Jennifer Mukiri Kijogu v Harambee Sacco Society Ltd [2020] KECPT 85 (KLR)

REPUBLIC OF KENYA

IN THE CO-OPERATIVE TRIBUNAL AT NAIROBI

TRIBUNAL CASE NO. 124 OF 2018

JENNIFER MUKIRI KIJOGU ...................................................CLAIMANT

VERSUS

HARAMBEE SACCO SOCIETY LTD..............................RESPONDENT

JUDGMENT

Vide the statement of claim dated 11/4/2018, the Claimant has moved the Tribunal seeking for the following reliefs:

a. That Judgment be entered for the Claimant against the Respondent for Kshs. 65,744 ; and

b. Costs and Interests.

It is the Claimant’s contention that at all times material to the claim, she was a member of the Respondent vide membership No. 418.  That in April, 2017, the Respondent effected a wrong deduction on her salary.  That it subsequently withheld her dividends amounting to Kshs. 16,000/.  That this trend continued until the month of February, 2018.  That accumulatively, her claim against the Respondent is for Kshs. 65,744/.

Respondent’s Case

The Respondent has opposed the claim vide a statement of response dated 29/6/2018.  The Respondent also called Mr. Benson Kangi Murimi, it’s loan officer to testify on 22/6/2020.  The said witness also produced the Respondent’s documents contained in the initial list and bundle of documents dated 29/6/18 and the supplementary documents contained in the supplementary list dated 2/3/2020.

Vide its defence, the Respondent contend that the Respondent applied and was granted a development loan of Kshs. 238,700/ in August, 2012.  That the rate of interest for the loan was 18% but the same was fed at 12%.  That the interest could not be adjusted at the time since most members had overcommitted their payslips.  That the interest was later fed before the loan was settled by the Claimant.  That this is the reason that there is the appearance of “fresh feed” narration of Kshs. 3000 in the Claimant’s April, 2017 payslip.

That as at 31/3/17, the Claimant’s outstanding loan was Kshs. 55,045. 45.  That the dividend for the year, 2016 was used to reduce the interest hence the Kshs. 3000 feed on the payslip.

During his testimony in court, RW1 stated that, vide a circular dated 13/2/2012, the Respondent reviewed the rate of interest for it’s loans.  That in terms of part 2 of the said circular (Document No. 1 in the list of documents dated 29/6/2018) the rate of interest for development loan was adjusted from 1% to 1. 5 p.m. on a reducing balance basis.  That when the Claimant applied for the development loan, this was the prevailing rate of interest.  That unfortunately during the said period, the Respondent could only recover loans upto 12%.

That the Claimant applied for the development loan on 25/5/2012.  That this was after the above circular had come into force.  That the said circular had already been disseminated to its branches.

That what the Respondent recovered from April, 2017 was the difference in the interest rate applied since the loan was taken.

That upon cross-examination, RW1 confirmed that the rate of interest in the loan application from 1% per month on a reducing balance basis.

Written Submissions

Upon the close of the Respondent’s case on 22/6/2020, we directed parties to file their respective final submissions.  The Claimant filed hers on 28/7/2020 while the Respondent did so 27/7/2020.  We will consider them as follows;

Claimants Submissions

Vide her written submissions, the Claimant contend that at the time she applied for the loan the rate of interest applicable was 12% and not 18% as contended by the Respondent.  That at the time the Respondent effected the disputed deductions, she had since cleared the loan and that she did not have any outstanding debt.  That she completed replying her loan in March, 2017.

That the Respondent failed to explain why it changed the interest rates from 12% to 18%.  That the physical loan application form filed by the Respondent indicate that the rate of interest applicable is 12% and not 18%.  That the issue of fresh feed of loan deduction was never communicated to her before she completed repaying the loan.

Respondent’s Submissions

Vide its submissions filed on 27/7/2020, the Respondent reiterated its averments in the statement of defence and the evidence of RW1.  It specifically submitted that the loan, the subject matter of this claim is Development loan applied for by the Claimant on 25/5/2012.  That the said loan was granted in August, 2012.  That by the time the Claimant applied for the loan, it had issued a circular on 13/2/2012.  That the said circular reviewed interest rate applicable to various products.

That said circular became effective on 17/2/2012.

That the Claimant applied for her loan in May, 2012 and therefore, the change in interest rate applicable applied to the loan.  That as a result of adjustment of the interest rate, her loan was processed at 18% p.a but fed in her payslip at 12%.  That the adjustment applied to all members and was not unique to the Claimant.  That the interest rate could not be adjusted at the time since most members had over committed their payslips.  That the interest rate of 18% was later fed on her payslip before the loan was settled by the Claimant.  That this is the reason for appearance of “ fresh feed” narration on April, 2017.  That as at 31/7/2017, the Claimants outstanding loan balance was Kshs. 55,043. 55.

Issues for determination

We have framed the following issues for determination

a. Whether the Respondent deducted the sum of Kshs. 65,744. 00 lawfully from the Claimant; and

b. Who should meet the costs of the claim.

Recovery of Kshs. 65,744. 00

The borne of contention in the present claim is whether the Respondent legally recovered the sum of Ksh. 65,744 from the Claimant.  It is the Claimant case that the Respondent unlawfully recovered the sum of Kshs. 3000 monthly from her payslip from April, 2017.  That this trend continued until February, 2018.  That the Respondent also withheld her dividends for the year, 2017 amounting to Kshs. 16,000/.

On its part, the Respondent contend that the Claimant applied for a development loan of Kshs. 238,700 on 25/5/2020.  That prior to this i.e on 13/2/2020, the Respondent issued a circular reviewing the rates of interest applicable to its products.  That as a result, the rates of interest for development loan increased from 1% p.m to 1. 5% per month.

That by the time the Claimant applied for this loan, the new rates were applicable.  That the said rate of interest was applied to the Claimant’s development loan granted on August, 2012.  That owing to the fact that at the time of adjustment of the interest rate, most of the Respondent’s members had overcommitted their salaries, it was decided that the new interest rates would be adjusted at later dates.  That this explains the “fresh feed” in the Claimants loan of Kshs. 238,744 was processed at the interest rate of 18% p.a but fed her payslip at 12% p.a.

At the outset, we find that for loan Applications, the primary obligation of the parties is discernible in the loan Application forms.  This document crystalizes obligations of the parties.  It sets out the amount of loan applied, the rate of payment and repayment mode.

In the present case the loan Application form is the one contained in the Respondent’s supplementary list of documents dated 2/3/2020.  At page 7 thereof, (part 9), it is shown that the rate of interest applicable to the Claimant’s loan (of Kshs. 238,700) was 1% p.m.  The Claimant executed the said form on 28/1/2012.

We have perused the circular contained in the Respondents list of documents dated 29/6/2020.  We note that the same reviews the rates of interest as stated by the Respondent.  It is this circular that the Respondent avers that the rate of interest applicable to the Claimants loan emate.  From this document, the following questions abound:

a. Why did the Respondent indicate the rate of interest to be 1% p.m whilst the circular on review of interest rates had increased to 1. 5%;

b. Why did the Respondent approve the loan when it knew that the Claimant’s payslip would not accommodate it; and

c. Did the Respondent ever inform the Claimant about intention to recover the loan.

From the material before us, it is our finding that the rate of interest applicable to the Development loan advanced to the Claimant is expressly indicated in the loan Application form executed by the Claimant on 25/5/2012.  The Claimant agreed to take the loan based on the said rate of interest.  The obligations of the parties crystalized upon execution of the said form.

We find the Respondent’s justification of Application of the new rate of interest unsubstantiated for the following reasons:

a. There is no proof that the Claimant knew about the variation of interest at the time of execution of the loan Application form; and

b. The Respondent expressly indicted the rate of interest applicable to the loan in the loan Application form.

Conclusion

The upshot of the foregoing is that we find that the Claimant has established her case on a balance of probability and hereby proceed to enter judgment against the Respondent for Ksh. 65,744 plus interest and cost at court rates.

Judgment signed, read and delivered virtually this 27th day of August, 2020.

Hon. B. Kimemia                            ……………………..

Chairman

Hon. F. Terer                                    …………………….

Deputy Chairman

P. Gichuki                                        …………………….

Member

Mr. Kavachi  for Respondent

Mr. Chima for Claimant

Mr. Kavachi – I am applying for 15 days stay.