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ELRCDismissedCause No 716 of 2015· [2019] KEELRC 2495 (KLR)

Zachary Ndungu Gichia v Family Bank Limited [2019] KEELRC 2495 (KLR)

Employment and Labour Relations Court of Kenya at Nairobi
25 January 2019
ANAbuodha Jorum Nelson
1,263 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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Kenya's Employment Court upheld Family Bank's decision to sack a manager over a flawed auction, confirming loss of confidence as a valid dismissal reason.

What this practically means

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Executive summary

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The claimant, employed by Family Bank Limited as a Collection and Recoveries Manager from 1st December 2011, was suspended on 13th August 2014 over an alleged unprocedural auction on 31st July 2014 of property charged to the bank (LR No Limuru/Kamirithu/2836). The bank's complaint was that the property, valued at Kshs 3,500,000 when charged in 2012, fetched a lower valuation at the time of sale, and that the claimant proceeded with the auction without consulting his line manager. After responding to a show cause letter and attending a disciplinary hearing on 21st August 2014, the claimant's employment was terminated on 22nd August 2014 on grounds of loss of integrity and credibility. He sued, claiming the auction followed the law and seeking, among other things, payment of three months' salary in lieu of notice (he was paid two) and leave to continue servicing his Kshs 7,000,000 staff loan at staff interest rates. The court held that the reason for termination is assessed on what the employer genuinely believed, applying the reasonable employer test; that loss of confidence is a valid ground of termination since employment is a personal service contract; and that the claimant's concession that he never consulted his line manager discharged the bank's evidentiary burden. The process was found procedurally fair. The loan prayer failed because the contract expressly ended the staff rate on termination, and the court cannot rewrite contracts. The claim was dismissed with costs on 25th January 2019.

Key legal issues

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01

Validity of the reason for termination

Holding

The reason - loss of confidence arising from an unprocedural auction of charged property at an undervalue without consulting the line manager - was valid

Reasoning

The court applied the reasonable employer test: reasons for termination are those the employer genuinely believed to exist. The claimant conceded he did not consult his line manager before proceeding with the auction despite the valuation at sale being lower than at the creation of the charge. The respondent therefore discharged its evidentiary burden, and loss of confidence in a personal service contract is a valid ground for termination.

p. 2
02

Procedural fairness of the termination process

Holding

The process was procedurally fair as the claimant responded to a show cause letter and attended a disciplinary hearing before termination

Reasoning

The claimant was suspended, issued a notice to show cause which he answered, invited to and attended a disciplinary hearing, and only then was his employment terminated. This satisfied the requirements of a fair procedure. His complaint of entitlement to three months' notice instead of two was not sustained as a basis for finding the termination unfair.

p. 2
03

Staff loan interest rate after termination

Holding

The claimant could not continue servicing the loan at staff rates because the contract itself provided that the staff rate ceases upon termination, and the claimant brought about the termination

Reasoning

The court declined to rewrite the loan contract. The contract expressly provided that the staff interest rate would cease on termination of employment. Since the claimant's own conduct brought about the termination, he could not pick and choose which consequences of the contract to live with. He also admitted knowing the rate would change on leaving employment and never approached the bank to negotiate repayment.

p. 2

Legal principles established

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  • Reasons for termination are those the employer genuinely believed to exist at the time, tested against the reasonable employer standard; the court does not substitute its own view
  • Loss of confidence is a valid ground for termination of employment
  • The court cannot rewrite a contract voluntarily entered into by the parties

Court orders

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  1. 1.The claim is found not merited and is hereby dismissed with costs
Jurisdiction invoked
Employment and Labour Relations Court jurisdiction under the Employment Act over termination of employment

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (1)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Zachary Ndungu Gichia v Family Bank Limited [2019] KEELRC 2495 (KLR)", Case Analysis (2019). Cause No 716 of 2015. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2019/2495/eng@2019-01-25

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