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ELRCDismissedCause No 279 of 2015· [2021] KEELRC 1676 (KLR)

James Gitau Kamau & 9 others v Habo Group of Companies Limited & another [2021] KEELRC 1676 (KLR)

Employment and Labour Relations Court
27 May 2021
LNLINNET NDOLO
957 words in judgment
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The bottom line

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Kenya's Employment Court ruled that a company's dissolution does not wipe out its debts, declining an objector's review application with costs to the claimants.

What this practically means

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Executive summary

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This is a ruling on an Objector's application dated 9th February 2021 seeking review and setting aside of the orders of 4th February 2021, by which the court had granted an oral stay of execution conditional on the Objector depositing not less than 50% of the decretal sum in court within three days, following dismissal of the Objector's objection application. The application was supported by an affidavit of Anderson Mugambi, Claims Manager of the Objector, on the ground of discovery of new matter: a Gazette Notice No. 666 dated 29th February 2021 showing the Respondent's dissolution under Section 897(4) of the Companies Act. The Claimants, in a replying affidavit sworn by the 1st Claimant, James Gitau, opposed the application, questioning the deponent's authority, asserting the Objector's close affiliation to the Respondent meant it knew of the dissolution, arguing dissolution was effected after judgment to escape liability, and noting that under the law the liabilities of directors and officers of a dissolved company continue and may be enforced as if the company had not been dissolved. The court found that the Gazette Notice was published after the 4th February 2021 ruling, so the Objector likely lacked knowledge of the dissolution at the time of the objection. However, applying Sections 897(4) and 897(6) of the Companies Act, the court held that dissolution does not extinguish accrued liabilities such as the decretal sum, and the Objector could not rely on the dissolution to reverse the finding that it had failed to establish interest in the proclaimed goods. The review application was declined with costs to the Claimants. Judgment delivered at Mombasa on 27th May 2021 by Linnet Ndolo, Judge, via Microsoft Teams due to COVID-19 restrictions.

Key legal issues

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01

Whether the Respondent's dissolution constitutes discovery of new and important matter justifying review

Holding

No - notice of dissolution was published only after the 4th February 2021 ruling, but the discovery does not assist the Objector because dissolution does not extinguish the accrued decretal liability

Reasoning

The court accepted that the Objector lacked knowledge of the dissolution when its objection was heard, since the Gazette Notice post-dated the ruling. However, the effect of dissolution under Section 897(6) of the Companies Act is that directors and officers may still be pursued for liabilities as if the company continued. Consequently, the dissolution cannot reverse the finding that the Objector failed to establish interest in the proclaimed goods.

p. 2
02

Effect of dissolution under Section 897(4) and 897(6) of the Companies Act

Holding

Dissolution pursuant to a company's own application does not extinguish accrued liabilities such as the decretal sum owed to the Claimants

Reasoning

The Gazette Notice showed the Respondent was dissolved under Section 897(4) of the Companies Act on its own application. Section 897(6) preserves the liability of directors and other officers of a dissolved company, who may be pursued to settle liabilities as if the company had not been dissolved. The court therefore held that accrued liabilities, including the decretal sum, survive dissolution.

p. 2

Legal principles established

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  • Dissolution of a company under Section 897(4) of the Companies Act does not extinguish accrued liabilities; directors and officers may be pursued as if the company had not been dissolved
  • Review jurisdiction of the ELRC is governed by Section 16 of the ELRC Act and Rule 33 of the ELRC (Procedure) Rules, including discovery of new and important matter not within the applicant's knowledge

Court orders

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  1. 1.The Objector's application for review dated 9th February 2021 is declined
  2. 2.Costs of the application awarded to the Claimants

Authorities

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Legislation

  • Employment and Labour Relations Court ActSection 16
  • Employment and Labour Relations Court (Procedure) RulesRule 33(1)
  • Companies ActSection 897(4); Section 897(6)
Jurisdiction invoked
Section 16 of the Employment and Labour Relations Court Act and Rule 33 of the Employment and Labour Relations Court (Procedure) Rules

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (1)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "James Gitau Kamau & 9 others v Habo Group of Companies Limited & another [2021] KEELRC 1676 (KLR)", Case Analysis (2021). Cause No 279 of 2015. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2021/1676/eng@2021-05-27

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