Bachitter Singh Chase v Barclays Bank of Kenya Ltd
High Court, at Nairobi October 3, 1990
Civil Case No 4549 of 1987
Employment Law – permanent and pensionable employment – whether person under such employment is irremovable–– promotion and improvement of terms of employment – whether promotion creates new contract or merely varies the original contract – distinction between summary dismissal and termination of contract of employment–– employee cited for misconduct – employer opting to terminate contract rather than dismiss employee – whether proper for employer to fail to pay employee’s pension.
Contract – variation of a contract - contract of employment – promotion of employee with improved terms of service – whether promotion creates a new contract or merely varies the original one – distinction between summary dismissal and termination of contract of employment.
The plaintiff was employed as a bank clerk by the defendant in 1962. He served for a probationary period of six months after which he was confirmed and he received a series of promotions so that by 1985, he was in the management cadre holding the position of a sub-manager.
In his several promotions, the plaintiff had not received any written communication varying the terms of employment set out in his letter of appointment of 1962, except with regard to his personal emoluments. In October, 1986, the defendant, acting under the terms of the letter of appointment of 1962, terminated the plaintiff’s service and paid him one month’s salary in lieu of notice of termination. The defendant informed the plaintiff that it was entitled to dismiss him summarily for gross misconduct but that in view of his long service, it had decided to merely terminate his service. The defendant paid the plaintiff accrued emoluments but declined to pay his pension.
In his suit against the defendant, the plaintiff claimed that he had become a permanent and pensionable employee and he could not be removed until he had attained retirement age. Further, he asserted that with each promotion he received, a new contract was created between him and the defendant so that the terms contained in his original letter of appointment no longer applied. Consequently, he argued that his dismissal was wrongful and he was therefore entitled to damages.
1. The plaintiff’s employment with the defendant was permanent and pensionable. However, permanent employment does not necessarily mean employment for life or until retirement; it merely means that the employment is to continue for an indefinite period with an element of permanency and a degree of security of tenure.
2. If an employee by the terms of his contract is to receive remuneration at a progressive rate, there is no new contract formed on each occasion his salary is thus increased. But the situation is different when the increase is done not automatically under an existing contract but owing to the position of the employee being changed by employers voluntarily promoting him to a higher grade.
3. Except for better personal emoluments, there was no evidence to show that the plaintiff’s promotion had brought him any better terms than under the original contract of 1962.
4. Therefore, although the original contract was replaced, the provisions as to termination were carried forward or re-enacted each time a new contract was created. The provisions as to termination were therefore as embodied in the original contract of 1962.
5. As a general rule, a dismissal comes about due to breach of a term of the contract of employment. A termination is where a party to a contract exercises a right under the contract to lawfully bring it to an end by notice even without a breach.
6. The plaintiff ceased to be an employee of the defendant upon payment of one month’s personal emoluments. He was not dismissed. His contract of employment with the defendant had been terminated.
7. As there was a clear stipulation in the contract that the plaintiff was a monthly servant, section 145(5)(iii) of the Employment Act (cap 226) applied, so that the defendant was obliged to give him one month’s notice before terminating his contract of employment.
8. The plaintiff’s actions had amounted to misconduct which entitled the defendant to dismiss him. As the defendant had waived its right to dismiss the plaintiff and instead chose to terminate his contract, the plaintiff was entitled to terminal benefits. It was unconscionable and inequitable to deny the plaintiff his pension.
Plaintiff’s claim for pension allowed, other claims dismissed.
1. East African Airways v Knight  EA 165
2. Meek v Port of London Authority (1918) 1 Ch D 415
3. Bridge v Campbell Discount Co Ltd  1 All ER 385;  AC 600;  WLR 439
4. Sifuna, RM v Commercial Bank of Africa NAI High Court Civil Case No 1069 of 1985
1. Treitel, GH (1970) The Law of Contract London: Sweet & Maxwell 3rd Edn p 86
2. Freedland, MR The Contract of Employment Oxford: Clarendon Press p 67
Employment Act (cap 226) sections 14(5)(iii), 16
Mr KM Maini led by M Kilonzo for the Plaintiff
Mr F Ojiambo for the Defendant