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Court of AppealPartially AllowedCivil Appeal No. 42 of 2015

Ol Pejeta Ranching Ltd v Muhoro (Civil Appeal 42 of 2015) [2017] KECA 329 (KLR)

Court of Appeal
22 September 2017
PWP. N. WakiASAsike-MakhandiaKMK. M'inoti
15,304 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~61 min to read original · ~4 min brief

The bottom line

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Kenya's Court of Appeal confirmed racial pay discrimination and unfair dismissal, but cut the employee's total award from roughly Kshs. 21.7 million to about Kshs. 9.2 million.

What this practically means

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Executive summary

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This was the appellant employer's appeal, and the employee's cross-appeal, against an award by Rika, J of the Industrial Court declaring the summary dismissal of a long-serving finance manager unfair and unlawful, and finding racial discrimination in pay. The Court of Appeal, in a single joint judgment, framed five issues: limitation, proof of discrimination, quantum of damages for discrimination, fairness of the termination, and the cross-appeal. On limitation, it held the continuing-injury defence under section 90 of the Employment Act could not be raised for the first time on appeal. On discrimination, it upheld the finding that unequal pay for work of equal value on racial grounds was proved: the employer failed to discharge its burden of justifying the pay disparity, its consultancy explanation was rejected on the evidence, and its own documents acknowledged historical disparities. However, the Court held the trial judge adopted a wrong approach to quantum by awarding the back-pay differential of Kshs. 18,256,947; damages for discrimination must be a composite global figure, and it substituted Kshs. 7,500,000. On termination, it upheld the finding of unfairness both substantively (the audit reports exonerated the respondent and blamed institutional weaknesses) and procedurally (he was denied the audit report and specific charges in time, and his appeal was rejected without a hearing), but reduced the maximum 12 months' compensation to 6 months (Kshs. 1,744,542) for want of reasons justifying the maximum. The cross-appeal, seeking costs, interest, pension, accrued service and tabulation corrections, was dismissed. The appeal partially succeeded; each party was to bear its own costs of the appeal, with the cross-appeal dismissed with costs.

Questions the Court framed

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The issues the Court set itself to decide, in its own words.

  1. 1.Whether the claim for discrimination was time barred
  2. 2.Whether the Judge erred in his finding that discrimination had been proved
  3. 3.If discrimination was not proved, whether the Judge correctly assessed the quantum of damages payable
  4. 4.Whether the respondent's termination was unfair and unlawful and the consequences thereof
  5. 5.Whether the cross-appeal should be allowed

Key legal issues

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01

Whether the discrimination claim was barred by limitation under section 90 of the Employment Act as a continuing injury

Holding

The claim was not time barred because the defence of continuing injury and the one-year limitation period was never pleaded or raised in the trial court and could not be raised for the first time on appeal; the claim was also anchored on human rights violation.

Reasoning

The record showed the continuing-injury defence was absent from the pleadings, evidence and submissions below, and the trial judge never addressed it. Relying on Mary Kitsao Ngowa v Krystalline Limited, the Court held parties are bound by their pleadings and may not switch defences on appeal. Further, claims anchored on human rights violations ordinarily attract no limitation sanction, though they should be brought promptly.

p. 11
02

Whether racial discrimination by way of unequal pay for work of equal value was proved

Holding

Discrimination was proved. The pay disparity between the black finance manager and white managers was not objectively justified, and the appellant failed to discharge the burden of proof under section 5(7) of the Employment Act and sections 107 and 108 of the Evidence Act.

Reasoning

Before the 2004 takeover the respondent and comparators earned similar salaries; after it, white managers earned disproportionately more. The appellant's explanation that white managers were consultants was rejected on the evidence, and no evidence of superior qualifications was tendered despite a court order to produce records. Internal emails and later salary adjustments corroborated acknowledged historical disparities.

p. 16
03

Whether the quantum of damages for discrimination was correctly assessed

Holding

The trial judge adopted the wrong approach; damages for discrimination must be a composite or global sum, not back pay calculated from salary differentials. The award of Kshs. 18,256,947 was set aside and replaced with Kshs. 7,500,000.

Reasoning

Following South African Airways v G.J.J.V.V, the Court endorsed the reasoning that pegging awards to months of remuneration risks high earners receiving more compensation than lower earners for the same injury. Assessment of damages is discretionary but must consider general conditions such as inflation and comparable local awards; the back-pay calculation converted the claim into one of underpayment.

p. 18
04

Whether the respondent's termination was unfair and unlawful

Holding

The termination was both substantively and procedurally unfair. No valid reason was proved since the audit reports exonerated the respondent of fraud, and the procedure was unfair because he was not supplied the audit report or specific charges in time to prepare a defence and his appeal was decided without a hearing.

Reasoning

Two employees admitted the fraud and were dismissed; neither the UHY nor PWC reports implicated the respondent, attributing the loss to weak institutional controls the respondent had long complained about. Under sections 43 and 45 of the Employment Act the employer bore the burden of proving valid reason and fair procedure, which it failed to discharge.

p. 21
05

Whether the 12 months' gross pay compensation for unfair termination was justified

Holding

The maximum award was unjustified because the trial judge gave no reasons for granting the maximum; it was reduced to 6 months' gross pay (Kshs. 1,744,542).

Reasoning

Section 49 remedies require the court to consider factors such as length of service, conduct of the employee and contribution to the termination. Although the award was discretionary, the exercise must rest on sound judicial principles; the absence of reasons justified appellate intervention, particularly as the respondent had already received compensation for discrimination.

p. 21

Legal principles established

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  • On a first appeal, the Court of Appeal must re-evaluate, re-assess and re-analyse the evidence and draw its own conclusions, while making due allowance for the fact that it did not see or hear the witnesses.
  • In equal pay for work of equal value claims, the claimant must establish that the unequal pay was caused by the employer discriminating on unlawful grounds, and a suitable comparator must actually exist and be employed by the same employer doing the same work or work of equal value.
  • Under section 7 of the Employment Act, in proceedings alleging contravention of the anti-discrimination provision, the employer bears the burden of proving that the discrimination did not take place as alleged.
  • A party cannot raise a new defence, such as limitation by reason of continuing injury, for the first time on appeal where it was never pleaded or canvassed before the trial court.
  • Damages for discrimination should be awarded as a composite or global figure rather than as a calculation of back pay, since an award pegged to months of remuneration risks over-compensating high earners.
  • An employer must supply an employee facing a disciplinary hearing with the allegations and the supporting material, such as an audit report, in sufficient time to prepare a defence; failure renders the termination procedurally unfair.

Court orders

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  1. 1.Appeal allowed in part
  2. 2.Award of Kshs. 18,256,947 in cumulative pay disparity and damages for discrimination set aside and substituted with an award of Kshs. 7,500,000
  3. 3.Award of Kshs. 3,489,084 for unfair termination set aside and substituted with an award of Kshs. 1,744,542 (6 months' gross pay)
  4. 4.Cross-appeal dismissed with costs
  5. 5.Each party to bear its own costs in this appeal

The bench

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One judgment of the whole court — no separate or dissenting opinions.

PW
majority
AS
majority
KM
majority
On appeal from
Industrial Court of Kenya (Employment and Labour Relations Court) at Nairobi
Industrial Cause No. 1813 of 2011
Jurisdiction invoked
First appeal under the Appellate Jurisdiction Act (Court of Appeal appellate jurisdiction over the Industrial Court award, order and decree)

Relief refused

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Cross-appeal relief: costs and interest on the trial judgment

Award of costs is discretionary and no basis shown for interfering with the trial judge's exercise of that discretion

p. 21

Cross-appeal relief: pension and accrued service pay

Not available to the respondent; he was a member of a pension scheme where the appellant contributed 7.5% of basic salary

p. 21

Cross-appeal relief: tabulation of leave and 12 months' compensation at the comparator's current salary and correction of alleged error on the face of the record

Untenable once damages for discrimination were pegged on a composite figure

p. 21

Costs

The cross appeal is dismissed with costs. Each party to bear its own costs in this appeal.

Quotable passages

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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 conclusion, the appeal partially succeeds. We set aside the award of Kshs. 18,256,947 in cumulative pay disparity and damages for discrimination as well as Kshs.3,489,084/- and substitute it with an award of Kshs. 7,500,000/- and Kshs. 1,744,542/- respectively.
p. 22Final orders - substitution of awards
The cross appeal is dismissed with costs. Each party to bear its own costs in this appeal.
p. 22Costs order
Taken as a whole the evidence adduced in this case leads to a reasonable conclusion that there was discrimination against the respondent based on race.
p. 16Racial discrimination proved
A composite or global figure of damages is appropriate to award for discrimination as opposed to calculation on the back pay adopted by the learned Judge.
p. 18Approach to damages for discrimination
The appellant cannot be allowed to hang on a defence that it never raised and prosecuted in the High Court in this present appeal.
p. 11New defence on appeal
In the circumstances, therefore it cannot be said that the termination process was fair.
p. 21Procedural fairness of termination

Issues in the judgment

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minor

The judgment uses inconsistent figures for the discrimination award: Kshs. 18,265,947 and Kshs. 18,256,947 appear interchangeably, and the cross-appeal discussion refers to both Kshs. 18,560,947 and Kshs. 18,650,947, which do not match either figure.

minor

The names of the two employees who admitted the fraud are given inconsistently as Charles Kimani/Peter Thuku and Charles Kimathi/Peter Thika.

minor

The judgment variously refers to the trial court as 'the High Court' and as the Industrial Court/Employment and Labour Relations Court in describing the appeal.

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (15)

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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, "Ol Pejeta Ranching Ltd v Muhoro (Civil Appeal 42 of 2015) [2017] KECA 329 (KLR)", Case Analysis (2017). Civil Appeal No. 42 of 2015. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2017/329/eng@2017-09-22

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