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ELRCStruck OutNot stated in the judgment extract· [2021] KEELRC 19 (KLR)

James Omari Meremo v Chase Bank Limited (In Liquidation) [2021] KEELRC 19 (KLR)

Employment and Labour Relations Court
20 December 2021
MMM. Mbaru
2,454 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~10 min to read original · ~4 min brief

The bottom line

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You must get the court's permission before suing a Kenyan bank in receivership or liquidation, or your case will be struck out.

What this practically means

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Executive summary

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Chase Bank Limited (In Liquidation) raised a preliminary objection dated 3rd August 2021 seeking striking out of the Claimant's memorandum of claim filed on 30th March 2017, on the ground that the Claimant neither sought nor obtained leave of court before commencing or continuing the suit against the Respondent while it was under receivership (from 7th April 2016 pursuant to Gazette Notice No. 2320) and later in liquidation (from 16th April 2021 pursuant to Gazette Notice No. 3651). The Respondent relied on sections 43, 53 and 56 of the Kenya Deposit Insurance Act and section 432(2) of the Insolvency Act, which prohibit commencement or continuation of proceedings against an institution under receivership or liquidation without court sanction. The Claimant argued that section 56 does not prohibit commencement of suits against an institution under receivership, that the objection was premature and should have been raised in a defence, relying on Thomas & Piron and Coast Haulers. Framing a single issue - whether the claim should be struck out for failure to comply with section 56(2) of the Kenya Deposit Insurance Act - the court held that leave was imperative. It reasoned that in employment disputes the Employment Act, particularly sections 66, 69 and 71, requires an employee of an insolvent employer to first apply to the Minister for payment before complaining to the court, and that the leave requirement protects insolvent institutions from multiplicity of suits while ensuring equal treatment of creditors, though it does not bar suits absolutely. Allowing the objection, the court struck out the suit with costs to the Respondent, while noting that time stopped running on 30th March 2017 when the claim was filed.

Key legal issues

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Whether a claim filed without leave of court against an employer under receivership and later liquidation is competent

Holding

Leave of the court was mandatory before filing the suit; the suit was struck out with costs, with time deemed stopped on the date of filing.

Reasoning

The court traced the scheme of sections 43, 53 and 56 of the Kenya Deposit Insurance Act and section 432(2) of the Insolvency Act, which prohibit commencement or continuation of proceedings against an institution under receivership or liquidation without court sanction. In employment disputes, section 69 of the Employment Act gives meaning to insolvency, directing an employee first to apply to the Minister for payment out of the National Social Security Fund, with a complaint to the court only under section 71 where the Minister fails to pay or underpays. The leave requirement protects insolvent institutions from multiplicity of suits and ensures equal treatment of creditors.

p. 3

Legal principles established

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  • Suits against an institution under receivership or liquidation cannot be commenced or continued without the sanction of the court; the leave requirement does not bar suits but allows the court to grant leave on good cause.

Court orders

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  1. 1.The Preliminary Objection dated 3rd August 2021 is allowed
  2. 2.The suit against the Respondent is struck out
  3. 3.Time stopped running on 30th March 2017 when the claimant filed suit to secure his rights
  4. 4.Costs to the Respondent
Jurisdiction invoked
Section 71 of the Employment Act, 2007 (complaint to the Employment and Labour Relations Court)

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, "James Omari Meremo v Chase Bank Limited (In Liquidation) [2021] KEELRC 19 (KLR)", Case Analysis (2021). Not stated in the judgment extract. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2021/19/eng@2021-12-20

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