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Supreme CourtDismissedPetition 37 of 2018

Kenfreight (EA) Limited v Nguti

Supreme Court of Kenya
23 July 2019
Philomena Mbete MwiluP.M. MwiluMohammed Khadhar IbrahimM. K. IbrahimSmokin Charles WanjalaS. C. WanjalaNjoki Susanna NdunguNjoki NdunguIsaac LenaolaI. Lenaola
6,263 words in judgment
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·~25 min to read original · ~4 min brief

The bottom line

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Employers cannot avoid unfair dismissal claims by simply giving contractual notice.

What this practically means

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The Supreme Court ruled that if an employee challenges their termination and the court finds it was unfair or wrongful, the employer must pay the remedies set out in section 49 of the Employment Act. It does not matter whether the employer gave notice or not. The court can award notice pay plus up to 12 months' salary, depending on the circumstances. Employers cannot use a contractual notice clause to sidestep these protections.

Executive summary

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The Supreme Court dismissed an appeal by Kenfreight EA Limited against the Court of Appeal's decision which had upheld the Employment and Labour Relations Court's finding that the respondent, Benson K Nguti, was unfairly terminated. The appellant had terminated the respondent's employment by giving one month's notice as per the contract, arguing that it could do so without assigning reasons and that the statutory protections under the Employment Act did not apply. The Supreme Court rejected this argument, holding that once a termination is challenged and found to be unfair or wrongful, section 49 of the Employment Act applies regardless of how the termination was effected. The court clarified that section 49 provides a range of remedies, including notice pay and up to 12 months' salary, and that a trial court has discretion to award any or all of these remedies, provided it exercises that discretion judiciously and is guided by the factors in section 49(4), including any compensation already paid. The court found no inconsistency between the Court of Appeal's decision in this case and its decision in CMC Aviation Ltd v Mohammed Noor, as the facts differed and the Court of Appeal had properly exercised its discretion in each case. The court also declined to interfere with the Court of Appeal's finding that the payment of Kshs 3,258,245 to the respondent was not an ex gratia payment but was based on an established company practice, as this was a proper exercise of discretion. The appeal was dismissed with costs to the respondent.

Questions the Court framed

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

  1. 1.What is the appropriate remedy for an employee upon unfair or wrongful termination of a contract of employment? Specifically, to whom would the remedy in section 49 of the Employment Act apply where the dismissal upon notice is found to be unfair or wrongful?

Key legal issues

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01

What is the appropriate remedy for an employee upon unfair or wrongful termination of a contract of employment?

Holding

The appropriate remedy is the one provided under section 49 of the Employment Act, regardless of how the termination was effected. The court has discretion to award any or all of the remedies listed in section 49(1), including notice pay and up to 12 months' salary, provided it exercises that discretion judiciously and is guided by the factors in section 49(4).

Reasoning

The Supreme Court held that the Employment Act provides for various modes of termination, but once a termination is challenged and found to be unfair or wrongful, section 49 applies uniformly. The court rejected the appellant's argument that a termination by contractual notice without assigning reasons could avoid the statutory remedies. The court emphasized that the trial court's discretion under section 49 must be exercised judiciously, guided by the factors in section 49(4), including any compensation already paid. The court found no inconsistency between the Court of Appeal's decision in this case and its decision in CMC Aviation Ltd v Mohammed Noor, as the facts differed, and the Court of Appeal had properly exercised its discretion in each case.

p. 13
02

Whether the Court of Appeal's decision in this case was inconsistent with its decision in CMC Aviation Ltd v Mohammed Noor, thereby creating conflicting decisions on the interpretation of the Employment Act.

Holding

The Supreme Court found no inconsistency between the two decisions. The facts in CMC Aviation (summary dismissal under section 44) were different from the instant case (termination by notice under the contract). The variation in the quantum of damages awarded was a proper exercise of judicial discretion based on the different circumstances of each case.

Reasoning

The Supreme Court reviewed both decisions and noted that in CMC Aviation, the Court of Appeal reduced the award to one month's salary because the contract was for a fixed two-year term terminable by one month's notice. In the instant case, the Court of Appeal upheld the trial judge's award of 12 months' salary as a proper exercise of discretion. The Supreme Court held that this was not an inconsistency but a 'mere variation of no stance at all' based on different facts. The court also noted that the issue of ex gratia payment was not present in CMC Aviation.

p. 13

Legal principles established

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  • Once a termination is found unfair, section 49 remedies apply regardless of how the termination was done.
  • Courts have discretion to award any or all remedies under section 49(1), including notice pay and up to 12 months' salary.
  • Judicial discretion under section 49 must be exercised judiciously, guided by the factors in section 49(4).
  • Different factual circumstances can lead to different award amounts without creating legal inconsistency.
  • An employer's payment based on established company practice is not automatically an ex gratia payment.

Court orders

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  1. 1.The Petition of Appeal dated October 4, 2018 be and is hereby dismissed.
  2. 2.The appellant shall bear the costs of the Appeal.

The bench

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

Philomena Mbete Mwilu
P.M. MwiluDCJ
Currently serving
majority

Wrote the judgment

Mohammed Khadhar Ibrahim
majority
Smokin Charles Wanjala
S. C. WanjalaSCJ
Currently serving
majority
Njoki Susanna Ndungu
Njoki NdunguSCJ
Currently serving
majority
Isaac Lenaola
I. LenaolaSCJ
Currently serving
majority
On appeal from
Court of Appeal at Mombasa
Civil Appeal No 31 of 2015
Jurisdiction invoked
Article 163(4)(b) and 163(5) of the Constitution

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.

To us, it does not matter how the termination was done, provided the same was challenged in a court of law, and where a court found the same to be unfair or wrongful, section 49 applies.
p. 13 Applicability of section 49 of the Employment Act
The Petition of Appeal dated October 4, 2018 be and is hereby dismissed.
p. 15 Final orders
The appellant shall bear the costs of the Appeal.
p. 14 Costs order

Key timeline

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2018-10-04
Kenfreight EA Limited files Petition of Appeal to the Supreme Court.
2023-07-28
Supreme Court dismisses the appeal and affirms the Court of Appeal decision.

Practical implications

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For lawyers

Section 49 applies to all unfair terminations

When advising employer clients, note that even terminations by contractual notice without reasons are subject to section 49 remedies if challenged and found unfair. The court's discretion under section 49(4) is key—argue the specific factors, especially any compensation already paid, to limit awards. The CMC Aviation case does not create a conflicting precedent; distinguish facts to justify different award amounts.

For businesses

Contractual notice does not shield from claims

You cannot avoid unfair dismissal liability by simply giving the notice period stated in the employment contract. If an employee sues and the court finds the termination unfair, you may still have to pay up to 12 months' salary plus notice pay. Review your termination procedures and ensure they comply with the Employment Act's fairness requirements, not just the contract terms.

For individuals

You can challenge a termination even with notice

If your employer terminates you by giving notice but you believe it was unfair, you can still take the case to court. The court can award you compensation including notice pay and up to 12 months' salary. Keep records of any payments made by the employer—they may be considered part of your entitlements, not just a goodwill gesture, and could affect the final award.

Frequently asked questions

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Can my employer fire me by just giving notice in Kenya?+

Yes, an employer can terminate your contract by giving notice, but if you challenge the termination and the court finds it was unfair or wrongful, the employer must pay the remedies under section 49 of the Employment Act. Notice alone does not protect the employer from a claim for unfair dismissal.

What compensation can I get for unfair dismissal in Kenya?+

Under section 49 of the Employment Act, a court can award you notice pay (equivalent to the notice period you should have received) and up to 12 months' salary as compensation for unfair termination. The court decides the amount based on factors like your length of service and any payments already made by the employer.

Is the CMC Aviation case still good law in Kenya?+

Yes, the Supreme Court confirmed that the CMC Aviation case is still valid. It was not inconsistent with this case because the facts were different. In CMC Aviation, the employee was summarily dismissed, while here the employee was terminated by notice. Different facts can lead to different compensation amounts without creating a legal conflict.

What is an ex gratia payment in Kenyan employment law?+

An ex gratia payment is a voluntary payment made by an employer without admitting liability. In this case, the court found that a payment of Kshs 3,258,245 to the employee was not ex gratia because it was based on an established company practice. This means the employer's regular practice can turn a payment into a contractual entitlement.

Later judgments citing this (9)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Kenfreight (EA) Limited v Nguti", Case Analysis (2019). Petition 37 of 2018. Source: https://new.kenyalaw.orghttps://new.kenyalaw.org/akn/ke/judgment/kesc/2019/79/eng@2019-07-23

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