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ELRCPartially AllowedCause No 635 of 2016· [2023] KEELRC 2345 (KLR)

Gold Crown Beverages (Kenya) Limited v Ngugi (Cause 635 of 2016) [2023] KEELRC 2345 (KLR)

Employment and Labour Relations Court
28 September 2023
5,008 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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A Kenyan court ruled a manager who resigned without the required three months' notice must pay his employer, while unproven misconduct claims failed.

What this practically means

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Executive summary

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The claimant, Gold Crown Beverages (Kenya) Ltd, employed the respondent as general manager - domestic sales from 1 February 2015 on a monthly salary of Kshs. 500,000, on terms requiring 3 months' notice or payment in lieu of termination. The claimant sued for breach of contract (notice pay of Kshs. 1,500,000), special damages of Kshs. 1,176,211 for transport and repackaging losses, general damages for reputational harm, recovery of unaccounted salary advances of Kshs. 1,141,466.35, travel advances of Kshs. 407,473.51 and an IOU of Kshs. 60,000, alleging the respondent extorted kickbacks from customers and suppliers and approved credit recklessly. The respondent filed a counter-claim alleging constructive dismissal for want of a job description, hostile work conditions, unfair deduction of salary, false imprisonment and criminal prosecution, and sought 12 months' compensation, notice pay, service pay, leave, terminal dues and a certificate of service. The court held that the respondent resigned with immediate effect without the contractual 3 months' notice and awarded the claimant notice pay of Kshs. 1,500,000. It held that unaccounted advances are recoverable under sections 17 and 19 of the Employment Act and awarded Kshs. 1,141,466.35, Kshs. 407,473.51, Kshs. 60,000 and proven kickbacks of Kshs. 25,000. General damages and the wider special damages failed for want of proof and because the alleged misconduct was never put to the respondent under section 41. Constructive dismissal was rejected as the resignation notice gave no reasons; the counter-claim was dismissed in its entirety, save for an order for a certificate of service. Each party was ordered to bear its own costs.

Key legal issues

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01

Whether the respondent breached the employment contract by resigning without the required 3 months' notice or payment in lieu

Holding

Yes; the respondent was liable for 3 months' notice pay of Kshs. 1,500,000.

Reasoning

Clause 11 of the written contract required 3 months' notice or payment in lieu. The resignation notice dated 4 June 2016 took immediate effect and offered no notice or payment. Under sections 35 and 36 of the Employment Act and the contract, the respondent ought to have issued the required notice, which was absent, so the claimant was entitled to payment in lieu.

p. 8
02

Whether monies advanced to the respondent and not accounted for were recoverable

Holding

Yes; salary advances balance of Kshs. 1,141,466.35, travel advances of Kshs. 407,473.51 and IOU of Kshs. 60,000 were due and payable.

Reasoning

Under sections 10(6), 17 and 19 of the Act the employer may deduct or demand monies advanced and loss occasioned by wilful default or negligence. The respondent, required to render an account, offered no material response to controvert the itemised advances; without any account the monies were lawfully due to the employer.

p. 8
03

Whether the claimant proved losses from alleged extortion, kickbacks and gross misconduct

Holding

Only Kshs. 25,000 in proven customer kickbacks was awarded; general damages for reputational loss and the wider special damages failed.

Reasoning

The alleged misconduct was never brought to the respondent's attention before he resigned, denying him a section 41 fair hearing. The witness statements of Solomon Mwangi and Betty Ogina were undated. No audited accounts evidenced the claimed losses, so only the uncontroverted payments of Kshs. 25,000 were awarded.

p. 9
04

Whether the respondent was constructively dismissed

Holding

No; constructive dismissal could not be inferred and the counter-claim was dismissed in its entirety.

Reasoning

The resignation notice gave no reasons and did not suggest frustration of employment. The absence of a job description was never raised during employment, alleged communications were not exhibited, and the criminal case arose after employment ended. Applying the concept on these facts would negate its essence of employer repudiation.

p. 9

Legal principles established

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  • An employee who resigns must give the contractual notice or pay in lieu thereof; failure renders him liable for the notice pay.
  • An employer may lawfully claim/deduct monies advanced and unaccounted for by an employee under sections 17 and 19 of the Employment Act.
  • Allegations of employee misconduct that were never put to the employee for a fair hearing under section 41 cannot ground employer claims based on that misconduct.
  • Compensation for unfair termination is not available where the employee resigned.

Court orders

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  1. 1.Declaration that the respondent unlawfully terminated the employment contract without notice
  2. 2.3 months' notice pay at Kshs. 1,500,000
  3. 3.Unaccounted funds at Kshs. 1,141,466.35
  4. 4.Advances made to the respondent at Kshs. 407,473.51
  5. 5.The IOU at Kshs. 60,000 is due and payable
  6. 6.Monies from customers Kshs. 25,000
  7. 7.Counter-claim dismissed in its entirety
  8. 8.Dues owed to the claimant to be paid within 30 days, failing which interest at court rates to accrue from dates of filing suit until payment in full
  9. 9.Claimant to issue the respondent with a Certificate of Service in terms of Section 51 of the Employment Act, 2007
  10. 10.Each party to bear own costs

Authorities

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Legislation

  • Employment Act, 2007Section 10
  • Employment Act, 2007Section 10(6)
  • Employment Act, 2007Section 17
  • Employment Act, 2007Section 19(1)(b)
  • Employment Act, 2007Section 35
  • Employment Act, 2007Section 35(6)
  • Employment Act, 2007Section 36
  • Employment Act, 2007Section 41
  • Employment Act, 2007Section 43
  • Employment Act, 2007Section 44(4)(c)
  • Employment Act, 2007Section 45
  • Employment Act, 2007Section 47(5)
  • Employment Act, 2007Section 51

Cases cited (5)

  • Milton M Isanya v Aga Khan Hospital Kisumu
    [2017] eKLR
  • Nathan Ogada Atiagaga v David Engineering Limited
    [2015] eKLR
  • Edwin Beiti Kipchumba v National Bank of Kenya
    [2018] eKLR
  • Milano Electronics Limited v Dickson Nyasi Muhaso
    [2021] eKLR
  • Muthaiga Country Club v Kudheiha Workers
    [2017] eKLR
Jurisdiction invoked
Employment and Labour Relations Court jurisdiction under the Employment and Labour Relations Court Act over the claim and counter-claim (not expressly cited in the judgment)

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, "Gold Crown Beverages (Kenya) Limited v Ngugi (Cause 635 of 2016) [2023] KEELRC 2345 (KLR)", Case Analysis (2023). Cause No 635 of 2016. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2023/2345/eng@2023-09-28

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