Kabuba v Metropolitan National Sacco Society Ltd [2023] KECPT 817 (KLR)

Kabuba v Metropolitan National Sacco Society Ltd (Tribunal Case 768. E833 of 2022) [2023] KECPT 817 (KLR) (17 August 2023) (Judgment)

Neutral citation: [2023] KECPT 817 (KLR)

Republic of Kenya

In the Cooperative Tribunal

Tribunal Case 768. E833 of 2022

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

August 17, 2023

Between

Esther Wangechi Kabuba

Claimant

and

Metropolitan National Sacco Society Ltd

Respondent

Judgment

1. The matter for determination is a Statement of Claim dated 15th September 2022 and filed on 16th September 2022. The same is supported by a Verifying Affidavit sworn on 15th September 2022 and filed on 16th September 2022 seeking the following reliefs as the Claimant averred in paragraphs 3 and 8 of the Statement of Claim.a.Kshs 556,000/= with interest at current bank rates from 06. 1.2020 until payment in fullb.Cost of the suitc.Any other or further relief that this Honorable Court may deem fit to grant.The Claimant filed a list of documents dated 15th September 2022 filed on 16th September 2022that include:1. Letter by the Claimant to the Respondent dated 6th January 2020. 2.Demand letter and notice of intention to sue dated 24th June 2022 from Muthoni Jomo &Co. Advocates.3. Letter from the Respondent to Muthoni Njomo &Co. Advocates dated 29th June 2022. 4.Statement of Account from 29/10/2012 to 22/04/20225. Any other Relevant Document.

2. The Respondent filed a statement of defense on 28th October 2022 dated 25th October 2022. As set out there in seriatim and traversed verbatim, the Respondent denies every allegation made in the Claim aside from what is admitted. The Respondent aver that the Claimant has been its member under Membership Number 50XXX operating FOSA A/c No 0000008XXX and making monthly contributions.

3. The Respondent denies paragraph 3 of the statement of claim that states that the Claimant on 29th October 2012 made a deposit of Kshs 5,000/= and continued making monthly contributions that held the current shares stand at Kshs 556,000/= and it further denies that in the year 2020, she approached the Respondent for a loan advancement which was declined with no reasons despite previously borrowing and been advanced thus putting the Claimant to strict proof.

4. The Respondent also denies the content of paragraph 5 of the statement of Claim and puts the Claimant under strict proof as it had never received notice to withdraw from the Claimant as even the withdrawal letter is not stamped. Additionally, from the AGM Resolutions by the General Assembly, members agreed to schedule refunds after two years due to liquidity challenges faced by the Respondent.

5. The same is also rejected by the Respondent that the Claimant visited Respondent SACCO offices after the expiry of 60 days after service of withdrawal letter from the SACCO in mid-March of, the same year then she went back in April 2020 and the manager told her verbally to get her refunds after two years of which she went back in April 2022 only to be told that the SACCO had no funds only to wait for a tentative date.

6. The Respondent admits to receiving a demand letter from the Claimant’s Advocate but says that it is not of any consequence to the foregoing.

7. The Respondent avers that being a member, the Claimant is obligated to by-laws of the SACCO and its amendments, and it admits the jurisdiction of the Tribunal.

8. Being a claim of refunds, parties were directed to file written submissions to dispose of the claim. The Claimant filed her submission on 10th May 2023 dated 15th March 2023.

Respondent’s Submissions 9. The Respondent filed their written submission dated 3rd May 2023. It states that the question in contention is true whether the Claimant withdrew her membership from the SAACO and satisfied the balance of probabilities that the Respondent failed, refused or neglected to refund her contributions or whether it was a proper choice. In light of this, the Respondent aver that as per the by-laws, a member wishing to withdraw must write to the SACCO after receipt, it is to wait for a period of 60 calendar days for the SACCO to schedule a refund, of which the Claimant failed to oblige. The Respondent aver that it is by the court’s discretion and legal burden of proof to satisfy that the Claimant withdrew her membership as the Respondent only was aware through the filing of this suit.

Issues For Determinationa.Whether the Claimant withdrew from the Respondent’s Saccob.Whether the 2019 Annual General Meeting Resolutions are legally binding a) Whether the Claimant withdrew from the Respondent’s Sacco 10. The Claimant wrote a letter of withdrawal to the SACCO for member No 50XXX A/c No 0000008XXX. However, on the statement of defense, the Respondent alleges that the letter was not received as it did not bear the stamp of the Respondent.

11. Further, the Respondent alleges that as per by-laws, members are required to wait 60 calendar days for refund requests under which the Claimant failed to do so. Also, the Respondent alleges that the Claimant did not receive submissions to withdraw and was only aware through the filing of this suit. Herein, the determination of this issue shall be put under the legal burden of proof.

b) Whether the 2019 AGM is legally binding 12. As per the Respondent’s submission, the 2019 Annual General Meeting resolutions had members resolve and agree to schedule refunds on a first come first serve basis. This was brought up due to the liquidity challenges faced by the Respondent and thus not possible to refund the members all at once. Further, the Respondent engages in the submissions that the resolutions were authorized and approved by SASRA in conjunction with the Commissioner for Co-operatives. However, there was no copy of authorization or approval annexed in the Respondent’s list of documents.

13. The questions engaged in the determination of this issue are:i.Did the resolutions meet the threshold of amendment of by-laws?ii.Were the right procedures followed in the amendment of by-laws?iii.Was any notice issued regarding the amendment?iv.Was the resolution registered in the SACCO’s by-laws.

Analysis 14. The Honorable Tribunal holds that it will deliver as per observation in the case of Tribunal Case No 446 of Theophilus Olokulale v Transcom (2017) that “Justice is a serious quest, and each party needs to play their role in ensuring that the said justice is served in a speedy and timeous manner.”

15. As per the SACCO’s by-laws, “a member is required to wait 60 calendar days after making a refund request in writing.” The Claimant requested for withdrawal and refund of the shares on 13th April 2021 and filed this suit on 4th May 2022, thus the criteria have been met and thus the Claimant met the burden of proof, This is a consequence of the letter indicating the Respondent’s address and same as which the Claimant served the Respondent and the latter replied through a statement of defense.

16. Herein, this subjects the Respondent to prove the balance of probability that it is not an act of the Respondent’s failure, refusal, or neglect to refund the contributions. In response as per submissions, it is averted that it is the liquidity challenges that the Respondent is facing that prompted the Annual General Meeting to avert the members from withdrawing at the same time that would collapse the SACCO.

17. In the case of Francis Joseph Kamau v Housing Finance Company of Kenya Limited (2014) eKLR, it was stated that a bank has a duty under its contract with its customers to exercise “reasonable care and skill” regarding operations within its contract with its customers. The standard of reasonable care and skill is an objective standard applicable to bankers.

18. However, was the right procedure followed? To subject a member to terms, there must be a set of procedures followed by both parties. Under by-laws, a member may wish to withdraw their contribution at any point but have to wait for 60 calendar days which was obliged by the Claimant. In contrast to this procedure, an Annual General Meeting was convened in 2019 upon which members opted to have refunds on a first come first serve basis therefore prompting the Claimant to have her refunds set on 22nd October 2023 from the termination of membership

19. Section 8 sub-section (2) of the Amendment of by-laws provides:“that no amendment of by-laws of a cooperative society shall be valid until the amendment shall be registered under this Act, for which a copy of the amendment shall be forwarded to the commissioner in the prescribed manner”.

20. Rule 8 of the Co-operatives Society Rules 2004 states that:1. Any amendment of the registered by-laws of a co-operative society under section 8 of the Act shall be made by a resolution of members at the general meeting in respect of which at least 15 clear days’ notice of the proposed amendment shall be given to the members of the society.2. No resolution under sub-rule (1) shall be valid and effective unless, in the case of a cooperative society with unlimited liability, half of the members of the society are present at the meeting and three-quarters of them vote in favor of the resolution

21. It is therefore that the Tribunal is obliged to answer the factual questions on the chances that the 2019 Annual General Meeting resolutions are impugned.

Determination 22. As per Section 8 of the Co-operativesSocieties Act, there was no notice of such amendments and there was no vote over the Resolutions as required by Rule 8(2) (a) of the Co-operatives Societies Rules.

23. Further, there is no evidence that the Resolutions were authorized and approved by SASRA as filed in this suit. This is supported by the first leaf of the Respondent’s by-laws which indicates that the last amendment of the Respondent’s by-laws was in April 2016 and as such, the impugned Annual General Meeting resolutions could not have high authority over the Respondent’s by-laws. Thereby, the Resolution is a breach of SACCO by-laws.

24. Guided by Article 10(1)(b) and (2) and Article 159(1) and (2) (a) of the Constitution of Kenya, the Honorable Tribunal shall abide by the rule of law. Herein, it can be observed that the Respondent did not follow the right procedure to amend or vary its by-laws which is illegal and thus an abuse of the court process.

25. On the matter of the Claimant being sought to relief from the Court, it is observed in section 79(3) that states that the Tribunal enters judgment in terms of the award together with costs, it shall issue a decree that shall be enforceable as a decree of the court

Upshot 26. As such, Judgment is entered in favor of Claimant against Respondent for Kshs 531,000/= plus cost and interest.

JUDGMENT SIGNED, DATED AND DELIVERED VIRTUALLY AT NAIROBI THIS 17TH DAY OF AUGUST, 2023. ...................HON. BEATRICE KIMEMIACHAIRPERSON SIGNED...................HON. J. MWATSAMADEPUTY CHAIRPERSON...................HON. BEATRICE SAWEMEMBER...................HON. FRIDAH LOTUIYAMEMBER...................HON. PHILIP GICHUKIMEMBER...................HON. MICHAEL CHESIKAWMEMBER...................HON. PAUL AOLMEMBERTribunal Clerk JonahMs. Njomo advocate for the Claimant.Korir advocate for the RespondentJudgment delivered.Korir advocate: We pray for 30 days of execution.Njomo advocate – No objectionTribunal: Respondent granted 30 days stay of execution.