[2021] KECPT 231 (KLR)

REPUBLIC OF KENYA

IN THE CO-OPERATIVE TRIBUNAL AT NAIROBI

TRIBUNAL CASE NO.288 OF 2020

BIASHARA SACCO SOCIETY LIMITED...................................1ST CLAIMANT

GABRIEL GITHIGAH KURIA GITHIGAH ..............................2ND CLAIMANT

GEOFFREY MAINA KAGIRI ...................................................3RD CLAIMANT

VERSUS

MUGAMBI WANG’OMBE....................................................1ST RESPONDENT

VERONICA WANJIRU MUGAMBI ..................................2ND RESPONDENT

JUDGMENT

1. The matter for determination is a Statement of Claim filed on 9/9/20 seeking the following prayers:

a) An Order of inhibition against the Respondents on all properties known as LR NO.5104/55 ,5104/56, 5104/57, 5104/58 AND 5104/59.

b) An Order of specific performance for the transfer of suit properties LR NO. 5104/56, 5104/57, 5104/58 AND 5104/59 to the 2nd and 3rd Claimants

c) In the alternative and without prejudice to prayer 1 & 2,the return of the purchase price of Kshs.12,000,000. 00 to the Claimants inclusive of a penalty of 30% as provided in the agreement special conditions clause 6(xiii).

d) Costs of the suit and interest at the court rates.

e) Any other or further relief this honourable tribunal may deem fit to grant.

2. The Respondent filed a Response and Counter-Claim on 5/10/20. In the Counter-Claim, the Respondent is seeking the following prayers;

3. The Claimants filed a Reply to Response and the Response to the Counter-Claim on 19/10/20 & 27/11/20.

4. The matter came up for hearing and CW1 Joseph Kamau states that the two Respondents were members of the 1st Claimant and were members of Midways Communications Limited.

That they were operating accounts;

I. Account No. 0000-64-32012 opened on 3/10/16 by Midways

II. Account No. 0000-64-32015 opened on 6/1/17 by Midways

III. Account No. 2008-01-07-089 opened on 15/2/17 by the 1st Respondent Mugambi.

IV. Account No. 6432-08-22878 opened on 27/12/18 by 2nd Respondent Veronica.

5. That the two Respondents took various loans and they were servicing them, that is;

i. 1/12/2016 Midways Kshs.1. 5 Million

ii. 20/1/2017 Overdraft Midways Kshs.300,000

iii. 9/2/2017 Kshs.1. 5 Million

iv. 2/6/2017 Overdraft Kshs.1. 5 Million

On 22/9/2017,they requested for additional financing and on 24/11/2017 an overdraft of Kshs.3 Million and loan of Kshs. 4 Million

6. That the loans were not serviced so they issued demand notices on 12/4/18. They responded via a letter dated 7/7/2018 and indicated that they wanted to sell a property to service the loan.

7. The loan of Midways was partially paid and it was split into two for each in their individual capacities; Veronica Kshs.5. 7 Million and Mugambi Ksh.2. 5 Million and the 1st Respondent guaranteed the loan as per the loan application form dated 20/12/18. That this therefore meant that they paid off Midways and took even the loans.

8. That the Respondents agreed to the sale of the property after negotiations and 1st Respondent was given money but he refunded to transfer the 4 plots at Kshs.4 Million. The Respondents then signed an agreement for sale between them and the 2nd and 3rd Claimant and officials of 1st Claimant being CW1 and the CEO and the land parcels were to remain in the custody of the 1st Claimant.

9. The CW2, the 3rd Claimant herein Geoffrey Maina states that the 1st Respondent approached him to buy his property and they signed an agreement for the 4 Land Parcels. They agreed to a purchase price of Kshs.12M, that is Kshs.3 Million per Land Parcel and all parties signed the agreement.

10. The terms were as follows;

a) To pay Kshs.3. 6 Million that is to pay 1st Respondent Kshs.1 Million into his account and to pay Kshs. 2. 6 Million to the loan account.

b) The 1st Respondent called for additional payment and in December 2019 he was paid Kshs.2 Million, April 2020 Kshs.1. 2 Million and Balance paid was Kshs.5. 2 Million. The Total was Kshs.12 Million (3. 6+8. 4)

11. That after the payment of the balance, he wrote a letter on 6/8/20 and stated that the sale had lapsed and that he wanted new terms and conditions.

12. That the 4 Land Parcels were the securities for the Kshs.12 Million loan which was still running. That the 1st Claimant had the obligation of following up.

13. The Respondents’ witness RW1 Mugambi Wang’ombe states that he filed a Counter-Claim because the sale had lapsed and wanted to negotiate new terms and conditions.

That this was because he realized earlier that the market value was Kshs. 4 Million for each plot and he was coerced to accept Kshs. 3 Million as the purchase price.

14. He prayed for the Return of the Title Deeds so that he would look for a willing buyer.

15. He confirmed that a valuation report was prepared before the sale agreement and that via a letter dated 7/7/18, he agreed that he was indebted.

16. That the loan was payed off by the buyers and he did not give them the completion documents because he wanted to have the title deeds back to enable him sell the lands by private treaty.

17. That the amount owed was Ksh.9,770. 801. 27 and he did not axe for the Kshs.1 Million that he had paid.

18. The Claimants filed their Written Submissions on 28/6/21 and the Respondents on 9/7/21.

19. That the following facts were not disputed;

i. That the 2nd and 3rd Claimants are members of the 1st Claimants.

ii. The Respondents owed the 1st Claimant Kshs.9,770,801. 27 jointly at the time of filing the suit.

iii. That the Land Parcels LR NO.5104/55 ,5104/56, 5104/57, 5104/58 and 5104/59 were securities the loans registered in the name of the 1st Respondent who had also guaranteed the 2nd Respondent.

iv. That the Land Parcels were sold to the 2nd and 3rd Claimants vide a sale agreement dated 3/10/19 who cleared the loan of the Respondents.

ISSUE ONE

Were the Respondents members of the 1st Claimant?

20. It has been established by the evidence on record that the two Respondents were members of the 1st Claimant as Co-operate clients that is Midways Communication Limited in which they were directors. That the two Respondents decided to take over the loans as individuals and split the loans between themselves. This clearly therefore confirms that they were members individually and as a Co-operate entity. The obligations of the Co-operate entity was taken over by the 2 Respondents individually.

ISSUE TWO

Whether the Claimants are entitled to the orders as prayed for in the Claim

21. It is clear that the two Respondents after splitting the loans of Midways Communication Limited, took individual responsibility to settle the outstanding loans. It is also clear that the 4 Land Properties were offered as securities for the loan facility and when the two respondents were unable to service the loans, their securities were attached and sold to the 2nd and 3rd Claimants.

22. The parties executed a sale agreement dated 3/20/19 for Land Parcel LR 5104/56, 5104/57, 5104/58 and 5104/59. The 1st Respondent wrote a letter dated 24/9/21 to be allowed to sell Land Parcel LR 5104/56, 5104/57, 5104/58 and 5104/59 and vide a letter dated 3/10/19 the 1st Claimant gave consent provided that the proceeds would be remitted through the account in the Sacco.

23. The 1st Respondent vide a letter dated 6/8/2020 sought to vary the sale agreement and to renegotiate the same. The 1st Claimant through their advocate vide a letter dated 13/8/20 responded to the said letter. The 1st Respondent wrote a letter dated 20/8/20 insisting that the sale agreement had lapsed and this brought about the filing of this suit.

24. The Respondents were both employees of banks at the time of retirement. They executed the sale agreements and it was expected that the sale would be completed on the fulfilment of the conditions set. The 2nd and 3rd Claimant paid the purchase price and the Respondents did not further fulfilment of the transfer within the time stipulated by the sale agreement.

25. It was clear from the evidence on record that the Claimants fulfilled their conditions but the 1st Respondent wanted to go back on the sale agreement to renegotiate the terms and conditions claiming that the title deeds should be returned to him for sale by private treaty. However, it’s clear that the 2nd and 3rd Claimants have cleared their obligations under the sale agreement but the 1st Respondent alleges that he executed the sale agreement by coercion. That the said coercion was not proved since it was clear from the evidence on record that the valuation report was done before the sale agreement was executed hence the 1st Respondent knew the market value of the Land Parcels at the time of the execution of the sale agreement.

26. The 1st Respondent is clearly trying to go back on the terms of the sale agreement by purporting coercion and the coercion has not been proved. The 1st Respondent knew the value of the Land Properties and entered into the sale agreement willingly; he therefore cannot allege fraud/duress owing to the common intention glaring clearly on the face of the records.

27. The Claimants have sought an order of inhibition against the four properties of the Respondents and an order of specific performance and in the alternative refund of the purchase price of Kshs. 12 Million.

28. On the inhibition orders; we find that the Respondents cannot go back on the terms of the Contract and the reasons are discussed in the prayers for specific performance hereunder.

29. Specific Performance :-

In Reliable Electrical Engineers Ltd vs Mantrac Kenya Limited [2006] eKLR

It was held that ;-

“Specific performancelike any other equitable remedy is discretionary and the Court will only grant it on well laid principles”

“The Jurisdiction of specific performance is based on the existence of a valid enforceable contract. It will not be ordered if the contract suffers from some defect, such as failure to comply with the formal requirements or mistake or illegality, which makes the contract invalid or enforceable.

Even when a contract is valid and enforceable, specific performance will however not be ordered where there is an adequate alternative remedy. In this respect damages are considered to be an adequate alternative remedy where the claimant can readily get the equivalent of what he contracted for from another source. Even when damages are an adequate remedy, specific performance may still be refused on the ground of undue influence or where it will cause severe hardship to the defendant.”

30. As discussed earlier, there is no challenge on the validity or otherwise of the contract. The terms are clearly stipulated. There is a valid sale agreement by the parties which has not been validated by any factors nor has there been any allegations or form of illegality that has been alluded to or proved.

31. It is clear that the 2nd and 3rd Claimants have already paid the purchase price, some of it to clear the outstanding loan and the rest to the Respondents. This has been confirmed by the Respondents. It is therefore incumbent on the Respondent to fulfil his part of the bargain as he is bound by the contract.

32. By claiming by the Respondents that the sale agreement had lapsed and he wants to renegotiate the terms and conditions afresh, the Respondent has demonstrated bad faith and the law requires that;

“he who comes to equity must come with clean hands”

33. The title deeds are in possession of the 1st Claimant but the Respondent has failed to facilitate the transfer by executing the transfer documents after the 2nd and 3rd Claimants fulfilled their obligations in full payment of the purchase price, which fact is not disputed. That being the one, the Respondents are frustrating the contractual terms as laid out in the sale agreement.

34. That being the case, it would therefore, mean that the compensation to the Plaintiff in terms of damages would not be adequate as land is unique and cannot be equated. Therefore, the best remedy is specific performance to ensure that justice is served. This was demonstrated in Godfrey Ngatia Njoroge –Vs- James Ndungu Mungai [2019] eKLR.

35. In Court of Appeal 330/03 Hussamudin Gulamhussein Pothiwalla, Administrator –Vs- Kidogo Basi Housing Cooperative Society Limited and 31 Others. It was held :-

“a court of law cannot re-write a contract between parties…. It was clear beyond peradventure that save for those special cameo where equity maybe prepared to relieve a party from a bad bargain, it is ordinarily not part equity’s functions to allow a party to escape from a bad bargain.”

To this end, the parties entered into a valid contract, a contract which has not been varied hence the parties are still bound by the terms therein.

36. If one party has wholly performed his obligations, then it is only fair and just for the other party to perform their obligation. We therefore find that the Respondents are bound by the terms of the sale agreement since the Claimants have already fulfilled their obligations. We consequently, issue an order for the Specific Performance against the Respondent jointly and severally to transfer the properties LR 5104/56, 5104/57, 5104/58 and 5104/59 to the 2nd and 3rd Claimants jointly.

ISSUE THREE

Counter-Claim

The Claimants having proved their Claim against the Respondents on a balance of probabilities, we therefore find that the Counter-Claim fails and is accordingly dismissed with costs.

ISSUE FOUR

Costs

Costs follow the event. The Claimants have proved their Claim against the Respondents on a balance of probabilities. We therefore order for the Respondents to pay the costs and interest of the Claim and the dismissed Counter-Claim.

In Summary, we order as follows:

1. An order of Inhibition is granted against the Respondents on the properties LR 5104/56, 5104/57, 5104/58 and 5104/59.

2. An order of Specific Performance for the transfer of suit properties LR 5104/56, 5104/57, 5104/58 and 5104/59 to the 2nd and 3rd Claimants jointly.

3. Costs and Interest at the Tribunal rates for the Claim and dismissed Counter-Claim to be paid to the Claimants by the Respondents.

JUDGMENT SIGNED, DATED AND DELIVERED VIRTUALLY THIS 2ND DAY OF SEPTEMBER, 2021.

HON. B. KIMEMIA CHAIRPERSON SIGNED 2. 9.2021

Hon. J. Mwatsama Deputy Chairperson Signed 2. 9.2021

Mr. Gitonga Kamiti Member Signed 2. 9.2021

Mr. Boniface Akusala Member Signed 2. 9.2021

Tribunal Clerk R. Leweri

Ng’ang’a Advocate for Claimant present

Mwai Advocate for Respondent present

Hon. B. Kimemia Chairperson Signed 2. 9.2021