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Court of AppealPartially AllowedNot stated in the judgment extract (appeal from ELRC decision of 30th May 2016)· [2019] KECA 300 (KLR)

Kenya Revenue Authority v Gitahi & 2 others

Court of Appeal
11 October 2019
PWP. N. WakiMohamed Abdulahi WarsameM. WarsameFSF. Sichale
8,576 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~34 min to read original · ~4 min brief

The bottom line

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Kenya's Court of Appeal upheld KRA's dismissal of three cashiers for proven misconduct, but cut their benefits because the disciplinary process was flawed.

What this practically means

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Executive summary

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Kenya Revenue Authority appealed against a decision of the Employment & Labour Relations Court (Monica Mbaru, J.) of 30th May 2016, which declared the summary dismissal of three former cashiers of the Road Transport Department unfair, ordered their reinstatement without loss of rank, payment of back salaries, bonuses and allowances, and awarded costs. The dismissals arose from a KRA investigation into deletion of over 65,000 receipts from the computerized Cash Receipting System with a revenue implication of over Ksh. 54 million. The Court of Appeal (Waki, Warsame and Sichale, JJ.A) framed three issues: substantive justification, procedural fairness, and the appropriateness of reinstatement. On the first, the Court held the trial court applied a skewed standard of proof; the employer need only prove, on a balance of probability, grounds it genuinely believed to exist, and the digital evidence traced the deletions to the respondents. The dismissal was therefore substantively justified. On the second issue, the Court, following Postal Corporation of Kenya v Andrew K. Tanui, held that section 41 of the Employment Act prescribes four minimum elements of a fair procedure which KRA did not meet, and that its Code of Conduct must give way to the statute; KRA also failed to constitute an appeal committee. On the third issue, the Court held reinstatement is an exceptional remedy requiring consideration of the section 49(4) factors, none of which the trial court considered. Given the irretrievable breakdown of trust and public interest in the integrity of a revenue body, the Court ordered that the respondents' services stand terminated as a normal termination. The appeal succeeded on substantive justification but failed on procedural fairness. Each party was ordered to bear its own costs of the appeal.

Key legal issues

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01

Whether the summary dismissal of the respondents was substantively justified

Holding

Yes. The employer proved on a balance of probability that there were reasonable and sufficient grounds to suspect gross misconduct; the trial court applied a skewed standard by demanding near-criminal-trial proof and by substituting its own view for that of the employer.

Reasoning

The Court re-evaluated the evidence: deletions of over 65,000 receipts with revenue loss of over Ksh. 54 million were traced through digital identities and personal passwords to the respondents; daily collection sheets were falsified; no employee reported unauthorized use of their codes. The employer need only show grounds it genuinely believed to exist on a balance of probability. The respondents' defences (leave, lack of deletion authority) did not explain their digital footprints in the system.

p. 14
02

Whether the dismissal was procedurally fair

Holding

No. Although the Court disagreed with the trial court's reasoning, it found the disciplinary process failed to meet the four minimum elements of section 41 of the Employment Act, and the statutory internal appeal was never heard by a properly constituted committee.

Reasoning

Following Postal Corporation of Kenya v Andrew K. Tanui, the Court held that section 41 sets minimum standards: explanation of grounds in an understandable language, the reason for contemplated termination, entitlement to a companion of the employee's choice, and hearing of representations. KRA's Code of Conduct did not require the presence of a fellow employee and so fell short of the statute. Further, KRA admitted no appeal committee was appointed and the appeals were summarily dismissed.

p. 16
03

Whether reinstatement was the appropriate remedy

Holding

No. Reinstatement is an exceptional remedy requiring consideration of the section 49(4) factors; the trial court gave none. Given the breakdown of trust, the respondents' contribution to the termination, and public interest in the integrity of a revenue-collection body, termination shall stand as a normal termination.

Reasoning

The trial court's sole stated reason (psychological trauma during suspension) fell short of section 49. Reinstatement, amounting to specific performance of a personal service contract, is to be ordered only in very exceptional circumstances. The respondents contributed to their termination under section 49(4)(b), (c) and (k); KRA's revenue mandate demands utmost trust and integrity from its employees. A fresh disciplinary process after five years was impractical.

p. 17
04

Whether the trial court could decide the procedural fairness issue (representation at the DC) not specifically pleaded

Holding

Yes. The issue was one of law which featured in counsel's submissions and therefore attracted the decision of the trial court, despite not being specifically pleaded.

Reasoning

KRA contended the issue was raised and decided suo motu without pleading. The Court took the view that a pure issue of law canvassed in submissions may be determined by the trial court even absent a specific plea, distinguishing it from an unpleaded issue of fact.

p. 14

Legal principles established

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  • On a complaint of unfair termination, the employee first bears the burden under section 47(5) of the Employment Act to prove that termination occurred and was wrongful; only then does the employer bear the burden under section 43 to justify the grounds of termination
  • The standard of proof in employment dismissal for gross misconduct is on a balance of probability, not beyond reasonable doubt; the employer need only prove grounds it genuinely believed to exist, and a court must not substitute its own view for that of the employer
  • Section 41 of the Employment Act lays down four mandatory minimum elements of a fair pre-termination procedure: explanation of grounds in a language the employee understands, the reason for contemplated termination, entitlement to the presence of another employee of the employee's choice, and hearing and consideration of representations
  • An employer's internal Code of Conduct that does not accord with the statutory minimum standards of section 41 of the Employment Act must give way to the statute
  • Reinstatement is an exceptional remedy under section 49 of the Employment Act; a court must consider the matters in section 49(4)(a)–(m) before ordering it, and failure to do so is a serious error of law
  • Where an employee's conduct has irretrievably broken down the trust and confidence essential to the employment relationship, particularly in a public body charged with revenue collection, reinstatement is not an appropriate remedy and termination may stand as a normal termination despite procedural lapses
  • Section 17(2) of the Industrial Court Act no longer restricts first appeals to matters of law only, having been amended by Act No. 18 of 2014; the Court of Appeal may re-appraise evidence and draw its own inferences of fact

Court orders

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  1. 1.The termination of the respondents' employment, though procedurally flawed, is declared lawful and substantively justified; the termination shall stand as a normal termination
  2. 2.Reinstatement and related orders of the ELRC (reinstatement to former ranks without loss of rank, payment of back salaries, bonuses and allowances, and reporting back to former stations) are set aside to the extent that the respondents shall not be reinstated; the services of the respondents shall stand terminated
  3. 3.Each party bears its own costs of the appeal
On appeal from
Employment & Labour Relations Court
Not stated in the judgment extract
Jurisdiction invoked
First appeal to the Court of Appeal under Rule 29(1)(a) of the Court of Appeal Rules and section 17(2) of the Industrial Court Act as amended by Act No. 18 of 2014

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (22)

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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, "Kenya Revenue Authority v Gitahi & 2 others", Case Analysis (2019). Not stated in the judgment extract (appeal from ELRC decision of 30th May 2016). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2019/300/eng@2019-10-11

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