COVID-19: A Data Protection Perspective and A Key Decision by The UK Supreme Court

Posted on April 21st, 2020

The COVID-19 pandemic raises data protection issues as most organizations begin to grapple with the data protection ramifications with regard to personal data that might relate to the pandemic e.g. travel history, proximity or contact with infected individuals, underlying health conditions or vulnerability, etc. Indeed, one of the proposed ways to check the spread of the disease is through the use of a mobile phone app that would alert one of close proximity or contact with an infected person. For such an app to work, it would undoubtedly require the availability and use of people’s personal health data which falls within the definition of “sensitive personal data” under the Data Protection Act, 2019 (DPA) and care ought to be taken before processing such data and risk running afoul of the DPA, with potential penal consequence.

Section 44 of the DPA prohibits the processing of sensitive personal data unless the same is processed in line with the data protection principles set out under section 25 of the DPA which include data collection for legitimate purposes and limited to the extent necessary. Under section 46 (1) of the DPA, processing of personal data relating to the health of an individual is restricted to healthcare providers or persons under obligation of professional secrecy under law. However, section 46 (2) (a) of the DPA, then provides that the condition under section 46 (1) is met if the processing “is necessary for reasons of public interest in the area of public health”. It is therefore arguable that organizations that possess or collect personal data may be allowed to process such data if it is deemed necessary “for reasons of public interest in the area of public health” relating to COVID-19.

That notwithstanding, organizations ought to take necessary precautions so as to abide by the data processing principles set out under section 25 of the DPA, and where in doubt, appropriate guidance may be sought from the Data Commissioner, given that the DPA is fairly new legislation in Kenya (having come into force on 25th November 2019) while the COVID-19 pandemic is itself a public health crisis of unprecedented proportions.

Speaking of compliance with data protection laws, a key decision was recently handed down by the United Kingdom’s Supreme Court regarding an employer’s vicarious liability in respect of breaches of the United Kingdom’s Data Protection Act, 2018 (the UK DPA) in the case of  WM Morrison Supermarkets plc vs Various Claimants (2020) UKSC 12. The decision was in respect of a challenge by Morrisons on the Court of Appeal’s decision by which the supermarket chain was found vicariously liable for data breaches committed by its former employee which had satisfied the “close connection test” The Court of Appeal also rejected the argument advanced by Morrisons that since vicarious liability in respect of data breaches by an employee was not expressly included in the UK DPA, an employer should not be vicariously liable for such breaches.

The UK Supreme Court considered the two issues afresh and applied the close connection test with reference to a long line of established precedent on vicarious liability. The Court considered the fact that the actions of Morrisons’ former employee had not been pursued in furtherance of his employer’s business and that he was on a “a frolic of his own”. The Court of Appeal’s application of the close connection test was found to have been faulty, as what ought to have been considered was the entire sequence of events and whether an individual was acting in his capacity as an employee and in furtherance of his employer’s objectives before arriving at a positive finding of vicarious liability.

On the issue as to whether vicarious liability is excluded under the UK DPA, the Court held that the statutory liability of a data controller under the UK DPA, including the liability for the conduct of its employee, is based on lack of reasonable care, whereas vicarious liability is not based on fault. The Court went on to state that there is nothing anomalous about the contrast between the fault-based liability of the primary wrongdoer under the UK DPA and the strict vicarious liability of his employer. In reaching this conclusion, the Court drew an analogy between the fault-based liability of an employee for negligence and the resultant strict vicarious liability of his employer with the resulting determination that the UKDPA does not exclude vicarious liability for data breaches by an employee.

While the decision was ultimately in Morrisons’ favour, the case turned largely on the application of the close connection test which was both fact dependent and context specific with regard to that particular case.


This alert is for informational purposes only and should not be taken as or construed to be legal advice. If you have any queries or need clarifications, please do not hesitate to contact John Mbaluto (john@oraro.co.ke), Gibran Darr (gibran@oraro.co.ke) or your usual contact at our firm, for legal advice relating to the COVID-19 pandemic and how the same might affect you.

Private Client

Posted on November 7th, 2019

Our Private Client practice area provides prudent direction to individuals and families. The Private Client team provides all-round legal services, in the most efficient way, by integrating the other practice areas, when handling personal and structural issues.

Through this practice area, we have been able to preserve, build, maintain and establish trust with our client base.  Our practice is aimed at linking relationships with our clients to provide them with practical and attainable legal advice and action.


Our private client practice area encompasses:

  • Wills and Probate
  • Private Trusts
  • Succession planning and offshore structures
  • Estate management
  • Family law – divorce, division of matrimonial property, child custody and maintenance advice and litigation.

Related Services

Dispute Resolution, Employment & Labour


For more information about our Private Client, please contact Chacha Odera (Managing Partner) or John Mbaluto, FCIArb (Deputy Managing Partner).  Alternatively click here to download our Private Client profile.

Key Contacts
Chacha Odera
Senior Partner

 

 

E: chacha@oraro.co.ke

John Mbaluto, FCIArb
Deputy Managing Partner

 

 

E: john@oraro.co.ke

KNUT’s Big Win in Trade Dispute with Employer

Posted on July 15th, 2019

Friday 12th July 2019 saw a big win for the Kenya National Union of Teachers (KNUT), the largest teachers' trade union in Kenya, against the employer, the Teachers Service Commission (TSC) after the Employment and Labour Relations Court ruled in favour of KNUT in a protracted trade dispute concerning teachers’ promotions, appraisal, transfers, training and union membership.

Some of the notable highlights from the Court’s decision include:

  • Headteachers, their deputies and teachers who are in management positions are unionisable and can vie for leadership positions in the union.
  • Teachers who are in leadership positions in the union should only be transferred within the same geographical location that they represent.
  • Appraisal tools should be ready by 1st December 2019, for a roll out in January 2020.
  • The Court also dismissed a promotions circular which had limited career progression to those with teachers training certificates.

TSC has indicated that would appeal the Court’s decision.

Oraro & Company Advocates’ John Mbaluto, a Partner in the dispute resolution practice group, was among the lead lawyers acting for KNUT in this matter. John has experience in advising both international and local clients on constitutional law, banking and commercial disputes, employment and labour law, and is also well regarded for advising employee associations and trade unions.

Our Dispute Resolution Heritage

Referred to as a “Dispute Resolution powerhouse”, we are well regarded for our in-depth understanding of the judicial process and our extensive experience to find innovative solutions to the most challenging problems whenever they occur. Our litigators have a long history of handling cutting-edge litigation matters, including many of the most significant disputes in the country. We are called upon to play a central role in high stakes and high profile matters in Kenya.

A tight-knit group of 16 lawyers (8 Partners, 5 Senior Associates and 4 Associates), arguably the largest dispute resolution team in Kenya, we approach each matter with intensity, thoroughness and creativity and build teams appropriate to the circumstances. We handle all aspects of contentious matters, from the strategic and tactical to the practical and procedural. We represent clients in tribunals in areas such as tax, environment, public procurements, among others.

Kosgei Kipkirui

Head of Business Development

T: +254 709 250 000/735

E: gkosgei@oraro.co.ke

Medicare in the Employment Context

Posted on September 12th, 2018

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Co-Authored by Clifford Odhiambo

Introduction

Former United Nations Secretary-General Kofi Annan once famously said —”It is my aspiration that health finally will be seen not as a blessing to be wished for, but as a human right to be fought for.”  The right to health is now universally recognized as an integral part of human rights. In Kenya, the right to health has been categorized as a socioeconomic right that has its footing in Article 43 of the Constitution which provides that: “Every person has the right to the highest attainable standard of health, which includes the right to health care services…”

Health and medical care are intrinsically linked; although one never needs medical care when one is healthy, good health, once lost, is restored through good medical care. In what way therefore does the right to medical care play out in the employment context? Do employers have the duty to guarantee to their employees the right to health as enshrined in the Constitution? Does the Employment Act cast any obligation upon employers to ensure (or try their best to ensure) the good health of their employees?

The Employment Act on the Right to Health

Part V of the Employment Act lists all the duties of employers in relation to contracts of employment. Of particular note in the context of the health is the employer’s duty to provide medical attention, prescribed under section 34 of the Employment Act. The duties are set out as follows:

 (1) An employer shall ensure the provision sufficient and of proper medicine for his employees during illness and if possible, medical attendance during serious illness.

 (2) An employer shall take all reasonable steps to ensure that he is notified of the illness of an employee as soon as reasonably practicable after the first occurrence of the illness.

 (3) It shall be a defence to a prosecution for an offence under subsection (1) if the employer shows that he did not know that the employee was ill and that he took all reasonable steps to ensure that the illness was brought to his notice or that it would have been unreasonable, in all the circumstances of the case, to have required him to know that the employee was ill.  

The Court’s interpretation of section 34 of the Employment Act

The Employment and Labour Relations Court is a specialist Court set up under Article 162 of the Constitution to hear and determine matters pertaining to employment and labour relations. While it is the duty of Parliament to enact and pass legislation, the duty of interpreting the law is vested in the Courts.

The Employment and Labour Relations Court was recently called upon to interpret section 34 of the Act in the case of Eddie Mutegi Njora v Mega Microfinance Co. Ltd [2015] eKLR.

  • Brief facts of the case

On 26th July 2008 the Claimant was employed as an Administrative Officer with the Respondent but a written contract of employment was only issued to him on 22nd February 2011 and was backdated to 26thJuly 2008. The Claimant was also simultaneously engaged with Mega Initiative Welfare Society which was a sister entity to the Respondent company. The terms of the Claimant’s contract were that he would be paid Kshs. 40,000.00 per month as his salary; be entitled to 30 days leave per year; and an in-patient medical cover. The contract of employment was not issued immediately as is required by law and as a result the Claimant did not know his terms and conditions of work. On 27th June 2011 the respondent issued the Claimant with a letter notifying him that his contract of service would end on 31st July 2011. Upon termination of contract, the Respondent filed suit seeking:-

  1. a) Accrued leave;
  2. b) 3 years’ service pay
  3. c) Unpaid medical cover; and
  4. e) Compensation for not being issued with an employment contract
  • Decision of the Court

Upon hearing the case, the Court pronounced itself as follows with regard to employer’s duty under section 34 of the Act:-Where an employer provides a medical cover, such a cover is to ensure the employer has taken a progressive step to ensure all employees are covered in terms of medical care and attention at all times. Where an employer has not provided such a medical cover, once an employee is unwell, such information should be brought to the attention of the employer as soon as it is reasonably practical.

The employer then has a duty to address the matter as appropriate where such sickness has been brought to their attention. The evidence by the Claimant is that he remained without a medical cover from March to July 2011 and therefore should be compensated for lack of such a medical cover.

The Claimant however failed to submit any evidence of sickness and need for medical attention that was brought to the attention of the Respondent and that the Respondent failed to address such a  situation or that the Claimant was forced to incur medical bills and the respondent failed to reimburse. The duty here is for the respondent to ensure the provision sufficient and of proper medicine for his employees during illness and if possible, medical attendance during serious illness as under section 34(1) of the Employment Act.

 Conclusion

The Court, in its application of section 34 of the Employment Act, adopted a literal approach and did not cast any greater burden upon employers to provide medical care for employees than what the Act expressly provides for.

There was no suggestion by the Court that an employer must obtain medical cover or insurance for employees but the Court did acknowledge that an employer that elects to do so (provide medical cover) is taking progressive steps towards ensuring its employees have the necessary medical care and attention at all times.

The Court however did confirm that the employer has a duty to provide proper medicine to its employees during illness, and medical attention during serious illness. Whilst the Court found that the employer has a duty to know of any illness affecting an employee, there is an equal duty owed by employees to inform the employer of the same.

Is Collective Bargaining Dead in the Public Sector?

Posted on September 12th, 2018

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Article 2 of the International Labour Organisation (ILO) Convention No. 154 defines collective bargaining as:

 “all negotiation which take place between an employer, a group of employers or one or more employers’ organizations, on the one hand, and one or more workers’ organisations on the other, for:

a) determining working conditions and terms of employment; and/or

b) regulating relations between employers and workers; and/or

c) regulating relations between employers or their organisations and a workers’ organisation or workers’ organisations.”

Simply put, collective bargaining is the joint determination by employees and employers of the problems of the employment relationship.  Article 41 of the Constitution entrenches the right to fair labour practices including that “every trade union, employer’s organization and employer has a right to collective bargaining”. Collective bargaining is therefore a constitutionally guaranteed right which ought to be enjoyed by all Kenyan workers.

Historically, collective bargaining has played a key role in the improvement of the terms of service of employees as it is through the leveraging of their collective strength in numbers that employees are able to effectively negotiate with an otherwise more powerful employer.

Collective bargaining assumes that two parties i.e. employer and employee, will engage in negotiations and eventually agree on a collective bargaining agreement which would be contractually binding between the two parties. It goes without saying, then that no third party should be involved in the collective bargaining process otherwise it would cease to be collective bargaining as envisaged by the law.

The public sector commands a fair share of the labour market in Kenya. According to the Kenya National Bureau of Statistics, approximately 30% of Kenya’s total labour force works in the public sector. Out of this, the only persons expressly excluded from the enjoyment of the rights guaranteed under Article 41 are individuals serving in the Kenya Defence Forces and the National Police Service. The rest of public sector workers are entitled to full enjoyment of the rights under Article 41, including the right to collective bargaining.

Enter the controversy created by the Salaries and Remuneration Commission (SRC);the SRC is established under Article 230 of the Constitution as one of the independent commissions with powers under Article 230 (4) to:-

  1. set and regularly review the remuneration and benefits of all State officers; and
  2. advise the national and county governments on the remuneration and benefits of all other public officers.

That the SRC is not the employer of public officers is plain, and thus it should have no direct role in collective bargaining. Yet the most important and often controversial item on the negotiating table is that of salary; the proverbial “elephant in the room”. However the role of setting, reviewing and advising on the remuneration of state and public officers is bestowed upon the SRC pursuant to Article 234 (4), and thus the question that arises is what is left of collective bargaining if the most important item is off the table?

In Teachers Service Commission (TSC) v Kenya National Union of Teachers & Others (2015) eKLR the Employment and Labour Relations Court (ELRC), as the court of first instance, found that the SRC had no role to play in collective bargaining between the  teachers’ unions and the employer – TSC and further found that SRC’s advice to TSC on the teachers’ remuneration could not possibly be binding (i.e. leaving room for negotiation of salaries between employer and unions and upholding the ideal of collective bargaining). The Court pronounced itself thus:-

 “Looking at the provisions of Article 230 of the Constitution as well as the provisions of Section 11 of the SRC Act, it is clear that SRC has the mandate of setting and regularly reviewing the remuneration and benefits of all State officers and advising the National and County Government on the remuneration and benefits of all other public officers.

 The Court therefore reiterates that the TSC has the mandate to set and review the remuneration of teachers upon advice by SRC.  The Court further restates that TSC is not bound by the advice of SRC in setting and reviewing remuneration of teachers. A plain and holistic interpretation of Articles 230(4) as read with Article 259(11) of the Constitution supports this finding by the Court.  TSC needs only prepare a budget for allocation of funds by the National Treasury and approval by the National Assembly.  However TSC must take into consideration the advice by SRC without necessarily being bound by it. Acting otherwise would be contrary to the Constitutional order…”

However, on appeal, the Court of Appeal disagreed with the decision of the Employment and Labour Relations Court, and held as follows:-

“I hereby come to the conclusion and finding that the advice given by SRC is binding. The advice is binding because to hold otherwise would render the functions of SRC under Article 230 (5) idle; it would render SRC ineffective and irrelevant; it will introduce a discretionary concept of pick and choose in Kenya’s governance structure. An interpretation that renders a constitutional Article idle and an Independent Commission ineffective does not pass the threshold of constitutionality. SRC is a constitutional organ and the trial judge erred in interpreting the Constitution in a manner that renders SRC’s singular and exclusive mandate in Article 230 (5) (a) idle and ineffective. The trial court misapprehended the doctrine of separation of functions which is keystone in Kenya’s governance structure. In holding that SRC has a non-binding advisory role in the determination remuneration and benefits of public officers, the trial court disregarded the central and exclusive juridical competence of SRC in the determination of fiscal sustainability of the total public compensation bill as per Article 230 (5) (a) of the Constitution.

 The advice given by SRC is binding because the advice is not merely an opinion that is given by a friend, it is advice that has a constitutional underpinning; it is binding because it emanates from a constitutional organ with exclusive constitutional mandate to determine fiscal sustainability of the total public compensation bill; it is binding because the principle of effectiveness require that all provisions of the constitution must be given effect. SRC advice is not an advice in personam, it is an advice in rem as it limits and determines remuneration rights and entitlements of public officers. Being an advice in rem, SRC advice binds all persons, state organs and independent commissions. 

Regrettably, the Court of Appeal did not reconcile the competing and/or conflicting provisions of the Constitution in a manner that advances the right to collective bargaining. The effect of the Court of Appeal’s decision was to give SRC carte blanche to dictate the salaries and remuneration of all workers in the public sector, effectively destroying the right of the said workers to collective bargaining with the employer. There can be no collective bargaining when one side’s position is entrenched or cast in stone.

Section 23 of the Registration of Titles Act – Did it Really Protect the Bona Fide Purchaser?

Posted on September 12th, 2018

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The Registration of Titles Act(Cap. 281) now stands repealed. Nonetheless, disputes in respect of land registered under the repealed Act, particularly those centered on the protection proffered by section 23 of the Act to bona fide purchasers for value without notice, will continue to rage on as we slowly transit into a new era of land laws.

The Registration  of  Titles Act was a product of the Torrens system of registration – a system which places emphasis on the accuracy of the land register and insists that the register must mirror all currently active registrable interests affecting a particular parcel of land.

The Government, as the keeper of the master record of all land and its respective owners, guarantees the indefeasibility of all rights and interests shown in the land register against the entire world; and in case of loss arising from an error in registration, the person affected is guaranteed Government compensation.

The statutory presumption of indefeasibility and conclusiveness of title under the Torrens system is rebuttable only by proof of fraud or misrepresentation, in which the buyer is involved. The object of the Torrens system was summarized in the Privy Council decision in Gibbs v Messer as follows:

“The main object of the Act and the legislative scheme for the attainment of that object are equally plain. The object is to save a person dealing with registered proprietors from the trouble and expense of going behind the register, in order to investigate the history of their author’s title and to satisfy themselves of its validity. That end is accomplished by providing that everyone who purchases, in bona fide and for value, from a registered proprietor and enters his deed of transfer or mortgage on the register, shall thereby acquire an indefeasible right, notwithstanding the infirmity of his author’s title.”

Back home in Kenya, the indefeasibility of title has received lip service from the Kenyan Courts including our own Court of Appeal. A case in point is the Appellate Court’s decision in Dr. Joseph Arap Ngok v Justice Moijo ole Keiwua, where the Court pronounced itself as follows:-

“Section 23 (1) of the Act gives an absolute and indefeasible title to the owner of the property. The title of such an owner  can  only  be  subject to challenge on grounds of fraud or misrepresentation to which the owner is proved to be a party; such is the sanctity of title bestowed upon the title holder under the Act.  It  is  our law and law takes  precedence  over all other alleged equitable rights of title. In fact, the Act is meant to give sanctity of title, otherwise the whole process of registration of title and the entire system in relation to ownership of property in Kenya, would be placed in  jeopardy.”

It would therefore appear that a plain reading of section 23 suggests that a bona fide purchaser is assured of protection, notwithstanding that previous dealings might be shown to have been mired in fraud. However, following a recent decision of the Court of Appeal in the case of Arthi Highway Developers Ltd v West End Butchery Ltd & Others, it seems that the protection offered by section 23 is not quite as indubitable as first thought. In this decision, the Court struck down as invalid titles transferred to bona fide purchasers, after having found that there was fraud in the initial transfer from the first owner. In applying the nemo dat quod non habet (no one gives who possesses not) principle (which principle has no application to immovable properties), the Court found that the fraudsters did not obtain good title to pass on to the bona fide purchasers.

Yet the Court of Appeal’s decision in the Arthi Highway Developers case is at glaring odds with an earlier decision by the same Court in Permanent Markets Society & Others v Salima Enterprises & Others, where it was held that even where it is shown that previous registrations were obtained illegally, the title of the last bona fide purchaser for value was indefeasible under section 23.

In view of the conflicting decisions emanating from the Court of Appeal as to the extent of protection offered by section 23 of the Registration of Titles Act, all eyes now turn to the Supreme Court to pronounce itself on the matter and hopefully lay to rest the spectre of section 23.

This follows the Supreme Court’s granting of leave to appeal to the said Court (the Court of Appeal having refused to grant leave to appeal on the basis that there was no controversy as to the application of section 23) in the case of Charles Karathe Kiarie & Others v The Administrators of the Estate of John  Wallace  Mathare  (Deceased) & Others. We shall keep our  clients and readers updated on the Supreme Court’s decision in the matter.

Homeground Advantage: Entrenching Local Interests in the Extractive Industry

Posted on June 27th, 2018

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Background

Kenya has recently discovered several blocks of natural gas and oil spanning several counties. However, most of these counties are poor, including Turkana which is known to have the most promising oil fields that could be exploited as early as June, 2017. Lamu and Wajir also have natural gas.

It has been observed that countries which are rich in natural resources, specifically non-renewable resources like minerals and fuels, somewhat paradoxically tend to have slow economic growth, little or no democracy leading to authoritarian rule, sluggish development and are more prone to conflict as compared to countries with fewer natural resources. This situation has been coined the “resource curse” or the “paradox of plenty”.

Resource Curse

The term resource curse was first used by a British economist, Richard Auty, in 1993 to describe how countries rich in mineral resources were unable to use that wealth to boost their economies and how contradistinctively, these countries had lower economic growth, than countries without an abundance of natural resources.

Avoiding the resource curse was one of the key issues raised by the public in 2012 after the Kenyan government announced that commercially viable oil had been discovered in Turkana. Several members of the public were apprehensive as they did not want Kenya to suffer the same resource curse suffered by several African countries such as Equatorial Guinea, Liberia, Libya, Nigeria, Republic of Congo, Sierra Leone and Sudan.

The Local Content Bill, 2016

Cognisant of the above, the Senate Committee on Energy, Roads and Transportation introduced the Local Content Bill in July 2016 (the Bill). The Bill is intended to avert the conflicts that have rocked communities in oil and gas rich areas by ensuring that the majority of poor Kenyans in those areas are assured of enjoying the benefits of natural resources.

The Bill is premised on Article 69(1) of the Constitution which imposes an obligation on the State to among other things, ensure the sustainable exploitation, utilisation, management and conservation of the environment and natural resources and ensure the equitable sharing of the accruing benefits and to ultimately utilise the environment and natural resources for the benefit of the people of Kenya.

Objectives of the Bill

The Bill seeks to provide a framework to facilitate local ownership, control and financing of activities connected with the exploitation of gas, oil and other mineral resources. It also seeks to make provision for an increase in local participation along the value chain in the exploration of gas, oil and other mineral resources.

The Bill also seeks to ensure that local content is entrenched in every aspect of the extractive industry through the involvement of local communities which should lead to the enhancement of the income received by local communities following their involvement in the extractive processes, for example, by ensuring that landowners and owners of resources receive the revenue due to them following use of their land and resources.

Further, the Bill looks to facilitate the development of local economies through the creation of employment opportunities and by ensuring the procurement of goods and services that are produced locally. Additionally, the Bill aims to stimulate local industrial development, capacity building and to increase the local capability to meet international standards in the supply of goods and services.

Local Content Committee

The Bill establishes a Local Content Development Committee (the Committee) whose functions include overseeing, coordinating and managing the development of local content in Kenya; making recommendations and advising the Cabinet Secretary in the Ministry of Mining (the Cabinet Secretary) on formulations of policy and strategies for the development and implementation of local content; making recommendations to the Cabinet Secretary on the minimum standard requirements for local content and the development of the local content plans; appraising, evaluating and approving local content plans and reports submitted to the Committee; overseeing, in consultation with the county governments, the implementation of local content policies and strategies by operators and collaborating with county governments in the implementation of strategies to improve the capacity of local persons, businesses and the capital markets to fully leverage the objectives of the intended Act.

Local Content Plan

Under the Bill, oil and gas companies will now be required to state how local communities will benefit from the proceeds of the extractive processes before they are licensed. The companies are required to submit a Local Content Plan (the Plan) to the Committee in which they should set out information regarding the procurement and utilisation of locally produced goods and services, the qualification requirements and employment of local persons to be engaged in the extractive industry, workforce development strategies in relation to locals and strategies for the support of local participation in the activities of the operator.

The operator is also required to set out in the Plan the strategies through which it intends to give priority to goods produced and services delivered locally and to also give priority to qualified local persons with respect to employment opportunities.

Skills and Technology Transfer

The Bill requires oil and gas exploration companies to commit to a skills and technology transfer agreement with local firms and individuals. This will ensure more Kenyans are employable and have the skills required for job opportunities in the extractive industry.

An operator is also required to submit to the Committee, a succession plan for any position not held by a local person within a period of six (6) months from the commencement of its operations. This provision seeks to ensure that where a certain position is held by an incumbent expatriate, the role will be taken up by a local person within a specified time.

The Bill also requires the Cabinet Secretary for Environment and Natural Resources to issue guidelines and contracting standards on thresholds to be attained by each operator with respect to the percentage of local equity ownership of companies engaged in the extractive industry.

Local Content Training and Development Fund

The Bill established the Local Content Training and Development Fund (the Fund) and requires the extractive industry players to remitsuch percentage of their net revenues to the Fund as will be determined by the Cabinet Secretary in consultation with the Committee for the purpose of training locals. This provision is aimed at ensuring that in the future, local content requirements are fully implemented as required under the Bill.

A Nigerian Perspective

It is arguable that the discovery and exploitation of oil in Nigeria has been more of a curse than a blessing. The oil has benefited only a few people and this has resulted in frequent conflicts amongst communities, particularly in the oil-rich Delta region.

The Nigerian Oil and Gas Industry Content Development Act, 2010 (the Nigerian Act) on local content was thus enacted with similar intentions as the Kenyan Bill. The Nigerian Act seeks to increase indigenous participation in the oil and gas industry by prescribing minimum thresholds for the use of local services and materials and to promote transfer of technology and skills to the Nigerian labour force in the industry.

Like the Kenyan Bill, the Nigerian Act provides for preferential treatment of local ventures and workforce. It also provides a host of requirements designed to ensure workforce development of and technology transfer to Nigerians as a first option. It requires that, whenever possible, operators should hire Nigerians. When the operators are unable to find skilled workers, the Nigerian Act then requires that they put in place programs and procedures for training workers and to make periodic progress reports to the Nigerian Content Monitoring Board.

In addition, the Nigerian Act mandates that operators provide a succession plan for all positions filled by expatriates, except for five percent (5%) of management positions, which may be permanently held by foreigners, with Nigerians taking over after a maximum of four (4) years of apprenticeship under incumbent expatriates.

Conclusion

While the Memorandum of Objects and Reasons of the Kenyan Bill states that one of its objectives is to provide a framework to ensure that landowners and owners of resources receive the revenue due to them, it would appear that the Bill does not have express provisions on exactly how the proceeds of the extractive industry are to be shared with the local community.

The Bill seems to place more focus on the involvement of the local community in the mechanical processes of the extractive industry through the provision of goods and services required for the industry and less on actual distribution of the income generated from the extractive industry.

It may therefore be concluded that while the Bill provides a good starting point on addressing the concerns of the public regarding the direction Kenya is taking to safeguard local interests in the extractive industry, the question as to how effective the Bill will be in achieving its stated intention will be answered once the Bill is passed into law and with the passage of time.

Obligated: Examining the Duty of Care in Banking

Posted on June 27th, 2018

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He that thinks he can afford to be negligent is not far from being poor.” The foregoing quote attributed to Dr. Samuel Johnson forewarns against the consequence of negligent conduct: that it may well leave one in a precarious economic state. Bankers are no more immune from this warning than the common man, and sufficient care ought therefore to be taken by banks to avoid negligent conduct at all times. This can be achieved by strictly observing and discharging the duty of care.

The common law has established that a duty of care is owed to persons whom one could reasonably have contemplated may be harmed by his action (or inaction in certain cases). However, even though a duty is owed, no liability attaches unless the harm suffered was of a foreseeable kind.

The Neighbour Principle

The duty of care may be succinctly summed up as the duty not to injure your neighbour. In the landmark case of Donoghue v Stevenson (1932) All ER 1, the House of Lords enunciated the neighbour principle as follows:- “The rule that you are to love your neighbour becomes in law: You must not injure your neighbour; and the lawyer’s question: who is my neighbor; receives a strict reply. You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour. Who, then, in law is my neighbour? The answer seems to be persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question.”

The law lays down the general rules which determine the standard of care to be attained and it is a question of fact whether one has failed to attain the standard of care required in the particular case. The standard of care required is not that of the defendant himself, but that of a person of ordinary prudence or a person using ordinary care and skill, while for professionals, the standard of care is that of an ordinary professional. Consequently, it is not a defence to state that one acted to the best of his own judgment, if his best judgment fell short of that of the ordinary, reasonable man, or the professional man, as the case may be.

Bank’s Duty of Care

Arising from the neighbour principle, it may be said that a banker owes a duty of care to any person (customer or otherwise) that he can reasonably foresee as likely to suffer injury by his action, while the standard of care to be applied is that of a reasonable banker. We now turn to consider the duty of care that a bank owes to its customers and non-customers, as well as the duty owed by customers to banks.

Duty of Care to Customers
The bank-customer relationship is contractual in nature and it may therefore be said that a bank has a contractual duty to its customer to exercise reasonable care and skill. In Karak Brothers Company Ltd v Burden (1972) All ER 1210 the Court had this to say about a bank’s contractual duty to its customer:-

…. a bank has a duty under its contract with its customer to exercise “reasonable care and skill” in carrying out its part with regard to operations within its contract with its customer. The standard of that reasonable care and skill is an objective standard applicable to bankers. Whether or not it has been attained in any particular case has to be decided in the light of all the relevant facts, which can vary almost infinitely.

A bank’s duty of care to its customers may also arise concurrently in tort. The case of Hedley Byrne v Heller & Partners Ltd (1963) 2 All ER 575 introduced the idea of “assumption of responsibility” by recognising liability for pure economic loss not arising from a contractual relationship.

A bank’s duty of care to its customers is wide and ranges from protecting a customer from fraud by agents such as directors and partners in issuing cheques and other payment instructions, to ensuring that the financial advice it issues is sound and reliable, to explaining the meaning and effect of security documents. The list is not exhaustive and whether a bank owes a duty of care is determined on a case by case basis, the test being whether the customer has suffered injury due to action or inaction of the bank that the bank ought to have reasonably foreseen the action or inaction as likely to injure the customer.

Duty of Care to Non-Customers

A bank may owe a duty of care to non-customers. One of the first cases to find such a duty of care was J & F Transport Ltd v Markwart (1982) CanLII 2660 (SK QB). The facts of the case are that the plaintiff, a trucking company, hired Mr. Markwart as a bookkeeper. About eight months later, Markwart established an account at the Bank of Montreal, fraudulently using his employer’s name as the account holder. When the account was opened, the bank failed to obtain the usual information such as evidence concerning the incorporation of the company or the names of the signing officers. Markwart proceeded to fraudulently deposit and cash cheques payable to the employer. The Court held that “the losses and frauds perpetrated by Markwart were solely the result of the negligence of the defendant in allowing him to set up a bank account into which he could deposit and cash cheques made payable to the plaintiff.” The Bank had failed in its duty of care by not making proper inquiry when the account was opened.

Similarly, in Vitalaire (A General Partnership) v Bank of Nova Scotia (2002) OJ No. 4902 (SCJ) the Court held that a bank that has reasonable grounds to suspect fraud by its customers will be liable to a non-customer if it fails to make reasonable inquiries to uncover or prevent the fraud, while in Dupont Heating & Air Conditioning Limited v Bank of Montreal (2009) CanLII 2906 (ON SC) it was held that a bank may owe a duty of care to a third party who is defrauded by the bank’s customer.

From the foregoing cases, it emerges that the duty of care owed by banks may indeed extend to non-customers and this includes instances where fraud which the bank ought reasonably to have foreseen is perpetrated and causes injury to a non- customer. This demands a high standard of care from banks that requires them to exercise reasonable care, skill and diligence in respect of every transaction undertaken within the bank, and it is not open to a bank to simply state, “he is not my customer”.

Customers’ Duty of Care to the Bank

The bank-customer relationship is symbiotic and it is only fair that customers should owe a duty of care to the bank. The main duties of care owed by a customer to the bank are those laid out in London Joint Stock Ltd vs Macmillan (1906) AC 439 and Greenwood vs Martins Bank Ltd (1918) AC 777. In the former case it was held that the customer owes his bank a duty to refrain from drawing cheques or other payment orders in such a manner as to facilitate fraud or forgery, while in the latter case the Court held that the customer owes a duty to inform his bank of any forged payment order as soon as he becomes aware of it.

The duties to refrain from facilitating fraud or forgery and the duty to promptly inform the bank of a forgery discovered by the customer have come to be known as the Macmillan Duty and the Greenwood Duty respectively.

Closer home, the High Court in the case of Barclays Bank of Kenya vs Jandy (2004) 1EA 8 stated that the customer’s duty of care to the bank includes acting in good faith, exercising reasonable care in executing written orders so as not to facilitate fraud or forgery and the duty to inform the bank of any forged payment orders, which includes the duty to notify the bank of unexpected deposits into one’s bank account.
Case law also suggests that any wider duty of care on the part of the customer will not be recognised unless the term contended satisfies the strict requirements for the implication of a contractual term.

The circumstanaces in which a duty of care might arise are wide and infinitely varying. It is well near impossible to have an exhaustive list of all such circumstances . In signing off, it is apt to quote John Stuart Mills:

A person may cause harm to others, not only by his actions but by his inaction, and in either case he is justly accountable to them for the injury.

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