[2024] KECPT 1389 (KLR)

Mutuku & 8 others v Kinyanjui & another (Tribunal Case 382 (E176) of 2021) [2024] KECPT 1389 (KLR) (29 August 2024) (Judgment)

Neutral citation: [2024] KECPT 1389 (KLR)

Republic of Kenya

In the Cooperative Tribunal

Tribunal Case 382 (E176) of 2021

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

August 29, 2024

Between

Timothy Mutuku

1st Claimant

Emily Kerandi

2nd Claimant

Joseph Njoroge

3rd Claimant

Mary Kirangu

4th Claimant

Angeline Wafula

5th Claimant

Anthony Sigei

6th Claimant

Jeremiah

7th Claimant

Peter Getugi

8th Claimant

Ann Kibe

9th Claimant

and

Jeiffer Wanjiku Kinyanjui

1st Respondent

Utafiti Sacco

2nd Respondent

Judgment

Backgrounds 1. The history of this matter dates back to 2019 when the Claimants and the Respondent were working for ILRI and the were members of their UTAFITI SACCO Limited. At the time and specifically on 10th August 2019 the Respondent approached the 1st 5th, 6th, 7th and 8th of the Claimants Listed herein to guarantee her to obtain a loan of Kshs 4,000,000/= from their Sacco further on 31st January 2020 she approached the 1st,2nd,3rd,4th and 9th claimants to guarantee her for a loan of Kshs 1,270,000/=. That through an email dated 21st August 2020 addressed to the Respondent by the Sacco the Claimants were put on notice that if the two (2) months payments promised by the Respondent is not received by 31st August the 2020 total outstanding Loan would be recovered from guarantors with effect from September 2020. The Sacco meant a head to tabulate the amount, which will be recovered from guarantors as followsSupersaver Special Loan1. Angeline Wafula 517,911. 07 Timothy Mutuku 180,496. 932. Anthony Sigei 517,911. 07 Emily Kerandi 180,496. 933. Timothy Mutuku 517,911. 07 Joseph Njoroge 180,496. 934. Jeremiah Musili 517,911. 07 Mary Kiragu 180,496. 935. Peter Getugi 517,911. 07 Anne Kibe 180,496. 43From then on, the Sacco kept sending emails to the Respondent until she paid Kshs. 100,000/= on 10th November, 2020 in fulfilment of her earlier promise made vide an email addressed to the guarantors dated 29th June 2020. Which reads as follows“Further to our meeting on Wednesday 24th June 2020 a confirm that I will be making payment of the outstanding interest on 10th July 2020 and therefore make monthly repayment of Kshs 55,165. 48/= until September 2020. After September and will than revert the normal payments.”In quest to push the Respondent to pay the defaulted loans, the Claimant reported to the assistants Chief of Njoro Sub-Location, Kiambaa Sub-county, Kiambu county to help them to mediate over the dispute between themselves and the Respondent. The end result of the meeting was an agreement that the Respondent will pay to the Sacco Kshs 100,000/= every month which she did twice and stopped

The Case 2. Having exhausted their means to persuade Respondent to repay her defaulted loans the Claimants authorized Jeramiah Misili to file a Statement of claim dated 27th August 2021 on 31st August 2021 and prayed for the following ordersa.That Respondent to resume repayment of her (2) loans which stood at Kshs 2,692,353 and Kshs 938,310. 90b.That the Claimants be Delisted as the Respondent guarantorsc.Utafiti Sacco to stop deducting Claimants salariesd.The assets of the Respondent be attachede.That Utafiti Sacco to refund all the monies which have been deducted from their salaries and to restore any loss of sharesf.General damagesg.Cost and incidentals to this suith.Interests on (a) and (f)

3. In support of the Statement of Claim the Claimants filed authority to Act witness Statement Sworn by Jeremiah Musili dated 26th August 2021 a verifying affidavit , list of Witness dated 27/8/2021 List of Documents dated 27th August 2021 copies of dully filled loan application forms for the Kshs 4,000,000/= and Kshs. 270,000/=. Further, they filed an affidavit of service on 27th October 2021

4. The Respondent filed a Memorandum of Appearance and filed a statement of Defence dated 29th September 2021 on 29th October 20221 and denied Most of the paragraph of the claim she however , confirmed that she has continued to make regular monthly payments to Utafiti Sacco for both her loan facility and savings she further prayed the tribunal to have the Sacco enjoined in the suit as an interested party among other prayed.

5. On 24/5/2022 during mention the Claimants confirmed to the tribunal the receipt of the Respondents Witness Statement and upon review of the documents they noted adverse mention of Utafiti Sacco and therefore made an oral application for leave to enjoin the Sacco of which the Respondents had no objection.

6. On 30/8/2022 the tribunal made the following orders:I.That the Claimants is granted leave to enjoin Utafiti Sacco as the 2nd Respondent within 7 daysII.That the 1st Respondent and the 2nd Respondent to file their responses within 14 days of service of w/statement and documents of the ClaimantsIII.PI Directors on hearing of the claim was Scheduled for 2/11/2022.

7. Resulting from the above orders the Claimants filed and served amended plaint dated 7/9/2022 Verifying affidavit Claimants Witness Statement sworn by Jeremiah Musili Claimant list of documents and List of Witness all dated 7/9/2022 .Together with three the Claimants also attached copies of the loan application and agreement forms made by Jenifer W. Kinyanjui for the loan of Kshs 4,000,000/= and Kshs 1,270,000/= and various email exchange between the Claimants and the Respondents and between the 2rd Respondent and the 1st Respondent

8. As the parties mere taking pre-trial directions on 20/4/2023, the 1st respondent told the tribunal that they are willing to settle the matter out of the Tribunal and made an application to be given 30 days to see whether they can reach settlement. Failure to which she would be willing to proceed to hearing. The tribunal granted the 1st Respondent 30 days to negotiate with Claimants and scheduled a mention date of 21/6/2023 to confirm settlement or matter to proceed to hearing. By consent the parties agreed that the hearing be conducted virtually on 14/7/2023

The Claimants Case 9. During the hearing it was the testimony of the Claimants representive that the eight (8) Claimants worked together at ILRI and that they are members of Utafiti Sacco although .Angeline Wafula the 5th Claimants has since left working for ILRI. He adopted his witness statement dated 7/9/2022 and filed on 16/9/2022 together with the list of documents dated and filed same date as above. He produced them as evidence before the tribunal. He further stated that 1st Respondent approached the five (5) of us to guarantee a loan supersaver of kshs.4. 000,000/= for her in august 2019 to enable her drill a borehole in her farming January, 2020 she approached f five (5) of us again to guarantors her a special loan of Kshs,1,270,000/= in order to enable her to expand her business

10. Later on 19/5/2022 we as her guarantors received an email from the 2nd Respondent that the 1st Respondent defaulted to pay her loans. When we engaged her, she stated that she was still committed to pay. After a protracted exchange of emails between the 2nd Respondents and 1st Respondents, on 9th June 2020 the 1st Respondents confirmed that she had a bus which she had put up for sale so that she can use the proceed to off-set the defaulted loan

11. On further failure to serve her loans Claimants Witness testified that in October 2020, the 2nd respondent transferred the outstanding net loan of Kshs.3. 600,000/= to the Claimants guarantors after deducting 1st Respondent shares. Therefore the Respondent deducted apportioned amounts from their respective salaries for the last 31 months at a rate of Kshs. 9,283/= per month

12. In conclusion, the witness sought for judgment against the 1st Respondent on prayers stated in the amended plaint dated 7th September 2022

Respondent’s Case 13. The 1st Respondent stated that she wished adopt her witness Statement and briefly confirmed that she is a member of Utafiti Sacco that she borrowed two (2) loanFrom the 2nd Respondent

14. She stated that when Covid-19 set in she experienced problems in her business due to the lock down hence defaulted in the repayment of the loan. She tried to sell her property to repay the loan but it was not possible because of the financial strain during the Covid-19 period

15. In conclusion the Claimant stated she willing to repay the loan and that she can pay Kshs.100,000/= per monthThe 2nd Respondent testified that the 1st and 2nd loan was granted to the 1st respondent and both loan application forms were guaranteed by the Claimants

16. She testified that the 2nd Respondent granted her the loan when she had left her employment with ILRI on the basis pf her ability to pay further the respondent confirmed that apart from communication with the 1st Respondent. Through emails, the Sacco did not pursue the loanee first before they deducted the defaulted amounts from Claimants

17. Having read the parties statements and having examined the documentary evidence presented the oral proceedings and the w/submissions filled by parties the tribunal have distilled four (4) issues for determination:I.Whether the Claimants case has merit?II.Whether the 2nd Respondent acted prematurely to attach the salaries of the Claimants to defray the 1st Respondents defaulted loan?III.Whether the 1st respondent should pay her loans?IV.Who should bear the costs of this suit

Issue One: Whether the Claimants case against the 1st Respondent case has merit 18. It is not in dispute that 1st Respondent approached the Claimants to guarantee her for the 1st loan of Kshs 4. 000,000/= and the second loan Kshs 1,270,000/=. This is evidenced by wording of paragraph 4 in the claimants amended plaint dated 7/9/2022 which state that the Claimants aver that they guaranteed the 1st Respondent in taking up two (2) loans from the 2nd Respondent dated 9/8/2019 amounting to Kshs. 4,000,000/= and 31/01/2020 amounting to Kshs 1,270,000/=.

19. The 1st Respondent admitted the same under paragraph 3 of her statement of defense this further evidenced in the 2 loan Application forms that were filed in the tribunal which show that the Claimants were the that were guarantors of the 1st Respondent

20. However, on 19th May 2020 one Mr. Misoi on behalf of the 2nd Respondent emailed to the 1st Respondent and copied the Claimants with a caution in the following words

21. I would like to bring your attention that your loans has been in default for more than two (2) months. Therefore you are required to regularize your account as soon as possible if not come end of this month your account will be closed and liability be transferred to your guarantors (Emphasis ours on the same date and in response, the 1st Respondent emailed the 2 Respondent and copied the Claimants and stated thus I remain committed to repaying my loan and will share a plan to update my repayment .The email exchanges went on until 29/10/2020 when 1st Respondent deposited Kshs 100,000/= to the account of the 2nd Respondent with a promise to clear the outstanding balance

22. Vide an email dated 19/11/2020 addressed to the 1st Respondent and copied the Claimants the 2nd Respondent confirmed that the Sacco board sat on 19/10/2020 and resolved to have the loan defaulted by the 1st Respondent be recovered from the guarantors the strength of cause of the loan application and agreement from which was signed by the Claimants. The email communication worried the claimants to the extend that they filed this suit in the Tribunal

23. Be that as it may when we examined the set of documents filed in the tribunal that Claimants members statement which show that apportioned loan defaulted was debited in individual member statement as the same time during hearing the claimants witness stated that the 2nd respondent deducted Kshs. 9,283/= monthly from the Claimants salaries and when he was asked whether he filed his pay slip to show that. The answer was in the negative.

24. The long and short of this is that the Tribunal find that Claimants have not demonstrated adequate proof against the 1st Respondent to warrants this case we therefore disallow the Claimants prayers (a) and (b) in the amended statement of claim whether the 2nd respond acted prematurely to attach the salaries of the Claimants?

25. During hearing the 1st Respondent admitted that she borrowed the two loans from the 2nd Respondent to do farming of export crops. When Covid- 19 struck and there was lock down she was unable to repay her loan. However, he disagreed with the 2nd Respondent around December 2019 if the loans could be consolidated and that she offered alternative security in order to free her guarantors from the future liability

26. The 2nd Respondent agreed and did valuation for two properties which she offered in Olkalau and Kiambu. The titles were produced before the Tribunal the 2nd Respondent declined to proceed to substitute the securities with the guarantors

27. Further the 1st Respondent had a approached her bankers for a loan to use to pay of the Sacco loan . She discovered that the 2nd respondent and the Claimants had listed her with her with the Credit Reference Bureau and therefore she could not qualify for al loan from any bank. These roadblocks frustrated the 1st Respondent to the extend that she felt that the 2nd Respondent was hindering her pay off her defaulted loans with them.

28. Having put the 1st respondent at a fix and being unable to sell the bus that had put in the market the 2nd respond decided to go for the cheap and short route to attach the salaries of the Claimants in their submissions the 2nd Respondent heaped blame on the 1st respondent and the Claimants for dragging them to the tribunal. This absurd become the 2nd Respondent in the case of the 1st Respondent frustrations and if the 2nd Respondent had considered the alternative securities it wound have reduced the tension that ensured later.

29. It is therefore our finding that the 2nd Respondent acted prematurely by rushing to attach the Claimants salary allow Claimants prayers pay her loans without getting in touch with the 1st Respondent new employer and agree with them to recover the amount of the defaulted loan from her salary.?(Clause (H)(4) the of Application and agreement states so).

30. The 2nd Respondent knew the employer of the 1st Respondent but they choose not to get in touch with them. This won confirmed in the oral testimony of M/S Jane Mbogo the Chief Executive Officer of the 2nd Respondent at the hearing on 7/9/2023 for these reasons we allow the claimants prayers (e) in the amended plaint.

ISSUE TWO:Whether the 1st Respondent should pay her loans? 31. The 1st Respondent is the principal debtor in the instant care and all along she has consistently advised the 2nd Respondent that she willing to repay her loan.

32. In her written submissions under paragraph 25, the 1st Respondent stated.

33. During the hearing the 1st Respondent confirmed that she had indeed defaulted in her payment and was willing to offset the outstanding debt through monthly installments of Kshs.100,000/=. The 1st Respondent requested the 2nd Respondent and the Claimants to avail a September of accounts for reach individual guarantor for consideration by her advocates which have been provided to date days which was not done.

34. As much as the guarantors/Claimants accepted repay the defaulted sum in the event of the borrowers default by the 1st Respondent this same 1st Respondent in her oral testimony during hearing and her w/sub confirmed to the tribunal that she has the capacity to pay her debts through employment income and assets

35. By default the by -laws of the 2nd Respondent was not filed which would have guided the Tribunal as to whether it is right for the 2nd Respondent to attach guarantors before filling a suit against the defaulters that notwithstanding there is no evidence adduced before the Tribunal to show that 2nd Respondent followed up the 1st Respondent in recovery of the defaulted sum.in the absence of the 2nd Respondent by- laws and the fact that 1st Respondent is in agreement to pay her loan, we find no reason to deny her obligations.

36. Further, we do not see the reason why 2nd Respondent should continue to deduct the Claimants salaries while they could pursue the 1st Respondent for the recovery of the defaulted sum. Consequently, we allow prayer c in the Claimant’s Amended Plaint.

37. In conclusion since prayers (a) and (e) in the Claimants Amended Plaint is about the refund of the deducted amount we consolidated it under it under prayer (e) and pronounce the Tribunal findings as:i.Judgment is found in favour of Claimant against 2nd Respondent in terms of prayer c,e and h.a.Utafiti Sacco the 2nd Respondent stops deducting the Claimant’s salaries towards paying the loans defaulted by the 1st Respondent.b.Utafiti sacco the 2nd Respondent refunds all the amounts deducted from the salaries of the Claimant’s herein and restore any loss of shares held therein.c.Interest on (a) and (f) hereinabove.ii.Costs to the Claimant against 1st and 2nd Respondent to be borne equally.

JUDGMENT SIGNED, DATED AND DELIVERED VIRTUALLY AT NAIROBI THIS 29TH DAY OF AUGUST, 2024. HON. B. KIMEMIA CHAIRPERSON SIGNED 29. 8.2024HON. J. MWATSAMA DEPUTY CHAIRPERSON SIGNED 29. 8.2024HON. BEATRICE SAWE MEMBER SIGNED 29. 8.2024HON. FRIDAH LOTUIYA MEMBER SIGNED 29. 8.2024HON. PHILIP GICHUKI MEMBER SIGNED 29. 8.2024HON. MICHAEL CHESIKAW MEMBER SIGNED 29. 8.2024HON. PAUL AOL MEMBER SIGNED 29. 8.2024TRIBUNAL CLERK JONAHMs. Metto advocate holding brief for Mr. Muthui advocate for the Claimant.Nyambake advocate holding brief for Ms. Githinji for the 1st Respondent.Gatambia advocate for the 2nd RespondentHON. J. MWATSAMA DEPUTY CHAIRPERSON SIGNED 29. 8.2024.