Spire Properties (K) Limited & another v Mwabora & 70 others & 60 others
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
#Key legal issues
#Jurisdiction of the ELRC over receivership validity
The ELRC exceeded its jurisdiction in nullifying the receivership; that is a commercial matter beyond Article 162(2)
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.
Liability of Transnational Bank
The bank cannot be liable merely for appointing the receiver; orders against it cannot stand
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.
Liability of Spire
No liability attaches to Spire; it was a separate entity that insulated itself through the sale agreements
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.
Terminal dues and quantum
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
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.
General damages award
The award of general damages was set aside as it rested on findings beyond the ELRC's jurisdiction
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.
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.Both Civil Appeal Nos. 135 of 2018 and 139 of 2018 allowed
- 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.The award of general damages set aside
- 4.The appellants shall bear their own costs
- 5.The claimants entitled to costs and interest, payable by the 1st respondent
- 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.