New Kenya Cooperative Creameries Limited v Bari and 2 others (All suing on behalf of themselves and representatives of all former employees of the Kenya Co-operative Creameries Limited) & another (Civil Appeal 191 of 2018) [2020] KECA 526 (KLR)
The bottom line
#Kenya's Court of Appeal ruled New KCC was not liable for old KCC employees' terminal dues because a completed Transfer of Business Act notice shielded it.
What this practically means
#Executive summary
#Key legal issues
#Separate corporate personality of New KCC vis-à-vis KCC
The appellant was duly incorporated on 19th November 2004 under certificate number C.113538, and the vesting order confirmed it as a separate entity from KCC; the learned Judge erred in holding they were one entity save for the change of name.
The Court found the certificate of incorporation to be prima facie proof of separate legal personality, applying the Salomon principle echoed by this Court in Victor Mabachi v Nurtun Bates. The vesting order declared assets of KCC (in liquidation) vested in New KCC, further demonstrating that the two were distinct entities. The appellant was an entity used by the Government to bail out KCC and give it a fresh start, not a mere renaming of the old company.
Effect of the notice under Section 3(1) of the Transfer of Business Act on the transferee's liability
The notice published in the Daily Nation of 28th June 2005 complied with Section 3(1) of the TBA; under Section 3(2) the appellant's liability for the transferor's liabilities ceased once notice became complete, absolving it of KCC's liabilities including the 1st respondents' terminal dues.
Section 3(1) makes a transferee liable for the transferor's business liabilities 'unless due notice in accordance with this Act has been given and has become complete.' The notice expressly stated the transferee would not assume any debts or liabilities of the transferors. The Court held the appellant compliant with the section and thereby absolved. It acknowledged the outcome was unfortunate for the employees but held it was the courts' duty to declare the law as it is.
Legal principles established
#- Under Section 3(1) and (2) of the Transfer of Business Act, a transferee becomes liable for the transferor's business liabilities unless due notice has been given and has become complete; once notice is complete, the transferee's liability ceases.
- A duly incorporated company is a separate and distinct legal entity from its predecessor or related entities, capable of its own rights and obligations.
- On a first appeal, the appellate court must re-evaluate, re-assess and re-analyse the entire record before determining whether the conclusions of the trial court stand or fall.
Court orders
#- 1.Appeal allowed
- 2.Judgment of the High Court set aside in its entirety
- 3.No order as to costs
- On appeal from
- Employment and Labour Relations Court (High Court)
- Not stated in the judgment
- Jurisdiction invoked
- First appeal under the Employment and Labour Relations Court Act/civil appellate framework; the judgment itself does not state the specific provision
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "New Kenya Cooperative Creameries Limited v Bari and 2 others (All suing on behalf of themselves and representatives of all former employees of the Kenya Co-operative Creameries Limited) & another (Civil Appeal 191 of 2018) [2020] KECA 526 (KLR)", Case Analysis (2020). Not stated in the judgment. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2020/526/eng@2020-07-10
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.