(Being an appeal from the judgement of Hon. E. N. Mutie dated 31.10.2024).
The appellant (the plaintiff before the CM’s court) approached the court vide a plaint dated 1.11.2023 seeking Ksh. 1,482,281.73 being payment for the maximum period 9 months insured by the respondent (the defendant in the lower court). The plaintiff also sought costs of the suit and interest in both claimed amounts until payment in full.
The respondent had filed a statement of defence dated 15.1.2024 in opposition to the orders sought in the plaint. The defendant’s case before the trial court was that the plaintiff’s termination from his former employer was as a result of a mutual settlement agreement and not a redundancy as alleged by the appellant.
The background of the case is that the plaintiff (appellant) took an unsecured loan of Ksh. 7,000,000 issued by standard chartered bank, which bank had in place a group credit life assurance policy between itself and the appellant. As part of the banks policy, the appellant was required to take out a death, disability and retrenchment cover underwritten by the defendant.
On and about 2.8.2022, the appellant made a claim, through standard chartered bank on the policy stating that he had been declared redundant.
By a letter dated 23.9.2022, the respondent in rejecting the appellant’s claim, referred to a settlement agreement dated 18.7.2022 between the appellant and Oracle Technology, the appellant’s former employer, which provided for a mutual termination of the appellant’s employment.
Before the trial court, the appellant testified as PW1 and the respondent called one witness, DW1.The learned magistrate delivered a judgement on the 31.10.2024, dismissing the appellant’s suit with costs, holding that the termination was by mutual agreement and not due to a redundancy.
The appellant, being aggrieved with the decision of the trial magistrate, filed this appeal. The appeal was disposed of by way of written submissions.
APPELLANT’S SUBMISSIONS
The appellant submitted that the learned magistrate erred in law by admitting in evidence and considering the mutual settlement agreement. The appellant’s case is that the agreement was between the appellant and his former employer and that the respondent was not a party to the same, as a result of which no privity of contract existed between the appellant and the respondent over the mutual settlement agreement. That a clause in the agreement barred any party whether privy to the agreement or not from using the agreement in any litigation. The appellant submitted that the mutual settlement agreement was executed after the termination of the appellant’s employment on account of redundancy notice dated 13.7.2022
The appellant further submitted that the learned magistrate erred in finding that the mutual settlement agreement superceeded the notice of termination of employment on account of redundancy. The appellant ‘s case is that the redundancy notice was the operative document triggering the insurance claim under the policy and that the subsequent mutual settlement agreement was merely a negotiation on terminal dues that did not negate the redundancy.
In support of his submission, the appellant cited the case of Aineah Likuyani Njirah –V- Agha Khan Health services (2013), Eklr Kenindia Assurance Company Ltd –V- New Nyanza Whole salers (2017), Okiya Omtatah Okoiti & 2 others –V-A. G and 4 others (2020) KECA 589(KLR), Coastal Bottlers Ltd –V- Kimotho Mithika (2018) KECA 523 KLR amongst others.
RESPONDENT’S SUBMISSIONS
The respondent submitted that the appellant’s termination was not by way of redundancy as contended by appellant but through a mutual settlement agreement. That the settlement agreement had a binding contractual nature as no element of fraud, coercion or mistake was pleaded.
The respondent further submitted that the appellant should not be allowed to approbate and reprobate. That the appellant cannot be allowed to accept the benefits of an agreement and simultaneously renounce its clear terms to gain an unfair advantage.
The respondent further submitted that the doctrine of privity of contract did not operate as an exclusionary rule of evidence and so does not preclude a third party from relying on a contract as documentary evidence of a factual occurrence.
The respondent submitted that it was duty bound to investigate the claim thoroughly, which inherently included reviewing all settlement documents submitted as part of the claim process.
In support of its submissions the respondent relied on among others the following case law;
▪ Felix Mutie Musonga –V- Tin Con Manufacturers Ltd (2020) KCELR 162(KLR)
▪ Moses Gichuki Gataru –V- Njuca Consolidated Company Ltd (2019) KEELRC 157
▪ Wokabi –V-BAT(K)Ltd (20220KEELRC 12694(KLR)
▪ Pauline Wangeci Warui –V-Safaricom Ltd (2020) KCCELRC 1497(KLR)
▪ Helga Christa Ohary –V-Icea Lion General Insurance Co.Ltd(2022)KCCHC 27033(KLR)
▪ Lubulellah & Associates –v-Gilbi Construction Co.Ltd(2024) KEELRC 4243(KLR)
▪ James Kamau Kimani –V-Corporate Insurance Co. Ltd (2020) KEHC 7786(KLR)
ANALYSIS AND DETERMINATION
This being a first appeal, I have the onerous task of reexamining and reevaluating the evidence before the trial court with a view to come to my own conclusion while bearing in mind that unlike the trial court, I did not have the benefit of listening and observing the demeanor of witnesses.
The locus classicus case on this issue is that of Selle & Anor –V-Associated Motor Boat Company Ltd & Others (1968) E. A 123 .In the said decision, the court of appeal stated that an appellate court will not normally interfere with a finding of fact by the trial court unless it is based on no evidence or on a misapprehension of the evidence or the trial court is shown demonstrably to have acted on wrong principles in reaching its findings.
From the record and the submissions filed by the parties’ advocates the crux of the appeal herein lies on the characterization of the appellant’s exit from his former employer, Oracle Technology systems Ltd. The appellant’s case is that the termination was as a result of redundancy which triggered the benefits under the insurance policy. The respondent’s case on the other hand is that the separation between the appellant and his former employer was by mutual consent.
As I deal with the main issue regarding the nature of separation of the appellant and his former employer, the court will also determine whether the doctrine of privity of contract barred the respondent from relying on the settlement agreement between the appellant and his former employer.
The evidence on record show that the appellant’s former employer initially issued the appellant with a notice of intended redundancy dated 2.6.2022 and a redundancy notice dated 13.7. 2022. On the 18.7.2022, the appellant and his former employer voluntarily executed a mutual settlement agreement. The relevant excerpts of the agreement read as follows;
‘’The parties have decided to mutually terminate the employment contract on the terms and conditions set forth in this settlement agreement”.
Clause 2.1 of the agreement further provides that the appellant’s employment would terminate on a mutually agreed termination date.
A defining Clause No.6.7 stipulated that the agreement constituted the entire understanding between the parties and superceded all prior correspondence, negotiations and agreements relating to the subject matter.
The subject matter in the agreement was indisputably the appellant’s employment status. The impact of the said clause was that the earlier redundancy notices were expressly superceded and rendered legally in operative by the appellant when he voluntarily executed the settlement agreement.
I therefore find that the learned Magistrate cannot be faulted for finding that the termination of the appellant ceased being an involuntary one purely initiated by the employer. The same morphed into a mutually agreed voluntary separation. The argument by the appellant that the mutual settlement agreement was merely a negotiation on terminal dues and therefore did not negate the redundancy is defeated by the unequivocal terms of Clause 6.7 of the mutual settlement agreement.
It is settled law that a settlement agreement as the kind between the appellant and his former employer is a binding contract between the parties involved and the court cannot interfere with it unless it is vitiated by factors that normally vitiates ordinary contracts under common law. There was no allegation that the agreement was executed under duress, fraud or undue influence. In this I seek reliance in the case of Coastal Bottlers Ltd –V-Kimathi Mithika (2018) eKLR.
The appellant appears to want to approbate and reprobate. The appellant cannot be allowed to accept the benefits of an agreement and simultaneously renounce its clear terms to gain an advantage. The doctrine of approbate and reprobate was aptly captured in Pauline Wangeci Warui –V-Safaricom Ltd (2020) KCCELRC (1497) KLR Where the court quoted the decision of the supreme court of India in Rajasthan State Industrial Development and Investment Corporation & Another –V-Diamond and Gem Development Ltd & Another AIR 2023 SC 1241 where it was held as follows;
‘’A party cannot be permitted to blow hot and cold, fast and loose & approbate and reprobate. Where one knowingly accepts benefits of a contract or conveyance of an order, he is estopped to deny the validity and binding effect on him of such a contract or conveyance or order.’’
During his testimony in court, the appellant admitted that due to the settlement agreement, his terminal benefits increased from Ksh. 2,391,303.37 to Ksh 4,157,263.37. He cannot be allowed to denounce the agreement in a bid to have him access funds from the respondent.
The appellant’s argument that there was no privity of contract between the respondent and either himself or the former employer as regards the settlement agreement must be examined against the entire circumstances of the case. The contract between the appellant and the respondent is a contract that is classified as a contract of utmost good faith (Uberrimae Fidei). The appellant was under an obligation to disclose to the respondent the existence of the settlement agreement just as much as he sought to rely on the redundancy notices which were superceded by the settlement agreement. The duty to disclose and be candid is key in insurance contracts. In the case of James Kamau Kimani-v-Corporate Insurance Company Ltd (2020) KEHC 7786 KLR t he court held as follows;
‘’Under the Uberrimae fidei principle, one has to essentially abstain from bad faith and act in good faith in an insurance contract. This would be achieved through disclosure and candor. Misrepresentation or non-disclosure once established lends to an inference of a breach of the Uberrimae fidei principle. Any keeping back is fraud and the policy may be avoided. The duty applies and runs both before and after the execution of the contract as the object of disclosure is to inform the parties of matters immediately under consideration’’ .
The appellant was therefore under a duty to reveal the true nature of his termination whether it be involuntary at the initiative of the employer or voluntary by agreement of the parties. The appellant cannot therefore be heard to rely on the doctrine of privity of contract to stop the respondent from relying on a critical document regarding their engagement. As rightly pointed out by respondent’s counsel in their submissions, privity does not operate as an exclusionary rule of evidence. It does not preclude a third party from relying on a contract as a documentary evidence of an occurrence relevant to a matter in issue. The privity rule however prevents a non-party from suing to enforce obligations and claim benefits under a contract that they are not party to. The respondent therefore had a right to rely on a term of the contract between the appellant and his former employer particularly if it excludes liability of the respondent. The respondent as the underwriter of the insurance policy had an undeniable interest in determining whether the insured risk, in this case, involuntary redundancy had actually crystallized. The Mutual Settlement Agreement was the key document as evidence of the nature of separation between the appellant and his former employer and the respondent had every right to rely on it.
It is therefore my finding that the appellant having executed the Mutual Settlement Agreement in the terms stated, his separation with his employer cannot be deemed involuntary. The credit life Assurance policy which the appellant had with the respondent expressly restricted the retrenchment cover to cushion an insured against involuntary loss of employment. The voluntary separation fundamentally offended the terms of the insurance policy thereby removing the appellant’s claim from the scope of the insured risk.
In conclusion, the appellant has failed to demonstrate that the trial court made findings which were not based on evidence or that the court acted on wrong principles.
The upshot of my finding is that the appeal herein has no merit. The same is dismissed with costs to the respondent.
DATED, SIGNED AND DELIVERED via TEAMS THIS 9 th JULY 2026
D.O. ONYANGO.
JUDGE
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The appellant (the plaintiff before the CM’s court) approached the court vide a plaint dated 1.11.2023 seeking Ksh. 1,482,281.73 being payment for the maximum period 9 months insured by the respondent (the defendant in the lower court). The plaintiff also sought costs of the suit and interest in both claimed amounts until payment in full.
The respondent had filed a statement of defence dated 15.1.2024 in opposition to the orders sought in the plaint. The defendant’s case before the trial court was that the plaintiff’s termination from his former employer was as a result of a mutual settlement agreement and not a redundancy as alleged by the appellant.
The background of the case is that the plaintiff (appellant) took an unsecured loan of Ksh. 7,000,000 issued by standard chartered bank, which bank had in place a group credit life assurance policy between itself and the appellant. As part of the banks policy, the appellant was required to take out a death, disability and retrenchment cover underwritten by the defendant.
On and about 2.8.2022, the appellant made a claim, through standard chartered bank on the policy stating that he had been declared redundant.
By a letter dated 23.9.2022, the respondent in rejecting the appellant’s claim, referred to a settlement agreement dated 18.7.2022 between the appellant and Oracle Technology, the appellant’s former employer, which provided for a mutual termination of the appellant’s employment.
Before the trial court, the appellant testified as PW1 and the respondent called one witness, DW1.The learned magistrate delivered a judgement on the 31.10.2024, dismissing the appellant’s suit with costs, holding that the termination was by mutual agreement and not due to a redundancy.
The appellant, being aggrieved with the decision of the trial magistrate, filed this appeal. The appeal was disposed of by way of written submissions.
APPELLANT’S SUBMISSIONS
The appellant submitted that the learned magistrate erred in law by admitting in evidence and considering the mutual settlement agreement. The appellant’s case is that the agreement was between the appellant and his former employer and that the respondent was not a party to the same, as a result of which no privity of contract existed between the appellant and the respondent over the mutual settlement agreement. That a clause in the agreement barred any party whether privy to the agreement or not from using the agreement in any litigation. The appellant submitted that the mutual settlement agreement was executed after the termination of the appellant’s employment on account of redundancy notice dated 13.7.2022
The appellant further submitted that the learned magistrate erred in finding that the mutual settlement agreement superceeded the notice of termination of employment on account of redundancy. The appellant ‘s case is that the redundancy notice was the operative document triggering the insurance claim under the policy and that the subsequent mutual settlement agreement was merely a negotiation on terminal dues that did not negate the redundancy.
In support of his submission, the appellant cited the case of Aineah Likuyani Njirah –V- Agha Khan Health services (2013), Eklr Kenindia Assurance Company Ltd –V- New Nyanza Whole salers (2017), Okiya Omtatah Okoiti & 2 others –V-A. G and 4 others (2020) KECA 589(KLR), Coastal Bottlers Ltd –V- Kimotho Mithika (2018) KECA 523 KLR amongst others.
RESPONDENT’S SUBMISSIONS
The respondent submitted that the appellant’s termination was not by way of redundancy as contended by appellant but through a mutual settlement agreement. That the settlement agreement had a binding contractual nature as no element of fraud, coercion or mistake was pleaded.
The respondent further submitted that the appellant should not be allowed to approbate and reprobate. That the appellant cannot be allowed to accept the benefits of an agreement and simultaneously renounce its clear terms to gain an unfair advantage.
The respondent further submitted that the doctrine of privity of contract did not operate as an exclusionary rule of evidence and so does not preclude a third party from relying on a contract as documentary evidence of a factual occurrence.
The respondent submitted that it was duty bound to investigate the claim thoroughly, which inherently included reviewing all settlement documents submitted as part of the claim process.
In support of its submissions the respondent relied on among others the following case law;
▪ Felix Mutie Musonga –V- Tin Con Manufacturers Ltd (2020) KCELR 162(KLR)
▪ Moses Gichuki Gataru –V- Njuca Consolidated Company Ltd (2019) KEELRC 157
▪ Wokabi –V-BAT(K)Ltd (20220KEELRC 12694(KLR)
▪ Pauline Wangeci Warui –V-Safaricom Ltd (2020) KCCELRC 1497(KLR)
▪ Helga Christa Ohary –V-Icea Lion General Insurance Co.Ltd(2022)KCCHC 27033(KLR)
▪ Lubulellah & Associates –v-Gilbi Construction Co.Ltd(2024) KEELRC 4243(KLR)
▪ James Kamau Kimani –V-Corporate Insurance Co. Ltd (2020) KEHC 7786(KLR)
ANALYSIS AND DETERMINATION
This being a first appeal, I have the onerous task of reexamining and reevaluating the evidence before the trial court with a view to come to my own conclusion while bearing in mind that unlike the trial court, I did not have the benefit of listening and observing the demeanor of witnesses.
The locus classicus case on this issue is that of Selle & Anor –V-Associated Motor Boat Company Ltd & Others (1968) E. A 123 .In the said decision, the court of appeal stated that an appellate court will not normally interfere with a finding of fact by the trial court unless it is based on no evidence or on a misapprehension of the evidence or the trial court is shown demonstrably to have acted on wrong principles in reaching its findings.
From the record and the submissions filed by the parties’ advocates the crux of the appeal herein lies on the characterization of the appellant’s exit from his former employer, Oracle Technology systems Ltd. The appellant’s case is that the termination was as a result of redundancy which triggered the benefits under the insurance policy. The respondent’s case on the other hand is that the separation between the appellant and his former employer was by mutual consent.
As I deal with the main issue regarding the nature of separation of the appellant and his former employer, the court will also determine whether the doctrine of privity of contract barred the respondent from relying on the settlement agreement between the appellant and his former employer.
The evidence on record show that the appellant’s former employer initially issued the appellant with a notice of intended redundancy dated 2.6.2022 and a redundancy notice dated 13.7. 2022. On the 18.7.2022, the appellant and his former employer voluntarily executed a mutual settlement agreement. The relevant excerpts of the agreement read as follows;
‘’The parties have decided to mutually terminate the employment contract on the terms and conditions set forth in this settlement agreement”.
Clause 2.1 of the agreement further provides that the appellant’s employment would terminate on a mutually agreed termination date.
A defining Clause No.6.7 stipulated that the agreement constituted the entire understanding between the parties and superceded all prior correspondence, negotiations and agreements relating to the subject matter.
The subject matter in the agreement was indisputably the appellant’s employment status. The impact of the said clause was that the earlier redundancy notices were expressly superceded and rendered legally in operative by the appellant when he voluntarily executed the settlement agreement.
I therefore find that the learned Magistrate cannot be faulted for finding that the termination of the appellant ceased being an involuntary one purely initiated by the employer. The same morphed into a mutually agreed voluntary separation. The argument by the appellant that the mutual settlement agreement was merely a negotiation on terminal dues and therefore did not negate the redundancy is defeated by the unequivocal terms of Clause 6.7 of the mutual settlement agreement.
It is settled law that a settlement agreement as the kind between the appellant and his former employer is a binding contract between the parties involved and the court cannot interfere with it unless it is vitiated by factors that normally vitiates ordinary contracts under common law. There was no allegation that the agreement was executed under duress, fraud or undue influence. In this I seek reliance in the case of Coastal Bottlers Ltd –V-Kimathi Mithika (2018) eKLR.
The appellant appears to want to approbate and reprobate. The appellant cannot be allowed to accept the benefits of an agreement and simultaneously renounce its clear terms to gain an advantage. The doctrine of approbate and reprobate was aptly captured in Pauline Wangeci Warui –V-Safaricom Ltd (2020) KCCELRC (1497) KLR Where the court quoted the decision of the supreme court of India in Rajasthan State Industrial Development and Investment Corporation & Another –V-Diamond and Gem Development Ltd & Another AIR 2023 SC 1241 where it was held as follows;
‘’A party cannot be permitted to blow hot and cold, fast and loose & approbate and reprobate. Where one knowingly accepts benefits of a contract or conveyance of an order, he is estopped to deny the validity and binding effect on him of such a contract or conveyance or order.’’
During his testimony in court, the appellant admitted that due to the settlement agreement, his terminal benefits increased from Ksh. 2,391,303.37 to Ksh 4,157,263.37. He cannot be allowed to denounce the agreement in a bid to have him access funds from the respondent.
The appellant’s argument that there was no privity of contract between the respondent and either himself or the former employer as regards the settlement agreement must be examined against the entire circumstances of the case. The contract between the appellant and the respondent is a contract that is classified as a contract of utmost good faith (Uberrimae Fidei). The appellant was under an obligation to disclose to the respondent the existence of the settlement agreement just as much as he sought to rely on the redundancy notices which were superceded by the settlement agreement. The duty to disclose and be candid is key in insurance contracts. In the case of James Kamau Kimani-v-Corporate Insurance Company Ltd (2020) KEHC 7786 KLR t he court held as follows;
‘’Under the Uberrimae fidei principle, one has to essentially abstain from bad faith and act in good faith in an insurance contract. This would be achieved through disclosure and candor. Misrepresentation or non-disclosure once established lends to an inference of a breach of the Uberrimae fidei principle. Any keeping back is fraud and the policy may be avoided. The duty applies and runs both before and after the execution of the contract as the object of disclosure is to inform the parties of matters immediately under consideration’’ .
The appellant was therefore under a duty to reveal the true nature of his termination whether it be involuntary at the initiative of the employer or voluntary by agreement of the parties. The appellant cannot therefore be heard to rely on the doctrine of privity of contract to stop the respondent from relying on a critical document regarding their engagement. As rightly pointed out by respondent’s counsel in their submissions, privity does not operate as an exclusionary rule of evidence. It does not preclude a third party from relying on a contract as a documentary evidence of an occurrence relevant to a matter in issue. The privity rule however prevents a non-party from suing to enforce obligations and claim benefits under a contract that they are not party to. The respondent therefore had a right to rely on a term of the contract between the appellant and his former employer particularly if it excludes liability of the respondent. The respondent as the underwriter of the insurance policy had an undeniable interest in determining whether the insured risk, in this case, involuntary redundancy had actually crystallized. The Mutual Settlement Agreement was the key document as evidence of the nature of separation between the appellant and his former employer and the respondent had every right to rely on it.
It is therefore my finding that the appellant having executed the Mutual Settlement Agreement in the terms stated, his separation with his employer cannot be deemed involuntary. The credit life Assurance policy which the appellant had with the respondent expressly restricted the retrenchment cover to cushion an insured against involuntary loss of employment. The voluntary separation fundamentally offended the terms of the insurance policy thereby removing the appellant’s claim from the scope of the insured risk.
In conclusion, the appellant has failed to demonstrate that the trial court made findings which were not based on evidence or that the court acted on wrong principles.
The upshot of my finding is that the appeal herein has no merit. The same is dismissed with costs to the respondent.
DATED, SIGNED AND DELIVERED via TEAMS THIS 9 th JULY 2026
D.O. ONYANGO.
JUDGE
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