[2017] KEHC 1807 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

COMMERCIAL AND ADMIRALTY DIVISION-MILIMANI

HCCC NO.248 OF 2016

MURI MWANIKI& WAMITI ADVOCATES..............................APPLICANT

VERSUS

BERBEN COMPANY LIMITED..............................1ST DEFENDANT/RESP.

AFRICAN BANKING CORPORATION LIMITED...2ND DEFENDANT/RESP.

R U L I N G

This is a ruling on a reference filed by way of Chamber Summons dated 28th February 2017 brought under Section 11 of the Advocates remuneration order. It seeks the following orders;

1. To set aside Taxing Master’s (Hon. Nancy Makau) decision delivered on 18th January 2017 and resultant Certificate of Taxation to the extent that it relate to reasoning and determination pertaining items 2, 5, 7, 8, 9, 12, 14, 15, 16, 17, 20, 21, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36 and 39 in the Advocate/Client Bill of Costs dated 9th May 2016.

2. That this Honorable Court be pleased to re-asses the fees due on proposed items of the Advocates in respect of Bill of Costs and make a finding on the same

3. That in the alternative the Court be pleased to remit the opposed items to another Taxing Master for review and consideration.

Grounds on the face of the application are that the Taxing Master erred in fact and law by failing to find that the 2nd Respondents were liable to pay Kshs.. 448,227. 80 as legal fees despite the 2nd Respondent having admitted and paid Kshs. 448,227. 80 to the Advocates after the bill was filed; that the Taxing Master misdirected herself by failing to take into consideration paragraph 7 of the Advocates Remuneration Order by disallowing interest in the Bill of Costs. That she erred in adding the allowed items in the bill and failed to exercise her discretion by failing to indicate who of the Respondents was liable to pay costs; that she erred by failing to find that the 2nd Respondent acted as an agent for the 1st Respondent.

The application is supported by Affidavit sworn by Njuguna Muri. He stated that the Bill of Costs arose from the matter of preparation and registration of a fixed and floating debenture over specific assets of the 2nd Respondent to secure 34,464,640 in favour of the 1st Respondent the chargor. He agreed that the item 1 & 2 of the Bill of Costs was rightfully taxed under Schedule 1 of Advocates Remuneration Order 2009 while item 3 to 43 under Remuneration Order 2014. He also agreed that the Taxing Master accurately noted the principal amount as Kshs. 448,227. 80 which was not disputed and already paid by the 1st Respondent to the 1st Respondent; that only Kshs. 100,000 had been paid at the time of filing suit and it was wrong for the Taxing Master to award a lesser amount of Kshs. 414,414. 82

He averred that the Taxing Master misdirected herself as follows

1. Taxing off item 2 which pertain to drafting and filing 1st Respondent’s annual returns.

2. Applying wrong Schedule in item 3 which is clearly provided under Schedule 6 Paragraph 4(d) at 180 per folio.

3. Failing to increase by 50% attendances to registry in items 7, 8, 12, 17, 20, 21, and in Court in item 13, 14, 15 &16 as provided in Schedule 6 part B (a) of Advocates Remuneration Order 2014.

4. Taxing off disbursements in item 26, 27, 28, 29, 30, 31, 32, 33, 34, 35 & 36 for failure to provide receipts yet she did ask for them and were not disputed by the 2nd Respondent.

5. That she erred in subjecting instruction fee to VAT and not other items that constitute legal fees

6. For denying the Applicant costs for taxation though the matter came up 7 times

7. That she failed to find that the 2nd Respondent was an agent of the 1st Respondent and notice to 2nd Respondent was sufficient notice for the 1st Respondent.

He averred that due to the Taxing Master’s misdirection the Advocates fee is inordinately low and not commensurate with the work done.

Parties agreed that the 1st Respondent’s application dated 9th February 2017 be deemed as response to the application herein. In the application the 1st Respondent was raising objection on error apparent on the face of the record. The 1st Respondent submitted that the Taxing Master miscalculated the total amount that the 1st Respondent had already paid to the Advocate; that she set off Kshs. 414,414. 82 against 348,000 which was not the correct amount that had been paid. On the issue of merging instruction fee, the 1st Respondent submitted that Schedule 3 of Advocates Remuneration Order 2014 relating to company works does not provided fee for filling of company returns. He submitted that it falls under instructions to create debenture which the Taxing Master correctly covered under item 1 and therefore no error in principle as it relate to item 2. On disbursements the 1st Respondent submitted that the onus of prove rests on the Applicant and it is not extinguished by paragraph 74 of Advocates Remuneration Order especially where the claim is substantial as in this matter. 1st Respondent cited MISC.APPL NO. 51 OF 2001 MUTHOGA GATURU VS.NACITI ENGINEERS LIMITED where Justice Ochieng held that the inability to produce proof rests completely at the Advocates door and found no fault on the part of the Taxing Master.

On interest, he submitted that the Taxing Master correctly points out that the 1st Respondent was served with the Bill of Costs in March 2016. The 1st Respondent submitted that there was no agency relationship between the 1st and 2nd Respondent as is made clear in exhibit MM3 in the Affidavit of Njuguna Muri which he quotes as follows;

“Ensure that you discuss and agree on your professional fees and disbursements with the borrower before commencing this brief. Please get in touch with Mr. Benson Obura of tel.…”

1st Respondent further submitted that as per agreement the responsibility and duty of payment solely lie on the 1st Respondent and that the 1st Respondent has paid fees it ought to and which was the subject matter of taxation; and if the Applicant wants to claim more from the mortgagor they should file a new bill.

The 2nd Respondent filed grounds of opposition and set out the following;

1. That there exist no relationship between the Applicant/Advocate and the 2nd Respondent

2. That there exist no agreement between the 1st and 2nd Respondent concerning payment of fees to the Applicant/Advocate

3. That the application before Court is incompetent, fatally defective, lacks merit and is an abuse of Court process.

Advocates for the parties herein submitted on 4th October 2017. Mr Gichangi for the Applicant reiterated grounds on the face of the application and the averments in the Affidavit in the application.

I wish to consider the following issues;

1. Whether the Applicant is entitled to claim fee from both 1st and 2nd Respondent.

1. Whether the Taxing Master was right in holding that item 2. was covered under item 1.

2. Whether the Taxing Master was right is failing to award disbursements.

3. When interest should start running and whether the Applicant is entitled to interest

4. Whether the Taxing Master misdirected herself by failing to award costs for taxation.

On the first issue I have perused the letter of instruction to prepare fixed debenture dated 29th June 2011 and note that the Applicant was asked to discuss and agree on their professional fees and disbursements with the borrower before commencing the brief. Telephone number of Ben Obura was given to the Applicant. This clearly meant that the borrower was to meet the cost of preparing debenture. The instruction letter was clear. Asking both the bank and the borrower to pay one service rendered would amount to double payment. I therefore find that the Taxing Master did not misdirect herself by allowing payment from one party not both the bank and the borrower.

On item 2, it is not provided under Schedule 3(3). The Schedule provide that it shall be provided under relevant Schedule. I have not seen any separate instruction letter for preparation of company returns; the Taxing Master was right in holding that it is covered under item 1.

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”.

My understanding is that if the Taxing Master requires prove of items under disbursement then she will ask the party concerned to avail. There is no indication to the effect that the Applicant was unable to avail the receipts or vouchers. If objection was raised concerning any of the items under disbursement, I believe the Taxing Master would have asked for the receipts or vouchers. Counsel for the Applicant however submitted that in their submissions before the Taxing Master they had explained why they could not produce receipts. That means even if they were asked to produce receipts they would not have been able to do so.It was therefore upon the Taxing Master to exercise her discretion on whether to allow the disbursements. I will not interfere with that discretion.

When should interest run? The instructions emanated from the 2nd resposndent.Even though the instruction letter spelt out that instruction fee and disbursement would be paid by the 1st Respondent, the instruction came from the 2nd Respondent.it is the 2nd Respondent who instructed the Applicant to prepare debenture. The 1st Respondent was a customer of the 2nd Respondent. Even if the costs were to be paid by the 1st Respondents who was a customer it was to be paid through the 2nd Respondent. Communication on payment of costs should have reached the 1st Respondent through the 2nd Respondent who was the instructing client. The instruction letter dated 29th June 2011 indicate that instruction fee and disbursements being agreed between the 1st Respondent and the Applicant and in the letter the 2nd Respondent asks the Applicant to keep the 2nd Respondent posted of the progress.my interpretation is that on the issue of costs the 1st Respondent and Applicant were to negotiate and agree on fee for creating the fixed debenture. Demand for fee to be paid after the process should have gone through the instructing bank to the borrower. Fee note was sent to the 2nd Respondent on 24th August 2011. Payment was to be received within 30 days.

Upon service of fee note the 2nd Respondent should have communicated the same to the 1st Respondent. It is admitted that the 1st Respondent was served in March 2016. It is not disputed that the 1st Respondent paid the fees after being served.

The question that follow is,is the Applicant entitled to interest from 24th August 2011?It is the 2nd Respondent who issued instruction to the Applicant on behalf of its client. Documents attached show that all communications were between the 2nd Respondent and the Applicant. It was proper for the Applicant to serve fee note to the 2nd Respondent despite the fact that it was clear that the party required to pay was the 1st Respondent. The 2ndRespondent never communicated with the 1st Respondent on costs immediately after being served by the Applicant. The 2nd Respondent is at fault for keeping quiet for 5 years. Interest for the period should therefore be paid by the 2nd Respondent.

As concern costs for taxation, the Bill of Costs would not have been filed in Court if payment was done within one month after service of fee note. The Applicant has incurred costs on taxation of the bill. Reasonable expenses should have been granted by the Registrar as costs of taxation.

From the fore going I direct as follows;

1. The Registrar do correct error on the face of record respect of deduction of the correct amount paid before taxation.

2. Interest be calculated with effect from a month after service of the fee note to the 2nd Respondent up to the date 1st Respondent was notified. Interest calculated to be paid by the 2nd Respondent to the Applicant.

3. Reasonable costs for taxation be provided. File to go back to Deputy Registrar to comply with above orders.

Dated, Signed and Delivered this 15th day of November 2017

………………………

RACHEL NGETICH

JUDGE

IN THE PRESENCE OF

………………... COURT ASSISTANT

………….……….. COUNSEL FOR APPLICANT

……………………. COUNSEL FOR 1ST RESPONDENT