Thagichu v Unaitas Coop. Sacco Limited [2024] KECPT 908 (KLR)

Thagichu v Unaitas Coop. Sacco Limited (Tribunal Case 831/E902 of 2022) [2024] KECPT 908 (KLR) (30 May 2024) (Judgment)

Neutral citation: [2024] KECPT 908 (KLR)

Republic of Kenya

In the Cooperative Tribunal

Tribunal Case 831/E902 of 2022

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

May 30, 2024

Between

Nyaga Thagichu

Claimant

and

Unaitas Coop. Sacco Limited

Respondent

Judgment

1. The Claim herein was brought by the Claimant vide an Amended Statement of Claim dated 8th September, 2023. The Claimant’s prayers as per the Amended Statement of Claim are: -a.Permanent injunction on (I) Title No. Ngariama Merichi/905 Kirinyaga (II) itiianga/Phase 1/ 732 Murang’a (III)Phase 1/678 Muranga.b.The Tribunal do order for a fresh valuation on the charged properties and preparation of a fresh valuation report.c.An order directing the 1st Respondent to supply the Claimant with full and proper Statements of accounts from the year 2010 to date.d.An order for a forensic audit of the Claimant’s loan account from the year 2010 to date to be conducted by a reputable audit firm to be agreed upon by the parties herein failure to which the Tribunal to appoint one.e.Costs of the Claim, audit and valuation.In his pleading, the Claimant states that he obtained loan from the 1st Respondent and provided as the securities the following properties which were charged to the 1st Respondent:1. On 11th December, 2013 for Kshs. 3,400,000/= (Legal charge on Ithanga/Phase 1/678)2. On 19th December, 2013 for Kshs. 1,200,000/= (Legal charge on Ngariama Merichi/ 905)3. On 25th March, 2015 for Kshs. 2,100,000/= (Legal charge on Ngairama Merichi/ 905)4. On 2nd August, 2018 for Kshs. 1,500,000/= (Second Further Legal Charge on NGAIRAMA Merichi/ 905)5. On 9th August, 2018 for Kshs. 1,000,000/= (Legal Charge on Ithanga/ Phase 1/678)6. On 28th August, 2018 for Kshs. 3,100,000/= (Further Legal Charge on Ithanga/ Phase 1/678)

2. The Claimant further states in the Statement of Claim that:i.The Loan replacement was agreed between the parties to be done on a reducing balance and the Claimant has paid a substantial amount by the loan to its former employer; that however it is difficult to ascertain how much the Claimant has repaid so far due to the nature of the account statement, which is not as clear as expected.ii.The repayment period of the loan has not expired.iii.The valuation done by 1st Respondent tis irregular as some of the properties for example Ithanga Phase 1/678 has lost value despite there being substantial development thereon.iv.The interest charged by the 1st Respondent is not true and it is exaggerated.v.The Claimant’s loan account has been charged irregular interest to the extent of being charged five (5) times in a single day.vi.The 1st Respondent has not indicated part of the Claimant’s security in its figures and has not taken them into account or recognized the said securities namely;a.House Financing Company of Kenya Bank Guarantee.b.Sacco deposits of Kshs. Kshs. 1,500,000/=;vii.Part of the Claimant’s security includes ancestral land which needs to be passed on to the next generation.viii.That the Claimant contests arrears and interest charged by the 1st Respondent.ix.The Second Respondent under instructions from the 1st Respondent intends to dispose of the Claimant’s properties without a clear indication of the arrears that the intended sake is illegal due to the abnormal and unexplainable figures claimed by the 1st Respondent;x.Despite numerous requests, the 1st Respondent has refused to supply the Claimant with a Statement of his accounts.

3. The 1st Respondent, on 31st of July, 2023, filed a Statement of Defence dated 7th March, 2023. In its Defence, the 1st Respondent admits that the Claimant obtained a loan from the Respondent, and adds that the Claimant was contractually obligated to repay the loan facility granted to him on accordance with the terms of lending; failing which the 1st Respondent would become entitled to pursue its statutory remedies as a secured lender.In further response to the claim, the 1st Respondent states that: -i.The repayment of the loan facilities granted to the Claimant as pleaded in the plaint was secured by among others, legal charges created and registered in its favour over properties known as Title Number Ithanga/ Phase 1/ 678 registered in the name of one Justus Adugo Gichobi and Title numbers Ngairama /Merichi /905 and Ithanga/ Phase 1/ 732 both registered in the name of the Claimant.ii.The Claimant lacks the requisite standing in law to agitate to Claim challenging the exercise of a charges statutory power of sale in respect of Title Number Ithanga/ Phase 1/ 678 which is not registered in his name and is therefore not the charger;iii.On account of default on the part of the Claimant as the borrower and other chargers, the entire debt secured under the legal charges became due and payable and the 1st Respondent became entitled to enforce the Security comprised therein through realization of the charged properties.iv.All the requisite statutory notices as required to be served by the provisions of Section 90 and 96 (2) of the Land Act, 2012 as well as the Auctioneers’ Rules, 1997 were duly served in respect of each of the charged properties;v.Valuation reports in respect of each of the charged properties were duly obtained in compliance with the provisions of Section 97 of the Land Act, 2012. The 1st Respondent finally avers that the intended realization of the charged properties is pursuant to a proper and legitimate exercise of a chargee’s statutory power of sale that has crystalized; That the Claimant s not entitled to any of the relief’s sought.

4. In response to the Claimant’s Claim, the 2nd Respondent, on 31st July, 2023, dated 2nd June, 2023. The 2nd Respondent states that as a licensed auctioneer’s firm it had been instructed by the 1st Respondent to sell the suit properties in exercise of its chargee’s statutory power of sale, the 2nd Respondent is a stranger to the rest of the averments in the plaint. That in relation to the issues subject of the dispute herein, it acted as an agent of its disclosed principal; That as an agent, it cannot be impleaded in the same suit with the 1st Respondent and no cause of action arises or can be sustained against it. That the suit against is therefore bad in law and untenable and should be struck out with costs.

Claimant’s Case. 5. At the hearing, the Claimant adduced sworn evidence. He stated that he works as a Human Resource and Digital Development.The Claimant adopted his Witness Statement dated 13/10/2022, filed on 17 10/2022 and further Witness Statement dated 8/10/2023 as his Evidence -in- Chief.The Claimant also produced in evidence his List of Documents dated 13/10/2022 filed on 17/10/2022 and Supplementary List of Documents dated 17/10/2022 filed on the same date and the documents therein were marked as Claimant’s exhibit 1 and 2. The Claimant proceeded to adduce oral evidence in chief and stated that he took a loan with the 1st Respondent for whom he worked for 17 years; that he borrowed a loan from 2012 to 2018 which he topped up from 3,000,000/= to 15,000,000/=. That in October, 2018, he left employment; that though he was able to service the loan, the interest rate changed from staff rate of 6. 5% to 14% hence he went into arrears. That he tried to sell one of his properties; Ithanga/ 732 but did not find a buyer so he provided another security. That he owes the 1st Respondent but the mode of recovery needs to change. That the entries in the lan account are unclear. That he provided a Lamu property which is not featured in the offer letter; He prayed that the 1st Respondent does not sell his matrimonial home, that they can sell the parcel in Lamu instead. That due to listing in Credit Reference Bureau, he is unable to get jobs and loans. That if he gets an opportunity, he will pay the loan. That the loan term is 9 years upto 2028 and he seeks the court’s intervention.

6. The Claimant acknowledged being indebted to the 1st Respondent but does not know the actual amount due. That the 1st loan was Kshs. 3,000,000/= in the year 2012 and it amounted to Kshs. 15,000,000/= as at August, 2018. That he left the 1st Respondent’s employment in October, 2018, by which time he had repaid Kshs. 4,000,000/= and left Kshs. 2,119,000/= in his account to cover the year at interest rate of 6. 5%. that however in July, 2019 the interest rate was converted to the commercial rate of 14. 5% requiring more payments. That his deposits of Kshs. 1,500,000/= were deducted towards payment of the loan. Further, he Claimant on the issue of valuation prays for a fresh valuation. That he did not file any valuation report challenging the record, neither did he request for an alternative Valuation Report. That he knows the 1st Respondent has a right to recover the loans. That he provided security documents for:-1. Ithanga Phase 1/6782. Ithanga Phase 1/ 7323. Ngariama Merichi 1/9054. Lamu Parcel.

7. The Claim on further cross-examination, admitted that he is aware that upon default, the 1st Respondent will exercise their recovery from the securities. That the four properties are at their disposal. That he has not given any proposals to repay. That he took the title for one of the properties but he could not get a buyer. That he has filed the documents for the properties he is offering. That in the interest rate charged in July 2019 about 9 months after he left employment; that he is challenging the recovery manner. That from the 1st Respondent’s valuation, the property has depreciated which should not be the case. That he is ready to pay for the account to be audited.

Respondent’s Case. 8. The 1st Respondent’s witness Wilson Ngigi Njoroge ‘Respondent’s Witness 1’ adduced sworn evidence at the hearing. He introduced himself as the Head of the Debt recovery of the 1st Respondent. That he Knows the Claimant who used to work with the 1st Respondent. That they worked together. The witness produced the Respondent’s Witness Statement dated 22/8/2023 as the evidence in chief. The witness also produced the List of Witnesses dated 2/6/2023 and the bundle of documents therein is marked as the 1st Respondent exhibit 1. In his oral evidence, Respondent Witness 1 states that when they charge interest rates, they normally give a period of 2 months to the debtor. That the 1st Claimant was given special accommodation for 9 months due to his service to the 1st Respondent. That the Claimant lacks commitment to repay the loan and did not bother to make any payments and has no seriousness in the repayment. That the 1st Respondent tried to entice the Claimant to give a repayment plan but did not turn up. That they engaged the Claimant by way of letter. That when given the opportunity to sell the Ithaga property, the Claimant took the Respondent in circles and Claimed not to have got a buyer. That they delayed o take action until 2023 due to his position at the 1st Respondent’s office. That the 1st Respondent must realize the security to repay the loan.

9. On Cross-Examination, Respondent Witness 1 stated that Ithanga Phase 1/678 offered a security does not belong to the Claimant. That the charger consented to the charge as per other document. That he was served with demand notices as per pages 160-174 of the Respondent’s bundle of documents and loan account statements as per his requests. On further cross examination, Respondent Witness 1 stated that the interest was on reducing balances. That no ex-members of staff were exempted, the 6 months rule for charge of interest applies uniformly irrespective of the years of service. That the letter of offer established the securities, the Housing Finance Company of Kenya Guarantee was never formalized.Respondent Witness 1 admitted that there is no full statement for 2012 to date. That there was only one entry for interest accrued in October, 2019 but in November, 2019, the account statements had 9 entries. However, the witness could not explain the 9 entries among other similar queries.The witness agreed that there are discrepancies in the account.On re-examination, the Respondent Witness 1 stated that the statement is made by the 1st Respondent’s accounts department and it is generated automatically and that the 1st Respondent is ready to provide proper information on the entries.After hearing, parties agreed to undertake a joint reconciliation of the Claimant’s loan account and file the same in the Tribunal within 30 days from 2/10/2023. As at the date of writing this judgment, the parties had not filed at the Tribunal a reconciliation report of the Claimant’s loan account.On 18th January, 2023, the Claimant filed Written Submissions dated 17th December, 2023. There are no Written Submissions for the Respondent on record.

Analysis. 10. We have considered the pleadings of the parties, the evidence adduced at the hearing and the documents on record. We have also considered the submissions filed by the Claimant on the issues arising on whether or not to grant the Claimant’s claim, and find that:-It is not in doubt that the Claimant is indebted to the 1st Respondent.It is also not in doubt that the Claimant charged three properties to secure the loan as per the offer letter dated 22/05/2018. However, we observe that there are discrepancies in the Claimant’s Loan Account Statement entries, an issue agreed to by the 1st Respondent’s witness. However, the discrepancies in our view do not warrant a forensic audit.We also observe that the values of the security properties have anomalies as they either depreciated or appreciated by a very small margin, giving rise to necessity to revalue the properties, especially for the same being securities, are likely to be sold in recovery of the loan arrears.

Determination. 11. In conclusion, we find that the Claimant’s claim has merit and we enter judgement as follows.1. The security properties herein being Ithanga/Phase 1 /678, Ngariama Merichi/905 and Ithanga/Phase 1/732 be valued afresh within 30 days from the date of this judgment.2. The Claimant’s Loan Account be reconciled within 30 days from the date of this judgment and the respondent is hereby ordered to supply the Claimant with the complete statement of account within 40 days from the date of this judgment.3. A temporary injunction for a period of 40 days from the date of this judgment is hereby issued restraining the 1st Respondent by itself or through its servants and/or agents from selling or otherwise disposing the security properties, namely NGARAMA Merichi/905 KIRINYAGA, Ithanga/Phase 1/732 MURANGA, Ithanga/Phase 1/678 MURANGA.4. The 1st Respondent to bear the costs of suit and costs of the valuation of properties and the reconciliation of Claimant’s Loan Account.

JUDGMENT SIGNED, DATED AND DELIVERED VIRTUALLY AT NAIROBI THIS 30TH DAY OF MAY, 2024. HON. J. MWATSAMA - DEPUTY CHAIRPERSON SIGNED 30. 5.2024HON. BEATRICE SAWE - MEMBER SIGNED 30. 5.2024HON. FRIDAH LOTUIYA - MEMBER SIGNED 30. 5.2024HON. PHILIP GICHUKI - MEMBER SIGNED 30. 5.2024HON. MICHAEL CHESIKAW - MEMBER SIGNED 30. 5.2024HON. PAUL AOL - MEMBER SIGNED 30. 5.2024Tribunal Clerk JonahOnchiri Advocate for the ClaimantChimei Advocate for the RespondentHON. J. MWATSAMA - DEPUTY CHAIRPERSON SIGNED 30. 5.2024