A. INTRODUCTION
1. By a Statement of Claim dated 18th January 2023, the Claimant, a former sales representative of the 1st Respondent, sued the Respondents jointly and severally for reliefs arising from the termination of his employment, namely: (a) Kshs. 303,000/- on account of illegal, unlawful and unjustifiable salary deductions; (b) Kshs. 346,005/- on account of unpaid monthly and product-wise sales commission; (c) Kshs. 424,050/- on account of unpaid house allowance in lieu of provision of reasonable housing accommodation; (d) Kshs. 103,000/- being one month's salary in lieu of notice of termination; (e) Kshs. 1,236,000/- as maximum compensation for unfair termination; (f) costs of the suit; and (g) issuance of a certificate of service.
2. The Respondents entered appearance and filed a Statement of Response dated and filed on 3rd March 2023, denying liability in its entirety and asserting that the Claimant's employment was lawfully terminated for cause, being gross misconduct in the form of failure to account for and remit to the 1st Respondent monies collected from its customers in the course of his duties.
3. The suit proceeded to full hearing. The Claimant testified in support of his case, adopted his witness statement as his evidence-in-chief, and called one witness, Ms Irine Rehema Mbaji (CW2), a former colleague at the 1st Respondent. The Respondents called two witnesses, the 2nd Respondent Mr Rohit Zaverchand Shah (RW1), and Mr Ahmed Abdulkarim Sheikh (RW2), a fellow sales representative of over twenty years' service with the 1st Respondent, both of whom adopted their respective witness statements and produced documents in support of the defence. At the close of the hearing, the parties, through their respective advocates, filed comprehensive written submissions, which this Court has carefully considered together with the pleadings, the evidence on record and the authorities relied upon.
B. THE CLAIMANT'S CASE
4. It is the Claimant's case, as pleaded and testified to, that he was employed by the 1st Respondent, a company in which the 2nd Respondent is the majority director and shareholder, as a sales representative with effect from 1st April 2020, and that he served the Respondents until on or about 26th–28th September 2022, when his employment was summarily terminated.
5. The Claimant's first ground is that although the written contracts of employment executed in the course of his tenure ultimately recited a gross monthly salary of Kshs. 49,462/-, this figure did not reflect his true remuneration, which he places at Kshs. 83,000/- net per month from April 2020, enhanced to Kshs. 103,000/- net per month from February 2021. He contends that the disparity between the payslips and his true earnings was the product of a practice, said to have been devised by the Respondents, of styling payslips at figures lower than what was actually paid, so as to make the Respondents' exposure to statutory tax obligations “manageable.” He urges that this was a consensual arrangement between himself and the Respondents which should not defeat his claim.
6. Second, the Claimant contends that he was entitled to, but was never paid, monthly and product-wise sales commissions, computed by reference to targets recorded in periodic “journey cycle plans” issued to him and other sales representatives, and that RW1 conceded in cross-examination that attainment of monthly targets entitled a representative to commission, and that certain products separately attracted commission upon sale.
7. Third, the Claimant contends that the 1st Respondent routinely and unlawfully surcharged his salary in respect of amounts allegedly not recovered from customers to whom the 1st Respondent extended credit on its own account, notwithstanding that it was the customers, and not the Claimant, who were indebted to the 1st Respondent, and notwithstanding that no disciplinary process of any kind preceded any such surcharge, contrary to section 41 of the Employment Act, 2007. He relies on a letter dated 11th March 2022 from the Kenya Long Distance Truck Drivers and Allied Workers Union to the 1st Respondent's managing director, protesting the practice as contrary to section 19(2) of the Employment Act, 2007, as evidence that the practice was known and objected to.
8. Fourth, the Claimant contends that no housing or house allowance was ever extended to him and that he is accordingly entitled to a house allowance calculated at fifteen per centum of his monthly emoluments for the length of his service.
9. Fifth, and centrally, the Claimant's case on termination is that he was on 28th September 2022 handed a single-paragraph letter summarily dismissing him “with immediate effect,” citing only “breach of your contractual obligation” and section 44 of the Employment Act, without particularising the specific conduct complained of, without prior notice, without any hearing, and without any opportunity to respond to whatever allegations informed the decision. He contends that the belated explanation proffered by the Respondents in their pleadings and evidence – that he had failed to remit customer collections – is unsupported by credible evidence, is internally inconsistent as to the amount allegedly involved, and was never tested by any disciplinary process or by the evidence of the very customers said to have made the disputed payments.
10. Sixth, the Claimant maintains that the 2nd Respondent ought to be held jointly and severally liable with the 1st Respondent, on account of the 2nd Respondent's pervasive and direct involvement in his day-to-day supervision, in the impugned remuneration and surcharge practices, and in the events culminating in the termination.
C. THE RESPONDENTS' CASE
11. The Respondents, through their Statement of Response dated 3rd March 2023 and the evidence of RW1 and RW2, deny that the Claimant is entitled to any of the reliefs sought. Their grounds of opposition, in summary, are as follows.
12. First, on the joinder of the 2nd Respondent, it is the Respondents' case that the Claimant was at all material times an employee of the 1st Respondent alone, a duly incorporated limited liability company (registered as long ago as 28th January 2000); that the written contracts of employment were executed between the Claimant and the 1st Respondent; that the 2nd Respondent acted throughout solely in his capacity as a director and disclosed agent of the 1st Respondent; and that no fraud, misrepresentation or other exceptional circumstance capable of displacing the separate legal personality of the 1st Respondent, or of rendering the 2nd Respondent personally liable, has been pleaded or proved. On this ground, the Respondents urge that the 2nd Respondent ought not to have been joined to the suit at all.
13. Second, on the terms of employment, the Respondents' case is that the Claimant was initially engaged on a probationary basis between May and August/September 2020 at a gross salary of Kshs. 92,334/-, before executing a written one-year contract of employment on 1st September 2020 providing for a gross salary of Kshs. 39,435/- per month, which was progressively reviewed, and a further written contract on 1st January 2021 for a term of up to three years, ultimately yielding a gross monthly salary of Kshs. 49,462/- as at the date of termination. The Respondents contend that the Claimant, having voluntarily executed these contracts and having signed monthly payslips acknowledging receipt of his salary “in full and final settlement,” is bound by their express terms, and that it is not open to this Court to rewrite the bargain freely entered into between the parties.
14. Third, and centrally, on the reason for termination, the Respondents' case is that the Claimant, in the course of his duties as a sales representative entrusted with collecting payments from the 1st Respondent's customers who bought on credit, collected monies on the 1st Respondent's behalf between August and September 2022 which he failed to remit to the company. They contend that this was uncovered through an internal reconciliation exercise and confirmed directly by the affected customers, and was reported to Makupa Police Station, and that it constituted gross misconduct within the contemplation of section 44(4) of the Employment Act, 2007, justifying summary dismissal under section 44(4)(g) thereof. The Respondents concede, however, that the disciplinary process contemplated under section 41 of the Act “was not fully complied with,” but urge that this procedural shortcoming does not, by itself, negate the existence of a valid and justifiable substantive reason for the dismissal, relying on the decision in Joseph Mwaniki Nganga v United Millers Limited [2022] eKLR for the proposition that a lawful reason for termination may exist independently of full compliance with procedure.
15. Fourth, on the monetary claims, the Respondents contend that the claims for unlawful salary deductions, unpaid commission and unpaid house allowance are unsupported by any credible or documentary evidence, are inconsistent with the executed contracts and signed payslips (which expressly itemise a housing allowance component), and that the commission claim, being in the nature of special damages, has not been pleaded or proved with the specificity and strictness the law demands.
D. SUBMISSIONS OF THE PARTIES
The Claimant's Submissions
16. Learned Counsel for the Claimant, M/s Muriithi & Masore Law, filed submissions dated 14th November 2025 urging, among other things, that: the 2nd Respondent and 1st Respondent should be treated as an inseparable entity for purposes of liability, relying on Jacob Zewde v Sauti Moja Marsabit & Another [2021] KEELRC 1580 (KLR) and Issa Shali v Buscar Ltd [2018] KEELRC 504 (KLR); that the Respondents' “deny and put to strict proof” defence is an untenable stock phrase which does not discharge the statutory burden placed on an employer under sections 10(7) and 74 of the Employment Act, 2007 to produce records proving the terms of employment, citing Gilbert Makori v Equity Bank Ltd [2016] KEELRC 350 (KLR) and Jamal Noor v Jagged Alliance [2020] KEELRC 576 (KLR); that the NHIF statements, being a public document, enjoy a presumption of regularity per Republic v Kenya Rural Roads Authority; Muthiani (Ex parte Applicant) [2023] KEELRC 1377 (KLR); that the inconsistent testimony of RW1 and RW2 on the date of commencement of employment dooms the Respondents' case on that point, relying on Aristide Nyang'au v Lavington Security Ltd [2021] KEELRC 959 (KLR); that terminal dues are severable from any finding on the propriety of the termination; that surcharge of an employee's salary without a hearing is unlawful, relying on KNLSB v Beatrice Ayoti [2014] eKLR and Mastisa v Modern Coast [2019] eKLR; that in the absence of a counterclaim the Respondents cannot resist repayment of sums surcharged, relying on Joseph Mwero v K-Rep Bank Ltd [2017] eKLR; and that the termination failed to meet any of the four conjunctive elements of a fair termination set out by the Court of Appeal in Postal Corporation of Kenya v Andrew K. Tanui [2019] eKLR (cited as “Posta v Tanui”).
The Respondents' Submissions
17. Learned Counsel for the Respondents, M/s Wanjiku Mohamed Advocates LLP, filed submissions dated 17th February 2026 pursuant to directions issued by this Court on 22nd October 2025, urging, among other things, that: a director of a disclosed principal cannot be held personally liable for a company's contractual obligations absent exceptional circumstances, relying on Kilonzo v Avacare (K) Limited & 2 Others [2023] KEELRC 1839 (KLR); that this Court cannot rewrite the contracts freely executed by the parties, relying on Bank of Baroda (K) Limited v Banking Insurance & Finance Union (K) & Another [2025] KECA 439 (KLR), citing Margaret Njeri Muiruri v Bank of Baroda (Kenya) Limited [2014] eKLR; that the claim for commission is a claim for special damages which must be strictly proved and was not, relying on Capital Fish Kenya Limited v The Kenya Power & Lighting Company Limited [2016] KECA 56 (KLR) and Ombato v Xtranet Communications Limited [2024] KEELRC 1160 (KLR); that a consolidated salary is presumed to include housing allowance absent proof to the contrary, relying on Charity Wambui Muriuki v M/s Total Security Surveillance Limited [2017] eKLR; and that the reason for the Claimant's summary dismissal was valid and reasonably held by the 1st Respondent, relying on Joseph Mwaniki Nganga v United Millers Limited [2022] eKLR and Ngagaya v Securitas Kenya Limited [2025] KEELRC 1714 (KLR), the latter for the proposition that a termination may be lawful in substance yet unfair for want of procedural compliance.
E. ISSUES FOR DETERMINATION
18. Having considered the pleadings, the evidence on record and the rival submissions, the following issues commend themselves for determination: (a) whether the 2nd Respondent was properly joined to these proceedings; (b) what were the terms of the Claimant's employment, including the date of commencement of service and the salary payable as at the date of termination; (c) whether the Claimant has proved his claims for unpaid commission, unpaid house allowance and unlawful salary deductions; (d) whether the termination of the Claimant's employment was substantively fair; (e) whether the termination was procedurally fair; and (f) whether, and to what extent, the Claimant is entitled to the reliefs sought.
F. ANALYSIS AND DETERMINATION
(a) Whether the 2nd Respondent was properly joined
19. It is trite, and has been the law since the House of Lords' decision in Salomon v A. Salomon & Co Ltd [1897] AC 22, that upon incorporation a company assumes a legal personality separate and distinct from that of its shareholders and directors, who thereupon act as its agents and are, save in exceptional circumstances, shielded from personal liability for the company's obligations. This principle was applied to an employment director in Lee v Lee's Air Farming Ltd [1961] AC 12, and has repeatedly been affirmed by this Court, including in Kilonzo v Avacare (K) Limited & 2 Others [2023] KEELRC 1839 (KLR), where it was held that a director of a disclosed principal cannot, absent exceptional circumstances such as fraud or misrepresentation, be held personally liable for obligations arising from an employment contract entered into by the company.
20. The two contracts of employment produced before this Court, dated 1st September 2020 and 1st January 2021 respectively, are each expressed to be “made between Bismack Ng'anga'a Mwangi… and Bhumi Distributors Ltd,” and are signed on the employer's part under a “Company Official Signature.” The Claimant did not plead, and no evidence was led to establish, any fraud, misrepresentation, sham, or other exceptional circumstance that would warrant lifting the corporate veil so as to fix the 2nd Respondent with personal liability. That the 2nd Respondent was, on the evidence, actively and directly involved in supervising the Claimant, in directing the sales operation, and in the events leading to the termination, does not, without more, displace his status as a director and agent acting for and on behalf of a disclosed principal; a director does not, merely by exercising the ordinary incidents of managerial authority, step outside the corporate veil and assume personal contractual liability. The authorities relied upon by the Claimant, Jacob Zewde v Sauti Moja Marsabit & Another and Issa Shali v Buscar Ltd, are distinguishable, as they were concerned with informal or undisclosed business arrangements where the identity of the true employer was itself in genuine doubt; no such doubt arises here, where a duly incorporated company with a documented history since the year 2000 is shown, without contest, to be the contracting employer.
21. The Court accordingly finds and holds that no employment relationship, whether express, implied, or by conduct, existed between the Claimant and the 2nd Respondent in his personal capacity, and that the 2nd Respondent's joinder to this suit was misconceived. The claim as against the 2nd Respondent is dismissed.
(b) The terms of employment: date of commencement and salary
22. On the date of commencement of employment, the Claimant pleaded and consistently maintained that he was engaged on 1st April 2020, a position corroborated by his NHIF Member Data Summary, a public record maintained by a state corporation and entitled to a presumption of regularity, which reflects the 1st Respondent (then trading, and subsequently as Bhumi Distributors Limited) as his employer from May/June 2020. Tellingly, the Respondents' own declaration dated 29th January 2024, issued under the 1st Respondent's own letterhead and seal for the purpose of these very proceedings, states in terms that the Claimant “was an employee at Bhumi Distributors Ltd for the period 1st May 2020 to 30th September 2022.” This is materially at variance with the Respondents' pleaded and contractual position that employment commenced only in September 2020, and is further undermined by the frank contradiction between RW1, who deposed to a commencement date of September 2020, and RW2, who deposed to an undisclosed date in January 2021. Where an employer's own witnesses and its own documentary record cannot agree on so basic a fact as the date on which an employee's service began, the inconsistency must, applying ordinary principles of evidence, be resolved in favour of the party disadvantaged by the uncertainty it was the employer's statutory duty to avoid. The Court accordingly finds that the Claimant's employment commenced on or about 1st April 2020 and ended on 28th September 2022, a period of approximately two years and five months.
23. On salary, the documentary record – the two written contracts of employment and the payslips signed monthly by the Claimant without contemporaneous objection – discloses a clear progression: a gross monthly salary of Kshs. 39,435/- between September and December 2020; Kshs. 42,176/- between January and March 2021; and Kshs. 49,462/- from April 2021 until the date of termination in September 2022, the last figure being expressly confirmed in the written contract of 1st January 2021. It is a well-settled principle, restated by the Court of Appeal in National Bank of Kenya Ltd v Pipeplastic Samkolit (K) Ltd & Another [2001] eKLR, and applied in the employment context in Margaret Njeri Muiruri v Bank of Baroda (Kenya) Limited [2014] eKLR, that it is not for a court of law to rewrite a contract for the parties; parties who have freely and voluntarily reduced their bargain to writing are bound by its terms, and a court's role is limited to interpreting and enforcing, not reconstructing, that bargain.
24. The Claimant nonetheless urges the Court to disregard the written contracts and signed payslips in favour of a materially higher, unwritten figure, on the basis that the documented salary was the product of a deliberate, if consensual, arrangement to understate his true earnings so as to reduce the Respondents' tax exposure. This ground cannot succeed, and for two independent reasons.
25. First, on the evidence, the Claimant has not discharged the burden of proving, on a balance of probabilities, that any sum beyond that recorded in the contracts and payslips was in fact paid to him. No bank statements, mobile money records, or other independent financial evidence corroborating net monthly receipts of Kshs. 83,000/- to Kshs. 103,000/- were produced; the assertion rests substantially on his own testimony and that of CW2, whose evidence, while broadly corroborative of certain company practices, is not itself accompanied by any documentary proof of the Claimant's actual receipts. Bare assertion, however sincerely made, does not discharge a claimant's evidential burden on a matter squarely within his own knowledge and capable of independent corroboration.
26. Second, and in any event, even had such proof been tendered, this Court could not, consistently with settled principle, lend its aid to enforce an arrangement of the kind pleaded. It is a long-standing rule of both the common law and this jurisdiction that no court will assist a party to found a cause of action upon an illegal or improper act: ex turpi causa non oritur actio. The rule was memorably expressed by Lord Mansfield in Holman v Johnson (1775) 1 Cowp 341 in the following terms:
“No court will lend its aid to a man who founds his cause of action upon an immoral or illegal act. If, from the plaintiff's own stating or otherwise, the cause of action appears to arise ex turpi causa, or the transgression of a positive law of this country, there the court says he has no right to be assisted.”
27. The same principle was applied within this jurisdiction by the Court of Appeal for Eastern Africa in Mistry Amar Singh v Serwano Wofunira Kulubya [1963] EA 408, where relief was declined to a party seeking to enforce rights arising from a transaction entered into in contravention of a statutory requirement. Deliberate under-declaration of an employee's salary to the tax authorities, if it occurred, would constitute a scheme to evade obligations imposed by the Income Tax Act and would offend Article 10 of the Constitution, which enshrines integrity and the rule of law among the national values binding all persons. A court cannot, without compromising its own integrity, become the instrument by which a party recovers the fruits of a transaction whose very premise is the evasion of a public revenue obligation. For both reasons, the Court declines to depart from the documented salary.
28. It follows, and the Court so finds, that the Claimant's salary as at the date of termination was Kshs. 49,462/- gross per month, being the figure recorded in the written contract of employment and consistently reflected in the payslips signed by the Claimant.
29. A related point requires brief comment. The Respondents, while resisting the higher salary figure pleaded by the Claimant for purposes of computing terminal dues, simultaneously suggest that this Court's pecuniary jurisdiction, invoked on the pleaded figure of Kshs. 103,000/- pursuant to Gazette Notice No. 6024 of 22nd June 2018, was improperly founded. This point was never raised by way of a preliminary objection at any stage before or during the plenary hearing, and the Respondents fully participated in a full trial on the merits without demur. It is settled, as this Court held in Ehenzo v Cosmos [2024] eKLR, that pecuniary jurisdiction is assessed by reference to the claim as pleaded at the point of filing. A subsequent finding, after full trial, that the salary actually proved is lower than that pleaded, goes to the merits of the individual claims advanced and not to the jurisdiction properly and regularly invoked at the commencement of the suit. The Court accordingly proceeds to determine the suit on its merits.
(c) The claims for commission, house allowance and salary deductions
30. On commission, it is well settled, and was restated by the Court of Appeal in Hahn v Singh [1985] KLR 716, that special damages must not only be specifically pleaded but must also be strictly proved; a claimant is not entitled to an award founded on assertion or approximation. This principle was applied to a claim of the present kind in Capital Fish Kenya Limited v The Kenya Power & Lighting Company Limited [2016] KECA 56 (KLR), where the Court of Appeal declined to countenance a claim unsupported by credible evidence beyond the bare assertion of the figures claimed, and again in Ombato v Xtranet Communications Limited [2024] KEELRC 1160 (KLR), where this Court held that a claimant seeking unpaid commission must demonstrate, by contemporaneous documentary evidence, both the contractual basis for the entitlement and its quantification. Here, while RW1 conceded that attainment of monthly targets could, in principle, entitle a representative to an incentive, the Claimant did not produce evidence that he in fact attained the specific targets referable to the sum of Kshs. 346,005/- pleaded, nor did he explain the arithmetical basis of that figure; the journey cycle plans produced are, on their face, inconsistent as between one cycle and another as to whether, and on what terms, incentives (as opposed to a fixed salary) were payable at all. RW2's unchallenged evidence was that representatives in the Claimant's position received incentives, not commissions properly so called, and that these were irregular and product-specific rather than a matter of contractual entitlement. The claim for unpaid commission is accordingly declined for want of the strict proof the law demands.
31. On house allowance, the payslips produced by both parties and signed by the Claimant each month expressly itemise a distinct “Housing Allowance” component (for instance, Kshs. 6,421/- forming part of the gross pay of Kshs. 49,462/- from April 2021 onward), separately stated from basic pay. This is direct documentary proof that a housing allowance was in fact paid as part of the Claimant's monthly remuneration throughout his tenure. As this Court observed in Charity Wambui Muriuki v M/s Total Security Surveillance Limited [2017] eKLR, where a claimant's own payslips reflect payment of housing allowance as a component of salary, it is incumbent upon the claimant to demonstrate the contrary before a further, standalone award can be made; here, far from rebutting the payslip entries, the Claimant did not address them at all. The claim for unpaid house allowance is accordingly declined.
32. On the claim for unlawful salary deductions of Kshs. 303,000/-, the Court accepts, as a matter of principle, that an employer may not lawfully surcharge an employee's wages on account of a customer's default without first affording the employee the disciplinary hearing contemplated under section 41 of the Employment Act, 2007, and that any purported surcharge effected without such process, or without proof that the loss was in fact occasioned by the employee's own default, is liable to be reversed, as was held in KNLSB v Beatrice Ayoti [2014] eKLR and Mastisa v Modern Coast [2019] eKLR. The difficulty for the Claimant, however, is evidential rather than principled. The payslips in the record, spanning the length of his tenure, disclose no line item for any such surcharge; his own signed acknowledgements record receipt, each month, of the full net pay computed from the gross salary and the ordinary statutory deductions. An assertion that deductions were instead concealed within, or absorbed by, other unspecified emoluments is not a permissible substitute for proof of the deduction itself, particularly where the burden of proving a discrete, quantified loss rests on the party asserting it. The claim for unlawful salary deductions is accordingly declined for want of proof.
(d) Whether the termination was substantively fair
33. Sections 43, 45(1) and 47(5) of the Employment Act, 2007, read together, place the legal burden squarely on the employer to prove the reason, or reasons, for an employee's termination, and provide that where an employer fails to do so, the termination shall be deemed to have been unfair. Section 43(1) requires the employer to prove “the reason or reasons for the termination,” failing which, by section 43(2), the termination is deemed unfair within the meaning of section 45. Section 47(5) allocates the burden of proving that an unfair termination or wrongful dismissal has taken place upon the employee, but the burden of justifying the grounds of termination itself remains, throughout, on the employer.
34. The termination letter of 28th September 2022 is, on its face, wholly deficient: it recites only that the Claimant's services were terminated “with immediate effect following breach of your contractual obligation as stated in our policy and Employment Act Section 44 clause (g),” without identifying the specific conduct relied upon, the dates, the amounts, or the customers concerned. The particulars of the alleged misconduct – said to be failure to remit customer collections – emerge only from the Respondents' subsequent pleadings and testimony, a sequencing which is itself suggestive that the true grounds were neither settled nor communicated to the Claimant at the time the decision to dismiss him was taken.
35. More troubling still is the state of the Respondents' own evidence as to the quantum and even the existence of the loss said to justify summary dismissal. Three internal documents, each purporting to state the sum allegedly misappropriated by the Claimant, disclose three different figures: an internal “Missing Invoices and Payments Stolen List” dated 3rd October 2022 – five days after the dismissal – totals Kshs. 452,066/-, and is itself endorsed with the caveat that “these 8 have been seen and verified so far[,] other investigation still going on before [the] list is fin[alised]”; the Police Abstract obtained from Makupa Police Station on 28th November 2022 records a reported loss of Kshs. 653,452/-; and correspondence with the 1st Respondent's insurers in January 2023 refers to a claim for loss of funds collected “between the months of August and September 2022,” in respect of which the insurers' own loss adjusters wrote directly to the Claimant – by then no longer in the Respondents' employ – inviting his comments, stating in terms that they were “specifically interested in establishing whether or not, or to what extent[,] the amounts quoted represent genuine losses claimable.” That the 1st Respondent's own insurers, more than three months after the summary dismissal, remained unable to establish whether a genuine loss had in fact occurred, and considered it necessary to solicit the dismissed employee's own account of the matter, is difficult to reconcile with the Respondents' case that they
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1. By a Statement of Claim dated 18th January 2023, the Claimant, a former sales representative of the 1st Respondent, sued the Respondents jointly and severally for reliefs arising from the termination of his employment, namely: (a) Kshs. 303,000/- on account of illegal, unlawful and unjustifiable salary deductions; (b) Kshs. 346,005/- on account of unpaid monthly and product-wise sales commission; (c) Kshs. 424,050/- on account of unpaid house allowance in lieu of provision of reasonable housing accommodation; (d) Kshs. 103,000/- being one month's salary in lieu of notice of termination; (e) Kshs. 1,236,000/- as maximum compensation for unfair termination; (f) costs of the suit; and (g) issuance of a certificate of service.
2. The Respondents entered appearance and filed a Statement of Response dated and filed on 3rd March 2023, denying liability in its entirety and asserting that the Claimant's employment was lawfully terminated for cause, being gross misconduct in the form of failure to account for and remit to the 1st Respondent monies collected from its customers in the course of his duties.
3. The suit proceeded to full hearing. The Claimant testified in support of his case, adopted his witness statement as his evidence-in-chief, and called one witness, Ms Irine Rehema Mbaji (CW2), a former colleague at the 1st Respondent. The Respondents called two witnesses, the 2nd Respondent Mr Rohit Zaverchand Shah (RW1), and Mr Ahmed Abdulkarim Sheikh (RW2), a fellow sales representative of over twenty years' service with the 1st Respondent, both of whom adopted their respective witness statements and produced documents in support of the defence. At the close of the hearing, the parties, through their respective advocates, filed comprehensive written submissions, which this Court has carefully considered together with the pleadings, the evidence on record and the authorities relied upon.
B. THE CLAIMANT'S CASE
4. It is the Claimant's case, as pleaded and testified to, that he was employed by the 1st Respondent, a company in which the 2nd Respondent is the majority director and shareholder, as a sales representative with effect from 1st April 2020, and that he served the Respondents until on or about 26th–28th September 2022, when his employment was summarily terminated.
5. The Claimant's first ground is that although the written contracts of employment executed in the course of his tenure ultimately recited a gross monthly salary of Kshs. 49,462/-, this figure did not reflect his true remuneration, which he places at Kshs. 83,000/- net per month from April 2020, enhanced to Kshs. 103,000/- net per month from February 2021. He contends that the disparity between the payslips and his true earnings was the product of a practice, said to have been devised by the Respondents, of styling payslips at figures lower than what was actually paid, so as to make the Respondents' exposure to statutory tax obligations “manageable.” He urges that this was a consensual arrangement between himself and the Respondents which should not defeat his claim.
6. Second, the Claimant contends that he was entitled to, but was never paid, monthly and product-wise sales commissions, computed by reference to targets recorded in periodic “journey cycle plans” issued to him and other sales representatives, and that RW1 conceded in cross-examination that attainment of monthly targets entitled a representative to commission, and that certain products separately attracted commission upon sale.
7. Third, the Claimant contends that the 1st Respondent routinely and unlawfully surcharged his salary in respect of amounts allegedly not recovered from customers to whom the 1st Respondent extended credit on its own account, notwithstanding that it was the customers, and not the Claimant, who were indebted to the 1st Respondent, and notwithstanding that no disciplinary process of any kind preceded any such surcharge, contrary to section 41 of the Employment Act, 2007. He relies on a letter dated 11th March 2022 from the Kenya Long Distance Truck Drivers and Allied Workers Union to the 1st Respondent's managing director, protesting the practice as contrary to section 19(2) of the Employment Act, 2007, as evidence that the practice was known and objected to.
8. Fourth, the Claimant contends that no housing or house allowance was ever extended to him and that he is accordingly entitled to a house allowance calculated at fifteen per centum of his monthly emoluments for the length of his service.
9. Fifth, and centrally, the Claimant's case on termination is that he was on 28th September 2022 handed a single-paragraph letter summarily dismissing him “with immediate effect,” citing only “breach of your contractual obligation” and section 44 of the Employment Act, without particularising the specific conduct complained of, without prior notice, without any hearing, and without any opportunity to respond to whatever allegations informed the decision. He contends that the belated explanation proffered by the Respondents in their pleadings and evidence – that he had failed to remit customer collections – is unsupported by credible evidence, is internally inconsistent as to the amount allegedly involved, and was never tested by any disciplinary process or by the evidence of the very customers said to have made the disputed payments.
10. Sixth, the Claimant maintains that the 2nd Respondent ought to be held jointly and severally liable with the 1st Respondent, on account of the 2nd Respondent's pervasive and direct involvement in his day-to-day supervision, in the impugned remuneration and surcharge practices, and in the events culminating in the termination.
C. THE RESPONDENTS' CASE
11. The Respondents, through their Statement of Response dated 3rd March 2023 and the evidence of RW1 and RW2, deny that the Claimant is entitled to any of the reliefs sought. Their grounds of opposition, in summary, are as follows.
12. First, on the joinder of the 2nd Respondent, it is the Respondents' case that the Claimant was at all material times an employee of the 1st Respondent alone, a duly incorporated limited liability company (registered as long ago as 28th January 2000); that the written contracts of employment were executed between the Claimant and the 1st Respondent; that the 2nd Respondent acted throughout solely in his capacity as a director and disclosed agent of the 1st Respondent; and that no fraud, misrepresentation or other exceptional circumstance capable of displacing the separate legal personality of the 1st Respondent, or of rendering the 2nd Respondent personally liable, has been pleaded or proved. On this ground, the Respondents urge that the 2nd Respondent ought not to have been joined to the suit at all.
13. Second, on the terms of employment, the Respondents' case is that the Claimant was initially engaged on a probationary basis between May and August/September 2020 at a gross salary of Kshs. 92,334/-, before executing a written one-year contract of employment on 1st September 2020 providing for a gross salary of Kshs. 39,435/- per month, which was progressively reviewed, and a further written contract on 1st January 2021 for a term of up to three years, ultimately yielding a gross monthly salary of Kshs. 49,462/- as at the date of termination. The Respondents contend that the Claimant, having voluntarily executed these contracts and having signed monthly payslips acknowledging receipt of his salary “in full and final settlement,” is bound by their express terms, and that it is not open to this Court to rewrite the bargain freely entered into between the parties.
14. Third, and centrally, on the reason for termination, the Respondents' case is that the Claimant, in the course of his duties as a sales representative entrusted with collecting payments from the 1st Respondent's customers who bought on credit, collected monies on the 1st Respondent's behalf between August and September 2022 which he failed to remit to the company. They contend that this was uncovered through an internal reconciliation exercise and confirmed directly by the affected customers, and was reported to Makupa Police Station, and that it constituted gross misconduct within the contemplation of section 44(4) of the Employment Act, 2007, justifying summary dismissal under section 44(4)(g) thereof. The Respondents concede, however, that the disciplinary process contemplated under section 41 of the Act “was not fully complied with,” but urge that this procedural shortcoming does not, by itself, negate the existence of a valid and justifiable substantive reason for the dismissal, relying on the decision in Joseph Mwaniki Nganga v United Millers Limited [2022] eKLR for the proposition that a lawful reason for termination may exist independently of full compliance with procedure.
15. Fourth, on the monetary claims, the Respondents contend that the claims for unlawful salary deductions, unpaid commission and unpaid house allowance are unsupported by any credible or documentary evidence, are inconsistent with the executed contracts and signed payslips (which expressly itemise a housing allowance component), and that the commission claim, being in the nature of special damages, has not been pleaded or proved with the specificity and strictness the law demands.
D. SUBMISSIONS OF THE PARTIES
The Claimant's Submissions
16. Learned Counsel for the Claimant, M/s Muriithi & Masore Law, filed submissions dated 14th November 2025 urging, among other things, that: the 2nd Respondent and 1st Respondent should be treated as an inseparable entity for purposes of liability, relying on Jacob Zewde v Sauti Moja Marsabit & Another [2021] KEELRC 1580 (KLR) and Issa Shali v Buscar Ltd [2018] KEELRC 504 (KLR); that the Respondents' “deny and put to strict proof” defence is an untenable stock phrase which does not discharge the statutory burden placed on an employer under sections 10(7) and 74 of the Employment Act, 2007 to produce records proving the terms of employment, citing Gilbert Makori v Equity Bank Ltd [2016] KEELRC 350 (KLR) and Jamal Noor v Jagged Alliance [2020] KEELRC 576 (KLR); that the NHIF statements, being a public document, enjoy a presumption of regularity per Republic v Kenya Rural Roads Authority; Muthiani (Ex parte Applicant) [2023] KEELRC 1377 (KLR); that the inconsistent testimony of RW1 and RW2 on the date of commencement of employment dooms the Respondents' case on that point, relying on Aristide Nyang'au v Lavington Security Ltd [2021] KEELRC 959 (KLR); that terminal dues are severable from any finding on the propriety of the termination; that surcharge of an employee's salary without a hearing is unlawful, relying on KNLSB v Beatrice Ayoti [2014] eKLR and Mastisa v Modern Coast [2019] eKLR; that in the absence of a counterclaim the Respondents cannot resist repayment of sums surcharged, relying on Joseph Mwero v K-Rep Bank Ltd [2017] eKLR; and that the termination failed to meet any of the four conjunctive elements of a fair termination set out by the Court of Appeal in Postal Corporation of Kenya v Andrew K. Tanui [2019] eKLR (cited as “Posta v Tanui”).
The Respondents' Submissions
17. Learned Counsel for the Respondents, M/s Wanjiku Mohamed Advocates LLP, filed submissions dated 17th February 2026 pursuant to directions issued by this Court on 22nd October 2025, urging, among other things, that: a director of a disclosed principal cannot be held personally liable for a company's contractual obligations absent exceptional circumstances, relying on Kilonzo v Avacare (K) Limited & 2 Others [2023] KEELRC 1839 (KLR); that this Court cannot rewrite the contracts freely executed by the parties, relying on Bank of Baroda (K) Limited v Banking Insurance & Finance Union (K) & Another [2025] KECA 439 (KLR), citing Margaret Njeri Muiruri v Bank of Baroda (Kenya) Limited [2014] eKLR; that the claim for commission is a claim for special damages which must be strictly proved and was not, relying on Capital Fish Kenya Limited v The Kenya Power & Lighting Company Limited [2016] KECA 56 (KLR) and Ombato v Xtranet Communications Limited [2024] KEELRC 1160 (KLR); that a consolidated salary is presumed to include housing allowance absent proof to the contrary, relying on Charity Wambui Muriuki v M/s Total Security Surveillance Limited [2017] eKLR; and that the reason for the Claimant's summary dismissal was valid and reasonably held by the 1st Respondent, relying on Joseph Mwaniki Nganga v United Millers Limited [2022] eKLR and Ngagaya v Securitas Kenya Limited [2025] KEELRC 1714 (KLR), the latter for the proposition that a termination may be lawful in substance yet unfair for want of procedural compliance.
E. ISSUES FOR DETERMINATION
18. Having considered the pleadings, the evidence on record and the rival submissions, the following issues commend themselves for determination: (a) whether the 2nd Respondent was properly joined to these proceedings; (b) what were the terms of the Claimant's employment, including the date of commencement of service and the salary payable as at the date of termination; (c) whether the Claimant has proved his claims for unpaid commission, unpaid house allowance and unlawful salary deductions; (d) whether the termination of the Claimant's employment was substantively fair; (e) whether the termination was procedurally fair; and (f) whether, and to what extent, the Claimant is entitled to the reliefs sought.
F. ANALYSIS AND DETERMINATION
(a) Whether the 2nd Respondent was properly joined
19. It is trite, and has been the law since the House of Lords' decision in Salomon v A. Salomon & Co Ltd [1897] AC 22, that upon incorporation a company assumes a legal personality separate and distinct from that of its shareholders and directors, who thereupon act as its agents and are, save in exceptional circumstances, shielded from personal liability for the company's obligations. This principle was applied to an employment director in Lee v Lee's Air Farming Ltd [1961] AC 12, and has repeatedly been affirmed by this Court, including in Kilonzo v Avacare (K) Limited & 2 Others [2023] KEELRC 1839 (KLR), where it was held that a director of a disclosed principal cannot, absent exceptional circumstances such as fraud or misrepresentation, be held personally liable for obligations arising from an employment contract entered into by the company.
20. The two contracts of employment produced before this Court, dated 1st September 2020 and 1st January 2021 respectively, are each expressed to be “made between Bismack Ng'anga'a Mwangi… and Bhumi Distributors Ltd,” and are signed on the employer's part under a “Company Official Signature.” The Claimant did not plead, and no evidence was led to establish, any fraud, misrepresentation, sham, or other exceptional circumstance that would warrant lifting the corporate veil so as to fix the 2nd Respondent with personal liability. That the 2nd Respondent was, on the evidence, actively and directly involved in supervising the Claimant, in directing the sales operation, and in the events leading to the termination, does not, without more, displace his status as a director and agent acting for and on behalf of a disclosed principal; a director does not, merely by exercising the ordinary incidents of managerial authority, step outside the corporate veil and assume personal contractual liability. The authorities relied upon by the Claimant, Jacob Zewde v Sauti Moja Marsabit & Another and Issa Shali v Buscar Ltd, are distinguishable, as they were concerned with informal or undisclosed business arrangements where the identity of the true employer was itself in genuine doubt; no such doubt arises here, where a duly incorporated company with a documented history since the year 2000 is shown, without contest, to be the contracting employer.
21. The Court accordingly finds and holds that no employment relationship, whether express, implied, or by conduct, existed between the Claimant and the 2nd Respondent in his personal capacity, and that the 2nd Respondent's joinder to this suit was misconceived. The claim as against the 2nd Respondent is dismissed.
(b) The terms of employment: date of commencement and salary
22. On the date of commencement of employment, the Claimant pleaded and consistently maintained that he was engaged on 1st April 2020, a position corroborated by his NHIF Member Data Summary, a public record maintained by a state corporation and entitled to a presumption of regularity, which reflects the 1st Respondent (then trading, and subsequently as Bhumi Distributors Limited) as his employer from May/June 2020. Tellingly, the Respondents' own declaration dated 29th January 2024, issued under the 1st Respondent's own letterhead and seal for the purpose of these very proceedings, states in terms that the Claimant “was an employee at Bhumi Distributors Ltd for the period 1st May 2020 to 30th September 2022.” This is materially at variance with the Respondents' pleaded and contractual position that employment commenced only in September 2020, and is further undermined by the frank contradiction between RW1, who deposed to a commencement date of September 2020, and RW2, who deposed to an undisclosed date in January 2021. Where an employer's own witnesses and its own documentary record cannot agree on so basic a fact as the date on which an employee's service began, the inconsistency must, applying ordinary principles of evidence, be resolved in favour of the party disadvantaged by the uncertainty it was the employer's statutory duty to avoid. The Court accordingly finds that the Claimant's employment commenced on or about 1st April 2020 and ended on 28th September 2022, a period of approximately two years and five months.
23. On salary, the documentary record – the two written contracts of employment and the payslips signed monthly by the Claimant without contemporaneous objection – discloses a clear progression: a gross monthly salary of Kshs. 39,435/- between September and December 2020; Kshs. 42,176/- between January and March 2021; and Kshs. 49,462/- from April 2021 until the date of termination in September 2022, the last figure being expressly confirmed in the written contract of 1st January 2021. It is a well-settled principle, restated by the Court of Appeal in National Bank of Kenya Ltd v Pipeplastic Samkolit (K) Ltd & Another [2001] eKLR, and applied in the employment context in Margaret Njeri Muiruri v Bank of Baroda (Kenya) Limited [2014] eKLR, that it is not for a court of law to rewrite a contract for the parties; parties who have freely and voluntarily reduced their bargain to writing are bound by its terms, and a court's role is limited to interpreting and enforcing, not reconstructing, that bargain.
24. The Claimant nonetheless urges the Court to disregard the written contracts and signed payslips in favour of a materially higher, unwritten figure, on the basis that the documented salary was the product of a deliberate, if consensual, arrangement to understate his true earnings so as to reduce the Respondents' tax exposure. This ground cannot succeed, and for two independent reasons.
25. First, on the evidence, the Claimant has not discharged the burden of proving, on a balance of probabilities, that any sum beyond that recorded in the contracts and payslips was in fact paid to him. No bank statements, mobile money records, or other independent financial evidence corroborating net monthly receipts of Kshs. 83,000/- to Kshs. 103,000/- were produced; the assertion rests substantially on his own testimony and that of CW2, whose evidence, while broadly corroborative of certain company practices, is not itself accompanied by any documentary proof of the Claimant's actual receipts. Bare assertion, however sincerely made, does not discharge a claimant's evidential burden on a matter squarely within his own knowledge and capable of independent corroboration.
26. Second, and in any event, even had such proof been tendered, this Court could not, consistently with settled principle, lend its aid to enforce an arrangement of the kind pleaded. It is a long-standing rule of both the common law and this jurisdiction that no court will assist a party to found a cause of action upon an illegal or improper act: ex turpi causa non oritur actio. The rule was memorably expressed by Lord Mansfield in Holman v Johnson (1775) 1 Cowp 341 in the following terms:
“No court will lend its aid to a man who founds his cause of action upon an immoral or illegal act. If, from the plaintiff's own stating or otherwise, the cause of action appears to arise ex turpi causa, or the transgression of a positive law of this country, there the court says he has no right to be assisted.”
27. The same principle was applied within this jurisdiction by the Court of Appeal for Eastern Africa in Mistry Amar Singh v Serwano Wofunira Kulubya [1963] EA 408, where relief was declined to a party seeking to enforce rights arising from a transaction entered into in contravention of a statutory requirement. Deliberate under-declaration of an employee's salary to the tax authorities, if it occurred, would constitute a scheme to evade obligations imposed by the Income Tax Act and would offend Article 10 of the Constitution, which enshrines integrity and the rule of law among the national values binding all persons. A court cannot, without compromising its own integrity, become the instrument by which a party recovers the fruits of a transaction whose very premise is the evasion of a public revenue obligation. For both reasons, the Court declines to depart from the documented salary.
28. It follows, and the Court so finds, that the Claimant's salary as at the date of termination was Kshs. 49,462/- gross per month, being the figure recorded in the written contract of employment and consistently reflected in the payslips signed by the Claimant.
29. A related point requires brief comment. The Respondents, while resisting the higher salary figure pleaded by the Claimant for purposes of computing terminal dues, simultaneously suggest that this Court's pecuniary jurisdiction, invoked on the pleaded figure of Kshs. 103,000/- pursuant to Gazette Notice No. 6024 of 22nd June 2018, was improperly founded. This point was never raised by way of a preliminary objection at any stage before or during the plenary hearing, and the Respondents fully participated in a full trial on the merits without demur. It is settled, as this Court held in Ehenzo v Cosmos [2024] eKLR, that pecuniary jurisdiction is assessed by reference to the claim as pleaded at the point of filing. A subsequent finding, after full trial, that the salary actually proved is lower than that pleaded, goes to the merits of the individual claims advanced and not to the jurisdiction properly and regularly invoked at the commencement of the suit. The Court accordingly proceeds to determine the suit on its merits.
(c) The claims for commission, house allowance and salary deductions
30. On commission, it is well settled, and was restated by the Court of Appeal in Hahn v Singh [1985] KLR 716, that special damages must not only be specifically pleaded but must also be strictly proved; a claimant is not entitled to an award founded on assertion or approximation. This principle was applied to a claim of the present kind in Capital Fish Kenya Limited v The Kenya Power & Lighting Company Limited [2016] KECA 56 (KLR), where the Court of Appeal declined to countenance a claim unsupported by credible evidence beyond the bare assertion of the figures claimed, and again in Ombato v Xtranet Communications Limited [2024] KEELRC 1160 (KLR), where this Court held that a claimant seeking unpaid commission must demonstrate, by contemporaneous documentary evidence, both the contractual basis for the entitlement and its quantification. Here, while RW1 conceded that attainment of monthly targets could, in principle, entitle a representative to an incentive, the Claimant did not produce evidence that he in fact attained the specific targets referable to the sum of Kshs. 346,005/- pleaded, nor did he explain the arithmetical basis of that figure; the journey cycle plans produced are, on their face, inconsistent as between one cycle and another as to whether, and on what terms, incentives (as opposed to a fixed salary) were payable at all. RW2's unchallenged evidence was that representatives in the Claimant's position received incentives, not commissions properly so called, and that these were irregular and product-specific rather than a matter of contractual entitlement. The claim for unpaid commission is accordingly declined for want of the strict proof the law demands.
31. On house allowance, the payslips produced by both parties and signed by the Claimant each month expressly itemise a distinct “Housing Allowance” component (for instance, Kshs. 6,421/- forming part of the gross pay of Kshs. 49,462/- from April 2021 onward), separately stated from basic pay. This is direct documentary proof that a housing allowance was in fact paid as part of the Claimant's monthly remuneration throughout his tenure. As this Court observed in Charity Wambui Muriuki v M/s Total Security Surveillance Limited [2017] eKLR, where a claimant's own payslips reflect payment of housing allowance as a component of salary, it is incumbent upon the claimant to demonstrate the contrary before a further, standalone award can be made; here, far from rebutting the payslip entries, the Claimant did not address them at all. The claim for unpaid house allowance is accordingly declined.
32. On the claim for unlawful salary deductions of Kshs. 303,000/-, the Court accepts, as a matter of principle, that an employer may not lawfully surcharge an employee's wages on account of a customer's default without first affording the employee the disciplinary hearing contemplated under section 41 of the Employment Act, 2007, and that any purported surcharge effected without such process, or without proof that the loss was in fact occasioned by the employee's own default, is liable to be reversed, as was held in KNLSB v Beatrice Ayoti [2014] eKLR and Mastisa v Modern Coast [2019] eKLR. The difficulty for the Claimant, however, is evidential rather than principled. The payslips in the record, spanning the length of his tenure, disclose no line item for any such surcharge; his own signed acknowledgements record receipt, each month, of the full net pay computed from the gross salary and the ordinary statutory deductions. An assertion that deductions were instead concealed within, or absorbed by, other unspecified emoluments is not a permissible substitute for proof of the deduction itself, particularly where the burden of proving a discrete, quantified loss rests on the party asserting it. The claim for unlawful salary deductions is accordingly declined for want of proof.
(d) Whether the termination was substantively fair
33. Sections 43, 45(1) and 47(5) of the Employment Act, 2007, read together, place the legal burden squarely on the employer to prove the reason, or reasons, for an employee's termination, and provide that where an employer fails to do so, the termination shall be deemed to have been unfair. Section 43(1) requires the employer to prove “the reason or reasons for the termination,” failing which, by section 43(2), the termination is deemed unfair within the meaning of section 45. Section 47(5) allocates the burden of proving that an unfair termination or wrongful dismissal has taken place upon the employee, but the burden of justifying the grounds of termination itself remains, throughout, on the employer.
34. The termination letter of 28th September 2022 is, on its face, wholly deficient: it recites only that the Claimant's services were terminated “with immediate effect following breach of your contractual obligation as stated in our policy and Employment Act Section 44 clause (g),” without identifying the specific conduct relied upon, the dates, the amounts, or the customers concerned. The particulars of the alleged misconduct – said to be failure to remit customer collections – emerge only from the Respondents' subsequent pleadings and testimony, a sequencing which is itself suggestive that the true grounds were neither settled nor communicated to the Claimant at the time the decision to dismiss him was taken.
35. More troubling still is the state of the Respondents' own evidence as to the quantum and even the existence of the loss said to justify summary dismissal. Three internal documents, each purporting to state the sum allegedly misappropriated by the Claimant, disclose three different figures: an internal “Missing Invoices and Payments Stolen List” dated 3rd October 2022 – five days after the dismissal – totals Kshs. 452,066/-, and is itself endorsed with the caveat that “these 8 have been seen and verified so far[,] other investigation still going on before [the] list is fin[alised]”; the Police Abstract obtained from Makupa Police Station on 28th November 2022 records a reported loss of Kshs. 653,452/-; and correspondence with the 1st Respondent's insurers in January 2023 refers to a claim for loss of funds collected “between the months of August and September 2022,” in respect of which the insurers' own loss adjusters wrote directly to the Claimant – by then no longer in the Respondents' employ – inviting his comments, stating in terms that they were “specifically interested in establishing whether or not, or to what extent[,] the amounts quoted represent genuine losses claimable.” That the 1st Respondent's own insurers, more than three months after the summary dismissal, remained unable to establish whether a genuine loss had in fact occurred, and considered it necessary to solicit the dismissed employee's own account of the matter, is difficult to reconcile with the Respondents' case that they
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