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JudgmentOmar Gwashe VS Kudheiha19 min read

Omar Gwashe VS Kudheiha

Employment and Labour Relations Court at Mombasa ELRC · · MBARU MONICA

Summary

The claimants, former employees of Pride Inn Hotels and Investments Limited, sought orders from the respondent trade union under the Labour Relations Act for special damages (Ksh. 400,000), general damages for negligence and breach of fiduciary duty, a declaration of the respondent's failure to effectively represent them, a fine for contravening s.39 of the Labour Relations Act, costs, and other relief. The claimants alleged the respondent negligently failed to communicate redundancy notices to them or their Mombasa branch until 9 July 2021, breaching fiduciary duty by entering an agreement without their consent, and causing irreparable loss. The court found the respondent's actions constituted negligence and breach of fiduciary duty, leading to the claimants' loss of faith in the union and private legal representation costs. The court ordered the respondent to pay special damages, a declaration of abdication of responsibilities, and costs.


The claimants are seeking orders,

  1. Special damages for Ksh. 400,000;
  2. General damages for negligence and breach of fiduciary duty by the respondent;
  3. A declaration that the respondent's failure to effectively represent the claimants was an abdication of their responsibilities towards the claimants;
  4. An order convicting the respondent to pay a fine for contravening s.39 of the Labour Relations Act;
  5. Costs of this suit;
  6. Any other relief the court may deem fit to grant.

The claimants are adult males and females. The respondent is a trade union under the Labour Relations Act.

The claimants were Pride Inn Hotels and Investments Limited employees, Shanzu, until 10 July 2021. During their employment, they were unionised under the respondent and paid union dues through monthly subscriptions. The respondents were mandated to be accountable to the claimants and protect their rights in good faith.

On 11 January 2021, the respondent's headquarters received a letter from the claimants’ employer indicating their intention to terminate their employment due to redundancy. The letter was not communicated to the claimants or sent to the Mombasa branch, which was the claimants' representative branch, until 9 July 2021.

As a result of negligent action and a lack of proper and effective communication between the respondent's head office and the Mombasa branch, the claimants suffered irreparable losses and damage as they were unaware of the redundancy process. The negligence by the respondent was that there was a failure to communicate to the Mombasa branch or communicate to the relevant claimants on the redundancy in time until 9 July 2021. Being aware of the shortening of the redundancy period by the respondent’s head office in Nairobi without communication to the claimants or the branch office in Mombasa. The claimants also contest that the respondent failed to oversee the tabulation of their terminal dues.

The claim is that the respondent was negligent during redundancy by failing to act honestly and diligently to protect the claimants’ rights. The respondent agreed with the employer that the agreement was binding on the claimants, which was unlawful and detrimental to them. This breached the fiduciary duty between the claimant and the respondent.

The breach of fiduciary duty arose because the respondent entered into an agreement dated 18 March 2021 without permission from the claimants or the works committee. Despite receiving monthly subscriptions, the representative failed to represent the claimants on pertinent issues effectively and failed to disclose pertinent issues addressed at various meetings.

Due to the respondent's actions, the claimants have suffered irreparable loss and damage and hold the respondent liable. The claimants were forced to secure private legal representation as they had lost faith in the respondent and spent Ksh. 400,000 in Mombasa ELRC Cause No. E004 of 2022. The orders sought herein should be issued with costs.

The claimants called Festus Joto Gilbert, the 12th claimant, who testified that the respondent was their union while Pride Inn Hotels employed them. Membership was by monthly subscription for all unionised employees. The claim herein is filed because the respondent mishandled their claim against the employer, Pride Inn Hotels, when it declared a redundancy.

Joto testified that the claimants learnt of the redundancy when they were called and issued with notice terminating their employment. The employer is based in Mombasa, and the claimants fell under the respondent’s Mombasa branch, which was not aware of the redundancy process. The respondent did not communicate with the claimants on the process leading to the termination of employment. The employer had issued notice on 11 January 2021, but had no communication with the branch or claimants.

The employer’s notice was issued to the respondent at the head office in Nairobi. The branch received communication from 29 June 2021 until 9 July 2021, when the claimants became aware that the employer had called for a meeting. The presenter was Zack Osore, a respondent representative. The agenda was the redundancy taking effect the following day, 10 July 2021.

The claimants blame the respondent for not communicating the redundancy process. Through a letter dated 13 July 2021, the respondents accepted that the redundancy notice was reduced. The process was to take effect on 31 July 2021, and the respondent agreed.

The representative did not properly represent the claimants' interests, leading to reduced terminal dues. The agreement on the payment of service charge was reached without the consultation of the claimants or the branch, hence a breach of the fiduciary duty owed to the claimants by the respondent.

Joto testified that Mr. Osore, through his letter dated 20 July 2021, admitted that the terminal dues relating to salary arrears from 2018 were not paid. These included;

  1. Accrued leave allowances;
  2. Uniform allowances;
  3. Underpayments going back to 2018.

The claimants did not agree to forgo payment of these dues at the end of their employment. Osore admitted that the claimants were entitled to these terminal dues for 2018 and 2019. Under the CBA, the claimants were entitled to ex gratia payments for 2018 and 2019. The wage paid was below the minimum wage gazetted by the Minister, yet the respondent failed to address such dues in negotiating the redundancy package.

Joto testified that the claimants only learned of the agreements between the employer and the respondent after their employment was terminated on 15 July 2021. They had no way of addressing their grievances with the employer since the police were deployed to ensure they all left the shop floor after the termination notices were issued.

The claimants were entitled to a service charge ordinarily negotiated by the Works Committee. The agreement secured by the respondent not to include the service charge was without the approval and consent of the claimants or their representative in the Works Committee. He was responsible for tabulating the service charge, and in December 2020, there was over Ksh.5 million due to the claimants. The agreement by the respondent to pay Ksh 3 million was way below what was available. For the months worked, applying the rate of Ksh.3 million, the claimants should have been paid their dues.

The non-communication on the process denied the claimants their rightful terminal dues, and the respondent should pay the damages.

Upon cross-examination, Joto testified that the claimant filed suit, Cause No. E004 of 2022. The claim was for payment of;

  1. Service charge;
  2. Uniform allowances;
  3. Leave pay;
  4. Severance pay.

The claim was dismissed. The employer did not pay terminal dues, and there was no notice to the respondent that there was non-payment of terminal dues. The claimant does not assist in the process of claiming terminal dues. A letter dated 13 January 2021 was sent to the respondent regarding the redundancy, and the letter was copied to the affected employees, the general manager, and the workers committee. At the end of employment, the claimant was called to the office alone and paid his terminal dues in the respondent's absence.

Joto testified that he was transferred from Pride Inn at some point during his employment, and the respondent intervened to stop the transfer.

The notice period for the redundancy was short. He was paid in lieu of notice, but the pay was insufficient. The notice took effect on 13 July 2021, and the employer paid the claim under Cause No. E004 of 2022, the court addressed the question of underpayments based on the claim of Ksh. 2.6 million, which the employer agreed to pay, but the court did not award the same.

Joto testified that the redundancy notice was supposed to affect 75 employees. The respondent negotiated, and the number was reduced to 35 employees, who were issued notices on 9 July 2021. Upon termination of employment, the claimants were paid their gross salary and arrears.

The claimants were aware of the dispute resolution committee. They opted to instruct their private advocates instead of the claimant and incurred legal fees that the respondent should have paid.

There is the witness statement of Omar Gwashe, who avers that the claimants were employed in various Pride Inn Hotels and Investments Limited departments in Shanzu. They were members of the respondent and paid monthly subscriptions.

Gwashe testified that the claimants became unionised under the respondent, so a CBA was entered with the employer to regulate relations between the parties.

On 11 January 2021, the respondent received notice from the employer indicating the intention to declare a redundancy and termination of employment. The content of the letter was not brought to the attention of the claimants or the respondent’s Mombasa branch, where they belonged. This was until 9 July 2021, a day before the termination of employment, which was effected on 10 July 2021.

Gwashe testified that due to the respondent's negligence and breakdown of information, the claimants suffered irreparable losses and damages as they were unaware of the redundancy process. The respondent's head office failed to communicate with the branch about the redundancy. The shortening of the redundancy period denied the claimants their rights at work.

There was a breach of fiduciary duty. The respondent entered into an agreement dated 18 March 2021 without the permission of the claimants or the works committee. The claimants had paid their monthly subscriptions to the respondent and, due to loss of faith and trust, were forced to secure the services of a private legal representative in seeking payment of their terminal dues, incurring costs. The respondent should pay for the loss and damages.

Response

In response, the respondent denied the claims and said that the claimants’ case was based on speculations and hearsay and was without proof. The claim is a smear campaign, and the alleged damages are without evidence, but it is a witch-hunt against the respondent.  The specific damages suffered have not been particularised.

The response is that the respondent acted according to the law, prudence, and observance when discharging duties. The claimants prematurely instituted Cause No. E004 of 2022 seeks to ventilate the same facts and issues to present the suit before the court. Upon realising the impetus and error in judgment in rushing to court and not succeeding, the claimants are now in a whirlwind to condemn the respondent for undertaking procedural and substantive diligence during a redundancy exercise.

The claimants were duly paid their terminal dues, as noted in the judgment in Cause No. E004 of 2022, which was delivered on 8 February 2024. The claim is without just cause and should be dismissed with costs.

In evidence, the respondent called Hezron Onwong’a, the chief industrial relations officer, who testified that the respondent received a letter dated 11 January 2021 from the claimant’s employer, [Pride Inn Paradise Hotels) declaring a redundancy. It was to affect 75 employees and their members. Upon the notice, the respondent commenced negotiations guided by Section 40 of the Employment Act, and the CBA negotiated with the Kenya Union of Hotelkeepers and Caterers Association.

Onwong’a testified that the respondent received a letter from the employer dated 23 June 2021 stating that 35 employees, including the claimants, were affected.

On 30 April 2020, the Minister, COTU, and FKE signed a Memorandum of Understanding gazetted on 26 June 2020. This suspended the implementation of CBAs whose effective dates fell within the COVID-19 period, hence freezing wage increments.

On 13 July 2021, the respondent wrote to the employer in response to the letter dated 23 June 2021. The respondent pointed out discrepancies with some benefits that did not align with the CBA and the Employment Act. The claimants' assertion that the respondent failed in its fiduciary duty and abdicated its obligation is incorrect. Omar Gwashe and Festus Joto were, during their employment, transferred through letters dated 31 October 2020, during the pandemic. The transfer was bound to adversely affect them since, during this period, they would be at risk. The transfer was hinged on undermining union activities and the unfair treatment of union leaders. The transfer was bound to disrupt their families. In undertaking its mandate, the respondent intervened through letters dated 23 November 2020, and both claimants remained at their duty stations.

Onwong’a testified that the claimants are not honest since it was involved in discussions with the employer to negotiate the impact of the redundancy. The works committee representatives, Omar Qwashe, Judy Khamsi, Japhet Mwachetu, and the employer signed an MOU to suspend the implementation of the CBA due to COVID guidelines for sustaining employment. The respondent did not fail to discharge its mandate as alleged. The claims by the claimants are an afterthought upon failing in their initial claim, having disowned the union and then being unable to achieve their mission. The claimants cannot turn around and accuse the respondent of breach of fiduciary duty, having ignored addressing their grievances within the dispute resolution mechanisms available under the CBA. The claimants have admitted that the employer paid them all their terminal dues, and they will not suffer any prejudice if the claim herein is dismissed with costs.

At the close of the hearing, both parties filed their written submissions. These submissions are analysed and addressed in the findings hereunder. The issues which emerge for determination are;

Whether the respondent was negligent leading to the claimant’s employment termination.

Whether there is a breach of fiduciary duty to the claimants by the respondent.

Whether the claimants are entitled to special damages.

Whether the claimants are entitled to general damages.

Who should pay the costs?

The claim herein is based on the facts that on 10 July 2021, the claimants were terminated in their employment with the Pride Inn Hotels and Investments Limited, Shanzu (the Employer), following a redundancy that was communicated to the respondent through a notice dated 11 January 2021. Still, the respondent failed to convey the same to the claimants. The claim is that the claimants only learned of the redundancy on 9 July 2021 and had to exit on 10 July 2021, and hence had no time to negotiate the payment of their terminal dues. They lost faith in the respondent and instructed private advocates to file Mombasa Cause No. E004 of 2022 to urge their claims. As a result, the claimants have incurred loss and damage due to the respondent's non-communication regarding the redundancy process. The respondent should pay the special and general damages incurred as a result.

In response, the respondent asserts that it received the notice dated 11 January 2021 and commenced negotiations with the employer. Of the 75 employees who were to be affected, this was reduced to 35, including the claimants. The employer has since paid the claimants all the terminal dues. The claimants opted to file Cause No. E004 of 2022 without the respondent's involvement, while negotiations were ongoing. They did not exhaust all the dispute resolution mechanisms and cannot blame the respondent for dismissing their case.

The claimants have argued that the respondent failed to communicate with them about the intended redundancy following the notice and letter dated 11 January 2021. Upon such notice, the respondent's head office in Nairobi did not inform the Mombasa branch or involve the claimants.

The employer declares a redundancy, not the trade union. Section 40(1) of the Employment Act directs the employer to notify the union to which the employees are members of the reasons for and the extent of the intended redundancy.

(1) An employer shall not terminate a contract of service on account of redundancy unless the employer complies with the following conditions—

(a) where the employee is a member of a trade union, the employer notifies the union to which the employee is a member and the labour officer in charge of the area where the employee is employed of the reasons for, and the extent of, the intended redundancy not less than a month before the date of the intended date of termination on account of redundancy;

The respondent has admitted that it received notice of the intended redundancy, and 75 employees were to be affected. Following discussions and negotiations, the respondent reduced the number of affected employees to 35, including the claimants.

The claimants filed the notice dated 11 January 2021. This notice is copied to the management, the Labour Office, and the employer, indicating that 75 employees would be affected. The employer invited the respondent to discuss the intended redundancy and noted that in selecting the 75 employees listed in the attached schedule, they had considered factors such as;

  1. Order of seniority in time;
  2. The skills,
  3. The abilities, and
  4. Reliability under each class.

The employer further offered that of the affected employees, they would tabulate their terminal dues, including;

  1. 30 days' pay in lieu of notice;
  2. Redundancy (severance) pay based on 16 days for each year worked;
  3. Any leave days pending; and
  4. Certificate of service.

As outlined above, the respondent discussed the matter with the employer and reduced the number of affected employees. 35 employees, not 75, lost employment through redundancy.

Upon the negotiations between the respondent and the employer, the employer retained the duty to communicate the termination notice to the subject employees, which was issued on 9 July 2021. Under section 40(1) (f) of the Employment Act, the employer can terminate employment by redundancy and pay in lieu of notice. This is lawful and legitimate.

In the case of Cargill Kenya Limited v Mwaka & 3 others [2021] KECA 115 (KLR), the court held that;

… It is Notably, a plain and contextual reading of subsection 1(f) shows that its express objective and purpose is the payment required to be made to employees affected by redundancy, and not the issuance of a notice. It is also notable that the legislative intention from the arrangement and content of the enactments in section 40 subsection (1) (d) to (g) was the provision of payments to be made to affected employees in a redundancy, and section 1(f) can only thus be construed within this context, …

This position is reiterated in the case of The German School Society & another v Ohany & another [2023] KECA 894 (KLR) and the case of Kenya Agricultural and Livestock Research Organization v Kenya Scientific Research International Technical and Institution Workers Union [2024] KECA 1577 (KLR) that upon the notice of intended redundancy, the employer is allowed under Section 40(1)(f) of the Employment Act to terminate employment and make payment in lieu of notice.

An employer is allowed to pay in lieu of notice in a redundancy.

Was the respondent negligent in their duty to the claimants?

In the case of Renne & another v Kenya Power and Lighting Company Limited [2024] KEHC 9717 (KLR), the court defined negligence as a specific tort based on common law jurisprudence. In a negligence claim, the claimant ought to establish that the respondent owed him a duty of care, that the duty of care was breached, and that the claimant suffered damages due to that breach.

In the case of Elijah Ole Kool v George Ikonya Thuo (2001) eKLR, the court held that;

When will an act or omission be said to be the cause of the Plaintiff’s injuries” a defendant will only be held liable for negligence if his act or omission is either the sole effective cause of the Plaintiff’s injury or the act or omission is so connected with it as to be a cause materially contributing to it. The first case will rarely raise contentions.

Based on these facts, the claimants lost their employment with the employer on 10 July 2021. Mr. Joto testified in court and admitted that the claimants were paid in lieu of notice.

Joto admitted that the respondent attended and intervened when he was transferred from the Pride Inn, and the transfer was stopped.

The respondent was not responsible for the notice, which led to the loss of employment. In any event, the employer paid the claimants in lieu of notice.

Upon termination of employment, the claimants did not seek to involve their union in agitating for any further claims. No effort is made to demonstrate that the claimants sought out the respondent, who declined to intervene.

Indeed, as asserted by the respondent, through a letter dated 13 July 2021, there was an effort to urge the payment of further terminal dues found necessary to the claimants. Still, they opted to file Mombasa Cause No. E004 of 2022 to agitate their rights through their advocates of choice.

Mr. Joto testified that he knew the internal dispute resolution mechanisms between the union and the employer. They did not invoke such mechanisms because they had lost trust in the respondent's handling of the redundancy process. However, as outlined above, the respondent received communication of the redundancy and engaged in discussions. The number of employees affected has been reduced.

A redundancy is the involuntary loss of employment. It does not relate to the competencies of the affected employees. The employer has set the criteria for reaching out to 75 affected employees. The employer had the right to terminate employment and pay in lieu of notice.

Can this be termed as negligence on the part of the respondent?

In the given circumstances, the respondent discharged its duty to the claimants. Their choice to instruct advocates of choice to represent their interests in court without involving the respondent cannot be faulted. These rights are constitutional and allowed under the Employment and Labour Relations Court Act. However, this choice should not be at the respondent's expense. The claimants must meet their legal costs. The option to have the claimants urge their case through the CBA motions, which allowed for internal dispute resolution, has since been overtaken by events.

The claimants filed a response to the respondent’s response herein and attached various documents. These include a Notice of Appeal and a Memorandum of Appeal. The claimants are dissatisfied with the Judgment in the claim filed in Mombasa Cause No. E004 of 2022. This, too, is a right secured by the Constitution and the law. The claimants should be allowed to ventilate their rights as necessary. Save, such should not be at the expense of the respondent who discharged its duty to discuss the redundancy notice and post-termination of employment, engaged the employer to address what it felt were dues not entirely settled.

On the claim that the redundancy notice was short and, hence, the claimants denied payments thereof, as addressed above, Mr. Joto admitted that he has since been paid all his terminal dues, including notice pay. Under Section 40 of the Employment Act, such payment is allowed. This cannot be blamed on the respondent, who asserts that there was a breach of fiduciary duty to communicate and ensure the notice period was served in full. Such would negate the employer’s right under Section 40(1) (f) of the Employment Act.

The claimants also submitted that the agreement entered into by the respondent with the employer dated 18 March 2021, agreeing to reduce the service charge for March 2020, July to December 2020, was without the consent and approval of the claimants and hence not legitimate. This agreement negates clause 21 of the CBA. The response was that there was an MOU between the Minister, COTU and FKE where it was agreed to suspend the implementation of CBAs whose effective dates fell within the COVID-19 period, hence freezing wage increments.

The Minister published this MOU on 30 April 2020, and the claimants have not contested it. The claimants, covered under COTU, were bound by the Minister's notice.

Did the respondent breach its fiduciary duty to the claimants?

The claimants have referred to the respondent’s mandate under Section 39 of the Labour Relations Act. They argue that the union should have applied its funds and, by extension, the union dues paid by the claimants to represent them in agitating for their rights and protecting their interests in claiming the payment of terminal dues.

In the case of Mukuha v Waweru Munyi Jackson t/a Waweru Munyi & Co Advocates [2022] KEHC 16682 (KLR), the court held that a fiduciary duty is where the respondent was entrusted with the claimant’s money and transactions as instructed, and that such instructions should be executed to the letter without breaching any of them. In carrying out those instructions, the respondent must perform them confidently, honestly, and in the client's best interest. It is a duty that requires the highest degree of accountability.

As outlined above, the respondent engaged the employer on the redundancy process within its mandate. Upon the termination of employment, there was further engagement to secure payments of what the respondent found to be justified under the law and the CBA. This was not to be as the claimants opted to instruct advocates of their choice and have since made claims for payment of;

  1. Accrued leave allowances;
  2. Uniform allowances;
  3. Underpayments going back to 2018.

Such matters are determined in Cause No. E004 of 2022. The claimants have since filed the Notice of Appeal.

In the given circumstances, the evidence by Mr. Joto for the claimants that they were aware of the motions initiated by the respondent through a letter dated 13 July 2021 to the employee regarding the payment of their terminal dues, the claimants cannot turn back and assert that the respondent failed to render an account to them. Being unionised allowed the claimants to be represented on the shop floor by the union representative. The claimants had a right to abandon their trade union and seek representation by an advocate. These choices will be addressed, with the dismissal of the claim under Cause No. E004 of 2022, the claimants cannot turn back and blame the respondent.

The claim for special damages of Ksh. 400,000 in legal costs is not justified. The claimants chose to incur this cost outside the respondent’s representation.

Without proof of negligence or breach of fiduciary duty, no damages arise.

The funds collected by the respondent are secured under Section 39 of the LRA to be applied diligently and with utmost fidelity to the law. The claimants' option to seek private legal counsel is lawful and constitutional, save that the respondent cannot pay the costs due.

Accordingly, the claim herein is without merit. It is dismissed with costs to the respondent. The costs are hereby assessed under the provisions of Section 12(4) of the Employment and Labour Relations Act and Rule 70(4) of the Employment and Labour Relations Court (Procedure) Rules at Ksh.200,000 to be paid within 30 days, after which the same shall accrue interests from this date until paid in full.

Delivered in open court at Mombasa this 24th day of April 2025.

M. MBARŨ

JUDGE

In the presence of:

Court Assistant: Marion

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    Omar Gwashe VS Kudheiha Omar Gwashe VS Kudheiha