Samuel Odhiambo Okope & 2 others v Mwalimu National Savings & Credit Co-operative Society Limited & another [2021] KECPT 270 (KLR)

Samuel Odhiambo Okope & 2 others v Mwalimu National Savings & Credit Co-operative Society Limited & another [2021] KECPT 270 (KLR)

REPUBLIC OF KENYA

IN THE CO-OPERATIVE TRIBUNAL

AT NAIROBI

TRIBUNAL CASE NO.57 OF 2021

SAMUEL  ODHIAMBO OKOPE..........................................................................................................1ST  CLAIMANT

GERALD  PHILIP  OCHIENG’.............................................................................................................2ND CLAIMANT

MOSES  AMOKE  AHAO ......................................................................................................................3RD CLAIMANT

(suing  through  their authorized  agent, ISAAC  ALUOCH  POLO ALUOCHIER)                                                      

VERSUS

MWALIMU  NATIONAL  SAVINGS &  CREDIT CO-OPERATIVE  SOCIETY  LIMITED.. 1ST RESPONDENT

CHARLES  GWADA  SUDHE...........................................................................................................2ND RESPONDENT

JUDGMENT

1. The statement of  Claim  dated  4.9.2020  filed   on 29.1.2021. The  Claimant  filed suit  on  behalf  of  Samuel  Odhiambo Okope,  Gerald  Philip Ochieng  and Moses  Amoke  Ahao members  of the Mwalimu  National  Savings  & Credit  Society  Limited  who are the  1st Respondent.

The Claimants were guarantors  to a  loan  of Kshs.1,018,916.46 advanced  by the  1st Respondent to  the 2nd  Respondent  on  19.6.2015.

The 2nd Respondent  defaulter and  the 1st  Respondent  attached  assets of the claim  and the burden  of servicing  the defaulters  loan  is  on the guarantors.

They  Claimant’s  claim  By-laws  76 of  the Mwalimu  National  Savings  and Credit  society  Limited  revised  on February  2017  states :

“  At  every  regular  meeting  of the Board  the item  LOANS shall appear  on the  agenda. At the  meeting,  the chief  Executive  shall  present  an up-to- date  listing  of delinquent  borrowers showing:

        Name of  borrower

        Account Number

        Date of loan

Date  of last payment

Unpaid  balance  of loan

Number  of months  delinquent

Borrowers  share  balance

Security  or guarantors if any

The  Board  shall  thereupon  take action  to collect  the overdue  accounts.  Any  loan  three months  overdue  shall be  referred  to the co-operative  Tribunal  as a dispute.

The Board  shall thereupon  take action  to collect  the overdue  accounts  by  attaching guarantors.”

The  1st Respondent  had a duty  to bring  the 2nd  Respondent  to Tribunal   first  before  resulting  to the guarantors.

The 1st Respondent  did  not comply  with the mandatory provisions  of the  legally  binding  By-law 76. The  1st  Respondent  actions  are illegal  by attaching  the guarantor’s  assets  before  1st  referring  the  loan  default  to the Tribunal.

2. The 1st  Respondent  filed their  Memo  of Appearance  dated  7.10.2020 on  1st February  2021 and their statement  of  Defence  dated  27.10.2020 filed  on  1st February  2021 and responded  as follows:

“ That  the strict  ready  and interpretation  of By-law  76  outlines  the  actions  of  recovery  of defaulted  loans  and that  the attachment  of guarantors  is  a recovery  action independent of  referring  the principal  borrower  to the Tribunal.

In guaranteeing  repayment  of the loan  the claimant’s  accepted  the liability  to repay  the loan  upon default  by the borrower which  forms  a separate  agreement  between  the claimant and  1st Defendant.

That  the attachment  of the Claimant’s  assets  was done  in  strict  adherence  to the law  where  the 1st  Respondent  was exercising  its right  of recovery  of the loan  advanced  to the  2nd  Respondent  whom the Claimants guaranteed.”

3. The parties  consented  to have  the matter  determined  by way  of written submissions which  claimant  submissions – dated 9.5.2021 were filed  on 12.5.2021. The  1st Respondent  filed  their written submissions  dated  26.5.2021 on 15.6.2021.

We take  note  the  2nd  Respondent  did not  enter  Appearance  neither  did he file  a statement  of Defence.  To this  end the Claimant  filed a Request  for Judgment  Application  dated  and interlocutory  judgment  was entered  in favour  of  claimant against  the Respondent  with costs  and interest.

Having  perused  the pleadings  and written  submissions  of the parties  herein  the issues  for determination  are:

Issue one

Whether  the Claimant’s  had  a duty  towards  the 1st Respondent to repay  the  2nd Respondent  loan  on default

Issue  two

Whether the  1st Respondent  was  right  in attaching  the  Claimant’s  assets  upon  default  of the  2nd Respondent loan  on default of the 2nd Respondent.

Issue  three

Costs

4. Issue one

Whether  the claimant’s  had  a duty  towards the  1st  Respondent  to  repay  the  2nd Respondent  loan  on default

It  is trite  law  that  any guarantor  has a  responsibility  to repay  any loan  they guaranteed  once  the same  is defaulted.  The guarantors are the 1st  contact  upon  a loan being  defaulted.

The Claimant’s  therefore  had   and have  a duty  towards  the 1st  Respondent  upon  the  2nd Respondent  having  defaulted  the loan.

Claimants guaranteed  the  2nd  Respondent  and accepted  to repay  the loan  in the event  of the borrower default.

5. The 1st Respondent  aver  there  is an  enforceable  contract  between  the claimant’s  and  1st Defendant  due to  the loan  Application Form.

Several  authorities cited  by the  1st Respondent  state  the Claimant’s  have  a duty  as guarantors.

Fidelity  Commercial  Bank  Limited  - vs-  Kenya  Garage  Vehicle  Industries  Limited  [2017] eKLR.

“  Because  a contract  of guarantee  is essentially  a contract  the following  basic  principles  of contract law  will apply. A contract  of guarantee binds  the person  giving a  guarantee  to honour  its terms irrespective  of any dispute  that may  be existing  between  the parties  to the transaction  for which  the guarantee  was given. A guarantee  is therefore  an accessory  contract  by which  the guarantor undertakes  to be answerable  to the provisions  for the debt  or default  of  another  person  whose  primary  liability  to the promise  must exist..”

6. To this  extent the  1st  Respondent have laid  their case. As much  as there  is the contract adduced  above, there  is  the By-laws which  are  the driving  engine  on any  society.

The  By-laws would  override  any other  agreements between  the parties.

We  therefore find  as much  as the claimant’s  were guarantors  to the loan  which was  advanced  to the  2nd Respondent and is  now  defaulted. The 1st  Respondent  ought  to follow  the  By-laws  strictly and  the same  is outlined.

However, upon  reading  Section  76  of the Mwalimu  National  Savings and Credit Co-operative  Society Limited  Sacco By- laws  which reads:

“  At  every  regular  meeting  of the Board  the item  LOANS shall appear  on the  agenda. At the  meeting,  the chief  Executive  shall  present  an up-to- date  listing  of delinquent  borrowers showing:

       Name of  borrower

        Account Number

         Date of loan

Date  of last payment

Unpaid  balance  of loan

Number  of months  delinquent

Borrowers  share  balance

Security  or guarantors if any

The  Board  shall  thereupon  take action  to collect  the overdue  accounts.  Any  loan  three months  overdue  shall be  referred  to the co-operative  Tribunal  as a dispute.

The Board  shall thereupon  take action  to collect  the overdue  accounts  by  attaching guarantors.”

The understanding  of the same  and the  order  in how  the default should  be handled is:

1st  - Tribunal

2nd Guarantors

To this end  we agree  with the  Claimant’s  that  the 1st Respondent  had a duty  to file  suit against  the 2nd Respondent  first  upon  default.  Once they  do not  recover  their monies  the 2nd  point  of  interest  is  the Claimants who  guaranteed  the said  loan.

7. Issue  two

Whether  the 1st  Respondent  was right  in attaching the Claimant’s assets  upon  default  of the  2nd  Respondent.

Section  76 By-laws  of Mwalimu  National  Savings and credit co-operative  society  Limited

Clearly  states  the guarantors  will  only be  called  out once  the 1st  Respondent  has filed  suit against  any defaulter.

This  was not  done neither  have the  1st Respondent  stated  there  is a case  against  the 2nd  Respondent. Nothing  has been  adduced  to show  they  that is  the 1st Respondent  have followed  up with  the 2nd Respondent  after  default  to warrant  them  to  attach  the claimants  assets.

The procedure  is laid  out quite clearly  in its  By-laws  and they did not  follow  the procedure  outlined.

8. The 1st  Respondent  further  brings out  the issue  of the Verifying Affidavit  being  defective.

The said  issue  is that  the Verifying  Affidavit  was sworn  in  plural  and thus  fatally  defective  as it offends  Order  19 Rule  1 Civil  Procedure  Rule  2010 and Section  18 of Oaths  and Statutory  Declarations Act Cap  15.

The Claimant’s  response  was Section  1A, Civil Procedure  Act,  that  we  should  look into  the overriding  objective  being  just,  expeditious,  proportionate  and affordable  resolution  of the Civil  disputes.

To this  end there  is a substantive  claim  filed  and the  Tribunal  shall  not be  dragged  into  ‘technicalities’ at this stage  of judgment.

9. Issue  three

Costs follow the  event

10. Conclusion

We find  in favour of  Claimants herein  and as such  the prayers  are allowed  as follows:

1. 1st Respondent  to reimburse  the Claimant’s  the amounts deducted  towards  the  loan  defaulted  by  2nd  Respondent.

2. Costs  to be  borne  by the  Respondents.

JUDGMENT SIGNED, DATED AND DELIVERED VIRTUALLY  AT NAIROBI THIS 19TH   DAY OF AUGUST, 2021

Hon. B. Kimemia         Chairperson                Signed      19.8.2021

Hon. J. Mwatsama       Deputy Chairperson  Signed      19.8.2021

Mr. Gitonga Kamiti      Member                       Signed      19.8.2021

Tribunal Clerk              R. Leweri

Oluochier  for  Claimant present

Ayisi  for 1st  Respondent present

1st  Claimant  : Kshs.124,630/37

2nd Claimant : Kshs.134,509/83

3rd Claimant: Kshs.445,275/07

Ayisi  for 1st Respondent : We  pray for 30 days  Stay  of Execution

1. To confirm  Appeal

2. If  not we  pay after  internal  mechanisms

Oluochier  Advocate  for Claimant:  no objection

Order :  30 days  stay of execution  granted.

Hon. B. Kimemia     Chairperson                Signed      19.8.2021

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