REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

CIVIL CASE NO. 226 OF 2000

KIRINYAGA DISTRICT FARMERS SOCIETY...........................................PLAINTIFF

VERSUS

KIRINYAGA DISTRICT COOPERATIVE UNION LIMITED...................DEFENDANT

RULING

This is a suit by the plaintiff against the defendant for Shs 19,759,303/- interest and costs.

Both plaintiff and defendant are co-operative societies under the Cooperative Societies Act cap 12 of 1997. That came into force on 1st June, 1998.

This application dated 13th March, 2000 is to enter judgment on admissions or alternatively to strike out the defence and enter summary judgment.

To that application a preliminary point was taken by the defendant that this being a suit between two co-operative societies, this Court has no jurisdiction under section 76 of the Act (cap 490) which reads as follows:-

“76. (1) If any dispute concerning the business of a cooperative society arises:-

(a) among members, past members and persons claiming through members, past members and deceased members; or

(b) between members, past members or deceased members, and the society, its committee or any officer of the society; or

(c) between the society and any other co-operative society;

it shall be referred to the Tribunal.

 (2) A claim by a co-operative society for any debt or demand due to it from a member or past member, or from the nominee or personal representative of a deceased member, whether such a debt or demand is admitted or not, is a dispute for the purpose of this section.”

Note that the Rules of Evidence do not necessarily apply to proceedings before the Co-operative Tribunal and that the Tribunal can regulate its own procedure – see sections 77 and 78 of the Act.

Note too that the High Court of Kenya has by section 81 of the Act the appellate jurisdiction from a decision by the Tribunal and that the High Court’s decision is final. It would clearly be wrong for the same Court – the High Court – to have both original and appellate jurisdiction in the same matter. Note too that there is no reference in the Act to the Court of Appeal.

Fortunately there are a number of authorities. Believe it or not the legal semantics are such that one begins to talk in riddles – like asking the question ‘When is a dispute not a dispute’.

I think the best approach is to run through the Kenyan authorities first in chronological order.

1. Gatanga Coffee Growers Co-operative Society vs Gitau [1970] EA 361. This was a suit from the Uganda High Court where sections 80 (1) and (2) of the Uganda Co-operative Societies are in almost identical terms to the present Kenya Act.

It was a claim by a member against his society for unpaid coffee proceeds. That was held to be a dispute between a member and a society concerning the business of the society. There is discussio~ by both Simpson J and Harris J of the words ‘dispute’ and ‘business’. They held the Court had no jurisdiction.

2.Lukenya Ranching & Farming Co-operative Society vs Kavoloto [1970] EA 414.

That was a dispute between the society and its former manager who was also a member. The Court held that the society was in breach of its contract of employment and awarded damages. On appeal it was held that the suit was not between the society and a member as such but between the society and its employee: the Court therefore had jurisdiction. Interestingly Gatanga was not referred to.

The Court of Appeal did debate on page 416 the meaning of the word ‘dispute’ and in the absence of any definition settled for the ordinary meaning of the word – ‘a quarrel’ or a ‘controversy.’

3.Ernest Muiruri Njoroge & 28 others vs Kabira Karanja & 4 others C/A 114 of 1997.

This was a suit by 28 members against the office bearers on the committee of a co-operative society relating to allotment of plots seeking reinstatement of the original allotments.

It was held that this was a dispute between members notwithstanding the argument that upon allotment of the plots the arguments became personal arguments. The members could not shed their status as members in connection with the plots so as to deny the society the protection afforded to it of going-in those days – to the Commissioner of Co-operative Development. The High Court had no jurisdiction.

4.Kanguramai Farmers Co-op Society Limited vs Irati Farmers Co-op Society Ltd & another HCCC 1364/99.

It was agreed this was a dispute between co-operative societies apparently within the ambit of section 76 but no members had yet been appointed to the Tribunal to be appointed under section 77.

It was held that where the law provided a remedy that is the remedy to be observed the absence of appointees to the Tribunal notwithstanding.

5.Kandara Farmers Co-op Society and 9 others vs Joseph Kanyua and 18 others HCCC 2646/98. Plaintiffs Nos 2 to 10 were members of the management committee. It was clear from the pleadings that the cause of action concerned the business of a co-operative society. A preliminary objection that the Court had no jurisdiction was upheld and Onyango Otieno J touched on all these cases except Lukenya.

The next part of the argument is whether this is a dispute within the meaning of section 76(1) Co-operative Societies Act. If it is not a “dispute” then it is argued the section does not apply. Recourse is had to the law of arbitration. We are all familiar with arbitration clauses, which usually start:

“If any dispute or difference shall arise between the parties…. then the matter goes to arbitration.”

So, the argument goes, what happens when there is no dispute between A and B but B just declines to pay: is the refusal to pay a dispute. That issue was dealt with the London and North Western Railways vs Jones [1915] 2 KB 35 citing with approval London & North Western Railways vs Billington (1899) AC 81 in which the Lord Chancellor is quoted as saying

“Any contention that the parties could, when they are sued for the price of the services, raise then for the first time, the question whether or not the charges were reasonable and that therefore they have a right to go to an arbitrator seems to me absolutely untenable.”

Reference to the plaint in the case before me makes it plain that there was an original agreement by the defendant to pay to the plaintiff Shs 39,753,303/-. Very shortly thereafter, the defendant revoked those instructions – the plaintiff says the defendant did so wrongfully and unlawfully – and gave different instructions.

The plaintiff says there is no real dispute. The defendant agreed to pay Shs 39,753,303/=: then changed that to Shs 19,759,303/- and then after two months revoked that instruction. None of the instructions be it noted was irrevocable. Had either the first and second instruction given by the defendant to its bank been acted on, the defendant would have had no complaint against its bank. It is perhaps significant that the bank did not hasten to comply: perhaps there were no funds.

Whatever the position may have been immediately after the first instruction was given on 17th October, 1999 and whatever the position may have been immediately after the second instruction on 25th October, 1999 the fact remains that the plaint in this matter was not filed until 10th February 2000 by which time the third – and nullifying - instruction had been resolved on 24th December, 1999 albeit not communicated to the bank until 21st February 2000.

It is clear to me that there is a dispute between two co-operative societies within the meaning of section 76 (1) Co-operative Societies Act which has to go to the Tribunal. I do not think that the plaintiff can bring itself within the quotation from Russell on Arbitration in Geomax Consulting Engineers vs KPT HCCC 1210/96.

“Mere refusal to pay upon a claim which is not really disputed does not necessarily give rise to a ‘dispute’ calling an arbitration clause into operation. It does not follow that the Courts cannot be resorted to without previous recourse to arbitration to enforce a claim which is not disputed but which the trader merely persists in not paying.”

Note that the resolution revoking the first two instructions was by a general meeting of the defendant not just the whim or blank refusal of a minor officer.

For these reasons the Preliminary Objection is upheld and the suit is struck out with costs.

Dated and Delivered at Nairobi this 23rd day of November 2000.

P.J.HEWETT

JUDGE