Skip to content
AI-generated case briefs sourced from Kenya Law · Not legal advice
AI-generated case brief
Case Brief · caselaw.co.ke
Court of AppealDismissedCivil Appeal No. 31 of 2015· [2016] KECA 688 (KLR)

Kenfreight (E.A.) Limited v Benson K.Nguti [2016] KECA 688 (KLR)

Court of Appeal
11 March 2016
6,657 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~27 min to read original · ~4 min brief

The bottom line

#

Kenyan employers cannot fire staff using only the contract's notice clause; the Employment Act requires valid reasons and a fair hearing before termination.

What this practically means

#

Executive summary

#
The Court of Appeal at Mombasa (Makhandia, Ouko and M'inoti, JJ.A.) dismissed this first appeal against a judgment of the Employment and Labour Relations Court (Makau, J.) which had declared the summary termination of the respondent, a General Manager of fourteen years' standing, unfair and unlawful and awarded him twelve months' gross salary (Kshs.8,116,344) as compensation for unfair termination. The central question was whether an employer could elect to terminate employment purely under the contractual notice clause, outside the Employment Act, 2007. The Court held that it could not: the Act, modelled on ILO Termination of Employment Convention No. 158, prescribes irreducible minimum terms, including the duty to give reasons and to hear the employee before termination, notwithstanding freedom to contract. The employer gave no reason for the termination, subjected the respondent to demeaning treatment, and replaced him with a Belgian national, confirming discrimination; the burden of proving fairness lay on the employer and was not discharged. The Court affirmed the maximum award of twelve months' gross salary as a proper exercise of judicial discretion, but corrected the trial judge on one point: the Kshs.4,669,677 paid at 15 days' salary per completed year was based on an established company practice and was not ex gratia, standing independent of the section 49 award; however, the section 49 award is subject to statutory deductions, which were ordered to be subtracted. The appeal failed and each party was ordered to bear its own costs.

Key legal issues

#
01

Whether an employer can rely solely on the contractual notice clause and bypass the statutory framework of the Employment Act

Holding

No. The Employment Act prescribes irreducible minimum terms; freedom to contract is now subject to the statutory duty to give reasons and hear the employee before termination.

Reasoning

The court traced the historical common-law position premised on freedom of contract, then analysed the labour law reform Taskforce and the Employment Act, 2007, modelled on ILO Convention No. 158, which introduced mandatory minimum terms, fair hearing and reasons for termination. Payment in lieu of notice under the contract did not displace the statutory requirements, so termination outside the Act without reason or hearing was unfair.

p. 6
02

Whether the respondent's termination was procedurally and substantively unfair

Holding

Yes. No reason was given for the termination, no disciplinary hearing was held, and the employer failed to prove a valid and fair reason under sections 43 and 45 of the Employment Act.

Reasoning

The termination letter specified no reason. The warning letters were not converted into disciplinary charges, the board meeting of 17th November 2010 was not a disciplinary hearing, and the employer failed to prove the alleged loss attributable to the respondent. He was replaced by a Belgian national, confirming discrimination. His treatment, including the demand to resign and the manner of eviction from the office, was shabby and unfair.

p. 10
03

Whether the payment of Kshs.4,669,677 (15 days' salary per completed year) was ex gratia or based on an established practice

Holding

It was based on an established practice of the company and was therefore not ex gratia; it stands independent of the section 49 award.

Reasoning

Applying the law on implied terms by custom and practice, the court found the payment of 15 days' salary per year of service was made pursuant to an established company practice. It therefore could not be treated as ex gratia. However, the section 49 award is subject to statutory deductions under section 49(2), which the trial judge erred in ignoring.

p. 11
04

Whether the award of 12 months gross salary was properly within the trial judge's discretion

Holding

Yes. The judge properly considered the respondent's rank, long service and difficulty in obtaining alternative employment; the maximum award was a judicial exercise of discretion.

Reasoning

Interference with discretion on appeal requires a showing of misdirection on law or misapprehension of facts. The judge explained the award of 12 months gross salary by reference to the respondent's senior rank and the difficulty of finding equivalent employment, considerations the appellate court endorsed, adding the demeaning treatment and long service.

p. 11

Legal principles established

#
  • Termination of employment cannot validly be effected outside the Employment Act; even where a contract permits termination by notice or payment in lieu, the employer must still prove a valid and fair reason and fair procedure under sections 43 and 45 of the Employment Act.
  • The employer bears the burden of proving that a termination was fair; the employee's burden is limited to asserting unfair termination.
  • An employer must explain the reasons for termination to the employee and give the employee an opportunity to be heard before terminating employment.
  • A term may be implied into an employment contract by custom and practice if it is fair, reasonable, notorious and certain and the parties' conduct shows an intention to be bound by it.
  • An appellate court will not interfere with an award under section 49 of the Employment Act unless the trial judge misdirected himself on the law or misapprehended the facts.

Court orders

#
  1. 1.Appeal dismissed
  2. 2.Statutory deductions to be subtracted from the award of Kshs.8,116,344 under section 49
  3. 3.Each party to bear their own costs

Authorities

#

Legislation

  • Employment Actsections 3, 5, 35(1)(c), 35(2), 41, 41(2), 43(1), 43(2), 45, 45(2), 45(3), 46, 47(5), 49(1)(c), 49(2), Part VI
  • Repealed Employment Actsection 16
  • Interpretation & General Provisions Actsection 3
  • International Labour Organization Termination of Employment Convention No. 158 of 1982Article 7

Cases cited (11)

  • Seascape Ltd v Development Finance Company of Kenya Ltd
    (2009) KLR 384
  • Peter Denis Mbwali & Anor v Kenya Literature Bureau
    H.C.C.C. No. 230 of 2000
  • Consolata Kihara & 241 Others v Director, Kenya Trypanosomiasis Research Institute
    (2003) KLR 232
  • Kepha Otwoma v The Standard Group Ltd.
    H.C.C.C. No. 395 of 2007
  • Walter Musi Anyanje v Hilton International Kenya Ltd & Another
    Civil Appeal No. 269 of 2003
  • Kenya Ports Authority v Edward Otieno
    Civil Appeal No. 120 of 1997
  • Addis v Gramophone Company
    (1909) AC 488
  • Rift Valley Textiles Ltd v Edward Onyango Oganda
    Civil Appeal No. 2 of 1992
  • Ombanya v Gailey & Roberts
    (1974) EALR 522
  • C.P.C. Industrial Products v Angima
    Civil Appeal No. 197 of 1992
  • Mrao Ltd v First American Bank of Kenya
    Msa Civil Appeal No. 39 of 2002
On appeal from
Employment & Labour Relations Court of Kenya at Mombasa
Industrial Court Cause No. 146 of 2013
Jurisdiction invoked
First appeal to the Court of Appeal under the Court of Appeal's appellate jurisdiction from the Employment and 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.

Cite this brief

#

Cite this brief

Caselaw, "Kenfreight (E.A.) Limited v Benson K.Nguti [2016] KECA 688 (KLR)", Case Analysis (2016). Civil Appeal No. 31 of 2015. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2016/688/eng@2016-03-11

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