[2023] KECPT 846 (KLR)

Lyambila v Edwin & another (Tribunal Case 127 of 2020) [2023] KECPT 846 (KLR) (17 August 2023) (Judgment)

Neutral citation: [2023] KECPT 846 (KLR)

Republic of Kenya

In the Cooperative Tribunal

Tribunal Case 127 of 2020

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

August 17, 2023

Between

Robin Masinde Lyambila

Claimant

and

Mukolwe Samuel Edwin

1st Respondent

United Nations Sacco Society Limited

2nd Respondent

Judgment

1. The claim for determination was brought by a Statement of claim dated 28/11/2019 and filed on 10/03/2020. This was initially brought vide a Notice of Motion that the claimant was desirous of it certified urgent. The Tribunal however dispensed off the Notice of motion dated 28/11/2019 and filed on 10/03/2020 by putting it abeyance to pave way for the hearing of the main suit.

2. Together with the Statement of claim, a Verifying Affidavit dated 28/11/2019 by the claimant and was also filed on 10/03/2020 and a list of documents dated 28/10/2019 and filed on 10/03/2020. The 2nd Respondent filed their Statement of Defence dated 29/01/2021 on 01/02/2021 accompanied by a Replying Affidavit by Moses Amolo sworn on 29/01/2021 and filed on 01/02/2021. Further the 2nd Respondent filed a list of documents dated 29/01/2021 and filed on 01/02/2021. The Tribunal gave a hearing date and the claimant and 2nd Respondent proceeded with one witness each.

claimant’s Case. 3. The claimant proceeded to give sworn evidence. The claimant averred that he guaranteed the 1st Respondent a loan amounting to Kshs. 6,000,000/= (six million). The claimant claims that he did not guarantee Kshs. 5,300,000/= which was the amount that was finally given to the 1st Respondent claimaning that he only signed the loan agreement stating that the 1st Respondent had requested for Kshs. 6,000,000/= and not Kshs, 5,300,000/=.

4. He finally relied on his list of documents and requested for prayers as per the Statement of claim. During the cross-examination, the claimant agrees that he signed the loan agreement that compromised of part B on guarantors. This part required the guarantors to read the document cautiously. Further, the claimant agrees that indeed his name appears on one of the pages and agreed that the signature was his. The claimant further claims that the 2nd Respondent communicated to the claimant to have the 1st Respondent repay.

Respondent’s Case. 5. The Respondent called Moses Amolo as Respondent Witness 1 who gave sworn evidence. He adopted his witness statement dated 05/02/21 as evidence in chief and also produced a list of documents dated 29/01/2021 and filed on 01/02/2021 and was produced as 2nd Respondent Exhibit 1-5. The Respondent witness averred that the society, as one of the conditions in the loan agreement, had the discretion to vary the applied amount downward depending on whether the borrower qualifies for the amount borrowed. During cross-examination, the Respondent emphasized that the variation was based on the loan agreement form. Further, the Respondent witness indicated that the guarantors was sufficient as security to the loan. The Respondents agrees that only the 1st Respondent was informed on the variation and since the loan applied for was varied downward the guarantors would not be exposed/prejudicial.

6. The Tribunal directed that both parties file their written submissions. The claimant filed their written submissions dated 18/01/2023 on 19/01/2023 while the 2nd Respondent filed theirs dated 18/04/2023 on 03/05/2023.

Analysis and Determination. 7. After critically perusing through the pleading and written submission of the parties, it is the Tribunal’s position that the issue for determination is;i.Whether the variation of loan amount by the 2nd Respondent discharged the guarantors.It is not in dispute that the claimant signed the Loan Application Form as a guarantor of the 1st Respondent. However, the claimant emphasis he guaranteed an amount of Kshs. 6,000,000/= and not Kshs. 5,300,000/=. Critical and careful reading of the Loan Application form indicates the following.i.The heading reads Loan Application and Agreement Form.ii.It has part A; Applicant’s Detailsiii.It has part B; Securityiv.It has part C; Loan Agreement and Declarationv.It has part E; Credit Committee

8. Of importance will be Part B that deals with security. The form indicates that a salary, deposits, guarantors and other collateral security required by the society are mandatory for the loan. Further, under the Repayment Guarantee sub-heading, the guarantors bind themselves by accepting liability for repayment of the borrowers’ loan in the event of default. The claimant has signed and with the sign having a witness. It will be crucial to also note that the Loan Application form has a caution that the guarantors are strongly advised to read the terms and conditions so as to understand the full implication of signing. A further look at the Application form under part C; Declaration of terms and conditions clause 15 reads that the loan applicant agrees to any variation by the Credit Committee in respect to Section E, the Credit Committee went ahead and varied the loan downwards to Kshs. 5,300,000/=

9. It is the Tribunal’s finding that the claimant should have understood that the credit committee could vary the loan amount. Further, by signing as guarantors they were bound by the variation above. Be that as it may, the Tribunal is of the considered view the downward variation was not in any way prejudicial to the guarantors.

10. Moreover, the Tribunal is cognizant of the High Court decisionSurya Holdings Limited &4 others v ICICI Bank limited and another [2015] eKLR where the court stated that there can never be an obligation on the guarantor if there has been unilateral variation on the terms of the Loan Agreement on the on the basis on which the guarantee was given. However, it is the Tribunal’s opinion that the variation done was not unilateral. The claimant signing the form agreed to the terms and conditions between the 1st and 2nd Respondent.

11. Further, the Tribunal is also cognizant of this Tribunal’s decision in Michael Muhuyi Kireu v IG Sacco limited, Tribunal Case 035 of 2021 that held that a guarantor must not be treated as a principal debtor. That their role sets in once the Principal Debtors has been pursued and all possible avenues of compelling the principal debtor have been exposed. The 2nd Respondent went ahead and setoff of the 1st Respondent’s deposits to clear the arrears after defaulting. Further the 2nd Respondent through numerous correspondences demanded for the payment of the arrears. It is clear in the agreement that it’s the society’s discretion to ask for a collateral as security. The Credit Committee found no need for other collateral other than salary, deposits and guarantors.It is therefore the Tribunal’s finding that in the present circumstance the guarantors were pursued after all other avenues were exhausted.

Upshot.From the foregoing, the Tribunal finds that the claimant has failed to his prove case on a balance of probabilities.

Orders.i.The claim against the Respondent is dismissed as the same lacks merit.ii.Costs payable to the Respondent.

JUDGMENT SIGNED, DATED AND DELIVERED VIRTUALLY AT NAIROBI THIS 17TH DAY OF AUGUST, 2023. HON. BEATRICE KIMEMIACHAIRPERSONHON. J. MWATSAMADEPUTY CHAIRPERSONHON. BEATRICE SAWEMEMBERHON. FRIDAH LOTUIYAMEMBERHON. PHILIP GICHUKIMEMBERHON. MICHAEL CHESIKAWMEMBERHON. PAUL AOLMEMBER