[2013] KEELRC 130 (KLR)

REPUBLIC OF KENYA

IN THE INDUSTRIAL COURT OF KENYA

AT NAIROBI

CAUSE NO. 962 OF 2011

CHARLES KIBIRU …………………………………………………….……….CLAIMANT

-VERSUS-

NAIROBI WATER & SERVICES CO. LTD. …………………………..RESPONDENT

Mr. Patrick Ngunjiri for Claimant.

Mr. Onyango Ohaga for Respondent.

JUDGMENT

The Claimant filed this suit on 17th June, 2012 seeking payment of Kshs.17,101,965/= being the total amount owing to him as a consequence of early termination and separation from employment by the Respondent.

The Respondent filed a Memorandum of reply on 3rd August, 2011 in which it is admitted that the Respondent employed the Claimant by dint of an employment contract dated the 19th June, 2007 attached to the Memorandum of claim as Appendix I.

In terms thereof the Board of the Respondent renewed the contract of the Claimant for a period of five (5) years with effect from the 17th August, 2007. The contract was due to end on 16th August, 2012.

Previously the Claimant had served a three (3) year contract with the Respondent.

The terms of the new contract included:

Basic pay of Kshs.368,526/=;

House Allowance of Kshs.55,000/=;

Entertainment allowance of Kshs.25,000/=;

Telephone allowance of Kshs.15,000/; and

Fuel allowance of Kshs.85,000/=.

The total gross pay per month was Kshs.548,528/=.

The Claimant served in the position of a Commercial Director.

On or about 31st July, 2009, the management of the Respondent recommended that some of the functions carried out by the Commercial Director be merged with the Financial Department.

On or about the 8th February, 2010, the Claimant requested to opt out or for the company to release him early from his position as a Commercial Director in line with the company’s policy adopted by the Board. The request was accepted by the Board of Directors on 20th April, 2010.

The request by the Claimant is contained in Appendix 2 to the Statement of claim and the acceptance is contained in Appendix 3 to the Statement of claim.

The Managing Director in the said acceptance letter stated as follows:

“Given the foregoing, you will, therefore, be paid for the remaining part of your contract as provided for in your employment contract with the company. By copy hereof, the Director Human Resource and Administration and the Finance Director are requested to review your contract and prepare the payment for your final dues in the course. The Director of Human Resource and Administration will issue you with a Certificate of service once you complete the clearance process of the company.”

The Claimant consequently separated with the Respondent but as at the time of coming to court, one (1) year had lapsed without the Respondent computing or paying his dues inspite of a demand letter dated 8th December, 2010, which is Appendix 6 followed by another demand letter dated 18th March, 2011.

The Claimant escalated the matter to his advocates who wrote another letter of demand dated 3rd June, 2011 which is Appendix 8.

The Claimant now seeks payment of:

Kshs.17,101,965/= computed as follows;

Basic pay Kshs.368,526/=.

House allowance Ksh.55,000/=.

Telephone allowance Kshs.15,000/=.

Fuel allowance Kshs.85,000/=.

Gross pay per month Kshs.548,526/=

Gross pay to end of contract: -

May 2010 – August 2012

Gross pay for 28 months …………………………………….Kshs.15,358,788/=.

Add arrears for August 2009 – April 2010 ……………….Kshs. 346,522/=.

Add gratuity ……………………………………………………..Kshs. 1,028,189/=.

Leave allowance………………………………………………… Kshs. 368,526/=

Total claim ………………………………………….Kshs.17,101,965

The Respondent filed a Replying memorandum dated 18th July, 2011 wherein it admits the contents of paragraph 3, 4 and 5 of the Statement of Claim concerning the employment particulars of the claimant and the request for the early retirement on the aforesaid terms.

However, the Respondent fails to acknowledge the acceptance of the request for early retirement made by the Claimant by the Respondent.

The Respondent purports to rely on the terms of the contract of employment of the Claimant, annexed to the Memorandum of claim as Appendix I wherein either party may terminate the contract at any time by giving to the other not less than six (6) months notice.

Furthermore, the contract provides that payment for the remaining term of the contract was only applicable where the Respondent terminated the contract and not in any other case. Accordingly, since the termination of the contract was at the instance of the Claimant, by requesting for early retirement, the payment of gross salary for the remainder of the contract was inapplicable.

Furthermore, the Respondent states that the Board paper dated 9th March, 2010 (Appendix 4 to the claim) was only a proposal to pay the current functional Directors for the remaining term of the contracts but the Claimant had voluntarily retired before the Respondent made its offer and was therefore not entitled to payment of the remaining contract period as the separation was at the instance of the Claimant and not of the Respondent.

In any event, the Respondent avers that by its letter dated 26th April, 2010 it informed the Claimant that his early separation with the claimant had been approved and that his last working day was 30th April, 2010.

The Respondent concludes that the Claimant had literally resigned from his employment and prays the court to dismiss the suit in its entirety with costs as the same lacks any basis and is an abuse of the court process.

The Claimant testified in support of its claim and largely affirmed the contents of the Statement of claim and appendices whose contents have been severally referred to in this judgment.

The Respondent did not find it useful to call any witnesses stating that the facts of this case are well documented and the documents appended to the pleadings illustrate that the claim is ill-conceived.

Upon a careful consideration of the facts of the case the court picks out the following issues for determination:

Whether the Respondent made a promise to the Claimant which the Claimant acted upon to his loss and detriment and therefore the Respondent is estopped from reneging on the promise.

What remedy if any, is available to the Claimant.

Analysis of Facts

As earlier stated, upon learning of the impeding restructuring of the Respondent Company which was going to affect the position held by the Claimant, the Claimant applied to relinquish his position to allow the proposed restructuring. He concluded by stating in the letter dated 8th February, 2010 as follows:

“I would therefore be willing to leave at the earliest if the company compensates me for the remaining part of my contract as stipulated in the same contract.”

The Managing Director responded to this mail on 26th April, 2010, as earlier cited in this judgment and in particular stating “you will, therefore, be paid for the remaining part of your contract…”

With that the Managing Director set in motion the process of separation with effect from 30th April, 2010 and directed the Director Human Resource and Administration and the Finance Director “to review your contract and prepare the payment for your final dues in due course.”

The law

The principal of estoppel was well set out in Combe vs. Combe 195 1 (1) All England Law Reports 766 at 770 by Denning LJ as follows:

“The principle as I understand it is that where one party has by his words or conduct made to the other a promise or assurance which was intended to affect the legal relations between them and to be acted on accordingly, then once the other party has taken him at his word and acted on it, the one who gave the promise or assurance cannot afterwards be allowed to revert to the previous legal relations as if no such promise or assurance had been made by him, but he must accept their legal relations subject to the qualification which he himself has so introduced even though it is not supported in point of law by any consideration, but only by his word.”

The Board of Directors acts through its Managing Director. The Managing Director was the immediate supervisor of the Claimant. The Managing Director through his letter of 26th April, 2010 approved the separation of the Claimant with the Respondent and set the separation date to be 30th April, 2010.

In the same vein, he promised the Claimant payment for the remaining part of the contract, which was 28 months in total.

The Claimant promptly acted on the said promise and quit his employment as scheduled on 30th April, 2010. He handed over to the Managing Director on 3rd May, 2010.

With that, he lost his job, with great expectation of a generous early retirement package promised him and actually offered by the Chief Executive of the Respondent.

The conduct by the Claimant falls squarely within the doctrine of estoppel. The Claimant received a promise and acted on it to his detriment.

The Respondent must now be held to its promise and it must accept the legal relationship with the Claimant subject to the qualification which through its Managing Director itself, introduced even though it was not supported in point of law by any consideration but only by the word of the Managing Director.

If there was the slightest doubt as to the ability of the Managing Director to bind the Respondent, the earlier letter of 3rd March, 2010, by the Chairman of the Board Mr. Titus G. Ruhiu wherein, he informed the Claimant that he had discussed the matter with the Managing Director and upon consultations with the fellow Board members had mandated the Managing Director to review the contract of the Claimant and advise the Board on the terms of exit of the Claimant concludes the matter beyond doubt.

This was followed by the letter of 26th April, 2010, by the Managing Director to the Claimant approving his exit with payment for the remaining term of the contract.

This promise caught the Claimant, hook, line and sinker to his detriment and the promise binds the Respondent squarely.

Accordingly, the claims by the Claimant as outlined in the Statement of Claim, the computation having not been challenged at all by the Respondent, is allowed in its entirety and the Respondent is directed to pay the Claimant gross pay for the remaining 28 months of his contract less, fuel allowance, telephone allowance and entertainment allowance, which amounts were only meant to facilitate his work while serving the Respondent and therefore became inapplicable upon termination of his employment.

The Respondent is therefore to pay to the Claimant a total sum of Kshs.11,358,728/=.

The arrears claimed for the period August 2009 to April, 2010 and leave allowance have not been supported by any evidence and the same are disallowed.

The gratuity of 31% in terms of clause 4 (viii) of the contract of service is only payable: “upon the successful expiration of each year’s service” based on the monthly salary received by the employee during the preceding year for every month of service completed. The Claimant did not adduce any evidence with respect to what year of service gratuity was being claimed. The claim was thus not proved and the same is dismissed.

In the final analysis the Respondent is to pay to the Claimant:

Kshs. 11,358,728/=

Interest on the amount at court rates from the date of filing the suit to date of payment.

Costs of the suit.

Dated and delivered at Nairobi this 3rd day of October, 2013.

MATHEWS N. NDUMA

PRINCIPAL JUDGE