[2023] KEHC 25645 (KLR)

Republic v Secretary Migori County Government; Mudida & another (Exparte Applicants) (Miscellaneous Application 60 of 2019) [2023] KEHC 25645 (KLR) (20 November 2023) (Ruling)

Neutral citation: [2023] KEHC 25645 (KLR)

Republic of Kenya

In the High Court at Kisii

Miscellaneous Application 60 of 2019

PN Gichohi, J

November 20, 2023

Between

Republic

Applicant

and

The Secretary Migori County Government

Respondent

and

Peter Mudida

Exparte Applicant

Rose Mudida

Exparte Applicant

Ruling

1. By a Notice of Motion Application dated 12/2/2022 and filed under a Certificate of Urgency on 14/02/2022, the Secretary Migori County Government (herein referred to as the Respondent) prayed for orders that:1. The Honourable Court to review its ruling and orders made on 15/12/2021 on account of proof of payment of the decretal sum;2. The Honourable Court do make such subsequent orders as it may deem fit upon review of the said ruling and orders of 15/12/2021;3. Costs of this Application be provided for.

2. The grounds thereof are on the face of the Application and Affidavit in support sworn on 12th February 2022 by Matiko Mang’era, the County Attorney Migori. The Respondent stated that while the Application for Contempt of Court was pending before this Court, the payment of the decretal sum was being processed by the County Government of Migori so as to settle the debt in compliance with the Court orders.

3. Further, he stated that the payment of the full decretal sum and interest disclosed in the Notice to Show Cause dated 26/5/2021 and served upon the Office of the County Attorney on 4/6/2021 by the Advocate for the Applicant/Decree Holder, was made to the Advocate and the transfer reflected in the Advocate’s bank by 30th December ,2021.

4. That in the circumstances, it was not possible for the Applicant to place proof of the payment before the said Ruling. He therefore urged the Court to review the said orders of 15th December ,2021 and discharge the former Secretary from any contempt of Court and/or disobedience of its orders in this matter.

5. The background to that Application is that when the Ex-parte Applicant moved the Court vide Application dated 23rd May 2019, he obtained an order for Mandamus compelling the Respondent, the Secretary Migori County Government to pay the decretal amount in High Court Civil Suit No. 121 of 1996 for Kshs. 2,000,000/= inclusive of interest at the rate of 12 % p.a with effect from the 25th day f November 2019 until payment in full plus costs of the suit taxed at Kshs. 505,675/= only , inclusive of interest thereon at 14% p.a. with effect from the 31st day of October 2017 until payment in full.

6. Upon failure by the Respondent to pay, the Ex-parte Applicants filed an Application dated 10th December, 2019 seeking orders that:-1. The Court be at liberty to commit the County Secretary Migori County Government Mr. Christopher Rusana to civil jail for a term not exceeding six months for blatant breach or disobedience of the court order of this court dated 18th June 2019. 2.This Court be pleased to impose such further monetary penalties and costs of and incidental to the application and the order be made that the Respondent named herein do pay the same personally.3. The Court do compel the Respondent to comply and enforce the orders granted herein.

7. Upon hearing of that Application, the Court granted prayer 1 of the Application and consequently the Court called upon the Respondent to Notice to Show Cause why he should not be held for contempt of Court. Upon being served, the Respondent filed a Replying Affidavit and challenged the said Order.

8. Upon hearing the parties, Ougo J delivered the Ruling dated 15th December 2021 as follows:-“It is not in doubt that the respondent has neglected to settle the decree of this court in HCCS No. 121 of 1996 that issued on 28th June 2017 before taxation of costs. This court therefore finds that the Secretary , Migori County Government , Mr. Christopher Rusana is in contempt of the court orders issued on 18th June 2019 . The Secretary , Migori County Government, having failed to demonstrate why he should not be held in contempt of the court orders, I therefore direct that he appear before this Court on 15th February 2022 for purposes of sentencing.”

9. When the matter came up for sentencing on 15/2/2022 as scheduled, Mr. Nyagwencha who was holding brief for Mr. Aswani for the Applicant told the Court that that the County Government had paid Kshs, 3,642, 698. 66 on 30/12/2021. However, his instructions were that the amount was not in full as the interest not paid. That they had not paid the full amount.

10. On the other hand, Mr. Nyasimi maintained that payment had been made and the only issue was subsequent interest as the payment was made on the basis of the Notice to Show Cause served on the Respondent indicating the amount as Kshs. 3,642,698. 66. That he had advised Mr. Aswani to file the bill and certificate of costs issued so that Mr. Nyasimi could serve it on the Respondent. While apologising for the delay for reasons that the Mr. Rosana had since left the Respondent, he maintained that the Respondent had no intention of disobeying the Court Orders. He therefore urged the Court to review the order for sentencing.

11. After hearing both parties on 15/2/2022, Ougo J made the following orders:-“From the explanation given by Mr. Nyasimi , I discharge the order for sentencing as the principal amount has been fully paid. The Applicant to pursue interest as directed by Counsel for the Respondent. Mention on the 3/5/2022 to confirm whether issue of interest pending is sorted out.”

12. This Court took over the matter on 18th April 2023 and parties agreed that the NTSC be heard on 25th May, 2023. Mr. Quinto Vincent Abayo, legal officer working at Migori County Government, appeared before the Court for hearing of the Notice to Show Cause. While on oath, he told the Court that pursuant to the Notice to Show Cause dated 26th May 2021, the sum of Kshs. 3,642,698. 66 was processed. However, IFMIS deducted tax from this sum and it was remitted to KRA. That as a consequence, what was paid to Advocate T. D.N. Aswani Advocate for the Applicant was Kshs. 3,397,758. 50 through RTGS.

13. He therefore told the Court that they have never been served with another order from the Court to show that they were supposed to pay any other amount. Further, he told the Court that the County Government settled the outstanding amount and due to the system put by the Controller of Budget , the County Government cannot pay any other amount without a Court Order backing the same.

14. When cross -examined by Mr. Aswani Advocate , he told the Court that he was familiar with this file as he has been in that capacity in Migori County Government since 2016. His position was that the outstanding amount as at 31st December 2021 was Kshs. 3,642,698/66. He denied being served with the figure of Kshs. 4,027,373. 69 and maintained that he paid what was in the Notice to show Cause dated 26th May 2021. That from that sum, it paid 16 % as tax for professional earning and further 2 % as Withholding Tax as per the Treasury IFMIS and this totalled to Kshs. 244,940/= leaving the amount payable as Kshs. 3,397, 758. 50.

15. He maintained that the law allows payment of VAT and Withholding Tax on Party and Party Costs but he could not state the section of the law that permits that. He denied receiving a response from Mr. Aswani attaching a High Court decision that VAT and Withholding Tax are not chargeable on party and party Costs. He maintained that he has never accessed that case law.

16. He further maintained that the money was withheld by IFMIS and if wrongly deducted, then there is a process of reclaiming it and this has to be done through KRA by the individual and not the County Government.

17. Being asked why he never communicated this to the Advocate all this time, he told the Court that there was miscommunication due to change of County Attorney in the County Government and that they thought all along that they had fully paid and there was no outstanding balance. He denied that from since December 2021 the balance would be Kshs.384,675/03 plus interest totalling to a total balance of Kshs. 738,728/92. He stated that he did not believe that interest could have accumulated to that amount. He maintained they have fully paid what was due.

18. The parties agreed to file and exchange written submissions the issues that had been raised during the hearing of the Notice to Show Cause and pursuant to directions earlier given by Ougo J regarding this application. The order of filing was that Mr. Aswani for the Applicant to file and serve and the Mr, Nyasimi for the Respondent to file and serve his after service.

Applicants’ Submissions 19. On 9/6/2023, Mr. Aswani for the Applicants filed submissions dated 7/6/2023. Giving the background of the matter and chronology of events and the communication between Counsel for the Applicants and the Respondent herein, Counsel maintained the submissions made orally before the Court during Notice to Show Cause.

20. Further, Counsel submitted that when Ougo J directed the parties to ascertain whether the outstanding interest had been paid or not, Counsel for the Applicant addressed the issue to Counsel for the Respondent showing calculations that revealed that outstanding interest on the principal and taxed costs was Kshs. 689,472. 89 as updated on 5th October 2022.

21. On issue of VAT and withholding Tax amounting to Kshs. 244, 940/=, Counsel submitted that upon his request for E-Return from KRA acknowledging receipt of Kshs. 244,940/= allegedly deducted from sums due as Tax, he received a notification from the Commissioner Domestic Taxes Department. It reflected that the PAYEE was Counsel on record for the Applicant.

22. Further, it reflected the nature of the transaction as Management , Professional Training or Consultation Fees over Kshs. 24,000/= in a month yet the Applicant’s claim against the Respondent was for recovery of damages arising from their interference with the Applicant’s plots in Migori Town for which they were awarded Kshs. 2,000,000/= plus costs and interest until payment in full and that the taxed costs were party and party costs which were payable to the Applicants and not to their Counsel on record.

23. While relying on the case of Pyramid Motor Vehicles Limited v Langata Gardens Limited [2015] eKLR, Counsel submitted that no VAT is chargeable on party and party costs. As a consequence, Counsel submitted that it was irregular for the Respondent to deduct this money form the Applicant. Counsel further submitted that that contrary to the Respondent’s argument during the hearing of the Notice to Show Cause, it is the Respondent and not the Applicant who should claim the said money from KRA.

24. While emphasising the Court Order dated 18th June 2019, Counsel submitted that all calculations of the outstanding amounts must include the stated interest on each of the amounts until payment in full. As a consequence, Counsel submitted that the Respondent’s stand that the only the amounts shown in the Notice to Show Cause were the correct amounts payable on 31st December 2021 is absurd going by the various orders made by the Court herein urging the parties to ascertain the outstanding interest balances and have them settled by the Respondent.

25. Lastly, Counsel submitted that having refused to, neglected and disregarded the Court Order issued on 18th June , 2019, it would be in order if the Respondent is committed to Civil jail for a term not exceeding six (6) months and/ or in addition to impose such further penalties and costs of and incidental to and this application and that the Respondent personally to pay the same personally.

Respondent’s Submissions 26. In his submissions dated and filed on 7/6/2023, Counsel for the Respondent submitted that the Notice to Show Cause issued by Court and dated 26th May 2023 and subsequently served upon the County Government of Migori on 4/6/2021 was for a total of Kshs. 3,642,698. 66. That the said Notice did not distinguish between the principal sum and costs but only indicated a lump sum decretal amount which by law is subject to tax.

27. Counsel therefore submitted that the County Government initiated the legal payment process and paid the entire sum on 21st October, 2021 vide Requisition No. 94529. That as a consequence, it would amount to double payment and if the County Government pays again which is against the law . That it will be against public interest to put public money into wasteful expenditure.

28. Further, Counsel submitted that if the Applicant felt that IFMIS wrongly deducted the amount paid to KRA as tax, the Applicant has an opportunity to claim refund from KRA as the issue of collection of tax by KRA is beyond the County Government’s control. Lastly, Counsel urged the Court to find that the County Government of Migori does not owe the Applicant any amount in this matter and has fully settled the decretal sum.

Determination 29. This court has considered the arguments by parties during the hearing of the Notice to Show Cause dated 26th May 2021 and the submissions by parties. There is no doubt about the various orders issued by the Court herein leading to the orders of 15th December, 2021.

30. A perusal of the Court record shows that the in the suit, Peter Mudida and Rose Mudida were the 1st and 2nd Plaintiff respectively while Migori County Government and Madina Sharif Hussein w/o Omar Sharif Ibrahim were the 1st and 2nd Defendant respectively.

31. As relates to the issue herein, there is no doubt or dispute that the Decree dated 28th June 2017 was in favour of the Plaintiffs (herein referred as the Applicants) as against the 1st Defendant (herein referred to as the Respondent) for general damages of Kshs. 2,000,000/= with interest at Court rates from the date of judgment until payment in full. The Respondent was ordered to pay to the Plaintiffs costs of the suit to be taxed and certified by the taxing master of the Court. The Respondent was also to pay interest on the taxed costs at court rates.

32. The Party and Party Bill of Costs was taxed on 31st Day of October 2017 as against the Respondent at Kshs. 505,675/=.

33. That effectively meant that interest on the sum of Kshs. 2,000,000/= was to run from the date of judgment by Hon. Justice J.M. Mutungi being 25th November 2016 until payment in full while the costs of the suit being Kshs. 505,675/= was to run from 31st October 2017 until payment in full. On both sums, interest was at court rates.

34. The Court record further shows that vide a letter dated 9th September 2018, Counsel for the Applicants demanded from the Respondent the principal sum of Ksh. 2,000,000. 00 and interest on the same at 12% from 25th November , 2016 to 30th September 2018 being Kshs. 2, 443,835. 00 plus Taxed Costs at Court rates 14% from 31st October 2017 to 30th September 2018 making a total of Kshs. 570, 950. 00. That was a total of Kshs. 3,014,786. 35 all inclusive.

35. The first Notice to Show Cause coming for hearing on 29th September, 2019 referring to disobedience of the Court Orders of 18th June 2019 was dated 30th July, 2020 and it read:-“Your presence will be dispensed with if the sum of Kshs. 3,642, 698. 66 being the balance/ amount of Decree together with interest , costs of execution and Court collection fees making in all Kshs. 3,642,698. 66 are lodged before the said date.”

36. The Court record shows that the second Notice to Show Cause still referring to disobedience of the Court Orders of 18th June 2019 and coming for hearing on 9th June 2021 is dated 26th May 2021. It appears to be a copy paste of the first Notice to show Cause in that it reads:-“Your presence will be dispensed with if the sum of Kshs. 3,642, 698. 66 being the balance/ amount of Decree together with interest , costs of execution and Court collection fees making in all Kshs. 3,642,698. 66 are lodged before the said date.”

37. The argument by the Respondent through its legal officer Quinto Vincent Abayo that the outstanding amount as at 31st December 2021 was Kshs. 3,642,698/66 and that they paid what was in the Notice to Show Cause dated 26th May 2021. The reason is that according to the decree, interest on the principal sum and interest on the taxed party and party costs was to continue accruing as long as they remained unpaid.

38. However, with the Order made by Ougo J on 15 /12/2022 , the issues for determination would only be any outstanding interest and whether the sum deducted from the sum of Kshs. Kshs. 3, 642,698. 69 was lawfully made.

39. Though the legal officer denied that since 31st December 2021, the balance would be Kshs.384,675/03 plus interest totalling to a balance of Kshs. 738,728/92 as put to him by Mr. Aswani on 23rd May 2023 during the hearing of the Notice to Shaow Cause, the order dated 18th June 2019 by Ougo J was that interest would accrue until payment in full.

40. The interest payable was 12% on principal sum and 14% on the taxed party and party costs. As a consequence, the total and final sum payable could not have been Kshs. 3, 642,698. 69 as processed by the Respondent.

41. Further, though the Respondent processed Kshs. 3,642,698. 69 as per the voucher, the actual amount paid to the Applicants was Kshs. 3,397,758. 50. The reason given by the Respondent is that a total of Kshs. 244,940. 00 payable to KRA as 19 % VAT and 2% Withholding Tax.

42. This deduction was however based on erroneous entry of the nature of the transaction. The money was not payable to the advocate but to the Applicants through their Advocate being costs as between them and the Respondent in the suit. In Pyramid Motor Vehicles Limited (supra), Onguto J had this to say on VAT charged on party and party costs:-“Value added Tax (VAT) is chargeable in taxable supply made by any registered person. There was no taxable supply of chargeable goods or services made to the Applicant herein by the Respondent herein. The Bills herein concerned Party and Party costs and VAT could then not apply as neither party fetched nor supplied services to the other. True legal services were rendered but it is not the Advocate who was being compensated herein. The Master could only have awarded VAT if the Bills were Advocate- Client Bills or if there was tendered evidence before the Master that that the Plaintiff had paid VAT and was consequently entitled to indemnity . But yet that again is debatable whether the Plaintiff was a vatable person. I would vacate the award on VAT as the Master erred .”

43. On that basis, the Applicants are entitled to a refund of Kshs. 244, 940. 00 from the Respondent together with interest. It is immaterial that Counsel for the Respondent was not aware of the above case law as at the time the deductions were made. Further, the entry in regard to the nature of the transaction is definitely made by the Respondent for IFMIS to do the deductions herein. The Applicants had no input there and cannot be told to pursue refund from KRA in the circumstances. For all intent and purposes, it is the Respondent who should bear the burden of seeking refund from KRA if they deem fit.

44. From the foregoing, this Court is satisfied that the Respondent has not fully settled the outstanding balance on both principal sum and taxed costs due to the accruing interest pursuant to the orders herein. As a result, the Court makes the following orders:-1. The Respondent’s application dated 12/2/2022 is disallowed as the Respondent has not fully settled the interest.2. The Respondent to pay to the Applicants the sum of Kshs. 244,940. 00 together with interest thereon within 21 days of this ruling.3. Within 21 days from the date of this ruling, the Respondent to pay to the Applicants all the outstanding interest as at 31st December, 2021. 4.In default of Order 2 and 3 above, the file be placed before the Judge in Kisii for further directions to the Applicants’ request for the Respondent’s committal to civil jail.5. No orders as costs.

DATED AND DELIVERED VIRTUALLY AT KISII (VIRTUALLY) THIS 20TH DAY OF NOVEMBER, 2023. PATRICIA GICHOHIJUDGEIn the presence of:N/A for ApplicantN/A for the RespondentAphline Court Assistant