Shiloah Investment Limited v Nyakundi (Employment and Labour Relations Appeal E035 of 2022) [2023] KEELRC 1036 (KLR)

Employment and Labour Relations Court

27 April 2023

CBC. N. Baari

1,736 words in judgment

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The bottom line

A Kenyan court reduced an unfair termination award by striking out gratuity for an NSSF-registered employee, but affirmed the 12 months' salary compensation and costs.

What this practically means

Executive summary

This is a first appeal to the Employment and Labour Relations Court at Kisumu (C. N. Baari, J) against a Trial Court judgment of July 27, 2022 which found in favour of the Respondent employee and entered judgment of Kshs 1,190,497.78 comprising the principal award, interest and costs after finding his summary dismissal unfair. The Appellant employer raised five grounds, condensed into three: that the principal award of Kshs 899,827.00 was neither pleaded nor proven; that gratuity was wrongly awarded to an NSSF-registered employee whose termination was not by redundancy; and that a certificate of costs was issued without any Bill of Costs being filed, served or taxed, with interest also wrongly computed for a whole year. The court applied the United India Insurance principles on interference with discretionary decisions. It found that compensatory damages had been specifically pleaded in paragraph 9 of the claim and upheld the award of 12 months' salary compensation at Kshs 635,172.00. It held that gratuity is payable only where it is an express contractual term or provided under an applicable CBA, and that Section 35(6) of the Employment Act exempts NSSF-covered employees; the Respondent admitted NSSF membership and his contract made no gratuity provision, so the gratuity award was set aside. On costs, the court held that Section 27 of the Civil Procedure Act and Paragraphs 49 and 51 of the Advocates Remuneration Order empower magistrates' courts to assess costs, and upheld the Trial Court's assessment together with interest. Each party was ordered to bear its own costs of the appeal.

Key legal issues

Whether compensatory damages for unfair termination were pleaded

Holding

The Trial Court did not err in awarding compensatory damages because the relief was specifically sought in the Respondent's claim

Reasoning

Paragraph 9 of the Respondent's claim sought a declaration that the summary dismissal was unfair and unlawful, a declaration of entitlement to compensatory damages, gratuity, costs and interest. Since the prayer for compensation was pleaded, the Trial Court, guided by Sections 49(1)(e) and 49(4)(e) of the Employment Act, was entitled to make the award. The uncontested finding of unfair termination therefore supported the award of 12 months' salary compensation.

p. 3

Whether the award of gratuity was sustainable

Holding

The award of gratuity was erroneous and was set aside because the Respondent was an NSSF member, his contract did not provide for gratuity, and no collective bargaining agreement applied

Reasoning

The Respondent admitted in submissions that he was a member of NSSF and not entitled to gratuity. Section 35(6) of the Employment Act exempts NSSF-covered employees from service pay. His letter of appointment did not provide for gratuity and described him as non-unionisable, so no CBA could apply. The principal award of Kshs 899,827.00 was assumed to include gratuity since the Trial Court did not explain how it arrived at the figure.

p. 4

Whether a magistrate's court can assess costs without a filed and taxed Bill of Costs

Holding

A magistrate's court has jurisdiction under Section 27 of the Civil Procedure Act and Paragraphs 49 and 51 of the Advocates Remuneration Order to assess costs; the Trial Court's assessment was upheld

Reasoning

Section 27 of the Civil Procedure Act confers on both the subordinate court and the High Court discretion and jurisdiction to award costs and determine the extent and by which party they are payable. Paragraph 49 of the Advocates Remuneration Order defines 'court' to include a Magistrate's Court, empowering it to determine costs in contentious matters. Paragraph 51 provides the applicable scale. The Trial Court's assessment of costs was therefore lawful and upheld.

p. 4

Legal principles established

Gratuity is only payable where it is an express term of the contract of service or a provision under an applicable collective bargaining agreement, and employees covered under NSSF are exempted from service pay under Section 35(6) of the Employment Act
A magistrate's court has jurisdiction to assess and award costs under Section 27 of the Civil Procedure Act and the Advocates Remuneration Order without a formal taxation of a Bill of Costs
An appellate court will not interfere with a discretionary award where the trial court exercised discretion on pleaded reliefs, per the principles in United India Insurance Co. Ltd v East African Underwriters (Kenya) Ltd [1985] EA

Court orders

1.The Trial Court's finding that the Respondent was unfairly terminated is upheld
2.The award of 12 months' salary in compensation for unfair termination is upheld at Kshs 635,172.00
3.The award of gratuity is set aside
4.The award of costs and interest and the assessment by the trial court is upheld
5.Parties shall bear their own costs of the appeal

Authorities

Legislation

Employment ActSection 35(6) (and 35(6)(d))
Employment ActSections 49(1)(e) and 49(4)(e)
Civil Procedure ActSection 27
Advocates Remuneration OrderParagraph 49
Advocates Remuneration OrderParagraph 51

Cases cited (3)

Anthony Yamo Ihito v Basco Products (Kenya) Limited
[2022] eKLR
Butt v Khan
(1981)
United India Insurance Co. Ltd v East African Underwriters (Kenya) Ltd
[1985] EA

On appeal from: Trial Court (Magistrate's Court); Not stated
Jurisdiction invoked: First appellate jurisdiction of the Employment and Labour Relations Court over appeals from the Trial Court (Statute not expressly cited in the judgment)

Key timeline

Practical implications

Frequently asked questions

Cite this brief

Caselaw, "Shiloah Investment Limited v Nyakundi (Employment and Labour Relations Appeal E035 of 2022) [2023] KEELRC 1036 (KLR)", Case Analysis (2023). . Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2023/1036/eng@2023-04-27

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