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IndustrialAllowedNot stated in judgment

Miseda v Todays Online Limited & 2 others; Standard Chartered Bank (Garnishee) (Cause 704 of 2010) (Employment and Labour) [2022] KEIC 2 (KLR)

Employment and Labour Relations Court
29 September 2022
608 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~2 min to read original · ~4 min brief

The bottom line

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Kenya's Employment Court held company directors personally liable for an 11-year-old unpaid award after they sold the business and left the country.

What this practically means

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Executive summary

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The Employment and Labour Relations Court at Nairobi, per James Rika, Judge, dealt with an application dated July 11, 2021 seeking enforcement of an award of Kshs 2,085,000 made on May 20, 2011 in the claimant's favour against the 1st respondent, which had remained unsatisfied and unappealed for 11 years. The claimant's earlier attempt to attach a motor vehicle was defeated by successful objection proceedings lodged by Communications Solutions Limited, the purchaser of the 1st respondent's assets. The 2nd and 3rd respondents, directors and shareholders of the 1st respondent, sold the business and left the jurisdiction, frustrating the claimant's engagement on enforcement. The claimant sought orders that the directors be held liable to satisfy the award and an order nisi over a bank account they held at the garnishee bank. The court held that the directors' disposal of the business, relocation outside the jurisdiction, and refusal to honour the award for over a decade were deliberate and fraudulent acts justifying lifting of the corporate veil. Relying on Section 2 of the Employment Act, which defines an employer to include agents and factors of companies, the court deemed the directors employers of the claimant in the absence of their company. It ordered the directors to personally pay the decretal amount, granted an order nisi directing the garnishee to attach all monies in their account towards satisfaction of the award, and directed the garnishee to file a replying affidavit within 7 days with an inter partes hearing date to be obtained at the registry. No costs order was recorded.

Questions the Court framed

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

  1. 1.Whether garnishee proceedings could validly be taken against the directors as opposed to their company
  2. 2.Whether the corporate veil of the 1st respondent should be lifted to hold the 2nd and 3rd respondents personally liable to satisfy the award
  3. 3.Whether the 2nd and 3rd respondents can be deemed employers of the claimant under Section 2 of the Employment Act
  4. 4.Whether an order nisi should issue against the bank account held by the 2nd and 3rd respondents

Key legal issues

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01

Lifting of the corporate veil to enforce an unsatisfied award against directors

Holding

The court lifted the corporate veil, holding the 2nd and 3rd respondents personally liable for the decretal amount

Reasoning

The directors sold the company's assets, relocated outside the jurisdiction, and failed to honour the award for 11 years despite awareness of it. The court characterised these as deliberate and fraudulent acts designed to dispossess the claimant of the benefit of the award, constituting circumstances that justify lifting the corporate veil.

p. 2
02

Directors as 'employers' under Section 2 of the Employment Act

Holding

The directors were deemed employers of the claimant in the absence of the sold company

Reasoning

Section 2 of the Employment Act defines an employer to include agents, foremen, managers or factors of companies that have contracted to employ an individual. The respondents held decisional control of the company and the power to dispose of the business, so they could conveniently be deemed employers in the company's absence.

p. 2

Legal principles established

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  • Directors who dispose of company assets, leave the jurisdiction and fail to honour an award may have the corporate veil lifted and be held personally liable as employers under Section 2 of the Employment Act
  • Deliberate acts to forestall satisfaction of a court award constitute fraudulent conduct justifying lifting of the corporate veil

Court orders

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  1. 1.The 2nd and 3rd respondents shall personally pay the decretal amount due to the claimant, as computed by the claimant
  2. 2.Order nisi granted directing the garnishee to attach all monies/debts in current account number 0150xxxxxxxx in the names of the 2nd and 3rd respondents and utilize such monies in satisfaction of Kshs 2,085,000
  3. 3.The garnishee to file its replying affidavit within 7 days of the ruling, with a suitable date for inter partes hearing to be obtained at the registry

The bench

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

majority

Wrote the judgment

Jurisdiction invoked
Original and supervisory jurisdiction over enforcement of its own award under the Employment and Labour Relations Court Act and the Employment Act

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.

Order nisi is granted, directing the garnishee to attach all monies/ debts in current account number 0150xxxxxxxx in the names of the 2nd and 3rd respondent, and to utilize such monies in satisfaction of the sum of Kshs 2,085,000.
p. 2Final orders - order nisi against directors' bank account
The 2nd and 3rd respondents shall personally pay the decretal amount due to the claimant, as computed by the claimant.
p. 2Personal liability of directors
These are deliberate acts meant to forestall satisfaction of an award of the court. They are fraudulent acts, meant to dispossess the claimant the benefit of an award, which he was granted by the court more than a decade ago.
p. 2Fraudulent conduct justifying lifting of the corporate veil

Issues in the judgment

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minor

The judgment does not state the case number, the names of the parties, or the identity of the garnishee bank, referring to them only by role

minor

The judgment refers to both 'Communications Solutions Limited' and 'Communications Limited' as the entity that lodged successful objection proceedings, an internal inconsistency

minor

The relief sought in paragraph 8 refers to order nisi 'with regard to the above account' numbered 0150xxxxxxxxx, while the order granted references account 0150xxxxxxxx, with inconsistent digit counts

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, "Miseda v Todays Online Limited & 2 others; Standard Chartered Bank (Garnishee) (Cause 704 of 2010)  (Employment and Labour) [2022] KEIC 2 (KLR)", Case Analysis (2022). Not stated in judgment. Source: https://new.kenyalaw.org/akn/ke/judgment/keic/2022/2/eng@2022-09-29

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