Boniface Karau v First Community Bank; Takaful Insurance of Africa (Interested Party) [2020] KEELRC 1217 (KLR)

The loan was a takeover of a facility from Barclays Bank granted solely because the applicant joined the respondent's employment. The Letter of Offer charged his property and salary, and the termination letter itself referred to the loan as 'staff facility'. Following Boniface Lum Amunga Biko v National Bank of Kenya and Abraham Nyambane Asiago v Barclays Bank, the court held that employment benefits such as staff loans cannot be divorced from the employment relationship, so the ELRC's jurisdiction under Article 162(2)(a) and Section 12(1) of the ELRC Act is engaged.

Applying Agricultural Finance v Lengetia Ltd, the court held a third party beneficiary cannot enforce a contract he did not negotiate. However, the Interested Party did not deny the cover existed; it rejected the claim without communicating the rejection to the beneficiary and purportedly investigated him without his knowledge. Whether that rejection was valid is a live issue requiring the Interested Party's presence, so no privity of contract is necessary and joinder is necessary.

Applying the Mrao Ltd definition, the court found that the disputed legality of the termination, which underpins the applicant's right to preferential staff loan terms, raised an apparent infringement of a right calling for rebuttal. The memorandum of response asserting lawful termination made this a triable issue sufficient to establish a prima facie case with a probability of success at this interlocutory stage.

The applicant argued that a sale of his matrimonial home would leave him homeless and that no monetary compensation would suffice. The court disagreed, holding that damages would remedy a sale. However, the balance of convenience tilted in his favour because he risked losing his matrimonial home and, if termination were later found unfair, there would be legitimacy in requiring continued payment at preferential staff rates.

The court weighed the risk of the applicant losing his matrimonial home against the respondent's interest in recovering the debt. Because the underlying termination is disputed and, if found unfair, the preferential employee interest rate would properly apply, preserving the status quo - restraint on interference with the property and continued servicing at Kshs.74,909 per month - best balances the parties' interests pending trial.