[2021] KECPT 524 (KLR)

REPUBLIC OF KENYA

IN THE CO-OPERATIVE TRIBUNAL AT NAIROBI

TRIBUNAL CASE NO.36 OF 2020

CATHERINE MUNYIRI........................................................CLAIMANT

VERSUS

FEP SACCO SOCIETY LIMITED...........................1ST RESPONDENT

PURPLE ROYAL AUCTIONEERS.........................2ND RESPONDENT

RULING

Vide the Application dated 4. 2.2020, the Claimant has moved this Tribunal seeking for the following Orders:

1. That this Application be certified as Urgent and be heard ex-parte at the first instance;

2. That this Honourable Tribunal be pleased to grant a temporary injunction restraining the Respondents whether by acting by themselves, servants or agents from attaching, advertising, auctioning, selling or otherwise taking possession from the Claimant motor vehicle Registration No. KBT 494G Toyota Land Cruiser or otherwise disturbing the Claimants rights of ownership and possession thereof pending the hearing and determination of this Application;

3. That this Honourable Tribunal be pleased to grant a temporary injunction restraining the Respondents whether by acting by themselves, servants or agents from attaching, advertising, auctioning, selling or otherwise taking possession from the Claimant motor vehicle Registration No. KBT 494G Toyota Land Cruiser or otherwise disturbing the Claimants rights of ownership and possession thereof pending the hearing and determination of this claim;

4. That the Honourable Tribunal be pleased to grant an interlocutory order barring the Respondent from visiting the Claimants house with goons, thugs or by themselves whatsoever pending the hearing and determination of this Application and suit.

5. Any other or further or better relief that this Honourable Tribunal may deem fit and just and convenient to grant in the circumstance; and

6. That the costs of this Application be provided for.

The Application is supported by the grounds on its face the Supporting Affidavit sworn by Catherine Munyiri on even date.

The Respondent has opposed the Application by filing a Replying Affidavit sworn by Jackson Wanjau, the 1st Respondent’s Chief Executive Officer on 13. 3.2020.

Vide the directions given on 22. 7.2020, the Application was canvassed by way of written submissions. The Claimant filed his written submissions on 26. 10. 2020 while the Respondents file their initial set of submissions on 28. 10. 2020 and Supplementary ones on 2. 11. 2020.

Claimant’s Contention

It is the Claimant’s case that she took a loan from the 1st Respondent with the security of his motor vehicle registration NO. KBT 494G Toyota Land Cruiser as its security. That she has been repaying the said loan albeit difficulties. That she is willing to repay the same by way of monthly installments of Kshs.40,000/= until repayment in full. That she is in the process of disposing of her property in Karen after which she will propose better loan settlement terms. That the 1st Respondent has been sending police detectives to her house and even threatening to arrest her and dispose her of her car.

Respondent’s Case

Vide the Replying Affidavit sworn by its Chief Executive Officer on 13. 3.2020, the 1st Respondent has opposed this Application on grounds that the Claimant was advanced a loan of Kshs.4,500,000/= in April 2016 and has defaulted in repaying the same. That as part of the terms of the loan Agreement, the Claimant was required to repay the loan by way of monthly installments of kshs.181,842/=. That the Claimant has defaulted in doing so thus subjecting the loan to fall into arrears which stood at Kshs.5,924,317/= as at 30. 8.2019.

Issues for determination

The instant Application has presented the following issues for determination:

a. Whether the Claimant has defaulted in repaying the loan she took with the Respondents;

b. If the answer in (a) above is in the affirmative, whether the Respondents have followed due process in recovery of the said loan; and

c. Who should meet the costs of this Application?

Default in repayment

From the Claimant’s own admission, it is apparent that she has defaulted in repaying the loan she obtained from the 1st Respondent. Though she has not stated the current outstanding amount, the 1st Respondent has shown it to be kshs.5,924,317/= as at 30. 8.2019.

Whether the Respondents have followed due process in recovery of the said loan

The instant Application has been precipitated by the Respondent’s attempt to attach and sell the Claimant’s motor vehicle Registration No. KBT 494 G in a bid to recover the outstanding loan. The Claimant confirms that she offered the said motor vehicle as part of security for the advancement of the said loan.

Vide her written submissions dated 8. 10. 2020, the Claimant conceded that the Respondents did not issue appropriate Notices before it offered the said motor vehicle for sale. That she only learnt of the purported sale vide Notices posted in trees. She cited the decision of the court in the case of Elizabeth Wambui Njuguna – vs- Housing finance company limited [2006] eKLR.

The foregoing submissions of the Claimants leads us to pose the question as regards the procedure for realization of a property which has been offered as security for advancement of financial accommodation. We will find the answer in the Auctioneer’s Rules.

Rule 12 (1) of the Auctioneer’s Rules sets out the following procedure for attachment and sale of moveable property:

“ 12 (1) Upon receipt of a Warrant or a letter of instruction, the auctioneer shall in case of moveable other than goods of perishable nature and livestock.

a. Record the court warrant or letter of instruction in the register;

b. Prepare a proclamation in sale form 2 of the schedule indicating the value of specific items and the condition of each item, such inventory to be signed by the owner of the goods.....;

c. In writing, give to the owner of the goods seven days’ Notice in sale form 3 of the schedule within which the owner may redeem the goods by payment of the amount set forth in the court warrant, or letter instructions;

d. On the expiry of the period of Notice without payment and if the goods are not to be soldin situremove the goods to safe premises for auction;

e. Arrange advertisement within 7 days, from the date of removal of the goods and arrange sale not earlier than 7 days after the first newspaper advertisement and not later than 14 days thereafter;

f. Not remove the goods under proclamation until the expiry of the grace periods.

It follows therefore that there exist an elaborate procedure to be followed by a Decree Holder or a lender in (this case, the 1st Respondent) while attaching and selling properties offered as security. In the case of a lending scenario, first and foremost, an instruction letter must be issued to an auctioneer. The instruction letter will thus trigger the recovery process. The auctioneer will begin by firstly minuting the said instruction letter on his register. Thereafter, the auctioneer will proceed to proclaim the moveable assets of the Debtor. Once this is done, the auctioneer will give the lender 7 clear days to redeem his goods. Once this period lapses and the debtor has not redeemed the goods, the auctioneer will then attach the said goods. Once this is done, the auctioneer will advertise the same for sale. The advertisement should be done within 7 days of attachment and the sale should not happen earlier than 7 days after the first newspaper advertisement.

The same should not however happen after the expiry of 14 days after advertisement.

A question therefore abound as to whether the Respondents complied with this laid down procedure while attaching the Claimant’s motor vehicle registration NO. KBT 494 G. We have perused the Respondents list of documents contained in the bundle dated 13. 3.2020. We note that the 1st Respondent only issued to the 2nd Respondent with a letter of instruction dated 14. 10. 2019. There is no document to demonstrate whether the 2nd Respondent proclaimed and advertised the said motor vehicle for sale. In the absence of these crucial material, we find that any intended sale of the said motor vehicle is illegal.

Conclusion

The upshot of the foregoing is that we find merit in the Claimant’s Application dated 4. 2. 2020 and determine it on terms that the Respondents are at liberty to realize the security offered for the advancement of loan as long as the procedure set out in Rule 12 of the Auctioneers Rules is followed. Unless this procedure is adhered to, the Respondents are restrained to sell the said properties. Costs in the cause.

RULING SIGNED, DATED AND DELIVERED VIRTUALLY THIS 7TH DAY OF JANUARY, 2021.

Hon. F. Terer Deputy Chairman Signed 7. 1.2021

Mr. P. Gichuki Member Signed 7. 1.2021

Mr. B. Akusala Member Signed 7. 1.2021