[2022] KEHC 13637 (KLR)

Rachuonyo & Rachuonyo Advocates v National Bank of Kenya Limited (Miscellaneous Application E647 of 2020) [2022] KEHC 13637 (KLR) (Commercial and Tax) (7 October 2022) (Ruling)

Neutral citation: [2022] KEHC 13637 (KLR)

Republic of Kenya

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

Commercial and Tax

Miscellaneous Application E647 of 2020

EC Mwita, J

October 7, 2022

Between

Rachuonyo & Rachuonyo Advocates

Advocate

and

National Bank of Kenya Limited

Client

Ruling

1. This is a reference by National Bank of Kenya Limited (National Bank) dated August 23, 2021 under paragraph 11 of the Advocates Remuneration Order against the ruling of the taxing officer delivered on August 10, 2021.

2. National Bank contends that the deputy registrar had no jurisdiction to determine fees claimed with respect to the proceedings before the Court of Appeal in civil appeal 96 of 2016 Jose Estates Limited v Muthumu Farm Limited & 2 others (2019) KLR. National Bank wants the taxing officer’s decision allowing advocates costs at Kshs 15,979,413. 84 varied and/or set aside and the bill of costs be taxed afresh limited to determining the fees due with respect to the application for stay of execution filed in civil suit 618 of 2000 Muthumu Farm Limited & another v National Bank of Kenya & another.

3. In the alternative, National Bank wants the court to interrogate the bill of costs pegged on the value of the subject matter of Kshs 22,500,000. National Bank further wants the court to find that the advocate was not entitled to getting up fees.

4. The reference is based on the grounds on its face, the affidavit of Chrispus N Maithya sworn on August 23, 2021, and written submissions dated February 23, 2022.

5. The gist of the reference is that instructions to Rachuonyo & Rachuonyo Advocates (the advocate) were limited to the application for stay of execution before the High Court following delivery of judgment on February 22, 2016 in civil suit No 618 of 2000, Muthumu Farm Limited & another v National Bank of Kenya & another and representation in civil appeal No 96 of 2016 Jose Estates Limited v Muthumu Farm Limited & 2 others [2019] eKLR. That application for stay was compromised by consent on May 8, 2016.

6. Following conclusion of the appeal, the advocate filed advocate/client bill of costs dated March 6, 2020, and later amended on May 28, 2020, which was taxed and allowed at Kshs 15,979,413. 84.

7. National Bank argues, first; that the taxing officer had no jurisdiction to determine fees claimed with respect to the proceedings before the Court of Appeal in civil appeal No 96 of 2016. Second, that the taxing officer erred in principle when he allowed Kshs 15,979,413. 84 basing instruction fee on Kshs 864,378. 323 by consolidating various amounts claimed in the pleadings, instead of applying Kshs 22,500,000 which was the value of the subject matter as contained in the advocate’s final fee note dated April 19, 2017. National Bank relies on Premchand Raichand Ltd & Another v Quarry Services of East Africa Ltd & others [1972] EA 162 for the proposition that the instruction fee payable to an advocate should be based on the value of the subject matter.

8. National Bank argues that the bill of costs should be taxed afresh before another taxing officer to ensure compliance with the test of reasonable compensation for professional work done. National Bank cites the decisions in President of the Republic of South Africa and others v Gauteng Lions Rugby Union and another (CCT16/98) [2001] ZACC 5; 2002 (1) BCLR 1 (CC); 2002 (2) SA 64 cited in KANU National Elections Board & 2 others v Salah Yakub Farah [2018] eKLR, Kenyari & Associates v Salama Beach Hotel Ltd & 4 others [2014] eKLR and Thomas K’Bahati & Co Advocates v Janendra Raichand Shah [2020] eKLR.

9. National Bank again argues that the taxing officer did not have jurisdiction to determine the fees claimed with respect to proceedings that were before the Court of Appeal. National Bank relies on section 108 and 111 part 5 of the Appellate Jurisdiction Act, and the decision in Kimeto & Associates Advocates v Alisah Mohammed (suing through her father and next friend Aminmohamed Mohamed)[2018] eKLR.

10. National Bank further relies on James v Nyeri Electicity [1961] EA 492 cited in Ekuru Kabage Nyamathwe & Co Advocates v Rose Wanjiru Kibe[2015] eKLR to argue that failure to peg instruction fees on the value of the subject matter is an error of principle warranting interference with the taxing master’s decision.

11. Regarding getting up fee, National Bank relies on Addax Kenya Limited v National Environment Management Authority & another[2019] eKLR for the submission that the taxing master erred in allowing getting up fees without the certification of the court.

12. On the argument that the reference is incompetent, National Bank argues that the reference complied with procedural requirements under rule 11 (1) of the Advocates Remuneration Order. According to National where reasons are contained in the taxing officer’s ruling, there is no need to apply for reasons. Reliance is placed on Ahmednasir Abdikadir & Co Advocates v National Bank of Kenya (2) [2006] eKLR 1 EA 5 cited in Otieno & Ragot Company Advocates v National Bank of Kenya Limited [2016].

Response 13. The advocate opposes the reference through a preliminary objection dated January 31, 2021, affidavits sworn by Clifford Owuor Rachuonyo on September 6, 2021 and January 31, 2022, and list and bundle of authorities dated February 4, 2022.

14. The advocate takes the view that the reference is defective and incompetent because National Bank did not file a notice of objection as required by rule 11 (1) of the Advocates Remuneration Order. The advocate relies on Nduati Charagu & Coompny Advocates v Foundation Centre Ltd & another [2017] eKLR and George Miyare t/a Miyre & Company Advocates v Evns Gor Semelango [2019] eKLR in this regard.

15. On the scope of service rendered, the advocate maintains that they were instructed by National Bank to act in civil appeal No 96 of 2016 and judgment was delivered on November 8, 2019. The advocate referred to paragraphs 5(b), 5(c), 5(d), 5(e) and 5(f) of the amended bill of costs which showed that services were rendered exclusively in the Court of Appeal and not the High Court.

16. According to the advocate, they successfully defended National Bank in the appeals and cross appeals relating to the sale of LR No 10551/3 by National Bank in exercise of its statutory power of sale which the High Court had held to be unlawful.

17. The advocate argues that the aggregate monetary claims in the pleadings amounted to Kshs 864,378,323 and as a result, due to their effort before the Court of Appeal, National Bank avoided a potential substantial refund of the purchase price of Kshs 14 million and interest at commercial rates for over a period of 17 years, the claim for substantial damages for wrongful sale and a claim by the purchaser in respect of the claim against it by the chargor.

18. The advocate maintains that the taxing officer properly exercised his discretion in accordance with established principles of taxation when determining instruction fee.

19. On getting up fees, the advocate asserts that certification on complexity of a matter is only required in appeals to the High Court before an award of getting up fees is made. Concluded appeals from the Court of Appeal are to be treated as defended suits where getting up fees is automatically earned once judgment is delivered upon full hearing. The advocate also submits that getting up fees is not an issue for consideration by this court as it was not contested before the taxing officer.

20. The advocate relies on rule iii (3) of the Court of Appeal Rules to argue that the taxing officer had the jurisdiction to tax the bill of costs. Reliance is also placed on National Bank of Kenya Limited v Rachuonyo & Rachuonyo Advocates(Misc App No E300 of 2019) where Majanja J. observed that it is appeals to the High Court rather than from the High Court that require certification from the court hearing the appeal. The court is urged to dismiss the reference.

Determination 21. The reference challenges the taxing officer’s decision delivered on August 10, 2021. I have considered the arguments by parties in this reference. The issues that arise are whether the reference is incompetent; whether the taxing officer had jurisdiction and whether the taxing officer properly exercised his discretion in taxing the advocate client bill of costs.

Competence of the reference 22. The advocate takes a preliminary issue that the reference is incompetent for the reason that National Bank did not issue a notice of intention to file the reference as required by rule 11(1) of the Advocates Remuneration Order. According to the advocate, it was mandatory for National Bank to issue the notice before the reference could be filed. Having not done so, the reference is incompetent.

23. National bank on its part maintains that the reference is properly before the court. According to National Bank, the notice would be necessary if reason were not contained in the ruling the subject of the reference. Where reasons are in the ruling of the taxing officer, there is no reason for the notice.

24. Rule 11(1) states that should a party object to the decision of the taxing officer, he may within 14 days after that decision, give notice in writing to the taxing officer on the items of taxation he objects to. This rule is clear that the party intending to object may give notice and identify the items s/he intends to object on. The rule uses the word “may” thus making it optional.

25. Giving of notice will be required where the decision by the taxing officer does not contain reasons. Where, however, the decision contains reasons, there would be no reason to give notice since the taxing officer will have already given reasons in the decision. Such a notice, in my view, would not serve any useful purpose other than burdening a party.

26. I have seen decisions relied on by the advocate to the effect that National Bank should have filed a notice of objection. With respect, I do not think failure to file the notice rendered the reference fatal. The reason for giving notice is to enable the taxing officer give reasons for the decision on the specified items. Where no notice is given, I do not fathom the prejudice a party, in this case the advocate, would suffer due to that omission. It does not also show what the taxing officer would do or not do where the notice is filed. As the court correctly observed in George Miyare t/a Miyre & Company Advocates v Evns Gor Semelango(supra), it would be superfluous to file a notice and ask for reasons (or even indicate the items one intends to object to) when the reasons are contained in the detailed ruling. I do not, therefore, agree with the advocate that failure to file the notice rendered the reference incompetent.

Jurisdiction 27. National Bank argues that the taxing officer did not have jurisdiction to tax the bill of costs arising from matters in the Court of Appeal. According to National Bank, the bill of costs was wrongly filed before the taxing officer instead of the Court of Appeal. The advocate on their part, take the view, first; that this issue was not raise before the taxing officer and should not therefore be raised before this court, since the taxing officer did not have an opportunity to render himself on the matter.

28. The advocate further argues that the provisions relied on by National Bank namely, rule 111(1) and (2) of the Court of Appeal Rulesdeal with taxation of party and party costs and not advocate client bill of costs. This being advocate client bill of costs; the applicable rule is 111(3) of the rules.

29. I have considered the issue and perused the record before the taxing office as well as the impugned decision. I have also perused the court of rules and, in particular, rule 111(1), (2) and (3). It is plain that rule 111(1) and (2) deal with taxation of party and party costs. In this respect, registrar of the Court of Appeal only deals with taxation of party and party costs. Rule 111(3) defers taxation of advocate client bill of costs to rules and scales to proceedings in this court (High court).

30. It follows that since what was before the taxing officer was advocate client bill of costs (remuneration of an advocate) the taxing officer had jurisdiction to tax the bill that was before him. In the premise, the issue having not been raised before the taxing officer, could not be raised at this stage before this court. Even then, the law is clear that any issue regarding advocate client remuneration should be governed by the rules and scale of proceedings before this court. I find no merit in the argument on jurisdiction.

31. Turning to the real issue at hand namely taxation. National Bank has attacked the decision of the taxing officer arguing that he erred in principle which calls for interfering with exercise of his discretion. The advocate’s argument on the other hand is that the taxing officer properly exercised his discretion and that National Bank’s complaint has no merit.

32. From the arguments of both sides, the disagreement turns on whether or not the taxing officer properly exercised his discretion and whether the amount allowed on instruction fee was inordinately high and whether getting up fee was justified.

33. It is an established principle of law, that a judge will not readily interfere with the decision of the taxing officer unless it is sufficiently demonstrated that the taxing officer erred in principle. An example is where the sum awarded is either inordinately high or low, taking into account the nature of the proceedings, to conclude that the taxing officer acted on a wrong principle.

34. In Premchand Raichand Ltd & another v Quarry Services East Africa Ltd & another[1972] EA 162, Spray, VP stated: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 the taxing officer, and particularly where he is an officer of great experience, merely because it thinks the award somewhat so high or so low as to amount to an injustice to one party or the other.

35. in Rogan-Kemper v Lord Grosvenor (No3) [1977] KLR 303; [1977] eKLR, Law JA, rendered himself thus:A Judge will not substitute what he considers to be the proper figure for that allowed by the taxing officer unless in the judge’s view, the sum allowed by the taxing officer is outside reasonable limits so as to be manifestly excessive or inadequate.

36. InBank of Uganda v Banco Arabe Espaniol, civil application No 29 of 2019; Mulenga, JSC writing for the Supreme Court of Uganda stated:[S]ave in exceptional cases, a judge does not interfere with the assessment of what the taxing officer considers to be a reasonable fee. This is because it is generally accepted that questions which are solely of quantum of costs, are matters which the taxing officer is particularly fitted to deal, and which he has more experience than the judge. Consequently, a judge will not alter a fee allowed by a taxing officer, merely because in his opinion, he should have allowed a higher or lower amount…Even if it is shown that the taxing officer erred in principle, the judge should interfere only if satisfied that the error substantially affected the decision on quantum and that upholding the amount allowed would cause injustice to one of the parties. (Emphasis).

37. On the basis of the above principles, I have considered the arguments by parties in this reference as well as the record and the ruling of the taxing officer, the subject of this reference. I will deal with the issues raised separately.

Instruction Fee 38. National bank argues that the taxing officer failed to peg instruction fees on the value of the subject matter which was an error of principle warranting interference with that decision. According to National Bank, the taxing officer fell into error by pegging instruction fee on the colossal amount of Kshs 864,378,323 instead of basing instruction fee on the value of the subject matter of Kshs 22,500,000 at the time of filing the bill of costs. National Bank argues, therefore, that the amount allowed on instruction fee was manifestly excessive.

39. The advocate on their part assert that the taxing officer properly applied his mind to the principles on taxation and exercised discretion in allowing instruction fee. According to the advocate, the taxing officer considered the memorandum of appeal, cross appeals, the nature of the rival monetary claims which aggregated Kshs 864,378,323 and allowed instruction fee at Kshs 6,687,387. 40 which was reasonable.

40. I have considered the arguments on this issue and perused the taxing officer’s decision. National Bank blames the taxing officer for applying Kshs 864,378,323 as the value of the subject matter instead of Kshs 22,500,000. National Bank does not state where the amount of Kshs 22,500,000 comes from for purposes of being applied as the value of the subject matter. On the other hand, National Bank states that the amount of Kshs 864,378,323 was aggregated from the pleadings.

41. The law is settled on how the taxing officer should determine the value of the subject matter. That is, the value of the subject matter should be determined for the pleadings, judgment or settlement but where this is not possible, the taxing officer is to use his discretion to assess instruction fee as he considers just, taking into account the nature and importance of the matter, interest of the parties, general conduct of the proceedings and directions of the trial court and all other relevant circumstances. (see Joreth v Kigano & Associates Advocates[2002] eKLR).

42. The taxing officer considerer the amended bill of costs and gave a detailed consideration at paragraphs 7, through 12 and allowed instruction fee of Kshs 6,687,837. 40 based on the value of the subject matter aggregated to Kshs 864,378,323. From the taxing officer’s decision, the argument by national Bank that the value of the subject matter was Kshs 22,500,000 was based on a fee note the advocate had sent to National Bank but which the taxing officer rejected as not forming a contract between the parties.

43. I agree with the taxing officer that the fee note was not a value discernible in the pleadings, was not an agreement for fees and could not be taken to be a binding contract between the advocate and client.

44. As the court stated in Kemper v Lord Grosvenor (No 3) (supra), a judge should not substitute his own views on what he considers to be the proper figure for that allowed by the taxing officer, unless the sum allowed by the taxing officer is outside reasonable limits so as to be manifestly excessive or inadequate. It is the duty of the party complaining to demonstrate to the satisfaction of the court that the amount is manifestly excessive or inadequate.

45. In Arthur v Nyeri Electicity(supra), the court emphasized that where there has been an error of principle, the court will interfere but questions solely of quantum are regarded as matters which the taxing officers are particularly fitted to deal with and the court will intervene in exceptional cases. The court declined to interfere with exercise of discretion even though the amount awarded was found to be high.

46. National Bank has not shown why or how the taxing officer erred in principle in allowing instruction fee at Kshs 6,687,837. 40, what the value of the subject matter was that the taxing officer ignored or how much instruction fee should have been allowed. In the premise, I do not find merit in the complaint that the taxing officer committed an error of principle to require this court to interfere with that discretion.

Getting Up Fee 47. National Bank argues that getting up fee in appeals is not automatic and that the court must certify that fee as payable. The advocate asserted that the provision relied on by National Bank deals with appeals from Magistrates’ Courts to the High Court (schedule iv rule 3 (fees for getting up on appeal) and not from the High Court to the Court of Appeal.

48. A reading of that rule shows that it relates to appeals to the High Court. This rule has nothing to do with appeals from this court to the Court of Appeal. The argument by National Bank that the taxing officer erred in allowing getting up fee has no merit.

49. Having considered the reference, response and submissions and after considering the impugned decision of the taxing officer, I do not find merit in this reference. Consequently, the reference dated August 23, 2021 is dismissed with costs.

DATED, SIGNED AND DELIVERED AT NAIROBI THIS 7TH DAY OF OCTOBER 2022E C MWITAJUDGE