Amudavi v Invest and Grow Sacco Ltd [2022] KEHC 10516 (KLR)

Amudavi v Invest and Grow Sacco Ltd (Civil Appeal E408 of 2021) [2022] KEHC 10516 (KLR) (Civ) (17 June 2022) (Judgment)

Neutral citation: [2022] KEHC 10516 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Law Courts)

Civil

Civil Appeal E408 of 2021

JK Sergon, J

June 17, 2022

Between

Wycliffe Shivachi Amudavi

Appellant

and

Invest and Grow Sacco Ltd

Respondent

(Being an appeal against the judgment and decree delivered by Honourables B. Kimemia, F Terer and P. Gichuki on 9th April, 2020 in Cooperative Tribunal Case No. 407 of 2018)

Judgment

1. The appellant lodged a claim against the respondent before the Cooperative Tribunal (“the Tribunal”) by way of the statement of claim dated 8th August, 2018 and sought for reliefs namely a refund of the sums of Kshs.320,000/= and Kshs.160,000/= respectively, and general damages, together costs of the suit and interest thereon.

2. The appellant pleaded in the claim that he was at all material times a teacher by profession and a member of the respondent, operating an account with it.

3. The appellant pleaded in the claim that his professional relationship with the respondent started experiencing challenges in the year 2014 thereby resulting in a claim lodged by the appellant before the Tribunal, namely Claim No. 10 of 2016 and which claim was concluded with the Tribunal finding that the respondent was in violation of the loan policy agreement entered into between the parties herein.

4. It is pleaded in the claim that despite the abovementioned finding, the respondent withdrew his shares in excess of Kshs.320,000/= and further declined to remit his dividends in the year 2015 totaling the sum of Kshs.160,000/= thereby resulting in loss/damage to the appellant.

5. Upon entering appearance, the respondent filed its statement of defence to deny the allegations set out in the claim.

6. At the hearing of the claim, the appellant testified while the respondent relied on the testimony of one (1) witness.

7. Upon close of submissions, the Tribunal dismissed the appellant’s claim in the judgment delivered on 9th April, 2020.

8. The appellant has now sought to challenge the aforementioned judgment on appeal and has put forward eight (8) grounds of appeal as seen in the memorandum of appeal dated 13th July, 2021:i.That the Honourable Tribunal erred in fact and in law by assuming appellate jurisdiction and overturning the decision of the tribunal in Cooperative Tribunal Case No. 10 of 2016. ii.Thatthe Honourable Tribunal erred in law and in fact by finding that the ruling in Cooperative Tribunal Case No. 10 of 2016 was made at the interlocutory stage whereas the ruling was the Tribunal’s final determination of the case.iii.That the Honourable trial Tribunal erred in law and in fact by finding that the ruling of the Tribunal in Cooperative Tribunal Case No. 10 of 2016 was not binding on the Tribunal in its determination of Case No. 407 of 2018. iv.Thatthe Honourable Tribunal erred in law and in fact by finding that the appellant was in arrears and the respondent was legally bound to apply his shared to recover the same despite the Tribunal’s ruling in Cooperative Tribunal Case No. 10 of 2016 in which the Tribunal held that the claimant did not have any arrears.v.Thatthe Honourable Tribunal erred in law and in fact by finding that the respondent’s witness (DW1) stated on oath that the requisite notice was issued to the appellant when in fact the witness stated that the notice was not served prior to the withdrawal of the appellant’s shares.vi.Thatthe Honourable Tribunal erred in law and in fact by finding that failure to issue a notice under Rule 30 of the Cooperative Society Rules was not fatal to the respondent’s case yet the rule is in mandatory terms.vii.That the Honourable Tribunal erred in law and in fact by ignoring and failing to take into consideration the evidence adduced on behalf of the appellant together with the submissions and authorities.viii.Thatthe Honourable Tribunal erred in law and in fact by finding that the claimant had not proved his case on a balance of probability and consequently dismissing it.

9. At the directions of the court, the parties put in written submissions on the appeal. The appellant on the one part submits that the that the Tribunal in Cooperative Tribunal Case No. 10 of 2016 delivered the ruling on the 15th of December, 2017 as a final determination of the original claim and not at the interlocutory stage, as claimed by the Tribunal in the claim giving rise to the present appeal.

10. The appellant is of the view that the above-cited decision is binding upon the Tribunal and cites the case of John Mugendi Njeru v Republic [2021] eKLR in which the court expressed itself thus:“The court which determined the said appeal and this court are courts of concurrent jurisdiction and this court does not have jurisdiction to review a decision of a court of equal status and thus it cannot review the judgment and/or orders made by the Honourable J.M. Bwonwonga, J. as doing so would be tantamount to sitting as an Appellate court on the judgment of the Honourable Judge. The law abhors that practice of a judge sitting to review a judgment or decision of another judge of concurrent jurisdiction. Good governance demands that cases be handled procedurally in the right forum. This is because the rule of the thumb that superior courts cannot sit in review/appeal over decisions of their peers of equal and competent jurisdiction much less those courts higher than themselves.”

11. The appellant further submits that the Tribunal in Cooperative Tribunal Case No. 10 of 2016 having made a determination that the loan had been cleared in full by April, 2016 the Tribunal in the impugned judgment ought to have found that the appellant was not indebted to the respondent subsequently and hence there was no justification for withdrawing his shares and declining to issue his dividends.

12. It is also the submission by the appellant that the Tribunal erred in its application of Section 34 of the Cooperative Societies Act (“the Act”) and Rule 30 of its Rules concerning the notice and therefore arrived at an improper finding despite evidence to show that no such notice was served upon the appellant prior.

13. For reference purposes, Section 34 of the Act stipulates that:‘‘A co-operative society shall have a first charge upon the share or interest in the capital and on the deposits of a member or past member, and upon any dividend, bonus or accumulated funds payable to a member or past member, in respect of any debt due from such member or past member to the society, and may set off any sum credited or payable to such member, or past member in or towards the payment of any such debt.’’

14. Rule 30 provides thus:‘‘Where a society intends to exercise its right of set-off under section 34 of the Act, the society shall give fourteen days notice of such intention to the member or past member concerned.’’

15. The appellant is therefore of the view that the Tribunal ought to have determined that in the absence of compliance to the above legal provisions by the respondent, its actions of withdrawing his shares and dividends amounted to an illegality and hence he is entitled to a refund of the same.

16. On its part, the respondent contends that the Tribunal arrived at a correct finding since the loan taken out by the appellant had been paid until April, 2016 when he began to default and hence it was proper for the respondent to attach his shares and to withhold his dividends.

17. The respondent further contends that the mere absence of service of the notice referenced under Section 34 and Rule 30 (supra) cannot be deemed fatal to the actions undertaken by the respondent.

18. I have considered the contending written submissions on appeal together with the few authorities cited in support thereof. I have also re-evaluated the evidence which the trial court had the opportunity to look at, in line with the case of C.K. Bett Traders Limited & 2 others v Kennedy Mwangi & another [2021] eKLR cited in the respondent’s submissions, where the court held thus:“This being a first appeal, parties are entitled to and expect a rehearing, reevaluation and reconsideration of the evidence afresh and a determination of this court with reasons for such determination. In other words, a first appeal is by way of retrial and this court, as the first appellate court, has a duty to re-evaluate, re-analyze and re-consider the evidence and draw its own conclusions, of course bearing in mind that it did not see witnesses testifying and therefore give due allowance for that.”

19. It is clear that the appeal lies fundamentally against the decision by the Tribunal dismissing the claim. I will therefore address the eight (8) grounds of appeal under the three (3) limbs hereunder.

20. The first limb touches on whether the Tribunal in Cooperative Tribunal Case No. 10 of 2016 made a final determination of the matter that was placed before it.

21. The appellant testified at the trial that upon the respondent freezing his salary account pursuant to a loan that had been advanced to him in the year 2014 in the sum of Kshs.360,000/= he lodged Cooperative Tribunal Case No. 10 of 2016 in a bid to obtain injunctive orders against the respondent and which matter was conclusively determined by that Tribunal.

22. The Tribunal in the impugned judgment determined that the abovementioned decision was made at the interlocutory stage and that the appellant did not tender any evidence to show that the abovementioned claim was heard and determined on merits.

23. Upon my re-examination of the pleadings and evidence, I note that subsequent to the institution of Cooperative Tribunal Case No. 10 of 2016 by the appellant, the Tribunal in that instance delivered a ruling on 5th December, 2017 where it held that since the evidence showed that the loan sum of Kshs.360,000/= advanced to the appellant had been paid off in full by April, 2016 the only issue for determination was that of costs. The Tribunal then went ahead to award costs to the appellant.

24. From the foregoing, it is clear that the abovementioned ruling dispensed with the matter and hence there was no need for the claim to go for full hearing. To this extent, I am in agreement with the averments made by the appellant that the Tribunal in the impugned judgment erred in finding that there is nothing to indicate that Cooperative Tribunal Case No. 10 of 2016 had conclusively been determined.

25. The second limb of the appeal which also forms the crux of the present appeal has to do with whether the Tribunal acted correctly in dismissing the appellant’s claim on the basis of his indebtedness to the respondent.

26. It is the evidence of the appellant that having repaid the loan sum of Kshs.360,000/= he had no outstanding loans owed to the respondent and that any claims that he had attached himself to other loans as a guarantor were denied.

27. Joseph Chirchir who was DW1 testified that the appellant paid the loan sum until April, 2016 but that from the month of May, 2016 there was a default which was recovered through his shares.

28. The witness further stated that the appellant had previously been paid dividends but that upon attachment of his shares, the dividends stopped flowing since dividends are ordinarily paid on the shares.

29. In cross-examination, the witness restated that the appellant had guaranteed some loans whose payment was defaulted and hence the step taken to attach his shares in a bid to recover the outstanding loan amounts.

30. In its judgment, the Honourable Tribunal reasoned that the evidence tendered shows that in the absence of any proof of repayment of the sums indicated in the loan statement, it was satisfied that the appellant was indebted to the respondent and hence the respondent was legally bound to apply his shares as a means of recovering the outstanding sums.

31. Upon my study of the record, it is apparent that the entire loan sum of Kshs.360,000/= had been paid off by April, 2016. This is reiterated in the ruling delivered by the Tribunal in Cooperative Tribunal Case No. 10 of 2016.

32. Upon my further study of the record, I note that the respondent’s averment is that the outstanding loan sums from the month of May, 2016 were the result of defaults both on the part of the appellant and on his part as a guarantor to other loans.

33. Nonetheless, I did not come across any credible evidence on the part of the respondent setting out the specifics of the guarantees made by the appellant to third parties and which would justify the attachment of his shares and the withholding of his dividends.

34. Going by the record, there is also nothing to indicate that the appellant took out a fresh loan with the respondent and which he was servicing subsequent to the loaned sum of Kshs.360,000/= which as I have already indicated, appears to have been repaid in full.

35. From the foregoing, I am therefore of the view that the respondent did not tender any credible evidence to support its allegations that the appellant was indebted to it so as to justify the action taken in respect to his shares and dividends.

36. In that respect, I disagree with the finding arrived at by the Tribunal regarding the indebtedness of the appellant.

37. The third and final limb of the appeal concerns itself with the issue of service of the notice.

38. The evidence tendered at the trial makes it apparent that the appellant was not served with a notice pursuant to Section 34 of the Act and Rule 30 of the Society Rules, since DW1 was unable to produce the same at the trial.

39. In turn, the Honourable Tribunal concluded that there was nothing to show that Rule 30 had been complied with by the respondent, but further concluded that this was not fatal.

40. Section 34 of the Act stipulates that:‘‘A co-operative society shall have a first charge upon the share or interest in the capital and on the deposits of a member or past member, and upon any dividend, bonus or accumulated funds payable to a member or past member, in respect of any debt due from such member or past member to the society, and may set off any sum credited or payable to such member, or past member in or towards the payment of any such debt.’’

41. Rule 30 provides thus:‘‘Where a society intends to exercise its right of set-off under section 34 of the Act, the society shall give fourteen days notice of such intention to the member or past member concerned.’’

42. From my reading and understanding of the foregoing, the proviso is couched in mandatory terms when it comes to issuance of a notice.

43. From my perusal of the record, there is nothing to support the averment by the respondent that it complied with the above proviso. In my view, while the absence of a notice may not be necessarily fatal, I find that it would result in a grave injustice to the concerned party, which I am convinced could have prompted the mandatory nature of the proviso in the first place.

44. Be that as it may, I have already arrived at the finding that the Honourable Tribunal erred in finding that there was credible evidence of indebtedness on the part of the appellant and I am therefore inclined to set aside its decision. In my view, the appellant succeeded in his claim and is therefore entitled to the reliefs sought therein.

45. The upshot therefore is that the appeal is hereby allowed. Consequently, the judgment delivered by the Cooperative Tribunal on 9th April, 2020 is hereby set aside and is substituted with an order entering judgment in favour of the appellant and against the respondent as prayed in the statement of claim dated 8th August, 2018. The appellant shall also have the costs of the appeal.

DATED, SIGNED AND DELIVERED ONLINE VIA MICROSOFT TEAMS AT NAIROBI THIS 17TH DAY OF JUNE, 2022. ..........................J. K. SERGONJUDGEIn the presence of:......................... for the Appellant......................... for the Respondent