Mary Immaculate Wachira v Bank of Africa Limited

The claim is that the transaction resulted in an erroneous transfer of Kshs. 48,180,000, which the Respondent sought to recover from Dubai Bank Kenya Limited, which acknowledged receipt of the funds and undertook to refund the entire amount together with interest at 12% per annum. However, the funds remained outstanding, prompting the Respondent to seek the intervention of the National Payment Systems Division. The Claimant was suspended from employment on 20 August 2015, on allegations of erroneously validating the payment to Dubai Bank Kenya Limited. The suspension was subsequently extended on 24 September 2015, pending further investigations. She was issued with a notice to show cause and summoned to a disciplinary hearing on 22 September 2015, where she responded to the allegations that she had erroneously validated the payment, resulting in a financial loss of Kshs. 48,180,000. The claim is that the Respondent dismissed the claimant from employment through a letter dated 22 October 2015. She contends that the dismissal was unfair and unlawful as the Respondent failed to consider her explanation and the evidence presented during the disciplinary hearing and the subsequent appeal. She further avers that the Respondent unilaterally varied the interest rate on her staff loan from the preferential rate to the commercial rate of 24%, despite her appeal against the dismissal remaining undetermined. The Claimant further avers that she was subsequently charged with conspiracy to defraud the Respondent but was acquitted by the Court on 12 July 2018. She maintains that she was not involved in any fraudulent transaction and that Dubai Bank Kenya Limited had acknowledged receipt of the funds and undertaken to refund them. The Claimant’s case is that her dismissal was unfair and unlawful for want of a valid reason and fair procedure, contrary to Sections 41, 43 and 45 of the Employment Act (the Act) and Article 41 of the Constitution. She ELRC NAIROBI JUDGMENT CAUSE NO. 1435 OF 2018 2

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further alleges that the Respondent violated her constitutional rights to dignity, fair labour practices and fair administrative action. At the time of her dismissal, the Claimant was earning a monthly salary of Kshs 202,000. Consequently, the Claimant is seeking the following Order: i. A declaration that the Claimant’s termination of employment conveyed via the letter dated 22 October 2015 was unfair, wrongful and unjust; ii. Order the Respondent to pay aggravated damages to the Claimant for unfair termination of employment as contemplated in Section 12(3)(VI) of the Industrial Court Act. iii. A declaration that the variation of interest rates on staff loans advanced resulting from the termination of services by the Respondent is unlawful and should be set aside. iv. Order the Respondent to pay the Claimant 12 months’ salary at the monthly salary at the time of the dismissal as required under Section 49 of the Employment Act as compensation for unfair termination thus: 12 months x monthly salary 12 × 202,000 = Ksh. 2,424,000 v. Order that the Respondent issues severance pay to the Claimant calculated below: 15 days’ pay × years worked (from 2007 to 2015) 40,400 × 8 years = Ksh.323, 200/= vi. Order that the Respondent pay two months’ salary in lieu of notice, Ksh 404,000. vii. Order any other award or benefit that this court may deem fit and just to grant in the circumstances of this case. viii. Orders the Respondent to pay Interest at the court's rate on all the above prayers from the date of termination to the date of full payment. ix. Orders that the Respondent be condemned to pay Costs of the suit. ELRC NAIROBI JUDGMENT CAUSE NO. 1435 OF 2018 3

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The Claimant testified that, at the time of the subject transaction and termination of employment, the Treasury Back Office–Interbank Procedures and the Foreign Exchange Procedure Manual were still works in progress and had not been finalised. She contends that the Treasury Back Office–Interbank Procedure relied upon by the Respondent was reviewed on 16 July 2015, after the 2 July 2015 transaction, and could therefore not be relied upon to establish the procedures applicable at the material time. She maintained that she discharged her duties diligently and that no previous allegations of negligence had been raised against her. On 2 July 2015, she oversaw 345 transactions valued at almost Kshs 1 billion, of which only one was erroneous. The error arose from a misinterpretation of the transaction details. As a member of the Treasury Back Office team, Ms Faith Wairimu Munyori admitted responsibility in a statement dated 3 November 2015. The error could not be attributed collectively to the team or solely to her, particularly when different individuals played distinct roles in processing the transaction. The Respondent’s account of the transaction fails to distinguish the roles played by the various officers involved and is intended to mislead the Court. The Claimant testified that such errors occur in banking transactions and are ordinarily remedied by recovering funds transferred to the wrong bank. Dubai Bank Kenya Limited was experiencing cash-flow constraints at the material time and was consequently unable to refund the funds. The Respondent was bound by its Human Resource Policy Manual, particularly Clause 10.6, in determining the appropriate disciplinary sanction. The charge attracted a warning, not dismissal, and the Respondent failed to consider the applicable sanction before summary dismissal. The Claimant denied the allegations of negligence and financial loss to the Respondent. The Respondent arrested and prosecuted her following a complaint. The Respondent's actions led to the arrest and prosecution. The Claimant testified that the loans the Respondent advanced to her were secured, and that the Respondent recovered the outstanding amounts by realising the security. No further sums are due and owing. ELRC NAIROBI JUDGMENT CAUSE NO. 1435 OF 2018 4

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The court has no jurisdiction to determine the Counterclaim, which arises from a commercial transaction and does not constitute a dispute between an employer and an employee within the meaning of the Act. The Court should dismiss the response and counterclaim with costs. Response and Counterclaim The Respondent admitted that the Claimant was employed as a Team Leader in the Treasury Back Office Department, where she processed interbank foreign exchange transactions. The employment was governed by a job description dated 14 January 2015, the Human Resources Policy Manual, the Treasury Back Office–Interbank Procedure and the Procedure Manual for Foreign Exchange. As Team Leader, the Claimant oversaw foreign exchange and money market transactions, verified transaction details, and ensured their accuracy before forwarding them for approval. On 2 July 2015, the respondent received a SWIFT message from Citibank New York requesting the purchase of USD 6,000,000, with Citibank South Africa indicated as the ordering institution. The Claimant and her team erroneously interpreted the transaction as a request by Dubai Bank Limited to purchase ZAR 6,000,000, failed to verify the transaction details and forwarded it for approval. The Claimant released Kshs. 48,180,000 to Dubai Bank Limited without confirming that it had received the corresponding funds. It maintains that the Claimant’s failure to identify the correct ordering institution, verify the transaction details and comply with the applicable procedures constituted gross negligence. The negligence resulted in the loss of Kshs. 48,180,000, and the Respondent has been unable to recover from Dubai Bank Limited, which was subsequently placed under receivership. The erroneous transaction necessitated interventions and negotiations with Dubai Bank Limited, culminating in a commercial loan arrangement that would not have been necessary had the Claimant exercised due diligence. ELRC NAIROBI JUDGMENT CAUSE NO. 1435 OF 2018 5

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The funds remain outstanding, and the Claimant is liable for the loss occasioned by her negligence. Following the incident, the Respondent investigated and, on 18 September 2015, issued the Claimant a notice to show cause and a notification to attend a disciplinary hearing scheduled for 22 September 2015. The notices specified the allegations against the Claimant and informed her of her right to be accompanied by an employee of her choice and to have an interpreter. During the disciplinary hearing, the Claimant admitted that an error had occurred in identifying the ordering bank, and she had validated the transaction, resulting in the loss of Kshs. 48,180,000. She released the funds to Dubai Bank Limited without confirming receipt of the corresponding funds as required by the Respondent’s procedures. The Claimant was suspended to facilitate independent investigations into the operations of the Treasury Back Office Department, and the Respondent contends that the extension of her suspension was necessary and lawful. It maintains that, upon completion of the disciplinary process and consideration of the allegations and the Claimant’s written and oral responses, it summarily dismissed her. The dismissal was based on valid reasons and was carried out in accordance with a fair procedure. The Claimant is not entitled to the reliefs sought. Compensation equivalent to twelve months’ salary is unwarranted because the termination was lawful and fair. Severance pay is not payable as the Claimant was not declared redundant and the claim for two months’ salary in lieu of notice is untenable, as summary dismissal was justified. On the variation of the interest rate applicable to the staff loans, the Respondent contends that upon termination of her employment, the Claimant ceased to qualify for preferential staff lending rates and was consequently liable to pay interest at the applicable commercial rates. ELRC NAIROBI JUDGMENT CAUSE NO. 1435 OF 2018 6

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The respondent is not responsible for the Claimant’s arrest and prosecution. It sought the assistance of the Banking Fraud Investigation Department to establish the nature of the transaction and trace the movement of the funds. The Claimant’s claim lacks merit, and the Respondent reiterates that her dismissal was lawful and fair. Counterclaim In the Counterclaim, the Respondent’s case is that between 2007 and 2015, the Claimant applied for and was granted various credit facilities, including a mortgage. By 22 October 2015, the Claimant’s outstanding indebtedness stood at Kshs 7,667,423.73, and the Claimant demanded settlement in full in a letter dated 22 October 2015. The Claimant failed to settle the outstanding debt, which continued to accrue interest. By 19 December 2018, the amount due and owing had increased to Kshs 11,398,725.91. The Respondent prays that the Claimant’s suit be dismissed with costs and judgment be entered in its favour for Kshs 11,398,725.91 being the outstanding loans advanced to the Claimant during her employment. It further seeks interest at prevailing bank lending rates from 22 October 2015 until payment in full, costs of the suit. Any judgment in favour of the Claimant be set off against the Counterclaim and any other relief the Court may deem fit to grant. Submissions The Claimant submitted that her summary dismissal was substantively and procedurally unfair, contrary to Sections 41, 43 and 45 of the Act. The transaction of 2 July 2015 was undertaken in reliance on written confirmation from Dubai Bank Kenya Limited and the guidance of the Respondent’s forex dealer. She acted in good faith, had no intention to defraud the Respondent and, upon discovering the discrepancy during reconciliation, promptly took steps to secure recovery of the funds and escalated the matter to her superiors. Respondent failed to establish a valid reason for her dismissal. She argues that the evidence showed the ELRC NAIROBI JUDGMENT CAUSE NO. 1435 OF 2018 7

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transaction involved other officers and that the back office was responsible for confirming receipt of funds. The claimant submitted that the Respondent’s disciplinary policy provided for graduated sanctions for breaches of operating procedures, with dismissal reserved for more serious or repeated misconduct. The Respondent’s witnesses admitted that the claimant had been misadvised, that she discovered the discrepancy and that the applicable procedures had been reviewed after the transaction. Her acquittal in Criminal Case No. 1078 of 2016, arising from the same transaction, confirms there was no dishonesty or negligence as alleged by the Respondent. The Claimant submitted that the Respondent failed to accord her a fair hearing as required under Section 41 of the Act. She was not furnished with the investigation report before the disciplinary hearing, and the written explanation was not properly considered. The appeal against dismissal was never determined. In Munyori v Bank of Africa Limited [2023] KEELRC 2889 (KLR) and Robert Gatobu Kimonye v Bank of Africa Limited [2021] KEELRC 5 82 (KLR), which arose from the same transaction, the courts have held that the Respondent’s handling of the disciplinary proceedings was unfair. The treatment of employees involved in the transaction was inconsistent. On the counterclaim, the Claimant submitted that the Court lacks jurisdiction to determine an ordinary commercial mortgage recovery claim. In the alternative, the Respondent has failed to demonstrate the outstanding loan balance following the sale of her charged property. She challenges the sale because no valuation was undertaken before the auction and that the reported sale price contained discrepancies. The Respondent failed to discharge its statutory duty of care under Section 97 of the Land Act as held in Francis Ngarama Kiratu v Equity Bank (Kenya) Limited & 2 Others [2019] eKLR. The Claimant seeks an order setting aside the variation of the interest rate on her staff loan and ELRC NAIROBI JUDGMENT CAUSE NO. 1435 OF 2018 8

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restoring the applicable staff loan interest rate. The Respondent’s actions concerning the loan and the sale of the charged property were unjustified. The Claimant urges the Court to find that the termination of employment was unfair and wrongful, and that the award of 12 months' compensation at Kshs. 2,424,000 is justified, together with two months' notice pay, Kshs. 404,000 and severance pay of Kshs. 323,200. The awards should include aggravated damages, the restoration of the applicable staff loan interest rate, interest and costs. The Court to dismiss the Respondent’s counterclaim and any claim for setoff. The Respondent submitted that the Claimant was employed as a Team Leader in the Treasury Back Office (TBO). Her responsibilities included supervising Treasury Back Office operations, liaising with correspondent banks, ensuring compliance with regulatory requirements, and independently checking and verifying front-office transactions. The Claimant was required to follow the Treasury Back Office–Interbank Procedure, which validated Treasury transactions, generated SWIFT messages, confirmed matching, and ensured settlement of funds. However, on 2 July 2015, Citibank New York sent a SWIFT message requesting the purchase of USD 6,000,000 with Citibank South Africa identified as the ordering institution. The transaction was incorrectly processed as ZAR 6,000,000, with Dubai Bank treated as the ordering institution. The Claimant and her colleagues failed to properly verify the transaction before processing it. Kshs. 48,180,000 was released before confirmation that Dubai Bank had received the corresponding funds. The funds were subsequently not recovered after Dubai Bank went into receivership. The Claimant failed to correctly identify the counterparty, currency, and other transaction details and failed to comply with the applicable Treasury ELRC NAIROBI JUDGMENT CAUSE NO. 1435 OF 2018 9

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and foreign-exchange procedures. These failures amounted to gross negligence, carelessness and improper performance of duty. Under section 43 of the Act, an employer must prove the reason or reasons it genuinely believed existed at the time of termination. The termination of the Claimant's employment was based on her failure to discharge her contractual and professional duties in processing the highvalue transaction. The issue was not fraud or dishonesty, but whether the Claimant exercised the degree of care, skill and diligence expected of an employee responsible for verifying and processing high-value Treasury transactions. Section 44(4) (c) of the Act concerning gross negligence, carelessness and improper performance of duty allows for summary dismissal. The Claimant has challenged the Respondent's reliance on the Treasury Back Office–Interbank Procedure on the basis that the version produced by the Respondent was reviewed on 16 July 2015, after the transaction on 2 July 2015. However, the procedure applied to the transaction. The document and its modification/review history were reviewed, and it is submitted that the procedure governed the processing and verification of interbank transactions. The Claimant was under a contractual obligation to perform her duties properly, and identification the and foreign-exchange verification of the procedure required proper transacting party. proper A disciplinary process preceded her termination. The process involved investigation of the transaction, suspension, issuance of a notice to show cause, an opportunity for the Claimant to respond, a disciplinary hearing and an opportunity to appeal. The Claimant was allowed to explain herself, and the decision to terminate was made after consideration of the circumstances surrounding the transaction. The acquittal in the criminal proceedings does not determine whether her employment was lawfully terminated. In criminal proceedings, criminal culpability must be established beyond reasonable ELRC NAIROBI JUDGMENT CAUSE NO. 1435 OF 2018 10

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doubt, whereas disciplinary proceedings concern compliance with employment policies, procedures and contractual duties. The absence of fraud, dishonesty, or conspiracy does not remove the alleged misconduct arising from a failure to perform Treasury duties properly. The cases involving Faith Wairimu Munyori and Robert Gatobu Kimonye also involved disciplinary action arising from the same transaction. These cases were determined on their own facts and evidence and cannot automatically establish that the Claimant's termination was unfair. The Respondent submitted that a counterclaim for the outstanding staff loan granted to the Claimant during her employment is justified. The original counterclaim was for Kshs. 11,398,725.91 being the balance as at 19 December, 2018, together with interest. The Respondent subsequently states that the outstanding balance as at 23 September 2022 was Kshs. 10,364,385.17, and ultimately seeks Kshs. 9,780,390.58, together with costs. The court has jurisdiction to determine the counterclaim because the loan arose directly from the employment relationship. The Claimant defaulted on repayment, and the mortgaged property was subsequently sold, with the proceeds being applied towards the outstanding loan. The Claimant only challenges the valuation or legality of the sale at the submissions stage. The Claimant did not properly plead these issues, and the present proceedings do not challenge the bank's exercise of its statutory power of sale. Determination On the pleadings, evidence, and written submissions, the issues for determination are whether the termination of employment was wrongful, unlawful, and unfair; whether the variation of the loan facility terms from the employee preferential rates to commercial rates is justified; and whether the remedies sought should be granted. The court must also determine whether the counterclaim is with merit. ELRC NAIROBI JUDGMENT CAUSE NO. 1435 OF 2018 11

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The respondent last employed the claimant as team leader, treasury back office. The job description included overseeing the processing of all foreign exchange (forex) and money market deals, checking and confirming the correctness of transaction details before forwarding them for approval, and exercising diligence and keen attention to detail. Through a letter dated 22 October 2015, the respondent terminated the claimant's employment by summary dismissal because, while transferring Ksh. 48,180,000 to Dubai Bank on 2 July 2015, she failed, refused, and neglected to ensure that the money alleged to have been sent to the bank was indeed received by the bank because the transaction was validated before the bank received it, contrary to bank procedures. The claimant admitted that, as the validator, she relied on verbal confirmation from Faith Munyori that the funds had been delivered, instead of referring to the SWIFT advice slip and making all necessary verifications before validating the transaction. The claimant was therefore found negligent in her duties as team leader, whose role was to validate each transaction to avoid losses to the respondent bank. Such conduct was found to be gross negligence, carelessness, improper performance of work and blatant failure to follow the bank's due processes as required under the employment contract. On 20 September 2015, the claimant responded to the show cause notice and admitted that she received an email from dealing confirming a forex deal between Bank of Africa and Dubai Bank totalling ZAR 6 million at an exchange rate of 8.03 to the Kenyan Shilling. As required by bank procedures for forex trades, the claimant validated the transaction as the team leader. She had held on to the transaction awaiting confirmation of receipt of funds: … just before the Central Bank of Kenya cut-off window, the treasury back office Officer confirmed that funds had since been sighted, and I thus proceeded to release the KES 48,180,000/- payment to Dubai ELRC NAIROBI JUDGMENT CAUSE NO. 1435 OF 2018 12

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Bank. This was the last payment (transaction no. 344) sent via KEPSS on that day. As a banking entity regulated under the Banking Act, the respondent is highly regulated. Each transaction is supported and verified. Hence, the claimant's role is to ensure that all transactions, before approval, have validation and records to support each transaction, however small or big. Under section 44 of the Act, the employer may issue a sanction of summary dismissal where the employee performs duties in breach of the employment contract by failing to undertake duties properly, in terms of section 44(3) of the Act. Similarly, under section 44(4) of the Act, where the employee performs duties negligently and causes loss of the employer's funds or property, summary dismissal is allowed. Section 41(2) of the Act protects the employee. The employer must invite the employee to a hearing in the presence of another employee of her choice. In this case, due process was followed, including an invitation to the disciplinary hearing upon investigation, and the claimant was allowed to attend with her representative. The right of appeal was also secured. The claimant was taken through due process, and the explanation of her conduct as the team leader in the transaction leading to the loss of Ksh. 48,180,000 to the respondent was found unsatisfactory. Under sections 41 and 44 of the Act, the court finds that due process was adhered to. With regard to the reasons leading to termination of employment, it is trite that certain sectors, including banking, are highly regulated. Fundamentall y, the claimant, having served in the banking sector for over 35 years, was professionally aware of the procedures before approving a transaction such as the forex transfer on 2 July 2015. Her validation of the transaction led to other transactions, resulting in a loss of Ksh. 48,180,000 to the respondent. ELRC NAIROBI JUDGMENT CAUSE NO. 1435 OF 2018 13

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Indeed, in Celina Nadite & 19 others v National Police Service Com mission [2019] KEELRC 2120 (KLR), the court held that a lack of financ ial probity undermines the foundation of trust and integrity. In Nzyoki v K enya Safari Lodges and Hotel Ltd & another [2026] KEELRC 1788 (KLR), the court held that an accountant who submitted a forged document to finance held a higher responsibility as an employee in the finance sector. He was not an ordinary layperson unaware of the consequences of such conduct. This position is reiterated in Otieno & 37 others v Union of Kenya Civi l Servants & 3 others [2024] KEELRC 99 (KLR), where the court emph asised that lack of financial probity taints a relationship. The banking sector, like other financial institutions, requires a higher stan dard of integrity and probity. In Agnes Murugi Mwangi v Barclays Ban k of Kenya Limited [2013] KEELRC 910 (KLR), the court emphasised that, in banking, handling other people's money requires banks to demons trate a high degree of integrity and financial probity to maintain customer confidence. The claimant, as a team leader in the treasury back office, sho uld have had this foresight in carrying out her duties and responsibilities before validating a transaction on verbal instructions. The claimant cannot blame her colleagues in the back office for not verifying the forex transaction before she approved and validated it. As the team leader, the greatest responsibility was with her. In the case of Violet Kadala Shitsukane v Kenya Post Savings Bank [2020] eKLR, the Court of Appeal, in addressing a similar matter, held that; Banks are custodians of their customers’ funds and other valuables of a personal nature and operate in a highly sensitive environment; ther efore, to inculcate and maintain customer confidence, banks and thei r staff must maintain a high degree of integrity, prudence, and financi al probity. Accordingly, where a staff member’s conduct in relation to ELRC NAIROBI JUDGMENT CAUSE NO. 1435 OF 2018 14

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funds and valuables belonging to customers suggests fraud, that staff member risks termination of employment. … In Evans Kamadi Misango v Barclays Bank of Kenya Limited (2015) eKLR, the court held: … In the business of handling other people's money, and to maintain customer confidence, they must demonstrate a high degree of integri ty and financial probity. This standard must necessarily extend to the Bank's employees, who are its face. The Claimant's conduct fell below this standard, and I find that the Respondent had a valid reason for te rminating her employment. The claimant has compared her case to that of Faith Wairimu Munyori and Robert Gatombu Kimonye, whose employment was terminated arising from the same facts. However, each case must be addressed on its merits. Each employee held a distinct and different contract of employment with different functions. The claimant was the team leader and had greater responsibilities in that role. A generic application of the findings in the cases relating to the claimant’s colleagues cannot suffice. Under section 43 of the Act, the Respondent had a valid and genuine reason for termination; under section 45 of the Act, it followed due process. No notice pay or compensation is due. On the claim for severance pay, as correctly submitted by the respondent, this only accrues in a redundancy regulated under section 40 of the Act. The claim herein relates to alleged wrongful, unlawful and unfair termination of employment by summary dismissal. Severance pay is not due. On the claim that the loan facility was wrongfully changed from the staff preferential rate to a commercial rate, and upon the finding that the employment was terminated fairly, the respondent is justified in claiming ELRC NAIROBI JUDGMENT CAUSE NO. 1435 OF 2018 15

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repayment of the loan facility. The applicable commercial rates are those that non-employees should pay. While the claimant contested the court's jurisdiction to recover the loan facility, she seeks to rely on the staff preferential rates. The double standards cannot apply. Indeed, where a benefit accrues with employment, it is protected. An employee who secures a loan facility during employment remains protected where the employment is unfairly terminated, as held in Abraham Nyambane Asiago v Barclays Bank of Kenya Limited [2015] KEELRC 1190 (KLR). Any liability accruing from the employment relationship, including a loan facility secured with employment, is recoverable at the end of the employment relationship. The court has the requisite jurisdiction to hear and determine all matters arising out of the employment relationship. Acquittal of criminal charges is fundamentally different from employment misconduct. In this case, with employment lawfully terminated, the benefit accrued from employment ceased. The loan facility accorded to the claimant during employment on staff preferential rates ceased. Notice was issued to make payment, failing which commercial rates would apply. The counterclaim is justified, with accrued interest from the date due until payment in full. Accordingly, the claim is without merit and is hereby dismissed with costs. The counterclaim is hereby allowed for the sum of Ksh. 9,780,390.58 as of 23 September 2022. Any remaining balance is recoverable under sections 17 and 18 of Employment Act. The respondent is entitled to the costs of the counterclaim. Delivered in open court this 1st day of October 2026 ELRC NAIROBI JUDGMENT CAUSE NO. 1435 OF 2018 16 the

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M. MBARŨ JUDGE In the presence of: Court Assistant: Kemboi …………………………………………………………… ……………….……………..……… ELRC NAIROBI JUDGMENT CAUSE NO. 1435 OF 2018 17 and …………………

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