded that the trial

12
Judge's finding on the existence of fraudulent transaction is not founded

on the pleadings and as such, it is not in order.

After a careful consideration of the complaint, the contending

submissions and the record before us, the issue for our determination is

the propriety or otherwise of the suit before the High Court which was

filed without authority of the company. Prior to that, it is crucial to

understand the nature of the dispute between the parties before the

High Court. This can be discerned in the amended plaint at page 59 of

the record of appeal which among other things show:

1. That the Plaintiff's claim against the Respondents jointly and

severally is for permanent injunction restraining the 2nd Defendant
from trespassing into the Plaintiff's factory and generai damages
for trespass into the Plaintiff's factory.

2. That the Plaintiff is owning, among other properties, exercise

books manufacturing machine known as Bieiomatic P-590 installed
at the Plaintiff's factory located on Plot No. 28 and 29 Block "JJJ"
Industrial Area Bonite Road Moshi.

3. That on I f f 1June, 2010 the Plaintiff convened an extra ordinary

general meeting and among the agendas was the sale of
Bieiomatic P-590 machine.

4. It was agreed that the machine would be sold at a price o f United

States Dollars Three Hundred Fifteen Thousand only (USD
315,000,00).
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 A copy o f minutes o f the meeting marked "A” is attached hereto to
form part o f this affidavit.

5. That contrary to what was resolved in the meeting referred to in

paragraph 6 hereinabove, the 1st Defendant without any mandate
from the Plaintiff, on 21st June, 2010 sofd the Bieiomatic P-590
machine to the 2nd Defendant at a price for below the agreed
price.

A copy o f the saie agreement marked "B" is attached hereto to

form part o f this affidavit.

6. That after selling the machine without mandate and at a price that
was not agreed in the meeting; the 1st Defendant wrote to the
Chairman o f the Plaintiffpurportedly informing him that he (the 1st
Defendant) had already sold the Bielomatic-590 machine at the
resolved price o f United States Doilars Three Hundred Fifteen
Thousand only (USD 315,000.00).

A letter dated 21st June, 2010 marked "C" is attached hereto to

form part o f this affidavit

7. That apart from the 1st Defendant there was no any other director
o f the Plaintiff who was involved in any way in the purported sale
o f the machine to the 2nd Defendant.

8. That there is no any amount o f money deposited in the Plaintiff's

account as proceeds o f sale o f the machine.

9. That in the letter referred in paragraph 8 hereinabove, the 1st

Defendant proposed that the 2nd Defendant be allowed to
dismantle the Bielomatic-590 machine and take it with them.

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 10. That Plaintiff did not allow the 2nd Defendant to inter into the
factory hence on 23rd June, 2010 the 2nd Defendant broke in the
Plaintiff's factory and started to dismantle the machine.

11. That the Plaintiff Reported the matter to police but police advised
that this being the matter o f either existence or none existence o f
the sale agreement o f the Bieiomatic-590 machine is a civil matter
and therefore the same should be taken to court as civil case.

12. That later on it was learned that the 2nd Defendant had already
dismantled the machine and shifted it to Dar es Salaam.

The reliefs claimed are as hereunder:

" WHEREFORE the Plaintiff prays for judgment and decree against the

1st Defendant for the following orders:

An order that the purported sale ofBieiomatic P-590 machine

by the 1st Respondent to the 2nd Respondent is null and void.

(i) An order that the 2nd Defendant shall return the Bieiomatic
P-590 machine to the Plaintiff's factory located on Plot No.
28 and 29 Block "JJJ" Industrial Area Bonite Road, Moshi.

(ii) An order that the 2nd Defendant shall re-assemble and fix the
machine in the Plaintiff's factory the way it was before they
started dismantling it.

(iii) General damages o f TSH. 30,000,000/= for tress pass.

(iv) Costs o f this suit.

(v) Any other and further relief(s) that this Honorable Court
may deem fit andjust to grant".
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 "When companies authorize the commencement
o f legal proceedings a resolution have to be
passed either at a company Board o f Directors'
meeting and recorded in the minutes; no such
resolution had been passed authorizing these
proceedings"

This position was followed by Kalegeya, J, as he then was but it

was narrowed down to befit a particular situation on the dispute

between the company and its Directors and/or shareholders in the case

Of ST. BENARD'S HOSPITAL COMPANY LIMITED VS DR. LINUS

MAEMBA MLULA CHUWA, Commercial Case No. 57 of 2004

(unreported). In that case, the dispute was between the company and

one of its shareholder and Director. The suit was a result of internal

conflict between the Company and its Director General and in the claim,

the company made reference to a Board of Director's resolution to

relieve the Director General from its duties. Relying on the case of

BUGERERE COFFEE GROWERS LTD VS. SEBADDUKA (supra), the

court observed that, a reading of that decision reveals that what is

required is not a specific resolution but a general permission. Secondly,

a resolution would be necessary where the suit involves a dispute

between a company and one of its shareholders or directors. Thus,

Kalegeya, J, as he then was held:

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 "Having carefully considered the matter, I have
reached a settled conclusion that, indeed the
pleadings (plaint) should expressly reflect that
there is a resolution authorizing the filing o f an
action. A company which does not do so in its
pleadings, risks itself to the dangers o f being
faced by any insurmountable preliminary
objection as is the one at hand. I should
hurriedly add however that in my view the
resolution should be o f a general nature, that is,
it is not necessary that a particular firm or person
be specifically to do the task. It suffices if the
resolution empowers the company management
to take the necessary action. I am making this
insistence because from the wording in Bugerere
case one may be led to believe that the
resolution should point out a particular person or
firm.

We subscribe to the said position to the extent that it relates to

the institution of a suit by one or more directors in the name of the

company whereas in the present matter, it revolves on the internal

conflict within the company, In any other case we will be hesitant to

extend the rule any further mindful of the legal position relating to the

power of the company to be sued in its own name. This position is well

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summed up by Pennington's Company Law, 15th edition, London,

Butterworths by Robert Pennington thus:

"The intention o f the legislature was undoubtedly

that the Court should assist the Company to
achieve its expressed objects by implying all
powers necessary for it to do so... On the whole
the Courts have been liberal in implying powers.
Thus powers have been implied to do acts
obviously appropriate to the carrying out on o f
any business such as appointing agents and
engaging employees; and instituting, defending
and compromising legal proceedings..."

The above reflects a correct legal position to which we fully

subscribe.

As correctly submitted by Mr. Mwaluko which is a requirement

under the Companies Act, in transacting the business of a company, the

directors of the company should be honest and transact the business

with due regard to the better interests of the company. What transpired

in the cases of BUGERERE COFFEE GROWERS LTD VS.

SEBADDUKA and ST. BENARD'S HOSPITAL COMPANY LIMITED

VS. DR. LINUS MAEMBA MLULA CHUWA, is similar to the present

case whereby the dispute was between the company who is the 1st

19
respondent and one of the directors who is alleged to have conducted

himself in the manner not compatible with the better interests of the

company. In the premises, since the claimant was a company, it was not

proper institute a suit on behalf of the company without its formai

authority. This required the express authority by way of resolution of the

Board of Directors to institute the case in the absence of which, the suit

in the name of the company was defective and it ought to have been

struck out. In a similar vein, we do not agree with the learned trial judge

who treated the respondent company as minority shareholder on the

ground that there were elements of fraud. The allegations of fraud are

not founded on the pleadings and as such, was in error as it offended

the settled rule against departure from the pleadings set out under

Order VI rule 7 of the Civil Procedure Code [CAP 33 R.E. 2019]. Thus,

the learned Judge's finding is not proper because besides the parties,

the court is as well bound by what is pleaded by the parties in order to

avert consideration of extraneous matters.

In view of what we have demonstrated above, since the suit at the

trial court which was at the instance of the 1st respondent was instituted

without its mandate through the board of directors, it was incompetent

and the respective judgment and proceedings are void. We thus quash

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 In a nutshell, the plaint contains serious allegations against one of

respondent's directors that he sold the company's property which was

entrusted to him below the agreed price; omitted to deposit the

proceeds realized in the purported sale and forcefully entered into the

company's premises so as to dismantle and take away the machine.

While the claimant is the respondent's Company, it is indeed glaring that

the row or rather the dispute was between the directors of the 1st

respondent whereby the 2nd respondent who is one of the directors, was

accused of not having acted in good faith in disposing of the asset of the

company contrary to what was resolved by its directors. Therefore,

could the company which according to the record before us had 5

directors, commence a suit without the authority of the company? We

do not think so. On this, we borrow a leaf from the case of BUGERERE

COFFEE GROWERS LTD VS. SEBADUKA [1970] 1 EA 147 (HCU)

which dealt with an akin situation. In that case, an advocate instituted a

suit in the name of the company challenging the appointment of new

directors following the removal of old directors. As the Court found that

there was no evidence adduced to prove authority of the company to

institute the suit, it held the suit defective. In particular, it states:

16
and set aside the entire pleadings, proceedings and judgment. Thus,

we find the 4th and 5th grounds of appeal as paraphrased are merited,

sufficing to dispose of the appeal and as such, we shall not determine

the remaining grounds of appeal. Having nullified the proceedings and

judgment on which the cross appeal is based, it is uncalled for to

determine it and we accordingly strike it out. Whoever wishes to

institute a similar suit on behalf of the company is at liberty to do so

subject to obtaining the authority of the company. Considering the

circumstances surrounding the matter we make no order as to costs.

DATED at DAR ES SALAAM this 19th day of May, 2023.

S. E. A. MUGASHA
JUSTICE OF APPEAL

L. J. S. MWANDAMBO
JUSTICE OF APPEAL

I. J. MAIGE
JUSTICE OF APPEAL
This Judgment delivered this 23rdday of May, 2022 in the presence
of Mr. Philemon Mutakyamirwa, learned counsel for the 2nd Respondent
also holding brief for Mr. Audax Kahendaguza, learned counsel for the
Appellant and Mr. Ezra Mwaluko, learned counsel for the Respondent, is
hereby certifiecLas^aJtcue copy of original.

A m ^
<k R. W. CHAUNGU
y jy ipEPUTY REGISTRAR
8 /ft// COURT OF APPEAL"