Paul Njaga Kihara v Chase Bank (Kenya) Limited In Receivership & another [2018] KEELRC 727 (KLR)
The bottom line
#A Kenyan court ordered a bank in receivership to honour a CEO's separation deal, restore his 6% staff loan rate, and pay for wrongly blacklisting him.
What this practically means
#Executive summary
#Key legal issues
#Whether the respondent breached the separation agreement by charging commercial interest rates before 15th April 2017
Yes - the commercial interest rate was charged from 1st March 2017 when the agreement provided that commercial rates would only apply if arrears remained uncleared by 15th April 2017, and the account statements show the claimant was not in arrears
The separation agreement in the letter of 20th March 2017 provided that staff interest rates would be retained subject to clearance of arrears by 15th April 2017. The respondent changed the rates to market rates with effect from 1st March 2017. The claimant's account statement showed a credit balance of Kshs.15,709,229.57 as at 5th April 2017, so he could not have been in arrears on 15th April 2017 to warrant the change from 6% to 14%.
Whether the reference of the claimant to the Credit Reference Bureau was justified
No - the claimant was not in default and had a credit balance in his account, so the reference was unwarranted, attracting general damages of Kshs.1,700,000 which he paid to clear his name
Having found the claimant was not in arrears, the court reasoned there was no basis for listing him as a defaulter with the CRB. The respondents did not deny the averment that the claimant paid Kshs.1,700,000 as excess interest and penalties to clear his name, which the court held to be reasonable compensation by way of general damages.
Whether the claimant was entitled to pay in lieu of unpaid leave days
Yes - the release letter provided for payment of accrued leave days, the respondents did not prove payment, and the court awarded Kshs.6,057,692 for 45 days under sections 10(3)(a)(i), 10(6) and 10(7)
The letter of release stated the claimant would be paid any leave days accrued and not taken. The respondent merely stated that terminal benefits were disbursed per the separation letters without any breakdown of payments. In the absence of proof that leave pay was made, the court awarded pay in lieu of 45 days based on the claimant's basic salary.
Whether the court could award the unpaid pension of Kshs.7,958,510.20
No - the claim against the pension was premature as the funds are held by trustees or pension managers, with dispute-resolution mechanisms under the Retirement Benefits Act
Under the Retirement Benefits Rules, an employee is entitled to 100% of his benefits but only a portion of employer contributions if he leaves before age 50. The claimant did not state his age at leaving service nor that he sought explanations from the scheme managers. Under the Act it is the trustees or pension managers who hold the funds; disputes go to the CEO of the Retirement Benefits Authority, with appeal to the Retirement Benefits Tribunal. The court faulted the respondent for not directing the claimant to the trustees.
Legal principles established
#- A separation agreement between an employer and employee is to be treated in law like any other agreement between an employer and an employee, and parties are bound to honour and perform their contractual obligations under it.
- A party cannot approbate and reprobate - one who knowingly accepts the benefits of a contract is estopped from denying its validity or binding effect.
- Where an employee's separation agreement provides for retention of staff interest rates on loans, charging commercial rates contrary to that agreement constitutes a breach entitling the employee to the declared staff rate.
Court orders
#- 1.Award of pay in lieu of 45 leave days in the sum of Kshs.6,057,692 based on the claimant's basic salary
- 2.Declaration that the claimant continues to repay the loan facilities at the staff preferential interest rate of 6% per annum in accordance with the separation agreement
- 3.Direction that the respondent recalculate the claimant's loan interest at 6% and give the claimant the benefit of any overpayment of interest, to be reflected in the loan accounts
- 4.Direction that the respondent issue the claimant a certificate of service forthwith in accordance with Section 51 of the Employment Act
- 5.Award of general damages in the sum of Kshs.1,700,000 for the unwarranted reference to the Credit Reference Bureau
- 6.Costs of the claim to the claimant, with interest on the decretal sum at court rates from the date of judgment
- Jurisdiction invoked
- Employment and Labour Relations Court jurisdiction over employment claims (statement of claim for wrongful withholding of salary accrued and terminal dues; reliefs under the Employment Act and Retirement Benefits Act invoked)
Key timeline
#Practical implications
#Frequently asked questions
#Later judgments citing this (3)
#Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.
- Waweru v Healthlink Matcare Limited t/a Nairobi Women’s Hospital (Cause E942 of 2022) [2025] KEELRC 570 (KLR)[2025] KEELRC 570 (KLR)27 Feb 2025distinguished
- Nrg Media Limited v Charles Karumi Maina [2021] KEELRC 261 (KLR)[2021] KEELRC 261 (KLR)29 Nov 2021
- Pauline Wangeci Warui v Safaricom Limited [2020] KEELRC 1497 (KLR)[2020] KEELRC 1497 (KLR)6 Mar 2020
Cite this brief
#Cite this brief
Caselaw, "Paul Njaga Kihara v Chase Bank (Kenya) Limited In Receivership & another [2018] KEELRC 727 (KLR)", Case Analysis (2018). Not disclosed in the judgment extract. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2018/727/eng@2018-11-02
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.