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Court of AppealDismissedCivil Appeal No. 247 of 2009

Peter Amolo Akumu Gould v Kenya Commercial Bank Limited [2014] KECA 105 (KLR)

Court of Appeal of Kenya
11 December 2014
2,526 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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Kenya's Court of Appeal confirmed an employer can end a contract by giving agreed notice, and an employee's compensation is limited to that notice period.

What this practically means

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Executive summary

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This is a first appeal from Osiemo, J of the High Court at Nairobi (HCCC No. 616 of 1999, judgment dated 19 June 2009), who had dismissed the appellant's suit for damages for unlawful termination of his employment by Kenya Commercial Bank. The appellant, employed in 1989 and confirmed under Articles of Agreement allowing termination for cause or by three months' notice or salary in lieu of notice, was terminated by letter dated 6 February 1999 on grounds including negligence and monetary loss. He argued before the Court of Appeal that he was entitled to serve until age 55, that the termination lacked cause and was malicious, and that natural justice was breached by a disciplinary committee convened in his absence. The Court (Kariuki, M'Inoti and Mohammed JJ.A) dismissed the appeal. It held that the contract contained no fundamental term guaranteeing service to retirement age; that the appellant was informed of the allegations against him and given an opportunity to explain, so the termination was with cause and in accordance with the contract and the pre-2007 employment law; that natural justice does not apply to a simple contract of employment unless specifically incorporated; and that damages for wrongful dismissal under a contract terminable by notice are confined to the notice period, excluding compensation for the manner of dismissal or injured feelings. The appellant was held entitled only to three months' payment in lieu of notice. The decision binds subordinate courts on the measure of damages for wrongful dismissal and the inapplicability of natural justice to simple employment contracts. The appeal was dismissed with costs to the respondent both on appeal and in the High Court.

Questions the Court framed

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The issues the Court set itself to decide, in its own words.

  1. 1.Whether the appellant's employment contract contained a fundamental term that he would serve the respondent until retirement age of 55 years such that termination before that age without cause was wrongful
  2. 2.Whether the appellant's employment was terminated with or without cause
  3. 3.Whether the rules of natural justice applied to the disciplinary committee proceedings convened in the appellant's absence
  4. 4.What is the correct measure of damages for wrongful termination where the contract provides for termination by three months' notice or salary in lieu of notice

Key legal issues

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01

Whether the employment contract guaranteed service until retirement age of 55 years

Holding

It did not; the contract provided for termination for cause or by three months' notice or salary in lieu of notice, so the appellant could not claim entitlement to serve until 55 years.

Reasoning

Clause 4 of the Articles of Agreement expressly allowed the Bank to terminate for cause or by three months' notice or payment in lieu. The Court applied Rift Valley Textiles and Kenneth Karisa Kasemo, holding that employment law does not force an employee upon an employer, and that damages on such a contract extend only over the notice period, not to retirement age.

p. 3
02

Whether the appellant's employment was terminated with cause

Holding

Yes. The appellant was informed of allegations of negligence, gross misconduct and insulting conduct, and was given an opportunity to explain; the respondent was dissatisfied with his explanations.

Reasoning

The Court re-evaluated the record on the first appeal and found the appellant was accused of gross misconduct and negligence, informed of the allegations, and given a chance to respond. Given this, the termination was with cause and in accordance with the contract and the pre-2007 employment law.

p. 4
03

Whether natural justice applied to the disciplinary committee convened in the appellant's absence

Holding

No. Natural justice has no application to a simple contract of employment unless specifically incorporated; and the record showed the appellant was heard on the allegations.

Reasoning

Following Rift Valley Textiles v Edward Onyango Ogonda, the Court held the rules of natural justice do not apply to a simple contract of employment unless the contract provides for them. Where a notice period is provided, the employer need not give reasons or a hearing. Further, the record showed the appellant was informed of the allegations and given an opportunity to explain.

p. 5
04

Measure of damages for unlawful termination under a contract terminable by notice

Holding

Damages are confined to the salary for the notice period (three months in lieu of notice), not the salary and emoluments the employee would have earned to retirement age.

Reasoning

Relying on Gunton v London Borough of Richmond upon Thames as cited in CPC Industrial Products v Omweri Angima, Addis Gramophone Co Ltd, Ronald Kimatu Ngeli and Kenya Ports Authority v Edward Otieno, the Court held damages for wrongful dismissal from a contract terminable by notice extend over the notice period, subject to mitigation, and exclude compensation for manner of dismissal or injured feelings.

p. 4

Legal principles established

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  • The rules of natural justice do not apply to a simple contract of employment unless the parties specifically provided for them in the contract; where the contract provides a notice period, the employer need not assign reasons or afford a hearing before terminating.
  • Where a contract of service contains a termination/notice clause, the measure of damages for wrongful dismissal is the salary for the notice period, not salary and emoluments to retirement age.
  • Damages for wrongful dismissal do not include compensation for the manner of dismissal, injured feelings or loss sustained from the dismissal.
  • On a first appeal, the Court is entitled to reconsider the evidence, evaluate it and draw its own conclusions, while making allowance for not having seen or heard the witnesses.

Court orders

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  1. 1.Appeal dismissed
  2. 2.Costs to the respondent both on appeal and in the High Court

The bench

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One judgment of the whole court — no separate or dissenting opinions.

majority

Wrote the judgment

majority

Wrote the judgment

majority

Wrote the judgment

On appeal from
High Court of Kenya at Nairobi
HCCC No. 616 of 1999
Jurisdiction invoked
First appeal to the Court of Appeal under the applicable appellate statutory framework (Constitution of Kenya 2010, Article 164; appeal against final judgment of the High Court in a civil suit)

Relief refused

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Setting aside the High Court judgment and making a final determination in favour of the appellant, or remitting the matter for retrial

The Court found the termination was with cause and in accordance with the contract and the law as it then stood

p. 5

General and special damages for wrongful termination, including lost salary and emoluments up to retirement age of 55

Where a contract of service includes a termination period, damages are confined to the notice period; the appellant was entitled only to three months' payment in lieu of notice

p. 5

Costs

Appeal dismissed with costs to the respondent both on appeal and in the High Court.

Quotable passages

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Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.

The rules of natural justice have no application to a simple contract of employment unless the parties themselves have specifically provided in their contract that such rules shall apply.
p. 5Natural justice and simple employment contracts
where, as in the instant case, a contract of service includes a period of termination of the employment, the damages suffered are the wages for the period which is normal notice would have been correct
p. 5Measure of damages for wrongful dismissal
This being a first appeal, we are entitled to reconsider the evidence, evaluate it and draw our own conclusions but making allowance for the fact that we have not seen or heard the witnesses
p. 3Duty of a first appellate court
In the circumstances of this appeal, we find that the appellant’s employment was terminated in accordance with his contract of employment and the law as it then stood, and that the learned trial Judge arrived at the correct decision. We accordingly, dismiss this appeal with costs to the respondent both on appeal and in the High Court.
p. 5Disposition and costs

Issues in the judgment

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minor

The respondent's name is given as 'Kenya Commercial Bank Limited' in the caption but 'KENYA COMMERCIAL BANK LTD' in the body heading; minor variance in rendering.

minor

Inconsistent styling of the Gunton case name: 'RICHMOND UPON THAME' appears instead of the usual 'Richmond-upon-Thames'.

Key timeline

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Practical implications

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Frequently asked questions

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Cite this brief

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Cite this brief

Caselaw, "Peter Amolo Akumu Gould v Kenya Commercial Bank Limited [2014] KECA 105 (KLR)", Case Analysis (2014). Civil Appeal No. 247 of 2009. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2014/105/eng@2014-12-11

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.