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ELRCPartially AllowedNotice of Motion dated 16th November 2018 and Notice of Motion dated 8th January 2019 in the main claim· [2019] KEELRC 717 (KLR)

Kenya Hotels and Allied Workers Union v Panari Hotel & 10 others; Kudheiha Workers & another (Interested Parties) [2019] KEELRC 717 (KLR)

Employment and Labour Relations Court
27 September 2019
MOMaureen Onyango
2,859 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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A Kenyan court set aside a Kshs.15 million VAT order against a Mombasa hotel because it never got a fair chance to be heard, and dismissed a contempt bid from employees who weren't parties to the case.

What this practically means

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Executive summary

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This judgment by Onyango J of the Employment and Labour Relations Court, Nairobi, determines two applications arising from a Ruling of 26th October 2018 directing the 4th Respondent hotel to pay Kshs.15,191,105.26 in respect of 16% VAT allegedly charged on employees' service charge. The 4th Respondent's Notice of Motion dated 16th November 2018 sought review and setting aside of that Ruling, contending it was condemned unheard, having assumed the 2nd Interested Party represented its interests, and that VAT was in fact never deducted from its employees' service charge, which was only subject to deductions under the CBA between the Interested Parties. The Claimant opposed, arguing the 4th Respondent was served and its errors were self-inflicted. The court framed two issues: whether the review threshold under Rule 33(1) of the ELRC Rules was met, and whether the employees' contempt application dated 8th January 2019 had merit. On review, the court found the 4th Respondent was not specifically called upon or served with the 19th April 2017 application, that its schedules and paylogs showing no VAT on service charge were unchallenged, and that it would be unjust to enforce payment of VAT never deducted; the review was granted and the orders against the 4th Respondent set aside. The contempt application against General Manager Solomon Mugwe was dismissed because the applicants were strangers to the proceedings without locus standi and the orders complained of were the very ones under review. Two other applications were postponed pending production of copies by the Interested Parties.

Key legal issues

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01

Review under Rule 33(1) ELRC Rules

Holding

Review granted to the extent that the orders against the 4th Respondent were set aside, since the 4th Respondent was condemned unheard after its interests were assumed to be represented by the 2nd Interested Party.

Reasoning

The Application of 19th April 2017 did not specifically call on the 4th Respondent to produce records, and the 4th Respondent was not among the parties to be served. The court was persuaded it reasonably believed the 2nd Interested Party represented it. Evidence in the schedules and payrolls, unchallenged, showed VAT was not deducted from employees' service charge, so it would be unjust to enforce payment of VAT never deducted.

p. 4
02

Contempt of Court against the 4th Respondent's General Manager

Holding

Dismissed; applicants are strangers to the proceedings without locus standi, and the orders allegedly disobeyed were themselves under review.

Reasoning

The court found the contempt application lacked merit because the very orders allegedly disobeyed were the subject of the review application. Further, the individual employees applying for contempt were not parties to the suit, never sought to be enjoined, and therefore lacked locus standi to bring the application.

p. 5

Legal principles established

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  • A mistake by a party should not deprive it of a hearing on the merits.
  • An application for review must be made within reasonable time and show discovery of new matter, error apparent, need for clarification or other sufficient reason.

Court orders

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  1. 1.The orders issued against the 4th Respondent in the Ruling of 26th October 2018 are set aside (review granted).
  2. 2.The Application dated 8th January 2019 seeking contempt proceedings is dismissed.
  3. 3.The 1st and 2nd Interested Parties directed to furnish the Court with copies of their Applications dated 23rd November 2018 and 11th December 2018 within 14 days.

Authorities

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Legislation

  • Constitution of Kenya, 2010Article 22
  • Value Added Tax Act, 2013section 5(4)
  • Employment and Labour Relations Court (Procedure) RulesRule 33(1)

Cases cited (7)

  • Stephen Gathua Kimani vs. Nancy Wanjira Waruingi t/a Providence Auctioneers
    [2016] eKLR
  • Pacreas T. Swai vs. Kenya Breweries Limited
    [2014] eKLR
  • Belinda Murai & Others vs. Amos Wainaina
    [1978] LLR 2782 (CALL)
  • Suleiman vs. Ambrose Resort Limited
    [2004] 2 KLR 589
  • Francis Njoroge vs. Stephen Maina Kamore
    Civil Appeal 181 of 2017
  • Rajesh Rughani vs. Fifty Investments Limited & Another
    [2016] eKLR
  • Phillip Chemwolo & Another vs. Augustine Kubede
    (1892-88) KAR 103 at 104
Jurisdiction invoked
Employment and Labour Relations Court Rules, Rule 33(1)

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 Hotels and Allied Workers Union v Panari Hotel & 10 others; Kudheiha Workers & another (Interested Parties) [2019] KEELRC 717 (KLR)", Case Analysis (2019). Notice of Motion dated 16th November 2018 and Notice of Motion dated 8th January 2019 in the main claim. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2019/717/eng@2019-09-27

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