Appeal hearing in Equity Bank vs State Oil case stalls over procedural concerns

Dar es Salaam. The hearing of an appeal by Equity Bank Tanzania Limited and Equity Bank Kenya Limited challenging a High Court judgement that favoured State Oil company stalled after the Court of Appeal raised some grounds about the legality of the trial proceedings.

The appeal was to be heard yesterday by three-panel Justices of Appeal led by Rehema Mkuye, along with Abraham Mwampashi and Zainabu Mruke.

However, before the hearing commenced, the court raised the question of whether it was appropriate for the High Court to proceed with the trial without amending the plaint due to changes in the defendants.

The original case was filed by State Oil against Equity Bank Tanzania following a dispute over the repayment of a $18.64 million loan owed by State Oil to Equity Bank Kenya, which was represented by Equity Bank Tanzania.

The company initiated the case after Equity Tanzania, which acted as the guarantor agent for Equity Bank Kenya in facilitating the loan, demanded repayment.

Following the case, Equity Tanzania requested and the court allowed Equity Bank Kenya to be joined in the case.

However, after Equity Kenya was joined, the court proceeded with the trial without directing amendments to include Equity Kenya in the plaint as the second defendant, instead including it only in the judgement.

As such, when the Court of Appeal raised the issue of whether it was appropriate for the High Court to continue with the trial without amending the plaint, lawyers for both sides, Mpaya Kamara and Timon Vitalis representing the appellants (the banks), and Frank Mwalongo representing State Oil, informed the court that it was unnecessary to amend the plaint because it did not affect either party.

Lawyer Kamara stated that Order 1, Rule 10(4) of the Civil Procedure Code provides that when a new defendant is added to a case, the complaint should be amended unless directed otherwise by the judge.

He argued that instead of ordering the amendment of the plaint, the presiding judge directed otherwise by ordering the defendants to file their written defences, and the trial proceeded accordingly, which was in accordance with the law.

Lawyer Vitalis emphasised that Order 1, Rule 10(4), should be read together with Order 1, Rule 10(2), which allows another defendant to be added to a case by the court’s order without being requested by either party.

He insisted that, in the circumstances of the case, it was unnecessary for the court to order the amendment of the plaint after Equity Bank Kenya was joined because it did not affect either party’s rights.

For his part, State Oil’s lawyer, Frank Mwalongo, echoed the sentiments of the appellants’ lawyers that it was unnecessary to amend the plaint.

“I agree with my colleagues as they explained that Order 1, Rule 10(4), also allows the judge to direct otherwise when a defendant is joined in a case. However, neither party was affected by the judge’s decision not to order the amendment of the plaint,” Mwalongo said, emphasising, “So I ask the court to see that this issue did not affect either party, and the judge acted in accordance with the law, and let’s proceed with the appeal hearing.” After hearing arguments from both sides, Justice Mkuye adjourned the case until the decision day, on a date to be communicated to the parties.

If the court, in its decision, finds it necessary for the plaint to be amended after a new defendant was added, it may order the case to be remitted to the High Court for a fresh start, from the point the court ordered Equity Bank Kenya to be joined. The case in question dates back to 2018, when State Oil took a $18.64 million loan from a foreign lender, Lamar Commodity Trading DMMC of Dubai, with Equity Bank Kenya’s guarantee.

To secure the loan, State Oil also pledged its assets to Equity Bank Kenya, under the supervision of Equity Tanzania.

However, State Oil either failed or neglected to repay the loan to Lamar, resulting in its guarantor, Equity Bank Kenya, having to settle it, thus becoming the creditor.

After the deadline for repaying the loan passed without payment, Equity Bank Tanzania demanded repayment from State Oil on behalf of Equity Bank Kenya as its agent entrusted with the guarantee. State Oil then sought refuge in the courts. In the case, the company requested the court order Equity Bank Tanzania to return the assets it had pledged as collateral for the guarantee from Equity Bank Kenya, arguing that it was not indebted to the banks.

During the trial, among the witnesses were representatives of Lamar, the lender, who testified that State Oil had failed to repay its loan and instead its guarantor, Equity Bank Kenya, had paid.

However, in its judgement issued by Justice Stephen Magoiga on October 1, 2021, the court agreed with State Oil’s claims that it had already repaid its debt in full, and thus the banks had no claims against it.

The judge ordered all assets pledged by State Oil to be returned to the company.