Mwarania v Cabinet Secretary, National Treasury & Planning & 2 others; Corporation Limited (Interested Party) [2023] KEELRC 2541 (KLR) | State Corporations Governance | Esheria

Mwarania v Cabinet Secretary, National Treasury & Planning & 2 others; Corporation Limited (Interested Party) [2023] KEELRC 2541 (KLR)

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Mwarania v Cabinet Secretary, National Treasury & Planning & 2 others; Corporation Limited (Interested Party) (Employment and Labour Relations Petition E034 of 2023) [2023] KEELRC 2541 (KLR) (19 October 2023) (Judgment)

Neutral citation: [2023] KEELRC 2541 (KLR)

Republic of Kenya

In the Employment and Labour Relations Court at Nairobi

Employment and Labour Relations Petition E034 of 2023

NJ Abuodha, J

October 19, 2023

Between

Jadiah M Mwarania

Petitioner

and

Cabinet Secretary, National Treasury & Planning

1st Respondent

Attorney General

2nd Respondent

Kenya Reinsurance Corporation Limited

3rd Respondent

and

Corporation Limited

Interested Party

Judgment

1. The Petitioner through a Petition dated 22nd February, 2023 alleged inter alia;a.That he was employed by the Interested Party herein after its Board of directors approved his appointment in April, 2016 to serve for a term of five years as the Managing Director/Chief Executive Officer which contract lapsed on 11th April, 2021. b.That prior to the lapse of the Petitioner’s contract the Interested Party’s Board Human Resource and Nominations Committee, a committee of the Board of Directors, held a meeting on 3rd November, 2020 which resolved that the Petitioner’s contract as the managing Director be renewed for a further 5 years while noting his good performance and the noted that the Mwongozo recommendations of the term limits for state corporations CEO’S was superceded by a government circular from the head of the Public Service referenced OP/CAB.9/1A dated 27th February,2018. c.On or about 18th January, 2021 the Interested Party informed the 1st Respondent of its decision to renew the Petitioner’s Contract in furtherance of the objectives of the corporation and to ensure stability and smooth transition noting the sensitivity of the Corporation’s business and the 1st Respondent responded to the Interested Party’s letter vide a letter dated 21st January, 2021 directing the Interested Party to limit the period of extension of the Petitioner’s contract to 1 year.d.Prior to the lapse of the extended one year being dissatisfied with the said directive the Human Resource and Nominations Committee of the Interested Party’s Board held a meeting on 13th August, 2021 and reiterated the resolution for extension of the Petitioner’s contract for the next four years based on the Petitioner’s performance as per the Corporation’s Article of Association, the state Corporations Act and the Government Circular dated 27th February, 2018 among others.e.The Interested Party’s Board constituted a special meeting on 19th August, 2021 whose agenda was to discuss the Committees Recommendations on extension of the Petitioner’s contract after lapse of one year in April 2021 and the meeting resolved to extend the Petitioner’s contract for another 4 years after the one year extension lapsed in April 2022 due to the Petitioner’s good performance.f.The Interested Party informed the 1st Respondent vide a letter dated 20th August, 2021 of its resolution to extend and renew the Petitioner’s contract for a further 4 years as per circular of 2018 which stipulated that the Petitioner’s position was not bound by any term limits.g.On 30th September, 2021 the 1st Respondent vide a letter of even date approved and concurred with the 1st Interested Party’s Resolutions to extend the Petitioner’s Contract of employment effective 11th April,2022 to complete a term of five years for a sustained success and profitability of the Interested Party.h.That in a strange twist of events the 1st Respondent vide a letter dated 9th May,2022 allegedly acting on instructions of the Head of Public Service directed that the Interested Party to limit the extension/renewal of the Petitioner’s contract for only a further term of one year and to initiate the process of recruitment of a managing Director.i.That the decision of the 1st Respondent to reduce the Petitioner’s term of contract extension from the five years as approved by his Employer, the Interested Party herein was so done without affording him the right to fair hearing before making the impugned decision and the Interested Party while disagreeing and dissatisfied with the said directive wrote to the 1st Respondent on 30th May,2022 requiring him to reconsider the extension of the Petitioner’s Contract by a further 4 years as the one year extension was not sufficient noting that the business of insurance is sensitive needs some stability.j.That the Interested Party further positioned that the regulatory changes in international markets like Nepal have put the Interested Party at a risk of loosing an entire portfolio of around Kshs 500,000,000/= which requires the Petitioner’s skilled and experienced intervention.k.That the 1st Respondent while acting ultra vires vide a letter of 19th July, 2022 directed the Petitioner’s Employer to start the process of recruiting CEO and while the Interested Party was dissatisfied with this directive wrote a letter to 1st Respondent on 27th October,2022 requiring him to reconsider the directive against the Petitioner’s contract renewal but the 1st Respondent again vide a letter dated 8th November,2022 directed that there would be no more extension and that a new Managing director be recruited.l.That vide letters dated 17th November, 2022 and 24th November, 2022 the Interested Party issued the Petitioner with a letter requiring him to proceed on terminal leave with effect from 15th December, 2022 pending expiry of the employment contract on 11 April, 2023 and the Petitioner had legitimate expectation that his contract would be extended and renewed for a further 5 years to enable him complete the assigned projects.m.The Petitioner has never had any disciplinary proceedings in his entire period of employment or invited to make any representations before being sent on a compulsory terminal leave of six months which was not provided for in the Interested Party’s documents.n.The Petitioner alleged violation of his constitutional rights ranging from Articles 2, 19, 20, 21 41, 47 and 50 of the Constitution.

2. The Petitioner therefore prayed for;-a.A declaration that the 1st Respondent lacks legal mandate to direct the Interested Party on matters relating to employment of its staff, the Petitioner herein includedb.A declaration that the 1st Respondent’s decisions and directions as constituted in his letters dated 21st January,2021,9th May,2021,19th July,2022 and 8th November,2022 to the interested party relating to the Petitioner’s employment are unlawful, null and voidc.A declaration that the Interested Party is prohibited from interfering with the Petitioner’s renewed term of employment as a managing Director for a five year term effective 11th April, 2021 premised on the directives and decisions of the 1st Respondent.d.An order restraining the Respondents and Interested party, their servants, officials representatives and/or agents having so advertised, from acting thereupon, interviewing, recruiting or otherwise in any manner replacing the Petitioner in his Position as the managing Director/Chief Executive Officer of the interested Party for a period of five years effective 11th April,2021e.General damages for the Constitutional violations of the Petitioner’s fundamental rightsf.Costs and interests.

3. The Interested Party and the Respondents responded through Replying Affidavit sworn on 22nd March,2023 and 10th March, 2023 respectively and alleged inter alia that;a.The Interested Party is a public limited Liability Company registered in the Republic of Kenya and a state corporation by virtue of section 2(c) of the state Corporation Act Cap 446 and controlled by the Government of Kenya through the National Treasury which holds a 60% share Capital and that the Interested Party being a state Corporation is subject to the Provisions of the State Corporations Act in matters engagement and employment of its staff including the position of the Chief Executive Officer.b.The Interested Party averred that in adherence to section 5(3) of the State Corporation Act, it sought approval from the parent ministry, the National Treasury and Planning, through the 1st Respondent on engagement and appointment of its staff and particularly on matters reappointment of the CEO and is also in its overall governance subject to the guidelines and provisions of Mwongozo Code of Governance for state Corporations which is issued under section 7 of the State Corporation Act.c.The Interested Party averred that under the Mwongozo Code the term of the office for the position of CEO was limited to two terms of three years each and that in Petition No. 75 of 2016 Peter Macithi Mungai Vs the Cabinet Secretary for Environment, Natural Resources & Regional Development Authorities and others the court held that the Mwongozo was binding and enforceable code.d.The Interested Party further averred that following its Board meeting held on 8th April,2010 the petitioner was appointed to serve as the Managing Director of the Interested Party in acting capacity where the Petitioner was appointed as the Managing Director with effect from 12th Appril,2011 for a term of five years where its Board sought the National Treasury’s approval of his salary and the 1st Respondent approved hence the Petitioner’s assertion that 1st Respondent has no jurisdiction on the appointment of himself when his salary was approved by the 1st Respondent is strange.e.The Interested Party averred that on April 2016 it renewed the Petitioner’s contract for the position of Managing Director for a further term of five years commencing on 12th April,2016 and terminating on 11th April,2021 and in November 2020 the Board Human Resource and Nominations committee of the Interested Party recommended to the Board a renewal of the Petitioner’s contract for a third and final term of 5 years where the committee while recommending to the Board believed that the Mwongozo Code had been suspended by a circular from the Head of Public service.f.The Interested Party averred that the Board received a clarification issued vide the Press release dated 12th April,2018 on the purport and intention of circular number OP/CAB.9/1A of 27th February,2018 and the Recommendation made by the Human Resources and Nomination Committee was not a resolution because it was pending consideration and approval by the Board of the Interested Party where the board requested for guidance from its Parent ministry the 1st Respondent herein on the extension of the Petitioner’s contract and its terms.g.The Interested Party averred that through a letter dated 21st January,2021 the 1st Respondent advised the Interested Party’s Board that the Petitioner had served a maximum of two terms and the Board should have ensured that there is in place succession plan to ensure seamless transition at the expiry of the Second contract but the 1st Respondent allowed the Interested Party Board request and granted approval to the Board to extend the contract of the Petitioner as the CEO for a period of one year with effect from 11th April,2021 to allow for smooth transition with the Board being advised to immediately embark on process of the recruitment of CEO.h.The Interested Party further averred that its Human Resource and Nominations committee held on 13th August, 2021 an appeal was made to the Board on behalf of the Petitioner to extend his contract for the remaining four years that were not granted to make it 5 years where the board held a special meeting and resolved to recommend the Petitioner’s extension of employment contract and sought approval from the 1st Respondent who extended the Petitioner’s Employment for only one year terming it as the last one and Interested Party was to immediately start the process of recruitment of CEO not later than 30th June,2022. i.The Interested Party averred that with approval of the 1st Respondent it issued the Petitioner with extension of contract of Employment dated 20th April, 2022 for a term of one year which terms were duly accepted and signed by the Petitioner and there was no reduction of the term as no five year contract was granted in the first place and the extension granted after the two terms was only granted to ensure smooth transition of the Interested Party.j.The Interested Party averred that since the Petitioner’s Contract was to expire in 11th April, 2023 it was a requirement for the CEO to be sent on terminal leave when recruitment process was ongoing to ensure non- interference with the process in compliance with Head of Public Service circular number OP/CAB.9/1A issued on 23rd November,2010 titled Procedure for Reappointment of service CEO in state Corporations and the Applicant continues to enjoy all his salary and benefits until the end of his contract period.k.The Interested Party averred that the 1st Respondent being the parent ministry of the Interested Party had the Mandate to set the terms and conditions of service of the Interested Party’s staff under Section 5(3) of the state Corporations Act and the Petitioner has not produced before the court any contract of employment past 11th April,2023 to deserve the orders sought and he mischievously intents to extend his employment contract when his contract lapsed by effluxion of time extended and the Court should allow the Interested Party to proceed with the process of recruitment of the Petitioner’s replacement.

4. The parties agreed to dispose this Petition by written submissions.

Petitioner’s submission 5. On the issue whether the 1st Respondent had legal mandate to direct the Interested Party on matters relating to employment of its staff, Ms Guserwa submitted that the letter of Appointment of 12th April,2016 showed that it was executed by the Chairman of the Board of directors of the Interested Party, Petitioner was therefore answerable to the Board and the Board reserved the right to terminate or extend the contract depending on performance of the Petitioner.

6. It was the Petitioner’s submission that Section 5(3) of the State Corporation Act relied on by the Interested Party and the Respondents provided for consultation with the parent ministry when it came to terms of service and did not grant the 1st Respondent veto powers to overrule the Board of a corporation.

7. On this issue it was the Petitioner’s Submissions that the governing document between the Petitioner and the Interested Party was the letter of the appointment which had not mentioned the 1st Respondent as the final decision maker. Section 5(3) of the State Corporation Act did not change the fact that the role of the minister was limited to approval of terms and conditions of already appointed officers. In this respect the petitioner relied on the cases Mary Munyuli Luseka v Brand Kenya Board; Cabinet Secretary, Ministry of Industry, Trade and Cooperatives (Interested Party) and Paul Kipsang Kosgei V National Industrial Training Authority& Another; Cabinet Secretary, Ministry of Labour & Social Services(Interested Party) (2020) eKLR where the courts held that the Minister had no power in renewal of the contracts and the only role they had was to approve the terms and conditions of service for CEO and staff.

8. On the issue of whether the Petitioner had a legitimate expectation to continue serving the Interested Party for another term of five years the Petitioner relied on the case of Teresa Carlo Omondi v Transparency International-Kenya(2017) eKLR to submit that the Interested Party took steps to retain the Petitioner for five years but it is the 1st Respondent who interfered with the process and submitted that the letter of appointment had a renewal clause for a similar term not the one year recommended by the 1st Respondent and the decision to send him on terminal leave was against his rights to fair labour practices under Articles 41,47 and 50 of the Constitution. Counsel relied on the case of Paul Kipsang above and further submitted that the interested Party was estopped from doing otherwise after pushing for the Petitioner’s extension of contract and further relied on case of Serah Njeri Mwobi v John Kimani Njoroge(2013) eKLR.

9. On the issue of whether the Petitioner was entitled to general damages for constitutional violations the Petitioner submitted that the Interested Party’s Board purporting to appoint a new CEO to prevent him resuming his position connoted malice hence the petitioner should be granted general damages for breach of his constitutional rights and relied on the case of Peter Ndegwa Kiai t/a Pema Wines & Spirits v Attorney General & 2 others(Civil Appeal 243 of 2017) (2021) KECA 328(KLR)(17 December,2021) which stated that it was the discretion of court to award general damages and submitted that the Petitioner will lose salary for the remaining three years where each month he was earning a salary of Kshs 2,071,500/= and in three years it would be Kshs 109,414,800/=

10. The Petitioner prayed for reinstatement and in the alternative he be granted Kshs 109,414,800 loss of salary for the three years.

1st and 2nd Respondent’s submissions 11. Through their Submissions dated 8th June,2023 the Respondents submitted on the issue of refusal of extension of the contract causing legitimate expectation that the same was done procedurally and within the confines of the State Corporation Act, the code of Governance for state Corporations(Mwongozo code) and the Constitution and relied on the case of Ben Chikamai & Another v Peter Macithi Muigai & 2 others. Counsel further Ms Rop submitted that the Interested Party’s Human Resource Board and Nominations Committee which resolved to extend the Petitioner’s contract did not have legal mandate under Section 5(3) of the State Corporation Act to appoint or extend the terms of contract of CEO.

12. On the issue of legitimate expectation the Respondents relied on the Paul Kipsang Case above and Jacob Kimutai Torutt v Coast Water Works Development Agency & Another; Commission for Human Rights and Justice (Interested Party) (2021) eKLR to submit that the Petitioner did not establish the alleged legitimate expectation since the Mwongozo Code provided that the tenure of the CEO was three year term renewable once subject to performance evaluation by the Board and the Cabinet Secretary extended the Contract for one year to allow transition and the Petitioner signed the extension of the one year voluntarily.

13. On the issue whether the Petition raised constitutional issues the Respondents submitted that what the Petitioner was seeking was available under section 49 of the Employment Act read together with Section 12(3) of the Employment and Labour Relations Court Act 2011. The Petitioner had therefore not illustrated that the remedies sought were inadequate catered for in the statute to justify a constitutional petition. In this regard counsel relied on the case of Communication Commission of Kenya & 5 Others v Royal Media Services Ltd & 5 others(2014) eKLR ; KKB V SCM & 5 Others Constitutional Petition 014 of 2020)(2022) KEHC 289(KLR); ELRC Petition 1 of 2013 Josphat Ndirangu v Henkel Chemicals(EA) Limited(2013) eKLR; Petition No. 11 of 2018 Peter Ndegwa Nderitu vs Teachers Service Commission (2019) eKLR; among others.

14. In addition it was the Respondent’s Case that the Petition did not illustrate the petitioner’s constitutional rights had been violated and relied on the case of Judicial Service Commission v Gladys Boss Shollei & Anther(2014) eKLR. According to Counsel there was no failure of compliance with the law by the Respondents or Interested Party to amount to infringement the petitioner’s right as was held in Francis James Ndegwa v Tetu Dairy Co-operative Society Limited(2016) eKLR and James Mukuha Gichane V National Hospital Insurance Fund & 3 others (2017) eKLR.

15. It was the Respondent’s case that the Petitioner did not bring out the alleged breach precisely as was stated in Anarita Karimi Njeru v Republic(No 1) (1979) K.L.R 154 and Gladys Shollei’s cases above.

16. On the issue of the letter dated 30th Septmber,2021 between Cabinet Secretary and head of Public Service approving his appointment for a further third term as being confidential the Respondent submitted that the Petitioner did not adhere to the procedure laid down by the Access to Information Act 2016 on how to access information from Public entities. That is to say, he never made an application under section 8 of the Access to Information Act to access the letter and relied on case of Katiba Institute v President Delivery Unit & 3 others(2017) eKLR to submit that the letter was illegally acquired and should be expunged from the court’s proceedings.

17. On whether the Applicant was entitled to the remedies sought the Respondents submitted that the Petitioner was not entitled to the same and the prayer for reinstatement was overtaken by events since another Managing Director was appointed and that the Petition be disallowed.

DETERMINATION 18. The Court reviewed and considered the pleadings and submissions by both counsels in support and opposition to the case; the Court also considered authorities relied on by Counsels and has come up with three main issues;a.I have Aa. aa.Whether the Petitioner is entitled to extension of his contract for a third term of five years and if he had legitimate expectation over the same.b.Whether Whether the Petitioner is entitled to general damages for breach of constitutional rightsc.Whether WhrherWhether the Petitioner is entitled to reliefs sought

Whether the Petitioner was entitled for extension of his contract for a third term of five year contract and if he had legitimate expectations over the same. 19. It was not in dispute that the Petitioner started working with the Interested Party on 9th April 2010 as an acting Managing director where he was confirmed to the position on 3rd April, 2012 and the same renewed for another five years in 12th April, 2016 to end in April 2021. This means the Petitioner had served for two terms of five years each and was seeking for a third term. He had served for two years as he sought full extension of his contract for a third term of five years.

20. The Contract the Petitioner and the Interested Party signed provided among others that the Petitioner was responsible to the Board, the Board reserved the right to terminate or extend the contract and that the 1st Respondent as per section 5(3) of the state Corporation Act had the mandate over the appointed staff to set their terms and conditions of service and not the appointment or reappointment.

21. The said section 5(3) of the State Corporations Act provides“A state Corporation may engage and employ such number of staff, including the Chief Executive, on such terms and conditions of service as the Minister May, in Consultation with the Committee, approve”

22. To this extent the Court agrees with the Petitioner that the Minister could not overrule the Board since from the onset the contract gave the board the power to terminate or extend the Contract. This was set out in the case of Paul Kipsang Kosgei V national Industrial Training Authority& Another; Cabinet Secretary, Ministry of labour & Social Services(Interested Party) (2020) eKLR where the Court stated:“Further under Section 5(3) of the State Corporations Act, the Minister had no power in the renewal of the contract. The only role of the Minister is to approve the terms and conditions of service for the Chief Executive Officer and staff. This is confirmed by the fact that the Petitioner’s original appointment letter was signed by the Chairman, Prof. Thomas E. Akuja PhD who also signed the gazette notice dated 27th June 2014. The Minister thus has no role in the appointment and could therefore not veto the decision of the Board.”

23. The Kenya Reinsurance Corporation Act does not provide for appointment or reappointment of the CEO. However the Interested Party being a state corporation is subject to Mwongozo Code. The Code provides that the tenure of CEO’s for state corporations shall be three years renewable once. In this particular case the Petitioner’s term was five years and he relied on the circular from the head of Public Service OP/CAB.9/1A dated 27th February, 2018 which provided for the term to be for five years or less and the CEO and further provide that the terms of CEO’s was not subject to limit as to number of terms served.

24. The Court has noted that the Interested Party’s Board recommended the Petitioner for a third term after it was resolved by the Board Human Resource and Nominations Committee. This Committee however lacked the mandate recommend the appointment of the Petitioner and the two extensions for one year each was done to ensure smooth transition since the Petitioner had already served his two terms as per the Mwongozo code.

25. This court faced with the similar issue of the said circular and the Mwongozo Code had this to say in David Kipchumba Kimosop v Kerio Valley Development Authority [2022] eKLR;What this implies therefore is that whereas Mwongozo remain the governing instrument in the running of State Corporations generally, it remains a policy document which whenever circumstances demand and are justifiable, can be deviated from.

26. In the case before me, there was no apparent explanation or reason to deviate from the Mwongozo code since the Petitioner had served for two terms of 5 years and got two extensions of one year each which was only made for transition purposes.

27. The Court has further noted that the Petitioner signed the two extension contracts of one year each which stipulated that they were for transition purposes. There was no allegation of duress or misrepresentation or fraud directed to the petitioner by the Interested Party. The Court therefore can safely assume that the petitioner signed the two annual extensions voluntarily. He is therefore estopped from seeking a five year contract when he voluntarily signed twice, one year contracts with the knowledge that his original two contracts that expired were for five years each. Besides, the petitioner was aware that the contracts were for transition purposes.

28. On the issue of the legitimate expectation on the part of the Petitioner it was the duty of the Petitioner to prove the same existed. The threshold in determining a claim for alleged breach of a legitimate expectation was considered by the Supreme Court in the case of Communications Commission of Kenya & 5 others vs Royal Media Services & 5 others [2015]eKLR These are:(a)a) There must be an express, clear and unambiguous promise given by a public authority(b)the expectation itself must be reasonable;(c)the representation must be one which it was competent and lawful for the decision-maker to make(d)there cannot be a legitimate expectation against a clear provision of the law.

29. The same Court further in the case of Kenya Revenue Authority v Export Tradind Company Limited [2022]KESC31 restated that:“As can be discerned from these two definitions, legitimate expectation may take many forms. It may take the form of an expectation to succeed in a request placed before the decision maker or it may take the objective form that a party may legitimately expect that, before a decision that may be prejudicial is taken, one shall be afforded a hearing… respectfully, we take the view that the question of whether a legitimate expectation arose is more than a a factual question. It is not merely confined to whether expectation exists in the mind of an aggrieved party, but whether viewed objectively, such expectation is in a legal sense, legitimate”.

30. In this case it has been illustrated and observed above that the Petitioner voluntarily signed the two one year extension contracts for smooth transition. He was aware or presumed to be aware that they would lapse through effluxion of time hence the issue of legitimate expectation for a five year contract did not arise

Whether the Petitioner is entitled to general damages for breach of constitutional rights 31. The Petitioner needed to prove first that there were constitutional issues raised in this petition and illustrate the many in which they were infringed before the court can delve into the issue of compensation for infringement of constitutional rights. As correctly submitted by Counsel for the respondent, the prayers sought by the Petitioner could well be handled by this court as employment claims without having to be filed as a constitutional petition. To qualify as a constitution question the Petition ought to have shown that the Employment Act did not adequately cover his complaints against the respondent. This was the holding in Judicial Service Commission v Gladys Boss Shollei & Another (2014) eKLR which relied on principles established in Anarita Karimi and Matemo Mumo cases. Where it was stated that the Petitioner needed to define the dispute to be decided by court and plead with particularity and reasonable precision on the provisions breached and the manner of breach alleged.

32. In this particular case the Petitioner has not met that test of pleading with particularity the infringed rights and hence he does not deserve the general damages for breach of constitutional rights.

33. In Conclusion the Court finds the Petition without merit and the same is hereby dismissed with costs.

34. It is so ordered.

Dated at Nairobi this 19th day of October, 2023Delivered virtually this 19th day of October, 2023Abuodha Jorum NelsonJudge