https://new.kenyalaw.org/akn/ke/judgment/keelrc/2026/1305

**REPUBLIC OF KENYA** **IN THE EMPLOYMENT AND LABOUR RELATIONS COURT** **AT MOMBASA** *(Before Hon. Lady Justice Monica Mbarũ)* **CAUSE NO. E086 OF 2025** **STEPHEN AMSON NGERESA ONYANGO CLAIMANT** *VERSUS* **WATU CREDIT LIMITED RESPONDENT** **JUDGMENT** The claimant is an adult male. The Respondent is a limited liability company. The respondent employed the claimant on 6 September 2017 as an intern, business development officer. He progressed through the ranks to 25 November 2022, when he was the asset recovery management assistant on a salary of KS. 120,000 per month. The claim is that on 10 November 2022, the respondent issued the claimant a notice to show cause why his employment would not be terminated for violating the respondent’s Code of Conduct, for a conflict of interest, and for failure to follow due procedure, as per the petty cash book. On the same day, 10 November 2022, the claimant was served with a letter of suspension to allow for investigations. He was directed to report back on 23 November 2022. On 12 November 2022, the claimant replied to the notice to show cause and challenged the charges against him. Through the notice dated 15 November 2022, the respondent invited the claimant to a disciplinary hearing on 17 November 2022. On 25 November 2022, a notice terminating employment was issued, and despite the appeal dated 28 November 2022, the respondent was delinked through a notice dated 2 December 2022. The claim is that the termination of employment was contrary to section 45(2) of the Employment Act (the Act) on the ground of lack of due process. The same was unfair since the charges against the claim were unfair, and the respondent does not have a code of conduct on conflict of interest, as alleged. There is no petty cash handbook, nor was one provided to the claimant during their employment. No report was submitted regarding the allegation used as the basis for the termination of employment. The claimant is seeking the following dues: 1. 12 months' compensation for unfair termination of employment, KS. 1,440,000. 2. Overtime of 2 hours for 5 days each week, KS. 1,154,400. 3. Costs of the suit and interests on the award. The claimant testified that as the recovery officer for the respondent, his duties included taking the register for petty cash and payment vouchers. These would go to the finance department. His role was that of an approver for the petty cash done by the head of department, Peter Ndirangu. The claimant testified that before taking up the role of recovery officer, he had no prior training, and he learned on the job. Brenda Otieno investigated the transactions in issue. She asked for his M-Pesa statement, which was part of the allegations against him and led to the termination of his employment. Upon cross-examination, the claimant admitted that, in his role, he was required to be diligent and that he had a handbook addressing conflicts of interest. As part of management, he was required to exercise high skills and knowledge. He was thus conversant with the respondent’s workplace policies. Under the petty cash process, he was the final approver of the vouchers and expense reports. All employee expenses came to him for approval. The claimant admitted that various vouchers had been brought to his attention and approved, but he had failed to properly check the details, resulting in unaccounted-for funds. This resulted in vouchers amounting to KS. 419,000 that were fictitious. The claimant admitted that there were fake vouchers for KS. 419,000, which was an oversight on his part. During the disciplinary hearing, the claimant was asked to explain why he approved 13 fictitious and fake vouchers. He noted it was a mistake on his part. The vouchers were produced and are overwritten. He approved these vouchers and was paid. Other vouchers lacked the supporting documents required under the respondent's policies and procedures. The claim was approved without the employee's details. Some have a single name of ‘Kennedy’ and no other details. He approved these vouchers. These were admitted errors and should have been avoided by checking the supporting documents and evidence. The claimant admitted that he knew Aloo personally. He was a friend. Both used to borrow money from each other. **Response and counterclaim** In response, the respondent admitted that the claimant was an employee and the claims made are without merit. He was under a contract requiring him to work diligently, but he was negligent in discharging his duties as an authorizer, admitting he failed to follow due process, which led to the fraudulent approval of vouchers and losses to the respondent. His actions constituted gross misconduct and resulted in the termination of his employment on 25 November 2022. The claimant was the assistant to recovery management and had worked in the finance department for many years. He was the authorizer for petty cash vouchers and employee expense reports. In August 2022, it came to the respondent’s attention that the claimant was involved in serious financial misconduct. This followed the petty cash officer's resignation. A financial review was conducted for June to August 2022. It identified fraudulent transactions and misconduct. It revealed that the claimant, as the designated petty cash approver, had approved numerous fraudulent transactions processed by the petty cash officer, constituting a serious breach of the employment contract. The investigations established that the claimant had a personal relationship with the petty cash officer, which impaired his objectivity and created an actual conflict of interest, as he was approving fraudulent vouchers printed by the officer. The claimant’s failure was not only isolated to this incident but a pattern that enabled fraud: 1. The claimant approved 13 fake mpesa codes, resulting in a loss of KSh. 419,000. 2. Approved duplicate vouchers that were used to support payments. 3. Approved vouchers where the amount had been overwritten. 4. Approved fake ER that lacked the employee's full name, period or signature. 5. Approved voucher where the supporting documents were dated after the voucher itself. Based on the investigations, the respondent found sufficient grounds to issue the claim with a notice to show cause dated 10 November 2022. He was found in violation of the policy and for failing to adhere to due process. The claimant responded on 12 November 2022, partially denying the allegation, stating that he did not understand the conflict of interest and had not received any training. He, however, admitted that there was oversight and due to work overload, he may have missed the error. The claimant was invited to a disciplinary hearing on 17 November 2022. He was accompanied by a fellow employee, Irene Madara. Upon the hearing, the respondent found the explanations given unsatisfactory. The claimant could not explain the loss of KS. 419,000, the property of the respondent. His employment was terminated lawfully through notice dated 25 November 2022. The claimant admitted that he had committed errors. This justified the termination of his employment. **Counterclaim** In the counterclaim, the respondent’s case is that the claimant, through fraudulent actions by failing to undertake his duties properly, approved petty cash payments in breach of his employment contract. This resulted in a financial loss for KS. 419,000, which is counterclaimed with costs and interests. In evidence, the respondent called Brenda Otieno Odoyo, the compliance officer, who testified that she conducted investigations in the finance department and found financial impropriety by the claimant. As the compliance officer, the investigations covered policy compliance and financial procedures compliance. The respondent reviews its policy procedures annually, and in this case, upon the petty cash officer's resignation, a mid-year review was deemed necessary. It revealed various instances of impropriety, and upon receipt of the report, the respondent issued a show-cause notice to the claimant. Other than the claimant, other employees were investigated without different outcomes; each was interviewed on his or her role. The claimant admitted the allegations made against him as the approver of petty cash vouchers and reports; he had signed various fictitious documents, resulting in a loss to the respondent. The claimant, as the sole approver, had the duty to countercheck every document. This was a requirement under the cash handbook. As part of his management responsibilities, he was required to be conversant with the policy documents under his contract. At the close of the hearing, parties filed written submissions. **Determination** The issues for determination in this case are whether there was unfair termination of employment and whether the remedies sought should be issued. Further, whether the counterclaim has merit. Who should pay costs. Through a notice dated 25 November 2022, the respondent terminated the claimant’s employment on the grounds that he had failed to follow the due process as an authorizer for petty cash when approving petty cash documents containing glaring mistakes. It was noted that during the disciplinary hearing, the claimant confirmed that he failed to pay attention to detail, and, as a result, several documents were approved without meeting the requirements and without due process being followed. The second reason and charge against the claim was that he failed to escalate issues flagged as fraudulent. It was stated that, during the hearing, the claimant observed on several occasions that some documents lacked critical elements and therefore did not meet the requirements for approval. He, however, went ahead and approved without consulting the fiancée team, proceeding instead on instructions from the Petty Cash Officer, who was below his rank. The claimant’s defence was that he was not trained in his role and had no policy or handbooks to rely upon. Upon the notice to show cause, the claimant responded as follows: …. *I approve the vouchers after money has been spent. The fake vouchers might have been an oversight on my end, of which I understand how I defrauded the company as alleged when the vouchers came to me as fraudulent, and so there is no way that […] through me.* *Due to the workload, I had to review over 600 vouchers at one time, so 13 vouchers could have passed my sight. With the petty cash register, an audit from the finance team ought to have been done to scrutinise what I recorded in the register…* During the disciplinary hearing on 17 November 2022, the claimant admitted as much. He had not checked the vouchers properly. This was due to the volumes involved. He admitted he may have made an error. It included the use of fake and fictitious vouchers. He admitted to approving vouchers 9593, 9596, and 9603, all relating to the same employee and using the same receipts and description. The claimant replied that: *… I had already said that I didn't check case by case, so maybe I did not see it.* Ultimately, upon the admission of the claim that he made errors of judgment and approved fake vouchers and receipts and that this was due to the numerous documents he was dealing with, he left the respondent with the prerogative to make a determination. As the responsible officer with the duty to approve petty cash payments and report, the claimant had a distinct role to fulfil. The lapse in being diligent in his duty is not only a dereliction of duty but also a breach of his employment contract and constitutes negligence as defined under section 44(3) and (4) of the Act. The admission upon the notice to show cause allowed the respondent the option for a sentence. However, the respondent opted to take the procedural justice. In [**Postal Corporation of Kenya v Tanui [2019] KECA 489 (KLR)**](https://new.kenyalaw.org/akn/ke/judgment/keca/2019/489/eng%402019-07-19), the court held that the employer may proceed against the employee through procedural fairness. In [**Nyangoje v Imani Collective Limited [2026] KEELRC 1071 (KLR)**](https://new.kenyalaw.org/akn/ke/judgment/keelrc/2026/1071/eng%402026-04-23), the court held that where the employee had admitted that he had indeed failed in his duties as alleged, albeit with the explanations given that he lacked training, the employer had no duty to proceed under section 41 of the Act as held in **Mwavali v Vipingo Beach Limited [2024] KEELRC 2736 (KLR).** In **Gati v Kenya Literature Bureau [2025] KEELRC 2587 (KLR)**, the court emphasised that upon an admission of misconduct or gross misconduct, the employer is at liberty to issue a sanction against the employee. In this case, the claimant was given a hearing and the right of appeal. The termination of employment was justified and for valid reasons. The remedies sought by the claimant are not available. On the counterclaim, the claimant, by admitting that he committed errors of judgment and approved fake and fictitious vouchers, admits that the negligence is apparent. Under section 17 of the Act, the loss incurred by the respondent as the employer due to such gross misconduct is recoverable from the claimant. Whether the counterclaim was raised or not, at the end of employment, losses to the employer arising from the employee's misconduct and gross misconduct are recoverable. Whatever dues are payable to the employee, such should be paid less the loss and damage to the employer. Accordingly, the respondent is entitled to the counterclaim for KS. 419,000 from the claimant. Thus, shall be paid, with costs, from the date of the judgment until paid in full. **Accordingly, the claim herein is without merit and is dismissed with costs to the respondent.** **The counterclaim is with merit and is allowed for payment of KS. 419,000 by the claimant to the respondent, with costs from the date of the judgment and interests to accrue at court rates.** **Delivered in open court at Nairobi, this 18th day of May 2026** **M. MBARŨ** **JUDGE** **In the presence of:** Court Assistants: Catherine, Kemboi and Omar ……………………………………………… and …………………………………..…………..