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ELRCStruck OutNot stated in the judgment· [2016] KEELRC 1608 (KLR)

George Mureithi and others v Kenatco Taxis Limited (In Receivership) [2016] KEELRC 1608 (KLR)

Employment and Labour Relations Court
25 February 2016
HWHellen Wasilwa
1,026 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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Employees suing a Kenyan company in receivership must first get the court's leave, or their case will be struck out entirely.

What this practically means

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Executive summary

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The Respondent raised a preliminary objection dated 14 January 2016 seeking dismissal of the Claimants' employment cause on five grounds, one of which (concerning a representative suit filed without leave) was abandoned at the hearing. The Respondent, a company under receivership, argued that the Claimants, as employees with claims against an insolvent employer, were bound by Part VIII of the Employment Act, which requires application in writing to the Minister of Labour for payment out of the National Social Security Fund under Sections 66 to 72, and that the Claimants had in fact invoked that procedure, creating parallel proceedings amounting to abuse of court process. The Respondent further contended that leave of the High Court was mandatory before instituting suit against a company under receivership. The Claimants countered that their claims arose from breaches of contracts entered into with the Receiver and Manager in 2005 to 2007 and dismissal letters issued in 2010, not from pre-receivership debts, so neither Part VIII nor leave of the High Court applied. The court found Section 228 of the Companies Act (Cap 486) dispositive: it is couched in mandatory terms that no proceeding shall be commenced against a company in winding-up except by leave of the court. Relying on Muturi & Apopo Advocates v Cyrus Jirongo & Sololo Outlets Limited, the court held the suit a non-starter for want of leave, allowed the preliminary objection, and struck out the claim on 25 February 2016 without addressing the remaining grounds.

Key legal issues

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01

Whether leave of the High Court was required before filing suit against a company under receivership

Holding

Leave was mandatory under Section 228 of the Companies Act and its absence rendered the suit a non-starter; the Preliminary Objection was allowed and the suit struck out

Reasoning

Section 228 of the Companies Act (Cap 486) is couched in mandatory terms: no action or proceeding shall be commenced or proceeded with against a company once a winding-up order is made or an interim liquidator appointed, except by leave of the court and subject to such terms as the court imposes. Since the Respondent was in receivership and no leave had been obtained, the court found it unnecessary to address the other grounds of the objection and struck out the claim.

p. 3

Legal principles established

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  • Where a winding-up order has been made or a liquidator appointed, no action or proceeding may be commenced or continued against the company except with leave of the court, and such leave is mandatory

Court orders

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  1. 1.The Preliminary Objection dated 14.01.2016 is allowed
  2. 2.The claim/cause is struck out for want of leave of Court before filing suit

Authorities

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Legislation

  • Employment ActPart VIII, Sections 66, 68, 69, 72
  • Companies Act (Cap 486)Section 228, Section 235

Cases cited (1)

  • Muturi & Apopo Advocates vs. Cyrus Jirongo & Sololo Outlets Limited
    High Court Misc Appl. 828/2006
Jurisdiction invoked
Not expressly stated; cause before the Employment and Labour Relations Court

Key timeline

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Practical implications

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Frequently asked questions

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Cite this brief

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Cite this brief

Caselaw, "George Mureithi and others v Kenatco Taxis Limited (In Receivership) [2016] KEELRC 1608 (KLR)", Case Analysis (2016). Not stated in the judgment. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2016/1608/eng@2016-02-25

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