National Bank of Kenya Limited v Hamida Bana & 103 others [2017] KECA 151 (KLR)
The bottom line
#Kenya's Court of Appeal ruled that employees who voluntarily accept a retirement scheme's terms are bound by them, even if those terms are less generous than their HR manual or CBA.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether the terms of the Voluntary Early Retirement scheme were those set out in the circular and acceptance letters, or whether the HR Manual and CBA benefits were incorporated
- 2.Whether the respondents' terms of employment could be varied by the VER scheme without loss of accrued benefits under the HR Manual and CBA
- 3.Whether the respondents were discriminatorily treated compared to other employees who retired earlier
- 4.Whether the trial Judge erred in awarding compensation and an additional award of Kshs.50,000 not pleaded or legally justified
Key legal issues
#Applicable terms of the VER scheme
The applicable terms were those set out in the circular and repeated in the acceptance letters; the HR manual was referred to only for exit procedures and the CBA was not incorporated
The court reappraised the record and found that the acceptance letters did not incorporate the HR manual or CBA entitlements. The HR manual was mentioned only to facilitate exit procedures. The circular, applications and acceptance letters varied the retirement terms stipulated in the HR manual and CBA with the respondents' consent, as they voluntarily applied for and accepted the scheme.
Freedom of contract and variation of employment terms
The parties varied the terms of retirement by mutual agreement; lack of consent argument failed as there was no evidence of undue influence or coercion
Relying on freedom to contract and William Barasa Obutiti, the court held parties may contract outside the instruments governing the employment relationship. The respondents were free to reject the VER terms; having accepted them, they were bound. The agreement of mutual release overrides formal or substantial restrictions in the original contract.
Judicial function in interpreting contracts
The court's mandate is to interpret and enforce the terms agreed, not to improve the instrument
Citing Damondar Jihabhai, Kenya Airways and Lord Hoffman in Belize Telecom, the court affirmed that courts cannot introduce terms to make an instrument fairer; they only discover what the instrument means. The trial Judge by holding otherwise rewrote the VER terms contrary to the parties' intention.
Alleged discrimination
No discrimination was established; the Kamweti case was materially different and the appellant discharged its burden under section 5(7) of the Employment Act
In Kamweti retirement was at the instance of the employer and expressly under the HR manual, unlike the respondents who voluntarily applied under the VER scheme. The differing terms therefore could not ground a discrimination claim, and the damages awarded had no basis.
Legal principles established
#- Employment relationships remain governed by the general law of contract; courts must enforce the terms the parties actually agreed and cannot rewrite them or imply terms to make them fairer
- An employer and employee may at any time during the currency of a contract of employment terminate it by agreement, on terms that override restrictions in the original contract
- Where parties voluntarily agree on terms of a voluntary early retirement scheme, those terms are binding and enforceable even if less favourable than HR manual or CBA entitlements
Court orders
#- 1.Appeal allowed with costs to the appellant
- 2.Judgment of the trial court dated 22nd February, 2017 set aside
- 3.Substituted therefor with an order dismissing the respondents' suit with costs to the appellant
The bench
#One judgment of the whole court — no separate or dissenting opinions.
- On appeal from
- Employment and Labour Relations Court of Kenya at Nairobi
- ELRC Cause No. 1300 of 2014 (consolidated with ELRC Cause Nos. 1301 and 1302 of 2014)
- Jurisdiction invoked
- First appeal to the Court of Appeal from the Employment and Labour Relations Court under the Court of Appeal Rules; consolidation ordered by this Court on 21st March, 2017
- Consolidated with
- Civil Appeal No. 73 of 2017, Civil Appeal No. 74 of 2017
Relief refused
#Declaration of discrimination and unfair treatment against the respondents
The appellant discharged its burden under section 5(7) of the Employment Act; there was no evidence of coercion and the parties voluntarily agreed on the VER terms
Compensation of 10 months' gross salary to each claimant
There being nothing irregular or unlawful in the retirement, there was no basis for the damages awarded
Additional award of Kshs.50,000 to claimants in Cause No. 1301
Granted by the trial court without any legal basis; fell with the setting aside of the judgment
Costs
Appeal allowed with costs to the appellant; the respondents' suit dismissed with costs to the appellant
Quotable passages
#Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.
In the end, we find that the appeal has merit and is hereby allowed with costs to the appellant. We hereby set aside the judgment of the trial court dated 22nd February, 2017 and substitute the same with an order dismissing the respondents’ suit with costs to the appellant.
Unlike the trial Judge we find that the applicable terms were those set out in the circular and repeated in the acceptance letters.
The court has no power to improve upon the instrument which it is called upon to construe, whether it be a contract, a statute, or articles of association.
It is open to an employer and employee at any time during the currency of a contract of employment to terminate the contract by agreement.
Accordingly, the appellant discharged its burden under section 5 (7) of the Employment Act that it did not discriminate against the respondents.
Key timeline
#Practical implications
#Frequently asked questions
#Later judgments citing this (3)
#Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.
- Nakuru Canners Limited & another v Nyamweya & 3 others; Commissioner of Lands (Third party) (Environment and Land Case 40 of 2019 & Civil Case 1588 of 1999 (Consolidated)) [2025] KEELC 6986 (KLR)[2025] KEELC 6986 (KLR)9 Oct 2025applied
- Muasya v Shell & Vivo Lubricants Kenya Ltd (Cause E6554 of 2020) [2025] KEELRC 2132 (KLR)[2025] KEELRC 2132 (KLR)17 Jul 2025applied
- National Social Security Fund v Grace K. Kazungu & another [2018] KECA 55 (KLR)[2018] KECA 55 (KLR)20 Dec 2018
Cite this brief
#Cite this brief
Caselaw, "National Bank of Kenya Limited v Hamida Bana & 103 others [2017] KECA 151 (KLR)", Case Analysis (2017). Civil Appeal No. 72 of 2017. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2017/151/eng@2017-12-01
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.