Transmara Sugar Company Limited & another v Omwamba [2024] KEELRC 2249 (KLR)

Transmara Sugar Company Limited & another v Omwamba (Civil Appeal E017 of 2022) [2024] KEELRC 2249 (KLR) (19 September 2024) (Judgment)

Neutral citation: [2024] KEELRC 2249 (KLR)

Republic of Kenya

In the Employment and Labour Relations Court at Nakuru

Civil Appeal E017 of 2022

DN Nderitu, J

September 19, 2024

Between

Transmara Sugar Company Limited

1st Appellant

Transmara Sugar Football Club

2nd Appellant

and

Shem Ondieki Omwamba

Respondent

Judgment

I. Introduction 1. In a decree issued on 10th January, 2023 arising from a judgment delivered on 21st July, 2022 the appellant, the respondent in the lower court, was ordered to compensate the respondent, the claimant in the lower court, as follows –DecreeThis matter coming up for judgment before Hon. M.I.G. Moranga – Senior Principal Magistrate:It Is Hereby Ordered That:-1. The refusal to pay the claimant his full dues is unfair and unlawful.2. The claimant be paid his arrears and terminal benefits amounting to Kshs749,050. 00/-3. The respondents to pay the costs of the claim.4. Interest on the above at court rates.Given under my hand and the Seal of this Honourable Court on this 10th day of January, 2023. Issued atKilgoris This 10Th Day of January, 2023SignedSenior Principal MagistrateKilgoris

2. Dissatisfied with the above judgment and decree the appellant through Wachira Wekhomba Aim & Associates commenced this appeal by way of a memorandum dated 22nd July, 2022 raising the following grounds of appeal –1. That the Learned Magistrate erred in law and in fact by allowing the Respondent’s claim as prayed despite the overwhelming evidence to the contrary.2. That the learned magistrate erred in law and fact by awarding the Respondent twelve (12) months’ salary without giving any legal or reasoned justification thus going against the principle of granting an award of compensation as set out under Section 49 and 50 of the Employment Act.3. That the learned magistrate erred in law and fact by making an award for the reminder of the contract and further awarded 12 months’ compensation hence amounting to double compensation.4. That the learned magistrate erred in law and in fact in finding that the Respondent’s termination from employment was unlawful.5. That the learned magistrate erred in fact and law by misinterpreting and misapplying the provisions of the Employment Act and arrived at erroneous finding.

3. The appellant is seeking the following reliefs –1. That the instant appeal be allowed.2. That the Judgment of Oanda SPM, delivered at Kilgoris on 21st July, 2022 be reviewed and/or set aside.3. That the Respondent does bear the costs of this Appeal.

4. The respondent opposed the appeal through Nyabena Alfred & Co. Advocates.

5. Stay of execution of the decree was by consent of counsel for both parties granted on 24th October, 2022 upon the appellant depositing half of the decretal sum with the court as security.

6. The appeal was canvassed by way of written submissions. Counsel for the appellant filed written submissions on 8th May, 2023 and counsel for the respondent filed on 28th July, 2023.

II. Submissions By Counsel 7. On the one hand, counsel for the appellant condensed his arguments into three issues –1. Whether the learned magistrate erred in law and in fact by allowing the respondent’s claim as prayed despite the overwhelming evidence to the contrary.2. Whether the learned magistrate erred in law and fact by awarding the Respondent twelve (12) months’ salary without giving legal or reasoned justification thus going against the principle of granting an award of compensation as set out under Section 49 and 50 of the Employment Act.3. Whether the learned magistrate erred in law and fact by making an award for the remainder of the contract and further awarded 12 months compensation hence amounting to double compensation.4. Whether the learned magistrate erred in law and fact in finding that the Respondent’s termination from employment was unlawful.

8. On the first issue, it is submitted that the trial court erred in fact and went against the evidence adduced in awarding to the respondent one month’s salary in lieu of notice yet the evidence on record confirmed that the same had already been paid. On pro-rata leave pay awarded it is submitted that the respondent did not complete one year of working so as to be entitled to annual leave.

9. On salary arrears awarded it is submitted that the court erred in fact and law in awarding the respondent as sum of Kshs33,000/= per month yet the evidence on record confirmed that he earned Kshs20,000/= a month. Further, it is submitted that the evidence on record confirmed that the respondent was not owed the salary arrears claimed as the same were paid as and when they fell due and payable.

10. It is further submitted that the claimant was not entitled to any bonuses for wins or the sum of Kshs4,500/= claimed.

11. On house allowance it is submitted that the respondent was provided with a fully furnished house and all his utilities were met by the appellants. The court is urged to follow the reasoning in Stephen Miheso v Kaimosi Tea Estate Ltd [2014] eKLR and find that under Section 31 of the Employment Act (the Act) an employer is only obliged to either provide housing or adequate housing allowance in lieu thereof and no more.

12. On the second issue the court is urged to follow the reasoning of the Court of Appeal in Ol Pejeta Limited v David Wanjau Muhoro [2017] eKLR wherein it was held that although Section 49(1)(c) of the Act gives discretionary powers to the court in making a maximum award equivalent to 12 months’ gross salary, such an award should be supported with the reasons therefor. The exercise of the attendant discretion should not be arbitrary, capricious, or whimsical. A judge should not be influenced by consideration of irrelevant or extraneous factors or parameters in making an award. Further, it is submitted that in Freight in Time Limited v Rosebell Wambui Munene [2018] eKLR the Court of Appeal reiterated that an award in the maximum should be supported with reasons or an explanation for the same to be justifiable.

13. It is submitted that the trial court did not give any reason(s) and or justification in making the maximum award hence rendering the same untenable.

14. On the third issue, it is submitted that the trial court erred in law by awarding compensation equivalent to 12 months’ gross salary and in the same breath awarding compensation for the salary of the balance of the contract hence making double compensation. The court is urged to adopt the reasoning in Njai Mutitu v University of Nairobi [2020] eKLR where it was held that an award for compensation in addition to payment for the remainder of the contract term amounts to double compensation. On the basis of the foregoing, the court is urged to set aside the award of the compensation equivalent to 12 months’ gross salary.

15. On the fourth issue, it is submitted that the written contract between the parties was not executed but the employment lapsed with the football season coming to an end and as such the respondent was not terminated but the contract came to its natural end.

16. On the basis of the foregoing it is urged that the appeal be allowed as prayed.

17. On the other hand, counsel for the respondent submitted that all the grounds raised in the memorandum of appeal may be condensed into two issues – Whether the learned magistrate erred in law in making a finding that the respondent’s termination by the appellants was unfair; and, Whether the learned magistrate erred in awarding as per the judgment.

18. On the first issue, it is submitted that the appellants and the respondent entered into a contract that commenced on 1st December, 2018 but the same was terminated at the instance of the appellants vide a letter of termination dated 1st August, 2019 with immediate effect. It is submitted that no reasons were given for the termination and the respondent was denied due process rendering the termination wrongful, unfair, and unlawful as the same was contrary to the provisions of Sections 41, 43 & 47 of the Act.

19. It is submitted that the trial court arrived at the right legal position in finding that the dismissal lacked both substantive and procedural propriety.

20. On the second issue on reliefs it is submitted that having arrived at the right decision that the termination was unfair and unlawful, the trial court correctly addressed itself to the issue of awarding compensation.

21. The court is urged to find that the contract between the parties failed to provide for housing or housing allowance besides the monthly basic pay of Kshs33,000/=. It is submitted that in the circumstances the trial court was fully justified and acted within the law in awarding housing allowance in arrears.

22. It is further submitted that having correctly found that the dismissal was wrongful, unfair, and unlawful the trial court was within the law in awarding compensation for the same in addition to the salary for the remainder of the contract.

23. The court is urged to uphold the decision of the lower court and dismiss the appeal with costs.

III. Issues For Determination 24. The court has perused the record of appeal, including but not limited to the proceedings in the lower trial court, the memorandum of appeal, and the submissions by counsel for both parties as summarized above. In my considered view, the following issues commend themselves to the court for determination –a.What was the nature and terms of the contract of employment between the parties herein?b.Was the respondent terminated or did the contract lapse or terminate as per the terms therein?c.If the respondent was terminated, was the termination unfair and unlawful?d.Did the trial court arrive at the correct decision in regard to the termination and compensation awarded?e.What appropriate orders should this court make in regard to the above issues and on costs?

IV. The Contract & Dismissal 25. As the first appellate court, this court is obligated to evaluate the evidence and arrive at its own conclusions but bearing in mind that it did not hear and record the evidence in the trial – See Selle v Associated Motor Boat Co. Ltd [1968] E.A 123.

26. It is not in dispute that the respondent was engaged by the 1st appellant, the owners the 2nd appellant, as a football coach. The employment relationship was regulated and governed by a formal contract exhibited at pages 75 -78 of the record of appeal. This contract was produced by the respondent during the trial in the lower court and the same is duly signed by the parties. The production of the same was not objected to during the trial and as such the court shall rely on the same as the foundation of the relationship between the parties. The court has no business rewriting or directing the terms of a duly and lawfully executed contract by and between parties with the requisite legal capacity.

27. The contract was to run for a period of 12 months from 1st December, 2018 to 1st December, 2019. Amongst the terms of the contract was a monthly salary of Kshs33,000/= plus bonuses of Kshs1,500/= for each match won and Kshs1,000/= for a draw to the respondent. All payments were to be made to the respondent via M-pesa through his duly registered designated mobile telephone line for such money transactions.

28. On termination, the contract provided for a one month’s notice by either party but in case of gross misconduct the respondents could terminate the contract without notice.

29. In a letter dated 1st August, 2019 the appellants terminated the services of the respondent with immediate effect. The termination was allegedly based on clause 8. 2 of the contract which provided that “The Club may terminate this agreement by giving one month’s notice in writing and shall be sufficiently served on the Coach by post to the address to which it was sent.”

30. The evidence on record is that the respondent was not given any reason(s) for the termination and no disciplinary hearing or process took place. Besides, the termination was with immediate effect. This was admitted by DW1 during the trial – See pages 152-154 of the record of appeal.

31. Obviously, the employment relationship between the parties was based on the duly executed contract and of course governed by the laws of Republic of Kenya and more so the Act. The law does not allow or cordon whimsical and or capricious termination of contract of employment. The court finds and holds that the termination was unfair and unlawful for lack of both substantive and procedural fairness. In that regard the trial lower court arrived at the right finding and decision and the court has no reason(s) for disturbing that holding.

V. Compensation Awarded 32. Having arrived at the right decision in that the termination was unfair and unlawful the trial lower court awarded the respondent as follows –i.One month’s salary in lieu of notice.....Kshs33,000. 00/=ii.Prorata leave.........................................Kshs33,000. 00/=iii.Salary arrears for January-June(13,000 x 6 months .................................Kshs78,0000. 00/=iv.July salary.............(33,000 – 5,000)......Kshs.28,000. 00/=v.Arrears for Winning allowance............Kshs.4,500. 00/=vi.House allowance 15% of 33,000 x 9. ...Kshs.44,550. 00/=vii.Salary for the remainder of theContract (33,000 x 4)...........................Kshs.132,000. 00/=viii.12 months Compensation(33,000 x12) Kshs.396,000. 00/=ix.Certificate of serviceTotal Amount Due Kshs749,050. 00/=

33. The court has critically examined the above award and found the same to be in accord with the applicable law except in one major aspect on the compensation equivalent to 12 months’ salary for the unfair and unlawful termination. For the umpteenth time the court shall reiterate that unfair and unlawful termination or dismissal does not and should not avail or present an opportunity to an employee to make more money than he/she should have earned bar the unfair and unlawful termination unless other violations or breaches, such as discrimination, are specifically pleaded and proved. The loss or damage that an employee suffers upon unfair and unlawful termination is in the loss of the income or earnings that should have been due and payable to him/her were it not for the termination.

34. Logically and reasonably, the court poses this rhetorical question – what is it that the respondent lost as a result of the unfair, unlawful, and premature termination of his contract? In my considered view, what the respondent lost is the earnings for the remainder of the contract. That is what the respondent lost and any award or compensation beyond amounts to unjust enrichment and or double-compensation or over-compensation.

35. For the foregoing reasons the court is persuaded and guided by the authorities cited by counsel for the appellants to the effect that the trial lower court misdirected itself and erred in making the award of compensation equivalent to 12 months’ salary in addition to salary for the balance of the contract period. For that reason, the award of Kshs396,000/= as compensation for unfair and unlawful compensation is hereby set aside.

36. There are no lawful reasons for the court to interfere with the other awards made in one month’s pay in lieu of notice, pro-rata leave, salary arrears, bonusses, house allowance, salary for the remainder of the contract, and certificate of service as the same were proved during the trial. The trial court also exercised its discretion rightly and correctly in awarding the costs of the trial to the respondent.

37. The foregoing paragraphs answer to all the issues raised above for determination.

VI. Orders 38. Flowing from the foregoing, the court makes the following orders –a.The appeal shall succeed to the extent that the award of Kshs396,000/- in compensation be and is hereby set aside.b.In substitution for the judgment of Khs749,050/= a judgment be and is hereby entered in favour of the respondent in the sum of Khs353,050/= plus interest from the date of judgment of the lower court, 21st July, 2022, till payment in full.c.The other awards remain undisturbed and a fresh decree shall issue accordingly.d.The amount deposited in court in the sum of Kshs374,525/= shall be released to the respondent’s counsel in satisfaction of the decretal sum plus interest and costs, for the trial in the lower court, and the appellants shall make good any shortfall.e.Each party shall meet own costs for this appeal.

DELIVERED VIRTUALLY, DATED, AND SIGNED AT NAKURU THIS 19TH DAY OF SEPTEMBER, 2024. ................................................DAVID NDERITUJUDGE