Mwai v Kenya Tourist Development Corporation [1983] KECA 68 (KLR)
The bottom line
#Kenya's Court of Appeal confirmed that a corporation is not liable for a hotel manager's orders unless you can prove the manager was actually its agent, or that it ratified the deal.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether the corporation ordered the red soil from the appellant
- 2.Whether the corporation received the soil
- 3.Whether Oluoch, the hotel manager, was the corporation's agent acting within actual, implied or ostensible authority
- 4.Whether the corporation's subsequent conduct amounted to ratification of the manager's order
- 5.Whether prior acceptance of responsibility for capital development, payment of other transporters, and post-delivery correspondence estopped the corporation from denying liability
Key legal issues
#Agency and ostensible authority of the hotel manager
The corporation did not hold out Oluoch as its agent; he was employed by African Tours and Hotels Limited, the managing agents, and no actual, implied authority or agency of necessity was proved.
Oluoch was employed by African Tours and Hotels Limited, which managed Homa Bay Hotel on behalf of its owner, Homa Bay Hotels Limited, in which the corporation was merely a shareholder. The corporation neither owned the managing agents nor held out Oluoch as its agent. Since Oluoch gave no evidence, why he directed the appellant to the corporation could not be established, and no actual, implied authority or agency of necessity was proved.
Ratification of an undisclosed principal's contract
The corporation's letters could not ratify an order it had not authorised; ratification of a contract made on behalf of an undisclosed principal outside actual authority is contrary to principle.
The corporation's correspondence invited the appellant to supply supporting documents but never admitted liability. On the authority of Keighley, Maxsted & Co v Durant, an agent for an undisclosed principal can bind that principal only within actual authority, and nothing incapable of ratification can be ratified. The letters may have misled the appellant, but they did not create agency or ratify the manager's order.
Estoppel based on prior conduct and payment of other transporters
There were no underlying or past arrangements on which estoppel or ratification could operate; other transporters were paid by the hotel company, not the corporation.
The evidence showed the corporation had never before paid for sand supplied to the hotel and would only enter written contracts for capital expenditure; if any requisition had been made, payment would have come from Homa Bay Hotels Limited. Payments to other transporters were for later deliveries recorded in hotel records. The corporation's assistance to complainants was intended to persuade the hotel management to pay justified claims, not an admission of liability.
Pleading of agency
Agency was not specifically pleaded in the plaint and therefore was not an issue before the courts.
The plaint was drawn by the appellant's advocate and claimed only for work done to the corporation; agency and ratification were raised only in submissions in the Court of Appeal. A party cannot succeed on a cause of action not pleaded, so even if the evidence could support agency, it was not an issue in the suit.
Legal principles established
#- An agent of an undisclosed principal can act only within the scope of his actual authority; conduct that is not capable of ratification cannot be ratified by the alleged principal.
- Correspondence from a body that merely misleads a claimant into thinking it will entertain a claim cannot operate as ratification of an order made by the manager of a separate entity.
- Shareholding in a company does not make a shareholder liable for the contracts of that company or its servants; the suit should have been brought against the company which owned the hotel.
Court orders
#- 1.The appeal is dismissed
- 2.The respondent is awarded the costs of this appeal
The bench
#One judgment of the whole court — no separate or dissenting opinions.
Wrote the judgment
Draft judgment circulated by Kneller JA, with which Hancox JA and Platt Ag JA agreed; held the High Court correctly found the corporation not liable on agency or ratification.
As Hancox JA and Platt Ag JA agree the appeal must be dismissed and it is so ordered.p. 4
Wrote the judgment
Agreed with the result dismissing the appeal but would have made no order for costs against the appellant in either court.
I would also dismiss the appeal, but speaking for myself, I would not make any order for costs against the appellant, either in this court or in the High Court.p. 2
Wrote the judgment
Delivered separate observations rejecting the four propositions advanced for the appellant and agreeing the appeal be dismissed with costs.
I agree that the appeal should be dismissed, and I have only a few observations to make.p. 2
- On appeal from
- High Court of Kenya, Kisumu
- Jurisdiction invoked
- First appellate jurisdiction of the Court of Appeal over appeals from the High Court (Kenya Tourist Development Corporation is a body corporate subject to ordinary civil appeal process)
Relief refused
#Reversal of the High Court orders and restoration of the trial magistrate's judgment awarding Kshs 13,000 against the corporation
No agency, authority or ratification linking Oluoch's order to the corporation was proved; the manager was employed by the managing agents, African Tours and Hotels Limited, and the hotel was owned by Homa Bay Hotels Limited.
Costs
The appeal is dismissed with costs; the respondent will owe the costs of this appeal (Hancox JA would have made no order for costs against the appellant, either in this court or in the High Court).
Quotable passages
#Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.
It would be an undisclosed principle and he could only effectively act within the scope of his actual authority
I do not see that the conduct by the officers of the corporation can operate to ratify something which was not capable of ratification
Even if the manager could be said to have been the agent of Homa Bay Hotel Ltd, this is still not the same as the corporation which is merely a shareholder in that company.
There were therefore no underlying or past arrangements upon which the alleged estoppel and ratification could operate.
As Hancox JA and Platt Ag JA agree the appeal must be dismissed and it is so ordered.
So it is ordered that the respondent will owe the costs of this appeal.
Issues in the judgment
#The judgment body records observations delivered by 'Platt Ag JA', but the signature block lists 'Z.R. CHESONI AG.JUDGE OF APPEAL' and does not name Platt; the identity of the third member of the coram is ambiguous on the face of the judgment.
Hancox JA states he would make no order for costs against the appellant, while Platt Ag JA states costs should follow the event and the final order awards the respondent costs; the judgment does not expressly reconcile this divergence.
The judgment as reproduced contains no coram heading naming the bench; the bench is reconstructed from the signature block and the body of the judgment.
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Mwai v Kenya Tourist Development Corporation [1983] KECA 68 (KLR)", Case Analysis (1983). Court of Appeal, Kisumu (second appeal from Senior Resident Magistrate's Court Kisumu, first appeal decided by Schofield J on April 27, 1983). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/1983/68/eng@1983-12-08
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.