https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/9170

 REPUBLIC OF KENYA IN THE HIGH COURT OF KENYA AT NAIROBI COUNTY COURT NAME: MILIMANI HIGH COURT CASE NUMBER: HCCSCA/E258/2025 MERCY TATU VS MAMRA SITACUS ADVOCATES LLP JUDGMENT **JUDGMENT** INTRODUCTION 1. This appeal arises from the judgment of the Small Claims Court delivered on 15th March 2024 in SCCCOMM/E3046/2022, wherein the learned Adjudicator dismissed the Appellant's claim for payment of the sum of Kshs. 290,000.00 together with costs and interest. 2. The claim before the trial court was founded on an alleged contract entered into between the Appellant and the 1st, 2nd and 4th Respondents. The Appellant contended that on or about 4th November 2021, she entered into a contract with the Respondents for the supply of 500 reams of printing paper valued at Kshs. 290,000.00. The goods were delivered on 6th November 2021 and received by the Respondents. A term of the agreement provided that the Respondents would pay the agreed sum within 14 days of delivery. That payment was never made. 3. The Appellant further averred that she was in constant communication with the Respondents and in particular with the 3rd Respondent, who repeatedly promised that payment would be forthcoming. Those promises were not honoured, and the Appellant instituted proceedings seeking the outstanding sum of Kshs. 290,000.00. 4. The 1st, 2nd and 4th Respondents denied liability. They maintained that they had never entered into any contract with the Appellant and had never taken delivery of any goods from her. They contended that the purported agreement was a fabrication bearing signatures that did not belong to any of the partners and that it had neither been authorised nor resolved upon by the partnership. The 1st and 2nd Respondents further stated that they were outside the jurisdiction of the court when the purported agreement was executed. The 4th Respondent, a law firm, stated that it does not engage in the buying or selling of goods of any kind and that the transaction was unknown to it until demand was made and proceedings commenced. 1. Upon hearing the parties, the learned Adjudicator found that the Appellant had failed to establish that the 3rd Respondent possessed authority to bind the 1st, 2nd and 4th Respondents and consequently dismissed the suit. The Appellant now appeals against that determination. JURISDICTION OF THIS COURT 1. This being an appeal from the Small Claims Court, the jurisdiction of this Court is governed by Section 38 of the Small Claims Court Act, which confines the appellate mandate to matters of law. This Court accordingly does not re-evaluate or reconsider the evidence that was placed before the trial court but instead determines whether the learned Adjudicator misdirected herself on the applicable law. GROUNDS OF APPEAL 1. The Memorandum of Appeal raises ten grounds, the substance of which may be distilled as follows: that the learned Adjudicator erred in dismissing the claim; failed to have regard to the evidence, documents and submissions placed before her; failed to consider that acts of an employee within the scope of employment bind the employer; made findings contrary to uncontroverted evidence; relied on distinguishable authorities; applied wrong principles of law; failed to do justice to the Appellant; and erred in declining to apply the indoor management rule, commonly known as the Rule in Turquand, to the circumstances of the transaction. ISSUE FOR DETERMINATION 1. The central issue arising for determination is whether the learned Adjudicator erred in finding that the 3rd Respondent lacked authority to bind the 1st, 2nd and 4th Respondents, and in consequently dismissing the Appellant's claim. ANALYSIS AND DETERMINATION Actual and Apparent Authority 1. The relationship between a principal and an agent is governed by well-established principles of agency law. A principal is generally bound by acts performed by an agent acting within the scope of authority conferred upon him. Such authority may be actual — whether express or implied — or apparent, where the conduct of the principal leads a third party reasonably to believe that the agent possesses authority to act on the principal's behalf. 1. In Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480, the Court explained that apparent authority arises where a representation is made by the principal that the agent has authority and the third party relies upon that representation in entering the transaction. Equally settled is the principle that an agent cannot create authority merely by asserting that he possesses it. The representation must emanate from the principal. In Armagas Ltd v Mundogas SA (The Ocean Frost) [1986] AC 717, the House of Lords held that apparent authority cannot be founded solely upon representations made by the purported agent. 2. In the present appeal, the 3rd Respondent candidly admitted that she had been conducting a personal side business using the name of the 4th Respondent and that she had not been authorised by the 1st, 2nd or 4th Respondents to enter into the transaction. She further admitted that no approval had been sought from the Respondents before committing them to the agreement and that the Respondents only became aware of the alleged contract after the dispute had arisen. That admission constituted direct evidence against the existence of actual authority. 3. No document was placed before the trial court demonstrating that the 1st, 2nd or 4th Respondents had expressly or impliedly empowered the 3rd Respondent to procure the goods in question. This Court accordingly concurs with the finding of the learned Adjudicator that actual authority was not proved. 4. As regards apparent authority, the Appellant was required to establish some representation by the Respondents which led her to believe that the 3rd Respondent possessed authority to bind them. The evidence discloses that the Appellant relied exclusively upon the 3rd Respondent's own assurances that she was acting on the Respondents' behalf. While such assurances may have induced the Appellant to proceed with the transaction, they could not in law create authority binding upon the 1st, 2nd and 4th Respondents. The doctrine of apparent authority is founded upon the conduct of the principal, not upon the assertions of the purported agent. Where the principal has made no representation, there is no basis upon which to estop it from denying liability. The ingredients necessary to establish apparent authority were not demonstrated. The Rule in Turquand (Indoor Management Rule) 1. The Appellant relied upon the doctrine of indoor management also referred to as the Turquan Rule, arguing that she was entitled to assume that all internal procedures necessary to authorise the transaction had been complied with by the 1st, 2nd and 4th Respondents. 2. The Rule in Turquand derives from Royal British Bank v Turquand (1856) 6 E & B 327, where the Court held that persons dealing with a corporation in good faith are entitled to assume that acts and internal procedures required by the corporation's constitution have been properly and regularly performed. The rule was developed to protect innocent third parties from being prejudiced by internal irregularities of which they could not reasonably be expected to be aware. 3. The principle has been recognised and applied in numerous common law jurisdictions. In Mahony v East Holyford Mining Co. (1875) LR 7 HL 869, the House of Lords held that outsiders dealing with a company are entitled to assume that company officers have been duly appointed and possess the authority their office ordinarily carries. Kenyan courts have equally acknowledged the rule. In East African Safari Air Ltd v Anthony Ambaka Kegode & Another [2011] eKLR, the Court of Appeal observed that persons dealing with a company are generally entitled to assume that the company's internal requirements and procedures have been complied with and need not inquire into the regularity of its internal management. 4. The doctrine, however, is not absolute and is subject to well-established exceptions. One such exception applies where the person dealing with the company has actual knowledge of the irregularity, or where the transaction is entered into by a person who plainly lacks authority and the third party relies solely upon that person's own representations. As was emphasised in The Ocean Frost (supra), a purported agent cannot clothe himself with authority by asserting that he possesses it; the representation must emanate from the principal. 5. In the present appeal, the Appellant did not demonstrate that the 1st, 2nd or 4th Respondents made any representation — whether express or implied — that the 3rd Respondent had authority to procure printing paper on their behalf or to bind them contractually. On the contrary, the evidence accepted by the trial court was that the 3rd Respondent was conducting a personal side business and had obtained no authorisation whatsoever. The 3rd Respondent herself admitted that no approval had been sought or granted. 6. The Rule in Turquand is intended to cure internal irregularities in the exercise of an existing authority; it does not create authority where none exists. It cannot be invoked to bind a principal where the person purporting to act on its behalf lacked any authority and where the alleged authority is founded exclusively upon that person's own representations. In those circumstances, the doctrine affords no protection to the party seeking to enforce the transaction. This Court therefore finds that the learned Adjudicator cannot be faulted for declining to apply the Rule in Turquand. Ratification 1. The Appellant also failed to establish ratification. Ratification occurs where a principal, with full knowledge of the material facts, adopts and affirms an unauthorised transaction. The evidence before the trial court was that the 1st, 2nd and 4th Respondents denied liability from the moment the matter came to their attention. No evidence was tendered demonstrating that the Respondents accepted the benefits of the transaction, made any payment, acknowledged indebtedness or otherwise adopted the contract. In the absence of such evidence, ratification could not be inferred. Burden of Proof 1. This Court is mindful that the Appellant may have supplied goods in the genuine belief that the 3rd Respondent possessed authority. However, agency law requires a party seeking to impose liability upon a principal to establish the source of the agent's authority. That burden rested upon the Appellant pursuant to Sections 107 and 109 of the Evidence Act, Cap 80 Laws of Kenya. That burden was not discharged. 2. Having independently reviewed the evidence on record and the applicable legal principles, this Court is satisfied that the learned Adjudicator properly directed herself on both the facts and the law. The finding that the 3rd Respondent acted without authority was supported by cogent evidence, including the 3rd Respondent's own admissions. This Court finds no basis upon which to interfere with the judgment of the Small Claims Court. FINAL ORDERS 1. The appeal lacks merit and is hereby dismissed in its entirety. 2. The judgment of the Small Claims Court delivered on 15th March 2024 in SCCCOMM/E3046/2022 is hereby upheld. 3. The Respondents shall have the costs of this appeal. Judgment delivered virtually on 25th June 2026 In the presence of; Akello for the Respondent Wesonga for the Appellant. C/A Irene Chelangat SIGNED BY/FOR: **★ TH E JUDICIAR Y O F KENY A ★** **HON. LADY JUSTICE CHELANGAT MUTAI** Milimani High Court High Court Civil Appellate Division Date: 2026-06-25 13:28:11