Mariam Saidi Mwabora & 70 others v Hotel Span Limited & 3 others [2017] KEELRC 1940 (KLR)
The bottom line
#Kenya's Employment Court awarded 57 former hotel workers Kshs.58 million after finding their bank-driven receivership and hotel sale unlawfully ended their jobs.
What this practically means
#Executive summary
#Key legal issues
#Whether the limitation objection was res judicata
The objection was res judicata, the High Court having ruled on limitation in its Ruling of 1st December 2009, which was not appealed; in any event the Claim, filed in 2007, was within time.
The High Court had expressly considered Section 4 of the Limitation of Actions Act and concluded it did not apply. That Ruling was binding and unappealed. Independently, the Claimants left employment on 30th April 2003 and filed suit in 2007, within the 6-year limitation whether the claim was framed in contract or fraud, given repeated unfulfilled promises to pay.
Whether the appointment of the Receiver/Manager was substantively valid
The appointment was substantively invalid - the 3rd Respondent had no justification, there being no default to the Bank of Scotland and no demand under the guarantee.
The Debenture permitted appointment only upon demand for sums called to be paid under the Bank of Scotland guarantee. The 3rd Respondent's own officers conceded no demand was made by the Bank of Scotland, no money was paid under the guarantee, and sums demanded were unrelated overdrafts. Even the Credit Officer could not say why the Receiver/Manager was appointed; the Bank claimed it acted out of 'prudence', a ground unknown to the Debenture.
Whether the Receiver/Manager lawfully exercised his power of sale
The sale was tainted by legal infirmity - inadequate advertising to a specialized international market, no valuation, and a gross undervalue of Kshs. 157 million against apparent value exceeding Kshs. 800 million.
A 5 Star hotel with international clientele required advertising to the specialized international industry and expert advice (per American Express v. Hurley). No valuation was exhibited. The Bank's General Manager valued it at over Kshs. 800 million in 1988. The Receiver, pressured by the 3rd Respondent, sold at roughly a tenth of true value to a cash-strapped purchaser, constituting carelessness or calculated indifference.
Who is liable for the Claimants' terminal dues
The 1st, 2nd and 3rd Respondents are jointly and severally liable for terminal dues; the 4th Respondent is liable for general damages only.
The 1st Respondent directly employed the Claimants and was not in liquidation. The 2nd Respondent adopted existing contracts and promised payment. The 3rd Respondent indemnified the purported Receiver, acted as principal in the sale, and there was no evidence the 1st or 2nd Respondents could pay. The 4th Respondent, though a successor employer for a fleeting moment, gave no undertaking for accrued dues but breached its promise of re-employment, meriting damages.
Whether the Claim could be defeated by procedural objections under Rules 9 and 24 of the Industrial Court (Procedure) Rules 2010
The objections were rejected; the multi-claimant Claim, instituted at the High Court and traversing multiple procedural regimes, was governed by substantive justice and the overriding objective, and not all claimants in a collective grievance must give evidence individually.
Rule 9 related to institution of suits and did not apply to a claim initiated under the Civil Procedure Act at the High Court. Directions under Rule 24 had in fact been issued in writing. No miscarriage of substantive justice was demonstrated, and no objection was raised during the hearing. Courts must manage proceedings without violating the right to a fair hearing.
Legal principles established
#- Appointment of a Receiver/Manager does not of itself automatically terminate contracts of employment.
- A Receiver/Manager is generally an agent of the Debtor Company, but the Debenture Holder may become vicariously liable where it gives express instructions or directions to the Receiver, or where the appointment is invalid.
- A Receiver/Manager has a duty not only to act in good faith but to take reasonable care to obtain a proper price or the true market value on exercising the power of sale.
- An invalidly appointed Receiver/Manager and the Debenture Holder who appointed him may be treated as trespassers and held liable in damages.
- Phoenix practices - acquiring a business, exploiting its goodwill and name, and failing to re-engage the former workforce - are to be discouraged and attract damages.
Court orders
#- 1.Preliminary objection raised by the Respondents declared res judicata, without merit and rejected.
- 2.Declared that termination of the Claimants' contracts of employment was irregular, unlawful and improper.
- 3.Claims by the 10th, 16th, 18th, 19th and 25th Claimants declared abated.
- 4.Claims by the 2nd, 32nd, 46th, 50th, 53rd, 54th, 58th, 62nd and 64th Claimants not established and rejected.
- 5.Rosebud Stella Mubiru to represent the 4th Claimant; Koon Choo and Christine Lyn Jogschat to jointly represent Siegfried Jogschat the 5th Claimant.
- 6.1st, 2nd and 3rd Respondents to severally and jointly pay terminal dues as shown in the computation of 16th April 2003, totalling Kshs. 29,603,973 to the 57 successful Claimants as itemised in the order.
- 7.General damages of Kshs. 500,000 each to the 57 successful Claimants, totalling Kshs. 28,500,000, payable by all the Respondents severally and jointly.
- 8.Costs granted to the Claimants against all the Respondents.
- 9.Interest granted on terminal dues of Kshs. 29,603,973 at 14% per annum from the date of filing the Claim.
- Jurisdiction invoked
- Jurisdiction assumed after transfer from the High Court to the Industrial Court (Employment and Labour Relations Court) by Ruling dated 25th March 2013; the Court held it 'must assume jurisdiction, and move on to look at the substance of the dispute' after rejecting the limitation objection as res judicata.
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Mariam Saidi Mwabora & 70 others v Hotel Span Limited & 3 others [2017] KEELRC 1940 (KLR)", Case Analysis (2017). ELRC Cause (formerly HCCC, Mombasa, filed 30th March 2007; transferred by Ruling dated 25th March 2013). Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2017/1940/eng@2017-09-08
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.