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ELRCDismissedNotice of motion dated May 31, 2022 in a claim filed May 31, 2022 (Cause number not stated in judgment)· [2023] KEELRC 940 (KLR)

Ouma v Faulu Microfinance Bank Ltd (Cause E015 of 2022) [2023] KEELRC 940 (KLR)

Employment and Labour Relations Court
20 April 2023
JKJemimah Keli
1,628 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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Kenya's Employment Court ruled it cannot handle disputes over staff loans secured by property, dismissing an ex-employee's bid to stop his bank from repossessing his land and car.

What this practically means

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Executive summary

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The claimant, a former employee of the respondent bank, filed a statement of claim dated May 31, 2022 seeking damages for unlawful termination, unpaid salary, service pay and terminal benefits, together with a notice of motion seeking interim injunctions restraining the respondent from varying loan interest rates, imposing penalties, classifying him as a defaulter, listing him with a credit reference bureau, and from proclaiming, selling or repossessing motor vehicle KCU 314 E and land parcel S/Wanga/Ekero/3900. The applicant asserted that the loans were staff loans obtained during employment, that dismissal deprived him of income to service them, and that the charged land was matrimonial property. The respondent opposed the application through the replying affidavit of Maurine Kahiro, showing that the loans were commercial facilities under letters of offer of October 30, 2018 and September 5, 2019, secured by a legal charge over land co-owned with the claimant's spouse, and that the claimant had defaulted. It also challenged the court's jurisdiction over the loan agreements. The court, on its own initiative, examined jurisdiction under Article 162(2)(a) of the Constitution and section 12 of the Employment and Labour Relations Act. It held that the loans were commercial contracts outside the court's purview, involving charges on matrimonial property co-owned by a non-employee spouse, and that the interim orders sought were final in nature with no direct link to the claim. Applying the Lilian S decision, the court dismissed the application with costs to the respondent.

Key legal issues

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01

Jurisdiction of the ELRC over disputes arising from loans issued in the course of employment

Holding

The court had no jurisdiction; the loans, though issued at staff rates during employment, were commercial contracts secured by charges over the applicant's land and a jointly registered motor vehicle, and the spouse who co-owned the land was not an employee before the court

Reasoning

The court traced its jurisdiction to Article 162(2)(a) of the Constitution and section 12 of the Employment and Labour Relations Act, which covers employment and labour disputes. It found the loan agreements to be commercial contracts whose terms are governed by the loan agreements themselves, distinct from the employment relationship. The charges implicated a third-party spouse not before the court, and the interim orders sought had no direct link to the claim and were final in nature. Citing Lilian S, the court downed its tools.

p. 4

Legal principles established

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  • The ELRC has no jurisdiction over commercial contracts, whether staff loans or otherwise; loan disputes secured by charges over property fall outside section 12 of the ELR Act
  • A court without jurisdiction must down its tools and any order issued without jurisdiction is a nullity ab initio

Court orders

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  1. 1.The application dated May 31, 2022 was held improper and outside the jurisdiction of the court and dismissed
  2. 2.Costs of the application to the respondent

Authorities

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Legislation

  • Constitution of KenyaArticle 162(2)(a)
  • Employment and Labour Relations ActSection 12

Cases cited (5)

  • Christopher Onyango & others v Heritage Insurance Co Ltd
    Cause No 781 of 2015
  • Bifu v Consolidated Bank of Kenya Limited
    Cause No 900 of 2012
  • Kihara v Barclays Bank (K) Limited
    (2001) 2 CA page 421
  • Maithya v Housing Finance Company & Another
    2003 EA 133
  • Motor Vessels ‘Lilian S’ v Caltex Oil (Kenya)
    1982
Jurisdiction invoked
Article 162(2)(a) of the Constitution and section 12 of the Employment and Labour Relations Act No 20 of 2011

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, "Ouma v Faulu Microfinance Bank Ltd (Cause E015 of 2022) [2023] KEELRC 940 (KLR)", Case Analysis (2023). Notice of motion dated May 31, 2022 in a claim filed May 31, 2022 (Cause number not stated in judgment). Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2023/940/eng@2023-04-20

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