Timaflor Limited v Mungai (Employment and Labour Relations Cause E014 of 2023 & E005 of 2024 (Consolidated)) [2025] KEELRC 87 (KLR)
The bottom line
#A Kenyan court ordered an employer to pay its ex-Finance Manager over Kshs. 3 million after failing to prove both a Kshs. 5 million 'loan' and the reason for firing him.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether the court has jurisdiction over the claimant's loan claim
- 2.Whether the respondent owes the Claimant a loan of Kshs. 7,194,767.05
- 3.Whether the termination of the Respondent's employment was unfair and unlawful
- 4.Whether the claimant violated respondent's right to fair labour practices, right to fair administrative action and freedom from discrimination
- 5.Whether the parties are entitled to the reliefs sought in their respective Claims
Key legal issues
#Jurisdiction over the employer's staff loan claim
The ELRC has jurisdiction because staff loan disputes flow from the employment relationship
The court invoked Article 162(2) of the Constitution and section 12 of the ELRC Act, which confers exclusive jurisdiction over disputes arising out of employment between employer and employee. It adopted Rika J's reasoning in BIFU v Consolidated Bank and Abraham Nyambane Atsiago v Barclays Bank, holding that the employment relationship generates rights beyond the express contract, and noted the respondent himself invoked the court's jurisdiction on the bonus-or-loan question.
Whether Kshs. 5,000,000 of the claimed debt was a loan or a bonus
It was a bonus; the claimant failed to prove it was a loan, so only Kshs. 2,194,767.05 was established
The claimant's own loan policy required a written application and management approval; CW1 and CW2 admitted no application existed for the Kshs. 5,000,000. The claimant's bank statement narrated the payment as a bonus, as did a remittance advice, and four managers received similar bonus payments. Despite a notice to produce, the claimant did not produce Fringe Benefits Tax Returns, prompting an adverse inference. The respondent admitted Kshs. 2,000,000 for a lorry bought on credit.
Whether the reason for termination (absence without leave) was valid
The reason was not proved; the respondent was sent away by the Managing Director and the termination was substantively unfair
CW3 corroborated that the Managing Director tore the loan schedules and met the respondent alone afterwards; Simon did not testify to rebut the respondent's account. The handwritten disciplinary minutes did not show that the statement 'As a dedicated employee, I left the farm' was made by the respondent. The respondent was paid full March salary and the attendance register showed him on leave during the alleged absence period.
Whether the termination procedure was fair under section 41
Procedure was fair: the respondent was notified of the charges, invited to a hearing, and allowed to respond with witnesses
A letter dated 25th April 2023 invited the respondent to a hearing on 27th April 2023, stating the offence and his rights to accompaniment, witnesses and to give evidence. He never protested the procedure before, during or after the hearing, and panellists CW2 and CW3 testified that he made representations before the verdict. The court relied on Kenfreight (EA) Ltd v Benson K. Nguti.
Remedies for unfair termination
Respondent awarded 45 days' pay in lieu of notice (Kshs. 885,594), six months' compensation (Kshs. 3,542,376) and accrued leave (Kshs. 787,194.66), but no severance or service pay
Gross salary was computed as basic salary plus house allowance (Kshs. 590,396), excluding variable performance-based items, following Postal Corporation v Tanui and Leakey v Chemai. Compensation of six months reflected eleven years of service. Severance pay applies only to redundancy, and service pay under section 35(5) is barred because the respondent was in a pension scheme and NSSF under section 35(6). An unsubstantiated allegation of comparable re-employment made from the bar was rejected as prejudicial.
Legal principles established
#- The ELRC has jurisdiction over staff loan disputes between employers and employees because such loans flow from the employment relationship
- A court may draw an adverse inference against a party who, having custody or control of a document, fails or refuses to produce it after a notice to produce
- An employer bears the burden of proving both a valid reason and fair procedure for termination; failure to prove the reason renders the termination unfair
- Gross salary for computing termination dues comprises basic salary plus fixed allowances, excluding allowances dependent on actual performance
Court orders
#- 1.The respondent to pay the claimant Kshs. 2,194,767.05 being the balance of his company staff loan
- 2.The claimant to pay the respondent salary in lieu of notice of Kshs. 885,594.00
- 3.The claimant to pay the respondent compensation for unfair termination of Kshs. 3,542,376.00
- 4.The claimant to pay the respondent accrued leave of Kshs. 787,194.66
- 5.Net decree: the claimant to pay the respondent Kshs. 5,215,164.66 less Kshs. 2,194,767.05, i.e. a net of Kshs. 3,020,397.61, with interest at court rates from the date of filing the suit until payment in full, subject to statutory deductions
- 6.Each side to bear its own costs of the suit
The bench
#One judgment of the whole court — no separate or dissenting opinions.
Wrote the judgment
- Jurisdiction invoked
- Article 162(2) of the Constitution and section 12 of the Employment and Labour Relations Court Act
- Consolidated with
- Nyeri ELRC No. E021 of 2023 (now Meru ELRC No. E005 of 2024)
Relief refused
#Claimant's claim for Kshs. 5,000,000 of the alleged loan
The court found the Kshs. 5,000,000 was a bonus, not a loan, since no written application or approval was produced and the bank statement narrated it as a bonus
Respondent's claim for severance pay of Kshs. 5,140,890
Severance pay is only available on redundancy; and service pay under section 35(5) is barred because the respondent belonged to a pension scheme and the NSSF
Declarations of unconstitutional termination, unfair labour practices and racial discrimination
The pleading did not meet the Anarita Karimi Njeru precision threshold and the respondent never submitted on the alleged violations
Respondent's claim for three months' pay in lieu of notice
The contract provided for a 45-day notice period, which the termination letter itself acknowledged
Compensation of 12 months' gross salary
The court awarded only six months' compensation considering the length of service and circumstances
Costs
Since both parties have succeeded in the respective suits, I direct that each side shall bear own costs of the suit.
Quotable passages
#Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.
I agree with the foregoing decisions and proceed to hold that the court is clothed with the jurisdiction to determine matters of staff loans between employers and their employees since they flow from the employment relationship.
I am satisfied that the claimant has failed to prove that the said Kshs. 5,000,000 was a loan and not a bonus. It follows that the only claim which the claimant has established is Kshs,2,194,767.05.
I make an adverse finding that the failure to produce the said evidence was because it would be against its case and in favour of the respondent.
Consequently, I hold that the claimant has failed to prove the reason cited for the termination and as such the termination was unfair within the meaning of section 45 of the Employment Act.
In the end, I decree that the claimant shall pay the respondent Kshs.5,215,164.66 less kshs. 2,194,767.05 leaving a net of Kshs. 3,020,397.61 The sum will attract interest at court rates from the date of filing his suit until payment in full as it is in the nature of liquidated claims.
Since both parties have succeeded in the respective suits, I direct that each side shall bear own costs of the suit.
Issues in the judgment
#The claimant's suit number is given inconsistently as E014 of 2023 in the heading area of para 2 reliefs context and as E014 of 2024 in witness testimony references
Witness testimony refers to the consolidated claimant suit as E014 of 2024 while her other statement is dated in E014 of 2023, and the respondent's suit is dated inconsistently (Nyeri E021 of 2023 / Meru E005 of 2024) with statements dated 14th December 2023 also referred to as 15th December 2023 and 14th September 2023 in E005 of 2024
Typographical discrepancy in the awarded loan balance: the claim is Kshs. 7,194,767.05 but one holding states Kshs. 7,194,756.05
The date of the Kshs. 5,000,000 payment is given variously as 11th July 2022 (bank statement/remittance) and 8th July 2022 in the loan schedule and the court's holding
The name of the claimant (employer) and the exact case number of the lead suit are not stated in the extracted judgment text
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Timaflor Limited v Mungai (Employment and Labour Relations Cause E014 of 2023 & E005 of 2024 (Consolidated)) [2025] KEELRC 87 (KLR)", Case Analysis (2025). Nyeri ELRC No. E014 of 2023 (consolidated with Nyeri ELRC No. E021 of 2023, now Meru ELRC No. E005 of 2024). Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2025/87/eng@2025-01-24
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.