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Court of AppealPartially AllowedCivil Appeal No. 92 of 2013· [2017] KECA 194 (KLR)

Registered Trustees of the Presbyterian Church of East Africa & another v Ruth Gathoni Ngotho- Kariuki [2017] KECA 194 (KLR)

Court of Appeal of Kenya
6 October 2017
AVAlnashir VisramGKG.B.M. KariukiJMJ. Mohammed
3,319 words in judgment
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The bottom line

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Kenya's Court of Appeal confirmed that when a fixed-term employment contract expires, it ends automatically and an employer's silence does not renew it.

What this practically means

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Executive summary

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The appellants appealed against a decision of the Industrial Court (Ongaya, J.) which had found that the respondent, a Nursing Officer employed on a three-year renewable fixed-term contract, had been unlawfully terminated and awarded her damages of Kshs. 5,141,148.34 with interest. The trial court had reasoned that the employer's failure to give three months' notice of its intention not to renew, as required by clause 6 of the contract, constructively renewed the contract and rendered the subsequent 5th May, 2010 letter a wrongful termination. The Court of Appeal, in a unanimous judgment, allowed the appeal in part. It agreed that the employer was contractually required to give three months' notice of its intention, but held that silence did not amount to automatic renewal, since renewal required the mutual consent of both employer and employee; otherwise an employee would be held in servitude. The respondent's removal from the payroll and the 31st March, 2010 letter showed the appellants' position, and her continued working was on her own motion. The contract therefore expired on 31st March, 2010 without renewal. The court further held that the bonding agreement, being ancillary to the employment, could not create a contract of service, and that fixed-term contracts carry no rights beyond their expiry, so claims for post-expiry salary and wrongful termination failed. The awards for leave not taken and extra duties were set aside for want of proof of special damages. The court set aside the judgment below save for the admitted sum of Kshs. 583,139.14, directed issuance of a certificate of service, and awarded the appellants costs of both the appeal and the suit in the ELRC.

Key legal issues

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01

Effect of failure to give notice of non-renewal under clause 6 of the contract

Holding

The failure to notify the respondent of the intention not to renew three months before expiry did not amount to an automatic or constructive renewal; renewal was subject to mutual consent.

Reasoning

The court construed clauses 2 and 6 of the contract and the human resource manual as a whole. Both required mutual consent to renewal. To hold that silence operated as renewal would force an employee upon an unwilling employer, amounting to servitude, contrary to established authority that employment cannot be imposed on an employer.

p. 4
02

Whether the appellants' conduct implied renewal of the expired contract

Holding

It did not; the respondent was told by letter of 31st March, 2010 that the contract had expired and was removed from the payroll, and she continued working on her own motion.

Reasoning

The court found the 31st March, 2010 letter communicated expiry, the respondent's removal from the payroll evidenced the appellants' position, and there was no evidence she was directed to continue working. Applying the rule against implying terms merely because reasonable, the contract expired on 31st March, 2010 without renewal.

p. 5
03

Whether the bonding agreement created a contract of service

Holding

No; the bonding agreement was founded on the existing contract of employment and could not exist in isolation or create a contract of service.

Reasoning

The sponsorship was extended to the respondent by virtue of her employment status. Even though it bound her to work for the hospital for five years after her studies, a contract of service would still need to be executed to regulate the employment relationship. The bond did not alter or substitute the fixed-term contract.

p. 5
04

Character of the letter dated 5th May, 2010

Holding

It was not a termination letter but a communication of the appellants' intention not to renew the already expired contract.

Reasoning

Having found the contract had expired on 31st March, 2010 and was not renewed, the court held there was nothing left to terminate. The letter merely communicated the decision not to renew, so claims for unlawful termination damages failed.

05

Proof of special damages and the appellate approach to damages awards

Holding

The claims for leave not taken and extra duties were not proved; special damages must be specifically pleaded and strictly proved, and the court set aside the awards except the admitted sum.

Reasoning

The respondent's own evidence showed she took monthly leave to attend classes, defeating the annual leave claim, and there was no evidence for the extra duties award. The court reiterated the principle that special damages must be strictly proved and applied the settled reluctance to disturb damages awards absent a wrong principle or an entirely erroneous estimate.

p. 6

Legal principles established

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  • Failure to give contractual notice of an intention not to renew a fixed-term contract does not amount to an automatic renewal; renewal requires the mutual consent of employer and employee.
  • A fixed-term contract confers no rights, obligations or expectations beyond its date of expiry, and claims founded on the period after expiry are unsustainable.
  • A bonding or sponsorship agreement ancillary to employment cannot of itself create a contract of service where none exists.
  • A court must enforce the contract as agreed and should not imply a term merely because it would be reasonable to do so.

Court orders

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  1. 1.Appeal allowed with costs
  2. 2.Judgment dated 11th December, 2012 and the damages awarded thereunder set aside save for the sum of Kshs. 583,139.14/= admitted by the appellants as due to the respondent
  3. 3.Appellants directed to issue the respondent with a certificate of service
  4. 4.Appellants to have costs of the suit in the ELRC

Authorities

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Legislation

  • Employment ActSection 2 (definition of contract of service)

Cases cited (11)

  • Alphonce Maghanga Mwachanga vs. Operation 680 Limited
    [2003] eKLR
  • Kenya Airways Ltd. vs. Satwant Singh Flora
    [2013] eKLR
  • Jabane vs. Olenja
    [1986] KLR 661
  • Savings and Loan Kenya Limited vs. Mayfair Holdings Limited
    [2012] eKLR
  • Ford vs. Beech
    [1848]
  • Minnie Mbue vs. Jamii Bora Bank Limited
    [2017] eKLR
  • Kenneth Karisa Kasemo vs. Kenya Bureau of Standards
    [2013] eKLR
  • Att-Gen of Belize vs. Belize Telecom Ltd.
    [2009] 1 W.L.R. 1988
  • Liverpool City Council vs. Irwin
    [1977] A.C 239
  • Peter M. Kariuki vs. Attorney General
    [2014] eKLR
  • Douglas Odhiambo Apel & another vs. Telkom Kenya Limited
    Civil Appeal No. 115 of 2006 (ur)
On appeal from
Industrial Court of Kenya at Nairobi
Industrial Cause No. 509 of 2010
Jurisdiction invoked
First appeal to the Court of Appeal under the applicable appellate provisions (not expressly stated in the judgment)

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (25)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Registered Trustees of the Presbyterian Church of East Africa & another v Ruth Gathoni Ngotho- Kariuki [2017] KECA 194 (KLR)", Case Analysis (2017). Civil Appeal No. 92 of 2013. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2017/194/eng@2017-10-06

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