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Case Brief · caselaw.co.ke
Court of AppealDismissedCivil Appeal No. 224 of 2002

James Francis Kariuki v Mathew Ndau Kanyi [2008] KECA 247 (KLR)

Court of Appeal
15 February 2008
1,781 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~7 min to read original · ~4 min brief

The bottom line

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Kenya's Court of Appeal confirmed that auctioneers jointly hired must split commissions equally when no sharing formula was agreed.

What this practically means

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Executive summary

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This was a second-appeal dispute between two licensed auctioneers, James Francis Kariuki (Ndarugu Merchant Auctioneers), the appellant, and Mathew Ndau Kanyi (Panama Rovers Auctioneers), the respondent. Both were jointly instructed by the Receivers of Kenya Fibre Corporation Ltd on 23rd June 1995 to conduct a public auction of the company's machinery, which realised Kshs. 13,834,500. The instructions provided for a single commission of Kshs. 691,725 (5% of the proceeds), to be shared between the two firms as they would jointly determine, and required all sale proceeds to be banked intact with the Receiver. Ndarugu retained Kshs. 687,000 from the proceeds, and Panama sued for its half share plus expenses of Kshs. 20,000. The Senior Principal Magistrate's Court at Kiambu entered judgment for Panama; the High Court (Aganyanya J) dismissed Ndarugu's first appeal on 14th March 2002. The Court of Appeal (Tunoi, O'Kubasu and Deverell JJA) dismissed the second appeal. It held that the tripartite arrangement created contractual obligations between the two auctioneers notwithstanding the absence of a direct sharing agreement, that an equal sharing of the commission must be implied where no formula was agreed, and that Ndarugu's wrongful retention of the proceeds made it directly liable for Panama's share. The High Court judgment and orders were upheld, with costs and interest at court rates to Panama.

Questions the Court framed

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The issues the Court set itself to decide, in its own words.

  1. 1.Whether there was privity of contract between Ndarugu and Panama entitling Panama to a share of the auction commission from Ndarugu
  2. 2.Whether, absent an agreed sharing formula, an equal sharing of the commission should be implied
  3. 3.Whether Ndarugu's retention of Kshs. 687,000 from the auction proceeds made it liable to pay Panama's share of the commission

Key legal issues

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01

Privity of contract between jointly instructed auctioneers

Holding

The tripartite arrangement between the Receiver and the two auctioneers created contractual obligations as between the auctioneers themselves, including an obligation on one to share the commission with the other.

Reasoning

The Receiver's letter of 23rd June 1995 instructed both firms jointly, provided for a single commission payable as if one auctioneer was retained, and required the two firms jointly to determine its sharing. The defence plea that each auctioneer should look separately to the Receiver was rejected; the effect of the tripartite agreement was that the Receiver owed the joint commission and the auctioneers owed sharing obligations inter se.

p. 3
02

Implied term as to sharing of commission

Holding

In the absence of an agreed sharing formula or instructions communicated to the Receiver, the law implies an intention that the commission be shared equally.

Reasoning

The letter required the auctioneers jointly to determine the sharing and communicate it to the Receiver. No agreement was reached and no instructions were communicated. The court therefore implied an equal division, consistent with the joint retainer and the single-commission scheme stipulated by the Receiver.

p. 4
03

Consequences of wrongful retention of sale proceeds

Holding

By retaining Kshs. 687,000 out of the proceeds instead of paying them intact to the Receiver, Ndarugu pre-empted the payment mechanism and became directly liable to Panama for Panama's 50% share of the commission.

Reasoning

The instructions required all cash proceeds to be banked intact and no item released until payment in full was received and banked. Ndarugu's retention of Kshs. 687,000 breached both the contract with KFC and its obligations vis-à-vis Panama, converting Ndarugu's obligation into direct liability for Panama's share.

p. 4

Legal principles established

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  • Where two auctioneers are jointly instructed under a single commission to be shared between them and no sharing formula is agreed or communicated to the instructing party, an equal sharing of the commission is implied.
  • An auctioneer instructed that all proceeds be banked intact who wrongfully retains part of the proceeds in breach of the instructions becomes contractually liable to pay the other jointly instructed auctioneer that auctioneer's share of the commission.

Court orders

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  1. 1.The appeal is dismissed with costs
  2. 2.The judgment and order of Aganyanya J delivered on 27th February 2002 and 14th March 2002 respectively are upheld
  3. 3.Ndarugu shall pay interest to Panama at court rates from the date of the judgment until payment in full

The bench

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One judgment of the whole court — no separate or dissenting opinions.

majority
majority
majority
On appeal from
High Court of Kenya, Nairobi
H.C.C.A. No. 342 of 1998
Jurisdiction invoked
First appeal to the Court of Appeal under the Court of Appeal's appellate jurisdiction (judgment, order and decree of the High Court)

Relief refused

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The appellant's challenge to the privity of contract finding and the High Court judgment

The tripartite arrangement in the Receiver's letter of 23rd June 1995 created contractual obligations between the two auctioneers, and Ndarugu breached them by retaining proceeds

p. 4

Costs

Appeal dismissed with costs to the respondent (Panama); Ndarugu to pay interest at court rates from the date of judgment until payment in full.

Quotable passages

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Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.

We therefore hereby dismiss the appeal with costs and uphold both the judgment and the order of Aganyanya J (as he then was), delivered on 27th February 2002 and on 14th March, 2002 respectively.
p. 4Final orders - dismissal of appeal and affirmation of the High Court judgment
Ndarugu shall pay interest to Panama at Court rates from the date of this judgment until payment in full.
p. 4Final orders - interest on the decretal sum
In these circumstances we consider that there must be implied an intention that the commission was to be shared equally between the two auctioneers.
p. 4Implied equal sharing of joint commission
We consider that this finding by the Senior Principal Magistrate was correct and that there was no merit in the claim by the respondent Ndarugu to the effect that there was no privity of contract between the appellant Ndarugu and the plaintiff Panama.
p. 3Rejection of the privity of contract defence

Issues in the judgment

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minor

The judgment inconsistently states the total commission as 5% of the proceeds in one passage and 15% in another; the arithmetic (5% of Kshs. 13,834,500 = Kshs. 691,725) supports 5% as the intended figure.

minor

The judgment refers to the Senior Principal Magistrate as Miss F.M. Muchemi in one passage and Miss F.N. Muchemi in another.

Key timeline

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Practical implications

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Frequently asked questions

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Cite this brief

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Cite this brief

Caselaw, "James Francis Kariuki v Mathew Ndau Kanyi [2008] KECA 247 (KLR)", Case Analysis (2008). Civil Appeal No. 224 of 2002. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2008/247/eng@2008-02-15

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.