[2020] KECPT 109 (KLR)

REPUBLIC OF KENYA

IN THE CO-OPERATIVE TRIBUNAL

AT NAIROBI

CASE NO. 352 OF 2012

DR. EDWIN KIPNG’ENO RONO.............................................. CLAIMANT

VS

KENYATTA MATIBABU SACCO SOCIETY LTD........1ST RESPONDENT

ANDREW K. ROTICH......................................................2ND RESPONDENT

JUDGMENT

The matter for determination is as per the statement of claim dated 14/8/2012 and filed on 14/8/2012. It was later amended vide the amended statement of claim dated 3/10/2016 and filed on 6/10/2016 seeking the following prayers.

a. An order directed to the 1st Respondent by itself and/or through their authorized servants and/or agents to reverse the transactions fraudulently carried out by the 2nd Respondent with regard to the Claimant’s account;

b. That upon prayer (1) above granted the 1st Respondent be compelled to tender a statement of account of the status of the Claimant’s account;

c. That the 1st Respondent be compelled to pay the Claimant arrears of dividends unlawfully withheld together with interest thereon;

d. A permanent injunction restraining the 1st Respondent from charging penalties on the Claimant for contributions fraudulently rerouted to the 2nd Respondent’s account; and

e. Costs of this suit.

The 1st Respondent denied the claim vide the response and filed on 5/10/2012. It was amended on 21/8/2013 and further amended on 7/11/2016 and filed on 8/11/2016.

The Claimant filed a reply to 1st Respondent further response on 11/11/2016.

The 2nd Respondent did not enter appearance or file a defence and interlocutory judgment was entered against him on 1/11/2012.

The matter came up and parties filed written submissions. The Claimant filed his on 1/10/2019 while the Respondent did so on 16/10/2019.

CW- 1 - the Claimant (Dr. Edwin Kipngéno Rono) stated that he was a Doctor at Kenyatta National Hospital. That he was a member of the 1st Respondent having joined in January, 2006. That the 2nd Respondent Andrew K. Rotich was the Chairman of the 2nd Respondent . That he made contribution in cash, cheque and check-off system . That he noticed that his payments were not being reflected in the accounts and wrote to the 1st Respondent. That the 1st Respondent replied vide their letter dated 26/4/2016 confirming that they were receiving his money and amounts appeared in his payslip later.

That he had not received dividends for the years 2007, 2008, 2009, 2010, 2011 and 2012 and in 2008, he was paid a lesser amount. That his statement had two (2) loans which were fictitious since the signatures were not his. He complained to the 1st Respondent and to chairman and vice chairman were removed.

The Claimant adopted his written statement as his evidence in chief. That his estimated loss was Ksh. 5,000,000/.

On cross-examination he stated that there were no tellers then, therefore he would issue cheques and give money to some of the officials and especially the 2nd Respondent who was his workmate and an official of the 1st Respondent .

That he applied for various loan of which he repaid and two (2) loans being school fees loan were never paid to him.

CW- 2, Clyde Atsango stated that he was a CPA holder and on instruction of the Claimant, examined the records of the Sacco and established a discrepancy that some payments made by cheque were not posted to reduce his loan. He also established that the loans were deducted yet he had not received them and he disowned the signatures. That he quantified the total loss to be Ksh. 3,021,092/ as at April, 2014 and Ksh. 5,316,824/15 as at the date of his evidence on 11/4/2017.

On cross-examination he stated that his report was not dated or signed but it covered the period between 2006 and April, 2014.

That it was not a requirement for him to sign the report. That the key finding was that there was no loss on deposits and the loss was on dividends and interest on shares. That he used the Sacco’s statement and the payslips and receipts.

The 1st Respondent case is that Meisa Awincha-R-W-1 stated that she was the Human Resource and Administration Manager having joined the 1st Respondent in July, 2004. She confirmed that the Claimant was a member of the 1st Respondent and the Claimant alleged that he had made some remittance through the 2nd Respondent , who had been the vice-chair and who ceased membership in 2012-2013.

That the 2nd Respondent was not authorized to receive money from the Claimant and if any member wished to make deposit they were required to do it by direct deposit in the accounts or by standing orders. That they were not accepting cash deposit since 2007. That upon any deposits they would issue receipts. That they were not aware of the 2nd Respondent’s receipt of deposit on behalf of the Claimant. That whatever he deposited on behalf of the Claimant was receipted. She produced a bundle of receipts and a list of documents filed on 17/3/2015, 29/5/2009 and 17/6/2016. That the Claimant applied for several loans which were granted and disbursed in cash and he signed for them. That all the while, there were no audit queries in regard to the Claimants account. That the forensic audit by CW-2 relied only on documents supplied by the Claimant . She also adopted her witness statement as her evidence –in- chief.

Issues for determination;-

We have framed the following issues for determination

Agreed Issues.

It’s not disputed that the Claimant was a member of the 1st Respondent . Secondly it’s not in dispute that the Claimant was making his contributions to the 1st Respondent directly and through the 2nd Respondent.

Contested Issues

1. Whether the 2nd Respondent was authorized to pay money on behalf of the 1st Respondent;

2. Whether there were any fraudulent transactions carried out by the 2nd Respondent with regard to the Claimant’s accounts;

3. If the answer in (a) above is in the affirmative, whether the 1st Respondent, is liable to reverse the same and credit to the Claimant’s account;

4. If the answer in (a) above is in the affirmative, whether, a permanent injunction should issue restraining penalties on the said transactions.

5. Whether there were any arrears of dividends together with interest thereon unlawfully withheld by the respondent.

6. Costs.

Whether the 2nd Respondent was authorized to receive money on behalf of the 1st Respondent.

The Claimant in his evidence and written submissions avers that the 2nd Respondent was an official of the 1st Respondent. That the Claimant complained about diversion of his monies by the 2nd Respondent to the 1st Respondent. That vide the letter dated 11/10/2011, the 1st Respondent admitted that the 2nd Respondent was their employee at the time when the money was diverted from the Claimant’s account.

The 1st Respondent in their submissions confirmed that the 2nd Respondent was an official as a vice-chair of the 1st Respondent . That the 1st Respondent was governed by the by- laws in which the duties of the chair and vice-chair are outlined. That none of the duties include, receiving monies from member on behalf of the 1st Respondent. That the 1st Respondent had a cash office headed by the Treasurer and whose duties and responsibilities are contained in the by-laws i.e to receive and receipt any monies by the members. It is therefore their submissions that the 2nd Respondent was not authorized to receive Members contribution. That the arrangement between the Claimant and the 2nd Respondent was therefore purely private between the two.

We have carefully considered submissions by both parties and on the issue, the by-laws of the 1st Respondent are clear and we agree with the submissions of the 1st Respondent that any transaction carried out by the 2nd Respondent on behalf of the Claimant arose out of their own private arrangements. We therefore find that the 2nd Respondent was not authorized to receive money on behalf of the 1st Respondent from it’s members.

Fraudulent transactions;

The Claimant in his evidence and written submissions allege that the 2nd Respondent would fail to relief amounts issued to him for purpose of depositing in his account and that on some situations, he would issue cheques or monies in repayment of his loans and the same would not reach his account.

The Claimant did not give particulars of the said fraud or the transactions alleged to have been defrauded from his account.

The Claimant submitted that despite effecting payment through cheques and cash, the 1st Respondent knowingly and deliberatly split the said cheques and ultimately credited his account and that of the 2nd Respondent thereby directing his monies for purposes other than what was intended and thereby denying him his rightful entitlement.

That between December, 2008 and June 2011, the 1st Respondent, willingly and knowingly directed ksh. 497,227/ from his account thereby denying him benefits from his own contribution. That despite having complained, the 1st Respondent did not act.

In response, the 1stRespondent submitted that the allegations of fraud have been generalized with the Claimant just simply stating that the 2nd Respondent fraudulently carried out transactions totaling to 601,575/ but he did not give particulars of these transactions or demonstrate how he arrived at the said pleaded figure.

That allegations of fraud, Under Order 2 Rule 10 must be particularized and specifically pleaded on the face of the pleadings.

That the 2nd Respondent was making deposits on the Claimant’s behalf and on his instructions hence the Claimant cannot be heard to claim. That the 1st Respondent was fraudulent.

That he did not give any evidence on specific instructions to the 1st Respondent on amount to be deposited by the 2nd Respondent to his account and did not show, any variance or failure by the 1st Respondent to follow such instructions.

We have carefully considered the submissions of both parties in this regard. Having found above on issue No.1 that the 2nd Respondent was not authorized to receive on behalf of the 1st Respondent any amount from the members, we agree with the submissions of the 1st Respondent that the Claimant cannot turn around to blame the 1st Respondent based on the personal agreement between himself and the 2nd Respondent.

We also find that under Order 2 Rule 10 of the Civil Procedure Rules, particulars of any misrepresentation, or fraud on which the party pleading relies upon must be specifically pleaded on the face of the pleadings and distinctly proved as was held in the case of Kinyanjui-vs-George Kamau Njoroge[2015]eKLR.

In this regard therefore, we find that the Claimant failed to particularize the fraudulent claim but instead generalized his statement on the claim without particularly pleading and proving the same as required by the mandatory provisions above.

We therefore find that this issue has not been proved on a balance of probability.

Issue No. 3 – Injunction.

Having found above that the 2nd Respondent did not have authority to receive monies on behalf of the 1st Respondent from its members, it follows therefore that the claim of fraud has not been established. Further we have perused the audit report (prepared by Clyde) the basis of which the claim of fraud is founded and note that the same is not authentic as it has not been dated. Secondly, we note that the said report only relies an information supplied solely by the Claimant.

We have noted the evidence of CW-2- the auditor especially that the report don’t have to be dated for it to be authentic. We respectfully disagree with him and find that for the report to be authentic, it must bear the date and signature of the person who prepared it.

To this end, we therefore find that this issue has not been proved on a balance of probability.

Arrears of dividends

The Claimant prays for this Court to order the 1st Respondent to pay him arrears of dividends with interest for the period for which the said monies were allegedly diverted. We have considered this claim vis-à-vis the evidence on record and find that apart from alleging, the Claimant has not specifically pleaded in his statement of claim the amount of dividends lost and the period for which it covers. In view of this, we reiterate our findings above and find that the same has not been proved on a balance of probability.

Conclusion

The upshot of the foregoing is that the Claimant has not established his case to the required standard and hereby dismiss it with costs.

Ruling Read, dated and delivered, via email in accordance with the directions given by the Honourable, the Chief Justice on 15/3/2020, this 30th day of, April, 2020.

Prepared by Hon. B. Kimemia – Chairman, Hon. F. Terer – Deputy– Chairman, and P. Gichuki Member, with the consent of the parties. The final orders to be delivered by email in accordance to the prevailing measures during the COVID-19.

B.KIMEMIA

CHAIRMAN Signed

F. TERER

DEPUTY CHAIR Signed

P. SWANYA

MEMBER Signed