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Court of AppealPartially AllowedCourt of Appeal at Nyeri, Civil Appeal (judgment dated 9th June 2023)· [2023] KECA 1590 (KLR)

NHIF Board of Management v Wakhu (Civil Appeal 54 of 2018) [2023] KECA 1590 (KLR)

Court of Appeal of Kenya
9 June 2023
WKW. KaranjaJMJamila MohammedAMA. O. Muchelule
4,381 words in judgment
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The bottom line

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Kenya's Court of Appeal upheld NHIF's dismissal of an employee who ran an undisclosed private business serving NHIF, ruling conflict of interest alone is a valid reason for termination.

What this practically means

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Executive summary

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The Court of Appeal at Nyeri (Karanja, Mohammed and Muchelule, JJA) allowed NHIF's appeal against a judgment of Ongaya, J. of the Employment and Labour Relations Court delivered on 21st July 2017, which had found that the respondent's dismissal was unfair. The respondent, a Senior Benefits and Quality Assurance Officer, was dismissed in October 2013 for engaging, directly and indirectly through his wife, in business with NHIF via St. Lavina Medical and Laboratory Services, contrary to his employment terms and the NHIF Human Resources Procedures Manual, and for failing to disclose the conflict of interest. The trial court had found that co-directorship alone did not establish a conflict, that no influence on the accreditation or contract award was proved, and that the respondent was not heard on 'incremental allegations' after the initial Show Cause Letter, awarding maximum compensation of 12 months' salary (Kshs.1,905,800). The Court of Appeal, reconsidering the evidence afresh, found there was no hearing by instalments and no procedural impropriety: the respondent was heard on the Show Cause Letter and the independent audit report before termination. On the merits, it found the respondent had an undisclosed private business doing work with the appellant, that the alleged sale was a ploy since his wife remained administrator and signed the January 2012 contract, and that this constituted a valid reason for termination. The trial court's findings were reversed in their entirety, and the appeal was allowed with costs, all orders of the learned Judge being set aside. The Court also observed, obiter, that the trial Judge had given no justification for the maximum award under section 49 of the Employment Act.

Key legal issues

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01

Procedural fairness of the disciplinary process

Holding

There was no hearing by instalments and no procedural impropriety; the respondent was heard on both the Show Cause Letter and the independent audit report before termination.

Reasoning

The Court traced the disciplinary chronology: a Show Cause Letter dated 4th June 2012, the respondent's written response of 17th June 2012, a session on 24th July 2012 at which an independent audit was directed (at which no hearing occurred), and a hearing on 14th June 2013 where the respondent was heard on the Show Cause Letter and the audit report before the Staff Advisory Committee terminated his employment. The trial court's finding of 'incremental allegations' heard by instalments was unsupported by the record, so the finding of want of hearing under section 41 of the Employment Act was undone.

p. 6
02

Validity of the reasons for termination - conflict of interest

Holding

The respondent had an undisclosed direct and indirect (through his wife) interest in St. Lavina Medical and Laboratory Services, which did business with the appellant; this constituted a valid reason for termination.

Reasoning

The respondent founded the facility in 2004, never disclosed it at employment or thereafter, and although the business was allegedly sold, his wife remained administrator and signed the January 2012 contract with the appellant. The alleged sale was a ploy. The trial court had erred in requiring proof of gainful employment or of actual influence on the award of the contract; the undisclosed private interest doing business with the employer was itself a conflict of interest contrary to the HR Manual and the employment terms. The Court reversed the trial court's findings and held the termination was on valid reasons.

p. 8
03

Maximum compensation of 12 months' salary under section 49 of the Employment Act

Holding

The question was academic given the finding of valid reasons, but the Court expressed concern that the trial Judge gave no justification for the maximum award.

Reasoning

Relying on Mara Ison Technologies Kenya Limited v Muriel Ogoudjobi and Olpejeta Ranching Limited v David Wanjau Muhoro, the Court noted that the trial Judge made no attempt to justify the maximum award: he did not consider whether terminal dues had been paid or whether the termination was callous or capricious. Since the unfair termination findings were reversed, no order on compensation survived; the Court did not disturb the award reasoning beyond these observations.

p. 8

Legal principles established

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  • The Court of Appeal, on appeal from the ELRC, may reconsider the evidence afresh and reach its own independent conclusion, while bearing in mind it did not see or hear the witnesses.
  • Fair hearing in employment discipline requires that the employee be informed of the allegations, given an opportunity to respond, and a determination made on that evidence.
  • A court should exercise great caution before interfering with an employer's disciplinary findings where proceedings were fairly conducted in accordance with laid-down regulations.

Court orders

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  1. 1.The appeal is allowed with costs
  2. 2.All the orders of the learned Judge of the Employment and Labour Relations Court are set aside

Authorities

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Legislation

  • National Hospital Insurance Fund Act
  • Employment Act, 2007section 41
  • Employment Act, 2007section 45(2)(c)
  • Employment Act, 2007sections 49 and 49(4)
  • Employment Act, 2007section 50
  • Public Officer Ethics Act, 2003section 12
  • NHIF Human Resources Procedures Manualsections 11, 12.9(ii) and 12.9(v)
  • Constitution of Kenya

Cases cited (8)

  • Kenfreight (E.A) Limited v Benson K. Nguti
    [2016] eKLR
  • Charles Mbembe Oloo v Kenya Posts and Telecommunications Corporation
    [1985] eKLR
  • Bett Francis Barngetuny & Another v Teachers Service Commission & Another
    [2015] eKLR
  • B. A. Imonikhe v Unity Bank PLC
    S.C. 68 OF 2001
  • Judicial Service Commission v Gladys Boss Shollei & Another
  • Nampak Corrugated Wadeville v Khoza
    (JA 14/98) [1998] ZALAC 24
  • Mara Ison Technologies Kenya Limited v Muriel Ogoudjobi
    [2019] eKLR
  • Olpejeta Ranching Limited v David Wanjau Muhoro
    [2017] eKLR
On appeal from
Employment and Labour Relations Court at Nyeri
Jurisdiction invoked
Appellate jurisdiction of the Court of Appeal over appeals from the Employment and Labour Relations Court (first-instance claim for unfair dismissal under the Employment Act, 2007)

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, "NHIF Board of Management v Wakhu (Civil Appeal 54 of 2018) [2023] KECA 1590 (KLR)", Case Analysis (2023). Court of Appeal at Nyeri, Civil Appeal (judgment dated 9th June 2023). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2023/1590/eng@2023-06-09

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