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Court of AppealDismissedCivil Appeal No. 293 of 2014· [2015] KECA 782 (KLR)

Board of Trustees National Social Security Fund v Micheal Mwalo [2015] KECA 782 (KLR)

Court of Appeal
24 April 2015
GKG.B.M. KariukiWilliam OukoW. OukoJMJ. Mohammed
4,436 words in judgment
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The bottom line

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Kenya's Court of Appeal ruled that consent judgments are binding contracts and NSSF could not escape its KSh 10.5 million settlement deal.

What this practically means

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Executive summary

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This is a unanimous judgment of the Court of Appeal at Nairobi (G.B.M. Kariuki, Ouko and J. Mohammed, JJ.A) dismissing an appeal by the Board of Trustees of the National Social Security Fund against a ruling of Linnet Ndolo, J of the Industrial Court refusing to review a consent judgment. The respondent's employment claim had been settled by a consent recorded on the instructions of the Fund's Managing Trustee through counsel, for payments including severance pay of over Shs.10.5 million. The Board later reneged, alleging the consent was illegal because the Managing Trustee acted without the Board's prior approval, and sought review. The Court of Appeal, hearing the matter as a first appeal, framed two issues: the respective roles and powers of the Managing Trustee and the Board, and the validity of the consent. It held that the NSSF Act nowhere bars the Managing Trustee from hiring an advocate or settling by consent; neither party produced the instrument of appointment or any delegation of powers, so want of authority could not be established. Applying company-law principles, including the rule in Royal British Bank v Turquand, the court held that a third party dealing with a chief executive in good faith assumes internal compliance. The burden lay on the appellant, which held the records, to prove excess of powers, and it failed. On consent judgments, the court restated the settled law that such judgments have contractual effect and can only be set aside on grounds justifying rescission of a contract, such as fraud, collusion, or an agreement contrary to public policy; the appellant's allegations were unsupported afterthoughts. The appeal was dismissed with costs to the respondent.

Key legal issues

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01

Authority of the Managing Trustee to settle and instruct advocates

Holding

The NSSF Act does not bar the Managing Trustee from hiring an advocate and settling a dispute by consent; absent the instrument of appointment or delegation, the settlement stands.

Reasoning

Neither party produced the instrument appointing the Managing Trustee or the delegation of powers, so the court could not determine that hiring an advocate or compromising the claim fell outside his remit. Section 3 vests management in the Board but was not shown to outlaw the payment. Good governance dictates that a CEO's powers be clearly delineated; a third party dealing with a CEO in good faith need not verify internal authority, applying the Turquand rule.

p. 5
02

Validity and setting aside of consent judgments

Holding

A consent judgment is contractual and binding; it can only be impeached on grounds justifying rescission of a contract, such as fraud, collusion, or an agreement contrary to public policy, all of which must be proved.

Reasoning

Following Brooke Bond Liebig v Mallya, Wasike v Wamboko and KCB v Specialised Engineering, the court held that consent orders bind parties and cannot be varied except on contractual grounds. The appellant's allegations of illegality, collusion and connivance were made after its decision to renege, were unsupported by evidence, and did not transcend rhetoric and speculation.

p. 6
03

Burden of proving want of authority

Holding

The party asserting that its officer acted without authority bears the burden of proof, and failure to produce the relevant instruments is construed against it.

Reasoning

The appellant, holding the records, did not produce the instrument appointing the Managing Trustee or any limitation of his powers. The December 2012 Board minutes never raised want of mandate. Post-hoc allegations of collusion were self-serving afterthoughts calculated to escape the judgment debt.

p. 6

Legal principles established

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  • A consent judgment or order has contractual effect and can only be set aside on grounds which would justify setting aside a contract, or where it was obtained by fraud, collusion or an agreement contrary to the policy of the court.
  • A person dealing with a company or body corporate in good faith is entitled to assume that it has complied with its internal procedures and formalities (the rule in Royal British Bank v Turquand), and is under no duty to verify internal approvals.
  • A duly instructed advocate has an implied general authority to compromise and settle an action, and a client cannot rely on an undisclosed limitation of that authority against the other side.
  • The party alleging that an officer exceeded the remit of his powers bears the burden of proving it, particularly where it holds the relevant records.
  • Review under Order 45 Rule 1 requires an apparent error or omission that is self-evident; misconstruing a statute or reaching an erroneous conclusion of law is not a ground for review, and 'any other sufficient reason' need not be analogous to the other grounds.

Court orders

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  1. 1.The appeal is dismissed
  2. 2.The appellant to pay the costs of the appeal to the respondent

Authorities

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Legislation

  • National Social Security Fund Act (Cap 258)Section 3
  • National Social Security Fund Act (Cap 258)Section 4
  • National Social Security Fund Act (Cap 258)Section 33
  • National Social Security Fund ActSection 33(3)
  • National Social Security Fund ActSection 33(4)
  • Civil Procedure Act (Cap 21)Section 67(2)
  • Civil Procedure ActSection 80
  • Civil Procedure RulesOrder 45 Rule 1

Cases cited (17)

  • Kenya Commercial Bank v. Specialised Engineering Co. Ltd
    [1982] e KLR 485
  • Birket V. Arcon Business Machines Ltd
    [1999] 2 All ER 429
  • Makula International Ltd Vs His Eminence Cardinal Nsubuga and Another
    [1982] HCB II
  • National Bank of Kenya Ltd v. Ndungu Njau
    Civil Appeal No. 211 of 1996
  • Sandar Mohamed v. Charan Singh
    [1959] EA 793
  • Selle v Associated Motor Boat Company
    [1968] EA 123
  • Williamson Diamonds Ltd v Brown
    [1970] EA 1
  • Arrow Car Ltd v Bimomo and 2 Others
    [2004] 2 KLR 101
  • Royal British Bank v. Turguand
    [1856] 6 E & B 327
  • Stand 242 Hendrik Potgieter Road Ruimsig Pty v. GÖbel (No.246/10)
    [2011] ZASCA105
  • Mohoney v. East Holyford Mining Co
    [1875] L.R. 7 HL 869
  • Wasike v Wamboko
  • Brooke Bond Liebig Ltd V Mallya
    [1975] EA 266
  • Kenya Commercial Bank Ltd V. Benjoh Amalgamated Ltd
  • Hirani V. Kassam
    [1952] 19 EACA 131
  • J. M. Mwakio v Kenya Commercial Bank Limited
    Civ Apps 28 of 1982 and 69 of 1983
  • Purcell v F.C. Trigell Ltd
    [1970] 3 All ER 671
On appeal from
Industrial Court of Kenya (now the Employment and Labour Relations Court) at Nairobi
Industrial Court Case No. 1093 of 2012 (referred to in the header as H.C.CR. A. NO. 212 OF 2008)
Jurisdiction invoked
First appellate jurisdiction over an appeal from the Industrial Court (now Employment and Labour Relations Court); the judgment does not cite a specific constitutional or statutory provision for its jurisdiction.

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (15)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Board of Trustees National Social Security Fund v Micheal Mwalo [2015] KECA 782 (KLR)", Case Analysis (2015). Civil Appeal No. 293 of 2014. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2015/782/eng@2015-04-24

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