Mwiki PSV Sacco Limited v Mbirua & 24 others [2024] KECPT 1372 (KLR)

Mwiki PSV Sacco Limited v Mbirua & 24 others (Tribunal Case 271 (E038) of 2021) [2024] KECPT 1372 (KLR) (Civ) (29 August 2024) (Judgment)

Neutral citation: [2024] KECPT 1372 (KLR)

Republic of Kenya

In the Cooperative Tribunal

Civil

Tribunal Case 271 (E038) of 2021

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

August 29, 2024

Between

Mwiki PSV Sacco Limited

Claimant

and

Simon Karangu Mbirua & 24 others & 24 others

Respondent

Judgment

1. The matter for determination is the Claimant’s statement of claim dated 28th May 2021. The claim avers in September 2019 at the Claimant’s request, the Commissioner for Cooperative Development conducted investigations on the Claimant’s operations. In conclusion of the report, it was found that the Respondent had misappropriated or mismanaged the Claimant’s funds to the tune of Kshs 23,801,536. 00/=.

2. An Annual General Meeting was convened by Claimant and by the Members’ resolution, they adopted the report by the Commissioner. As a result, the Commissioner of Cooperatives Department issued notice of intention to surcharge dated 3rd March 2020 against the Respondent and filed various responses/submissions.

3. Upon dissatisfaction, the Commissioner for Cooperatives Department issued surcharge orders dated 28th May 2024. S/N NAME AMOUNT(KES)

1 Simon Karangu Mbirua 2,661,844. 00

2 Margaret Wangari Mwangi 2,341,246. 00

3 Ruth Nduta Njogu 508,687. 00

4 Catherine Gitau 451,866. 00

5 Peter Maina Wambugu 612,458. 00

6 John Karugo Gaitungu 534,750. 00

7 Joan Wanjiku Mbirua 705,773. 00

8 Joseph Mwangi Maina 1,601,893. 00

9 Joseph Njoroge Mbucho 595,000. 00

10 Margaret Wairimu Mbirua 1,120,625. 00

11 Peter Ng’ang’a Ngahu 3,205,348. 00

12 Wilson Gitau Gakubu 2,034,233. 00

13 Jacinta Wambui Mwangi 209,200. 00

14 Simon Wachira Mutua 857,478. 00

15 George Wambugu Maina 301,100. 00

16 Robert Mwangi Kimani 535,889. 00

17 James Maona 77,000. 00

18 Hellen Karugo 805,493. 00

19 Milkah Wairimu Njoroge 808,747. 00

20 Live Well Co. Ltd 20,000. 00

21 Jacinta Warutere 652,004. 00

22 Joseph Mutai Gitau 1,838,551. 00

23 Prime Four Co.Ltd 56,667. 00

24 Peter Ngoigo 231,056. 00

25 Teresia Wanja Mwangi 1,034,628. 00

TOTAL 23,801,526. 00

4. The Claimant avers that the Respondents are liable to reimburse the Claimant and their prayer is;a.The surcharge amount of Kshs 23,801,526. 00 against the Respondent’s as captured below;S/N NAME AMOUNT(KES)

1 Simon Karangu Mbirua 2,661,844. 00

2 Margaret Wangari Mwangi 2,341,246. 00

3 Ruth Nduta Njogu 508,687. 00

4 Catherine Gitau 451,866. 00

5 Peter Maina Wambugu 612,458. 00

6 John Karugo Gaitungu 534,750. 00

7 Joan Wanjiku Mbirua 705,773. 00

8 Joseph Mwangi Maina 1,601,893. 00

9 Joseph Njoroge Mbucho 595,000. 00

10 Margaret Wairimu Mbirua 1,120,625. 00

11 Peter Ng’ang’a Ngahu 3,205,348. 00

12 Wilson Gitau Gakubu 2,034,233. 00

13 Jacinta Wambui Mwangi 209,200. 00

14 Simon Wachira Mutua 857,478. 00

15 George Wambugu Maina 301,100. 00

16 Robert Mwangi Kimani 535,889. 00

17 James Maona 77,000. 00

18 Hellen Karugo 805,493. 00

19 Milkah Wairimu Njoroge 808,747. 00

20 Live Well Co. Ltd 20,000. 00

21 Jacinta Warutere 652,004. 00

22 Joseph Mutai Gitau 1,838,551. 00

23 Prime Four Co.Ltd 56,667. 00

24 Peter Ngoigo 231,056. 00

25 Teresia Wanja Mwangi 1,034,628. 00

TOTAL 23,801,526. 00b.Court interest on the total outstanding sum of Kshs. 23,801,526. 00/= at court rate from the date of filing suit until payment in full.c.Costs of the suit.d.Such further relief as the Tribunal may deem fit to grant.

5. The Claimant filed List of Documents dated 28th May 2021 which had:a.Copy of the inquiry report.b.Copy of the notice of intention to surcharge dated 3rd March 2020. c.Copy of the affidavit of service sworn on 17th March 2020 by the process server.d.Copy of the surcharge order dated 28th May 2020. e.Copy of the affidavit of service sworn on 23rd June 2020 by the Process Server.f.Copies of the demand letters.

6. The Respondents were issued and filed their responses. The 1st, 2nd, 3rd, 4th, 5th, 6th, 7th, 10th, 12th, 14th, 15th, 17th, 18th, 22nd, 23rd and 24th Respondents did not file a response in Defence as such, default judgement was entered against them.

7. The 8th, 11th, 13th, 16th, 19th and 25th Respondents filed a Statement of Defence dated 22nd September 2021 to which the Respondents stated they were not informed of the alleged inquiry nether were they given an opportunity to defend themselves as such they were condemned unheard.

8. Further, the Inquiry Report and Surcharge have been challenged in Appeal Nos 1 of 2020 and as such the proceedings ought to be stayed pending hearing of the appeal.

9. They filed their List of Witnesses dated 22nd September 2021 and witness statements by the 8th, 11th, 13th, 16th and 25th Respondents.

10. The 8th, 11th, 13th, 16th, 19th and 25th Respondents filed list of documents dated 29th September 2021 on 15th October 2021 to which included;1. Mwiki PSV Sacco report and Accounts dated 31/12/20152. Mwiki PSV Sacco3. report and accounts dated 31/12/20164. Mwiki PSV Sacco minutes of AGM dated 16/04/2016. 5.Mwiki PSV Sacco Chairman’s report dated 06/05/2017. 6.Mwiki PSV Sacco statement of accounts, Cooperative Bank from 01/01/2017, 19/12/2017. 7.Mwiki PSV Sacco Chairman’s report dated 31/03/2018. 8.Any other relevant documents.

11. Before we look at the evidence adduced during trial it is important to note that CTA E001 of 2022 and CTA E015 of 2022 have since been determined and appeals dismissed. These appeals were against the Claimant and Respondents who had appealed. These are 1st, 4th, 5th, 7th, 10th, 12th, 15th, 17th, 22nd, 23rd, 8th, 11th, 13th, 16th, 19th, 21st, 24th and 25th Respondents.

12. Further, the Claimant’s Counsel stated before trial that the 9th and 20th Respondents had cleared their surcharged amount. 21st Respondent is deceased and was discharged.

13. The 1st, 4th, 5th, 7th, 10th, 12th, 15th, 17th, 22nd and 23rd Respondents denied the claim. They stated in paragraph 5 that they were collectively hounded out of office before Commissioner could give them findings. They further aver the Special General Meeting resolution the Respondents were never invited as such the Respondents contend their submissions were never considered by the Commissioner.

14. The Respondents further aver that they only learned of the existence of the surcharge orders dated 28th May 2021 when served with the Claimant’s application and Tribunal order dated 25th June 2021.

15. The Respondent avers that the surcharge orders were issued based on an incomplete report and the Claimant has never explained why it failed to serve the surcharge orders against the Respondent.

16. The Respondents further aver that they filed CTA/E015/22 which was yet to be delivered and claim ought to be dismissed.

17. During trial, the Claimant called upon CW 1 Biayo Mwania who is the current Chairman. He adopted his witness statement dated 5th October 2022 filed on 25th October 2022 as his evidence in chief. He produced his documents as per the list of documents dated 28th May 2021 filed on 28th June 2021 marked as (exhibit 1 – 6). He also produced documents in the supplementary list of documents in the supplementary list of documents dated 4th October 2022 as CEX 7. Documents dated 8th May 2024 filed on 9th May 2024 marked and produced as (exhibit 8 and 9).

18. On cross-examination, CW 1 stated that he joined the Sacco in 2010 and was chair of the audit committee which he became chair after the inquiry. He confirmed the specific period of the inquiry was 2019. He further confirmed during cross-examination that it was not allowed to offset one’s loan with their allowances. He said several members were questioned by the Commissioners and is not is not sure whether the Respondents were questioned.

19. CW 1 on cross-examination further stated that during the Annual General Meetings he could not remember whether any issues were raised by the members.

20. He confirmed that the members as per the minutes of the Annual General Meeting of 2016. Minute No 6, the financial report was read and confirmed. He further stated that if the auditor had been there, they ought to have raised the inconsistencies in their financials.

21. On re-examination CW 1 stated that while in the Annual General Meeting they realized all was not well as Members were applying for loan and they were not getting the same processed.

22. The Respondent held the Claimant’s system as incompetent. He confirmed the Respondent was presented to Members on 18th October 2019. Despite appeal, the appeals had not been upheld.

23. The Respondents gave evidence and RW 1 was Peter Ngachu the 11th Respondent. He adopted the witness statements dated 29th September 2021 filed on 15th October 2021 as his evidence in chief. He produced his documents dated 29th September 2021 filed on 15th October 2021 marked as R EX 5 – 6.

24. On cross-examination, he confirmed he was still a member of the Sacco. He confirmed that he was aware of the surcharging order and was not aware the appeal had been determined. He confirms that the surcharge procedure was done well.

25. He confirmed he responded to the intention to surcharge but has not brought the response in court.

26. On re-examination RW 1 stated he had challenged the appeals Tribunal on appeal. The 1st, 4th, 5th, 7th, 10th, 12th, 15th, 17th, 22nd and 23rd Respondent were closed because of non-appearance

27. Parties filed written submissions dated 27th May 2024 filed on 10th June 2024.

28. The 8th, 11th, 13th, 16th, 19th and 25th Respondents filed written submissions dated 7th June 2024 on even date.

29. Having considered all the pleadings, evidence and written submissions by the parties, the only issue for determination is one;

Issue one; 30. Whether the Respondents are responsible to pay the surcharged amounts. The Respondents – 1st, 4th, 5th, 7th, 10th, 12th, 15th, 17th, 22nd, 23rd, 8th, 11th, 13th, 16th, 19th, 21st, 24th and 25th Respondents had filed appeal.

31. CTA No 1 of 2020 and CTA No E015 of 2022 which in essence challenged the I.R and its outcomes. The said appeals were dismissed vide judgement delivered on 7th March 2024. The said judgement dealt with the legitimacy of the IR which issues were raised in the Defence by the Respondents herein.

32. The Respondents despite mere denials have not challenged the Claimant’s claim or given sufficient reasons why they should not be surcharged the amounts in the CIR.

33. As such, we shall not belabor on the point the Claimants took and necessary steps to adopt the Commissioners for Cooperatives. Respondent IR.

34. The Inquiry Report was adopted in an Special General Meeting called by the Claimants and as such the Respondents now have no other option but make payments.

35. The judgements in CTA No. 1 of 2020 and CTA No. E015 of 2022 lays down the procedures followed by the Commissioner of Cooperatives as well as to surcharge the Members.

Upshot: 36. Judgement is entered in favour of Claimants against the Respondents for Kshs 22,534,532. 00/=37. S/N NAME AMOUNT(KES)

1 Simon Karangu Mbirua 2,661,844. 00

2 Margaret Wangari Mwangi 2,341,246. 00

3 Ruth Nduta Njogu 508,687. 00

4 Catherine Gitau 451,866. 00

5 Peter Maina Wambugu 612,458. 00

6 John Karugo Gaitungu 534,750. 00

7 Joan Wanjiku Mbirua 705,773. 00

8 Joseph Mwangi Maina 1,601,893. 00

10 Margaret Wairimu Mbirua 1,120,625. 00

11 Peter Ng’ang’a Ngahu 3,205,348. 00

12 Wilson Gitau Gakubu 2,034,233. 00

13 Jacinta Wambui Mwangi 209,200. 00

14 Simon Wachira Mutua 857,478. 00

15 George Wambugu Maina 301,100. 00

16 Robert Mwangi Kimani 535,889. 00

17 James Maona 77,000. 00

18 Hellen Karugo 805,493. 00

19 Milkah Wairimu Njoroge 808,747. 00

20 Live Well Co. Ltd 20,000. 00

21 Jacinta Warutere 652,004. 00

22 Joseph Mutai Gitau 1,838,551. 00

23 Prime Four Co.Ltd 56,667. 00

24 Peter Ngoigo 231,056. 00

25 Teresia Wanja Mwangi 1,034,628. 00

Total 22,534,532/=

38. The 1st, 2nd, 3rd, 4th, 5th, 6th, 7th, 8th, 10th, 11th, 12th, 13th, 14th, 15th, 16th, 17th, 18th, 19th, 22nd, 23rd, 29th and 25th Respondents plus costs and interests.

JUDGMENT SIGNED, DATED AND DELIVERED VIRTUALLY AT NAIROBI THIS 29TH DAY OF AUGUST, 2024. HON. B. KIMEMIA CHAIRPERSON SIGNED 29. 8.2024Hon. J. Mwatsama Deputy Chairperson Signed 29. 8.2024Hon. Beatrice Sawe Member Signed 29. 8.2024Hon. Fridah Lotuiya Member Signed 29. 8.2024Hon. Philip Gichuki Member Signed 29. 8.2024Hon. Michael Chesikaw Member Signed 29. 8.2024Hon. Paul Aol Member Signed 29. 8.2024Tribunal Clerk JonahMuchiri Advocate for the ClaimantOmwoma Advocate holding brief for Mr. Wachira for the 1st, 4th, 5th, 7th, 10th, 12th, 15th, 17th, 22nd and 23rd Respondents.Gregory Ndege Advocate – No appearanceMwangi advocate for the 5th, 11th, 13th, 16th, 19th and 25th RespondentsAnyona advocate: We pray for 30 days stay of executionWe have an application dated 15th May 2024. We filed the application, paid the requisite fees, delivered a hard copy and we are yet to receive communication from the registry.Gist of Application was to arrest judgement. Application was under Certificate of Urgency.Irungu Advocate: We request for 30 days stay as well as leave to appeal.Muchiri Advocate: No opposition on issue of stay. We pray for 30 days stay of execution.Tribunal’s Orders;1. 30 days stay of execution granted on the Respondents.2. Application dated 15th May 2024 not in file and cannot give directions on the same.Hon. J. Mwatsama Deputy Chairperson Signed 29. 8.2024