https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1581

Gulf Strem Investments Ltd v Stephen (Suing as the legal representative of the Estate of Stephen Munyao Kini - Deceased) (Civil Appeal E011 of 2020) [2026] KECA 1581 (KLR) (31 July 2026) (Judgment) Neutral citation: [2026] KECA 1581 (KLR) Republic of Kenya In the Court of Appeal at Mombasa Civil Appeal E011 of 2020 AK Murgor, KI Laibuta & SO Okong'o, JJA July 31, 2026 Between Gulf Strem Investments Limited Appellant and Anna Kanini Stephen (Suing as the legal representative of the Estate of Stephen Munyao Kini - Deceased) Respondent (An appeal from part of the Judgment and Decree of the Employment and Labour Relations Court at Mombasa (Rika, J.) delivered on 13th December 2019 in Cause No. 940 of 2016)) Judgment 1.This appeal arises from the Judgment of the Employment and Labour Relations Court at Mombasa where the Respondent, Stephen Munyao Kini, who was the Claimant, filed a Statement of Claim against the Appellant, Gulf Stream Investments Limited. Following his demise, the Respondent is now represented by Anna Kanini Stephen (Suing as the Legal Representative of the deceased’s Estate). 2.In his Statement of Claim, the Respondent pleaded that he was employed by the Appellant on 17th January 2005 as an Operations Superintendent and subsequently rose to the position of Deputy Terminal Manager. As at the date of termination of his employment on 13th June 2016, he earned an annual salary of Kshs. 3,072,672. He contended that his termination was procedurally unfair and invalid. He therefore sought severance pay for 11 years amounting to Kshs. 1,408,231, unpaid annual leave for 50 days at Kshs. 492,400, overtime for 1,170.5 hours at Kshs. 1,729,413, compensation for unfair termination at Kshs. 19,602,412, together with a declaration that the termination was unfair and unlawful, interest and costs. The total claim amounted to Kshs. 23,602,412. 3.In its Statement of Response, the Appellant admitted the employment relationship and confirmed that the Respondent rose to Deputy Terminal Manager in 2014. It stated that his role entailed oversight of critical operational activities, ensuring compliance with safety procedures, and implementation of terminal operational standards. The Appellant averred that, on 13th June 2016, the Respondent’s employment was terminated on the grounds of gross misconduct. It was alleged that he sanctioned unauthorized repairs to the boiler despite a management decision to defer the repair to await the sourcing of proper spare parts. According to the Appellant, this unilateral action resulted in a fire at the workplace causing damage and exposing the plant and personnel to risk. The Respondent was suspended on 18th May 2016, whereupon investigations were conducted, and he was given an opportunity to respond. The Appellant maintained that the Respondent breached its General Rules and Regulations, and that termination was lawful and fair. It denied liability for severance pay on the ground that the termination was not by redundancy, stated that 19.75 leave days had been paid. The Appellant denied that he was entitled to overtime on the basis that the Respondent was a management employee, and asserted that all terminal dues, including three months’ salary in lieu of notice, had been duly paid. 4.During the hearing, the Respondent testified that, on the night of 5th May 2016, sparks were reported to have occurred in the boiler, whereupon he contacted the Appellant’s service provider, Precor Place Products, to undertake repairs because there were pressing oil orders which could not await a full repair; that he requested for a temporary or stop-gap repair to be undertaken pending a full overhaul. He denied that there was a fire, maintaining that there were only sparks, and asserted that repair of the boiler was the responsibility of the Appellant. He further testified that he was not issued with a show cause letter, nor accorded a disciplinary hearing as required by law. On cross-examination, he conceded that he authorized the repair, but maintained that his actions were within his mandate, and that no significant fire or damage had occurred. He claimed compensation based on the years he expected to work up to retirement 5.The Appellant’s Human Resource Manager, Winny Chepkemoi, testified and confirmed that management had resolved to defer repair of the boiler until proper spare parts were sourced. Despite this, the Respondent authorized repairs which bypassed safety circuits, which action resulted in a fire and damage to supply cables. She stated that the Respondent was suspended, whereupon investigations were conducted, and he was subsequently dismissed. She maintained that he had been paid all his terminal dues including three months’ salary in lieu of notice 6.In its judgment, the trial court identified three issues for determination, namely: whether there was a valid reason for termination; whether the procedure adopted was fair; and whether the Respondent was entitled to the remedies sought 7.On the question of validity of the reason, the court found that the Respondent had indeed authorized repairs contrary to a corporate management decision and, that his unilateral action exposed the Appellant’s plant and machinery to risk. The argument that the sparks did not result in a fire was rejected and the court held that there was valid reason for termination under Sections 43, 44 (4)(c) and 45 of the Employment Act and, to that extent, termination was substantively justified. 8.However, on the issue of procedure, the Court found that, although investigations were carried out, the Appellant did not conduct a distinct disciplinary hearing as required under Section 41 of the Employment Act. The court found that the investigation process was not equivalent to a disciplinary hearing; that there was failure to formally communicate the charges the Respondent faced and convene a disciplinary forum after completion of investigations. The Court therefore held that termination was procedurally unfair. 9.Regarding the remedies sought, the court declined the claim for severance pay on the ground that termination was not on account of redundancy. The claim for overtime was also rejected for the reason that, under the applicable contractual terms and Wage Orders, management employees were not entitled to overtime. The court also dismissed the claim for 50 days’ leave for lack of proof. On compensation, the Court declined to award anticipatory salaries up to the retirement age, and equally rejected the argument that compensation should be limited to pay over the notice period. Taking into account that there was a valid reason for termination, but for the flawed procedure, the Respondent’s 11 years of service, his age of 53 years at termination, his contributions including oversight of ISO certification, and his contribution to the circumstances leading to termination, the Court awarded compensation equivalent to 5½ months’ salary of Kshs. 1,408,231. It declared termination unfair only on account of the manner of termination, ordered issuance of a Certificate of Service, and made no order as to costs and interest. 10.Aggrieved by the decision, the Appellant has preferred the present appeal on the grounds that the learned Judge misdirected himself in holding that: due process was not followed within the provisions of the law on the procedure to be followed by an employer before the termination of an employment contract; due process was not followed without reference to the investigation undertaken by the Appellant and the opportunity given to the Respondent to respond to the allegations before a decision was made to terminate his employment contract; the termination was manifestly faulty without appreciating that the Appellant brought the details of the circumstances of the termination to the Respondent’s attention, which he was given an opportunity to address during interviews conducted at the investigation stage, thus satisfying the requirement for notification and hearing as provided under Section 41 of the Employment Act; in failing to appreciate that reference to the investigation process was in fact a hearing process as envisaged in law, and in failing to consider the measures taken during the investigation process to comply with due procedure; in awarding an excessive 5½ months’ compensation as damages without considering the applicable criteria, including that the Respondent acknowledged disregarding the Appellant’s policies and its corporate decision not to repair the boiler, the volatile nature of the Appellant’s business of bulk oil storage, and the Respondent’s breach which resulted in a fire that endangered plant and machinery and occasioned a potential risk of harm to personnel on site, together with the resultant loss and damage sustained by the Appellant on account of the Respondent’s unauthorised actions; in awarding compensation to the Respondent without taking into account that a large portion of the Respondent’s claim had failed, and without providing justification for his determination in that regard; in failing to exercise his discretion judiciously in awarding 5½ months’ compensation to the Respondent without taking into account that the Appellant gave the Respondent three months’ pay in lieu of notice in recognition of his tenure of service, despite the fact that his actions were grievous in nature and amounted to gross misconduct; and in failing to uphold and apply the decision of this Court in the case of CMC Aviation Limited vs Mohammed Noor [2015] eKLR, to the effect that compensation for unlawful termination should be commensurate with the termination notice under the employee’s contract, contrary to the doctrine of stare decisis. 11.When the appeal came up for hearing on a virtual platform, learned counsel Mr. Oyoo appeared for the Appellant while learned counsel Ms. Kembe holding brief for Mr. Opwapo appeared for the Respondent. 12.In the course of filing their written submissions, counsel for the Respondent also raised a Preliminary objection on three grounds that: i) the Notice of appeal dated 23rd January 2020 was statute barred and ought to be expunged from the Court’s record; ii) that the appeal was filed against the deceased person who has no capacity to be sued; and iii) in light of i) and ii) above this Court has no jurisdiction to entertain the appeal. 13.In canvassing the preliminary objection, counsel submitted that Appellant’s Notice of appeal dated 23rd January 2020 and served on the Respondent advocates on 28th of January 2020 was filed out of time, and no application for extension of time was filed by the Appellant and, further, that since a deceased person cannot be sued, no valid appeal existed against the Respondent. 14.In their oral and written submissions, counsel for the Appellant submitted that the learned trial Judge was wrong in holding that due process was not followed and in awarding the Respondent compensation equivalent to 5½ months’ salary despite having found that there was a valid reason for termination. 15.On the issue of procedural fairness, counsel submitted that the Appellant complied with Sections 41 and 43 of the Employment Act. It was argued that the Respondent was notified of the allegations through the suspension letter dated 18th May 2016, which set out in detail the alleged breach of safety policies and unauthorized repairs; that the Respondent was informed of his right to respond, and to be accompanied by a fellow employee. Further, an investigation report was prepared and the Respondent was accorded an opportunity to give his input before a decision was made. Counsel contended that the trial court failed to properly evaluate this evidence and thereby misdirected itself in concluding that there was no compliance with Section 41. In support of this position, counsel relies on the case of Nazareno Kariuki vs Feed the Children Kenya [2013] eKLR, for the proposition that the role of the Court is not to reconstruct the internal disciplinary processes of an employer or improve upon its decision, but to examine whether, in the particular circumstances, the employer acted in a reasonably fair manner. It was submitted that the Appellant acted reasonably and met the statutory threshold under Sections 41, 43, 45 and 47(5) of the Employment Act, and that the learned Judge improperly disregarded the steps taken by the Appellant to undertake the disciplinary process. 16.Turning to the award of compensation, counsel submitted that the learned Judge exercised his discretion injudiciously by awarding 5½ months’ salary notwithstanding the finding that termination was substantively justified; that Section 49(4) of the Employment Act requires the court to consider, inter alia, the circumstances in which termination took place and the extent to which the employee contributed to the termination. Counsel contended that the Respondent’s actions of authorizing unsafe repairs and bypassing safety circuits contrary to management’s decision substantially contributed to his termination, which actions were not adequately considered. It is submitted that, as a consequence, the award was excessive and punitive in nature, particularly as the award failed to take into account that the Respondent had already been paid three months’ salary in lieu of notice under his contract. 17.As a consequence, it was submitted that an appellate court may interfere with a wrong exercise of discretion, or where the judge misdirected himself or where the decision is plainly wrong. Counsel cited Kenya Revenue Authority & 2 others vs Darasa Limited [2018] eKLR, amongst other authorities in support of this proposition. 18.With reference to the Preliminary objection, counsel submitted that, in accordance with Rule 87 (3) of this Court’s rules, the demise of a person does not negate the appeal and that, for all intents and purposes, the appeal was competent. 19.In response, counsel for the Respondent submitted that the appeal is incompetent and that the termination was both substantively and procedurally unfair; that the Appellant filed the appeal against a deceased person and failed to properly regularize the proceedings, thereby rendering the appeal a nullity. 20.On the merits, counsel supported the trial court’s finding that there was no compliance with Section 41 of the Employment Act. It was argued that an investigation is not equivalent to a disciplinary hearing, and that no evidence was produced that a formal disciplinary forum was convened after the investigations were concluded. The Respondent relied on the case of National Bank of Kenya vs Samuel Nguru Mutonya [2019] eKLR, where this Court held that failure to comply with Section 41 renders termination procedurally unfair, even where pay in lieu of notice has been made. 21.On the award of compensation, counsel submitted that the learned Judge properly exercised his discretion under Section 49 of the Employment Act in awarding compensation of 5½ months’ salary; that the court took into account that the Respondent had served for 11 years with a good record, had risen through the ranks, and was 53 years at termination; and that Section 49 vests discretion in the trial court to determine an appropriate remedy based on the circumstances of each case. 22.This being a first appeal, the Court’s role is set out under Rule 31(1)(a) of the Court of Appeal Rules and, as expounded in Abok James Odera T/A A.J Odera & Associates vs. John Patrick Machira T/A Machira & Co. Advocates [2013] KECA 208 (KLR), which specifies that our duty is to re-evaluate, re-assess, and re- analyze the record and determine whether the conclusions reached by the learned trial Judge should stand or not and give reasons either way. 23.Having considered the Memorandum and record of appeal and the parties’ submissions, the following issues arise for determination:i.Whether the appeal is incompetent;ii.Whether the learned Judge was in error in finding that the termination of the deceased's employment was procedurally unfair despite the investigations conducted by the Appellant and the opportunity allegedly accorded to the deceased to respond to the allegations against him;iii.Whether the learned Judge properly exercised his discretion in awarding the Respondent compensation equivalent of 5½ months’ salary for unfair termination taking into account the relevant factors under Section 49(4) of the Employment Act; andiv.Whether the award of compensation was excessive and unjustified. 24.We begin with the Preliminary objection as to whether the appeal is competent. As pertains to the issue that a deceased person cannot be sued, Anna Kanini Stephen (Suing as the legal Representative of the Estate of the deceased) having been appointed the legal representative of the deceased, clearly became the person through whom the deceased was capable of being sued. 25.On the question of the delay in service of the Notice of appeal on the Respondent, having regard to Rule 86 of the Court’s rules, we consider it is too late in the day for the Respondent to raise this issue at this juncture. 26.On the fore going premises, the preliminary objection is devoid of merit fails. 27.We now turn to the merits of the appeal with respect to whether the termination of the deceased’s employment was procedurally unfair despite the investigations conducted by the Appellant and the opportunity allegedly accorded to the deceased to respond to the allegations against him. The Appellant submitted that, upon the occurrence of the boiler incident, the deceased was suspended through a letter dated 18th May 2016 to facilitate investigations, and was informed of the allegations against him. It was argued that the deceased participated in the investigation process and was afforded an opportunity to explain his conduct before the decision to terminate his employment was made, and therefore the requirements of Section 41 of the Employment Act were substantially complied with. 28.The Respondent, on the other hand, submitted that although investigations may have been undertaken, no evidence was tendered to show that the deceased was subsequently invited to a disciplinary hearing or informed of the specific charges facing him, or afforded an opportunity to defend himselfin the presence of a fellow employee or shop floor representative of his choice before the decision to terminate his employment was reached. 29.In addressing this issue, the learned Judge had this to say:“The letter of termination does not refer to any disciplinary hearing. An investigation must be distinguished from a disciplinary hearing. The hearing follows investigation. Once investigation was complete, there was an obligation on the part of the respondent to communicate formal charges against the Claimant, and convene a disciplinary forum to hear the Claimant, as required under Section 41 and 45 of the Employment Act. The safety investigation report at page 31 to 36 of the respondent documents filed on 14th February 2017 is not a disciplinary report. It is an incident investigation report, require required under the safety health and environmental manual of the respondent business… the report was therefore related to investigation not the disciplining of the Claimant. To this extent., termination was unfair under Section 41 and 45 of the Employment Act”. 30.In determining the procedural fairness in the dismissal process, a court should consider whether Section 41 of the Employment Act, which provides the minimum threshold of a fair procedure, has been complied with by an employer prior to summarily dismissing an employee. The section provides:“41(1)Subject to Section 42 (1), an employer shall before terminating the employment of an employee, on the grounds of misconduct; poor performance or physical incapacity explain to the employee, in a language the employee understands, the reason for which the employer is considering termination and the employee shall be entitled to have another employee or a shop floor union representative of his choice present during this explanation.(2)Notwithstanding any other provision of this part, an employer shall, before terminating the employment of an employee or summarily dismissing an employee under Section 44 (3) or (4) hear and consider any representations which the employee may on the grounds of misconduct or poor performance, and the person, if any, chosen by the employee within subsection (1), make.” 31.In the case of Janet Nyandiko vs Kenya Commercial Bank Limited [2017] eKLR, this Court summarized those procedures thus:“Section 45 of the Act makes provision inter alia that no employer shall terminate the employment of an employee unfairly. In terms of the said section, a termination of an employee is deemed to be unfair if the employer fails to prove that the reason for the termination was valid; that the reason for the termination was a fair reason and that the same was related to the employee’s conduct, capacity, compatibility or alternatively that the employer did not act in accordance with justice and equity.The parameters for determining whether the employer acted in accordance with justice and equity in determining the employment of the employee are inbuilt in the same provision. In determining either way, the adjudicating authority is enjoined to scrutinize the procedure adopted by the employer in reaching the decision to dismiss the employee, the communication of that decision to the employee and the handling of any appeal against the decision. Also not to be overlooked is the conduct and capability of the employee up to the date of termination, the extent to which the employer has complied with the procedural requirements under section 41, the previous practice of the employer in dealing with the type of circumstances which led to the termination, and the existence of any warning letters issued by the employer to the employee.Section 41 of the Act enjoins the employer in mandatory terms, before terminating the employment of an employee on grounds of misconduct, poor performance or physical incapacity to explain to the employee in a language that the employee understands the reasons for which the employer isconsidering to terminate the employee’s employment with them. The employer is also enjoined to ensure that the employee receives the said reasons in the presence of a fellow employee or a shop floor union representative of own choice; and to hear and consider any representations which the employee may advance in response to allegations leveled against him by the employer.” 32.From the record, it is not disputed that investigations were carried out following the boiler incident, and that the Respondent was suspended pending those investigations. However, the critical question is whether the investigation process was followed by a disciplinary hearing that met the requirements of Section 41. The learned Judge found that, while investigations were conducted, there was no evidence that the Appellant convened a separate disciplinary hearing after the investigations were concluded. The Judge further found that the investigation process could not be equated to the hearing envisaged under Section 41. 33.In the case of Postal Corporation of Kenya vs Andrew K. Tanui [2019] eKLR this Court held:“Admittedly, there has been considerable debate as to what amounts to a fair hearing or procedure in disciplinary proceedings. Indeed the appellant has cited the Kenya Revenue Authority case where this Court held that the fairness of a hearing is not determined solely by its oral nature, and that a hearing may be conducted through an exchange of letters as happened in that case. It also held that whether an oral hearing is necessary will depend on the subject matter and circumstances of the particular case and upon the nature of the decision to be made. We believe that is still good law, but not in respect of a hearing before termination as envisaged under Section 41 of the Act. It is our further view that Section 41 provides the minimum standards of a fair procedure that an employer ought to comply with. The section provides for "Notification and hearing before termination on grounds of misconduct…" 34.An investigation is intended to establish facts and determine whether the intended disciplinary action is warranted. The hearing contemplated under Section 41 is the forum through which an employee is informed of the charges facing him and afforded an opportunity to make representations before a decision affecting his employment is made. In this case, although an investigation into the incident surrounding the boiler were conducted, the evidence does not disclose that Disciplinary hearings for the Respondent were conducted at which the allegations were formally put to him. The two processes are distinct and serve different purposes. One cannot ordinarily substitute for the other. 35.In the case of Standard Group Limited vs. Jenny Luesby [2018] eKLR, this Court held that:“There are no exceptional circumstances that have been established by the Respondent that the case against the claimant was so severe that she could not be accorded the basic minimum. That is notice and a hearing before the summary dismissal. That hearing is as important as the law made it mandatory, even in the worst case scenario where an employee grossly misconducts oneself. The right to a hearing is what amounts to meeting the tenets of natural justice. Such a hearing in an employment relationship should be conducted in the presence of the affected employee together with another employee of her choice, as this is the meaning of a fair hearing. However, senior an employee is, where the case is that of misconduct, the seniority is not a justification for failure to meet the mandatory provisions of the law. It remains a sacrosanct duty for an employer to uphold. This was denied of the claimant, and I find this to be an unfair labour practice.” 36.Although the Appellant’s case was that the deceased was informed of the allegations through the suspension letter and afforded an opportunity to respond during the investigation process, the record does not reveal any notice convening a disciplinary hearing, minutes of such hearing, or evidence that the deceased was invited to appear before a disciplinary panel in the company of a fellow employee or representative as contemplated under Section 41 of the Employment Act. In the circumstances, the learned Judge cannot be faulted for reaching the conclusion that what was undertaken was an investigation and not the distinct disciplinary hearing required by law. Accordingly, there is no basis for interfering with the learned Judge’s decision that the dismissal of the deceased was procedurally unfair. 37.As to whether the learned Judge properly exercised his discretion in awarding the Respondent compensation equivalent to 5½ months’ salary and whether the award was excessive or contrary to Section 49(4) of the Employment Act and the applicable authorities, the Appellant contended that the learned Judge failed to adequately consider the Respondent’s contribution to the circumstances leading to his dismissal, the payment of three months' salary in lieu of notice. The Appellant further argued that the award was excessive and amounted to an improper exercise of discretion. 38.Under Section 49(1) (c) of the Employment Act, an award for compensation for unlawful termination is discretionary. It stipulates:Where in the opinion of a labour officer summary dismissal or termination of a contract of an employee is unjustified, the labour officer may recommend to the employer to pay to the employee any or all of the following(a)……;(b)……;c.the equivalent of a number of months wages or salary not exceeding twelve months based on the gross monthly wage or salary of the employee at the time of dismissal. 39.Section 49(4) of the Act requires the court to consider relevant factors, including the employee’s conduct, the extent of contribution to the termination, the circumstances of dismissal, and the interests of justice. See also Kenfreight (EA) Ltd vs Benson K. Nguti [2016] eKLR. 40.The principles governing appellate interference with the exercise of judicial discretion are well settled. An appellate court will not interfere merely because it would have reached a different conclusion. Interference is warranted only where the trial court misdirected itself in law, took into account irrelevant considerations, failed to take into account relevant considerations, or arrived at a plainly wrong decision. See United India Insurance Co Ltd vs. East African Underwriters (Kenya) Ltd [1985] KECA 39 (KLR) where this Court held:“…The Court of Appeal is only entitled to interfere if one or more of the following matters are established: first, that the judge misdirected himself in law; secondly, that he misapprehended the facts; thirdly, that he took account of considerations of which he should not have taken account; fourthly, that he failed to take account of considerations of which he should have taken account, or fifthly, that his decision, albeit a discretionary one, is plainly wrong.”See also: Nakuru Industries Limited vs. Paul Obadha Odhiambo [2015] KECA 389 (KLR), 41.The record shows that the learned Judge expressly took into account that the Respondent had served the Appellant for approximately 11 years, and had risen through the ranks to the position of Deputy Terminal Manager. The learned Judge further appreciated that the Respondent was 53 years old at the time of termination, and had made significant contributions to the Appellant's operations, including oversight of ISO certification processes. At the same time, the learned Judge recognized that the Respondent had materially contributed to the circumstances leading to termination by authorizing repairs to the boiler contrary to a management decision. The court also found that there existed a valid and lawful reason for termination, but that the dismissal was rendered unfair solely because of the Appellant's failure to comply with the procedural requirements of Section 41 of the Employment Act. 42.In our view, those are precisely the considerations contemplated under Section 49(4) of the Employment Act. Far from ignoring the Respondent’s contribution to the events leading to dismissal, the learned Judge expressly acknowledged it and moderated the award accordingly. Clearly the learned Judge took into account the fact that termination was substantively justified, and that procedural unfairness was the only basis upon which compensation was being awarded. 43.On the basis of the factors relied upon, it cannot be said that an award equivalent to 5½ months’ salary was excessive. Given the Respondent's lengthy service, age, senior position within the Appellant's organization, and the finding that the dismissal was procedurally unfair, we are satisfied that the learned Judge properly exercised his discretion under Section 49 of the Employment Act. Conversely, the Appellant has not demonstrated any misdirection in principle or any basis upon which this Court may interfere with that exercise of discretion. 44.Having re-evaluated the Record of appeal, the Judgment of the Employment and Labour Relations Court, the grounds of appeal, the submissions by counsel and the applicable law, we come to the conclusion that the learned Judge properly directed himself on both the law and the facts, and properly exercised his discretion under Section 49 of the Employment Act in awarding compensation equivalent to 5½ months’ salary. 45.In sum, the appeal is devoid of merit and is hereby dismissed in its entirety with costs to the Respondent. It is so ordered. DATED AND DELIVERED AT MOMBASA THIS 31ST DAY OF JULY, 2026.A. K. MURGOR…………...…............. JUDGE OF APPEALDR. K. I. LAIBUTA CArb, FCIArb.…………...…...............JUDGE OF APPEALS. O. OKONG’O…………………............ JUDGE OF APPEALI certify that this is the true copy of the originalsigned DEPUTY REGISTRAR