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ELRCDismissedMemorandum of Claim dated 29th January 2022 (ELRC, Nairobi)· [2024] KEELRC 1661 (KLR)

Gichia v Policy Holders Compensation Fund (Statutory Manager, United Insurance Company) (Cause E064 of 2022) [2024] KEELRC 1661 (KLR)

Employment and Labour Relations Court
28 June 2024
3,712 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~15 min to read original · ~4 min brief

The bottom line

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Kenya's Employment Court ruled that a fixed-term contract simply ends when it expires, and even 16 years of renewals don't guarantee renewal.

What this practically means

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Executive summary

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The Claimant, employed as Manager for Life by United Insurance Company Limited (under statutory management since 2005), sued the Policyholders Compensation Fund, the Company's Statutory Manager since 26th June 2015, claiming Kshs 3,080,000.00 for unpaid salary, notice pay, service pay, compensatory damages for unfair termination and general damages. She maintained her employment contract was with the Company, that the Fund was merely a Statutory Manager without power to terminate, and that sixteen years of successive renewals created a legitimate expectation of renewal. The Respondent contended the Statutory Manager issued and managed all her contracts, that her last contract was a fixed one-year term from 9th March 2020 to 8th March 2021, and that non-renewal meant the contract ended by effluxion of time. The Court framed three issues: the Respondent's role in managing the contract, whether non-renewal amounted to unfair termination, and entitlement to remedies. The Court held the appointment of the Statutory Manager rendered the Board of Directors functus officio, vesting in the Fund the power to issue and renew employment contracts, which the Claimant had accepted. Relying on Court of Appeal authority, the Court held fixed-term contracts carry no expectation of renewal, that reasons and a Section 41 hearing were unnecessary, and that sixteen years of renewals created no legitimate expectation. The claim was dismissed in its entirety with each party bearing its own costs.

Key legal issues

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01

Whether the Respondent (Statutory Manager) had a role in the management of the Claimant's employment contract

Holding

Yes. Upon appointment as Statutory Manager, the Respondent assumed the powers of the Board of Directors, including issuing, renewing and deciding not to renew the Claimant's contracts.

Reasoning

The Company was placed under statutory management on 15th July 2005 and the Respondent became Statutory Manager from 26th June 2015. The appointment rendered the Board of Directors functus officio, so the Statutory Manager exercised the Board's powers. All sixteen of the Claimant's contracts, including the last one dated 6th March 2020, were issued by the Statutory Manager, and she executed them. Her denial of an employment relationship with the Respondent undermined her own claim against the Respondent.

p. 6
02

Whether non-renewal of the fixed-term contract amounted to unfair termination

Holding

No. The one-year fixed-term contract ended by effluxion of time on 9th March 2021; no hearing or reasons for non-renewal were required.

Reasoning

The last contract was expressly for one year. Fixed-term contracts carry no expectation of renewal, and an employer is not obliged to give reasons for non-renewal. Section 41 hearing obligations do not arise on effluxion of time. The Claimant's sixteen years of renewals did not create a legitimate expectation of automatic renewal, particularly given the extraordinary statutory-management context.

p. 7
03

Whether the Claimant was entitled to the remedies sought

Holding

No. Having found no unfair or unlawful termination, the Court held the Claimant was not entitled to any of the reliefs claimed.

Reasoning

Since the claim for unfair termination failed, the heads of claim (unpaid salary, notice pay, service pay, compensatory and general damages) fell away. The entire claim was dismissed with each party bearing its own costs.

p. 8

Legal principles established

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  • A statutory manager appointed over a company assumes the powers ordinarily vested in the Board of Directors, including entering into and renewing contracts of employment.
  • Fixed-term contracts carry no obligation or expectation of renewal, and an employer need not give reasons for non-renewal beyond effluxion of time.
  • Repeated renewal of fixed-term contracts over many years does not of itself create a legitimate expectation of automatic renewal.

Court orders

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  1. 1.The Claim is dismissed in its entirety
  2. 2.Each party to bear its own costs

Authorities

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Legislation

  • Insurance ActSection 67(C)
  • Employment ActSection 41
  • Employment ActSection 40
  • Civil Procedure RulesOrder 21 Rule 1
  • Civil Procedure ActSection 1B
  • Constitution of KenyaArticle 159(2)(d)
  • Constitution of KenyaArticle 48

Cases cited (13)

  • Savings & Loan (K) Limited vs Kanyenje Karangaita Gakombe & another
    (2015) eKLR
  • Alex Wainaina Mbugua vs Kenya Airways Limited
    (2017) eKLR
  • Joseph Mwaniki Nganga vs United Millers Limited
    (2022) eKLR
  • Teresa Carlo Omondi vs Transparency International Kenya
    (2017) eKLR
  • Keen Kleeners Limited vs Kenya Plantation and Agricultural Workers Union
    (2021) KECA 352 (KLR)
  • Enid Nkirote Mukire vs Kenya Yearbook Editorial Board
    (2022) eKLR
  • Registered Trustees of the Presbyterian Church of East Africa & another vs Ruth Gathoni Ngotho Kariuki
    (2017) eKLR
  • Richard Erskine Leakey & 2 others vs Samson Kipkoech
    (2019) eKLR
  • Communications Commissions of Kenya & 5 others vs Royal Media Services Limited & 5 others
    (2014) eKLR
  • Trocaire vs Catherine Wambui Karuno
    [supra]
  • Oshwal Academy (Nairobi) & another vs. Indu Vishwanath
    [2015] eKLR
  • Bernard Wanjohi Muriuki vs. Kirinyaga Water And Sanitation Company Limited & another
    [2012] eKLR
  • Transparency International Kenya vs Teresa Carlo Omondi
    (2023)
Jurisdiction invoked
Employment and Labour Relations Court jurisdiction over employment disputes (Employment Act; Employment and Labour Relations Court Act)

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, "Gichia v Policy Holders Compensation Fund (Statutory Manager, United Insurance Company) (Cause E064 of 2022) [2024] KEELRC 1661 (KLR)", Case Analysis (2024). Memorandum of Claim dated 29th January 2022 (ELRC, Nairobi). Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2024/1661/eng@2024-06-28

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