Fortune Sacco Society Limited v Kirugumi [2023] KECPT 1084 (KLR)

Fortune Sacco Society Limited v Kirugumi (Tribunal Case 489 of 2018) [2023] KECPT 1084 (KLR) (14 December 2023) (Judgment)

Neutral citation: [2023] KECPT 1084 (KLR)

Republic of Kenya

In the Cooperative Tribunal

Tribunal Case 489 of 2018

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

December 14, 2023

Between

Fortune Sacco Society Limited

Claimant

and

Cecilia Muthoni Kirugumi

Respondent

Judgment

1. The Claimant, in 2026 advanced to the Respondent a long term loan to the tune of Kshs 4,647,800/= which the Respondent was to repay over a period of sixty months. The loan was to be payed at a 19% interest per year and was secured by a parcel of land known as Kiine/Sagana/804. As at 11th September, 2018, the loan arrears were at a tune of Kshs 5,571,270/= which necessitated the filing of this Claim.The Respondent on his part alleges that the loan between him and Mr. Peter Kimani Karanja who organized for Mr. Joseph Magothe to assist them with his title, the land parcel Kiine/Sagana/804 as security for the loan. According to the Respondent and as per their private agreement, which herself, Mr. Peter Kimani and Mr. Joseph Magothe are aware of, she has already paid her portion and the arrears are as a result of Mr. Peter Kimani not paying their portion.

2. According to the Respondent, she has already done her bit and in the event that Mr. Kimani is unable to pay their portion which is in arrears, the Sacco should exercise their right of sale of the property that was used to secure the loan for recovery.

3. Around October 2017, the Claimant advertised that parcel of land known as Kiine/Sagana/804 for Public Auction to recover the loan arrears in this suit, which necessitated the filing of another case by Joseph Magothe in Kerugoya Chief Magistrates Court, Civil Suit No. 200 of 2017. That suit in Kerugoya was based on the fact that the Claimant in this suit’s right of Statutory Power of Sale had not accrued and also that the property in question (that they wanted to auction) was matrimonial property and the necessary consents had not been complied with before it was charged by the Claimant to serve the loan that is the subject of this suit. The case in Kerugoya dismissed that suit.

4. The parties in this suit were later directed to file Written Submissions to help the Tribunal dispense with this suit. From the Claimant’s Submissions, they still maintain that the Respondent is still indebted to them and this suit is still legitimate as they have not recovered what they are owed and this Tribunal should direct the Respondent to pay them as they cannot exercise the Statutory Power of sale on the Parcel of Land Kiine/Sagana/804 as caution or restriction had been lodged on the property.

5. From the Respondent’s Submissions, the case before this Tribunal has no merit as the procedure on how to handle the matter is well captured in law and the Claimant is in court without following or exploiting all the necessary options available to them for recovery.

6. We have carefully considered the facts adduced in this case and the circumstances, the parties in this case find themselves in and our beginning point in the determination of this matter is to understand the reasonable expectations and/ or obligations that were created with the signing of the Loan Agreement form of 3rd February, 2016. Courts have always insisted that Loan Agreements and/ or commercial transactions create distinct contracts and obligations between parties and in Mrao Limited vs First American Bank of Kenya and 2 others (2003) KLR 125, it was the position of the court of Appeal in that matter that:“it is the duty of any person entering into a commercial transaction particularly one in which a large amount of money is involved to obtain the best possible legal advice so that he can better understand his obligations under the documents to which he appends his signature or seal”

7. In this particular case, the Claimant entered into a Loan Agreement with the Respondent and her guarantors. In Nairobi HCCC Number 573 of 2011 (Talewa Road Constructors Limited and Another vs Jamii Bora Charitable Trust Registered Trustees and Another), the court noted that all parties (including guarantors) to a commercial contract are bound by the terms of that contract.As to whether a Charge is a form of guarantee and or as to whether it forms part of a loan agreement or contract was dealt with elaborately in Ebony Development Co. Ltd. Vs Standard Chartered Bank Ltd. [2008]eKLR where the court made it clear that:“the security of a charge was a guarantee. The obligation of a guarantor is clear. It becomes liable upon default by the Principal debtor…”

8. In short, the Loan Agreement dated 3. 2.2016 formed a contractual obligation between the Claimant, the Respondent and the Respondent guarantor who in this case is Mr. Joseph Magothe who willingly (there is no evidence to suggest otherwise) agreed to charge his property Kiine/Sagana/804. It has always been the position of courts and it is also our position, that parties to a contractual obligation should not be allowed to run away from their contractual obligations or use technicalities to benefit from breaches of contractual obligations.

9. In this particular case, all the three parties involved in this suit want to use technicalities to benefit from the breaches of their contractual obligations in the following ways:i.The Claimant did not do their due diligence to ensure that the property they charged was free or without restrictions. They should have obtained the spousal consent before charging it, and now that they have hit a brick wall and have realized that they cannot exercise the statutory power of sale as a result of lack of spousal consent, they are running away from that security without exploring all legal options to discharge that security.ii.The Respondent, whose name is in the loan agreement and the party who received the loan disbursement now wants this Tribunal to believe or understand without evidence that the proceeds of the loan was shared with other parties not before court and this court should release her of her obligation to pay the arrears and order some other party not to pay the arrears. How?iii.The guarantor, Mr. Magothe who brought or made his ‘matrimonial property’ land parcel Kiine/Sagana/804 an item under commercial transaction wants to run away from his obligation to both the Respondent and the Claimant by introducing a new issue of lack of spousal consent which was not obtained as at the time he charged the property.

10. Having considered all those facts and the circumstanced prevalent, it is our decision that it is in the interest of lateral justice to commit all parties not to abandon or run away from their obligation and as such we make the following orders:

Judgment entered in favour of Claimant against Respondent.i.The Claimant succeeds with his prayers in his Statement of Claim filed on 4th October, 2018 to the effect that they are owed the unpaid arrears by the Respondent which stood at Kshs. 5,571,270/= by 3rd October, 2018 plus interest until the amount is paid in full.ii.The Claimant to pursue all options available to discharge the parcel of land known as Kiine/Sagana/804 and exercise the statutory power of sale to recover what is in arrears.iii.All parties to bear their own costs.

JUDGMENT SIGNED, DATED AND DELIVERED VIRTUALLY AT NAIROBI THIS 14TH DAY OF DECEMBER, 2023. HON. BEATRICE KIMEMIA CHAIRPERSON SIGNED 14. 12. 2023HON. J. MWATSAMA DEPUTY CHAIRPERSON SIGNED 14. 12. 2023HON. BEATRICE SAWE MEMBER SIGNED 14. 12. 2023HON. FRIDAH LOTUIYA MEMBER SIGNED 14. 12. 2023HON. PHILIP GICHUKI MEMBER SIGNED 14. 12. 2023HON. MICHAEL CHESIKAW MEMBER SIGNED 14. 12. 2023HON. PAUL AOL MEMBER SIGNED 14. 12. 2023Tribunal Clerk JonahKamau advocate holding brief for Kibue advocate for the Claimant.Kahiga advocate for the Respondent.HON. J. MWATSAMA DEPUTY CHAIRPERSON SIGNED 14. 12. 2023