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Court of AppealPartially AllowedCivil Appeal No. 180 of 2017· [2018] KECA 150 (KLR)

Kiambaa Dairy Farmers Co-operative Society Limited v Rhoda Njeri & 3 others

Court of Appeal
11 October 2018
PKP. O. KiageFSF. SichaleSKS. ole Kantai
3,148 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 that the maximum 12 months' pay for unfair dismissal is reserved for the worst cases, cutting the workers' award to two months.

What this practically means

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Executive summary

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This unanimous Court of Appeal judgment at Nyeri (Kiage, Sichale and Kantai, JJ.A) concerned a single surviving ground of appeal: whether the ELRC at Nyeri (Ongaya, J.) was justified in awarding four summarily dismissed employees of the appellant co-operative compensatory damages equivalent to 12 months' gross pay each. The respondents had been dismissed on suspicion of authoring an anonymous letter, after being given an opportunity to appear before the Board Committee, and had been paid one month's pay in lieu of notice. The High Court declared the dismissals unlawful and unfair, awarded terminal dues and compensatory damages, and dismissed the appellant's Kshs. 2,000,000 counterclaim. On appeal, the Court reaffirmed the settled principles limiting appellate interference with quantum, but held that compensatory damages for unfair dismissal are neither mandatory nor automatic: they range from zero to twelve months' gross pay, and the maximum is reserved for the most egregious cases of abuse. Drawing on section 49 of the Employment Act and its own decision in Ol Pajeta Ranching Ltd v David Wanjau Muhoro, the Court held that a trial court must lay a visible, reasoned basis on the record for a maximum award; the Judge here had simply 'plucked it from the air', a capricious exercise of discretion amounting to reversible error. The Court reduced the award to the equivalent of two months' gross pay for each respondent and ordered the appellant, having partly succeeded, to be paid half the costs of the appeal. The Court also deprecated counsel's failure to cite authorities. Kantai and Sichale, JJ.A wrote short concurring judgments agreeing fully with Kiage, JA's lead judgment.

Key legal issues

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01

Interference by an appellate court with the quantum of compensatory damages for unfair dismissal

Holding

The maximum 12-month award under section 49 of the Employment Act is not a default remedy; it must be justified for the most egregious cases. The trial judge 'simply plucked it from the air' without reasons, which was a capricious exercise of discretion and a reversible error.

Reasoning

Section 49 read with section 50 of the Employment Act prescribes mandatory considerations tied to gross wages and capped at twelve months. The trial court's discretion must be exercised within those statutory parameters and the reasons must appear on the record. Failure to lay a basis exposes the award to interference on the established principles for disturbing quantum (wrong principle, irrelevant considerations, or inordinately high/low award). Here the employer afforded a hearing and paid notice pay, so the maximum was plainly excessive; the award was reduced to two months' gross pay.

p. 4
02

Rationale for the statutory cap on compensatory damages in employment disputes

Holding

The employment relationship is special and not commercial; Parliament capped compensatory awards at 12 months' salary to balance the interests of employers, employees and the socio-economic interests of the country, and courts must exercise judicial restraint in exceeding that cap.

Reasoning

Adopting the reasoning of Rika, J in Abraham Gumba v KEMSA, approved in the Barclays Bank case, the court endorsed the historical justification for capping compensatory awards since the era of the Trade Disputes Act, and the House of Lords' explanation in Eastwood v Magnox Electric PLC that it is not for courts to upset the legislative balance. Monetary awards proliferating above 12 months' salary would disturb the equilibrium intended by Parliament.

p. 3
03

Duty of counsel to research and cite authorities

Holding

Counsel appearing before the Court must make thorough preparation and support contentions with case law; the Court deprecated the emerging habit of inadequate research and refused to condone a lowering of advocacy standards.

Reasoning

Both counsel argued quantum without citing any authorities. The court roundly upbraided them, observing that it expects industry in research before the Court. This dictum, while not dispositive of the appeal, is a documented professional-standards admonition.

p. 2

Legal principles established

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  • Compensatory damages for unfair dismissal are neither mandatory nor automatic; they lie within a range of zero to twelve months' gross pay, and the maximum must be reserved for the most egregious cases and be justified on the record.
  • A trial court must undertake a deliberate and visible-on-the-record consideration of the section 49 Employment Act factors before fixing quantum; a maximum award without reasons is a capricious exercise of discretion inviting appellate intervention.

Court orders

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  1. 1.The appeal succeeds only on the quantum of compensatory damages; the award of 12 months' gross pay is reduced to the equivalent of two months' gross pay for each respondent.
  2. 2.The appellant, having partly succeeded, is to be paid by the respondents half the costs of this appeal.
On appeal from
High Court of Kenya at Nyeri (Employment and Labour Relations Court)
ELRC Cause No. 5 of 2015 (consolidated with ELRC Causes No. 6, 7 and 71 of 2015)
Jurisdiction invoked
First appeal to the Court of Appeal from the High Court (ELRC) under the Employment Act framework; appeal pursued on a single ground of excessive quantum of damages.

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (3)

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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, "Kiambaa Dairy Farmers Co-operative Society Limited v Rhoda Njeri & 3 others", Case Analysis (2018). Civil Appeal No. 180 of 2017. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2018/150/eng@2018-10-11

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