[2003] KEELRC 17 (KLR)

REPUBLIC OF KENYA

IN THE INDUSTRIAL COURT OF KENYA

AT NAIROBI.

(Before: Charles P. Chemmuttut, J.,

A.K. Kerich & J.M. Kilonzo, Members.)

CAUSE NO.84 OF 2000.

KENYA UNION OF DOMESTIC, HOTELS, EDUCATIONALINSTITUTIONS, HOSPITALS &

ALLIEDWORKERS..............................................................................................Claimants.

.v.

AFRICAN TOURS & HOTELS LTD. (IN RECEIVERSHIP) ..................................Respondents.

Issues in Dispute:

1. Lock-out of 142 members (hereinafter called the grievants).

2. Violation of Collective Bargaining Agreement Clauses II & V.

3. Refusal by Management to meet Union officials.

J.M. Kariuki for the Claimants (hereinafter called the Union).

No appearance for the Respondents (hereinafter called AT&H).

A W A R D.

On 19th July, 2000, the Minister for Labour referred this dispute to the Court for consideration and determination under powers vested in him by Section 8 of the Trade Disputes Act, Cap. 234, Laws of Kenya (which is hereinafter referred to as the Act); and his reference, together with the statutory certificates from the Labour Commissioner and the Minister himself under Section 14(9)(e) and (f) of the Act, were received by the Court on 21st July, 2000. The dispute was then listed for mention on 9th August, 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 1st September and 11th October, 2000, and the dispute was fixed for hearing on 31st October, 2000. The Union submitted its memorandum on 5th September, 2000. On 22nd February, 2001, M/S. Oraro & Co., Advocates, filed a notice of appointment and a reply statement on behalf of AT&H; and on 8th November, 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 11th April, 2002, the dispute was fixed for hearing on 20th June, 2002, and the parties were duly notified.On the said date, i.e. 20th June, 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 heard ex-parte.

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 affected 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. Jeniffer Maina 11. Esther Jebii 12 Margaret Anzemo

13. David Ogos 14 George Munguti 15. Mercy Gikonyo

16 Jeniffer Kibias 17. Charles Mutegi 18. Joram Kabiru

19. Joseph Mutua 20. Kennedy Kisaka 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. Cliff 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

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. Geoffrey 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. Geoffrey Otuku 80. Saulo Oliendo 81. Esther Mugure

82. Hellen W. Wanjara 83. Kamuti Mwinzi 84. Charles Mwangi

85. Esther Muiruri 86. Arnold Mawala 87. PeterNgugiMburu

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 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 30th June 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 effect from 1st July 1986, reverted back to the latter (Milimani Hotels Ltd.) after the former (AT&H.) was placed under receivership on 29th June 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 4th October, 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 effect from 1st July, 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 29th June, 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 29th June, 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.

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 affected 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”.

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).

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, Buffalo 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 1st July, 1986, he said, AT&H. took over full operations of the Hotel on a lease basis, together with the 26 members of staff; and engaged about 99 other employees. However, on 30th June, 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 1st July, 1998 “in connection with the payment of their emoluments and future employment” (see U. App.3). The notice read in extenso thus:-

“NOTICE TO EMPLOYEES.

TAKE NOTICE that following the termination of the lease of Hotel Milimani by African Tours and Hotels with effect 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 30th day of June, 1998.

(Sgd.)

HON. MATERE KERIRI.

CHAIRMAN”.

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, being bona fide employer of the grievants, was liable to

pay them their terminal benefits, amounting to Kshs.9,597,028/= as indicated in the attached schedule.

In rebuttal, AT&H vehemently denied in its written statement that it either locked-out the grievants or refused to meet the officials 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/= 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.

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 be the 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 benefits and all other dues which have accrued due or payable to the employees as at the 30th day 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 the demised term with effect from the 1st day 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 1st July, 1986. ”

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 sufficient 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 by Lord Thankerton in Short v. Henderson Ltd. (1946) 62, T.L.R. 427, at page 429, which was decided in the House of Lords, are as follows:

“These are (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 Board v. Coggins & Griffith (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”.

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.

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.

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 in Workers’ Union v. 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.

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 the grievants will, therefore, be quite capable of being implemented and their fate would be no better or no worst than other employees similarly affected by the liquidation, if any, of AT&H.

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 so award and order.

Both members of the Court were consulted and have supported this decision.

DATEDand delivered at Nairobi this 5th day of November, 2003.

Charles P. Chemmuttut,

JUDGE.