NSHILI KIVU TEA FACTORY LTD (NKTF LTD) Et al v KIGALI LAW CHAMBERS (KLC)

# NSHILI KIVU TEA FACTORY LTD (NKTF LTD) Et al v KIGALI LAW CHAMBERS (KLC)

- Source: Amategeko - Section: Decisions (Judgements) - Date: 2022-06-17 - Case/document no.: RCOMAA 00003/2022/CA - Collection: Court of Appeal

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NSHILI KIVU TEA FACTORY LTD (NKTF LTD) Et al v KIGALI LAW CHAMBERS (KLC) [Rwanda Court of Appeal-RCOMAA 00003/2022/CA(Rukundakuvuga, PJ, Kanyange and Ngagi, J.) 17 June 2022] Commercial Laws–Legal profession–Professional fees–Professional fees is any remuneration based on a contract between an advocate and a client in order to assist the latter in his or her profession as an Advocate– Regulation fixing the scale of fees for advocates, article 40. Commercial Laws–Professional fees–Disputes over professional fees–Claim relating to professional fees–mediation phase conducted in the Bar Association–If the parties in disputes over professional fees fail to reach an agreement by resorting to courts, what were done in the mediation phase in the Bar Association are over and cannot affect the claim filed to court, save to see whether that procedure was followed or not. Regulation fixing the scale of fees for Advocates, Article 40. Commercial Laws–Contract– implicit termination of contract–For contracts which are performed in instalments, if the performance in instalment is due and is not paid after a reasonable time, in which the creditor can wait for the debtor to willingly pay him or her elapses, and the creditor does not follow up with the payment ,it is deemed that the creditor has implicitly known that the debtor has relieved himself or herself from obligations. Commercial Laws– companies–Functioning of companies–Indoor management rule–Contract made by a company representative is opposable to the party to it, irrespective of the mistakes she or he has made in the management of the company. Facts: KIGALI LAW CHAMBERS Ltd (KLC Ltd was used to be a legal counsel of NSHILI KIVU TEA FACTORY Ltd(NKTF Ltd) and NSHILI KIVU PLANTATION Ltd(NKTP) for a monthly professional fees of 200.000Rwf and its office rent. On 01/02/2018, it entered into a new contract for two years with Nicholas WATSON, the President of the Board of Directors of those companies, where they agreed on a monthly payment of 4.000USD and which would be effective from 01/01/2019. The meeting of the new Board of Directors of those companies was held and passed various resolutions, including a resolution of terminating the signed contract with KLC Ltd but without notifying it. Managing Partner of KLC Ltd wrote a letter he has labelled as a final notice asking for the payment. That letter was not replied to and thus making KLC Ltd to file a claim to the Commercial Court where it held that the claim cannot be admitted since KLC Ltd has failed to first start with referring it to the Bar Association. KLC Ltd wrote a letter to the President of the Bar Association requesting him to solve that issue but the parties failed to reach an agreement. It again filed a claim to the Commercial Court and it held that the claim by KIGALI LAW CHAMBERS Ltd has merit by awarding it 96.000USD,1.000.0000Rwf

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for representation fees, 100.000Rwf of procedural costs and 20.000Rwf of court fees. After being dissatisfied with the decision of the judgment, NKTF Ltd and NKTP Ltd appealed to the Commercial High Court and the court held that the judgment does not change. NKTF Ltd and NKTP made an appeal to the Court of Appeal. Held:1. Professional fees is any remuneration based on a contract between an advocate and a client in order to assist the latter in his or her profession as an Advocate. 2. In case the parties in disputes over professional fees fail to reach an agreement by resorting to courts, what were done in the mediation phase in the Bar Association are over and cannot affect the claim filed to court, save to see only whether that procedure was followed or not. 3. Contract made by a company representative is opposable to the party to it, irrespective of the mistakes she or he has made in the management of the company. 4. For contracts which are performed in instalments, if the performance in instalment is due and is not paid after a reasonable time, in which the creditor can wait for the debtor to willingly pay him or her elapses, and the creditor does not follow up with the payment ,it is deemed that the creditor has implicitly known that the debtor has relieved himself or herself from obligations. The appeal has merit in some aspects. Incidental claim lacks merit The decision of the appealed judgment changes only with regards to dollars the appellants should pay the defendant The appellants should jointly pay the defendant eight thousand United States Dollars(8.000USD). Court fees deposited equal to the cost of proceedings. Laws referred to: Law nº 83/2013 of 11/09/2013 establishing the Bar Association in Rwanda and determining its organization and functionin, article 27 and 64 Law nº 17/2018 of 13/04/2018 governing companies, article 142 and 151 Law nº 45/2011 of 25/11/2011governing contracts, article 88 and 89. Regulation nº 01/2014 fixing the scale of fees for advocates, article 2 and 40.

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Authors referred to: JT Pretorius; PA Delpot, Michelle Havenga&Maria Vermaas, South Africa Company Law through cases, JUTA&CO,Ltd,6th ed.1999,p.346. Véronique Wester-Ouisse,``Le préjudice moral des personnes morales: Quand ``la perversion de la cité commence par la fraude des mots``,JCP,G nº 39,24 Septembre 2012. Cases cited: Nº RS/INJUST/RCOM 00004/2020/SC;NEW KIGALI BUSINESS SERVICES Ltd v KASESE DISTILLERS Ltd, decided by Supreme Court on 19/11/2021. Judgment BACKGROUND OF THE CASE [1] KIGALI LAW CHAMBERS Ltd is “Law firm” which provides consultation services and represents the litigants before the courts and it is managed by Counsel Bandora Alfred. In 2014, the Law firm entered into a fixed term contract which was subject to renewal, with Both NSHILI KIVU TEA FACTORY Ltd(NKTF Ltd) and NSHILI KIVU TEA PLANTATION Ltd(NKTP Ltd) of providing legal services and to be its secretary for a fee of 200.000Rwf and rental payment of the office of KIGALI LAW CHAMBERS Ltd. On 01/02/2018, the contract was modified whereby KIGALI LAW CHAMBERS Ltd(KLC Ltd) has signed a contract with Nicholas WATSON, the President of the Board of Directors of NKTF Ltd and NKTP Ltd, at a monthly fee of 4.000USD.On 01/12/2018, due to the fact that Nicholas WATSON was rarely available, he signed another two year contract with KLC Ltd which would be effective from 01/01/2019 to December 2020. [2] On 19/01/2019, it was held a meeting of Board of Directors of NKTF Ltd attended by MURENZI Jean and BANGANINKA Jacqueline but Nicholas WATSON did not, and in this meeting the secretary was Counsel GASHAGAZA Philbert and it passed a resolution suspending ,with immediate effect , the money which Counsel Bandora Alfred was being paid on ground that he was not commissioned by any company administration and ordered that the 4.000USD which was unduly being paid be refunded. On 18/06/2019, KLC Ltd through its managing partner Counsel BANDORA Alfred wrote a final notice letter to the President of the Board of Directors of NKTF Ltd and NKTP Ltd, notifying him or her to honour the terms of the contract signed on 01/12/2018. After getting no reply , KLC Ltd sued NKTF Ltd and NKTP Ltd in the Commercial court claiming that they have breached the contract and requesting to be paid the agreed amount of 96.000USD and various damages.

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[3] In the judgement RCOM 01870/2019/TC, handed down by the Commercial Court on 27/12/2019, basing on article 40 littera 1 of Regulation nº 01/2014 fixing the scale of fees for advocates , the Court dismissed the claim of KLC Ltd on ground that it failed ,in the first place, to refer it to the President of the Bar Association. ON 09/01/2020, KLC Ltd through its managing Partner Counsel BANDORA Alfred wrote a letter to the President of Rwanda Bar Association requesting him or her to settle the dispute it has with NKTF Ltd and NKTP Ltd. On 28/07/2020, the President of Rwanda Bar Association, after examining the disputes between the two sides, wrote to Counsel BANDORA Alfred allowing him to resort to other Authorities. On 05/08/2020, KLC Ltd sued NKTF Ltd and NKTP Ltd in the Commercial Court stating that they failed to honour the contract and requesting them to pay 96.000USD equal to the tasks performed during the 24 months and other various damages because they have assigned the job to others without prior termination of the former contract. [4] The defence lawyers of NKTF Ltd and NKTP Ltd refuted the allegations of KLC Ltd by requesting to not be considered because the contract which is the basis of the allegations was not legally made since the former President of the Board of Directors, Nicholas WATSON took a unilateral decision to increase the contract amount from 200.000frw to 4.000USD without the approval of the Board members and therefore the damages sought by KLC Ltd should not be awarded. [5] The legal team of NKTF Ltd and NKTP Ltd before the hearing in merit, raised an objection of incompetence of the seized court requesting the court to dismiss the claim because it is not of commercial nature and another objection relating to the failure of referring it to the Bar Association within the time limits as per laws. On 8/12/2020, In its interlocutory judgement, the Commercial Court has rejected the objections raised by NKTF Ltd and NKTP Ltd on ground that the contract was made for their business interests and on the fact that the claimed amount is clear and no dispute over its fixation. [6] During the hearing of 29/12/2020, counsels for NKTF Ltd and NKTP Ltd requested the Court to stay the hearing on ground that there is an ongoing criminal action against counsel BANDORA Alfred, Nicholas WATSON and KLC Ltd and they requested also to forcibly intervene them but the commercial court decided to continue the hearing since there was no criminal action instituted before the courts and it found no need for force intervention of Nicholas WATSON and counsel BANDORA Alfred because they could not interfere with the decision of the judgement. [7] The commercial court in its judgement RCOM 01250/2020/TC of 18/02/2021, has held that the claim ok KIGALI LAW Chambers Ltd has merit and that NKTF Ltd and NKTP Ltd breached the contract they made with KLC Ltd and ordered them to pay KLC Ltd 96.000USD, 1.000.000Rwf of advocate fees, 100.000Rwf of court proceedings and 20.000Frw of court fees and ordered no provisional judgement execution.

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[8] NKTF Ltd and NKTP Ltd, after being dissatisfied with the decision, made appeal to the Commercial High Court and requested the court to examine if that claim should have been admitted without firstly being referred to the President of the Bar Association within two months(2), if the commercial court was competent to hear the case, if the commercial court took the decision without regard to the Articles of association of the sued companies, if Nicholas WATSON and counsel BANDORA Alfred should have been forcibly intervened on the first level. KLC Ltd rebutted by saying that the appeal of NKTF Ltd and NKTP Ltd is groundless, it filed an incidental claim requesting the court to examine if provisional execution of 96.000USD should be ordered and it also requested moral damages, procedural costs and lawyer’s fee. [9] On 29/09/2021, the Commercial High Court delivered the judgement RCOMA 00208/2021/HCC and held that the appeal of NKTP Ltd and NKTP Ltd is not valid as well as the incidental appeal of KLC Ltd and that there is no change of the decision of the judgement RCOM 01250/2020/TC rendered by commercial court on 18/02/2021 and it ordered that the court fees be deposited into the State Treasury. [10] NKTF Ltd and NKTP Ltd made an appeal to the instant court, stating that the subject matter of KIGALI LAW CHAMBERS Ltd was about the advocate fees and therefore, it should firstly have referred the claim to the President of the Bar Association within two months(2) starting from when disputes arose as per article 40 of regulation fixing the scale of fees for advocates and that the contract should not have been based on since it was not sanctioned by the meeting of the Board of Directors because it is the governing organ of those companies, their appeal was registered on case nº RCOMAA 00003/2022/CA. [11] The hearing was conducted in public on 04/05/2022, NSHILI KIVU TEA PLANTATION Ltd & NSHILbyI KIVU TEA FACTORY Ltd were represented by counsel NYILIDANDI Assiel and counsel HABINEZA Gasore Gilbert, Whereas KIGALI LAW CHAMBERES Ltd was represented by counsel BANDORA Alfred. [12] Generally, the arguments of both parties in the hearing focused specifically on the admissibility of KLC Ltd.’s claim in the commercial court whereby NKTF Ltd and NKTP Ltd say it should not have been admitted since the procedure, provided in article 40 of regulation fixing the scale of fees for advocates which should firstly be followed in the Bar Association prior to filing a claim of this nature, was not complied with and they focused also on the holding of the Commercial High Court confirming the payment of the amount of money KLC Ltd sued for basing on the contract of 01/12/2018 which was made by an incompetent person. KLC Ltd contended the validity of the allegations by requesting to uphold the decision of the judgement Nº RCOMA 00208/2021/HCC delivered by the Commercial High Court. Both parties requested procedural fees and miscellaneous damages. [13] Basing on those arguments, the Court sees it fit to examine the following issues.

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a. To determine whether the issue between NSHILI KIVU TEA PLANTATION Ltd & NSHILI KIVU TEA FACTORY Ltd and KIGALI LAW CHAMBERS Ltd is subject to the provisions of article 40 of Regulation fixing the scale of fees for advocates. b. To determine whether the Commercial High Court erred in basing on the contract of 01/12/2018. c. Damages and procedural fees.

LEGAL ISSUES ANALYSIS IN THE CASE To determine whether the issue between NSHILI KIVU TEA PLANTATION Ltd & NSHILI KIVU TEA FACTORY Ltd and KIGALI LAW CHAMBERS Ltd is subject to the provisions of article 40 of Regulation fixing the scale of fees for advocates. [14] Counsels for NKTF Ltd and NKTP Ltd criticize the 16th. Paragraph of the appealed judgement by saying that the Commercial High Court has held that the issue of the entire case arose from collaboration because KLC Ltd has said that the work which they were doing was given to other people without prior termination of the contract and that the fact that the claim was brought before the court without regard to the time limits provided for under article 40 of Regulation fixing the scale of fees for advocates does not violate the law, and that the court did this without considering that the subject matter was the breach of contract and the payment of professional fee for a lawyer amounting to 96.000USD. [15] They explain that KLC Ltd did not comply with the time limits for referring the claim to the President of Rwanda Bar Association because the final letter dated 18/06/2019 of KLC Ltd to NKTP Ltd and NKTF Ltd would have been the starting point to count the time limits to refer the issue to the president of Rwanda Bar Association. They elucidate that on 27/12/2019, KLC Ltd filed a claim in the commercial court in the case RCOM 01870/2019/TC and the court dismissed it on ground of not complying with the procedures provided for under article 40 of regulation fixing the scale of fees for advocates, and after this KLC Ltd has referred the issue to the President of Rwanda Bar Association but the mediation was not successful and therefore the President of the Bar Association gave it a green light to recourse to other Authorities. They therefore say that if you take into account of when the final notice letter was delivered and when the issue was referred to the President of Rwanda Bar Association, you will notice that the two months period provided for under article 40 of the above mentioned regulation was not complied with.

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[16] Counsel for KLC Ltd rebutted by saying that the issue between KLC Ltd and NKTP Ltd as well as NKTF Ltd is not covered by article 40 of regulation fixing the scale of fees for advocates because the subject matter is the non-performance and the breach of the contract and not about the professional fees since that was agreed on by both parties in this contract and which the courts have so confirmed. He elucidates that in the 14th paragraph of the judgement RCOM 01250/2020/TC , the commercial court has clearly articulated why the raised objection is not valid is because there were no disputes as to the payment of professional fees amounting to 96.000USD since the subject matter was about the failure to perform and the breach of contract KLC Ltd had with NKTP Ltd and NKTF Ltd as this was upheld by the Commercial High Court in the 16th paragraph of the judgement RCOMA 00208/2021/HCC, whereby the court after making an analysis has held that the subject matter was related to the non-performance of the contract governing the work relationship between the parties to it and which was not terminated. Therefore, article 40 of regulation is under no circumstances related to the case in question because the professional fee claimed is not controversial. [17] He also states that even if KCLC Ltd has referred the issue to the President of the Bar Association, it was to comply with the order of the court in the judgement RCOM 01870/2019/TC despite them not agreeing with that decision since they demonstrated that the subject matter had nothing to do with article 40 of regulation fixing the scale of fees for advocates as was so upheld by the Commercial High Court in the appealed judgement. He further asks the court to examine whether the two months provided for in the regulation fixing the scale of fees for advocates are of public order and whose noncompliance could lead to the inadmissibility of the claim by the court. He concludes by requesting the court to dismiss this objection as the lower courts have so upheld. DETERMINATION OF THE COURT [18] As it was above shown, the issue that the litigants want the court to examine in this ground for appeal is to determine whether the issue between KLC Ltd and NKTF Ltd as well as NKTP Ltd is related to article 40 of regulation fixing the scale of fees for advocates. The Court brings to the notice that the article 40 concerns two things namely: referring the disputes over the professional fees for advocates to the President of the Bar Association and doing it within two months counting from when they arose. a. Concerning the referral to the President of the Bar Association of disputes over the fixing and payment of fees for advocates. [19] The article 64, littera 2 of the Law nº 83/2013 of 11/09/2013 establishing the Bar Association in Rwanda and determining its organization and functioning, stipulates that“ disagreements concerning the payment of fees shall be referred to the President of the Bar Association for mediating the two parties’’

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[20] Article 27, littera 3 of Law nº 83/2013 of 11/09/2013 establishing the Bar Association in Rwanda and determining its organization and functioning, states that“ the Council of the Bar is responsible for putting in place regulations meant for the promotion of advocates ‘profession’.’ [21] Article 40, littera 1 of regulation fixing the scale of fees for advocates explains the manner in which the fees related disputes are solved in the following words: “All disputes relating to the fixing or payment of fess shall be addressed to the President of the Bar, within two months from the day on which the dispute arose. The complaint shall be filed by any interested party, whether at the initiative of the client who disputes all or part of the fees that are claimed, or the advocates who seeks the payment of his or her fee note. The letter of complaint should be accompanied by supporting documents’’. Article 2, littera 1 of the regulation stipulates what a fee for advocate is in this way: “Professional fee is remuneration or compensation due to the Advocate for the material, intellectual and administrative works he/she performs, whether for consultation, examining documents, meetings, proceedings(including waiting and travel time), notices, telephone interviews, drafting correspondence and pleadings, assistance and pleadings, provision of advice, the time of hearings, monitoring of enforcement of judgements and other services, including the administrative handling of the file’’. The article in question, in its littera 2 explains how the permanent agreement between an Advocate and a client should be understood:“ a contract between an Advocate and a client in which the latter undertakes to assign to the Advocate all or part of his/her legal cases and pay him/her, usually on a monthly basis, a fixed and unchanging fee, regardless of the importance of the litigation, or a fixed fee plus a variable amount, depending on the services performed, the results or any other basis agreed by the parties’’. [22] All these provisions, jointly read, make it clear that a professional fee is a cost which a client gives to an advocate in compensation for the different works he/she has performed for the client and that remuneration may be given once or monthly depending on the contract between an Advocate and his/her client, and all disputes related to the fixing or payment should firstly be referred to the President of the Bar Association. In other words, It should be understood that any fee based on a contract between an Advocate and a client in the aim of assisting him/her in his or her profession as an Advocate, is deemed to fall in the scope of this article. [23] The decision of the appealed judgement RCOMA 00208/2021/HCC shows that the matter in this case arises from the collaboration because KLC Ltd states that the works it was doing were assigned to other people without prior termination of the contract and for which it seeks damages, and as the commercial court has upheld it in the judgement RCOM 0187/2019/TC, it is out of the scope of article 40 of Regulation fixing the scale of fees for Advocates, therefore there was no violation of laws in filing the claim to the court without complying with the time limits provided for under article 40 of regulation fixing the scale of fees for Advocates.

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[24] The case file contains the contract signed on 01/12/2018 between KLC Ltd represented by Counsel BANDORA Alfred and Nicholas WATSON , the President of the Board of Directors of NKTP Ltd and NKTF Ltd. The contract in question shows different services it would deliver as an Advocate, including the provision of legal advice, drafting commercial contracts and other necessary documents, representing NKTF Ltd and NKTF Ltd before courts with the latter committing themselves to pay KLC Ltd 4000USD per month. [25] The case file contains also the judgment RCOM 01870/2019/TC handed down by the Commercial court on 27/12/2019, in which KLC Ltd sued NKTF Ltd and NKTP Ltd, the subject matter being:“ Breach of contract and requesting of moral damages of 20.000USD- Ordering the defendant to pay the agreed amount of 96.000USD for 24months- Ordering the defendant to pay damages’’. In that judgement, the Commercial Court basing on article 64, littera 2 and article 40 littera 1 respectively of Law Nº 83/2013 of 11/09/2013 establishing the Bar Association in Rwanda and determining its organization and functioning and Regulation fixing the scale of fees for Advocates, has dismissed the claim on ground that it did not first refer it to the President of the Bar Association. [26] The case file contains a final notice letter dated 18/06/2019 written by Managing director of KLC, counsel BANDORA Alfred to the president of Board of directors of NKTP Ltd and NKTF Ltd notifying the latter to pay what is provided for in the contract they jointly signed on 01/12/2018. The case file contains a letter written on behalf of KLC Ltd by counsel BANDORA Alfred KLC Ltd to the Present of the Bar Association requesting him to address the issue between KLC Ltd and NKTF Ltd &NKTP Ltd relating to the breach of the contract on the part of the those companies. It contains also a letter of 28/07/2020 by the President of the Bar Association giving counsel BANDORA Alfred a green light to resort to other Authorities because the mediation was not successful. [27] The court finds groundless the confirmation by Commercial High Court that the contract made between KLC Ltd and NKTF Ltd & NKTP Ltd is an ordinary, noncontroversial and not in the scope of article article 40, littera 1 of regulation Nº 01/2014 above mentioned because of the following reasons: a. As it was explained in the previous paragraphs, KLC Ltd made contract with NKTP Ltd and NKTF Ltd to provide the latter with the services afore mentioned for a monthly consideration of 4.000USD and on whose payment they failed to agree, as it was particularly explained in the 23rd paragraph of the judgement, any remuneration based on the contract between an advocate and a client for the purpose of assisting the latter in his or her profession as an advocate, that contract in question is based on the remuneration stipulated by this article. b. As it was again previously shown, there is a judgement RCOM 01870/2019/TC delivered on 27/12/2019 by the Commercial Court in which the court has

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confirmed that the claim of KLC Ltd would first be referred to the President of the Bar Association and the judgement in question was not appealed. Therefore, the fact that Counsel BANDORA Alfred on behalf of KLC Ltd opted to comply with the decision of that judgement by referring the matter to the President of the Bar Association on 09/01/2020 and by being authorised on 28/07/2020 by the President to resort to other Authorities since no agreement was reached, it is clear that KLC Ltd has agreed that that procedure has to first be followed before going to court as provided for under article 40, littera 1 of Regulation Nº 01/2014 cited above. [28] Because of all those reasons, the court finds no contention as to whether the matter over fees for advocates would necessarily first be referred to the President of the Bar Association before going to court. It instead finds that the issue to be analysed is determining whether KLC Ltd in referring the matter to the President of the Bar Association after two months (2) was a reason of its inadmissibility in the Court. b. To determine whether KLC Ltd in referring to the president of the Bar Association the disputes relating to the fees for Advocates after two months(2) is a reason of inadmissibility of the claim before the court. [29] Article 40, littera 1 of Regulation Nº 01/2014 above reiterated provides the following: [30] “ All disputes relating to the fixing or payment of fess shall be addressed to the President of the Bar, within two months from the day on which the dispute arose. The complaint shall be filed by any interested party, whether at the initiative of the client who disputes all or part of the fees that are claimed, or the advocates who seeks the payment of his or her fee note. The letter of complaint should be accompanied by supporting documents’’. The littera 2 of that article states that“ The President of the Bar shall receive complaints and directs them to the commission of the Bar responsible for fees issues which ,in turn, shall summon the parties to a hearing session and submit its report to the President of the Bar. The latter shall take a decision within two (2)months from the date of its referral by the President of the Bar’’. Whereas its littera 8 adds that“ Once the decision has been made and signed by the President of the Bar, it shall be notified to the parties who have each, for a period of one(1)month to lodge an appeal(principal or incidental) with the competent court’’. [31] As it is obvious in the litteras mentioned in the previous paragraph, Article 40 of this Regulation provides two phases of settling disputes relating to fees for Advocates. It means through mediation phase before the President of the Bar and the phase of going to court. Those two phases must follow the order provided for under this article but each has its specific rules, formalities and prescribed time limits to comply with. It is against this background that referring the issue to the President of the Bar is done within two(2) months, whereas it is one(1) month to sue in court. The phase of suing in court happens when the mediation has failed and which ends

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upon the notification to the parties in dispute by the President of the Bar of the decision taken. This means that what was done in that phase is no longer effective and could not affect the case already in court save to see only if that procedure was followed or not. The court is no longer preoccupied with the manner in which it was done except when that is the subject matter. This means that the party who has reasons of not agreeing to that procedure due the noncompliance with the time limits, he/she must refuse to be engaged in it ,thus making it impossible. Once he/ she consented to it, it is no longer possible for him/her as the defendant to object as to the way it is was done. [32] The case file contains the final notice letter by Counsel BANDORA Alfred on behalf of KLC Ltd to the president of the Board of NKTP Ltd &NKTF Ltd notifying him to honour the contract made between them on 01/12/2018. The court bailiff has shown that he or she has notified Nicholas WATSON of this letter via email. [33] The file of the case contains a letter dated 09/01/2020, written by counsel BANDORA Alfred on behalf of KLC Ltd to the President of the Bar requesting the latter to settle the matter KLC Ltd has with NKTF Ltd &NKTP Ltd relating to the failure of those companies to honour the contract and to pay the fees for Advocates amounting to 96.000USD as was agreed on in the contract. [34] The case file contains a letter of 28/07/2020 by the President of the Bar to counsel BANDORA Alfred authorizing him to recourse to other authorities. In this letter, the President of the Bar, basing on the replies of the parties to the explanations on this issue they were requested through a letter and on the failure to reach an agreement in the mediation session of 26/05/2020 which they were summoned to attend, shows that he/she gives them a green light to appeal to other authorities to solve their issue. [35] The court finds that since the two parties have unquestionably consented to be mediated by the President of the Bar and since NKTF Ltd & NKTP Ltd did not object as to the compliance of time limits at that level thereby attending the mediation session to its completion without claiming that the mediation was illegally conducted, they cannot, under no circumstances, say that the mediation session before the Bar did not comply with the time limits prescribed by article 40 of regulation cited above. [36] Because of all those reasons aforementioned , the court finds unfounded the allegations by NKTF Ltd and NKTP Ltd that the claim of KLC Ltd should not have been admitted because of the noncompliance with the two months period of referring the issue to the President of the Bar, therefore this ground of the appeal is baseless. To determine whether the Commercial High Court erred in basing on the contract of 01/12/2018

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[37] The legal team of NKTP Ltd and NKTF Ltd were not satisfied with the decision of the Commercial High Court on the twelfth page of the 27th paragraph of the appealed judgement where the court has upheld the decision of the commercial court which confirmed that KLC Ltd had no obligations of knowing if the terms of the contract of 01/12/2018 were first sanctioned by the Board members, and that what matters most is that the President of the Board of Directors of those two companies signed it. They say that it is illegal, inconsistent with the then laws that were governing companies in Rwanda and the Articles of Association of those companies since they were managed by the Board of Directors (It is contrary to article 145 and 147 of Law governing companies, article 15 of their Articles of association) which was competent to first examine all the resolutions concerning those companies, but nevertheless , no meeting of shareholders or of Board members was held to pass the resolution thereof. They say that Nicholas WATSON was not competent to enter into contract with KLC Ltd without the approval by the Board meeting of those two companies and the fact that he signed as the President of the Board, he was not automatically entitled to do what is not approved by the Board, but he did that with the purpose of plunging those companies into loss. [38] They continue to say that for counsel of KLC Ltd to say that they acknowledge the contract of 01/02/2018, it is not true and they do not even own that of 01/12/2018 which is the subject matter in the instant case and that the meeting of the Board of Directors of those two companies which took place on 19/09/2019 has established new Bord of Directors, Nicholas WATSON is no longer the President of the Board of Directors and the meeting of 14/03/2017 is the last one he chaired and which KLC Ltd lastly attended. [39] Counsel for KLC Ltd says that Nicholas WATSON signed the contract as the President of the Board of Directors of NKTF Ltd and NKTP Ltd, he was competent to sign it since the contract could not bear the signatures of all members of the Board of Directors. He also says that there is nothing that shows that the meeting of the Bord of Directors was not held and that KLC Ltd could not know whether the meeting of the Board of Directors of those two companies was held or not because only the shareholders could know. He explains that the subject matter was the contract based payment made with and signed by the President of the Board of Directors of the two companies who was competent to do so and KNTP Ltd as well as NKTF Ltd do not object to the contract and if it is not the case they would challenge it before the court instead of waiting to be sued for the breach thereof. He also says that the contract of 01/02/2018 which was signed by Nicholas WATSON as the President of the Board of Directors, stipulates that KLC Ltd should be given 4.000USD per month and which was paid , he does not understand why they own that contract and deny that of 01/12/2018 which is challenged in this case despite being both signed by Nicholas WATSON as the President of the Board of Directors of those two companies. [40] He continues to say that the contract of 01/12/2018 has no defects even though the signatory was not in Rwanda, he made an affidavit bearing a signature of their country’s notary

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and sent it via email due the COVID 19 Pandemic and old age which prevented him from moving. He also says that the certificate of registration of BARCO Trading Ltd , a foreign company ,shows that BARCO Trading Ltd, which holds 92% of shares in NKTP Ltd and NKTF Ltd, belongs to Nicholas WATSON and his children and if you relate this to what is provided by the Law governing companies that was in force in 2018, you realize that the owner of BARCO Trading Ltd was fully entitled to sign on behalf of the Board of Directors since he was the majority shareholder. He states also that Nicholas WATSON is still the President of the Board of Directors and that he attended another meeting of 11/06/2018 and which bears the Notary signature. [41] When asked if KLC Ltd was paid 4.000USD in compensation of the service it delivers or as a retainer, he responded that KLC Ltd had to be paid 4.000USD per month as it is provided for under article 2 of the contract dated 01/12/2018 and that sometimes the work was much and sometimes not much and that the work that KLC Ltd had to do was provided in that contract. As to whether it really performed the work provided in that contract , he said that they did it, when asked the person they reported to from 01/01/2019, he responded that they continue to do it the same way, that they used to instruct him what to do and he did it, that they used to go to Nshili to see if those companies had no problems since the president of the Board has already left and that the report was used to be sent online. He concludes by requesting the court to dismiss this ground of appeal and to order NKTF Ltd and NKTP to promptly pay KLC Ltd. DETERMINATION OF THE COURT [42] The court finds that the disputes in question are related to whether the contract on which KLC Ltd bases in claiming the payment was signed by a competent person as well as determining whether KLC ltd must be paid the money provided in that contract. To determine whether the contract on which KLC Ltd bases in claiming the payment was signed by a competent person. [43] NKTF Ltd and NKTP Ltd say that Nicholas WATSON who signed the contract as the President of the Board of Directors did that without being authorized since there was no meeting of Board of Directors that sanctioned him, Whereas KLC Ltd says that it is not the first time Nicholas WATSON signs the same contracts for it and that the contracts were already paid. In resolving these disputes, the court will scrutinize the routine of taking decisions relating to signing of the contracts of this kind in NKTF Ltd and NKTP Ltd. [44] Article 151, littera 2 of Law Nº 17/2018 of 13/04/2018 governing companies which was in force when the contract was signed, provides as follows: “Members of the Board of Directors must act in a collegial administration and must be of a sufficient number provided for in incorporation documents of the company for a meeting to be attained’’.

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[45] [44] Article 142, littera 1 of Law Nº 17/2018 of 13/04/2018 cited above provides the following: “The business and affairs of a company are managed by or under the direction of the Board of Directors of the company which has all powers necessary for the management except where the company’s incorporation documents or this Law expressly reserve those powers to the shareholders or any other person’’. [46] Article 15 of Article of Association of NKTF Ltd and NKTP Ltd provides that the management of a company is run by the Board of Directors, that the decisions of the Board of Directors are legally taken when the required quorum of the people who attend the meeting is reached and when the decision has got the majority votes except when there are other provisions that provide otherwise at that time. [47] When these provisions are jointly read, they imply that the Board of Directors is competent to make contract with other people. However, the law is not clear as to what happens if the President of Board of Directors takes a decision not approved by the Board of Directors .This however has got a solution which is almost acceptable in the principles governing the management of companies. Generally, the decision of the President of the Board of Directors is deemed to have been legally taken by the Board of Directors vis -a -vis the persons who contracted with that company1.In other words, the company cannot decline to pay the persons who contracted with it on ground that its President has acted illegally. The President of the Board of Directors will instead ,if the issue like this arises, personally be liable for the consequences caused in case it is proven that the latter has overstepped his/her competence. [48] The case file contains the contract of 01/12/2018 made between The President of Board of Directors ,Nicholas WATSON on behalf of NKTF Ltd & NKTP Ltd and Counsel BANDORA Alfred on behalf of KLC Ltd. In the contract, those two companies agreed with KLC Ltd that the latter would provide them with legal services as per article one of that contract for a monthly payment of 4.000USD as it is stipulated by its article two, and that contract had to be effective from 01/01/2019 and it would last for two years renewable, meaning that it would end on 31/12/20202. 1 This is based on the principle called “Indoor management rule’’ This rule allows persons dealing with a company, namely through the managing director, to assume that all matters concerning internal management and procedure have been complied with. See JT Pretorius; PA Delport, Michelle Havenga &Maria Vermaas, South African Company Law through Cases, JUTA &CO, Ltd; 6th ed.1999, p 346. 2 Article 1: The duties of the Law firm shall be to provide the client with legal counsel, draft business agreements and prepare such other legal documents as the situation may necessitate, represent the client in the courts of law in Rwanda and perform such other judicial duties where the client has interests. Art. 2: The Law Firm shall be entitled to a consolidated payment of $ 4000 US (Four Thousand American Dollars) as monthly retainer fees for the services as stipulated in the Article 1 of this contract. Art. 3: This agreement commences on 1st January 2019 and is valid for a period of two years (24 months) renewable upon agreement writing by the client and the Law Firm.

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[49] The casefile contains the minute of the meeting of NKTF Ltd and NKTP Ltd of 14/03/2017 which shows that Nicholas WATSON is elected to be the President of the Board of Directors for a term of twelve months(12). [50] The case file contains a minute of the meeting of NKTF Ltd of 19/01/2019.That minute shows that the Board of Directors is composed of MURENZI Jean, BANGANINKA Jacqueline and Nicholas WATSON(who did not attend). Those who attended the meeting have elected MURENZI Jean to chair it and GASHAGAZA Philbert as its secretary. The meeting took a decision of immediately suspending the money that was being paid to counsel BANDORA Alfred since he was not commissioned by any company administration and that 4.000USD he was being unduly paid be refunded. [51] The court finds that the legal counsels for NKTF Ltd and KTP Ltd which had contract with KLC Ltd, do not deny that Nicholas WATSON was the president of the Board of Directors of those two companies by the time the contract was made, but they rather say that the contract made between Nicholas WATSON and KLC Ltd had to be approved by the Board of Directors because it is endowed with the power of the management of the company and due to the fact that it has not sanctioned it, therefore the contract of 01/12/2018 should be invalidated. [52] The fact that the legal counsel for NKTF Ltd and NKTP Ltd agree that on 01/12/2018 when the contract was made Nicholas WATSON was the President of the Board of Directors of NKTF Ltd and NKTP Ltd, the court finds that the latter cannot deny the contract on ground that it was signed by its President without being authorized by the Board of Directors because as it was explained in the 47 paragraph, the acts of the President of the Board of Directors are deemed to be the acts of the company vis-a- vis other people. Furthermore, the fact that there is another contract of 01/02/2018 that Nicholas WATSON, on behalf of NKTF Ltd and NKTP Ltd , made with KLC Ltd that the latter had to be paid 4.000USD per month and which was put into effect and which he was not even sued for by other Board members, the court finds it clear that they agree that Nicholas WATSON, as the President of the Board of Directors of those two companies, was entitled to make contract on their behalf. Therefore, this is not a defect that results in the invalidation of the contract of 01/12/2018. [53] For counsels of NKTF Ltd and NKTP Ltd to say that Nicholas WATSON was not competent to make contract with KLC Ltd without the approval of the Board of Directors of those two companies, that the contract of 01/02/2018 was made inconsistently with the provisions of article 145 and 147 of Law Nº 17/2018 of 13/04/2018 governing companies on ground that Nicholas WATSON has exercised his powers to sign it without the approval of the meeting of the Board of Directors, the court finds it baseless because those provisions do not prohibit the President of the Board f Directors from taking decisions on behalf of the company, rather, as explained above, those articles are not of any help as to the settlement of the disputes in question.

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To determine whether KLC Ltd has to be paid all the money provided in the contract of 01/12/2018 [54] NKTF Ltd and NKTP Ltd say that the Commercial High Court should not have based on the contract of 01/2/2018 in ordering them to pay KLC ltd 96.000USD because they do not own that contract on ground that it was signed by an incompetent person, that nothing was done basing on it, because it would last for two years and be effective from 01/01/2019 but it was later on suspended by meeting of the Board of Directors convened on 19/01/2019. [55] KLC Ltd says that the Commercial High Court has made no mistake by basing on the contract of 01/12/2018 to order NKTF Ltd and NKTP Ltd to pay it 96.000USD because Nicholas WATSON signed it when he was still the President of the Board of Directors and was competent to sign that contract. As to the fact that KLC Ltd was doing nothing, it says that it is groundless because it continued to work as usual and report online. As to the cancellation of the contract, he says that it was cancelled by unauthorized persons and that he was not notified. [56] In resolving these disputes, the court will examine whether the contract of 01/12/2018 should not have continued to be respected despite its termination by the Bord of Directors on 19/01/2019 without notifying KLC Ltd. [57] Article 89 of Law Nº 45/2011 of 25/11/2011 governing contract provides that“ If the debtor repudiates the obligations, such repudiation gives the other party the right to claim for damages for all remaining obligations….however, Article 91 littera 1 adds that“a party’s obligation to pay damages on repudiation of the obligation is extinguished if it appears that the aggrieved party does not perform his or her own obligations’’. [58] When these provisions are read together, they imply that if the contract is breached and the other party does not perform his or obligations, the breaching party has the obligations to pay the other party basing on what has been already performed. This is stressed by the principle found in the article 84 which provides that“ One party shall not require the other party his or her obligations unless that party has performed his or her main obligations in case mutual obligations’’ also Article 82 provides that“ …..Where only party of obligations is due at one time, the other party can perform a part that is comparable to performed obligations, unless the circumstances indicate otherwise’’. [59] Article 88 of Law mentioned above resolves the disputes as to knowing the time of the repudiation of the obligations. It reads as follows: “ Repudiation of obligations may be made through the following: i. A statement by the debtor to the creditor indicating that the debtor will not perform the obligations. ii. A voluntary act indicating that the debtor will not perform the obligations.

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This means that the party who repudiates the obligations may do it explicitly by notifying the other party through writing or do it implicitly through an act indicating that he or she will not perform his or her obligations, like refusing to pay when the debt is due. In other words, when the payment is due and the creditor does not get paid, he or she has obligations to ask why in order to know if there was no change as to the obligations to pay, but generally if the payment is due and the creditor is not paid it is deemed that the latter has known that the debtor has relieved himself or herself from obligations. [60] Briefly, basing on the analysis of the articles mentioned in the previous paragraphs, regarding the contracts that are performed in instalments, when the payment in instalment is due and not paid and the creditor fails to follow up, he or she is deemed to have known that the debtor has relieved himself or herself from obligations, consequently the creditor claims for the payment of the works so far performed. [61] As it was shown, the contract of 01/12/2018 KLC Ltd made with NKTP Ltd and NKTF Ltd had to be effective from 01/01/2019. That contract shows that KLC Ltd had to be paid 4.000USD per month for a period of two(2) years. It means that the contract had to be performed in instalments, each instalment equals to one month and to pay for the works done in that very month. [62] On 19/01/2019, the new administration of NKTP Ltd and NKTF Ltd being represented by Mr. MURENZI Jean held a meeting of the Board of Directors and took various decisions including the one of terminating the contract mentioned in the previous paragraph which KLC Ltd made with NKTP Ltd and NKTF Ltd. This decision was not expressly notified to KLC Ltd, consequently and contrary to the provision of the contract, it was not paid for the last month. However KLC Ltd did not claim for the payment agreed on in the contract until 18/06/2019 after one month has already elapsed. It means that KLC Ltd has known that NKTP Ltd and NKTF Ltd implicitly relieved themselves from obligations on 31/01/2019 after realizing that one month has elapsed without being paid. As for KLC Ltd to have early known that prior to claiming for the payment is substantiated by the final notice letter to the president of the Board of Directors of NKTP Ltd and NKTF Ltd notifying him to pay what is provided for in the contract which was signed on 01/12/2018, issuing a notice letter means that KLC Ltd has before attempted other ordinary means. [63] Another obvious point made by NKTP Ltd and NKTF Ltd and which was not contradicted by KLC Ltd is that there is no evidence, since the termination of the contract, that KLC Ltd continued to work. [64] The court, basing on the given explanations and on the interpretation of the laws especially in the paragraph 61 and 62, finds that after terminating the contract, NKTP Ltd and NKTF Ltd had relieved themselves from their obligations but because they did not expressly notify KLC Ltd, it must be construed that KLC Ltd implicitly knew it when the entire month has

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elapsed without being paid. The court finds however that the normal practice deriving from Rwandan culture, it is possible ,when the payment is due and not paid, that the creditor waits for a short time to pass without claiming the payment in order to let the debtor to willingly pay. This however cannot go beyond the next month. It is against that background that the court finds that KLC Ltd should be paid for the month of January 2019 and February 2019 on ground that it is the exact time it should have known the termination of its contract with NKTP Ltd and NKTF Ltd, this is equals to four thousands United States Dollars per month for a period of twelve months, totally it is eight thousands United States Dollars(4.000USD x 2) =8.000USD). B. INCIDENTAL APPEAL OF KLC Ltd 3. To determine whether KLC Ltd had to be awarded damages. [65] The representatives of KLC Ltd requested the court to order NKTP Ltd and NKTF Ltd to pay KLC Ltd moral damages amounting to 20.000USD arising from nepotism based injustice since it worked well for them for many years thereby achieving a lot, but the person called MURENZI Jean who came later calling himself the chairman took away the job from it and give it to his brother in law, and this is the crux of the claim. [66] The defence attorneys of NKTP Ltd and NKTF Ltd said that the damages sought by KLC Ltd should not be considered because the companies they represent demonstrates that the contract KLC Ltd based on , is inconsistent with their Articles of association, as well as article 54 of Law Nº 13 bis/2014 of 21/05/2014 governing the Office of Notary, it provides the manner in which the deeds notarized by a foreign notary have probative value in Rwanda but the procedure which the contract of 01/12/2018 should go through in order to have a probative value was not followed. DETERMINATION OF THE COURT [67] The case file shows that KLC Ltd requested damages amounting to 20.000USD from the first level in the Commercial Court but that court found them baseless since the contract between them was a fixed term contract and to say that they lose hope of working with them, this cannot be awarded damages. It again requested damages in the Commercial High Court but the court refused to award damages on ground that KLC Ltd as a company cannot suffer morally. [68] Regarding the fact that a company or an entity cannot be awarded moral damages because they are not human beings per se, that precedent was overruled by the Supreme Court in the judgement Nº RS/INJUST/RCOM0004/2020/SC delivered on 19/11/2021, NEW KIGALI BUSINESS SERVICES Ltd v KASESE DISTILLERS Ltd, where in its paragraph 48, the Court said as follows: “The court finds that the precedent previously based on by the Supreme Court in deciding the judgement of Bralirwa Ltd v Kazigaba Andre´et al, where it cited scholarly

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writings, and which was reiterated by the courts of other countries, and even by modern scholarly writings on civil laws which say that the precedent is outdated. Among them, there is Véronique Wester Ouisse who says that no one should disagree that companies may request moral damages because , as it is for the natural persons , their dignity, their public trust and reputation may interfere and affect their going concern, therefore the problem should not be viewed businesswise. However, she explains that the company that wishes to request damages have to firstly establish the harm suffered’’3 [69] The Supreme Court expounded as to the fact that companies or entities can be awarded damages, that it has already become the principle in tort liability Laws. However, those moral damages are aimed at liability based on how the public may lose the trust in the company or entity(reputation) or based on restoring the dignity of the company or entity because its name was brought into disrepute/held in dishonour(honour). This means that the company or entity cannot claim for moral damages on ground that it was agonized(distress), was physically inflicted or mentally hurt(Physical or mental hurt) or humiliated(humiliation) because this is a peculiarity of natural persons. Furthermore, a company cannot be awarded damages without first establishing the harm it suffered. The court also explains that the moral damages that can be awarded to a company or entity are aimed at restoring the lost dignity of a company or entity rather than the loss they suffered.4 [70] [69] Basing on the explanations in the previous paragraphs, the court finds baseless 20.000USD of moral damages sought by KLC Ltd since it did not lose public trust or dignity because its name was not dishonoured(honour), to the extent that it can be awarded moral damages, therefore it should not be awarded moral damages in this case. 4. To determine whether the procedural costs sought by both parties are valid. [71] Counsels for NKTP Ltd and NKTF Ltd basing on article 34 of Regulation Nº 01/2014 fixing the scale of fees for Advocates, request the Court of Appeal to order KLC Ltd to pay NKTF Ltd and NKTP Ltd 5.000.000Rwf of Advocate fees and 1.000.000Rwf of procedural fees which were early requested from the first level up to the appeal level, and 2.000.000Rwf of lawyer’s fees at this level. They also say that the procedural fees and Advocate fees requested by KLC Ltd in the incidental appeal are groundless and should not be awarded. 3“Au vrai, nul ne disconvient qu’une société commerciale puisse subir un dommage moral, au sens d’une atteinte à la personnalité sociale qu’elle a pu se forger aux yeux du public: la considération, la réputation voire l’honneur ne sont pas propres aux personnes physiques. Mais une société ne devrait pas pouvoir en tirer réparation que si un préjudice en résulte. Or, pour admettre qu’elle puisse subir un préjudice moral, il faudrait reconnaitre que son image, son crédit, sa réputation lui servent à autre chose qu’à développer ’activité commerciale qui borne son objet social et donc sa personnalité juridique.” ; Véronique Wester-Ouisse, “Le préjudice moral des personnes morales : quand "la perversion de la cité commence par la fraude des mots", JCP, G n° 39,24 Septembre 2012. 4 See Paragraph 50 and 51 of Judgement Nº RS/INJUST/RCOM 00004/2020/SC decided by Supreme Court on 19/11/2021.

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[72] The representative of KLC Ltd says that there is a principle in laws that says that no one should base on his or her mistakes to make profits, and because of that reason NKTP Ltd and NKTF Ltd should not be awarded damages since they are the root cause of these cases in refusing to honour the contract 01/12/2018 signed by the chairman who also signed the previous contract. [73] He/she also says, basing on article 152 of Law Nº 22/2018 of 29/04/2018 relating to civil, commercial, labour and administrative procedure, that they request the Court of Appeal to order NKTF Ltd and NKTP Ltd to jointly give 12.000.000Rwf of advocate fees back to KLC Ltd because it was represented by three lawyers from the commercial court and that their fees should be awarded irrespective of their number, that is to say that it is 4.000.000Rwf for each court level and 5.000.000Rwf of procedural fees. DETERMINATION OF THE COURT [74] Regarding the advocate and procedural fees requested by both parties in this case, the court finds that no party should be awarded damages because each one has lost and won in some aspects. III. DECISION OF THE COURT [75] Holds that the appeal of NSHILI KIVU TEA FACTORY Ltd and NSHILI KIVU TEA PLANTATION Ltd has merit on some aspects. [76] Holds that the incidental appeal of KIGALI LAW CHAMBERS has no merit. [77] Holds that the decision of the judgement RCOMA 00208/2021/HCC decided by the Commercial High Court on 29/09/2021, changes only in relation to the Dollars NSHILI KIVU TEA FACTORY Ltd and NSHILI KIVU TEA PLANTATION Ltd should pay KIGALI LAW CHAMBERS. [78] Orders NSHILI KIVU TEA FACTORY Ltd and NSHILI KIVU TEA PLANTATION Ltd to jointly pay KIGALI LAW CHAMBERS eight thousands United States Dollars (8.000USD ). [79] Decides that the court fees equal to the costs of the trial.