Van Leer East Africa Ltd (Greif (K) Ltd) A Business of Greif Bros Corporation v Baiba Dhidha Mjidho [2007] KECA 273 (KLR)
The bottom line
#Kenya's Court of Appeal slashed a Kshs 7.7 million redundancy award to about Kshs 103,000, ruling that severance is based on basic salary and statutory rates, not allowances or union agreements.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.What was the respondent's monthly salary for the purposes of computing terminal dues - whether 'salary' includes allowances and other emoluments
- 2.Whether an employee of management status who is not a union member can rely on the redundancy provisions of a Collective Bargaining Agreement between the employer's association and a trade union
- 3.Whether section 16A(1)(e) of the Employment Act (Cap 226) applies to all employees irrespective of management status
- 4.Whether a plaintiff who does not plead a Collective Bargaining Agreement in the plaint may nonetheless rely on it
- 5.Whether provident fund payments are relevant to the computation of severance pay under section 16A(1)(e) of the Employment Act
- 6.Whether the award of damages under the 'Competition' clause of the letter of appointment was justified as to liability and quantum
- 7.Whether the figure of Kshs 5,893,951 said to have been paid to the respondent should have been factored into the award
Key legal issues
#Meaning of 'salary' for computation of terminal dues
Salary means basic salary only; the respondent's last basic monthly pay slip figure of Kshs.139,253/= was the correct basis, not gross income of Kshs.281,620/=
The Court adopted the reasoning in Kenya Ports Authority v Edward Otieno that damages for wrongful termination are the wages for the period of notice, and held that 'salary' and 'wages' in their ordinary meaning do not include allowances or provident fund arrangements. The trial Judge's use of gross income was therefore an error of principle.
Enforceability of an unpleaded CBA against a non-unionised management employee
The CBA was not binding on the employer in relation to the respondent and could not be relied upon because it was not pleaded
Clause 2 of the CBA covered only employees represented by the union. The respondent was neither a union member nor represented by the union, and the CBA was not pleaded in the plaint. The Court also held that section 16A(1)(e) applies to all employees irrespective of management status, but its statutory rates, not CBA rates, govern.
Termination as redundancy and entitlement to statutory severance
The termination by reason of worldwide restructuring and abolition of the respondent's position amounted to redundancy under section 16A of the Employment Act, entitling the respondent to notice pay, leave pay and 15 days' severance pay per completed year
All the facts constituting redundancy under section 16A(2) were adequately pleaded in paragraph 6 of the plaint, which was admitted in the defence, even though the word 'redundancy' was not used. The respondent was thus entitled to rely on the Employment Act and on his contract of employment, with severance computed on basic salary.
Damages for breach of the Competition clause
The award of Kshs.3,379,440/= was erroneous in both liability and quantum because unreasonableness of refusal and actual loss were not proved
The clause imposed on the employee the burden of proving damages flowing from an unreasonable refusal to release him from the restraint. The trial Judge made no finding of unreasonableness, led no evidence of the salary the competitor would have paid, and quantified the award on the respondent's earnings from the appellant rather than the loss suffered.
Effect of absence of cross-appeal
Having not cross-appealed, the respondent could not ask this Court to disturb the disallowance of the leave claim, even though the Court doubted its correctness
The Court indicated it might otherwise have reversed the trial Judge's finding that a statutory claim was a claim for general damages, but the absence of a cross-appeal precluded it from doing so.
Legal principles established
#- In ordinary usage, 'salary' or 'wages' under the Employment Act means basic salary only and does not include allowances, provident fund arrangements or other additional payments
- A Collective Bargaining Agreement between an employers' association and a trade union is not enforceable by or against a management-level employee who is not a party and not represented by the union
- A party cannot rely on a document or agreement that has not been pleaded
- Section 16A(1)(e) of the Employment Act applies to all employees irrespective of management status
- An employee claiming indemnity under a competition/restraint clause must prove the unreasonableness of the employer's refusal, the damage suffered and its quantum
- Statutory severance pay on redundancy is at the rate of 15 days' pay per completed year of service, not the CBA rate of 23 days
Court orders
#- 1.The judgment of the High Court awarding the respondent Kshs.7,685,420.85 plus interest and costs is set aside
- 2.Judgment substituted in favour of the respondent for Kshs.103,480/= being Kshs.1,787,078 less Kshs.1,683,548 paid pursuant to the preliminary decree dated 14th October 2003
The bench
#One judgment of the whole court — no separate or dissenting opinions.
- On appeal from
- High Court of Kenya at Mombasa
- H.C.C.C. No. 159 of 2003
- Jurisdiction invoked
- First appellate jurisdiction under the applicable provisions governing appeals from the High Court to the Court of Appeal (not expressly cited in the judgment)
Relief refused
#Claim for 85 days accrued leave (Kshs.394,550/=) as recomputed by this Court
The trial Judge had disallowed the item as a claim for general damages and the respondent did not cross-appeal, precluding this Court from disturbing the finding
Damages for breach of the Competition clause (Kshs.3,379,440/= awarded below)
The respondent failed to prove unreasonableness of the refusal or any loss; the award was erroneous as to both liability and quantum
Gratuity based on clause 24(f)(iii) of the CBA (23 days per completed year)
The CBA was neither pleaded nor binding on the parties; the statutory rate is 15 days per completed year
Bonus for the year 2003 (Kshs.174,066.25)
The trial Judge disallowed it for want of evidence and it could not be included in the award
Costs
The final orders of this Court make no express costs order; the judgment below had awarded the respondent costs of the suit, which fell with the judgment set aside.
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.
We have come to the conclusion that the appeal must be allowed. The final finding of the learned judge in giving judgment in favour of the respondent against the appellant for a total of Kshs.7,685,420.85 cannot be upheld and it is hereby set aside.
We substitute for that judgment a judgment in favour of the respondent for Kshs.103,480/= being Kshs.1,787,078 less Kshs.1,683,548/= being the amount paid by the appellant to the respondent pursuant to the preliminary decree dated 14th October 2003.
We consider that the word “salary” means just that and does not include other additional payments of allowances etc.
The number of days applicable in the formula provided in the Act is 15 days only and not 23 days.
We consider that this clause in the contract of employment of the respondent by the appellant clearly imposes upon the respondent the burden of proving any damages suffered by the respondent under the “Competition” provision in the employment contract.
Issues in the judgment
#Internal contradiction in the substituted award figures: the Court first computes a corrected total of Kshs.6,634,943 due under the High Court judgment, but the final substituted judgment is Kshs.103,480/= based on a different computation of entitlements (Kshs.1,787,078 less payments made)
Two inconsistent computations of severance pay appear: Kshs.1,971,340 (15 days x Kshs.9,387.33 x 14 years) and later Kshs.974,769.6 (15 x 14 x Kshs.4,641.76), without reconciliation
The memorandum of appeal as reproduced contains a misdescription of the salary figure found by the trial Judge (Kshs.281,900/= instead of Kshs.281,620/=), acknowledged by the Court
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Van Leer East Africa Ltd (Greif (K) Ltd) A Business of Greif Bros Corporation v Baiba Dhidha Mjidho [2007] KECA 273 (KLR)", Case Analysis (2007). Civil Appeal 86 of 2006. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2007/273/eng@2007-06-29
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.