Peter v Cosmos Sacco Society Limited [2024] KECPT 1503 (KLR)

Peter v Cosmos Sacco Society Limited (Tribunal Case 195,E263 of 2023) [2024] KECPT 1503 (KLR) (26 September 2024) (Judgment)

Neutral citation: [2024] KECPT 1503 (KLR)

Republic of Kenya

In the Cooperative Tribunal

Tribunal Case 195,E263 of 2023

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

September 26, 2024

Between

Elizabeth Peter

Claimant

and

Cosmos Sacco Society Limited

Respondent

Judgment

Notice of Motion Application 1. The Notice of Motion Application dated 13th December, 2023 is brought under Articles 27 and 50 of the Constitution of Kenya, Sections 12,28,37 and 88 of the Cooperative Societies Act, Rules 3,6,11 and 17 of that Cooperative Tribunal Rules, Section 38 of the Civil Procedure Act and Orders 22 Rule 6 and Order 22 Rule 18 (3) of the Civil Procedure Rules seeking among others:i.Spent.ii.That leave be granted to the firm of Wanjiru Mwenda & Co. Advocates to come on record, file Defence and protect the Respondent/Applicant’s interest in the matter and the draft Notice of Change of Advocates and draft Defence annexed be deemed properly filed and on record.iii.That the Honorable Tribunal be pleased to set aside proceedings, judgment and all consequential orders and proceedings upon fit and just terms against the Respondent.iv.That the Honorable Tribunal be pleased to stay, lift and suspend the Warrants of Arrest issued on 13th December, 2023 against John Wakhungu, Patrick Mbuvi and Patrick Ndoli pending the hearing and determination of the Application.v.That the Honorable Tribunal be pleased to make such orders as it may deem fit and convenient to grant to meet the ends of justice.

2. The Application was based on the grounds of the Supporting Affidavit of John Okumu Wakhungu:a.That the officials against whom the Warrants of Arrest have been issued instructed the firm of Wanjiru Mwenda Company Advocates to appear and represent them during the Notice to Show Cause hearing but the Internet and or technological challenges made it impossible for their Counsel to address the Tribunal as he was not being heard by the Tribunal leading to lack of representation on their behalf.b.That during the hearing of the main suit, the Respondent instructed an Advocate who entered appearance on their behalf but withheld the said instruction due to a mistake of facts as the Respondent thought involvement of the Ministry by investigating, auditing and inspecting the financial status of the Respondent to unearth the responsible officials in the past regime would lead to an alternative solution to the present dispute immediately.c.That the Respondent is a body corporate with limited liability separate and independent from the members and/or officials and failure by the Claimant to serve a Notice of Entry of Judgment and an Application to Lift the Veil of Incorporation Jeopardized their right of prior notice and denied them the right and an opportunity to be heard before being exposed to personal liability.d.That failure to file and serve an Application to Lift the Veil of Incorporation denied the officials an opportunity to be heard before being subjected to personal liability and act that is against the principles of natural justice.e.That the officials are mere office bearers, agents and trustees of the Respondent and/or members at large, and they cannot be subjected to personal liability unless there is proof of direct involvement in funds embezzlement through independent investigations, fraud, frustration of the execution process or any other exception permitted in the law.f.That the officials cannot be subjected to personal liability instead of the Respondent herein merely due to the inability of the Respondent to settle the liability against the claimant.g.That issuance of Warrants of Arrest and Committal to Civil Jail is an extreme form of execution that is difficult to remedy once the harm is done, and the Claimant ought to have pursued other means of execution against the Respondent instead.h.That there is apparent discrimination as the Respondent has a board comprising of seven members all of whom are collectively responsible in steering and running of the Respondent but the Claimant has no proper grounds as to why she has handpicked only three officials.i.That there are over 136 pending refund claims whose funds were misappropriated by the previous regime and/or board and arresting and committing to civil jail of the officials is not a proper remedy to the dispute at hand.j.That there is ongoing audit and investigation by the relevant ministry and the draft audited reports shall be tabled before the general membership in January 2024 for adoption of proper recourse and reporting to the DCI for investigation and arrest of the responsible officials from the past board who shall be held responsible to settle claims such as this one.k.That the Claimant is aware of the ongoing audit and investigation processes as all pending refund claims are constantly updated through their representative, Madam Julie Mbela of 0712135135. l.That granting of leave for the Respondent to file their Defence shall give the Tribunal an opportunity to examine the issues arising out of the dispute at hand properly and determine the matter on merit.m.That the Claimant will not suffer any prejudice if the Orders sought are granted in the interim pending hearing and determination of the Application and Suit.n.That it is in the best interest of justice for the Tribunal to grant the Orders prayed for to enable the matter to be determined conclusively and justifiably.

3. On 25th April, 2024. This Tribunal directed that the Application to be canvassed by way of written submissions. The Claimant filed her written submissions on 14th May, 2024 stating among others:i.That the Application is made several months after the Respondent filed their Memorandum of Appearance on 17th April, 2023. ii.That the grounds raised in the Application are flimsy, unmerited with pure intention to mislead the Honorable Tribunal.iii.That the Respondent has not shown any seriousness in the matter considering the period taken from the time the suit and judgment was entered.iv.That the annexed defense does not raise triable issues given that the amount in the claim is admitted.v.That the Respondent has not shown any willingness to settle the amounts in question, despite their knowledge of indebtedness.vi.That the Respondent's assertion that they are merely officials and are not supposed to take liability for the Cooperative's debt is a very high degree of ignorance of the law as espoused in the Cooperative Societies Act.vii.That the Respondent seems to be admitting the Claim and it is only fair that they accept indebtedness and provide a schedule or a proposal for refund instead of their pursuing to set aside the judgment.viii.That the Respondent’s officials (John Wakhungu, Patrick Ndoli, Patrick Mbuvi and James Mutunga were in office when the suit was instituted and ought to have developed a schedule to pay the Claimant. That the assertion that management are newly elected in office is untrue.ix.That on a balance of probability, allowing the application will prejudice the Claimant as the grounds raised do not meet the threshold to set aside the judgment.

4. The Respondents on their end filed their written submissions on 1st July, 2024 stating among others:i.That failure to file a defense was an oversight and the Application is seeking to set aside the judgment to allow the Respondent to be heard on merit.ii.That the Respondent is run by a board comprising of 6 all of whom must be held liable if that is the case.iii.That to only bring 3 board members to court is against the spirit of the Constitution and violates the rights of the three board members against discrimination.iv.That for personal liability to only be held against the 3 board members, there is need for lifting of the veil of incorporation after extensive investigations have been done to only find the three personally liable.v.That the Respondent has demonstrated good intentions by complying and cooperating to hasten proceedings.

5. We have considered the Application and scrutinized the written submissions filed and the only question remaining for determination, is as to whether this Tribunal should set aside proceedings, judgment and all consequential orders and proceedings and allow the Respondent to file their Statement of Defence.Should the Tribunal set aside proceedings, judgment and all Consequential Orders and Proceedings and allow the Respondent to file their Statement of DefenceThe starting point is to indicate that the decision to set aside an ex parte judgment is discretionary, and courts have always exercised that discretion to avoid injustice and hardship resulting from accidents, inadvertence, or excusable mistake or error, but not to assist a person who has deliberately sought whether by evasion or otherwise, to obstruct or delay the course of justice.In this particular case, the grounds raised for setting aside are numerous, but to summarize, the respondents have raised two very critical issues:i.That there may be an issue of discrimination as not all board members have been brought before this Tribunal,ii.That there is already a process going on to refund all 136 members who have refund cases, and if the Respondent is given an opportunity, they can bring that evidence before the Tribunal, and lastiii.That Respondents have demonstrated good intentions by complying and cooperating and are ready to abide by the directions of the Tribunal

6. Discretion must be exercised upon reason and must be exercised judiciously. In law, the discretion that a court has in deciding whether to set aside a judgment is meant to ensure that parties do not suffer injustice or hardship because of excusable mistake or error. It will not be proper use of such discretion if this Tribunal turns its back to a litigant who clearly demonstrates such an excusable mistake, inadvertence, accident or error.

7. In the instant case, we have considered all the factors raised including the very fact that this case is a case of refunds, and the argument raised by the Claimant that there is nothing in the annexed Defence that is a denial of the debt and as such the Respondents should come up with a schedule of payment. To allow for the environment in which parties can discuss that schedule of payment for the refunds, it is our collective decision that we set aside the proceedings, judgment and all consequential orders and allow the Respondent to file their annexed defense.

Final OrdersThe Notice of Motion Application dated 13. 12. 2023 is found to be with merit allowed in terms of prayers:i.Spentii.Leave has been granted for the firm of Wanjiru Mwenda & Co. Advocates to come on recordiii.The annexed Statement of Defence is deemed properly filed and on record – allowed, upon payment of the requisite fees 7days from today.iv.That the Honorable Tribunal is pleased to lift and the Warrants of Arrest issued on 13th December, 2023 against John Wakhungu, Patrick Mbuvi and Patrick NdoliFurther the annexed Statement of Defence to be filed 7 days from date of this ruling.v.Mention for Pre-trial directions on 21. 1.2025. Notice to issue.

JUDGMENTSIGNED, DATED AND DELIVERED VIRTUALLY AT NAIROBI THIS 26TH DAY OF SEPTEMBER, 2024. HON. B. KIMEMIA CHAIRPERSON SIGNED 26. 9.2024HON. J. MWATSAMA DEPUTY CHAIRPERSON SIGNED 26. 9.2024HON. BEATRICE SAWE MEMBER SIGNED 26. 9.2024HON. FRIDAH LOTUIYA MEMBER SIGNED 26. 9.2024HON. PHILIP GICHUKI MEMBER SIGNED 26. 9.2024HON. MICHAEL CHESIKAW MEMBER SIGNED 26. 9.2024HON. PAUL AOL MEMBER SIGNED 26. 9.2024Tribunal Clerk JemimahElizabeth Peter PresentCosmos Sacco Society Limited – No appearanceHON. J. MWATSAMA DEPUTY CHAIRPERSON SIGNED 26. 9.2024