[2025] KECPT 343 (KLR)

Jachin Sacco Limited v Makalya (Tribunal Case 484 of 2020) [2025] KECPT 343 (KLR) (Civ) (26 June 2025) (Judgment)

Neutral citation: [2025] KECPT 343 (KLR)

Republic of Kenya

In the Cooperative Tribunal

Civil

Tribunal Case 484 of 2020

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

June 26, 2025

Between

Jachin Sacco Limited

Claimant

and

Clay James Makalya

Respondent

Judgment

1. The Claimant filed a Statement of Claim dated 13th November, 2020 as a result of non-payment of a Loan agreement of 26th April 2016. The Respondent was a member of the Claimant and was advanced a loan of Kshs 600,000/= on 14th February, 2017 to be paid over 35 months at an interest rate of 1% per month.

2. According to the Claimant, the Respondent honored a few of his monthly payments but thereafter stopped servicing his loan as per the agreement. The Claimant after making tremendous efforts to communicate with the Respondent in bids to find an amicable solution to the settlement of the arrears, on 25th May 2019 the Claimant issued a Notice of Intention to enlist the Respondent with a Credit Reference Bureau with intention to elicit some form of reaction from the Respondent.

3. The Respondent remained taciturn and reticent leading to the filing of this claim for the Honorable Tribunal to order the Respondent to honor his contractual obligation and service the loan. As at the date of filing the Claim, 13th November, 2020 the accrued principal plus interest stood at Kshs 773,294/=The Respondent filed his Statement of Defence dated 28th August, 2023 in which he admitted to receiving the loan, but denied owing the Claimant the sum indicated as his shares of Kshs 300,000/= had not been accounted for.

4. During the hearing, the Claimant was represented by its Chief Executive Officer Ephantus Mwangi who confirmed that the Respondent was their member and took the loan, and as at the date of hearing 20th November, 2024 had arrears of Kshs 928,837/=It was the Claimant’s witness position that the interest accruing to the loan had stopped in August, 2024 as per the duplum rule. The Claimant witness also testified that they had not taken the shares of the guarantors to pay the loan, neither did they take the Respondent’s shares.

5. The Respondent testified that he had saved about Kshs 365,000/= by the time he took the loan, and that he had another loan arrears of Kshs 152,000/= It was also the Respondent's testimony that he fell ill with mental illness and lost his job and that affected the servicing of the loan.

6. The Claimant filed his submissions dated 29th January, 2025 Stating among others:i.That the Respondent’s savings were accounted for, as at the date of applying for the loan he had savings amounting to Kshs 356,500/= for which Kshs 130,337/= we used to offset his arrears for a previous loan, and Kshs 226,163 were used in March 2018 to offset arrears for the suit loan.ii.That the Respondent has never challenged the authenticity of the statement of account nor produced any cogent evidence to prove that his savings had not been used to offset his loan arrears.iii.That the Respondent failed to service his loan as was required, and it is evident from the statement of account that the Respondent defaulted in payment of the loan in March 2017 even before he fell ill.iv.That the Respondent has not proved or presented evidence that the Claimant attached his guarantors shares.v.That the Respondent's reliance on his guarantors to shoulder his fiscal burden is tantamount to an admission of being in breach of his contractual obligations and nefariously trying to benefit from the breach.vi.That the suit loan was disbursed to the Respondent more than 8 years ago.

7. The Respondent on his part filed his submissions dated 18th December, 2024 stating among others:I.That during his sickness, some of the guarantors sympathized with him and agreed that their shares be used in realizing the loan, and he reasonably believes that the claim had been settled by the guarantors shares.II.That he is unable to repay the loan at the moment due to illness and loss of job, and nothing is preventing the Claimant from going after the guarantors for the amount they guaranteed.III.That the Claim is premature as the Claimant has not exhausted all avenues available to them.

8. We have considered the Statement of Claim, the Defence and submissions filed and evidence adduced at the hearing, and there are only two questions remaining for determination:i.What is the role of guarantors?ii.Has the Claimant proved his case on a balance of probabilities?

What is the role of guarantors? 9. This Honourable Tribunal has held in numerous cases that guarantors are persons under secondary obligations who come in to satisfy the debt when the principal debtor has failed to service the loans. To mean the issue is not as to whether guarantors should come at some point to satisfy a debt once there is default - that has been settled, the issue is at what point should they come to satisfy that debt given that they are not the principal debtor.This Honourable Tribunal in Atemba & 4 others v Trans-National Times Sacco Society Limited & another (Tribunal Case 251 of 2021) [2024] KECPT 974 (KLR) (30 May 2024) (Judgment) clearly laid down the procedure of attaching guarantors savings when it stated that:“.….It is and has always been our considered view that the guarantor is secondary and should be used as a last result when a loan is defaulted.The 1st Respondent cannot decide/choose an easy way out to deduct the guarantors savings to repay a loan for a defaulter who they know where to locate and even have details of his source of income. The question we ask ourselves is also, why should the guarantors suffer loss while the loan defaulter is able and capable to repay their loan.We reiterate the purpose of a guarantor is to assist members secure a loan and not service it for the loanee.We are not disputing the fact that guarantors have an obligation towards the 1st Respondent however we are looking into the circumstances leading to the deductions. In the instant case the (Claimant)guarantors have done their due diligence and located the 2nd Respondent who is able to make payment but for some reason the 1st Respondent opted for the easy way out. This is an unacceptable and unconscionable practice which seeks to punish innocent parties…”

10. In this particular case, it is clear to us that the Respondent took the loan to go buy land, which whether he bought or not is irrelevant, and given that the Claimant is still able to trace him, he can’t turn around and tell the Claimant to go deduct his guarantors. The guarantors guaranteed him in good faith and their reasonable expectation was not that their life savings will be deducted without the Claimant first trying all reasonable options to recover from the Respondent - the Principal Debtor.

11. We are convinced as a Tribunal that the Claimant has still not exhausted all the reasonable options of recovery and as such we can’t fault them for bringing this matter to court, or to encourage them to proceed and recover from the guarantors given that they are still able to trace the Respondent who is the Principal Debtor.

Has the Claimant proved his case on a balance of probability? 12. It is not in doubt that the Respondent took the loan, neither is it in doubt that the Respondent a year after taking the loan had already defaulted - reasons why he defaulted notwithstanding.Given that the Respondent has not presented any evidence to confirm that his guarantors agreed that their savings should be used to pay his loan, or presented evidence to challenge the statement of accounts as filed and served, and given that we are also satisfied that interest on the loan has not been charged beyond the limit prescribed by the in duplum rule, we are persuaded that after 8 years of approving the loan, the Claimants have every right to get this Honourable Tribunals orders directing the Respondent to pay them.

Final OrdersJudgment is entered in favour of Claimant against Respondent1. The Statement of Claim dated 13th November, 2020 succeeds with costs2. The Respondent is ordered to pay the Claimant the sum of Kshs 928,837/= plus interest at Tribunal rates from the date of this judgement till payment is made in full.

JUDGMENT SIGNED, DATED AND DELIVERED VIRTUALLY AT NAIROBI THIS 26TH DAY OF JUNE, 2025. HON. J. MWATSAMA DEPUTY CHAIRPERSON SIGNED 26. 6.2025HON. BEATRICE SAWE MEMBER SIGNED 26. 6.2025HON. FRIDAH LOTUIYA MEMBER SIGNED 26. 6.2025HON. PHILIP GICHUKI MEMBER SIGNED 26. 6.2025HON. MICHAEL CHESIKAW MEMBER SIGNED 26. 6.2025HON. P. AOL MEMBER SIGNED 26. 6.2025Tribunal Clerk GechikoNo appearance by partiesJudgment delivered in absence of the parties.HON. J. MWATSAMA DEPUTY CHAIRPERSON SIGNED 26. 6.2025