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: 2022-02-17 - 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 law – Advocate's profession–Professional fees – Professional fee is any remuneration based on a contract between an advocate and a client to assist the latter in his or her profession as an Advocate – Regulation fixing the scale of fees for advocates, article 40. Commercial law – Professional fees – Disputes over professional fees – Claim relating to professional fees – Mediation phase is conducted in the Bar Association – If the parties in disputes over professional fee fail to reach an agreement by resorting to courts, what was done in the mediation phase in the Bar Association is considered as null and cannot affect the claim filed to the court, except to ensure whether that procedure was followed or not. Regulation fixing the scale of fees for Advocates, article 40. Commercial law – Contract – Implicit termination of the contract – For contracts which are performed in installments, if the performance in installment is due and is not paid after a reasonable time, in which the creditor can wait for the debtor to voluntarily pay 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 law – Companies–Functioning of companies – Indoor management rule – Contract made by a company representative is binding to the contracting party, irrespective of the mistakes she or he has made in the management of the company. Facts: KIGALI LAW CHAMBERS Ltd (KLC Ltd was hired as legal counsel of NSHILI KIVU TEA FACTORY Ltd (NKTF Ltd) and NSHILI KIVU PLANTATION Ltd (NKTP) for a monthly professional fee of 200,000 Frw and they paid the rental fee for the office of KLC Ltd. On 01/02/2018, it entered into a new contract for two years with Nicholas WATSON who was the Chairperson of the Board of Directors; they agreed that he would be paid 4,000 USD per month within a period of two years from 01/01/2019. The meeting of the new Board of Directors of those companies took various decisions, including the suspension of the contract signed by KLC Ltd but it did not notify it of the contract suspension. The Managing Director of KLC Ltd wrote a letter he has considered as a final notice requesting the payment. No reply was provided to that letter, thus KLC Ltd filed a claim to the Commercial Court which held that the claim is not admissible because KLC Ltd did not firstly seize the Bar Association. KLC Ltd wrote a letter to the President of the Bar Association requesting him to settle the issue but it failed to reach the parties' agreement. It again filed a claim to the Commercial Court which held that the claim lodged by KIGALI LAW CHAMBERS Ltd has merit, it awarded it 96,000 USD, 1,000,0000 Frw for representation fee, 100,000 Frw of procedural fee and 20,000 Frw of court fee. NKTF Ltd and NKTP Ltd were dissatisfied with the court ruling and appealed to the Commercial High Court and the Court held that the appealed judgment is sustained. NKTF Ltd and NKTP appealed to the Court of Appeal.

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Held:1. Professional fee is any remuneration based on a contract between an advocate and a client to assist the latter in his or her profession as an Advocate. 2. In case the parties to the disputes over professional fees fail to reach an agreement by resorting to courts, what was done in the mediation phase in the Bar Association is considered null and cannot affect the claim filed to the court, except ensure whether that procedure was followed or not. 3. Contract made by a company representative is binding to the contracting party, irrespective of the mistakes she or he has made in the management of the company. 4. For contracts that are performed in installments, if the performance in installments is due and is not paid after a reasonable time, in which the creditor can wait for the debtor to voluntarily pay 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 on some issues. The cross appeal lacks merit. The ruling of the appealed judgment changes only with regard to the dollars to be paid by the appellants to the respondent. The appellants should jointly pay the respondent eight thousand United States Dollars (8.000 USD). The deposited court fees cover the expenses of the judicial proceedings. Statutes and statutory referred to: Law nº 83/2013 of 11/09/2013 establishing the Bar Association in Rwanda and determining its organization and functioning, articles 27 and 64 Law nº 17/2018 of 13/04/2018 governing companies, articles 142 and 151 Law nº 45/2011 of 25/11/2011 governing contracts, articles 88 and 89. Regulation nº 01/2014 fixing the scale of fees for advocates, articles 2 and 40. Cases referred to: Judgment Nº RS/INJUST/RCOM 00004/2020/SC; NEW KIGALI BUSINESS SERVICES Ltd v KASESE DISTILLERS Ltd, decided by the Supreme Court on 19/11/2021. 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. Judgment I. BACKGROUND OF THE CASE

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KIGALI LAW CHAMBERS Ltd is a law firm that counsels and represents the litigants before the courts and it is managed by Counsel Bandora Alfred. In 2014, it entered into a fixed term contract which was subject to renewal, with NSHILI KIVU TEA FACTORY Ltd (NKTF Ltd) and NSHILI KIVU TEA PLANTATION Ltd (NKTP Ltd) providing legal aid and being its secretary for a fee of 200,000 Frw as well as paying the rental fee for the office of KIGALI LAW CHAMBERS Ltd. On 01/02/2018, the contract was modified, KIGALI LAW CHAMBERS Ltd (KLC Ltd) signed a contract with Nicholas WATSON, the Chairperson of the Board of Directors of NKTF Ltd and NKTP Ltd, at a monthly fee of 4,000 USD. 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.

On 19/01/2019, it was held a meeting of the Board of Directors of NKTF Ltd attended by MURENZI Jean and BANGANINKA Jacqueline but Nicholas WATSON was absent, the secretary was Counsel GASHAGAZA Philbert and it decided on the immediate suspension of the payment made to Counsel Bandora Alfred on ground that he was not appointed by any company organ and on the recovery of 4,000 USD unduly paid to him. On 18/06/2019, KLC Ltd represented by its Managing Director Counsel BANDORA Alfred wrote a letter to the President of the Board of Directors of NKTF Ltd and NKTP Ltd, notifying him that he gave him the final notice for the payment provided under 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 96.000 USD and various damages.

In the judgment RCOM 01870/2019/TC, rendered by the Commercial Court on 27/12/2019, basing on article 40, paragraph 1 of Regulation nº 01/2014 fixing the scale of fees for advocates, the Court dismissed the claim of KLC Ltd on the ground that it did not firstly refer it to the President of the Bar Association. On 09/01/2020, KLC Ltd through its Managing Director Counsel BANDORA Alfred wrote a letter to the President of the Rwanda Bar Association requesting him to settle the dispute it has with NKTF Ltd and NKTP Ltd. On 28/07/2020, after examining the allegations of both parties, the President of the Bar Association wrote a letter to Counsel BANDORA Alfred allowing him to resort to other organs. On 05/08/2020, KLC Ltd sued NKTF Ltd and NKTP Ltd in the Commercial Court stating that they failed to respect the contract because the works to be performed by KLC Ltd were assigned to others without the termination of the contract they concluded, it claimed 96,000 USD covering the tasks performed during the 24 months as indicated in the contract they concluded, it requested to be granted various damages.

The legal counsel to NKTF Ltd and NKTP Ltd in their defence on the case issues stated that the request of KLC Ltd cannot be considered as based because the contract on which it relies was not legally made since the former President of the Board of Directors, Nicholas WATSON took a unilateral decision to increase the professional fee from 200,000 Frw to 4,000 USD without the approval of the Board of Directors members and therefore KLC Ltd does not deserve the claimed damages.

Before the hearing of the case on the merits, the legal counsel to NKTF Ltd and NKTP Ltd raised the objection on the claim of inadmissibility based on the lack of the jurisdiction of the Commercial Court to hear the case because it is not commercial and another objection related to the fact that the application was not addressed to the President of the Bar Association within the time limits as per the laws. On 08/12/2020, in the interlocutory judgment, the Commercial Court

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ruled that the objections raised by NKTF Ltd and NKTP Ltd are baseless on the ground that the contract was made for the business interests of NKTF Ltd and NKTP Ltd and the amount of money to be paid is justified so that there is no dispute over its determination.

During the hearing of 29/12/2020, the legal counsel to NKTF Ltd and NKTP Ltd requested the Court to suspend the hearing on the ground that there is an ongoing criminal action against Counsel Bandora Alfred, Nicholas WATSON, and KLC Ltd and they also requested for the intervention of Nicholas WATSON, the former Chairperson of the Board of Directors of NKTF Ltd and NKTP Ltd together with Counsel Bandora Alfred, the Commercial Court decided for the continuation of the case hearing, because there was no criminal action before the Court, it found that Nicholas WATSON and Counsel BANDORA Alfred should not intervene because they could not interfere with the judgment ruling.

In the judgment RCOM 01250/2020/TC of 18/02/2021 rendered by the Commercial Court on 18/02/2021, the same Court held that the claim filed by KIGALI LAW CHAMBERS Ltd has merit and that NKTF Ltd and NKTP Ltd breached the contract they concluded with KLC Ltd and ordered them to pay to KLC Ltd 96,000 USD, 1,000,000 Frw of advocate fee, 100,000 Frw of procedural fee and 20,000 Frw of court fee and ordered that there will be no provisional judgment execution.

NKTF Ltd and NKTP Ltd were dissatisfied with the ruling of the judgment and lodged an appeal to the Commercial High Court and requested the Court to examine whether that claim should have been admitted without first referring to the President of the Bar Association within two months (2), whether the Commercial Court had the jurisdiction to hear the case, whether the Commercial Court ruled regardless of the Articles of association of the sued companies, and whether Nicholas WATSON and Counsel BANDORA Alfred should intervene on the first level. KLC Ltd in its defence stated that the appeal of NKTF Ltd and NKTP Ltd is groundless, it filed a cross appeal requesting the Court to examine whether the provisional judgment execution on 96,000 USD should be ordered and it also requested moral damages, procedural fee, and lawyer's fee.

On 29/09/2021, the Commercial High Court delivered the judgment RCOMA 00208/2021/HCC and held that the appeal of NKTP Ltd and NKTP Ltd lacks merit as well as the cross appeal of KLC Ltd and that the judgment RCOM 01250/2020/TC rendered by the Commercial Court on 18/02/2021 is sustained and it ordered that the court fee is borne to the Public Treasury.

NKTF Ltd and NKTP Ltd appealed to the instant Court, stating that the subject matter of KIGALI LAW CHAMBERS Ltd was about the advocate fee and therefore, it should first 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 of 01/2018 should not serve as the basis since it was not approved by the Board of Directors as it is the governing organ of those companies, their appeal was registered on case nº RCOMAA 00003/2022/CA.

The hearing was held in public on 04/05/2022, NSHILI KIVU TEA PLANTATION Ltd & NSHILI KIVU TEA FACTORY Ltd were represented by Counsel NYILIDANDI Assiel and

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Counsel HABINEZA Gasore Gilbert, while KIGALI LAW CHAMBERS Ltd was represented by Counsel BANDORA Alfred.

Generally, in the course of the hearing, the debates of both parties were focused on the admissibility of KLC Ltd's claim in the Commercial Court, NKTF Ltd and NKTP Ltd sustain that it should not have been admitted since it did not comply with the procedure provided under 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, and the Commercial High Court decided that KLC Ltd should be paid the claimed amount of money basing on the contract of 01/12/2018 made by an incompetent person. KLC Ltd contended that such allegations are baseless, it requested to uphold the decision of the judgment Nº RCOMA 00208/2021/HCC delivered by the Commercial High Court. Both parties requested for procedural fees and various damages.

Basing on those debates, the Court that the following issues shall be analysed: a. Determine whether the issue between NSHILI KIVU TEA PLANTATION Ltd and NSHILI KIVU TEA FACTORY Ltd and KIGALI LAW CHAMBERS Ltd is related to the provisions of article 40 of Regulation fixing the scale of fees for advocates. b. Determine whether the Commercial High Court erred by basing on the contract of 01/12/2018. c. Issues related to damages and procedural fees. II. ANALYSIS OF LEGAL ISSUES OF THE CASE 1. Determine whether the issue between NSHILI KIVU TEA PLANTATION Ltd and NSHILI KIVU TEA FACTORY Ltd and KIGALI LAW CHAMBERS Ltd is related to the provisions of article 40 of Regulation fixing the scale of fees for advocates.

The legal counsel for NKTF Ltd and NKTP Ltd sustain that, in paragraph 16 of the appealed judgment, the Commercial High Court held that any case arising from the issue of collaboration because KLC Ltd stated that the works which it performed were assigned to others without prior termination of the contract and there was no law which was violated by the fact that the claim was brought before the Court regardless of the time limit provided under article 40 of Regulation fixing the scale of fees for advocates, and the Court so proceeded without considering that the subject matter was the breach of contract and the payment of a professional fee amounting to 96,000 USD, thus such amount should be considered as lawyer's fee.

They explain that KLC Ltd did not comply with the time limit for referring the claim to the President of the Rwanda Bar Association because the last letter dated 18/06/2019 of KLC Ltd to NKTP Ltd and NKTF Ltd would have been the starting point to calculate the time limit to refer the issue to the President of Rwanda Bar Association. They elucidate that KLC Ltd, instead of addressing the disputes to the President of the Bar, filed a claim in the Commercial Court in the case RCOM 01870/2019/TC rendered on 27/12/2019, and the Court dismissed the claim because it did not comply with the procedure provided under article 40 of Regulation fixing the scale of fees for advocates; on 09/01/2020, KLC Ltd has referred the issue to the President of Rwanda Bar Association but the agreement was not reached, therefore the President of the Bar Association

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authorized it to resort to other organs. They therefore state that in consideration of the transmission date of the last letter requesting for the payment and the date of application to the President of Rwanda Bar Association, it is evident that the period of 2 months provided under article 40 of the above mentioned Regulation was not complied with.

The legal counsel for KLC Ltd in his defence maintains that the issue between KLC Ltd with NKTP Ltd and NKTF Ltd is not related to article 40 of the Regulation fixing the scale of fees for advocates because the subject matter is the non-performance and the breach of the contract and there are no disputes about the professional fee since it was agreed on by both parties in this contract and the two Courts so held. He elucidates that in paragraph 14 of the judgment RCOM 01250/2020/TC, the Commercial Court motivated why the raised objection is baseless because there were no disputes as to the payment of a professional fee amounting to 96,000 USD since the subject matter was about the failure to perform and the breach of the service contract KLC Ltd had with NKTP Ltd and NKTF Ltd, this was upheld by the Commercial High Court in paragraph 16 of the judgment RCOMA 00208/2021/HCC because, on basis of its analysis, the Court held that the subject matter was related to the non-performance of the contract governing the collaboration between the parties to it and which was not terminated. Therefore, article 40 of the Regulation is under no circumstances related to the case under litigation because the professional fee claimed is not disputable.

He also states that the fact that KLC Ltd has referred the issue to the President of the Bar Association was in the context of enforcing the Court decision in the judgment RCOM 01870/2019/TC, but they disagreed on that decision since they indicated that the issue is not related to the article 40 of Regulation fixing the scale of fees for advocates, the same was upheld by the Commercial High Court in the appealed judgment. He also sustains that the Commercial Court has to examine whether the period of two months provided under the Regulation fixing the scale of fees for advocates is of public order so that the contract non-performance could lead to the inadmissibility of the claim before the Court. He concludes by requesting the Court to dismiss this objection as the lower courts have so upheld. DETERMINATION OF THE COURT As above explained, the litigants request the Court to determine at this ground of appeal whether the issue between KLC Ltd and NKTF Ltd, and NKTP Ltd is related to article 40 of the Regulation fixing the scale of fees for advocates. The Court recalls that article 40 concerns two issues namely: referring the disputes over the professional fees for advocates to the President of the Bar Association and addressing it within two months computed from when the disputes arose. a. Referring the disputes over the professional fees for advocates to the President of the Bar Association

Article 64, paragraph 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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Article 27 (3) of Law nº 83/2013 of 11/09/2013 establishing the Bar Association in Rwanda and determining its organization and functioning, provides that“the Council of the Bar is responsible for putting in place regulations meant for the promotion of advocates ‘profession’.’

Article 40 (1) of the Regulation fixing the scale of fees for advocates explains how the fees related disputes are solved in the following words: "All disputes relating to the fixing or payment of fees 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 seek the payment of his or her fee note. The letter of complaint should be accompanied by supporting documents''. Article 2 (1) of the same Regulation defines professional fee as follows: “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 judgments and other services, including the administrative handling of the file''. Article 2 (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’’.

These articles denote that a professional fee is a cost that 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 first 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 to assist him/her in his or her profession as an Advocate, is considered as remuneration concerned by this article.

The decision of the appealed judgment RCOMA 00208/2021/HCC indicates that the issue of this case arises from the collaboration because KLC Ltd states that the works it was performing were assigned to others without prior termination of the contract and for which it seeks damages, and as the Commercial Court has upheld in the judgment 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 limit provided under article 40 of Regulation fixing the scale of fees for Advocates.

The case file contains the contract signed on 01/12/2018 between KLC Ltd represented by Counsel BANDORA Alfred and Nicholas WATSON, the Chairperson of the Board of Directors of NKTP Ltd and NKTF Ltd. The contract indicates different services KLC Ltd would deliver as Advocate, including the provision of legal advice, drafting commercial contracts and other necessary documents, and representing NKTF Ltd and NKTF Ltd before courts, both companies committed themselves to pay KLC Ltd 4,000 USD per month.

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The case file contains also the judgment RCOM 01870/2019/TC rendered by the Commercial Court on 27/12/2019, in which KLC Ltd sued NKTF Ltd and NKTP Ltd, and the subject matter was: "Breach of service contract and requesting of moral damages of 20,000USD- Ordering to the respondent to pay the 24 month agreed amount of 96,000 USD- Ordering to the respondent to pay damages’’. Basing on article 64, paragraph 2 of Law Nº 83/2013 of 11/09/2013 establishing the Bar Association in Rwanda and determining its organization and functioning and article 40, paragraph 1 of Regulation fixing the scale of fees for Advocates, the Commercial Court has dismissed the claim on ground that it did not firstly refer it to the President of the Bar Association.

The case file contains the letter dated 18/06/2019 written by the Managing Director of KLC Ltd, Counsel BANDORA Alfred to the Chairperson of the Board of Directors of NKTP Ltd and NKTF Ltd for notifying him as the last notice to make payment as provided under the contract they jointly signed on 01/12/2018. The case file contains the letter of 09/01/2020 written on behalf of KLC Ltd by Counsel BANDORA Alfred to the President of the Bar Association requesting him to address the issue between KLC Ltd and NKTF Ltd and NKTP Ltd relating to the breach of the contract by those companies. It contains also the letter of 28/07/2020 written by the President of the Bar Association to Counsel BANDORA Alfred allowing him to resort to other organs because the mediation was not successful.

The Court finds ungrounded the ruling of the Commercial High Court which held that the contract between KLC Ltd and NKTF Ltd and NKTP Ltd is ordinary, without disputes, therefore it is not in the scope of article 40, paragraph 1 of Regulation Nº 01/2014 above mentioned due to the following reasons: a. As explained in the previous paragraphs, KLC Ltd concluded the contract with NKTP Ltd and NKTF Ltd to provide the services above mentioned, and those companies were committed to paying it a monthly remuneration of 4,000 USD, later they failed to agree on the payment of the mentioned remuneration, as it was especially explained in paragraph 23 of the judgment, any remuneration based on the contract between an advocate and a client to assist 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 explained above, there is a judgment RCOM 01870/2019/TC rendered on 27/12/2019 by the Commercial Court which held that the claim of KLC Ltd would firstly be referred to the President of the Bar Association and that judgment was not appealed. Due to the fact that KLC Ltd represented by Counsel BANDORA Alfred complied with the decision of that judgment by referring the disputes to the President of the Bar Association on 09/01/2020 and was authorized on 28/07/2020 by the President of the Bar Association to resort to other organs since no agreement was reached, it is clear that KLC Ltd has agreed that the procedure has to be followed before seizing the courts as provided under article 40, paragraph 1 of Regulation Nº 01/2014 abovementioned.

Due to those reasons, this Court finds that there are no disputes to determine whether the issue over the professional fee would necessarily first be referred to the President of the Bar Association before seizing the courts. Rather, it finds that the issue to be analysed is determining whether the fact that KLC Ltd referred the issue to the President of the Bar Association after two months (2) would be the ground of the claim inadmissibility before the Court.

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b. Determine whether the fact that KLC Ltd referred the disputes to the President of the Bar Association after two months would be the ground for the claim to be rejected.

Article 40, paragraph 1 of Regulation Nº 01/2014 above mentioned provides that: "All disputes relating to the fixing or payment of fees 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 seek the payment of his or her fee note. The letter of complaint should be accompanied by supporting documents''. Paragraph 2 of that article provides 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 decide within two (2) months from the date of its referral by the President of the Bar''. Paragraph 8 provides 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’’.

As provided under the abovementioned paragraphs of the article 40 of the Regulation, such article stipulates two steps for settling disputes relating to fees for Advocates, meaning through mediation before the President of the Bar and before the Court. The two steps must be followed according to the order provided under this article, but each has its specific laws, procedure, and time limit. In this context, the issue is referred to the President of the Bar within a period of two (2) months, while the Court is seized within a period of one (1) month. The Court is seized when the mediation has failed; such a step ends upon the decision notification to the parties in disputes by the President of the Bar. This means that what was done in that phase is completely concluded and could not affect the case already in court, except to check if that procedure was followed or not. The conditions in which it was followed do not concern the court, except when they constitute the subject matter. This means that a party who has reasons for not consenting to the mediation due to non-compliance with the time limit, he/she must not participate in it, thus it is not held. Once he/ she consented to it, it is no longer possible for him/her as the defendant to object against the conditions in which it was conducted.

The case file contains the letter of 18/06/2019 written by Counsel BANDORA Alfred on behalf of KLC Ltd to the Chairperson of the Board of Directors of NKTP Ltd and NKTF Ltd notifying him as final notice to make the payment according to the contract signed on 01/12/2018. The court bailiff indicated that he sent it to Nicholas WATSON through his e-mail.

he case file contains the letter dated 09/01/2020, written by counsel BANDORA Alfred on behalf of KLC Ltd to the President of the Bar requesting him to settle the issue between KLC Ltd and NKTF Ltd and NKTP Ltd relating to the contract breach by those companies and to the outstanding payment of a professional fee amounting to 96,000 USD as was agreed upon in accordance with the contract.

The case file contains the letter of 28/07/2020 written by the President of the Bar to Counsel BANDORA Alfred allowing him to resort to other organs. Basing on the fact that both parties were required to provide provided explanations, the fact that both parties were summoned to the mediation of 26/05/2020 and failed to reach an agreement, the President of the Bar allowed them to have recourse to other organs competent to handle their disputes.

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The Court finds that since the two parties consented to be mediated by the President of the Bar and no one challenged the procedure, since NKTF Ltd and NKTP Ltd did not challenge the compliance with the time limit at that level, they did not contest the mediation session which was conducted to its completion without claiming that the mediation was illegally conducted, they have no basis to pretend that the mediation session before the Bar did not comply with the time limit prescribed by article 40 of Regulation above mentioned.

Because of those reasons aforementioned, the Court finds ungrounded the allegations of NKTF Ltd and NKTP Ltd that the claim of KLC Ltd should not have been admitted because of the non-compliance with the period of two months for referring the disputes to the President of the Bar, therefore this ground of the appeal is baseless. 2. Determine whether the Commercial High Court erred by basing on the contract of 01/12/2018

The legal counsel to NKTP Ltd and NKTF Ltd were not satisfied by the fact that on page 12 in paragraph 27 of the appealed judgment, the Commercial High Court upheld the decision of the Commercial Court that KLC Ltd had no obligations of ensuring if the terms of the contract of 01/12/2018 were approved by the Board of Directors, the essential element is that it was signed by the President of the Board of Directors of those two companies. They sustain that such procedure is inconsistent with the laws, either the law governing companies in Rwanda or the Articles of Association of those companies as they were managed by the Board of Directors (It is contrary to articles 145 and 147 of Law governing companies, article 15 of their Articles of association) which was competent to examine all the resolutions concerning those companies, but no meeting of shareholders or Board of Directors members was held to analyse and take the decision thereof. They state that Nicholas WATSON was not competent to enter into a contract with KLC Ltd without the approval of the Board of Directors of those two companies because the fact that he signed as the President of the Board of Directors does not entitle him to do what is not approved by the Board of Directors, but he so proceeded with the purpose of causing the loss to the companies.

They further submit that the statements of the legal counsel of KLC Ltd that they acknowledge the contract of 01/02/2018 are not correct because they do not recognize it as they do not recognize the contract of 01/12/2018 under litigation in the instant case and that the meeting of those two companies convened on 19/01/2019 has established new Board of Directors, Nicholas WATSON is no longer the Chairperson of the Board of Directors and the last meeting he chaired and in which KLC Ltd attended was held on of 14/03/2017.

The legal counsel for KLC Ltd submits that Nicholas WATSON signed the contract as the Chairperson of the Board of Directors of NKTF Ltd and NKTP Ltd, he was competent to sign the contract and it could not be signed by all members of the Board of Directors. He also maintains that there is no evidence that the meeting of the Board of Directors was not held, KLC Ltd could not know whether the meeting of the Board of Directors of those two companies was held or not because the meeting issue is known by the shareholders of those companies. He explains that the subject matter is the payment based on the contract concluded with the competent person who is the President of the Board of Directors of the two companies and who signed it, KNTP Ltd and NKTF Ltd do not object to the contract and if they could recognize it, they could challenge it

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before the court seeking its invalidation, instead of waiting to be sued for failure to make payment. He also states that the contract of 01/02/2018 indicating that KLC Ltd should be paid 4,000 USD per month was signed by Nicholas WATSON as the Chairperson of the Board of Directors because he was appointed in June 2018 and they made payment according to that contract, he wonders himself how they recognize it and reject that of 01/12/2018 under litigation in this case while they all were signed by Nicholas WATSON as the Chairperson of the Board of Directors of those two companies.

He further submits 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 the notary in his country and sent it through e-mail due to the COVID-19 Pandemic as he could not travel due to his old age. He also maintains that the registration certificate of BARCO Trading Ltd indicates that Nicholas WATSON and his children are the owners of that foreign company which paid for shares in NKTP Ltd and NKTF Ltd, BARCO Trading Ltd of Nicholas WATSON holds more than 92% of shares in those companies if you link those facts to the provisions of the Law governing companies into 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 also states that Nicholas WATSON is still the Chairperson of the Board of Directors because he attended another meeting on 11/06/2018 which bears the Notary's signature.

When he was questioned if KLC Ltd was paid 4,000 USD in compensation for the work performed or when the work was performed or not, he responded that KLC Ltd had to be paid 4,000 USD per month as it is provided under article 2 of the contract dated 01/12/2018, sometimes the workload could be high or low, the work to be performed by KLC Ltd was provided in the contract. As to whether it performed the work provided in the contract, he submitted that it performed it, when he was asked to whom they reported from 01/01/2019, he responded that they continued to proceed in the same way as before, they used to instruct him what to do and he did it, they used to go to Nshili to check if those companies had no problems since the Chairperson of the Board of Directors has already left and that the report was sent online. He concludes by requesting the Court to dismiss this ground of appeal and order NKTF Ltd and NKTP to promptly pay KLC Ltd. DETERMINATION OF THE COURT

The Court finds that the disputes on this issue are related to determining whether the contract on which KLC Ltd bases claiming the payment of professional fees was signed by a competent person as well as determining whether KLC Ltd must be paid the total amount of money provided under the contract. a. Determine whether the contract on which KLC Ltd bases in claiming the payment of professional fees was signed by a competent person

NKTF Ltd and NKTP Ltd state that Nicholas WATSON who signed the contract as the Chairperson of the Board of Directors so proceeded without any authorization since there was no meeting of the Board of Directors that authorized him to do so, while KLC Ltd submits that it is not the first time that Nicholas WATSON signs the similar contract and he was paid without any

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problem. In resolving these disputes, the Court will analyse the procedure according to which were taken the decisions relating to signing the contracts like this one in NKTF Ltd and NKTP Ltd.

Article 151, paragraph 2 of Law Nº 17/2018 of 13/04/2018 governing companies which was into 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’’.

Article 142, paragraph 1 of Law Nº 17/2018 of 13/04/2018 abovementioned 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’’.

Article 15 of Article of the Association of NKTF Ltd and NKTP Ltd provides that the management of a company is entrusted to the Board of Directors, and the decisions of the Board of Directors of the company are legally taken when the required quorum of the shareholders who attend the meeting is reached and when the decision has got the majority votes except when other articles provide otherwise at that time.

Those articles jointly read denote that the Board of Directors is competent to make contracts with other people. However, the law is not clear as to what happens if the Chairperson of the Board of Directors takes a decision not approved by the Board of Directors. However, this has got a solution that is almost acceptable in the principles governing the management of companies. Generally, the decision of the Chairperson of the Board of Directors is considered as 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 the ground that its Chairperson failed to comply with the procedure. However, when such an issue arises, the Chairperson of the Board of Directors is personally held liable for the consequences in case it is proven that the latter misused his powers.

The case file contains the contract of 01/12/2018 concluded by the Chairperson of the Board of Directors, Nicholas WATSON on behalf of NKTF Ltd and 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 4,000 USD as it is stipulated by article two, and that contract had to be effective from 01/01/2019 and it would last for a renewable period of two years, 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

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The case file contains the minutes of the meeting of NKTF Ltd and NKTP Ltd of 14/03/2017 which indicates that Nicholas WATSON is elected to be the Chairperson of the Board of Directors for a term of twelve months (12).

The case file contains the minutes of the meeting of NKTF Ltd on 19/01/2019. The minutes indicate that the Board of Directors is composed of MURENZI Jean, BANGANINKA Jacqueline, and Nicholas WATSON (who did not attend the meeting). Those who attended the meeting decided that it should be chaired by MURENZI Jean and GASHAGAZA Philbert was its secretary. The meeting took a decision on the immediate suspension of the payment made to Counsel BANDORA Alfred since he was not appointed by any company organ and on the recovery of 4,000 USD unduly paid to him.

The Court finds that the legal counsel for NKTF Ltd and KTP Ltd which had a contract with KLC Ltd, do not deny that Nicholas WATSON was the Chairperson of the Board of Directors of those two companies by the time the contract was concluded, rather they submit that the contract made between Nicholas WATSON and KLC Ltd would have been approved by the Board of Directors which is the company managing organ; due to the fact, it did not approve the contract of 01/12/2018, such contract should be invalidated.

Due to the fact that the legal counsel for NKTF Ltd and NKTP Ltd agree that on 01/12/2018 when the contract was concluded Nicholas WATSON was the Chairperson of the Board of Directors of NKTF Ltd and NKTP Ltd, the Court finds that the latter cannot deny the contract on the ground that it was signed by its Chairperson without being authorized by the Board of Directors because as it was explained in paragraph 47, the acts of the Chairperson of the Board of Directors are deemed to be the acts of the company vis-a-vis other people. Furthermore, due to the fact that there is another contract of 01/02/2018 concluded by Nicholas WATSON, on behalf of NKTF Ltd and NKTP Ltd, and KLC Ltd according to which the latter had to be paid 4,000 USD per month and which was performed and other members of the Board of Directors did not sue him for that, the Court finds that it is clear that they agree that Nicholas WATSON, as the Chairperson of the Board of Directors of those two companies, was entitled to make a contract on their behalf. Therefore, this is not a defect that can justify the invalidation of the contract of 01/12/2018.

Concerning the statements of the legal counsel of NKTF Ltd and NKTP Ltd that Nicholas WATSON was not competent to make a contract with KLC Ltd without the approval of the Board of Directors of those two companies, the contract of 01/02/2018 was made according to the procedure inconsistent with the provisions of articles 145 and 147 of Law Nº 17/2018 of 13/04/2018 governing companies on the ground that Nicholas WATSON has misused his powers by signing it without the approval by the meeting of the Board of Directors, the Court finds that they are baseless because those articles do not prohibit the Chairperson of the Board of Directors from taking decisions on behalf of the company, rather, as explained above, those articles do not serve for the settlement of the disputes.

as stipulated in 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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b. Determine whether KLC Ltd has to be paid all the total amount of money provided in the contract of 01/12/2018

NKTF Ltd and NKTP Ltd submit that the Commercial High Court should not have based on the contract of 01/2/2018 in ordering them to pay KLC Ltd 96,000 USD because they do not recognize that contract on grounds that it was signed by an incompetent person, KLC Ltd did nothing on basis of it, because it should be effective from 01/01/2019 with a duration of two years but it was suspended on 19/01/2019 by the Board of Directors.

KLC Ltd sustains that the Commercial High Court did not err by basing on the contract of 01/12/2018 to order NKT F Ltd and NKTP Ltd to pay to it 96, 000 USD because Nicholas WATSON signed it when he was still the Chairperson of the Board of Directors and was competent to sign that contract. As to the fact that KLC Ltd was doing nothing, he maintains that it is groundless because it continued to work as usual and submitted reports online. As to the termination of the contract, he submits that it was terminated by incompetent persons and it was not notified.

In resolving these disputes, the Court will examine whether the contract of 01/12/2018 should be maintained while the meeting of 19/01/2019 decided that it was terminated without notifying KLC Ltd.

Article 89 of Law Nº 45/2011 of 25/11/2011 governing contracts provides that “If the debtor repudiates the obligations, such repudiation gives the other party the right to claim for damages for all remaining obligations”. Article 91 (1) provides that "a party's obligation to pay damages on the repudiation of the obligation is extinguished if it appears that the aggrieved party does not perform his or her obligations''.

Those articles read jointly denote that if the contract is breached and the other party does not perform his or her obligations, the breaching party has the obligation to pay the other party basing on what has been already performed. This is emphasized by the principle found in 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 part 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''.

Article 88 of the Law mentioned above resolves the disputes as to determining the time of the repudiation of the obligations. It reads as follows: “Repudiation of obligations may be made through the following: 10 a statement by the debtor to the creditor indicating that the debtor will not perform the obligations; 20 a voluntary act indicating that the debtor will not perform the obligations”.

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 an obligation 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

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the creditor is not paid it is deemed that the latter has known that the debtor has relieved himself or herself from obligations.

Briefly, basing on the analysis of the articles mentioned in the previous paragraphs, regarding the contracts that are performed in installments, when the payment in installment 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.

As expounded, 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 indicates that KLC Ltd had to be paid 4,000 USD per month for a period of two (2) years. It means that the contract had to be performed in installments, each installment equal to one month and to pay for the works done in that very month.

On 19/01/2019, the new management organ of NKTP Ltd and NKTF Ltd 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. The fact that it has early known that before claiming for the payment is highlighted by the final notice letter of 18/06/2019 to the Chairperson 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.

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.

Basing on the explanations provided and on the interpretation of the laws especially in paragraphs 61 and 62, the Court 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 elapsed without being paid. The Court finds however that according to the normal practice deriving from Rwandan culture, when the payment is due and not paid, the creditor waits for a short time to pass without claiming the payment in order to let the debtor voluntarily pay. This cannot go beyond the following month. In this context, the Court finds that KLC Ltd should be paid for January 2019 and February 2019 on the ground that it is the exact time it should have known the termination of its contract with NKTP Ltd and NKTF Ltd, this is equal to four thousand United States Dollars per month for twelve months, totally it is eight thousand United States Dollars (4.000USD x 2) =8.000USD). B. CROSS APPEAL OF KLC Ltd

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1. Determine whether KLC Ltd had to be granted damages.

The legal counsel of KLC Ltd requested the Court to order NKTP Ltd and NKTF Ltd to pay KLC Ltd moral damages amounting to 20,000 USD 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 chairperson took away the work from it and give it to his brother-in-law, and this is the main point of the claim.

The legal counsel of NKTP Ltd and NKTF Ltd submits that the damages claimed by KLC Ltd should not be considered because the companies they represent demonstrate that the contract KLC Ltd is 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 to have a probative value was not followed. DETERMINATION OF THE COURT

The case file indicates that KLC Ltd requested damages amounting to 20,000 USD 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 stated that they do not expect to work again with them cannot give rise to the payment of damages. It also requested damages in the Commercial High Court but the Court finds that KLC Ltd is a company, it is not a natural person who can experience suffering, and it cannot be granted such damages.

Regarding the fact that a company or an entity cannot be awarded moral damages because they are not a natural person, this position was overruled by the Supreme Court in the judgment Nº RS/INJUST/RCOM0004/2020/SC rendered on 19/11/2021, NEW KIGALI BUSINESS SERVICES Ltd v KASESE DISTILLERS Ltd, where in its paragraph 48, the Court held that: “The Court finds that the precedent previously based on by the Supreme Court in deciding the judgment of Bralirwa Ltd v Kazigaba Andre´et al, where it based on the author statements, and which was re-examined by the courts of other countries, and even by modern authors on civil laws indicate that the position is outdated. Among them, there is Véronique Wester Ouisse who states 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 functioning, therefore the issue should not only be considered on the side of business activities. However, she explains that “the company that wishes to claim for damages have to first establish the harm suffered''3.

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.

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The Supreme Court expounded that the fact that companies or entities can be awarded damages has already become the principle of liability laws. However, those moral damages are aimed at liability based on how the public may lose 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 dishonor. This means that the company or entity cannot claim moral damages on the ground that it was distressed, physically inflicted or mentally hurt, or humiliated 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

Basing on the explanations in the previous paragraphs, the Court finds baseless 20,000 USD of moral damages claimed by KLC Ltd since it did not lose public trust nor dignity because its name was not dishonoured, to the extent that it can be awarded moral damages, therefore it should not be awarded moral damages in this case. 2. Determine whether the procedural fees claimed by both parties are grounded.

The legal counsel for NKTP Ltd and NKTF Ltd, based 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 5,000,000 Frw as lawyers fees and 1,000,000 Frw as procedural fees which were early requested from the first level up to the appeal level, and 2,000,000 Frw of lawyer’s fees at this level. They also state that the procedural fees and lawyer’s fees claimed by KLC Ltd in the cross appeal are not grounded and should not be awarded.

The legal counsel of KLC Ltd submits that there is a legal principle stipulates 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 by failing to perform the contract of 01/12/2018 signed by the Chairperson who also signed the previous contract.

He further avers that based on article 152 of Law Nº 22/2018 of 29/04/2018 relating to civil, commercial, labor, and administrative procedure, they request the Court of Appeal to order NKTF Ltd and NKTP Ltd to jointly refund 12,000,000 Frw as lawyers fees 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 4,000,000 Frw at each level and 5,000,000 Frw as procedural fees. DETERMINATION OF THE COURT

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.

4 See Paragraphs 50 and 51 of Judgement Nº RS/INJUST/RCOM 00004/2020/SC rendered by Supreme Court on 19/11/2021.

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III. DECISION OF THE COURT

Holds that the appeal of NSHILI KIVU TEA FACTORY Ltd and NSHILI KIVU TEA PLANTATION Ltd has merit in some aspects.

Holds that the cross appeal of KIGALI LAW CHAMBERS lacks merit.

Holds that the judgment RCOMA 00208/2021/HCC rendered by the Commercial High Court on 29/09/2021 is overruled only in relation to the Dollars NSHILI KIVU TEA FACTORY Ltd and NSHILI KIVU TEA PLANTATION Ltd should pay to KIGALI LAW CHAMBERS.

Orders to NSHILI KIVU TEA FACTORY Ltd and NSHILI KIVU TEA PLANTATION Ltd to jointly pay KIGALI LAW CHAMBERS eight thousand United States Dollars (8,000 USD). Decides that the deposited court fee covers the expenses of the judicial proceedings.