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Court of AppealPartially AllowedCivil Appeal No. 47 of 2012· [2019] KECA 917 (KLR)

Nzoia Sugar Company Limited v Francis Oyatsi [2019] KECA 917 (KLR)

Court of Appeal of Kenya
8 March 2019
4,606 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 slashed a Kshs. 13.6 million wrongful termination award to Kshs. 2.29 million because the trial court never explained its figures.

What this practically means

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Executive summary

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The Court of Appeal (Ouko, Makhandia and Gatembu Kairu, JJA) heard Nzoia Sugar Company Limited's appeal against an Industrial Court award of approximately Kshs. 13.6 million to Francis Oyatsi, a Managing Director whose employment was terminated by board resolution on 31st December 2008 following allegations deliberated in his absence. The Industrial Court declared the termination wrongful and a nullity and awarded the full reliefs claimed without reasons. On appeal, the appellant abandoned liability and challenged only quantum. The Court applied the Mbogo v Shah discretion standard and its employment jurisprudence, holding that an award of remedies under Section 49 of the Employment Act must be justified by reasons and statutory factors including length of service, mitigation and the 12-month cap under Section 49(c). It found the Judge had simply pasted the pleaded claims into the award and set aside orders 2, 3 and 4. It substituted damages of Kshs. 1,780,000.00 (four months' gross salary), prorated gratuity of Kshs. 567,300.00 (half the full-term figure, since the respondent served under half of the three-year term), and accrued leave of Kshs. 527,889.00, a total of Kshs. 2,285,189.00 subject to statutory deductions. The certificate of service and costs orders below were upheld. As the appellant substantially succeeded and the liability holding was unchallenged, each party was ordered to bear its own costs of the appeal. The decision binds lower courts to give reasoned, statute-anchored justifications for employment awards.

Key legal issues

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01

Whether an appellate court may interfere with the quantum of damages for wrongful termination

Holding

Yes, where the trial court gave no reasons for the awards or proceeded on wrong principles

Reasoning

The Court applied the Mbogo v Shah discretion standard and the line of employment cases (CMC Aviation, Ol Pejeta, NSSF v Kazungu) holding that an award of remedies under Section 49 must be justified by reference to the statutory factors. The Judge here simply pasted the pleaded figures into the award without analysis, inviting appellate intervention.

p. 3
02

Measure of damages for wrongful termination of a fixed-term contract

Holding

Damages are limited by Section 49 of the Employment Act, capped at 12 months' gross salary, with notice-based measures applicable where the contract is terminable by notice; the Court awarded 4 months' gross salary

Reasoning

The contract allowed termination on three months' notice or payment in lieu. The Court held the trial judge ignored this provision, the capped 12-month limit, and the fact that the respondent served less than half the term. Considering length of service, accelerated payment, comparable awards and the position held, 4 months' gross salary was reasonable.

p. 5
03

Entitlement to gratuity where contract terminated before completion

Holding

Gratuity conditional on successful completion is payable prorated to the period worked when termination is wrongful

Reasoning

Relying on Bamburi Cement v Kilonzi and Rika J's decision in Ben Panhill Sifuna, the Court held that where the employee is not at fault for premature termination, fairness demands pro-rata gratuity as reward and recognition for time served. It halved the full-term figure since the respondent served about half of the three-year term.

p. 5
04

Whether leave 'to be earned' up to the end of the contract period is payable

Holding

No; only leave actually earned during service is payable

Reasoning

The contract provided 30 working days' leave per calendar year, not carried forward without board approval. The Court computed leave actually earned from the contract terms and set aside the award for leave that would only accrue if the respondent had continued working to the contract's end.

p. 6

Legal principles established

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  • A court awarding remedies under Section 49 of the Employment Act must give reasons justifying the quantum; an unexplained award is liable to be set aside on appeal
  • Compensation for wrongful termination is capped at the equivalent of twelve months' gross monthly salary under Section 49(c), and courts must consider the statutory factors including length of service and mitigation
  • Where employment is wrongfully terminated before the end of a fixed term, contractual gratuity conditional on successful completion is payable prorated to the period worked
  • An appellate court will not interfere with an award of damages unless it is inordinately high or low, or the judge proceeded on wrong principles or failed to justify the award

Court orders

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  1. 1.Orders 2, 3 and 4 of the Industrial Court Award set aside and substituted
  2. 2.Appellant to pay respondent damages of Kshs. 1,780,000.00 being equivalent of 4 months' gross salary for wrongful termination
  3. 3.Appellant to pay respondent gratuity of Kshs. 567,300.00
  4. 4.Appellant to pay respondent accrued leave of Kshs. 527,889.00
  5. 5.Total payable of Kshs. 2,285,189.00 subject to statutory deductions under Section 49(2) of the Employment Act
  6. 6.Certificate of service order and costs order of the Industrial Court upheld
  7. 7.Each party to bear its own costs of the appeal

Authorities

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Legislation

  • State Corporations ActSection 6(1)(b)
  • Employment Act, 2007Section 49
  • Employment Act, 2007Section 49(2)
  • Employment Act, 2007Section 49(1)(a),(b),(c)
  • Employment Act, 2007Section 49(4) (referred to in CMC Aviation quote)
  • Employment Act, 2007Section 50
  • Labour Institutions ActSection 15

Cases cited (17)

  • CMC Aviation Ltd vs Captain Mohammed Noor
    Civil Appeal No. 199 of 2013; [2015] eKLR
  • Kenya Ports Authority vs Edward Otieno
    Civil Appeal No. 120 of 1997
  • Ben Panhill Sifuna vs Kenya Urban Roads Authority
    [2014] eKLR
  • Omega Enterprises (Kenya) Limited vs Kenya Tourist Development Corporation and 2 others
    Civil Appeal No. 59 of 1993
  • Macfoy vs United Africa Co. Ltd
    [1961] 3 All ER 1169
  • Mbogo and Another vs. Shah
    [1968] E.A. 93
  • International Planned Parenthood Federation vs Pamela Ebot Arrey Effiom
    [2016] eKLR
  • Butt v Khan
    (1982-88) 1 KAR 1
  • Berkley-Steward v Waiyaki
    (1982-88) 1 KAR 1118
  • National Social Security Fund vs Grace K. Kazungu & another
    [2018] eKLR
  • OlPejeta Ranching Limited vs. David Wanjau Muhoro
    [2017] eKLR
  • Bamburi Cement Limited v William Kilonzi
    [2016] eKLR
  • Chai Trading Co. Ltd v Joseph Kimathi Ikiamba
    [2018] eKLR
  • Ronald Kimatu Ngeli v Ukulima Sacco Society Ltd
    [2011] eKLR
  • Peter Amolo Akumu Gould v Kenya Commercial Bank Limited
    [2014] eKLR
  • Gunton v London Borough of Richmond Upon Thame
    [1980] 3 All ER 577
  • Ethics and Anti-Corruption Commission v Nicholas Mwenda Mtwaruchiu & 8 others
    [2018] eKLR
On appeal from
Industrial Court of Kenya at Nairobi
Industrial Court Cause No. 361(N) of 2009
Jurisdiction invoked
First appellate jurisdiction over appeals from the Industrial Court under the labour statutes establishing that court (Employment Act, 2007 regime; Labour Institutions Act)

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, "Nzoia Sugar Company Limited v Francis Oyatsi [2019] KECA 917 (KLR)", Case Analysis (2019). Civil Appeal No. 47 of 2012. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2019/917/eng@2019-03-08

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