Chege v MTN Sacco Society Ltd [2023] KECPT 764 (KLR)

Chege v MTN Sacco Society Ltd (Tribunal Case 320 of 2020) [2023] KECPT 764 (KLR) (Nairobi) (26 October 2023) (Judgment)

Neutral citation: [2023] KECPT 764 (KLR)

Republic of Kenya

In the Cooperative Tribunal

Nairobi

Tribunal Case 320 of 2020

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

October 26, 2023

Between

Arthur Macharia Chege

Claimant

and

MTN Sacco Society Ltd

Respondent

Judgment

1. The Claim herein was brought by the Claimant by way of Statement of Claim dated 2nd October, 2020. Though the Tribunal stamp indicates the date of filing as 25th September 2020, the receipts for payment of filing fees for the same indicates the date as 22nd October, 2020; hence the correct date of filing is 22nd October, 2020. At the time of filing, the Statement of Claim was accompanied by a List of Documents and List of Witnesses.

2. In his Claim, the Claimant states that he is a member of the Respondent which he joined in February 2010 by paying the sum of Kshs. 80,000/=, that he was unprocedurally suspended by the Respondent in October, 2019 and after unsuccessfully seeking to have the suspension issue resolved, he resigned from the Society in January, 2020.

3. The Claimant avers further that the Respondent's by-laws provide that the Claimant is entitled to a refund of all funds due and owing after the Sacco deducts all liabilities, if any; that his contributions totaled to Kshs. 1,428,528/=, part of which was utilized to pay an outstanding loan. It is the Claimant’s case that during the period of his membership, he contributed to the purchase of 3 cash lite machines to the Respondent, worth a total of Kshs. 45,000/=; that a dividend was declared for the period from 1st January to 31st December, 2019, but the Respondent failed to pay the Claimant the sum of Kshs. 128,000/= being the dividend.

4. Consequently, the Claimant prays for Judgement against the Respondent in the sum of Kshs. 183,380/= being the total of the dividends and profits at 1% per month from March, 2020 and the refund of the Costs of the cash lite machines, costs of the suit and interest until payment in full.

5. The Respondent, in Defence of the Claim, filed a Response to the Statement of Claim dated 4th November, 2020 and filed on 6th November 2020. In the Response, the Respondent denies that the Claimant paid the sum of Kshs. 80,000/= when he the Respondent joined and put the Claimant to strict proof.

6. The Respondent further avers that the process was followed prior to the Claimant's expulsion and after the expulsion and that the Claimant engaged in acts that contravened the by-laws of the Respondent as he did not disclose his membership and role in the management of NAMU Shuttle, a competitor of the Respondent hence he engaged in unfair competition, knowing the Respondent and Namu Shuttle were plying the same routes; that the Claimant promoted the interests of NAMU Shuttle while he was a member of the Respondent. The Respondent states further that the Claimant’s decision to resign from the Respondent's membership was voluntary and that the Respondent duly refunded all the due owing to the Claimant, and the Claimant discharged the Respondent from liability therefore any Claim made now is an afterthought; that the issue of contribution towards the purchase of PDQS/Cash lite machines and the refund of the same is an issue between the Claimant and the bank as the Respondent was not involved. The Respondent prays that the Claim be dismissed with costs.

7. The Claimant countered the Response to his Claim by filing on 12th February, 2021, a reply to the Response of even date, in which reply he denies the Respondent's averments and adds that the Respondent was always aware of his membership in NAMU Shuttle.

8. Both parties filed Witness Statements and Lists of Documents . The Claim proceeded to hearing on 3rd May, 2023. At the hearing, the Claimant produced and adopted his Witness Statement dated 2nd October, 2020 filed on 30th November, 2020 as his evidence in chief.

9. The Claimant also produced his List of Documents dated 2nd October, 2020, filed on 25th September, 2020. and the Supplementary List dated 1/9/2021 filed on 31/9/2021 as Claimants Exhibits 1-7.

Claimant's Case. 10. The Claimant adduced evidence reiterating the contents of the Statement of Claim and particularly that he had been issued with a letter of suspension in October 2019 but he chose to exit in January, 2020, The Claimant states that back in 2010, he was a member of another Sacco but plying a different route from the Respondent, then NTSA restricted the operation of one vehicle to one Sacco and members chose to split the fleet between the two Saccos; and they decided that the vehicles would be independent of each other but the owners of such vehicles held by the Saccos would not be officials of either Sacco; and that he was not an official of the Respondent.

11. The Claimant states that after the issue of the Suspension raised by the Respondent's management in 2016 was sorted out in 2017, the Respondent went ahead to grant the Claimant a loan to purchase another vehicle. The Claimant further stated that the Suspension letter of October 2019 was issued after the issue of being in two Saccos had been resolved; that though the letter dated 4th October, 2019 was titled expulsion, its content was about suspension; that the mandate to expel a member was with the Annual General Meeting; that the procedure was not followed as per the by-laws as the letter was supposed to give him 30 days’ notice to defend himself which he was not accorded, and even after various requests, he was not given audience, neither was he allowed to the Annual General Meeting.

12. The Claimant stated that he decided to resign in January, 2020 and he was thus entitled to dividends as declared with interest which the Respondent declined to pay to him yet he was a member of the Respondent in 2019.

13. It was the Claimant's evidence that he is entitled to refund of the Kshs. 45,000/= which he paid for the 3 PDQ machines, the purchase of which was facilitated from the Sacco by the Bank. In total the Claimant averred he is Claiming for Kshs. 183,380/= plus interest and costs.

The Respondent's Case. 14. At the hearing, the Respondent's witness Francis Manyeki produced and adopted a witness statement dated 4th August, 2022 as evidence in chief. He also produced documents attached to the List of Documents dated 18th July 2020 as Respondent's Exhibit 1-16.

15. The Respondent Witness stated in his evidence that he is in the Management of the Respondent and that in 2019 he was the Hon. Secretary thereof. The Witness further stated that he knows the Claimant; that by a letter dated 19/6/2016, the Respondent raised an issue of conflict of interest against the Claimant; that in such a case, the member should respond to show cause why disciplinary action should not be taken against him; that the Claimant continued with the action, so the by-laws mandated disciplinary action of suspension waiting for ratification by Annual General Meeting. That the Claimant was issued with a suspension letter dated 4/10/2019.

16. The Respondent’s Witness further stated that the Claimant was not justified in his response to the letter dated 4/10/2018 to want to continue by making allegations about other members in regards to the Claimant for refund of the money paid for PDQ machines. The Respondent Witness stated that is was upon the members to secure the gadget, the Respondent did not collect the funds, they were obtained from the bank and when the system did not work, the Respondent wrote to every member to follow up with the Bank.

17. In regards to the Claimant's Claim for dividends, the Respondent witness stated that dividends are payable for any particular year from January to December and not in pro-rata basis. That the Claimant ceased being a member on 4/10/2019 and waited until the year ended to claim interest; that on suspension, the Claimant did not go to see the management, he had left by the time of the Annual General Meeting.

18. The Witness confirmed that the Claimant paid his loan; he also stated on Cross-examination that the Annual General Meeting expels a member, that he only communicated to the Claimant the decision of the management to suspend him; that he was not expelled at the Annual General Meeting because he had resigned by then.

19. The parties, after the hearing of the case filed Written Submissions. The Claimant's Submissions were dated 2nd June 2023, while the Respondent's Submissions were dated 5th July, 2023 and were filed on 7th July, 2023.

Determination. 20. We have considered the pleadings of the parties including the Witness Statements, Documents produced at the hearing , the oral evidence and the Written Submissions and have found the following issues for determination;-

i. Whether the Claimant was expelled or suspended from the Respondent's membership in October 2019. 21. It is not in question that the Claimant was a member of the Respondent from the year 2010, neither is it in question that the Claimant was a member of 2 Saccos, one being the Respondent herein, the other being NAMU Sacco. It is clear from the evidence adduced before the Tribunal that the Respondent issued the Claimant with a letter raising an issue of conflict of interest, vide a letter dated 19/9/2016, that the Claimant responded to the said letter vide letter in April 2017, explaining his case. We note from the evidence that the Claimant was advanced a loan after his letter of April 2017, an indication that the matter was resolved and the Claimants continued to enjoy his membership in the Sacco.

22. The issue for our determination under this head is whether, by its letter dated 4th October, 2019, the Respondent expelled or suspended the Claimant from its membership.

23. We have considered the Respondent's letter dated 4th October, 2019, marked as Claimant's exhibit1 and the Respondent's Exhibit 9. Though the said letter is titled expulsion from the Sacco, the contents relate to the suspension of the Claimant from the Respondent's membership contrary to the Respondent averment that is was a letter of expulsion. We however find it curious that in the same letter, the Respondent notified the Claimant that the accounts office was working out dues and he would be refunded his dues less outstanding balances as soon as possible. Did the Respondent consider its letter dated 4th October, 2019 as a letter of expulsion rather than a suspension? If so, does it mean that the Respondent did not deem the issues of conflict of interest raised in September as unresolved by October 2019?

24. We have already reached a conclusion on the two questions and we have to proceed to determine issue above.

25. The Claimant argues that he was suspended on 4/10/2019, while the Respondent argues that the Respondent was expelled. we turn to the Respondent's by-laws in order to better understand the situation. The by-laws of the Respondent are marked and produced as exhibit 6 on the Claimant's list of documents. By-law 14 thereof provides for ceasation of membership which can occur on account of death, expulsion and withdrawal among other reasons.

26. By-law 15 provides that the ,Management Committee may suspend a member subject to the decision of the general meeting to expel, who fails to fulfil his/her own obligations to the society, is a member of another Society having similar objects or acts in a manner pre-judicial to the interests of the society among other grounds.

27. By-law 16, 1(a) and (b) provide the procedure for suspension. the procedure set out thereunder provides that upon formal and written proof that a member has committed a violation punishable by expulsion, the Management Committee shall serve a thirty (30) days written notice to the member stating the reason(s) for the proposed expulsion; that upon the expiry of the 30 days and taking into consideration the member's Defence if any, the Management Committee shall initiate an administrative inquiry and make a decision on its finding within (15) days.

28. By-law 16. 2 provides that: “a suspended member shall appeal to the next general meeting on the expulsion. From the foregoing, it is clear that the Respondent's By-laws have put in place a process for suspension and expulsion of a member”.

29. While the Claimant has admitted that he was a member of another Society having similar objects as the respondent, the question is whether the suspension letter dated 4/10/2019 was issued to him as per the procedure set out under By-law 16 (1) (a) and (b). Our examination of the said letter leaves no doubt that it does not give the Claimant the requisite thirty (30) days’ notice requiring him to file a Defence. Instead, the letter as worded purports to end the relationship between the Claimant and itself, by informing that his dues were being worked out and would be paid as soon as possible.

30. The intention of the Sacco are made clearer in its letter to the Claimant dated 25/10/2019, warning him that the Respondent would not process his dues until he removes the Sacco branding which was still on his motor vehicle registration number KCE 216 Z “even after being expelled from the Sacco”.

31. Ultimately, we find that the Claimant was not expelled from the Sacco on 4/10/2019 and that he was suspended albeit unprocedurally.

ii. Whether or not the Claimant is entitled to payment of dividends and interest. 32. The Claimant adduced evidence that he resigned from the Respondent’s membership vide the letter dated 3/01/2020 and he was paid his dues on the 30th January 2020.

33. The Respondent also stated that the Claimant resigned on the said date and he was paid his dues on 30/1/2020. This position is confirmed by exhibits 13 and 14 of the Respondent's lists of documents.

34. Having found in determining issue 1 above that the Claimant was suspended in October 2019, we find that he did not cease being a member until his resignation in January 2020.

35. By-law 18. 1. provides for payment on ceasation of membership and states that on ceasation, a person shall be refunded the following amounts;a)The nominal value of shares and depositsb)Any dividends or interests due prior to the cessation date.c)Any deposits or any other funds held by the Society on his or her behalf.

36. From the Respondent's aforesaid Statement and the payment voucher therewith, we find that the Claimant was paid his dues except dividends on 30/1/2020 pursuant to his ceasation by withdrawal on 1st January 2020.

37. We have examined the annual report and financial statements for the year ended 31st December, 2019 produced under the Claimant's supplementary List of Documents and find that indeed the dividend was recommended and paid as per the cash flow and expense entries. We also find from the financial statements that the stated interest rate for payment on the member deposits and dividends was 9%.

38. We therefore find that the Claimant is entitled to dividend for the year ending 31st December 2019 and interest thereon at the rate of 9% on share capital, there being no dispute on the amount claimed.

iii. Whether or not the Claimant is entitled to refund of Kshs. 45000/= paid for PDQ machines. 39. The Claimant has not produced any evidence in support of this Claim. His allegation that the Respondent is bound to refund him this money has instead been refuted by the Respondent, showing that it was not in any way responsible for the purchase as it was an issue between the Claimant and the bank a position well communicated to members in its letter dated 14/2/2019; exhibit 8 in the Respondent's list of Documents.

40. The Claim for the same must therefore fail.

41. Consequently, there being no dispute on the amount of dividends and interest computed by the Claimant, we find and enter Judgement in favor of the Claimant against the Respondent in the sum on Kshs. 138,380/=, with costs of suit and interest at Tribunal rates until payment in full.

JUDGMENT SIGNED, DATED AND DELIVERED VIRTUALLY AT NAIROBI THIS 26TH DAY OF OCTOBER, 2023. HON. BEATRICE KIMEMIA CHAIRPERSON SIGNED 26. 10. 2023HON. J. MWATSAMA DEPUTY CHAIRPERSON SIGNED 26. 10. 2023HON. BEATRICE SAWE MEMBER SIGNED 26. 10. 2023HON. FRIDAH LOTUIYA MEMBER SIGNED 26. 10. 2023HON. PHILIP GICHUKI MEMBER SIGNED 26. 10. 2023HON. MICHAEL CHESIKAW MEMBER SIGNED 26. 10. 2023HON. PAUL AOL MEMBER SIGNED 26. 10. 2023Tribunal Clerk JonahMacharia Advocate holding brief for Kabathi Advocate for the Claimant.Mwaniki Kariuki and Company advocate for Respondent- No appearance.HON. J. MWATSAMA DEPUTY CHAIRPERSON SIGNED 26. 10. 2023