Lake Basin Development Authority v Kabok Peter Aguko
The bottom line
#Kenya's Court of Appeal ruled a state board cannot backtrack on a promised exit package, but an employee cannot receive both gratuity and pension contributions.
What this practically means
#Executive summary
#Key legal issues
#Whether the pre-determination of the respondent's contract was a decision of the Board or of the Cabinet Secretary
It was the Board's decision, merely communicated by the Cabinet Secretary, as shown by the Board minutes of 1st and 2nd October 2015.
The minutes of the Board meeting of 1st and 2nd October 2015 recorded the resolution to lift the interdiction, pre-determine the contract and pay the balance of the unexpired term. The Cabinet Secretary's letter of 19th October 2015 merely communicated that Board decision. Subsequent letters from the appellant computing terminal benefits affirmed the resolution, so the appellant could not disown it.
Whether LBDA could retract its decision to pre-determine the contract
No. The Board was aware of the misconduct allegations when it resolved on a benign exit and nothing new had arisen; it was estopped from derogating from the decision.
The Board passed its resolution with full knowledge of the gross misconduct allegations, choosing a benign exit. Letters of 25th November and 28th December 2015 assuring payment affirmed the resolution. The trial court's finding of estoppel was therefore entitled, and the appellant could not resile from its own decision.
Whether the respondent qualified for both gratuity and provident fund payments
Partly: the gratuity was payable because the pre-determination was not a summary dismissal, but the employer's provident fund contributions could be deducted from the gratuity to avoid double payment under section 35(6).
The letter pre-determining the contract did not cite gross misconduct, so the contractual gratuity clause remained engaged. However, clause 8.3 only gave an option to continue with another scheme and did not exempt the section 35(6) rule against double payment. The employer was entitled to withhold from gratuity the sums it contributed to the provident fund.
Whether an express exclusion clause is required before an employee is disentitled to both gratuity and pension
No. The statutory scheme in section 35(6) itself precludes double payment; an exclusion clause is only relevant to denial of gratuity for misconduct.
The court read James Musembi Mweu as concerning exclusion clauses barring gratuity on misconduct grounds, not as requiring an express clause before the statutory bar on double payment applies. Section 35(6) provides statutory underpinning for avoiding double payment unless the contract expressly saves both payments.
Legal principles established
#- A board that has resolved to pre-determine an employee's contract with benefits cannot retract that decision when nothing new has arisen, and is estopped from denying it.
- Under section 35(6) of the Employment Act, an employer is not to pay both gratuity and pension/provident fund benefits unless the contract expressly contemplates and saves double payment.
- Gratuity is a gratuitous payment payable only if expressly provided for in the contract, and is not payable where termination is on account of misconduct.
Court orders
#- 1.Appeal allowed only to the extent that the appellant may deduct any sum it made as contributions to the pension scheme from the gratuity due to the respondent
- 2.Each side to bear its own costs
- On appeal from
- Employment & Labour Relations Court
- No. 188 of 2016
- Jurisdiction invoked
- First appeal to the Court of Appeal under the Court of Appeal's appellate jurisdiction (Employment & Labour Relations Court appeal)
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Lake Basin Development Authority v Kabok Peter Aguko", Case Analysis (2022). Civil Appeal 61 of 2017. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2022/855/eng@2022-04-28
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.