East African Airways Corporation collapsed alongside the East African
Community in 1977. Now the former employees of the defunct corporation
have gone to court seeking to be paid terminal dues. PHOTO | FILE
On Thursday, the Kenya government will hope that the push to
break away from the East Africa Community in the 1970s will not come
back to hurt the economy.
On Thursday, Kenya will know
whether it will pay at least Sh600 billion, more than a third of this
year’s total budget, to former employees of the defunct East African
Airways Corporation (EAAC).
The claim revolves around
some of the past “unresolved issues” arising from the dissolution of the
East African Community (EAC) in 1977 which have returned to haunt
Kenya.
Following dissolution of the regional bloc,
member states negotiated the EAC Mediation Agreement for the Division of
Assets and Liabilities, which they signed in 1984. The distribution of
the assets is what has become the subject of a court case as about 3,000
former employees of the airlline claim they did not receive their
share.
They are seeking Sh306 billion in respect of the
Provident Fund and Sh302 billion in respect of loss of office
(redundancy) payments.
They have sued the ministries
of finance, transport, the registrar general and Attorney-General. The
figures include interests calculated from the time they ought to have
been paid to date.
The other respondents are Barclays
Bank International Ltd (England and Wales Company), Barclays Bank Trust
Company Ltd (England and Wales Company), Barclaytrust Channel Islands
Ltd (Jersey entity), Barclaytrust International Ltd now known as
Barclays Private Bank & Trust Ltd (Jersey entity) and Barclays Bank
Kenya Ltd.
The former EAAC employees have not been able
to compute claims relating to their outstanding leave, notice and
repatriation expenses due to absence of certain records they said are
being held by the registrar general.
The former
employees say after the collapse of the corporation on January 13, 1977,
they were declared redundant on February 15, the same year and lost
their employment as their offices were abolished.
They
said at the time of the liquidation of the EAAC, they were to be paid
their terminal benefits as preferential creditors. They have, however,
not been paid to date.
“The official receiver and
liquidator (from the respondents) of the defunct EAAC has to date
allegedly, from records obtained at the Kenya National Archives, made
payments of only a portion of the entitlements of some of the former
employees of the defunct EAAC by way of dividend distribution of 12 per
cent in 1979 and 13 per cent in February 1980,” they said.
The
former employees said that other than recently stumbling upon documents
indicating that they had been invited to collect dividend in 1979 and
1980, they have never received any payments from the respondents (the
said ministries, banks, registrar general and attorney general) in this
regard to date.
“There is no concrete clarity as to
what sum the official receiver and liquidator deposited with the
government upon winding up the EAAC that is due to us but the government
has, through various correspondences and answers in the floor of
Parliament, made admissions as to owing us various unspecified amounts
over the years,” the former EAAC employees noted.
They
said that ministries of finance, transport, the registrar-general and
Attorney-General as employees and agents of the Government of Kenya were
under “a constitutional, statutory and equitable duty and obligation”
to meet their terminal benefits and emoluments as specified by the
relevant laws, and in particular, the EAC Mediation Agreement.
Mr
Silvanus Maundu Ndisya, deputy registrar-general and deputy official
receiver, said some of the documents being sought by the former EAAC
employees may have been destroyed, defaced or lost due to “the
inordinate lapse of time”.
He said that on realisation
of the assets of the corporation, the official receiver, with the
assistance of the advising accountants, declared and paid out dividend
to creditors, including former employees, seven times.
“A
number of the former employees have not collected their dividend
cheques to date and their names are contained in the advising
accountants’ final report of the official receiver and liquidator dated
March 1988.
These monies are in the company’s
liquidation account kept by the official receiver at National Bank,”
said Mr Maundu in court papers.
He said the matter had already been determined in previous suits filed in the East African Court of Justice in Arusha, Tanzania.
The
Attorney-General through litigations counsel said that what was
received by the government, out of which payments were made to the
genuine claimants, is clearly laid out under Article 2 and 3 of the EAC
Mediation Agreement of 1984.
He said the petitioners
have not demonstrated beyond reasonable doubt that they were indeed
employees of the defunct corporation.
“Proof of
employment has not been adduced and as such, it is not sufficient for
them to bring a blanket claim that they were employees. They ought to
have attached in their petition, particulars of employment such as
employment letters, staff identity card and others,” said the litigation
counsel.
Further, that the State began paying the
dividend claimed by the former EAAC employees as early as 1980 but it
was a pre-requisite that one had to prove that he or she was indeed a
former employee.
The ministries of finance, transport,
the registrar-general and Attorney-General, through their lawyer, asked
the court not to allow the petition arguing that doing so would
encourage another group to come with a similar or different claim
without sufficient proof, “and ask for such astronomical sums that even
supersede the Gross Domestic Product of some East African Countries.”
“The
court must put this matter to rest once and for all. We urge you to
find that the petitioners or anyone claiming under their title was paid
their retirement benefits and it would be unfair on the government to
ask them to repay people they had paid,” said the litigation counsel.
The
banks on their part also contested the claim by the former EAAC
employees saying that the EAC Mediation Agreement Act of 1984
comprehensively addressed all the issues raised in the petition.
“All
issues pertaining to the pension and provident funds were specially
addressed in the EAC Mediation Agreement Act of 1984 where the funds
were acknowledged to be in the custody of the Crown Agents,” explained
the banks in their court papers.
It was also their
argument that reports prepared by various government bodies demonstrate
that the issues raised by the petitioners had been addressed by
government and parliamentary committees.
A report to
the Deputy Prime Minister and Minister for Finance dated October 10,
2010 in its conclusion makes reference to the case filed in 1997 where
about 774 former employees had sued the government for their pension.
“This
case was dismissed by the court which held that the Government of Kenya
adequately compensated the former employees of the defunct East African
Community,” said the banks’ lawyer.
A related report
made to the office of the Deputy Prime Minister and Minister for Finance
also confirmed that payments for the provident fund claims were handled
by the liquidator and were paid out as dividend according to records
available at the State Law office.
Crown Agents
The
report further states that the funds received from the Crown Agents at
the time of the report were held in an account at the Treasury known as
the East African Community Fund.
These funds had
originally been paid to the government by the Crown Agents at about the
time the East African Community Mediation Agreement 1984, was enacted.
At
that time, the Crown Agents paid 20,592,450 UK pound as pension funds
and 1,248,977 UK pounds as provident funds assets for onward
transmission to former employees.
The taskforce that
was appointed to look into the matter made several visits to Uganda,
Tanzania and the United Kingdom. They held a meeting in London on
January 11, 2011 where members of the taskforce met with Mr Terry King,
Head of Pensions Services, Crown Agents and gathered reliable
information.
The taskforce also relied on information
contained in a report in Uganda which indicated that all former
employees of the East African Airways Corporation were paid 25 per cent
of their dues on February 22, 1977, while the balance of 75 per cent of
the provident fund was paid between July and October 1977 by Barclays
Bank of Kenya.
In the payments, Kenya received Sh8,839,235, Tanzania (Tsh3,217,769.30) and Uganda (Ush1,657,779.45).
“It
is also clear that the petitioners are acting in bad faith because, at
all material times prior to filing the suit, they were aware that Crown
Agents had already notified the National Assembly that it had destroyed
its records upon expiry of the limitation period,” said the banks.
“It
is unconscionable for the former EAAC employees to expect the financial
institutions to keep any account after more than 30 years have passed.”
The banks said the petition is time-barred having been filed over 30 years late.
“It
is impossible for a fair trial to take place on account of delay in
excess of 30 years and loss of documents. There are no witnesses who can
give any credible evidence thus severely prejudicing the right to fair
trial,” the banks claimed.
Judgment will be delivered on December 4, 2014.
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