Skip to content
AI-generated case briefs sourced from Kenya Law · Not legal advice
AI-generated case brief
Case Brief · caselaw.co.ke
Court of AppealPartially AllowedCivil Appeal 135 & 139 of 2018 (Consolidated)· [2022] KECA 947 (KLR)

Spire Properties (K) Limited & another v Mwabora & 70 others & 60 others

Court of Appeal
29 July 2022
11,763 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~47 min to read original · ~4 min brief

The bottom line

#

Kenya's Court of Appeal ruled that only the employer, Hotel Span, owes the sacked hotel workers six months' salary; the bank and buyer escape liability.

What this practically means

#

Executive summary

#
This consolidated appeal arose from an ELRC judgment awarding 71 former employees of Hotel Span Limited terminal dues of Kshs. 32,457,007 and general damages of Kshs. 500,000 each (Kshs. 28,500,000), jointly and severally against Hotel Span, the Receiver (R.T. Dunnet), Transnational Bank and Spire Properties. The ELRC had found the receivership substantively invalid, the sale of the hotel flawed, and liability attached to all respondents, including Spire as a successor employer creating legitimate expectation. Spire and Transnational Bank appealed. The Court of Appeal allowed both appeals in their entirety. It held that the ELRC, whose jurisdiction is confined by Article 162(2) of the Constitution and Section 12 of the ELRC Act to employment and labour disputes, exceeded its jurisdiction by nullifying the receivership - a commercial matter. A receiver is an agent of the debtor company, not the appointing authority, so no liability could attach to Transnational Bank merely for appointing the Receiver. No evidence showed common ownership between Hotel Span and Spire, and the sale agreements placed termination obligations on the Receiver, so no liability attached to Spire; the court noted a legislative gap on employee protection in going-concern transfers. The terminal dues were held to be unsecured debts of Hotel Span; the Receiver's termination was by redundancy, and the court awarded six months' gross salary per deserving Claimant, payable by Hotel Span alone. The general damages award was set aside. The appellants bear their own costs; the claimants recover costs and interest from Hotel Span.

Key legal issues

#
01

Jurisdiction of the ELRC over receivership validity

Holding

The ELRC exceeded its jurisdiction in nullifying the receivership; that is a commercial matter beyond Article 162(2)

Reasoning

Mwongo J's transfer ruling did not extend the ELRC's constitutional jurisdiction. Article 162(2) and Section 12 of the ELRC Act confine the court to employment and labour disputes. Nullifying a receivership is beyond that mandate, so the judge's findings on the receivership's validity and the resulting damages cannot stand.

02

Liability of Transnational Bank

Holding

The bank cannot be liable merely for appointing the receiver; orders against it cannot stand

Reasoning

The court held that a receiver is the agent of the debtor company, not the appointing authority. Attaching liability to the bank solely because it appointed the receiver would be ultra vires the ELRC's jurisdiction. The bank's appeal therefore succeeds on the liability findings.

p. 19
03

Liability of Spire

Holding

No liability attaches to Spire; it was a separate entity that insulated itself through the sale agreements

Reasoning

No evidence showed common directors or beneficial ownership between Hotel Span and Spire. The sale and supplemental agreements placed the obligation to terminate original contracts on the Receiver, so the employment relationship was not transferred to Spire. The court noted a legislative gap on employee protection in going-concern transfers.

p. 19
04

Terminal dues and quantum

Holding

Terminal dues were an unsecured debt of Hotel Span; the Receiver's termination was by redundancy and Hotel Span must pay six months' gross salary per deserving Claimant

Reasoning

The dues accrued before receivership and ranked behind the debenture holders. Clause 14 of the Sale Agreement addressed only termination and preferential payments, not terminal dues. The court substituted the trial award with six months' gross salary per Claimant, payable by Hotel Span alone.

p. 19
05

General damages award

Holding

The award of general damages was set aside as it rested on findings beyond the ELRC's jurisdiction

Reasoning

Having found the judge lacked jurisdiction over the receivership's validity, the court held no general damages were awardable on that basis, and the award had to be set aside.

p. 20

Legal principles established

#
  • The ELRC's jurisdiction is limited to employment and labour relations disputes; it cannot invalidate a receivership or attach liability to a debenture holder for appointing a receiver
  • A receiver is an agent of the debtor company, not the appointing authority; liability cannot be attached to the appointing bank solely on that basis
  • Employees' terminal dues are unsecured debts ranking behind debenture holders' secured claims during receivership
  • An employment relationship with the original employer is not transferred to a purchaser of a business as a going concern where the sale agreements place termination obligations on the Receiver

Court orders

#
  1. 1.Both Civil Appeal Nos. 135 of 2018 and 139 of 2018 allowed
  2. 2.The only order remaining in favour of the Claimants is six months gross salary due and payable by the 1st respondent (Hotel Span Limited)
  3. 3.The award of general damages set aside
  4. 4.The appellants shall bear their own costs
  5. 5.The claimants entitled to costs and interest, payable by the 1st respondent

Authorities

#

Legislation

  • Constitution of Kenya, 2010Article 162(2)
  • Employment and Labour Relations ActSection 12
  • Limitation of Actions ActSection 4(1)
  • Employment ActSections 49 and 50
  • Companies Act (repealed) (Cap 486)Sections 95 and 311
  • Transfer of Business Act (Cap 500)Section 7(c)
  • Industrial Court Act, 2011

Cases cited (24)

  • Re Jaffe Limited [in liquidation] v. Jaffe [No. 2]
    [1932] NZLR 195

    Purported receivers and debenture holders may be trespassers towards the debtor company's assets

  • Azim Virjee & 2 Others v. Glory Property Limited
    [2007] eKLR

    Receiver appointed under invalid charge is a masquerade; acts under purported receivership are null and void

  • American Express International Banking Corp v. Hurley
    [1983] 3 All ER 564

    Duty of receiver in marketing sale of charged property to the specialised industry

  • Cuckmere Brick Co. Limited v. Mutual Finance Limited
    [1971] Ch. 941

    Receiver must take reasonable care to obtain a proper price or true market value in exercising power of sale

  • Joyce Wanja Mwangi v Nairobi County Government & 2 others
    [2016] eKLR

    Cited by Spire - ELRC has no jurisdiction over commercial matters

  • National Bank of Kenya v Pipeplastic Samkolit (K) Ltd & another
    [2001] eKLR

    Cited by Spire - a court should not re-write contracts for parties

  • Kundan Singh Construction International Limited v Bank of Africa Kenya Ltd & another
    [2015] eKLR

    Cited by Spire - courts should not re-write contracts for parties

  • Ali Abdi Mohamed v Kenya Shell and Company
    [2017] eKLR

    Cited by Spire on enforceability of promises

  • Lucy Mirigo & 550 others v Minister for Lands & 4 others

    Cited by Spire on enforceability of promises

  • Willis Ogola Okendo v Collins Oyuu & 3 others
    [2018] eKLR

    Cited by Spire - legitimate expectation requires clear and unambiguous representation

  • Kenfreight (E.A.) Limited v Benson K. Nguti
    [2016] eKLR

    Cited by Spire - remedies in termination claims under Section 49 of the Employment Act

  • Walter Musi Anyanje v Hilton International Kenya & another
    [2008] eKLR

    Cited by Spire - no general damages in suits based on termination of employment contracts

  • Standard Group Limited v Jenny Luesby
    [2018] eKLR

    Cited by Spire - remedies outside Sections 49 and 50 only justified on established constitutional violations

  • International & Commercial Development Corporation (ICDC) v Patheon Limited
    [2015] eKLR

    Cited by Claimants - exceptions to the rule that a receiver is agent of the debtor company

  • Herman P. Steyn v Charles Thys
    [1997] eKLR

    Cited by Claimants - court may decide an unpleaded issue left to it at trial

  • Paramount Bank Limited v Vaqvi Syed Qamara & another
    [2017] eKLR

    Cited by Claimants - ELRC may entertain general damages flowing directly from dismissal

  • Judicial Service Commission v Gladys Boss Shollei & another
    [2014] eKLR

    Cited by Claimants - against filing separate proceedings on intertwined issues

  • Top Time Enterprises Limited v P V R Rao as Receiver/Manager & another
    [2014] eKLR

    Cited by Claimants - receiver's personal liability on contracts entered in performance of functions

  • Athey v Leonati
    [1996] 3 SCR 458

    Cited by Claimants - defendant liable for all injuries caused or contributed by its negligence

  • R.J.T. v H.M.T
    [1977] eKLR

    Cited by Claimants - general damages assessed as fair and just compensation

  • Selle and another v Associated Motor Boat Company Limited and others
    [1968] 1 EA 123

    Duty of a first appellate court to reconsider and evaluate the evidence itself

  • Republic vs. Karisa Chengo & another
    [2017] eKLR

    Constitution demarcates jurisdictional competences of the various courts

  • In the Matter of Interim Independent Electoral Commission
    [2011] eKLR

    On jurisdictional limits of courts

  • Samuel Kamau Macharia vs. Kenya Commercial Bank & 2 others
    [2012] eKLR

    A court cannot assume jurisdiction not conferred by the Constitution or statute

On appeal from
Employment and Labour Relations Court at Mombasa
Mombasa Industrial Court Cause No. 79 of 2013 (Previously Mombasa HCCC No. 62 of 2007)
Jurisdiction invoked
Article 162(2) of the Constitution as read with Section 12 of the Employment and Labour Relations Act; appellate jurisdiction of the Court of Appeal

Key timeline

#

Practical implications

#

Frequently asked questions

#

Cite this brief

#

Cite this brief

Caselaw, "Spire Properties (K) Limited & another v Mwabora & 70 others & 60 others", Case Analysis (2022). Civil Appeal 135 & 139 of 2018 (Consolidated). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2022/947/eng@2022-07-29

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