[2018] KEHC 9221 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

MILIMANI HIGH COURT

MISC. CAUSE NO. 298 OF 2015

KTK ADVOCATES...................................................ADVOCATE/APPLICANT

VERSUS

NYAMBENE COFFEE ESTATES LTD............. 1ST CLIENT/RESPONDENT

NYAMBENEMILLS LTD....................................2ND CLIENT/RESPONDENT

LAWRENCE C.NJERU........................................3RDCLIENT/RESPONDENT

RULING

1. The outcome of the Motion before Court will turn on whether a Retainer to KTK Advocates (The Advocates) can be implied or discerned from the conduct of Nyambene Coffee Estates Ltd, Nyambene Coffee Mills Ltd and Lawrence C. Njeru (Lawrence) (jointly the Respondents or Clients).

2. That Motion is dated 20th July 2016 and is brought under the Provisions of Section 51(2) of The Advocates Act for the following prayers:-

1. THAT Judgement be entered against the Clients/Respondents in the sum of Khs.11,631,039. 28 plus interest.

2. THAT costs for this application and all the other incidental costs be provided for.

3. These Taxation proceedings were commenced by presentation of an Advocate/Client Bill of Costs by the Advocates on 25th June 2015. The Bill was taxed before the Taxing Officer on 24th February 2016 at Ksh.11,631,039. 28. The Record of the Taxing Officer shows that the Client were neither represented nor present in Court but the Taxing Officer was satisfied that they were duly served. This is the Bill that the Advocates seek to enforce as a Judgement.

4. The 1st and 2nd Respondents have through Affidavits filed on their behalf by Protasio Njeru on 27th October 2016 and 31st October 2016 resisted the Motion on the Ground that there was no Retainer. On his part the 3rd Respondent states that the only work that he asked Mr. Donald Kipkorir (an Advocate with KTK Advocates) to undertake was to get information about a few accounts from Equatorial Commercial Bank. That the Advocate got the information in form of Documents and that was all to it. The 3rd Respondent thinks that the sum of Khs.11,00,605 is such a colossal sum for simply writing a Demand Notice. On another front the 3rd Respondent states that he was never invited to participate in the Taxation proceedings before the Deputy Registrar.

5. The matter against the 3rd Respondent has to be straightforward. There is an admission by the 3rd Respondent that he retained Mr. Kipkorir to do some work for him and which instructions were carried out. The issue raised by the 3rd Respondent is that the costs sought by the Advocates and taxed in their favour is disproportionate the simple task carried out by the Advocate. That however is a question of quantum of fees. The proceedings before this Court are not in the nature of a Reference from the Taxation and it is not occasion for the Court to revisit the quantum of fees. If it is true that the 3rd Respondent was not invited for the Taxation before the Taxing Officer, then the proper cause for the 3rd Respondent was to seek the setting aside of the Taxation.

6. Following the Taxation, a Certificate of Taxation dated 28th June 2016 was issued in favour of the Advocates. The same has neither been set aside nor altered. Retainer is not disputed in respect to the 3rd Respondent. There is no reason for this Court to decline the Orders sought in the Motion as against the 3rd Respondent. The Provisions of Section 51(2) are clearly on the side of the Advocates and they read:-

“(2) The certificate of the taxing officer by whom any bill has been taxed shall, unless it is set aside or altered by theCourt, be final as to the amount of the costs covered thereby, and the Court may make such order in relation thereto as itthinks fit, including, in a case where the retainer is notdisputed, an order that judgment be entered for the sum certified to be due with costs”.

7. In respect to the 1st and 2nd Respondents, Retainer is disputed and there can be no successful claim for fees if there is no Retainer. The two assert that they have never met, instructed or heard about the firm of KTK Advocates. They deny instructing or retaining the said Advocates. They press the point that no Resolution was made by them to instruct the said Advocates. In addition they aver that they were never invited to the Taxation and were lucky to stumble on this matter and immediately instructed their current Advocates.

8. It is common cause to the parties that where Retainer is disputed under the Provisions of Section 51(2) of The Advocates Act, the onus is on Advocates to prove Retainer. The yardstick of proof is the normal standard of a balance of probability. The law is that Retainer can be expressed by way of a written authority or implied or discerned from the conduct of a Client (See for example decision in Ochieng, Onyango Kibet & another vs. Adopt A Light Limited (2007) eKLR).

9. At the hearing of the Motion, Mr. Kipkorir asked this Court to look at the Bundle of Documents filed at the Taxation and the Court will see that there was indeed instructions. In that Bundle there is an email of 4th November 2013 from the 3rd Respondent to Mr. Kipkorir which reads,

“Dear Donald,

Attached find the demand letter from Equatorial Commercial Bank Ltd. I will scan the original offer letter and other relevant documents later.

Kind Regards

Lawrence C. Njeru

Managing Director

Nyambene Coffee Mills Ltd

P.O. Box 104517-00100

NAIROBI

Of significance would be the subject of the email being Nyambene Coffee Mill and Nyambene Marketing Mills.

10. There is then communication dated 5th November 2013 to Equatorial Commercial Bank by the advocates and it helps to reproduce it,

Head of Legal

Equatorial Commercial Bank

Equatorial Fidelity Centre

Waridi Lane

Off Waiyaki Way

WESTLANDS

Dear Sirs,

RE: DEMAND FOR SETTLEMENT

NYAMBENE COFFEE ESTATES LIMITED

We have been retained by Nyambene Coffee Estates Limited, our client who has given us your letters dated 28. 10. 13 that claim the sum of Khs.144,887,482 and US$908,313. 10.

We are seeking further instructions and shall revert.

Yours faithfully,

Donald B. Kipkorir

For: KTK Advocates

cc.

Directors

Nyambene Coffee Estates Limited

600200-MERU

11. Making reference to this letter, the 3rd Respondent writes an email of 12th November 2013 as follows:-

“Dear Donald,

Thank you for your letter to Equatorial Commercial Bank Ltd in favour of Nyambene Coffee Mills ltd and Nyambene Coffee Estates Ltd. I hope the letter covers the two companies as per the Demand letters they had sent because you have only addressed me. Thanks.

Kind Regards,

Lawrence C. Njeru

Managing Director” (of emphasis)

The letter underscores that the matter involves both the 1st and 2nd Respondents.

12. There is also an additional email from Mr. Lawrence Njeru to the Advocate sent a day earlier being 11th November 2013.

13. In an email dated 19th February 2014, Mr. Lawrence Njeru writes to Mr. Kipkorir asking him to get some information from Equatorial Commercial Bank in respect to Accounts for among others Nyambene Coffee Estates Ltd and himself. There is then the email of 18th July 2014 in which Mr. Lawrence Njeru writes,

“Dear Mr. Kipkorir

We have just been given the attached letter please advice on the way forward.

Kind regards

Lawrence C. Njeru

Managing Director

Nyambene Coffee Mills Limited.”

14. On 6th August 2014, the Advocates give some short advice and raise a fee note of Khs.3,910,150. 50. The Reference of the Interim Fee request Note is Equatorial Commercial Bank and Nyambene Coffee Mills, Nyambene Coffee Estates. That fee is neither paid nor is the letter responded to. It is that state of affairs that must have triggered the Taxation which has now culminated in the Motion before Court.

15. There is then undisputed evidence that as at 14th November 2013, the Directors of Nyambene Coffee Mills Ltd were Nyambene Coffee Estates Limited and lecof Limited C. And the Directors of Nyambene Coffee Estates Limited as at 13th November 2013 were:-

Protasio Njeru

Henry Paul Ireri Njeru

Lawrence C. Njeru

Francis Mambo Gatumo

Sigsmonda Njeru

Christine W. Njeru

In his affidavit Mr. Lawrence Njeru states,

“That I was the Managing Director of the 1st and 2nd Respondent at the time when the alleged work is said to have been done by KTK Advocates”.

It is therefore a common fact that at times material to this matter Lawrence Njeru was a Managing Director of Nyambene Coffee Estates Limited and Nyambene Coffee Mills Limited. (The 1st and 2nd Respondents respectively).

16. It has to be remembered that Mr. Lawrence Njeru (the 3rd Respondent) confirms instructing the Advocates but states that this was for “me to file a civil suit against them”, suggesting perhaps that the instructions were personal to him. However, the emails tell a different story. They were written by Lawrence on behalf of the 1st and 2nd Respondents. Look, for instance, at the email of 12th November 2013 in which Lawrence emphasizes that the matter involves the two companies (see paragraph 11 of this Decision). If that was all to the matter then a foregone conclusion would be that Retainer can be implied or discerned from the conduct of the 1st and 2nd Respondents present in the email communication.

17. Yet it is argued by the 1st and 2nd Respondents that in so far as the two are Limited Liability Companies, instructions can only be through a resolution of the Board of Directors of the Companies. This Court is asked to find support for this proposition in the decision of East African Portland Cement ltd vs. Capital Markets Authority & 4 others (2014) eKLR in which Hon. Mumbi J. held,

32. That being the case, what does the law provide with regard to suits filed without the authority of the company?

33. In Affordable Homes Africa Limited vs Ian Henderson & 2 Others HCCC No 524 of 2004,Njagi J observed that as an artificial body, a company can take decisions only through the agency of its organs, the Board of Directors and the shareholders; and that where a company’s powers of management are, by the articles, vested in the Board of Directors, the general meeting cannot interfere in the exercise of those powers (see the decision of the Court in Automatic Self-Cleansing Filter Syndicatev. Cuninghame [1906] Ch.34, CA.); that it was therefore necessary to examine a particular company’s articles of association to ascertain wherein lies the power to manage the company’s affairs, for therein also lies the power to sanction the commencement of court actions in the name of the company. The Court (Njagi J) observed that it was common ground that there was no authority from the Board Directors to institute the suit, and consequently, he held as follows:

“The upshot of these considerations is that in the absence of a board resolution sanctioning the commencement of this action by the company, the company is not before the court at all. For that reason, the preliminary objection succeeds and the action must be struck out with costs, such costs to be borne by the advocates for the plaintiff.”

34. I believe a similar situation obtains in the present suit. Article 92 of the company’s Memorandum and Articles of Association (annexure KT3 annexed to the undated affidavit of Mr. John Maonga filed in Court on 24th December 2014) provides that the business of the company shall be managed by the Directors who may do on behalf of the company all such acts and exercise all such powers as may be exercised by the company. As already stated, Article 110 of the company’s Articles provides for the passing of resolutions of directors in writing, such resolutions to be as effective as those passed at meetings of the Board of Directors. As has also been found, the resolution purportedly authorising the present petition was not passed in accordance with Article 110. Consequently, there was no resolution for the filing of this matter.

35. In Bugerere Coffee Growers Ltd vs Sebaduka & Another (supra), it was held, in dismissing the suit, that when companies authorise the commencement of legal proceedings, a resolution or resolutions have to be passed either at a company or Board of Directors’ meeting and recorded in the minutes, but no resolution had been passed authorising the proceedings in the case. The Court held further that where an advocate has brought legal proceedings without authority of the purported plaintiff the advocate becomes personally liable to the defendants for the costs of the action.

18. In addition the 2nd and 3rd Respondents relied on the following holding by Hon. Emukule J. in East African Safari Air Ltd vs. Anthony Kegode & Anor;-

“When an advocate is however instructed to file a suit, particularly against current or sitting directors or immediate former directors of the company, special care is required on the part of the Advocate or his firm that necessary authorizations by way of clear resolutions of the Board had been taken to institute the suit”.

19. This Court is largely in agreement with Emukule J. that where an Advocate is instructed by a Company to file suit against current or sitting Directors or immediate former Directors then it would be prudent for the Advocate to obtain clear authorization by way of a Resolution from the Board to Commence the Action to be sure that the suit is not merely a manifestation of some Board Room wars but clearly intended by the Company.

20. However in the absence of such special circumstances there is no reason to depart from the general rule that a person dealing with a corporation, acting in good faith and without knowledge or notice of any irregularity, need not inquire about the formality of the internal procedures of the corporation but is entitled to assume that there has been compliance with the Articles and bylaws. It is assumed that a person who is conducting the affairs of the Company in a manner which appears consonant with the Articles of the Corporation is acting with authority. The old rule in the decision of Royal British Bank vs. Turquand119 EA 886 has been affirmed by the Court of Appeal in the case of East African Safari Air Limited vs. Anthony Ambaka Kegode & another CA No. 42 of 2007 which was an appeal from East African Safari Air Limited (supra). The Rule is as follows:-

“While persons dealing with a company are assumed to have read the public documents of the company and to have ascertained that the proposed transaction is not inconsistent therewith, they are not required to do more; they need not inquire into the regularity of the internal proceedings – what Lord Hatherley called “the indoor management” and may assume that all is being done regularly. This rule, which is based on the general presumption of law, is eminently practical, for business could not be carried on if a person dealing with the apparent agents of a company was compelled to call for evidence that all internal regulations had been duly observed. Thus, where the articles give power to borrow with sanction of an ordinary resolution of the general meeting, a lender who relies on this power need not inquire whether such sanction has in fact been obtained. He may assume that it has, and if he is acting bona fide he will, even though the sanction has not been obtained, stand in as good position as if it had been obtained.”

21. Even if I was to agree that an Advocate must obtain the relevant Company Resolution under a Corporate Seal to institute a suit, this strict requirement may not extend to simply receiving instructions to act, like here, in a matter that does not end in litigation. If Lawrence appeared to have the authority to bind the Company and appeared to be acting in consonance with the Articles of Association, then the Advocates, in the absence of evidence of any irregularity or bad faith, were entitled to assume that Lawrence was acting in compliance with the Articles and Memorandum of Association of the Company.

22. There is consensus that Lawrence was indeed the Managing Director of the 1st and 2nd Respondents. The Articles of the 1st Respondent provides for the appointment of a Managing Director and Article 17 gives the following Powers:-

“The Directors may entrust to and confer upon a managing Director any of the powers exercisable by them upon such terms and conditions and with such restrictions as they may think fit and either collaterally with or to the exclusion of their own Powers and may from time to time revoke, withdraw, alter or vary all or any such powers”.

Further, it is not contended that the two Companies do not have Power to retain the services of an Advocate.

23. The nature of instructions given by Lawrence was to protect the interests of the two companies. No evidence has been placed before this Court that the Advocates in taking up the instructions were acting in bad faith or had notice or knowledge or reason to believe that Lawrence was not acting in compliance with the Memorandum and Articles of The Companies. The Advocates were entitled to assume that the internal procedures and workings of the Company had been followed or complied with. The act of Lawrence who was the apparent agent of the Two Companies must bind the Companies and I have to find that there was indeed Retainer.

24. As the certificate of Taxation has not been set aside, raised or altered, and this Court having found that there was Retainer, it allows the Notice of Motion dated 20th July 2016 as prayed.

Dated, Signed and Delivered in Court at Nairobi this 31stday of May, 2018.

F. TUIYOTT

JUDGE

PRESENT;

Chege h/b for Kiome for Respondent

Wachama for Applicant

Nixon - Court Assistant