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ELRCAllowedNot stated in judgment (Motion dated February 15, 2023 in the main suit)

Lusaka v Daystar University (Cause 1850 of 2017) [2023] KEELRC 1170 (KLR)

Employment and Labour Relations Court
15 May 2023
1,029 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~4 min to read original · ~4 min brief

The bottom line

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A Kenyan court allowed an employer to deduct a departing employee's outstanding Sacco loans from money the court had awarded the employee, blocking full payout.

What this practically means

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Executive summary

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The respondent University, through a Motion dated February 15, 2023 supported by its Legal Manager Mueni-Nyokabi Kahumbura, sought a permanent restraint against execution of the judgment of April 25, 2022 (award of payment in lieu of notice, leave pay and unpaid half salaries) and a permanent stay of execution, invoking the doctrine of lien to offset the claimant's outstanding Sacco loans against the decretal sum. Counsel for the applicant, Mr. Kipkorir, submitted that after statutory deductions the net decretal sum was Kshs 559,704.00 while the claimant owed Kshs 740,734.00, a variance of Kshs 181,030.00, relying on Barclays Bank of Kenya Ltd v Kepha Nyabera and an Indian authority. The claimant's counsel, Ms. Chadianya, countered that lien entitles a party only to retain property, not to sell or apply monies; that the loans were owed to Saccos, not the respondent; that the respondent should have pleaded a counterclaim; and that the court was functus officio. The court, applying section 19(1)(h) of the Employment Act, held that the claimant's loans were owed to Saccos closely associated with the respondent, so no counterclaim was necessary; permitting the claimant to escape loan liability would be unjust enrichment and unfair to colleagues. The reconciliation showing the claimant owed Kshs 181,030.00 was held proper. The court allowed prayers 3 and 4 of the Motion, granting permanent restraint and stay of execution, with costs to the applicant.

Questions the Court framed

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The issues the Court set itself to decide, in its own words.

  1. 1.Whether the doctrine of lien was available to the respondent/judgment debtor post-judgment to withhold the decretal sum against the claimant's outstanding Sacco loans
  2. 2.Whether permanent stay of execution and restraint of execution should be granted
  3. 3.Whether the respondent ought to have counterclaimed instead of relying on the doctrine of lien
  4. 4.Whether the court was functus officio

Key legal issues

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01

Availability of the doctrine of lien to a judgment debtor employer post-judgment

Holding

The court allowed the respondent to apply the doctrine of lien, treating the decretal sum as properly creditable against the claimant's outstanding Sacco loans.

Reasoning

The claimant undisputedly owed Sacco loans as at termination of employment. The loans did not belong to the respondent, so no counterclaim lay; instead the respondent was entitled to pay the decretal sum net of loan deductions. Recovery of such loans was necessary to prevent unjust enrichment and to protect the Sacco's pooled funds and its operation.

p. 3
02

Statutory basis for deduction of loan repayments

Holding

Section 19(1)(h) of the Employment Act permitted the deduction of amounts due under written loan repayment agreements.

Reasoning

The court invoked section 19(1)(h), noting the claimant's payslips showed contributions to Biblia Sacco and Multipurpose Sacco, with substantial outstanding balances at December 2016 which would have been paid through the check-off system had employment continued.

p. 2
03

Alleged functus officio and absence of substantive appeal

Holding

The court did not accept that functus officio or lack of appeal barred relief; it found the Motion merited and allowed prayers 3 and 4.

Reasoning

Ms. Chadianya argued the court was functus officio and that a permanent injunction against execution without a substantive appeal was unknown to law. The court, after reviewing the application and submissions, found the reconciliation proper and the Motion merited, allowing the prayers for restraint and stay.

p. 3

Legal principles established

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  • An employer may deduct from an employee amounts due under a written loan agreement, including set-off against sums awarded post-termination
  • Prohibiting employers from recovering loans owed by exiting staff would be unjust enrichment and would prejudice Sacco members' pooled funds

Court orders

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  1. 1.The Claimant/Decree Holder is permanently restrained from executing the Decree pursuant to the doctrine of lien
  2. 2.Permanent stay of execution is issued (prayers 3 and 4 of the Motion allowed)
  3. 3.The respondent/applicant is awarded costs of the Motion

The bench

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One judgment of the whole court — no separate or dissenting opinions.

majority

Wrote the judgment

Jurisdiction invoked
Original Employment and Labour Relations Court jurisdiction over execution of its decree; Employment Act section 19(1)(h)

Quotable passages

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Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.

The respondent therefore could not counterclaim for the outstanding loan amounts but had the responsibility to pay the Claimant net of deductions for loans he took.
p. 3Doctrine of lien available where loans owed to Saccos rather than the employer
It would not only be unjust enrichment for the Claimant to get away with his loan responsibilities but unfair to his former colleagues who would lose money from the pool they borrow from.
p. 3Justification for set-off of Sacco loans against decretal sum
In the foregoing, the Court do find that our reconciliation is proper and that the Claimant owes them the sum of Kshs 181,030.00.
p. 2Reconciliation of accounts and variance owed by claimant
From the foregoing, the Court finds the Motion dated February 25, 2023 merited and hereby allows prayers 3 and 4 of the same. The applicant shall further have costs of the Motion.
p. 3Final orders

Issues in the judgment

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minor

The judgment dates the Motion as February 15, 2023 at the start but refers to it as February 25, 2023 in the final orders

minor

The judgment repeatedly uses 'lieu' where the doctrine discussed is clearly 'lien'

minor

The opening numbered paragraphs (1 and 2) of the judgment are blank, and the identity of the claimant is not fully stated in the excerpt

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, "Lusaka v Daystar University (Cause 1850 of 2017) [2023] KEELRC 1170 (KLR)", Case Analysis (2023). Not stated in judgment (Motion dated February 15, 2023 in the main suit). Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2023/1170/eng@2023-05-15

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