[2023] KECPT 793 (KLR)

Bwambura v Metropolitan National Sacco Society Ltd (Tribunal Case 31/E044 of 2022) [2023] KECPT 793 (KLR) (31 August 2023) (Judgment)

Neutral citation: [2023] KECPT 793 (KLR)

Republic of Kenya

In the Cooperative Tribunal

Tribunal Case 31/E044 of 2022

BM Kimemia, Chair, J. Mwatsama, Vice Chair, B Sawe, F Lotuiya, P. Gichuki, M Chesikaw & PO Aol, Members

August 31, 2023

(Coram: Hon.B. Kimemia- Chairperson, Hon. J. Mwatsama- Deputy Chairperson, Hon. B. Sawe- Member, Hon. F. Lotuiya- Member, Hon.P. Gichuki- Member, Hon. M. Chesikaw- Member and Hon. P. Aol- Member.)

Between

Justus Mariera Bwambura

Claimant

and

Metropolitan National Sacco Society Ltd

Respondent

Judgment

1. The matter for determination is a statement of claim dated 7th February 2022 and filed on 5th February 2022. The same is supported by a Verifying Affidavit sworn on 7th February 2022 and filed on 5th February 2022 seeking the following reliefs:a.Ksh 89,500/= refund.b.Cost and interest until payment in full.c.Any other or further relief that this Honorable Court may deem fit to grant.The Claimant filed a list of documents dated 7th February 2022 filed on 5th February 2022 that include:1. Withdrawal Letter2. StatementThe Claimant also filed a written statement dated 7th February 2022 filed on 5th February 2022. He avers that he has been a member of the Respondent Sacco Society Account Number 400502XXXXXXX5525000. He also avers that he has been making deposit contributions and that the share capital is Ksh 89,500/= and that on 3rd September 2021 he made formal request to withdraw and has tried making several attempts of refunds with no success.

2. The Respondent filed a statement of defense on 7th March 2022 dated 22nd February 2022. As set out there in seriatim and traversed verbatim, the Respondent denies every allegation made in the Claim aside from what is admitted. The Respondent aver that the Claimant has been its member under Membership No. 11XX06 operating A/c No 400502XXXXXXX5525000 and making monthly contributions.The Respondent also denies the content of paragraph 4 and 7 of the Statement of Claim and puts the Claimant under strict proof as it had never received notice to withdraw from the Claimant as even the withdrawal letter is not stamped. Additionally, from the Annual General Meeting Resolutions by the General Assembly, members agreed to schedule refunds after two years due to liquidity challenges faced by the Respondent.The Respondent admits to receiving a demand letter from Claimant’s Advocate but says that it is not of any consequence to the foregoing.The Respondent aver that being a member, the Claimant is obligated to by-laws of the Sacco and its amendments, and it admits the jurisdiction of the Tribunal.

3. Being a claim of refunds, parties were directed to file written submissions to dispose of the claim.

Claimant’s Submission 4. The Claimant filed his submission on 4th April 2023. He avers that he is of membership No 11XX06 operating A/c No 400502XXXXXXX5525000.

5. He seeks to establish himself to strict proof that he served a notice calling for his refund and secondly, if there were any notice of by-laws brought to his attention if they were bidding and over-ride legal constitutional rights of the Claimant.

Respondent’s Submissions 6. The Respondent filed their written submission dated 7. 12. 2022 dated 2. 12. 2022. It states that the question in contention is true whether the Claimant withdrew her membership from the Sacco and satisfied the balance of probabilities that the Respondent failed, refused, or neglected to refund her contributions or whether it was a proper choice. In light of this, the Respondent aver that as per the by-laws, a member wishing to withdraw must write to the Sacco after receipt, it is to wait for a period of 60 calendar days for the Sacco to schedule a refund, of which the Claimant failed to oblige. The Respondent aver that it is by the court’s discretion and legal burden of proof to satisfy that the Claimant withdrew her membership as the Respondent only was aware through the filing of this suit.

Issues for Determinationa.Whether the Claimant observed the laws of the Saccob.Whether the Respondent meets the balance of probabilitiesc.Whether the 2019 Annual General Meeting Resolutions are legally bindingd.Whether the standard of proof lies to the Claimant a) Whether the Claimant observed the laws of the Sacco 7. The Claimant wrote a letter of withdrawal to the Sacco for member No. 11XX06, A/c No 400502XXXXXXX5525000. However, on the statement of defense, the Respondent alleges that the letter was not received as it did not bear the stamp of the Respondent.

8. Further, the Respondent alleges that as per by-laws, members are required to wait 60 calendar days for refund requests under which the Claimant failed to do so. Also, the Respondent alleges that the Claimant did not receive submissions to withdraw and was only aware through the filing of this suit. Herein, the determination of this issue shall be put under the legal burden of proof.

b) Whether the Respondent meets the balance of probabilities 9. The fabric of this issue as alleged is whether the Respondent failed, refused, or neglected to refund the contributions.

10. However, the Respondent alleges that there may be valid reasons for immediate non-refund. Further, the Respondent engages that operations are done diligently by customs and practices of banking as provided in law and hence cannot engage in negligent or malicious retention of member’s fund; thus, a balance of probability threshold must be met by the Respondent to determine the issue in favor to the Respondent.

c) Whether the 2019 Annual General Meeting is legally binding 11. As per the Respondent’s submission, the 2019 Annual General Meeting resolutions had members resolve and agree to schedule refunds on a first come first serve basis. This was brought up due to the liquidity challenges faced by the Respondent and thus not possible to refund the members all at once. Further, the Respondent engages in the submissions that the resolutions were authorized and approved by SASSRA in conjunction with the Commissioner for Co-operatives. However, there was no copy of authorization or approval annexed in the Respondent’s list of documents.

12. The questions engaged in the determination of this issue are:i.Did the resolutions meet the threshold of amendment of by-laws?ii.Were the right procedures followed in the amendment of by-laws?iii.Was any notice issued regarding the amendment?iv.Was the resolution registered in the Sacco’s by-laws?d)Whether the standard of proof lies to the Claimant

13. The Claimant is to prove that she followed the right procedures in acclaiming for refunds and thus the case should be subjected to the benefit of the law.

Analysis 14. We find as per observation in the case of Tribunal Case No. 446 of Theophilus Olokulale v Transcom (2017) that “Justice is a serious quest, and each party needs to play their role in ensuring that the said justice is served in a speedy and timeous manner.”

15. As per the Sacco’s by-laws, “a member is required to wait 60 calendar days after making a refund request in writing.” The Claimant requested for withdrawal and refund of the shares on 13th April 2021 and filed this suit on 4th May 2022, thus the criteria have been met and thus the Claimant met the burden of proof, this is a consequence of the letter indicating the Respondent’s address and same as which the Claimant served the Respondent and the latter replied through a statement of defense.

16. Herein, this subjects the Respondent to prove the balance of probability that it is not an act of the Respondent’s failure, refusal, or neglect to refund the contributions. In response as per submissions, it is averted that it is the liquidity challenges that the Respondent is facing that prompted the Annual General Meeting to avert the members from withdrawing at the same time that would collapse the Sacco.

17. In the case ofFrancis Joseph Kamau v Housing Finance Company of Kenya Limited (2014) eKLR it was stated that a bank has a duty under its contract with its customers to exercise “reasonable care and skill” regarding operations within its contract with its customers. The standard of that reasonable care and skill is an objective standard applicable to bankers.

18. This then indulges the Claimant has not met the balance of probabilities that the Respondent has failed, refused, or neglected to refund the contributions, but to address the challenges faced by the Sacco, the Respondent acted in good faith and exercised its duties with reasonable care and skill. This cannot be disputed.

19. However, was the right procedure followed? To subject a member to terms, there must be a set of procedures followed by both parties. Under by-laws, a member may wish to withdraw their contribution at any point but have to wait for 60 calendar days which was obliged by the Claimant. In contrast to this procedure, an Annual General Meeting was convened in 2019 upon which members opted to have refunds on a first come first serve basis therefore prompting the Claimant to have her refunds set on 22nd October 2023 from the termination of membership

20. Section 8 sub-section (2) of the Amendment of by-laws provides that no amendment of by-laws of a cooperative society shall be valid until the amendment shall be registered under this Act, for which a copy of the amendment shall be forwarded to the commissioner in the prescribed manner.

21. Rule 8 of the Co-operatives Society Rules 2004 states that:1. Any amendment of the registered by-laws of a co-operative society under section 8 of the Act shall be made by a resolution of members at the general meeting in respect of which at least 15 clear days’ notice of the proposed amendment shall be given to the members of the society.2. No resolution under sub-rule (1) shall be valid and effective unless, in the case of a cooperative society with unlimited liability, half of the members of the society are present at the meeting and three-quarters of them vote in favor of the resolution

22. It is therefore that the Tribunal is obliged to answer the factual questions on the chances that the 2019 Annual General M resolutions are impugned.

Determination 23. As per section 8 of the Co-operativesSocieties Act, there was no notice of such amendments and there was no vote over the Resolutions as required by rule 8(2) (a) of the Co-operatives Societies Rules.

24. Further, there is no evidence that the Resolutions were authorized and approved by SASSRA as filed in this suit. This is supported by the first leaf of the Respondent’s by-laws which indicates that the last amendment of the Respondent’s by-laws was in April 2016 and as such, the impugned Annual General Meeting resolutions could not have high authority over the Respondent’s by-laws. Thereby, the Resolution is a breach of Sacco by-laws and is illegal.

25. Guided by article 10(1)(b) and (2) and article 159(1) and (2) (a) of the Constitutionof Kenya, the Tribunal shall abide by the rule of law. Herein, it can be observed that the Respondent did not follow the right procedure to amend or vary its by-laws which is illegal and thus an abuse of the court process as observed in the case of Nancy Musili v Joyce Mbete Katisi (2018) eKLR

26. Thus, the Respondent’s Sacco by-laws are still illegal and enforceable

27. On the matter of the Claimant being sought to relief from the Court, it is observed in section 79(3) that states that the Tribunal enters judgment in terms of the award together with costs, it shall issue a decree which shall be enforceable as a decree of the court

28. Further, on engaging on whom to bear the cost of the suit, it is observed in the case of Cecilia Karuru Ngayu v Barclays Bank of Kenya & Another(2016) eKLR that “to my mind, there appear to be no clear or prescribed definitions on what constitutes ‘good reasons’ that will justify the court’s departure in awarding costs from the general rule that ‘cost follow the event’.”

Upshot 29. Judgment is entered in favor of the Claimant against the Respondent for KSH 79,582. 82/= plus the cost and interest of the suit.

RULING SIGNED, DATED AND DELIVERED VIRTUALLY AT NAIROBI THIS 31ST DAY OF AUGUST, 2023. HON. BEATRICE KIMEMIA CHAIRPERSON SIGNED 31. 8.2023HON. J. MWATSAMA DEPUTY CHAIRPERSON SIGNED 31. 8.2023HON. BEATRICE SAWE MEMBER SIGNED 31. 8.2023HON. FRIDAH LOTUIYA MEMBER SIGNED 31. 8.2023HON. PHILIP GICHUKI MEMBER SIGNED 31. 8.2023HON. MICHAEL CHESIKAW MEMBER SIGNED 31. 8.2023HON. PAUL AOL MEMBER SIGNED 31. 8.2023TRIBUNAL CLERK JEMIMAHNO APPEARANCEHON. BEATRICE KIMEMIA CHAIRPERSON SIGNED 31. 8.2023