[2022] KEHC 263 (KLR)

Singh Gitau Advocates v Metro Petroleum Limited (Miscellaneous Civil Application E352 of 2019) [2022] KEHC 263 (KLR) (Commercial and Tax) (25 March 2022) (Ruling)

Neutral citation: [2022] KEHC 263 (KLR)

Republic of Kenya

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

Commercial and Tax

Miscellaneous Civil Application E352 of 2019

DAS Majanja, J

March 25, 2022

Between

Singh Gitau Advocates

Applicant

and

Metro Petroleum Limited

Respondent

Ruling

1. Introduction and backgroundSometime in the year 2005, the Client instructed the Advocates to act on its behalf in HCCC NO 240 OF 2005: Quasar Limited v Metro Petroleum Limited (“the Suit”). The Advocates claim that the Client failed to give them further instructions and also failed to settle their legal fees and for this reason they filed an Advocate-Client Bill of Costs dated 14th August 2019 (“the Bill of Costs”) in which they claimed KES 4,702,982. 18. The Bill of Costs, which was unopposed, was placed before the Deputy Registrar who, in a ruling dated 15th October 2020 (“the Ruling”) taxed off KES 75,354. 80 and certified the sum of KES 4,627,627. 30 as the amount due to the Advocates.

2. The Advocates seek judgment for the certified costs while the Client seeks leave to file a reference against the Ruling out of time. The Advocates’ have filed the Notice of Motion dated 3rd May 2021 made, inter alia, under section 51(2) of the Advocates Act (Chapter 16 of the Laws of Kenya) supported by the affidavit of Aaron Kinyanjui, an advocate having conduct of this matter on behalf of the Advocates, sworn on 3rd May 2021. It is opposed by the Client through the replying affidavit of its director, Bill Kipsang Rotich, sworn on 19th July 2021.

3. The Client’s Chamber Summons is dated 15th July 2021 and is made under Rule 11(4) of the Advocates Remuneration Order (“the Order”). The application is supported by affidavits of Bill Kipsang Rotich sworn on 15th July 2021 and 30th September 2021 respectively and opposed by the Advocates through the replying affidavit of Aaron Kinyanjui sworn on 1st September 2021.

4. The parties have filed written submissions in support of their respective positions. I propose to first deal with the Client’s application which will determine whether the Advocates’ application will be determined or stayed pending hearing of the proposed reference.The client’s application

5. The Client seeks enlargement of time to file the reference on the ground that it did not receive the Notice of Taxation and was unaware of the taxation proceedings as it was undergoing litigation pitting its directors in HCCC No. 542 of 2007, Pankaj Somaia vs Metro Petroleum Company Limited, Bill Kipsang Rotich and Florence Rotich. It asserts that these proceedings contributed to lack of participation in the taxation process and contributed to delay in the decision making due to differences amongst the members of the Board of Directors.

6. The Client contends that if the Advocates’ application proceeds before determination of the challenge to taxation, administration of justice stands to be embarrassed, as the Advocates will execute an astronomical decree of KES 4,627,627. 00 and shall unnecessarily inflict hardship and egregiously affect the Client’s assets. That it would also render the Client’s present application nugatory which would be tragic and against interests of justice as the Client would have been condemned unheard, contrary to law and public interest.The advocates’ reply

7. The Advocates oppose the application. They contend that the dispute over the management of the Client is an internal dispute to which the Advocates are neither a party to, nor has any role to play. The Advocates submit that parties dealing with a corporation, acting in good faith and without knowledge of any irregularity, are entitled to assume that a corporation’s internal policies and proceedings have been followed and complied with.

8. The Advocates claim that the Client has been aware of the pending fees and only cherry picked those it thought necessary to prosecute its case. The Advocates submit that the Taxation Notice was duly served upon the Client as evidenced by the affidavit of service on record. Further that the service was effected through the Client’s known postal address which they had previously used to serve all court process in the past. They accuse the Client of ignoring service and only seeking to set aside the Ruling when the Advocates chose to enforce the costs.

9. The Advocates submit that the Client has not shown sufficient cause to warrant the granting of orders sought in its application and that nothing will be achieved in setting aside the Ruling as the Client has not argued that the awarded costs are exaggerated as the Bill of Costs presented and the amount awarded is strictly within the provisions of the Order.The client’s response

10. While the Client concedes that the dispute as to the management of the company is an internal matter that the Advocates have no role to play, it submits that it is imperative to note that the internal dispute had a direct impact on the inadvertent failure by the Client to defend the Bill of Costs. It adds that the rule in Turquand’s Case derived from the case of Royal British Bank v Turquand (1885) E&B 327 has no basis in the present application and or dispute. The Client reiterates the existence of the dispute in its management which following the Judgment in HCCC No. 542 of 2007 affected the decision making of the Client due to delayed differences of its Board of Directors.

11. The Client reiterates that as a consequence of the dispute it did not receive the Taxation Notice and neither was it aware of pendency of the taxation proceedings and that it has gained knowledge of these proceedings after service of the present application. The Client avers that upon scrutiny of the Affidavit of Service referred to by the Advocates, it is imperative to note that the said affidavit as drawn and filed makes no reference to service of the actual Bill of Costs but rather the service of the Taxation Notice and the said affidavit merely makes reference to the Bill of Costs, but does not make mention of it being among the documents being served upon the Client contrary to the provisions of Order 5 Rule 15 of the RulesAnalysis and determination

12. The main issue for determination is whether the court ought to enlarge time for filing the reference. Under Paragraph 11(4) of the Order, the court has the discretion to enlarge time to file a reference as the said provision provides that “The High Court shall have power in its discretion by order to enlarge the time fixed by subparagraph (1) or subparagraph (2) for the taking of any step; application for such an order may be made by chamber summons upon giving to every other interested party not less than three clear days’ notice in writing or as the Court may direct, and may be so made notwithstanding that the time sought to be enlarged may have already expired.”

13. The Supreme Court, in County Executive of Kisumu v County Government of Kisumu & 8 others SCK Civil Application No. 3 of 2016 [2017] eKLR held that in an application for extension of time, the whole period of delay should be declared and explained satisfactorily to the Court and it reiterated the principles it had earlier delineated in Nicholas Kiptoo Korir Arap Salat v Independent Electoral & Boundaries Commission & 7 others, [2014] eKLR that a court, in its determination of such an application is guided by:1. Extension of time is not a right of a party. It is an equitable remedy that is only available to a deserving party at the discretion of the Court;2. A party who seeks for extension of time has the burden of laying a basis to the satisfaction of the court;3. Whether the court should exercise the discretion to extend time, is a consideration to be made on a case to case basis;4. Whether there is a reasonable reason for the delay. The delay should be explained to the satisfaction of the Court;5. Whether there will be any prejudice suffered by the respondents if the extension is granted;6. Whether the application has been brought without undue delay; and7. Whether in certain cases, like election petitions, public interest should be a consideration for extending time.

14. The Ruling was delivered on 15th October 2020, the Certificate of Costs was issued by the court on 13th January 2021 and the present application filed about 5 months later. As outlined in the Client’s case, its reasons for delay were failure to receive the notice of taxation due to internal wrangles in its management and thus unaware of the existence of the taxation proceedings. The Advocates deponed that they served the Notice of Taxation to the Client by way of registered post and that they have also attached a postage receipt and affidavit of service to prove service. The Client does not claim that the postal address used to effect service upon it was erroneous but that it was unable to access their post office box due to its internal wrangles. I find that the fact that the Client could not access its post office box did not mean that service was not properly effected upon it. On the contrary, the certificate of postage is proof that the company was properly served with the Notice of Taxation and once the same was sent, it was deemed to have been received by the Client.

15. From the material on record, I also find that the Client has not demonstrated that during the alleged period of management turmoil and pending case, the company was completely shut down and only partially resumed operations upon conclusion of the case. I note that judgment in HCCC No. 542 of 2007 was delivered on 20th January 2020 meaning the Client was back in operation soon after and thus could access its post office box. I have also read the judgment delivered in HCCC No. 542 of 2007 and it is inconsistent with the case made out by the Client and the deponent. Although there were apparent wrangles in the management of the Client, the deponent, Billy Kipsang, was in control and remained in control of the company. In that case, Kasango J., made the following findings:174. In a nutshell, I grant judgment in favour of the Plaintiff. He was irregularly side-lined by Kipsang and Florence, from being a director of the Company.175. Kipsang and Florence had absolute control over the management of the Company from June 2007. Therefore, the accounts of the Company are in their hands. I believe that that is the reason why the Defendants readily agreed to make available the Accounts for the period between 2006 and 2010.

16. It is clear therefore that the so called wrangles did not affect control of the Client. The Client failed to make full and frank disclosure of this fact, a matter that this court is entitled to take into account in the exercise of discretion. From the totality of the evidence on record, I am not convinced that the Client has satisfactorily explained the reasons for the delay in filing the application for enlargement of time. I therefore reject its application.

17. I now turn to the Advocates’ application seeking judgment against the Client for the certified taxed sum of KES. 4,627,627. 00. Section 51(2) of the Advocates Act provides that:The certificate of the taxing officer by whom a bill has been taxed shall, unless it is set aside or altered by the Court, be final as to the amount of the costs covered thereby, and the Court may make such order in relation thereto as it thinks fit, including, in a caser where the retainer is not disputed, an order that judgment be entered for the sum certified to be due with costs.

18. The Certificate of Costs is conclusive as to the amount unless set aside by way of a reference under Rule 11 of the Order (See Otieno, Ragot & Company Advocates v Kenya Airports AuthorityNRB CA Civil Appeal No. 39 of 2017 [2021] eKLR). I have dismissed the Client’s application seeking to file the reference out of time. The certificate of costs is valid and has not been set aside. There is thus no reason to deny the application.Disposition

19. For the reasons I have set out above, I now make the following orders:a.The Client’s Chamber Summons dated 15th July 2021 is dismissed with costs.b.The Advocates’ Notice of Motion dated 3rd May 2021 is allowed on terms that judgment be and is hereby entered for the Advocates against the Client for the sum of KES 4,627,627. 00 with interest thereon at court rates from 15th October 2020 until payment in full together with costs of the application.c. The costs for both applications are assessed at KES. 30,000. 00 only.

SIGNED AT NAIROBID. S. MAJANJAJUDGEDATED AND DELIVERED AT NAIROBI THIS 25TH DAY OF MARCH 2022. A. MABEYAJUDGECourt Assistant: Mr M. OnyangoMr Kinyanjui instructed by Singh Gitau Advocates for the Advocates/Applicants.Mr Mukuha instructed by Echesa & Bwire Advocates LLP for the Client/Respondent.