[2023] KECPT 788 (KLR)

Mbogo v Metropolitan National Sacco Society Ltd (Tribunal Case 3/ E003 of 2022) [2023] KECPT 788 (KLR) (26 October 2023) (Judgment)

Neutral citation: [2023] KECPT 788 (KLR)

Republic of Kenya

In the Cooperative Tribunal

Tribunal Case 3/ E003 of 2022

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

October 26, 2023

Between

Eunice Wairimu Mbogo

Claimant

and

Metropolitan National Sacco Society Ltd

Respondent

Judgment

1. The matter for determination is brought vide a Statement of Claim dated 7th January 2022 and filed on 7th January 2022. The same is supported by a Verifying Affidavit sworn on 7th January 2022 and filed on 7th January 2022 seeking the following reliefs:a.Refund of KSH 144,339/=b.Accrued salary deductions until final determination of this suit.c.Cost of the suit and interestd.Any other or further relief that this Honorable Court may deem fit to grant.The Claimant filed a list of documents dated 7th January 2022 filed on an even date that include:1. Withdrawal Letter2. Payslip.

2. The Respondent filed a statement of defense on 24th February 2022 dated 18th January 2022. As set out there in seriatim and traversed verbatim, the Respondent denies every allegation made in the Claim aside from what is admitted. The Respondent says that the Claimant has been its member under Membership Number 16374 operating FOSA A/c No. 0020070198 and making monthly contributions.The Respondent also denies the content of paragraphs 4 and 6 of the statement of Claim and puts the Claimant under strict proof as it had never received notice to withdraw from the Claimant. Additionally, in the Annual General Meeting Resolutions by the General Assembly, members agreed to schedule refunds on a first come first served basis due to liquidity challenges faced by the Respondent.Further, the Respondent avers that it is amenable to consent to making the Claimant’s refunds by way of installments and further aver that it stopped deducting funds and the same was notified to the Claimant’s employer and it admits the jurisdiction of the Tribunal.

3. Being a claim of refunds, the parties were directed to file written submissions to dispose of the claim. The Claimant filed her submission on 13th June 2023 dated 22nd May 2023.

Respondent’s Submissions 4. The Respondent filed their written submission dated 21st July 2023 dated 14th November 2023. It states that the question in contention is true whether the Claimant withdrew her membership from the SAACO and satisfied the balance of probabilities that the Respondent failed, refused, or neglected to refund her contributions or whether it was a proper choice. In light of this, the Respondent aver that as per the by-laws, members are obliged to its resolutions. The Respondent aver that it is by the court’s discretion and legal burden of proof to satisfy that the Claimant withdrew her membership as the Respondent only was aware through the filing of this suit.

Issues for Determinationa.Whether the Claimant withdrew from the Respondent’s Saccob.Whether the 2019 Annual General Meeting Resolutions are legally binding

a) Whether the Claimant withdrew from the Respondent’s Sacco 5. The Claimant wrote a letter of withdrawal to the SACCO for member 16374 operating FOSA A/C No. 0020070198.

6. Also, the Respondent alleges that the Claimant did not receive submissions to withdraw and was only aware through the filing of this suit. Herein, the determination of this issue shall be put under the legal burden of proof.

b) Whether the 2019 AGM is legally binding 7. As per the Respondent’s submission, the 2019 Annual General Meeting resolutions had members resolve and agree to schedule refunds on a first come first serve basis. This was brought up due to the liquidity challenges faced by the Respondent and thus it was not possible to refund the members all at once. Further, the Respondent engages in the submissions that the resolutions were authorized and approved by SASRA in conjunction with the Commissioner for Co-operatives. However, there was no copy of authorization or approval annexed in the Respondent’s list of documents.

8. The questions engaged in the determination of this issue are:i.Did the resolutions meet the threshold of amendment of by-laws?ii.Were the right procedures followed in the amendment of by-laws?iii.Was any notice issued regarding the amendment?iv.Was the resolution registered in the SACCO’s by-laws?

Analysis 9. The Honorable Tribunal holds that it will deliver as per observation in the case of Tribunal Case No. 446 of Theophilus Olokulale v Transcom(2017) that “Justice is a serious quest, and each party needs to play their role in ensuring that the said justice is served in a speedy and timeous manner.”

10. As per the SACCO’s by-laws, “a member is required to wait 60 calendar days after making a refund request in writing.” The Claimant requested for withdrawal and refund of the shares on 13th April 2021 and filed this suit on 4th May 2022, thus the criteria have been met and thus the Claimant met the burden of proof, this is a consequence of the letter indicating the Respondent’s address and same as which the Claimant served the Respondent and the latter replied through a Statement of Defence.

11. Herein, this subjects the Respondent to prove the balance of probability that it is not an act of the Respondent’s failure, refusal, or neglect to refund the contributions. In response as per submissions, it is averted that it is the liquidity challenges that the Respondent is facing that prompted the Annual General Meeting to avert the members from withdrawing at the same time that would collapse the SACCO.

12. In the case of Francis Joseph Kamau v Housing Finance Company of Kenya Limited (2014) eKLR, it was stated that a bank has a duty under its contract with its customers to exercise “reasonable care and skill” regarding operations within its contract with its customers. The standard of reasonable care and skill is an objective standard applicable to bankers.

13. However, was the right procedure followed? To subject a member to terms, there must be a set of procedures followed by both parties. Under by-laws, a member may wish to withdraw their contribution at any point but have to wait for 60 calendar days, which was obliged by the Claimant. In contrast to this procedure, an Annual General Meeting was convened in 2019 upon which members opted to have refunds on a first come first serve basis therefore prompting the Claimant to have her refunds set on 22nd October 2023 from the termination of membership

14. Section 8 sub-section (2) of the Amendment of by-laws provides that no amendment of by-laws of a cooperative society shall be valid until the amendment shall be registered under this Act, for which a copy of the amendment shall be forwarded to the commissioner in the prescribed manner.Rule 8 of the Co-operatives Society Rules 2004 states that:1. Any amendment of the registered by-laws of a co-operative society under section 8 of the Act shall be made by a resolution of members at the general meeting in respect of which at least 15 clear days’ notice of the proposed amendment shall be given to the members of the society.2. No resolution under sub-rule (1) shall be valid and effective unless, in the case of a cooperative society with unlimited liability, half of the members of the society are present at the meeting and three-quarters of them vote in favor of the resolution

15. It is therefore that the Tribunal is obliged to answer the factual questions on the chances that the 2019 Annual General Meeting resolutions are impugned

Determination 16. As per Section 8 of the Co-operatives Societies Act, there was no notice of such amendments and there was no vote over the Resolutions as required by rule 8(2) (a) of the Co-operatives Societies Rules.

17. Further, there is no evidence that the Resolutions were authorized and approved by SASRA as filed in this suit. This is supported by the first leaf of the Respondent’s by-laws which indicates that the last amendment of the Respondent’s by-laws was in April 2016 and as such, the impugned Annual General Meeting resolutions could not have high authority over the Respondent’s by-laws. Thereby, the Resolution is a breach of SACCO by-laws.

18. Guided by article 10(1)(b) and (2) and Article 159(1) and (2) (a) of the Constitution of Kenya, the Honorable Tribunal shall abide by the rule of law. Herein, it can be observed that the Respondent did not follow the right procedure to amend or vary its by-laws, which is illegal and thus an abuse of the court process.

19. On the matter of the Claimant being sought to relief from the Court, it is observed in Section 79(3) that states that the Tribunal enters judgment in terms of the award together with costs, it shall issue a decree that shall be enforceable as a decree of the court.

Upshot 20. As such, Judgment is entered in favor of Claimant against Respondent for KSH 144,339/= plus cost and interest.

JUDGMENT SIGNED, DATED AND DELIVERED VIRTUALLY AT NAIROBI THIS 26TH DAY OF OCTOBER, 2023. HON. BEATRICE KIMEMIA CHAIRPERSON SIGNED 26. 10. 2023HON. J. MWATSAMA DEPUTY CHAIRPERSON SIGNED 26. 10. 2023HON. BEATRICE SAWE MEMBER SIGNED 26. 10. 2023HON. FRIDAH LOTUIYA MEMBER SIGNED 26. 10. 2023HON. PHILIP GICHUKI MEMBER SIGNED 26. 10. 2023HON. MICHAEL CHESIKAW MEMBER SIGNED 26. 10. 2023HON. PAUL AOL MEMBER SIGNED 26. 10. 2023TRIBUNAL CLERK JONAHEunice Wairimu presentKorir Advocate for the RespondentKorir advocate -We pray for 30 days Stay of Execution.Eunice Wairimu- I am not in agreement. I oppose the 30 days stay of execution.Tribunal order- 21 days stay of execution granted to Respondent.Hon. J. Mwatsama Deputy Chairperson Signed 26. 10. 2023