[2021] KECPT 491 (KLR)

REPUBLIC OF KENYA

IN THE CO-OPERATIVE TRIBUNAL AT NAIROBI

TRIBUNAL CASE NO. 366 OF 2018

DANIEL NG’ANG’A KARANJA ...............................................................CLAIMANT

VERSUS

METROPOLITAN NATIONAL SACCO LIMITED ......................... RESPONDENT

JUDGMENT

Vide the Statement of Claim dated 30. 7.2018, the Claimant has moved this Tribunal seeking for judgment against the Respondent as follows:

a. Kshs. 355,342/= being monies illegally withdrawn from his account by the Respondent;

b. Kshs. 511,297. 15/= being interest illegally levied;

c. Interest on (a) and (b);

d. General damages for breach of loan agreement; and

e. Costs.

In support of the claim the Claimant filed the following documents.

a. Witness statement recorded by the claimant on 30. 7.2018;

b. List of documents dated 30. 7.2018.

During trial on 26. 2.2020, the Claimant adopted the witness statement and produced the said documents.

The Respondent has opposed the claim by filing the following documents.

a. Statement of Defence dated 12. 9.2018;

b. Witness statement sworn by Daniel Lee Kibuthu Kamau; and

c. List and bundle of documents dated 12. 9.2018.

During Defence hearing on 25. 8.2020, the Respondent called one (1) witness, Daniel Lee Kinuthia Kamau who produced the said documents and also adopted his witness statement.

Claimant’s Case

It is the Claimant’s case that at the material times to this claim, he was a member of the Respondent. That on or about December, 2004, he applied for a loan facility with the Defendant for Kshs.2,200,000/=. That the Respondent approved the said loan on 2. 1.2015 subject to the following terms:

a. The facility was repayable on 72 monthly installments of Kshs.46,519/= each;

b. Kshs.24,106/= was to be paid through authorized check off system with the claimant’s employer; and

c. Kshs.22,413/= was to be recovered through a standing order.

That for case of operations, the Claimant channeled his salary from his Co-operative Bank account to his account with the Respondent.

That he subsequently fulfilled his end of the bargain by religiously ensuring that his salary account was ever debited with the required amount to fund the standing order;

That on or about 10. 6.2016, the Respondent illegally and conspicuously (and without his express or implied authority)deducted from his account a sum of Kshs.265,690/=. That it further made a further illegal deduction of Kshs.89,652/= on 15. 11. 2016.

That upon realization of the occurrence, he approached the Defendant and queried the said deductions. That the Respondent informed him that the said deductions were based on facilities under performance.

That as a result of the said frustrations he proceeded to make an early redemption of his loan sometimes in February, 2018.

That the amount sought by the Respondent amounted to Kshs.1,927, 453/=. That the same included the full interest for the intended facility period.

That the Respondent therefore .....enriched itself by charging him interest for a period of six(6) years despite the facility being redeemed within 3 years.

That despite the fact that the Respondent was to recover the loan based on initial agreed terms, it went ahead to breach the terms of the loan Agreement. He particularized the said breach as follows:

a. Failure to consistently make the necessary deductions from the Claimant’s account;

b. Citing the Claimant for under performance of his loan;

c. Failing to inform the Claimant about the said under performance;

d. Unjustly enriching itself by charging the Claimant full term interest even after an early redemption of the facility.

That it is on the basis of the foregoing that the Respondent is liable to reimburse him on a full indemnity basis, his costs and expenses incurred in correction of the claim.

Upon cross-examination, the claimant stated that the Respondent had authority to make deductions on his account. That he signed the loan Application form. That he was not notified of 5% penalty for early clearance of the loan. That he did not know about what was in the loan policy. That he was never told that his account was in arrears. That he had an agreement with the Respondent regarding what was to be deducted. That he was not aware of any lieu by the Respondent on his fund.

On Re-examination, he reiterated that the Respondent did not issue him with any notice of default. That his guarantors were neither informed.

Respondent’s case

It is the Respondent case that indeed the Claimant applied for a loan of Kshs.2. 200,000/= on 9. 12. 2014. That the said loan was disbursed to his Fosa Account on 2. 1.2015. That monthly loan repayment was Kshs.46, 519/=. That in terms of the Agreement with both parties, the loan was to be recovered as follows:

a. Kshs.24,106- through check-off ;

b. Kshs.22,413 through a standing order.

That at the Claimant’s own volition, he opened an account with it and caused his salary to be channeled through his Fosa account. That his net salary was not sufficient to meet his monthly loan repayment. That he was aware of this fact and he undertake to deposit money in the said Fosa Account in order to satisfy the Standing Order.

That the check-off deductions commenced on January, 2015 while the standing order was not effected as there was no sufficient funds, in the account. That this state of affairs caused the loan to underperform and accrue interest.

That when the claimant eventually put sufficient fund, in the account in the months of October and November, 2016, the outstanding amounts were atomically recovered. That all these transactions are reflected in the loan statement. That at no point in time, did the Claimant query the said deductions.

That after a few years, (in February 2018) the claimant approached the Respondent with intention to clear the outstanding loan.

That the Respondent availed him with a statement of the outstanding loan. He was also informed that if he was to clear the loan in advance, there would be a charge of 5% on the outstanding loan at the point of payment which was Kshs.91,783,50. That his outstanding loan at that point was Kshs.1,835,670/=. That when this charges (of 5%) was applied, the total amount payable came to Kshs. 1,927,453. 50/=. That once advised on this figure, the Claimant proceeded to repay the same. That he subsequently issued a demand letter and proceeded to institute this claim.

Written submissions

At the close of the Respondent’s case on 19. 10. 2020, we directed parties to file their respective final submissions. The Claimant did so on 28. 9.2020.

Claimant Submissions

Vide these submissions (filed on 28. 9.2020) the Claimant reiterated the contention, above and framed the following main issues for determination:

a. Whether the plaintiff defaulted in servicing the loan;

b. Whether the Defendant breached the terms of the loan Agreement; and

c. Whether the Defendant was satisfied in charging the plaintiff hefty administrative fees upon early redemption of the loan.

On the issue NO. 1 (whether the plaintiff defaulted in repaying the loan)the Claimant submitted that he did not default in repayment of the loan. He cited the provisions of section 120 of the evidence Act (Cap 80) laws of Kenya and the decision of the court in the case of Ezemak Refrigeration & Contractors Limited -vs Nation Media Group Limited [2018] eKLR to support this argument.

As regards issue No. 2 (whether the Defendant breached the terms of the loan agreement) the claimant submitted that indeed the Respondent did so. He relied on the Ezemak case above and the case of Nakara Trading Company Limited - vs- Coffee Marketing Board [1990-1994] EA 448 to buttress this argument.

As regards issue No. 3 (whether the Defendant was justified in charging the plaintiff hefty administrative fees upon early redemption of the loan balance) the Claimant submitted that it was not justified to do so. He then relied on the decision of the court in the case of Company of Habitat & housing in Africa (shelter Afrique) vs- sunset paradise Apartments Limited [2019] eKLR to buttress the point.

Defendant written submissions

Vide the submissions filed on 29. 12. 2020, the Respondent reiterated its averments above and further stated as follows:

That whilst the Claimant contend that it failed to make the necessary deduction, from his salary account, he did not lead evidence to prove this fact. That the Claimant was duty bound to prove that his account had sufficient funds but the Respondent nevertheless refused to make the requisite deductions.

That to the contrary, the Defendant tendered evidence to prove that to demonstrate that there were insufficient funds in the Claimants accounts. It then referred to the case of Raphael Karuru Gitau - vs- Barclays Bank of Kenya Limited [2017]to buttress this point.

That as regards the contention that the Respondent illegally withdrew a sum of kshs.355,342/= from his account, the said sum was a cumulative figure deducted on two (2) separate date, that is, 10. 6.2010 for Kshs.265,690/= and 15. 11. 2016 for Kshs.89,652/= so as to reduce his arrears. That the Claimant’s statement of account confirm this contention.

That prior to this deductions, the Claimant had never made any single (Bosa) repayment of the loan.

That all along, the only sums deducted were the salary deductions. The standing order amounts were never effected at all.

That as regards the claim for Kshs.511,297. 15/=. The Claimant contend were illegal interest levied, the defendant submitted that the same was a result of the 5% levy for early repayment of the loan. The Defendant cited several authorities to buttress this point.

Issues for determination

We have framed the following issues for determination:

a. Whether the Claimant defaulted in repayment of his loan and if so, whether the defendant illegally recovered the defaulted amount;

b. Whether the Respondent had a legal basis to apply a 5% charge for early redemption of the loan;

c. Who should meet the costs of the claim?

Default in repayment of the loan

It is not in dispute that the Claimant applied for a loan facility of Kshs.2,200,200/= on 2. 7.2015 repayable as follows:

a. Kshs.24,106/= through check- off system on his salary account; and

b. Kshs.22,413/= through a Standing Order.

We have perused the Claimant loan statements dated 7. 5.2018. The same confirms that the Claimant received the said funds on 2. 1.2015. Upon further perusal of the said statement, it occurs that the monthly amounts being deducted to reply the loan was Kshs.24,106. 00/= nowhere does the account show a deduction of Kshs.22,413/=. What this means is that the Claimant did not make funds available for standing order to be effected.

We also note that there was a credit of Kshs.265,690/= on the account on 10. 6.2016. There was also another deposit of Kshs.89,000/= on 15. 11. 2016. What we deduce in this is that when the claimant made monies available in his account on the said dates, the system automatically applied them towards repayment of the loan arrears. It is not therefore true fort the Claimant to contend that the said sums were deducted illegally from his account. We have perused his bundles of documents and nowhere do we find a document showing that he availed funds to cater for the monies meant to be deducted by way of a standing order.

5% charge for early Redemption of the law

The Respondent has vehemently defended its position to levy a penalty of 5% for early redemption of the loan. It has pegged this argument on usages of trade.

We have however, perused the loan application for the said facility. It was signed by the Claimant on 5. 12. 2014. nowhere in the said form do we find a penalty of 5% for early redemption of the loan. We thus find that the Defendant breached the terms of the loan Agreement by applying the levy on the outstanding loan. The total amount of monies illegally recovered by the Respondent in this regard is Kshs.91,783. 00 being 5%x1,835,669. We find that the Claimant is entitled to be refunded this amount.

Conclusion

When all is said and done, we find that the Claimant has partially succeeded in the claim and thus enter judgment in his favour for Kshs.91,783/= with interest and costs at court rates. The other claims are dismissed.

Judgment signed, dated and delivered virtually this 4th day of March, 2021.

Hon. B. Kimemia Chairperson Signed 4. 3.2021

Mr. P. Gichuki Member Signed 4. 3.2021

Mr. B. Akusala Member Signed 4. 3.2021

No appearance for parties

Hon. B. Kimemia Chairperson Signed 4. 3.2021