Kenya Union Of Domestic, Hotels, Educational Institutions, Hospitals & Allied Workers v African Tours & Hotels Ltd. (In Receivership) (Cause 84 of 2000) (Employment and Labour) [2003] KEIC 25 (KLR)

on 9thAugust, 2000, when Messrs. S.N. Mwari and R.M. Muthanga, who appeared for the parties respectively, were directed to submit or file their respective written memoranda or statements by 1stSeptember and 11thOctober, 2000, and the dispute was fixed for hearing on 31stOctober, 2000.The Union submitted its memorandum on 5thSeptember, 2000.On 22ndFebruary, 2001, M/S. Oraro & Co., Advocates, filed a notice of appointment and a reply statement on behalf of AT&H; and on 8thNovember, 2001, the Union submitted a further or an amended memorandum to which no rejoinder was received from AT&H.Meanwhile, the parties took several adjournments for one reason or another, and on 11thApril, 2002, the dispute was fixed for hearing on 20thJune, 2002, and the parties were duly notified. On the said date, i.e. 20thJune, 2002, Mr. J.M. Kariuki appeared for the Union, but there was no appearance for AT&H, and no reasons were given for its counsel’s non-appearance.In the circumstances, the case was heardex-parte. 2. At the commencement of the hearing of this matter, Mr. Kariuki applied to withdraw issues Nos.2 and 3, leaving issue No.1 for consideration and determination. This being the case, I allowed the application for withdrawal and dismiss issues Nos.2 and 3 as withdrawn. Mr. Kariuki also amended the list of the grievants, and in the result only 124 of them are said to have been locked-out and are afiected by this dispute, namely:1. James Ongota 2. Moses Ninah 3. James Ng’ang’a 4. Daniel Gitonga 5. Charles Katee 6. John Muiruri 7. Rosemary Muturi 8. Jacob Aneya 9. Esther Watiri 10. Jenifier Maina 11. Esther Jebii 12. Margaret Anzemo 13. David Ogos 14. George Munguti 15. Mercy Gikonyo 16 Jenifier Kibias 17. Charles Mutegi 18. Joram Kabiru 19. Joseph Mutua 20. Kennedy Kisaka https://new.kenyalaw.org/akn/ke/judgment/keic/2003/25/eng@2003-11-05 2

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21. Michael Nguku 22. John Ndegwa 23. Gideon Kyalo 24. Zipporah Chemtai 25 Charles Kiarie 26. Monicah Wanjiku 27. Patrick Shikuku 28. Onesmus Kivondo 29. Joshua Ogango 30. Josphat Macharia 31. Francis Wahindi 32. Clifi Otieno 33. Fred Onyango 34. Joseph Ngelema 35. Maria Partet 36. David Munge 37. Lazarus Munyi 38. Josphat Gathoka 39. Judy Kihingo 40. Lilian Chelogoi 41. James Kala 42. Rose Wanza 43. Mellen Michuki 44. Jane Mngola 45. Maureen Kituku 46. Elizabeth Nthiwa 47. Lucy Wairimu 48. Roselyn Chepkurui 49. Jane L. Waithera 50. Margaret Githinji 51. Joyce Adhiambo https://new.kenyalaw.org/akn/ke/judgment/keic/2003/25/eng@2003-11-05 3

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52. Joyce Simiyu 53. Lorna Chemutai 54. Patrick Obare 55. Hellen Minayo 56. Janet Mbithi 57. Emily Kangu 58. Elijah Mwaka 59. Alfred Motobo 60. Kinyua Githaiga 61. Antoninah Wambui 62. Geofirey Wambu 63. Maggrey Mbogo 64. Faith Gathoni 65. Tabitha Okiya 66. Joyce Wanjiru 67. Samuel M. Mwaura 68. Anne Kimondo 69. Anne Katunge 70. Dorcas Karimi 71. Eunice Kimotho 72. Anne Adhiambo 73. Pauline Chepngetich 74. Florence Kabii 75. Alice Odundo 76. Samson Owiti 77. Bernard Njuguna 78. Patrick Ngunjiri 79. Geofirey Otuku 80. Saulo Oliendo 81. Esther Mugure 82. Hellen W. Wanjara https://new.kenyalaw.org/akn/ke/judgment/keic/2003/25/eng@2003-11-05 4

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83. Kamuti Mwinzi 84. Charles Mwangi 85. Esther Muiruri 86. Arnold Mawala 87. Peter Ngugi Mburu 88. Johnson Kang’ethe 89. Peter Osano 90. John Kuria 91. James Matiri 92. Arthur Adika 93. Evans Jumba 94. Paul Ng’ang’a 95. Stephen Njuguna 96. Grace Wanjiku 97. Fabian Achuta 98. Abisai Saisi 99. Charles Wambai 100. Peter Njoroge 101. Justus Mutavi 102. William Adero 103. Stephen Wambua 104. Samuel Wainaina 105. Stephen anyoike 106. Samuel G. Kamau 107. John Mugo 108. Gideon Musiva 109. Hilary Mwangi 110. Joseph Bunyi 111. Simon Wainaina 112. Gabriel Mwakaba 113. Margaret Huta https://new.kenyalaw.org/akn/ke/judgment/keic/2003/25/eng@2003-11-05 5

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3. 114. Margaret Watenga 115. Naomi Muthui 116. Henry Owiti 117. John Ochieng 118. Joseph Munguti 119. Duncan Ndungu 120. James Wambua 121. Mogaka Oredho 122. Robert Muyumba 123. George Macharia 124. Mary Muragu This dispute arose on 30thJune 1998, when Milimani Hotel, which had been leased to AT&H. by Milimani Hotels Ltd. for a period of five (5) years and three (3) months, with efiect from 1stJuly 1986, reverted back to the latter (Milimani Hotels Ltd.) after the former (AT&H.) was placed under receivership on 29thJune 1998.The parties met at their own level to resolve the matter but no settlement was reached. Consequently, the Union reported a dispute to the Minister for Labour in accordance with Section 4(1) of the Act.The Minister accepted the dispute and appointed Mr. E. Masara to act as the Investigator; and on the basis of the Investigation report, which was released to the parties on 4thOctober, 1999, the Minister found and recommended as follows:- “Findings. ……………. Milimani Hotel is wholly owned by Milimani Hotels Limited and that it was leased to African Tours and Hotels (AT&H.) for a period of 5 years and 3 months with efiect from 1stJuly, 1986.That AT&H. continued to use the trade name of Milimani Hotels for business purposes. That there was no valid written contract between the parties as at 29thJune, 1998, when AT&H. was placed under receivership, but an understanding that AT&H continue to pay rent to Milimani Hotels Limited. ………There were two categories of employees engaged by the hotel before it was placed under receivership, namely:Category ‘A’ consisted of employees who were engaged by Milimani Hotels before the lease was signed with AT&H in 1986, totalling 26. Category ‘B’ consisted of employees hired after the lease was signed and were hired by AT&H, they were 116 in total. On 29thJune, 1998 AT&H was placed under receivership and the hotel reverted back to its owners, Milimani Hotels Limited, who on humanitarian grounds undertook to pay some of their former employees in category ‘A’ and rehired the others back.The others who fall on category ‘B’ they contended are the responsibility of AT&H who hired them. https://new.kenyalaw.org/akn/ke/judgment/keic/2003/25/eng@2003-11-05 6

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Finally, AT&H contention that they are under no obligation to pay their former employees is indeed unfortunate as the laws of this country clearly spell out what the employers responsibility are in any employment contract. Recommendation: ……….. I recommend that African Tours and Hotels should pay all the afiected employees their June, 1998 salaries without any apportionment. They should further pay terminal dues to the 116 employees in category ‘B’ as stipulated in the parties CBA”. 4. The Minister finally appealed to the parties to accept the recommendation as a basis of resolving the matter.The Union accepted the recommendation, but it would appear that the Company rejected it. Hence, this dispute for consideration and determination (see U. App.8). 5. Mr. Kariuki submitted that before AT&H. was placed under receivership as aforestated, it managed several lodges and hotels across the country, including Milimani Hotel, Panafric Hotel, Olkurruk Lodge, Mountain Lodge, Bufialo Springs Lodge, Marsabit Lodge, Whitesands Hotel, Ngulia Safari Lodge, Mombasa Beach Hotel, Lake Bogoria Hotel, Meru Mulika Lodge, Voi Safari Lodge, Sunset Hotel, Sirikwa Hotel, Kilaguni Lodge and Kabarnet Hotel, all of which were members of the Kenya Association of Hotelkeepers and Caterers, with which the Union had entered into both valid recognition and collective agreements (see U.Apps.1 & 2).On 1stJuly, 1986, he said, AT&H. took over full operations of the Hotel on a lease basis, together with the 26 members of stafi; and engaged about 99 other employees.However, on 30thJune, 1998, Hon. Matere Keriri, in his capacity as the Chairman of Milimani Hotels Ltd., issued a notice to all the employees to report to the Receiver/Manager on 1stJuly, 1998 “in connection with the payment of their emoluments and future employment” (see U. App.3).The notice read inextensothus:“Notice to Employees. Take notice that following the termination of the lease of Hotel Milimani by African Tours and Hotels with efiect from 30.6.1998 all employees of Hotel Milimani are advised to report to the Receiver/Manager of African Tours and Hotels Limited on 1.7.1998 in connection with the payment of their emoluments and future employment. Dated this 30thday of June, 1998. (Sgd.) Hon. Matere Keriri. Chairman”. 6. Mr. Kariuki submitted further that when the employees reported to the management of AT&H, they were locked-out and were denied audience.Therefore, AT&H, beingbona fideemployer of the grievants, was liable to pay themtheir terminal benefits, amounting toKshs.9,597,028/=as indicated in the attached schedule. 7. In rebuttal, AT&H vehemently denied in its written statement that it either locked-out the grievants or refused to meet the oficials of the Union.However, it maintained that the grievants were the employees of Milimani Hotel Ltd., and, therefore, they (grievants) could have no cause of action against it (AT&H) outside the period of the tenancy agreement.In the circumstances, AT&H admittedly agreed to assume liability to the grievants for the period of the tenancy agreement to the extent of Kshs.4,000/ https://new.kenyalaw.org/akn/ke/judgment/keic/2003/25/eng@2003-11-05 7

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= to every grievant; and the balance of their claim, if any, would rank in priority with its all the other unsecured creditors and can only be paid if and when there are funds available from which payment can be made. 8. The question which requires consideration in this case is whether, in the face of these clear admissions of liability, AT&H can be saddled with the obligations under Clause 4(r) of the lease agreement, which is usefully reproduced hereunder:“4. Provided always it is hereby mutually agreed and declared as follows:(a) ……………………………………………………… (b) ………………………………………………………………………… (c) ………………………………………………………………………… (d) ………………………………………………………………………… (e) ………………………………………………………………………… (f) ………………………………………………………………………… (g) ………………………………………………………………………… (h) ………………………………………………………………………… (i) ………………………………………………………………………. (j) ………………………………………………………………………. (k) ……………………………………………………………………. (l) ………………………………………………………………………. (m) …………………………………………………………………… (n) ……………………………………………………………………. (o) …………………………………………………………………….. (p) ……………………………………………………………………. (q) ……………………………………………………………………. Employees (r) All the servants employees and agents in the and Servants: employment of the Lessor shall continue anddeemed to bethe employees and servants of the lessor, who shall be liable,and continue to be liable during the term hereby demised to pay and discharge all their, or any of their, claims demands and dues in respect of wages, salaries, terminal benefitsand all other dueswhich have accrued due or payable to theemployees as at the 30thday of June, 1986.The annexure hereto marked ‘Schedule of Terminal Benefits’ indicates the terminal benefits of the employees as if the employees had their employment terminated at that date.The Lessee shall be liable for the payment and discharge of the employees salaries wages terminal benefits and other dues which shall accrue due or payable to them during https://new.kenyalaw.org/akn/ke/judgment/keic/2003/25/eng@2003-11-05 8

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the demised term with efiect from the 1stday of July, 1986, during which term the Lessee shall have complete control supervision and charge of the employees with power and liberty to transfer them to any hotels and lodges managed by them, and suspend dismiss or terminate such employees as they may think fit.In the event of termination or dismissal, the terminal benefits shall be apportioned by the Lessee and the Lessor as at the 1stJuly, 1986.” 9. Three collective ingredients of the concept of employment are: and employer, his employee and a contract of employment between the two, i.e. employer and employee.It is not suficient to say that “X” is an employee but the question that immediately follows is: whose employee is he?Therefore, unless there is a contract of employment or service between “X” and “Y”, there would be no relationship of employee and employer between them.The four indicia of contract of employment or service, derived from authorities of Courts in England, were recapitulated byLord ThankertoninShortv.Henderson Ltd. (1946) 62, T.L.R. 427,at page 429, which was decided in the House of Lords, are as follows: “These are 10. (a) the master’s power of selection of his servant; (b) the payment of wages or other remuneration; (c) the master’s right to control the method of doing the work, and (d) the master’s right of suspension or dismissal.” In Harbour Boardv.Coggins & Grifith (Liverpool Ltd) (1947) I.A.C.I,the following observation was made:“The proper test is whether or not the hirer had authority to control the manner of execution of the act in question”. 11. Therefore, the prima facie test for the determination of relationship between an employer and an employee is the existence of the right in the employer to supervise and control the work done by the employee, not only in the matter of direction in what work the employee is to do, but also the manner in which he shall do his work. 12. Thus, some of the tests or essentials to find out whether or not a person is in employment of a certain establishment or industry are:(i) whether the establishment or industry has administrative control over the employee; (ii) whether the establishment or industry pays for the work done by the employee, and (iii) whether the establishment or industry has power to dismiss and reinstate the employee. 13. Where the lessee himself engages employees, as in the present case, for carrying on the work, which he has taken, the lessor cannot be said to have any control or supervision over the employees; and, as a logical corollary, the employees will be the employees of the lessee alone.It was held inWorkers’ Unionv.M.B. Hotel United, Karachi, 1975 P.L.C. 533,which is on all fours with the case at hand, that when an establishment was leased out by a proprietor and was being run by the lessee, the workmen employed in the establishment were, in the circumstances, not the employees of the proprietor. 14. As regards the liquidation of AT&H, this is a ground which has been pressed for the first time here, and such a ground cannot be made the basis of the decision in this case.The payment of terminal benefits to https://new.kenyalaw.org/akn/ke/judgment/keic/2003/25/eng@2003-11-05 9

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the grievants will, therefore, be quite capable of being implemented and their fate would be no better or no worst than other employees similarly afiected by the liquidation, if any, of AT&H. 15. In this case, therefore, AT&H had administrative control over the grievants and also paid their wages or salaries and granted them leave, e.t.c.AT&Hhad also power to dismiss and reinstate the grievants.In the circumstances,I have no doubt in my mind that the grievants were the employees ofAT&H for the period that the lease subsisted, and AT&H is liable to pay all the outstanding terminal benefits due and owing to the grievants for the said period as shown in the attached schedule.I soawardandorder. 16. Both members of the Court were consulted and have supported this decision. DATED AND DELIVERED AT NAIROBI THIS 5THDAY OF NOVEMBER, 2003. CHARLES P. CHEMMUTTUT, JUDGE. https://new.kenyalaw.org/akn/ke/judgment/keic/2003/25/eng@2003-11-05 10

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