CRDB Bank wins appeal in Sh90bn tussle

Dar es Salaam. The Court of Appeal has overturned a High Court judgment that required CRDB Bank to pay a businessman and two other respondents a staggering Sh90 billion in compensation for allegedly withholding securities deposited in acquisition of loan.

A panel led by Chief Justice Ibrahim Juma and justices Stella Mugasha and Jacobs Mwambegele ruled in favour of the bank on August 7 in an appeal the lender had lodged against the High Court’s January 2018 judgment.

“The appellant bank was within its legal right under the personal guarantees to refuse to release the title documents to (the businessman). For the reasons outlined, the appeal is hereby allowed. The judgment of the High Court is set aside,” the panel declared.

During hearing of the appeal, the main contention was whether the bank had legal justification to retain the securities even after the Registered Trustees of the Dar es Salaam International School Trust Fund, which is one of the respondents, had cleared the loan owed to the bank.

The other respondent in the matter was EDBP & GD Construction Co. Ltd, which had also borrowed from the bank and the businessman, Mr Issack Mwamasika, had executed personal guarantee. The company, in which Mr Mwamasika is managing director, failed to repay the loan as agreed.

The High Court had ordered CRDB Bank to pay the respondents $42,997,298 (over Sh90 billion) after winning a case. The decision prompted CRDB Bank to challenge the verdict at the Court of Appeal.

In their August 7, 2018 judgment, a copy of which The Citizen has, the justices of the Court of Appeal held that the personal guarantee and indemnity which the businessman and his co-directors executed to enable the company to secure the a loan from the bank was, in law, a binding contractual agreement. They said that such agreement left it open for the bank to enforce the terms of that guarantee in case the company, as principal borrower, fails to liquidate its debt.

According to the justices, clauses from the guarantee provided the bank with legal justification to refuse to return the loan security documents.

The justices said the High Court judge failed to take into account the evidential burden which fell on the shoulder of the businessman and his co-directors of EDBP & GD Construction Co Ltd, who is the principal debtor. They pointed out further that the personal guarantees which were signed and executed not only committed them to repay the debt of EDBP & GD Construction Co Ltd or face the seizure of their personal assets but it also provided the Bank with legal justification to withhold the security documents.

“On the strength of authorities that are bound, the advocates for the appellant are correct to submit that if a person executes a personal guarantee to support the principal debtor’s application for loan, the guarantor concerned puts all his property at risk if the principal debtor defaults,” the justices ruled.

In the High Court, the respondents sued the appellant bank on a variety of claims arising from a contract of redemption of mortgages, discharge of hypothecation of a goods bond, as well as the torts of negligence and detinue (an action in law of tort to recover for the wrongful taking of personal property).