Ndungú & others v Limuru Dairy Co-op. Soc. Ltd [2023] KECPT 47 (KLR)

Ndungú & others v Limuru Dairy Co-op. Soc. Ltd (Tribunal Case 595 of 2015) [2023] KECPT 47 (KLR) (Civ) (26 January 2023) (Judgment)

Neutral citation: [2023] KECPT 47 (KLR)

Republic of Kenya

In the Cooperative Tribunal

Civil

Tribunal Case 595 of 2015

BM Kimemia, Chair, M Mwatsama, Vice Chair & Gitonga Kamiti, Member

January 26, 2023

(Coram before Hon. B. Kimemia-Chairperson, Hon. Mjeni Mwatsama-D/Chairperson and G. Kamiti)

Between

Loise Kashera Ndungú & others

Claimant

and

Limuru Dairy Co-op. Soc. Ltd

Respondent

Judgment

1. Matter for determination is an Amended Statement of Claim dated Novemeber 16, 2018 filed on December 10, 2018. The Claimants claim is that in the year 1969 the Claimants and other 973 members forward the Respondent with its office headquarters in Limuru. They later acquired parcel of land i.e LR No 11164/33 measuring 84. 24 ha or thereabouts between the year 2009 and 2014 with consent of the Claimant and all other members the Respondent transferred the whole of LR No 11164/33 to Buxton Farmers Co Ltd to dispose of its and the later was to re-transfer 16 acres to the Respondent to hold in trust for the 995 members.The Claimant’s aver the bulk of LR No 11164/33 was disposed of and 16 acres transferred to the Respondent by Buxton Farmers Co Ltd . The 16 acres now registered in the name of the Respondent.

2. That on 8th and October 30, 2013 the Respondent with no consent or approval of the Claimant’s and 995 other members borrowed 100 members from Kiambu unity Savings and Credit Co-op. Society creating change over LR No 11164/33 the same being a violation of Sec 49 Co-operative Societies Act.The Claimant’s prayers are thus;a.An order directing the Respondent to give an Account to the 995 members of how it invested/spent the Kshs 100,000,000/ (One Hundred Million Shillings) borrowed on 8th and October 30, 2013 and secured by LR No 11164/4. The Claimant further filed list of documents dated October 14, 2015 which included;a.Certificate of Title to LR No 11164/1b.Certificate of Title to LR No 11164/4c.Sale Agreement dated August 10, 1998. The Claimant further added other List of documents dated April 26, 2016 and these included;a.Copy of title to LR No 11164/4b.Copy of title to LR No 11164/1c.Sale Agreement dated August 10, 1998d.Audit Report dated October 17, 2011

3. The Respondent filed an Amended Statement of Defence dated January 15, 2019 filed on June 17, 2019. The Respondent in their Defence stated that LR No 11164/33 measuring approximately 16 acres in land in possession of and owned and registered in the name of the Respondent and any allegation of creation and existence of an trust for the Claimant and or the 995 foundling members is false and Claimant put to strict proof. Thus the claim by Claimant’s to restrain the Respondent from creating a charge over the suit property has no basis and there is no obligation on part of Respondent to give an account of the 100,000,000. 00 to the Claimants.

4. The Respondent further state the 995 members owed the Respondent Kshs 794, 463. 00 as reflected by Respondent’s balance sheet.Buxton farmers Company Limited representing the 995 members owed the Respondent Kshs 13,683,242. 15 as at October, 2007 thus total owed by Buxton farmers to Respondent amounted to Kshs 14,477,705. 15. The purchase price of Kshs 10,000,000. 00 million was to offset the balance that is Kshs 5000,000. 00 purchase of 10 acres where the Milk processing plant stands and the other to offset debt to Respondent.The balance of Kshs 9,477,705. 15 was paid off in form of 6 acres handed over to the Respondent. The Respondent thus prayed for the claim to be dismissed plus costs.The Respondent filed list of documents being;a.A copy of the certificate of title of LR No 11164/4b.A copy of Buxton farmers company limited certificate of incorporation.c.A copy of the joint minutes between the executive committee of Limuru dairy farmers co-operative society limited and Buxton farmers company limited held on December 5, 2007d.A copy of the joint between the executive committee of Limuru Dairy Farmers Co-operative Society Limited and Buxton Farmers Company Limited held on February 6, 2008. e.A copy of the correspondence between Buxton Farmers Company Limited and Limuru Dairy Farmers Co-operative Society Limited dated December 7, 2006f.A copy of minutes of the Special General Meeting of Limuru Dairy Farmers So-operative Society Limited held at Limuru milk processors grounds on July 20, 2002g.A copy of minutes of the Annual General Meeting of Buxton Farmers Company Limited held at Buxton Buxton farm on December 16, 2009h.A copy of the transfer dated May 12, 2008i.A copy of minutes of the Annual General Meeting of Limuru Dairy Farmers Co-operative Society Limited held at Limuru Milk Processors grounds on September 22, 2012j.A copy of the charge between Limuru Dairy Farmers Co-operative Society Limited and K- Unity Savings and Credit Co-operative Society Limited dated September 27, 2013k.A copy of the further charge between Limuru Dairy Farmers Co-operative Society Limited and K-Unity Savings and Credit Co-operative Society Limited dated August 19, 2013l.A copy of a formal demand letter from K-Unity Savings and Credit Co-operative Society Limited to Limuru Dairy Farmers Co-operative Society Limited Milk processing plant dated October 7, 2015m.A copy of a formal demand letter from K-Unity Savings and Credit Co-operative Society Limited to Limuru Dairy Farmers Co-operative Society Limited dated October 7, 2015n.A copy of minted of the Annual General Meeting of Limuru Dairy Farmers Co-operative Society Limited held at Limuru Milk processors grounds on October 16, 2015.

5. The matter proceeded for hearing with on August 4, 2021 with CW1 – Nelson Mungari who adopted his witness statement filed on July 30, 2021 as his evidence in chief and produced their documents as filed in the list of documents dated October 15, 2015 and April 8, 2021. He stated he participated in the purchase of the land in question. He said he is a member of Buxton Farmers Company as well as member of Lincrest Company Limited which he wishes the 16 acres to be transferred to.During cross-examination he stated the minutes on Page 23-24 audited account’s the minutes were not signed thus can not be authenticated.He said they have always objected the alleged debt of Kshs 5,000,000. 00 owed to the Respondent.

6. The Respondent called RW1 Josephat Murie Njogu who adopted his witness statement dated May 9, 2016. He stated he is a member of Limuru Dairy Farmers and produced their documents in evidence marked as Rex1. He stated the members sold 5 acres at a value of Kshs 5,000,000. 00 and money was paid in kind. He further stated the society owed the members Kshs 5,000, 000. 00 and the 995 members owed the society more than Kshs 14,000,000. 00 million.He referred to page 29 of Respondent’s list of document showing a transfer of documents of 192 acres from Limuru Farmers Limited to Buxton Farmers Limited. Limuru dairy was left with 16 acres legitimates he does not know what the Claimant’s are claiming as the land was transferred to Buxton Farmers. Lincrest farmers is no where in the land transaction. The membership of Buxton farmers and Lincrest are different.

7. On cross-examination he stated the 6 acres was given in a mutual meeting by the parties. The land was given Buxton Farmers as an alternative since they did not have money.He stated as of February 6, 2008 the debt stood at Kshs 14,477, 705. He however did not know why was holding the title deeds and does not know whether the title deeds were being held as security.On cross-examination he confirmed the transfer of documents in page 29-30 Respondent list of documents was not signed. He could not breakdown how the Kshs 14,000,000. 00 million debt accrued as he did not have the records in court. He stated parties in the meeting agreed on the figure.When asked if the Claimant’s and 995 members did transferred 16 acres to the Respondent he stated the land was in the hands of the society and when society demanded its money the board negotiated with the land.

8. RW2- Simon Njenga adopted his witness statement as evidence in chief. He states he was a member of Limuru Dairy Farmers the Respondent herein as well as Buxton farmers.He stated the Respondent brought 10 acres after resolution of members 10 acres to build Milk processing plant 6 acres to offset debts.The issues were discussed in the year, 2008 members wanted an explanation and the chairman gave an explanation.As a member of Buxton Farmers he said he did not have any claim.

9. Both parties closed their cases and Claimant filed their written submission dated April 8, 2022 on May 13, 2022 while Respondent’s filed their written submission dated May 12, 2022 on September 8, 2022. Having considered the pleading by both Claimant and Respondent their respective witness statements and evidence during trial as well as their written submissions the issues that arise for determination are as follows;1. Whether there was a trust created between Buxton farmers limited and Limuru Dairy Co-operative Society?2. Who owns the 16 acres of land in contention?

ISSUE ONE Whether there was a trust created between Buxton farmers limited and Limuru Dairy Co-operative Society? 10. From the pleadings and proceedings of the case it was in agreement by both parties that;a.Limuru Diary Society was formed by 995 members who bought land as a group and or society. First farm was LR No 11164/1 measuring 208 acres and LR No 111532 measuring 388 acres.The farms as agreed by both Claimant and Respondent was registered in the name of Respondent that is Limuru Dairy Co-operative Society Limitedb.Buxton Farmers Limited was inco-operated by the 995 members and Respondent transferred the property to Buxton which later the property LR No 11164/1 was sold and proceeds shared amongst its members. The Respondent’s remained with 16 acres of land from parcel 11164/1 which is now the parcel in contention parcel No 11164/4?

11. It is no doubt that the Respondent held the property on behalf of Buxton Farmers Limited and hence why when the parcels were sold money was shared amongst the members. On what other basis/way would they have been holding the property if not in trust?What is a trust?Black Law Dictionary defines a trust as “an equitable or beneficial right or title to land or other property, held for the beneficiary by another person, in whom resides the legal title or ownership, recognizes and enforced by courts chancery. Black’s law Dictionary, 2nd Edition from the case above Limuru Dairy Co-operative Society Limited was holding the property.LR No 11164/1 and LR No 11164/4 as trustees for the sole reason upon sale of the assets the members are the ones who benefitted or were the beneficiaries.How then is it that the 16 acres that remained upon sale that LR No 11164/4 should not be treated as where it was hived from ?Whatever reasons there were for holding on to the 16 acres the same was held in trust for the members as the previous parcels of land.The Advocates in their opening statement/remarks before calling their witnesses stated Buxton Farmers Company Limited was inco-operated to represent membership of those who bought the farms.

12. In the absence of an express trust, there are trusts created by operation of the law. We have constructive and resulting trusts. We shall not delve into this arena.Resulting trust where we believe the parties herein fail arises act of guilty where property is transferred under circumstances which suggest the transfer did not intend to cover a beneficial interest upon the transfer in Snell’s Equity 29th Edition, sweet and Maxwell page 175. “A resulting trust may arise either upon the unexpressed but presumed intention of the settle or upon his informally expressed intention”Page 177 – “general rule is that resulting trusts will automatically arise in favour of the person who advances the purchase money ; whether or not the property is registered in his name or that of another is immaterial”.We are convinced that indeed the Respondent’s herein Limuru Dairy Co-operative held the property in trust for Buxton Farmers Limited from their conduct and more so during/ and after sale of the documents.

ISSUE TWO Who owns the 16 acres in contentions? 13. Having established from above a trust was in existence.We now delve to the 16 acres LR No 11164/4 which is agreed by both parties to have been liked off what was LR No 11164/4. The 16 acres from evidence of the parties. The Respondent produced minutes July 20, 2000 Special General Meeting Respondent’s list of documents where the executive committee discusses matter of sale of Limcrest farm was to be set off against property of the society.Further, the Respondent’s documents.A joint meeting between the Management Committee of Buxton Farmers Limited and Limuru Dairy .In 2003 the discussion was that Respondent had advanced Buxton farmers animal feeds worth Kshs 13,600,000. 00 million.There was discussion of agreement of sale of 10 acres construction of Limuru processing plant worth Kshs 5,000,000. 00 million and Buxton Farmers owed Respondent Kshs 9,4000,000 . 00 million.

14. It is important to note that the minutes above and relied on by Respondent’s refer to executive committee of Buxton farmers limited and Respondent Limuru Dairy Co-operative and management committee of Buxton Farmers Limited and Respondent Limuru Dairy Co-operative.None of the minutes was for an Annual General Meeting, Special General Meeting or extraordinary meeting called with all members present.We then ask ourselves with whose mandate were all these transaction being done for the 16 acres of land in a meeting dated December 5, 2007. CW1 stated he inquired about the debts as alleged by Respondent.In the minutes attached we find no resolution reached by the parties and thus not sure whether the debt was accounted for or not.It is unfortunate both Claimant and Respondent did not attach any audited accounts to inform the tribunal whether indeed the debt was featured or factored in the account which would have assisted in coming up with a decision.Another issue is whether the Board meeting resolutions bind the members?If the meeting resolutions are not discussed or brought to an Annual General meeting or Special General Meeting herein could the members rectify the same?Further, the Respondent whole giving evidence on cross-examination.RW1- confirmed the 10 acres that was hired off from the sale belonged to the 995 members it was paid in lieu.He further stated that the other 6 acres there was a mutual understanding in a joint board management.

15. When RW1 was questioned on the breakdown of the debt that divided the transfer he stated he did not have the records in court.We cannot help what wonder why the documents that could assist involving the mystery of the debt could not have been produced.The bone of contention is the accumulate debts which Claimant’s claim did not exist and thus Respondent had no business taking the said share.The Respondent did not produce the evidence which they claim are debts having accumulate over the years to warrant them to transfer the 16 acres to themselves.Despite the fact that the Respondents stand is that the Board registered and agreed on the debt to be paid.Question would be was the Board management resolution enough to aid the Claimant’s claim over the 16 acres?The answer is NoIn any given society the Board are given authority by the membership and it should act in its best interest.For any decision as “big “as ceding the society’s land the same ought to have been taken back to the member for rectification.Further the minutes of the board are clear the debt was agreed between them.There is nothing in the minutes to evidence figures were tabled to show how the debt accrued and why the same how not been paid or called for payment with all the above we are inclined to agree with Claimant that indeed the 16 acres belongs to them as no contrary evidence has been adduced by Respondent to convince us otherwise.

UPSHOTWe thus find in favour of the Claimant against Respondent in them following therein;a.A Declaration that the Respondent holds LR No 11164/4 in trust for the Claimants and /or the 995 founding members of the Respondent- allowed.b.An order terminating the trust between the Claimants and the Respondent- declined.c.An order directed to the Respondent to transfer LR No 11164/4 to the Claimants or their nominee – Limcrest Farmers Company Limited- declined.d.An order of injunction restraining the Respondent from creating a further charge over LR No 11164/4 in favour of Kiambu Unity Savings And Credit Co-operatie Society Limited or any other Lender whomsoever to secure a loan of Kshs 100,000,000/- (One Hundred Million Shillings) or any other sum without the approval, authority, knowledge consent of the 995 Claimants until this matter is heard and determined or further orders of this Tribunal – allowed.e.Plus costs and interest in the suit.

JUDGMENT, READ AND DELIVERED VIRTUALLY ON 26TH JANUARY, 2023. Hon Beatrice Kimemia - Chairperson Signed January 26, 2023Hon Mjeni Mwatsama - D/Chairperson Signed January 26, 2023Gitonga Kamiti - Member Signed January 26, 2023