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ELRCPartially AllowedPetition Number 35 of 2012 (originally High Court Petition Number 417 of 2012)· [2014] KEELRC 693 (KLR)

George S Onyango OGW v Board of Directors of Numerical Machining Complex Limited Minister for Industrialization Attorney- General [2014] KEELRC 693 (KLR)

Industrial Court of Kenya
16 January 2014
JRJames Rika
8,980 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~36 min to read original · ~4 min brief

The bottom line

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Kenya's Industrial Court declared a state corporation's board illegally appointed and awarded the ex-Managing Director damages, but refused reinstatement.

What this practically means

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Executive summary

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The Petitioner, former Managing Director of Numerical Machining Complex Limited (a company 51% owned by Kenya Railways Corporation and 49% by the University of Nairobi), challenged the appointment of Prof. Nick Wanjohi as Chairman by the President on 18th November 2011 and six Board Members by the Acting Minister for Industrialization on 20th January 2012, and the subsequent non-renewal of his contract by that Board. He alleged violations of Articles 10, 22, 23, 27, 28, 41 and 47 of the Constitution, arguing the appointments contravened the Company's Articles of Association and the State Corporations Act. The Respondents countered that the constitutional jurisdiction was trivialized, the Petitioner should have pursued contractual or judicial review remedies within six months, and that he approbated and reprobated by working with the new Board for eight months. The Court held the Petitioner properly invoked constitutional jurisdiction, that the State Corporations Act fully governed the Company, and that Section 6(1) of the Act is qualified by Clause 86 of the Articles of Association, which tied the appointing authority's hands. The Wanjohi Board was declared illegally constituted; its decisions, including the refusal to renew, were illusory and null. However, the Petitioner's fixed-term contract lapsed on 9th November 2012; the renewal terms were frustrated by supervening impossibility, and he was not entitled to reinstatement or holding over. The Petition was partially allowed: the appointments were declared null and void ab initio, the Board unlawfully created, and the Respondents ordered to pay coalesced damages of Kshs. 600,000 and the costs of the Petition.

Key legal issues

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01

Proper invocation of constitutional jurisdiction in an employment dispute

Holding

The invocation was not misplaced: the Petitioner was challenging the exercise of state power (presidential and ministerial appointments) which affected his contract and public corporate governance, and constitutional remedies under Article 23 are accessible without judicial review limitations

Reasoning

The Court accepted that legislation such as the Employment Act is the first port of entry for employment grievances, but held this is not immutable: every exercise of state power is subject to constitutional review, private disputes are not beyond the Bill of Rights, and the Constitution's expanded access to justice allows a party to choose the vehicle best suited to his circumstances. Judicial review time limits create barriers to victims of governmental excesses.

p. 8
02

Applicability of the State Corporations Act to the Company

Holding

The Act fully applies; the Company is wholly owned by two government institutions and no exemption under Section 5A was shown

Reasoning

Though registered as a private company under the Companies Act, the Company is wholly owned by Kenya Railways Corporation and the University of Nairobi. The definition of a State Corporation excludes only companies not wholly owned or controlled by government or a state corporation. No material suggested a presidential exemption under Section 5A.

p. 9
03

Validity of the Board appointed after 18th November 2011

Holding

The Board chaired by Professor Nick Wanjohi was illegally constituted; its decisions, including the refusal to renew the Petitioner's contract, were illusory and null

Reasoning

Clause 86 of the Articles mandated that the Chairman be the Executive Chairman or Managing Director of Kenya Railways, the Vice-Chancellor of the University of Nairobi be a director, and the Minister appoint only four expert members. The President and Minister departed from the Articles without revoking the existing Board or amending the Articles, violating Section 6(1) of the Act and Article 10 of the Constitution.

p. 11
04

Whether the Petitioner remained Managing Director and was entitled to reinstatement

Holding

No; his fixed-term contract lapsed on 9th November 2012. The renewal/exit terms were frustrated by the illegality, entitling him to damages only

Reasoning

Legitimate expectation ran both ways; the contract contained no holding-over provision. The illegal Board did not terminate but declined to renew a lapsed contract. Granting restraint would renew his contract and make him a beneficiary of the violations. Supervening impossibility frustrated the exit terms, and damages were the appropriate recourse.

p. 13
05

Whether the Petitioner's approbation and reprobation defeated the Petition

Holding

No; his conduct was an act of self-preservation and could not validate the illegal executive appointments

Reasoning

The doctrine of blowing hot and cold is a contract principle requiring proof of material prejudice. The legality of the presidential and ministerial appointments is a matter of law unaffected by the Petitioner's earlier recognition of the Board; the Respondents failed to show material prejudice from his change of position.

p. 12
06

Industrial Court's jurisdiction over validity of a State Corporation Board

Holding

The Industrial Court had jurisdiction; the dispute's closest connecting factors are labour and employment

Reasoning

The High Court transferred the dispute, and both courts have held the Industrial Court has exclusive jurisdiction over employment-related disputes regardless of their nature. The core question was whether the Board was 'employed' in accordance with the shareholders' contract, and its human resource decisions' validity.

p. 12

Legal principles established

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  • Where a State Corporation's Articles of Association prescribe the composition of the Board, Section 6(1) of the State Corporations Act is qualified and the appointing authority's hands are tied by the Articles
  • Decisions of an illegally constituted Board are illusory and of no effect in law
  • The Constitution should not be used as a substitute for ordinary remedies, but constitutional jurisdiction is not displaced where the challenge is to the exercise of state power affecting employment and public governance
  • A wholly government-owned company registered under the Companies Act is nonetheless fully governed by the State Corporations Act unless exempted

Court orders

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  1. 1.Declaration that the President of Kenya and the Acting Minister for Industrialization contravened the Articles of Association of Numerical Machining Complex Limited, the State Corporations Act, and the Constitution of Kenya by appointing Professor Nick Wanjohi as Chairman on 18th November 2011 and the six Board Members on 20th January 2012
  2. 2.Declaration that the Board of the Numerical Machining Complex Limited was unlawfully created
  3. 3.Declaration that Legal Notice No. 14701 appointing the Chairman and Legal Notice No. 450 appointing the Board Members are null and void ab initio
  4. 4.Compensation to the Petitioner by the Respondents for violation of his fundamental rights and breach of his contract of employment by payment of coalesced damages assessed at Kshs. 600,000
  5. 5.The Respondents shall bear the costs of the Petition

Authorities

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Legislation

  • Constitution of KenyaArticles 10, 22, 23(3), 258, 27(1), 28, 41, 47
  • State Corporations Act Cap 446Sections 3, 5(3), 5A, 6(1), 7, 7(3), 27(1)(c)
  • Employment Act 2007
  • Companies Act Cap 486
  • Industrial Court Act
  • Civil Procedure Rules 2010Order 53

Cases cited (11)

  • Julius Nyarotho v. the Attorney-General and 3 Others
    [2013] e-KLR
  • Isabel Wayua Musau v. Copy Cat Limited
    [2013] e-KLR
  • J.P. Bansal v. State of Rajastan & Anor
    [Civil Appeal 5982 of 2001]
  • Alphonce Mwangemi Munga & 11 Others v. Africa Safari Club
    Petition Number 564 of 2004
  • East African Portland Cement Company Limited v. the Attorney-General & Another
    [2013] e-KLR
  • Uhuru Muigai Kenyatta v. Nairobi Publications Limited
    [2013] e-KLR
  • Alex Malikhe Wafubwa & 7 Others v. Elias Nambakha Wamita & 4 Others
    [2012] e-KLR
  • GMV v. the Bank of Africa Limited
    [2013] e-KLR
  • Carmichele v. Minister of Safety and Security
    [2001] [4] SA 938, 2001 [10] BCLR 995
  • Julie Topirian Njeru v. Kenya Tourist Board
    Cause Number 886 of 2010
  • Dr. Anne Kinyua v. Nyayo Tea Zone Development
    Cause Number 1065 of 2012, [2012] e-KLR
Jurisdiction invoked
Articles 22, 23, 258 and 41 of the Constitution; Industrial Court Act; transferred from the High Court (Constitutional and Human Rights Division) on 26th October 2012

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (25)

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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, "George S Onyango OGW v Board of Directors of Numerical Machining Complex Limited Minister for Industrialization Attorney- General [2014] KEELRC 693 (KLR)", Case Analysis (2014). Petition Number 35 of 2012 (originally High Court Petition Number 417 of 2012). Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2014/693/eng@2014-01-16

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