[2023] KECPT 729 (KLR)

Kaoka v Mhasibu Sacco Soc Ltd & 2 others (Tribunal Case 138 of 2021) [2023] KECPT 729 (KLR) (21 September 2023) (Judgment)

Neutral citation: [2023] KECPT 729 (KLR)

Republic of Kenya

In the Cooperative Tribunal

Tribunal Case 138 of 2021

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

September 21, 2023

Between

Lilian Tinkira Kaoka

Claimant

and

Mhasibu Sacco Soc Ltd

1st Respondent

Caroline Kavata Kimatu

2nd Respondent

Martin Franco Mutiso

3rd Respondent

Judgment

1. The matter for determination is a Plaint dated 08th March 2021 and filed on the same day. In the Plaint, the Plaintiff (Claimant) avers that she as well as the 2nd and 3rd Defendants (Respondents) were MEMBERs of the 1st Respondent. The Claimant had guaranteed loans to the tune of Kshs. 172,784. 89/= to the 2nd Respondent and Kshs. 154,970. 46/= to the 3rd Respondent. However, unbeknownst to the Claimant both the 2nd and the 3rd Respondents defaulted on their loans and the 1st Respondent deducted the Claimants shares without any notice to recover the above amounts. The Plaintiff was accompanied by the Claimant’s witness statement and a list of documents.

2. The Respondents failed to enter appearance or file Statement of Defence despite service of summons.

3. On 6th October 2021 the Claimants filed a request for judgement dated 1st September 2021 on the basis that the Respondents did not enter appearance or file a Defence within the requisite time.

4. On 7th October 2021, Judgement was entered in favour of the Claimants against the Respondents. Formal Proof was set for 11th July 2023.

5. During the Formal Proof hearing, the Claimant presented his case as against the Respondents, and the Claimant testified. She told the court that she knew the 2nd and the 3rd Respondents and she adopted her witness statement.

Analysis 6. The Claimant and the 2nd and 3rd Respondents were members of the 1st Respondent. The Claimant guaranteed a loan to the 2nd and the 3rd Respondent. The Sacco deducted the savings of the Claimant when the 2nd and 3rd Respondents defaulted on their loans. The Claimants contention is that she was not given any notice of default by the guarantors.In the case of Ebony Development Co. Ltd v Standard Chartered Bank Ltd [2008] eKLR Khaminwa, J on delivering on the issue of the liability of guarantors held that:“The security of charge was a guarantee. The obligation of a guarantor is clear. It becomes liable upon default by the principal debtor...”The position that the Claimant as a guarantor would become liable in case the 2nd and the 3rd Respondents defaulted is clear. The Claimant does not dispute the validity of the guarantee. The Claimant does not also dispute that the Respondents defaulted on their loan repayments.However, we also seek counsel on Halsbury’s Laws of England, Fourth Edition Reissue) Vol 20(1) para 239 which provides that:-“When a creditor has acquired a right to immediate payment of the debt from the Guarantor, the Guarantor is entitled to call upon the Principal Debtor to pay the amount of the debt guaranteed, so as to relieve the Guarantor from his obligation, even though the Guarantor, has paid nothing under the guarantee, even though the Creditor has not demanded payment from him or the Principal Debtor’’.It follows that it was only fair that the Claimant be notified by the 1st Respondent of the 2nd and 3rd Respondents default so that the claimant could call upon them to settle their debt. We are also cognizant of the Claimant’s own admission that the 2nd and 3rd Respondents' loan had become due and defaulted which therefore means he would step in as the debtor and repay the loan if his pleas to the 2nd and 3rd Respondents were not heeded. Lack of notice of default does not absolve the Claimant the position of a guarantor. The Claimant prays this Tribunal to order the 1st Respondent to refund the shares taken to cater for the defaulted loan. However, we feel that the only wrong that the 1st Respondent did was failure to notify the Claimant of the 2nd and 3rd Respondents’ default. The greatest wrong was done by the 2nd and 3rd Respondents who, if they had serviced their loans as agreed, this matter would not be here.

7. The upshot of the above is that judgment is entered in favour of the Claimant as follows:a.A refund of Kshs 154,970 by the 2nd Respondentb.A refund of Kshs. 172,784 by the 3rd Respondentc.Costs to this Claim to be borne by the Respondents jointly and Severallyd.Interest on the above from the date of filing suit at Tribunal rates.

JUDGMENT SIGNED, DATED AND DELIVERED VIRTUALLY AT NAIROBI THIS 21ST DAY OF SEPTEMBER, 2023. HON. BEATRICE KIMEMIACHAIRPERSONHON. J. MWATSAMADEPUTY CHAIRPERSONHON. BEATRICE SAWEMEMBERHON. FRIDAH LOTUIYAMEMBERHON. PHILIP GICHUKIMEMBERHON. MICHAEL CHESIKAWMEMBERHON. PAUL AOLMEMBER