Companies

KPMG to pay ex-boss Sh379m for illegal sack

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Richard Boro Ndung’u, former KPMG East Africa head of tax and corporate services. FILE PHOTO | NMG

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Summary

  • Audit firm KPMG has been dealt a blow after the High Court ordered it to pay its ex-boss Sh379.03 million for unlawful sacking in 2017.
  • Justice Francis Tuiyott upheld the decision of an arbitrator awarding the millions of shillings to Richard Boro Ndung’u, saying his compulsory retirement was unlawful.
  • The Sh379.03 million award is, however, a reduction from the Sh504.8 million (at the current exchange rate) earlier granted to Mr Ndung’u in 2018 by the arbitrator, John Ohaga, which had prompted KPMG to seek redress in the High Court.

Audit firm KPMG has been dealt a blow after the High Court ordered it to pay its ex-boss Sh379.03 million for unlawful sacking in 2017.

Justice Francis Tuiyott upheld the decision of an arbitrator awarding the millions of shillings to Richard Boro Ndung’u, saying his compulsory retirement was unlawful.

The Sh379.03 million award is, however, a reduction from the Sh504.8 million (at the current exchange rate) earlier granted to Mr Ndung’u in 2018 by the arbitrator, John Ohaga, which had prompted KPMG to seek redress in the High Court.

“I find and hold that the claimant has suffered loss and damage as a result of the conduct of the respondents towards him since the commencement of investigations against him from October 3, 2016 culminating in his purported compulsory retirement on January 13,2017 and the announcement," the judge said.

Justice Tuiyott knocked out Sh35.5 million on account of profit initially awarded to Mr Ndung’u by the arbitrator. The judge also reduced special damages by Sh661,430 and aggravated damages of Sh2.7 million.

He noted that although Mr Ndung’u had not issued a formal notice of his intention to retire on August 31, 2019, he had given that indication in at least two association meetings.

Mr Ndung’u’s word, the judge noted, was that he would no longer be a partner after August 2019 hence compensating him for the period after would be to confer a profit on him.

"To therefore award him damages for a period beyond that would be to put him in a better position than he would have been had he retired on August 31, 2019 as he had unequivocally stated," said the judge, who reduced more damages by Sh86.8 million.

The tussle between KPMG and its ex-employee began on the morning of Monday, October 3, 2016 when Mr Ndung’u was summoned to the office of then CEO Josphat Mwaura at ABC Place, Westlands.

An allegation had been made against him by an anonymous person that he was having an inappropriate relationship with his personal assistant, according to court documents.

Mr Ndung’u was then asked to surrender his phone and laptop to facilitate investigations.

He was also required to leave office for two days as the investigations were conducted. Mr Ndung’u contended that although he knew it was unlawful for the CEO to confiscate his phone, he nonetheless gave them out without a fight.

The encounter with the CEO set in motion a series of events that culminated in his dismissal from the KPMG East Africa partnership.

Following the sacking, Mr Ndung’u moved to court demanding $8.2 million which was the expected earnings from 2017 to 2024 when he would reach his retirement age of 60, among other damages.

He accused his former employer of unfairly targeting him, intimidation, and non-procedural removal from partnership. The High Court directed the matter be heard by an arbitrator.

At the end of the arbitration proceedings, Mr Ohaga on March 6 ,2019 awarded Mr Ndung’u an aggregate sum of Sh460.5 million (at the then exchange rates) and a further Sh1.9 million in special damages. Mr Ohanga also indicated that the award would earn interest at the rate of five per cent per year until KPMG settles it.

But aggrieved by the arbitrator’s ruling, KPMG filed a case in the High Court.

"KPMG chose the meeting of Association of December 16, 2016 as the forum in which the removal of RBN [Mr Ndung’u] would be considered but as the tribunal found (and which is upheld by this court) the meeting was not properly convened in respect to that agenda. It cannot be said that there was ever a proper or indeed any consideration to exit RBN," Justice Tuiyott said in his judgment.

The judge said Mr Ndung’u should have been given notice to prepare his answers because even though the investigations may have been characterised as informal, it was detailed and included mapping and forensic examination of his mobile telephones and laptops.

"As a matter of good faith, it seems fair that RBN should have been given prior notice of these serious allegations to enable him prepare his answer to them," the judge said.

KPMG, however, said it was not satisfied by Justice Tuiyott’s decision and has be granted the green light to move to the Court of Appeal. "As a consequence, the Appellants who have signalled their intention to appeal this court’s decision will have to move the Court of Appeal under Section 39(3) (b) of the Act," the judge said.