Mwai v Noetica Rural Sacco Society Ltd [2023] KECPT 780 (KLR)

Mwai v Noetica Rural Sacco Society Ltd (Tribunal Case 504 of 2014) [2023] KECPT 780 (KLR) (Civ) (31 August 2023) (Judgment)

Neutral citation: [2023] KECPT 780 (KLR)

Republic of Kenya

In the Cooperative Tribunal

Civil

Tribunal Case 504 of 2014

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

August 31, 2023

Between

John Gathu Mwai

Claimant

and

Noetica Rural Sacco Society Ltd

Respondent

Judgment

1. Matter for determination is Statement of Claim dated 30/10/14 filed on 31/10/14. The Claimant avers to have been a member of the Respondent Nditeka Rural Sacco Society Limited. In 2004, the Claimant took a loan of Kshs. 2,000,000/= and upon execution register, a changeover property LR. no. Muguga/Muguga/1367 in favor of the Respondent.He states he paid the loan, in November 2004 the Respondent purchased 5 parcels of land LR. No. Sigona/211,535,536,537 and 538. The Claimant avers that he was the Commission Agent and was to be paid Commission of 5%, (850,000) of the purchase price of Kshs. 17,000,000/=.As a result, the payment due to the Claimant was credited to the Claimant’s loan account and issued with payment voucher no. 5441 dated 18/11/2004.

2. The Claimant then sought for discharge of his property LR. No. Muguga/Muguga/1367 and release of the original title. The same was not done. However, on 30th June 2014, the Claimant received a Demand letter from the Respondent Claiming he owed them Kshs. 3,284,214. 10/=There was a meeting in a bid to settle the matter. On 5/9/14 the Claimant wrote to get a comprehensive Statement of Accounts for his Loan Account and another letter done on 18/9/14. However, on 23/9/2014, the Claimant was served by the Respondent agent that is Fantasy Auctioneers with a Notification of Sale which quoted an amount of Kshs. 7,212,236. 19/=.The Claimant claims he is yet to receive a comprehensive Statement of Accounts. The Claimant prays for;1. A declaration that the purported Notification of sale issued by the Respondent’s Agents George Gitonga MuchiriT/a Fantasy Auctioneers to the Claimant dated 23rd September 2014 is unlawful and therefore null and void.2. A declaration that no event of default has occurred or arisen and the Claimant has cleared in full and final the Loan Account held with the Respondent. Consequently, the Respondent is not entitled to exercise its legal rights under the securities as threatened in the demand letter dated 30th June 2014 or at all nor is it entitled to forward his details to the Credit Reference Bureau.3. An Order that the Respondent does unconditionally Discharge and release the Original Title in respect of LR. No. Muguga/Muguga/1367 to the Claimant.4. Costs of the Suit.5. Any other orders that this Tribunal deems fit to grant.The Claimant filed list of documents dated 26/4/2015 on 27/4/2015 which include;i.Payment voucher dated 18th November 2014. ii.Affidavit sworn by Michael Ndungu Kibuku dated 26th September 2014. iii.Affidavit sworn by Humphrey Mbugua Thairu dated 26th September 2014. iv.Affidavit sworn by Stephen Ndungu Kangethe dated 26th September 2014. v.Letter from John Mwai Gathu addressed to Ndetika Rural Sacco Society dated 10th February 2014. vi.Letter from Ndetika Rural Sacco Society dated 30th June 2014. vii.Letter from John Mwai Gathu addressed to Ndetika Rural Sacco Society dated 4th August 2014. viii.Letter from Kimani Kiarie and Associates Advocates dated 5th September 2014. ix.Letter from Ndetika Rural Sacco Society dated 2nd September 2014. x.Letter from Kimani Kiarie & Associated Advocates dated 18th September 2014. xi.Letter from Kimani Kiarie & Associates Advocates dated 3rd October 2014. xii.Loan repayment receipt dated 2nd April 2004. Claimant’s further list of documents dated 25/2/2018 filed on 28/2/2018.

3. The Respondent filed a further amended Statement of Defence as well as a counter Claim dated 20/11/19 filed on 29/3/18. The Respondent denied the Respondent’s Claim and stated that the Claimant had taken several loans and refused to account for them.The Affidavits sworn by the four officials were false. The Respondent avers the Claimant is guilty of material disclosure as such not entitled to the prayers in the Statement of Claim.The Counter Claim the Respondent claim against Claimant for Kshs. 7,212,263. 19/= being several loans and prays for;i.Kshs. 7,212,263. 19ii.Interest on (i.) above ac court rates.iii.Costs.iv.Any other and further relief the Honourable Court may deem fit to grant.The Respondent filed their list of Documents dated 21/4/2015 filed on even date which documents includedi.Loan Application form dated 6th November 2003. ii.Loan Repayment pledge dated 6th November 2003. iii.Loan Application form dated 23rd December 2003. iv.Loan Repayment pledge dated 23rd December 2003. v.Loan Application form dated 24th December 2003. vi.Loan Repayment pledge dated 24th December 2003. vii.Loan Application form dated 19th January 2004viii.Loan Repayment pledge dated 19th January 2004. ix.Loan Application form dated 20th December 2003. x.Loan Repayment pledge dated 29th January 2004. The Respondent also filed Supplementary List of Documents dated 12/10/18 which included;i.Member’s Statement of Accounts as at 29th December, 2007. ii.Copy of the Search for Title Muguga/Muguga/1367.

4. The Claimant filed a reply to the Respondent’s Defence and Counter Claim dated 19/4/2018 denying owing the Respondents Kshs. 1,287,821. 62/=. Claimant further reiterates he paid all his loans but the Respondent never issued receipts.

5. Matter came up to hearing on 18/5/22 and 8/11/22 respectively.Claimant Witness 1 John Githu adopted his Witness Statement dated 30/10/2014 as his Evidence in Chief.He produced in evidence his List of Documents dated 20/4/2015 marked Claimant’s Exhibit 1 and Supplementary List of Documents dated 26/2/2018 marked as Claimants Exhibit 2 and further Supplementary List of Documents dated 22/1/2018 Claimant Exhibit 3. His prayer was for the release of his title deed LR. No Muguga/Muguga/1367 and loan to be calculated afresh.On cross examination he confirmed he took a loan of Kshs. 2,000,000/= and paid for a period of 2 years. He stated when he acted as agent for the 1st Respondent he was paid via voucher an amount of Kshs 850,000/= credited to his loan.He stated that the Respondent did not give him Statement of Accounts. On re-examination he explained he was an agent because the original owner had declined to sell the land to them.His logbooks which were security for the loan was released to him. The discharge of the title was to be done after the committee meeting, however, 3 months later the officials left and have been changing the committee since then, that is, between 2004-2014.

6. The Respondent called Respondent Witness 1, Beatrice Wanjiru Gichue. She adopted her Witness Statement as her evidence in Chief.She produced List of Documents dated 21/4/2015 , Supplementary List of Documents dated 12/10/18 marked as Respondent Exhibit 1 and 2 respectively.She stated that the Claimant did not service his loans regularly total due is Kshs.3,257,437. 01/=Interest and penalty are Kshs. 1,922,019. 77/=.

7. On cross-Examination she stated that before the Kshs. 2,000,000/= loan there were other loans taken by the Claimant not paid.She confirmed she did not know how many accounts the Claimant had. She could not ascertain amount in deposits accounts /FOSA accountShe further confirmed on cross-examination that there was no change for the Kshs.2,000,000/= loan advanced . She further confirmed that the Claimant cleared the other loans of FOSA, the Kshs. 300,000/= loan was also cleared and there was no further charge against the title deed.She further stated the loan fell dormant from April 2004.

8. The Respondent Witness 2, Geoffrey Njuguna also testified as the Respondent’s Accountant. He adopted his Witness Statement dated 19/3/19 as his evidence in Chief. He stated that there was no board Resolution for Claimant to act as Respondent’s Agent and there is nothing in the Minutes to show the agency fee of Kshs. 850,000/=. He confirmed there was no waiver by the Board. The amount outstanding is Kshs. 3,240,000/=.On Cross examination he confirmed he was Respondent’s member since 2006 and only became member of the board in the year 2019. He confirmed the former officials swore Affidavits that the Caimans was owed Kshs. 850,000/= as agency fee which was used to offset his loans.He did not have the procurement policy/rules for appointing agents.On further cross examination, he stated between 2004-2014 he followed up with the loan and wanted to auction. However, he did not have the evidence in court.Respondent witness 2 confirmed that the land in question was in deed bought.

9. Parties were directed to file their Written Submissions after closing their cases.The Claimants filed their Written Submissions dated 22/11/22 filed on 9/12/22 and Respondents Written Submissions dated 3/2/23 filed on even date.Upon considering the pleadings, evidence adduced before the Tribunal and Written Submissions, we find the following are Issues for determination.ISSUE I. Whether the Claimant paid up all the loan facilities advanced to him?ISSUE 2. Whether the Title LR. No. Muguga/Muguga/1367 can be used as collateral for the unpaid loan of Kshs.2,000,000/= as alleged by the Respondent?

ISSUE 1. Whether the Claimant paid up all the loan facilities advanced to him. 10. It is not in contention that the Claimant was a member of the Respondent and that he took loans of the Respondent and the last loan was taken in the year 2004 for Kshs. 2,000/=.It is not in contention that the Respondent had collateral from the Claimant in form of log books for motor vehicles and title in question.The Claimant avers the return of his log book symbolizes he has paid up his loan.On issue of title, the Claimant avers it was to be discharged or released to him and only got delayed because there was a change in management. The Respondent did not follow up on the Claimant’s loan is at all as demanded for payment and only did so upon demand from Claimant dated 10/2/14 to release his title.Their response to the Demand Letter of Claimant’s title was that he owed them and his loan remained unpaid.

11. The Claimant was cleared that he had paid up his loan and more so was paying up the Kshs. 2,000,000/= in installments of Kshs. 85,000,000/= per month for almost 10 months and Kshs. 850,000/= was offset when he acted as an agent on the sale of land worth Kshs.17,000,000/=.The only thing the Claimant has to support his claim is Affidavits from the Management officials then.One Michael Ndungu Kibuku sworn on 26/9/2014 and Affidavit of Humphrey Mbugua Thairu Sworn on 26/9/2014 and Stephen Ngungu Kangethe Sworn on 26/9/14. They all confirm Commission of Kshs 850,000/= was applied towards the loan repayment.The three confirmed having signed the payment voucher dated 18/11/2021 which the Claimant produced in evidence.The Respondent’s documents produced in evidence shows the Claimant’s Accounts but the Kshs. 850,000/= does not feature anywhere,We are not inclined to agree with the Claimant that indeed there was an agreement between him and the former officials and there was an agency fee of Kshs. 850,000/= which was to be used to offset the loan facility.We further question why the Respondent did not follow up on the loan default they now demand from the Claimant.Between 2004-2014 is almost 10 years. The Respondent filed Respondent’s supplementary list of Documents which had the Claimant’s member Statement of Accounts as at 29/12/2017. If indeed no repayment had been done, why the delay in demanding payment and only request for it when the Claimant demand s for his title?

12. The said statement shows the Claimant had savings of Kshs 634,198/= and yet despite continuous default, no deductions were made of the same.There is nothing to show what transpired between 2007 and 2014 when the demand of payment was done. We are at crossroads, however, we shall agree with Claimant upon analyzing the facts and evidence before us and declare he had indeed repaid his loan and the issue of records is wanting for the Respondent’s part.

ISSUE 2. Whether the title no. Muguga/Muguga/1367 can be used as collateral for the 2 million loan. 13. The Respondent’s supplementary list of Documents dated 12/10/2018 attached as search for Muguga/Muguga/1367 which clearly shows it was to secure a loan of Kshs. 300,000/= that was 18th March 2014. It has not been disputed that the loan of Kshs. 300,000/= was repaid.The loan in contention as per the Respondent is one for Kshs.2,000,000/=.As alluded earlier, the Claimant wrote a demand letter for release of title in 10th February 2014 and got a demand letter on 30th June 2014 for Kshs. 3,284,214. 10/=We ask ourselves what precipitated the demand letter by the Respondent and why did it take too long and even instructed auctioneers.We are not satisfied that the Claimant owes the Respondent as such the titles Muguga/Muguga/1367 cannot be used as collateral for the alleged outstanding loan of Kshs 3,284,214. 10/=.

14. As such, we are convinced the Claimant has proved his case on a balance of probabilities and as such we find in favour of Claimant against the Respondent and declare;i.A declaration is hereby granted that the purported Notification of sale issued by the Respondent’s Agents George Gitonga MuchiriT/a Fantasy Auctioneers to the Claimant dated 23rd September 2014 is unlawful and therefore null and void.ii.A declaration that no event of default has occurred or arisen and the Claimant has cleared in full and final the Loan Account held with the Respondent. Consequently, the Respondent is not entitled to exercise its legal rights under the securities as threatened in the demand letter dated 30th June 2014 or at all nor is it entitled to forward his details to the Credit Reference Bureau it is disallowed since no loan arrears.iii.An Order that the Respondent does unconditionally Discharge and release the Original Title in respect of LR. No. Muguga/Muguga/1367 to the Claimant is hereby granted.iv.Costs of the Suit.Counter claim is not proven and as such is dismissed with no orders as to costs

JUDGMENT SIGNED, DATED AND DELIVERED VIRTUALLY AT NAIROBI THIS 31ST DAY OF AUGUST, 2023. HON. BEATRICE KIMEMIA CHAIRPERSON SIGNED 31. 8.2023HON. J. MWATSAMA DEPUTY CHAIRPERSON SIGNED 31. 8.2023HON. BEATRICE SAWE MEMBER SIGNED 31. 8.2023HON. FRIDAH LOTUIYA MEMBER SIGNED 31. 8.2023HON. PHILIP GICHUKI MEMBER SIGNED 31. 8.2023HON. MICHAEL CHESIKAW MEMBER SIGNED 31. 8.2023HON. PAUL AOL MEMBER SIGNED 31. 8.2023Ms. Mungai advocate for the Claimant.Ms. Ariga holding brief for Getange for Respondent.Judgment as read out on 31. 8.2023. Ariga advocate: We pray for 30 days stay of execution.Mungai advocate: We object to the Application. The only thing left is release of title deed to Claimant. There is no need for stay.Tribunal order: Respondent granted 14 days stay of execution.HON. J. MWATSAMA DEPUTY CHAIRPERSON SIGNED 31. 8.2023