[2021] KECA 1013 (KLR)

IN THE COURT OF APPEAL

AT MOMBASA

(CORAM: NAMBUYE, OKWENGU & MUSINGA, JJ.A)

CIVIL APPEAL NO. 93 OF 2019

BETWEEN

MOHAMED FAKI KHATIBpractising as

KHATIB & COMPANY ADVOCATES........................................APPELLANT

AND

FARID AHMED SWALEH.................................................1STRESPONDENT

HANS JURGEN ZAHLTEN.............................................2NDRESPONDENT

(An appeal from the Judgment and Decree of the High Court of Kenya at Mombasa (Otieno, J.), dated 16thFebruary, 2018

inH.C.C.C No.109 of 2015 (O.S))

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JUDGMENT OF THE COURT

[1] This appeal arises from a dispute involving an advocate,

Mohammed Faki Khatib(appellant), practicing asKhatib & Co. Advocatesand his clients,Farid Ahmed SwallehandHans Jurgen Zahlten(1st and2ndrespondentsrespectively). The dispute was referred to the High Court by the respondents through an originating summons in which the respondents sought orders that the appellant do deliver a cash account of monies received forand on their behalf; that a declaration be issued that the appellant is holding monies due to the respondents; and that the appellant be ordered to pay to the respondents Kshs.6,799,000 which was an excess of proceeds from the sale ofparcel No.Kilifi/Mtwapa/79 Kilifi(suit property). The appellant was alleged to have received a total sum of Kshs. 15,799,000 in regard to the transaction.

[2] The 2nd respondent had instructed the appellant to sell the suit property by public auction, and the 1st respondent emerged as the highest bidder during the auction sale. The 1st respondent claimed that he paid a total of Kshs 7,799,000 to the appellant and had the property registered in his name. He subsequently had the suit property subdivided and one portion sold to one Hilaa Abdulla Aminfor Kshs. 8 million, which amount was paid to the appellant, who was handling the transactions. Of the amount received, the appellant only paid Kshs. 9 million to the 2nd respondent, leaving an amount of Kshs. 6,799,000 unaccounted for, the 1st respondent alleged.

[3] In a replying affidavit sworn in response to the summons, the appellant claimed that the 1st respondent purchased the suit property at a price of Kshs. 11,000,000 but only paid a deposit ofKshs. 3,000,000 and was unable to raise the balance of Kshs. 8,000,000; that the suit property was subdivided and a portion sold to Hilaa Abdulla Amin for Kshs. 8,000,000, but Hilaa Abdulla Amin only paid Kshs. 6,000,000 leaving a balance of Kshs. 2,000,000; that the appellant only received a total sum of Kshs. 12,799,000 and not Kshs. 15,799,000 as alleged; that the 1st respondent failed and/or refused to pay commission for the sale; and that he was not holding any money for and on behalf of the respondents.

[4] Before the matter proceeded to hearing, the parties attempted to have the matter settled through mediation by Morris Ouma, an Advocate. Upon hearing the parties, Mr. Ouma found that the appellant had received a total of Kshs. 13,399,000 out of which he had accounted for the sum of Kshs. 12,982,240 leaving a balance of Kshs. 416,760, unaccounted for; that out of the amount accounted for, the advocate had wrongly charged Kshs.1,982,240 as commission as an estate agent; and that a further enquiry ought to be made in regard to that sum. The court was however unable to adopt the results of the mediation as the appellant sought to have the matter heard by the court.

[5] The learned Judge of the High Court (Otieno, J.) directed that the matter proceeds by way of affidavit evidence and submissions, limited to three issues. The issues were: how much was received by the appellant from the respondents; how much did the appellant disburse from the amount received; was commission agreed to be payable and if so, how much commission was paid? Despite the parties having agreed by consent to have the appellant render and file cash accounts within 30 days, the appellant did not file a statement of account but instead filed a supplementary affidavit in which he insisted that he had accounted for all the money he received.

[6] Upon considering the affidavits and submissions duly filed by the parties, the learned Judge delivered a judgment in which he ruled in favour of the respondents. The learned Judge was clearly not impressed by the conduct of the appellant. This is how he described him:

“This is a classic example where an advocate as an officer of the court can be seen to resist basic duty of rendering accounts to a client. The moment the originating summons was filed, it was only honourable that the sought accounts be provided. Instead the counsel has taken court into a long and winding journey and in circles during which time contradictory affidavits and proposed accounts have been exhibited to court all doing very little to resolve the dispute. That is to this court a totaldereliction of duty to court imposed on the advocate by virtue of his profession and oath of office as now encoded under section 1(B) Civil Procedure Act.”

[7] The learned Judge found that the appellant had not accounted for a sum of Kshs. 2,415,760, and ordered the appellant to render a true, accurate and authentic accounts to the respondents within 30 days of the judgment, and in default to pay the sum of Kshs. 2,415,760 to the respondents within 10 days after the end of 30 days. The learned Judge also awarded the respondents costs of the suit.

[8] The appellant is aggrieved by that judgment. In his memorandum of appeal, the appellant has raised five grounds contending that; the learned Judge erred in rejecting the accounts furnished by the appellant as being non authentic; in finding that the balance of Kshs. 2,415,760 was not accounted for by the appellant; in taking into account irrelevant factors; in failing to find that the appellant had rendered timely and proper accounts; and in failing to take into account the appellant’s submissions and evidence.

[9] Hearing of the appeal proceeded virtually by way of written submissions which were duly orally highlighted by the parties. For the appellant, it was submitted that the accounts furnished at thetrial were sufficient to show the money he had received and howthe same had been disbursed. The appellant maintained that hereceived a total of Kshs. 13,799,000 as follows:

- Kshs. 3,899,000 from 1st respondent

- Kshs. 8,000,000 from Hilaa Abdulla Amin

- Kshs. 1,500,000 from 1st respondent

- Kshs. 4,000,000 from Hilaa Abdulla Amin

And the amount was disbursed as follows:

And the amount was disbursed as follows:-

Hans Jurgen Zahlten - Kshs. 10,300,000-

Commission to agents - Kshs. 1,000,000-

Advocates and Auctioneers fees - Kshs.1,200,000-

Advocates fees for transaction with Hilaa - Kshs.382,240-

Agreed commission on sale to Hilaa - Kshs. 600,000

Total = Kshs. 13,482,000/-respondent was Kshs. 416,760. He added that the respondent didnot produce any document to prove that they had paid Kshs.15,799,000.

[11] For the respondents, it was submitted that the main issuewas on the accounts; that the appellant only paid out Kshs.11,000,000 and failed to account for the balance of the moniesreceived; that the appellant filed differing accounts; and that thelearned Judge was right in finding that the appellant failed torender proper accounts.

[12] This being a first appeal, the Court’s mandate is as set out inSelle vs Associated Motor Boat Company Ltd[1968] EA 123andRule 29(1)of thisCourt’s Rules, namely: to re-appraise the evidence and to draw inferences of fact. Further, the Court takes cognizance of the dicta inMwangi -v- Wambugu(1984) KLR 453,that an appellate court will not normally interfere with a finding of fact by the trial court, unless such finding is based on no evidence or on a misapprehension of the evidence, or the Judge is shown demonstrably to have acted on wrong principles in reaching the findings.

[13] The bone of contention which is the crux of this appeal is whether the appellant provided a true and proper account of all the money he received with regard to the transactions involving the sale of the suit property to the 1st respondent, the subdivision of the suit property, and sale of the subdivision to Hilaa.

[14] It is the appellant’s contention that he provided evidence showing the amount of money he received and how the same was utilized. The respondents on the other hand contend that the appellant failed to properly account for the full amount he received on their behalf.

[15] In Kim Jong Kyu v Housing Finance Company Ltd & 2others[2015] eKLRthis Court captured the relationship betweenan advocate and client and particularly the advocate’s obligationas follows:

“Advocates in addition to being professionals, are officers of the court and play a vital role in the administration of justice. In our legal system, the advocate/client relationship has long been recognized as fiduciary relationship in which the client places his or her confidence, faith, reliance and trust in the advocate, whose aid, advice, opinion or protection is sought from time to time. The client gives the advocate significant amount of control over the matter in which the brief relates. With this relationship comes certain duties and responsibilities on the advocate. These duties and responsibilities are provided for in the statute and the rules of conduct as we demonstrate below. The sets of rules that govern the advocates’ professional conduct arise out of the duty that they owe to the court, their clients, and fellow advocates. Section 80 of the Advocates Act stresses the advocate’s duty to a client;

‘80. Betrayal of trustAny person who, being an advocate, is entrusted in his professional capacity with any money, valuable security or other property to retain it in safe custody with instructions to pay or apply it for any purpose in connection with his duty as an advocate fails to pay, apply or account for the same after due completion of the purpose for which it was given, shall be guilty of an offence:’

In addition, the Advocates (Accounts) Rules and the Advocates (Deposit Interest) Rules draw the permissible limits of dealings with funds receivedon behalf of and for the benefit of a client. The foregoing emphasizes that an advocate must at all times act in the best interest of his client; that where he is required to invest he must do so prudently and avoid obvious risks and; that failure to account for funds held by an advocate on behalf of a client is in fact a criminal offence.”

[16] The fact that the appellant and the respondent had an advocate/client relationship is not disputed. This means that the appellant as the advocate had the obligation not only to act in good faith and in the best interest of the respondents, who were his clients, but also the duty to account for funds received on behalf of the respondents.

[17] In the originating summons, the respondents claimed that the appellant had received the sum of Kshs. 15,799,000/- and failed to account for a sum of Kshs. 6,799,000. The learned Judge in considering the evidence stated as follows:

“…it is reasonable to accept the defendant’s position that the sum of Kshs.5,799,000/= and not 7,399,000/= was paid by 1stplaintiffs. I say Kshs.5,799,000/= was paid because in the Supplementary Affidavit, a schedule of cheque payment is given as at 25/1/2011. The Replying affidavit says that a sum of Kshs.400,000/= was paid on behalf of the 1stplaintiff on the 21/10/2011. That sum when taken together with the sum received from HILLA ABDULLAH AMIN in the sum of Kshs.8,000,000/= make a total sumreceived by the defendant to be Kshs.13,799,000/=.

18. Of that sum, I find that the 2ndplaintiff did acknowledge payment of Kshs.9,800,000/= and payment of Kshs.1,200,000/= as fees to advocate and auctioneer making a total of Kshs.11,000,000/= thereby leaving a balance of Kshs.2,799,000/= to be accounted for. This I do accept even though the 1stplaintiff feels the sum charged for fees of the advocate and auctioneer are exorbitant. I say I am prepared to accept that acknowledgement because the 2ndplaintiff must be taken to be the best custodian of his rights including right to property which give him the right to deal with the property in the manner he deems fit. In that context, if he accepted that the advocate be paid 700,000/= and auctioneer Kshs.500,000/= who is the 1stplaintiff to challenge him?

19. I would accept it, additionally, notwithstanding that he seems to have discharged the advocate on the basis that the advocate only received Kshs.11,000,000/= and not 13,799,000/= as conceded in the supplementary affidavit by the defendant.

20. This leads me to the finding that the defendant advocate did receive on behalf of the plaintiffs the sum of Kshs.13,799,000/= out of which he has accounted for the sum of Kshs.11,000,000/= and needs to account for the balance of Kshs.2,799,000/=.

21. Of that sum, not accounted for, the defendant has averred that he did serve a fee note dated 2/2/2011 upon the 1stplaintiff and the said plaintiff has not controverted such assertion. I consider that fee note duly supported by the Stamp Duty Declaration Assessment And Pay In slip for Kshs.240,140/=, to be reasonable. Itherefore find that the advocate has further accounted for the sum of Kshs.383,240/= thereby leaving a sum of Kshs.2,415,760/= outstanding and due for accounts.”

[18] The learned Judge found that the appellant received a sum of Kshs. 13,799,000 on behalf of the respondents, out of which he only accounted for the sum of Kshs. 11,000,000. The learned Judge found that the balance of Kshs. 2,799,000 was not accounted for, but the appellant had demonstrated that he was entitled to Kshs. 383,240 being his fees and stamp duty paid, and therefore only the sum of Kshs. 2,415,760/- was unaccounted for. [19] From the record of appeal, it is evident that the respondents attached the relevant cheques paid out to the appellant and also attached a bank statement detailing the banking of the cheques, which trail the learned Judge analyzed and having excluded the cheques which were dishonoured, acknowledged the payments. The appellant on the other hand failed to attach any evidence showing a trail of the money that was received or paid out. He gave different accounts which the trial court had to sieve through in order to come to its conclusion. The unreliability of the appellant’s accounts is evident even in his written submissions in which, although he claims to have received a sum of Kshs. 13,799,000from the transaction, the actual amount which he lists as having received from the 1st respondent and Hilaa Abdulla Amin actually totals to Kshs.17,399,000, which as the learned Judge found was not the correct figure.

[20] In his submissions, the appellant gives a breakdown of payments made out totaling Kshs. 13,482,240. The alleged payments included payments of commissions to agents which the appellant could not justify, given that the sale was an auction sale and the payments made included the auctioneers’ fees. The learned Judge properly considered and analysed the evidence and came to the conclusion that there was need for the appellant to render proper accounts on the amount which was not accounted for. We cannot fault the learned Judge as it is clear that the appellant was unable to give a proper account.

[21] The appellant having a fiduciary duty to account for the monies received by him, he had the duty to satisfactorily discharge this obligation by properly accounting for the monies which were entrusted to him. The appellant should not have had difficulties giving account of the monies received, because the appellant ought to have had a proper paper trail of the transactions undertaken, and the monies paid out. From the contradictory accounts that theappellant gave, it is evident that the appellant did not have a proper paper trail of the monies received and paid out.

[22] We find that this appeal has no merit. It is accordingly dismissed with costs.

Dated and delivered at Nairobi this 29thday of January, 2021.

R. N. NAMBUYE

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JUDGE OF APPEAL

HANNAH OKWENGU

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JUDGE OF APPEAL

D. K. MUSINGA

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JUDGE OF APPEAL

I certify that this is a true

copy of the original.

Signed

DEPUTY REGISTRAR