IN THE HIGH COURT OF THE TANZANIA
(DAR ES SALAAM DISTRICT REGISTRY)
AT DAR ES SALAAM
MISC. CIVIL APPLICATION NO. 230 OF 2020
(Arising from Civil Case No. 4 of 2015)
AYDIN TANZ CRANE CO. LIMITED...APPLICANT/D. HOLDER
VERSUS
GAGAJA CONTRACTORS LIMITED...RESPONDENT/D.DEBTOR
RULING
Lat Order: 23/11/2021
Date of Ruling: 8/2/2022
MASABO, J.:-
The applicant has moved this court under section 44(1) and Order XXI rule
28 of the Civil Procedure Code, Cap 33 RE 2019. Her main prayer is for lifting
the cooperate veil and order the arrest of Mr. Mohamed J. Kilumbi, who is
identified as the managing director of the respondent company in
satisfaction of a sum of EURO 453,709 decreed in her favour by this court in
Civil Case No. 4 of 2015. In an affidavit deponed by the applicant’s counsel
John J. Lingopola, it is deponed that upon the decree being extracted in
2018, the applicant successfully applied for its execution but as of todate it
has not been fully executed as the assets earmarked for attachment and
sale, that is Caterpillar Grader with Registration number T433 BLP and
Dynapac Road Roller with registration number T393 CAJ had already been
sold out to third parties and the last asset, that is, Dynapac Roller with
Registration Number T. 444, is untraceable although the record shows it is
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still owned by the decree debtor. The applicant is of the strong feeling that
the transfer of the two machines and the disappearance of the third machine
is tactically deployed to prevent the execution of the decree as the two
machines were sold on the verge of the attaining the order for attachment
of the assets.
Hearing proceeded ex parte the respondent defaulted appearance.
Submitting in support of the application Mr. Mbilingi, advocate for the
applicant reiterated the averments in the counter affidavit and proceeded
that there are three reasons why the decree debtor’s veil of incorporation
should be lifted and her director, one Mohamed J. Kilumbi be arrested and
detained as civil prisoner. The three reasons as extracted from the
submission are that:
1. thejudgment debtor has failed to satisfy the decree of this court
2. we could not realise the order for attachment as the assets of
the judgment debtor are nowhere to be traced and some have
been sold
3. the judgment debtor has always committed fraud as he
tempered with the assets ofthe company”.
In fortification of his point, Mr. Mbilingi cited the ruling of this court in Fusuni
Investment Co. Ltd v FARB Associates Limited and 2 others, Civil
application No. 221 of 2020, in which an order for arrest and detention of
the judgment debtor was issued.
I have carefully considered the application, its supporting affidavit and the
submission made by the applicant. It is pertinent at this juncture to point
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out that the application is premised on the principle prominently known as
Salmon’s principle which was developed by Lord Macnaghten in Salmon
v Salmon (1897) A.C.22.. In this case, His Lordship held thus:
“The company is at law a different person altogether
the subscribers... , and, though it may be that after
incorporation the business is precisely the same as it
was before, and the same persons are managers,
and the same hands receive the profits, the company
is not in law the agent of the subscribers or trustee
of them. Nor are subscribers, as members liable, in
any shape or form, except to the extent and in the
manner provided by the Act”.
This principle has been cited with approval in numerous decisions of this
court and the Court of Appeal such that it has now become a trite law in our
jurisdiction. These decisions include, Yusuf Manji Versus Edward
Masanja and Abdallah Juma [2006] TLR 127 CAT; Mussa Shaibu
Msangi Vs Sumry High Class Limited & Sumry Bus Service Ltd Misc.
Commercial Cause No 20 of 2012 (HC Commercial Division) and Zebedayo
Mkodya v Best Microfinance Solutions Limited Commercial Case No.
95 of 2016 (HC Commercial Division). In Yusuf Manji Versus Edward
Masanja and Abdallah Juma (supra), having cited the above principle
with approval, the Court of Appeal proceeded to hold held that:
In our view, and as correctly held by the learned judge, in
certain special and exceptional circumstances, the court
may go beyond the purview of this principle by what was
described in Salomon (supra) lifting the veil.
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The circumstances warranting the exception/or permitting the lifting of veil
as elucidated in the decisions above cited, can be summarised as follows:
(i) where after completion of the liquidation process there of the
company, there is nothing left to cover unsecured creditors or
were, as in the instant case;
(ii) where there is a judgment debtor and the company has no
assets;
(iii) where it is established that the veil of incorporation is used to
evade legal or contractual obligation or
(iv) where the companies are formed merely as cloaks, shams,
devices, masks or facets of control or to evade payment of taxes
or to conceal true facts.
Therefore, in the instant application, the crucial issue to be considered is
whether such circumstances are existent. A similarly crucial point for
deliberation and consideration is the relationship between the decree debtor
company and the person against whom the order for arrest and detention is
sought.
Starting with the second question, as the veil of incorporation can only be
lifted against a member or director of the company, the relationship between
the decree debtor company and the person against whom the veil of
incorporations is sought to be lifted against must be sufficiently established.
In the instant case, the prayer in the chamber summons is for lifting of the
corporate veil against one Mr. Mohamed J. Kilumbi, who is described as
director of the decree debtor company. One would have expected the
applicant to provide the court with cogent evidence as regards the
relationship between the said Mohamed J. Kilumbi and the decree holder
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company but none was rendered. In my perusal of the application and the
supporting documents, I have observed that, save for paragraph 7 of the
affidavit which reiterates the prayer for arrest and detention of the said Mr.
Mohamed J. Kilumbi, there is no concrete evidence for this court to form an
opinion let alone to draw a conclusion that, the said Mohamed J. Kilumbi, is
indeed the managing director of the decree debtor company.
Such evidence is fundamental and cannot be easily overlooked. Needless to
say, such evidence as an official record from respondent’s offices or from the
Business Registration and Licensing Authority (BRELA) showing the
relationship between the said Mohamed J. Kilumbi and the respondent was
very crucial. Its absence has a fatal effect to the application. It would
certainly be a lucid misdirection for this court to proceed to draw a conclusion
based on bear assertions by the applicant’s counsel. Under the premise, I
hasten to hold that, the applicant has miserably failed to substantiate the
existence of a relationship which would make the said Mohamed J. Kilumbi,
who was for unknown reason not made a party to these proceedings,
responsible for the deeds of the decree debtor thereby justifying the lifting
of veil and granting of orders for arrest and detention of Mohamed J. Kilumbi.
Regarding the 2nd question, the applicant has just mentioned that she
identified three assets for attachment and sale but found out that, two of
these three items were sold before the attachment and the remaining asset
was not traceable and the efforts to locate other assets of the company has
ended futile. In my strong view, much as this fall under the exception above
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stated, the materials on record do not sufficiently justify the lifting of veil as,
apart from a letter showing the attempt made to allocate the three assets
above mention, there is nothing on record to show that, the decree debtor
has no other assets capable of being attached and/sold for execution of the
decree. Hence, a rebuttable assumption that there are still other assets
which can be attached and sold to realise the decretal sum. I may also add
here that, under the circumstances, even if the relationship between the
decree debtor and Mohamed J. Kilumbi had been established, the application
would still be hesitant to lift the veil and issue the warrant for arrestee and
detention of Mohamed J. Kilumbi.
In the foregoing, the application fails in entirety and is dismissed for want of
merit. As the application proceeded ex parte, there are no orders for costs.
DATED at DAR ES SALAAM this 8th day of February 2022.
X
Signed by: J.L.MASABO
J.L. MASABO
JUDGE
