Catherine Munyiri v FEP Sacco Society Limited & Purple Royal Auctioneers [2021] KECPT 524 (KLR)

REPUBLIC OF KENYA

IN THE CO-OPERATIVE TRIBUNAL AT NAIROBI

TRIBUNAL CASE NO.36 OF 2020

CATHERINE MUNYIRI........................................................CLAIMANT

VERSUS

FEP SACCO SOCIETY LIMITED...........................1ST  RESPONDENT

PURPLE  ROYAL AUCTIONEERS.........................2ND RESPONDENT

RULING

Vide the Application  dated 4. 2.2020,  the Claimant has moved  this Tribunal  seeking  for the following Orders:

1. That this  Application  be certified  as Urgent  and be heard  ex-parte  at the first  instance;

2. That  this Honourable  Tribunal  be pleased to grant  a temporary  injunction  restraining  the Respondents whether  by acting  by themselves, servants or agents from attaching, advertising, auctioning, selling  or otherwise taking  possession  from the Claimant  motor vehicle  Registration  No. KBT 494G Toyota  Land Cruiser or otherwise  disturbing the Claimants rights  of ownership  and possession  thereof pending  the hearing  and determination  of this Application;

3. That  this Honourable  Tribunal  be pleased to grant  a temporary  injunction  restraining  the Respondents whether  by acting  by themselves, servants or agents from attaching, advertising, auctioning, selling  or otherwise taking  possession  from the Claimant  motor vehicle  Registration  No. KBT 494G Toyota  Land Cruiser or otherwise  disturbing the Claimants rights  of ownership  and possession  thereof pending  the hearing  and determination  of this claim;

4. That the Honourable  Tribunal  be pleased  to grant an  interlocutory  order barring  the Respondent  from visiting  the Claimants house  with goons,  thugs or by  themselves whatsoever pending  the hearing  and determination  of this Application  and suit.

5.  Any other  or further  or better relief  that this Honourable  Tribunal  may deem  fit and just  and convenient  to grant  in the circumstance; and

6. That the costs of this Application  be  provided for.

The Application is supported by the grounds on its face the Supporting  Affidavit  sworn by  Catherine  Munyiri on even date.

The Respondent  has  opposed  the Application by filing a Replying  Affidavit  sworn by Jackson Wanjau,  the 1st Respondent’s  Chief Executive  Officer on 13. 3.2020.

Vide  the  directions  given  on  22. 7.2020,  the Application  was canvassed  by way of  written submissions.  The Claimant filed  his written submissions  on  26. 10. 2020 while  the Respondents file  their initial  set of  submissions  on 28. 10. 2020 and  Supplementary  ones  on  2. 11. 2020.

Claimant’s  Contention

It is  the Claimant’s case  that  she took  a loan from the 1st  Respondent  with the security  of his  motor vehicle  registration  NO. KBT 494G Toyota  Land Cruiser as  its security. That she  has been  repaying  the said loan  albeit  difficulties. That she  is willing  to repay  the same  by way  of monthly  installments of Kshs.40,000/= until repayment  in full.  That she  is  in the process  of disposing  of her property  in Karen  after which  she will  propose  better loan  settlement  terms. That  the  1st  Respondent  has been  sending  police detectives to her house  and even threatening  to arrest  her and dispose  her of her car.

Respondent’s  Case

Vide  the Replying  Affidavit  sworn  by its  Chief Executive Officer  on 13. 3.2020,  the  1st  Respondent  has opposed  this Application  on grounds  that the Claimant was advanced  a loan  of  Kshs.4,500,000/= in April  2016 and  has defaulted  in repaying  the same. That as  part of the terms  of the  loan  Agreement,  the Claimant  was  required  to repay  the loan  by way  of monthly installments of kshs.181,842/=. That  the Claimant  has defaulted  in doing so  thus subjecting  the loan  to fall into arrears  which stood  at  Kshs.5,924,317/= as  at 30. 8.2019.

Issues  for determination

The  instant Application  has presented  the following  issues for determination:

a. Whether  the Claimant  has defaulted  in repaying  the loan  she took  with the Respondents;

b. If the answer in (a)  above  is in the affirmative, whether  the Respondents  have followed  due  process  in  recovery  of  the said loan; and

c. Who should  meet  the costs  of  this Application?

Default  in repayment

From the  Claimant’s  own admission, it is apparent  that she has  defaulted  in repaying  the loan  she obtained  from the 1st Respondent. Though  she has  not stated  the current  outstanding  amount,  the 1st  Respondent  has shown  it to be  kshs.5,924,317/= as  at 30. 8.2019.

Whether  the Respondents  have followed  due process  in recovery  of the said loan

The instant  Application  has been  precipitated by the Respondent’s  attempt  to attach  and sell the Claimant’s  motor vehicle Registration No. KBT  494 G  in a bid to  recover  the outstanding  loan.  The Claimant  confirms  that  she offered  the said motor vehicle  as part of security  for the advancement of the said  loan.

Vide her  written  submissions dated  8. 10. 2020,  the Claimant  conceded that  the Respondents did not issue  appropriate  Notices before  it offered  the said  motor vehicle  for sale.  That she  only  learnt  of the  purported  sale  vide  Notices posted  in trees. She cited   the decision  of the court in  the case of  Elizabeth  Wambui  Njuguna – vs-  Housing  finance  company limited [2006] eKLR.

The foregoing  submissions  of the Claimants leads  us to  pose the  question  as regards the  procedure  for realization  of a property  which has   been  offered as security for  advancement  of financial  accommodation. We will  find the answer  in the Auctioneer’s Rules.

Rule 12 (1) of the  Auctioneer’s  Rules  sets  out  the following  procedure  for  attachment  and sale  of moveable  property:

“ 12 (1) Upon  receipt  of a Warrant  or  a letter  of instruction,  the  auctioneer shall in  case of  moveable other than  goods of perishable  nature  and livestock.

a. Record  the court warrant  or letter  of instruction  in the register;

b. Prepare  a proclamation  in sale  form  2  of the schedule  indicating  the value  of specific  items  and  the condition  of each item,  such  inventory  to be signed  by the owner  of the goods.....;

c. In writing,  give  to the owner  of the goods  seven days’ Notice  in sale form  3 of  the schedule  within  which  the owner  may redeem  the  goods  by payment  of the amount  set forth in the court warrant, or  letter instructions;

d. On the expiry  of the period  of  Notice  without payment  and if the goods  are not  to be soldin situremove  the goods  to safe premises  for auction;

e. Arrange  advertisement  within  7  days,  from the date  of removal  of  the goods  and arrange sale  not earlier  than 7 days after  the first newspaper advertisement  and not later than  14 days thereafter;

f.   Not  remove the goods  under  proclamation  until the  expiry  of the grace periods.

It follows  therefore  that  there  exist  an elaborate  procedure  to be followed  by a Decree Holder  or  a lender in (this case,  the 1st  Respondent) while  attaching  and selling  properties  offered as security.  In the case of a lending  scenario,  first and foremost,  an instruction letter must  be issued  to an auctioneer. The instruction letter  will thus trigger  the recovery  process. The auctioneer  will begin  by  firstly minuting  the said instruction letter on his register. Thereafter,  the auctioneer will proceed  to proclaim  the moveable  assets of the Debtor. Once  this is  done,  the auctioneer  will give  the lender  7 clear days to redeem  his goods. Once this period lapses and the debtor  has not redeemed  the goods,  the auctioneer  will then  attach  the said  goods. Once this  is done, the auctioneer  will advertise  the same for  sale. The advertisement should be  done  within  7  days of  attachment  and the sale should  not happen earlier  than 7 days  after the first  newspaper  advertisement.

The same  should  not however happen  after the expiry  of 14 days after  advertisement.

A question  therefore abound  as to whether  the Respondents  complied  with  this laid  down  procedure  while  attaching  the Claimant’s  motor vehicle  registration  NO. KBT 494 G. We have  perused  the  Respondents list  of documents  contained  in the bundle  dated 13. 3.2020. We note  that the 1st  Respondent  only issued to the 2nd  Respondent  with a letter  of instruction dated  14. 10. 2019. There is  no document to  demonstrate  whether the 2nd  Respondent  proclaimed  and  advertised  the said  motor vehicle  for sale. In the absence  of these crucial  material,  we find that  any intended  sale  of the said  motor vehicle  is illegal.

Conclusion

The upshot  of the foregoing  is  that we find  merit  in the Claimant’s Application  dated 4. 2. 2020 and determine  it on terms that the  Respondents are at  liberty  to  realize  the security offered for the  advancement  of loan as long  as the procedure  set out in  Rule  12  of the Auctioneers Rules is followed.  Unless  this procedure  is adhered  to,  the Respondents  are  restrained  to sell the said  properties. Costs  in the cause.

RULING SIGNED, DATED AND DELIVERED VIRTUALLY THIS 7TH DAY OF JANUARY, 2021.

Hon. F. Terer                          Deputy Chairman      Signed      7. 1.2021

Mr. P. Gichuki                        Member                       Signed      7. 1.2021

Mr. B. Akusala                       Member                       Signed      7. 1.2021