[2022] KEHC 16158 (KLR)

Muri Mwaniki & Wamiti Advocates v Kenya Orient Insurance Limited (Miscellaneous Civil Application 125 of 2019) [2022] KEHC 16158 (KLR) (8 December 2022) (Ruling)

Neutral citation: [2022] KEHC 16158 (KLR)

Republic of Kenya

In the High Court at Nyeri

Miscellaneous Civil Application 125 of 2019

FN Muchemi, J

December 8, 2022

Between

Muri Mwaniki & Wamiti Advocates

Advocate

and

Kenya Orient Insurance Limited

Client

Ruling

Brief facts 1. The application for determination dated September 23, 2021 seeks for orders for setting aside and review of the taxing master’s ruling dated July 13, 2021 on the advocate/client bill of costs dated December 4, 2019.

2. The respondent opposed the application and filed a relying affidavit dated December 7, 2021.

The Applicant’s Case 3. The applicant states that the bill of costs dated December 4, 2019 was taxed on July 13, 2021 and through their letter dated July 16, 2021, they wrote to the Deputy Registrar objecting to the taxation and calling for reasons for the ruling. The applicant states that they received the reasons for the ruling on September 13, 2021.

4. The applicant objects to the ruling on taxation on grounds that the learned taxing officer erred in law and misdirected herself in principle in taxing the following:-i.Items No 9, 16, 21, 28, 43, 49, 67, 84, 86, 90, 92, 94, 96, 98 & 102 which relate to journeys from home by failing to take judicial notice from the court record that the applicant’s firm was based in Nairobi and the journey would be made to court in Nyeri, covering the period in the said items of hours as is required for journeys from home under schedule V and which items were thus not vague as held by the learned taxing officer. Moreover, the applicant contends that the items were unopposed and the learned taxing officer could have directed under paragraph 13A of the Advocates Remuneration Order for the production of such documents necessary to make a determination on this.ii.Item No 104 which relates to VAT yet VAT is chargeable under the Value Added Tax Act, 2013 for taxable supplies which include the supply of services by the advocate to the client. Moreover, the applicant contends that the taxing officer misdirected herself by taxing off the item on VAT for lack of documents yet it would be impractical to avail documents to prove payment as they have never received payment from the client for the services supplied and for which taxation was being done to ascertain the amount payable to enable the applicant remit VAT thereon.iii.Item No 66 which relates to attending court to record a consent by failing to adhere to the amounts stipulated for attendance in schedule V of the Advocates Remuneration (Amendment) Order 2014. iv.Items No 83, 85, 89, 97 and 101 which relate to attending the court registry by failing to adhere to the amounts stipulated for such items in Advocates Remuneration (Amendment) Order 2014. v.Items No 91, 93, 95 and 97 which relate to attending court for mentions by failing to take into account that counsel was in court for longer than 15 minutes during mentions.

5. The applicant contends that the learned taxing master erred in principle by failing to exercise her discretion properly and made manifest error in principle in resulting in the grant of grossly deficient award of Kshs 103,726/-.

The Respondent’s Case 6. The respondent contends that the reference is fatally defective and ought to be dismissed as the applicant has not offered a plausible and satisfactory explanation for the delay in filing the application as the reasons for the Taxing officer’s decision were contained in her ruling. Further, the respondent argues that the applicant ought to have first sought the court’s leave to have time extended to file the said reference.

7. The respondent further argues that it is the applicant’s duty to follow up on receiving a copy of the ruling. The applicant sent their last email on July 22, 2021 and further the applicant’s averments that they received a copy of the ruling on September 13, 2021 has not been substantiated by any proof. Moreover, the respondent contends that the applicant has failed to show how the taxing master erred in exercising her discretion.

8. The respondent states that parties are bound by their pleadings and it is the applicant’s duty to make their case and not upon the court to take judicial notice and make a finding on matters that have not been claimed. In any event, the applicant was at any time before the ruling free to avail to the taxing officer any documents they felt were necessary to assist the taxing officer in assessing costs.

9. Parties canvassed the application by way of written submissions.

The Applicant’s Submissions 10. The applicant submits that the application has been filed within the time prescribed in law for doing so pursuant to paragraph 11(1) and (2) of the Advocates Remuneration Order. The applicant states that the ruling on taxation was delivered on July 13, 2021and a notice of objection was given on July 14, 2021 followed by payment of filing fees was done on July 22, 2021. The applicant further submits that they received the ruling bearing the reasons being the copy of the said ruing stamped certified on September 13, 2021 and the instant application was filed on 23rd September well within the 14 days from the date of the certified ruling and period prescribed by paragraph 11(2) of the Advocates Remuneration Order. As such, the applicant argues that there was no delay in filing the reference and thus no need to seek leave to enlarge time to file the reference.

11. The applicant relies on the case of Nyangito & Co Advocates v Doinyo Lessos Creameries Ltd [2014] eKLR and submits that the there is cause to interfere with the taxation by the taxing officer. The applicant submits that the taxing master taxed off items No 9, 16, 21, 28, 43, 49, 67, 84, 86, 90, 92, 94, 96, 98 and 102 stating that they were vague in description for not stating where the journey started, the purpose of the journey and the distance. The applicant submits that the items were not vague as they were described in terms of hours and not distance, as required for journeys from home by paragraph 7 of schedule V of the Advocates Remuneration Order 2009. Additionally, the applicant contends that the taxing master failed to take judicial notice that their firm was based in Nairobi as the documents filed were dated at Nairobi and the applicant’s address on the documents indicated that the firm was based in Nairobi from where the journey would be made to court in Nyeri, covering the period indicated in the said items described in terms of hours.

12. In any event, the said items were unopposed and the learned taxing master could have directed under paragraph 13A of the Advocates Remuneration Order for the production of such documents necessary to make a determination on this. The applicant argues that it is an error for the taxing officer to fail to tax or tax off items for lack of documents before invoking and availing himself of the powers and authorities to direct and call for such documents as may be necessary for the determination of any dispute before him. To support this contention, the applicant makes reference to the case of Alutalala Mukhwana t/a Alutalala Mukhwana & Co Advocates v Tom Ndeche & another [2021] eKLR.

13. On item No 66 which relates to attending court to record a consent, items No 83, 85, 89, 97 and 101 which relate to attending the court registry and items No 91, 93, 95 and 97 relating to court attendance for mentions, the applicant contends that the said items are provided for as attendances under paragraph 3 of schedule V at the rate of Kshs 1,000/- for every 15 minutes. The applicant further argues that it was rightly indicated the time spent for all the attendances and as such argues that the sum of Kshs 4,200/- awarded in taxation for tem No 66 and Kshs 1,000/- for all the other items are not reasonable. The applicant thus prays that the total amounts as charged is according to scale and urges the court to allow them as drawn.

14. On item No 104 which relates to VAT, the applicant argues that payment of VAT for taxation of items will follow the taxation once the fees have been taxed and ascertained by the taxing officer. Therefore, it would be impractical to avail documents to prove payment seeing the advocate has not been paid for the services supplied for which taxation was being done so as to ascertain the amount payable to enable the advocate to remit VAT thereon.

15. The applicant further submits that VAT is chargeable under the Value Added Tax Act, 2013 for taxable supplies which include the supply of services by the advocate to the client. The applicant relies on the cases of Ngatia & Associates Advocates v Interactive Gaming & Lotteries Ltd (2017) eKLR and AN Kimani & Co Advocates v Kenindia Assurance Co Ltd [2018] eKLR and submits that VAT is chargeable on all professional fees and not just the instruction fees. The applicant thus submits that the taxing officer’s decision to tax off the said item No 104 is thus erroneous and that VAT is properly charged under the bill of costs.

16. The applicant submits that the taxing officer erred in principle by failing to exercise her discretion properly and made manifest error in principle as shown resulting in the grant of the grossly deficient award of Kshs 103,726/-.

The Respondent’s Submissions 17. The respondent relies on paragraph 11 of the Advocates Remuneration Order and submits that the ruling in the present case was delivered on July 13, 2021 and the reference was filed on September 23, 2021, which is outside the fourteen days allowed for giving of notice to the taxing officer. Further, the applicant has not sought leave of the court to file the notice out of time and thus the respondent submits that the application is incompetent.

18. The respondent submits that the applicant has failed to demonstrate how the taxing master erred in principle to warrant this honourable court to interfere with the taxing master’s decision. To support its contentions, the respondent relies on the case of Otieno, Ragot & Company Advocates v Kenya Airports Authority [2021] eKLR.

19. On items no. 9, 16, 21, 28, 43, 67, 84, 86, 90, 92, 94, 96, 98 and 102, the respondent argues that the taxing master declined the said items on the basis that they were vague as the purpose of the journey was not stated, the beginning and the end of the journey was not stated as well as the kilometres or miles to enable the court to determine if the 6 hours indicated was justifiable. The respondent further submits that parties are bound by their pleadings and in any event, the taxing master did not decline to tax the said items based on the fact that they were referred to as journey from home as alleged by the applicant but on the reason stated in the ruling and as such, did not err in principle in any way.

20. The respondent submits that the applicant objects to item No 66 which relates to attending court for hearing when parties recorded a consent. The applicant had charged Kshs 8,000/- and the same was taxed at Kshs 4,200/-. The applicant further objected to the decision on item No 83, 85, 89, 97 and 101 which relate to attending court registry. The applicant charged Kshs 3,000/- whereas the taxing master taxed the same at Kshs 1,000/-. The applicant further objects to the decision on items No 91, 93 and 95 which relate to attending court for mentions. The advocate charged Kshs 8,000/- and the same was taxed at Kshs 1,000/-. The respondent submits that the law gives the taxing master some leeway. The taxing master in the instant case identified the appropriate scale fee as scheduled and thereafter proceeded to determine whether the basic fee should be increased or reduced. The respondent further submits that the applicant has not demonstrated how the taxing master erred in exercising her discretion to arrive at the taxed amounts putting into consideration that the reasoning for the same was stated in the ruling.

The Law Whether The Reference Offends The Provisions Of Rule 11(1) And (2) Of The Advocates Remuneration Order 21. Rule 11 of the Advocates Remuneration Order provides:-1. Should any party object to the decision of the taxing officer, he may within fourteen days after the decision give notice in writing to the taxing officer of the items of taxation to which he objects2. The taxing officer shall forthwith record and forward to the objector the reasons for his decision on those items and the objector may within fourteen days from the receipt of the reasons apply to a judge by chamber summons, which shall be served on all the parties concerned, setting out the grounds of his objection.

22. The taxation ruling was delivered on July 13, 2021. The applicant wrote to the Deputy Registrar on July 14, 2021, notifying her of the items he wished to object to and requested for the reasons for the ruling. The applicant on July 16, 2021, wrote to the court requesting for certified copies of the said ruling. The court responded on July 22, 2021 and attached the assessment invoice for payment which the applicant paid promptly. The applicant has filed the instant application on September 23, 2021. I have perused the court record and noted that the certified copies of the ruling were availed on September 13, 2021. I am not convinced by the applicant that he filed the reference in time because he asked for the reasons for the ruling on July 14, 2021 and thereafter on 16th July he asked for certified copies of the ruling. He then filed a reference using the copies of the ruling meaning that the reasons were contained in the ruling which he could have used to file his reference in the beginning. Furthermore, courts have held that taxation rulings contain the reasons for the ruling and therefore an applicant may file a reference without the receipt of the reasons. This principle was enunciated in Ahmednasir Abdikadir & Company Advocates v National Bank of Kenya Ltd (2) [2006] 1 EA 5 where the court held:Although rule 11(1) of the Advocates Remuneration Order stipulates that any party who wishes to object to the decision of the taxing officer, should do so within 14 days after the said decision and thereafter file his reference within 14 days from the date of receipt of the reasons. Where the reasons for the taxation on the disputed items in the bill are already contained in the considered ruling, there is no need to seek for further reasons simply because of the unfortunate wording of sub rule (2) of rule 11 of the Advocates Remuneration Order demands so. The said rule was not intended to be ritualistically observed even when reasons for the disputed taxation are already contained in the formal and considered ruling.

23. Therefore the applicant ought to have filed for leave of court to extend time within which he could file his reference. That notwithstanding, it is my considered view that failure to comply with the provisions of rule 11 (1) and (2) of the Advocates Remuneration Order may have the effect of making the application incompetent. Article 159 of theConstitution calls for courts to administer justice without undue regard to technicalities, it is my considered view that the court guided by article 159 has a basis of considering the merits of the application.

Whether The Applicant Has Made Out A Case For Setting Aside Of The Taxing Master’s Assessment. 24. The law is settled that a court will only interfere with the taxing master’s decision where there is an error of principle. In Republic v Ministry of Agriculture & 2 others ex parte Muchiri W’njuguna & 6 others [2006] eKLR it was held:-The taxation of costs is not a mathematical exercise; it is entirely a matter of opinion based on experience. A court will not, therefore, interfere with the award of a taxing officer, particularly where he is an officer of great experience, merely because it thinks that the award somewhat too high or too low; it will only interfere if it thinks the ward so high or so low as to amount to an injustice to one party or the other….The court cannot interfere with the taxing officer’s decision on taxation unless it is shown that either the decision was based on an error of principle, or the fee awarded was manifestly excessive as to justify an interference that it was based on an error of principle.

25. Similarly, in the case of Nyangito & Co Advocates v Doinyo Lessos Creameries Ltd [2014] eKLR, Odunga J laid out the principles as follows:-a.That the court cannot interfere with the taxing officer’s decision on taxation unless it is shown that either the decision was based on an error of principle or the fee awarded was manifested excessive as to justify an inference that it was based on an error of principle;b.It would be an error of principle to take into account irrelevant factors or to omit to consider relevant factors and, according to the Remuneration Order itself. Some of the relevant factors to be taken into account include the nature and importance of the cause or matter, the amount or value of the subject matter involved; the interests of the parties, the general conduct of the proceedings and any direction by the trial Judge;c.If the court considers that the decision of the taxing officer discloses errors of principle, the normal practice is to remit it back to the taxing officer for reassessment unless the Judge is satisfied that the error cannot materially have affected the assessment and the court is not entitled to upset a taxation because in its opinion. “

26. The advocate/client bill of costs dated December 4, 2019 was drawn for Kshs 360,945. 76/-. The taxing master taxed the bill at Kshs 103,726/-. On items No 9, 16, 21, 28, 43, 67, 84, 86, 90, 92, 94, 96, 98 and 102, the applicant contends that the learned taxing master ought to have taken judicial notice that the advocates offices were in Nairobi and thus he was travelling from his home in Nairobi to court in Nyeri and it took him six hours to do so. The respondent argues that the learned taxing master did not error in principle as she taxed off the said items because they were vague as to the purpose of the journey, the beginning and end of the journey as well as the kilometres to enable the court determine if the 6 hours were justifiable.

27. Upon perused of the bill of costs dated 4th December and the impugned ruling of the taxing master as well as schedule V of the Advocates Remuneration Order 2009. It is noted that the applicant did not indicate the purpose of the journey and the kilometres travelled which would have assisted the court to ascertain if the six hours were justifiable. However, the law gives the taxing master discretion to either increase or decrease the said amounts if for any special reason it is found fit to do so. Further, the taxing master had the discretion to call for documents to clarify the claim for the journeys as empowered by paragraph 5 of the Schedule V of the Advocates Remuneration Order. Alternatively, the taxing master would have used her discretion to tax off the amounts that seemed reasonable based on the fact that the record was clear that the applicant’s counsel was based in Nairobi and had to travel to Nyeri to attend court. It is notable that the time taken for the journey was estimated as six (6) hours which the taxing master failed to consider and exercise her discretion judiciously. The failure to take the foregoing factors into consideration was in my view an error in principle.

28. On items No. 66 relating to attending court to record a consent, items No 83, 85, 89, 97 & 101 relating to attending the court registry and items No 91, 93, 95 & 97 attending court for mentions, the applicant argues that the attendances are provided for under paragraph 3 schedule V at the rate of Kshs 1,000/- for every 15 minutes. He further states that he has indicated the time he spent and therefore the award of Kshs 4,200/- and Kshs 1,000/- respectively are not reasonable. The taxing master in awarding the said amounts justified her reasons that for the attendances at the court registry, she perused the court record and confirmed that the attendances were conducted by the court clerk and not the advocate and thus that is what she took into account in taxing the items at Kshs 1,000/-. On items No 91, 93, 95 and 97 on the attendances for mentions in court, the taxing master taxed the same at Kshs 1,000/- as they could not have taken more than 15 minutes. Notably, the provision gives the taxing master with discretion to increase or diminish the fees for various reasons. It is my considered view that the applicant has not demonstrated that the taxing mastered exercised her discretion injudiciously. In her ruling, the taxing master has given reasons on why she reduced the fees in the items above. As such, it is my view that the awards are reasonable and do not warrant interference by this court.

29. On the issue of value added tax, courts have had occasion to address this issue. In Mereka & Co Advocates v New Kenya Co-operative Creameries Limited[2018] eKLR, the court said:-In regards to the question of whether VAT should be awarded when the same is not pleaded, the court’s view is premised on the case of Amuga & Co. Advocates vs Arthur Githinji Maina Miscellaneous Application No 265 of 2012 wherein the Honourable Judge made reference to the A M Kimani & Co Advocates v Kenindia Assurance Co Ltd holding that:-………under the Value Added Tax Act an advocate is entitled to charge VAT on instruction fees and also disbursements.In Ngatia & Associates Advocates v Interactive Gaming & Lotteries Limited [2017] eKLR the court observed that:My view is that indeed, estoppel does not operate against the law. Equally, I am in agreement with the advocates that VAT is a statutory charge on legal services rendered to the client.However, I do not agree that VAT is chargeable on the entire award. Neither do I agree that VAT is chargeable only on instruction fees.VAT is a tax levy on advocates in respect of the professional fees they charge for legal services they render to their clients. It is a charge payable to the Kenya Revenue Authority and the advocate is only but a statutory agent for KRA. The levy once collected by the advocate for the above services rendered is then remitted on a monthly basis to KRA. The court proceeded to allow VAT charged on the instruction fees.

30. The bill dated December 4, 2019 is hereby remitted for taxation to another taxing master other than Hon M Lubia.

31. Each party to meet their own costs of this application

32. It is hereby so ordered.

DATED AND SIGNED AT NYERI THIS 8TH DAY OF DECEMBER, 2022. F MUCHEMIJUDGERULING DELIVERED THROUGH VIDEO LINK THIS 8TH DAY OF DECEMBER , 2022.