Retirees Cannot Access Benefits After Nairobi County Government Failed To Remit Funds To Lapfund

By The Weekly Vision Team

A tussle between Nairobi City County and the Local Authority Provident Fund (Lapfund) over unremitted deductions from employees’ salaries took a new twist after High Court Judge D. S. Majanja ruled in favour of the Fund. In a ruling dated November 10, 2023, the court dismissed claims by the county that the High Court did not have jurisdiction over the suit.

Latest reports indicate that Nairobi City County owes pension schemes Ksh. 39.66 billion, of which Ksh. 15 billion is owed to Lapfund, Ksh. 32.86 million is owed to CPF and Ksh. 24.62 billion is owed to Laptrust. According to Lapfund, Nairobi City County must forward to its employees retirement benefits, comprising employer and employee contributions at a rate of 12% and 15%, respectively, of the employee’s basic salary and house allowance.

However, when the county government failed to remit the contributions, there was an agreement that the county government would transfer to the Lapfund a property, Mariakani Estate No. 209/6612, comprising 240 three-bedroom houses. Despite the transfer, the county government continued to receive rents, which amounted to Kshs. 164,800,199.00 for the period January 2015 to December 2021. Lapfund now demands that the rent collected during that period (Ksh. 164,800,199.00) be forwarded to them.

The judge noted, “I have considered the parties’ written submissions, and I take the following view of the matter: According to the complaint, the dispute arises from the failure of the defendant to remit employees’ statutory deductions. The parties thereafter resolved the dispute by way of a debt swap, where the debt would be paid by the transfer of the suit property. In my view, the issue is not about the collection of rent, as the plaintiff is not a landlord and the defendant is a tenant. What is in issue are the parties’ obligations under the debt swap and whether, in fact, the defendant would cease to collect rent, and if not, whether it should account for the rent collected after the suit property was transferred after the debt swap agreement”.

In applying the predominant purpose test to this matter, the judge noted that the issue of rent is peripheral since the relationship between the parties is the debt swap agreement and the obligations thereunder. The ruling further reads, “I do not wish to belabor the matter any further, and I hold that the High Court has jurisdiction to adjudicate this matter. The preliminary objection lacks merit and is dismissed with costs to the plaintiff.”.

This therefore means that the case filed by Lapfund to recover the Ksh. 164,800,199.00 already collected by the county government should be given to them and Lapfund should be collecting rent from the said property, which the county government transferred to Lapfund.