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Court of AppealPartially AllowedCivil Appeal No. 134 of 2012· [2017] KECA 719 (KLR)

David N Nyamu v Insurance Training And Education Registered Trustees & another [2017] KECA 719 (KLR)

Court of Appeal of Kenya
17 February 2017
3,506 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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Kenya's Court of Appeal ruled an employer's mixed signals made a termination unfair, but old employment law meant the employee won only Kshs.64,257 in medical expenses.

What this practically means

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Executive summary

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This first appeal arose from the dismissal by Mwera J of the appellant's claim for damages for wrongful termination of his employment as Finance Controller of the 1st respondent, together with the upholding of the respondents' counterclaim. The appellant, employed from 30th January 1997 and terminated by letter dated 31st August 2006, contended that his termination was unfair, un-procedural and in breach of contract, while the respondents maintained it was a lawful contractual termination by notice. The Court of Appeal, applying Rule 29(1) of its Rules to re-appraise the evidence, held that the contract was permanent and pensionable rather than a fixed term contract, and that both parties enjoyed a reciprocal statutory right of termination on reasonable notice under section 14(5) of the repealed Employment Act. Although the respondents may have been contractually entitled to terminate by notice, the Court found their inconsistent conduct - sending the appellant on compulsory leave pending a review, then terminating him citing major restructuring, then reverting to contractual termination - made the termination wrongful and unfair. However, because the cause of action predated the Employment Act 2007, general damages were unavailable and the claim for the unexpired term to retirement age failed. The Court awarded only the proved medical reimbursement of Shs.64,257/-, reduced the counterclaim to the admitted sum of Shs.1,414,498.35, and ordered each party to bear its own costs. The appeal partially succeeded and the trial judgment was set aside in part.

Key legal issues

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01

Nature of the employment contract

Holding

The contract was permanent and pensionable, not a fixed term contract, notwithstanding the presence of termination clauses

Reasoning

A fixed term contract requires clear commencement and termination dates. The appointment letter of 30th January 1997 had no such dates. The appellant had completed probation, been placed on a pension scheme and received pension benefits at termination, so probation provisions ceased to apply. The existence of premature termination options does not by itself convert a contract into a fixed term one.

p. 3
02

Terminability and reasonable notice

Holding

Both employer and employee had a reciprocal statutory right to terminate on reasonable notice; one month's notice was reasonable in the circumstances

Reasoning

Section 14(5) of the repealed Employment Act provides a reciprocal right to terminate on reasonable notice, regardless of what the contract says. In assessing reasonable notice the courts consider factors including the position held by the employee. Deeming the notice to be one month where none is provided was rejected in Barclays Bank of Kenya Ltd v Joseph Mwaura Njau as unnecessarily restrictive. One month's notice here was reasonable.

p. 4
03

Whether the termination was wrongful and unfair

Holding

Although the respondents may have been contractually entitled to terminate by notice, their inconsistent conduct - compulsory leave pending review, then termination citing restructuring, then reverting to contractual termination - made the termination wrongful and unfair

Reasoning

The compulsory leave letter promised that the appellant would be advised of the next course of action after review, but the termination letter cited major restructuring and never referenced the review outcome. No misconduct or poor performance was alleged. The termination was involuntary and through no fault of the appellant, yet the office was not abolished as in redundancy, since his job was taken by a subsequent employee. The inconsistency left the reason for termination unclear and the employer was obliged to explain.

p. 5
04

Remedies for unfair termination under the repealed law

Holding

General damages were unavailable for a pre-2008 cause of action; special damages for the unexpired term were unsustainable; only the proved medical claim of Shs.64,257/- was awardable

Reasoning

Under the repealed Employment Act no general damages were awardable even for distress and mental anguish, as Sonye v Siaya Teachers held. Section 49 remedies introduced by the Employment Act 2007 did not apply retrospectively. A permanent employee cannot claim the unexpired term to retirement. However, the failure to present medical claim forms was reasonably inferred to be non-deliberate given the manner of termination, so reimbursement was warranted.

p. 6
05

Extent of the counterclaim

Holding

Only the admitted indebtedness of Shs.1,414,498.35 was proved; the car loan of Shs.459,708/- was payable directly to NIC Bank

Reasoning

The appellant admitted in submissions and testimony to owing Shs.1,456,681.28. The respondents' own witness confirmed the respondents were only guarantors of the motor vehicle loan, that NIC Bank had not approached them for payment, and that their claim from the appellant was Shs.1,414,498.35. The trial judge's decree for the full Shs.1,916,389.28 lacked justification.

p. 6

Legal principles established

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  • Employment causes of action accruing before 2nd June 2008 are governed by the repealed Employment Act Cap 226 and the repealed Trade Disputes Act Cap 234 through saving provisions, not the Employment Act 2007
  • Section 14(5) of the repealed Employment Act confers a reciprocal right on employer and employee to terminate an employment contract on reasonable notice
  • A contract is not a fixed term contract merely because it contains options for premature termination; a permanent and pensionable contract runs to retirement pending premature termination
  • An employer whose conduct sends mixed signals about the reason for termination must explain the reasons for the intended termination; inconsistent conduct renders the termination wrongful and unfair even if the employer was contractually entitled to terminate by notice
  • No general damages were awardable in suits based on termination of employment contracts under the repealed Employment Act

Court orders

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  1. 1.The appeal partially succeeds
  2. 2.The appellant is awarded Kshs.64,257/- in unpaid claims for medical expenses
  3. 3.The counterclaim is allowed only to the extent of Shs.1,414,498.35 (reduced from Shs.1,916,389.28 awarded by the trial court)
  4. 4.Each party bears its own costs

Authorities

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Legislation

  • Employment ActNo. 11 of 2007 (whole Act)
  • Employment Act (repealed)Cap 226, section 2
  • Employment Act (repealed)Cap 226, section 14(5)
  • Employment Act (repealed)Cap 226, section 40(1)
  • Trade Disputes Act (repealed)Cap 234, section 2
  • Employment Act 2007section 49
  • Court of Appeal RulesRule 29(1)

Cases cited (12)

  • Gerald Muli Killu v Barclays Bank of Kenya
    [2016] eKLR
  • British Broadcasting Corporation v Kelly-Phillips
    [1997] UKEAT 1397_96_2506
  • Gascol Conversions Ltd v Mercer
    [1974] EWCA Civ 11
  • Kyobe v East African Airways
    [1972] EA 403
  • East African Airways v Knight
    [1975] EA 165
  • Alfred J. Githinji v Mumias Sugar Company Ltd
    [1995-1998] 1 EA 81
  • Rift Valley Textiles Ltd. v Edward Onyango Oganda
    Civil Appeal No. 27 of 1992
  • Central Bank of Kenya Ltd. v. Nkabu
    [2002] KLR 149
  • Barclays Bank of Kenya Ltd v Joseph Mwaura Njau
    [2006] eKLR
  • Kenfreight (E.A.) Limited v Benson K. Nguti
    [2016] eKLR
  • Gad David Ojuando v Prof. Nimrob Bwibo & 2 others
    Kisumu Civil Appeal No. 336 of 2005 (unreported)
  • Sonye v Siaya Teachers Co-operative Savings and Credit
    [1999] 2 EA (CAK) 310
On appeal from
High Court of Kenya at Nairobi
HCCC No. 1177 of 2006
Jurisdiction invoked
First appeal to the Court of Appeal under Rule 29(1) of the Court of Appeal Rules against the judgment of the High Court in the exercise of its original jurisdiction

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, "David N Nyamu v Insurance Training And Education Registered Trustees & another [2017] KECA 719 (KLR)", Case Analysis (2017). Civil Appeal No. 134 of 2012. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2017/719/eng@2017-02-17

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