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Court of AppealAllowedCivil Application No. NAI 182 of 2015 (UR 147/2015)· [2016] KECA 369 (KLR)

Murata Sacco Society Limited v Banking Insurance & Finance Union (K) [2016] KECA 369 (KLR)

Court of Appeal
22 July 2016
EGE. M. GithinjiAVAlnashir VisramSKS. ole Kantai
2,004 words in judgment
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The bottom line

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Kenya's Court of Appeal halted collection of a Shs.42.9 million employment award against Murata Sacco because paying it could cripple the Sacco while its appeal is heard.

What this practically means

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Executive summary

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This is a single-judgment ruling of a three-judge Court of Appeal bench (Githinji, Visram and ole Kantai, JJ.A) on a rule 5(2)(b) application by Murata Sacco Society Limited for a stay of execution of a decree of the Industrial Court (Mbaru, J.) dated 7th October 2014, pending an intended appeal. The Industrial Court had found that the retrenchment of 93 employees without compliance with the statutory process and the CBA procedure was wrongful, rejected reinstatement as sought seven years after termination, awarded each employee one month's salary in lieu of notice (already paid), three months' gross salary as general damages for wrongful termination, and gratuity of two months' basic salary per completed year under clause 9(a) of the CBA, totalling approximately Shs. 42.9 million. The Court of Appeal restated the established rule 5(2)(b) principles: arguability and nugatory-ness. It held that the legality of the general damages award and the question whether the gratuity had been converted into, and paid through, a provident fund scheme were arguable grounds. On nugatory-ness, it accepted the applicant's undisputed audited losses for 2013 and 2014, found payment of the relatively large decree would probably cause liquidity problems, rejected the respondent's unsupported assertion that loan deductions would retain much of the decree, and noted the offer of Shs. 5,000,000 as security. The Court allowed the application and stayed execution on condition that the applicant deposits Shs. 5,000,000 in an interest-bearing account within 45 days, with costs of the application to be costs in the appeal. The intended appeal itself remains to be heard; no decision on the merits was made.

Key legal issues

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01

Arguability of the intended appeal on the award of general damages for wrongful termination

Holding

The legality of the award of three months' gross salary as general damages for wrongful termination is an arguable point of law, since the CBA and the then operative Employment Act did not specifically provide for such damages.

Reasoning

The award of general damages rested on the finding that the termination was wrongful, a finding still contested. Neither the CBA nor the operative Employment Act (repealed) specifically provided for an award of damages for wrongful termination. The court therefore found the ground neither frivolous nor idle, satisfying the first limb of rule 5(2)(b).

p. 3
02

Arguability of the intended appeal on the award of gratuity

Holding

Whether the gratuity awarded under clause 9(a) of the CBA had been converted into, and already paid through, a retirement benefits scheme is an arguable ground.

Reasoning

It was not disputed that the applicant had established a retirement benefits scheme covering all the 93 retrenched employees and had paid into it a lump sum equal to two months' salary for each year of service, contending this replaced clause 9(a) gratuity. The trial judge's rejection of the double-payment argument on the reasoning that pension and gratuity are different left a live contested question of law and fact.

p. 3
03

Whether the appeal would be rendered nugatory absent a stay

Holding

The applicant would suffer substantial loss rendering a successful appeal nugatory, given the large decretal sum relative to the applicant's size, undisputed trading losses, doubtful refundability, and the offer of partial security.

Reasoning

The applicant's audited accounts showing losses of Shs. 90,197,363 and Shs. 108,415,875 in 2013 and 2014 were undisputed. The decretal amount was relatively large for a medium-sized financial institution; payment would probably cause liquidity problems. The respondent's claim that loan deductions would retain much of the decree was bare and unsupported, and no former employee was said to be able to refund. The offer of Shs. 5,000,000 as security showed good faith.

p. 4

Legal principles established

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  • An applicant under rule 5(2)(b) must demonstrate that the intended appeal is arguable and that unless stay of execution is granted, the appeal would be rendered nugatory.
  • Following deletion of section 17(2) of the Industrial Court Act by Act No. 18 of 2014, appeals lie to the Court of Appeal from the Employment and Labour Relations Court on both matters of fact and law.
  • The nugatory-requirement limb may be satisfied where payment of a large decretal sum would probably cause liquidity problems adversely affecting a substantial applicant's operations, particularly where the decretal sum is unlikely to be refundable and partial security has been offered.

Court orders

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  1. 1.Execution of the decree of the Industrial Court stayed pending the hearing and determination of the intended appeal
  2. 2.Applicant to deposit Shs.5,000,000/- in an interest bearing bank account in a bank to be agreed upon by the respective advocates within 45 days
  3. 3.Costs of the application to be costs in the appeal

Authorities

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Legislation

  • Court of Appeal Rulesrule 5(2)(b)
  • Industrial Court Actsection 17(2)
  • Employment Act, Chapter 226

Cases cited (1)

  • Butt v Rent Restriction Tribunal
    [1982] KLR 417
On appeal from
Industrial Court (now Employment and Labour Relations Court) at Nairobi
Industrial Cause No. 616 of 2010
Jurisdiction invoked
Rule 5(2)(b) of the Court of Appeal Rules; appellate jurisdiction under the Industrial Court Act as amended by Act No. 18 of 2014

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, "Murata Sacco Society Limited v Banking Insurance & Finance Union (K) [2016] KECA 369 (KLR)", Case Analysis (2016). Civil Application No. NAI 182 of 2015 (UR 147/2015). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2016/369/eng@2016-07-22

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