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Court of AppealPartially AllowedCivil Appeal No. 203 of 2016· [2018] KECA 191 (KLR)

Kenya Railways Corporation v Gideon K. Mutindi & 2 olthers [2018] KECA 191 (KLR)

Court of Appeal of Kenya
18 October 2018
AMA. K. MURGORFSF. SICHALESKS. ole KANTAI
2,663 words in judgment
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The bottom line

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Kenya's Court of Appeal overturned huge damages against Kenya Railways, confirming that written show-cause notices can satisfy fair hearing requirements and limiting compensation.

What this practically means

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Executive summary

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This was a first appeal by Kenya Railways Corporation against a judgment of the Industrial Court at Nakuru (Ongaya, J.) delivered on 26 September 2014, which awarded three former Finance Department employees a total of Ksh.4,906,326.20 as compensation for termination on 31 January 2001 following allegations of fraudulent overtime and subsistence allowance claims, plus costs. The Court of Appeal (Murgor, Sichale and Kantai, JJ.A) in a single judgment of the court restated the first-appeal standard per Selle v Associated Motor Boat Company: re-assess the evidence and reach independent conclusions while respecting trial findings of fact unless unsupported or perverse. The court held that the disciplinary process was fair: the respondents were served with show-cause notices and responded, and an oral hearing is not required in all cases, applying Republic v Immigration Appeal Tribunal ex-parte Jones. It accepted that auditors from the Traffic Department could properly investigate Finance Department staff on impartiality grounds. Following its own earlier decision in Kenya Revenue Authority v Menginya Salim Murgani, the court held that an employer with a contractual exit clause may terminate on notice or payment in lieu without assigning reasons, and damages are confined to the notice period; the award of lost salaries up to age 55 was therefore wrong. The respondents, being members of the Kenya Railways Staff Retirement Benefit Scheme and drawing pension, were not entitled to gratuity, which would amount to double payment. The appeal was allowed, the decree of 26 September 2014 was set aside, and each party was ordered to bear its own costs.

Key legal issues

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01

Procedural fairness of the termination process

Holding

The termination was procedurally fair: the respondents were served with notices to show cause, responded to the allegations, and the use of Traffic Department auditors did not render the audit report illegal

Reasoning

The court held that the show-cause notices informed the respondents of the allegations and gave them opportunity to respond, satisfying due process. Relying on ex-parte Jones, it held fairness does not always demand an oral hearing. The use of auditors from another department was justified on impartiality grounds since all three respondents worked in the Finance Department.

p. 3
02

Entitlement to lost salaries up to retirement age

Holding

The trial court erred in awarding lost gross salaries up to age 55 because the contracts contained an exit clause permitting termination on notice

Reasoning

Because the employment contracts provided for termination on three months' notice or one month's salary in lieu, either party could disengage without assigning reasons. Damages for wrongful termination were therefore confined to the contractual notice period, and the award of salaries to age 55 was wrong.

p. 3
03

Gratuity for members of a provident fund

Holding

Employees who are members of a registered provident fund are not entitled to gratuity or service pay under the repealed section 35 of the Employment Act

Reasoning

Section 35(6) of the repealed Employment Act excluded service pay where the employee is a member of a registered provident scheme. The respondents were on the pension list and drawing pension; paying gratuity as well would be double payment.

p. 4
04

Function of a first appellate court

Holding

A first appeal is determined by way of rehearing: the court re-analyzes and re-assesses the evidence, respecting trial findings of fact unless unsupported or perverse

Reasoning

Following Selle v Associated Motor Boat Company, the court restated the classic first-appeal standard while cautioning that, unlike the trial judge, it had neither seen nor heard the witnesses and must give due deference to credibility-based findings.

p. 2

Legal principles established

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  • On a first appeal, the appellate court must re-analyze and re-assess the evidence and reach its own independent conclusions, while respecting trial court findings of fact unless unsupported by evidence or perverse
  • A fair hearing in disciplinary proceedings does not require an oral hearing in all cases; written show-cause notices giving the employee an opportunity to respond satisfy due process
  • An employer on a contract with a notice/exit clause may terminate on notice or payment in lieu without assigning reasons; damages for wrongful dismissal are limited to the notice period
  • An employee who is a member of a registered provident or pension fund is not entitled to service pay/gratuity under section 35 of the Employment Act

Court orders

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  1. 1.The appeal is allowed
  2. 2.The judgment/decree dated 26th September 2014 of the ELR Court is set aside
  3. 3.Each party to bear his/its own costs

Authorities

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Legislation

  • Kenya Railways Actsections 83 and 87
  • Employment Act 2007section 44
  • Employment Act (repealed)sections 35(5) and 35(6)
  • Kenya Railways Corporation Personnel Regulations 1988Regulation G12(a)
  • Retirement Benefits Act(referred to in section 35(6) of the repealed Employment Act)
  • Constitution of Kenya 2010(referred to generally as to its promulgation and resultant labour law statutes)

Cases cited (3)

  • SELLE VS. ASSOCIATED MOTOR BOAT COMPANY
    [1968] E.A 123
  • Republic vs Immigration Appeal Tribunal ex-parte Jones
    [1988] IWLR 477
  • KENYA REVENUE AUTHORITY VS MENGINYA SALIM MURGANI
    [2010] eKLR
On appeal from
Industrial Court (Employment and Labour Relations Court) at Nakuru
Industrial Cause No. 91 of 2013 (formerly Nakuru HCCC No. 327 of 2001)
Jurisdiction invoked
First appeal to the Court of Appeal under the applicable appellate statutes (the judgment identifies the appeal as 'a first appeal' from the Industrial Court); no specific constitutional or statutory provision is cited 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 (1)

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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, "Kenya Railways Corporation v Gideon K. Mutindi & 2 olthers [2018] KECA 191 (KLR)", Case Analysis (2018). Civil Appeal No. 203 of 2016. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2018/191/eng@2018-10-18

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