[2024] KECPT 950 (KLR)

Wambugu & 18 others v Ratta & another (Tribunal Case 211 of 2021) [2024] KECPT 950 (KLR) (23 May 2024) (Judgment)

Neutral citation: [2024] KECPT 950 (KLR)

Republic of Kenya

In the Cooperative Tribunal

Tribunal Case 211 of 2021

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

May 23, 2024

Between

David Muthui Wambugu

1st Claimant

Willie Joseph Mutuku

2nd Claimant

Nyawira Peter Nderitu

3rd Claimant

Lwal Vincent NO

4th Claimant

Njeru Dancun Muchangi

5th Claimant

Nganga Antony Kamau

6th Claimant

Gituku Arthur Nganga

7th Claimant

John Joseph Muema

8th Claimant

Ndegwa Jonathan Gitahi

9th Claimant

Kuria Charles Thuo

10th Claimant

Shazima Oscar Mungahu

11th Claimant

Obuya George Nambubi

12th Claimant

Ojiambo Alban Huss

13th Claimant

Gichobi Akire Kaburia

14th Claimant

Wambui Benard Kamau

15th Claimant

Nganga Reuben Kanyonga

16th Claimant

Muhu Nicholus Njenga

17th Claimant

Muia Abednego Mutili

18th Claimant

Kamau Mwangi Perminus

19th Claimant

and

James Owondo Ratta

1st Respondent

Balozi Cooperative Savings & Credit Society Limited

2nd Respondent

Judgment

1. This judgment emanates from an Amended Statement Claim dated 27th April 2021 seeking for orders:a.That an order do issue compelling the 1st Defendant herein to settle all the loan arrears with the 2nd Defendant arising from the amounts which the Plaintiffs had guaranteed him forthwith.b.That this Honourable court be pleased to grant a permanent order of injunction restraining the 2nd defendant by themselves, their agents, employees, servants, assigns or any other person acting on their behest from attaching the Plaintiff’s shares held by the 2nd Defendant.c.That this Honorable court be pleased to issue an order compelling the 1st defendant to surrender to the 2nd defendant all the original ownership documents that is to say title deeds with regard to land parcels known as Siaya/usigu/318, North Gen/ndere/1936, Plot No. 20 In L.R No. 22143 On Kayole Spine, log books for motor vehicles registration numbers KDA 072C, Mazda Van KAC 844N, Suzuki Station Wagon to be used as collateral until payment of the entire loan guaranteed by the Plaintiffs.d.That this Honourable court be pleased to grant a permanent order of injunction restraining the 1st defendant by himself, his agent, employees, servants, assigns or any other person acting on his behest from selling , transferring or any way interfering with land parcels known as Siaya/Usigu/318, North Gem/Ndere/1936, Log Books for motor vehicle registrations number KDA 072C, Mazda Van KAC 844N, Suzuki Station Wagon.e.A permanent injunction do issue compelling Zamara Actuaries , Administrators and Consultants Limited to remit all the monthly pension held by them to the 2nd Defendant until the loan in arrears of Kenya shilling six million seven hundred and fifty seven, seven hundred and sixty six (Kshs. 6,757,766. 00/=has been fully paid to the 2nd defendant.f.An order to issue compelling the 1st Defendant to deposit with this Honourable Tribunal his travel passport.g.General damages for mental stress and anguish.h.Punitive damages.i.Costs of the suit.j.Interest on (g), (h) and (i) abovek.Any other remedy as this Honourable Ttribunal may deem fit to grant.

2. The Claimants filed a Statement of Claim dated 27. 4.2021, Verifying Affidavit dated 27. 4.2021 sworn by David Muthui Wambugu his authority to act dated 27. 4.2021, Supporting Affidavit dated 27. 4.2021, List of Witnesses dated 27. 4.2021. List of Documents dated 27. 4.2021, 2 copies of the 1st Defendant title deeds, 3 copies of log books, 1 copy of layout of Plot No. 20 in Kayole and several copies of email exchanges.

Brief Background 3. The Claimants/Plaintiffs herein named and the 1st Defendant were colleagues who were employed at the USA Embassy in Nairobi and each of them was a member of the 2nd Defendant.On different dates the 1st Defendant borrowed loans from the 2nd Defendant and approached his workmates/Claimants to be his guarantors for the different types of loans which amounted to Kshs. 9,389,714/= as at 19. 8.2021 the loan until the time he left employment in May 2020 when the outstanding loan stood at Kshs. 6,757,766/=. By the time he exited employment the 1st Defendant was paid a lump sum amount of Kshs. 5. 000,000/= into his pension scheme where he was to be paid a pension of Kshs. 70,000/= per month. The 1st Defendant/Respondent through a replying affidavit dated 22. 6.2021 contended that he is still a member of the 2nd Respondent and that he will pay his outstanding loan. In an attempt to do so he applied for a special loan facility to offset the outstanding loan but he was unable to secure the commitment of the proposal guarantors.When this happened, the 1st Defendant/Respondent offered his two (2) tittle documents namely Siaya/Usigu /318 and MortGem/Ndere/1936 as security for the grant of the special loan. The 2nd Defendant advised that these two (2) properties must be valued in order to establish the maximum amount that could be secured.However, the valuation could not proceed because the 1st Defendant failed to pay the requisite valuation fees.Finally, on 23. 3.2021, the 2nd Defendant gave 90 days’ notice to the guarantors to pursue the 1st Defendant/Respondent to pay the outstanding arrears failure to which their deposits would be attached jointly and severally. It is this communication which prompted the Claimants to move to this Tribunal and sought for injunctive orders against their deposits.

4. The 1st defendant/Respondent entered appearance and filed a Statement of Defence dated 19. 8.2021 in response Claimants Statement of Claim dated 27. 4.2021. It is the 1st Defendant/Respondent testimony that he took three different types of loans from the 2nd Defendant/Respondent namely;a.Boresha Loan Kshs. 1,530,000/=b.Boresha plus loan Kshs. 6,790,000/=c.Normal loan Kshs. 1,080,000/=Total Kshs. 9,400,000/=These three loans were guaranteed by different guarantors who are part of the Claimants herein and others who are not in this suit.

5. The 1st defendant/Respondent confirmed that he used to service his loan from the time he borrowed until May 2020 when he left employment. He disputed the claim by the Claimants/Applicants that he was paid a lumpsum of Kshs. 5,000,000/= and instead he clarified that the same amount went into his pension scheme where he gets Kshs. 70,000/= per month for his sustenance.

6. Further, he confirmed that he has always attempted to settle the loan that he owed the 2nd Respondent and had even offered his two plots in Siaya to show commitment.

Analysis 7. It is an undisputed fact that both the Claimants/Plaintiffs and the 1st Defendant/Respondent are members of the 2nd Defendant/Respondent and employees of the USA Embassy in Nairobi. It is further not in dispute that the 1st Defendant/Respondent borrowed three (3) types of loans totaling over Kshs. 9,000,000/= from the 2nd Defendant/respondent secured by the share deposits of the Claimants/Plaintiffs who in this case were his guarantors.Similarly, the 1st Defendant/Respondent defaulted in repayment of the loan after he left employment thereby necessitating the 2nd defendant/respondent to advice the guarantors to persuade their former colleague (1st Defendant/Respondent) to repay the loan.

8. Upon failure of the Claimants/Plaintiffs to convince the 1st defendant/Respondent to repay the arrears, the 2nd Defendant exercised her right under guarantor ship.The Tribunal granted orders in its ruling dated 17. 2.2022 pending the determination of this matter in form of a judgment.Given that the provisions of the law which govern guarantor ship fall under the law of contract, the law provides that the primary liability falls upon the guarantor once a borrower defaults to repay his/her loan.This was the decision of the court in the case of Stephen Sonto Sipala versus Cooperative Bank of Kenya Limited and another [2018] eKLR. Where the court pronounced itself that:“…on the basis of these findings, temporary relief in favor of the Plaintiff in unmerited, the Plaintiff is guarantor and his liability arises once the borrower defaults and he should always ensure that the borrower pays lest his property is sold”.

9. In the same vein, the guarantors knew the consequences of default by their colleague and even indicated in the loan Application of waiver of the guarantors obligations, instead the claimants confirm that the 2nd Defendant issued them notices that the 1st Defendant/Respondent had defaulted in his loan repayment and required them to pay up as guarantors lest their shares deposits will be attached.

10. There is overwhelming evidence that the 1st Defendant/Respondent wa pursued by vigorously by the guarantors to the extend that they held a meeting with the Chief Executive Officer of the 2nd Defendant/Respondent, attempted to obtain a special loan which was to be secured by two (2) title deeds and log books. All these attempts failed and we take Cognizant’s of the decision form how much each one of them bound himself/herself to pay.Further, it is known that if the Claimants/Plaintiffs did not guarantee the 1st Defendant/Respondent the 2nd Defendant/Respondent would not have granted the loans to the 1st Defendant.This resonates very well with the decision of the court in the case of Rose Chepkirui Mibei & Jared Mokua Nyariki & others [2015] eKLR where the court held that:“…………once there is default and notice is given to the guarantor, his obligations under the guarantee must take effect immediately, unless the parties agree through a contract that the guarantor will not be called upon to make good money owed by the Principal Debtor”In the instant case, we have not seen any contract between the Claimants and the 1st Defendant regarding of this Tribunal in the case of Michael Muhuyi Kiveu versus IG Sacco Limited [2022] eKLR where it was decided that:“The Principal Debtor must be pursued, all attempt made to recover from him, then and only then should guarantors be notified of the default and that they are required to pay the debt. As a last resort, the guarantors will be coerced to pay the dues once the principal debtor has defaulted”.

11. The 1st Defendant/Respondent had provided two (2) titles of Land namely Siaya/Usigu/318 and North Gem/Ndere/1936 to secure a special loan from the 2nd Defendant/Respondent which did not materialize.Although the properties were valued, and the titles were in possession of the 2nd Defendant/Respondent, the properties could not be auctioned by the 2nd Defendant/Respondent, because the same were not collateral for the defaulted loan. Similarly, those titles were not charged to the 2nd Defendant and could not auction them.

12. The upshot of this is that, the Claimants/Plaintiffs signed the guarantee forms for the 1st Defendant/Respondent freely/voluntarily and it remains trite law that they as guarantors accepted liability jointly and severally incase the borrower defaulted.On this issue, we find that the Claimants/Plaintiffs did not/do not warrant the prayers sought.Therefore, Amended Statement of Claim on 23. 7.2021 is not merited and is dismissed with costs.

JUDGMENT SIGNED, DATED AND DELIVERED VIRTUALLY AT NAIROBI THIS 23RD DAY OF MAY 2024. Hon. J. Mwatsama - Deputy Chairperson Signed 23. 5.2024Hon. Beatrice Sawe - Member Signed 23. 5.2024Hon. Fridah Lotuiya - Member Signed 23. 5.2024Hon. Philip Gichuki - Member Signed 23. 5.2024Hon. Michael Chesikaw - Member Signed 23. 5.2024Hon. Paul Aol - Member Signed 23. 5.2024Tribunal Clerk JonahMwihia advocate for the ClaimantsKwegu advocate for 1st Respondent – No appearanceChege Kiabathi advocate for 2nd Respondent – No appearanceHon. J. Mwatsama - Deputy Chairperson Signed 23. 5.2024