Court dashes ex-Dubai Bank staff hopes for salary arrears

Dubai bank Kenya limited was insolvent to the tune of Sh1.3 billion. [Edward Kiplimo, Standard]

The Labour Court in Nairobi has dismissed a case filed by former Dubai Bank employees, seeking more than Sh44 million in salary arrears from the defunct lender.

Justice Maureen Onyango in her verdict found that it is impossible for the liquidator to pay the salaries owed to the employees as all the money recouped from the collapsed bank went to paying secured creditors.

As of the date of liquidation on August 24, 2015, Dubai Bank had a cash balance of Sh36 million. However, it owed insured creditors at least Sh123 million.

The bank was insolvent to the tune of Sh1.3 billion.

Justice Onyango found that even if Kenya Deposit Insurance Corporation (KDIC) and Adam Moru, who was Dubai Bank's liquidation agent, were willing to pay the salary arrears, it would put them at odds with the insured creditors, who came first in the line of claim.

She, however, noted that all was not lost for the former employees as they could still be paid in future when KDIC recoups more money from debts owed to the bank.

"From the foregoing, it is evident that the first and second respondents (KDIC and Boru) were not in a position to pay the debts of the claimants, which ranked second to the insured deposits. I, therefore, find that the second respondent was insolvent and there were no funds to be applied to payment of the monies owed to the claimants at the time that they demanded payment or at the time they approached the court," said Justice Onyango.

The case was filed by Francis Mulu, Rahim Abdumalik and Hassan Kinuthia on behalf of 41 former Dubai Bank employees.

They accused the liquidator of failing to pay their dues when the bank was placed under receivership and subsequent liquidation.

The former employees claimed that they were not issued with a notice of the lender's true financial position before it went under.

They accused the liquidator of failing to honour his end of the bargain after he issued them with termination letters.

They told the court KDIC had promised to pay their salary arrears and terminal benefits.

The petitioners asked the court to find that they were unlawfully sacked, adding that their rights to fair labour practices were infringed.

According to their tabulation, they were owed Sh44.7 million in salaries arrears.

KDIC and Mr Boru admitted that Dubai Bank owed its former employees salaries but added that there was no evidence to show the lender had withheld their dues.

He told the court that after the bank went under, he held a meeting with all employees and explained to them what was at stake and the procedures through which they could be paid.

Mr Boru said the termination of their employment was necessitated by the bank's inability to meet its financial obligations as a licenced banking institution.

At the time, Mr Boru added, the bank was owed Sh4 billion in loans, overdrafts, and staff loans.