'(Being an appeal from the judgment and decree of Hon. C. K. Cheptoo (Principal Magistrate), delivered on 8th March 2024 in the Magistrates Court at Milimani MCCC No. E8443 of 2021)
1. This appeal arises from a suit by the appellant against the respondent in a plaint dated 21st May 2021 for breach of contract. The respondent’s claim in the suit was for KShs 1,448,237/= as the principal sum, KShs 398,554/= as interest on the principal sum calculated up to September 2020, and interest on the principal sum at 3% from October 2020 until payment in full, together with costs of the suit and interest.
2. The claim arose from the supply of assorted steel products by the appellant to the respondent from the respondent’s Local Purchase Order (LPO) number 5946 issued to the appellant’s sister company, Tononoka Steels Limited, and delivery made to the respondent through invoice/delivery note No. 48740 dated 10th April 2019.
3. The appellant filed suit to recover the unpaid money for the assorted steel products supplied.
4. The respondent filed a statement of defence dated 23rd August 2021 and denied the claim. It averred that it had no contractual relationship with the appellant or its sister company Tononoka Steels Ltd, but that the contract for the supply of the various assorted steel products was between the appellant and a company by the name of Cospin srl, which was executed on 20th May 2019 for the rehabilitation and design of the water and sewage system of Kirandich basin, Kabarnet. That, the respondent was only engaged by Cospin srl as its agent to oversee the works being undertaken by Cospin srl at the Kirandich basin project. The respondent therefore denied issuing any LPO to the appellant as alleged and contended that as the contractor’s agent, it could not be sued as there was no contract between it and the appellant.
5. At the hearing, the appellant called one witness, PW 1, Prasad Karey, the company’s group head of sales and marketing. He adopted his witness statement dated 21st May 2021 as his evidence in chief and produced the documents in the lists of documents dated 21st May 2021 and 14th September 2021, respectively, as exhibits. The witness statement essentially reiterates the averments in the plaint.
6. In his testimony in court, PW 1 stated that the LPO was not issued to the appellant by Cospin srl, and he was not aware of that company. However, on being referred to the contract signed by the appellant with Cospin srl, which was part of the respondent’s documents, he said that he was aware of the company. He conceded that he was the one who signed the contract on 22nd February, but hastened to add that the appellant did not supply any goods to Cospin srl. He said the contract was concluded on 20th May when Cospin srl signed it.
7. PW 1 was emphatic that the appellant supplied all the goods as per the invoices issued.
8. In cross-examination, he was taken through the contract. He said that parties to the contract were the appellant and the respondent. He however, conceded that he had signed the contract and then that he was aware that the contract was signed between Cospin srl and the appellant, He also said that Thomas and Piron Grands Lacs Ltd (Piron), the respondent, was acting for Cospin srl. He said he was not aware that all the invoices were to be issued to Cospin srl.
9. In re-examination, he said that the materials were supplied to the Kirandich project in Baringo.
10. DW 1, Coralie Piron, gave evidence for the respondent. He also adopted his witness statement dated 23rd August 2021 as his evidence in chief and also produced the accompanying documents as exhibits. He said that under the contract, Thomas & Piron, the respondent was acting on account of Cospin srl and that the materials were supplied to the Kirandich site. He said that at the time of supplying the materials, the contract had not been signed by the parties but the same was working. He said the contract was extended in April 2019. He said that delivery was done based on LPOs and Cospin srl was to pay the appellant. He said that the respondent had no communication on what the appellant had supplied to Cospin srl. However, they were following up on payment from Cospin srl on behalf of the appellant.
11. In cross-examination, DW 1, said that they were directors of Cospin srl.
12. Upon considering the evidence and submissions of the parties, the learned trial magistrate in her judgment dated 8th March 2024, found that the respondent was a subcontractor of the contractor, Cospin srl. She found further that the respondent was an agent of the main contractor, Cospin srl, and therefore, the appellant had no legitimate claim against the respondent, and the appellant should have directed the claim to Cospin srl.
13. Consequently, the learned trial magistrate dismissed the appellant’s claim against the respondent.
14. The appellant now appeals against that decision, raising some five grounds in its memorandum of appeal dated 3rd April 2024, that the learned trial magistrate erred in law and in fact:
a. by finding that the respondent was acting as an agent of the appellant.
b. in finding that the contract executed in May 2019 between the appellant and Cospin srl applied to the particular transaction between the appellant and the respondent.
c. in finding that there was no contractual relationship between the appellant and the respondent.
d. by disregarding the appellant’s uncontroverted evidence in support of the claim, in particular that:
i. evidence that the respondent issued the LPO dated 3rd April 2019 which was issued by the respondent in its own name and capacity.
ii. evidence that the respondent received the goods ordered for through the LPO dated 3rd April 2019.
iii. express admission of indebtedness through e-mails and electronic messages – WhatsApp.
e. by making a determination that amounted to assisting the respondent to unjustly enrich itself.
f. by finding that the appellant had no legitimate claim against the respondent.
15. The appeal was heard by way of written submissions, which learned counsels for the appellant and the respondent respectively filed.
16. In listing the issues for determination, learned counsel for the appellant simply indicated that he would be merging the grounds of appeal into two and argue them as such. Consequently, grounds 1, 2, 3 and 4 were argued together while grounds 5, 6 and 7 (this court already merged grounds 4 and 5) were argued together.
17. This being a first appeal, the duty of the court is to re-evaluate, re-analyze and re-consider the evidence and draw its own conclusions, bearing in mind that it did not see witnesses testifying and therefore give due allowance for that. See for example Selle & another vs. Associated Motor Boat Co. Ltd & others [1968] E.A at page 126 where it was held as follows:
“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 allowance in this respect. In particular, this court is not bound necessarily to follow the trial judge’s findings of fact if it appears either that he has clearly failed on some point to take account of particular circumstances or probabilities materially to estimate the evidence or if the impression based on the demeanor of a witness is inconsistent with the evidence in the case generally (Abdul Hameed Saif v Ali Mohamed Sholan (1955), 22 E.A.C.A. 270)”.
18. See similar holding in Peters vs. Sunday Post Limited (1968) EA 123. (1956) E.A page 424.
19. In support of grounds 1, 2, 3, and 4, it is the appellant’s position that the respondent issued the subject LPO in its own name and capacity, received the materials, and accepted the subsequent invoice and was therefore liable to pay. Further, it promised to pay for the materials in its WhatsApp correspondence with the appellant. However, it failed to make the payment as expected. Learned counsel for the appellant submits further that the respondent failed to provide any evidence that it was acting within the scope of its authority with Cospin srl in issuing the subject LPO in its name. According to learned counsel, if the respondent was acting as an agent, the LPO ought to have been in the principal’s company name and signed off as an agent.
20. According to the appellant, the LPO is a contract on its own, and in this case, the contract was between the appellant and the respondent. That even upon being invoiced, the respondent never denied liability nor requested that the invoice be raised against a third party but went ahead to promise to clear the payments. Under those circumstances, the appellant submits that where an agent accepts liability and makes a promise, then it is held liable for the performance of the contract.
21. Learned counsel has cited the following communication from the respondent to the appellant: “I have, however, access and saw the funds are there”, “we have given them 2 weeks’ notice to send us the funds.” According to the appellant, this communication was an insinuation that the funds were to be made available to the respondents and the respondent would make payment to the appellant.
22. The appellant cites the case of Carol Construction Engineers Limited & another v National Bank of Kenya [2019] KEHC 95 (KLR) where the English case of Pickard v Sears 112 E.R. 179 is cited and where Lord Denman CJ stated thus:
“The rule of law is clear that where one, by his words or conduct, willfully causes another to believe in the existence of a certain state of things, and induces him to act on that belief, so as to alter his own previous position, the former is precluded from averring against the latter a different state of things as existing at the time…”
23. The submissions in support of grounds 5, 6, and 7 are more or less the same as those for the earlier grounds.
24. The respondent submits through its learned counsel that the two issues for determination are whether the trial court erred in finding that the respondent was the contractor’s agent and that the appellant had no legitimate cause of action against the respondent.
25. The respondent submits that the respondent was sub-contracted by the contractor, Cospin srl on the contract No. Kirandich/II/02-LOT with Rift Valley Water Services Board for the rehabilitation and design of the Water and Sanitation Systems for the Kirandich Basin & Capacity Building, Kabarnet. That the respondent was sub-contracted to oversee the works and that at all material times, the respondent was acting as the contractor’s agent, which fact was known to the appellant.
26. The respondent cites the case of Industrial & Commercial Development Corporation (ICDC) v Patheon Limited [2015] KECA 96 (KLR) where the Court of Appeal considered the definition of the word “agent,” and submits that from the contract dated 12th February 2019, the respondent had been engaged as Cospin srl’s agent concerning the RVWSB contract in terms of that definition.
27. The respondent submits that although in this appeal the appellant argues that the respondent acted outside the authority of its principal, it never pleaded the same nor argued it before the trial court. It is therefore raising a new issue in the appeal and attempting to make a fresh case on appeal, and the same should be disregarded by this court. In support thereof, the respondent cites the case of Mahamud v Mohamad & 3 others [2018] KESC 62 (KLR).
28. In response to the ground that the respondent failed to adduce evidence to show that it was acting as an agent of the contractor in issuing the subject LPO, the respondent refers to the contract dated 12th February 2019 between itself and the contractor, Cospin srl where it was appointed to act on behalf of the contactor and its scope extended to issuing LPOs to the appellant.
29. The respondent submits that the appellant, by alleging that the LPOs were issued by the respondent in its personal capacity without the contractor’s authority, is feigning ignorance, yet it was all along aware that the respondent was at all times acting as an agent of Cospin srl, the contractor. That the LPOs were issued based on the contract between the contractor, Cospin srl, with RVWSB, as read with the contract between the contractor and the appellant dated 20th May 2019, and that the respondent was not a party to either of them. Further, that the contract between the contractor and the appellant, dated 20th May 2019, notes that the respondent was the contractor’s local agent as the contractor is domiciled in Italy and that Prasad Karey, the appellant’s witness had confirmed knowledge of the same in his testimony in court. Further that the witness had confirmed that he had correspondence with the respondent’s principal on 12th June 2020 and 17th July 2020. In the circumstances, the respondent submits that the appellant is estopped under section 120 of the Evidence Act (Cap. 80) Laws of Kenya, from claiming otherwise.
30. The respondent submits further that the intention of the appellant and the contractor in their contract dated 20th May 2019 was clear that the respondent was acting as the contractor’s agent and this court cannot find otherwise, as doing so would amount to overriding the parties’ intention. That submission is supported by the cases of National Bank of Kenya Ltd v Pipeplastic Samkolit (K) Ltd & another [2001] KECA 362 (KLR) where it was held that, “A Court of law cannot re-write a contract between the parties. The parties are bound by the terms of their contract, unless coercion, fraud or undue influence are pleaded and proved.” and reiterated in the case of Pius Kimaiyo Langat v Co-operative Bank of Kenya Limited [2017] KECA 152 (KLR) that, “ … it is not the business of courts to rewrite contracts between parties. They are bound by the terms of their contracts, unless coercion, fraud or undue influence are pleaded and proved.”
31. The respondent submits further that the trial court properly considered all the evidence adduced before it in arriving at its judgment dated 8th March 2024.
32. The respondent submits that, as an agent of the contractor, a disclosed principal, it was not bound to settle the claim by the appellant. It relies on the case of Victor Mabachi & another v Nurtun Bates Limited [2013] KECA 204 (KLR) where the Court of Appeal cited with approval, the holding in the case of Anthony Francis Wareheim t/a Wareheim & 2 Others vs. Kenya Post Office Savings Bank, Civil Application Nos. Nai 5 & 48 of 2002, at page 10, that:
“It was also prima facie imperative that the court should have dismissed the respondent’s claim against the second and third appellants for they were impleaded as agents of a disclosed principal contrary to the clear principal of common law that where the principal is disclosed, the agent is not to be sued. Furthermore, the court having found on the evidence that the second and third appellants were principals in their own right and not agents of the first appellant in the transaction giving rise to the suit, it should have dismissed the suit against the first appellant who had been sued as the principal.”
33. The above decisions affirm the principal that an agent cannot be sued where there is a disclosed principal.
34. I have considered and re-evaluated the evidence tendered before the trial court. For me, the issues for determination are whether or not the appellant was liable on the contract in this case in any way, and if so, whether the trial court was correct to find that the respondent was acting as an agent of Cospin srl and was therefore not liable for the goods supplied under the LPO dated 3rd April 2019.
35. It is apparent from the evidence on the record of the trial court that Cospin srl in JV with Nurovi srl, both of Italy, referred to as “the contractor” entered into a contract with Rift Valley Water Services Board (RVWSB) (although in one instance referred to as Council probably erroneously) on 29th April 2016. The contract was for “Design and completion of works for the rehabilitation of water and sewage systems in the Kirandich basin (“executive planning and works”).
36. Afterward, Cospin srl in JV with Nurovi srl entered into a contract dated 12th February 2019 with Thomas & Piron Grand Lacs Ltd (Piron), the respondent herein, referred to as the “subcontractor” for the latter to carry out the execution of “works” under the said contract. Under the latter contract, Piron was therefore entrusted with all the supplies and installation works for the project, the overall design phase having been executed between the Contractor and RVWSB.
37. There is also another contract between Cospin srl c/o Thomas & Piron Grands Lacs Ltd and Tononoka Rolling Mills Ltd (Tononoka) dated 22nd February 2019, but signed on 13th May 2019 by Tononoka and on 20th May 2019 by Cospin srl c/o Thomas & Piron Grand Lacs. In this contract, Cospin and Piron were collectively referred to as “the contractor,” while Tononoka was referred to as “the Supplier to Main contractor.”
38. These agreements between the various parties thereto are not disputed at all. It is also not disputed that the materials, the subject of the claim in the suit before the trial court, were supplied to the project which Cospin had with RVWSB at the request of Piron, who were at the time undertaking the project as the contractor. What is in dispute is the nature of the relationship between the appellant, the respondent, and Cospin and the respondent’s liability to the appellant. It is the word of the appellant against that of the respondent, seeing that Cospin was not made a party to the suit.
39. In the case of Maurice Oduor Okech v Chequered Flag Limited [2013] eKLR, citing the case of Everret Aviation Limited Vs the Kenya Revenue Authority [2013] eKLR, the Court stated that:
“… In determining whether a relationship between parties is a contract for services between two independent parties or a contract of service giving rise to an employer/employee relationship, the traditional tests of control of the work by the employer and its integration into the employer’s care business are no longer conclusive. In my view, the fundamental behaviour of the parties such as the form of documentation evidencing the relationship and the mode of payment is critical.”
40. I find that this holding, though relating to an employment contract, by analogy, it aptly applies to the current case between the parties. In this case, the form of contract between the parties was reduced into writing and therefore the terms thereof have to be considered.
41. The law under section 107(1) of the Evidence Act and supported by many authorities requires that he who asserts must prove. The burden was upon the appellant to prove its allegations that indeed the respondent and not Cospin was responsible for the payment of the materials supplied for the project.
42. The appellant maintains that the supply of materials was a contract under the LPO and appears to suggest that the contracts between the parties ought not to be considered. Indeed, the appellant’s witness appeared at some point to discount the contract between the appellant and Cospin c/o Piron, alleging that he was not aware of it, only to be reminded by his counsel and then he conceded that he was in fact the one who signed it. I think it was erroneous for the appellant to try and dispute that the supply of the materials was based on the contract dated 20th May 2019 and allege that the LPOs formed independent contracts. That was not the case.
43. That contract refers to both Cospin srl and Piron, Cospin being indicated as being care of (c/) Piron. Under the Memorandum of Agreement to that contract, clause 5 provides that the Supplier to Main Contractor (in this case Tononoka), the appellant, duly acknowledges receipt of the Contractor’s Approval Invoice Process Scheme (attached). Unfortunately, that scheme was not among the documents supplied either by the appellant or the respondent. However, what is notable here is the use of the term “contractor.” As stated above, the term “contractor” as used in that contract refers to Cospin srl and Piron collectively. It is therefore not obvious from that contract that the respondent was acting as an agent of Cospin for purposes or as an independent contractor.
44. This leaves us with the contract between Cospin srl and Piron. Under the contract, Piron was expected to acquire full management of the project. It is worth noting that this contract was titled “Substract contract,” which most probably was meant to be a “subtract contract,” given the fact that it was some standard form contract and Cospin was essentially passing the responsibility of execution of its contract with RVWSB to Piron as is evidenced from the terms therein. For instance, it is indicated in the contract that… “Second, Thomas & Piron Grand Lacs Ltd, knows well the places (hereinafter “Site”, the type of work to be done and the related times for their completion…” Article 2 of the contract provided that Piron undertook to perform all the work as foreseen in the executive design (Annex 2) and the price list (Annex 5). Of particular importance is the provision on the amount of money payable for the works which was indicated as follows:
“… the tender sum of Euro 17,282,000/= less Euro 420,000/= of design costs making the sum payable to Piron Euro 16,862,202/= with a discount of 18.16% which total amount included all the provisions as indicated in the Bill No. 1 with the exception of the guarantee of success and the obligation of the advance payment.”
45. What is notable here is that the price or consideration for execution of the work by Piron was explicitly stated without any reservation. According to me, this was equivalent to Cospin assigning the full execution of the contract it had remaining with RVWSB to Piron. Under Article 4, it was provided that,
“… - from which the principle is: state of progress every 15 days and payments within 30 days and accepts that process, methodology, and timing are reflected identically in this contract between Thomas Piron….. and Cospin… which means that the prior documents, signed by the Customer, will trigger the billing process.
Payments will be made according to the price list of this agreement, or to the SAL products deducted from the discount of 18.16% with the only deductions provided for in the contract (or deemed) which is attached to Annex 5 (net amount of 18.16%).
46. Further that:
Cospin srl in JV with Nurovi srl accepts the principle of “assignment of receivables”, for an amount equal to this Sub-Contracting Contract referred to in Article 2 and according to the price list referred to in Annex 5, or to the SAL products deducted from 18.16% discount with the deductions provided for in the contract as deemed, which will be managed and implemented by the Banks of the Contractor and the SubContractor (sample and draft in Annex 6).
It is mandatory to implement this assignment as soon as possible, so that Thomas & Piron Grand Lacs Ltd can access the necessary funds at its bank.”
47. It is apparent from the foregoing provisions of the contract that Cospin went as far as making provision for Piron to access funds for execution of the contract.
48. The contract provides further that:
1. For supplies: 20% payment by proof of payment, 50% by waybill and proof of insurance for each delivery, 30% upon completion of the supply installation.
2. The General principle will be that all payments made to Cospin srl in JV with Nurovi srl will also be made in proportion to Thomas & Piron Grands Lacs Ltd, which will issue a payment certificate to Cospin srl when Cospin srl is issuing a certificate for payment to the Rift Valley Water Services Board.
49. The same clause provides that any savings on the execution of the works would be in favour of Piron.
50. Article 4 further provided for payment terms and also that the general principle would be that Piron would issue a payment certificate to Cospin when Cospin is issuing a payment certificate to RVWSB.
51. Article 7 provided that Thomas & Piron Grands Lacs Ltd will commit within 7 days from the signing of the agreement, provided that, Cospin srl provides the necessary permits and undertakes all necessary actions to obtain the assignment of the credit confirmed in favour of Thomas Piron through their bank.
52. Artcle 9 further provided that “Piron will undertake to cover all expenses anticipated by Cospin for the realization of works and engineering and construction works.”
53. Further that Piron will enjoy, “assuming all responsibilities”:
a. of the economic benefits deriving from the engineering of the project.
b. from the economies deriving from the modifications to the materials ….
54. I have not seen in the judgment where the learned trial magistrate considered the terms of the contracts. The learned trial magistrate found that the respondent was an agent of Cospin. That was correct insofar as the respondent’s relations with Cospin and RVWSB went. In that case, there would be no difficulty in finding, as learned counsel for the respondent urges, that it was an agent of a disclosed principal, Cospin. The position in law, as submitted by the respondent, and on abundance of decided authorities, is that where a principal is disclosed and known, his/her agent should not be sued in the same cause as a co-defendant. It is true that where there is a disclosed principle, the agent cannot be sued as was held in the case of City Council of Nairobi v Wilfred Kamau Githua t/a Githua Associates & another [2016] eKLR the Court of Appeal held that:
“In the circumstances of this case, the 2nd respondent cannot be sued as agent where there is a disclosed principal [the appellant]. There is therefore no cause of action against the 2nd respondent. The principle of common law is that where the principal is disclosed, the agent is not to be sued. In the circumstances of this case, the principal (the appellant) is disclosed and the agent (the 2nd respondent) cannot therefore be sued. There are no factors vitiating the liability of the disclosed principal. Accordingly, the enjoinment of the 2nd respondent in this case is unwarranted.”
55. However, there are exceptions to this general rule, which are (1) if the agent is undisclosed or partially disclosed, (2) if the agent lacks authority or exceeds it, or (3) if the agent entered into the contract in a personal capacity. From the facts of this case, exceptions 1 and 2 are not applicable herein.
56. It is the appellant’s submission that its case falls within exception 3, that is, where the agent enters into a contract with a third party in its personal capacity.
57. In the present case, I agree with the appellant that reading the provisions of the contract between the respondent, Piron and Cospin srl, it gave Piron the authority to enter into contracts with third parties without reference to Cospin srl, except to the extent that it was the main contractor. I do not find any chance in this contract for the respondent to pass any bills emanating from third parties, such as the appellant herein, with which it had engaged in its execution of the contract, to Cospin srl. In the circumstances, it can only be concluded that the respondent, although executing the works on behalf of Cospin, its engagement with the appellant was in its personal capacity as per the terms of its contract with Cospin srl.
58. I therefore find that the contract made between the appellant and Cospin c/o Piron was essentially a contract between the appellant and Piron even as Cospin was the main contractor.
59. It was thus not tenable for the appellant to sue the principal, Cospin, when the latter had given authority to Piron to act on its own capacity in execution of other sub-contracts for the execution of the works under the project.
60. I therefore find that the learned trial court was in error to find that the respondent was not liable and proceeded to dismiss the suit by the appellant against the respondent. It is apparent that the learned trial magistrate did not consider the issue of the exceptions to the general rules in agency law where the agent enters into a contract with a third party in a personal capacity. Had she had so, I believe she would have arrived at a different conclusion.
61. Consequently, I allow the appeal. The judgment dismissing the appellant’s suit is hereby set aside and substituted with a judgment allowing the case by the appellant against the respondent as prayed in the plaint.
62. The appellant gets the costs of the appeal.
Dated, Signed and Delivered on the virtual platform Teams this 22nd day of September, 2024.
ANDAYI W. F.
JUDGE
In the presence of:
Dache for the Appellant.
Ogore for the Respondent.
Ummu h/b for Carlos: Court Assistant.
'
1. This appeal arises from a suit by the appellant against the respondent in a plaint dated 21st May 2021 for breach of contract. The respondent’s claim in the suit was for KShs 1,448,237/= as the principal sum, KShs 398,554/= as interest on the principal sum calculated up to September 2020, and interest on the principal sum at 3% from October 2020 until payment in full, together with costs of the suit and interest.
2. The claim arose from the supply of assorted steel products by the appellant to the respondent from the respondent’s Local Purchase Order (LPO) number 5946 issued to the appellant’s sister company, Tononoka Steels Limited, and delivery made to the respondent through invoice/delivery note No. 48740 dated 10th April 2019.
3. The appellant filed suit to recover the unpaid money for the assorted steel products supplied.
4. The respondent filed a statement of defence dated 23rd August 2021 and denied the claim. It averred that it had no contractual relationship with the appellant or its sister company Tononoka Steels Ltd, but that the contract for the supply of the various assorted steel products was between the appellant and a company by the name of Cospin srl, which was executed on 20th May 2019 for the rehabilitation and design of the water and sewage system of Kirandich basin, Kabarnet. That, the respondent was only engaged by Cospin srl as its agent to oversee the works being undertaken by Cospin srl at the Kirandich basin project. The respondent therefore denied issuing any LPO to the appellant as alleged and contended that as the contractor’s agent, it could not be sued as there was no contract between it and the appellant.
5. At the hearing, the appellant called one witness, PW 1, Prasad Karey, the company’s group head of sales and marketing. He adopted his witness statement dated 21st May 2021 as his evidence in chief and produced the documents in the lists of documents dated 21st May 2021 and 14th September 2021, respectively, as exhibits. The witness statement essentially reiterates the averments in the plaint.
6. In his testimony in court, PW 1 stated that the LPO was not issued to the appellant by Cospin srl, and he was not aware of that company. However, on being referred to the contract signed by the appellant with Cospin srl, which was part of the respondent’s documents, he said that he was aware of the company. He conceded that he was the one who signed the contract on 22nd February, but hastened to add that the appellant did not supply any goods to Cospin srl. He said the contract was concluded on 20th May when Cospin srl signed it.
7. PW 1 was emphatic that the appellant supplied all the goods as per the invoices issued.
8. In cross-examination, he was taken through the contract. He said that parties to the contract were the appellant and the respondent. He however, conceded that he had signed the contract and then that he was aware that the contract was signed between Cospin srl and the appellant, He also said that Thomas and Piron Grands Lacs Ltd (Piron), the respondent, was acting for Cospin srl. He said he was not aware that all the invoices were to be issued to Cospin srl.
9. In re-examination, he said that the materials were supplied to the Kirandich project in Baringo.
10. DW 1, Coralie Piron, gave evidence for the respondent. He also adopted his witness statement dated 23rd August 2021 as his evidence in chief and also produced the accompanying documents as exhibits. He said that under the contract, Thomas & Piron, the respondent was acting on account of Cospin srl and that the materials were supplied to the Kirandich site. He said that at the time of supplying the materials, the contract had not been signed by the parties but the same was working. He said the contract was extended in April 2019. He said that delivery was done based on LPOs and Cospin srl was to pay the appellant. He said that the respondent had no communication on what the appellant had supplied to Cospin srl. However, they were following up on payment from Cospin srl on behalf of the appellant.
11. In cross-examination, DW 1, said that they were directors of Cospin srl.
12. Upon considering the evidence and submissions of the parties, the learned trial magistrate in her judgment dated 8th March 2024, found that the respondent was a subcontractor of the contractor, Cospin srl. She found further that the respondent was an agent of the main contractor, Cospin srl, and therefore, the appellant had no legitimate claim against the respondent, and the appellant should have directed the claim to Cospin srl.
13. Consequently, the learned trial magistrate dismissed the appellant’s claim against the respondent.
14. The appellant now appeals against that decision, raising some five grounds in its memorandum of appeal dated 3rd April 2024, that the learned trial magistrate erred in law and in fact:
a. by finding that the respondent was acting as an agent of the appellant.
b. in finding that the contract executed in May 2019 between the appellant and Cospin srl applied to the particular transaction between the appellant and the respondent.
c. in finding that there was no contractual relationship between the appellant and the respondent.
d. by disregarding the appellant’s uncontroverted evidence in support of the claim, in particular that:
i. evidence that the respondent issued the LPO dated 3rd April 2019 which was issued by the respondent in its own name and capacity.
ii. evidence that the respondent received the goods ordered for through the LPO dated 3rd April 2019.
iii. express admission of indebtedness through e-mails and electronic messages – WhatsApp.
e. by making a determination that amounted to assisting the respondent to unjustly enrich itself.
f. by finding that the appellant had no legitimate claim against the respondent.
15. The appeal was heard by way of written submissions, which learned counsels for the appellant and the respondent respectively filed.
16. In listing the issues for determination, learned counsel for the appellant simply indicated that he would be merging the grounds of appeal into two and argue them as such. Consequently, grounds 1, 2, 3 and 4 were argued together while grounds 5, 6 and 7 (this court already merged grounds 4 and 5) were argued together.
17. This being a first appeal, the duty of the court is to re-evaluate, re-analyze and re-consider the evidence and draw its own conclusions, bearing in mind that it did not see witnesses testifying and therefore give due allowance for that. See for example Selle & another vs. Associated Motor Boat Co. Ltd & others [1968] E.A at page 126 where it was held as follows:
“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 allowance in this respect. In particular, this court is not bound necessarily to follow the trial judge’s findings of fact if it appears either that he has clearly failed on some point to take account of particular circumstances or probabilities materially to estimate the evidence or if the impression based on the demeanor of a witness is inconsistent with the evidence in the case generally (Abdul Hameed Saif v Ali Mohamed Sholan (1955), 22 E.A.C.A. 270)”.
18. See similar holding in Peters vs. Sunday Post Limited (1968) EA 123. (1956) E.A page 424.
19. In support of grounds 1, 2, 3, and 4, it is the appellant’s position that the respondent issued the subject LPO in its own name and capacity, received the materials, and accepted the subsequent invoice and was therefore liable to pay. Further, it promised to pay for the materials in its WhatsApp correspondence with the appellant. However, it failed to make the payment as expected. Learned counsel for the appellant submits further that the respondent failed to provide any evidence that it was acting within the scope of its authority with Cospin srl in issuing the subject LPO in its name. According to learned counsel, if the respondent was acting as an agent, the LPO ought to have been in the principal’s company name and signed off as an agent.
20. According to the appellant, the LPO is a contract on its own, and in this case, the contract was between the appellant and the respondent. That even upon being invoiced, the respondent never denied liability nor requested that the invoice be raised against a third party but went ahead to promise to clear the payments. Under those circumstances, the appellant submits that where an agent accepts liability and makes a promise, then it is held liable for the performance of the contract.
21. Learned counsel has cited the following communication from the respondent to the appellant: “I have, however, access and saw the funds are there”, “we have given them 2 weeks’ notice to send us the funds.” According to the appellant, this communication was an insinuation that the funds were to be made available to the respondents and the respondent would make payment to the appellant.
22. The appellant cites the case of Carol Construction Engineers Limited & another v National Bank of Kenya [2019] KEHC 95 (KLR) where the English case of Pickard v Sears 112 E.R. 179 is cited and where Lord Denman CJ stated thus:
“The rule of law is clear that where one, by his words or conduct, willfully causes another to believe in the existence of a certain state of things, and induces him to act on that belief, so as to alter his own previous position, the former is precluded from averring against the latter a different state of things as existing at the time…”
23. The submissions in support of grounds 5, 6, and 7 are more or less the same as those for the earlier grounds.
24. The respondent submits through its learned counsel that the two issues for determination are whether the trial court erred in finding that the respondent was the contractor’s agent and that the appellant had no legitimate cause of action against the respondent.
25. The respondent submits that the respondent was sub-contracted by the contractor, Cospin srl on the contract No. Kirandich/II/02-LOT with Rift Valley Water Services Board for the rehabilitation and design of the Water and Sanitation Systems for the Kirandich Basin & Capacity Building, Kabarnet. That the respondent was sub-contracted to oversee the works and that at all material times, the respondent was acting as the contractor’s agent, which fact was known to the appellant.
26. The respondent cites the case of Industrial & Commercial Development Corporation (ICDC) v Patheon Limited [2015] KECA 96 (KLR) where the Court of Appeal considered the definition of the word “agent,” and submits that from the contract dated 12th February 2019, the respondent had been engaged as Cospin srl’s agent concerning the RVWSB contract in terms of that definition.
27. The respondent submits that although in this appeal the appellant argues that the respondent acted outside the authority of its principal, it never pleaded the same nor argued it before the trial court. It is therefore raising a new issue in the appeal and attempting to make a fresh case on appeal, and the same should be disregarded by this court. In support thereof, the respondent cites the case of Mahamud v Mohamad & 3 others [2018] KESC 62 (KLR).
28. In response to the ground that the respondent failed to adduce evidence to show that it was acting as an agent of the contractor in issuing the subject LPO, the respondent refers to the contract dated 12th February 2019 between itself and the contractor, Cospin srl where it was appointed to act on behalf of the contactor and its scope extended to issuing LPOs to the appellant.
29. The respondent submits that the appellant, by alleging that the LPOs were issued by the respondent in its personal capacity without the contractor’s authority, is feigning ignorance, yet it was all along aware that the respondent was at all times acting as an agent of Cospin srl, the contractor. That the LPOs were issued based on the contract between the contractor, Cospin srl, with RVWSB, as read with the contract between the contractor and the appellant dated 20th May 2019, and that the respondent was not a party to either of them. Further, that the contract between the contractor and the appellant, dated 20th May 2019, notes that the respondent was the contractor’s local agent as the contractor is domiciled in Italy and that Prasad Karey, the appellant’s witness had confirmed knowledge of the same in his testimony in court. Further that the witness had confirmed that he had correspondence with the respondent’s principal on 12th June 2020 and 17th July 2020. In the circumstances, the respondent submits that the appellant is estopped under section 120 of the Evidence Act (Cap. 80) Laws of Kenya, from claiming otherwise.
30. The respondent submits further that the intention of the appellant and the contractor in their contract dated 20th May 2019 was clear that the respondent was acting as the contractor’s agent and this court cannot find otherwise, as doing so would amount to overriding the parties’ intention. That submission is supported by the cases of National Bank of Kenya Ltd v Pipeplastic Samkolit (K) Ltd & another [2001] KECA 362 (KLR) where it was held that, “A Court of law cannot re-write a contract between the parties. The parties are bound by the terms of their contract, unless coercion, fraud or undue influence are pleaded and proved.” and reiterated in the case of Pius Kimaiyo Langat v Co-operative Bank of Kenya Limited [2017] KECA 152 (KLR) that, “ … it is not the business of courts to rewrite contracts between parties. They are bound by the terms of their contracts, unless coercion, fraud or undue influence are pleaded and proved.”
31. The respondent submits further that the trial court properly considered all the evidence adduced before it in arriving at its judgment dated 8th March 2024.
32. The respondent submits that, as an agent of the contractor, a disclosed principal, it was not bound to settle the claim by the appellant. It relies on the case of Victor Mabachi & another v Nurtun Bates Limited [2013] KECA 204 (KLR) where the Court of Appeal cited with approval, the holding in the case of Anthony Francis Wareheim t/a Wareheim & 2 Others vs. Kenya Post Office Savings Bank, Civil Application Nos. Nai 5 & 48 of 2002, at page 10, that:
“It was also prima facie imperative that the court should have dismissed the respondent’s claim against the second and third appellants for they were impleaded as agents of a disclosed principal contrary to the clear principal of common law that where the principal is disclosed, the agent is not to be sued. Furthermore, the court having found on the evidence that the second and third appellants were principals in their own right and not agents of the first appellant in the transaction giving rise to the suit, it should have dismissed the suit against the first appellant who had been sued as the principal.”
33. The above decisions affirm the principal that an agent cannot be sued where there is a disclosed principal.
34. I have considered and re-evaluated the evidence tendered before the trial court. For me, the issues for determination are whether or not the appellant was liable on the contract in this case in any way, and if so, whether the trial court was correct to find that the respondent was acting as an agent of Cospin srl and was therefore not liable for the goods supplied under the LPO dated 3rd April 2019.
35. It is apparent from the evidence on the record of the trial court that Cospin srl in JV with Nurovi srl, both of Italy, referred to as “the contractor” entered into a contract with Rift Valley Water Services Board (RVWSB) (although in one instance referred to as Council probably erroneously) on 29th April 2016. The contract was for “Design and completion of works for the rehabilitation of water and sewage systems in the Kirandich basin (“executive planning and works”).
36. Afterward, Cospin srl in JV with Nurovi srl entered into a contract dated 12th February 2019 with Thomas & Piron Grand Lacs Ltd (Piron), the respondent herein, referred to as the “subcontractor” for the latter to carry out the execution of “works” under the said contract. Under the latter contract, Piron was therefore entrusted with all the supplies and installation works for the project, the overall design phase having been executed between the Contractor and RVWSB.
37. There is also another contract between Cospin srl c/o Thomas & Piron Grands Lacs Ltd and Tononoka Rolling Mills Ltd (Tononoka) dated 22nd February 2019, but signed on 13th May 2019 by Tononoka and on 20th May 2019 by Cospin srl c/o Thomas & Piron Grand Lacs. In this contract, Cospin and Piron were collectively referred to as “the contractor,” while Tononoka was referred to as “the Supplier to Main contractor.”
38. These agreements between the various parties thereto are not disputed at all. It is also not disputed that the materials, the subject of the claim in the suit before the trial court, were supplied to the project which Cospin had with RVWSB at the request of Piron, who were at the time undertaking the project as the contractor. What is in dispute is the nature of the relationship between the appellant, the respondent, and Cospin and the respondent’s liability to the appellant. It is the word of the appellant against that of the respondent, seeing that Cospin was not made a party to the suit.
39. In the case of Maurice Oduor Okech v Chequered Flag Limited [2013] eKLR, citing the case of Everret Aviation Limited Vs the Kenya Revenue Authority [2013] eKLR, the Court stated that:
“… In determining whether a relationship between parties is a contract for services between two independent parties or a contract of service giving rise to an employer/employee relationship, the traditional tests of control of the work by the employer and its integration into the employer’s care business are no longer conclusive. In my view, the fundamental behaviour of the parties such as the form of documentation evidencing the relationship and the mode of payment is critical.”
40. I find that this holding, though relating to an employment contract, by analogy, it aptly applies to the current case between the parties. In this case, the form of contract between the parties was reduced into writing and therefore the terms thereof have to be considered.
41. The law under section 107(1) of the Evidence Act and supported by many authorities requires that he who asserts must prove. The burden was upon the appellant to prove its allegations that indeed the respondent and not Cospin was responsible for the payment of the materials supplied for the project.
42. The appellant maintains that the supply of materials was a contract under the LPO and appears to suggest that the contracts between the parties ought not to be considered. Indeed, the appellant’s witness appeared at some point to discount the contract between the appellant and Cospin c/o Piron, alleging that he was not aware of it, only to be reminded by his counsel and then he conceded that he was in fact the one who signed it. I think it was erroneous for the appellant to try and dispute that the supply of the materials was based on the contract dated 20th May 2019 and allege that the LPOs formed independent contracts. That was not the case.
43. That contract refers to both Cospin srl and Piron, Cospin being indicated as being care of (c/) Piron. Under the Memorandum of Agreement to that contract, clause 5 provides that the Supplier to Main Contractor (in this case Tononoka), the appellant, duly acknowledges receipt of the Contractor’s Approval Invoice Process Scheme (attached). Unfortunately, that scheme was not among the documents supplied either by the appellant or the respondent. However, what is notable here is the use of the term “contractor.” As stated above, the term “contractor” as used in that contract refers to Cospin srl and Piron collectively. It is therefore not obvious from that contract that the respondent was acting as an agent of Cospin for purposes or as an independent contractor.
44. This leaves us with the contract between Cospin srl and Piron. Under the contract, Piron was expected to acquire full management of the project. It is worth noting that this contract was titled “Substract contract,” which most probably was meant to be a “subtract contract,” given the fact that it was some standard form contract and Cospin was essentially passing the responsibility of execution of its contract with RVWSB to Piron as is evidenced from the terms therein. For instance, it is indicated in the contract that… “Second, Thomas & Piron Grand Lacs Ltd, knows well the places (hereinafter “Site”, the type of work to be done and the related times for their completion…” Article 2 of the contract provided that Piron undertook to perform all the work as foreseen in the executive design (Annex 2) and the price list (Annex 5). Of particular importance is the provision on the amount of money payable for the works which was indicated as follows:
“… the tender sum of Euro 17,282,000/= less Euro 420,000/= of design costs making the sum payable to Piron Euro 16,862,202/= with a discount of 18.16% which total amount included all the provisions as indicated in the Bill No. 1 with the exception of the guarantee of success and the obligation of the advance payment.”
45. What is notable here is that the price or consideration for execution of the work by Piron was explicitly stated without any reservation. According to me, this was equivalent to Cospin assigning the full execution of the contract it had remaining with RVWSB to Piron. Under Article 4, it was provided that,
“… - from which the principle is: state of progress every 15 days and payments within 30 days and accepts that process, methodology, and timing are reflected identically in this contract between Thomas Piron….. and Cospin… which means that the prior documents, signed by the Customer, will trigger the billing process.
Payments will be made according to the price list of this agreement, or to the SAL products deducted from the discount of 18.16% with the only deductions provided for in the contract (or deemed) which is attached to Annex 5 (net amount of 18.16%).
46. Further that:
Cospin srl in JV with Nurovi srl accepts the principle of “assignment of receivables”, for an amount equal to this Sub-Contracting Contract referred to in Article 2 and according to the price list referred to in Annex 5, or to the SAL products deducted from 18.16% discount with the deductions provided for in the contract as deemed, which will be managed and implemented by the Banks of the Contractor and the SubContractor (sample and draft in Annex 6).
It is mandatory to implement this assignment as soon as possible, so that Thomas & Piron Grand Lacs Ltd can access the necessary funds at its bank.”
47. It is apparent from the foregoing provisions of the contract that Cospin went as far as making provision for Piron to access funds for execution of the contract.
48. The contract provides further that:
1. For supplies: 20% payment by proof of payment, 50% by waybill and proof of insurance for each delivery, 30% upon completion of the supply installation.
2. The General principle will be that all payments made to Cospin srl in JV with Nurovi srl will also be made in proportion to Thomas & Piron Grands Lacs Ltd, which will issue a payment certificate to Cospin srl when Cospin srl is issuing a certificate for payment to the Rift Valley Water Services Board.
49. The same clause provides that any savings on the execution of the works would be in favour of Piron.
50. Article 4 further provided for payment terms and also that the general principle would be that Piron would issue a payment certificate to Cospin when Cospin is issuing a payment certificate to RVWSB.
51. Article 7 provided that Thomas & Piron Grands Lacs Ltd will commit within 7 days from the signing of the agreement, provided that, Cospin srl provides the necessary permits and undertakes all necessary actions to obtain the assignment of the credit confirmed in favour of Thomas Piron through their bank.
52. Artcle 9 further provided that “Piron will undertake to cover all expenses anticipated by Cospin for the realization of works and engineering and construction works.”
53. Further that Piron will enjoy, “assuming all responsibilities”:
a. of the economic benefits deriving from the engineering of the project.
b. from the economies deriving from the modifications to the materials ….
54. I have not seen in the judgment where the learned trial magistrate considered the terms of the contracts. The learned trial magistrate found that the respondent was an agent of Cospin. That was correct insofar as the respondent’s relations with Cospin and RVWSB went. In that case, there would be no difficulty in finding, as learned counsel for the respondent urges, that it was an agent of a disclosed principal, Cospin. The position in law, as submitted by the respondent, and on abundance of decided authorities, is that where a principal is disclosed and known, his/her agent should not be sued in the same cause as a co-defendant. It is true that where there is a disclosed principle, the agent cannot be sued as was held in the case of City Council of Nairobi v Wilfred Kamau Githua t/a Githua Associates & another [2016] eKLR the Court of Appeal held that:
“In the circumstances of this case, the 2nd respondent cannot be sued as agent where there is a disclosed principal [the appellant]. There is therefore no cause of action against the 2nd respondent. The principle of common law is that where the principal is disclosed, the agent is not to be sued. In the circumstances of this case, the principal (the appellant) is disclosed and the agent (the 2nd respondent) cannot therefore be sued. There are no factors vitiating the liability of the disclosed principal. Accordingly, the enjoinment of the 2nd respondent in this case is unwarranted.”
55. However, there are exceptions to this general rule, which are (1) if the agent is undisclosed or partially disclosed, (2) if the agent lacks authority or exceeds it, or (3) if the agent entered into the contract in a personal capacity. From the facts of this case, exceptions 1 and 2 are not applicable herein.
56. It is the appellant’s submission that its case falls within exception 3, that is, where the agent enters into a contract with a third party in its personal capacity.
57. In the present case, I agree with the appellant that reading the provisions of the contract between the respondent, Piron and Cospin srl, it gave Piron the authority to enter into contracts with third parties without reference to Cospin srl, except to the extent that it was the main contractor. I do not find any chance in this contract for the respondent to pass any bills emanating from third parties, such as the appellant herein, with which it had engaged in its execution of the contract, to Cospin srl. In the circumstances, it can only be concluded that the respondent, although executing the works on behalf of Cospin, its engagement with the appellant was in its personal capacity as per the terms of its contract with Cospin srl.
58. I therefore find that the contract made between the appellant and Cospin c/o Piron was essentially a contract between the appellant and Piron even as Cospin was the main contractor.
59. It was thus not tenable for the appellant to sue the principal, Cospin, when the latter had given authority to Piron to act on its own capacity in execution of other sub-contracts for the execution of the works under the project.
60. I therefore find that the learned trial court was in error to find that the respondent was not liable and proceeded to dismiss the suit by the appellant against the respondent. It is apparent that the learned trial magistrate did not consider the issue of the exceptions to the general rules in agency law where the agent enters into a contract with a third party in a personal capacity. Had she had so, I believe she would have arrived at a different conclusion.
61. Consequently, I allow the appeal. The judgment dismissing the appellant’s suit is hereby set aside and substituted with a judgment allowing the case by the appellant against the respondent as prayed in the plaint.
62. The appellant gets the costs of the appeal.
Dated, Signed and Delivered on the virtual platform Teams this 22nd day of September, 2024.
ANDAYI W. F.
JUDGE
In the presence of:
Dache for the Appellant.
Ogore for the Respondent.
Ummu h/b for Carlos: Court Assistant.
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