[2015] KEHC 1983 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

COMMERCIAL & ADMIRALTY DIVISION AT MILIMANI

MISCELLANEOUS CIVIL APPLICATION NO 319 OF 2015(OS)

IN THE MATTER OF PROFESSIONAL UNDERTAKING FROM HARITSHETH ADVOCATES TO MAHMOUD AND GITAU ADVOCATES

BETWEEN

AFRISON EXPORT IMPORT LIMITED.......................................PLAINTIFF

AND

HARITSHETH T/A HARIT SETH ADVOCATES...........1ST DEFENDANT

AND

ROBERT GITAU AND AHMED MAHMOUD

T/A MOHMOUD AND GITAU ADVOCATES..............2ND DEFENDANT

JUDGMENT

Revoking professional undertaking

[1] The Originating Summons dated 9th July 2015 has placed the following question before the court for determination:-

(1) Whether the professional undertaking given on 6th June 2013 by HaritShethAddvocates to Mahmoud and Gitau Advocates was cancelled by the Plaintiff vide a letter dated 29th June 2015and thus became null, void and unenforceable;

(2) Whether the court should cancel and nullify the said undertaking;

(3) Whether the court should issue a permanent injunction against the Defendants jointly and severally from acting on, effecting and or executing the said undertaking;

(4) Whether the Defendants can effect or actualize the said undertaking after it had been cancelled by the Plaintiff;

(5) Whether the Defendants have any valid and or legal basis not to cancel the said undertaking; and

(6) Who should pay costs of the application?

[2] The OS is expressed to be brought under section 1, 1A, 1B, 3, 3A of the Civil Procedure Act, Order 37 rule 14, Order 40 rule 1 and 2, Order 52 rule 7(1) (b) of the Civil Procedure Rules and all enabling provisions fo the law. It is supported by the Affidavit of FRANCIS M. MBURU, a director of the Plaintiff Company.The Plaintiff also filed a Motion dated 9th July 2015 under Certificate of Urgency.

[3] The OS was opposed by the 1st Defendant through the Replying Affidavit of HARITSHETH sworn on 6th August 2015. The 2ndDefendant did not file any response despite being served with the application and the OS. See affidavits of service sworn on 16th July 2015 and 21st August 2015 and filed on 22nd July 2015 and 24th August 2015, respectively.

The Plaintiff’s gravamen

[4] The affidavit evidence and the submissions made herein show that the Plaintiff through its directorand in a letter dated 3rd June 2013, instructed the 1st Defendant to give professional undertaking to the 2nd Defendant on certain terms. According to the letter dated 3rd June 2013, the persons who were to be paid as per the undertaking are:-

a) Jimmy Kibaki......................................Kshs. 100,000,000

b) F. M Mulwa..........................................Kshs. 70,000,000

c) Almasi Limited...................................Kshs. 165,000,000

d) Mahmoud &Gitau Advocates (Handling fees).......Kshs. 65,000,000

The 1st Defendant then gave the undertaking dated 6th June 2013. In the written format before court, the undertaking related to Kshs. 400,000,000 that was to be received from the Government of Kenya on sale of the plaintiff’s properties and in settlement of NBIHCCC NO 617 OF 2012. The letter and the undertaking are annexed as exhibits FMM2 & FMM3.

[5] According to the Plaintiff, it paid a sum of Kshs, 65,000,000 in advance to the 2nd Defendant as handling fees in respect of the services rendered to it and other related companies. But despite the payment of the fees in full and numerous instructions to stick to the agreed terms of the undertaking, the Plaintiff learnt that the 2nd Defendant was planning to pay parties other than those mentioned in the undertaking. Communication went through among the parties herein culminating into the letter dated 29th June 2015 instructing the 1st Defendant to cancel the undertaking herein in order to avert the breach herein.

1st Defendant’s reply

[6] The 1st Defendant opposed the OS and the application through the Replying Affidavit herein. He averred thatthe undertaking was to pay a sum of Kshs. 400,000,000 to the 2nd Defendant being fees for professional services rendered to the plaintiff and related companies. The said sum of money was to be paid upon receipt by the 1st Defendant of funds from the Government of Kenya in satisfaction of HCCC NO 617 OF 2012 (OS) on pro ratabasis. He further stated that, initially he did not know the purpose of the payment. And that, he only learnt later in November 2014 that part of the money was to be paid to Jimmy Kibaki who agreed to a reduction of Kshs. 150,000,000 whch was his initial claim. He averred that these negotiations were done in the 1st Defendant’s office. He deposed also that he learnt later that Almasi Limited was also a beneficiary of the undertaaking. The 1st Defendant was apprehensive that the 2nd Defendant was demanding payment of the entire sum whereas the plaintiff had written to the 1st Defendant asking them to cancel the undertaking.It was averred by the 1st Defendant that his firm had not received the balance of the money from the Government of Kenya. But even upon receipt of the balance of the decretal amount, Mr HaritShethintended to file inter pleader proceedings given the disagreements among the parties in the matter. He stated categorically that he has no claim whatsoever on the sums in question and they are ready to abide by the order of the court.

DETERMINATION

[7] I should state from the outset that matters of non-enforceability of an undertaking are inextricable to proceedings for enforcement of the undertaking; they are not sediments in such proceedings. That said,I will be guided by the Constitution especially Article 159 as well as the overriding objective of the law which demands that court should endeavour to serve substantive justice in the cases it adjudicates. Therefore, I will determine the OS on its merit and as guided by the law. I have considered the affidavit evidence, all the arguments and judicial authorities presented before court by the parties and their counsels. Mr Nyamai argued that they do not have a problem with the 1st Defendant per se.Their major quarrel is with the 2nd Defendant who is bent at breaching the undertaking herein to the detriment of the plaintiff. I am aware that parties to an OS under Order 52 rule 7 of the CPR may be heard even if they have not filed any formal pleading of reply. But, the 2nd Defendant did not appear in court or offer any response to the court on the allegation levelled against them. I note they were properly served with notice of the hearing as well as my orders on the hearing on this matter. Only the 1st Defendant appeared and made representations before the court. Nonetheless, and I stated this earlier, despite the failure by the 2bd Defendant to make representations; I will decide this case on merit and the law.

[8] I need not over-emphasize the important role played by professional undertaking to smooth the path of or hasten transactions and circumventing problematic areas of practice in transaction between the parties. See Encyclopaedia of Forms and Precedents,5th Ed. Vol. 39 pp 581. The undertaking becomes the assurance that a transaction will be completed. Therefore, any advocate who breaches the undertaking willbe committed to punitive and disciplinary process and power of the court as a way of (1) upholding professional conduct and ethics of advocates as officers of the court and ministers of justice; that is a matter of public policy; and (2) thereby upholding sanctity of undertaking in transactions between parties. See that cases of (1) Kenya Commercial Bank vs. Adala [1983] KLR 467;(2)Kenya Re vs. MugukuMuriu CA CIVIL APP NO 48 OF 1994;and(3)Naphtali Paul Radier vs. David Njogu [2006] eKLR. From these cases, there are two things which emerge and are directly relevant to the case before me. The first one is that the undertaking must be unambiguous, unequivocal and binding. The second is that that the advocate receiving the undertaking must also adhere to the terms of the undertaking. I have perused the undertaking dated 6th June 2013 and it is clear that the 1st Defendant undertook:-

‘’...to remit to you Kshs. 400,000,000/= (Kenya Shillings our hundred million) within ten days of receipt by ourselves of cleared funds from the Government (and upon being authorized to release the said funds to our clients) in full and final settlement of all your fees in respect of services rendered to our clients’’.

Further, the undertaking provided that:-

‘’We shall be obliged if you would confirm that you have accepted the terms of this undertaking’’.

[9] I have also perused the letter dated 3rd June 2013 which gave the 1st Defendant very clear instructions on the content of the undertaking and the beneficiaries of the sum of Kshs. 400,000,000 which was subject of the undertaking as follows:-

a) Jimmy Kibaki......................................Kshs. 100,000,000

b) F. M Mulwa..........................................Kshs. 70,000,000

c) Almasi Limited...................................Kshs. 165,000,000

d) Mahmoud &Gitau Advocates (Handling fees).......Kshs. 65,000,000

The letter also referred to a meeting- although no date was disclosed- between the Plaintiff and the 1st Defendant. That is not all. In the undertaking, Mr HaritSheth referred to a letter dated 30th May 2013 but he did not annex the said letter in his affidavit. Doubtless, the undertaking did not carry the specific instructions given to the 1st Defendant by the Plaintiff; rather, it contained general terms and stated that the entire sum of Kshs. 400,000,000 was the fees due to the 2ndDefendant in respect of services rendered to the Plaintiff. These events and stated factsare totally irreconcilable with the averments made by Mr HaritShethparticularly in paragraphs 6 and 7 of his affidavit sworn on 6th August 2015. He did not deny the letter dated 3rd June 2013. This brings to the point where I must state that, whereas I do not wish to assign any ominous connotation to, but these are serious omissions which go to the root of the undertaking.These matters arises form evidence placed before the court.

[10] Again, the undertaking carried a very ambiguous statement:-

‘’...(and upon being authorized to release the said funds to our clients)...’’

Mr Sarviaemphasized on this particular aspect of the undertaking and I think some further authorization was needed- I suppose from the Government of Kenya- for the funds to be released to the plaintiff before it can be paid under the undertaking to the 2nd Defendant. Although Mr Sarvia did not categorically state that the undertaking was vague, indeed he was alluding to that fact. On the other hand, Mr Nyamai states that the undertaking was vague and so it needed further and specific instructions for it to be effective. Based on the material before the court, I agree with Mr Nyamai on that point. As if that is not enough, yet another matter emerges; the court has not been shown any letter from the 2nd Defendant confirming acceptance of the terms of the undertaking as per the last paragraph of the undertaking dated 6th June 2013. I only see later demand by the 2nd Defendant for compliance by the 1stDefendant with the undertaking. All these things put to doubt whether the undertaking as formulated was unambiguous, unequivocal and binding. See the case of Kenya Re (supra)that an advocate will be held liable on an undertaking he has given and which is unambiguous, unequivocal and binding on him.

[11] The other issue is the alleged breach by the 2nd Defendant of the undertaking. The evidence provided was not controverted by the 2nd Defendant despite having been served with the OS and application herein. I do not see anything which would make the court think that the plaintiff is not telling the truth. It clear and without any doubt that despite the serious shortcoming of the undertaking, the parties were in constant contact and instructions were given on the beneficiaries who were named persons and the parties knew them plus the amount payable to each. I believe, therefore, any attempt to utilize the sums otherwise than agreed will be a breach of the undertaking for which nullification will be merited. Indeed, from the evidence from the plaintiff and the 1st Defendant, instructions as to beneficiaries of the undertaking were provided by the Plaintiff which then makes the undertaking as formulated incomplete or subject to further instructions. In sum, the answer to the questions posed in the OS is that the undertaking dated 6th June 2013 is hereby cancelled. It is accordingly nullified and is void. I grant the OS and prohibit any party from relying on or executing the undertaking dated 6th June 2013. Mr Sarvia should not lose sleep over the undertaking as it is nullified accordingly. In light thereof, the interlocutory application is spent.

[12] On costs, they follow the event. Judicial decisions and eminent literary writings on this phraseology are legion and I need not multiply them. Except I am content to state that, the result of the entire litigation is that the plaintiff is the successful party; it was forced to incur expenses in filing this suit after making demand to the 2nd Defendant to desist from the breach herein. I am also alive to the fact that, in determining the successful party, it is not necessary that no or little resistance was put forth in the matter. The upshot is that the Plaintiff is entitled to be recompensed of the costsso incurred and the person to pay is the 2nd Defendant. This is not a punishment to the 2nd Defendant but a remedial way of compensating the plaintiff for having had to file suit to vindicate its rights even after making demand to the 2nd Defendant to ameliorate the situation herein. I note that the 1st Defendant did not make full disclosures to court or made contradictory averments in his affidavits on this matter but I do not think they deserve to be condemned to costs given their position as well as the circumstances of the case. Accordingly, costs shall be paid by the 2nd Defendant. It is so ordered.

Written, dated and signed at Nairobi this 22ndday of September 2015 by:

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F. GIKONYO

JUDGE

Dated, signed and delivered in court at Nairobi this 30th day of September 2015 by:

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C. KARIUKI

JUDGE