REPUBLIC OF KENYA
IN THE HIGH COURT OF KENYA AT NAIVASHA
CIVIL APPEAL NO. E117 OF 2023
UNAITAS SACCO SOCIETY LIMITED..........................................................1 ST APPELLANT
BEYOND VISION AUCTIONEERS..............................................................2 ND APPELLANT
-VERSUS-
MOSES KARANJA MWIRIGI........................................................................RESPONDENT
(Being an appeal from the Ruling of the trial court (Hon N S Lutta, CM) dated 29.11.2023 in the original Naivasha CMCC No. E0214 of 2023)
JUDGMENT
Background of the Appeal
1. The origin of this appeal is in a commercial loan agreement entered into between the 1 st Appellant and the Respondent. The Respondent is a member of the 1st Appellant and was granted an asset finance credit facility in the principal sum of Kenya Shillings 1,505,000, exclusive of interest and other applicable charges. To secure the repayment of this facility, the Respondent entered into a security agreement creating a charge over the suit motor vehicle, registration number KBY 063Z. As a matter of perfection of the security interest, the motor vehicle was jointly registered in the names of the Respondent and the 1 st Appellant.
2. The Respondent’s case at the trial court was that he had been a diligent borrower, making consistent monthly repayments until approximately March 2023, when he encountered financial difficulties attributed to the prevailing economic conditions in the country. He claimed to have engaged the manager of the 1 st Appellant’s Kahatia Branch via telephone, proposing to settle the outstanding arrears in the subsequent month of April 2023. The Respondent alleged that this proposal was accepted; however, on the 17/04/2023, the 1 st Appellant issued instructions to the 2 nd Appellant to repossess the vehicle and the repossession took place on the 25 th of April 2023 at the Respondent’s place of work in Naivasha.
3. The Respondent contended that the process was high-handed and legally flawed, asserting that he was served with a Notification of Sale of Movable Property and the vehicle was simultaneously towed without the issuance of a prior proclamation notice or the mandatory seven-day redemption period required under the Auctioneers Rules. Consequently, the Respondent filed Civil Suit No. E214 of 2023 and an accompanying Notice of Motion dated 19 th May 2023 seeking injunctive orders.
4. The Appellants responded by filing a Preliminary Objection on the 7 th of July 2023, arguing that the Chief Magistrate’s Court lacked jurisdiction to entertain the suit by virtue of Section 76 of the Co-operative Societies Act. They maintained that the dispute was between it, as a co-operative society, and its member and should therefore have been referred to the Co-operative Tribunal.
5. Having heard the parties on the preliminary objection, the learned trial magistrate delivered a ruling in which the court held that the Appellants had not demonstrated that the Respondent was a member of the Sacco and that the court possessed the requisite jurisdiction to hear the matter. The court also found the application for injunction to be meritorious, citing a lack of evidence that the Appellants had served the necessary statutory notices.
The Appeal
6. Dissatisfied with the entirety of the ruling, the Appellants filed a Memorandum of Appeal dated 19 th December 2023. Even though the Memorandum of Appeal sets 11 grounds of appeal, the Court has coalesced same, for clarity purposes, into only two grounds as follows: -
a. The trial magistrate erred in finding that the Plaintiff was not a member of the Sacco under Section 76 of the Cooperative Societies Act and thus perpetuated the error in law by concluding it had jurisdiction to hear a dispute relating to Sacco business. (Grounds 1-4)
b. The magistrate erred in allowing an application for an interlocutory injunction when the prerequisites were never met and when orders sought were not predicated on similar prayers in the main suit. The application was therefore fatally defective. (Grounds 5-10)
7. The Appellants seek orders to set aside the trial ruling, allow the preliminary objection, strike out the primary suit, and dismiss the Respondent's application with costs.
8. The court gave directions that the Appeal would be canvassed by way of written submissions pursuant to which directions both parties complied. The Appellant having filed its revised submissions dated 5 th August 2024 while the Respondents’ submissions are dated 24 th June 2024.
Summary of the Appellant’s Submissions
9. The Appellant raises challenge to jurisdictional findings of the trial court and submits that the learned trial magistrate’s dismissal of their Preliminary Objection was a material error of law. They contend that Section 76 of the Co-operative Societies Act creates an exclusive forum for disputes involving a Sacco and its members regarding society business. They challenge the magistrate’s finding that membership was not proved, arguing that membership was a statutory prerequisite for the loan under Section 43 of the Cooperatives Act.
10. The appellant further cites Southern Star Sacco Limited vs Vanancio Ntwiga [2021] KEHC 8599 (KLR) , where the court held that once a dispute falls under Section 76, it must be referred to the Tribunal stressing that since there was the letter of offer and share account statement, the magistrate had no basis to conclude that membership was not demonstrated.
11. On the merits and competence of the application considered and allowed by the trial court, the Appellant contends that the Respondent’s application was fatally defective because it was not predicated on a prayer for a permanent injunction in the main suit. They cite Order 40 Rule 2 of the Civil Procedure Rules and the decision in Mary Ngaru vs. Family Bank Ltd & two others [2014] eKLR , which confirms that an interlocutory injunction cannot granted to exist in a vacuum without a corresponding final relief sought and anticipated at the end of the suit.
12. They also argue that the trial court granted what effectively amounted to a perpetual injunction at a preliminary stage, which constitutes a grave misdirection of law. They point out that the learned magistrate failed to apply the three-pillar test in Giella vs Cassman Brown & Co. Ltd (1973) EA 358 and instead mistakenly treated the matter as objection proceedings.
13. The Appellants submit that the Respondent’s admission of default should have been a complete bar to the grant of an injunction. Citing Labelle International Limited & another vs Fidelity Commercial Bank Limited & another [2015] KEHC 4552 (KLR) , they argue that a charge cannot be restrained by injunction when the debt is admitted.
14. Finally, they contest the magistrate’s finding that notices were not issued by pointing out that there were three notices annexed to the Replying Affidavit, all dated March 2023, and issued under the Movable Properties Securities Act. It was equally pointed out that there was a subsequent proclamation notice issued and annexed in the replying affidavit. They submit the magistrate ignored this material evidence, reaching a decision that did not accord with the evidence on record.
Summary of the Respondent’s Submissions
15. The Respondent maintains that the trial court was correctly seized of the matter because the dispute did not qualify for the exclusive mandate of the Co-operative Tribunal. He argues that the 2 nd Appellant is an independent institution whose activities are governed by the Auctioneers Act and Rules, not the Co-operative Societies Act. He contends that because the auctioneer is a non-member, the jurisdictional criteria of Section 76 were not met.
16. He relies on Tescom Sacco Society vs Mary Nyaguthii Ngigi [2016] KEHC 1634 (KLR) to define membership, asserting that the Appellants provided no evidence that the auctioneer was a member. He submits that the suit concerns the illegal acts of an auctioneer, which falls under the common law jurisdiction of the courts.
17. The Respondent asserts that the repossession was illegal due to a total failure to follow the Auctioneers Rules 1997. He highlights Rule 12(c), which requires seven days’ notice to redeem property, and Rule 12(g), which prohibits removal until the grace period has expired. He claims he was ambushed and the vehicle was towed immediately, depriving him of any opportunity to settle the debt.
18. He submits that he satisfied the Giella vs Cassman Brown & Co. Ltd (1973) EA 358 threshold by demonstrating a prima facie case based on procedural illegality and showing that the vehicle is his sole livelihood, making the harm irreparable. He concludes by citing Article 159(2)(d) of the Constitution, arguing that the court was right to grant the injunction despite the default, in order to uphold the rule of law.
Issues, Analysis and Determination
19. Having carefully perused the Memorandum of Appeal, the trial court record, the ruling of the subordinate court, and the rival submissions of both parties, the Court identifies the following issues for its determination;
a. Whether the Subordinate Court lacked jurisdiction to hear and determine the suit by virtue of Section 76 of the Co-operative Societies Act;
b. Only if the foregoing issue be answered in the negative;
i) Whether the Respondent’s application for an interlocutory injunction was fatally defective for lack of a prayer for a permanent injunction in the main suit;
ii) Whether the Respondent established a prima facie case for the grant of an interlocutory injunction, considering the admission of default and the alleged procedural violations by the auctioneer; and,
k) Whether the learned trial magistrate erred in his assessment of the evidence regarding the service of statutory notices and the nature of the application.
20. The starting point is inevitably the jurisdictional challenge. The court appreciates Section 76 of the Co-operative Societies Act to obligate that if any dispute arises concerning the business of a co-operative society among members, past members, or between a member and the society, it shall be referred to the Co-operative Tribunal. This provision is couched in mandatory terms, and the Kenyan courts have consistently held that where a statute provides for a specific dispute resolution mechanism, the court should not assume jurisdiction before that avenue gets exhausted.
21. The learned trial magistrate dismissed the jurisdictional objection on two grounds: first, that membership was not demonstrated; and second, that the inclusion of the 2 nd Appellant, a non-member, ousted the Tribunal’s jurisdiction.
22. The Court finds the first ground to be a clear misdirection of fact and law. Section 33(5) of the Sacco Societies Act ( in pari materia with section 43, Cooperative Societies Act) legally prohibits Saccos from granting loans to non-members. Therefore, the Respondent’s receipt of a loan facility from the 1 st appellant creates an obvious inference of the respondent’s membership. Furthermore, the Appellants produced the letter of offer with the Respondent’s membership number (732093) and a share statement. These documents were not challenged at the trial stage. Consequently, the finding that the Respondent was not proved to be a member was obviously erroneous.
23. It is of significant relevance that in an attempt to rebut the Preliminary Objection and the averment that the court lacked jurisdiction on account of the provisions of the Cooperative Societies Act, the respondent did not deny membership but contended that the dispute was about unlawful repossession. The court views such a contention to be nothing more than splitting hairs. The court considers the contention as quibbling because the repossession of the motor vehicle was a consequence of default of the loan obligations by the respondent. That is clearly an inseparable consequence of the business of the Sacco and a dispute between the society and its co-operator. The court finds that the dispute was one obligated by the Act to be referred to the tribunal and that the court clearly lacked jurisdiction in the matter.
24. On whether section 76 of the Cooperative Societies Act barred the suit against the 2 nd appellant, as an auctioneer appointed by the 1 st appellant, the court takes the view that the auctioneer had no other interest in the matter away from the interest of the 1 st appellant. The auctioneer was indeed an urgent appointed by the appellant to help it recover a security employed in its business as a deposit taking and loan granting Sacco. SFuch was the dispute before the court in Charles Mwangi Kirigwi & another vs Unaitas Sacco Society Limited & another [2020] KECPT 3 (KLR) where the Tribunal held that an auctioneer acting as an agent for a Sacco in the recovery of a loan is discharging the business of the society . The Tribunal reasoned that the core of the dispute remains the loan agreement between the member and the Sacco, and the auctioneer is merely the vehicle for realization. To hold otherwise would allow any member to evade the specialized jurisdiction of the Tribunal by simply naming an agent or third party as a defendant.
25. The court therefore holds and finds the dispute the trial court quintessentially concerns the business of a co-operative society, the grant and subsequent recovery of a member’s loan. The learned trial magistrate should have downed his tools upon being presented with evidence of membership and the nature of the dispute. The Preliminary Objection dated 7 th July 2023 was thus meritorious and should have been upheld.
26. Its is therefore the conclusion of the court that the trial court usurped the jurisdiction it did not have and thus achieved nothing but a nullity. When null it vests on the respondent no rights and this court has the duty under its appellate supervisory mandate to correct the overreach. The correction is thus effected by a finding that the preliminary Objection was well merited and that the trial court committed an obvious error in dismissing it. Because the decision was erroneous, it is set aside and, in its place, substituted an order allowing the preliminary objection and striking out the suit with costs for having been filed before a court devoid of jurisdiction.
27. Because, the matter was before a court without jurisdiction, and the suit having been a deserving candidate for striking out, and now stands so struck out, there is no benefit to be derived by delving into the other issues isolated in this decision. Those other issues have become moot upon the determination that the trial court lacked jurisdiction in the matter.
28. The appeal is thus allowed with costs to the appellants.
Dated, signed and delivered virtually this 27 day of March, 2026.
Patrick J O Otieno
Judge
Page | 9
IN THE HIGH COURT OF KENYA AT NAIVASHA
CIVIL APPEAL NO. E117 OF 2023
UNAITAS SACCO SOCIETY LIMITED..........................................................1 ST APPELLANT
BEYOND VISION AUCTIONEERS..............................................................2 ND APPELLANT
-VERSUS-
MOSES KARANJA MWIRIGI........................................................................RESPONDENT
(Being an appeal from the Ruling of the trial court (Hon N S Lutta, CM) dated 29.11.2023 in the original Naivasha CMCC No. E0214 of 2023)
JUDGMENT
Background of the Appeal
1. The origin of this appeal is in a commercial loan agreement entered into between the 1 st Appellant and the Respondent. The Respondent is a member of the 1st Appellant and was granted an asset finance credit facility in the principal sum of Kenya Shillings 1,505,000, exclusive of interest and other applicable charges. To secure the repayment of this facility, the Respondent entered into a security agreement creating a charge over the suit motor vehicle, registration number KBY 063Z. As a matter of perfection of the security interest, the motor vehicle was jointly registered in the names of the Respondent and the 1 st Appellant.
2. The Respondent’s case at the trial court was that he had been a diligent borrower, making consistent monthly repayments until approximately March 2023, when he encountered financial difficulties attributed to the prevailing economic conditions in the country. He claimed to have engaged the manager of the 1 st Appellant’s Kahatia Branch via telephone, proposing to settle the outstanding arrears in the subsequent month of April 2023. The Respondent alleged that this proposal was accepted; however, on the 17/04/2023, the 1 st Appellant issued instructions to the 2 nd Appellant to repossess the vehicle and the repossession took place on the 25 th of April 2023 at the Respondent’s place of work in Naivasha.
3. The Respondent contended that the process was high-handed and legally flawed, asserting that he was served with a Notification of Sale of Movable Property and the vehicle was simultaneously towed without the issuance of a prior proclamation notice or the mandatory seven-day redemption period required under the Auctioneers Rules. Consequently, the Respondent filed Civil Suit No. E214 of 2023 and an accompanying Notice of Motion dated 19 th May 2023 seeking injunctive orders.
4. The Appellants responded by filing a Preliminary Objection on the 7 th of July 2023, arguing that the Chief Magistrate’s Court lacked jurisdiction to entertain the suit by virtue of Section 76 of the Co-operative Societies Act. They maintained that the dispute was between it, as a co-operative society, and its member and should therefore have been referred to the Co-operative Tribunal.
5. Having heard the parties on the preliminary objection, the learned trial magistrate delivered a ruling in which the court held that the Appellants had not demonstrated that the Respondent was a member of the Sacco and that the court possessed the requisite jurisdiction to hear the matter. The court also found the application for injunction to be meritorious, citing a lack of evidence that the Appellants had served the necessary statutory notices.
The Appeal
6. Dissatisfied with the entirety of the ruling, the Appellants filed a Memorandum of Appeal dated 19 th December 2023. Even though the Memorandum of Appeal sets 11 grounds of appeal, the Court has coalesced same, for clarity purposes, into only two grounds as follows: -
a. The trial magistrate erred in finding that the Plaintiff was not a member of the Sacco under Section 76 of the Cooperative Societies Act and thus perpetuated the error in law by concluding it had jurisdiction to hear a dispute relating to Sacco business. (Grounds 1-4)
b. The magistrate erred in allowing an application for an interlocutory injunction when the prerequisites were never met and when orders sought were not predicated on similar prayers in the main suit. The application was therefore fatally defective. (Grounds 5-10)
7. The Appellants seek orders to set aside the trial ruling, allow the preliminary objection, strike out the primary suit, and dismiss the Respondent's application with costs.
8. The court gave directions that the Appeal would be canvassed by way of written submissions pursuant to which directions both parties complied. The Appellant having filed its revised submissions dated 5 th August 2024 while the Respondents’ submissions are dated 24 th June 2024.
Summary of the Appellant’s Submissions
9. The Appellant raises challenge to jurisdictional findings of the trial court and submits that the learned trial magistrate’s dismissal of their Preliminary Objection was a material error of law. They contend that Section 76 of the Co-operative Societies Act creates an exclusive forum for disputes involving a Sacco and its members regarding society business. They challenge the magistrate’s finding that membership was not proved, arguing that membership was a statutory prerequisite for the loan under Section 43 of the Cooperatives Act.
10. The appellant further cites Southern Star Sacco Limited vs Vanancio Ntwiga [2021] KEHC 8599 (KLR) , where the court held that once a dispute falls under Section 76, it must be referred to the Tribunal stressing that since there was the letter of offer and share account statement, the magistrate had no basis to conclude that membership was not demonstrated.
11. On the merits and competence of the application considered and allowed by the trial court, the Appellant contends that the Respondent’s application was fatally defective because it was not predicated on a prayer for a permanent injunction in the main suit. They cite Order 40 Rule 2 of the Civil Procedure Rules and the decision in Mary Ngaru vs. Family Bank Ltd & two others [2014] eKLR , which confirms that an interlocutory injunction cannot granted to exist in a vacuum without a corresponding final relief sought and anticipated at the end of the suit.
12. They also argue that the trial court granted what effectively amounted to a perpetual injunction at a preliminary stage, which constitutes a grave misdirection of law. They point out that the learned magistrate failed to apply the three-pillar test in Giella vs Cassman Brown & Co. Ltd (1973) EA 358 and instead mistakenly treated the matter as objection proceedings.
13. The Appellants submit that the Respondent’s admission of default should have been a complete bar to the grant of an injunction. Citing Labelle International Limited & another vs Fidelity Commercial Bank Limited & another [2015] KEHC 4552 (KLR) , they argue that a charge cannot be restrained by injunction when the debt is admitted.
14. Finally, they contest the magistrate’s finding that notices were not issued by pointing out that there were three notices annexed to the Replying Affidavit, all dated March 2023, and issued under the Movable Properties Securities Act. It was equally pointed out that there was a subsequent proclamation notice issued and annexed in the replying affidavit. They submit the magistrate ignored this material evidence, reaching a decision that did not accord with the evidence on record.
Summary of the Respondent’s Submissions
15. The Respondent maintains that the trial court was correctly seized of the matter because the dispute did not qualify for the exclusive mandate of the Co-operative Tribunal. He argues that the 2 nd Appellant is an independent institution whose activities are governed by the Auctioneers Act and Rules, not the Co-operative Societies Act. He contends that because the auctioneer is a non-member, the jurisdictional criteria of Section 76 were not met.
16. He relies on Tescom Sacco Society vs Mary Nyaguthii Ngigi [2016] KEHC 1634 (KLR) to define membership, asserting that the Appellants provided no evidence that the auctioneer was a member. He submits that the suit concerns the illegal acts of an auctioneer, which falls under the common law jurisdiction of the courts.
17. The Respondent asserts that the repossession was illegal due to a total failure to follow the Auctioneers Rules 1997. He highlights Rule 12(c), which requires seven days’ notice to redeem property, and Rule 12(g), which prohibits removal until the grace period has expired. He claims he was ambushed and the vehicle was towed immediately, depriving him of any opportunity to settle the debt.
18. He submits that he satisfied the Giella vs Cassman Brown & Co. Ltd (1973) EA 358 threshold by demonstrating a prima facie case based on procedural illegality and showing that the vehicle is his sole livelihood, making the harm irreparable. He concludes by citing Article 159(2)(d) of the Constitution, arguing that the court was right to grant the injunction despite the default, in order to uphold the rule of law.
Issues, Analysis and Determination
19. Having carefully perused the Memorandum of Appeal, the trial court record, the ruling of the subordinate court, and the rival submissions of both parties, the Court identifies the following issues for its determination;
a. Whether the Subordinate Court lacked jurisdiction to hear and determine the suit by virtue of Section 76 of the Co-operative Societies Act;
b. Only if the foregoing issue be answered in the negative;
i) Whether the Respondent’s application for an interlocutory injunction was fatally defective for lack of a prayer for a permanent injunction in the main suit;
ii) Whether the Respondent established a prima facie case for the grant of an interlocutory injunction, considering the admission of default and the alleged procedural violations by the auctioneer; and,
k) Whether the learned trial magistrate erred in his assessment of the evidence regarding the service of statutory notices and the nature of the application.
20. The starting point is inevitably the jurisdictional challenge. The court appreciates Section 76 of the Co-operative Societies Act to obligate that if any dispute arises concerning the business of a co-operative society among members, past members, or between a member and the society, it shall be referred to the Co-operative Tribunal. This provision is couched in mandatory terms, and the Kenyan courts have consistently held that where a statute provides for a specific dispute resolution mechanism, the court should not assume jurisdiction before that avenue gets exhausted.
21. The learned trial magistrate dismissed the jurisdictional objection on two grounds: first, that membership was not demonstrated; and second, that the inclusion of the 2 nd Appellant, a non-member, ousted the Tribunal’s jurisdiction.
22. The Court finds the first ground to be a clear misdirection of fact and law. Section 33(5) of the Sacco Societies Act ( in pari materia with section 43, Cooperative Societies Act) legally prohibits Saccos from granting loans to non-members. Therefore, the Respondent’s receipt of a loan facility from the 1 st appellant creates an obvious inference of the respondent’s membership. Furthermore, the Appellants produced the letter of offer with the Respondent’s membership number (732093) and a share statement. These documents were not challenged at the trial stage. Consequently, the finding that the Respondent was not proved to be a member was obviously erroneous.
23. It is of significant relevance that in an attempt to rebut the Preliminary Objection and the averment that the court lacked jurisdiction on account of the provisions of the Cooperative Societies Act, the respondent did not deny membership but contended that the dispute was about unlawful repossession. The court views such a contention to be nothing more than splitting hairs. The court considers the contention as quibbling because the repossession of the motor vehicle was a consequence of default of the loan obligations by the respondent. That is clearly an inseparable consequence of the business of the Sacco and a dispute between the society and its co-operator. The court finds that the dispute was one obligated by the Act to be referred to the tribunal and that the court clearly lacked jurisdiction in the matter.
24. On whether section 76 of the Cooperative Societies Act barred the suit against the 2 nd appellant, as an auctioneer appointed by the 1 st appellant, the court takes the view that the auctioneer had no other interest in the matter away from the interest of the 1 st appellant. The auctioneer was indeed an urgent appointed by the appellant to help it recover a security employed in its business as a deposit taking and loan granting Sacco. SFuch was the dispute before the court in Charles Mwangi Kirigwi & another vs Unaitas Sacco Society Limited & another [2020] KECPT 3 (KLR) where the Tribunal held that an auctioneer acting as an agent for a Sacco in the recovery of a loan is discharging the business of the society . The Tribunal reasoned that the core of the dispute remains the loan agreement between the member and the Sacco, and the auctioneer is merely the vehicle for realization. To hold otherwise would allow any member to evade the specialized jurisdiction of the Tribunal by simply naming an agent or third party as a defendant.
25. The court therefore holds and finds the dispute the trial court quintessentially concerns the business of a co-operative society, the grant and subsequent recovery of a member’s loan. The learned trial magistrate should have downed his tools upon being presented with evidence of membership and the nature of the dispute. The Preliminary Objection dated 7 th July 2023 was thus meritorious and should have been upheld.
26. Its is therefore the conclusion of the court that the trial court usurped the jurisdiction it did not have and thus achieved nothing but a nullity. When null it vests on the respondent no rights and this court has the duty under its appellate supervisory mandate to correct the overreach. The correction is thus effected by a finding that the preliminary Objection was well merited and that the trial court committed an obvious error in dismissing it. Because the decision was erroneous, it is set aside and, in its place, substituted an order allowing the preliminary objection and striking out the suit with costs for having been filed before a court devoid of jurisdiction.
27. Because, the matter was before a court without jurisdiction, and the suit having been a deserving candidate for striking out, and now stands so struck out, there is no benefit to be derived by delving into the other issues isolated in this decision. Those other issues have become moot upon the determination that the trial court lacked jurisdiction in the matter.
28. The appeal is thus allowed with costs to the appellants.
Dated, signed and delivered virtually this 27 day of March, 2026.
Patrick J O Otieno
Judge
Page | 9