Banking, Insurance and Finance Union (Kenya) v National Bank of Kenya Limited [2019] KEELRC 1412 (KLR)
The bottom line
#A Kenyan court allowed an employer to auction an ex-employee's property because staff loans must still be repaid after losing your job.
What this practically means
#Executive summary
#Key legal issues
#Whether interim restraining orders could issue where the subject property is not pleaded in the substantive claim
The orders could not issue because the grievant's property had been dropped from the pleadings in the Amended Memorandum of Claim of 1st August 2017, which deleted paragraphs (vii) and (viii); the application was therefore sought in vacuo, consistent with Radido J's rulings of 13th April 2018 and 23rd November 2018.
The court traced the history of the pleadings: properties were introduced in the 2015 Amended Memorandum of Claim but deleted in the 2017 amendment. Since the property was no longer pleaded, the court lacked a pleading foundation for the interim relief sought. Earlier rulings in the same cause had already taken the same position, binding the parties' approach.
Whether an employee can resist sale of property securing a staff loan on account of termination of employment
No. The staff loan, though a benefit of employment, is a contract whose terms must be adhered to; default allows lawful recovery through the statutory power of sale absent mistake or misrepresentation.
The court held that employees should foresee termination and put mechanisms in place to keep repaying loans, and where unable, should notify and renegotiate with the employer. There was no refutation of the debt, and no evidence that the Respondent breached the law or the Applicant's rights in recovering it. Following Francis Kalama Mulewa v Kenya Commercial Bank, the court will not come to the aid of a party in breach of loan terms.
Whether there was any basis to restrain the Respondent's statutory power of sale
No valid reason or evidence was shown that the Respondent breached the law or the Applicant's rights in attempting to recover the debt.
The Respondent had issued the statutory notices (30-day demand, 90-day statutory notice, 40-day notice of intention to sell, and the redemption notice) and the debt of over Kshs.7 million was outstanding and unrefuted. An injunction to restrain enforcement of contractual rights must be supported by valid reason; none was advanced. The possible claim on interest as a staff benefit was not prayed for.
Legal principles established
#- An employee remains bound to repay a staff loan even after termination of employment; the employment relationship does not extinguish the contractual obligation to service the loan.
- A court will only interfere with a loan contract where there is a mistake or misrepresentation of material facts, which must be pleaded and proved.
- Interim orders cannot issue in respect of matters not pleaded in the substantive claim; orders sought in vacuo will be refused.
Court orders
#- 1.The application dated 17th January 2019 is dismissed
- Jurisdiction invoked
- Original jurisdiction of the Employment and Labour Relations Court over an interlocutory application in a Cause (the judgment does not cite a specific provision)
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Banking, Insurance and Finance Union (Kenya) v National Bank of Kenya Limited [2019] KEELRC 1412 (KLR)", Case Analysis (2019). Not stated in judgment (Cause filed by Amended Memorandum of Claim dated 23rd October 2015, amended 1st August 2017). Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2019/1412/eng@2019-06-14
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.