Manga v Prime Bank Ltd

2. According to the appellant, on 4th February 2011 he was summarily dismissed without being accorded a hearing, indenitely suspended from duty, and placed on half salary pending investigations into alleged fraudulent activities within the respondent’s bank. He further alleged that on the same date, the respondent caused his arrest on false allegations, leading to his detention at Kileleshwa Police Station. Although he was later released on a cash bail of Kshs.30,000, no charges were immediately preferred against him. 3. The appellant further averred that while still under suspension, he received two letters from the respondent by registered mail in August 2011. One letter purported to invite him to a disciplinary hearing scheduled for 14th July 2011, while the other communicated his summary dismissal. He contended that he only became aware of the disciplinary hearing after the scheduled date had passed and was therefore denied an opportunity to participate in the process. He maintained that his dismissal was founded on allegations of gross misconduct arising from the alleged fraudulent activities. 4. The appellant also alleged that on 6th June 2011, the respondent again caused his arrest on allegations that he had stolen Kshs. 4,611,490. Consequently, he was charged before the Chief Magistrate’s Court at Kibera in Criminal Case No. 719 of 2011 with the oence of stealing by servant contrary to section 281 of the Penal Code. He contended that the respondent breached the https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1785/eng@2026-09-25 2

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rules of natural justice and the requirements of the Employment Act, 2007 by failing to notify him of the allegations against him, failing to provide valid and justiable grounds for his dismissal, and denying him an opportunity to be heard before terminating his employment. He further asserted that the disciplinary process was rushed and conducted in violation of the respondent’s own constitution and the statutory requirements governing fair termination. 5. Consequently, the appellant sought, among other reliefs, declarations that the respondent’s practice of subjecting him to successive xed-term contracts amounted to an unfair labour practice contrary to Article 41 of the Constitution; that his termination was unfair, unlawful, illegal, null and void; that the respondent could not lawfully terminate his employment on the same grounds that formed the basis of the pending criminal proceedings; and that he remained an employee of the respondent throughout the period of suspension until the conclusion of the criminal case, with entitlement to salary during that period. He also sought payment of Kshs.2,271,072.89. 6. The respondent admitted that the appellant was employed as a Senior Ocer in its Human Resource Department under a xed- term contract that was renewed to run from 1st July 2008 to 30th June 2011. It explained that under the department’s reimbursement and disbursement procedures, a sta member seeking reimbursement would submit a claim to the Human https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1785/eng@2026-09-25 3

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Resource Department. The Senior Ocer would review the claim and forward it to the General Manager or Deputy General Manager for approval. Upon approval, the clerk would prepare a payment voucher, enter the transaction details in the expense register, and sign as the preparer. The Senior Ocer would then verify the voucher against the claim, the approval granted, and the entries in the expense register before signing as the authorizing ocer. Thereafter, the voucher would be submitted for nal approval by the General Manager or Deputy General Manager. The clerk would then present the approved voucher to a teller at the Riverside Drive Branch for cash withdrawal, after which the cash would be handed to the Senior Ocer for delivery to the intended sta member. 7. The respondent averred that at all material times the appellant served as the Senior Ocer while Solomon Kitonyi served as the departmental clerk. It alleged that between July 2010 and January 2011, the appellant, in collusion with the clerk, manipulated the reimbursement and disbursement process by altering approved vouchers to inate payment amounts, processing vouchers without the requisite approvals, forging bank ocers’ signatures, and failing to record claims, payments and disbursements. According to the respondent, the appellant and the clerk appropriated the excess funds generated through these fraudulent transactions, causing it a loss of Kshs.4,611,490. https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1785/eng@2026-09-25 4

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8. The respondent further contended that following the discovery of the irregularities, the appellant was suspended on 4th February 2011 pending investigations. An internal audit completed on 28th March 2011 allegedly conrmed the fraudulent activities, prompting the respondent to lodge a complaint with the National Police Service. As a result, both the appellant and the clerk were charged with stealing by servant in Nairobi Criminal Case No. 719 of 2011. The respondent maintained that the appellant was invited to attend a disciplinary hearing scheduled for 14th July 2011 but declined to attend after being informed of the hearing, vide a phone call, as the appellant had relocated from his last known place of address. Upon considering the audit report, the respondent summarily dismissed the appellant and informed him that his contract, which had expired on 30th June 2011, would not be renewed. It denied that the appellant had served diligently and loyally, maintained that he received half salary during the period of suspension, and asserted that the criminal proceedings were independently undertaken by the National Police Service and the Director of Public Prosecutions. 9. In its defence,the respondent maintained that the burden of proving unfair termination under sections 43 and 47(5) of the Employment Act, 2007, ought to rest on the appellant as opposed to the employer. In its counterclaim, it sought recovery of Kshs.4,611,490 together with interest and costs, challenged the constitutionality of section 43 of the Employment Act on the ground that it was inconsistent with Articles 27(1), 41 and 50(1) of the Constitution, and sought clarication on the alleged inconsistency between sections 41(1) and 44(1) of the Act. https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1785/eng@2026-09-25 5

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10. The hearing of the suit was scheduled for 15th May 2018. On that date, learned counsel Mr. Wati, holding brief for Mr. Mureithi for the appellant, applied for an adjournment on the ground that Mr. Mureithi was indisposed. The application for adjournment was declined. In response, learned counsel Mr. Mwangi for the respondent urged the court to dismiss the appellant’s suit with costs and to allow the respondent to proceed with the counterclaim. Accordingly, the appellant’s suit was dismissed with costs. 11. During trial, the respondent called two witnesses. Its case was that the appellant, a Senior Ocer responsible for, among other duties, payments and maintenance of expenditure registers, colluded with another employee to defraud the respondent. The Head of Internal Audit testied that investigations revealed that the appellant and the other employee altered genuinely approved expenditure vouchers to reect higher amounts and appropriated the dierence, and also generated ctitious vouchers which were paid without the requisite approvals. The respondent produced expenditure vouchers, reimbursement claim forms, expenditure registers, an internal investigations report, and a report by a document examiner from the Kenya Police, which concluded that the handwriting and signatures on the impugned documents matched the appellant's specimen handwriting and signatures. The investigations attributed a loss of Kshs.4,611,490 to the appellant. The respondent further informed the superior court that the appellant faced a pending criminal charge of stealing by servant arising from the same transactions. https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1785/eng@2026-09-25 6

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12. In its judgment, the superior court (S. Radido, J. as he was then) observed that the appellant's claim had earlier been dismissed and that he neither led a reply to the counterclaim nor attended the hearing of the counterclaim. After considering the respondent's evidence and submissions, the superior court found that the respondent had met the legal and evidential burden of proof in support of its counterclaim. Consequently, it entered judgment in favour of the respondent against the appellant for Kshs.4,611,490 together with costs and interest from the date of judgment. 13. Aggrieved by the above decision, the appellant has condensed the nine (9) issues for determination inter alia: whether the superior court had jurisdiction to entertain the respondent’s counterclaim; whether there was sucient and credible evidence presented in support of the counterclaim; and whether the counterclaim was proved against the appellant to the required standard. 14. We heard the appeal on 14th January 2026. Learned counsel Mr. M. Mureithi appeared for the appellant, while learned counsel Mr. Kimani appeared for the respondent. Both counsel elected to rely entirely on their respective written submissions. https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1785/eng@2026-09-25 7

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15. The appellant submitted that the superior court erred in entertaining and allowing the respondent’s counterclaim. He contended that the counterclaim, being founded on allegations of fraud and theft, concerned criminal or quasi-criminal conduct and therefore fell outside the jurisdiction of the Employment and Labour Relations Court, whose mandate is limited to employment and labour relations disputes under Article 162(2)(a) of the Constitution and section 12 of the Employment and Labour Relations Court Act. He further argued that the counterclaim was statute-barred, as the alleged fraudulent acts occurred between 2010 and January 2011, whereas the counterclaim was not led until 9th October 2014, contrary to section 4(2) of the Limitation of Actions Act and section 89 of the Employment Act. 16. The appellant further submitted that, notwithstanding his failure to le a defence to the counterclaim, the respondent remained under a duty to prove its claim to the requisite standard. He argued that allegations of fraud must be proved to a standard higher than a balance of probabilities, though lower than beyond reasonable doubt, and that the respondent failed to meet that threshold. According to the appellant, the audit report principally implicated the respondent’s tellers and Solomon Kitonyi in the collection and payment of inated sums and did not conclusively link him to the alleged fraud. He also challenged the evidential value of the document examiner’s report, contending that it was https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1785/eng@2026-09-25 8

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produced through a witness who was not its maker and who failed to explain its ndings, thereby rendering it unproved hearsay evidence. He maintained that no evidence was led identifying the specic vouchers he allegedly altered, the extent of his involvement in the fraudulent scheme, or any fraudulent receipt, conversion, or appropriation of the funds claimed. 17. Lastly, the appellant submitted that the superior court failed to identify and apply the correct standard of proof applicable to fraud claims and appeared to determine the counterclaim on the ordinary civil standard merely because he had not defended the suit. He further argued that there was no proof that he personally received or converted the monies claimed and that the superior court erred in holding him solely liable for the entire sum of Kshs.4,611,490 despite the respondent’s own pleading that the fraud had been committed jointly with others and without any evidence apportioning liability. He therefore urged this Court to nd that the respondent had failed to prove fraud to the requisite standard, allow the appeal, and set aside the judgment and decree of the superior court. 18. In opposing the appeal, it was submitted that the appeal was devoid of merit and ought to be dismissed. The respondent argued that the appellant’s claim before the superior court had been dismissed on 15th May 2018 after he failed to proceed with the hearing despite having been granted a previous adjournment. The respondent contended that the appellant neither challenged nor appealed that dismissal and therefore could not use the present appeal against the judgment on the counterclaim to indirectly challenge the earlier order dismissing his claim. https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1785/eng@2026-09-25 9

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19. The respondent further submitted that when the counterclaim came up for hearing on 22nd October 2018, neither the appellant nor his advocate appeared, despite having notice of the hearing date. Consequently, the respondent proceeded to call its witnesses and adduce evidence in support of the counterclaim, which evidence remained uncontroverted. 20. On the merits, the respondent argued that the superior court properly exercised its jurisdiction and correctly entered judgment in its favour. It maintained that the counterclaim arose directly from the employment relationship between the parties and concerned losses allegedly occasioned by the appellant in the course of his employment. Accordingly, the Employment and Labour Relations Court had jurisdiction to determine the dispute. 21. The respondent also contended that its counterclaim was founded on fraud and fraudulent falsication of documents by the appellant and other employees, as pleaded in the memorandum of response and counterclaim. It therefore submitted that the appellant’s argument on limitation was misplaced and had not been properly raised before the superior court. The respondent relied on authority to argue that parties should not be permitted to raise entirely new issues on appeal that were not canvassed before the trial court. https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1785/eng@2026-09-25 10

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22. The respondent further submitted that it had discharged both the legal and evidential burden of proof by producing documentary evidence, including expenditure vouchers, reimbursement claims, expenditure registers, the internal audit report, and the document examiner’s report linking the appellant to the fraudulent transactions. It argued that, in the absence of any defence to the counterclaim and in light of the unchallenged evidence tendered by its witnesses, the superior court correctly found the appellant liable for the loss of Kshs.4,611,490. 23. Finally, the respondent urged the Court of Appeal not to interfere with the superior court’s ndings, submitting that there was no error of law or fact warranting appellate intervention and that the judgment on the counterclaim should be upheld with costs. 24. This is a rst appeal. We are therefore enjoined to re-evaluate, re- assess and re-analyse the entire evidence on record and draw our own independent conclusions, while bearing in mind that we did not have the advantage of seeing or hearing the witnesses testify. This principle was well stated in Selle -vs- Associated Motor Boat Co. Ltd [1968] EA 123, where it was held that an appellate court will not ordinarily interfere with ndings of fact by a trial court unless such ndings are based on no evidence, on a misapprehension of the evidence, or on wrong principles of law. https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1785/eng@2026-09-25 11

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25. Guided by that approach, we proceed to determine whether the Employment and Labour Relations Court (ELRC) had jurisdiction to entertain the respondent’s counterclaim, whether the counterclaim was statutebarred, whether the allegations of fraud were proved to the required standard, and whether the superior court properly evaluated the evidence and applied the correct legal principles. 26. On jurisdiction, the appellant contended that the counterclaim, being founded on allegations of fraud and theft, was criminal or quasi-criminal in nature and therefore fell outside the jurisdiction of the ELRC. We are however guided by the principle in Owners of the Motor Vessel “Lillian S” -vs- Caltex Oil (Kenya) Ltd [1989] KLR 1 that jurisdiction is determined from the pleadings and the nature of the dispute. From the record, we nd that the counterclaim arose directly from the employment relationship between the parties and concerned alleged losses occasioned in the course of the appellant’s duties as a Senior Ocer in the respondent’s Human Resource Department. The claim was anchored on alleged breach of employment obligations and misuse of oce during the subsistence of employment, resulting in nancial loss to the employer. We therefore come to the conclusion that the mere framing of the claim in terms of fraud does not, without more, oust the jurisdiction of the ELRC where the dispute is substantially rooted in employment. The superior court therefore properly assumed jurisdiction under Article 162(2)(a) of the Constitution and section 12 of the Employment and Labour Relations Court Act. https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1785/eng@2026-09-25 12

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27. On limitation, the appellant argued that the counterclaim was statute-barred under section 4(2) of the Limitation of Actions Act and section 89 of the Employment Act. It is trite that limitation is a substantive defence which must be specically pleaded and strictly proved. From the record, we note that this issue was not properly pleaded or substantively canvassed before the superior court. We therefore nd that it cannot properly be raised at this stage to impeach the judgment. In any event, even where fraud is alleged, section 26 of the Limitation of Actions Act may in appropriate cases postpone the running of time where concealment is proved, but such must be specically pleaded and strictly established. No sucient evidential basis was laid before the superior court to sustain a limitation defence. 28. On the merits of the counterclaim, the law is settled that allegations of fraud must be strictly proved, though not beyond reasonable doubt, but to a standard higher than a balance of probabilities. This was restated in Vijay Morjaria -vs- Nansingh Madhusingh Darbar & Another [2000] eKLR and Kinyanjui Kamau -vs- George Kamau [2015] eKLR. The respondent bore the burden of proving both the existence of fraud and the appellant’s participation in it. 29. From the record, the respondent called evidence through its Head of Internal Audit who testied on a series of irregularities in the https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1785/eng@2026-09-25 13

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reimbursement and payment processes within the Human Resource Department. The evidence pointed to altered and inated expenditure vouchers, ctitious claims processed without proper approvals, and irregular cash disbursements. These were supported by documentary exhibits including expenditure vouchers, reimbursement claim forms, and expenditure registers, which revealed inconsistencies and gaps consistent with manipulation of the system. 30. Further, from the record, an internal audit report was produced detailing the nature and extent of the irregular transactions within the department. A document examiner’s report from the Kenya Police was also produced, indicating that the handwriting and signatures on the impugned documents matched the appellant’s specimen handwriting. We are mindful that expert evidence is opinion evidence and not conclusive on its own, but it is admissible and may be relied upon where corroborated by other independent evidence, as stated in Mutonyi -vs- Republic [1982] KLR 203. In this case, we nd that the report was properly considered alongside the documentary and oral evidence and was not treated in isolation. 31. It is undisputed that the appellant did not le a defence to the counterclaim or attend the hearing despite having notice. We reiterate that failure to defend a claim does not entitle a party to automatic judgment, but it leaves the respondent’s evidence uncontroverted and subject to evaluation on its own merit. In Postal Corporation of Kenya -vs- Associated Auctioneers [2015] eKLR, this Court held that uncontroverted evidence, if credible and sucient, may properly form the basis of a nding. We therefore nd that the superior court was entitled to evaluate the evidence as presented and determine whether it met the required standard of proof. https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1785/eng@2026-09-25 14

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32. On liability, from the record, the evidence demonstrated a coordinated scheme involving manipulation of the payment and verication processes within the department, involving more than one actor. We therefore come to the conclusion that civil liability for fraud may properly be joint where participation in a common scheme is established. On the evidence before the superior court, it was entitled to nd that the loss of Kshs.4,611,490 was jointly occasioned through that scheme. 33. On the standard of proof, we are satised that the superior court was alive to the requirement that fraud must be strictly proved and evaluated the evidence with due caution. There is nothing on record to suggest that it applied a mere balance of probabilities without regard to the heightened threshold applicable in fraud cases. As this is a rst appeal, we are guided by Mwangi -vs- Wambugu [1984] KLR 453 and reiterate that we will not interfere with ndings of fact unless they are shown to be based on no evidence, a misapprehension of the evidence, or wrong principles. 34. In the end, having carefully re-evaluated the entire record, we conclude that the appellant has not demonstrated any error of law or fact on the part of the superior court. We therefore nd that the ELRC properly assumed jurisdiction, the limitation defence was not established, and the respondent discharged the burden of proof on fraud to the required standard. https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1785/eng@2026-09-25 15

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35. The appeal is accordingly devoid of merit and is dismissed with costs to the respondent, and the judgment of the superior court on the counterclaim is hereby upheld. DATED AND DELIVERED AT NAIROBI THIS 25TH DAY OF SEPTEMBER 2026. JAMILA MOHAMMED .................................... JUDGE OF APPEAL A.O. MUCHELULE ..................................... JUDGE OF APPEAL JOEL NGUGI .................................... JUDGE OF APPEAL I certify that this is a true copy of the original. Signed DEPUTY REGISTRAR. Page 1 of 16 https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1785/eng@2026-09-25 16

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