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ELRCDismissedCause No 2061 of 2015· [2020] KEELRC 1021 (KLR)

Josephine Mwandoe v Consolidated Bank of Kenya Limited [2020] KEELRC 1021 (KLR)

Employment and Labour Relations Court
21 May 2020
HWHellen Wasilwa
3,108 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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A former National Bank of Kenya director lost her case entirely because she sued the bank instead of the Treasury, which had appointed and removed her.

What this practically means

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Executive summary

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The Claimant, a retired school principal, was appointed a Director of the Respondent by letter dated 25/2/2013 from the Permanent Secretary, Treasury, for a three-year term. She was never gazetted under Section 6 of the State Corporations Act. She claimed that in June 2013 new Directors took over, rendering her redundant, and that her removal without notice breached Section 41 of the Employment Act and Section 185(2) of the Companies Act. She sought a declaration that the termination was null and void, reinstatement, damages of Kshs. 4,246,928.96 for the unserved contract, damages for unfair termination, a Certificate of Service, costs and interest. The Respondent denied liability, asserting it was not the appointing authority, that the Claimant served only in an observer capacity pending gazettement, that keeping 12 Directors would breach Article 88 of its Memorandum and Articles of Association and the CBK Prudential Guidelines, and that shareholders lawfully removed her under Section 185 of the Companies Act on 15/5/2014. The Claimant's witnesses conceded she knew gazettement was required, that she simultaneously served as a Director of Kenya National Assurance Company (2001) Ltd, and that the Ministry of Finance gazetted new Directors after her removal. The Respondent's Company Secretary conceded the lack of gazettement was never communicated to the Claimant and that the Bank had no capacity to revoke her appointment. The court held that although the appointing authority was the Permanent Secretary, Treasury, the removal was sanctioned by the shareholders' meeting of 15/5/2014 and duly confirmed by the Ministry of Finance, which gazetted replacement Directors. Since the Claimant sued neither the Treasury nor the Attorney General, she sued the wrong party, an omission the court found fatal. The suit was dismissed with no order of costs.

Key legal issues

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01

Wrongful joinder of the Respondent

Holding

The Claimant's suit fails because she sued the wrong party; the appointing authority was the Permanent Secretary, Treasury, and although the shareholders' meeting sanctioned her removal, the Ministry of Finance confirmed it by appointing and gazetting other Directors

Reasoning

The court found that the appointment was made by the Permanent Secretary, Treasury, by letter dated 25/2/2013. The Extra Ordinary General Meeting of 15/5/2014 sanctioned removal, but the Ministry of Finance confirmed it by gazetting new Directors. The Claimant admitted the Ministry should explain the non-gazettement. Since neither the Treasury nor the Attorney General was sued, the omission was fatal.

p. 4
02

Removal as Director versus unfair termination of employment

Holding

The court did not reach the merits of unfair termination, redundancy or the employee-status question because the suit was dismissed for suing the wrong party

Reasoning

Although extensive evidence and submissions were taken on employee status, gazettement under the State Corporations Act, legitimate expectation and the LIFO principle, the court determined the matter solely on the wrong-party point, noting that the Respondent was not the appointing authority and that the removal was duly confirmed by the Ministry of Finance.

p. 4

Legal principles established

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  • A claimant who sues a party that was neither the appointing nor the removing authority sues the wrong party, and such misjoinder is fatal to the claim

Court orders

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  1. 1.The Claimant's suit is dismissed
  2. 2.No order of costs

Authorities

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Legislation

  • Employment ActSection 41
  • Employment ActSection 40
  • Employment ActSection 43
  • Employment ActSection 45(2)
  • Companies ActSection 185(2)
  • State Corporations ActSection 6
  • Central Bank of Kenya Prudential GuidelinesGuideline No. 3.4.6 on board composition
  • Respondent's Memorandum and Articles of AssociationArticle 88

Cases cited (8)

  • Eaton v Robert Eaton Limited
    (1988) I.R.L.R. 83
  • Geoffrey Makana Asanyo v Nakuru Water and Sanitation Services Company & 6 Others
    [2014] eKLR
  • Tobias Ongaya Auma & 5 Others v Kenya Airways
    [2007] eKLR
  • Addah Adhiambo Obiero v Ard Inc
    [2014] eKLR
  • Rookes v Bernard
    (1964) AC 1129
  • Communication Commission of Kenya & 5 Others v Royal Media Services Limited & 5 others
    [2014] eKLR
  • Richard Erskine Leakey & 2 others v Samson Kipkoech Chemtai
    [2019] eKLR
  • Wilson v Trenton Service Station Limited
    EAT/100/87 23 June 1987
Jurisdiction invoked
Employment and Labour Relations Court jurisdiction over employment claims (Memorandum of Claim filed under the Employment Act); no specific provision invoked

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, "Josephine Mwandoe v Consolidated Bank of Kenya Limited [2020] KEELRC 1021 (KLR)", Case Analysis (2020). Cause No 2061 of 2015. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2020/1021/eng@2020-05-21

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