Real Estate developer ordered to pay Ecobank Sh4.3 billion

Dar es Salaam. Real estate developer Pristine Properties Limited has been ordered to pay Ecobank Tanzania Limited Sh4.3 billion for money owed to complete the construction of ocean wave residential building at Sea View, Upanga Ward, Dar es Salaam.

High Court (Commercial Division) judge Butamo Phillip said Pristine Properties Limited’s argument that it failed to repay the loan because the bank breached agreements by refusing to convert the loan from Tanzanian currency into US dollars could not hold water.

The court has also ordered that the developer to pay the bank defaulting interests and legal costs.

Ecobank brought a suit against the real estate developer, its director Gulam Mohamedali Punjani and two other guarantors---Muslim Shivji Karim and Sabri Ally Saad for breach of the June 30, 2015 credit facility issued in two instalments.

The bank granted Pristine a term loan of $3 million (in Tanzanian shilling equivalent) for financing the completion of ocean wave residential building at plot number 2406/5 Sea View, Upanga, Dar es Salaam.

The securities for the loan included personal guarantees and indemnity of Mr Karim, Mr Punjani and Mr Saad.

Others were a mortgage over landed property including plot number 2406/5, Sea View, Ilala Municipality in the name of Pristine Properties Limited with eight other sub-titles, all registered in the name of Pristine Properties Limited.

According to the bank, the credit facility was restructured upon Pristine Properties Limited’s request and approved by Mr Karim, Mr Punjani and Mr Saad as guarantors to the loan.

The restructured credit facility included a medium term loan of $3 million in Tanzanian Shilling equivalent and the second facility of $900,000.

It was Econbank’s case that upon execution of all relevant documents for the securities, proceeded to dispense the entire amount but Pristine failed to repay the loan as agreed.

By September 30 of 2018 when the case was being opened, the outstanding amount from the credit facilities stood at Sh5.7 billion and $300,397, which included defaulting interests, penalties and charges.

Pristine admits loan but…In their defence, all the defendants admitted the existence of the credit facilities but contended there was fraudulent misrepresentation by EcoBank.

According to the developer, they requested the credit facilities in USD currency but the bank failed to honour its promise to convert the loan into US dollars despite agreeing to do so.

It emerged at the hearing of the case that the defendants had sued the bank in a separate case in the High Court for failure to convert the loan into the USD currency. This made the judge to temporarily suspend hearing of the case pending determination of the case.

The defendants were asking the court to declare that Ecobank breached the loan agreement by failing to convert it into USD currency.

However, on December 19, 2019, Lady Justice Joaquina De Mello dismissed the case, saying the developer and other defendants failed to prove their claim that the bank breached the credit facilities agreement. The decision gave way for the commercial court to proceed with the Ecobank case.

Hearing starts
Mr Punjani appeared in court on 23 November, 2020 for tendering exhibits and cross questioning. However, he couldn’t finish tendering all the intended exhibits as his lawyer, Mr Hashimu Lugwisa asked for adjournment to allow him to properly prepare himself and the witness for the hearing.

Mr Lugwisa told the court that he discovered in the course of leading his client to tender exhibits that the witness was not well prepared for hearing of the defence case. He only tendered a few exhibits.

The judge granted the request for adjournment and fixed hearing of the case on 10 February, 2021. But when the case was called for hearing that day, the witness failed to appear in court.

That was the second time the defendants prevented hearing of the case from proceeding. Since the witness statement of Mr Punjani had already been admitted in court as evidence, the judge ordered the hearing to continue.

In his statement, Mr Punjani admitted to have received the loan but claimed the source of the dispute could be traced back when the bank informed them it had no enough reserve of the USD currency, forcing them to take the loan in Tanzanian shilling currency.

“The plaintiff promised to convert the loan into USD currency as soon as USD currency is available. The first defendant (Pristine) had to effect repayment of the loan under the interests chargeable in TZS currency, which is higher than the interest rate chargeable in USD currency,” alleged Mr Punjani.

Judge rejects developer’s defence In his recent decision, Justice Phillip comprehensively turned down Pristine and other defendants’ defence that it failed to repay the loan due to the bank’s refusal to convert the loan into USD currency.

“It is evident that the defendants’ defence that the failure to repay the credit facilities is due to the plaintiff’s refusal to convert the same into USD currency cannot hold water now,” said the judge.

He based his decision on the decision of the High Court to dismiss the suit in which the plaintiff had sought a declaration that the bank’s move to refuse to convert the loan into USD was a breach of loan agreement.

“In fact, the excuse, argument is now redundant since this court vide its decision in Civil Case No. 161 of 2017 determined the same and made a finding that it has no merit.

“Legally, the dispute on the conversion of the credit facility from TZS currency into USD currency is res judicature and this c9ourt is functus officio as it has already determined that issue,” said the judge.

Court honours bank statement
The court also rejected to grant Sh5.7 billion that Ecobank claimed as outstanding amount from the loan. Ecobank has alleged that the outstanding amount from the credit facilities were Sh5.7 billion together with defaulting interests, penalties and charges and USD 300,397, but the bank statement that was tendered in court ending in 31 August, 2018 showed the outstanding balance of Sh3.7 and $292,120.35.

The court ordered the defendants jointly and severally to pay the bank Sh3.7 and $292,120.35 being outstanding amount together with defaulting interest, penalties and charges. They have also been ordered to pay interests on the total outstanding amount at the rate of 19 percent and eight percent per annul for the Sh3.7 billion and $292,120.35, respectively.