Orient Savings & Credit Society Limited v Ngogi [2025] KECPT 95 (KLR)

Orient Savings & Credit Society Limited v Ngogi (Tribunal Case 29 of 2021) [2025] KECPT 95 (KLR) (30 January 2025) (Judgment)

Neutral citation: [2025] KECPT 95 (KLR)

Republic of Kenya

In the Cooperative Tribunal

Tribunal Case 29 of 2021

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

January 30, 2025

Between

Orient Savings & Credit Society Limited

Claimant

and

John Mwangi Ngogi

Respondent

Judgment

1. The Statement of Claim dated 18th January 2021 was filed on 26th January 2021 on the allegation that the Respondent took four loans from the Claimant’s Sacco and never settled all of them. The loans taken were:i.A personal loan of Kshs. 650, 000/= disbursed on 26th June, 2024 and payable in monthly installments of Kshs. 14,098. 26/=ii.A staff loan of Kshs. 1,550, 000/= disbursed on 26th June, 2014 and payable in monthly installments of Kshs. 21,527. 78/=iii.A staff loan of Kshs.1,000, 000/= disbursed on 12th October, 2014 and payable in monthly installments of Kshs. 14,241. 54/=iv.A FOSA Development Loan of Kshs. 1,000, 000/= disbursed on 17th August, 2015 and payable in monthly installments of Kshs. 33,333. 33/=

2. It is the Claimant's position that the Respondent is fully aware of the provisions of the loan disbursement agreement and had a responsibility to ensure that the loan repayment is not in arrears and his continued failure to service the loans which continued to accrue at the rate of 16% for their personal loan and 14. 4% for the staff and FOSA loan necessitated the filing of this claim, because he also ignored the demand letters sent to him and the notice of intention to sue.

3. The Claimant as at the date of filing the claim is claiming for a personal loan balance of Kshs. 663,312. 70/= , two staff loan balance of Kshs. 2,411,981. 10/= and a FOSA loan balance of Kshs. 1,880,657. 40/= all totaling to Kshs. 4,955,951. 20/= being the loan amount disbursed principal balance and the interest accrued as at the date of filing the claim.

4. The Respondent filed their Amended Statement of Defence dated 25th July 2022 stating among others:i.That the alleged loans were pegged on his salary as an employee of the Respondent and once the claimant dismissed him from his employment, the repayment guarantee failed to take effectii.That it was his legitimate expectation that he would be allowed to serve through his contract of employment until he had at least cleared any alleged loans with the Respondent as the alleged loans disbursed had entirely been guaranteed by his salaryiii.That he has been unemployed since termination from employment and that the interest rates of the loans ought not to be raised given that the loan interest rate terms had been set out when he was an employee of the Claimantiv.That the Claimant has altered the contents of the loan agreement and or changed the alleged amounts due in the loan agreement by inserting new provisions in the loan agreement like the new interest rates

5. During trial, the Claimant relied on evidence of Joseph Kinuthia Kiragu who was their chairman who had filed a witness statement dated 10th June 2022 and stated among others that as at January 2021 the amount claimed was Kshs. 4,955,951. 20/=. He also stated that whether a member of the society is paid salary or not, it is still their obligation to pay the loan and that the Respondent had not denied receiving the monies. It was also his position that the Respondent was the Chief Executive Officer of the Society and he was the custodian of documents and most documents could not be traced including those that concerns his loans once he was relieved duty.

6. The Respondent at trial, relied on his witness statement dated 25th July, 2022 and indicated that he was an employee of the Claimant until March 2017, and that at the moment he is out of work. It was also his position that upon being relieved of duty, they needed to have signed a new agreement in relation to the loans but that was not done.

7. At the closing of the trial, this Tribunal made an order on 16th Nov., 2023 for the parties to file their written submissions as they reconcile their accounts in 30 days and as at the date of writing this judgement, the parties had not reconciled their accounts. The accounts filed in court by the Respondent dated 3rd August, 2021 indicate a loan balance of Kshs 2,502,784. 05/=

8. The Claimant filed their written submissions dated 12th September 2024 indicating among others that:i.That the Respondent was the CEO of the Sacco and as such aware of the interest ratesii.That the Respondent admitted to taking the loans but did not lead any evidence to show any payment of the loansiii.If in doubt, the Court is entitled to enter judgement in favor of the Claimant on this sum at the court rates of 14% per annum from November 2016 until payment in full.

9. The Respondent filed their written submissions dated 29th August 2024 indicating among others that:i.A court of law cannot re-write a contract between partiesii.It is not clear from the claim how the sum and the 14. 4% and 16% interest were arrived at by the Claimant and as such, the claim by the Claimant is capricious, extortive and unproven and would amount to unjust enrichmentiii.The Honourable Court cannot endeavor to right a wrong that is not proven and or award amounts of money not proveniv.In terminating the Respondent’s employment, the Claimant frustrated the Respondent and cannot now want to change the terms of their contract to benefit themselves.

10. We have looked at the pleadings and analyzed the evidence adduced at trial, and the only question remaining for determination is as to whether the evidence adduced is sufficient to grant the prayers in the Statement of Claim dated?

Is the evidence adduced sufficient to grant the prayers in the Statement of Claim? 11. The beginning point in this case is to state that loan agreements are contracts, and the basics of a contract are well known and are as stated in William Muthee Muthami V Bank of Baroda, (2014) eKLR where the of Court of Appeal observed that:“… party to an agreement must, in addition, prove that there was offer, acceptance and consideration. It is only when those three elements are available that an innocent party can bring a claim against the party in breach.”

12. Second, it is also important to state that once a contract is signed willingly, it binds the parties that have signed it on the terms they have signed against. This was the position of the Court of Appeal in National Bank of Kenya Ltd v Pipe Plastic Samkolit (K) Ltd & another [2001] eKLR, when it stated that:“It was clear beyond para-adventure that save for those special cases where equity might be prepared to relieve a party from a bad bargain, it is ordinarily no part of equity’s function to allow a party to escape from a bad bargain.”

13. Third, it is also settled in law that if the terms of a contract are certain and there are no elements of undue influence or fraud, it is not the duty of a court to rewrite that contract. That was the position the Court of Appeal in Pius Kimaiyo Langat v Co-operative Bank of Kenya Ltd [2017] eKLR, when they stated clearly that:“alive to the hallowed legal maxim that it is not the business of Courts to rewrite contracts between parties as the said parties were bound by the terms of their contracts, unless coercion, Fraud or undue influence are pleaded and proved.”

14. Fourth, it is also trite law that whoever alleges must prove. The Evidence Act puts to rest the issue of where the burden of proof lies in proving that the loans disbursed were pegged on salary and or that the repayment guarantee failed to take effect upon the Respondent being relieved off duty. Section 107 of the Evidence Act provides that:“(1)Whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts must prove that those facts exist.(2)When a person is bound to prove the existence of any fact it is said that the burden of proof lies on that person.”

15. Fifth, it is also settled in law that retirement or loss of work and or change of fortunes do not relieve a party from their responsibility and or obligation to continue servicing their loan(s), unless the loan agreement documents expressly provide as such. However, it is also important to note that courts have also ruled that there are benefits even terminated employees, whether lawfully or unlawfully terminated, still continue to enjoy post-employment like in the case of Beatrice Wangui Mwihia v Barclays Bank of Kenya [2019] eKLR where the Court held that:“In this regard therefore, the concept of employment and labour relations is wide and not restricted to the contract of service. With employment, there comes other relations at play such as the work benefits that require formation of relations such as the one leading to facilities such as loans, mortgage, and car and buying of agricultural land. Such relations cannot be divorced from the core employment relationship of the employer and employee. To do so would be lose the context within which labour relations find meaning.”

16. The same understanding was also expressed in ELRC No. 781 of 2015 Christopher Onyango & 23 others v Heritage Insurance Company Limited where the Court explained the rationale on preferential rates as follows:“.... On the loans due, the Respondent has recalled all of them. However, the employment relationship generates rights and obligations. Such are to be found in the employment contract, human resource policy, and the law. The common denominator is employment. Within such employment, the Claimant enjoyed benefits of various loans. Such cannot be separated to create a different set of rights outside the employment relationship.”

17. The facts of this case are clear and not in dispute, at least to the extent that the Respondent took a number of loans and as at the date of termination of his employment, he had not finished repaying those loans. It is clear to us that there was a contract involved in the disbursement of those loans, and that contract was clear and certain, and as such this Tribunal has got no business to rewrite it. The Claimant at trial was not been able to produce any evidence that showed that interest charged on the loans was to change with the termination of employment of the Respondent, neither did the Respondent produce any evidence that showed that the loans were also to terminate with loss of his employment. Final Orders:1. The Statement of Claim dated 18th January 2021 and filed on 26th January 2021 succeeds and judgement is entered in favor of the Claimant for the sum of Kshs 2,502,784. 05/= plus interest at Tribunal rates from the date of filing till payment is made in full.2. Costs awarded in favor of the Claimant

JUDGMENT SIGNED, DATED AND DELIVERED VIRTUALLY AT NAIROBI THIS 30TH DAY OF JANUARY, 2025. Hon. J. Mwatsama - Deputy Chairperson Signed 30. 1.2025Hon. Beatrice Sawe - Member Signed 30. 1.2025Hon. Fridah Lotuiya - Member Signed 30. 1.2025Hon. Philip Gichuki - Member Signed 30. 1.2025Hon. Michael Chesikaw - Member Signed 30. 1.2025Hon. Paul Aol - Member Signed 30. 1.2025Tribunal Clerk MutaiKiongi advocate for Respondent- PresentLiwo advocate for Claimant – No appearanceKiongi advocate - We pray for 30 days stay of executionTribunal orders:30 days stay of execution granted to RespondentHon. J. Mwatsama - Deputy Chairperson Signed 30. 1.2025