Pride Inn Limited, whose strict religious policy forbids handling alcoholic beverages, has been ordered by the Court of Appeal to pay Sh2,104,770 to Thatchmaanz Limited for supplying and managing alcohol at its Nairobi hotels.
The three-judge bench comprising Justices W. Karanja, K. M’Inoti, and L. Achode dismissed Pride Inn’s appeal in a ruling that exposes the tension between religious principles and commercial profit, finding that the hotel chain cannot escape debts from an arrangement it designed, approved, and profited from for seven months.
The judgment reveals how Pride Inn’s management devised an elaborate scheme to sell alcohol without physically handling it, allowing the company to boost revenues while theoretically maintaining its proprietors’ religious sensibilities.
But when payment became due, the hotel claimed the entire operation was unauthorized and illegal.
“The entire essence of this model was that the Defendant did not wish to handle the alcoholic beverages yet wanted to avail them to its customers and patrons,” the trial judge noted, capturing what critics may view as corporate hypocrisy dressed in religious garb.
The controversy began in early 2014 when Pride Inn’s strict no-alcohol policy created what the company acknowledged was a serious financial problem.
According to Anthony Ngunga, who served as Pride Inn’s Chief Executive Officer from February to December 2014, the religious restriction had “adversely affected its revenue streams.”
Court documents reveal that Ngunga held meetings with Pride Inn’s top leadership, including Chairman Shabir Kassam and Managing Director Hasnain Noorani, to discuss “the need to raise revenue for the appellant by allowing the sale of alcohol.”
The solution they crafted was ingenious in its attempt to split moral responsibility from financial benefit.
Rather than abandon their religious stance or continue losing money, Pride Inn’s board approved bringing in a third party to handle all physical aspects of alcohol sales.
Ngunga testified that he proposed Edward Ahn, director of Thatchmaanz Limited, who had experience in the bar and restaurant industry.
In April 2014, a meeting attended by Pride Inn’s Managing Director sealed the arrangement.
Under the oral agreement, Thatchmaanz would supply alcoholic beverages to Pride Inn’s Nairobi hotels, construct and operate bars, hire staff, and bill the hotel directly for alcohol consumed by customers.
Pride Inn would impose a service charge on sales but would not touch the bottles or handle the money directly.
The contract was to run for three years, from May 2014 to May 2017, with renewal provisions to allow Thatchmaanz to recover its investment in bar construction and equipment.
The Operation: Bars, Staff, and Booming Business
Thatchmaanz moved quickly. By the end of May 2014, the company had established a complete bar unit at Pride Inn’s Lantana Road location, stocked all Nairobi outlets with alcoholic beverages, and engaged qualified bar staff.
Operations commenced with what appeared to be full approval from Pride Inn’s management.
The business model seemed designed to satisfy everyone.
Pride Inn’s proprietors could claim they didn’t “handle” alcohol while their hotels offered comprehensive bar services to customers.
Thatchmaanz would build a steady supply relationship with a premium hotel chain. Customers would enjoy drinks at Pride Inn establishments.
Moses Mahavi, who worked as Bar Manager for Thatchmaanz, testified that his duties included ensuring supply of alcoholic beverages whenever needed by Pride Inn’s hotels and restaurants.
“The appellant also required the respondent to supply alcoholic beverages to any of its guests outside of the main hotel premises, who required it, through the outside catering offered by the appellant,” he stated.
Evidence showed that suppliers delivered alcoholic beverages directly to Pride Inn’s premises, where they were verified by the hotel’s security officers who issued gate passes. Hotel staff conducted further verification.
The entire operation was integrated into Pride Inn’s business, from security protocols to customer service.
Michael Kimitho Kamau, Pride Inn’s General Manager at the time, corroborated this account.
He testified that he was “aware that the directors of Pride Inn Hotels were in discussions to allow the sale of alcohol in the Nairobi units” and that “they entered into an agreement to allow an independent vendor to supply the alcohol to be sold in the units and in turn to be paid independently by the Hotel.”
When the Money Stopped Flowing
The first signs of trouble emerged in July 2014,just two months into operations.
Despite alcohol flowing freely at Pride Inn establishments and revenue presumably increasing, invoices dating from May 19, 2014, remained unpaid.
Edward Ahn testified that he contacted Ngunga to query why payments had not been made despite repeated assurances.
Ngunga met with Kamau and requested him to prepare all invoices and send them to Pride Inn’s financial controller for “prompt settlement.” The settlement never came.
By November 2014, with debts mounting and patience exhausted, Thatchmaanz threatened to terminate the arrangement. Ngunga asked Ahn to reconsider.
In December 2014, a crucial meeting was held at Pride Inn’s Westlands office, attended by the hotel’s Managing Director Noorani, Chief Finance Officer, Ahn, and Ngunga.
According to testimony, the meeting resolved that outstanding invoices totaling approximately Sh1,500,000 would be settled within one week, and Thatchmaanz would continue supplying alcoholic drinks and running the bars.
On December 2, 2014, just days after this meeting, Ngunga ceased employment with Pride Inn. The promised payment never materialized.
On December 16, 2014, Pride Inn made a partial payment of Sh322,200 by cheque,an amount that would later prove crucial in establishing the hotel’s acknowledgment of the debt. But that was all Thatchmaanz would receive.
By the time operations ceased, unpaid invoices totaled Sh2,104,770. Thatchmaanz had also invested Sh1,000,000 in bar construction and equipment, plus Sh648,000 in staff salaries.
The Defense: “We Never Authorized This”
When sued in the High Court, Pride Inn mounted a defense that struck at the foundations of the arrangement its own board had approved.
The hotel claimed any purported contract with Thatchmaanz was undertaken without company authority and could not bind it.
Nicholas Ochieng, Pride Inn’s General Manager, provided the company’s official position: “It was the company’s policy not to engage in the sale of alcoholic beverages in any of its hotel branches and at no point did the company obtain a license as required by law to sell alcoholic beverages in its premises as alleged by the respondent.”
He added that if Thatchmaanz had entered into an oral contract with Ngunga, “then that was a private agreement that the company was not privy to and therefore, is not bound by it.”
Pride Inn also invoked the legal doctrine of ex turpi causa non oritur actio—the principle that courts should not enforce illegal contracts.
The hotel argued the arrangement was illegal because its premises were not licensed to sell alcohol under the Nairobi City County Alcoholic Drinks Control and Licensing Act, 2014.
The irony was sharp: Pride Inn was simultaneously claiming it never authorized alcohol sales while arguing those very sales were illegal.
The Inconvenient Evidence
Pride Inn’s defense faced several devastating problems. First, the hotel conspicuously failed to call Managing Director Hasnain Noorani to testify, despite him being identified as a key participant in the April 2014 meeting that birthed the arrangement and the December 2014 meeting that promised payment.
“The unrebutted testimonies of PW1 and PW2, coupled with evidence of performance including the establishment of the bar complete with barmen, stocking of beverages, and a part-payment in the form of a cheque of Kshs. 322,000 issued by the appellant, support the existence of an oral agreement,” the Court of Appeal noted.
Second, evidence showed that Pride Inn’s own General Manager, Kamau, had visited Nairobi City Hall in May 2014 to obtain licenses for the units to sell alcohol.
He paid inspection fees and received a receipt dated February 4, 2015. Kamau testified that they were told the Alcohol Licensing Board had not yet been formed but were advised to pay fees and proceed with sales pending the Board’s appointment.
Third, the partial payment of Sh322,200 contradicted Pride Inn’s claim of non-authorization.
Courts recognize that partial payment typically constitutes acknowledgment of debt.
Fourth, and perhaps most damning, Thatchmaanz presented evidence that after terminating the arrangement, Pride Inn hired Thatchmaanz’s former Bar Manager, Moses Mahavi, to continue running the bar at Lantana Road. Ahn testified that “the appellant continues to operate the business of selling alcoholic drinks.”
This evidence painted a picture of a company that approved alcohol sales at the highest level, benefited from them financially, made partial payment acknowledging the debt, continued the business after the dispute—but refused to pay the supplier who made it all possible.
The Court’s Verdict: You Can’t Have It Both Ways
The High Court, presided over by Justice Tuiyott, ruled in favor of Thatchmaanz in February 2019, awarding Sh2,104,770 plus interest. Pride Inn appealed to the Court of Appeal.
The appellate judges began by addressing whether a valid contract existed.
They outlined requirements for oral contracts: valid and legally enforceable terms, essential elements like offer and acceptance, and compliance with laws and regulations.
“Going by the conduct of the parties herein, and having regard to the common course of natural events and human conduct in relation to the prevailing facts of this particular case, we are convinced that there was an orally binding contract between the appellant and the respondent,” the Court of Appeal declared.
The judges found that the arrangement was not a conventional sale of goods but rather “a hybrid commercial arrangement – a service and supply contract, designed to allow the appellant to offer alcohol to patrons without violating its internal restrictions.”
This finding rejected Pride Inn’s argument that the Sale of Goods Act applied and had been violated.
On the illegality argument, the court was equally unimpressed.
“The duty to obtain the licence lay with the appellant, since the sale occurred within its premises and for the benefit of its clientele,” the judges ruled.
They noted that Pride Inn’s own General Manager had taken steps to obtain licenses, and that Section 56(b) of the relevant Act allowed a nine-month transitional period for compliance.
The County Government had allowed Pride Inn to proceed with sales pending appointment of the Licensing Board.
“In our view, the appellant cannot rely on the doctrine of ‘ex turpi causa non oritur actio’ where it has been proved that the duty was upon it to ensure that it had obtained the licence before it allowed the sale of alcoholic beverages in its premises,” the court stated.
The judges characterized the absence of a license as “a regulatory lapse for which the appellant bore responsibility” rather than fundamental illegality that would void the contract.
The Message: Religious Principles Don’t Trump Legal Obligations
The Court of Appeal’s ruling sends a clear message about corporate accountability. Companies cannot structure elaborate arrangements to achieve moral distance from activities their principles prohibit, profit substantially from those activities, and then invoke those same principles to escape financial obligations.
The judgment also addresses the limits of the ex turpi causa defense. A party cannot claim a contract is illegal due to missing licenses when that party bore the duty to obtain those licenses, took steps to do so, and was given transitional permission by authorities.
On damages, the court found that Thatchmaanz had “not only pleaded special damages but also strictly proved them” through unpaid invoices totaling Sh2,104,770 covering the period from May to December 2014.
Pride Inn’s final gambit, attempting to hold Anthony Ngunga personally liable through third-party proceedings also failed.
The court noted that Pride Inn had sought leave to serve the third-party notice by substituted service but never filed the required application or effected service.
“There is no evidence that third-party proceedings were prosecuted in the trial court,” the judges observed.
Pride Inn Limited has been ordered to pay the full judgment amount of Sh2,104,770 plus costs and interest to Thatchmaanz Limited, bringing closure to a dispute that began when the hotel’s bar taps were flowing but its payments had run dry.
