The Appellant is a customer of the Respondent where he holds
two current accounts. The Appellant also holds a Fixed Deposit Account (FDR).
On 30th June, 2004, the Appellant, after being persuaded by his
friend who had bought shares in Simon Agency Limited in order to buy cotton,
offered his FDR as an additional security to guarantee the loan which was
granted by the Respondent to Simon Agency Limited in a form of an overdraft.
To facilitate the guarantee, the Appellant signed a letter of
lien as additional security for the loan. The Appellant believed that the
guarantee was to expire after one year. However, as at 31st March,
2005 the loan was not fully paid on the reason that Simon Agency Limited’s
business did not go well. This necessitated the Respondent to grant additional
loan to Simon Agency Limited which was valid for one year and based on the same
securities offered by the principal borrower earlier and the Appellant’s FDR.
Despite the second loan, Simon Agency Limited did not manage to settle the
outstanding loan by the end of the agreed period. Nevertheless, the Respondent
again granted Simon Agency Limited, during the period of 2007/2008, a further
loan on the same securities. However, up to 3rd September, 2010
Simon Agency Limited had not managed to settle the outstanding balance which
included the principal sum and interests. The Respondent was thus compelled to
sell some of the buildings which were offered as securities by Simon Agency
Limited. The Respondent also uplifted all the outstanding amount which were in
the Fixed Deposit Account belonging to the Appellant.
That action prompted the Appellant to lodge a Commercial Case
before the High Court (Commercial Division) in which he contended that the
Respondent acted unprofessionally and as a result he suffered damages. He
contended that the Respondent had no justification of taking his money for the
outstanding debt of the principal borrower because there was a binding
agreement between them after the guarantee expired on 31st March,
2005.
On her part, the Respondent denied the claims and contended that
the Appellant did not withdraw his FDR from being used as security and
therefore she continued to issue additional loans to Simon Agency Limited. The
Respondent argued further that there was no need to give notice to the
Appellant as the modality of the action to be taken was stipulated in the
letter of lien.
In view of the dispute between the parties, the High Court,
(Commercial Division) (Nchimbi, J), heard evidence and arguments that were laid
before that court and in the end the suit was dismissed with costs. Appellant
filed this appeal with the Court.