[2022] KEHC 16419 (KLR)

Mark Properties Limited (In Administration) v Coulson Harney LLP Advocates (Commercial Case 287 of 2020) [2022] KEHC 16419 (KLR) (Commercial and Tax) (9 December 2022) (Ruling)

Neutral citation: [2022] KEHC 16419 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts Commercial and Tax Division)

Commercial and Tax

Commercial Case 287 of 2020

DAS Majanja, J

December 9, 2022

Between

Mark Properties Limited (In Administration)

Plaintiff

and

Coulson Harney LLP Advocates

Defendant

Ruling

1. The basic facts leading to the dispute between the plaintiff (“the company”) and the defendant (“the advocates”) are largely common cause. The company has a developed of a 24 storey mixed user building on Land Reference 1870/V/271, Nairobi, in Westlands, Nairobi, commonly known as Le’ Mac (“the suit property”) with the intention of selling various portions of the development, namely, banking halls, restaurants, office and commercial spaces and residential apartments to interested purchasers. In due course, the company was introduced to the advocates. The advocate—client relationship was consummated in a letter of engagement dated September 13, 2012 wherein the company mandated the advocates to provide legal services in relation to the sale of units on the suit property.

2. The company states that the purchasers began making payments for their desired apartments in 2013 which payments included the company’s legal costs and estimated stamp duty on the registration of the leases which were paid at the stage of execution of the contracts of sale. In the course of their engagement, the parties appear to have disagreed on a number of issues. In August 2020, the advocates terminated the relationship and ceased to act for the company.

3. The company avers that in terminating retainer, the advocates abandoned the conveyances that had been paid for and that it was incumbent upon the advocates to surrender the company's legal fees and the deposits on stamp duty to the company to enable it complete the process of registration of the leases. The company claims that the advocates received about Kshs 136,936,463. 00 from the purchasers which sum forms the substance of the dispute and which the company now claims.

4. The company has now been placed under administration hence the advocates’ have filed the notice of motion dated April 12, 2021 made, inter alia, under section 560(1)(d) of the Insolvency Act, 2015 seeking the following orders:a.Spentb.Spentc.Spentd.Spente.That P V R Rao, the administrator of the plaintiff [under administration], be and is hereby enjoined to the proceedings herein as a defendant to the proposed counterclaim.f.That court's approval be and is hereby granted to the defendant to institute proceedings against the plaintiff [under administration] by way of a counterclaim.g.That court's approval be and is hereby granted to the defendant to institute taxation proceedings against the plaintiff [under administration] in respect of its [the defendant's] bills of costs in relation to the legal services rendered by the defendant pursuant to the letter of engagement dated September 13, 2012 and costs awarded by the court vide the ruling dated and delivered on March 15, 2021. h.That court's approval be and is hereby granted to the defendant to set-off and set-up against the plaintiff for purposes of recovery of any costs pursuant to section 60A(5)(b) of the Advocates Act, cap 16 laws of Kenya [hereinafter, "Advocates Act"] in the event that the disciplinary committee handling the respective complaints exercises its jurisdiction in determining the costs to which the defendant is entitled pursuant to section 60A(2)(a) of the Advocates Act.i.That the honourable court be pleased to give directions regarding the remittance of the balance of Kshs 10,070,006. 00 held in the NCBA Escrow Account No 4610280029 in the joint names of Njoroge Regeru for the defendant and Chris N Mutuku, at the time representing the defendant.j.That costs of and incidental to the instant application be borne by the plaintiff on a full indemnity basis and interest thereon at court dates from the date of ruling until payment in full.k.That this honourable court be pleased to grant any such further orders or directions that the court considers appropriate the circumstances.

5. The application is supported by the affidavit of advocates’ partner, Alex G Njage, sworn on April 12, 2021. It is opposed by the company through the grounds of opposition and the notice of preliminary objection both dated November 18, 2021. The thrust of the objection is that the commercial and tax division of the High Court does not have the jurisdiction to determine the legal issues and issue the orders sought in the application.

6. The parties have filed their respective submissions in support of their position with respect to the preliminary objection and the application. The substance of the preliminary objection is that the application for grant of leave to proceed with the suit by way of counterclaim should be made in the pending insolvency proceedings: Milimani COMM IC No E010 of 2021 Re: Mark Properties Limited (under administration). The company’s case is grounded on this court’s observation in the ruling dated July 30, 2021 that the issue of leave to proceed with the suit should be determined in the insolvency cause relating to the company.

7. I have already resolved the issue of the forum for seeking leave to proceed with the suit by way of a counterclaim in my previous decision but for purposes of completeness, let me outline the reasons for so holding. The advocates urge that this court has jurisdiction as section 2 of the Insolvency Act defines court as High Court and if there is an insolvency division that division. They submit that since there is no insolvency division, this court as a commercial division has jurisdiction over the matter. They contend that this court should not refer the issue to another insolvency court and since this court has already issued the ruling dated July 30, 2021, the client who did not object to the court’s jurisdiction at the time is now estopped from raising the issue of jurisdiction now. The advocates further submit that initiating separate proceedings in a different court would lead to unnecessary proceedings which would be contrary to the purpose of the moratorium on legal proceedings.

8. It is common ground that the High Court does not have an insolvency division to deal with the insolvency matter. Insolvency matters are dealt with by the commercial division. The suit before the court is not an insolvency matter. As I have outlined in the opening paragraphs, this suit is by the company against the advocates seeking money held on its behalf. Had there been an insolvency division, this suit would not be in the said division. On the other hand, the insolvency cause, being one that concerns the plaintiff’s administration would have been filed in the insolvency division.

9. The application under consideration is filed pursuant to section 560(1)(d) of the Insolvency Act which provides that, “A person may begin or continue legal proceedings (including execution and distress) against the company or the company’s property only with the consent of the administrator or with the approval of the court." The court referred to therein is the court exercising insolvency jurisdiction which has authority to grant such leave. This is why I observed that the application for leave should be made in the cause of and concerning the administration of the company being Milimani High Court IC No E10 of 2021; Re: Mark Prime Properties Ltd (under administration). The judge granting leave would have a global view of the affairs of the plaintiff including considering the factors set out in section 560A of the Insolvency Act in order to decide whether to grant leave sought by the advocates to file a counterclaim. This court cannot usurp the mandate of the court exercising insolvency jurisdiction.

10. A brief observation on the issue of joinder of the administrator. Upon appointment, the administrator took over the conduct of the suit through its advocates, Wamae & Allen Advocates, in place of the firm of the previous firm on record Chris N Mutuku Advocates. It would therefore be unnecessary to join the administrator to the suit since he took over the control and management of the company. Any personal actions against the administrator would be dealt with in the insolvency matter or by the court exercising insolvency jurisdiction.

11. For the reasons I have set out above, I allow the plaintiff’s preliminary objection dated November 18, 2021 with the result that the application dated April 12, 2021 is struck out with costs to the plaintiff.

DATED AND DELIVERED AT NAIROBI THIS 9TH DAY OF DECEMBER 2022. D. S. MAJANJAJUDGECourt Assistant: Mr M. OnyangoMr Wawire instructed by Wamae and Allen Advocates for the Plaintiff.Mr Regeru instructed by Njoroge Regeru and Company Advocates for the Defendant.