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ELRCStruck OutPetition dated 31st July 2023· [2024] KEELRC 1332 (KLR)

Kiplagat & 2 others v Eldoret Water and Sanitation Company Limited (ELDOWAS) & 2 others; Uasin Gishu County (Interested Party) (Petition E007 of 2023) [2024] KEELRC 1332 (KLR)

Employment and Labour Relations Court
24 May 2024
3,143 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~13 min to read original · ~4 min brief

The bottom line

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Kenya's Employment Court confirmed that company directors are not employees, so boardroom removal disputes belong in other courts, not the ELRC.

What this practically means

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Executive summary

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This Ruling by Maureen Onyango, Judge, of the Employment and Labour Relations Court decided two preliminary objections against a Petition dated 31st July 2023. The Petitioners, former directors appointed to the Board of the 1st Respondent (a water service provider) in 2021, challenged the termination of their board appointments by the Interested Party, a majority shareholder, on 16th June 2023. The 1st Respondent objected that directors are not employees and the ELRC lacks jurisdiction under Articles 165(3)(b) and (d), 162(2) of the Constitution and sections 2 of the Employment Act and the ELRC Act. The 3rd Respondent and the Interested Party similarly objected that no employer-employee relationship existed; further, that the County Government of Uasin Gishu, as a shareholder, could not be sued for the company's acts, and that the 3rd Respondent, as agent of a disclosed principal, was wrongly joined. The Petitioners countered that the objections raised factual issues unsuitable for determination as preliminary objections. The court framed a single issue: whether the objections were merited. Applying section 2 of the Employment Act and the binding Court of Appeal precedent in Rift Valley Water Services Board v Geoffrey Asanyo, which held that a director is an office-holder and not, without more, an employee, the court found the Petitioners were appointed as directors under the Memorandum and Articles of Association under the Companies Act, not employed for wages or salary. Accordingly, the court upheld both preliminary objections and struck out the Petition for want of jurisdiction, making no order for costs. The rival contentions about the shareholder and agent were not separately determined.

Key legal issues

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01

Whether the Petitioners are employees of the 1st Respondent and whether the ELRC has jurisdiction

Holding

The Petitioners are not employees; they were appointed as directors under the Memorandum and Articles of Association under the Companies Act, so the ELRC lacks jurisdiction

Reasoning

Relying on section 2 of the Employment Act and section 12 of the ELRC Act, and the binding Court of Appeal decision in Rift Valley Water Services Board v Geoffrey Asanyo, the court held that directors receiving allowances are office-holders, not employees. Their appointments arose from the company's Memorandum and Articles of Association, not a contract of service, so no employer-employee relationship exists to confer jurisdiction on the ELRC.

p. 6
02

Whether the preliminary objections qualify as proper preliminary objections on a pure point of law

Holding

The court did not expressly rule on this; it proceeded to uphold the objections on jurisdiction

Reasoning

The Petitioners argued, citing Mukisa Biscuits and Orao v Mbaja, that the objections raised factual questions requiring evidence. The court did not engage with this argument, instead addressing the single issue of jurisdiction, which it treated as a pure question of law, and upheld the objections.

p. 4

Legal principles established

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  • Directors of a company are office-holders and not, without more, employees of the company; the Employment and Labour Relations Court has no jurisdiction over disputes relating to their board appointment or removal absent a contract of service

Court orders

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  1. 1.The Preliminary Objections dated 23rd August 2023 and 7th September 2023 are upheld
  2. 2.The Petition dated 31st July 2023 is struck out for want of jurisdiction
  3. 3.There shall be no orders for costs

Authorities

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Legislation

  • Constitution of Kenya, 2010Articles 162(2), 165(3)(b), 165(3)(d)
  • Employment and Labour Relations Court ActSection 2, Section 12
  • Employment ActSection 2, Section 3
  • Water Act 2016Not specified
  • Companies ActNot specified

Cases cited (12)

  • Kariuki & 3 Others v Kiambu Water & Sewerage Co. Ltd & 13 Others
    (2022) KEELRC 12831 (KLR)
  • Rift Valley Water Services Board and 3 Others v Geoffrey Asanyo & 2 others
    Civil Appeal No. 60 of 2015 (Consolidated with Civil Appeal No. 61 of 2015)
  • Simiyu v Cabinet Secretary; Ministry of Energy & Another; Rural Electrification and Renewable Energy Corporation & Another
    (2023) KEELRC 718 (KLR)
  • Samuel Kamau Macharia & Another v Kenya Commercial Bank Limited & others
    (2012) eKLR
  • National Social Security Fund Board of Trustees v Kenya Tea Growers Association & Others
    (Civil Appeal No. 656 of 2022) (2023) KECA 80 (KLR)
  • Mukisa Biscuits Manufacturing Ltd v West End Distributors
    (1969) EA 696
  • Orao v Mbaja
    (2005)1 KLR 141
  • AKN v JNM
    (2014) eKLR
  • Wilson Kiarie Kimani (Suing as the personal legal representatives of Margaret Wangui Kimani v Aberdere Investment Limited & 3 others
    [2019] eKLR
  • Owners of the Motor Vessel 'Lillian S' v Caltex Oil (Kenya) Ltd
    [1989] eKLR
  • McMillan v Guest
    [1942] AC p.561
  • Parsons v Albert J. Parsons and Sons Ltd
    [1979] ICR p.271
Jurisdiction invoked
Article 162(2) of the Constitution and Section 12 of the Employment and Labour Relations Court Act

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, "Kiplagat & 2 others v Eldoret Water and Sanitation Company Limited (ELDOWAS) & 2 others; Uasin Gishu County (Interested Party) (Petition E007 of 2023) [2024] KEELRC 1332 (KLR)", Case Analysis (2024). Petition dated 31st July 2023. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2024/1332/eng@2024-05-24

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