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ELRCStruck OutNot stated in the judgment extract· [2018] KEELRC 1426 (KLR)

Kenya Union of Commercial, Food and Allied Works v Peter Obondo Kahi & Nakumatt Holdings Limited [2018] KEELRC 1426 (KLR)

Employment and Labour Relations Court
2 July 2018
HWHellen Wasilwa
1,069 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~4 min to read original · ~4 min brief

The bottom line

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Employees suing a Kenyan company under administration must first get the administrator's consent or court leave, or their entire case will be struck out.

What this practically means

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Executive summary

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The 1st and 2nd Respondents raised a preliminary objection challenging the jurisdiction of the Employment and Labour Relations Court to hear the claimants' suit on the ground that Nakumatt Holdings Ltd was placed under administration on 22nd January 2018. Under section 560(1)(d) of the Insolvency Act No. 18 of 2015, no person may begin or continue legal proceedings against a company under administration or its property except with the consent of the administrator or the approval of the court. The Respondents argued that the claimants had neither sought nor obtained such leave or consent, rendering the proceedings an abuse of court process, and that the claims were covered as second priority claims under the Second Schedule of the Insolvency Act. The claimants countered that the administrator had terminated the services of some 1,400 employees on 22nd February 2018 without observing section 40(1) of the Employment Act, 2007 or Clause 30 of the Collective Bargaining Agreement, and that the Insolvency Act's protection should not be misused to violate employment laws and the CBA. The court held that the company was indeed under administration, that there was no indication the claimant had sought leave of the court or the administrator, and that the suit was therefore incompetent. Following precedent in receivership matters, the court struck out the entire suit for being improperly before the court and awarded costs to the Respondents.

Key legal issues

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01

Whether proceedings against a company under administration require prior leave or consent under section 560(1)(d) of the Insolvency Act

Holding

Yes - such proceedings cannot be commenced without the administrator's consent or the court's approval, and the suit filed without leave is struck out as improperly before the court

Reasoning

The court confirmed that Nakumatt Holdings Ltd was placed under administration on 22 January 2018 by order of the court. Section 560(1)(d) of the Insolvency Act imposes a moratorium on legal proceedings against a company under administration except with the administrator's consent or the court's approval. There was no indication the claimant sought or obtained such leave. Relying on precedent involving companies in receivership, the court held the suit incompetent ab initio and struck it out.

p. 2

Legal principles established

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  • No legal proceedings may be commenced or continued against a company under administration without the consent of the administrator or the leave of the court, and a suit filed without such leave is incompetent and will be struck out

Court orders

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  1. 1.The entire suit is struck out for being improperly before the court
  2. 2.Costs are awarded to the Respondents

Authorities

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Legislation

  • Insolvency Actsection 560(1)(d)
  • Insolvency ActSecond Schedule (second priority claims)
  • Employment Actsection 67(b)(i)
  • Employment Actsection 40(1)

Cases cited (4)

  • George Mureithi & Others v Kenatco Taxis (in receivership)
    Cause No. 507 of 2013
  • Muturi & Apopo Advocates v Cyrus Jirongo & Soplolo Outlets
    Misc. Application 828/2006
  • Charity Wangui Ngumo v Chase Bank Limited (in Receivership) & Antique Actions Agencies
  • Amos Omusotsi v Bulleys Tanneries (under Receivership)
Jurisdiction invoked
Section 560(1)(d) of the Insolvency Act No. 18 of 2015 (moratorium on legal proceedings against a company under administration)

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, "Kenya Union of Commercial, Food and Allied Works v Peter Obondo Kahi & Nakumatt Holdings Limited [2018] KEELRC 1426 (KLR)", Case Analysis (2018). Not stated in the judgment extract. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2018/1426/eng@2018-07-02

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