[2023] KEHC 18819 (KLR)

Archdiocese of Kisumu v Ecobank Kenya Limited; Awad Auto Limited (Garnishee) (Commercial Case 40 of 2018) [2023] KEHC 18819 (KLR) (20 June 2023) (Ruling)

Neutral citation: [2023] KEHC 18819 (KLR)

Republic of Kenya

In the High Court at Kisumu

Commercial Case 40 of 2018

RE Aburili, J

June 20, 2023

Between

Archdiocese of Kisumu

Plaintiff

and

Ecobank Kenya Limited

Defendant

and

Awad Auto Limited

Garnishee

Ruling

1. This ruling determines the chamber summons application dated 10th August 2020 filed by the Garnishee/Applicant Awad Auto Limited. The application is expressed to be brought under Section 11 (1) and (2) of the Advocates of the Remuneration Order. (Should be Paragraph, not Section). The applicant seeks the following orders:i.That the matters herein be deemed as a reference to the trial courtii.That the 30th July 2020 decision of the taxing officer on items 1,2,9,11 to 15 and items 20 to 43 and reasons given on 31st July 2020 be set aside.iii.That the decision of the taxing officer of 30th July 2020 and the purported reasons given on 31st July 2020 be set aside and be deemed to be as it is a nullity in law.iv.That the reason letter dated 31st July 2020 be struck out as it offends paragraph/clause 11 of the Advocates Remuneration Order Cap 16. v.That the bill of cost dated 22nd October 2019 be remitted to another taxing officer for taxation an/or be taxed accordingly by this court.vi.That the defendant/respondent do meet the cost of the application herein.

2. The application is predicated on the grounds on the face of the Application and supported by the Affidavit dated 10th August 2022, sworn by Mr. G.J. Kathuthu. The Applicant avows that the taxing officer erred in law and misdirected herself in awarding minimal or low amounts that could not account for direct costs or expenses (air travel) and instruction fees thus justifying the assertion taxation was based on wrong principles of law.

3. The applicant further averred that there were no reasons advanced by the taxing officer and thus the reasons letter dated 31st July 2020 was a nullity in law.

4. It was further maintained that the applicant was not a garnishee as the defendant’ attempt to make it a garnishee was dismissed and that the defendant’s proceeding went beyond that of garnishee thus the correct proviso to use in the taxation of awarded costs was Schedule 6 of the Advocates Remuneration Order and further that the taxing officer misinterpreted Section (Paragraph) 11 (2) of the Advocates Remuneration Order.

5. Opposing the application/Reference, the defendant/Respondent filed a replying affidavit sworn on the 7th March 2022 by John Wambugu and filed on the same day in which he deposes that the applicant was a garnishee by virtue of the fact that, the defendant/ Respondent being a decree holder, it wanted to secure payment of Kshs 100,000,000 from the applicant which amount was due to the plaintiff/judgement debtor following the judgement debtor’s sale of LR No 3525/12 and LR No 3525/13 to the applicant.

6. The defendant/Respondent contended in deposition that vide its Notice of Motion dated 18. 02. 2019, the defendant obtained a court order restraining the applicant from remitting Kshs 100,000,000 which the applicant was to pay to the plaintiff following the plaintiff’s sale of LR No 3525/12 and LR No 3525/13 to the applicant.

7. It was further deposed that the appropriate schedule and scale to be applied by the taxing master was Schedule 6 Paragraph A 14 (b) of the Advocates Remuneration Order which states that the instructions fees for garnishee proceedings should not be less than Kshs 14,000 and thus the figure sought by the applicant was excessive and exaggerated.

8. It was further contended by the defendant in deposition that the only issue for determination in garnishee proceedings was whether the intended garnishee had funds due to the judgement debtor and thus there was no complex element to be determined.

9. Regarding the disbursements claimed by the applicant in paragraphs 22 to 36 of its party and party Bill of Costs, it was contended that they were payable subject to the production of receipts which the applicant failed to do.

10. The Defendant further contended that the applicant had failed to demonstrate that the Taxing Officer misdirected herself, applied wrong principles of the law and/or that she exercised her discretion wrongly.

11. The parties indicated that they would file submission to dispose of the matter. The applicant stated that he had filed his submissions with the instant application however there is nothing in the court record as evidence of this. Nonetheless, the affidavit by the applicant is detailed enough hence I have relied on the same as well as the submissions filed in support of the party and party bill of costs.

The Defendant’s Submissions 12. On behalf of the defendant, it was submitted that the garnishee was indeed a garnishee as it was brought in vide this court’s order issued following the defendant’s Notice of Motion dated 18/02/2019 where the applicant was ordered to hold Kshs 100,000,000 that was to be paid to the plaintiff herein.

13. It was further submitted that there is no dispute that the applicant referred to itself as a garnishee in its party and party Bill of Costs and thus taking into account the aforementioned, the assertion by the applicant that it was not a garnishee does not hold.

14. The defendant further submitted that the appropriate schedule and scale that was to be applied by the taxing officer was schedule 6 paragraph A14 (b) of the Advocates Remuneration Order which provides that garnishee proceedings should not be less than Kshs 14,000

15. It was further submitted that paragraphs 22 to 36 of the Bill of costs that referred to disbursements in the sum of Kshs 173,825 were only payable subject to the production of receipts which the garnishee never availed and thus the taxing officer was right in her findings rejecting and rejection of the same.

16. Further submission on behalf of the defendant was that the garnishee failed to demonstrate that the taxing officer misdirected herself, applied the wrong principles of the law and that she exercised her discretion wrongly as was held in the case of Kipkorir, Titoo & Kiara Advocates v Deposit Protection Fund [2005] KLR 528.

17. The defendant thus submitted that the application dated 10. 8.2020 lacked merit and ought to be dismissed with costs.

Analysis and Determination 18. I have considered the application as presented by the garnishee/applicant, the grounds and supporting as well as replying affidavit and the court record as the respondent reiterated the contents of the replying affidavit in its submissions. In my view, the issue for determination is whether the instant application is merited.

19. The Applicant seeks an order that the ruling on taxation of the Garnishee’s costs delivered on 30th July 2020, be set aside.

20. The established principles for the setting aside the decisions of Taxing Master were well stated by the Court of Appeal in the case of Kipkorir, Tito & Kiara Advocates v Deposit Protection Fund Board [2005] eKLR that:“On reference to a Judge from the Taxation by the Taxing Officer, the Judge will not normally interfere with the exercise of discretion by the Taxing Officer unless the Taxing Officer, erred in principle in assessing the costs.”

21. The proper exercise of discretion by the Taxing Officers was restated in the case of Kamunyori & Company Advocates v Development Bank of Kenya Limited (2015) Civil Appeal 206 of 2006, where it was held that:“… Failure to ascertain the correct subject matter in a suit for the purpose of taxation is an error of principle. So too, failure to ascribe the correct value to the subject matter is an error of principle. Authorities on taxation show that a Judge will normally not interfere with the Taxing Officer’s decision on taxation unless it is based on an error of principle. Where it is shown that the sum awarded was so manifestly excessive as to justify interference, an error of principle can be inferred. If instructions fee is arrived at on the wrong principles, it will be set aside”

22. Applying the above principles to this reference, on item 1, I observe from the court file that the matter subject of the contentious bill of costs and therefore this reference involved a garnishee application dated 18th February 2019 that was determined vide a ruling delivered on the 23rd July 2020. The applicant defended the matter which was dismissed with costs.

23. The applicant herein filed its party and party bill of costs which were taxed and the reasons for the taxation confirmed by a letter dated 31st July 2020 written by the Taxing Master.

24. Schedule 6 paragraph 14 of the Advocates Remuneration Order deals with Garnishee Proceedings and provides as follows:(a)Instructions to institute garnishee proceedings, if not opposed— Kshs 4,200(b)Instructions to institute or to defend garnishee Proceedings, when opposed, such sum as the taxing officer considers reasonable but not less than Kshs 14,000. [emphasis added]

25. There is no dispute that the proceedings for which costs were awarded and finally taxed on were Garnishee proceedings and therefore any other term beyond garnishee proceedings, when the ruling itself clearly shows that the taxation was in respect of garnishee party and party bill of costs, is farfetched and is rejected.

26. The applicable schedule for party and party garnishee proceedings is clear as stated above. I therefore find that the taxing officer was right in awarding the applicant Kshs 14,000 as Instruction Fees. I find no error of principle to warrant interference with the same.

27. On Court Attendances as set out in Items 9, 13, 14 and 15, the applicant complains that the taxing officer applied the wrong principles. I must however emphasize that matters of quantum of taxation are matters purely within the province, competence and judicial discretion of the taxing Master. This Court will not lightly interfere with an award of quantum by the taxing Master, unless there was an error in principle or the discretion was improperly exercised, resulting in an injustice.

28. In her decision, the Taxing Master gave her reasons why she arrived at the said decision on the items for court attendances and this court having perused the court record on the respective dates mentioned for court attendances, agrees with the findings by the taxing master. I find no error of principle and or failure by the Taxing Master to take into account relevant matters.

29. On items 13 and 15, the taxing Master noted that there was no order availed for seeking the application of the higher scale of Kshs 7100 for half a day in court as claimed by the applicant. I am in agreement with the reasoning of the taxing master on this that in the absence of a specific order awarding costs on a higher scale as stipulated in Paragraph 50 A of the Advocates Remuneration Order, 2014, the taxing master could not have granted the items as sought. Section 50 of the Advocates Remuneration Order provides as follows:“Subject to paragraphs 22 and 58 and to any order of the court in the particular case, a bill of costs in proceedings in the High Court shall be taxable in accordance with Schedule 6 and, unless the court has made an order under paragraph 50A, where Schedule 6 provides a higher and a lower scale the costs shall be taxed in accordance with the lower scale.’

30. Accordingly, the lamentation by the applicant on these items is found to be devoid of merit and is declined.

31. On Item 14, the taxing officer noted that there was no record of attendance as per the court record and thus she taxed it off completely. I have confirmed from the court record that there was no attendance on the specific day hence the taxing master committed no error of principle in declining to grant the item.

32. On Item 20, the taxing officer noted that the taxation hearing took less than half an hour as directions were issued on filing of submissions thus she taxed the item at 1,100. I find no reason to interfere with the same.

33. In the end, I find that the taxing officer exercised her discretion judiciously on the taxation of the court attendance fees. I uphold her decision on the same.

34. On whether the taxing master should have awarded the applicant the disbursements sought in the bill of costs, the disbursements were Items 22 – 37 and 39 – 43. The applicant’s counsel claimed that he travelled from Nairobi to attend to the matters in Kisumu and further that he took air flights and spent in hotels and thus he was to be refunded.

35. On the other hand, the defendant argued that the applicant’s counsel failed to produce receipts for the same and that as such, the taxing master was right in declining to award the same. The question is, did the Taxing Master misdirect herself in disallowing disbursements? Section 74 provide as follows?“Subject to section 74 A, receipts or vouchers for all disbursements charged in a Bill of Costs shall be produced if required by the Taxing Master.”

36. This court’s understanding of the above provision is that if the Taxing Master requires prove of items under disbursement, then she will ask the party concerned to avail them. In her decision, the Taxing Officer only noted that receipts were not availed.

37. In his taxation submissions the applicant’s counsel did not address himself to the disbursements whereas the defendant submitted that the same ought to be payable only upon production of receipts. It is therefore my finding that although the applicant’s counsel may have travelled by air, or by road, there was no such evidence of the expense incurred for travel. In addition, since an objection to the granting of the items on disbursements was raised by the defendant, the burden of proof lay on the applicant to avail evidence of the claimed disbursements. The applicant could not remain silent and leave it to the taxing officer to ask for receipts. I am fortified by several decisions of this court which I have no reason to depart from.

38. In Ngatia & Associates Advocates v Interactive Gaming & Lotteries Limited [2017] eKLR, the court held that disbursements must be proved by way of receipts. In AM Kimani & Co. Advocates v Trident Insurance Company Limited [2016] eKLR, the court observed that:“In respect to the disbursements, the advocate readily admitted that she did not file any receipt to confirm any of the sums claimed.30. In Muthoga Gaturu & Co. Advocates v Naciti Engineers Limited Misc. Case No 51 of 2001, Mwera J. (as he then was) held as follows:“That paragraph (74 of the Remuneration Order) reads:“74. Subject to paragraph 74A, receipts or vouchers for all disbursements charged in a bill of costs shall be produced on taxation if required by the taxing officer.”

39. Later in Hezron Odhiambo Abok v Prajapat Pravinbhai Jivabhai t/a Mitra Enterprises (K) Ltd [2019] eKLR the court observed as follows and I concur that:“In this matter it is not shown that the taxing officer required the advocate to produce vouchers and receipts for the items of disbursements referred to above. Accordingly, the taxing officer would have done well to allow those items which totalled Kshs 1,200/- only.”31. I do not understand the learned Judge to have been laying down a general rule, that if the taxing officer failed to ask the advocate to produce receipts and vouchers, the sums claimed as disbursements should be allowed.32. In order to get a better appreciation of paragraph 74, it is necessary to compare it to paragraph 74A, which states as follows;“1) The taxing officer shall allow reasonable charges and expenses of witnesses who have given evidence and shall take into account all circumstances and without prejudice to the generality of the foregoing, the following factors ...”33. Thus, pursuant to paragraph 74A, there is no requirement for receipts and vouchers. The factors to be taken into account include;“a)the loss of time of the witness;b)if the witness is a party, the time spent giving evidence;c)the loss of wages or salary to the witness or his employer while attending court:34. By specifying that the taxing officer shall allow reasonable charges and witness expenses subject to the factors specified, plus any other relevant factors, the paragraph 74A of the Remuneration Order must be taken to have created an exception to the general rule of evidence, which requires the person who makes an allegation, to prove it.35. Mwera J. appears to have been saying that if the sums claimed in respect of disbursements were not substantial, the taxing officer may consider allowing such sums and that too, if the taxing officer had not required the claimant to produce vouchers or receipts to prove the claims.36. In this case, the advocate has submitted as follows;“The taxing officer further erred in law and fact by failing to award us costs for disbursements for failure to produce receipts where in our submissions we had explained why we could not produce receipts and when it is clear that some expenses had been incurred by virtue of the services that we had rendered to the client”.37. In effect, the advocate had no receipts which she could have produced even if the taxing officer had asked her to produce them. Therefore, whether or not the advocate had been asked to produce receipts or vouchers to prove the disbursements incurred, the taxing officer would not have been given anything more. It is not the failure by the taxing officer which was the cause for the advocate’s failure to make available the requisite proof. The inability to produce proof rests completely at the advocate’s door, as she did not have evidence to support the disbursements claimed.”18. In Maina Murage & Company Advocates v Mae Properties Limited [2018] eKLR, the court declined a claim for disbursements on the basis that that the applicant did not provide receipts to prove the said disbursements and the number of folios in the photocopying had not been specifically stated.19. On the basis of the above authorities, it is my finding that it was incumbent upon the applicant to prove the disbursements he claimed. There was no evidence by way of receipts as to how he came to the same, and I hold that the taxing officer cannot be faulted for taxing off Item 47. ”

40. That notwithstanding, I do note that the applicant has still not availed any receipts to support his claim for disbursements in this application/reference. The same could have been annexed to the supporting affidavit. suit. I therefore find that there was no basis upon which the taxing master could have awarded the items 22 – 37 and 39 – 43 on disbursements which were not proved.

41. Finally, on the issue of VAT, the applicant laments that the taxing master ered in principle in declining to award VAT on the taxed party and party costs.

42. On the part of the respondent, it was argued that VAT is not awardable on party and party bill of costs. Section 6 (1) of the Value Added Tax Act, 2015 provides that:“Tax shall be charged on any supply of goods or services made or provided in Kenya where it is a taxable supply made by a taxable person in the course of or in furtherance of any business carried on by him.”

43. Section 2 of the VATAct defines “supply” to include the sale or provision of taxable services to another person and “a taxable service” as that which has not been specified in the Third Schedule. Legal services are not listed amongst exempt supplies in the Third Schedule of the Act.

44. In Pyramid Motors Limited vs Langata Gardens Limited (2015) eKLR, JL Onguto J (RIP) had this to say on payment of VAT in party and party costs and I agree that:“On the final issue of VAT, I hold the simple view that in allowing the same the Master erred under the Value Added Tax Act, 2013 particularly section 5 thereof. Value Added Tax (VAT) is chargeable in taxable supply made by any registered person. There was no taxable supply of either goods or services made to the Applicant herein by the Respondent herein. The Bills herein concerned Party and Party costs and VAT could then not apply as neither party fetched nor supplied services to the other. True, legal services were rendered but it is not the Advocate who was being compensated herein. The Master could only have awarded VAT if the Bills were Advocate- Client Bills or if there was tendered evidence before the Master that the Plaintiff had paid VAT and was consequently entitled to indemnity. But yet that again is also debatable whether the Plaintiff was a vatable person. I would vacate the award on VAT as the Master erred. In the result, I would not return the Bills to the master for re-assessment but would direct that the item of VAT be completely and wholly taxed off.”

45. Thus, from a reading of Section 6 (1) of the VATAct, Party and Party Bill of Costs does not attract an aspect of taxable supply in the same manner as an Advocate Client Bill of Costs would. It therefore follows that a taxing Master can only award VAT if the Bill of costs is an Advocate- Client bill of costs.

46. In the end, I find and hold that the applicant has not demonstrated to the satisfaction of this court the taxing officer misdirected herself on a matter of principle. For that reason, as was stated by the Court of Appeal in Joreth Limited v Kigano & Associates, Civil Appeal No 66 of 1999 [2002] EA, 92 (2002) eKLR, a Judge siting on a reference against the assessment ought not to interfere with the findings. I find no reason to interfere with the findings of the taxing master.

47. Accordingly, I find no error I n the taxing officer’s award dated and delivered on the 30th July 2020and the reasons given on 31st July 2020.

48. I thus find that the Chamber Summons dated 10th August 2020 is devoid of any merit and is hereby dismissed.

49. To avoid escalation of costs on this very mundane issue of garnishee proceedings, I order that each party shall bear their own costs of the Reference.

DATED, SIGNED ND DELIVERED AT KISUMU THIS 20TH DAY OF JUNE, 2023R.E. ABURILIJUDGE