https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/7439

NSSF Co-operative Society Ltd v Omukuba & 5 others (Commercial Appeal E366 of 2024) [2026] KEHC 7439 (KLR) (Commercial and Tax) (28 May 2026) (Judgment) Neutral citation: [2026] KEHC 7439 (KLR) Republic of Kenya In the High Court at Nairobi (Milimani Commercial Courts) Commercial and Tax Commercial Appeal E366 of 2024 MO Ado, J May 28, 2026 Between Nssf Co-Operative Society Ltd Appellant and Abednego Omukuba & 5 others & 5 others & 5 others & 5 others & 5 others & 5 others Respondent Judgment Introduction 1.This appeal arises from the judgment of the Co-operative Tribunal in which the Tribunal found that the Appellant unlawfully recovered loan arrears from the Respondents' shares and deposits without first issuing the requisite notice of default. The Tribunal consequently ordered the Appellant to reimburse the sums deducted together with interest. 2.The dispute before the Tribunal concerned a loan advanced by the Appellant to one of its members and guaranteed by the Respondents. The Respondents complained that although they had guaranteed the loan, the Appellant recovered the outstanding debt from their shares without notifying them of the borrower's default as required by law. 3.Upon considering the evidence and submissions placed before it, the Tribunal found in favour of the Respondents and held that the Appellant had failed to issue a proper notice of default prior to effecting deductions from the Respondents' accounts. The Tribunal ordered reimbursement of the deducted sums together with interest. 4.Aggrieved by that decision, the Appellant lodged the present appeal on the following grounds:i.The Tribunal erred in law by rewriting the terms of the contract and the by-laws governing the parties.ii.The Tribunal erred by giving probative value to unsupported and challenged oral evidence.iii.The Tribunal disregarded the Appellant's evidence and thereby violated the principles of natural justice.iv.The Tribunal erred in finding that the Respondents had discharged the burden of proof on a balance of probabilities.v.The Tribunal improperly shifted the burden of proof to the Appellant.vi.The Tribunal made findings unsupported by the evidence and applicable law.vii.The Tribunal failed to properly evaluate the Appellant's evidence and failed to appreciate that no debt remained due to the Respondents. 5.The Appellant seeks an order setting aside the judgment of the Tribunal and substituting it with an order dismissing the Respondents' claim with costs. 6.The appeal was canvassed by way of written submissions. The Appellant filed submissions dated 27th August 2025 while the Respondents filed submissions dated 22nd October 2025. The Parties' Cases 7.The Appellant submits that the Tribunal failed to appreciate the contractual obligations undertaken by the Respondents as guarantors. It contends that the guarantors were duly notified of the borrower's default and that the deductions from their shares were lawfully undertaken pursuant to the guarantee arrangements and the applicable by-laws. 8.The Appellant further submits that the Tribunal improperly disregarded its evidence and instead relied on unsupported assertions by the Respondents. It maintains that the Respondents failed to discharge the burden of proving that the deductions were unlawful. 9.The Respondents submit that although they were notified of an earlier default in 2018, the borrower subsequently regularised the loan account. They contend that when the borrower defaulted again in 2020, the Appellant failed to notify them before recovering Kshs. 49,289.00 from each guarantor's shares. 10.The Respondents submit that the Appellant did not produce any documentary evidence demonstrating that notice of the 2020 default was issued before the deductions were effected. They rely on Sections 107, 108 and 109 of the Evidence Act and the decisions in Mbuthia Macharia v Annah Mutua & Another [2017] eKLR and Peter Ngigi Kigira v Fredrick Nganga Kigira [2021] eKLR. 11.They further contend that the Tribunal did not rewrite the parties' contract but merely enforced statutory obligations imposed upon co-operative societies before recovery can be made against guarantors. Analysis and Determination 12.This being a first appeal, the court is under a duty to reconsider and re-evaluate the evidence on record and draw its own conclusions while bearing in mind that it did not have the advantage enjoyed by the Tribunal of seeing and hearing the witnesses testify. Nevertheless, the court will not lightly interfere with findings of fact unless they are based on no evidence, are founded on a misapprehension of the evidence, or are otherwise shown to be plainly wrong. 13.The principle was set in Selle v Associated Motor Boat Co. Ltd [1968] EA 123, where the Court stated:“An appeal to this Court from a trial by the High Court is by way of retrial and the principles upon which this Court acts in such an appeal are well settled. Briefly put, they are that this Court must reconsider the evidence, evaluate it itself and draw its own conclusions though it should always bear in mind that it has neither seen nor heard the witnesses and should make due allowance in this respect.” 14.The principle was reaffirmed in Peters v Sunday Post Ltd [1958] EA 424, where the Court observed that while a first appellate court has jurisdiction to review the evidence and reach its own conclusions, it should not lightly differ from the findings of fact of the trial court where those findings are based on the credibility and demeanour of witnesses. 15.The Court of Appeal of Kenya has consistently applied these principles. In Abok James Odera t/a A.J. Odera & Associates v John Patrick Machira t/a Machira & Co. Advocates [2013] eKLR, the Court stated:“This being a first appeal, we are reminded of our primary role as a first appellate court namely, to re-evaluate, re-assess and re-analyse the extracts on the record and then determine whether the conclusions reached by the learned trial Judge are to stand or not and give reasons either way.” 16.Having considered the record of appeal, the judgment of the Tribunal, the grounds of appeal, and the parties' submissions, the issue falling for determination is whether the Appellant complied with the contractual and statutory requirements governing recovery of a defaulted loan from guarantors. 17.It is common ground that the Respondents guaranteed a loan advanced by the Appellant to one of its members. It is equally undisputed that the principal borrower defaulted and that the Appellant recovered Kshs. 49,289.00 from the Respondents' shares in their capacity as guarantors. 18.The dispute concerns whether the Respondents were notified of the borrower's default before the deductions were effected. 19.The Appellant argues that it duly notified the Respondents of the default and that the Tribunal improperly disregarded the contractual arrangements governing the guarantee. 20.The Respondents concede that they were notified of a default in 2018. Their case, however, is that the borrower subsequently regularised the account and that a fresh default occurred in 2020 in respect of which no notice was issued before deductions were made. 21.The rights and obligations of co-operative societies in relation to recovery from guarantors are governed not only by contract but also by statute. Section 34 of the Co-operative Societies Act and Rule 30 of the Co-operative Societies Rules require a society to notify affected members before recovery measures are undertaken against them. The purpose of such notice is to inform guarantors of the borrower's default and afford them an opportunity to take appropriate measures before their deposits or shares are attached. 22.The burden of proving compliance with that requirement rested upon the Appellant. The Supreme Court in Gwer & 5 others v Kenya Medical Research Institute & 3 others [2020] KESC 66 (KLR) reiterated that the burden of proving a particular fact pursuant to section 108 of the Evidence Act lies upon the party asserting its existence. The Court, at paragraph 49 of the Judgment, stated as follows:“Section 108 of the Evidence Act provides that, “the burden of proof in a suit or procedure lies on that person who would fail if no evidence at all were given on either side;” and section 109 of the Act declares that, “the burden of proof as to any particular fact lies on the person who wishes the court to believe in its existence, unless it is provided by any law that the proof of that fact shall lie on any particular person.” 23.In this case, since the Appellant asserted that notice had been issued, it was incumbent upon it to demonstrate such compliance. 24.I have reviewed the record of appeal. The Appellant relies on a demand letter dated 19th April 2018 and evidence that the guarantors were informed of the borrower's default through SMS communication. The Respondents do not dispute receiving that notification. 25.The difficulty with the Appellant's case is that the deductions complained of arose following a subsequent default in 2020. The evidence shows that on 3rd June 2020, the Appellant wrote to the Respondents informing them that the borrower had defaulted to the tune of Kshs. 246,447.00 and that Kshs. 49,289.00 had already been deducted from their shares as guarantors. 26.That communication did not constitute a notice of intended recovery. Rather, it informed the Respondents that recovery had already taken place. The Appellant did not place before the Tribunal any demand letter, notice, SMS records, email correspondence, dispatch register, or any other documentary evidence showing that the Respondents were notified of the 2020 default before the deductions were effected. 27.In those circumstances, the Tribunal was entitled to conclude that the Appellant had failed to comply with the statutory notice requirements. 28.The importance of notifying guarantors before recovery is as emphasized in Josphat Magut & 6 others v Kitisuru Sacco Society Limited [2021] KECPT 271 (KLR), where the Tribunal observed that a default notice serves to inform guarantors of a borrower's default and enables them to take appropriate steps before adverse action is taken against them. The Hon. Tribunal stated that:“The Default Notice is an imperative instrument used by the lender to inform the guarantor that the loanee has defaulted, and the guarantor to use all their means to persuade the loanee to pay the debt. If this notice is not given, the guarantors are left in the dark, as that is the only way that the can keep abreast with the performance of a loan. Failure to inform the guarantors is a breach of fiduciary duty owed to them by the lender, especially because of the remedies adverse to them in performance of the contract.” 29.I endorse that reasoning. A notice issued in 2018 could not serve as notice of a separate default occurring approximately two years later. Once the earlier default had been remedied, any subsequent default required fresh notification before recovery could be undertaken against the guarantors. 30.I therefore reject the Appellant's contention that the Tribunal rewrote the parties' contract. The Tribunal merely enforced statutory obligations that regulate the exercise of contractual rights. Compliance with mandatory statutory requirements cannot amount to rewriting a contract. 31.I also find no merit in the complaint that the Tribunal shifted the burden of proof. The Respondents established that deductions had been made from their accounts. Once they asserted that no prior notice had been issued, the evidential burden shifted to the Appellant to demonstrate compliance with the statutory notice requirement. The Appellant failed to do so. 32.The upshot of the foregoing is that I am satisfied that the Tribunal's findings were supported by the evidence and applicable law. The Tribunal properly concluded that the Appellant failed to notify the Respondents of the 2020 default before effecting deductions from their shares. 33.Consequently, none of the grounds of appeal has merit. 34.The appeal is therefore dismissed in its entirety. Costs of the appeal are hereby awarded to the Respondent. 35.It is so ordered. DATED, SIGNED, AND DELIVERED AT NAIROBI THIS 28TH DAY OF MAY 2026HON. MR. JUSTICE MOSES ADOJUDGE OF THE HIGH COURTIn the Presence of:Moses C/AMuriuki………………for the AppellantMs. Nyariki for Nyongesa…………………for the Respondent