Kahenya & another v NRS Sacco Society [2025] KECPT 359 (KLR)

Kahenya & another v NRS Sacco Society (Tribunal Case 877. E964 of 2022) [2025] KECPT 359 (KLR) (Civ) (26 June 2025) (Judgment)

Neutral citation: [2025] KECPT 359 (KLR)

Republic of Kenya

In the Cooperative Tribunal

Civil

Tribunal Case 877. E964 of 2022

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

June 26, 2025

Between

Titus Kuria Kahenya

1st Claimant

Jane Nyambura Kahenya

2nd Claimant

and

NRS Sacco Society

Respondent

Judgment

1. The Claim is instituted though the statement through the Statement of Claim dated 27/10/2022 wherein the Claimant prays for judgement against the respondent for :a.Declaration that the intended exercise of statutory power of sale is unlawful.b.Damages for breach of contract.c.Interest on (a) above at court rates.d.Costs of this suit.e.Any other relief that this Honourable Tribunal deems fit to grant.

2. In their witness statements dated 14/3/2024 the 1st Claimant state that they were member of the respondent the 1st Claimant further states that he was given a loan of Kshs. 6. 500,000/= but Kshs.4. 600,000/= was disbursed.

3. He alleges that he has been repaying the Kshs. 4. 600,000/= on loan but noticed that his loan balance was not reducing and that the respondent had indicated loan disbursed as Kshs 6. 500,000/=.

4. He further avers that he has received a demand notice for arrears he is not aware of the claimant has filed documents dated 14/3/2021 and 27/10/2022 in support of his claim. During the hearing of the claimant’s case on 16/10/2024 the Claimant stated that he borrowed Kshs. 6. 500,000/= but received Kshs. 4. 500,000/= . He admitted to default on his loan and making no repayment since moving to this Tribunal.

5. In his written submissions dated 29/10/2024 the loan of Kshs. 6. 500,000/= was not disbursed in full with Kshs. 1,726,000/= being used to settle outstanding loan instalments of the claimant. The claimants stated that they severally enquired from the respondent why they debited their asset account towards loan repayment when they had not defaulted. The claimants aver that they applied for Kshs. 6. 500,000/= repayable in 60 months. they state that their loan was not in default at the time of filing this claim and that they made a lump sum payment of Kshs. 1,000,000/= and yet the loan amount did not reduce significantly they state that they realized interest was being computed on Kshs.6. 500,000/= alleged loan. The Claimant’s prayers are:a.Tribunal to declare the intended statutory power of sale illegalb.Tribunal to award claimants’ damages for breach of contract

6. The respondent’s case is based on the respondent’s Statement of Defence and counterclaim dated 5/3/2024 wherein the respondent prays for judgement against the claimant for Kshs. 5,563,467 plus costs and interest as a counter claim. The respondent’s states that the claimants were to complete repaying the loans given by 30/06/2021, which they did not occasioning a Kshs. 234,113. 72 as interest plus penalties. The respondent avers that they issued several reminders and demand notice to the claimants to repay the outstanding loans. They further state that the claimants gave land as security for the loans and that the same land is being held as security for the loans

7. In their witness statement dated 5/3/2024, Ms. Justa Karimi for the respondent stated that the 1st and 2nd Claimant are siblings and had a membership joint account. The respondent alleges that the claimants applied for a Kshs. 950,000 loan which was disbursed on 21/6/2021. Sum of Kshs. 238,000 was retained by the respondent in the claimants account as asset saving. The respondent states the claimants applied for a Kshs. 6. 500,000/= loan and gave collateral in form of land parcel No LR NO. Muguga/Kanyariri/1383 register in the name of 2nd Claimant. The respondent state that the Claimants failed to make any repayments for 2 monthly occasioning the automated system of the respondent to effect deductions on the claimant’s account on several dates the claimants defaulted on their loan repayment. Occasioning the respondent to deposit funds to the claimant loan account in order to reduce the interest and penalties

8. The respondent still that on 8/9/2022 the claimant made a lumpsum deposit of Kshs.1,000,000/=. The respondent avers that at October 2022; the claimants had accumulated interest and penalties of Kshs. 234,113/=. the respondent states that due to this situation they issued a notice of sale as a statutory notice thereafter and the security land which they felt was their night to exercise its statutory power of sale.

9. The Claimants are alleged to have continued to default on their loans and are in default to the sum of Kshs. 5,563,467. 90/=. during the hearing of the respondent’s case on 16/10/2024 the respondent witness Ms. Justa Karimi adopted the statement of 4/4/2023 as the evidence in chief. She avered that the claimant’s loan of Kshs. 6. 500,000/= was disbursed in full the Claimants FOSA account which the Claimants could access to withdraw the witness enumerated the various withdrawals done the Claimant in their account.

10. She stated that at one time, the claimants Fosa account had Kshs. 1,726,000 which they were able to access. She avered that the respondent systems were automated so that any default it would deduct from the asset account to the loan account. She stated that at one time the Claimants FOSA account had Kshs. 1,726,000 which they were able to access. She asked that the Respondent systems were automated so that upon default it would deduct from the asset account to the loan account. She stated that the counter claim of Kshs. 5,563,467 is for the outstanding loan balance. She prayed that the claimants case is dismissed in their loan balance cleared. In their written submission dated 13/11/2024 the respondent aver that the gist of the suit in the Kshs.6. 500,000/= borrowed by the Claimant and secured by a charge over a land L.R.NO Mugaga/Kanyariri 1383 registered in the 2nd Claimant name. the Claimant claim that out of Kshs. 6. 500,000/= approved only Kshs. 4. 600,000/= was disbursed which is denied by the respondent.

11. The respondent states that the entire loan of Kshs. 6. 500,000/= was disbursed to the claimants. the respondent prays for the counter claim of Kshs. 5,563,467/= being amount due from the claimant as at 29/02/2024.

Analysis 12. The Claimants’ prayers among others is for this tribunal to determine whether the intended exercise of statutory powers of sale by the respondent is lawful or not. We are also invited to determine if there was a breach of contract between the claimant and their Respondent to warrant the respondent exercise the statutory power of sale. It is imperative to bring out a brief on what occasioned the respondent to exercise the statutory power of sale. This case revolves around a Kshs. 6. 500,000/= approved and disbursed to the claimant in June 2021. as per the Loan agreement the terms and conditions of the Claimants Loan were as follows;Type of loan – Development.Repayment- 60 minutesInterest- 1. 5% p.m on reducing balanceSecurity – that the Claimant Claimants Savings Shares, Asset Security ( Title Deed)

13. A general condition in the Loan agreement is that the Claimant covered not access the entire Kshs. 6. 500,000/-M until the title charging was couple disbursed into two phases Kshs 4. 600,000/= a balance of Kshs. 1. 600,000/= retained in the Claimants account.The Claimant alleges that upon repaying a lumpsum of Kshs. 1,000,000/= she realized that the principal loan did not change significantly. This tribunal is expected to determine as her statement of claim the following; Was the intended exercise of statutory of sale unlawful.

Is the Claimant entitled to damage for the alleged breach of contract

Is Claimant entitled to interest on cost of the suit.

14. In determining if there was a breach of contract, we have referred ourselves to terms of the loan as contained in the loan agreement. The question is whether the Claimant breached the loan agreement contract. We note that the loan was defaulted as testified by the claimant and orally in court that they had been defaulting in these monthly instalments. It is noted that the Kshs. 1,000,000/= lumpsum repayment was meant to make good the default as testified by the claimant. The Claimant also admitted that they had only repaid Kshs. 2,000,000/= and that they stopped repayments upon filing this suit

15. We are of the opinion that the loan granted to the claimant was default and this was a breach of the Loan. Agreement between the Claimant and the respondent the issue to determine is whether the respondent’s intended exercise of statutory was unlawful. We have established from the claimants’ oral admissions that their loan was in default. The issue to determine here is whether the respondent followed due process in the statutory power of sale as stipulated in the Land No. 6 of 2012.

16. Documents filed by the respondent show the following; Loan applied and approved Kshs. 6. 500,000/= balance of Claimants account statement Kshs. 5563,467. 90

Notice for default letter to the Claimant from the respondent dated 10/07/2022

2nd Notice of default dated 11/07/2022

Notice to rectify 17/10/2022

Recovery through sale of LR No Mugaga/Kanyariri/1383, Jane Kahenya dated 21/2/2023 to the Auctioneer

17. We note that it was 7 months from the 1st Notice of default to the letter to the auctioneer a reasonable time accorded the claimant by the respondent. in view of the foregoing this tribunal is satisfied that the claimants were in default of their loan as at the time of filing this case as that no repayments were made since filing this case.

18. We also find that the respondent notified the claimant of their loan default loan before notifying their auctioneer on the Claimant’s defaulting.in this regard we find that the Claimants case lacks merit and is thus dismissed in its entirety with costs to the respondent.

JUDGMENT SIGNED, DATED AND DELIVERED VIRTUALLY AT NAIROBI THIS 26TH DAY OF JUNE, 2025. HON. J. MWATSAMA DEPUTY CHAIRPERSON SIGNED 26. 6.2025Hon. Beatrice Sawe Member Signed 26. 6.2025Hon. Fridah Lotuiya Member Signed 26. 6.2025Hon. Philip Gichuki Member Signed 26. 6.2025Hon. Michael Chesikaw Member Signed 26. 6.2025Hon. P. Aol Member Signed 26. 6.2025Tribunal Clerk GechikoNo appearance by partiesJudgment delivered in absence of parties.HON. J. MWATSAMA DEPUTY CHAIRPERSON SIGNED 26. 6.2025AW.N.PGJUDGMENT