Court throws out Sh1bn Migori pension recovery suit
The Labour Court has dismissed a Sh1 billion suit by the Local Authorities Provident Fund Board against Migori County Government.
What you need to know:
- The court ruled that the board ceased to exist after Parliament repealed the law that created it.
- The repealed Act was replaced with the County Governments Retirement Scheme Act, 2019.
The Employment and Labour Relations Court has dismissed a Sh1 billion suit by the Local Authorities Provident Fund Board against Migori County Government after finding the board lacked the legal capacity to sue.
Justice Nzioki wa Makau ruled that the board ceased to exist after Parliament repealed the law that created it - the Local Authorities Provident Fund Act -ending its bid to recover alleged unremitted pension contributions meant to secure the employees’ retirement benefits.
The repealed Act was replaced with the County Governments Retirement Scheme Act, 2019.
However, the new Act was declared unconstitutional in December 2022 in a separate case following a finding that it was enacted without adequate public participation and conflicted with several constitutional provisions.
Justice Makau’s ruling leaves unresolved the underlying dispute over the alleged pension arrears because the LAP Fund’s case was determined on a preliminary legal objection.
The legal dispute arose from a claim filed in February 2022 in which the LAP Fund Board sought Sh1 billion from Migori County Government and its Chief Finance Officer. The board alleged the money represented provident fund contributions deducted from employees but never remitted.
Migori County responded with an objection asking the court to strike out the case. It argued the Local Authorities Provident Fund Board had ceased to exist after the County Governments Retirement Scheme Act came into force in October 2019 and that only the County Governments Retirement Scheme could institute such proceedings.
Pension arrears
The pension board opposed the application. It argued that the County Governments Retirement Scheme Act had later been declared unconstitutional and that transitional provisions preserved its legal mandate.
It also maintained that the claim covered pension arrears dating back to 2013, long before the disputed law came into force. The court upheld the objection and found the claimant no longer had legal standing.
"The claimant is therefore the wrong party to be in court seeking provident funds for the employees of the defunct local authorities," Justice Makau said.
"Upon repeal of Cap 272 by the County Governments Retirement Scheme Act on October 7, 2019, the claimant ceased to exist or was swallowed up by the new structures in place," he added.
The court concluded that the board was "incompetently before this court as it no longer exists" and dismissed the entire suit without making any order on costs.
Before reaching that decision, the county government argued that striking out the case would prevent the court from issuing orders that could not be enforced because the claimant lacked legal capacity.
It also maintained that all pension contributions claimed for the period after 2019 had been remitted to the County Governments Retirement Scheme.
The board argued that striking out a suit was a drastic remedy reserved for the clearest cases.
It further maintained that disputed questions over whether contributions had been remitted, to whom they were paid and the amounts allegedly outstanding required a full hearing rather than determination through a preliminary application.
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