Kenya Airline Pilots Association v Kenya Airways Limited [2015] KEELRC 460 (KLR)

Full Case Text

REPUBLIC OF KENYA

IN THE EMPLOYMENT AND LABOUR RELATIONS COURT OF KENYA AT NAIROBI

CAUSE NO. 1564 OF 2015

KENYA AIRLINE PILOTS ASSOCIATION ……….…………………..…… CLAIMANT

VERSUS

KENYA AIRWAYS LIMITED …………………………………….………. RESPONDENT

RULING

1. The Claimant association, the Kenya Airline Pilots association filed their application through Notice of Motion on 4th September 2015 under the provisions of section 12(3) (i) and (viii) of the Industrial Court Act [Employment and Labour Relations Court Act] seeking for orders that;

Spent

Pending the hearing and determination of this application the respondent, its employees, servants and or agents whatsoever, be restrained from disposing of or selling B777-200 and B777-300 aircrafts.

Pending the hearing and determination of the suit the respondent, its employees, servants and or agents whatsoever be restrained from disposing of or selling B777-200 and B777-300 aircrafts.

This Court do issue an interlocutory injunction restraining the restraining the respondent, its agents and or servants from whatsoever be restrained from disposing of or selling the B777-200 and B777-300 aircrafts and any other Kenya airways assets pending the outcome of investigations being carried out by the government of Kenya and McKinsey and Seabury.

The costs of this application be provided for.

2. This application is supported by the annexed affidavit of Captain Ronald Karauri and on the grounds that the application by the Claimant involves a matter of great public importance touching ion strict adherence to law and parameters set by the government of Kenya in investigating a public company of great economic significance as the respondent. The Respondent is a public limited company listed at the Nairobi Stock Exchange (NSE) with 29. 8% equity shareholding by the government of Kenya in trust with 26. 7% equity shareholding by KLM while the rest 43. 47% equity shareholding is publicly traded at the NSE.

3. Other grounds are that the Claimant is the largest professional body of pilots in Kenya with over 500 members and registered as a trade union under the Labour Relations Act and thus conversant with matters herein especially welfare issues and aviation matters generally. The orders sought are to restrain the Respondent from selling the B777-200 and B777-300 aircrafts in breach of the Claimant members rights to fair labour practices with far reaching negative consequences to the economy of Kenya.

4. Other grounds are that the Respondent has recognised the Claimant as the trade union in line with the Labour Relations Act and any changes to the fleet has to be dialogued with the claimant. The Respondent now in disregard of ongoing investigations by the government of Kenya, McKinsey and Seabury intends to sell B777-200 and B777-300 aircrafts. Unless the Court grants the orders sought the Claimant members shall suffer irreparable loss and damage which may lead to some of them being rendered redundant. In the interests of justice and public interest the application be granted as it is brought in good faith.

5. In the affidavit of Captain Ronald Karauri he avers that as the Secretary General of the Claimant they are a registered trade union under the provisions of the Labour Relations Act and for smooth operations and air safety, the Claimant and the Respondent regularly hold management meetings where critical issues are deliberated and consensus agreed and any decisions that affect network planning are first dialogued between the Claimant and the respondent.

6. The Claimant was informed of the sale of B777-200 and B777-300 aircrafts in February 2015 but to date the Respondent has not informed the Claimant of the implications on manning levels on the fleet once the aircrafts are sold. The sale of these aircrafts is not an economically sound decision, it is aimed at further frustrating the claimant. The Respondent has leased the B777-200 aircrafts since 20th February 2009 and will soon fully own the aircraft. The Respondent has also since 2007 leased the B777-300 as the Respondent is the operator and conditional purchaser of the B777-200 and the lessee of B777-300 aircrafts which is owned by Tsavo Aircraft Financing LLC. The Claimant members have always held their obligations by working hard to qualify, obtain and maintain the relevant certifications pertaining to the B777-200 and B777-300 aircrafts.

7. Captain Karauri also avers that the sale of B777-200 and B777-300 aircrafts is of no economic value to the Respondent and only geared to frustrate the Claimant as there is nothing technically unworthy with these aircrafts. The Claimant is aware of the recent poor financial results posted by the Respondent but there has been no attribution to the B777s and the Respondent should explain to the shareholders the issues at hand before disposing off these aircrafts. The sale of the aircrafts will not resolve the Respondent financial problems and a good example is Ethiopian Airlines which uses the B777s for its long range passenger services and is making profits. Majority of pilots on the B777-200 and B777-300 aircrafts have been sent on leave after which the Respondent will terminate their services.

8. The application should be allowed as prayed.

9. The Claimant also filed their Further Affidavit on 25th September 2015 sworn by Captain Ronald Karauri the General Secretary of the claimant. he avers that the Claimant and its members have a right as well in discussions that touch on terms and conditions of service affecting duration of employment, method of wage payment and Kenyanisation amongst other items as listed out in the CBA between the patties. The matter at hand weighs more on the duration of employment with the pending disposal of the aircrafts and the Respondent has an obligation to inform the Claimant what will become of its members if the said disposal is carried out. This disposal creates a possibility of a redundancy of the Claimant members. The disposal of the aircrafts is not in denial but the Respondent needs to inform the Claimant of the repercussions of the sale and its ability to compensate the Claimant members in the event it declares them redundant.

10. Captain Karauri also avers that they are not infringing on the proprietary rights of the lessor but seeking a temporary suspend of the right accorded to the Respondent as the employer of the Claimant members before their right is lost indefinitely. The status quo should be maintained until the issue of claimants possible exit is addressed and Claimant members know what they are entitled to.

11. Captain Karauri also avers that the Senate committee was mandated to investigate the Respondent and make recommendations on how to salvage it and the issue of the Respondent leasing and buying of aircrafts since 1996 is part of the investigations. The two consultants McKinsey and Seabury are not investigating the Respondent but facilitating its turnaround. The Claimant will not offer security as its claim is for the Respondent to clarify if the member’s jobs will be secure and if not, whether they will be entitled to appropriate compensation before sale is effected. Before the sale the Respondent should set out clear compensation terms of the Claimant members.

12. In reply the Respondent filed a Replying Affidavit sworn by Alban Mwendar on 22nd September 2015. He avers that the Respondent is engaged in air transport industry, an economic sector which is known worldwide to be highly competitive and full of operational risks. The Respondent has a recognition agreement with the Claimant and recognise the Claimant as the representative of all pilots, flight engineers, and flight navigators employed by the Respondent in negotiating terms and conditions of service which specifically embrace rates of pay; duration of employment; hours of work; method of wage payment; leave; dues; medical facilities; insurance; fleet agreements; and kenyanisation. Under the collective agreement, the Respondent reserves the right to conduct its business and manage its operations including its staff.

13. Mr Mwendar also avers that the CBA between the parties does facilitate collective bargaining and defines the mandate and extent of the claimant’s activities within the Respondent organisation which does not include intervention in the commercial activities of the respondent. Parties hold periodic consultative meetings at which operational issues affecting the welfare of the pilots are discussed.

14. On 21st August 2015 and 9th October 2015[1] the Respondent brought to the attention of the Claimant their intention to dispose its fleet of Boeing 777-200 and 777-300 aircrafts due to various economic and operational considerations which include cash flow concerns brought about by reduction in passenger capacity due to the outbreak of Ebola disease and terrorism attacks in East Africa. The aircrafts earmarked for disposal are either under simple lease or lease finance/capital agreements and the Respondent doe stop wholly own the aircrafts save as a lessee and orders sought restraining the Respondent from disposing off these crafts will not have any effect as the persons who currently have proprietary rights over them have overriding interests over them yet they are not parties herein. Even where the Respondent were the owner of these aircrafts the Court as an arm of state is not expected to bar or restrict the Respondent from disposing of them as to do so would amount to limiting or restricting the respondent’s proprietary right over its own assets contrary to the Bill of Rights under the constitution.

15. Mr Mwendar also avers that the decision to sell the respondent’s interests in the aircrafts was given due consideration by the Board of the Respondent on behalf of the shareholders as evidenced by its resolution in a meeting held on 25th July 2015, and the sale is subject to conditions imposed by the owners. The Respondent is not under investigations by the government but the Senate has called the Respondent to explain its operations relating to financial losses it has suffered in the recent past. The government is a stakeholder in the Respondent and is represented in the board where a decision to sell was made. Mckinsey and Seabury are not investigating the respondents but are consultants to turn arounds its operations and has resulted in the decision to sell the aircrafts in question.

16. The Respondent has appointed Cabot Aviation Services limited to act as the sales agents for its aircrafts, negotiations for sublease of the 3 B777-300 ER and are at an advanced stage and the legal huddles currently being introduced by the Claimant can only frustrate the efforts made so far and success achieved to date which has far reaching irreparable losses to the Respondent unless the Claimant undertakes to indemnify the Respondent for each loss. If the Court grants the orders sought, the Respondent shall seek the Claimant to give a security on costs which will arise from expenses being incurred by the Respondent due to abortive disposal.

17. The subject aircrafts are currently grounded as their capacity far much exceeds the current capacity requirements for the routes they were acquired for and using them would be uneconomical and an additional financial loss to the already cash strapped airline. The Respondent is paying leasing fee to the owners of the aircrafts yet they are not generating sufficient income to the respondent. The orders of the Court on 4th September 2015 are prejudicial to the Respondent and are of no benefit to the Claimant members as the Respondent cannot make them pilot aeroplanes which are uneconomical to operate.

18. Mr Mwendar also avers that as the respondent’s Human Resource director he is aware that the Claimant members are not persons versed in economic and financial issues to the able to authoritatively depose on economic value of continuing to fly the aircrafts and the decision to terminate the services of some pilots is regulated in law and cannot be based upon the same of the subject aircrafts. The law has appropriate remedies in a case of an employer who takes the prerogative to restructure. The Claimant has no prima facie case, any loss that may be incurred resulting from the sale can be compensated for and the balance of continence requires that the aircrafts be disposed of.

Determination

19. The Claimant application is premised on the facts that the parties herein have a recognition agreement and a collective agreement (CBA) that address the terms and conditions of service for the Claimant members. It is also common cause that the Claimant members are the employees of the Respondent and such employment is still subsisting. It is also a fact that the Respondent is in the process of selling its B777-200 and B777-300 aircrafts as its business has been on a downward trend.

20. The Respondent is a public company listed at the NSE and with it has various stakeholders the largest being the government of Kenya as well as KLM and the public who hold equity shareholding. Thus as a business, part of the Respondent assets are its employees part of whom are the Claimant members, its aircrafts and other assets. The subject aircrafts herein have been leased and the parties to such lease have agreed to the proposed sale and an agent appointed for that purpose.

21. The Claimant is seeking for an interlocutory injunction to restrain the Respondent from selling the B777-200 and B777-300 aircrafts and other assets pending the outcome of investigations being carried out by the government of Kenya and McKinsey and Seabury consultants hired by the respondents. The Claimant thus have applied to restrain the Respondent from selling these aircrafts as the sale is in breach of their right to fair labour practices and the sale will have far reaching consequences to the economy of Kenya and some of its members will be rendered redundant.

22. As submitted by both parties, interlocutory injunctions are governed by key principles set out in the case of Giella v Cassman Brown& Co. Ltd. [1975] E.A. 358, where the Court held;

(a) The applicant must show a prima face case with a probability of success.

(b) Applicant must prove that he will suffer irreparable injury unless interlocutory injunction is granted.

23. However even where the above principles in the Giuella Caseare to be followed, it is imperative for the Court to consider that while granting an interlocutory injunction, the party seeking to establish a right before hand and before hearing is concluded, must act in the clearest of cases. The court in the case of Megarry Jin Shepherd Homes Ltd v

Shadahu(1971) 1 Ch 34 where the learned Judge stated as follows in relation to mandatory injunctions;

… It is plain that in most circumstances a mandatory injunction is likely other things being equal, to be more drastic in its effect than a prohibitory injunction. At the trial of the action, the Court will of course grant such injunction as the justice of the case requires; but at the interlocutory stage, when the final result of the case cannot be known and the Court has to do the best it can, I think the case has to be unusually strong and clear before a mandatory injunction can be granted even if it is sought to enforce a contractual obligation.

24. Such a strong and clearcase must be established by the applicant. Even with such a demonstration, the court must not stop there must go ahead and assess as to whether an applicant has established a clear and summary case to warrant the granting of mandatory Orders. I find the restatement of the law on mandatory injunctions in the case of Kenya Breweries Ltd & 2 Ors v Washington Okeyo(2002) eKLR in which the Court of Appeal declared:

The test whether to grant a mandatory injunction or not is correctly stated in Vol. 24 Halsbury’s Laws of England 4th Edition paragraph 948 which reads:

‘A mandatory injunction can be granted on an interlocutory application as well as at the hearing, but, in the absence of special circumstances, it will not normally be granted. However, if the case is clear and one which the court thinks it ought to be decided at once, or if the act done is a simple and summary one which can be easily remedied, or if the defendant attempted to steal a march on the plaintiff …. a mandatory injunction will be granted on an interlocutory application’.

25. To further affirm the position as above, in an earlier case in Locabail International Finance Ltd. V. Agroexport and others [1986] 1 All ER 901at page 901 it was stated:

A mandatory injunction ought not to be granted on an interlocutory application in the absence of special circumstances, and then only in a clear case either where the court thought that the matter ought to be decided at once or where the injunction was directed at a simple and summary act which could be easily remedied or where the defendant had attempted to steal a march on the plaintiff. Moreover, before granting a mandatory interlocutory injunction the court had to feel a high degree of assurance that at the trial it would appear that the injunction had rightly been granted, that being a different and higher standard than was required for a prohibitory injunction.

26. There exists an employer and employee relationship between the parties herein. Such a relationship is further regulated by the CBA agreed upon by the parties. The Claimant is not any ordinary union as this is also an association of professionals comprising of pilots, flight engineers ad flight navigators employed by the respondent. The contracts of employment have not been terminated. There is however apprehension that there will be a redundancy premised on the proposed sale of the Respondent aircrafts. However, redundancies are matters regulated in law with clarity as to the process, notifications and the resultant effect on an employee. Such a process of redundancy, though feared by the Claimant has not commenced. The employment contracts remain intact. Though the Claimant state that their members have been sent on leave, such details are not outlined and the Court will not go into them as these require call of evidence as to the circumstances of such leave and the link between such leave and the current application seeking to stop the sale of assets by the respondent, which is a public company listed at the NSE. As held in the Megarry casean application such as this one must be strong and clear for the Court to be persuaded at the first instance that there should be an interlocutory order pending hearing restraining the Respondent from disposing of its assets, leased or not.

Is there a prima facie case?

27. Looking at the orders sought by the claimant, the grounds and averments in the two affidavits of Captain Karauri dated 4th September 2015 and 25th September 2015, he avers at paragraph 9 of the Further Affidavit that;

… The applicant is seeking from the said orders in its application dated 4th September 2015 is to maintain the status quo until the employment issue with regard to its members is handled adequately. This is to ensure that even if the possibility of exit is on the table, the members know what they are entitled to.

28. That conceded by the claimant, the Court then has to look at the memorandum of claim and the final orders sought so as to preserve the status quo pending the hearing and determination of the same being that;

Declaration that the intended sale of the aircrafts is unlawful and unprotected

A mandatory injunction restraining the Respondent from terminating, varying or issuing notices to the Claimant members, which would in any manner interfere with their employment contracts.

…

29. As noted above, the employment of the Claimant members is ongoing. The employment relationship between the parties has not been severed. Parties have a CBA that regulate the termination, varying or issue of notices with regard to termination. Such employment and the Claimant members being part of the assets of the Respondent can be secured as a separate and specific assert from the subject aircrafts being disposed. Even where the Respondent has heavily invested in the Claimant and its members in Training of Claimant members to qualify, obtain and maintain the relevant certifications pertaining to the B777-200 and B777-300 aircrafts, such is a best practice to make the Claimant competitive in any business environment and remain available to the service of the respondent. Such investment is for the Respondent to enjoy while the Claimant members remain at their employment but the Claimant and its members also retain the right to terminate their employment as under the agreed upon CBA. Such is the nature of employment. Each party has rights and duties to the employment contract.

Who shall suffer irreparable damage and loss?

30. The Claimant in the Further Affidavit of Captain Karauri concede at paragraph 12 that the two consultants McKinsey and Seabury are not investigating the respondents but are tasked to turnaround operations at the Respondent business and in the process have made a decision that the aircrafts be disposed of. Captain Karauri goes further at paragraph 13 of his affidavit to depose that;

… The applicant will not undertake to provide security as its claim is for the Respondent to clarify if the jobs of the claimant’s members will be secure and if not, whether its members will be entitled to appropriate compensation before sale is effected.

31. The Respondent assets comprising its staff and other properties including the subject aircraft, there is the right to decide as to which to dispose in an effort of turning around its business. In this case, the Respondent has taken the option of disposing of its B777-200 and B777-300 aircrafts and not any other of its assets. From the averments of the Claimant and in the affidavit in support, an employer cannot be forced to terminate the employment of an employee without good cause. The employer is equally not allowed to frustrate and employee so as to cause such an employee to resign on his own volition as that would be an unfair labour practices tantamount to an unfair termination. In this case though, the employment of the Claimant members is secure, it subsists and the option taken by the Respondent is not to terminate their employment but rather to dispose of part of its other assets. The orders sought relate to the subject aircrafts and other assets of the respondentsbut such other assets are not indicated or listed in the affidavit in support. I take it then, the Respondent may have other assertsat its disposal and in any eventuality of need to declare redundancy, which is not the case here, then there remains other possible assets for use in that regard.

Whose balance of convenience?

32. Noting the above issues with regard to loss and damage to be suffered and the principles with regard to the Court assessing the balance of convenience as under the Giella casethe case being that the Claimant member’s employment is secured is settled. In the unlikely event of a redundancy, the applicable law and the process set out under section 40 of the Employment Act is to apply whereas in the unlikely eventuality of a termination that is unfair, the Claimant has remedies set out under section 49 of the Employment Act. To thus stop the sale of the aircrafts so as to secure the Claimant members employment; or pending investigations being undertaken by a major shareholder of the Respondent business the government of Kenya; or for contemplated redundancy and settlement of expected compensation would not be in the interests of justice at this point.

33. In the case of Polyoak (Pty) Ltd v Chemical Workers Industrial Union & others (1999) 20 ILJ 392 (LC), the South Africa Labour Court was asked to confirm an interim order, amongst other things restraining unlawful conduct by striking employees for an indefinite period and the Court held;

The fourth prayer I consider improper is an open-ended one, that is, one that binds the respondents for a period whose duration is indefinite and potentially unlimited. As I have said, an interdict can be granted only to restrain misconduct that is likely to occur in the future. The period during which this is likely to happen is a question of fact, but it will rarely, if ever, be indefinite. It will normally last for no longer than the motive for wrongdoing remains alive - typically, within this context, the duration of the strike plus the time it thereafter takes for life to return to normal. The unlimited operation of a sword of Damocles, to which I referred above, is more than simply undesirable, it is legally wrong

34. In this case and noting the above case though on a different cause of action, the principle is that, there is no definite claim that has been confirmed in terms of a redundancy, termination or due compensation gone into to warrant the restraint sought. There is nothing definite that the Claimant member’s employment shall be terminated or a redundancy will follow. The claim for such redundancy, termination or compensation is futuristic, speculative and uncertain. To secure such uncertainty by stopping the sale of the respondent’s aircrafts would thus be far-fetched in the circumstances of this case. The orders sought are thus not commensurate with the anticipated threat or the noted possibilities.

35. The above analysis that made, it is important to set out here that In employment and labour relations matters apart from parties addressing the above principles in the Giella case, a party seeking interlocutory orders such as in this case must establish the following grounds as held in the case of Dr. Anne Kinyua versus Nyayo Tea Zone Development Corporation, Cause No.1065 of 2012that;

With regard to employment cases, the employee seeking relief will in addition to the general principles for grant of injunction demonstrate that on the evidence the Respondent has not shown that the Claimant 'has no reasonable prospect of succeeding at trial' in being granted a final injunction, second that injunctions can be granted to restrain dismissals as can declarations that acts of purported dismissal are invalid. Thirdly that sufficient relevant confidence subsists between the employer and the employee and finally that the Claimant has not accepted the alleged repudiation of contract.[Emphasis added].

36. Therefore, in employment and labour relations matters it is not only sufficient to set out the common law principles of injunctions. Employment relations in Kenya are governed by the principles of fairness. In seeking an interlocutory order it must therefore be set out clearly that the Claimant or an applicant has a good case with arguable grounds with reasonable prospects of success at trial and that the acts of the Respondent are not valid and that the contract of employment has not been frustrated or being frustrated by the Claimant as the employee. These are salient features that the Court must address in an application such as this one. Therefore where the Claimant has conceded major parts in the averments made by the Respondent and noting that the sale being stopped is only made to secure a future interest that has not been confirmed by the Court as final remedy, to grant the orders sought at this instance would not aid the course of justice.

37. The parties herein still enjoy a healthy relationship. There are several meetings that so far have been held in good faith with regard to the welfare of the Claimant members. The dialogue and continued engagements in good faith and in accordance with the terms of the current CBA should be encouraged. It is not lost to the Court that the huge investment the Respondent has made with regard to the Claimant members is for their mutual benefit. Such should be protected with the employment secured. However, where the Respondent as the employer is in violation of any constitutional right/s of the Claimant or its members that can specifically be set out and that is to be addressed in accordance with the applicable constitutional provisions.

38. With the above outline, I find the Claimant members remain a key asset to the respondent. Their employment contracts should not be frustrated for initiating this claim. The suit shall remain alive for prosecution and with it where there is good basis, the Court shall address as appropriate. The provisions of section 46(h) of the Employment Act shall be relevant to quote here that;

46. The following do not constitute fair reasons for dismissal or for the imposition of a disciplinary penalty…

h) an employee’s initiation or proposed initiation of a complaint or other legal proceedings against his employer, except where the complaint is shown to be irresponsible and without foundation;

In conclusion, application dated 4th September 2014 is hereby dismissed. Costs shall be in the cause.

Delivered, dated and signed in open Court at Nairobi this 30th Day of September 2015.

M. Mbaru

JUDGE

In the presence of:

Court Assistant……………………

……………………….……………

Annexures “AM2A” refer to a meeting held on 21st August 2014 and “AM2B” refer to a meeting held on 9th October 2014.