[2020] KEHC 894 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA

AT NAIROBI

CRIMINAL DIVISION

MISCELLANEOUS CRIMINAL APPLICATION

NO. 566 OF 2019

TUSHAR SHAR...................................................................................CLIENT/APPLICANT

-VERSUS-

KTK ADVOCATES..................................................................ADVOCATE/RESPONDENT

IN THE MATTER OF THE ADVOCATES ACT CAP 16 LAWS OF KENYA

-AND-

IN THE MATTER OF A REFERENCE UNDER RULE 11 OF THE ADVOCATES (REMUNERATION)

ORDER AGAINST PART OF THE RULING THAT WAS DELIVERED ON

22ND SEPTEMBER 2020 BY HON. S. KANYIRI DEPUTY REGISTRAR

IN RELATION TO A BILL OF COSTS

-BETWEEN-

KTK ADVOCATES................................................................................................APPLICANT

-VERSUS-

TUSHAR SHAR................................................................................................RESPONDENT

RULING

1. The application for consideration is a Chamber Summons dated 6th October, 2020 brought by the Applicant (hereinafter ‘the client’) under Rule 11of theAdvocates (Remuneration) Order. It emanates from the decision of Hon. S. Kanyiri, deputy registrar, of 22nd September 2020 in respect of the Respondent’s (hereinafter ‘the advocate’) advocate-client bill of costs dated 3rd December 2019. It seeks the following Orders:-

i. THAT this Honourable Court does find that the taxing officer erred in principle and in law by increasing the taxed costs by ½.

ii. THAT this Honourable Court does find that the taxing officer erred in principle and in law by applying the rate of 16% for VAT instead of the current rate of 14%.

iii. THAT this Honourable Court does reduce the increment that was loaded on the taxed costs and further sets aside the 16% VAT that was loaded onto the Bill and applies the current rate of 14% VAT.

iv. THAT this court does grant such further orders as it may deem fit and just in the interest of justice.

v. THAT the costs of this application be provided for.

2. The application is predicated on the grounds on the face of it and the Supporting Affidavit sworn by TUSHAR SHAH, the client herein. In the Affidavit, the client deposes inter alia that the bill, in which the advocate demanded the sum of Kshs. 4,779,179. 80 from him, arose from the proceedings in Makadara Criminal Case No. 3171 of 2018 where he had instructed the advocate to represent him. He avers that he filed an Affidavit in opposition to the bill of costs and tendered submissions in respect thereof through his advocates but the advocate did not tender any submissions in support of the bill.

3. He avers that in the impugned decision, the deputy registrar taxed the Bill at Kshs. 375,025/=. He states that he has no issue with the adjudged instruction fees or other disbursements but contends that he is dissatisfied with the taxing officer’s decision of increasing the taxed costs by one half since the bill of costs was presented and taxed under Schedule V of the Advocates Remuneration Order which does not provide for increment of advocates costs by half. Further, he states that he is also aggrieved by the decision of the taxing officer of applying the rate of 16% for VAT instead of the current applicable rate of 14%.

4. The advocate did not file any response to the application, nor make any submissions.

5. The Application was canvassed by way of oral submissions. Learned counsel Mr. Kiplagat appeared for the Applicant and submitted that the Applicant is aggrieved by two items namely: the increase of the fees by one half and the imposition of VAT rate of 16% instead of the current rate of 14%. He argued that the Deputy Registrar did not give any reasons for the increase of the fees and the tax rate in the impugned ruling. He submitted that there has been an amendment to the tax rate from 16% to 14% which is the applicable rate. He therefore urged that the application be allowed.

Analysis and Determination

6. The issues that arise for determination upon considering the application, the supporting affidavit and submission by counsel are:

i. Whether this court can interfere with a taxing officer's decision.

ii. Whether the taxing officer committed an error of principle by increasing of the fees by one half.

iii. Whether the taxing officer committed an error of principle by applying a VAT rate of 16% instead of 14%.

Issue No. (i) - Whether this court can interfere with a taxing officer’s decision.

7. This is not a contested issue. However, it is important to note that a judge sitting on a reference can only interfere with the exercise of the taxing officer’s discretion if it is shown that an error of principle was committed in the assessment of the costs. The Court of Appeal while addressing itself on the same in Joreth Limited v Kigano & Associates [2002] eKLRstates as follows:

“We have found that the learned judge erred in reassessing the instruction fee and we have also found that the taxing officer applied correct principles in arriving at the figure of instruction fee that he awarded. What the learned Judge did not appreciate was that sitting on a reference against the assessment of instruction fee by the taxing officer he ought not to have interfered with the assessment of costs unless the taxing officer had misdirected himself on a matter of principle.” (Emphasis added)

8. Similarly, in Kanu National Elections Board & 2 others v Salah Yakub Farah [2018] eKLR, Mativo J. cited the South African case of Visser vs Gubb1981 (3) SA 753(C) 754H – 755C where the court posited that:

“The court will not interfere with the exercise of such discretion unless it appears that the taxing master has not exercised his discretion judicially and has exercised it improperly, for example, by disregarding factors which he should properly have considered, or considering matters which it was improper for him to have considered; or he had failed to bring his mind to bear on the question in issue; or he has acted on a wrong principle. The court will also interfere where it is of the opinion that the taxing master was clearly wrong but will only do so if it is in the same position as, or a better position than, the taxing master to determine the point in issue… The court must be of the view that the taxing master was clearly wrong, i.e. its conviction on a review that he was wrong must be considerably more pronounced than would have sufficed had there been an ordinary right of appeal.”

Issue No. (ii) - Whether the taxing officer committed an error of principle byincreasing of the fees by one half.

9. As rightfully noted by the taxing officer in the impugned ruling, the bill emanated from legal services rendered to the client by the advocate in a criminal case. Paragraph 49A of the Advocates Remuneration Order provides as follows regarding the taxation of such a bill of costs:

“Costs in criminal cases, whether in the High Court or subordinate courts if not agreed or ordered, shall be taxed as between advocate and client under schedule V.”

10. Notably however, Schedule 5of theAdvocates Remuneration (Amendment) Order, 2014 does not envisage the increase of an advocate’s costs by one half. (See Meenye & Kirima Advocates v Kenya Commercial Bank Limited [2005] eKLR). Further, the taxing officer did not provide any reason for adding one half of the total costs to the taxed sum of Kshs 215,210/=. Indeed, it is only by evaluating the reasons given for reaching the said decision that the court would have been able to appreciate whether or not the taxing officer exercised her discretion judiciously. In the premises, I agree with the client’s submissions that the taxing officer committed an error of principle by adding one half of the taxed sum of Kshs 215,210/= to the amount.

Issue No. (iii) - Whether the taxing officer committed an error of principle byapplying a VAT rate of 16% instead of 14%.

11. In April 2020, parliament enacted the Tax Laws (Amendment) Act, 2020which amended various statutes inter alia Section 5(2) (c) of the Value Added Tax Act, 2013 by reducing the VAT rate charged on the supply of taxable goods and services made in Kenya from 16% to 14%. The taxing officer applied the 16% VAT rate sought by the Advocate in the bill of costs. In my view therefore, this was an error of principle which cannot be overlooked as the applicable rate is currently 14% and not 16%. In the case of Mwangangi & Company Advocates v Machakos County [2020] eKLR, Justice D. K. Kemei when confronted with a similar issue stated that:

“I note that the Applicant has sought for VAT at 16% which then was the prevailing rate. However, the current rate is 14% and which should be the applicable rate since the sums if paid is in the present and not past. The VAT therefore will attract the rate of 14%.”

12. The big question therefore is what action should the court take in the circumstances? The court can either remit the bill back to the taxing officer for taxation or proceed to tax the bill. On this, I associate myself with the sentiments of Ringera J. (as he then was) in the case of First American Bank of Kenya Ltd v Gulab P Shah & Others [2002] 1 E.A. 61that:

“I have asked myself whether I should remit the bill back to the taxing officer with directions that she should determine the instruction fees … I am convinced in my mind that that would be a waste of judicial time in the circumstances of this case. I would also saddle the parties with further unnecessary costs. I think the just course of action in this matter is for this court to exercise its discretion in a reference on taxation to determine the matter with some finality.”

13. The taxation of the advocate-client bill of costs dated 3rd December 2019 at Kshs. 375, 025/= should be set aside and taxed as follows: the uncontested advocate’s total costs of Kshs. 215,210/= + 500/= for filing of the bill of costs and certificate of taxation ADD 14% VAT = Kshs. 245,909/40.

14. The upshot is that the Application is merited and is allowed with costs to the Applicant.

Signed & dated this 10th day of December, 2020, in open court at Nairobi.

......................

H. I. Ong’udi

Judge

With the consent of counsel for both parties the Ruling shall be sent to them electronically by email.

H. I. Ong’udi

Judge