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ELRCAllowedIndustrial Cause (Statement of Claim dated 31st May 2011)· [2014] KEELRC 436 (KLR)

Samuel Kamau Muhindi v Invesco Assurance Co.Ltd [2014] KEELRC 436 (KLR)

Industrial Court of Kenya
15 May 2014
2,078 words in judgment
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The bottom line

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Kenya's Industrial Court ordered a company in receivership to pay its former CEO over KSh 6.8 million in unpaid terminal dues, pension, costs and interest.

What this practically means

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Executive summary

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The Claimant, formerly Managing Director/Chief Executive of the Respondent under a contract dated 4th August 2005, resigned on 9th March 2007. The Respondent's Chairman accepted the resignation the same day, waived the three-month notice and agreed to pay three months' salary in lieu. The parties agreed terminal dues of Kshs. 9,270,259, offset by a motor vehicle valued at Kshs. 2,840,000, payable by an initial Kshs. 1 million and six equal monthly installments of Kshs. 905,043. The Claimant signed a discharge voucher on 16th April 2007 and accepted the computation in writing, but the Respondent failed to pay. The Respondent later went into receivership for 22 months and defaulted on pension remittances of Kshs. 399,617. The court found a written contract existed despite inconsistent dates pleaded, since the actual contract produced was uncontested. The discharge voucher confirmed only computation, not payment, and the Respondent's documentary bundle predated the resignation. Allegations of professional breach, negligence and malpractice failed for want of evidence and were irrelevant to dues arising from the agreed settlement. The 'without prejudice' wording in the offer letter became spent upon acceptance. The arbitration objection was out of time under Section 6 of the Arbitration Act, and the six-year contractual limitation period under the Limitation of Actions Act applied, the Employment Act not being retroactive. Judgment was entered for the Claimant in the sum of Kshs. 6,829,876 (terminal dues plus unremitted pension contributions), with costs and interest from the date of judgment at court rates.

Key legal issues

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01

Existence of contract of employment

Holding

A written contract existed between the parties dated 4th August 2005

Reasoning

The Respondent denied the contract on the basis that the Claimant pleaded two different, incorrect dates. However, the Claimant produced the actual contract in his supplementary statement of claim, which confirmed the date as 4th August 2005. The Respondent did not contest the genuineness of the document. The court held that pleadings can be confirmed or controverted by evidence, and the conflicting dates were mere mistakes clarified by the document.

p. 3
02

Payment of terminal dues

Holding

The Respondent did not pay the Claimant terminal dues of Kshs. 6,430,259

Reasoning

The discharge voucher confirmed only the computation of terminal dues, not payment, and the covering letter asked the Claimant to sign signifying agreement to the computations. The Respondent's bundle of documents related to expenses predating the resignation and none evidenced payment of terminal dues. The agreed mode of payment (initial Shs. 1 million plus six installments) was never implemented.

p. 3
03

Allegations of professional breach, negligence and malpractice

Holding

The allegations failed for want of evidence and were irrelevant to entitlement to terminal dues

Reasoning

The Respondent adduced no evidence to prove the allegations. Moreover, the terminal dues arose from a negotiated settlement following resignation and were payable whether the resignation was voluntary or compelled. Part payment of Shs. 1 million with an agreement to pay the balance in installments confirmed the liability.

p. 4
04

Effect of 'without prejudice' wording

Holding

The words became spent upon acceptance of the offer

Reasoning

The court agreed with Wa Makau J in Millicent Wambui v Nairobi Botanica Gardening Limited that 'without prejudice' protects an offeror where no agreement is reached. Once the Claimant accepted the offer and other documents confirmed it, the protection fell away and did not affect his entitlement to terminal dues.

p. 4
05

Arbitration clause

Holding

It was too late to invoke arbitration at the submissions stage

Reasoning

Section 6 of the Arbitration Act requires a party seeking stay pending arbitration to apply before filing a defence. The Respondent raised arbitration only in written submissions after filing its defence, so the objection came too late.

p. 4
06

Limitation period

Holding

The claim was filed within the six-year limitation period for contract claims

Reasoning

The Employment Act 2007's three-year limitation did not apply because the cause of action arose before that Act was enacted. The six-year period under the Limitation of Actions Act for contracts applied. The Claimant resigned on 9th March 2007 and filed on 3rd June 2011, just over four years later.

p. 4

Legal principles established

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  • A discharge voucher confirming only the computation of terminal dues is not evidence of payment of those dues
  • The words 'without prejudice' in an offer cease to have effect once the offer is accepted
  • An application for stay pending arbitration under Section 6 of the Arbitration Act must be made before a defence is filed
  • A claimant who has ceased to be a member of a pension scheme is entitled to unremitted pension contributions directly from the employer

Court orders

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  1. 1.Judgment entered for the Claimant against the Respondent in the sum of Kshs. 6,829,876
  2. 2.Costs of the claim awarded to the Claimant
  3. 3.Interest on the judgment sum from the date of judgment at court rates

Authorities

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Legislation

  • Arbitration ActSection 6
  • Employment Act 2007Section 90
  • Limitation of Actions Actlimitation period of 6 years in respect of contracts

Cases cited (1)

  • Millicent Wambui v Nairobi Botanica Gardening Limited
    [2013] eKLR
Jurisdiction invoked
Industrial Court jurisdiction over employment and terminal dues claims

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, "Samuel Kamau Muhindi v Invesco Assurance Co.Ltd [2014] KEELRC 436 (KLR)", Case Analysis (2014). Industrial Cause (Statement of Claim dated 31st May 2011). Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2014/436/eng@2014-05-15

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