Surya Company Limited v Kimanzi (Employment and Labour Relations Appeal E061 of 2025) [2026] KEELRC 271 (KLR) (30 January 2026) (Judgment)

REPUBLIC OF KENYA IN THE EMPLOYMENT & LABOUR RELATIONS COURT AT NAIROBI ELRCA APPEAL NO. E061 OF 2025 SURYA COMPANY LIMITED………………………………… APPELLANT -VERSUS- MUSEE KIMANZI ..………………………..……..……….. RESPONDENT (Being an Appeal from the Judgment and Decree of the Magistrate’s Court at Milimani, Milimani Commercial Court of Hon. T.M. Olando (Mr.) delivered on 6th February 2025 in Milimani MELRC Case No. E669 of 2021.) JUDGMENT 1. Through the Memorandum of Appeal dated 28th February, 2025 the Appellant appeals against the Judgment of Honourable T.M Olando delivered on 6th February, 2025. 2. The Appeal was based on the grounds that: i. The learned Magistrate erred in law and fact by awarding the Respondent ex gratia payment despite the absence of any contractual, legal or statutory basis for such an award. ii. The learned Magistrate misapprehended the principles governing ex gratia payments and failed to appreciate that such payments are discretionary and not legally enforceable. JUDGMENT APPEAL NO. E160 OF 2023 1 iii. The learned Magistrate erred in awarding the Claimant the costs and interest of the claim even after dismissing his claim. 3. The Appellant prayed that this appeal be allowed costs of the Appeal and the proceedings in the lower court and the judgment and decree of the lower court awarding ex gratia payment to the Respondent be set aside. 4. The Appeal was disposed of by written submissions. APPELLANT’S SUBMISSIONS 5. The Appellant’s Advocates N K Mugo & Company Advocates filed written submissions dated 17th July, 2025. 6. On the issue of whether the trial court erred in awarding the Respondent ex gratia payment despite the absence of any contractual, legal or statutory basis for such an award counsel submitted that ex gratia payments are discretionary and gratuitous. That such payments do not stem from any legal obligation and are typically made out of good will. That the ex gratia payment could not be claimed as a matter of right and was not enforceable in law unless it arises from an express contractual provision, a statutory obligation, or an established JUDGMENT APPEAL NO. E160 OF 2023 2 and binding custom or practice within the employer’s organization. 7. Counsel relied on the case of Benson Owenga Anjere V Kivati Ntuto & Another (2013) eKLR on definition of the ex gratia payment as per Black’s Law Dictionary and on the case of Gaye Madiodio v Societe Internationale De Tele Communication Aerornautiques (SITA) (2021) eKLR that ex gratia payment is not a right. 8. Counsel submitted that in this case neither the Respondent pleaded nor proved any entitlement to an ex gratia payment in his claim before the trial court. That the pleadings were silent on such relief and no evidentiary material was placed before the court to suggest that an ex gratia payment was due. That parties were bound by their pleadings and the court cannot grant a relief that was not specifically pleaded nor substantiated by evidence. 9. Counsel further submitted that the trial court expressly found that the Respondent had failed to prove his claim for unlawful termination and proceeded to dismiss the principal claim. That the court therefore erroneously proceed to award ex gratia JUDGMENT APPEAL NO. E160 OF 2023 3 payment of Kshs 126,546.90/= which decision was not supported by pleadings and evidence but also contradicted established principles governing judicial discretion in employment matters. 10. Counsel submitted that the court failed to identify or rely upon any legal foundations for granting such an award like a term of the contract of employment, a company policy or consistent practice and a statutory provision. That without such basis the award was irregular and amounted to a gratuitous conferment of benefit outside the scope of pleadings and the law. 11. On the issue of whether the trial court erred in awarding the Respondent the costs and interest of the suit even after dismissing the suit counsel submitted that it is a well-settled principle that costs follow the event and a successful litigant is ordinarily entitled to costs unless there exists good reason to depart from that rule. That in this case the Respondent’s claim was dismissed in its entirety having failed to prove any of the reliefs sought. That despite this the trial court proceeded to JUDGMENT APPEAL NO. E160 OF 2023 4 award him costs and interest a decision that lacked both factual and legal justification. 12. Counsel relied on section 12(4) of the Employment and Labour Relations Court Act on the discretionary power of court in awarding costs. That the said discretion should be exercised judicially and in accordance with established principles of law. Counsel relied on the case of Ayoti Distributors Limited V Ochieng (Civil Appeal E093 of 2021) (2024) KEHC 1510(KLR) (14 February 2024) (Ruling) on the court exercising the discretion judiciously not capriciously. 13. Counsel submitted that the trial court failed to offer any reason, judicial or otherwise for awarding costs and interest to a litigant whose claim had been dismissed. That the absence of reasons renders the exercise of discretion arbitrary and inconsistent with both statutory guidance and judicial authority. RESPONDENTS’ SUBMISSIONS 14. The Respondent did not file his submission at the time of preparation of this judgment despite the Appellant filing an affidavit of service of their submissions to his advocates. DETERMINATION JUDGMENT APPEAL NO. E160 OF 2023 5 15. The court has considered the grounds of appeal, the record of appeal and submissions filed by the counsel for the Appellant herein and proceeds to analyse them as follows. 16. It is now settled law that the duty of the first appellate court is to re-evaluate the evidence in the subordinate court both on points of law and facts and come up with its own findings and conclusions as held in Gitobu Imanyara & 2 others v Attorney General [2016] eKLR, the Court of Appeal stated that: - “[A]n appeal to this Court from a trial by the High Court is by way of retrial and the principles upon which this Court acts in such an appeal are well settled. Briefly put, they are that this court must reconsider the evidence, evaluate it itself and draw its own conclusions though it should always bear in mind that it has neither seen nor heard the witnesses and should make due allowances in this respect” 17. In this case, the Judgment of the trial court was a declaration that the Claimant failed to prove his on a balance of probabilities on unlawful termination. The trial Magistrate awarded the Claimant ex gratia pay of Kshs 126,546.90/= which was 12 years’ service with costs and interests. The Appellant being aggrieved by the judgment appeals on the JUDGMENT APPEAL NO. E160 OF 2023 6 Judgment award of ex gratia payment and costs and interests awarded to the Respondent raising 3 grounds. 18. The court finds that the grounds will be condensed in to two issues namely: - a. Whether the trial court erred by awarding the Respondent ex gratia payment of Kshs 126,546.90/= b. Whether the trial court erred by awarding the Respondent costs and interests of the suit. Whether the trial court erred by awarding the Respondent ex gratia payment of Kshs 126,546.90/= 19. The trial court awarded the Respondent ex gratia payment which to this court notes was more like service pay for the years worked. This court notes if the trial court intended this amount to be service pay the same would not be applicable since the Respondent was a member of NSSF as per section 35(6) of the Employment Act which exempts members of NSSF from service pay. Black’s Law Dictionary defines ex gratia as follows: - Out of grace; as a matter of grace, favor, or indulgence; gratuitous. A term applied to anything accorded as a favor; as distinguished from that which may be demanded ex debito, as a matter of right. JUDGMENT APPEAL NO. E160 OF 2023 7 20. From the above definition it is clear the same payment is not of right but of grace. This court notes that the Respondent claimed the same in the memorandum of claim as service pay but there was no evidence supporting if he was promised the same by the Appellant. In Nicholas Wachira Koigia v NCR Kenya Limited [2013] KEELRC 860 (KLR the Court held that an ex gratia payment is purely discretionary and not a matter of right. 21. In Kenya Union Of Journalists & Allied Workers v Nation Media Group Limited [2014] KEELRC 589 (KLR) the court stated as follows regarding ex gratia payment: - “Ex gratia is not provided for under the law. Ex gratia is defined in the concise Oxford English dictionary (2011) edition as (with reference to payment) done from a sense of moral obligation rather than because of any legal requirement. Black’s Law Dictionary 9th Edition defines ex gratia as a favour; not legally necessary and Ex gratia payment as “A payment not legally required”. 22. From the foregoing this payment is not legally binding although recognized by the Employment Act among the considerations to be taken in to account under section 49(4) when the court is awarding damages for unfair termination the same is discretionary. The Respondent never produced any evidence either the employment contract or policy or practice JUDGMENT APPEAL NO. E160 OF 2023 8 of the Appellant or statutory provision that he was entitled to the same. The Respondent was therefore not entitled to ex gratia payment and the court overturns the trial court award of the same payment. Whether the trial court erred by awarding the Respondent costs and interests of the suit. 23. The trial court awarded Respondent costs and interests of the suit. This was despite finding the Respondent not having proved his claim for unfair termination. This court notes that the trial court ought to be guided by the well-established principles that costs follow events. This therefore meant after finding that the Respondent did not prove his case then there was no way the trial court would award him costs. Whereas the court has discretion to award costs under section 12(4) of the Employment and Labour Relations Court Act the same should be exercised judiciously. 24. In Jasbir Singh Rai & 3 others V Tarlochan Singh Rai & 4 others [2014] eKLR, the Supreme Court discussed the issue of costs. The Court stated: - JUDGMENT APPEAL NO. E160 OF 2023 9 “that as a general rule, the costs follow the event and the Court must give reasons whenever costs do not follow the event. 25. In this case there was no reason given by the trial court why costs did not follow the event yet the Respondent’s case was dismissed apart from the ex gratia payment which this court has overturned. 26. In the upshot the Appeal is found merited and is hereby allowed with each party bearing the costs of this appeal. 27. It is so ordered. Dated at Nairobi this 30th day of January, 2026 Delivered virtually this 30th day of January, 2026 Abuodha Nelson Jorum Presiding Judge-Appeals Division JUDGMENT APPEAL NO. E160 OF 2023 10