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ELRCPartially AllowedNotice of Motion dated 24th August 2023· [2024] KEELRC 202 (KLR)

Solanki v Hard Tech Industrial Supplies Ltd (Cause E752 of 2021) [2024] KEELRC 202 (KLR)

Employment and Labour Relations Court
13 February 2024
JGJacob Gakeri
2,839 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~11 min to read original · ~4 min brief

The bottom line

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An employer who admitted it couldn't pay a potential judgment must deposit KShs.3.5 million or provide a bank guarantee before the case is heard.

What this practically means

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Executive summary

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The Claimant, a former senior employee of the Respondent company, brought a Notice of Motion dated 24th August 2023 seeking security for costs/decretal sums pending determination of his unfair termination claim. He sought an order that the Respondent deposit Kshs.7,604,054, furnish a bank guarantee for that sum, or provide sufficient security, and in default that director Mr. Jauyant Kumar Patel attend court for examination and be committed to prison. The application was premised on apprehension that the Respondent was disposing of assets, trading through a related entity, Camtech Engineering Ltd, which shared its physical and postal addresses, and lacked the wherewithal to honour any judgment. The Respondent opposed, asserting a mutual separation agreement for Kshs.2,220,912, denial of any link to Camtech Ltd, and that allegations were unsupported. The court framed a single issue: whether the motion was merited. It applied Order 26 of the Civil Procedure Rules and case law placing the burden on the applicant to prove inability to pay. It found the shared addresses unexplained, the Respondent's conduct of the proceedings unsatisfactory (no defence, exhibits or witness statement despite leave), and critically, an express admission in the Replying Affidavit of inability to pay Kshs.7,604,054 owing to COVID-19. The court allowed the application in part: the Respondent was ordered, within 45 days, to deposit Kshs.3.5 million in a joint interest-earning account or provide a bank guarantee or other acceptable security for that sum. All other prayers were declined and costs were granted in the cause.

Key legal issues

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01

Whether security for costs should issue pending determination of the employment claim

Holding

Application allowed in part; security of Kshs.3.5 million ordered by deposit or bank guarantee within 45 days

Reasoning

The court accepted the applicant bore the burden of proving inability to pay. Similarity of addresses between the Respondent and Camtech Ltd, unexplained by evidence, the Respondent's failure to file any exhibits or defence despite leave, and its express admission of inability to pay Kshs.7,604,054 due to COVID-19, established a proper case for security, lest the suit become an academic exercise. The court however limited the security to a reduced sum and declined the other prayers.

p. 6
02

Whether the relationship between the Respondent and Camtech Engineering Ltd undermined the separate legal personality defence

Holding

The shared addresses and unexplained relationship suggested more than the Respondent was willing to divulge, notwithstanding Salomon v Salomon

Reasoning

While acknowledging corporate separateness per Salomon, the court found the shared physical and postal addresses between the Respondent and Camtech Ltd, the Respondent's admission it facilitated incorporation for a former employee, and the absence of any explanatory affidavit from the Camtech director or financial statements, created an unexplained intimacy between the entities that supported the applicant's apprehension.

p. 5

Legal principles established

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  • In an application for security for costs, the onus is on the applicant to prove that the respondent will not be in a position to pay the costs and that lack of good faith makes the order reasonable
  • A respondent's express admission of inability to satisfy a potential decree justifies an order for security

Court orders

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  1. 1.Pending the hearing and determination of this suit, the Respondent company shall deposit the sum of Kshs.3.5 million into an interest earning bank account jointly in the names of the advocates on record for the parties, within 45 days
  2. 2.Alternatively, pending the hearing and determination of this suit, the Respondent company shall provide a bank guarantee or other acceptable security to the applicant for the payment of Kshs.3.5 million, within 45 days
  3. 3.All other prayers declined
  4. 4.Costs of the application shall be in the cause
Jurisdiction invoked
Employment and Labour Relations Court jurisdiction over employment cause; application under Order 26 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, "Solanki v Hard Tech Industrial Supplies Ltd (Cause E752 of 2021) [2024] KEELRC 202 (KLR)", Case Analysis (2024). Notice of Motion dated 24th August 2023. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2024/202/eng@2024-02-13

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