Vision Coop Savings Coop Society v Wahome [2025] KECPT 355 (KLR)

Vision Coop Savings Coop Society v Wahome (Tribunal Case 464 of 2018) [2025] KECPT 355 (KLR) (Civ) (26 May 2025) (Judgment)

Neutral citation: [2025] KECPT 355 (KLR)

Republic of Kenya

In the Cooperative Tribunal

Civil

Tribunal Case 464 of 2018

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

May 26, 2025

Between

Vision Coop Savings Coop Society

Claimant

and

Salome Wahome

Respondent

Judgment

Introduction 1. The facts giving rise to this suit are not in dispute. The Respondent herein is a member of the Claimant and on 6/5/2014 she applied for super plus loan of Kshs. 2,250,000 which was guaranteed by seven [7] guarantors.She was advanced the loan by the Claimant which was to be repaid within 48 months by instalment on 12th October 2017 the Claimant through their advocate wrote a demand letter to the Respondent pointing out that she had defaulted in her repayment of the loan which stood at kshs.855,279/= as at the date of the demand letter.

2. By a statement of claim dated 26th September 2018 the Claimant sought from the Respondent a payment of Kshs.855, 279 being the loan amount in arrears, General damages, costs and interest of the suit.

3. Further, the Claimant filed a Verifying affidavit sworn by one Mr. Justus Nyangwecha dated 26th September 2018. Together with the above, the Claimants filed a copy of the super plus loan application and loan agreement form dated 6/5/2014 and a demand letter dated 12th October 2017.

4. On receipt, the Respondent filed a statement of Defence dated 7th January 2019 together with her Witness statement, List of documents and List of witnesses all dated the same day.

5. Under paragraph 5 of the respondents Defence, she denied that she does not owe the Kshs.855,279 to the Claimant because the Claimant had recovered the same from each of her guarantors who have demanded and threatened to sue her for recovery of their money. The Respondent termed the claim to be unfair and illegal for the Claimant to claim funds which it has already recovered from her guarantors who are pursuing her for the refund of the deducted amounts.

6. After several pre-trials and mention dates the suit was eventually scheduled for an oral hearing on 14/4/2025. During the hearing the Respondent represented herself in person while the Claimants were represented by M/S Shelmith advocate. Both parties adopted their Witness statements, List of documents, Statement of claim and Statement of Defence

7. It came into light during the oral hearing that the Respondent was to pay an instalment of Ksh.44, 800 per month a figure that was not captured in the super plus loan application and loan agreement form. Further, the credit officer of the Claimant M/S Nancy Karanu who was the witness giving evidence confirmed to the tribunal that they recovered the defaulted loan of Kshs.870,279/= from the guarantors as provide under clause D [payment guarantee] in the loan application form.

8. Among the Claimants supplementary list and bundle of documents dated 13th July 2023 that was filed on 18th July 2023, the tribunal takes cognizance of a letter dated 17/8/2015 addressed to the Respondent by the Claimant in the following terms“please note that if we do not receive full payment towards this loan balance within the next one month, we will have no alternative but to take the following measures”a.Revert to your guarantors.b.Forward your name to CRB.c.Send your name to our lawyer to initiate legal proceedings for the recovery of the amounts in default.

9. After one month specifically on 23rd September,2015 the Claimants wrote to the Respondents guarantors namely 1. Kariuki Harison Mugui [618] 2. Charity Muiruri [1453] 3. Godfrey Malusi Muema [1786] 4. David Mureithi Karia [2136] 5. Kimani Ndungu Gibson [1371] 6. David Kitheka 7. Stephen Karuwa [1862] and gave them notice that as guarantors of the Respondent when she defaulted to repay her loan, each one of them was to be deducted Kshs. 124,325/= to satisfy the Kshs. 870,279/= loan arrears.

10. This letter to the guarantors which carried the notice had a ridder at the last paragraph which was granted as follows:“A part from the above, we shall continue pursuing other recovery mechanism’s and when payment is realized, we shall refund the amount deducted”It is this ridder statement that inform the basis of the Claimants attempt to make recovery from the Respondent after recovering the defaulted loan from her guarantors.

11. To drive their point home, the Claimants hinged their submissions on the principle of subrogation which is used more often in insurance contracts than in Co-operative loan contracts.The basic definition of subrogation is:“Subrogation is the right of one party [usually an insurer] to step into the shoes of another party [usually their insured] and pursue legal claims against a third party who caused a loss. It allows the subrogated party to recover the amount they paid out to their insured, essentially taking over the insured rights to sue the at-fault party.”The instant suit is about a loan defaulter not a third party and the guarantee terms that permits the Sacco [The Claimant] to recover from the guarantors the defaulted amounts from the borrower without any proof of recovery attempt. This point is emphasized more elaborately by the court in the case of Ebony Development Co. Ltd v Standard Bank [2008] which states that “The guarantor becomes liable upon default by the Principal”

12. There is no provision in the Cooperative societies Act 1997 The Saccos societies Act No.14 of 2008 or Policy Statement from the Commissioner of Cooperatives that provides for a Cooperative society or Sacco to pursue a loan defaulter after recovery the defaulted amount from the guarantors. Essentially the Claimants are punishing two parties the guarantors and the borrower for the same default.

13. It cannot be gainsaid that the Claimant are entitled to pursue the Respondent after they recovered their defaulted loan from the guarantors. Principally they wanted to pursue the Respondent, nothing would have stopped them doing so but deciding to pursue after the recovery in our view is not merited.

14. Further it is noted that the Claimant in their written submissions dwelt so much on the principle of the subrogation which belongs to insurance matters and it does not oust the contract of guarantee which in the Law that financial institutions including Saccos rely on when a borrower defaults to repay his/her loan.

15. While the Tribunal agrees with the Claimant submissions under paragraph 23,24 and 25, we take note of the use of insurance terms such as seeking for indemnity for the amount recovered from the guarantors as submitted by the Claimant in paragraph 26. We again state that the issue at hand is not about an issuance claim but a contractual guarantee matter which terminates when the Claimant has recovered the defaulted loan from the guarantors.

16. In normal practice within the Cooperative sector, when a Claimant recovers a defaulted loan arrears from Respondent and their loan book is balance, they wash their hands and it will be up to the guarantors to pursue the recovery of their deducted amount from the borrower.

17. Here, the Claimant /Sacco does not once again step in to pursue the Respondent on behalf of the guarantors to recover the deducted amounts on their behalf. If the Sacco choses to do so, it borders on what the law calls double jeopardy which we would not wish to venture into in this case.

18. As stated earlier herein, nothing would have stopped the Claimant from pursuing the Respondent and stop the recovery of the defaulted amount from the guarantors, but now that they choose to recover from the guarantors, they should allow the guarantors to pursue the Respondent.

19. One of the mandates of the Cooperative Tribunal is to determine disputes between members of a society or Sacco as provided under Section 76 1[a] of the Cooperative Society’s Act 1997 and states as follows:“If any dispute concerning the business of a Cooperative Society arises:a.Among members, past members and persons claiming through members, part members and deceased members orb.Between members, past members or deceased members, and the society, its committee or any officer of the society; orc.Between the Society and any other Co-operative Society, it shall be referred to the Tribunal.It should be referred to the Tribunal”The guarantors and the Respondents are members or part members of the guarantor is perfectly within the law as a matter of right to pursue the Respondent to recover the amount deducted from, his/her account subject to proof.

20. We note that the guarantors have been in touch with the Respondent and the Respondent acknowledges that she owes them the amount deducted by the Sacco to defray her loan arrears. The Respondent state that she requested the guarantors to write to the manager of the Sacco to release a tittle deed which she had given to them to hold as security for the loan. We have seen a copy of the letter written by the guarantors dated 3rd August 2018. Now that the loan arrears have been settled, we direct the Sacco to release the title registered No. Aguthi /Gaki/1271 in the name of Bernard Wahome Waweru to him without any condition.

21. Having come to the conclusion that the Claimant recovered the total amount of the loan arrears from the guarantors, it is our finding that the Claimants have no further Claim against the Respondent. What is remaining is for the guarantors to pursue the Respondent through out of Court settlement or by approaching the Tribunal for redress.

22. It is now clear from the finding of the Tribunal that this Claimant’s Suit has no merit and hereby dismissed.

23. We order no costs and interest.

JUDGEMENT SIGNED, DATED AND DELIVERED VIRTUALLY AT NAIROBI THIS 26TH DAY OF MAY, 2025. HON. J. MWATSAMA DEPUTY CHAIRPERSON SIGNED 26 .5. 2025Hon. Beatrice Sawe Member Signed 26 .5. 2025Hon. Fridah Lotuiya Member Signed 26 .5. 2025Hon. Philip Gichuki Member Signed 26 .5. 2025Hon. Michael Chesikaw Member Signed 26 .5. 2025Hon. Paul Aol Member Signed 26 .5. 2025Tribunal Clerk A.GechikoMs. Shelmith Advocate holding brief for Mrs. Kouna for the Claimant.Salome Wahome – None Appearance.HON. J. MWATSAMA – DEPUTY CHAIRPERSON SIGNED 26/06/2025