Introduction
1. This is an appeal from the Ruling of the magistrate in the Milimani CMCC No. E356 of 2022 in which the trial court disallowed the Appellant’s application for amendment of defence, and upheld the Respondent’s application dated 9th September 2022 for judgment on admissions, thereby striking out the Appellant’s defence, and entering a summary judgment in favour of the Respondent for a sum of KES. 8,000,000 together with interest and costs.
2. The background of the dispute is that by a letter dated 3rd December 2020, the Appellant engaged the Respondent as an agent to prospect for buyers, regarding a property known as LR No. 209/15789. The agreed commission was 2 percent of the purchase price.
3. Acting on the agreement, the Respondent secured a buyer and the property was sold for a sum of KES. 400,000,000/=. The Appellant however failed to pay the agreed commission on among other reasons, that the Respondent was not a registered estate agent within the meaning of the Estate Agents Act.
4. Following the failure and/or refusal by the Appellants to pay the agreed commission, The Respondent on 8th April 2022 instituted a suit in the lower court to enforce recovery of the agreed sum of KES. 8,000,000/-, being 2 percent of the purchase price.
5. Upon service with the pleadings, the Appellant on 21st April 2022 made a part payment of KES 4,000,000/= to the Respondent.
6. On 26th May 2022, the Appellant entered an appearance in the lower court and filed a Statement of Defence dated 9th June 2022, and a Preliminary Objection of the same date, arguing that the suit is premised on illegality since it offended section 18 of the Estate Agents Act Cap. 533, and consequently needed to be struck out in its entirety.
7. The Respondent on his part filed an application dated 9th September 2022 and sought to have the Appellant’s defence struck out and judgment entered in his favour, for the sum of KES. 8,000,000 together with interest and costs on the basis that its claim against the Appellant had been admitted, and part payment of KES 4,000,000/= made by the Appellant in that regard.
8. On 9th November 2022, the Appellant filed an application in the subordinate court seeking leave to amend its defence to include a counterclaim against the Respondent herein, for the recovery of the sum of KES. 5,500,000 allegedly paid to the Respondent under a mistake of fact.
9. Directions were given by the trial court that both applications (the Respondent’s application dated 9th September 2022 for summary judgment and the Appellant’s application dated 9th November 2022 for leave to amend defence) be heard together.
10. On 17th March 2023, the trial court, after hearing the two applications, delivered its Ruling and disallowed the Appellant’s application for amendment of defence. The Respondent’s Application for summary judgment was however allowed by the trial court and judgment was accordingly entered in favour of the Respondent for a sum of KES. 8,000,000 together with interest and costs.
The Appeal
11. Aggrieved by the lower court’s decision, the Appellant (Defendant in the lower court) filed the instant Appeal vide his Memorandum of Appeal dated 13th April 2023, raising six (6) grounds that: -
i. The Learned Magistrate erred in law and in fact in holding that the Appellant had waived the apparent illegality of the Appellant (sic) acting as an estate agent in the transaction subject of the suit.
ii. The Learned Magistrate erred in law and in fact in holding that there was no affidavit to show the basis upon which the payment to the Respondent by the Appellant in error arose.
iii. The Learned Magistrate erred in law and in fact in the exercise of his discretion in relation to the Appellant’s application for amendment of its defence where the suit had not been set down for hearing.
iv. The Learned Magistrate contradicted himself in holding on the one hand that the allegation that the firm of Waweru Gatonye Advocates was acting for the Defendant in the transaction was not controverted and on the other hand questioning whom between the Defendant and the aforesaid firm of Waweru Gatonye Advocates is the proper party to sue for the payment made to the Respondent.
v. The Learned Magistrate erred in law and in fact in allowing the Respondent’s application for summary judgment
vi. The Learned Magistrate erred in law and in fact in holding that the Defendant’s Defence was a sham.
12. The Appeal was canvassed by way of written submissions. The Appellant filed its submissions dated 10th July 2024 whilst the Respondent filed his dated his submissions dated 31st May 2024 whilst that of the Respondent is dated 1st August 2024.
Appellant’s submissions
13. The Appellant submitted that the trial court erred in law and in fact in holding that the Appellant had waived the apparent illegality of the Respondent. According to the Appellant, the finding by the magistrate was grossly erroneous since a party cannot waive an illegality. The Appellant maintained that the services described in the letter dated 3rd December 2020 (which was the subject of the suit) are estate agent services within the meaning of and fall squarely within Section 2(2) of the Estate Agents Act and therefore could not, pursuant to Section 18(1) (a) of the Act, be performed by a person not registered under the Act.
14. Citing the Court of Appeal decision in the case of Mapis Investment (K) Limited v Kenya Railways Corporation [2006] eKLR, the Appellant therefore maintained that it was illegal for the Respondent to practice as an estate agent. Consequently, the Appellant submitted that it was manifestly wrong for the trial court to enforce an illegal contract. The Appellant relied on among others, the decision in the case of Mistry Amar Singh v. Serwano Wofunira Kulubya 1963 EA 408 and that of Mike Munga Mbuvi v Kenya Airways Limited [2017] eKLR in support of this argument.
15. Regarding the trial court’s decision to dismiss its application for amendment of the defence, the Appellant submitted that the court erred in failing to consider the draft amended defence and counter-claim, which had been annexed to the application, clearly specifying the basis of the Appellant’s application for amendment of its defence. Referring to among others, the case decision in the case of St Patrick’s Hill School Ltd v Bank of Africa Kenya Ltd [2018] eKLR, the Appellant maintained that the trial court erred in the exercise of its discretion in relation to the Appellant’s application for amendment of its defence.
16. Finally, referring to the decision in the case of Olympic Escort International Co. Ltd. & 2 Others –vs- Parminder Singh Sandhu & Another [2009] eKLR, it was the Appellant’s submissions that the trial court erred in fact and in law by entering summary judgment in favour of the Respondent despite the fact that the Appellant’s defence raised a myriad of triable issues which required further and deeper interrogation at a full trial.
17. The Appellant therefore urged this court to find merit in the appeal and allow the same as prayed.
Respondent's Submissions
18. On his part, the Respondents supported the lower court’s Ruling and urged this court to maintain the same. The Respondent asserted that he duly and lawfully acted as the Appellant’s representative in prospecting for buyers for the sale of the property LR No, 209/15789 and that his action was ratified by the Appellant who also benefited therefrom the property in question was purchased by a person procured by the Respondent.
19. The Respondent submitted that he was acting under the Appellant’s express instructions and in accordance with the letter of 3rd December 2020 by which he was appointed as such and fixed his commission at the rate of 2% of the purchase price. The Respondent cited among others, the case of Industrial & Commercial Development Corporation (ICDC) vs Patheon Limited [2015] eKLR, in support of the argument that the principal-agent relationship can only be established by the consent of the principal and agent.
20. The Respondent further submitted that the Appellant did not engage the Respondent as an “estate agent” professional, neither did the Respondent hold himself out to the Appellant as such prior to the signing of the letter of 3rd December 2020, which created the agency relationship between the parties herein.
21. It was further the Respondent’s submissions that the terms of the letter of 3rd December 2020 were clear that the Respondent was to simply act on behalf of the Appellant under delegated authority, to sell the property in question. The Respondent asserted that it was the Appellant who approached the Respondent and delegated to the Respondent the duty of prospecting buyers for the Appellant’s property.
22. Citing the case of National Bank of Kenya Ltd vs Pipeplastic Samkolit (K) Ltd & Another [2001] eKLR, the Respondent submitted that the true intention of the parties can only be established by reference to the letter of 3rd December 2020 and that at no point did parties intend in the said letter, to be bound or subject to the provisions of Section 18 of the Estate Agents Act.
23. The Respondent submitted that it would be unjust and amount to unjust enrichment if the Appellant were to be allowed to retain the benefits accruing from the Respondent’s services rendered at the Appellant’s request without making any payment for the services.
24. The Respondent maintained that the Respondent’s Statement of Defence dated 9th June 2022 was a sham and that no triable issues had been raised therein. The Respondent submitted that the primary issue raised in the said statement of defence was the question of whether the Respondent was a registered estate agent, and whether the letter dated 3rd December 2020 could be enforced in light of the provisions of Section 18 of the Estate Agents Act. The Respondent submitted that in light of the said letter of engagement between the parties, these issues were crystal clear and therefore not triable.
25. Referring to the various correspondence between the Appellant and the Respondent, including the email correspondence of 21st March 2022 in which the Appellant offered to pay to the Respondent a sum of KES 6,000,000/- in respect of the agency fees, the Respondent submitted that the debt was admitted and that the Appellant’s statement of defence was a mere denial. The case of Mugunga General Stores vs – Pepco Distributors Ltd [1987] eKLR, was cited by the Respondent in support of this argument.
26. Regarding the Appellant’s application for leave to amend the Statement of Defence and plead a counterclaim, the Respondent submitted that the application by the Appellant was made in bad faith and was merely meant to obfuscate issues and that the trial court was right in dismissing the same. The case of Kassam v Bank of Baroda (Kenya) Ltd [2002] eKLR, was cited by the Respondent in that regard.
27. The Respondent submitted that while the Appellant stated in the said application for amendment of defence stated that the intention was to plead a refund of Kshs. 5,500,000/= allegedly paid to the Respondent in error under the agreement, the Respondent did not demonstrate in the said application that the said sum was actually paid to the Respondent, let alone erroneously so. It was further the Respondent’s position that the Respondent did not controvert, whether in the said application for amendment or in its response to the Respondent’s application for summary judgment, that a sum of KES 4,000,000/- had been paid by the Appellant to the Respondent under the agreement.
28. Consequently, the Respondents urged this court to dismiss the appeal with costs in its favour.
Analysis and determination
29. As this is a first appeal, this court is duty-bound to reassess and reevaluate the evidence presented in the subordinate court, considering both points of law and facts, and to reach its own findings and conclusions. This is the principle in Peters v Sunday Post Limited [1958] EA 424. In doing so, this court is expected to acknowledge the fact that it did not have the opportunity to hear or observe witnesses firsthand, and must therefore make appropriate allowances for that limitation.
30. I have carefully considered the memorandum of appeal and the parties’ submissions in support of their respective positions and note that the only major issues for determination in this appeal are as follows; -
i. Whether the trial court erred in allowing the Respondent’s Application dated 9th September 2022 for summary judgment against the Appellant.
ii. Whether the trial court erred in dismissing the Appellant’s application dated 9th November 2022, for amendment of Statement of Defence.
Whether the trial court erred in allowing the Respondent’s Application dated 9th September 2022 for summary judgment against the Appellant.
31. From the record, I note that the Respondent’s Application dated 9th September 2022 was in the main, seeking the striking out of the Appellant’s Statement of Defence dated 9th June 2022 on the basis that the same raised no triable issue, contained general denials, and was therefore a sham. The Respondent pleaded that the terms of the letter of 3rd December 2020 by which he was engaged by the Appellant to act as his agent were clear that he was entitled to 2 percent of the purchase price and that and that the Appellant had even admitted the claim by paying a sum of KES 4,000,000/= on or about 21st April 2021 towards the same.
32. The Appellant, in its response to the Defendant’s said application of 9th June 2022 filed a Replying Affidavit dated 9th November 2022, sworn by Boniface Abala, the Appellant’s Legal Manager. From the affidavit, I note that the Appellant took the position that its Statement of Defence raised cogent issues for trial and listed 5 issues in that regard.
33. The issues listed by the Appellant in Paragraph 7 of the said affidavit of Boniface Abala to be triable, as raised in its statement of defence in question included the following; -
a) Whether the Plaintiff (Respondent herein) is a registered estate agent
b) Whether the Letter dated 3rd December 2020 is legal and enforceable against the Defendant (Appellant herein).
c) Whether the Defendant is liable to the Plaintiff at all under the Letter dated 3rd December 2020.
d) Whether the Plaintiff, being not registered under the Estate Agents Act, can sustain an action against the Defendant for payment of commission on a sale of immovable property.
e) Whether the present suit offends the various provisions of the Estate Agents Act.
34. The Appellant in the said affidavit of Boniface Abala, also stated that it had mistakenly paid to the Respondent a sum of KES 5,500,000/- under the agreement and that it intended to raise as a counterclaim for the refund of the same, once its application dated 9th November 2022 for leave to amend its defence is granted by the court.
35. From a careful review of what the Appellant in its replying affidavit considered to be triable, I am inclined to agree with the trial court’s findings that the issues raised in the Appellant’s Statement of Defence dated 9th June 2022 are mere denials, without disclosing any triable issue.
36. First, the question of whether the Respondent was a registered estate agent under the Estates Agents Act, was, in the circumstances of this case, immaterial. The letter of 3rd December 2020 by which the Appellant procured the services of the Respondent did not mention that the Respondent was engaged in his capacity as a registered estate agent. From the letter, what is clear is that the Respondent was merely acting as a representative, a delegate, or an agent of the Appellant for the purposes of disposal of the property in question. The Respondent’s professional qualifications was, obviously not one of the special conditions of the agreement.
37. A cursory perusal of the letter reveals that the only condition in the letter was that a commission of 2 percent of the purchase price would be paid to the Respondent and that the same was contingent upon the successful sale of the property.
38. I agree with the Respondent’s submissions that the intention of parties to an agreement should ordinarily be ascertained from the agreement itself, for it is always deemed that what parties intended is what is stated in the agreement. In the case of Vinayak vs Singh & 2 others (Civil Appeal (Application) 175 of 2017) [2023] KECA 1433 (KLR), the Court stated as follows on the issue; -
"The fundamental consideration in determining the terms of a written contract or its application to an event that arose during the course of their relationship is to discern the intention of the parties from the words used in the context of the document as a whole, the factual matrix surrounding the conclusion of the agreement and its purpose or (where relevant) the mischief it was intended to address.
More importantly, where parties deliberately enter into a contract on certain terms, they must be held to those terms even if that led to hardship, and that the courts must not make new contracts for the parties. Holding the parties to self-imposed obligations gives effect to the principle of freedom of contract. The underlying principle of contract law is that parties are free to choose if they want to contract, with whom and on what terms....”
39. It is a settled principle of law that where there is an agreement between parties, the role of the court is to simply give effect to the parties' intentions as reflected in the agreement and not to re-write the agreement (see the Court of Appeal decision in the case of National Bank of Kenya Ltd-Vs-Pipeplastic Samkolit (K) Ltd & Another [2001] KLR 112).
40. In the circumstances, it is the position of this court that the letter of 3rd December 2020 was clear on its terms and that the question of whether or not the Respondent was registered as an estate agent under the Estates Agents Act was not a condition of the agreement.
41. Further, even assuming that there was any ambiguity in the said letter, it is a rule of interpretation in contract law that any ambiguity arising from the terms of a contract is to be interpreted against a party who drafted or introduced it for their benefit – the contra proferentem rule. In Euromec International Limited v Shandong Taikai Power Engineering Company Limited (Civil Case E527 of 2020) [2021] KEHC 93 (KLR) (Commercial and Tax) (21 September 2021) (Ruling), Mtivo J (as he then was), stated as follows regarding the interpretation of contracts; -
“22. In interpreting contracts;
a. the courts would endeavor to interpret the contract in cases of ambiguity in a way that ensured the validity of the contract rather than rendering the contract ineffective or uncertain.
b. the courts would strictly interpret contractual provisions that sought to limit rights or remedies, or exclude liability, which arose by operation of law; and
c. where a clause had been drafted by a party for its own benefit, it would be construed in favour of the other party (the contra proferentem rule). The last principle had limited applicability in cases involving sophisticated commercial agreements where a contract had been jointly drafted by the parties or where the parties were of comparable bargaining power.
42. From the above, it is evident that the Appellant having drafted the letter of 3rd December 2020 by which the services of the Respondent were procured, cannot now turn around and ask the court to interpret it in a manner that is likely to disadvantage the Respondent. If the parties had intended that the Respondent needed to be a registered estate agent, then, nothing could have been easier than to expressly state so in the agreement.
43. In any event, I have carefully perused the record of appeal and note that the Appellant’s conduct in the matter demonstrated their admission to the Respondent’s claim under the contract. Of significance is the email correspondence of 21st March 2022 from the Appellant offering to pay the Respondent a sum of KES 6,000,000/-. In the email from Boniface Abala, the Appellant’s Legal Manager, it was stated by the Appellant as follows; -
“Dear Sir,
The subject of your outstanding agency fees and our engagement over the last two months refers. This correspondence serves to convey our intent to close the long outstanding matter of your fees at an all inclusive figure of Kshs. 6,000,000/= rather than the initially proposed amount of Kshs. 10,000,000/=.
Kindly confirm if this is acceptable to you and send us an invoice in this regard for our further action.”
44. It is also instructive to note that just one month after the said e-mail of 21st March 2022, the Appellant, on 21st April 2022, paid the Respondent a sum of KES 4,000,000. It is instructive to note that the Appellant in its response to the Respondent’s application for summary judgment did not dispute the payment of KES 4,000,000/- to the Respondent, nor did they explain the circumstances under which the payment was made.
45. In light of the foregoing, I find that the trial court did not err in striking out the Appellant’s Statement of 9th June 2022 for being a mere denial.
46. In view of my finding that the terms of the Appellant’s letter of 3rd December 2020 did not require the Respondent to be a registered estate agent under the Estate Agent’s Act, then it is equally my finding that any payments made by the Appellant to the Respondent pursuant to the letter (agreement) of 3rd December 2020 was not paid in error. Consequently, the Appellant’s application dated 9th November 2022 for amendment of the defence and to plead counterclaim, also falls by the wayside.
47. Accordingly, I find the appeal to be without merit, and the same is hereby dismissed with costs to the Respondent.
SIGNED DATED and DELIVERED IN VIRTUAL COURT THIS
23RD DAY OF JANUARY 2025
ADO MOSES
JUDGE
In the presence of:
Moses – Court Assistant
Wafula……….. for the Appellant
Ngatia SC………. for the Respondent