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Court of AppealPartially AllowedCivil Appeal 14 of 2005· [2006] KECA 344 (KLR)

Mapis Investment (K) Limited v Kenya Railways Corporation

Court of Appeal
9 June 2006
ROR. S. C. OmoloEOE. O. O'KubasuWDW. S. Deverell
2,822 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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Kenya's Court of Appeal refused to pay an unregistered estate agent Kshs. 17.5 million in commission because its contract was illegal.

What this practically means

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Executive summary

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Mapis Investment (K) Ltd sued Kenya Railways Corporation claiming Kshs. 17.5 million as the balance of an alleged agency commission, pleading that it was appointed sole selling agent of LR No. 209/6524 Nairobi at a reserve price of Kshs. 95 million, sold the property to the Japanese Embassy for Kshs. 120 million, and was entitled to the difference. The High Court (Mary Kasango, Ag. J.) dismissed the suit on 10th November 2004. KRC filed a cross-appeal and grounds for affirming, contending for the first time that any agreement was illegal because neither Mapis nor its director, Mr. Shompa, was a registered estate agent contrary to sections 8, 8A and 18 of the Estate Agents Act, Cap 533, and rule 2 of the Estate Agents (Remuneration) Rules 1987, and that the agreement exceeded KRC's powers under the Kenya Railways Act. The Court of Appeal permitted four grounds for affirming to be argued despite not having been raised below. It held that nothing in the Kenya Railways Act rendered the agreement illegal (a ground abandoned by counsel), and that a special fee could lawfully be agreed for sole agency instructions under paragraph 5 of the Schedule to the Remuneration Rules. However, on the uncontradicted evidence, including a letter produced by Mr. Shompa himself stating that neither he nor Mapis was registered, the alleged contract would be illegal under section 18. Applying the ex turpi causa principle from Mistry Amar Singh v Kulubya, the court refused to enforce it. The appeal was dismissed with costs; the cross-appeal was allowed without costs; the judgment below was sustained but for different reasons. This decision binds subordinate courts and the High Court on the enforceability of contracts concluded by unregistered estate agents.

Key legal issues

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01

Illegality of the alleged agency contract for non-registration under section 18 of the Estate Agents Act

Holding

If the contract existed, the conduct of Mr. Shompa and the appellant was in breach of express statutory provisions and illegal, so no further commission could be awarded

Reasoning

The letter of 20th November 2002 stating that neither Mr. Shompa nor the appellant was registered was produced by Mr. Shompa without denial, amounting to an admission. Section 18(1) prohibits unregistered practice as an estate agent. The court allowed the point though not raised below, applying the ex turpi causa principle that a court will not enforce an illegal contract once illegality is apparent from the plaintiff's own evidence.

p. 5
02

Whether a fee above the scale could be agreed under the Estate Agents (Remuneration) Rules 1987

Holding

Paragraph 5 of the Schedule permits a special fee or commission for sole agency instructions, so agreeing a fee above the scale with a registered agent would not breach the Rules

Reasoning

The instructions of 15th January 1998 confirmed the appellant as sole selling agents, which were 'sole agency instructions'. Paragraph 5 of the Schedule to the Rules expressly allows a special fee or commission to be agreed for such instructions, so ground for affirming No. 2 failed on its own terms.

p. 4
03

Whether the Kenya Railways Act rendered the agreement illegal

Holding

Nothing in Cap 397 rendered the alleged agreement illegal; the ground was abandoned

Reasoning

The court found no provision in the Kenya Railways Act supporting the proposition that the Act made the alleged agreement illegal, and counsel for KRC rightly abandoned ground for affirming No. 4 at the renewed hearing.

p. 3

Legal principles established

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  • A contract to perform estate agency services can only be legal if entered into with a registered estate agent; unregistered practice under section 18 of the Estate Agents Act renders the contract illegal and unenforceable
  • A court should not enforce an illegal contract even where illegality was not pleaded, if the evidence adduced by the plaintiff proves the illegality
  • A special fee or commission may lawfully be agreed for sole agency instructions notwithstanding the scale of fees in the Estate Agents (Remuneration) Rules

Court orders

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  1. 1.The appeal be and is hereby dismissed with costs
  2. 2.The cross appeal be and is hereby allowed but with no orders as to costs since the grounds on which the cross appeal are being allowed were never raised in the superior court
  3. 3.The judgment of the superior court is sustained but for different reasons stated herein
On appeal from
High Court of Kenya at Milimani Commercial Courts, Nairobi
H.C.C.C. No. 335 of 1998
Jurisdiction invoked
First appeal to the Court of Appeal under the Court of Appeal Rules (appeal from the High Court)

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, "Mapis Investment (K) Limited v Kenya Railways Corporation", Case Analysis (2006). Civil Appeal 14 of 2005. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2006/344/eng@2006-06-09

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