[2023] KECPT 1076 (KLR)

Kamunya & 8 others v Waweru & another (Tribunal Case 384 (E161) of 2021) [2023] KECPT 1076 (KLR) (30 November 2023) (Judgment)

Neutral citation: [2023] KECPT 1076 (KLR)

Republic of Kenya

In the Cooperative Tribunal

Tribunal Case 384 (E161) of 2021

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

November 30, 2023

Between

Jane Kamunya

1st Claimant

Agnes Muthoni Maina

2nd Claimant

Mercy Warui

3rd Claimant

Emily Oduori

4th Claimant

Catherine Ikiara

5th Claimant

Nancy Gichuhi

6th Claimant

Ann Karaya

7th Claimant

David Muraguri

8th Claimant

Margaret Nguthiru

9th Claimant

and

Joseph Thiga Waweru

1st Respondent

Mwito Savings and Credit Cooperative Society Limited

2nd Respondent

Judgment

1. The Claim herein was brought by the Claimant vide Statement of Claim dates 18th August, 2021, filed on 2nd September, 2021. The Claimants state that they were members of the 2nd Respondent wherein they guaranteed a loan of ksh 5,700,000/= issued by the 2nd Respondent to the 1st Respondent who was also a member of the 2nd Respondent; that the loan was approved on 14th October, 2015 and disbursed on 6th November, 2015. The Claimants state further that the 1st Respondent defaulted in payment of the loan agreement; that the 2nd Respondent was negligent and failed to take any step to address the 1st Respondent default and hurriedly placed liability on the Claimants and issued notices to the Claimant that they had been attached on account of the 1st Respondent’s loan, to the extent of monies set out under paragraph 14 of the Statement of Claim, and on the same date, the Claimant’s employers were instructed to make deductions on their salaries to settle the liabilities. That the 1st Respondent was actively in business in that period.

2. The Claimant’s claim for judgement against the Respondent’s for: -a)An order directing the 1st Respondent and 2nd Respondent to refund all the monies deducted from the Claimant’s contribution and/or deductions from their salaries.b)General damages for breach of contract by the 1st Respondent.c)Special damages of ksh 200,000/=d)Costs of the case.

3. The 1st Respondent opposed the Claimant’s claim by way of statement dated 5th December 2021 filed on 8th December 2021. In his Statement, the 1st Claimant states that he was a member number 11785 of the 2nd Respondent and he knows the Claimants; that in November, 2005, the Claimants guaranteed for him a loan of ksh 5,700,000/= disbursed to him by the 2nd Respondent. The 1st Respondent further admits that at some point, he was unable to repay the loan as per agreed terms and the same was restructured but that did not work; and finally, he was unable to pay the balance which was amounted to ksh 1,678,396/=; that he had not worked since 2018 and he closed down his business and he has since been listed under Credit Reference Bureau.

4. The 2nd Respondent opposed the Claimants’ claim by way of Response to claim dated 19th May, 2022, filed on 23rd May, 2022. In his Response, the 2nd Claimant states that he is aware that the Claimants jointly and severally guaranteed the repayment of a loan from the Sacco to the 1st Respondent at the 1st Respondent’s request in September, 2015; admits that the 1st Respondent defaulted and that it (2nd Respondent), took several steps to address and reduce the 1st Respondent’s defaults in servicing his loan. And it exhausted all reasonable and co-effective avenues for recovery, prior to resorting to attachment of guarantors’ income. The 2nd Respondent states further that the Claimants have no reasonable/ justifiable cause of action against the 2nd Respondent and the suit is an afterthought which seeks the Tribunal’s hand in rewriting a guarantee contract; that they are the authors of their misfortunes. Finally, the 2nd Respondent prays that the case against it be struck out/ or dismissed with costs to it.

Claimant's CaseThe Claimants called two witnesses at the hearing, Claimant Witness 1 Margaret Nguthiru, adduced sworn evidence.She stated that she agreed to be 1st Respondent’s guarantor since he had a construction business and he was able to pay; that she guarantees him ksh 690,000/=; that after the 1st Respondent defaulted, she was not notified until the 2nd Respondent moved to attach her salary when she received a letter to that effect. The Witness who is the 9th Claimant stated that she reached out to the Respondent who promised to pay but eventually stopped taking her calls; that her attached salary could not be satisfied by her payslip and she had to continue paying via mpesa. 5. On cross examination, the Witness confirmed that she signed the guarantee document and that she would pay the money in the event of default. That she had paid ksh 349,978/= to the 2nd Respondent; that she had no issue against the 2nd Respondent save that she was not notified of the 1st Respondent’s default in good time.Claimant Witness 2, Nancy Njeri Gichuhi also confirmed that she agreed to guarantee the 1st Respondent’s loan, that she did not know he defaulted until salary was attached; that her salary was deducted for two months; that she met the 1st Respondent several times and pleaded with him to pay.

6. On Cross-examination, Claimant Witness 2 also confirmed that she willfully guaranteed the loan; that the 2nd Respondent did nothing wrong by recovering from her salary on the 1st Respondent’s default; that she had no issue with the 2nd Respondent.

1st Respondent's Case 7. The 1st Respondent adduced oral evidence in his Defence. He admitted in court that the two Claimants guaranteed his loan: that he found difficulties repaying the loan, that he had already paid some of the guarantors though he produced no evidence in proof; that he still owes ksh 1,200,000/= to the 2nd Respondent.

8. On cross examination, the 1st Respondent denied being aware that the Claimants were being attached, he learnt later about it, though he admitted that the 2nd Respondent informed him of its intention to attach the Claimant’s salaries. The 1st Respondent on further cross-examination admitted that he met the Claimants several times after he defaulted.He stated that the 2nd Respondent did not attack his salary as he was a private member, that his shares were utilized to offset part of the loan; that he had no idea how much the 2nd Respondent had taken from the Claimants; though he knew they had been paying.

Respondent's Case 9. Respondent’s Witness 1, Samuel Mongare stated that he is the credit manager of the 2nd Respondent. He confirmed that the 1st Respondent took a loan with the 2nd Respondent; that he was guaranteed by 10 persons but one of them, one Harrison Mungai had passed away; that the other guarantors are the Claimants in this case.The Witness further averred that the Claimants have no case against the Sacco and that it should be dismissed with costs.The witness further stated that the 1st respondent started to default in 2017, then stopped in 2018 and did not continue despite reminders; that the 2nd Respondent informed the guarantors and started attaching their salaries in March, 2019. That the 2nd Respondent ordinarily does not offset the guarantor’s shares, they pay through the pay slip or mpesa; that once the amounts are fully paid by guarantors, they usually do not go back to the debtor; that the full amount owed by the 1st Respondent has been paid by the guarantors in this case; save for the sum guaranteed by the deceased guarantor. The witness admitted that the guarantors were notified at the time pf attachment.

Analysis and Determination 10. We have considered the oral and documentary evidence and submissions of the partied and come up with the following issues;

Issue One: Whether or not the Claimants are Entitled to the Orders Sought in the Statement of Claim.It is not in dispute that the 1st Respondent was advanced a loan of ksh 5,700,000/= by the 2nd Respondent; or that the said claimants guaranteed the loan; neither is it in doubt that the arrears of the said loan which stood as ksh 1,795,883. 91/= as at 28/01/2019 was settled from deductions of guarantors’ salaries and/ or mpesa payments, save for the amount which would have been paid by the deceased guarantor. It is also not in question that the 1st Respondent did not pay any money to the 2nd Respondent since the said 28/01/2019, neither did he dispute the amounts claimed by the Claimants herein. There is also evidence that the guarantors were notified of the default late and they reached out to the 1st Respondent to urge him to pay. The guarantors acknowledge that they agreed to guarantee the loan and that they understood their salaries would be deducted if the 1st Respondent defaulted; however, that did not entitle the 1st Respondent to sit back and made no effort when he in fact knew that the claimants had been attached. We hold that the Claimants are entitled to refund of the money deducted from their salaries or paid via mpesa towards the 1st Respondent’s loan arrears. 11. However, we find that the Claimant’s Claim for general and special damages fail. Damages for breach of contract must be specifically pleaded and proved. Similarly, Special damages must not only be pleaded but specifically proved by production of the necessary documents in support thereof.The Claimants have neither pleaded the damages nor proved the same. In the case of Kenya Breweries Limited Kiambu v General Transport Agency Limited (2000) eKLR, the court held that: “it is the duty of the plaintiff to prove its claim for damages”

Issue Two: Whether or not the Claimants have a Case Against the 2nd Respondent.The 2nd Respondent was not party to the contract of guarantee which gave rise to contractual obligations between the Claimants and 1st Respondent. 12. The purpose of the guarantors was to secure the loan by the 2nd Respondent to the 1st Respondent, hence, when the 1st Respondent defaulted in the payment pf his loan, the 2nd Respondent moved to recover the arrears from the guarantors. While we fault the 2nd Respondent for not issuing sufficient notice to the Claimants before attaching their salaries, we find that they are not obligated to refund the Claimants monies which were deducted, unless there is evidence that it is holding money paid by the 1st Respondent after the date of recovery of the money from the guarantors. Evidence adduced at the hearing showed that the 1st Respondent did not pay any money towards his loan from 28/01/2019. We are thus unable to find the2nd Respondent liable to pay the Claimants any refund.In conclusion, we enter judgment in favor of the Claimants against the 1st Respondent in the sum of ksh 1,433,693. 69/= with costs of suit and interest at the court rates from the date of filing this suit until payment in full.

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. PAUL AOL - MEMBER SIGNED 30. 11. 2023HON. MICHAEL CHESIKAW - MEMBER SIGNED 30. 11. 2023Tribunal Clerk JonahMocha advocate for the ClaimantMaweu advocate for the 2nd RespondentJoseph Thiga Weru - No appearanceHON. J. MWATSAMA - DEPUTY CHAIRPERSON SIGNED 30. 11. 2023