[2023] KECPT 747 (KLR)

Muchiri v Society (Tribunal Case 82 of 2020) [2023] KECPT 747 (KLR) (31 August 2023) (Judgment)

Neutral citation: [2023] KECPT 747 (KLR)

Republic of Kenya

In the Cooperative Tribunal

Tribunal Case 82 of 2020

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

August 31, 2023

Between

James Kiarie Muchiri

Claimant

and

Aberdare Sacco Society

Respondent

Judgment

1. The matter for determination is a Statement of Claim dated 20th February 2019 in which the Claimant claims that sometime between the year 2014 to 2016 the Claimant was a member of the Respondent’s Cooperative Society and served as an Honorary Secretary. It’s the Claimant’s claim that during his term as the Honorary Secretary, the Respondent took a loan of Kshs. 9,000,000/- from the Cooperative Bank of Kenya and the Claimant did guarantee the Respondent as a policy of the Respondent. Later the Claimant left the employment of the Respondent, but when he tried to apply for a loan, the same was denied and reason is that the Respondent has neither cleared the loan that the Claimant guaranteed as an Honorary Secretary, nor discharged the Respondent as a Guarantor when the Claimant vacated Office. As a result, the Claimant claims that he lost the Loan Application fee, and the business that he would have done with the loan. The Claimant now feels aggrieved, and prays for judgement against the Respondent for:1. General Damages for loss of loan facility and business2. Special Damages in the sum of Kshs. 8,000. 000/=3. Cost of the suit4. Any other relief this Honorable court may deem fit

2. The Respondent filed its reply to the Statement of Claim dated 18th August 2020. In his reply, the Respondent admits that the Claimant was indeed a member and an Honorary Secretary as claimed. The Respondent avers that the loan that was offered to the Respondent required a personal guarantee by the officials of the Respondent, and would be personally liable in case of default by the Respondent, and that the resignation by the Claimant did not invalidate the personal guarantee of the loan.

3. During the hearing, the Claimant and a representative of the Respondent were heard and cross examined.

4. Both parties filed submissions. The Claimant, submitted that it was the Respondent’s responsibility to regularize and inform the bank that the Claimant ceased to be an official of the Respondent. The Claimant also submits that the Respondent owed him a duty of care and a duty to duly service their loans. He further submits that it was a term of the contract that the Claimant was only bound for the obligations of the Respondent while in the office as an official of the Respondent. On General Damages, the Claimant has prays for an award of Kshs. 4,000,000/- computed from the approximations he would have gotten from his dairy business.

5. On his submissions, the Respondent considered the questions on whether the Respondent was in breach of contract and duty of care and whether the Claimant is entitled to the reliefs sought. Relying on case law and the law of contract, the Respondent submitted that the Claimant executed a personal guarantee and that he had not proved the costs claimed on a balance of probabilities. The Respondent prays that the Claimant’s claim be dismissed with costs.

6. The question that this tribunal asks itself is whether the Respondent was in breach and whether the Claimant is entitled to the reliefs that were sought. The breach would have occurred if the respondent failed to replace the Claimant’s name as a guarantee with the incoming Honorary Secretary. In asking this question we have to consider the guarantee that the claimant claims he signed for the Respondent. It is not in dispute that there was a guarantee that was signed by the claimant for the loan that the Respondent took. It is also not in dispute that the claimant left the position that he was holding in the respondent.

7. The tribunal finds that the Claimant has not proved on a balance of probabilities that the guarantee signed was not a personal guarantee. Indeed the Claimant did not produce a copy of the guarantee form, which would have enabled this court to determine the nature and the liability for the guarantee. It is also common knowledge that a guarantor agrees to guarantee another a loan with the knowledge that he will be required to repay the debts should the debtor not be in a position to pay. Therefore, although debtors are required to repay their loans as agreed in their loan agreements, the question of default is never too remote once someone agrees to be a guarantor. Being a guarantor is also voluntary, and indeed at no point has the claimant indicated that he was forced. The claimant’s claim is that he suffered a loss when he failed to secure a loan after being listed with the Credit Referencing Bureau as a result of the Respondent’s failure to honour its loans. This Tribunal has not seen the agreement (if any) between the Claimant and the Respondent on the terms of being a guarantor, but we feel that there is an implied term that at some point a guarantor will bear the burden of default of the debtor, and being listed in the credit bureau is one of them. This is because once the debtor defaults, the debt falls on the shoulders of the guarantor. Therefore, this Tribunal finds that the claimant has not shown how the Respondent was in breach of contract.

8. On the question of failing to accord the Claimant duty of care, this court is guided by the principles and threshold required to sustain a claim of negligence established by Lord Macmillan in Donoghue v Stevenson when he stated that,“The law takes no cognisance of, carelessness in the abstract. It concerns itself with carelessness only where there is a duty of care and where failure in that duty has caused damage ... the cardinal principle of liability is that the party complained of should owe to the party complaining a duty to take care and that the party complaining should be able to prove that he has suffered damage in breach of that duty.”Accordingly, the claimant is required to show that the Respondent owed him a duty of care, that the duty was breached, and that the claimant suffered damage as a result of such breach. We find that the Claimant has not shown such duty, or such breach.

9. The upshot of the above is that the Claimant’s claim lacks merit and is hereby dismissed with costs.

JUDGMENT SIGNED, DATED AND DELIVERED VIRTUALLY AT NAIROBI THIS 31ST DAY OF AUGUST, 2023. HON. BEATRICE KIMEMIA - CHAIRPERSON - SIGNED 31. 8.2023HON. J. MWATSAMA - DEPUTY CHAIRPERSON - SIGNED 31. 8.2023HON. BEATRICE SAWE - MEMBER - SIGNED 31. 8.2023HON. FRIDAH LOTUIYA - MEMBER - SIGNED 31. 8.2023HON. PHILIP GICHUKI - MEMBER - SIGNED 31. 8.2023HON. MICHAEL CHESIKAW - MEMBER - SIGNED 31. 8.2023HON. PAUL AOL - MEMBER - SIGNED 31. 8.2023Tribunal Clerk - JemimahMutegi holding brief for Kibera advocate for RespondentGekonge advocate for Claimant.HON. BEATRICE KIMEMIA - CHAIRPERSON - SIGNED 31. 8.2023