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ELRCPartially Allowed· [2024] KEELRC 1210 (KLR)

Mugo v Technical Institute Group of Schools & another (Employment and Labour Relations Cause E428 of 2022) [2024] KEELRC 1210 (KLR)

Employment and Labour Relations Court
17 May 2024
AMAnna Ngibuini Mwaure
1,467 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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A Kenyan court struck out a company director from an employment case, confirming directors cannot be sued personally for their company's employment obligations without exceptional grounds.

What this practically means

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Executive summary

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The Respondents filed a notice of motion dated 5th December 2023 seeking to strike out the 2nd Respondent, a director of the 1st Respondent company, from the employment suit and to discontinue the claim against him unconditionally. They argued that a director is separate and distinct from the company per Salomon v Salomon, and that his joinder was superfluous, embarrassing and likely to delay the suit, and that the Claimant had not sought leave to sue him. The Claimant opposed, contending the application was a delaying tactic, that the issues could only be resolved at the substantive hearing, and citing Ondicho Meshack Rakamba v Kuldip Singh & 4 Others where a similar application had been dismissed. Delivering its ruling, the court adopted the principles in Wago Roba Molu v Personal Systems Computer Limited, Salomon v Salomon & Co. Ltd and Victor Mabachi v Nurturn Bates Ltd on corporate personality. It held that a company is a juristic person distinct from its directors and agents unless factors warranting lifting of the veil exist. The Claimant's appointment letter was issued by the 1st respondent, merely signed by the 2nd respondent as director, which was proper, and no evidence showed the 2nd respondent's direct involvement. The court found no basis to enjoin the 2nd respondent, struck out his name, discontinued the suit against him, and allowed the claim to proceed against the 1st respondent, with costs in the cause.

Key legal issues

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01

Whether the corporate veil should be lifted to enjoin a director personally in an employment claim against his company

Holding

The claimant failed to lift the corporate veil; the 2nd respondent is separate and distinct from the 1st respondent and was improperly joined

Reasoning

Applying Salomon v Salomon and Victor Mabachi, the court held that a company is a distinct juristic person from its directors and agents. The appointment letter was issued by the 1st respondent, though signed by the 2nd respondent as director, which is proper. No evidence showed the 2nd respondent was directly involved in the employment matters, and no factors warranted lifting the veil. The suit against him was therefore unnecessary and his name was struck out, with the claim discontinued as against him.

p. 3

Legal principles established

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  • A company is a separate legal entity, distinct from its directors and agents, unless factors warranting lifting of the veil exist
  • It is proper for a director to sign documents on behalf of the company; such signature does not make the director a party to the employment relationship

Court orders

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  1. 1.The 2nd respondent's name is struck out from the suit
  2. 2.The suit is discontinued as far as the 2nd respondent is concerned
  3. 3.The case may proceed against the 1st respondent if the claimant wishes
  4. 4.Costs in the cause

Authorities

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Legislation

  • Employment ActSection 2 (definition of employer)
  • Civil Procedure RulesOrder 21 Rule 1
  • Civil Procedure ActSection 1B
  • Constitution of KenyaArticle 159(2)(d)
  • Constitution of KenyaArticle 48

Cases cited (5)

  • Salmond v Salomon
  • Salomon v Salomon & Co. Ltd.
    [1897] AC
  • Wago Roba Molu v Personal Systems Computer Limited
    [2021] eKLR
  • Victor Mabachi & Anor v Nurturn Bates Ltd
    NRB CA Civil Appeal No. 247 of 2005 [2013] eKLR
  • Ondicho Meshack Rakamba vs Kuldip Singh & 4 Others
    Petition 18 of 2017
Jurisdiction invoked
Employment and labour relations jurisdiction of the ELRC; notice of motion dated 5th December 2023

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, "Mugo v Technical Institute Group of Schools & another (Employment and Labour Relations Cause E428 of 2022) [2024] KEELRC 1210 (KLR)", Case Analysis (2024). . Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2024/1210/eng@2024-05-17

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