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Court of AppealPartially AllowedCivil Appeal No 228 of 2017

Grain Pro Kenya Inc. Ltd v Andrew Waithaka Kiragu [2019] KECA 563 (KLR)

Court of Appeal
28 June 2019
EGE. M. GithinjiMartha Karambu KoomeM. K. KoomeFSF. Sichale
2,580 words in judgment
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The bottom line

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Kenya's Court of Appeal ruled that employers only avoid paying house allowance if the employment contract clearly states the salary includes it, and set 15% of salary as the standard.

What this practically means

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Executive summary

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This was a first appeal to the Court of Appeal at Nairobi (Githinji, Koome and Sichale, JJ.A) against the judgment of Mbaru J of the Employment and Labour Relations Court, which had awarded the respondent Kshs. 571,531 as house allowance, Kshs. 185,400 as compensation for unfair termination, Kshs. 23,800 for 14 days of unpaid salary and costs. The appellant challenged only the house allowance award, contending that the respondent was paid a consolidated gross salary inclusive of house allowance under section 31(2)(a) of the Employment Act, and that the figure was not proven as a special damage. The sole issue was whether the USD 600 monthly salary incorporated a house allowance. The Court held that the letter of appointment, the primary contractual document, did not state that the salary was consolidated to include house allowance; the clause 'other benefits as required by law' therefore imported the statutory entitlement to house allowance under section 31 of the Employment Act. Payslips could not displace the contract since they do not constitute a contract of employment. The Court clarified that had the contract expressly stated the salary was inclusive of house allowance, section 31(2)(a) would have excluded the claim. On computation, the trial judge had adopted the claimed figure without explaining the formula; applying a 15% rate, the Court reduced the award to Kshs. 231,750 with interest at the court rate. The appeal partially succeeded; each party was ordered to bear their own costs in the appeal, with the appellant bearing the ELRC 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 respondent was entitled to house allowance which was not specifically stated in his letter of appointment, i.e. whether the salary of USD 600 was a gross salary incorporating a house allowance
  2. 2.If house allowance is payable, the correct basis of computation of the award

Key legal issues

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01

Whether house allowance is payable where the letter of appointment is silent on whether the salary was consolidated to include it

Holding

House allowance was due because the contract did not provide that the salary of USD 600 was consolidated and inclusive of house allowance; the clause 'other benefits as required by law' imports the statutory entitlement to house allowance under section 31 of the Employment Act

Reasoning

Courts interpret but do not rewrite contracts. The appointment letter was silent on whether the USD 600 salary included house allowance, and clause (e) provided for 'other benefits as required by law'. House allowance is a benefit required under the Employment Act, so the trial judge's interpretation could not be faulted. However, had the contract expressly stated the salary was inclusive of house allowance, section 31(2)(a) would have excluded the claim.

p. 3
02

Evidential weight of payslips in establishing consolidated salary

Holding

Payslips do not constitute the contract of employment; the letter of appointment is the primary contractual document because the employee has no part in the preparation of the payslip

Reasoning

Counsel for the appellant invited the Court to look at the payslips showing a gross salary. The Court held that the primary document of contract was the letter of appointment, as a payslip is merely issued by the employer, the employee has no part in its preparation and no place to sign it. It therefore could not displace the terms of the written contract.

p. 3
03

Correct computation of the house allowance award

Holding

The award was reduced from Kshs. 571,531 to Kshs. 231,750, being 15% of the total salary earned over the approximately 25 months of employment

Reasoning

The trial judge adopted the claimed figure without explaining the formula. The authorities cited applied a 15% rate. The Court computed 600 x 25 x 103 = 1,545,000 as total salary for the period of employment from 1st June 2010 to 14th September 2012, and 15% thereof, Kshs. 231,750, as the appropriate house allowance.

p. 4

Legal principles established

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  • Where an employment contract expressly and clearly states that the salary is consolidated and inclusive of house allowance, section 31(2)(a) of the Employment Act excludes any separate claim for house allowance
  • The letter of appointment is the primary document of contract; a payslip does not constitute a contract of employment
  • 15% of the monthly salary is a reasonable percentage to award as house allowance where it has not been consolidated in the basic wage

Court orders

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  1. 1.Appeal allowed in part; the award of Kshs. 571,531 as house allowance set aside and substituted with Kshs. 231,750
  2. 2.Substituted sum of Kshs. 231,750 to be paid to the respondent with interest from the date of the award at the court rate
  3. 3.Each party to bear their own costs in this appeal
  4. 4.Appellant to bear the costs as ordered for the ELRC proceedings

The bench

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

EG
majority
Martha Karambu Koome
M. K. KoomeJA
Currently serving
majority
FS
majority
On appeal from
Employment and Labour Relations Court at Nairobi
E & LRC Cause No 2404 of 2012
Jurisdiction invoked
First appeal to the Court of Appeal from the Employment and Labour Relations Court

Relief refused

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Full award of house allowance of Kshs. 571,531 as computed and claimed by the respondent

The trial judge adopted the claimed figure without explanation; 15% of the salary is a reasonable basis for computing house allowance

p. 3

Costs

Each party to bear their own costs in this appeal; the appellant shall bear the costs as ordered for the ELRC proceedings

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.

For avoidance of doubt, we clarify that had the contract expressly stated that the salary of USD 600 was inclusive of house allowance, we would not have used the clause “other benefits as required by law” in the contract to award house allowance. We would have applied Section 31 (2) (a) of the Employment Act to exclude it.
p. 3Consolidated salary under section 31(2)(a) of the Employment Act
We hold the primary document of contract here was the letter of appointment as the pay slip does not constitute a contract.
p. 3Primacy of the letter of appointment over payslips
In the upshot of the above analysis this appeal partly succeeds as we interfere with the award of Ksh. 571,531 and substitute it with a sum of Ksh. 231,750 to be paid to the respondent with interest from the date of the award at the court rate.
p. 4Final orders - disposition
we order each party to shall bear their own costs in this appeal but the appellant shall bear the costs as ordered for the ELRC proceedings.
p. 4Costs order

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (4)

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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, "Grain Pro Kenya Inc. Ltd v Andrew Waithaka Kiragu [2019] KECA 563 (KLR)", Case Analysis (2019). Civil Appeal No 228 of 2017. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2019/563/eng@2019-06-28

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