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ELRCPartially AllowedELRC Cause 783 of 2019 (Consolidated with Cause 741 of 2019)

Direct Pay Limited v Kihuha & another (Cause 783 & 741 of 2019 (Consolidated)) [2024] KEELRC 2834 (KLR)

Employment and Labour Relations Court
15 November 2024
2,979 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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What this practically means

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Executive summary

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Two consolidated ELRC causes were determined together. In Cause 783 of 2019, Direct Pay Limited sued its former Systems Manager, Michael Gichuhi Kihuha, and a former employee, Cathrine Wangui Kinyua, seeking a permanent injunction against disclosure of proprietary information and damages for breach of contract, alleging the 1st defendant made nine unauthorized payments of Kshs. 7,404,337 to non-merchant companies and deleted the records, and shared confidential information with the 2nd defendant by email. In Cause 741 of 2019, Kihuha claimed unfair termination, defamation, and terminal dues. The Court held an employment relationship existed and that although the parties had agreed on separation by resignation, the resignation had not crystallized; the effective termination was the dismissal letter of 31.07.2019. The dismissal was found not unfair, the employer having complied with section 41 and satisfied section 43 of the Employment Act, 2007, and the employee's claim for compensation for unfair termination failed. The Court found the employee breached the confidentiality clause by sharing policies with the former employee, who herself was not culpable as the clause applied only during her employment, though she was a necessary party bearing her own costs. The defamation claim failed because accurate publication of misconduct is not libel and no particulars were established. The employer's injunction prayer was declined as ambiguous for want of particulars. The employer was ordered to pay the employee Kshs. 55,000 unlawfully deducted from terminal dues, with interest if unpaid by 15.12.2024, and each party was to bear its own costs.

Questions the Court framed

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The issues the Court set itself to decide, in its own words.

  1. 1.Whether an employment relationship existed between Direct Pay Limited and Michael Gichuhi Kihuha, and the status of Cathrine Wangui Kinyua as a former employee
  2. 2.Whether the termination of the employee's contract of service was unfair
  3. 3.Whether the employee breached the confidentiality clause by sharing proprietary information with the former employee
  4. 4.Whether the former employee was culpable of breach of the confidentiality clause
  5. 5.Whether the employee was defamed by the employer
  6. 6.Whether general damages were established
  7. 7.Whether the Kshs. 55,000 deducted from final dues was justified
  8. 8.Whether a permanent injunction restraining disclosure of proprietary information should issue

Key legal issues

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01

Whether the dismissal of the employee was unfair

Holding

The dismissal was not unfair; the employer complied with section 41 and valid and fair reasons existed under section 43 of the Employment Act, 2007.

Reasoning

The employer issued a notice to show cause, suspended the employee pending investigations, and conducted a disciplinary hearing which the employee attended unaccompanied. The hearing record showed his authorised company ID was used to delete settlement transactions, and he admitted sharing internal policies with a former employee. Although acquitted in criminal proceedings, the Court found valid and fair reasons existed at the date of dismissal. The effective termination was the dismissal letter, not the agreed resignation, which had not crystallised.

p. 5
02

Whether the employee breached the confidentiality clause

Holding

Yes; the employee breached the confidentiality clause by sharing the employer's policies and other information with a third party, the former employee.

Reasoning

The employee admitted in court that he signed a contract with a confidentiality and non-disclosure clause requiring consent to disseminate proprietary information, and that he was never given authority to disseminate information. The record of the disciplinary hearing showed he admitted forwarding the employer's actual policy documents by email of 17.07.2019 to the former employee without her request, confirming breach.

p. 5
03

Whether the Kshs. 55,000 deduction from terminal dues was justified

Holding

The deduction was not justified; the employer failed to show the loss was attributable to the employee or prove ownership and value of the items.

Reasoning

The employer deducted Kshs. 55,000 for a lost laptop bag and a damaged phone. The employer's witness failed to show that such loss was attributable to the employee and had no evidence of ownership or value of the two items. The employee is therefore entitled to the refund of the deducted amount with interest if not paid by the ordered date.

p. 6
04

Whether the former employee was liable for breach of confidentiality or conspiracy

Holding

No; she only received the information sent by the employee and did not breach the confidentiality clause, though she was a necessary party.

Reasoning

The Court found the confidentiality clause applied only while the former employee was in the employer's service. Having left employment at all material times, she merely received the information sent by the employee and bore no culpability. Her submissions were upheld; however, as a necessary party she was to bear her own costs of the suits.

p. 5

Legal principles established

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  • Where parties have agreed on separation by resignation but the agreed exit date has not arrived, the employment continues and an intervening summary dismissal is the effective termination of the contract.
  • An employer must specify the proprietary information by pleading particulars and proving it in evidence before a permanent injunction restraining disclosure can issue.
  • A confidentiality clause binds an employee during employment, but a former employee who merely receives information is not culpable of breach of a confidentiality clause that applied only while she was in the employer's service.
  • Accurate publication of a person's misconduct to third parties does not amount to defamation or libel.

Court orders

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  1. 1.Direct Pay Limited to pay Michael Gichuhi Kihuha Kshs. 55,000.00 by 15.12.2024, failing which interest to be payable thereon at court rates from the date he filed his suit until full payment
  2. 2.Each party to bear own costs of the suits

The bench

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One judgment of the whole court — no separate or dissenting opinions.

majority

Wrote the judgment

Jurisdiction invoked
Employment and Labour Relations Court jurisdiction under the Employment Act, 2007 over employment disputes
Consolidated with
ELRC Cause 741 of 2019 (Michael Gichuhi Kihuha v Direct Pay Limited)

Relief refused

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Damages for unfair, illegal and unlawful termination of employment, one month's notice and leave days

The effective termination was by the dismissal letter, and the dismissal was not unfair as valid and fair reasons existed and due process under sections 41 and 43 of the Employment Act was complied with

p. 5

General damages for libel and aggravated/exemplary damages, apology and retraction

No defamation established as the publication of the employee's misconduct was accurate and no particulars of defamatory words and their publication were established

p. 5

Permanent injunction restraining disclosure of proprietary or confidential information

The employer did not plead particulars or prove the specific information, and granting the prayer would present supervisory difficulty

p. 6

Damages for breach of contract by the plaintiff against the 1st defendant (general damages as claimed)

No established basis or measure of general damages was proved

p. 6

Costs

Each party to bear own costs of the suits.

Quotable passages

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Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.

While the employee was acquitted in the ensuing and related criminal proceedings, it appears to the Court that as at dismissal, the reasons for dismissal existed as valid and fair as had been levelled.
p. 5Effect of criminal acquittal on validity of reasons for dismissal
It should be obvious that as at the disciplinary proceeding and dismissal, while parties had agreed upon terms of separation by resignation, the same had not crystalized because the employee was still in employment until 01.08.2019.
p. 5Resignation not yet effective; dismissal is the operative termination
Direct pay limited to pay Michael Gichuhi Kihuha Kshs. 55,000.00 by 15.12.2024 failing interest to be payable thereon at court rates from the date he filed his suit until full payment.
p. 6Final order - refund of unlawful deduction
Each party to bear own costs of the suits.
p. 6Costs order
The prayer is declined as ambiguous and want in particulars.
p. 6Injunction refused for lack of particulars

Issues in the judgment

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minor

The judgment refers to prayers for general damages being pursued by 'the employer', which appears inconsistent since the general damages claims (libel) were made by the claimant/employee; possibly a typographical error

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, "Direct Pay Limited v Kihuha & another (Cause 783 & 741 of 2019 (Consolidated)) [2024] KEELRC 2834 (KLR)", Case Analysis (2024). ELRC Cause 783 of 2019 (Consolidated with Cause 741 of 2019). Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2024/2834/eng@2024-11-15

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