John Chege, James Agengo, Elias Gitau, Peter Njuguna, Victoria Nzioka, Obadiah Lagat, David Kurgat & Wilfred Kabaiku Macharia v Stima Sacco Co-operative Society Ltd [2019] KECPT 49 (KLR)

REPUBLIC OF KENYA

IN THE CO-OPERATIVE TRIBUNAL AT NAIROBI

TRIBUNAL CASE NO. 42 OF 2019

JOHN CHEGE …….………………………………..…………………………1ST CLAIMANT

JAMES  AGENGO……..……………………………………………………..2ND CLAIMANT

ELIAS  GITAU………………………………………………………………..3RD CLAIMANT

PETER NJUGUNA …………………………………………………………..4TH  CLAIMANT

VICTORIA  NZIOKA….……………………………………………………..5TH CLAIMANT

OBADIAH LAGAT ………………………………………………………….6TH CLAIMANT

DAVID  KURGAT …..………………………………………..……….…….7TH  CLAIMANT

VERSUS

WILFRED  KABAIKU MACHARIA ...……….………………………..1ST RESPONDENT

STIMA SACCO  CO-OPERATIVE  SOCIETY  LTD….……………..2ND RESPONDENT

RULING

The matter for determination is Notice of Motion dated 11. 4.2019 seeking the following orders;-

1. THAT, this application be certified as urgent and be heard Ex-parte in the first instance.

2. THAT, pending the hearing and determination of the Tribunal case No.  42 of 2019, the 2nd Respondent by itself, its servants, agents,employees and /or anybody whatsoever deriving under it be restrainedfrom making any deductions against the applicant's accounts in a bib tooffset the 1st Respondent's loan.

3. THAT, pending the hearing and determination of this application, the  2nd Respondent by itself, its servants, agents, employees and/oranybody whatsoever deriving authority under it be restrained frommaking any deductions against the applicant's accounts in a bid to offsetthe 1st Respondent's loan.

4. THAT,the costs of this application be provided for.

Based on the grounds on the face of the application and supporting affidavit of James Agengo, 2nd applicant herein. The same is opposed vide the replying affidavit of Susan Mutali, legal officer of the 2nd Respondent filed on the 5th July, 2019. The  1st Respondent  filed   Replying Affidavit on  26. 8.19. The Application was canvassed by way of written submission .

In general the application seeks Injunctive orders against the 2nd respondent from making any deductions against the applicants accounts in a bid to offset the 1st respondent's loan.

The brief facts as per the application is that said applicants on 23. 10. 2017 guaranteed a loan by the 2nd respondent to the 1st respondent of Kshs. 3. 7 million which was to be repaid in 48 monthly instalment and serviced through monthly deduction from the 1st Respondent's salary who was a permanent employee at Kenya Power  and Lighting Cooperation   Limited.

That on or about 12/10/2018 the 2nd respondent issued demand to the applicant requiring payment of Kshs. 422,615/43 from each applicant.

That the applicants later discovered that the 1st respondent had applied for voluntary early retirement without their knowledge, yet he had four years left for his contract.

That the 2nd respondent has threatened and continued to deduct money from the applicants savings and earnings in repayment of the said loan and unless restrained they are subject to great financial risks.  That the application for early retirement went through without any objection by the second respondent.

Despite the mandatory requirement that at the time of termination of an employee’s clearance relating to employee deduction was to be signed by the heads of appropriate departments. The second respondent being one of these department of heads that the 2nd respondent failed to indicate that the 1st respondent was still pending and the 1st respondent changed his pay point from his account with  the 2nd respondent to an account in Barclays Bank where his pension benefits were deposited on 26. 6.2018.

That the second respondent had fiduciary duty to inform the applicant of any change affecting the loan agreement or any action taken by the 1st respondent that may prejudice their position.

In response, the 2nd respondent filed their submission on 19. 8.2019 and 1st respondent filed on 26. 8.2019.

That the dispute arises from a loan facility of Ksh. 3. 7million obtained by the 1st respondent from the 2nd respondent which was to be repaid within 48 months.

That the applicants jointly and severally guaranteed the loan and on alternative collateral was issued.

That the 1st respondent duly serviced the loan from December, 2017 to May, 2018, when he defaulted prompting first defaulters notice to issue dated 24. 8.2018.

That they issued the 2nd defaulters notice dated 4. 10. 2018 and advised the 1st respondent to settle the outstanding loan and copied to the applicants.

That the 2nd respondent applied the 1st respondent deposit reducing the amount from 3,537,445 to 2, 958,308.

That a Notice was issued to the applicants notifying them they would be debiting 13,217 from their accounts monthly with effect from 6th January, 2019 to recover a total of Kshs. 379,355/ from each.

That due to this notice the applicants moved the tribunal for the orders. The 1st respondent submitted that it is not disputed that he obtained the loan and  the applicants were his guarantors.  That he was not aware of the default since he reasoned that the employer offsets the said loan from his dues.

That the 2nd respondent owed him the duty to inform him of the default .

That he never received the said default notice and if he would have received the same he could have remedied the situation.

That , since the 2nd respondent had no report to offset the loan, having not served the 1st respondent, that the applicants are entitled to the prayers sought of an interlocutory injunction.

That, further the applicants have not shown a prima facie case and they have not proved that they cannot be compensated by way of damages.

Therefore the application should be dismissed with costs to 1st respondent.

We have carefully considered the submissions of parties, the pleadings and the affidavits on the record.

The applicants seeks injunctive orders in which the key issues for determination was as held GIELLA .VS. CASSMAN BROWN COMPANY LIMITED( 1973)  EA 358.

1.  The applicant must show a prima facie case with probability  of success.

2. An interlocutory  injunction  will not  issue unless  the applicant    might     otherwise  suffer  irreparable  injury  which  will not  be adequately compensated by an  award  of  damages.

3. The balance  of convenience  should tilt  in favour  of the applicant.

On the issue  one,  establishment  of  a prima facie  case  which  is a high  likelihood  of  success,  a prima facie  case  is defined  as a genuine  and arguable case  in which  a court  probably  amounting  itself  will conclude  that they revisit a right  which  has apparently  been infringed.

The  circumstances  of this cases arises  from  a guarantee  on a loan  and default  thereof.  We note  that where  a  guarantor  signs  a guarantee, he  accepts liability to repay   the loan  upon default  by the  borrower.   We have noted  the annexure “SSS 1” being  the loan  application  form  and on page 8 is the  signed  guarantee by each  of the  applicants. This  guarantee  is not disputed by  the  applicants.

We note  the contents  and the  wordings  of the repayment  guarantee  therein “we the undersigned, hereby accept  jointly  and severally, liability  for the repayment  of this loan  in the event  of the  borrowers default. We  understand  that  the amount  in default  may be  recovered  by  an offset against  our deposits  or attachment  of our property, salary, deposits  and other  property  owed by  us”

We note  that  the applicant  have not  denied that they signed the guarantee form,  the validity of  the  guarantee or the  demand  notices. By  signing  the guarantee form  it is trite  law  that guarantors  accepted  liability jointly  and severally  in case  of  default  by the  borrower.

On this issue,  we find  that  even  as per the  1st  respondents  submissions, the  applicants  have not  proved  a prima facie  case.

2. Irreparable  injury  incapable  of not being  adequately  compensated  by  award  in damages. We  note  that  this  is a liquidated claim where  the amounts are known and  the attracting  interest  is also  known.

The amount  to be debited  from each  applicant’s  account  Kshs.379,355/= within  a period  of 24  months therefore  any loss or injury  can easily  be quantified  and compensated  by way of  damages. The  case  GIELLA (Supra) is binding  to this  tribunal.

3. balance  of convenience  we note  that  the applicants  willingly guaranteed the  1st respondent  and signed  the guarantee and the  amount  proposed  to  be debited  from  their  accounts  Kshs.13,217/= per  month  and due  to the guarantee agreement  we note that  the  2nd  respondent  would  suffer  great  financially  since there  is no other  collateral  from which  the defaulted  amount  cannot be recovered.

The  1st respondent  has  submitted  that  he is ready  and willing  to pay  the amount  of the loan  hence  the balance  of convenience  tilts  in favour  of the  2nd  respondent.  Since  the inconvenience  he stands to suffer  for outweighs  the convenience  of the  applicants.

The  1st  respondent  submitted  that the  application  has no merits  since  the  applicants  have not  shown  a prima facie  case  and not  demonstrated  that they  cannot  be compensated  by  way of  award in damages.

We  therefore  dismiss  the application  dated 11. 4.19 with costs  to be  paid  to the  2nd  respondent.

Read and delivered in open court, this 7TH of November 2019.

In the presence of:

Claimant:Miss Ndolo holding brief for Miss Mburu.

Respondent:Miss Tanui for 2nd Respondent.

Court Assistant:Leweri and Buluma

B.Kimemia           -        Chairman-signed.

R.Mwambura       –        Member-signed.

P.Swanya             -        Member-signed.