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ELRCPartially AllowedCause No E080 of 2021· [2023] KEELRC 1269 (KLR)

Chovondo & 3 others v Ultimate Engineering Ltd; Omido & another (Intended Respondent) (Cause E080 of 2021) [2023] KEELRC 1269 (KLR)

Employment and Labour Relations Court
22 May 2023
JGJACOB GAKERI
4,108 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~16 min to read original · ~4 min brief

The bottom line

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Kenyan employees suing a foreign-owned company can join its sole director-shareholder and get security for costs, but only solid, certified evidence wins asset-freezing orders.

What this practically means

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Executive summary

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This is a ruling of the Employment and Labour Relations Court at Nairobi, delivered virtually on May 22, 2023 by Dr. Jacob Gakeri J, on a Notice of Motion dated March 2022 brought by the Claimants (former employees of Ultimate Engineering Ltd) whose employment was terminated on February 8, 2020 on grounds of redundancy following a Kenya Revenue Authority Agency Notice. The applicants sought leave to enjoin the 1st and 2nd Intended Respondents (former or current directors/shareholders), an order that the Respondent deposit Kshs 8,000,000/= as security, a warrant of arrest against the Intended Respondents, attachment of Plot No 214/425 and LR No 209/68/2 in Muthaiga, a Mareva injunction freezing assets and bank accounts, an injunction over shares in listed companies, and an order restraining the Intended Respondents from leaving the jurisdiction. The applicants alleged the Intended Respondents were disposing of assets, winding up the company and relocating to the USA to defeat any judgment and evade tax. The Intended Respondents opposed, stating the company closed due to the KRA Agency Notice, the properties were charged to banks and were not company property, and the application was an abuse of process. The court found the applicants' supporting affidavit full of allegations unsupported by evidence, with documents lacking certification and of no evidential value, and noted the applicants' own lack of urgency. It allowed joinder of the 2nd Intended Respondent as sole shareholder and director, ordered security of Kshs 2,000,000/= within 45 days, refused the Mareva injunction and all ancillary prayers, and ordered costs to abide the outcome of the suit.

Key legal issues

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01

Joinder of the Intended Respondents

Holding

The 2nd Intended Respondent, being the sole shareholder and director, has a stake in the proceedings and is enjoined; no case made against the 1st Intended Respondent

Reasoning

Applying Order 1 Rule 10(2) and the interested-party jurisprudence, the court examined whether the Intended Respondents had a stake or legal/equitable interest. Documentary evidence from the Business Registration Service showed the 2nd Intended Respondent was the only shareholder and director. The applicants tendered no evidence connecting the 1st Intended Respondent to the company.

p. 7
02

Security for costs

Holding

Security granted but reduced from Kshs 8,000,000/= to Kshs 2,000,000/=, payable within 45 days

Reasoning

The company's accounts were inaccessible owing to a KRA Agency Notice, it had no office in Kenya, and its sole director lived in the USA, leaving the claimants with no assets to resort to if successful. Applying the discretionary principles on security for costs, the court found security merited but fixed Kshs 2,000,000/= as sufficient.

p. 8
03

Mareva injunction and ancillary orders

Holding

Refused for lack of evidential support

Reasoning

The Mareva principles require a good arguable case, jurisdiction, assets within the jurisdiction, real risk of removal and balance of convenience. The applicants produced unauthenticated, uncertified documents of no evidential value, gave no proof of the bank accounts, and failed to demonstrate urgency, having been absent from court for months.

p. 5

Legal principles established

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  • A party to be joined must have a legal, identifiable or demonstrable interest in the subject matter of the proceedings
  • The order for security for costs is discretionary and may consider absence of known assets, absence of an office within the jurisdiction, and financial standing
  • The party alleging a state of affairs must adduce sufficient evidence to prove it

Court orders

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  1. 1.The Applicants are granted leave to enjoin the 2nd Intended Respondent in this suit
  2. 2.The Respondents to deposit Kshs 2,000,000/= as security within 45 days
  3. 3.Costs shall abide the outcome of the suit

Authorities

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Legislation

  • Civil Procedure Rules, 2010Order 1 Rule 10(2)
  • Civil Procedure Rules, 2010Order 39 Rules 5 and 6
  • Civil Procedure Rules, 2010Order 21 Rule 1
  • Evidence ActBurden and standard of proof provisions (not specifically numbered)
  • Civil Procedure Act (Chapter 21, Laws of Kenya)Section 1B
  • Constitution of KenyaArticles 159(2)(d) and 48

Cases cited (17)

  • Habiba W. Ramadhan & 7 others V Mary Njeri Gitiba
    (2017) eKLR
  • Kenya Medical Laboratory Technicians Board & 6 others V Attorney General & 4 others
    (2017) eKLR
  • Communications Commission of Kenya & 4 others V Royal Medial Services Ltd & 7 others
    (2014) eKLR
  • Meme v Republic
    (2004) 1 EA 124
  • Gatirau Peter Munya v Dickson Mwenda Kithinji & 2 others
    (2014) eKLR
  • Lalji Ganji Nathoo V Nathoo Vas Sanje
    (1960) EA 315
  • Boor Mohammed Abulla V Reinchodbhal J. Patel & another
    (1962)
  • Musera & another V Stallion Insurance Co. Ltd
    (2005)
  • Kearly Development V Tamal Construction
    (1995) 3 ALL ER 534
  • Ocean View Beach Hotel V Salim Sultan Moloo & another
    (2012) eKLR
  • Aggrey Shivona V The Standard Group PLC
    (2020) eKLR
  • Shah V Sheti
    Civil App No 34 of 1981
  • Jayesh Hasmukh Shah v Navin Hira & another
    (2015) eKLR
  • Kanduyi Holdings Ltd V Balm Kenya Foundation & another
    (2013) eKLR
  • Mareva Campania Naviera SA v International Bulkcarriers SA
    (1980) 1 ALL ER 213
  • Beta Health International Ltd v Grace Mumbi Githaiga & 2 others
    (2016) eKLR
  • Henry Kaverenge Kisali V Ultimate Engineering Ltd
    Cause No 16 of 2016
Jurisdiction invoked
Original employment and labour jurisdiction of the Employment and Labour Relations Court; application under Order 39 and Order 1 Rule 10(2) of the Civil Procedure Rules, 2010

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, "Chovondo & 3 others v Ultimate Engineering Ltd; Omido & another (Intended Respondent) (Cause E080 of 2021) [2023] KEELRC 1269 (KLR)", Case Analysis (2023). Cause No E080 of 2021. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2023/1269/eng@2023-05-22

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