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ELRCPartially Allowed· [2020] KEELRC 1225 (KLR)

Banking Insurance and Finance Union Kenya v Consolidated Bank of Kenya Limited [2020] KEELRC 1225 (KLR)

Employment and Labour Relations Court
23 April 2020
MOMaureen Onyango
2,235 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~9 min to read original · ~4 min brief

The bottom line

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Kenya's Employment Court stopped a bank from selling a dismissed employee's property and capped interest at staff rates until the dismissal dispute is fully heard.

What this practically means

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Executive summary

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The Applicant, on behalf of two grievants, Pharis Ayah Etyang and Helidy Waturi Kimathi, moved the Employment and Labour Relations Court by notice of motion seeking interim ex parte orders restraining the Respondent bank from selling property No. North Teso/Kocholia/2778 and from charging commercial interest rates (13% plus default interest) on their staff loans following their dismissal on 7th May 2018, and seeking refunds of monies recovered at the enhanced rates. The Respondent opposed, arguing that the loan agreements expressly provided that preferential staff rates would lapse on dismissal; that it had complied with Sections 90(1) and 96(2) of the Land Act before exercising statutory power of sale; and that the Court lacked jurisdiction because the cause of action arose after termination. The court framed two issues: jurisdiction and entitlement to the orders sought. Relying on Abraham Nyambane Asiago, it held that the preferential 6% rate was an employment benefit, so the dispute fell within Section 12(1)(a) of the ELRC Act. Applying Giella vs Cassman Brown and Eliud Kimaile, the court found a prima facie case and irreparable harm, since the lawfulness of the terminations - on which the power to vary rates depended - remained undetermined. The refund prayer was rejected because the grievants still owed loan balances. The court restrained the sale of the property and the charging of interest above 6% pending hearing and determination of the suit, and directed continued loan servicing. No costs order was made despite the Applicant's prayer.

Key legal issues

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01

Jurisdiction of the ELRC over staff loan interest disputes post-termination

Holding

The Court has jurisdiction because the preferential rates were an employment benefit arising from the employment relationship

Reasoning

Section 12(1)(a) of the Employment and Labour Relations Court Act confers jurisdiction over disputes arising out of employment relationships. Relying on Abraham Nyambane Asiago, the court held that the employment relationship is a wide concept not restricted to the contract of service. Since the preferential 6% staff rate was given because of employment, it was an employment benefit and disputes over it fall within the Court's jurisdiction.

p. 3
02

Entitlement to interim injunction restraining sale of charged property and reversion to preferential rates

Holding

Prima facie case and irreparable harm established because the legality of the terminations is yet to be determined

Reasoning

Applying the principles in Giella vs Cassman Brown, the court found a prima facie case because whether the Respondent could vary the interest rates depends on whether the terminations were lawful and fair, an issue pending determination. Sale of the grievants' houses for inability to service enhanced rates would cause irreparable harm. Interim restraints pending full hearing were therefore warranted.

p. 3
03

Prayer for refund of monies paid at enhanced commercial rates

Holding

Refund refused; the accounts may only be credited, since the grievants still owe loan balances

Reasoning

The court observed that the grievants had not stated that they had overpaid their loans; they still owed money. Ordering a refund to a debtor who still owes the lender would be improper. The only available relief was crediting the accounts with funds paid as a consequence of the enhanced interest. The refund prayer was rejected, though no crediting order was made in the final orders.

p. 3

Legal principles established

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  • The ELRC has jurisdiction over disputes concerning interest rates applicable to former employees where the preferential rates arose from the employment relationship
  • Whether an employer may lawfully vary preferential staff interest rates depends on the lawfulness and fairness of the termination of employment
  • A court cannot order a refund of loan repayments to a borrower who still owes money to the lender

Court orders

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  1. 1.That the respondent be and is hereby restrained from selling the property No. North Teso/Kocholia/2778 in the name of Pharis Ayah Etyang pending hearing and determination of this suit
  2. 2.That the respondent be and is hereby restrained from charging interest rates above 6% or the rate of interest applicable to employees of the respondent pending hearing and determination of this suit
  3. 3.That the grievants do continue servicing the loans in accordance with the terms of the loan agreement pending hearing and determination of this suit
Jurisdiction invoked
Section 12(1)(a) of the Employment and Labour Relations Court Act

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, "Banking Insurance and Finance Union Kenya v Consolidated Bank of Kenya Limited [2020] KEELRC 1225 (KLR)", Case Analysis (2020). . Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2020/1225/eng@2020-04-23

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