Mutahi v Azima Savings and Credit Co-operative Society Limited & another [2024] KECPT 922 (KLR)

Mutahi v Azima Savings and Credit Co-operative Society Limited & another (Tribunal Case 826/ E899 of 2022) [2024] KECPT 922 (KLR) (Civ) (30 May 2024) (Judgment)

Neutral citation: [2024] KECPT 922 (KLR)

Republic of Kenya

In the Cooperative Tribunal

Civil

Tribunal Case 826/ E899 of 2022

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

May 30, 2024

Between

Gerald Gathirimu Mutahi

Claimant

and

Azima Savings and Credit Co-operative Society Limited

1st Respondent

David Mbithi

2nd Respondent

Judgment

Claimant’s Case. 1. The Claimant’s case is based on the Statement of Claim dated 12/10/2022, Claimant Witness Statement received on 15/3/2023 and Claimant’s documents dated 8/11/2023. The Claimant in his Statement of Claim states that he was a member of the Respondent and that he guaranteed the 2nd Respondent in the year 2020.

2. In the year 2022, the 1st Respondent notified the Claimant that the 2nd Respondent had defaulted in his loan.The 2nd Respondent continues to default his loan repayment despite several undertakings between the Claimant and the 2nd Respondent on mode of repaying the loan. The delay has occasioned the loan balance to grow from Kshs. 945,779/= to Kshs. 1,216,261/=.

3. The Claimant states that the action by the 1st Respondent to deduct the 2nd Respondent’s loan from his salary is irregular and unlawful. The Claimant states that the 2nd Respondent is a man of means and hence should be compelled to repay his loan. He states that the 2nd Respondent earns Kshs. 200,000/=.He claims that the action of the 1st Respondent has subjected him to financial embarrassment since he cannot borrow loans from the 1st Respondent.

4. In his Claimant Witness Statement, the Claimant reiterates that the actions of the 1st Respondent to deduct his salary to repay the 2nd Respondent’s loan was irregular and unlawful.The Claimant has filed documents in support of his case.In his List of Documents dated 12/10/2022, the Claimant has filed the following in support of his case; Notice to guarantor.

Loan repayment undertaking.

Claimant’s pay slips for January, 2022 to August, 2022.

During the hearing of the case on 9/11/2023, the Claimant adopted his Witness Statement and Documents as his evidence in chief.

5. He confirmed that he was a casual labourer earning Kshs. 349/= per hour and that he guaranteed the 2nd Respondent’s loan in 2019. The 2nd Respondent defaulted to repay his loan occasioning the 1st Respondent to deduct the Claimant’s salary to repay the loan.He states that the 2nd Respondent was capable of repaying his loan being a man of means, a senior employee and a board member of the 1st Respondent.He states that the 2nd Respondent stopped repaying the loan in 2021 when he left employment. However, the 2nd Respondent is employed elsewhere and thus able to repay his loan.He states that the 1st Respondent did not pursue the 2nd Respondent before proceeding to deduct his salary.The Claimant states that the court during the hearing heard that the 2nd Respondent was a man of means, a senior staff at Delmonte Kenya Ltd and a Board member of the 1st Respondent and has businesses and land in his Rural home.The Claimant while testifying that he feels the 1st Respondent is protecting the 2nd Respondent at his expense.He states that he made all possible efforts to follow the 2nd Respondent. At some stage, the 2nd Respondent undertook to repay the loan from 3/6/2022 but the 1st Respondent just went ahead to deduct the Claimant. He states that the guarantee undertaking notwithstanding the 1st Respondent abandoning to follow the 2nd Respondent and follow the 2nd Respondent is unfair.He states that the 1st Respondent must be followed.

6. On Cross Examination, he confirmed guaranteeing the 2nd Respondent Kshs. 3,000,000/= with other guarantors.He states that he started repaying the 2nd Respondent’s loan in May, 2022. He confirmed that he guaranteed 2nd Respondent voluntarily.On re-examination, he confirms that he had not expected the 2nd Respondent to default.

7. In his Written Submissions dated 30/11/2023, the Claimant narrates the journey the case has undergone since filing his Statement of Claim. He states that a Summary judgement was entered against the 2nd Respondent for lack of a Statement of Defence.The Claimant further submits that the 1st Respondent did not exhaust all available options to pursue the 2nd Respondent before resorting to deducting his salary.He reiterates that the 2nd Respondent is a man of means and should have been pursued by the 1st Respondent debt collector.

8. The Claimant has demonstrated through his Statement of Claim and the hearing that he made efforts to pursue the 2nd Respondent to repay his loan.He avers that the 1st Respondent failed to demonstrate that they made any efforts to pursue the 2nd Respondent to repay his loan.He states that the 1st Respondent was unfair to pursue him instead of the 2nd Respondent.

Respondents’ Case 9. The Respondent case is from the Statement of Defence dated 2. 11. 2022, 1st Respondent’s Witness statement of 13/3/2023, 1st Respondent’s Documents dated 13/3/2023 and hearing on 9/11/2023. The Defence case is further supported by the 1st Respondent’s Submissions of 26/1/24. The 1st Respondent, in his Witness Statement of 13/3/2023, states that he is the chairman of the Respondent and duly authorized to make this statement.He states that the Claimant willingly guarantees the 2nd Respondent.

10. He confirms that the 2nd Respondent has defaulted in loan repayment resulting in the 1st Respondent attaching the salary of the Claimant as per Loan Agreement.In their list of documents’ dated 13/3/2023, the Respondent has filed the following documents in support of the Respondent’s case: Board resolutions to defend the suit.

Loan Application Form for the 2nd Respondent.

2nd Respondent’s Loan Statement.

The Claimant guaranteed the 2nd Respondent in the Jipange Loan as shown in the copy of loan agreement. The implications of the guarantee in the event of default by the loanee are well stipulated in the loan agreement form.The 1st Respondent filed the 2nd Respondent’s statements to confirm that he is in default.

11. During the hearing of the Respondent’s case on 9/11/2023, Respondent Witness number 1 Mr. Kennedy Kavula adopted his Witness Statement and Documents dated 3/3/2023 and 13/3/2023 respectively as his evidence in chief. He states that he works in Del monte Kenya Ltd. and he is the Chairman of the 1st Respondent.He confirmed the 2nd Respondent took a loan Kshs. 3,000,000/= and had 6 guarantors, one of them being the Claimant. This loan was defaulted in 2021 went he loan balance was Kshs. 2,217,516/=He confirmed that the 1st Respondent had a debt collector. In May 2021, Kshs. 1,600,000/=, loan defaulted was shared equally among the 6 guarantors. He stated that some guarantors have fully repaid their portion of the loan.He stated that he has been the Chairperson of the 1st Respondent since 2019 and confirmed that the 2nd Respondent was his member and once a board member.He stated that the 1st Respondent gave the 2nd Respondent 10 months before starting to deduct the Claimant. He stated that the 2nd Respondent did not honor the commitment.He stated that the 2nd Respondent was not working with Del Monte in 2021 and therefore could not have influenced the Board of the 1st Respondent on cross examination. It was confirmed that the 1st Respondent bought land.

Analysis. 12. We have analyzed both the Claimant and the Respondent’s case and that there is no dispute regarding the Claimant guaranteeing the 2nd Respondent for a Kshs. 3,000,000/= loan.It is not in dispute that the 2nd Respondent defaulted in his loan repayment. It is also on record that the 1st Respondent engaged a debt collector to have the 2nd loan repaid.It is also on record that the Claimant spared no efforts to follow the 1st Respondent as regards the loan default by the 2nd Respondent.We observe that while the loan Application form/ Agreement provides for loan guaranteeing and guarantors undertaking to repay the loan in the event of default, we find in this case a deliberate effort by the 2nd Respondent to default and leave the burden of repayment to the guarantors.We find the actions of the2nd Respondent to be in conflict with noble spirit of the Co-operative Society; that is the 1st Respondent. In view of this, the judgement is entered in favour of the Claimant against the Respondent for:a.A permanent injunction is issued against the 1st Respondent from making deductions from the Claimant’s salary until it is established that the 2nd Respondent is unavailable or not in a position to repay his loan after exhausting all the debt collection avenues.b.The 1st Respondent to refund all the monies deducted from the Claimant’s salary for purposes of offsetting the 2nd Respondent’s loan from the month of May, 2022 until the date of determination of this suit.c.Plus costs and interests of suit awarded to the Claimant.

JUDGMENT SIGNED, DATED AND DELIVERED VIRTUALLY AT NAIROBI THIS 30TH DAY OF MAY, 2024. HON. J. MWATSAMA DEPUTY CHAIRPERSON SIGNED 30. 5.2024HON. BEATRICE SAWE MEMBER SIGNED 30. 5.2024HON. FRIDAH LOTUIYA MEMBER SIGNED 30. 5.2024HON. PHILIP GICHUKI MEMBER SIGNED 30. 5.2024HON. MICHAEL CHESIKAW MEMBER SIGNED 30. 5.2024HON. PAUL AOL MEMBER SIGNED 30. 5.2024Tribunal Clerk JonahMs. Muthii Advocate for the ClaimantMs. Odera advocate holding brief for Mr. Chege for the 1st RespondentMs. Odera advocate- We pray for 30 days stay of executionMs. Muthii advocate- No objectionTribunal order:30 days stay of execution granted for order number 2. Hon. J. Mwatsama Deputy Chairperson Signed 30. 5.2024