Directline Assurance Co. Ltd v Jeremiah Wachira Ichaura [2016] KECA 118 (KLR)
The bottom line
#Kenya's Court of Appeal ruled that an employer can only owe a dismissed employee damages for the notice period in the contract, not the unexpired term.
What this practically means
#Executive summary
#Key legal issues
#Retroactive application of the Constitution of 2010 and the Employment Act, 2007
Both statutes were inapplicable to a dismissal on 28th May, 2008; the court should have applied the repealed Employment Act, Cap 226 and the then-constitution
The cause of action arose on 28th May, 2008 when services were terminated. The Constitution of 2010 was promulgated on 27th August, 2010 and the Employment Act, 2007 came into effect on 2nd June, 2008, both after the cause of action accrued. A party cannot be expected to comply with a law not in existence at the time of termination, so only the repealed statutes govern the dispute and the available remedies.
Whether gross misconduct justifying summary dismissal was proved
The alleged misconduct (failure to devote time and attention to work) was not proved; the termination was wrongful and unfair
The termination letter did not specify the days, dates and times of the alleged dereliction. The job required travel to branches in the Mount Kenya region, so absence from the office was expected. No warning or reprimand was issued, the sole witness did not supervise the respondent, and no attendance records were tendered. The burden of proof under Sections 107-109 of the Evidence Act lay on the employer and was not discharged.
Measure of damages for wrongful dismissal under a contract with a termination clause
The award of Kshs.4,200,000/= (12 months' salary under Section 49(1)(c) of the Employment Act, 2007) was erroneous; damages were limited to six months' salary in lieu of notice
Under Cap 226 and settled Kenyan authority, where a contract contains a termination clause, compensation is limited to the notice period. The fixed-term argument does not displace this where a termination clause exists; unexpired-term damages apply only to fixed-term contracts without such a clause. The trial court's reliance on the inapplicable Employment Act, 2007 could not stand, and discretion cannot override the law.
Entitlement to unremitted pension of Kshs.140,000/=
The pension award was unmerited because the contract required at least three consecutive years of employment to benefit from the pension scheme
Clause 6A of the employment contract provided that the respondent could not withdraw monies paid into the pension scheme until he had remained in employment for not less than three consecutive calendar years. Having worked only about four months, he fell far below the threshold, so the trial court's award of unremitted pension had no contractual basis.
Interest on the decretal sum
The trial court's silence on the prayed-for interest was an omission, not a judicial exercise of discretion; interest at 14% from the date of termination was awarded under Section 26(1) of the Civil Procedure Code
Interest was specifically pleaded and testified to, yet the judgment made no mention of it. Since discretion cannot be exercised by silence, the omission had to be corrected. Following Dalmas Ogoye v K.N.T.C., amounts due at termination attract interest; 14% from 28th May, 2008 was appropriate.
Legal principles established
#- A court can only award the remedies available under the law in force at the time the cause of action arose; retroactive application of the Constitution of 2010 or the Employment Act, 2007 to pre-2008 terminations is erroneous
- Where a contract of service contains a termination clause, the measure of compensation for unlawful dismissal is the period specified in the termination clause, regardless of the nature of the employment
- General damages are not awardable for breach of contract
- Discretion cannot override the law; judicial discretion must follow the law
- An appellate court will not interfere with a trial court's discretion on interest unless it misdirected itself; silence amounts to no exercise of discretion and may be corrected on appeal
- Lumpsum terminal dues awards are subject to statutory deductions; damages are computed on net, not gross, salary
- The burden of proving the misconduct justifying summary dismissal lies on the employer
Court orders
#- 1.The appeal is allowed to the extent that the award of Kshs.4,200,000/= is set aside
- 2.The award of Kshs.140,000/= being unremitted pension for a period of four months is set aside
- 3.The respondent shall be entitled to the sum of Kshs.2,100,000/= only, subject to statutory deductions
- 4.The sum of Kshs.2,100,000/= shall attract interest at the rate of 14% from the date of termination, that is to say 28th May, 2008
- 5.Each party shall bear the costs of this appeal
- On appeal from
- Employment & Labour Relations Court of Kenya at Nairobi
- E.&L.R.C.C. No. 873 of 2011
- Jurisdiction invoked
- First appeal to the Court of Appeal against the judgment and decree of the Employment & Labour Relations Court
Key timeline
#Practical implications
#Frequently asked questions
#Later judgments citing this (1)
#Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.
- Jacqueline Kiaraho v Co-operative Bank of Kenya [2017] KECA 371 (KLR)[2017] KECA 371 (KLR)28 Jul 2017followed
Cite this brief
#Cite this brief
Caselaw, "Directline Assurance Co. Ltd v Jeremiah Wachira Ichaura [2016] KECA 118 (KLR)", Case Analysis (2016). Civil Appeal No. 68 of 2014. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2016/118/eng@2016-11-04
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.