IN THE COURT OF APPEAL OF TANZANIA

AT PAR ES SALAAM

fCORAM: LILA. J.A.. MWANDAMBO. J.A. And FIKIRINI. J.A.^

CIVIL APPEAL NO. 165 OF 2020

HERITAGE INSURANCE COMPANY TANZANIA LIMITED.............APPELLANT

VERSUS
FIRST ASSURANCE COMPANY LIMITED................................ RESPONDENT
(Appeal from the decision of the High Court of Tanzania,
(Commercial Division) at Dar es Salaam)

(Philip, JO
dated the 31st day of January, 2020
in

Commercial Case No. 145 of 2018

JUDGMENT OF THE COURT

24th October, 2022 & 5th April, 2023

MWANDAMBO. J.A.:

The appellant Heritage Insurance Company Tanzania Limited,

unsuccessfully sued the respondent First Assurance Company Limited in

a suit for payment of USD 533,530.25 being balance allegedly due and

payable to her from a facultative reinsurance claim. Besides, the appellant

claimed interest on the principal sum, damages and costs. She has

appealed against that judgment before the Court.

 The appellant's suit before the trial court was premised on facts

alleging that the respondent had refused to settle a claim on a facultative

reinsurance despite its earlier undertaking to settle the claim. Tlie dispute

arose from the following background. For quite some time, the appellant

was an insurer to a company called Samos Hotel Limited (the insured)

covering buildings and contents at its hotel in Zanzibar. Given the

magnitude of the insured risk, the appellant made an arrangement ceding

part of the risk by way of a facultative reinsurance with several insurance

companies for different proportions, the respondent assuming 25% of the

insured value. Pleadings show that such an arrangement with the

respondent began on 1st April 2014 evidenced by a facultative closing slip

running through 31st March 2015 covering 25% of the insured risk which

meant that, in the event of occurrence of the insured risk, the respondent

would be liable for 25% of the claim.

It was common cause that, on 17th April 2015, the appellant sent an

email to the respondent notifying her of a renewal of insurance policy with

the insured Samos Hotel Limited for another year from 1st April 2015 to

31st March 2016. Through that email, the appellant asked the respondent

to confirm the reinsurance coverage arrangement it had the previous year

to which the respondent agreed. On 4th May 2015, the appellant's officer

2
sent an email to the respondent intimating a possibility of a claim by the

insured, subject of the facultative reinsurance. That email indicated

further that the appellant had appointed a loss surveyor to investigate the

circumstances behind the toss of which the respondent would be kept

abreast. Nevertheless, this information did not stop the parties from going

ahead with the arrangements for renewal of the facultative reinsurance

for, on 16th June 2015 the respondent signed a facultative reinsurance

closing slip (exhibit P3) covering the period from 1st April 2015 to 31st

March 2016 (the second period of cover). The signing of exhibit P3 was

followed by the appellant's payment of the requisite premium to the

respondent on 30th June, 2015.

The arrangements above went almost simultaneously with the

settlement of the interim request from the insured forwarded to the

appellant by the company which had been appointed to survey and

investigate on the fire incident and the loss involved. Initially, the

appellant paid USD 500,000.00 against the request for interim payment

and claimed from the respondent the corresponding 25% of its share

under the facultative reinsurance. There was no dispute that the

respondent agreed to settle the claim against a cash call as evident

through an email (exhibit P8) from the respondent's General Manager sent
to the appellant's officer on 9thJune 2015. That was followed by a second

request for interim payment for an equivalent amount which the

respondent undertook to pay its share upon receipt of a cash call from

the appellant. In the process of the settlement of the insured's claim, it

was mutually agreed that the appellant retains a sum of USD 75,000 from

the amount it owed the respondent by way of a set off considering that

the respondent had not yet paid any amount demanded. Subsequently,

the respondent paid the appellant a sum of USD 25,000 making a total of

USD 100,000 thereby reducing the liability from USD 630,392.75 to USD

535,392.75. It was common ground that, the respondent made no other

payment to the appellant on the cash calls despite demands followed by

promises for payment. After a series of correspondences characterized by

claims and responses between the parties, on 20th July 2017, the

respondent reneged on its earlier undertaking by refusing to settle the

claim contending that the loss occurred prior to the renewal of the

facultative reinsurance. It purportedly rescinded the coverage

notwithstanding that it had already expired long before that date.

The foregoing resulted into the appellant instituting the suit before

the trial court predicated upon breach of the facultative reinsurance cover

by non-payment of the claim as alluded to above. The appellant claimed

that it had a valid facultative reinsurance policy which was automatically

renewed upon its expiry on 31st March 2015 based on the insurance

business usage, custom and practice to that effect. In support of that

assertion, the appellant provided a list of 10 instances involving her and

other insurance companies, the respondent included. It was her case that,

the email it sent on 17thApril 2015 (exhibit D2) was by no means a request

for renewal but meant to put the records proper and that, under the said

practice, a facultative reinsurance closing slip would not be issued

promptly but at a subsequent date as it happened in the instant case; 16th

June 2015 followed by payment of the requisite premium to the reinsurer.

It was contended further that, the appellant had no knowledge of the

occurrence of the risk on 17th April 2015 but in any event, at that time,

the cover was already in existence and the respondent was not justified

in cancelling the contract of insurance long after its expiry.

The respondent, for her part, denied existence of any valid

facultative reinsurance before 17th April 2015 when the appellant

requested for its renewal. It denied the appellant's contention that the

facultative reinsurance coverage was renewed automatically upon expiry

on 31st March 2015. Regarding the renewal covering the period between

17th April 2015, the respondent contended that, the appellant did not
disclose a materia! fact that the risk, subject of the request for the renewal

had already occurred a day before the email asking the respondent to

renew it. It was her further contention that, had the appellant disclosed

the fact on the occurrence of the risk, it would not have agreed to renew

the facultative coverage. Hence, its election to avoid the contract upon

discovery of the non-disclosure at a later stage. It also counterclaimed

from the appellant an amount of USD 25,000 paid to the appellant as part

of the avoided facultative reinsurance.

The trial court framed five issues for determination of the suit.

However, the issues boil down to two main issues namely; one, whether

there was a facultative reinsurance cover and the terms thereof; two,

whether there was any breach of the terms and conditions of the

facultative reinsurance coverage by either of the parties. From those

issues followed the reliefs.

In its judgment, the trial court rejected the appellant's claim on

automatic renewal of the facultative coverage upon expiry on 31st March

2015 based on insurance business practice in the absence of any notice

of renewal. Having so stated, the court found that the evidence supported

existence of a coverage from 17th April 2015, a day when the appellant's

officer contacted the respondent vide exhibit D2 for a renewal. From such

6
a finding, the trial court addressed itself on the validity of the coverage

running from 17th April 2015 considering the facts showing that the risk

sought to be insured in favour of the primary insured occurred on 16th

April 2015; a day before the appellant contacted the respondent to

confirm the arrangement for the cover vide exhibit D2. Satisfied that the

appellant failed to disclose to the respondent material facts on the

occurrence of the risk a day before the instruction for renewal, the trial

court concluded that, the appellant was in breach of the principle of

utmost good faith; a fundamental principle in contracts of insurance. It

thus found the facultative coverage void as there was no longer any

insurable risk.

Even though the appellant's advocate contended that the contract

could be voidable for misrepresentation, the learned trial judge took a

different view reasoning that, contracts of insurance are special contracts

distinct from ordinary contracts which are rendered void for

misrepresentation notwithstanding the dictates of section 19 (1) of the

Law of Contract Act (the Act) to the contrary. Upon that finding, the trial

court dismissed the appellant's suit. On the other hand, it entered

judgment for the respondent on the counter-claim for an amount of USD

25,000 on account of the amount it paid in part settlement of the claim

under a facultative cover which it held to be inexistent.

The appellant appeals against the whole judgment upon fifteen

grounds of appeal. It is significant that rule 93 (1) of the Tanzania Court

of Appeal Rules, 2009 (the Rules) requires a memorandum of appeal to

be concise, without argument or being narrative specifying the points

which are alleged to have been wrongly decided. The appellant's

memorandum of appeal contains 15 grounds from findings of the High

Court on just one main issue which was, whether there was a facultative

reinsurance cover between the plaintiff and the defendant. Besides, the

grounds are not free from arguments and being narrative. We shall leave

the matter at that but not without a reminder to litigants and their counsel.

We cannot do better than echoing the words expressed by Lord

Templeman in Ashmore v. Corp of Lloyd's [1992] 2 All. ER 486. His

Lordship sounded a warning to litigants and particularly their legal

advisors of their duty to cooperate with the court by ensuring that they

present their cases with focused, chronological and brief pleadings

defining issues in such a way simplifying the matters and not raising a

multitude of ingenious arguments hoping that the judge will fashion a

8
winner. We can only hope that litigants and their advocates shall strive

to adhere to the requirements prescribed by the Rules.

Having examined the grounds of appeal, it is evident that,

regardless of the number, they raise the following issues, one, whether

the trial court was correct in holding that the appellant failed to discharge

her burden of proof that there existed a facultative reinsurance cover

running from 1st April 2015 to 31st March 2016; two, whether the

respondent was in breach of the facultative reinsurance coverage; and,

three, whether the High Court had jurisdiction to enter judgment in

favour of the respondent on the counter-claim.

Mr. Audax Kahendaguza, learned advocate of Auda & Company

Advocates continues to represent the appellant as he did before the trial

court. So does Mr. Hussein Mohamed, learned advocate from a firm of

advocates operating in the name of Pegasus Legal, for the respondent.

Both learned advocates lodged their written submissions for and against

the appeal raising powerful arguments in support of their respective stand

points to which we feel indebted for their industry.

In view of the approach we have taken, we shall be excused in our

judgment for not following the pattern adopted by the appellant's learned

advocate in his written submissions. It will be apparent that the first issue

9
we have framed for the determination of this appeal takes on board

grounds I, 2, 3, 4, 6, 8, 9, 10 and 11. Mr. Kahendaguza's bone of

contention both in his written and oral submissions was against the trial

court failing to make a finding that the appellant discharged her burden

of proof that a facultative reinsurance coverage was automatically

renewed running from 1st April 2015 based on custom, usage and practice

in the insurance industry prevalent at the time. He argues that, the

evidence placed before the trial court both oral and documentary, proved

the existence of automatic renewal of reinsurance coverage amongst

insurance companies. He cites examples from ten instances through

exhibit P21 even though six of out them relate to transactions after 1st

April 2015. He also relies on the evidence of PW4 said to be an expert in

insurance industry to the same effect. To bolster his submission on the

relevance of customs and usage in contracts, the learned advocate relies

on the works of Cheshire, Fifoot and Furmston in their book; Law of

Contract, 12th Edition, Butterworths, London.

The learned advocate criticizes the trial court for determining the

first and decisive issue in the negative despite its finding that a facultative

reinsurance cover existed and established through exhibit P3 and D2 as

well as the testimonies of DW1 and DW2. On this, the learned advocate

10
argues that the trial court strayed into error in determining the first issue

in the manner it did and framing a different issue on which it concluded

that there was no valid facultative reinsurance cover in answer to the first

issue.

Submitting further, the learned advocate contends that, contrary to

the view held by the trial court, the evidence through PW4 established

that no writing was required to support automatic renewals. It was his

submission that, in any event, exhibit D2 was by no means a request for

renewal of the cover which had been automatically renewed from 1st April

2015. According to him, exhibit D2 was meant to document existence of

the renewed cover for further steps to be taken including issuance of

closing slips as was always the case in the previous transactions. Mr.

Kahendaguza concluded his submissions on the first issue covering

grounds 1, 2, 3, 4, 6, 8, 9, 10 and 11 by urging the Court to set aside the

trial court's finding and make its own inferences which will result in an

affirmative answer to the first issue before the trial court determined

against the appellant.

Mr. Hussein was emphatic in his written as well as oral submissions

in support of the trial court's findings that resulted into the dismissal of

the appellant's suit. Essentially, the learned advocate submits that in the

ii
absence of any express term in the agreement, the argument on

automatic renewal cannot be inferred. He submits that, to succeed in such

a claim, the appellant must have led evidence proving that the practice in

favour of a positive finding on automatic renewal was so notorious and

prevalent that it could be positively implied in the agreement the parties

entered on 1st April 2014. He draws support from a decision of the Privy

Council in BP Refinery (Western Port) Pty Ltd. v. President,

Councillors and Rate Payers of The Shire of Hastings [1977] 52

AUR 20, 26 for the proposition that a term can only be implied subject to

existence of five conditions that is to say; one, it is reasonable and

practicable; two, it is necessary to give business efficacy to the contract;

three, it is so obvious that it goes without saying; four, it is capable of

clear expression and; five, it must not contradict any express terms of

the contract. It is the learned advocate's submission that the appellant's

case did not satisfy the above conditions. In his further submission, Mr.

Hussein places reliance on Waddington in Tamplin (FA) Steamship

Co. Ltd. v. Anglo Mexican Petroleum Products Co. Ltd. [1916] A.C.

397 for the proposition that a term cannot be implied in a contract where

it is inconsistent with its express provisions or with the intention of the

parties gathered from the provisions.

12
 With regard to the arguments revolving around grounds three and

four contending that the trial court determined the first issue negatively

based on a newly framed issue, it is the learned advocate's submission

that the trial court did not frame and determine a completely new issue

regarding the validity of the cover. He argues that was corollary to the

main issue on the existence of the cover which it had already found to be

inexistent. The learned advocate contends that, submitting otherwise

borders on absurdity matching with painting a lily and invites the Court to

reject it.

On the effective date of the renewal of the cover, subject of grounds

6, 8, 9, 10 and 11, the learned advocate, yet again, posits that the

appellant's arguments that the reinsurance cover was renewed on 1st April

2015 are a fallacy. He contends that exhibit D2 sent on 17thApril 2015 for

the renewal of the coverage running retrospectively from 1st April 2015

was acted upon oblivious of the fact that the appellant concealed a

material fact that the primary insured's hotel had been gutted down by

fire on 16th April 2015. According to the learned advocate, the facultative

reinsurance was not automatically renewed on 1st April 2015 as to cover

the risk which occurred on 16thApril 2015 neither was exhibit D2 anything

other than notice of renewal. This is so, it is argued, had the reinsurance

13
cover been automatically renewed as contended by the appellant, there

could be no basis for sending that email. He invites the Court to reject the

appellant's submissions on these grounds.

Having examined the counsel's submissions, it seems to us that, the

first issue we have posed cannot be determined without appreciating the

nature of the contract the parties were at loggerheads as to its terms, in

particular, in relation to its renewal. Apparently, neither the learned

advocate for the appellant nor the respondents was forthright in the

submissions on what document constituted a facultative reinsurance

cover from which the trial court could ascertain the intention of the

parties. The issue has exercised our minds to a considerable extent

considering that we had no benefit of any authority in that regard. Our

research has landed into an article titled: " The precision o f the formation

of a contract o f reinsurance and other fairly storied by John Edmond of

Allens Arthur Robinson; a renowned law firm in Australia available at

<https://date.ailens.com au/pubs/pdf/insur/ins4junos.pdf> accessed on

11th December 2022 which we find to be quite useful in this appeal.

According to the author, formation of a contract of reinsurance is

governed by the same principles applicable to other contracts regardless

14
of the fundamental consideration in insurance contracts; utmost good

faith. The learned author articulates the issue thus:

"It is quite usuai for the parties to a contract to

reduce their intentions to a short form document
know as a slip. The idea o f the slip is to have the
salient terms of the contract set out in writing.
Those terms are usually themselves In a short
form code which is understood by both parties to
refer to a particular market wording. In the
simplest o f cases, the broker prepares the slip and
presents it to a reinsurer with a view to that
reinsurer taking on the risk. The reinsurer then
reviews the slip and, if he accepts the terms, he
will affix his stamp and scratch for 100% o f the
risk" (At page 3).

In support of the proposition, the learned author refers to a decision

of the Court of Appeal of England in General Reinsurance Corporation

and Ors v. Forsakringsakrietbolaget Fennia Patria [1983] 2 LLR 287

at p. 290 in which Kerr, U writing for the majority stated:

"The presentation o f the slip by the broker

constitutes the offer, and the writing o f each fine
constitutes an acceptance of this offer and the
underwriter"

15
 The learned author remarks that the same considerations should

apply in cases where there is no broker. Downplaying the myth that a

slip is not a contract of reinsurance, the learned author remarks that:

" This is not simply the case. The analysis above

demonstrates that provided there is adequate
certainty between the parties, the siip is perfectly
acceptable form o f the contract. Indeed\ it is
regrettably the case that in many o f the
disputes..., the policy or wording is notissued until
after it becomes dear that a dispute is likely. It is
quite usual for one party or both parties to sue on
the slip...", (At page 5).

We are highly persuaded by the above decisions and, in our firm

view, they hold true in our jurisdiction. Under the circumstances, it is

glaringly clear that the facultative reinsurance closing slip (exhibit P3) for

the period from 1st April 2014 to 31st March 2015 constituted the contract

of reinsurance between the parties.

In the premises, the argument advanced by Mr. Kahendaguza that

a closing slip was merely a paper to document what the parties had

already agreed but not necessarily the contract itself, in our view, is

misconceived. One wonders, if the slip did not constitute the agreement

between the parties, it is not clear to us which contract the appellant had

16
with the respondent between 1st April 2014 to 31st March 2015 which the

appellant claims to have been automatically renewed from 1st April 2015

to 31st March 2016. It will be recalled that, apart from the custom and

usage heavily relied upon by the appellant in support of the argument on

automatic renewal, it is plain that the parties had been in the relationship

for only a year as the reinsured and re-insurer. It is for this reason the

argument by the respondent's learned advocate that for such custom,

usage and practice to be relied upon, it must have been shown from the

evidence that such custom, usage and practice was too prevalent at the

time to bind the parties or any of the players in the industry. This takes

us back to John Edmond's article in which he argues that:

nAt the end o f the policy period it is usual for

renewal terms to be quoted. Generally, the
reinsurer wiii provide cover under a new contract
from the end o f the existing contract. Under the
common law, it has been said that the time o f the
formation o f the new contract depends on who
initiates the renewal" (At page 12).

He refers to a statement of Jacobs, J. in Randall v. Western

Australia Insurance Co. Limited [1981] 1ANZ Ins. Cas 60 - 422 where

it was stated:
 " Where the policy is renewable and both parties
so desire, the renewal is effected in one o f two
ways. The insured, by tendering the renewal
premium in the first instance, makes an offer to
renew the policy which the insurer may accept or
decline at their pleasure; they cannot therefore be
compelled to accept the renewal premium when
tendered. If, on the other hand, the insurer invite
the insured to renew the policy by sending him a
renewal notice... the offer to renew proceeds from
them and the insured's acceptance is signified by
payment o f the renewal premium".

The record shows that the first contract expired on 31st March 2015

but it was not until 17th April 2015 when the appellant notified the

respondent vide exhibit D2 that it had renewed the policy with the insured

asking her to confirm the reinsurance arrangement. Despite the

appellant's attempt to treat that email as just seeking confirmation from

a contract that had already been automatically renewed, the trial court

rejected that argument and rightly so in our view. Drawing inspiration

from Randall's case (supra), we agree with the learned trial judge that

the appellant failed to discharge its burden of proof in support of an

automatic renewal. Similarly, we agree that the email (exhibit D2) sent to

18
the respondent on 17th April 2015 constituted a renewal notice for a new

contract upon expiry of the previous one.

Having so held, the next question for our consideration relates to

the effective date of the renewal vide exhibit D2. Was it from 1st April

2015 or 17th April 2015?. The learned trial judge agreed with the

respondent's learned advocate that it was from 17th April 2015 rejecting

the appellant's argument that the contract took effect from 1st April 2015

on the ground that it was automatically renewed. Mr. Kahendaguza urged

that, even assuming that the email was a notice to renew the facultative

reinsurance cover, it was for renewal from 1st April 2015 and not from the

date it was sent. To reinforce his argument, the learned advocate

submitted that, based on exhibit D2, the respondent signed exhibit P3 on

16th June 2015 covering a period from 1st April 2015 even though at that

time it was aware of the occurrence of the risk on the insured occurring

on 16th April 2015. It was his further argument that, subsequently, the

appellant accepted the premium for the second period of cover.

In further elaboration, the learned advocate argued that, indeed, in

para 8 of its written statement of defence, the respondent did not dispute

that it accepted to renew the reinsurance cover rather, it did so as a result

of the appellant's concealment of a material fact in relation to the

19
occurrence of the insured risk, subject of the cover a day before the notice

to renew. Accordingly, the learned advocate contended that, it was wrong

for the trial court to have held as it did that the facultative reinsurance

cover took effect from 17th April 2015 rather than 1st April 2015 and

holding that on that date, there was no longer any risk to be reinsured

and hence rendering the contract void. Taking the argument further, the

learned advocate contended that the holding that the contract was void

for non-disclosure was a misconception in the light of the express

provisions of section 19 (1) of the Act regardless of the underlying

principle of utmost good faith in contracts of insurance. On the contrary,

the learned advocate argued, assuming there was a misrepresentation or

concealment of material fact in relation to the date of the occurrence of

the insured risk, the respondent had a right to rescind the contract which

it did not do.

To support his stance, Mr. Kahendaguza argued that the appellant

established its case that the respondent did not exercise its right to rescind

the contract after it became aware of the occurrence of the insured risk

on 4th May 2015 or any other subsequent date before the expiry of the

cover and purported to do so on 20thJuly 2017 when there was no longer

any cover in existence. Several instances were cited to demonstrate that

20
the rescission of the cover two years after its expiry was merely an

afterthought considering that the respondent had already affirmed the

contract by doing the acts pointed out earlier.

Reinforcing his submission on affirmation of the contract, Mr.

Kahendaguza relied on commentaries from Cheshire, Fifoot and

Furmston's Law of Contract (supra) and argued that, the respondent's

acts constituted a binding affirmation of the contract. Concluding, it was

urged that the trial court's finding that no facultative reinsurance coverage

existed from 1st April 2015 to 31st March 2016 was erroneous as it was

against the weight of the evidence on record.

Mr. Hussein advanced several arguments in support of the trial

court's finding on the effective date of the facultative cover based on

exhibit D2 but crystallising into the appellant's alleged concealment of the

material fact on the occurrence of the loss a day before the notice of the

renewal vide exhibit D2. It was his submission that, the appellant's email

of 4th May 2015 was too vague to inform the respondent of the particulars

and the date of the occurrence of the risk. That aside, the learned

advocate contended that the agreement on the retrospective operation of

the cover was made on the assumption that at that time, the appellant

had disclosed all material facts which was not the case. Had it been so,

21
the learned advocate argued, the respondent could not have agreed to

that arrangement. He also contended that, the appellant's case before the

trial was not premised on affirmation as to bring into play section 19 (1)

of the Act. Otherwise, the learned advocate, placed reliance on a book by

MacGillivray on Insurance Law for the proposition that a party who

sets up a defence of waiver, he must do so specifically citing words or

actions leading him to believe that such words or actions intended to treat

the policy as subsisting.

On the whole, whilst the respondent's advocate concedes that it was

in order for the cover to run retrospectively from 1st April 2015, he argues

that it cannot apply in this case because the appellant concealed material

fact relevant to the reinsured risk having occurred a day before the email

seeking renewal of the coverage. Apparently, he made no submissions on

the incidents cited to prove affirmation of the contract featuring in the

appellant's written submissions.

We propose to begin our discussion on this issue with the obvious;

that is, parties are bound by their own pleadings; a well settled principle

expressed in various decisions amongst others, James Funke Gwagilo

v. Attorney General [2004] T.L.R 161.

22
 Juxtaposed to this appeal, it is evident that, the respondent

admitted in para 8 of its written statement of defence that it agreed to a

renewal of the facultative reinsurance coverage in response to the

appellant's request via exhibit D2 dated 17th April 2015 running

retrospectively from 1st April 2015. With respect, the respondent cannot

not depart from its pleadings. Whether that was a result of

misrepresentation or concealment of a material fact relevant to the risk is

a distinct issue. In our view, had the trial court properly directed its mind

to the facts and the respondent's pleadings, it should have found that,

even though the appellant's case on automatic renewal was not

established, there was evidence supporting renewal of the cover from 1st

April 2015 following exhibit D2. That evidence included; one, signing the

facultative reinsurance closing slip (exhibit P3) on 16th June 2015 running

from 1st April 2015 to 31st March 2016, two, accepting payment of

premium on 30th June 2015; three, committing itself to pay its share on

the insured's claim under a cash call followed by part payment as late as

21st January 2016 vide exhibits P8 and P12.

There can be no doubt that, contrary to the submission by the

learned advocate for the respondent supporting the finding of the trial

23
court, the contention that the facultative reinsurance coverage took effect

from 17th April 2015 is not supported by any evidence.

Undeniably, the respondent who had agreed to a retrospective

renewal of the coverage cannot renege on that undertaking and argues

as it does that, it could not have agreed to a retrospective facultative

reinsurance allegedly because there was no longer any insurable risk

following the occurrence of the loss on the insured on 16th April 2015. In

the same token, since we have already held that exhibit D2 was an offer

for the renewal of the cover running from 1st April 2015, there could not

have been created any valid contract from it on the basis of an acceptance

from the respondent for such cover running from 17th April 2015. Again,

the trial court appears to have strayed into error in holding that the cover

started to run from 17th April 2015 disregarding the tenor of the email

duly responded to by the respondent. In our view, the holding in support

of the cover running from 17th April 2015 had no legal or factual basis.

That finding cannot stand and is hereby set aside. That takes us to a

consideration whether there was any breach of the facultative reinsurance

cover.

The appellant's case was premised on the respondent's refusal to

pay its share on the ceded risk in the amount of USD 533,530.25 after

24
payment of USD 100,000. On the other hand, the respondent's contention

was that there was no facultative reinsurance cover because the appellant

concealed a material fact relevant to the ceded risk. Both learned

advocates have advanced formidable arguments for or against their stand

points. Without going into the details of their respective arguments, we

have already held that there existed a facultative reinsurance cover for

the second period from 1st April 2015 to 31st March 2016. Whether that

cover was vitiated by the alleged non-disclosure of the material fact

involving occurrence of the loss to the insured's hotel on 17th April 2015

is the next issue for our consideration before deciding whether there was

any breach.

The appellant's case was that it was not aware of the loss until 4th

May 2015 even though the respondent imputes knowledge considering

the evasive nature of the email. All the same, the appellant argues that,

notwithstanding the notification of the possibility of a claim from the

insured, the events that followed negates any claim justifying repudiation

of the cover. We have already accepted that the events supported the

appellant's case on the existence of the cover. According to the appellant's

advocate, since the respondent became aware of the occurrence of the

loss preceding notice of renewal through exhibit D2, it had an option to

25
rescind the contract immediately thereafter for the alleged non-disclosure

in pursuance of section 19 (1) of the Act. It was thus argued that, since

it did not do so and went ahead doing the acts cited earlier on, it must be

taken to have affirmed the contract.

Mr. Hussein argued that the appellant's case was not premised on

affirmation and so it cannot be a basis of its case on appeal. It was his

further submission that, for a party to rely on affirmation which is

equivalent to relinquishment of his right to rescind a contract for non­

disclosure or any other reason, there must have been express pleading to

that effect.

It is plain from the plaint that the case for the appellant was

predicated upon breach of the facultative reinsurance cover said to have

been automatically renewed by custom and usage. Some of the

paragraphs went to show that, despite the existence of such contract and

the respondent reinsurer signing a facultative reinsurance slip after it

became aware of the loss occurring within the period of the renewed

cover, it reneged on its obligation to settle the claim. It is equally plain

that repudiation of the cover for non-disclosure of material facts was

raised in the respondent's defence particularly, paras 8, 11, 17 and 22,

26
 Apparently, the appellant did not seek to file any reply on those

aspects and no issue was framed to determine such contention. All the

same, both the appellant and the respondent led evidence for and against

this aspect in their respective witness statements. The appellant did so

through PW1 who feigned ignorance of the fire outbreak at the insured's

hotel on 17th April 2015, the date an email to the respondent was sent.

From the respondent's side, Bosco Bugali (DW1) and Mariam Sakara

(DW2) testified. The essence of their evidence was that, the facultative

reinsurance was renewed on 17th April 2015 but the respondent was not

aware of the occurrence of the loss a day before which resulted into

rescinding the cover upon discovery that the appellant concealed a

material fact relevant to the reinsurance cover in question.

In their closing submissions, both learned advocates addressed the

trial court on whether the appellant misrepresented to the respondent on

the existence of the loss on 16th April 2015 having a bearing on exhibit D2

on the basis of which the respondent acceded to renew the facultative

reinsurance cover. Whilst the appellant was adamant that the cover was

automatically renewed upon expiry of the previous one running from 1st

April 2015, it maintained and continues to do so in this appeal that, the

email was by no means a notice of renewal rather intended to keep record

27
of the renewed cover. It was also submitted that apart from the fact that

the appellant was unaware of the loss on 16th April 2015, during the

existence of the cover, the respondent took no step to rescind the same

when it became aware of it on 4th May 2015 or any date thereafter.

Instead, it was submitted, the respondent went ahead to sign a closing

slip confirming the renewal running from 1st April 2015, vide exhibit P3,

committed itself to pay its share of the claim in response to cash call

request (exhibit P8 and P12) and accepted payment of the premium on

the renewed cover thereafter. The appellant's advocate submitted further

that the respondent's conduct and acts were consistent with a party

affirming the contract in pursuance of section 19 (1) of the Act and not

otherwise.

The respondent's advocate was resolute that there was no

automatic renewal of the cover and thus loss on the insured's hotel

occurring on 16th April 2015 was not protected by any reinsurance cover.

It was equally argued that, the respondent acceded to the renewal of the

cover from 17th April 2015 and not otherwise because the reinsurance

cover so renewed couid not have operated retrospectively to cover a loss

that had already occurred for which there was concealment from the

appellant inducing the respondent to accede to the renewal. These

28
arguments were all intended to support the respondent's decision to

repudiate the claim but no submissions were made in response to the

appellant's contentions on affirmation.

Be it as it may, as indicated earlier, the trial court took the view that

the cover was void which sealed any opportunity for a discussion on the

alternative argument on affirmation. We have already held that although

there was no evidence of automatic renewal of the facultative reinsurance

cover, there was evidence of its renewal in response to exhibit D2

resulting into the signing of the facultative reinsurance closing slip (exhibit

P3) on 16th June 2015. We have equally held that it was an error for the

trial court to hold as it did that the cover was void in the absence of

evidence of misrepresentation according to the dictates of section 19 (1)

of the Act. As to whether the appellant rescinded the contract, we

endorse Mr. Kahendaguza's submission that the respondent's conduct and

acts were inconsistent and incompatible with a party rescinding the

contract on the alleged misrepresentation. We say so mindful of the

provisions of section 19 of the Act which provides that:

"19. -(1) Where consent to an agreement is caused

by coercion, undue influence, fraud, or
misrepresentation, the agreement is a contract
 voidable at the option o f the party whose consent
was so caused:
Provided that, if such consent was caused by
misrepresentation or by silence, or fraud within
the meaning o f section 17, the contract
nevertheless is not voidable, if the party whose
consent was so caused had the means o f
discovering the truth with ordinary diligence.
(2).... (n.a)
(3) A party to a contract, whose consent was
caused by fraud or misrepresentation may, if he
thinks fit, insist that the contract shall be
performed, and that he shall be put in the position
in which he would have been if the
representations made had been true"

A similar issue involving rescission and affirmation of a voidable

contract whose consent was caused by fraudulent misrepresentation was

discussed by the Court of Appeal of England in Car and Universal

Finance Co. Ltd. v. Caldwell [1964] 1 All. ER 290. As to what may be

taken as constituting affirmation of a voidable contract, Lord Sellers

stated:

"...An affirmation o f a voidable contract may be

established by any conduct which unequivocally
manifests an intention to affirm it by the party who
has the right to affirm or disaffirm.
 Communication o f an acceptance o f a contract
after knowledge o f a fundamental breach o f it by
the otherparty or o f fraud affecting it is, o f course,
evidence establishing affirmation but it is not
essential evidence.... "[atpage 292].

Concurring, Lord Upjohn stated:

"Where one party to a contract has an option

unilaterally to rescind or disaffirm it by reason o f
the fraud or misrepresentation o f the other party,
he must elect to do so within a reasonable time
and cannot do so after he has done anything to
affirm the contract with knowledge o f the facts
giving rise to the option to rescind. In principle
and on authority he must in my judgment in the
ordinary course communicate his intention to
rescind to the other party. This must be so
because the other party is entitled to treat the
contractual nexus as continuing until he is made
aware o f the intention of the other to exercise his
option to rescind. So, the intention must be
communicated and an uncommunicated intention,
for example by speaking to a third party or making
a private note, wifi be ineffective. The text-books
to which we were referred are unanimous on the
subject."[ at page 295].

31
 Drawing inspiration from the above, we cannot but agree that the

respondent's act purporting to rescind the contract two years after the

expiry of the cover was not only strange but also not made within

reasonable time contemplated by section 19 (1) of the Act. If anything,

the respondent might have meant repudiating the claim which is not the

same as rescinding a contract.

On the other hand, despite Mr. Hussein's argument on affirmation,

it is our view that, such argument is not being taken for the first time in

this appeal. It was raised before the High Court but in view of its finding,

considering it could have been superfluous. Otherwise, we find no merit

in the argument against affirmation considering the acts and conduct of

the respondent as discussed above which leaned more in favour of

affirmation than rescission of the contract. Having examined the evidence

on record, we reject the respondent's argument on rescission of the

facultative reinsurance cover for the alleged non-disclosure. On the

contrary, since the respondent did not rescind the contract and instead

conducted itself in a manner that established its affirmation, its refusal

to settle the claim upon demand through undisputed cash calls was in

breach of the facultative reinsurance cover constituted by exhibit P3. The

net effect is that, the trial court ought to have answered the second issue

32
affirmatively in favour of the appellant. Consequently, the finding on the

refund of USD 25,000 in favour of the respondent in its counter-claim

cannot stand. It is hereby set aside. So is the judgment on the counter­

claim.

In view of the above, we find it superfluous discussing the third

issue we formulated above on the pecuniary jurisdiction of the trial court

on the counter-claim. The above said, we allow the appeal and quash the

decision of the High Court dismissing the appellant's suit and entering

judgment on the respondent's counter-claim.

As to the reliefs, we order the respondent to pay the appellant USD

533,530.25 as prayed. As regards interest, the appellant claimed 20% of

the principal sum per annum from 4th November 2015 to the date of

judgment. However, the claim was shorn of justification of the rate in the

pleadings and the evidence. As we held in National Insurance

Corporation (T) Limited & Another v. China Civil Engineering

Construction Corporation, Civil Appeal No. 119 of 2004 (unreported),

the award of interest must be based on express agreement or any usage

of trade having the force of law. There was no such evidence before the

trial court and thus, in the absence of such evidence, the claim cannot

succeed. It is accordingly rejected.

33
 Regarding the claim for general damages, we think, given all the

circumstances of the case and considering the principle behind the award

of general damages engraved under section 73 (1) of the Act, we award

the appellant a sum of TZS 50,000,000.00 as general damages.

The sums awarded shall attract payment of interest at the court's

rate of 7% per annum from the date of judgment of the trial court till full

and final satisfaction of the decree. The appellant is awarded its costs in

this Court and the trial court.

DATED at DAR ES SALAAM this 5th day of April, 2023.

S. A. LILA
JUSTICE OF APPEAL

L. J. S. MWANDAMBO
JUSTICE OF APPEAL

P. S. FIKIRINI
JUSTICE OF APPEAL

The Judgment delivered this 5th day of April, 2023 in the presence

of Mr. Alfred Rweyemamu, learned counsel for the Respondent and also

holding brief for Mr. Audax Kahendaguza, learned counsel for the

Appellant, is hereby certified as a true copy of the original.