Wambugu & 18 others v Ratta & 2 others [2022] KECPT 164 (KLR)

Wambugu & 18 others v Ratta & 2 others (Tribunal Case 211 of 2021) [2022] KECPT 164 (KLR) (17 January 2022) (Ruling)

Neutral citation: [2022] KECPT 164 (KLR)

Republic of Kenya

In the Cooperative Tribunal

Tribunal Case 211 of 2021

J. Mwatsama, Vice Chair, P. Gichuki & B. Akusala, Members

January 17, 2022

Between

David Muthui Wambugu & 18 others

Claimant

and

James Owondo Ratta & 2 others

Respondent

Ruling

1. The Application for determination is dated April 27, 2021 the same has been brought under Article 159 (2) (d) Constitution of Kenya Section 1a and 1b Civil Procedure Act, Order 40 Rules 1(a), 2,4, and 10 Order 51 Rule 1 Civil Procedure Rule 2010 and all other enabling provisions of the law.The said Application sought for Orders that:a.That this Application be certified as extremely urgent and heard ex-parte and service be dispensed with in the first instance.b.That this Honourable Tribunal be pleased to issue an order compelling the 1st Defendant/Respondent to immediately continue paying his loan with the 2nd Defendant/Respondent until completion of payment of the said loan in full pending the hearing and determination of this Applicationc.That this Honourable Tribunal be pleased to grant an order of temporary injunction restraining the 2nd Defendant/Respondent either by themselves, their agents, employees, servants, assigns or any other person acting on their behest from attaching the Plaintiffs/Applicants shares deposited with the 2nd Defendant/Respondent pending inter-parties hearing and determination of this Application, or until further orders of this Honourable Court.d.That this Honourable Tribunal be pleased to grant an order of temporary injunction restraining the 2nd Defendant/Respondent either by themselves, their agents, employees, servants, assigns or any other person acting on their behest from attaching the Plaintiffs/Applicants shares deposited with the 2nd Defendant/Respondent pending inter-parties hearing and determination of this suit.e.That this Honourable Court be pleased to grant an order compelling the 1st Defendant /Respondent to deposit with the 2nd Defendant /Respondent ownership documents of the following assets; land parcel known as Siaya/Usigu/318, land parcel known as North Gem/Ndere/1936, plot number 20 in Kayole in LR.NO. 221xx On Kayole Spine Log books for motor vehicle registration Number KDA xxxx,Mazda Van, KAC xxxx, Suzuki Station Wagon pending the hearing and determination of the instant application.f.That this Honourable Court be pleased to grant an order compelling the 1st Defendant /Respondent to deposit with the 2nd Defendant /Respondent ownership documents of the following assets; land parcel known as Siaya/Usigu/318, land parcel known as North Gem/Ndere/1936, plot number 20 in Kayole in LR.NO. 221xx on Kayole Spine log books for motor vehicle registration Number KDA xxxx,Mazda Van, KAC xxxx, Suzuki Station Wagon pending the hearing and determination of this suit.g.That this Honourable Court be pleased to issue and order directing Zamara Actuaries Administrators And Consultants Limited to remit the 1st Defendant/Respondent monthly pension payment to the 2nd Defendant/Respondent to be utilized towards the payment of the loans owed by the 1st Defendant/Respondent pending the hearing and determination of this Application.h.That this Honourable Court be pleased to issue and order directing Zamara Actuaries Administrators And Consultants Limited to remit the 1st Defendant/Respondent monthly pension payment to the 2nd Defendant/Respondent to be utilized towards the payment of the loans owed by the 1st Defendant/Respondent pending the hearing and determination of this suit.i.That pending the hearing and determination of this Application and suit, this Honourable Tribunal be pleased to grant an order of temporary injunction restraining the 1st Defendant/Respondent from all travels outside the territorial jurisdiction of this court and consequently order that the 1st Defendant/Respondent’s passport be deposited with this Honourable Tribunal.j.That this Honourable court be pleased to issue Warrants of Arrest against the 1st Defendant/ Respondent in default of compliance with any of the orders granted by this Honourable Tribunal and the same to be executed by the Officer Commanding the Station (OCS) Kayole Police Station.k.Costs of this Application be borne by the 1st Defendant/Respondent.

2. The Application is supported by the Affidavit of David Muthui Wambugu sworn on April 27, 2021 to which the Claimants aver.The Claimant and 1st Respondent were shareholders of the 2nd Respondent and former workmates at US Embassay.The 1st Respondent left employment voluntarily before he left employment the 1st Respondent approached the Claimant/Applicants to be his guarantors for various loans cumulating to more than Kshs. 9,000,000/=.The 1st Respondent serviced the loans until May 2020 when he started defaulting. The loan is now in arrears of Kshs. 6,757,766. 00 and interest continues to accrue.In May 2020 the 1st Respondent employment with US Embassy and was paid a lumpsum of kshs. 5,000,000/= of which he verbally promised the Claimants he would offset the loan.The claimants aver as a ridicule to them the 1st ……instead of repaying the loan went ahead and purchased a brand new motor vehicle registration Number KDA xxxx registered on October 9, 2020 and annexed copy of the copy of records.The Claimant on following up with the 1st Respondent he in……he had placed a standing order with Central Bank of Kenya Bank the same being false. The claimant have been issued with notices by the 2nd Respondent.

3. The claimant avers as a matter of fact the 1st Respondent receives a monthly pension of more than kshs. 70,000/= from Zamara Actuaries Administrators and consultants Limited but continues to disregard his financial responsibility towards the claimant.That the 1st Respondent is a man of means who owns several properties and land parcels known as Siaya/Usigu/318, North Gem/Ndure/1936, motor vehicle registration No. KDA xxxx, KAC xxxx and plot number 20 in Kayole where he has built is home and also derives income. The Claimants attached copies of the title deeds and copy of motor vehicle records.The Claimant are thus convinced and apprehensive the 1st Respondent is refusing to meet his financial obligations to their detriment.The Claimant have tried to have meeting with 1st Respondent but he has not settled the loan arrears thus falling on deaf ears resulting to the instant Application.The 2nd Respondent has issued notices of attachment of shares yet there are other arrears of having the defaulter that is the 1st Respondent deposit collaterals as per the 2nd respondent by-laws and policies as per paragraph 15 of the Societies Act.That further the Claimant aver the 1st Respondent is a flight risk who might leave the jurisdiction of the County and is only proper the deposits his original passport.

4. The 1st Respondent entered appearance and filed a Replying Affidavit sworn on June 22, 2021 filed on June 23, 2021. the 1st Respondent in response to the Application dated 27. 4.2021 responded as follows; that he took 3 different loans from the 2nd Respondent namely Boresha- kshs. 1. 53 Million, Boresha plus- kshs. 6. 79Million , Normal loan kshs. 1. 08Million the loans were guaranteed by different guarantors some who are the applicants herein and others are not.That he serviced his loan till he left employment in May 2020. His dividends for the year 2020 amounting to Kshs. 240,000/= was utilized to reduce the loan.That he is still a member of 2nd Respondent and thus no cause of alarm by the Applicants.The 1st Respondent avers it is not true he was paid Kshs. 5,000,000/= as the said amount goes to pension scheme and balance due is taxed leaving a small amount for sustenance.He confirms having bought a car for business to enable him get a livelihood however the business did not pick up because of Covid and death of his family members.Further he loaned the deponent a sum of Kshs. 50,000/= which he was to remit as part of his loan repayment to the Sacco but he has not done so.

5. That while in employment he was paid twice a month and was repaying the loan twice a month however with no employment he has no steady income and has even applied for a special loan to settle the outstanding loan. It was the deponent who frustrated his attempts to get a loan and 2nd Respondent demanded the entire outstanding loan.The Kshs. 70,000/= being received monthly as pension cannot be utilized to settle the loan.That his wife was sick and admitted in hospital and passed away. The 1st Respondent avers he used Motor Vehicle KDA 072C to secure a loan to pay the hospital bills and met expenses. All income from the vehicles goes towards settling the loan taken for the hospital bills and thus no funds available to meet other obligations.There is no …..from the Kayole plot as alleged. The plots in Siaya are agricultural plots whose value is low and were only offered to show his commitment to settle the loan.That it is in the interest of justice, fair and expedient the application be dismissed.

6. The 2nd Respondent filed Grounds of Opposition dated July 27, 2021 filed on August 25, 2021 to which the grounds alluded to one, the Notice of Motion fails the basic test for interlocutory injunction as set out in Giella versus Cassman BrownTwo, the Application is a misuse of the then tribunal by the guarantors who are not disputing the loan amount or th fact that they guaranteed issuance of the loan.Third, there is no valid cause of action against the 2nd Respondent.Four, the Applicant is made …… with ….to deprive the 2nd Respondent their legitimate right to exercise their security in light of the 1st Respondent amongst other grounds.

7. The 2nd Respondent further filed a Replying Affidavit sworn on August 19, 2021 filed on August 25, 2021 and the same sworn by Josim Onyago the General Manager of Balozi Co-operative Savings and Credit society Limited the 2nd respondent herein.He stated the 1st Respondent did apply for various loans in the year 2019. Boresha laon Kshs. 1. 500,000/=,Boresha plus loan - Kshs. 7,000,000/=, normal loan Kshs. 1,000,000/=.To secure the advancement of the credit facilities the 1st Respondent secured the commitment of a number of guarantors who offered their deposits as security incase of default. The fundamental condition being that the guarantors would be jointly and severally liable for repayment of the loan in case of default.In August 2020, the 1st Respondent in payment of 3 loan facilities and accounts fell into arrears.The 1st Respondent applied for a special loan facility to offset the arrears and regularize his account but was unable to secure the commitment of all the proposed guarantors, resulting to short…in security.On December 4, 2020 the 2nd Respondent wrote to the 1st Respondent and informed him the special loan could not be processed as not all guarantors had executed the guarantee required.

8. Vide an email received on January 13, 2021 the 1st Respondent requested for a restructure of his outstanding loan to allow for a 3 month grace period having lost a family member. As a show of sympathy the 2nd Respondent acceded to the 1st Respondent plea and granted his request to enable him reorganize his finances.The 1st Respondent presented scanned copies of 2 title documents that is Siaya/Usigo/318 and North Gem/Ndere /1936 for the 2nd Respondent to consider them as security for the grant of the special loan.The valuation process could not proceed owing to failure by 1st Respondent to pay the requisite valuation fees.The 2nd Respondent has taken all reasonable steps to delay the attachment of the Applicant’s deposits and allow the 1st Respondent to regularize his account.Total loan amount as at June 29, 2021 was Kshs. 9,095,297/=.That the 2nd Respondent right to exercise against their deposits …….. upon default by the 1st Respondent.The only assets used to secure the 1st Respondent impugned loan facilities were the Applicant’s deposits.That the current Application and claim discloses no valid cause of action against the 2nd Respondent as the Claimant /Applicants have neither disputed the fact that they guaranteed the subject loan nor 2nd Respondent right to exercise its security.That the 2nd Respondent is a savings and Credit Co-operative Society which has a duty to protect the financial interests of thousands of members and protractor of debt recovery measures, such as that in the case is grossly ….to the interest of members of 2nd Respond.It is thus in the interest of justice to grant the orders sought.

9. The Applicants filed a further affidavit sworn by David Muthui Wambugu on October 12, 2021 filed on even date and states that there is a legitimate cause of alarm by the Applicants, the 2nd Respondent having issued alerts and threats on attaching shares for the loans guaranteed.The 1st Respondent in paragraph 8 and 9 concedes to receive a monthly income but has ignored to meet his financial obligations in regard to loan repayments as per the attached letter.

10. The parties were directed to file written submissions and Applicant filed their written submissions dated 12. 10. 2021. That the 1st Respondent frustrated avenues of repayment of the loan as the special loan would only be available upon valuation reports being done.That the 2nd Respondent Replying Affidavit deponed on August 19, 2021 clearly demonstrates there are other avenues for recovery of the amount in arrears by 1st Respondent other than attaching the applicants shares.The 2nd respondent filed their written submissions dated October 29, 2021 on November 4, 2021. As at the time of writing this ruling the 1st Respondent had not filed their written submissions.The issue for determination are thus(i)Whether the claimants have satisfied the requirement for issuing injunctive orders.(ii)Whether the claimants have satisfied threshold for compelling 1st Respondent to surrender documents as security pending hearing and determination of suit.

Issue number one Whether the claimants have satisfied the requirement for issuing injunctive orders? 11. The principles in the celebrated case of Giella – vs- Cassman Brown (1973) EA 358 are still in use today. The 3 principles are :(i)Applicant must have a prima facie case(ii)Applicant should demonstrate irreparable injury/harm if temporary injunction is not granted.(iii)Where does the balance of convenience ……We do not wish to del….the aforementioned points.

(i) Prima facie case .In the case of Mrao Limited -vs- first ….bank of Kenya Limited [2003] eKLR CA gave a determination on a prima facie case it stated:“………….in Civil cases, it is a case in which, on the material presented to the court a Tribunal property directing itself will conclude that there exists a legal right which has apparently been infringed by the opposite party as to call for an explanation or rebuttal from the latter”We note in this case that indeed the 1st Respondent has infringed the rights of the Claimant/Applicant’s herein. He took a loan, he did not repay and the Applicants who are his guarantors have now been deducted their shares.However, we note as a guarantors they do have a duty towards the 2nd Respondent once the 1st Respondent defaults in its loan obligations ..Their legal right was infringed by the 2nd Respondent not fulfilling his obligations and thus cannot be meted against the 2nd Respondent.

(ii) Irreparable Harm 12. The Applicants must show they will suffer irreparable harm if the orders sought for are not granted.In the case of Pius Kipchirchir Kogo-vs- Frank Kimeli Terai[2018] eKLR the court stated :“………………….irreparable injury means that the injury must be one that cannot be adequately compensated for in damages and that the existence of a prima facie case is not itself sufficient. The applicant should further show that irreparable injury will occur to him if the injunction is not granted and there is no other remedy given to him by which he will protect himself from the consequences of the apprehended injury.”The deductions as per the affidavits filed are already being done on the Applicants.Question is – have the deductions caused irreparable harm against the applicant’s herein?We believe harm has been caused on the Claimant/Applicants by the deductions being done they have lost their shares and savings because of the negligence of the 1st Respondent.The big question is the harm irreparable?We do find the harm can be repaired by the Applicants being restored back to their positions since it is all monetary.Harm suffered herein is not irreparable in our view.

(iii) Balance of convenience 13Question is who suffers greater inconvenience by the 1st Respondent not repaying his loan. Is it the Claimant/Applicants and or the 2nd Respondent.The 2nd Respondent have a rec…..when 1st Respondent does not pay. They go for the guarantors who in this case are guarantors.The Applicants suffer greater inconvenience because their shares are deducted and may or may not recover the cash again.In the case of Robert Mugo wa Karanja- vs Eco Bank (Kenya) Limited and Another (2019) eKLR stated:“circumstances for consideration before granting a temporary injunction under Order 40 rule 1 of Civil Procedure Rule requires a proof that any property in dispute in a suit is in a danger of being wasted damaged or alienated by any party of the suit or wrongfully sold in execution of a decree or that the Respondent threatens or intends to remove or dispose the property; the court is in such situation enjoined to a grant a temporary injunction to restrain such acts.”Question - to which party does the balance of convenience be in the case above?The 2nd Respondent would lose just as much as the Applicants have with the loan not being serviced by the 1st Respondent.

14. We then ask ourselves who are guarantors and what is their role?Guarantor is a person who agrees to be responsible for somebody or for making sure that something happens or is done(as per oxford learners dictionaries. Com)The Claimants thus have a duty to ensure the 1st Respondent pays the loan and if not they are to bear the consequences.The role of a guarantor is …………………..however, this does not mean a guarantor should pay for a defaulted loan for a person who is negligent and able to repay.Even if the balance of convenience is tilting towards the applicants and 2nd respondent we would not at this stage issue injunctive orders.

Issue number two- Whether the Claimants have satisfied threshold for compelling 1st Respondent to surrender documents as security pending hearing and determination of suit. 15. Can the Tribunal compel the 1st Respondent to deposit ownership documents of the assets in their prayer number …….and …… to safeguard their interests?We note the factual chronology of events in the case at hand have prompted the Applicants to file this Application and seek for the orders.The grounds are quite substantive and the 1st Respondent has not shown any reason why the orders should not be granted as prayed.He admits not having repaid the loan, he fell in arrears and now his guarantors are the ones who stand at risk of losing their shares.When guarantors guarantees a loan for anyone they do so with utmost good faith believing the one being given the loan shall repay.They usually have no intention to repay the loan for the defaulter but more so assist them in acquiring the loan facility.

16. The doctrine of utmost good faith is a contractual legal obligation that requires contracting parties to act honestly and not mislead or withhold any information that is essential to the contract.the 1st Respondent in his response righty states he took the loan, left employment, fell into arrears because his wife was sick and she died. He had financial challenges during the time.However, he now does not offer any remedy to the people who stood by him at the time of need that is when he required guarantors for his loan.We ask ourselves is the 1st Respondent acting in good faith?The existence of the loan is not disputed by the 1st Respondent and his can be said is a deliberate intention not to pay the loan because he is aware the 2nd Respondent would go for the guarantors and he will be off the hook.

17. The Tribunal has additional power to regulate its …process in the interest of justice other than just relying on the Constitutionof Kenya 2010. Question we ask ourselves – have the applicants established any basis for the orders against the 1st Respondent?It is essential for maintenance of Rule of Law and order that the authority of the Tribunal and its mandate is upheld at all times.The Tribunal cannot fold its hands and watch innocent guarantors be at the mercy of a loan defaulter simply because he knows they will be liable for his loan and he walks Scott free.It is the obligation of every person with a loan facility to repay his loan and not burden the guarantors with his responsibility despite life’s vi…………….The Applicants have demonstrated the 1st Respondent has property and thus means to pay for the loan if he was willing to do so but has refused at their expense.

18. Tribunal has jurisdiction in the matter as vested in Section 3A Civil Procedure Act and Section 78 (2) Co-operative Society Act.The Respondent has failed to repay his loan leaving the Claimant guarantors to repay the same despite the Claimants reaching out to the Respondent.It is clear the Respondent defaulted and Claimant are now facing the burden of repayment.Indeed it has been evidenced by the Claimant the Respondent has means to pay for the loan.The Respondent has not demonstrated any sufficient reason why the orders sought in the Application should not be granted.We have carefully considered the submissions of parties in regard to the Application dated April 27, 2021. Section 79 (1) (a) Co-operative Societies Act“(1)(a) The Tribunal may make such orders for the purpose of securing the attendance of any person at any place, the discovery or production of any document or the investigation of contravention of this Act as it deems necessary or expedient”Rule 3 Co-operative Practice and Procedure Rules, 2009……………….the Tribunal thus has a mandate to issue orders sought.It is with this in mind that having looked at the merits of the application, we are persuaded the 1st respondent ought to be made accountable.

19. It is thus in the interest of justice to order that the Application dated April 27, 2021 is found to be with merit and issue/grant as follow:a. That this Honourable Court is pleased to grant an order compelling the 1st Defendant /Respondent to deposit with the 2nd Defendant /Respondent ownership documents of the following assets; land parcel known as Siaya/Usigu/318, land parcel known as North Gem/Ndere/1936, plot number 20 in Kayole in LR.NO. 22143 On Kayole Spine log books for motor vehicle registration Number KDA xxxx,Mazda Van, KAC xxxx, Suzuki Station Wagon pending the hearing and determination of the instant application.b. That this Honourable Court is pleased to grant an order compelling the 1st Defendant /Respondent to deposit with the 2nd Defendant /Respondent ownership documents of the following assets; land parcel known as Siaya/Usigu/318, land parcel known as North Gem/Ndere/1936, plot number 20 in Kayole in LR.NO. 22143 On Kayole Spine log books for motor vehicle registration Number KDA xxxx,Mazda Van, KAC xxxx, Suzuki Station Wagon pending the hearing and determination of this suit.c. That pending the hearing and determination of this Application and suit, this Honourable Tribunal is pleased to grant an order of temporary injunction restraining the 1st Defendant/Respondent from all travels outside the territorial jurisdiction of this court and consequently order that the 1st Defendant/Respondent’s passport be deposited with this Honourable Tribunal.d.. That this Honourable court is pleased to issue Warrants of Arrest against the 1st Defendant/ Respondent in default of compliance with any of the orders granted by this Honourable Tribunal and the same to be executed by the Officer Commanding the Station (OCS) Kayole Police Station.

RULING SIGNED, DATED AND DELIVERED VIRTUALLY AT NAIROBI THIS 17*TH DAY OF JANUARY, 2022. Hon. J. Mwatsama Deputy Chairperson ………………………Mr. P. Gichuki Member …………………………Mr. B. Akusala Member …………………………Tibunal Clerk …………………