Kinyua v Fortune Sacco Society Limited & another [2022] KECPT 895 (KLR)

Kinyua v Fortune Sacco Society Limited & another (Tribunal Case 140 of 2020) [2022] KECPT 895 (KLR) (Civ) (16 December 2022) (Judgment)

Neutral citation: [2022] KECPT 895 (KLR)

Republic of Kenya

In the Cooperative Tribunal

Civil

Tribunal Case 140 of 2020

BM Kimemia, Chair, J. Mwatsama, Vice Chair & M. Mbeneka, Member

December 16, 2022

Between

Patrick Wachira Kinyua

Claimant

and

Fortune Sacco Society Limited

1st Respondent

Restorers Consult Auctioneers

2nd Respondent

Judgment

1. The claim for determination is filed via plaint dated March 18, 2020 filed on even date. The claimant avers he was proprietor of land parcel No 1 Mwerua/Mukure/2090. He used the same as security for a loan amount of Kshs 600,000/=.The charge is dated March 23, 2011 in the 1st respondent favour.He avers to have repaid the loan at over Kshs 680,000/= but had not completed payment.The claimant avers the amount demanded is two times the principal amount.The figure owing according to respondent is Kshs 1,700,000/= and claimant thus prays for :a.A declaration that the 1st defendant has misconstrued the outstanding figures and should thus avail the relevant bank statements to help the tribunal realize the correct figure.b.A permanent order restraining the defendants, their agents, employees servants or anyone claiming through them from auctioning, leasing, and/or executing any dealings whatsoever on LR No Mwerua/mukure2090 in bid of recovery of the loan arrears.c.Costs and interests of the suit.Claimant filed list of documents dated March 18, 2020 and further list of documents dated March 15, 2022 filed on March 18, 2022.

2. The respondent filed a reply to statement of claim and counter claim dated November 29, 2021. The defence denied the averments by the claimant and stated the claimant was advanced a loan facility of Kshs 694,000/- and the claimant made sporadic and nominal payments.In the counter claim the respondents avers their claim is for Kshs 940,960. 60/= as at October 28, 2021. The respondent’s claim in the counter- claim is for:a.The sum of Kenya shillings nine hundred and forty thousand nine hundred and sixty (Kshs 940,960/=) only.b.Interest on (a) above at 19% per annum from October 5, 2020. c.Costs of the counterclaim and interest thereon at court rates.d.Any other or further relief this honourable tribunal may deem fit and just to grant.The respondent filed list of documents dated November 29, 2021 filed on November 4, 2021 which include:1. Loan application form.

2. Demand letters from the 1st respondent to the claimant.

3. Letter of instructions from the 1st respondent to the 2nd respondent.

4. Statutory notice from the 1st respondent to the claimant.

5. 2nd letter of instructions from the 1st respondent to the 2nd respondent

6. Notification of sale issued by the 2nd respondent to the claimant.

7. 45 days redemption notice from the 2nd respondent to the claimant

8. Newspaper advertisement advertising the suit property for sale.

9. Claimant’s statement of account.

3. The matter came up for hearing on June 9, 2022. CW1 Patrick Wachira Kinyua gave evidence and adopted his witness statement dated March 18, 2020 filed on March 19, 2020 as his evidence - in -chief.On cross examination he confirmed he had taken a loan in November 2013. He confirmed he had not cleared paying the loan however had paid respondent Kshs 680,000/= but did not produce the bank slips evidencing payment.He confirmed he approached respondent for time to pay the loan arrears.Claimant further confirmed the loan taken in 2013 was to be repaid by 2015 and the same had not been done.Claimant on re examination confirmed payments made on November 8, 2018, November 12, 2018 and September 3, 2019.

4. The respondent also had their day in court a witness RW1 Henry Wachira the respondent’s sacco head of credit.He adopted his witness statement as his evidence- in- chief.He confirmed the loan in question was a top up loan. He confirmed the amount due is Kshs 943,814. 07 and loan was to be paid with bonus payments for year 2014 and 2015. On cross examination he stated he did not have documents for the previous loans and did not state how much was due from the previous loans.He stated the loan was secured using the land as collateral and the witness in the loan application agreement were to witness the claimant signature and not to be guarantors.He stated the claimant benefited with Kshs 299,574/-. He confirmed notices were made to claimant and thus he had to pay the auctioneers charges.He stated that they are charged with auctioneer charges with every notice.He also confirmed the auctioneer was paid for a job not done.On re examination he confirmed the loan subject matter is Kshs 694,000/=.

5. Parties filed the written submissions with respondent filing their written submissions dated October 11, 2022 on even date and claimant filing their written submissions on June 20, 2022 filed on July 18, 2022. Having considered the pleadings, evidence by parties and written submissions the issues for determination is just one

Issue One Whether the claimant is in arrears and how much is owing to the respondent?The issue for determination is not whether the claimant owes the respondent but how much is owing to the respondent.It is not in dispute the claimant took a loan with the respondent.The issue is how much has been repaid and how much is owing.Unfortunately the respondent did not prove that the said loan was a top up and how much was owing in the previous loan if at all.

6. RW1 testified and stated he did not have the documents neither were they produced in evidence.We thus take it the loan disbursed and owing for purpose of this case is Kshs 680,000/=.From the loan statement of account the claimant is seen to have paid Kshs 815,519/= as per the loan account customer statement dated January 6, 2021. The statement shows the balance to stand at Kshs 943,814. 07. The claimant however claims the amount being proposed for payment by respondent is over and above twice the amount procured.

7. Sub issue a- Duplum RuleThe question to be asked- is it right for the respondent to ask for an amount more than twice of the principal sum.Duplum rule applies.It is unconscionable for any financial institution to recover more than twice the principal amount.It is not right for respondent to claim Kshs 1,759,333. 39 from an advanced figure of Kshs 685,740. 00. A quick reference to the duplum rule as described on google it is a “ rule that limits the amount recovered by a bank or a defaulted facility to the principal owing when the loan becomes non performing plus contractual interest not exceeding the principal owing when the loan becomes non-performing plus recovery expense”February 15, 2022 google.The rule was enunciated by the Zimbambwe High Court in Commercial Bank of Zimbambwe v MM Builders and Suppliers PVT Limited 1997 (2) SA 285 ZHC as follows:“it is a principle firmly entrenched in our law that interest, whether it accrues as simple or compound interest, ceases to accumulate upon any amount of capital owing once the accrued interest equals the amount of capital outstanding whether the debt arises as a result of a financial loan or out of any contract whereby a capital sum is payable together with interest thereon at a determined rate.”The Banking (Amendment) Act introduced section 44A in the Banking Act cap 488 Laws of Kenya.Section 44A limit on interest recovered on defaulted loans.“An institution shall be limited in what it may recover with respect to a non performing loan to the maximum amount under sub section (2).The maximum amount referred to in sub section (1) is the sum of the following:The principal owing when the loan becomes non-performing;Interest, in accordance with the contract between the debtor and the institution, not exceeding the principal owing when the loan becomes non-performing; and expenses incurred in the recovery of any amounts owed by the debtor.”In the case of HCC No 145 of2019 - KiambuFrancis Mbaria Wambugu v Jijenge Credit Limited and Nairobi Chairman Auctioneers.Justice Meoli quoted the case of Mwambija Ranching Company Limited and another v Kenya National Capital corporation [2019] eKLR as follows:“In the duplum rule is concerned with public interest and its key aim was to protect borrowers from exploitation by lenders who permit interest to accumulate to astronomical figures. It was also meant to safeguard the equity of redemption and safeguard against banks making it impossible to redeem a charged property. In essence; a clear understanding and appreciation of the duplum rule is meant to protect both sides”

8. To this end we find it wrong for respondent to charge over and above what is required by law and thus order the total amount owing if at all is Kshs 1,371,480/=.Less what the claimant has paid as per the loan account customer statement is Kshs 555,960. 61/=1. A declaration that the 1st defendant has misconstrued the outstanding figures and should thus avail the relevant bank statements to help the tribunal realize the correct figure is hereby allowed.

2. A permanent order restraining the defendants, their agents, employees servants or anyone claiming through them from auctioning, leasing, and/or executing any dealings whatsoever on LR No Mwerua/Mukure2090 in bid of recovery of the loan arrears is hereby by allowed.We indeed have looked at evidence before the tribunal and find the respondent erred once more in charging the title LR No Mwerua/Mukure/2090 and putting it up for sale while the loan form had guarantors.Nothing is mentioned if indeed the guarantors were informed of the default by the claimant. Not suggesting they would have paid the balance but to push the claimant into meeting his obligation the charging of the land was drastic and thus we are not in agreement with how the same was done.We therefore direct and order for the claimant to pay balance of Kshs 555,960. 61 owing to the respondent.

9. The counter claim was claiming for Kshs 940,960/= which the same fails as what is owing to respondent is Kshs 555,960. 61 in application of the duplum rule and what is just.

10. UpshotThe claim thus succeeds in prayer a and fails in prayer b.The counter claims succeeds partially and we find the claimant is indebted to the respondent to the tune of Kshs 555,960. 61.

JUDGMENT SIGNED, DATED AND DELIVERED VIRTUALLY AT NAIROBI THIS 16TH DAY OF DECEMBER, 2022. Hon. Beatrice Kimemia Chairperson Signed 16. 12. 2022Hon. J. Mwatsama Deputy Chairperson Signed 16. 12. 2022M. Mbeneka Member Signed 16. 12. 2022Tribunal Clerk J. MutaiHon. J. Mwatsama Deputy Chairperson Signed 16. 12. 2022