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ELCPartially AllowedNairobi CTC No. 375 of 2010 (Appeal from Co-operative Tribunal)· [2021] KEELC 175 (KLR)

Ufundi Savings & Credit Co-operative Society Limited v Bernard Ndungu Kariuki & 299 others; Alex G Marete & 81 others (Interested Parties) [2021] KEELC 175 (KLR)

Environment and Land Court
20 December 2021
EOE. ObagaKBK. BorBEB.M. Eboso
9,031 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~36 min to read original · ~4 min brief

The bottom line

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The Environment and Land Court ruled Ufundi Co-op Plaza is co-owned by the Sacco and its investing members, who share sale proceeds 50.88% to 49.12% after the bank loan is repaid.

What this practically means

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Executive summary

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This was an appeal from the majority award of two members of the Co-operative Tribunal in Nairobi CTC No. 375 of 2010, delivered on 9/12/2014, in a dispute over Ufundi House (destroyed in the 1998 American Embassy terror attack) and its replacement, Ufundi Co-op Plaza. The Tribunal majority had found that the property solely belonged to the 15,000 Investment Members and restrained the Sacco from dealing with Ufundi Co-op Plaza. The Chairman dissented, favouring sale and sharing of proceeds at 60:40 in favour of the Sacco. Allowed as appellant, the Sacco argued the majority award was against the weight of evidence, that the properties were distinct in acquisition and ownership, that the charge securing Kshs 160,000,000/= in favour of Co-operative Bank was ignored, and that the award was impracticable. The three-judge bench framed five issues and found, on the minutes of the Special Delegates Meeting of 16/4/1988, that the Sacco contributed Kshs 8,700,000/= and Investment Members Kshs 8,400,000/= towards Ufundi House, making it co-owned. Ufundi Co-op Plaza, funded largely by USAID, was held to be a replacement of Ufundi House and therefore co-owned in the ratio 50.88% to 49.12%. No trust arose since Section 47(4) of the Co-operative Societies Act bars members from claiming a specific share of the Reserve Fund. The ADM resolution of 29/4/2010 to sell was held properly made. The court allowed the appeal, set aside the Tribunal award, declared the co-ownership ratio, permitted the Sacco to dispose of Ufundi Co-op Plaza, directed that sale proceeds first redeem the Co-operative Bank charge before the net balance is shared 50.88% to 49.12%, ordered the 49.12% share to be paid to contributing members, released rental deposits in court to the bank, and directed each party to bear its own costs at both levels.

Key legal issues

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01

Ownership of Ufundi House

Holding

Ufundi House was co-owned by the Appellant and the Investment Members

Reasoning

The minutes of the Special Delegates Meeting of 16/4/1988 showed that the Appellant contributed Kshs 3,600,000/= from its Statutory Reserve Fund plus Kshs 5,100,000/= in legal and valuation fees, totalling Kshs 8,700,000/=. Investment Members contributed Kshs 8,400,000/= and the balance was a Co-operative Bank loan repaid from rental income. The Tribunal's finding of sole ownership by Investment Members was therefore unsupported by evidence.

p. 7
02

Ownership of Ufundi Co-op Plaza and the trust claim

Holding

Ufundi Co-op Plaza was a replacement of Ufundi House and is co-owned by the Appellant and the Investment Members in the ratio 50.88% to 49.12%; no trust arose

Reasoning

The purchase price of Kshs 232,500,000/= was funded by USAID (Kshs 205M), sale of the empty plot of Ufundi House (Kshs 20M) and tenants' cash deposits (Kshs 7.5M). The press release and the Chairman's speech confirmed the building was a replacement. Since Ufundi House was co-owned, its replacement is co-owned. Section 47(4) bars members from claiming a specific share of the Reserve Fund, so the Appellant owned its contribution in its own right, not as trustee.

p. 8
03

Validity of the decision to sell Ufundi Co-op Plaza

Holding

The decision to sell made at the Annual Delegates Meeting of 29/4/2010 was properly made

Reasoning

The delegates meeting was the supreme decision-making organ and its delegates represented both general and Investment Members. CW1 attended past delegates' meetings as a delegate and offered no evidence of any other legitimate organ, nor that the delegates were not entitled to attend. His non-attendance and disagreement with the decision could not be a basis for faulting the resolutions.

p. 9
04

Existing encumbrance (charge in favour of Co-operative Bank)

Holding

The subsisting charge must be redeemed before the net sale proceeds are shared; rental income deposited in court is applied to the bank loan

Reasoning

The property was charged to K-Rep Bank in 2001 and a charge securing Kshs 160,000,000/= from Co-operative Bank was registered on 9/12/2013. No party challenged the encumbrances, yet the Tribunal ignored them. Under Section 81(2) the court has wide powers, and 11 years of litigation made it unjust to leave the charge unresolved.

p. 10

Legal principles established

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  • On a first appeal, the appellate court reconsiders and re-evaluates the evidence and draws its own conclusions while making due allowance for not having seen or heard the witnesses
  • Where a property is destroyed and replaced with assistance extended because of that destruction, ownership of the replacement follows the ownership of the destroyed property
  • An appellate court with wide statutory powers may pronounce itself on an existing encumbrance which the trial tribunal ignored, where complete adjudication requires it

Court orders

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  1. 1.The Award of the Co-operative Tribunal in Nairobi Tribunal Case Number CTC 375 of 2010 dated 9/12/2014 is set aside and replaced with the court's orders
  2. 2.Declaration that L.R. No. 209/2571 (Ufundi Co-op Plaza) is co-owned by the Sacco and the Investing Members in the ratio of 50.88% to 49.12% respectively
  3. 3.The Sacco is allowed to dispose of L.R. No. 209/2571 together with the developments thereon (Ufundi Co-op Plaza)
  4. 4.The proceeds of the sale shall first be utilised to redeem the title by paying the outstanding loan owed to Co-operative Bank of Kenya Limited, and the net balance shared 50.88% to 49.12% in favour of the Appellant and Investment Members respectively
  5. 5.The 49.12% portion of sale proceeds belonging to Investment Members shall forthwith be paid to the Sacco members who contributed money for the purchase of Ufundi House
  6. 6.Parties to bear their respective costs relating to Nairobi CTC No. 375 of 2010
  7. 7.All rental income deposited in court shall forthwith be released to the Co-operative Bank of Kenya Limited towards redemption of the title charged to it
  8. 8.Parties to bear their respective costs of this appeal

Authorities

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Legislation

  • Co-operative Societies Act Cap 490Section 27 (and 27(1))
  • Co-operative Societies Act Cap 490Section 45(e)
  • Co-operative Societies Act Cap 490Section 47(4)
  • Co-operative Societies Act Cap 490Section 76
  • Co-operative Societies Act Cap 490Section 80(1)
  • Co-operative Societies Act Cap 490Section 81(1) and 81(2)
  • Evidence ActSections 107 and 108
  • Registration of Titles Actreferenced generally
  • Banking Actreferenced generally (registration of the Co-operative Bank)
  • Ufundi Sacco by-lawsBy-law no. 38 and by-law No. 57

Cases cited (8)

  • Mary Wanjiru Kihugu & 6 others v Regency Co-operative Savings and Credit Society Limited
    [2021] eKLR
  • Mbilo Nzeki Munyasa & Another v Malde Transporters Ltd & 2 others
    [2015] eKLR
  • Susan Mumbi Vs Kefala Grebedhim
    Nairobi HCCC No 332 of 1993
  • Kandara Farmers Society Limited & 9 Others v Joseph Kinyua & 18 others
    Civil Application No. 48 of 1999(19/99 UR)
  • Mbogo v Shah
    [1968] EA 93
  • National Bank of Kenya Limited v Wilson Ndolo Ayah
    [2009] eKLR
  • Equip Agencies Limited v I & M Bank Limited
    (2017) eKLR
  • Kenya Ports Authority v Kuston (Kenya) Limited
    (2009) 2EA 212
On appeal from
Co-operative Tribunal
Nairobi CTC No. 375 of 2010
Jurisdiction invoked
Section 81(1) and 81(2) of the Co-operative Societies Act Cap 490

Key timeline

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Practical implications

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Frequently asked questions

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Cite this brief

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Cite this brief

Caselaw, "Ufundi Savings & Credit Co-operative Society Limited v Bernard Ndungu Kariuki & 299 others; Alex G Marete & 81 others (Interested Parties) [2021] KEELC 175 (KLR)", Case Analysis (2021). Nairobi CTC No. 375 of 2010 (Appeal from Co-operative Tribunal). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2021/175/eng@2021-12-20

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.