Molo Welfare Cooperative Society Ltd v Molo Dairy Farmers Co-operative Society Ltd [2025] KECPT 196 (KLR) | Cooperative Societies Disputes | Esheria

Molo Welfare Cooperative Society Ltd v Molo Dairy Farmers Co-operative Society Ltd [2025] KECPT 196 (KLR)

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Molo Welfare Cooperative Society Ltd v Molo Dairy Farmers Co-operative Society Ltd (Tribunal Case 118 of 2010) [2025] KECPT 196 (KLR) (27 February 2025) (Judgment)

Neutral citation: [2025] KECPT 196 (KLR)

Republic of Kenya

In the Cooperative Tribunal

Tribunal Case 118 of 2010

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

February 27, 2025

Between

Molo Welfare Cooperative Society Ltd

Claimant

and

Molo Dairy Farmers Co-operative Society Ltd

Respondent

Judgment

1. In the Claim herein amended on 19th August, 2023, the Claimant prays for Judgment against the Respondent for:a.A Declaration that The Claimant is entitled to refund of payments made by it to Cooperative Bank of Kenya Limited and expenses incurred on Maziwa House by the Claimant on account of the Respondent together with general damages.b.An Order for the taking of accounts made to establish all the amounts due and payable by the Respondent to the Claimant.c.An order be made that amounts found due and payable by the Respondent to the Claimant be paid to the Claimant together with interest within such time as this Honorable Court may find just in the circumstances.d.An Order that the Respondent is liable to pay the Claimant 10% of the total value of the building for breach of agreement.e.A Declaration that the Claimant is Co-owner with the Respondent of Molo Farmers Housing Co-operative Limited as a result of amalgamation and that the Claimant entitled to be in the management committee and make resolution thereto, share profits and/or proceeds arising from the business or any income generating activity carried out by the entity.f.An Order to the Respondent to give accounts of the Rent collected as per the rent account from the date of amalgamation to date and the same be backed by certificate of confirmation from the Co-operative Bank.g.Costs of The Claim.h.Any other or further relief as may seem fit to this Honorable Court to grant.

2. It is the Claimant’s Claim that on or about 24th July 2001, the Claimant and the Respondent got into an agreement whereby they agreed to amalgamate their societies so as to form a Co-operative Society to be known as Molo Farmers Housing Co-operative Society Limited; that the said Molo Farmers Housing Co-operative Society Limited was formed to take over the ownership and management of the Respondent’s property known as Maziwa House L. R. No. 533/454 Molo Town after repaying a loan then due to be paid by the Respondent to the Co-operative Bank of Kenya; that in pursuit of the said agreement, The Claimant paid to the Co-operative Bank of Kenya Limited a sum of Kenya Shillings Eight Hundred Thousand (Kshs. 800,000/=) on account of the Respondent which was then indebted to the said bank; that the said payment represented the Claimant’s proposed half shares in the society to be formed knowns as Molo Farmers Housing Co-operative Society Limited.

3. That the Respondent neglected/refused the terms of the agreement after formation but ousted the Claimant and therefore benefited from the proceeds of Molo Farmers Housing to the exclusion of the Claimant and also benefited from the Claimants said sum of money without any reciprocal benefit to the Claimant who is now entitled to the refund of the same, that in furtherance of the said agreement, the Claimant entered into the said house and carried out renovations and improvement to the building at Kshs. 600,000/= but after the Claimant and the Respondent amalgamated, the Respondent ejected the Claimant from the management and all other activities of the new entity, which it continued to run in an inquiry report of the Respondent, the said sum of Kshs. 800,000/= was found to be due and payable by the Respondent to the Claimant; that the Molo Farmers Co-operative Society Ltd was formed as a result of capital contribution of members of both parties; that the Respondent has however refused, failed and/or neglected to pay the sum of Kshs. 800,000/= in accordance with the report, despite demand; that the Respondent has further refused to refund to the Claimant the sum of money expended by the Claimant in renovating and improvement of the house and general damages.

4. The Respondent, in response to the Amended Claim filed an amended Defence and Counterclaim dated 29th November, 2023.

5. The Respondent denies that on 24th July, 2001, it entered into an agreement with the Claimant whereby it was agreed to amalgamate to form a Co-operative Society known as Molo Farmers Housing Co-operative Society Limited and that without prejudice, even if the said agreement was entered into as alleged, the same was unlawful and null and void for lack of resolution and/or other necessary approvals by the respective co-operators and the said agreement had no force of Law.

6. Further, the Respondent denies that the main objective of the society to be formed was to take over the ownership and management of the Respondent’s property known as Maziwa House L. R. No. 533/454 Molo Town after repaying a loan then due to the Co-operative Bank of Kenya; and that Claimant paid to the Co-operative Bank of Kenya Limited a sum of Kshs. 800,000/= or at all and puts the Claimant to proof; that if at all there was payment as stated, it was the Claimant who proposed half shares in the society to be formed known as Molo Farmers Housing Co-operative Society Limited; that the Respondent denies it refused to proceed with the amalgamation; that/or it benefited from the Claimants said sum of Kshs. 800,000/= or that the Claimant is entitled to a refund of the said sum or at all.

7. The Respondent admits that the Claimant entered into Molo Housing pursuant to the illegal agreement dated 24th July, 2001 but denied that the Claimant carried out renovations or improvements but admits that the Claimant was ejected from the said house after the illegality involved in the arrangement was discovered by the management of the Respondent;that by the time the Claimant was ejected from Maziwa House, the Claimant had collected the sum of Kshs. 2,238,352/= without any accountability to the Respondent and to date, has never handed over the said sum of Kshs. 2,238,352/= or forwarded any audited accounts of the said money to the Respondent; that it is not true that the inquiry Report by Lucy W.Kahwai and Protus K.Ruoha has stated that a sum of Kshs. 800,000/= was found to be due and payable by the Respondent to the Claimant.

8. The Respondent states that without prejudice, the Claimant should first account for the rent received during the period it managed Maziwa House before making any claim against the Respondent.

9. The Respondent denies the particulars of breach of contract set out by the Claimant and adds that as far as the Claimant’s Claim for general damages is based on breach of contract, the same is time barred under the limitation of Actions Act.

Counter Claim 10. The Respondent has counterclaimed against The Claimant and states that the Claimant entered into its premises in L. R. No. 533/454 known as Maziwa House and managed the said house in July, 2001 and collected rent in excess of Kshs. 2,238,351/= and claims for a true account of the rent received during the period the Claimant managed Maziwa House from July, 2001 to the date of eviction and the payment to the Respondent any sum that the Tribunal may find due to the Respondent.

11. The Respondent also claims the costs of the Counterclaim.

12. In reply, the Claimant put in the Reply to Defence and Defence to Counterclaim dated 6th January, 2011 filed on 24th February, 2011 which was not amended as at the date of writing this judgment 24th February,2011 wherein the Claimant reiterates the contents of the Statement of Claim and adds that irrespective of whether or not the agreement was null and void as averred by The Respondent, the Respondent received the sum of Kshs. 800,000/= in pursuance of a consideration which totally failed and further denies receiving rent for the property as stated by the Respondent.

13. In its Defence to the Respondent’s Counterclaim the Claimant denies that it collected the sum of Kshs. 2,238,351/= and states that the Respondent is not entitled to an order for an account in respect of the said money which the Claimant terms as imaginary and fictitious.

14. The Claimant finally prays that the Defence and the Counterclaim be dismissed with costs.

15. After the Hearing of the case inter-partes, both parties filed Written Submissions in support of their respective cases.

16. The Claimants Written Submissions are dated 25th October, 2024, while the Respondent’s Written Submissions are dated 8th November, 2024.

Analysis and Determination 17. We have considered the pleadings and documentary evidence of both parties; we have also considered the oral Evidence adduced in Court by Claimant Witness 1, Claimant Witness 2 and Respondent Witness 1 during the hearing.

18. Further we have considered the Written Submissions of the parties and case Law cited therein.

19. It is true that he who alleges must prove and our task is to determine the following:i.Whether the Claimant has proved its claim against the Respondent on a balance of probability. In this regard we have to determine whether there was a valid contract between the Claimant and Respondent.

20. In support of its claim, the Claimant has produced as evidence a Memorandum of Agreement made on 24th July, 2001 between itself and the Respondent wherein it was agreed to form” Molo Farmer Housing Co-operative Society” which would take over the ownership of the Maziwa House L. R. No. 533/454, valued at Kshs. 5,000,000/=, which amount as per the agreement had upon agreement transformed into shares 2500 worth Kshs. 2,000/= per share; that the Claimant would pay the sum of Kshs. 800,000 /= equivalent to 400 shares to the Co-operative Bank of Kenya Limited; that all rents collected from Maziwa House each month shall be paid directly to the Co-operative Bank of Kenya to which the Respondent owed the sum of Kshs. 5,000,000/= and that such rents collected would become equal shares of each party and shall towards clearance of the loan each month; that one month after the loan has been liquidated, members of all the parties shall call a general meeting to deliberate on;I.Capital contribution of each party which forms the share capital of either party which may be the sum of Kshs. 5,000,000/= or above.II.The transfer of the title documents from Molo Dairy Farmers Co-operative Society to Molo Farmers Housing Co-operative Society to be held in common as per the share of each party.

21. It was further agreed that a party in breach of the agreement would be liable to pay the other party 10% of the total value of the building and shall refund the total amount he paid towards the loan.

22. The contract was signed in execution by Chairman and Secretary of the both parties; with society stamp affixed in the presence of an Advocate.

23. At the background of the agreement between the Claimant and Respondent was a joint special meeting of both societies, the minutes of which were produced by the Claimant as Exhibits on its Further List of Documents dated 19th August, 2023. The said minutes were signed by the Secretary and Chairman of Molo Dairy Farmers Co-operative Society and J. K. Kihiu and Festus Monda as “interim secretary for Housing Co-operative” under the stamp of Molo Welfare Co-operative Society. It was also signed by the Co-operative Officer.

24. It is stated as a proposal that “Molo Welfare Sacco Members”, the economic sum of the pyrethrum growers association merge with Molo Dairy members who were willing to save the building (lead Maziwa House); that members form the two Co-operatives and any other co-operatives jointly form Molo Farmers’ Co-operative Housing Society; that each individual member will contribute Kshs. 2,000/= for capital plus Kshs. 200 registration fee per share. That all members payments be paid directly by bankers cheques to the Co-operative Bank for repayments; that a legal agreement be drawn between Molo Welfare Sacco and Molo Dairy Farmers Co-operative Society towards the formation of Molo Farmers Housing Society, each society to continue with initial objectives for the betterment of the members, especially towards poverty eradication; the Co-operative officer was tasked by members to assist with the registration of Molo Farmers Housing Co-operative Society.

25. From the foregoing and the evidence of the witnesses of parties who adduced oral evidence, the following is clear to us:1. It is not in question that Maziwa House L. R. No. 533/454 in Molo Town was purchased by Molo Dairy Farmers Co-operative Society on a Kshs. 5,000,000/= loan from Co-operative Bank of Kenya Limited.2. It is not in question that Molo Dairy Farmers Co-operative Society defaulted in payment of the said Loan.3. A meeting was held between members of Molo Dairy Farmers Co-operative Society and members of Molo Welfare Sacco Co-operative Society, with a view to Co-operative and salvage Maziwa House from Auction; that the Claimant had an “affiliate” being Molo Pyrethrum Growers Association which as per evidence adduced had money refunded to it upon a failed attempt to buy a different house from Barclays Bank;4. That the special meeting held on 6th July, 2001 was attended by members of the Claimant and The Respondent and the Co-operative officer.5. Though the Respondent disputes that the property of both the meeting and contract, both did occur.6. It is not in doubt that the parties herein agreed to form the society known as Molo Farmers Housing Co-operative Society from their willing membership.7. It is also clear from the minutes and contract contrary to the Claimant’s averments, that the Claimant and Respondent did not intend to amalgamate to form Molo Farmers Housing Co-operative Society Limited but to continue operating as entities with their respective initial function.8. Whereas Molo Farmers Housing Co-operative Society was formed, the Claimant and Respondent herein remained as independent societies.9. Despite the Respondent’s averment that the contract was invalid, we do not doubt that the parties herein intended to be bound by the resolution of the meeting held on 6th July, 2001 and the Memorandum of Agreement made on 24th July, 2001 for reasons that:a.There is evidence that after the special meeting, a sum of Kshs. 800,000/= is admitted by Respondent Witness 1 to have been paid into the Respondent’s account vide a Banker’s Cheque by Pyrethrum Farmers Association of which in the minutes to the meeting, the Claimant is termed and indicated as the economic “farm” of the said Association.b.As a result of the payment of Kshs. 800,000/= the Claimant evidently moved into the property known as “Maziwa House” and carried out rent collection from sometime in the year 2001 to the year 2005 when they were ejected by the Respondent.c.From the minutes of the meeting, the agreement of parties, we find that despite the reasons for invalidity of the agreement rightfully stated by the Respondent, there has been established an offer, an acceptance of the offer a consideration and an intention to create legal retaliations between the Claimant and the Respondent.See the following of Harris JA in Garvey Versus Richards(2011)JMGA16; In the case of AJ Lircas operations Property Ltd VS Glalztone Area Water Board, &Ano No.(2015) QCA 287, the Court clarified that in some circumstances it may find that there is a valid and binding contract even in circumstances where the formal requirements of execution have not yet been met.

26. We therefore find that there was an agreement between the parties herein as there has been no coercion, fraud or undue influence pleaded or proved by the Respondent.

27. However, we do find that there is no evidence that Molo Farmers Housing Society took ownership of Maziwa House in the contrary, the title documents for L. R. No. 533/454 produced in evidence by the Respondents show that it is still registered in the name of the Respondent and it was discharged from the loan in 2015.

28. Further, there is no evidence was produced of any payments of any money directly by the Claimant or the Housing Society to the Co-operative Bank towards the Loan. It is evident to us that after payment of Kshs.800,000/= on behalf or on account of the Claimant vide cheque issued in September, 2001, the Claimant occupied the premises until it was ejected in 2005.

29. It is clear to us that whereas collection of rent was alluded to by both parties, there is no evidence of how much rent was collected on the premises and how much thereof was applied to the loan, neither is the evidence that the Claimant renovated the house. Evidence from the minutes of 6/7/2001 indicate that there were tenants in arrears. There is also no evidence that the Claimant paid any rent for its own premises or that the Respondent returned the sum of Kshs. 800,000/= when it was deposited into its account, contrary to that the Respondent clearly allowed the Claimant to enter Maziwa House and occupy the same until the year 2005. Having no evidence, it paid any money directly to the loan and Molo Pyrethrum Farmers Association not being a party to this suit, no damages can be claimed by Claimant.

30. There is no evidence on record that the Co-operative Bank of Kenya wrote off the debt owed to it by the Respondent.

31. The evidence before us point to a contract between the Claimant and the Respondent which appears to have become frustrated, for reasons attributed to reasons which led the failed purpose of the agreement.

32. As a result, the ultimate intent to transfer of the property to the Molo Farmers Housing Co-operative Society was not could not be achieved, and the agreement did not capitalize as admitted by both parties.

33. Under the principle of restoration. A party is entitled to refund of monies paid on account thereof; so as to restore it to its initial position.

34. Hence having found that the agreement was frustrated, the parties are entitled to damages of obligations already met.

35. It is in view of all the foregoing that we hereby make the following orders in Judgement: -1. On the Amended Claim: -a.A Declaration is hereby issued that the Claimant is entitled to be refunded any money paid by it to the Co-operative Bank of Kenya on account of Maziwa House.b.The Claim for refund of money incurred towards renovation of Maziwa House has not been proved hence it fails.c.Prayer (b) of the Amended Claim is hereby allowed.d.Any money found due and payable under prayer (b) of the Amended Claim to be paid within six months from the date taking out accounts.e.Prayers (d), (e) and (f) of the Amended Claim fail.f.Each party to bear own costs of the Claim.2. On The Counterclaim: -a.Prayer (a) of the Counterclaim is allowed.b.Any money found to be due and payable to the Respondent under prayer (a) of the Counterclaim to be paid within six months from the date of taking of accounts.c.Each party to bear own costs of the Counterclaim.

JUDGMENT SIGNED, DATED AND DELIVERED VIRTUALLY AT NAIROBI THIS 27TH DAY OF FEBRUARY, 2025. Hon. B. Kimemia - Chairperson Signed 27. 2.2025Hon. J. Mwatsama - Deputy Chairperson Signed 27. 2.2025Hon. Beatrice Sawe - Member Signed 27. 2.2025Hon. Fridah Lotuiya - Member Signed 27. 2.2025Hon. Philip Gichuki - Member Signed 27. 2.2025Hon. Michael Chesikaw - Member Signed 27. 2.2025Hon. Paul Aol - Member Signed 27. 2.2025Tribunal Clerk JonahNo appearance by parties.Judgment delivered in absence of parties.Hon. B. Kimemia - Chairperson Signed 27. 2.2025