Joseph Ashioya & 171 others v Kenya United Steel Company [2006] Limited [2018] KEELRC 2526 (KLR)
The bottom line
#What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether the Claim is time-barred under the Limitation of Actions Act
- 2.Whether Kenya United Steel Company [2006] Limited (formerly S.R.M Limited) is the same entity as, or otherwise liable for the obligations of, Kenya United Steel Company Limited, which employed the Claimants
- 3.Whether S.R.M Limited/KUSCO [2006] Limited is a phoenix company that should assume employment liabilities of the collapsed KUSCO Limited
- 4.Whether the Claimants established an employment relationship with, or any legal nexus to, the Respondent
Key legal issues
#Identity of the employer entity and nexus to the Respondent
The Claimants failed to establish that KUSCO [2006] Limited (formerly S.R.M Limited) is connected to KUSCO Limited, their original employer
S.R.M Limited bought only land and assets of KUSCO Limited under a court-sanctioned receivership, assumed no liabilities, and changed its name commercially to retain market share. No common directorship, management or enterprise was shown. KUSCO Limited still exists, was never wound up or liquidated, so claims lie against it, not the innocent purchaser.
Phoenix company doctrine
Mwabora distinguished; no fraud or flawed receivership, so no imposition of liability on the purchaser
In Mwabora the receivership was flawed and commitments to employees were dishonoured. Here the receivership was challenged up to the Court of Appeal unsuccessfully, no fraud was established, and the only undertaking was to offer jobs on application and interview. The name change was a bona fide commercial decision, sufficient in the court's view.
Limitation of actions
The defence of time-bar fails; trade disputes under the repealed Trade Disputes Act are not governed by the Limitation of Actions Act
The Respondent's submission that Radido J withheld a verdict on limitation was incorrect. The earlier Ruling of 26 July 2013 expressly held the Limitation of Actions Act inapplicable to trade disputes under the repealed Trade Disputes Act, so time-bar fell away as an issue.
Late evidence and procedural orders
The Claimants' Further Affidavit and Supplementary Submissions filed 18 December 2018 were filed contrary to orders and expunged
The documents questioning the validity of the Sale Agreement arrived three days before judgment despite the letter having been available since May 2014; they were filed contrary to the 7 December 2018 orders and were expunged from the record.
Labour Office Report
The Report recommending the Receiver-Manager pay the Claimants is unsustainable against the legal findings in the Ruling of 26 July 2013
The Report did not take account of the legal relationships established in the earlier Ruling discharging the Receiver-Manager, and its recommendations were ambiguous as to whether the Receiver-Manager was to pay arrears of salaries as well as severance and terminal benefits.
Legal principles established
#- Where a business collapses and is sold on receivership and later rises as a phoenix company with the same operational infrastructure, the phoenix company may be called upon to shoulder employment obligations of the collapsed business, but this requires proof of a common enterprise or common thread
- For liability to extend across corporate structures, employees must show the entity before the court is their employer or capable of assuming employment liability, with a common thread running through the structures
- A purchaser of assets through a regular, court-sanctioned receivership who does not assume liabilities and changes its name for commercial reasons is not a phoenix and bears no employment liability of the seller
- Trade disputes initiated under the repealed Trade Disputes Act are not subject to the Limitation of Actions Act
Court orders
#- 1.The Claim is rejected
- 2.No order on the costs
- 3.The file shall be marked as closed
- 4.Parties wishing to appeal shall be supplied, upon payment of requisite fees, with certified proceedings and a copy of the Judgment
The bench
#One judgment of the whole court — no separate or dissenting opinions.
Wrote the judgment
- Jurisdiction invoked
- Employment and Labour Relations Court jurisdiction under the Employment & Labour Relations Court [Procedure] Rules 2016; dispute initially filed under the repealed Trade Disputes Act Cap 234
Relief refused
#4 months' salary and benefits amounting to Kshs. 5,974,791
No employment relationship or legal nexus established between the Claimants and the Respondent; S.R.M Limited did not take over liabilities of KUSCO Limited
Severance pay, annual leave pay, housing and other allowances amounting to Kshs. 29,839,199 per the collective agreement
Liability fell, if at all, on KUSCO Limited or the Receiver-Manager, not the Respondent; the receivership was regular and not fraudulent
Interest and costs
Claim rejected in its entirety; no order on costs
Costs
No order on the costs (each party to bear own costs implicitly; court made no order on costs)
Quotable passages
#Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.
IT IS ORDERED: a) The Claim is rejected. b) No order on the costs. c) The file shall be marked as closed.
Employers must not be allowed to escape employment liability, through clever manipulation of multiple layers of legal and business structures.
For this principle to apply, Employees must be able to show that their Claim is directed against a common business or enterprise, of which the disparate legal and business structures are components.
Such change of name does not cast the Respondent in the mould of a phoenix, which should bear the employment liability of the original KUSCO Limited.
the Limitation of Actions Act was/is not applicable to trade disputes envisaged under the repealed Trade Disputes Act
The Court is not persuaded that Kenya United Steel Company [2006] Limited is properly joined to this Claim.
Issues in the judgment
#Internal inconsistency in dates: the collective agreement relied on for reliefs is stated as dated 15th January 2012, after the events of 2003 and after re-employment in 2007
Typographical inconsistency: paragraph 64 states 'submit KUSCO Limited was never would up' where the context and paragraph 32 indicate 'wound up'
Inconsistent date on the Abid Alam Further Affidavit: paragraph 28 says sworn 11th December 2018, paragraph 61 refers to it filed 14th December 2018
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Joseph Ashioya & 171 others v Kenya United Steel Company [2006] Limited [2018] KEELRC 2526 (KLR)", Case Analysis (2018). Cause Number 703 of 2011 (Nairobi), transferred and heard at Mombasa. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2018/2526/eng@2018-12-21
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.