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ELRCAllowedNot stated in judgment (Motion dated February 15, 2023 in the main suit)· [2023] KEELRC 1170 (KLR)

Lusaka v Daystar University (Cause 1850 of 2017) [2023] KEELRC 1170 (KLR)

Employment and Labour Relations Court
15 May 2023
ANAbuodha J. N.
1,029 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~4 min to read original · ~4 min brief

The bottom line

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A Kenyan court allowed an employer to deduct a departing employee's outstanding Sacco loans from money the court had awarded the employee, blocking full payout.

What this practically means

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Executive summary

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The respondent University, through a Motion dated February 15, 2023 supported by its Legal Manager Mueni-Nyokabi Kahumbura, sought a permanent restraint against execution of the judgment of April 25, 2022 (award of payment in lieu of notice, leave pay and unpaid half salaries) and a permanent stay of execution, invoking the doctrine of lien to offset the claimant's outstanding Sacco loans against the decretal sum. Counsel for the applicant, Mr. Kipkorir, submitted that after statutory deductions the net decretal sum was Kshs 559,704.00 while the claimant owed Kshs 740,734.00, a variance of Kshs 181,030.00, relying on Barclays Bank of Kenya Ltd v Kepha Nyabera and an Indian authority. The claimant's counsel, Ms. Chadianya, countered that lien entitles a party only to retain property, not to sell or apply monies; that the loans were owed to Saccos, not the respondent; that the respondent should have pleaded a counterclaim; and that the court was functus officio. The court, applying section 19(1)(h) of the Employment Act, held that the claimant's loans were owed to Saccos closely associated with the respondent, so no counterclaim was necessary; permitting the claimant to escape loan liability would be unjust enrichment and unfair to colleagues. The reconciliation showing the claimant owed Kshs 181,030.00 was held proper. The court allowed prayers 3 and 4 of the Motion, granting permanent restraint and stay of execution, with costs to the applicant.

Key legal issues

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01

Availability of the doctrine of lien to a judgment debtor employer post-judgment

Holding

The court allowed the respondent to apply the doctrine of lien, treating the decretal sum as properly creditable against the claimant's outstanding Sacco loans.

Reasoning

The claimant undisputedly owed Sacco loans as at termination of employment. The loans did not belong to the respondent, so no counterclaim lay; instead the respondent was entitled to pay the decretal sum net of loan deductions. Recovery of such loans was necessary to prevent unjust enrichment and to protect the Sacco's pooled funds and its operation.

p. 3
02

Statutory basis for deduction of loan repayments

Holding

Section 19(1)(h) of the Employment Act permitted the deduction of amounts due under written loan repayment agreements.

Reasoning

The court invoked section 19(1)(h), noting the claimant's payslips showed contributions to Biblia Sacco and Multipurpose Sacco, with substantial outstanding balances at December 2016 which would have been paid through the check-off system had employment continued.

p. 2
03

Alleged functus officio and absence of substantive appeal

Holding

The court did not accept that functus officio or lack of appeal barred relief; it found the Motion merited and allowed prayers 3 and 4.

Reasoning

Ms. Chadianya argued the court was functus officio and that a permanent injunction against execution without a substantive appeal was unknown to law. The court, after reviewing the application and submissions, found the reconciliation proper and the Motion merited, allowing the prayers for restraint and stay.

p. 3

Legal principles established

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  • An employer may deduct from an employee amounts due under a written loan agreement, including set-off against sums awarded post-termination
  • Prohibiting employers from recovering loans owed by exiting staff would be unjust enrichment and would prejudice Sacco members' pooled funds

Court orders

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  1. 1.The Claimant/Decree Holder is permanently restrained from executing the Decree pursuant to the doctrine of lien
  2. 2.Permanent stay of execution is issued (prayers 3 and 4 of the Motion allowed)
  3. 3.The respondent/applicant is awarded costs of the Motion
Jurisdiction invoked
Original Employment and Labour Relations Court jurisdiction over execution of its decree; Employment Act section 19(1)(h)

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, "Lusaka v Daystar University (Cause 1850 of 2017) [2023] KEELRC 1170 (KLR)", Case Analysis (2023). Not stated in judgment (Motion dated February 15, 2023 in the main suit). Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2023/1170/eng@2023-05-15

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