Daniel Ng’ang’a Karanja v Metropolitan National Sacco Limited [2021] KECPT 491 (KLR)

REPUBLIC OF KENYA

IN THE CO-OPERATIVE TRIBUNAL AT NAIROBI

TRIBUNAL  CASE NO. 366 OF 2018

DANIEL  NG’ANG’A KARANJA ...............................................................CLAIMANT

VERSUS

METROPOLITAN NATIONAL  SACCO LIMITED ......................... RESPONDENT

JUDGMENT

Vide the  Statement of Claim dated  30. 7.2018,  the Claimant  has moved  this Tribunal  seeking  for judgment  against  the Respondent  as follows:

a.   Kshs. 355,342/= being  monies  illegally withdrawn  from his  account  by the  Respondent;

b.   Kshs. 511,297. 15/=  being interest  illegally  levied;

c.   Interest  on (a)  and (b);

d.  General  damages  for breach  of  loan agreement; and

e.  Costs.

In support  of the claim the Claimant  filed the following  documents.

a. Witness statement  recorded  by the  claimant on  30. 7.2018;

b. List  of  documents  dated  30. 7.2018.

During  trial  on  26. 2.2020, the Claimant  adopted  the witness  statement  and produced  the said documents.

The Respondent  has opposed  the claim  by filing   the  following  documents.

a. Statement  of Defence  dated 12. 9.2018;

b. Witness  statement  sworn  by Daniel  Lee  Kibuthu  Kamau; and

c. List  and bundle  of documents dated  12. 9.2018.

During  Defence  hearing  on  25. 8.2020, the  Respondent  called one  (1) witness, Daniel  Lee  Kinuthia  Kamau who produced  the said  documents  and also  adopted  his witness  statement.

Claimant’s Case

It is  the Claimant’s  case that  at the material  times  to this  claim,  he was a member  of the Respondent. That  on or about  December,  2004, he  applied  for  a loan facility  with  the Defendant  for Kshs.2,200,000/=. That  the Respondent approved  the said loan  on  2. 1.2015 subject  to the following  terms:

a. The facility  was repayable  on  72  monthly  installments  of Kshs.46,519/= each;

b. Kshs.24,106/= was  to be paid  through  authorized  check  off system  with the claimant’s employer; and

c. Kshs.22,413/=   was to be recovered  through  a standing  order.

That  for case of operations,  the Claimant  channeled  his salary  from his  Co-operative  Bank account to his account  with the Respondent.

That  he subsequently  fulfilled  his  end of  the bargain  by religiously  ensuring  that his  salary  account  was  ever debited  with the required  amount  to  fund the standing  order;

That  on or about  10. 6.2016,  the Respondent  illegally  and conspicuously (and without his express or implied  authority)deducted  from his  account  a sum of  Kshs.265,690/=.  That  it further  made  a further  illegal  deduction  of  Kshs.89,652/= on  15. 11. 2016.

That upon  realization  of the occurrence,  he approached  the Defendant  and queried  the said  deductions. That  the Respondent  informed  him that  the said  deductions  were based  on  facilities  under performance.

That  as  a  result of the  said  frustrations  he  proceeded  to make  an early  redemption  of his  loan sometimes  in February, 2018.

That  the amount  sought  by the Respondent  amounted to  Kshs.1,927, 453/=.  That  the same included  the full interest  for the intended facility  period.

That  the Respondent  therefore  .....enriched  itself  by charging  him interest  for a period  of  six(6)  years  despite  the facility  being redeemed within  3 years.

That  despite  the fact  that the  Respondent  was to recover  the loan based  on initial  agreed  terms,  it  went  ahead  to  breach  the  terms  of  the loan  Agreement. He  particularized  the said  breach  as follows:

a. Failure  to consistently make  the necessary  deductions  from  the  Claimant’s  account;

b. Citing  the Claimant  for  under performance  of his loan;

c. Failing  to  inform  the Claimant  about  the said under  performance;

d. Unjustly  enriching itself  by charging  the Claimant  full term  interest  even  after  an early  redemption  of the facility.

That it is  on the  basis  of the foregoing   that  the Respondent  is liable  to reimburse  him  on  a full  indemnity  basis,  his costs  and expenses  incurred  in correction  of the claim.

Upon  cross-examination,  the  claimant  stated that  the Respondent  had authority  to  make  deductions  on his account. That  he signed  the loan  Application  form. That he  was not notified  of  5% penalty  for early  clearance  of the loan.  That  he did not  know  about  what  was in the loan  policy. That he was  never  told that  his account  was in  arrears. That  he had an agreement  with  the Respondent  regarding  what was  to be  deducted. That  he was not  aware  of any  lieu  by the  Respondent  on his fund.

On Re-examination, he  reiterated  that the  Respondent  did  not issue  him with any  notice  of default.  That his  guarantors were  neither  informed.

Respondent’s  case

It is  the  Respondent  case that  indeed  the Claimant  applied  for a  loan of Kshs.2. 200,000/= on  9. 12. 2014. That  the said  loan  was disbursed  to  his Fosa  Account  on 2. 1.2015. That  monthly  loan repayment  was Kshs.46, 519/=.  That in  terms  of the Agreement  with  both parties,  the loan  was to be  recovered  as follows:

a. Kshs.24,106- through  check-off ;

b. Kshs.22,413 through  a standing order.

That  at the Claimant’s  own  volition,  he  opened  an account  with  it and  caused  his salary  to be  channeled  through  his Fosa  account. That  his net  salary  was not sufficient  to meet  his  monthly  loan repayment. That  he was aware  of this fact  and he  undertake  to deposit  money  in the said  Fosa Account  in order to satisfy the Standing  Order.

That  the check-off deductions  commenced  on January, 2015 while  the standing  order was  not effected  as there  was no sufficient funds, in  the account. That  this  state of  affairs  caused  the loan  to underperform  and accrue  interest.

That when  the  claimant  eventually  put sufficient  fund,  in the account  in the  months  of October  and  November, 2016,  the outstanding  amounts  were  atomically  recovered. That  all these  transactions  are reflected  in the loan  statement. That  at no point  in time,  did the  Claimant  query  the said deductions.

That  after  a few years,  (in February 2018) the claimant  approached  the Respondent  with intention  to  clear  the  outstanding  loan.

That  the Respondent  availed  him with  a statement  of the outstanding  loan.  He was also  informed  that  if he was  to clear  the loan  in advance, there  would be  a charge of  5% on  the outstanding  loan  at the point  of payment  which  was  Kshs.91,783,50. That  his outstanding  loan at that  point  was  Kshs.1,835,670/=. That  when this  charges  (of 5%) was applied,  the total  amount  payable  came to Kshs. 1,927,453. 50/=. That  once advised  on this figure,  the Claimant  proceeded  to repay the same.  That  he subsequently issued a demand  letter  and proceeded  to institute  this claim.

Written  submissions

At the close  of the Respondent’s  case on  19. 10. 2020,  we directed  parties  to file  their  respective  final submissions. The Claimant  did so  on  28. 9.2020.

Claimant Submissions

Vide these  submissions  (filed  on 28. 9.2020) the Claimant  reiterated  the contention,  above  and framed the following  main  issues  for determination:

a. Whether  the plaintiff  defaulted  in servicing  the loan;

b. Whether  the Defendant  breached  the terms  of the loan  Agreement; and

c. Whether  the Defendant  was satisfied in charging  the plaintiff  hefty  administrative  fees  upon  early  redemption  of the  loan.

On the  issue NO.  1 (whether  the plaintiff  defaulted  in repaying  the loan)the Claimant  submitted  that  he  did not  default  in repayment  of the loan. He  cited the provisions  of section  120 of the evidence  Act  (Cap 80) laws of Kenya and the  decision of  the court in the case  of Ezemak Refrigeration & Contractors  Limited  -vs  Nation  Media Group  Limited  [2018] eKLR to  support  this argument.

As regards  issue No. 2 (whether  the Defendant  breached  the terms  of  the loan agreement) the claimant  submitted  that indeed the Respondent  did so.  He  relied  on the Ezemak  case above  and the case  of  Nakara Trading  Company  Limited  - vs-  Coffee  Marketing  Board  [1990-1994] EA  448 to buttress  this argument.

As regards  issue No. 3 (whether  the Defendant  was  justified  in charging  the plaintiff  hefty  administrative  fees upon  early  redemption of  the loan  balance) the Claimant  submitted that it was  not justified  to do so.  He then relied on the decision  of the court  in  the case of  Company  of Habitat  & housing  in Africa (shelter  Afrique) vs-  sunset  paradise  Apartments Limited [2019] eKLR to  buttress  the point.

Defendant written  submissions

Vide  the submissions  filed on  29. 12. 2020,  the Respondent  reiterated its  averments  above  and further  stated  as  follows:

That whilst  the Claimant  contend  that  it failed to make  the necessary deduction,  from  his salary  account,  he did not  lead  evidence  to prove  this fact. That  the Claimant  was duty  bound  to prove  that his  account  had sufficient  funds  but the  Respondent  nevertheless  refused  to make  the requisite  deductions.

That  to the contrary,  the Defendant  tendered  evidence  to prove  that  to demonstrate   that there  were insufficient  funds in the Claimants accounts. It then  referred  to the case of  Raphael  Karuru Gitau  - vs-  Barclays  Bank  of Kenya  Limited [2017]to buttress  this point.

That  as regards the contention  that  the Respondent  illegally  withdrew  a sum  of kshs.355,342/= from  his account,  the  said sum was  a cumulative  figure  deducted  on two (2) separate  date, that is,  10. 6.2010 for Kshs.265,690/= and 15. 11. 2016  for Kshs.89,652/= so as  to reduce  his arrears. That  the Claimant’s  statement  of account   confirm  this contention.

That  prior to this  deductions,  the Claimant  had never  made any  single  (Bosa) repayment  of the loan.

That  all along,  the only  sums deducted were  the salary  deductions.  The standing  order  amounts  were never  effected  at all.

That as regards the claim for Kshs.511,297. 15/=. The  Claimant  contend were  illegal  interest  levied,  the defendant  submitted  that  the  same was  a result  of the 5% levy  for early  repayment  of the loan. The Defendant  cited  several  authorities  to  buttress  this point.

Issues  for determination

We have framed  the following  issues  for  determination:

a. Whether the Claimant  defaulted  in repayment  of his loan  and if so,  whether  the defendant  illegally recovered  the defaulted  amount;

b. Whether  the Respondent  had a  legal  basis  to apply  a 5% charge  for early  redemption  of the loan;

c. Who should  meet the costs of  the claim?

Default  in repayment  of the loan

It is  not in dispute  that the  Claimant  applied  for  a loan  facility  of Kshs.2,200,200/= on  2. 7.2015 repayable  as follows:

a. Kshs.24,106/= through  check- off  system  on his salary account; and

b. Kshs.22,413/= through  a Standing Order.

We have  perused  the Claimant loan statements  dated  7. 5.2018. The  same confirms   that the Claimant  received  the said funds  on  2. 1.2015.  Upon  further  perusal  of the said  statement,  it occurs  that  the monthly  amounts  being deducted  to reply  the  loan was  Kshs.24,106. 00/= nowhere  does  the account  show  a deduction  of  Kshs.22,413/=. What  this means  is  that the Claimant  did not make  funds  available for standing  order  to  be effected.

We also note that  there was  a credit  of Kshs.265,690/=  on the account  on 10. 6.2016. There  was  also another  deposit  of Kshs.89,000/= on 15. 11. 2016.  What we  deduce  in this  is that  when  the claimant  made monies  available  in his account on the said  dates,  the system automatically  applied  them towards  repayment  of the loan arrears. It is  not therefore  true  fort the Claimant  to contend  that the said  sums were  deducted illegally  from  his  account.  We have  perused  his bundles of  documents  and nowhere  do we  find a  document  showing that  he availed  funds  to cater  for the  monies  meant  to be  deducted  by way  of  a standing  order.

5%  charge  for early  Redemption  of the law

The  Respondent  has vehemently  defended  its position  to levy  a penalty  of 5% for early  redemption  of the loan.  It  has pegged this  argument  on usages  of trade.

We have  however,  perused  the loan  application  for the said facility.  It was  signed  by  the Claimant  on  5. 12. 2014. nowhere in the said  form  do we  find a penalty  of 5% for early  redemption  of  the loan.  We thus  find  that the Defendant  breached  the terms  of the loan  Agreement  by applying  the levy  on the outstanding  loan.  The total amount  of  monies  illegally  recovered  by the  Respondent  in this regard  is Kshs.91,783. 00 being  5%x1,835,669. We  find that  the Claimant  is entitled  to  be refunded  this amount.

Conclusion

When  all is said and  done,  we  find that  the  Claimant  has partially  succeeded  in the claim  and thus  enter  judgment  in his favour  for  Kshs.91,783/= with  interest  and costs at  court   rates. The other  claims  are dismissed.

Judgment signed, dated and delivered virtually this 4th day of  March,  2021.

Hon. B. Kimemia                  Chairperson      Signed      4. 3.2021

Mr. P. Gichuki                       Member             Signed      4. 3.2021

Mr. B. Akusala                      Member             Signed      4. 3.2021

No appearance  for parties

Hon. B. Kimemia                  Chairperson      Signed      4. 3.2021