Dar es Salaam. The distributor of new and used commercial vehicles, Benbros Motors Limited, was ordered to pay Ecobank Tanzania Limited 399 million shillings in unsettled loan it obtained for importing vehicles.
The High Court’s commercial division dismissed the defense of vehicle importers and three loan guarantors who blamed the bank for their non-repayment of the secured loan in 2015.
Judge Stephen Magoiga ordered the car dealership to pay Ecobank 387.7 million shillings plus $ 4.9 million and dismissed the company’s counterclaim which sought, among other things, an order that the actions of the bank thwarted their efforts to repay the loan.
The company also suffered a double blow after the court appointed Mr. Gaspar Nyika to manage all of its assets with the power to sell mortgaged properties and ordered the eviction of Benbros from his land property in the Mikocheni industrial zone.
Ecobank sued the car dealership and three loan guarantors – Yasser Mohammed Es-Haq, Noufal Mohammed Es-Haq and Yusra Mohammed Abdullah Es-Haq – in 2018 to force the company to repay the loan.
She also requested an order appointing Mr. Gasper Nyika to take control of all the assets of Benbros Motors Limited, with the powers to sell, lease or collect the income from the assets which were used to secure the loan.
The bank also wanted the court to order the eviction of the company from plot number 72 of the Mikocheni industrial zone, which served as collateral for the disputed loan.
Called on to defend themselves against them, the defendants jointly acknowledged the unpaid amount but accused the bank of having frustrated the entire loan repayment mechanism by its slowness to react to their multiple requests for rescheduling of the loan and the refusal to the bank to hand over the vehicles to the customer on hold. .
They argued that the situation had severely affected Benbros’ cash flow and ability to repay the loan.
During the mortgage of plot number 72 in Mikocheni industrial zone, Benbros argued that the mortgage deed was signed under certain constraints and under undue influence.
The car dealership further claimed that its efforts to get other financiers ready to buy the loans such as Azania Bank, Equity Bank and CRDB Bank had been hampered by Ecobank.
“Even when we have been working to get new financiers ready to redeem the loan and pay the bank on condition that the bank helps remove Benbros from the Bank of Tanzania (BoT) list of non-performing debtors so that new financiers to take the case, they unreasonably refused by not responding even after six months, which caused interested financiers to abandon the idea, ”argued Benbros. The defendant has filed a counterclaim against the bank in an attempt to evade liability in the 398 million shillings lawsuit. This would later lead to a strained business relationship between the bank and the car dealership that began on June 26, 2014, when the bank donated $ 3.5 million to finance the import of new vehicles, buses, Truck and Tire Trailers from Great Wall Motors, Sinotruck Hubei Co. Limite, Aelos Tires Limitea and Yutong Bus Manufacturing Co Limited.
In addition, on May 27, 2015, the bank granted Benbros a loan of $ 10 million to secure any claim by the beneficiary resulting from a default by the borrower for the purchase of the brand new Yutong against an order of local purchase.
Again, on December 2, 2016, Benbros applied to the bank for an amendment to the two loan agreements which was approved by extending the annual renewal to 90 days and reducing the exposure to $ 5,312,000. Also at the request of the applicant, the bank renewed on March 31, 2017 the existing loan agreements at $ 5 million.
The court heard that the three loans were secured by a long-term guarantee on the assets of Benbros and personal guarantees from the second, third and fourth defendants.
Also a land property on plot number 72, Mikocheni industrial zone was mortgaged for the purpose of securing the loan.
Mr. Mohamed Abdullah Ahmed who is the president of Benbros admitted in court that they had entered into a loan agreement with the bank and that the second, third and fourth defendants were guarantors of the loan.
He told the court he did not dispute that the payments were late, but was quick to accuse the bank of frustrating the execution of contracts for not allowing the restructuring of the loan due to the unfavorable business conditions that existed.
Benbros’ defense fails
In his recent ruling, Judge Magoiga dismissed Benbros’ claims that the payment terms for the three loans had been breached by Ecobank.
“The accused’s (Benbros) frustration allegations were based on email communications and a letter dated April 16, 2018.
“But a careful reading of the exhibits responds and negates all the efforts of the defendant who did not meet the conditions set by the plaintiff (bank) which were necessary for a defaulter who requested more financing. In these circumstances, he cannot rightly say that the complainant frustrated the exercise, ”said the judge.
The judge refused to accept Benbros’ claim that Ecobank thwarted plans to let other financiers take over the loan.
“Apart from the mention of CRDB Bank and Equity Bank, nothing has been presented to support the allegations of the willingness of these financiers to take up the case and no witnesses from these banks have been produced to substantiate his allegations.
“In the absence of such evidence, there is no way to conclusively conclude that the plaintiff has in any way frustrated any payment effort,” said the judge.
Claiming that Benbros had executed under duress a mortgage deed on Plot No.72 of the Mikocheni Industrial Zone, the judge said that the admission by the lawyer who represented the defendants that they had nothing to submitting on the matter to the hearing of the case was nothing more than nothing was advanced to prove the problem.