Andrew Opiyo Ochwang'u v Leafde Ltd

(b) Kshs. 1,422,068 particularised as salary until the last day worked in October 2021 (Kshs. 107,350), 13 unpaid leave days (Kshs. 46,518) and 12 months basic salary as compensation for unfair termination (Kshs. 1,288,200); (c) a certificate of service; (d) costs of the suit; and (e) interest on the sums claimed at court rates from the date of filing suit. 2. The appellant’s case was that, on or about 1 st April 2021, he was employed by the respondent as Head of Finance and Accounting at a gross salary of Kshs. 107,350; that, due to his good performance, his position was confirmed on 17th July 2021; that he discharged his duties diligently without any complaints, and to the satisfaction of the respondent; that, sometime in October 2021, the respondent served him with an undated letter informing him that his services were to be terminated on 31 st October 2021; that he was never given an opportunity to defend himself on the allegation in the letter of termination; that the respondent unlawfully and unprocedurally 2

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terminated his services without following the procedure provided in the Employment Act; and that the respondent had abused his employment rights and subjected him to harassment by using the police to arrest him. 3. In its Defence dated 18th October 2022, the respondent denied that the appellant was unlawfully terminated. Its case was that, in October 2021, the company discovered serious irregularities in the finance department resulting in losses; that audit investigations were conducted, that they revealed the appellant’s role in the irregularities, particularly involving pricing of items, solicitation of money from suppliers and casual workers, and payment of invoices; that the matter was reported at Lungalunga Police Station; that the respondent proceeded to issue a one month’s notice of dismissal to the appellant and fully stipulated the terminal dues to be paid; that the respondent paid the appellant one month’s salary in lieu of notice over and above the agreed amount in the employment contract; that the employment contract clearly set out grounds for termination included acts amounting to 3 gross negligence, gross

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incompetence, 4

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conduct bringing the company into disrepute, and dishonesty in the course of duty; and that the appellant deliberately conducted himself in a manner aimed at defrauding the company. The respondent urged the court to strike out the appellant’s claim. 4. In its judgment delivered on 29 th June 2023, the ELRC (M. Mbaru, J.) found that, while the respondent had grounds to dismiss the appellant for gross misconduct, having conducted a comprehensive audit and reported the irregularities leading to the appellant being charged with a criminal case of stealing by servant, it failed to comply with the mandatory requirement to accord him a fair hearing before termination; and that the omission resulted in procedural unfairness. 5. With regard to compensation, the court observed that the appellant’s conduct amounted to gross misconduct; and that he had been arrested for theft by servant, and had an ongoing criminal case. Accordingly, the court declined to award him compensation, holding that such an award would be tantamount to rewarding him for gross 5

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misconduct. Consequently, it entered judgment in favour of the appellant for annual leave pay for 13 days at Kshs. 46,518, less statutory deductions, and directed that each party bears their own costs. 6. Aggrieved by the ELRC’s decision declining to award compensation for unlawful termination, the appellant moved to this Court on appeal vide a Memorandum of Appeal dated 2nd February 2024 on two grounds, namely that: “1. The learned Judge erred in law and fact by declining to award the Appellant compensation for unlawful termination that he had been charged in a criminal offence. 2. The learned Judge erred in law and fact by misdirecting herself on evidence not before the Honourable Court to reach a wrong decision of denying the Appellant compensation.” 7. By reason of the matters aforesaid, the appellant prays for orders that the appeal be allowed; that the decision denying him compensation be set aside, and that the prayers sought in his 6

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statement of claim be allowed; and that he be awarded costs of this appeal with interest thereon. 8. In support of the appeal, learned counsel for the appellant, M/s. Oduor Henry John, filed written submissions dated 23 rd May 2025 while, in rebuttal, learned counsel for the respondent, M/s. Akanga Matende, filed written submissions dated 24 th June 2025. 9. This Court's mandate on a first appeal was authoritatively expounded in Ng'ati Farmers' Co-Operative Society Ltd v Ledidi & 15 Others [2009] KLR 331, where it was stated that an appeal to this Court from a trial by the High Court proceeds by way of retrial, and that the principles governing the exercise of this Court's appellate jurisdiction in such matters are well settled. In brief compass, it was pronounced that this Court is duty-bound to reconsider the evidence, evaluate it independently, and draw its own conclusions therefrom, whilst remaining ever conscious that it has had neither the opportunity of seeing nor the advantage of hearing the witnesses, and must therefore make due and 7

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generous allowance 8

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in that regard. Of particular significance, it was further enunciated that this Court is not invariably bound to follow the trial Judge's findings of fact where it appears either that the learned Judge has clearly failed, at some material point, to take into account particular circumstances or probabilities of sufficient weight to properly estimate the evidence, or where the impression formed on the basis of a witness's demeanour stands in irreconcilable conflict with the evidence as it appears in its totality. 10. This mandate was further reinforced and given authoritative expression in Kenya Ports Authority v Kuston (Kenya) Limited [2009] 2 EA 212, where it was unequivocally stated that, on a first appeal from the High Court, the Court of Appeal is enjoined to reconsider the evidence, evaluate it independently, and draw its own conclusions therefrom, whilst remaining ever mindful that it has had neither the benefit of seeing nor the advantage of hearing the witnesses, and must therefore make due allowance in that regard. It was further pronounced that the court's solemn responsibility is to adjudicate strictly upon the evidence as it 9

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appears on the record, and 1 0

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not to venture beyond those confines by introducing extraneous matters that were neither placed before the parties nor addressed in the course of the proceedings. 11. However, we are ever mindful of the salutary caution administered by the predecessor to this Court in Peters v Sunday Post Ltd [1958] EA 424, where it was firmly stated that it is a weighty matter for an appellate court to depart from a finding of fact made by the trial judge, who enjoyed the distinct advantage of observing and hearing the witnesses testify. Their Lordships acknowledged that an appellate court does indeed possess jurisdiction to revisit the evidence with a view to determining whether the conclusion originally drawn therefrom ought to be disturbed; but they were equally emphatic that such jurisdiction is one to be exercised with circumspection and restraint, and that it does not suffice, as a basis for interference, that the appellate court might itself have arrived at a different conclusion on the same evidence. 1 1

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12. In our considered view, the main issue that commends itself for our determination is whether the learned Judge was at fault in declining to award the appellant compensation for unlawful termination. 13. In the impugned judgment, the learned Judge found, as a matter of fact not in dispute, that the appellant had been issued with a notice terminating his employment on 31 st October 2021 on the grounds that he had committed acts of gross misconduct through financial impropriety; that, following a comprehensive audit, he had been found culpable; that he had consequently been reported to Lungalunga Police Station; and that he had since been charged with stealing by servant contrary to Section 281 of the Penal Code before the Msambweni Law Court in the relevant criminal proceedings. 14. Turning to the substantive question of unfair termination, the learned Judge observed that sections 44(3) and (4) of the Employment Act, 2007 clothe an employer with the authority to summarily dismiss an employee for breach of contract or gross 1 2

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misconduct, but that such authority is not untrammelled as the employer is equally enjoined, by dint of section 41(2) of the same Act, to afford the employee notice and a meaningful opportunity to be heard in response to the allegations levelled against him. 15. Applying those principles to the facts of the case, the learned Judge found that, notwithstanding the respondent's conduct of a comprehensive audit, its report to the police at Lungalunga, and the criminal charge preferred against the appellant at Msambweni Law Court, the appellant had not been accorded a hearing at the shop floor level prior to the termination of his employment. The learned Judge further observed that no explanation had been proffered by the respondent to account for its failure to comply with this crucial procedural requirement, and accordingly concluded that the termination, though grounded in substantive cause, was attended by procedural unfairness. 16. On the question of compensation, the learned Judge directed herself, in accordance with section 45(5)(b) of the Employment Act, 2007, to have regard to the conduct and culpability of the employer. 10

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She however found, on the evidence, that the appellant's own conduct was of a most serious character, as he was arrested and charged with theft by servant in relation to the misappropriation of funds belonging to the respondent and entrusted to his stewardship, a matter he did not contest. In those circumstances, the learned Judge held that to make an award of compensation would, in effect, be to visit a reward upon the appellant for his gross misconduct, and she accordingly determined that, notwithstanding the finding of procedural unfairness, the decision to decline compensation therefor was the just and appropriate order in the circumstances. 17. Taking issue with the learned Judge’s decision, counsel for the appellant submitted that no evidence had been adduced before the trial court to establish that the appellant had been charged with a criminal offence. He urged that the only evidence on record was to the effect that the appellant had been arrested, and that he had never in fact been charged before any criminal court at Msambweni Law Court, a conclusion he said was fortified by the respondent's conspicuous failure to place before the court 11

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any criminal case 12

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number in that regard. Counsel further contended that the learned Judge had therefore fallen into error, both in law and on the facts, in declining to grant the appellant the reliefs sought on the basis of a criminal charge that had not been proved to exist. 18. Counsel additionally drew the Court's attention to the appellant's witness statement, which had been adopted as his evidence in chief, and in which the appellant had deposed that the respondent was deploying the police as an instrument of harassment against him. Counsel stressed that this evidence had gone wholly uncontradicted, and that none of the respondent's witnesses had testified to the effect that the appellant had been charged at Msambweni Law Court. 19. In rebuttal, counsel for the respondent submitted that the trial court had correctly found the termination to be lawful within the meaning of section 43(1) of the Employment Act, 2007 which places upon an employer the burden of establishing valid reasons for termination. He urged that the respondent had discharged that 13

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burden by adducing irrefutable evidence of the appellant's embezzlement, comprising financial records and witness testimony, and that the respondent had further followed due process in effecting the summary dismissal — circumstances which, in his submission, disentitled the appellant from any claim of unlawful termination. 20. In support of the proposition that compensation for unlawful termination is contingent upon the concurrent absence of both substantive justification and procedural fairness, counsel placed reliance on the decision in Walter Ogal Anuro v Teachers Service Commission [2013] KEELRC 386 (KLR). 21. On the question of whether the absence of criminal charges was of any legal consequence, counsel submitted that it was entirely immaterial to the validity of the termination of employment. He drew the Court's attention to the decision of this Court in Kenya Revenue Authority v Reuwel Waithaka Gitahi & 2 Others [2019] KECA 300 (KLR) where it was held that it would be improper for a court 14

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to require an employer to conduct what would amount to a near- 15

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forensic examination of the facts and to attain proof beyond reasonable doubt, as in a criminal trial, before being entitled to take appropriate disciplinary action. 22. Counsel discharged, further on a submitted balance of that the probabilities, respondent the burden had of establishing that the appellant had engaged in gross misconduct warranting summary dismissal, and that the OB number placed before the court afforded reasonable grounds for suspicion of misconduct. He concluded by urging that the respondent had satisfied the evidentiary standard prescribed under section 107 of the Evidence Act, and that the Employment Act requires no more than that a termination be grounded in valid reasons related to misconduct, criminal conviction being neither the threshold nor the standard upon which the appellant's dismissal had been justified. 23. We take to mind section 44 of the Employment Act, which provides that summary dismissal may be justified where the employee commits gross misconduct, 16 including where the

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employee 17

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commits or is reasonably and sufficiently suspected of having committed a criminal offence against or to the substantial detriment of the employer. 24. The standard of proof for establishing gross misconduct is lower than proof beyond reasonable doubt, as is the case in criminal trials. As observed by this Court in Kenya Power & Lighting Company Ltd v Wasike [2017] KECA 446 (KLR): “13. … it is improper for a court to expect that an employer would examination of have to undertake the facts and a near forensic seek proof beyond reasonable doubt as in a criminal trial before he can take appropriate action subject to the requirements of procedural fairness that are statutorily required …. 14. It bears repeating that the standard of proof an employer needs to be satisfied about an alleged act of criminality on the part of an employee is the lesser one of balance of probabilities.” 18

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25. With regard to the burden of proof that the respective parties ought to have discharged, section 47(5) of the Employment Act provides: 47. Complaint of summary dismissal and unfair termination (5) For any complaint of unfair termination of employment or wrongful dismissal the burden of proving that an unfair termination of employment or wrongful dismissal has occurred shall rest on the employee, while the burden of justifying the grounds for the termination of employment or wrongful dismissal shall rest on the employer. 26. The evidence adduced by the respondent before the trial court established that, upon discovering irregularities in its finance department that had materially undermined the company's profitability, the Board of Directors engaged Aason Solutions Limited to conduct an independent audit. The resulting Forensic Investigative Audit Report was produced and testified to by Serena Salim Mohamed (RW2), an accountant at the said firm. 19

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27. The report made damning findings of the gravest character. It revealed that the appellant had played a central and directing role in a scheme of fraud and misappropriation of funds perpetrated between March and September 2021; that he exercised significant and largely unchecked control over cash management and the company's bank account, including the authority to initiate and approve transactions with minimal oversight; and that large sums of money had been withdrawn or transferred without proper documentation, with upwards of Kshs. 7.9 million unsupported by receipts and a further Kshs. 3 million transferred to personal accounts without any explanation. The report further linked the appellant to the deliberate manipulation of financial records spanning petty cash, supplier payments, and payroll, as well as the deployment of inflated or fictitious supplier invoices and the possible use of ghost workers. The auditors concluded, in terms that admitted no ambiguity, that the fraudulent activities were deliberate and systematic in nature, carried out for personal gain, and made possible by the appellant's position of trust and control within the company. The report accordingly recommended that the appellant be 11 0

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held accountable and that appropriate steps be taken to recover the misappropriated funds. 28. It was upon the foundation of those findings that the respondent proceeded to summarily dismiss the appellant. The appellant neither rebutted nor contradicted the findings and recommendations of the audit report, and the only conclusion that could properly be drawn in those circumstances is that the respondent had discharged the burden of establishing a substantive justification for the summary dismissal. 29. It is noteworthy that the appellant made no attempt to assail the findings of gross misconduct against him as set out in the audit report. His case rested, rather, upon the procedural omission on the part of the respondent in failing to accord him a hearing, and thereby an opportunity to make representations on the grounds of gross misconduct, prior to effecting the summary dismissal, as expressly required under section Employment Act. That omission was not respondent's General Manager, Irene Bogonko 11 1 in 42 of the dispute. The

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(RW1), candidly admitted in her evidence that the appellant was not taken through a disciplinary committee hearing, attributing that failure to the absence of the directors from Kenya at the material time. The summary dismissal was therefore, to that extent, procedurally defective. 30. Where, however, an employer has established, through cogent and unrebutted evidence, a substantive justification for summary dismissal, any procedural breach on its part can, at best, attract only limited or nominal compensation. This Court's decision in Oyombe v Eco Bank Limited [2022] KECA 540 (KLR) is instructive in this regard. This Court, while acknowledging that the appellant therein had not been accorded a proper hearing or opportunity to defend himself prior to termination, and that the absence of procedural fairness entitled him to some measure of compensation, nonetheless limited that award to two months' salary, declining all other reliefs sought — and that notwithstanding the finding that the appellant's conduct had caused financial loss and eroded the employer's trust. The Employment and Labour Relations Court arrived at a similar outcome in Maina v Retriever Limited 11 2

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[2023] KEELRC 2744 (KLR) 11 3

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where, having found that the claimant's gross misconduct had been substantially proved, the court awarded a nominal compensation of one month's salary in recognition of the procedural defect in the dismissal. 31. In the present case, it was common ground that the respondent had paid the appellant two months' salary in lieu of notice, dues to which the appellant was, strictly speaking, not entitled, given that a substantive justification for his summary dismissal had been amply demonstrated. In those circumstances, to have awarded an additional sum as compensation for the respondent's procedural omissions would have been to overcompensate the appellant, who had already been sufficiently, if not generously, recompensed. We therefore find no basis upon which to disturb the learned Judge's decision to decline any further award of compensation. Accordingly, that aspect of the judgment must stand. 32. In view of the foregoing, we find that the appeal fails and is hereby dismissed in its entirety with costs to the respondent. 20

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Consequently, the judgment of the ELRC (Monica Mbaru, J.) delivered on 29th June 2023 is hereby upheld. Orders accordingly. Dated and delivered at Mombasa this 25th day of September, 2026. A. K. MURGOR ………………………………… JUDGE OF APPEAL DR. K. I. LAIBUTA CArb, FCIArb. …………………………………… JUDGE OF APPEAL G. W. NGENYE-MACHARIA ………………………………... JUDGE OF APPEAL I certify that this is a true copy of the original. Signed DEPUTY REGISTRAR 21

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