[2024] KECPT 906 (KLR)

Kitui Teachers DT Sacco Society Limited v Kimanzi & 2 others (Sued as the Officials of Mwongeli Self-help group) (Tribunal Case 564/ E565 of 2023) [2024] KECPT 906 (KLR) (30 May 2024) (Ruling)

Neutral citation: [2024] KECPT 906 (KLR)

Republic of Kenya

In the Cooperative Tribunal

Tribunal Case 564/ E565 of 2023

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

May 30, 2024

Between

Kitui Teachers DT Sacco Society Limited

Claimant

and

Ruth Kimanzi

1st Respondent

Irene Mumbi

2nd Respondent

Felistas Kasina

3rd Respondent

Sued as the Officials of Mwongeli Self-help group

(Coram: Hon. J. Mwatsama- Deputy chairperson, Hon. B. Sawe- Member, Hon. F. Lotuiya- Member, Hon.P. Gichuki- Member, Hon. M. Chesikaw- Member and Hon. P. Aol- Member.)

Ruling

1. The Respondents filed a Notice of Motion Application under Section 1A, 1B, 3A of the Civil Procedure Act, Order 51 Rule 1 and 4 of the Civil procedure Rules, Rule 11 of the Co-operative Tribunal (Practice and Procedure) Rules dated 23rd October, 2023 seeking among others:i.Spent.ii.That pending hearing and determination of the Application inter-parties, the Honourable Tribunal be pleased to issue an order compelling the Respondent to file in Court and serve the Applicants within 7 days from the date of the order the original copies of the Applicants loan agreement signed on 3/6/2020. iii.That the Honourable Tribunal be pleased to strike out or dismiss with costs the Respondent’s Statement of Claim dated 24th July, 2023 on the grounds that the Claim was filed at the Tribunal prematurely before the Respondent exhausted the internal mechanisms of selling securities and recovering ROSA deposits and shares as pledged by the Applicants in the acknowledgement form for loan security dated 3/6/2022. iv.That the Respondents be condemned to pay costs of the Application.

2. The Application was supported by the Affidavit of Ruth Kimanzi which raised the following grounds among others:a.That the Respondents advanced a loan of Kshs. 2,070,000/= to the Applicants on 18/6/2020 in which they have pleaded that they paid for the loan but the Respondent never provided them with any reconciliation statements to establish whether they have any loan outstanding or not.b.That according to bullet number 3 in the eligibility and client orientation checklist which is dated 18/6/2020, the Applicants were required “to provide acceptable collateral to cover 100% of loan including the loan amount” and therefore there was no provision for the officials to be sued in their individual capacities.c.That the Applicants complied with the pre-conditions set out in the “eligibility and client orientation checklist” and provided security of title deed of land parcel number Mulango/ Katulani/ “A” 2054 registered in the nae of Mutuku Mbwika, logbooks of motor vehicle registration no KAE 534 C, Motor cycled no KMDP 215 J and KMCW 904U plus savings of Kshs. 740,935/= and all funds that were in the Applicant’s savings account.d.That the Respondent “acknowledgement form for loan security” which was signed between the Applicants and the Respondent on 18/6/2020 clearly stated that Mwongeli Self Help Group (the Applicant) promised to pay the loan in full and in case they fail to pay the loan “the title deed and POSA deposits will be used to recover the loan amount plus our deposits.”e.That the Respondent is bound by the agreement which they signed on 18/6/2020 and therefore the Respondent should have first exhausted the internal mechanisms set out in the acknowledgement form for loan security by first selling the securities which have all along been in custody and recovering POSA deposits and all other savings held in their society and also provide proper accountable records of the funds realized.f.That the Applicant have reliably been informed that the Respondent is in the process of applying for judgement before exhausting the laid down mechanisms set out in the loan agreement form and we therefore urge the Tribunal to either trike out or dismiss the Respondents suit because It’s premature and an abuse of the court process.

3. This Tribunal gave directions on 30th October, 2023 and those directions having been complied with, it issued further directions on 23rd January, 2023 for the case to be canvassed by way of Written Submissions. We have considered the Notice of Motion and the pleadings filed including the submissions and the only question remaining for determination, is as to whether the Claimants have followed the right process of recovery of the loan.

Process Of Recovery Of The Loan. 4. Loan agreement forms once signed are in most cases conclusive contracts between lenders and borrowers and should only be disregarded if there are clear convincing reasons for doing that. The Loan Agreement Forms offer the terms of borrowing and lending and also define who parties in the lending borrowing are.

5. In this particular case, it’s important that we begin by examining the Loan Agreement Form that was signed on 18/6/2020 to first confirm whether its terms and the parties that entered into the parties that entered into that contract were clear for both parties. This in essence will help us know whether we should disregard the terms in the contracts, or if we should “pierce through the veil” in the interest of justice to help the Claimant recover their loan.

6. From evidence before court, the Claimant’s Submissions are not adequate to persuade this court to disregard or “ look beyond the loan form” to enable them recover the loan arrears.

7. To begin with, they have not availed sufficient evidence on why they don’t want to follow the process of recovery as stipulated by the loan agreement signed. There is no evidence presented in court to show that they have reached a dead end with the securities provided or that they have tried exhausting the options available to them and own into a swamp.

8. What the Claimants are trying to do in our opinion, is lifting the veil prematurely or trying the shortest route to recover which in our opinion should not be the case at this point in time. In cases where courts have agreed that the veil be lifted, those courts have also been commenced though evidence that there is fraud or improper conduct with the aim of denying a party their rightful entitlement in a contract.

9. In this particular case, there is no such evidence on record, but be as it may, after looking at the pleadings, affidavits and submissions filed, it is our considered view as a Tribunal that in as much as the time might not be ripe to “pierce through the veil” it is also not in the interest of justice and public policy to strike out the Statement of Claim as it raises valid and legitimate legal issues that should be determined to their logical conclusion.

Final Orders.Notice of Motion dated 23. 10. 2023 is held in abeyance.i.The matter to proceed for full hearing and determination. As such, parties to file all documents to be used at trial 30 days from today.ii.Mention for pre-trial directions on 8. 8.2024

RULING SIGNED, DATED AND DELIVERED VIRTUALLY AT NAIROBI THIS 30TH DAY OF MAY, 2024. HON. J. MWATSAMA DEPUTY CHAIRPERSON SIGNED 30. 5.2024HON. BEATRICE SAWE MEMBER SIGNED 30. 5.2024HON. FRIDAH LOTUIYA MEMBER SIGNED 30. 5.2024HON. PHILIP GICHUKI MEMBER SIGNED 30. 5.2024HON. MICHAEL CHESIKAW MEMBER SIGNED 30. 5.2024HON. PAUL AOL MEMBER SIGNED 30. 5.2024TRIBUNAL CLERK JONAHMs. Wachira advocate holding brief for Njeri Ngunjiri for Respondent/ApplicantMs. Mbilo advocate holding brief for Mr. Mulu for Claimant/Respondent.HON. J. MWATSAMA DEPUTY CHAIRPERSON SIGNED 30. 5.2024