1. Before the Court is an appeal against the judgment of the Honourable Senior Principal Magistrate at Nyeri, Hon. Mathias Okuche, delivered on 10/11/2022 in ELC NO.18 OF 2020.
2. The Appellant filed its Memorandum of Appeal dated 6th December 2022, and on the following grounds:
1) THAT the Learned Trial Magistrate erred in law and fact by failing to appreciate that the Appellant’s case had been proved on a balance of probability and that there was evidence to support the same.
2) THAT the Learned Trial Magistrate erred in law and fact when he failed to address himself on the issue of the Appellant not being a party to any sale agreement, which formed the basis of the 1st Respondent’s claim herein, despite there being evidence in support of the same.
3) THAT the Learned Trial Magistrate erred in law and fact in entering judgment without addressing himself on the issues raised by the Appellant in his filed statements and submissions, thereby arriving at the wrong conclusion.
4) THAT the Learned Trial Magistrate erred in fact and law in awarding costs of the suit to the Respondents against the Appellant, despite the circumstances that led to the suit.
3. The Appellant prays for the following ORDERS:
a) THAT the appeal be allowed.
b) THAT the judgement delivered on 10/11/2022 by the Honourable Magistrate in Nyeri ELC Case N.18 of 2020 and the resultant decree be set aside.
c) THAT judgment of the Honourable Magistrate Mathias Okuche delivered on 10th day of November 2022 be and is hereby set aside and be substituted with orders dismissing the suit against the appellant herein.
d) THAT an order that the Respondents do pay the costs of this appeal and costs in the Chief Magistrate's court do issue.
4. A document titled Supplementary Memorandum of Appeal, dated 1st August 2023, filed by the firm of Magua & Mbatha Advocates, appears on the record of appeal at page 4. However, perusal of the court record does not reveal any leave having been granted for filing the said document. Further, Order 42 Rule 3 of the Civil Procedure Rules provides for amendment of the Memorandum of Appeal but does not mention a Supplementary Memorandum of Appeal. In the Court's view, the said document is not properly on the court record and is hereby struck out and expunged from the court record. This judgment will be in respect of the Memorandum of Appeal dated 2nd December 2022.
Summary of the suit and evidence before the trial Court
5. Before the trial court, the 1st Respondent herein was the Plaintiff; the 2nd Respondent was the Defendant, while the Appellant was the 3rd Party. The suit was instituted vide the plaint dated 12th March 2020. The Plaintiff claimed that on 27/7/2017she agreed to buy and the defendant agreed to sell land parcel L.R. 7628/131 vide an agreement of even date.
6. The Plaintiff averred that she paid a deposit of Ksh 440 000/= to the defendant, with the balance of the purchase price being payable upon the title being charged to a lending institution.
7. The Plaintiff claims that the defendant took charge of the transfer process and appointed an agent after the transfer deeds were executed with a view to safeguarding their interests; however, the defendant did not keep their promise to transfer the property.
8. After innumerable requests that the defendant surrender the transfer documents for the Plaintiff to register, the documents were handed back to the defendant by the agent to hand over to the plaintiff, but the defendant failed to give the documents to the Plaintiff. The Plaintiff then discovered that the defendant had misrepresented themselves as owners of the land.
9. The Plaintiff claims the deposit paid plus other costs incurred under the agreement, amounting to Ksh 87 900/=.
10. The defendant filed their statement of defence dated 12th August 2020. It admitted having entered into an agreement with the plaintiff but claimed that it was holding the interest in the suit property on behalf of Ihururu Housing Co-operative Society Ltd, at whose request it entered the sale agreement. They stated that the Plaintiff was well aware of the details. The suit property was transferred to Ihururu Housing Co-operative Society Ltd after a members’ resolution.
11. The Defendant denied receiving the sum of Ksh 440,000 from the Plaintiff, stating that it was paid to and acknowledged by Ihururu Housing Co-operative Society Ltd, stating that the defendant was aware of the transfer of the suit property’s interest as a member of both societies. They also denied the extra expenses that the plaintiff alleged that she incurred and put her to strict proof thereof. The Defendant claims that it signed the agreement for sale and transfer of land documents and obtained relevant consents and left the completion of transfer to the Plaintiff and Ihururu Housing Co-operative Society Ltd.
12. Through a third-party notice dated 2nd September 2020, the Appellant herein was joined to the suit as a third party. It filed its defence dated 30th August 2021and denied the contents of the Plaint, stating that it was not a party to any sale agreement with the plaintiff and neither did it authorise the defendant to sell the suit property on its behalf.
13. The third party denied receiving any money as part of the proceeds of the sale of the suit property, and that it took charge of the process of transfer of the land to the Plaintiff.
The Hearing of the Suit
14. During the hearing, the Plaintiff adopted her witness statement and bundle of documents as evidence in chief. She reiterated the contents of her plaint and stated that she is a member of the defendant society. Initially, the suit land Mweiga Plot LR 7623/331 was to be transferred to Ihururu Housing & Investment Co-operative Society Ltd, but the officials requested that the suit land be transferred by the Defendant to her, and all documents were signed and sealed at an advocate’s office.
15. The purchase price was Ksh 1. 650,000/= and a deposit of Ksh 440, 000/= was paid. That, as per the agreement, the certificate of title was to be used by her to secure funds to facilitate payment of the balance of the purchase price of Ksh 1, 210,000/= after transfer in her name. That the transfer forms were executed and sealed, ready for transfer. The chairman was supposed to follow up on the said transfer.
16. The Plaintiff claimed that the process of transfer took too long until she reported the matter to the DCIO. Upon being summoned by the DCIO, the agent known as Denis Njenga Mburu returned the documents to the then-chairman Francis Githua Wangungu in the presence of the DCIO. She was instructed by the said Chairman to prepare an additional agreement showing the names of the officials of the society, and the agreement was prepared at the advocate’s office, but some officials declined to show up to sign the documents despite paying additional charges.
17. The Plaintiff stated that after numerous correspondence, the Plaintiff showed no willingness to honour the terms of the agreement, prompting her to file this suit.
18. In cross-examination, she stated that she entered into an agreement with the defendant society, and she used to be a member. She acknowledged that it was Ihururu Housing Co-operative Society Ltd who wrote a letter dated 16/6/2018 to her, confirming approval of her request to buy the suit property and that she paid the Ksh 440,000/= deposit to the officials of Ihururu Housing. That she was a member of both co-operative societies. Her view was that both the defendant and the third party were the same.
19. She stated that she entered into an agreement with the defendant, Ihururu Dairymen’s Co-operative Society and not the third party, Ihururu Housing Co-operative Society Ltd. The Ihururu Housing officials had no authority to sell on behalf of the 3rd Party. She stated that it was the chairman, David Wanjohi, who took the consideration money.
20. DW 1 Alice Wanjiru, the Secretary Manager of the defendant, adopted her witness statement as evidence, stating that she knows that Ihururu Housing Co-operative Society Ltd was founded from Ihururu Dairymen’s. She stated that the Plaintiff bid for and won a tender for the purchase of the suit property back in the year 2018.
21. Pursuant to an AGM held on 18th June 1999, a decision to split the two societies was born, and the members resolved to transfer several properties to Ihururu Housing Co-operative Society Ltd, among them, the suit property. The title to the suit property had been issued in the name of the defendant, Ihururu Dairymen’s Co-operative Society, and the parties approached the defendant and agreed on a direct transfer to the plaintiff and all requisite transfer documents were signed in favour of the purchaser, the plaintiff herein.
22. The witness, DW 1, stated that the Defendant did not receive any money from the Plaintiff on account of the said and that she was well aware of these circumstances. That the Plaintiff has never made any follow-up with the Defendant as alleged, and that they had long handed over the documents in respect to her transaction to Ihururu Housing Co-operative Society Ltd, and that is where her claim should lie.
23. Upon cross-examination, she stated that they were transacting on behalf of the 3rd party. That in the confusion of separation, some officials had misappropriated the monies of the members and that it was the 3rd party chairman who pocketed the monies paid by the plaintiff.
24. DW 2 Meshack Murage, who was the chairman of Ihururu Dairymen’s Co-operative Society but was already retired, confirmed that the plaintiff was one of the society’s members. He adopted his witness statement and list of documents as his evidence in chief. He remembered signing an agreement for sale and transfer of land documents together with the other officials of Ihururu Dairymen’s Co-operative Society for the sale of the suit property to the Plaintiff at the request of Ihururu Housing Co-operative Society sometime in 2018, since it was still registered in the defendant’s name.
25. That the Defendant handed over all documents to the Plaintiff and the Housing Society, together with the Commissioner of Lands' consent to transfer the suit property, and thereafter the Defendant had no other obligation on the transaction. The witness denied that the Defendant received any money paid on account of the sale.
26. On cross-examination, DW 2 acknowledged that the agreement signed between the plaintiff and the defendant did not show that they signed it on behalf of Ihururu Housing Co-operative Society. He could not explain why the defendant paid the consideration to the 3rd party’s then chairman, David Wanjohi. His view was that the suit against them should be dismissed and the 3rd party should pay the claim.
27. DW 3 Michael Gachinga Kariuki stated that he used to be Vice Chairman of the 3rd party and is still a member. He adopted his witness statement as his evidence in chief. He averred that the Defendant and the 3rd party are two different entities, and the acts of one entity do not bind the other. On 18th February 2002, the defendant and the 3rd party entered into an agreement where the defendant was to transfer some of the immovable property to the 3rd party and among them the suit property.
28. He stated that on 27/07/2018, the Defendant herein entered into an agreement with the Plaintiff for the sale of the land parcel Mweiga Plot No.7628/131 and that the 3rd party was not part of any agreement and neither did they authorise anybody to act on their behalf for the sale of the said parcel.
29. DW 1 denied that the 3rd party took charge of the transfer process, as it was not in any sale agreement with the plaintiff. He stated that there was no legal course of action between 3rd party and the plaintiff and prayed that the suit against the 3rd party be dismissed with costs.
30. The parties filed written submissions, and judgment was delivered by the trial court on 7th November 2020. The trial Magistrate observed that the agreement between the Plaintiff and the Defendant was not disputed. Further, the fact that the agreement was breached was undisputed. The trial Court found that, according to the agreement, the defendant was liable to make good the refund of the purchase price. However, the court noted that from the evidence on record, the Defendant only facilitated the agreement on behalf of the Defendant. The trial court stated that as a court of equity, the third party should pay the claim regardless of the technicalities. Judgment was thus entered against the third party as per the Plaint, and the claim against the Defendant was dismissed with costs to be paid by the 3rd party.
31. Being dissatisfied with the decision of the trial court, the third party filed this appeal.
Appellant’s Written Submissions
32. Counsel for the Appellant submitted that the officials of the 2nd Respondent, Ihururu Dairymen’s Co-operative Society and the 1st Respondent executed the agreement dated 27/7/2018 and that the Appellant was never party to the said agreement. Counsel noted that it was the 2nd Respondent who acknowledged receipt of the deposit.
33. Counsel for the Appellant submitted that the 1st Respondent did not discharge her burden of proof against the Appellant, stating that the trial court did not cite any reasons for its finding and that no material evidence was produced to confirm the allegation that the 2nd Respondent facilitated the agreement on behalf of the third party.
34. Being the registered owner, the 2nd Respondent was the only one capable of entering into the sale agreement with the 1st Respondent. It is further submitted that the 2nd Respondent had no authority to sell property on behalf of the Appellant herein.
35. Counsel relied on Section 3(3)(a) and(b) of the Law of Contract Act CAP 23, and submitted that there was no intention to bind third parties to the agreement since the agreement did not expressly confirm the intention.
36. Secondly, it was submitted that the trial court erred in law and in fact by applying the wrong principles of law, thus arriving at an erroneous conclusion, submitting that the evidence to be produced in court to prove a claim must flow from pleadings. On this point, they relied on the case of Galaxy Paints Company Ltd. v. Falcon Guards Ltd. Civil Appeal No.219 of 1998 and the cases of Tweedle v. Afkinson (1861)EWHCOBJ57 and Aineah Liluyani Njirah vs. Aga Khan Health Services(2013) Civil Application No.194 of 2009, as well as the doctrine of privity of contract.
37. The Appellant urges the Court to find that neither the sale agreement dated 27/7/2018 nor the acknowledgement by David Wanjohi Wanyiri vested in the Appellant any right or obligation drawn from the agreement between the 1st and 2nd Respondents.
1st Respondent’s Submissions
38. Counsel for the 1st Respondent submitted that the appellant was joined in the proceedings, and the Trial Court found that there was clear and undeniable evidence that the 3rd party was aware of the sale and indeed received the money through its former officials, who acknowledged receipt of the said funds.
39. It is their submission that the Trial Court did not rewrite the agreement for sale but interpreted the agreement together with other evidence that directly impacted liabilities, and that the appellant and the 2nd Respondent are not strangers.
40. Counsel also noted that the Court cannot be invited to resolve internal accountability issues. That the Appellant in its evidence did not deny that its officials did receive and did acknowledge such receipt of the monies.
41. Counsel for the 2nd Respondent informed the Court on 26th February 2025 that he associated himself with the submissions of the 1st Respondent and did not wish to file any submissions.
Analysis and Determination
42. This being a first appeal, the court has considered the Court of Appeals' position on the role of an appellate court as stated in the case of Gitobu Imanyara & 2 others v Attorney General [2016] e KLR, where the Court of Appeal stated that;
"An 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."
43. The Court has considered the grounds of appeal, proceedings before the trial court, the judgment thereof and submissions of Counsel for the parties. The Court is of the view that the grounds of appeal may be summarised into the following issues for determination:
A) Whether the Learned Trial Magistrate erred in law and fact when he entered judgment against the Appellant, who was not a party to any sale agreement, which formed the basis of the 1st Respondent’s claim.
B) Whether the Learned Trial Magistrate erred in law and fact in entering judgment without considering that the Appellant’s case had been proved on a balance of probability without addressing himself on the issues raised by the Appellant in his filed statements and submissions, thereby arriving at the wrong conclusion.
C) Whether the Trial Magistrate erred in awarding the costs of the suit to the 1st Respondent.
Whether the Learned Trial Magistrate erred in law and fact when he entered judgment against the Appellant, who was not a party to any sale agreement, which formed the basis of the 1st Respondent’s claim.
44. The 1st Respondent’s claim is based on the agreement for sale dated 27th July 2018 between her and the 2nd Respondent herein. The subject of the agreement was the sale/purchase of L.R. Mweiga Plot LR 7623/331 for the price of Ksh 1, 650,000/=. She claims to have paid a deposit of Ksh 440, 000/= on the agreement that the suit property would be transferred to her name to facilitate payment of the balance. She stated that the property was never transferred to her. She thus claims a refund of the deposit paid and expenses incurred.
45. As was found by the trial court, the fact that the agreement dated 27th July 2018 was entered into between the 1st and 2nd Respondents is not disputed. Further, the court is satisfied that there was a breach of the said agreement and the land in question was never transferred to the 1st Respondent. The completion documents were not made available to the 1st Respondent to enable her to obtain funding for the balance of the purchase price.
46. The court agrees with the trial court when it made a finding that “the defendant entered into the agreement for the purchase of the suit parcel of land with the Plaintiff. The agreement was breached. The Defendant was thus liable to make good the refund of the purchase price”
47. The 2nd Respondent filed a defence to the Plaintiff’s claim, where it admitted having entered into an agreement with the plaintiff but claimed that it was holding the interest in the suit property on behalf of Ihururu Housing Co-operative Society Ltd, the Appellant herein, at whose request and on whose behalf it entered the sale agreement. The 2nd Respondent stated that the 1st Respondent was well aware that the suit property was transferred to the Appellant after a members’ resolution. The 2nd Respondent denied receiving the sum of Ksh 440,000 from the 1st Respondent, stating that it was paid to and acknowledged by the Appellant.
48. The standard of proof in a civil claim is on a balance of probability. Mary Kasango J in the case of D. T. Dobie & Company (K) Ltd v Wanyonyi Wafula Chebukati [2014] eKLR stated as follows regarding this standard:
“The burden of proof in Civil cases is on a balance of probability.
Denning J. in MILLER –Vs- MINISTER OF PENSIONS (1947), discussing that burden of proof, had this to say-
“That degree is well settled. It must carry a reasonable degree of probability, but not so high as is required in a criminal case. If the evidence is such that the tribunal can say: ‘We think it more probable than not', the burden is discharged, but if the probabilities are equal, it is not.
Thus, proof on a balance or preponderance of probabilities means a win, however narrow. A draw is not enough. So, in any case in which the tribunal cannot decide one way or the other which evidence to accept, where both parties’ explanations are equally (un)convincing, the party bearing the burden of proof will lose, because the requisite standard will not have been attained.”
14. Sections 107 and 108 of the Evidence Act Cap 80 provide who bears the
burden of proof in a case. Those two Sections provide-
“107. (1) Whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts must prove that those facts exist.
(2) When a person is bound to prove the existence of any fact, it is said that the burden of proof lies on that person.
108. The burden of proof in a suit or proceeding lies on that person who would fail if no evidence at all were given on either side.”
49. Having evaluated the evidence on record, the court believes that the balance of probability lies heavier in favour of the position that the breach of contract was caused by the 2nd Respondent, who was the Defendant as the vendor and a party to the agreement dated 27th July 2018. In this court's view, the trial court erred when it dismissed the suit against the 2nd Respondent/Defendant and in finding that the Appellant/third party was directly liable to make good the terms of the contract and in entering judgment in favour of the 1st Respondent, who was the Plaintiff against the Appellant who was the third party.
B) Whether the Learned Trial Magistrate erred in law and fact in entering judgment without considering that the Appellant’s case had been proved on a balance of probability without addressing himself on the issues raised by the Appellant in his filed statements and submissions, thereby arriving at the wrong conclusion.
50. Having found that there was a breach of contract by the Defendant, the court must consider whether the Defendant was entitled to contribution or indemnity from the third party/Appellant herein.
51. After the 2nd Respondent filed a defence, it filed a Third Party Notice dated 2nd September 2020 claiming full indemnity from the Appellant in respect of any sums that may be payable to the 1st Respondent and costs that may be incurred by the 2nd Respondent. It claimed that the transaction subject matter of the suit was entered into upon request by the third party to transfer the property to the purchaser directly. The 2nd Respondent claimed that it performed the obligations under the agreement by releasing all the completion documents to the Appellant.
52. The Civil Procedure Rules provide for third-party notices under Order 1 Rule 15, stating as follows;
(1) Where a defendant claims as against any other person not already a party to the suit (hereinafter called the third party)—
(a) that he is entitled to contribution or indemnity; or
(b) that he is entitled to any relief or remedy relating to or connected with the original subject-matter of the suit and substantially the same as some relief or remedy claimed by the plaintiff; or
(c) that any question or issue relating to or connected with the said subject-matter is substantially the same question or issue arising between the plaintiff and the defendant and should properly be determined not only as between the plaintiff and the defendant but also as between the plaintiff and the defendant and the third party or between any or either of them,
he shall apply to the Court within fourteen days after the close of pleadings for leave of the Court to issue a notice (hereinafter called a third party notice) to that effect, and such leave shall be applied for by summons in chambers ex parte supported by affidavit.
53. The Appellant in its defence denied the contents of the Plaint, stating that it was not a party to the sale agreement herein and neither did it authorise the 2nd Respondent to sell the suit property on its behalf. The Appellant also denied receiving any money as part of the proceeds of the sale of the suit property, and that it took charge of the process of transfer of the land to the Plaintiff. The Trial court proceeded to hear and determine the dispute between the 1st Respondent and the 2nd Respondent, and the dispute between the 2nd Respondent and the Appellant.
54. In the Court's view, the issues in contention are;
i) Whether the 2nd Respondent entered into the sale agreement on its behalf or at the request and on behalf of the Appellant herein.
ii) Who received the initial sale deposit of Kshs. 440,000?
55. The court has looked at the pleadings filed in court by all the parties and the evidence adduced before the trial court. The court is persuaded that the 2nd Respondent entered into the transaction of sale of the suit property at the request and on behalf of the 3rd Party/Appellant. This is for various reasons that will be enumerated hereafter.
56. The reason the court is convinced that the 2nd Respondent entered into the sale agreement at the request and on behalf of the Appellant herein is by considering the documents exhibited by all the parties. In particular, the documents produced by the 2nd Respondent and the Appellant herein show that even though the suit parcel of land was registered in the name of the 2nd Respondent, the same was owned by the Appellant, and all the parties were aware of this.
57. The court has considered the minutes of meetings of the Appellant held on 26th July 2000, showing that documents relating to the suit parcel of land were handed over to the Appellant's housing committee. The Court has also seen the Agreement of transfer of Assets between the Appellant (the transferee) and the 2nd Respondent (the transferor) dated 18th February 2002. In the agreement, it was agreed that the suit parcel of land, among others, was to be transferred to the Appellant. The agreement affirms that the 2nd Respondent had resolved to have the Appellant incorporated and registered under the Co-operative Societies Act with the intent that it shall take over ownership and running of some of the 2nd Respondent's land and buildings.
58. The handing over and/or transfer of the assets was confirmed during a meeting held on 10th October 2013, which was signed by the Appellant and the 2nd Respondent. All these documents show that the suit parcel of land was the property of the Appellant, even though the title was in the name of the 2nd Respondent.
59. Further to this, the Court has confirmed from the evidence adduced that the 1st Respondent (the purchaser) was a member of the Appellant and the 2nd Respondent. She stated that she expressed her interest in buying the plot by a letter dated 12th June 2018 and that the 2nd Respondent accepted to sell the plot to her via a letter dated 16th June 2018. The court notes that the letter dated 12th June 2018 was not on the 1st Respondent's list of documents, but the letter dated 16th June 2018 is a letter from the Appellant herein, Ihururu Housing Co-op Society Ltd, addressed to the 1st Respondent with reference to the sale of Mweiga plot LR. 7623/331. The said letter is signed by the Chairman of the Appellant, David Wanjohi Wanyiri. The letter states that "We are pleased to inform you that your tender offer for the above plot, amounting to 1.65 M (One Million six hundred and fifty thousand Kshs), has been approved. Other processes can proceed while awaiting valuation approval."
60. The 1st Respondent confirmed in her evidence that initially the land was to be transferred to the Appellant herein by the 2nd Respondent. However, the officials of the Appellant requested the officials of the 2nd Respondent to transfer the land to the 1st Respondent directly. The 2nd Respondent accepted the request and signed the transfer documents.
61. In the court’s view the signing of the sale agreement was part of the agreement between the Appellant and the 2nd Respondent. These instructions from the Appellant were confirmed through the letter to the 2nd Respondent dated 29th June 2018.
62. The 1st Respondent, in her testimony before the trial court, stated that the same Chairman of the Appellant, David Wanjohi, was tasked with the duty to follow up and ensure fast transfer of the land to her and that he gave the documents of transfer to a broker by the name Dennis Njenga Mburu.
63. She testified that when the transfer took too long, she reported the matter to the DCIO and the agent and the chairman were summoned, and they returned the documents to the then chairman Francis Gathua Wangungu, who was the vice chairman during the sale agreement. The 1st Respondent further testified that they agreed that a further agreement would be drawn to include officials of the Appellant, but despite the agreement being drawn, some of the officials of the Appellant refused to sign it.
64. Further, the 2nd Respondent produced in evidence minutes of a meeting of the Appellant 4th July 2019, where the sale of the suit parcel of land to the 1st Respondent was discussed. The meeting resolved that “the buyer of Mweiga plot said that she has already deposited the balance of Kshs 1,160,000 with her lawyer and is now waiting for our lawyer to collect after giving the title". By a letter dated 10th July 2019 from the Appellant addressed to the firm of Kabira Kioni & Co. Advocates, the Appellant confirmed that the buyer had deposited the balance of Kshs. 1,210,000 with her lawyer, and that the title could be released to her after receipt of the money. This was indeed a confirmation that the Appellant was aware of and was a party to the transaction.
65. Further, by a letter written by the Advocate for the 1st Respondent, Karweru & Co Advocates, dated 14th August 2019, addressed to the Appellant, sought a refund of the deposit of the purchase price, and it acknowledged that the Appellant was the seller of the land while the land was registered in the name of the 2nd Respondent.
66. The court is cognizant of the fact that the sale agreement dated 27th July 2018 and the averments made in the plaint show that the 1st Respondent purchased the suit land from the 2nd Respondent, who is described as the registered lessee of the suit parcel of land reference number 7623/131. The agreement and the plaint show that the 2nd Respondent, as vendor, was desirous of selling the land. However, having handed over and transferred the suit parcel of land to the Appellant as detailed above, the court is convinced that it is more likely that the sale of the suit parcel of land was by the Appellant than it was by the 2nd Respondent. The totality of the evidence adduced shows that the involvement of the 2nd Respondent was because the title deed was in its name, and the only way to complete the transaction was by involving it in the transaction.
67. Going on to the issue of who received the initial sale deposit of Kshs. 440,000, the court notes that clause 1 of the sale agreement stated that the deposit of Ksh 440,000/= was paid to the vendor, Ihururu Dairymen's Co-operative Society, the 2nd Respondent herein, who acknowledged having received the part payment.
68. As stated earlier, when a decision was made to split the two societies, the Appellant and the 2nd Respondent, the members resolved to transfer several properties to Ihururu Housing Co-operative Society Ltd, among them, the suit property.
69. During the hearing and on cross-examination, the 1st Respondent stated that she paid the deposit to officials of the Appellant. On further cross-examination, she stated that it was the then chairman of the Appellant, David Wanjohi, who took the deposit. It is noted that none of the parties claims that David Wanjohi was an official of the 2nd Respondent herein. He was also not one of the signatories of the sale agreement, and the chairman of the 2nd Respondent.
70. The 2nd Respondent denies having received the deposit of the purchase price, stating that the said deposit was paid to and acknowledged by Ihururu Housing Co-operative Society Ltd before the signing of the sale agreement by its then officials. The 2nd Respondent exhibited an acknowledgement of receipt of Kshs 440,000 dated 6th July 2018 from the 1st Respondent, being a deposit of the purchase price for the suit parcel of land. The recipient of the money was David Wanjohi Wanyiri. He further acknowledged receipt of Kshs 50,000, being payment for the title deed /lease certificate and stamp duty payment.
71. In the court's view, the deposit of the purchase money was received by the Appellant's Chairman, David Wanjohi Wanyiri. Even though the Appellant states that the money was not received in any of its accounts, the court is of the view that the acts of the Appellants’ chairman were binding on the Appellant, especially when dealing with third parties in good faith. Indeed, this is fortified by the minutes of the Appellants' meeting of 4th July 2019, the letter dated 10th July 2019 and the one dated 14th August 2019, all confirming the Appellants' knowledge of the sale transaction of the suit land.
72. Counsel for the Appellant relied on the holding of the Court of Appeal in the case of Galaxy Paints Company Ltd V Falcon Guards Ltd [2000]eKLR, where it was held that issues for determination flow from pleadings, and that the claim herein was against the 2nd Respondent and not them. The Learned Judges of Appeal in the above-quoted case found that:
“It is trite law, and the provisions of O.XIV of the Civil Procedure Rules, are clear that issues for determination in a suit generally flow from the pleadings, and unless pleadings are amended in accordance with the provisions of the Civil Procedure Rules, the trial court, by dint of the provisions of O.XX rule 4 of the aforesaid rules, may only pronounce judgment on the issues arising from the pleadings or such issue as the parties have framed for the court's determination”.
73. In the case of Mark Otanga Otiende v Dennis Oduor Aduol [2021] eKLR, the Court of Appeal quoted as follows regarding privity of contract:
“…… a contract cannot be enforced either by or against a third party, except in certain cases only. In Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] AC 847, Lord Haldane, LC, rendered the principle thus:
74. However, the present suit was against the 2nd Respondent, but the 3rd party proceedings brought in the Appellant and the claim against the said third party had to be taken into consideration. The issue of third-party proceedings is determined between the defendant and the third party, as was enunciated in Kenya Commercial Bank vs Suntra Investment Bank Ltd (2015) eKLR, where the court held that:-
“In law, a third party is enjoined in a suit at the instance of the defendant and through the set procedure under Order 1 Rule 15-22 of the Civil Procedure Rules. And, liability between the defendant and the third party is determined between the defendant and the third party, but of course, after the court is satisfied that there is a proper question to be tried as to liability of the third party and the defendant, and has given directions under Order 1 Rule 22 of the Civil Procedure Rules. The way I understand the law on third parties, such issues of third parties are issues and triable only between the third party and the defendant and cannot be a bona fide issue triable between the defendant and the plaintiff. On the basis of those legal reasons, even if the third party had been joined, which he has not, it is not a triable issue at all for purposes of liability between the plaintiff and the defendant.”
75. In the case of Lucy & 2 others v Mukomene & 4 others (Civil Appeal E029 of 2020) [2022] KEHC 3010 (KLR) (16 June 2022) (Judgment), the court made the following observations concerning the right to indemnity;
“Indemnity is one of the grounds upon which a defendant may issue with leave of the court a third party notice under Order 1 Rule 15 of the Civil Procedure Rules. See Yafesi Walusimbi v. AG of Uganda (1959) EA 223 and Total Oil Products Ltd v. William M. K. Malu (1966) EA 164. In addition, as defined in Bullen and Leake’s Precedents of Pleadings, 10th ed. (1950) at p. 164, “an indemnity is a collateral contract or security (either express or implied) whereby the principal party or indemnitor undertakes to compensate another person (the indemnitee) for any loss or injury resulting from some act or forebearance done by him at the request of the Indemnitor.” See also Birmingham and District Land Co. v. L. and N.W. Rly. Co. (1887) 34 Ch. D 261 cited in Yafesi Walusimbii and dealing with a rule similar to our Order 1 Rule 15 of the Civil Procedure Rules. In this case, there is a right to indemnity based on the dealing between the 2nd and 3rd appellants’ Insurer CIC Insurance and the purported advocate for the 1st respondent during the negotiations on the settlement of the negligence claim herein.”
76. From the foregoing, this court agrees with the finding of the trial court that the 2nd Respondent had proved its case on a balance of probabilities against the 3rd party/Appellant. However, this court finds that the trial court erred in dismissing the suit against the 2nd Respondent and in entering judgment against the Appellant directly instead of making an order in favour of the 1st Respondent against the 2nd Respondent and finding that the 2nd Respondent was entitled to an order of contribution and/or indemnity against the Appellant.
C) Whether the Trial Magistrate erred in awarding the costs of the suit to the 1st Respondent.
77. Section 27 of the Civil Procedure Act, CAP 21 of the Laws of Kenya, provides that:
“Subject to such conditions and limitations as may be prescribed, and to the provisions of any law for the time being in force, the costs of and incidental to all suits shall be in the discretion of the court or judge, and the court or judge shall have full power to determine by whom and out of what property and to what extent such costs are to be paid, and to give all necessary directions for the purposes aforesaid; and the fact that the court or judge has no jurisdiction to try the suit shall be no bar to the exercise of those powers: Provided that the costs of any action, cause or other matter or issue shall follow the event unless the court or judge shall for good reason otherwise order.”
78. Kariuki J in the case of DGM v EWG [2021] eKLR quoted with approval the holding in these cases as follows:
In Reid, Hewitt & Co v Joseph, AIR 1918 Cal 717 and Myres v Defries (1880) 5 Ex D 180, the House of Lords noted that: -
“The expression ‘costs shall follow the event’ means that the party, who, on the whole, succeeds in the action gets the general costs of the action, but where the action involves separate issues, whether arising under different causes of action or under one cause of action, the word ‘event’ should be read distributive and the costs of any particular issue should go to the party who succeeds upon it.”
79. The court agrees with the position that costs usually follow the event and are discretionary.
80. In conclusion, the appeal herein partly succeeds. Accordingly, for the reasons set out above, and for clarity and avoidance of doubt, the court makes the following Orders;
A) The appeal from the judgment of the Honourable Senior Principal Magistrate at Nyeri, Hon. Mathias Okuche, delivered on 10/11/2022, is allowed in part and the following orders are issued in place of the orders issued by the trial court;
B) Judgment is hereby entered in favour of the 1st Respondent (Plaintiff) against the 2nd Respondent (Defendant) as follows;
i) Payment of Kshs 440,000 plus 30% interest as penalty/breach charge.
ii) Kshs 28,400 as per paragraph 10 of the plaint.
iii) Interest on (B) (i) and (ii) above at court rates.
( C) The 1st Respondent is awarded costs of the suit before the trial court.
(D) The Appellant (the Third Party) shall indemnify the 2nd Respondent (Defendant) for the entire amount awarded to the 1st Respondent/Plaintiff at paragraphs (B) and (C) above.
( E) The costs of this appeal are awarded to the 1st Respondent to be paid by the Appellant (third party).
Delivered, Dated and Signed at Nyeri on the 1st day of August 2025