https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/7019

Monarch Hotel Ltd v Mokaya & another (Civil Appeal E1319 of 2024) [2026] KEHC 7019 (KLR) (14 May 2026) (Judgment) Neutral citation: [2026] KEHC 7019 (KLR) Republic of Kenya In the High Court at Nairobi (Milimani Commercial Courts) Civil Appeal E1319 of 2024 WA Okwany, J May 14, 2026 Between The Monarch Hotel Limited Appellant and Dominic Nyambane Mokaya 1st Respondent The Monarch Boutique Hotel Limited 2nd Respondent (Being an appeal from the decision of Hon. Wamae E.M. Muindi (Adjudicator) delivered on 14th November 2024 in Milimani SCC COMM. No. E6838 of 2024) Judgment Background 1.The 1st Respondent instituted proceedings before the Small Claims Court claiming Kshs. 721,929/= being the value of food and meat products allegedly supplied on credit between 26th January 2024 and 11th April 2024. 2.The evidence before the trial court showed that the supplies were made to the 2nd Respondent, which acknowledged receipt of the goods through invoices and issued several cheques in payment. The cheques were subsequently dishonoured upon presentation. 3.The 2nd Respondent contended that it was merely acting as an agent of the Appellant pursuant to a Management Agreement dated 7th November 2023 and amended on 17th January 2024, under which the Appellant allegedly appointed the 2nd Respondent to manage and operate the hotel premises on its behalf. 4.On the basis of that contention, the 2nd Respondent issued Third Party proceedings against the Appellant seeking indemnity and contribution. 5.The Appellant denied liability and maintained that the Management Agreement did not create an agency relationship but rather a manager/operator relationship under which the 2nd Respondent independently undertook management and operational responsibilities. 6.The Appellant further contended that it was not privy to the supply contract entered into between the 1st and 2nd Respondent and that all transactions relating to supply, invoices, acknowledgements and issuance of cheques were undertaken solely by the 2nd Respondent. 7.The trial court considered the documents placed before it and found that the 1st Respondent had established supply of goods to the 2nd Respondent and proved the outstanding debt through invoices, dishonoured cheques and bank records. 8.The learned Adjudicator further held that the 2nd Respondent’s assertion that it acted merely as an agent of the Appellant was not substantiated by evidence. 9.The trial court however proceeded to find that the Appellant continued to receive the goods and failed to disclose its alleged non-involvement to the 1st Respondent. 10.Consequently, the trial court held the Appellant and the 2nd Respondent jointly and severally liable for the outstanding debt of Kshs. 721,929/= together with interest and costs. The Appeal 11.Dissatisfied with the entire Judgment, the Appellant lodged the present Appeal challenging the findings of the trial court on liability, agency, privity of contract and the propriety of imposing joint and several liability upon the Appellant. 12.The Appellant challenges the Judgment on numerous grounds, which may be summarized as follows:a.That the learned Adjudicator erred in entering Judgment jointly and severally against the Appellant without documentary evidence supporting liability;b.That the trial court erred in finding that the Appellant received goods supplied by the 1st Respondent whereas the evidence showed that the goods were received by the 2nd Respondent;c.That the trial court failed to appreciate that the 2nd Respondent acknowledged receipt of the goods and issued dishonoured cheques in its own name;d.That the trial court contradicted itself by finding that agency had not been substantiated while still imposing liability upon the Appellant;e.That the Appellant was not privy to the supply contract between the 1st and 2nd Respondents;f.That liability was imposed upon the Appellant based on assumptions rather than evidence;g.That the learned Adjudicator failed to properly evaluate the Management Agreement and the doctrine of disclosed principal. 13.The Appeal was canvassed through written submissions filed by all parties. The Appellant’s Submissions 14.The Appellant submitted that appeals from the Small Claims Court lie only on points of law pursuant to Section 38 of the Small Claims Court Act. Reliance was placed on Peter Gichuki King’ara vs. IEBC & 2 Others Nyeri Civil Appeal No. 31 of 2013 and Aesthetics Limited vs. Times and Seasons Chemicals (Civil Appeal E027 of 2023) [2025] for the proposition that the question whether a trial court properly considered and evaluated evidence constitutes a point of law. 15.The Appellant argued that the Management Agreements dated 7th November 2023 and 17th January 2024 did not create an agency relationship between the Appellant and the 2nd Respondent. Reference was made to Black’s Law Dictionary, 10th Edition, definition of agency as a relationship where an agent acts on behalf of and subject to the control of a principal. 16.The Appellant also relied on Commissioner of Domestic Services vs. Dutch Flower Groups Kenya (Income Tax Appeal E101 of 2020) [2021] KEHC 23 (KLR) where the Court stated that what creates agency is the degree of control retained by the principal over the agent. 17.It was submitted that the 2nd Respondent operated independently as a “Manager/Operator” and not as an agent acting under the Appellant’s control. 18.The Appellant further relied on National Bank of Kenya Ltd vs. Pipeplastic Samkolit (K) Ltd & Another Civil Appeal No. 95 of 2001 KLR 112 (2002) EA 503 for the proposition that courts cannot rewrite contracts between parties. 19.The Appellant contended that the 2nd Respondent independently contracted with the 1st Respondent, received the goods, issued invoices and dishonoured cheques in its own name and never disclosed that it acted on behalf of the Appellant. 20.It was further submitted that the dishonoured cheques constituted admission of debt by the 2nd Respondent. Reliance was placed on Equatorial Commercial Bank vs. Wilfred Nyasimi Oroko HCC No. 224 of 2011 [2015] eKLR where the Court held that a dishonoured cheque issued in respect of a debt constitutes admission of the debt to the extent of the amount of the cheque. 21.The Appellant also invoked the doctrine of privity of contract and relied on Dunlop Pneumatic Tyre Co Ltd vs. Selfridge & Co Ltd [1915] AC for the principle that only a party to a contract can sue or be sued upon it. 22.The Appellant therefore urged the Court to find that the trial court misdirected itself by imposing liability on the Appellant despite absence of contractual privity or proof of agency. The 1st Respondent’s Submissions 23.The 1st Respondent maintained that it supplied food and meat products to the 2nd Respondent between January and April 2024 and produced invoices, dishonoured cheques, demand letters and bank statements in proof of the debt. 24.The 1st Respondent submitted that the internal arrangements between the Appellant and the 2nd Respondent could not defeat the supplier’s claim. 25.It was contended that the Appellant benefited from the supplied goods and that the Management Agreement demonstrated involvement by the Appellant in the operation of the hotel business. 26.The 1st Respondent further submitted that the Appellant never expressly disclaimed liability during the period of supply and therefore could not later evade responsibility. 27.The 1st Respondent urged the Court to uphold the findings of the trial court and dismiss the Appeal. The 2nd Respondent’s Submissions 28.The 2nd Respondent supported part of the Appeal and submitted that it acted merely as an agent of the Appellant who was a disclosed principal. 29.The 2nd Respondent relied on the Management Agreement dated 1st November 2023 and argued that the Appellant expressly appointed the 2nd Respondent to manage the hotel on its behalf. 30.The 2nd Respondent submitted that an agent of a disclosed principal cannot ordinarily be sued for liabilities incurred on behalf of the principal. Reliance was placed on City Council of Nairobi vs. Wilfred Kamau Githua t/a Githua Associates & Another [2016] KECA 649 (KLR) and Anthony Francis Wareheim t/a Wareheim & 2 Others vs. Kenya Post Office Savings Bank Civil Applic. Nos. Nai 5 & 48 of 2002 for the principle that where a principal is disclosed, liability ordinarily attaches to the principal and not the agent. 31.The 2nd Respondent further argued that the Appellant resumed control of hotel operations and diverted funds to accounts inaccessible to the 2nd Respondent, thereby frustrating settlement of the debt. 32.It was submitted that the trial court ought to have held the Appellant solely liable as disclosed principal and absolved the 2nd Respondent from liability. Analysis and Determination 33.This being a first appeal, the duty of this Court is to reconsider and re-evaluate the evidence on record and arrive at its own independent conclusion while bearing in mind that it neither saw nor heard the witnesses testify. This principle was settled in Selle & Another vs. Associated Motor Boat Co. Ltd & Others [1968] EA 123. 34.I am also alive to the provisions of Section 38 of the Small Claims Court Act, which limits appeals from the Small Claims Court to matters of law only. The Court of Appeal in Peter Gichuki King’ara vs. IEBC & 2 Others (supra) affirmed that the question whether a trial court properly considered and evaluated evidence and applied the correct legal principles constitutes a point of law. 35.I find that the central issue in this appeal is whether the learned Adjudicator properly imposed joint and several liability upon the Appellant together with the 2nd Respondent for the debt arising from supply of food items by the 1st Respondent. 36.It was not disputed that the food products were supplied directly to the 2nd Respondent between January and April 2024. The invoices produced before the trial court were addressed to the 2nd Respondent. Further, the dishonoured cheques relied upon by the 1st Respondent were issued solely by the 2nd Respondent. 37.The evidence on record therefore clearly established privity of contract between the 1st Respondent and the 2nd Respondent. 38.The Appellant’s liability can therefore only arise if the evidence established either, that the 2nd Respondent acted as an agent of the Appellant; or that the Appellant independently assumed liability for the debt. 39.The learned Adjudicator expressly found that the defence by the 2nd Respondent that it acted as an agent under a management agreement “was not substantiated.” Having made that finding, the trial court nonetheless proceeded to impose joint and several liability upon the Appellant. 40.With all due respect to trial court, I find that the learned Adjudicator’s conclusion was inconsistent with the court’s own findings and unsupported by the evidence on record. 41.I note that the Management Agreements dated 7th November 2023 and 17th January 2024 described the 2nd Respondent as a “Manager/Operator” mandated to manage and operate the Appellant’s hotel premises. 42.I have carefully examined the terms relied upon by the parties. While the Agreements granted the 2nd Respondent authority to operate the hotel premises and I note that there was no evidence demonstrating that the Appellant directly controlled procurement transactions entered into by the 2nd Respondent with third-party suppliers. 43.In Commissioner of Domestic Services vs. Dutch Flower Groups Kenya (supra) the Court held that what creates an agency relationship is the degree of control retained by the principal over the conduct of the alleged agent. 44.No evidence was produced before the trial court to demonstrate that the Appellant instructed, negotiated, supervised or approved the procurement transactions undertaken by the 2nd Respondent with the 1st Respondent. Furthermore, no evidence was presented to show that the 2nd Respondent disclosed to the 1st Respondent that it was contracting on behalf of the Appellant. 45.The invoices, acknowledgements and cheques were all issued exclusively in the name of the 2nd Respondent. 46.The 2nd Respondent independently acknowledged the debt and attempted settlement through issuance of cheques which were dishonoured. 47.In Equatorial Commercial Bank vs. Wilfred Nyasimi Oroko (supra) the Court held that a dishonoured cheque issued in respect of a debt constitutes an admission of that debt. 48.The dishonoured cheques in the present case therefore constituted admission of indebtedness by the 2nd Respondent.The doctrine of privity of contract further militates against imposition of liability upon the Appellant in the absence of proof that it was party to the supply agreement. This is the position that was taken in Dunlop Pneumatic Tyre Co Ltd vs. Selfridge & Co Ltd (supra) where the House of Lords affirmed the principle that only parties to a contract may sue or be sued upon it. 49.Similarly, in National Bank of Kenya Ltd vs. Pipeplastic Samkolit (K) Ltd & Another (supra) the Court held that courts cannot rewrite contracts for parties.The contractual relationship evidenced before the trial court was between the 1st Respondent and the 2nd Respondent. I therefore find that the Court cannot rewrite that relationship to impose liability upon the Appellant where none was expressly assumed. 50.The 2nd Respondent argued that it acted merely as an agent of a disclosed principal and therefore ought not to bear liability. 51.The authorities relied upon by the 2nd Respondent, including Anthony Francis Wareheim t/a Wareheim & 2 Others vs. Kenya Post Office Savings Bank and City Council of Nairobi vs. Wilfred Kamau Githua t/a Githua Associates & Another, (supra) correctly state the principle that an agent acting for a disclosed principal is ordinarily not personally liable. 52.I however find that the above cited authorities are distinguishable from the present case because the evidence before this Court does not establish that the Appellant was disclosed to the 1st Respondent as principal during the procurement transactions. 53.To the contrary, the evidence shows that the 2nd Respondent dealt with the 1st Respondent in its own name, received the goods, acknowledged the invoices and issued cheques in its own name. 54.I therefore find that the 2nd Respondent contracted as principal and not merely as an agent of a disclosed principal. 55.It is my finding that the learned Adjudicator erred in law by imposing joint and several liability upon the Appellant in the absence of evidence establishing contractual privity, assumption of liability or a disclosed agency relationship. 56.The Appeal therefore succeeds to the extent that the Judgment of the Small Claims Court imposing liability upon the Appellant cannot stand. 57.Accordingly, I make the following final Orders:a.The Appeal is hereby allowed.b.The Judgment of the Small Claims Court delivered on 14th November 2024 in SCC COMM No. E6838 of 2024 is hereby set aside only insofar as it imposed joint and several liability upon the Appellant.c.Judgment is hereby entered against the 2nd Respondent, THE Monarch Boutique Hotel Limited, for the sum of Kshs. 721,929/= together with interest at court rates from the date of filing suit until payment in full.d.The suit against the Appellant, The Monarch Hotel Limited, is hereby dismissed.e.The 1st Respondent shall have costs of the suit before the Small Claims Court against the 2nd Respondent only.f.Each party shall bear its own costs of this Appeal. 58.It is so ordered. DATED, SIGNED AND DELIVERED AT NAIROBI THIS 14TH DAY OF MAY 2026.HON W. A. OKWANYJUDGEIn the presence ofMiss Kibii for AppellantNjuguna for 1st RespondentMunguti for RespondentAbdirzak - Court Assistant