Obonyo v Bornfit Gym & Spa Ltd

among other prayers, a declaration that he was unlawfully and unfairly terminated from employment. The Applicant then filed its Statement of Response to the said claim, whose defence is that the relationship between the parties is that of Director/Shareholder and Company, governed by the Companies Act, and not one of employer and employee. 4 The Applicant contends that the Claimant was a shareholder and director of the Respondent Company, holding five percent (5%) shares allocated to him on an ex gratia basis, as reflected in the company's statutory records and minutes maintained pursuant to Section 93 of the Companies Act, 2015. 5 It is the Applicant's case that the Claimant served the Company exclusively in the capacity of a director, subject to the provisions of the Companies Act and the rights of shareholders, including removal from the position of director. 6 The Applicant asserts that vide a letter dated 14 th October, 2025, the Claimant admitted to being removed from directorship and demanded compensation of 5% of the shares in the Company, and that this same demand letter forms the basis of his claim despite his knowledge that his removal from directorship was lawful, having arisen from a unanimous resolution passed at an Annual General Meeting held on 19th September, 2025. Page 2 of 14

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7 It is the Applicant's position that, despite alleging employment termination, the Claimant's grievance in truth arises from his removal as a director, a matter governed by Section 139 of the Companies Act, 2015, which does not amount to termination of employment. 8 The Applicant further contends that by dint of Article 162(2)(a) of the Constitution and Section 12 of the Employment and Labour Relations Court Act, this Court's jurisdiction is confined to employer-employee disputes, which is absent in this matter, and that disputes touching on a director's removal and compensation fall for determination by the High Court under Divisions 3 and 6 of the Companies Act. 9 It is the Applicant's case that jurisdiction is a threshold issue upon which the Court is obligated to down its tools once want thereof is established, and that allowing the claim to proceed would occasion injustice and waste the Court's time, without any prejudice to the Claimant, who remains free to pursue his remedies before the appropriate forum. 10 In its Further Affidavit responding to the Claimant's Replying Affidavit dated 16th March, 2026, the Applicant maintains that the Claimant has expressly admitted, in paragraph 3 of his Replying Affidavit, to being a director and shareholder of the Company, a fact which the Applicant contends fortifies the jurisdiction of the High Court over that of this Court. Page 3 of 14

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11 The Applicant avers that the remuneration the Claimant characterizes as monthly net salary was in truth a director's allowance, and that at no point was he termed an employee, his diverse duties having crystallized from his fiduciary responsibility as a director under Section 148 of the Companies Act. 12 It is the Applicant's case that, as a majority shareholding director, control and responsibility for day-to-day management vested in him by custom of company law, and that no instrument was ever executed to establish an employment relationship. 13 The Applicant further asserts that the Claimant, in seeking to ventilate what is essentially a corporate dispute over removal and compensation of a director before this Court, has bypassed the recourse properly available to him under Sections 139, 141 and 143 of the Companies Act, in breach of his fiduciary duty to the Company, and urges that the suit be dismissed in its entirety with costs to the Applicant. Claimant/Respondent’s Case 14 In opposition to the application, the Claimant/Respondent a replying affidavit dated 16th March 2026. 15 It is the Claimant/Respondent's case that he does not dispute holding a minority shareholding of 5% in the Applicant company, while the majority director held 95% Page 4 of 14

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and exercised control over the affairs and operations of the company at all material times. 16 The Claimant/Respondent contends, however, that this shareholding is inconsequential to the present dispute, as his principal and entire engagement with the Applicant was in his capacity as an employee. He avers that any issues touching on his shareholding or directorship ought to be pursued separately before the appropriate Court, being distinct from the employment dispute before this Court. 17 The Claimant/Respondent states that he was employed by the Applicant from March 2023 as an On-Site Manager and Gym Instructor at its gym and spa facility at Hazina Trade Centre, Nairobi County, where he worked under the authority, direction and control of the Applicant's majority director, performing various duties in furtherance of the gym's business operations. 18 It is the Claimant/Respondent's case that the Applicant duly paid him a monthly net salary of Ksh 150,000/= for services rendered as an employee in managing the gym's operations, as evidenced by his bank account statements annexed as "MOO 1". 19 The Claimant/Respondent further contends that this Court is properly seized of jurisdiction under Article 162(2)(a) of the Constitution and Section 12 of the Employment and Labour Relations Court Act, his suit arising from the Applicant's unfair termination of his employment, carried out without any due process. Page 5 of 14

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20 It is his position that to allow the application and dismiss his suit would permit the Applicant to evade accountability for unfairly terminating his employment, thereby depriving him of his livelihood without due process and unjustly denying him redress, and would undermine the role of this Court in upholding and protecting employment rights. 21 The Claimant/Respondent accordingly argues that the application is bereft of merit and ought to be dismissed with costs, with the suit set down for hearing on its merits. Respondent/Applicant's Submissions 22 The Applicant submitted that this Court lacks jurisdiction to determine the dispute as its jurisdiction is confined to employment and labour relations disputes under Article 162(2)(a) of the Constitution and section 12 of the Employment and Labour Relations Court Act. 23 It was submitted that the Constitution mandates this Court to hear disputes relating to employment and labour relations, while section 12 of the Employment and Labour Relations Court Act exhaustively sets out the categories of disputes falling within its jurisdiction, including disputes arising out of employment relationships between employers and employees. According to the Applicant, any matter falling outside those statutory parameters is beyond the Court's jurisdiction. Page 6 of 14

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24 The Applicant argued that the Claimant had deliberately attempted to recharacterize a dispute concerning the directorship and management of a company as an employment dispute in order to invoke the jurisdiction of the Employment and Labour Relations Court. 25 It was submitted that the evidence on record demonstrates that no employer–employee relationship ever existed between the parties. Rather, the only relationship between them was that of co-directors and shareholders of the Respondent company, which relationship was subsequently terminated through the Claimant's removal as a director. 26 In support of that contention, the Applicant relied on the Claimant's demand letter dated 14th October 2025, wherein the Claimant acknowledged that the parties had incorporated the Respondent company, with the Respondent holding 95% of the shares and the Claimant holding 5%, and that both served as directors. 27 The Applicant further submitted that the demand letter expressly complained about the Respondent's management of the company and sought compensation for the Claimant's 5% shareholding, thereby demonstrating that the dispute concerned shareholding, management and directorship rather than employment. 28 The Applicant further submitted that minutes of the meeting held on 19th September 2025 established that the Claimant was removed as a director pursuant to a unanimous resolution of the Board of Directors and Page 7 of 14

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shareholders. It was argued that the removal was undertaken under section 139 of the Companies Act and that any challenge to such removal ought to have been pursued in accordance with section 141 of the Companies Act. 29 The Applicant submitted that disputes relating to company membership, management, shareholding and directorship fall exclusively within the jurisdiction of the High Court. Reliance was placed on section 3 of the Companies Act, which defines the Court as the High Court unless another court is expressly specified. It was therefore argued that the present dispute is governed by the Companies Act and not the Employment Act or the Employment and Labour Relations Court Act. 30 On the second issue, the Applicant relied on the decision in Owners of the Motor Vessel “Lillian S” v Caltex Oil (Kenya) Ltd [1989] eKLR, wherein the Court held that jurisdiction is everything, that a court's authority must derive from the law, and that where a court lacks jurisdiction, it must immediately "down its tools" and take no further step. The Applicant relied particularly on the holding that: " The limits of this authority are imposed by statute, charter or commission under which the court is constituted and may be extended or restricted by the like means……..Where the court takes it upon itself to exercise a jurisdiction which it does not possess, its decision amounts to nothing. Jurisdiction must be acquired before judgment is given." Page 8 of 14

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31 The Applicant therefore submitted that, since the dispute concerns company management and directorship and is regulated by the Companies Act, this Court lacks jurisdiction to entertain the claim. Consequently, the Applicant urged the Court to down its tools and strike out the suit with costs. Claimant/Respondent’s Submissions 32 The Claimant/Respondent submitted that the sole issue for determination is whether an employer–employee relationship existed between the parties. It was submitted that although it is undisputed that the Claimant held a 5% shareholding in the Respondent company, the present suit is not founded on his status as a shareholder or director but on the alleged unfair termination of his employment. 33 The Claimant submitted that prior to the institution of the suit, he issued two separate demand letters dated 14 th October, 2025, each asserting a distinct cause of action: the first titled "Unfair termination of employment of our client, Martin Odhiambo Obonyo," and the second titled "Compensation of our client's 5% shareholding in Bornfit Gym and Spa Limited." 34 It is the Claimant's submission that the demand letter founding the instant claim is the former, in which it was expressly stated that the Claimant "has been in employment as a Gym Instructor/ Manager with Bornfit Gym & Spa Limited (company) since March 2023" and that "in September 2025 our client's employment with the Page 9 of 14

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company was unlawfully terminated by the company." The Claimant submitted that the Applicant, is deliberately relying solely on the shareholding demand letter while ignoring the employment demand letter, sought to conflate two distinct legal relationships and causes of action in an attempt to mislead the Court. 35 It was submitted that the dispute properly before the Court arises from the unfair termination of the Claimant's employment as Gym Instructor and Manager from March 2023 to September 2025, and that the remedies sought are labour related remedies flowing from that termination. The Claimant submitted that his stake in the company does not extinguish his right to commence an action arising from a distinct employment relationship. 36 The Claimant further submitted that the evidence demonstrates the existence of an employment relationship. It was argued that he earned a fixed monthly salary of Kshs.150,000, which was paid regularly and continuously for services rendered as the Respondent's employee. Reliance was placed on bank statements showing regular salary payments as evidence of an ongoing contract of employment. 37 The Claimant submitted that the Respondent/Applicant’s own records acknowledged him as its employee. In particular, reliance was placed on the Respondent's 2025 Annual General Meeting minutes, which referred to the Claimant as the General Manager and recorded that the company had resolved to pay his outstanding salary for Page 10 of 14

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August 2025. According to the Claimant, the Respondent's own documents unequivocally recognized him as an employee earning a salary, which is a defining feature of an employment relationship. 38 The Claimant rejected the Applicant's contention that the payments constituted directors' allowances rather than salary. It was submitted that had the payments been intended as directors' allowances, the Respondent would have expressly described them as such in its minutes. The Claimant argued that this assertion raises disputed questions of fact that cannot be conclusively determined on affidavit evidence but require oral evidence at trial. 39 On the question of resolving these disputed facts, the Claimant relied on Republic v Nairobi City County & another Ex-Parte Premier Food Industries Limited [2016] KEHC 4145 (KLR), submitting that the court there held that disputed facts "cannot be resolved on coldprint affidavits but may require viva voce evidence to be taken." It was submitted that the parties' conflicting accounts on whether the Claimant's payments constituted salary or directors' remuneration are substantive questions of fact properly resolved only through crossexamination at trial, and that on this ground alone the Application ought to be dismissed. 40 The Claimant further submitted, relying on the definition of "employee" under Section 2 of the Employment Act as "a person employed for wages or a salary," that the Page 11 of 14

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Respondent's own acknowledgment of paying him a salary supports his status as an employee. 41 The Claimant also relied on WhatsApp communications exchanged with the Respondent's principal director, which allegedly demonstrated that he was consistently recognized as the manager responsible for the day-to-day operations of the gym. It was submitted that the communications further established that he worked under the authority, direction and supervision of the Respondent's majority director, reporting on staffing, procurement, client management and the general operation of the business. According to the Claimant, these features are consistent with the existence of an employer–employee relationship. 42 To support the proposition that a company director may simultaneously be an employee, the Claimant relied on NMN v Board of Directors, Uhai East Africa Sexual Health and Rights Initiative (Uhai Eashri) & 2 others [2024] KEHC 823 (KLR) , where the Court adopted the test in Eaton v Robert Eaton Ltd and Secretary of State for Employment [1988] IRLR 83, considering factors such as whether the individual held a managerial title, whether there was an agreement to employ the director, whether remuneration was paid by way of salary or directors' fees, whether it was fixed in advance, whether it was payable as of right, and whether the individual worked under the control of the board. Page 12 of 14

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43 Applying these principles, the Claimant submitted that the Respondent itself designated him as General Manager, acknowledged his entitlement to a monthly salary, paid him a fixed salary of Kshs.150,000, and exercised supervisory control over his work. It was therefore argued that these factors overwhelmingly establish that the Claimant served the Respondent as an employee notwithstanding his status as a minority shareholder and director. 44 The Claimant further submitted that the Respondent cannot approbate and reprobate by recognizing him as an employee in its internal records and communications while subsequently denying the existence of an employment relationship before the Court. He argued that the Applicant's jurisdictional objection is merely an attempt to delay and frustrate the hearing of the substantive claim for unfair termination. 45 It is the Claimant/Respondent’s submission that the dispute arises out of an employment relationship between an employer and an employee and therefore falls squarely within the jurisdiction of the Employment and Labour Relations Court under Article 162(2)(a) of the Constitution and Section 12 of the Employment and Labour Relations Court Act. 46 I have examined all the averments and submissions of the parties herein. The applicant filed the application seeking striking out of this claim on account of jurisdiction on account of subject matter. The applicant avers that there Page 13 of 14

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is no employer- employee relationship between the claimant and the respondent. 47 The application has raised would have to be determined by calling of evidence to ascertain whether such a relationship existed or not. It would in the circumstances be a waste of precious court’s time. I believe the issues raised can be determined within the main cause. I do find the application is not necessary at the moment and I proceed to dismiss it accordingly. Costs in the cause. Dated, Signed and Delivered virtually at Nairobi this 17th Day of September 2026. HELLEN WASILWA JUDGE Page 14 of 14

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