Solutions Savings & Credit Cooperative Society Limited v Tharaka Nithi Cereals Marketing Cooperativee Union Limited & another [2023] KECPT 792 (KLR)

Solutions Savings & Credit Cooperative Society Limited v Tharaka Nithi Cereals Marketing Cooperativee Union Limited & another (Tribunal Case 218 of 2019) [2023] KECPT 792 (KLR) (21 September 2023) (Judgment)

Neutral citation: [2023] KECPT 792 (KLR)

Republic of Kenya

In the Cooperative Tribunal

Tribunal Case 218 of 2019

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

September 21, 2023

Between

Solutions Savings & Credit Cooperative Society Limited

Claimant

and

Tharaka Nithi Cereals Marketing Cooperativee Union Limited

1st Respondent

The County Government Of Tharaka Nithi

2nd Respondent

Judgment

1. The matter for determination is the Statement of Claim dated 15. 4.2019. the claimant in the statement of claim states that the 1st Respondent was created purposely to develop the cereals value chain in the 2nd Respondent County.

2. On 7. 6.2018, the Claimant and 1st Respondent entered into a Memorandum of Understanding for a loan of Kshs. 15,000,000/= to the 1st Respondent repayable at 2% per month repayable in 2 months upon disbursement.

3. The Claimant avers that this loan to the Respondent was intended to be distributed to individual farmers who are members of the Cooperative Societies affiliated to the 1st Respondent.

4. The Memorandum of Understanding stipulated that upon default to repay the loan in 2 months a further 2% per month interest will be charged on the loan.

5. The Memorandum of Understanding also stipulated that the 2nd Respondent will provide guarantee and indemnity for the Kshs. 15,000,000/= loan. This will be through a counter guarantee and indemnity executed by the 2nd Respondent.

6. This counter guarantee and indemnity was executed by the 2nd Respondent on 7. 6.2018. this guarantee was to indemnified the Claimant far the Respondent to pay back to the Claimant all the sum or sum of amounts as shall have been disbursed to the farmers plus interest thereon in the event of default by the 1st Respondent to repay the same.

7. The Claimant confirms that the Kshs. 15,000,000/= was disbursed to the farmer but the 1st Respondent failed, refused to repay the same after the lapse of the agreed period.

8. The Claimant further states that the 2nd Respondent failed to Honour the guarantee and indemnity as provided in the Memorandum of 7. 6.2018.

9. The Claimant avers that the 1st and 2nd Respondent refusal to repay the Kshs. 15,000,000/= is illegal and unlawful and a breach of the Memorandum of Understand.

10. The Claimant states that the 1st Respondent has only managed to repay Kshs. 2,500,000/= leaving a balance of Kshs. 13,140,645/= and now attracting a 2% per month interest.

11. Claimants witness Mr. Francis Muriithi Rinhenia confirmed that he is the chairman of the Claimant’s Sacco since 2020.

12. He confirmed that the Claimant and the Respondent entered into a Memorandum of Understanding for Kshs. 15,000,000/= to enable 1st Respondent purchase green grams from farmers who are members of the 1st Respondent.

13. Both the Claimant and the Respondent agreed that the loan interest was to be 2% for month and total loan was to be repaid in two months.

14. He confirmed that this loan facility was guaranteed by the 2nd Respondent. the 2nd Respondent duly executed a separate counter guarantee and indemnity in favour of the Claimant undertaking to settle any amount defaulted by the 1st Respondent.

15. The Claimant witness avers that the loan was disbursed to the 1st Respondent from mid June 2018.

16. He stated that the 1st Respondent failed to repay the loan as stipulated in the memorandum of understanding of 7. 6.2018.

17. Upon default by the 1st Respondent followed by several demands and reminders to both 1st and 2nd Respondents , the Claimant filed for this claim.

18. The Claimant witness states that there were efforts between the Claimant and the 2nd Respondent in September 2021 to reach a consensus. At that time the loan balance was Kshs. 11,392,096. 70/=.The 2nd Claimant sought for more time to clear the outstanding loan.

19. During the hearing on 10. 1.2023 Mr. Peter Kimathi Festus -CW1 testified on behalf of the Claimant. The Claimant witness is the branch supervisor of the Claimant Sacco.

20. He adopted his statement dated 26. 8.2022 as his evidence in chief. He also produced a list of documents dated 10. 4.2019. the witness confirmed that the 1st Respondent indeed received cereals from the farmers and the Claimant paid for the same to the farmers individual accounts held with the 1st Respondent. a total of Kshs. 13,950,092/= was paid for the cereals.

21. The witness averred that the 2nd Respondent who is the County Government of Tharaka Nithi guaranteed the 1st Respondent for the loan advanced by the Claimant.

22. On cross examination, the Claimant witness confirmed that the Claimant is only claiming the disbursed amount and not Kshs. 15,000,000/= as per the Memorandum of Understanding.

23. He stated that the Claimant did the first demand letter to 1st Respondent on 13. 11. 2018 which was received by the 1st Respondent Chief Executive Officer on 13. 1.2018. He stated that the Claimant took the 1st Respondent shares to reduce the outstanding loan.

24. On re examination, the Claimant witness stated that the loan was to accrue a 2% per month interest and another 2% per month penalty. This is as per clause 6 of the Memorandum of Understanding. The Claimant witness stated that the 1st Respondent had admitted defaulting in loan repayment and had promised to repay the loan by 22. 11. 2018.

25. He stated that the Memorandum of Understanding was a tripartite agreement between the Claimant the 1st Respondent and the 2nd Respondent wherein the 2nd Respondent committed to repay the loan if the 1st Respondent defaults.

26. The Claimant prays for judgment against the 1st and 2nd Respondent jointly and severally for:a.The sum of Kshs. 13,140,645/=b.Interest on (a) above at 2% per month from 25. 3.2019 until payment in full.c.Costs of the suit plus interest thereon.d.Any other suitable relief or remedy the tribunal may deem fit and just to grant.

Respondents Case 27. The Respondents in this case are:i.Tharaka Nithi cereals marketing union limited as the 1st Respondent.ii.The County Government of Tharaka Nithi as the 2nd Respondent.

1st Respondent Case 28. As at the time of the main hearing on 10. 1.2023 and the time of writing this judgment the 1st respondent had not filed their Statement of Defence.The 1st Respondent did not appear during the main hearing on 10. 1.2023.

2nd Respondent’s Case 29. The 2nd Respondent case is contained in 2nd Respondent’s Statement of Defence dated 27. 9.2019.

30. The 2nd Respondent’s states that the 1st Respondent is a Cooperative body initiated by the 2nd Respondent to develop a vibrant cereal supply chain.

31. The 2nd Respondent denies the existence of a Memorandum of Understanding between the Claimant and the 2nd Respondent.

32. The 2nd Respondent also denies the loan of Kshs. 15,000,000/= disbursement arrangement as alleged by the Claimant in paragraph 7 of the Statement of Claim.

33. The 2nd Respondent states that it is only a guarantor and not a Debtor and execution can only issue against the Debtor.

34. The 2nd Respondent denies that it executed a guarantee and indemnity against the Claimant’s loan to the 1st Respondent.

35. The 2nd Respondent denies knowledge of the loan and the interest/ penalties thereon.

36. In response to Claimants statement paragraph 12, the 2nd Respondent states that Kshs. 13,000,000/= has been repaid to the Claimant.

37. The 2nd Respondent avers that the claim by the Claimant is unfounded and untrue.

38. 2nd Respondent witness Mr. Aggrey Karani Riungu filed his statement dated 12. 8.2021, the witness is the Chief Officer, Department of Trade under the County Executive member for Trade, Industry and Cooperative Development.He affirmed that the 2nd Respondent is only a guarantor and not a debtor in this matter.He states that he was informed that Kshs. 13,000,000/= was repaid to the Claimant.

40. He confirmed that the three parties that is Claimant and both Respondents have severally tried to negotiate an out of court agreement so as to determine the balance payable by the 1st Respondent and mode of payment.

41. 2nd Respondent witness states that the 2nd Respondent guaranteed the 1st Respondent in good faith and has tried to settle this matter amicably.He avers that the 2nd Respondent should not have been sued since it did not receive any monies from the Claimant.

Analysis 42. The Claimant has adduced adequate information and documents to prove that indeed the 1st Respondent was loaned Kshs. 15,000,000/=.

43. The Memorandum of Understanding signed by the two parties namely the claimant and the 1st Respondent on 7. 6.2018 stipulated under paragraph 1 that the 2nd respondent was the guarantor to the Kshs. 15,000,000/=.

44. The 2nd Respondent, the County Government of Tharaka Nithi committed the guarantee the Kshs. 15,000,000/= loan vide the counter guarantee and indemnity dated 7. 6.2018.

45. This indemnity was duly executed by the Governor, Chief Officer, there and the County Secretary who approved this signatures under seal of the County.

46. The counter guarantee and indemnity was explicit in terms of accepting liability of the Kshs. 15,000,000/= in the event of default.

48. The Memorandum of Understanding of 7. 6.2018 has also prescribed the loan interest and penalties associated with the Kshs. 15,000,000/= loan.

49. The 1st Respondent has not prosecuted his Defence. Non appearance of the 1st Respondent witness during the main hearing complied with failing to file their Statement of Defence render the 1st Respondents Defence weak.

50. The 2nd Respondent has adequately prosecuted its Defence by asserting that the Kshs. 15,000,000/= was granted to the 1st Respondent and not to the 2nd Respondent they also deny the existence.

51. This court observes that the counter guarantee and indemnity dated 7. 6.2018 was actually witnessed by three crucial officers of the County Government of Tharaka Nithi hence rendering the document credible while there is denial that the Claimant loaned the 1st Respondent Kshs. 15,000,000/= documents filed in court and the court proceedings prove that indeed the 1st Respondent received Kshs. 13,000,000/= being disbursements to the farmers who were members of the 1st Respondent.

52. We observe that the 2nd Respondent Statement of Defence was a mere denial of the Statement of Claim by the Claimant.

53. Documents filed in court have also proved that there was indeed a loan of Kshs. 13,000,000/= disbursed by the Claimant to the 1st Respondent.

54. The denial by the 2nd Respondent on its obligation as a Guarantor to the loan of the 1st Respondent is again a mere denial of facts.

55. The Memorandum of Understanding and the counter guarantee and indemnity documents are explicit on the liability of the 2nd Respondent.

56. During mention on 18. 7.2023 to confirm filing of written submissions the 1st Respondent appeared but as at the date of writing this judgment had not filed the Application as advised.

Conclusion 57. This court therefore passes judgment in favour of Claimant against the 1st and 2nd Respondents jointly and severally for:a.The sum of Kshs.13,140,645/=.b.Interest on (a) at 2% per month from the date of filing suit until payment in full.c.Costs of suit and interest.

JUDGMENT SIGNED, DATED AND DELIVERED VIRTUALLY AT NAIROBI THIS 21ST DAY OF SEPTEMBER, 2023. HON. BEATRICE KIMEMIA CHAIRPERSON SIGNED 21. 9.2023HON. J. MWATSAMA DEPUTY CHAIRPERSON SIGNED 21. 9.2023HON. BEATRICE SAWE MEMBER SIGNED 21. 9.2023HON. FRIDAH LOTUIYA MEMBER SIGNED 21. 9.2023HON. PHILIP GICHUKI MEMBER SIGNED 21. 9.2023HON. MICHAEL CHESIKAW MEMBER SIGNED 21. 9.2023HON. PAUL AOL MEMBER SIGNED 21. 9.2023TRIBUNAL CLERK JEMIMAHMuthomi advocate for 2nd RespondentMithega Kariuki advocate for the Claimant- no appearanceShisaya advocate for 1st RespondentShisaya advocate - We filed Application dated 20. 9.2023 under Certificate.Tribunal – We looked into the Application dated 20. 9.2023. We therefore proceed to make judgment.HON. J. MWATSAMA DEPUTY CHAIRPERSON SIGNED 20. 9.2023Muthomi advocate - We seek for certified copies of proceedings and judgment.Tribunal order-The parties to follow up in the Registry.30 days stay of execution granted.HON. J. MWATSAMA DEPUTY CHAIRPERSON SIGNED 21. 9.2023