John Gitau Mwaura v National Bank of Kenya Ltd [2018] KEELRC 1381 (KLR)

REPUBLIC OF KENYA

IN THE EMPLOYMENT AND LABOUR RELATIONS COURT OF KENYA

AT NAIROBI

CAUSE NO. 2153 OF 2014

JOHN GITAU MWAURA........................................................CLAIMANT

- VERSUS -

NATIONAL BANK OF KENYA LTD................................RESPONDENT

(Before Hon. Justice Byram Ongaya on Friday 27th July, 2018)

JUDGMENT

The claimant filed the memorandum of claim on 04. 12. 2014 through Chenge Busiku & Company Advocates. The claimant prayed for judgment against the respondent for:

1) A declaration and finding that the decision of the respondent to terminate the claimant was unprocedural, wrongful, unlawful, and illegal and which amounted to unfair termination.

2) An order for compensation of the claimant for a maximum period of 12 months’ gross salaries as at time of termination under section 49 of the Employment Act.

3) An order for reinstatement or re-engagement of the claimant to an equitably suitable position with the respondent with all his back salary, allowances, benefits and any other legal dues from 01. 09. 2012 to the date of judgment or a period the Court deems fit to grant.

4) In the alternative to prayer 3 above an order for payment of all his back salary, allowances, benefits and any other legal dues from 01. 09. 2012 to the date of judgment or a period the Court deems fit to grant and payment of at least 5 years salary based on the claimant’s basic salary.

5) A declaration that the respondent’s action of levying commercial interest on the claimant’s house loan account, car loan, commercial loan, and insurance premium financing after the unlawful termination, from the date of termination to the date of judgment be deemed irregular and void abinitio.

6) An order as to costs of this suit to the claimant.

7) The honourable Court do make any such further order it deems fit to grant.

The memorandum of response was filed on 22. 01. 2018 through Oraro & Company Advocates. The respondent prayed that the suit should be dismissed with costs as the prayers were lacking in merits.

There was no dispute that at all material time the claimant was employed by the respondent and deployed at the respondent’s Moi’s Bridge Branch as the Branch Manager at a pay of Kshs. 273, 756. 00 per month. The claimant was initially employed on 04. 06. 1989 as a clerical staff and over the years he had risen through the ranks.

In January 2012 an audit was conducted at the Moi’s Bridge Branch and various operational lapses were noted especially in the credit department of the Branch. Thus the claimant was suspended from duty on 09. 07. 2012 at half salary to pave way for relevant investigations at the branch because as the Branch Manager, he was implicated accordingly.

A further special audit was carried out on 16. 07. 2012 and 20. 07. 2012. It was meant to confirm lapses in the earlier audit; to verify claims of inappropriate lending practices; and to identify control lapses in the management of all departments. The findings of the special audit were as follows:

a) The audit carried out on 11th and 14th January, 2012 had established that the claimant had been approving loans despite not having the relevant discretionary lending limits. The claimant had continued to do so despite the advice given to him to desist.

b) The audit of January 2012 showed that the Branch had 48 irregularly overdrawn accounts amounting to Kshs.18, 660, 179. 20. As at 14. 07. 2012, the irregularly overdrawn accounts had increased to 76 with debts amounting to Kshs.22, 205, 045. 71.

c) The irregularities took place at a time the claimant was the Branch Manager.

The claimant received a show-cause letter dated 10. 08. 2012 setting out the allegations of reckless & un-authorised lending; insubordination; system manipulation; un-collected bank revenue; and un-authorised leave. The particulars of the allegations were stated in the letter and the claimant was invited to reply by 14. 08. 2012 at 5pm. The claimant replied by his letter dated 14. 08. 2012. His reply was to the following effect:

a) The account for Lucia Nyokabi Mwangi and Elephant Electrical & Hardware were indeed overdrawn and for the former the respondent’s Managing Director had verbally approved the same on the spot on his visit at the Branch.

b) On insubordination he may have used unprofessional language and he regretted the same as it had been used to put things into perspective. He apologised for the hurting effect his communication may have occasioned.

c) On system manipulation he stated that he used the off line mode to satisfy the needs of the corporate customers so that such customers were not suddenly denied what they had been enjoying.

d) On uncollected bank revenues it was true that appraisal and commitment fees had not been collected with respect to formal application but the same would be recovered upon disbursement of the funds applied for.

e) On unauthorised absence from work he admitted that he had one afternoon left without permission because he had been unable to secure permission from his two supervisors, one who was not picking the telephone call and another one who had travelled to Garissa.

The claimant was dismissed from the respondent’s employment by the letter of dismissal dated 11. 09. 2012 upon the reasons:

a) Irregularly authorising the disbursement of a total of Kshs. 22. 2 million credit facilities in breach of the bank’s credit policy.

b) Irregularly authorising the switching off of the banking system from on-line mode to facilitating the overdrawing of accounts by customers at the branch.

c) Failure to collect appraisal and commitment fee as outlined in the bank’s tariff schedule on facilities that the claimant irregularly granted.

d) The claimant’s insubordination of his supervisors by using unprofessional and insolent communication while responding to a memo addressed to him by the General Manager on 26. 06. 2012.

The 1st issue for determination is whether the termination of the contract of employment by the dismissal decision was unfair. It is submitted for the claimant that the termination was unfair because there was no disciplinary hearing as envisaged in section 41 of the Employment Act, 2007. The Court has considered the undisputed replies to the show-cause letter. The Court returns that the claimant substantially admitted the policy breaches and the allegations but sought to offer excuses for the lapses. More important on the allegation of insubordination the claimant apologised. The Court returns that in this case whereby the claimant admitted the allegations and apologised for some, a disciplinary hearing was thereby rendered superfluous. The Court returns that the claimant was accorded due process of a notice and he replied substantially admitting the allegations and apologising. The respondent complied with sections 43 and 45 as the procedure was fair and the reasons for termination related to the claimant’s conduct and the respondent’s operational requirements. In the circumstances, the failure to accord a disciplinary hearing after the reply to the show-cause letter is excusable as the hearing was superfluous. The Court returns that the dismissal was not unfair.

While making that finding the Court has no doubt that as at the time of the dismissal, the respondent had a valid reason to terminate the contract of service. First, the claimant testified that big loans involving large sums of money in issue were issued contrary to credit policies only that there was a practice that the Managing Director verbally approves such loans – and the Court finds that the evidence was that the credit policy was breached whereas the basis for the verbal approvals was not established in the highly delicate and documented banking enterprise. Second, the claimant confirmed in his testimony that he tendered his apology in view of the alleged insubordination. Thirdly, the audit reports showed that the Branch acted contrary to the bank’s policies.

The Court considers that the claimant’s prayers were based on a finding that the dismissal was unfair but the Court has found otherwise. Thus the Court will not delve into analysis of the remedies because they are not available.

The Court has considered the claimant’s concerns that the respondent’s Managing Director issued verbal approvals which appear to have been contrary to the credit policy. The Court considers that to balance justice, each party will bear own costs of the proceedings.

In conclusion the claimant’s suit is hereby dismissed with orders that each party will bear own costs of the proceedings.

Signed, dated and delivered in court at Nairobi this Friday 27th July, 2018.

BYRAM ONGAYA

JUDGE