[2023] KECPT 1038 (KLR)

Endende v IG Sacco Ltd Kakamega & 5 others (Tribunal Case 126 of 2020) [2023] KECPT 1038 (KLR) (Civ) (30 November 2023) (Judgment)

Neutral citation: [2023] KECPT 1038 (KLR)

Republic of Kenya

In the Cooperative Tribunal

Civil

Tribunal Case 126 of 2020

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

November 30, 2023

Between

Wycliffe Afandi Endende

Claimant

and

IG Sacco Ltd Kakamega

1st Respondent

Peter Madolio Serenge

2nd Respondent

Dan Angaya Musingulu

3rd Respondent

Grace Makungu Adero

4th Respondent

Edgar Odali Ndoseywi

5th Respondent

Eunice Kabeyeka Afandi

6th Respondent

Judgment

1. The matter for determination is an Amended Statement of Claim dated 27th February 2020 in which the Claimant avers that he was a member of the 1st Respondent together with the 2nd to 8th Respondents. The Claimant avers that he took a loan with the 1st Respondent amounting to Kshs. 1,998,000/- sometime in 2015 and has since finished paying the same. However, the Claimant contends that between 2017 and 2019, the 1st Respondent unlawfully and illegally loaded onto the claimant’s loan account unknown amounts of money in the form of guarantor attachments amounting to Kshs. 14,430,246. 72/-, while he has never at any time guaranteed the 2nd to 8th Respondents for any loans. The Claimant pleads fraud and illegality on all the Respondents. The Claimant therefore prays fora.A declaration that the loan of Kshs. 14,430,6. 72/- loaded on the Claimant’s Loan Account number 5-1256295-00 as guarantor attachments are fictious, illegal and unlawful.b.A declaration that the Claimant has no outstanding loan to the Respondent.c.The fictious and illegal loan of Kshs. 14,430,6. 72/= loaded on the Claimant’s Loan Account as guarantor attachment be struck out.d.An order directing the 2nd, 3rd, 4th, 5th, 6th, 7th, and 8th Respondents to clear all their loans with the 1st Respondent.e.The Claimant be paid all the unpaid dividends on the shares standing on his account aforesaid 5-1256295-00. f.Costs of the claim.The Claimant filed an Amended Witness Statement and a Claimant List of Documents both dated 19th January 2021 and filed on 9th November 2021.

2. The 2nd to 8th Respondents did not enter appearance nor file Statement of Defence and through the Application of the Claimant, an Interlocutory Judgement was entered against them in favour of the Claimant on 29th May 2023 when the Tribunal was satisfied that they were duly served.

3. The 1st Respondent filed an Amended Statement of Defence dated 25th day of April 2022 and filed on 11th May 2022. In the Statement of Defence, the Respondent admitted that the Claimant and the 2nd to 8th Respondents were its members. The respondents also contend that the Claimant indeed guaranteed the loans allocated in his account and via a letter dated 2nd January 2019, the Claimant confirmed the guaranteed loans. The Statement of Defence was filed together with a witness statement and List of Documents.

4. The matter was set down for hearing on 29th of May 2023 in physically in Kakamega. During the hearing the Claimant adopted his Witness Statement, and produced his documents. His prayer was for the Sacco to refund his shares and deposits. In his Statement, the Claimant claims that he does not know the persons he is said to have guaranteed, and that even at that time the Sacco claims he guaranteed the Respondent’s, he was not qualified as a guarantor since there was a loan he was servicing.

5. On Respondent’s case, the Credit Officer of the 1st Respondent, one Joseph Churchill testified. He adopted his Witness Statement and produced his documents. In cross examination, he told the Tribunal that there are particular documents that are filled when one applies for a loan, and that those documents were duly filled in this case. On being asked why the signatures differ he replied that he is not a signature expert and thus not in a position to commend. He also asserted that the Sacco exhausted all means before going after the guarantors. In re-exam, he asserted that the they only receive complete documents from members before granting the loans, and that they do not source guarantors for members who want to borrow loans.

6. Both parties filled their submissions.

7. The Claimants, in their submissions, sought to answer the question on whether the guarantor was regular. They sought to rely on the case of Michael Muhuyi Kiveu v IG Sacco Limited [2022] eKLR where this court stressed the need of a Sacco to pursue the defaulter and only attach the guarantor’s after all attempts have been made to make the principal debtor pay for his loans. They also submitted on the importance of a default notice and that the 1st Respondent did not issue a Default Notice to the Claimant, but only admitted to sending messages to guarantor’s mobile numbers. The Claimants also urged the Tribunal to closely scrutinize the loan guarantee forms.

8. The Respondent in his submissions, sought to answer four questions. The first is the question on whether the Claimant guaranteed loans to the 2nd to 8th Respondents, the second question is on whether there was fraud on the part of the 1st Respondent, the third on whether the Claimant has a duty to repay the 1st to 8th Respondent’s loans in default, and finally whether the Claimant is entitled to the orders sought. It is the Respondent’s submissions that the Claimant has not proved his case, and that the Claimant is rightfully the one to pay the defaulters loans as a guarantor since there is evidence to this.

Analysis 9. The question before this Tribunal is whether the Claimant is entitled to the prayers sought in his Statement of Claim as against the 1st Respondent. In answering this question, the Tribunal notes that there is no dispute on whether the Claimant or the 2nd to 8th Respondents are members of the 1st Respondent. There is also no dispute as to whether the Claimant took a loan of his own, and whether that loan has been cleared. In fact, the Claimant’s loan is not a subject of this matter. The question that this Tribunal has to address itself on is whether the Claimant is a guarantor in the sense of it, and if established that the Claimant is a guarantor, then the next question if found that the Claimant is a guarantor, is whether the attachment of his dividends is ‘ripe’.On the first question on whether the Claimant is a guarantor will be answered by asking the question on who is a guarantor.“The Law of Guarantees” by Geraldine Andrews & Richard Millet 2nd Edition, at page 156 provides as follows:“A contract of guarantee is an accessory contract, by which the surety undertakes to ensure that the principal performs the principal obligations. It has been described as a contract to indemnify the Creditor upon the happening of a contingency namely the default of the principal to perform the principal obligation. The surety is therefore under a secondary obligation which is dependent upon the default of the principal and which does not arise until that point.In this Tribunal, it has previously been held in the case of Mwindani Kombo Mwinyi v Bandari Savings and Credit Cooperative Society Limited held that“A contract of guarantee requires that the guarantors acknowledge that they would repay the loan in case of default by the loanee. This acknowledgement is done by appending a signature against the provided space in the loan agreement. It is presumed that the person appending their name as a guarantor must have read the loan agreement in order to establish the particulars of the loan, the quantum of the loan, and the quotient of their culpability in the event of default.”This court has also held severally that Guarantors are persons under secondary obligations who come in to satisfy the debt when the principal debtor had failed to service the loans.The question before this court at this point is whether the Claimant was a proper guarantor within the meaning of the word. Did the Claimant agree to be a guarantor? This question cannot be answered by the 1st Respondent who seeks to enforce the contract of guarantee against the Claimant. This is because it is the 1st Respondent’s evidence that loanees are given loan forms, then they go seek guarantors and bring filled forms to the Sacco. The 1st Respondent have no specimen signatures with which to confirm whether the persons loanees pick have indeed agreed. This means that the 1st Respondent’s system can be subject to abuse and forgeries. Therefore, could the Claimant be justified when he claims he was never a guarantee? We feel that this is possible. On perusal of the loan application forms, this Tribunal notes that the guantum of guarantee is not specified. Therefore, could the Claimant have agreed to guarantee an unknown amount of money? We also note that the details of the Claimant in the loan application forms, especially his postal address differ and there is even one in which his mobile number his written in place of his postal address. This court is not a signature expert, but a plain perusal of the forms also show that the signatures differ in great length. To this end, we are inclined to believe that the Claimant has proved his case on a balance of probabilities.On prayer (b) on declaration that the Claimant has no outstanding loan with the Respondent, we find that this prayer was not properly canvassed in the suit as the main subject of this suit is the question of guarantee by the Claimant. This prayer, therefore, fails.

10. The upshot of the above is that we find merit in the Claimant’s claim. We order as follows:a.A declaration is hereby made that the loans of Kshs. 14, 430, 246. 72 loaded on the Claimants loan account 5-1256295-00 as guarantor attachments are illegal and the same be struck out with immediate effect.b.The Claimant be paid all unpaid dividends that remained unpaid as a result of the illegal loading of loans in (a) abovec.The Claimant is awarded the Costs of suit and interest from date of filing suit at Tribunal rates.

JUDGMENT SIGNED, DATED AND DELIVERED VIRTUALLY AT NAIROBI THIS 30TH DAY OF NOVEMBER, 2023. Hon. Beatrice Kimemia Chairperson Signed 30. 11. 2023Hon. J. Mwatsama Deputy Chairperson Signed 30. 11. 2023Hon. Beatrice Sawe Member Signed 30. 11. 2023Hon. Fridah Lotuiya Member Signed 30. 11. 2023Hon. Philip Gichuki Member Signed 30. 11. 2023Hon. Michael Chesikaw Member Signed 30. 11. 2023Hon. Paul Aol Member Signed 30. 11. 2023Tribunal Clerk JonahEsoba advocate for the Respondent.Morigori Ondieki advocate for ClaimantEsoba advocate – We pray for stay of executionTribunal order:30 days stay of execution granted.Hon. J. Mwatsama Deputy Chairperson Signed 30. 11. 2023