Gulf African Bank Limited v Petroafric Company Limited & 2 others [2022] KEHC 14006 (KLR)

Gulf African Bank Limited v Petroafric Company Limited & 2 others (Civil Suit E154 of 2020) [2022] KEHC 14006 (KLR) (Commercial and Tax) (7 October 2022) (Ruling)

Neutral citation: [2022] KEHC 14006 (KLR)

Republic of Kenya

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

Commercial and Tax

Civil Suit E154 of 2020

A Mshila, J

October 7, 2022

Between

Gulf African Bank Limited

Plaintiff

and

Petroafric Company Limited

1st Defendant

Ahmed Abdullahi Ali

2nd Defendant

Nur Ahmed Hari

3rd Defendant

Ruling

Background 1. Before the court is a chamber summons dated April 29, 2021 brought under sections 1A,1B &3A of the Civil Procedure Act and rule 11 of the Advocates (Remuneration) Order. The applicant sought the following orders;a.The plaintiff objects to the taxing officer’s reasons in reducing fees in respect of items 1, 11 and the taxing off of 50% increment based on advocate client costs and VAT and the reasoning and findings be set aside and the items objected to be allowed as prayed in the plaintiff’s bill of costs dated January 12, 2021. b.The court in the interest of time and justice allow items 1, 11 and the taxing off 50% increment based on the advocate client costs and VAT as prayed in the plaintiff’s bill of costs dated January 12, 2021 after allowing for adjustments for the items that had been taxed off.c.In the alternative, the plaintiff’s bill of costs dated January 12, 2021 be remitted for re-taxation before any other taxing officer and be heard on a priority basis with directions that the costs be taxed on a full indemnity basisin accordance with the decree dated November 12, 2020. d.Costs of this application be provided for.

2. The application was supported by the sworn affidavit of Allen Waiyaki Gichuhi who stated that on item No 1 the deputy registrar committed a fatal error at page 3 to 4 of the ruling dated April 15, 2021 by referring to totally alien reliefs that were not part of the reliefs sought in the plaint dated April 6, 2021. The error is apparent on the record as the reliefs relied upon by the taxing officer related to an entirely different suit that related to, inter alia, a dispute over land, fraud, rectification and cancellation of title, refund of costs for rectification and cancellation, injunctive relief and demolition of parts of the suit property whose value was not ascertainable.

3. The real issues and reliefs in the plaint dated April 6, 2021 were simply for a liquidated demand against the borrower and guarantors for Kshs 76, 531 ,262. 67, profit and costs which was allowed in the summary judgment application. This was clearly set out in item I of the advocate client bill of costs dated January 12, 2021.

4. On item 11 the applicant stated that this was a half day court attendance and not disbursements as erroneously determined.

5. Lastly, with regard to the increase by 50% and VAT, the decree was a full indemnity basis as ordered by the judge. The taxing officer cannot sit on an appeal from the decision of a high court judge.

Applicant’s Case 6. It was the applicant’s submission that the plaintiff instituted this suit by way of plaint dated April 6, 2020 seeking judgment against the 1st defendant for the sum of Kshs 76, 531,262. 67; against the 2nd and 3rd defendants jointly and severally for sum of Kshs 72, 000,000; and costs of the suit with interest at court rates until payment in full.

7. Judgment was entered on November 11, 2020 whereby the defendants’ statement of defence was struck out and judgment entered for the plaintiff against the defendants jointly and severally as prayed in the plaint dated April 6, 2020. The costs of the application and the entire suit was to be borne by the defendants/respondents on a full indemnity basis.

8. The plaintiff proceeded to file the bill of costs dated January 12, 2021 for taxation at Kshs 4, 981,413. 85, and a taxation notice for March 18, 2021 was served on the defendants who failed to appear or file objections to the bill of costs.

9. The applicant asked the court to allow the following costs as follows;Item Particulars Amount (Kshs)

1 Instructions being to scale on the sum of Kshs. 76,531,262. 67 and having already been discounted to 75% of instruction fees. 1,385,976. 75

11 Court Attendance for half a day 7,100

Increase by 50% 1,012,207. 50

VAT should be allowed after taking into consideration the allowed items above and factoring in items that were taxed off [items 3,4 & 6] 467,255

11 Disbursements was increased from Kshs.75 to 325 325

10. Further, the applicant submitted that the court taxed off items 3,4 and 6 which came to Kshs 77,520 to which there was no objection. After deducting this sum the final costs are as follows:Advocate client costs Kshs 3,387,598Filing Fees Kshs 72,005Disbursements Kshs 1,200Grand Total Kshs 3,460,803

11. It was the Applicant’s contention was that the actual and scale costs are Kshs 3,460,803 that the Court should allow to save on judicial time and avoid a re-taxation based on the error made by the taxing officer who had no legal basis to tax off Kshs 3,840,332. 85.

12. The Applicant took the position that the Deputy Registrar committed a fatal error in assessing instruction fees under item 1 of the bill of costs, by referring to totally alien reliefs that were not part of the reliefs sought in the Plaint dated April 6, 2020.

13. The introduction of the alien reliefs led to a misguided conclusion that the suit related to, inter alia, a dispute over land, fraud, rectification and cancellation of title, injunctive reliefs, demolition of parts of the suit property and further, that the value of the subject matter was not ascertainable when in fact these reliefs did not form part of the Plaint.

14. The Decree dated November 12, 2020 entered judgment for prayers in the Plaint dated April 6, 2021 which was simply for a liquidated sum of Kshs 76,531,262. 67 together with default damages and the taxing officer cannot sit on appeal from the decree and must tax the fees as per the judgment and costs which were allowed on a fully indemnity basis.

15. The Applicant relied on the case ofKANU National Elections Board & 2 others v Salah Yakub Farah [2018] eKLR where it was stated that the court will interfere with the exercise of the Taxing Officer’s discretion where it is of the opinion that the taxing master was clearly wrong or in circumstances where it is in the same position as, or a better position than the taxing master to determine the very point in issue. The court must be of the view that the taxing master was clearly wrong in that its conviction on a review that he or she was wrong must be considerably more pronounced than would have sufficed had there been an ordinary right of appeal.

16. In addition, it was the Applicant’s submission that costs were sought on a full indemnity basis because the charge and guarantees allowed such costs to be paid on a full indemnity basis that includes VAT. The Court in the case ofMarie Thande v Barclays Bank of Kenya [2006] eKLR allowed costs on a full indemnity basis because the legal charge duly executed by the chargor provided for such costs.

Respondent’s Case 17. In response, the Respondent argued that the reference herein was filed in complete breach of the mandatory provisions of Rule 11(1) and (4) of the Advocates Remuneration Order, for reasons that the Applicant did not file a Notice of Objection as required by Rule 11(1) within 14 days from April 15, 2021 when the Taxing Officer delivered her decision. The Applicant did not notify the Taxing Officer that it was objecting to taxation of Items 1 & 11 of the taxation.

18. In the case ofMuriu Mungai & Co Advocates vs New Kenya Co-operative Creamersies Ltd [2008] eKLR the court made the finding that the party wishing to object to the taxation must first serve a Notice of Objection indicating terms of the bill objected to within 14 days from the date of the decision objected to.

19. Regarding Item No 1 the Respondent stated that the instruction fee as sought by the Applicant are in contravention of Schedule 6 of theAdvocates Remuneration Order 2014.

20. The Respondent further submitted that Item No 6 – drawing bundle of documents is opposed as it is not provided for in the Advocates Remuneration Order as what is provided for is drawing of the list of document which was not prayed for.

21. On Item No 7, the Notice of Motion referred to contains 21 folios as drawn, which translates to Kshs 3650 and the 70, 000 as sought is opposed.

22. The Respondent opposed the VAT and also stated that the Applicant tabulated advocate client cost on Item 1 to 58 which is opposed. this was a party to party Bill of Costs hence the increment of instruction fees by 50% is not justified in any case. It was the Respondent’s submission that the reference as drawn must fail.

Issues for Determination 23. The Court has considered the pleadings and the submissions by the parties and the issue for determination is;a.Whether the Taxing Officer committed an error in principle as to entitle the court to interfere with its discretion?

Analysis 24. This Court is guided by the principles espoused in the established case of Kipkorir, Tito & Kiara Advocates vs Deposit Protection Fund Board [2005] eKLR where the Court observed;“On reference to a Judge from the Taxation by the Taxing Officer, the Judge will not normally interfere with the exercise of discretion by the Taxing Officer unless the Taxing Officer, erred in principle in assessing the costs.”

25. Paragraph 11 of Advocates Remuneration Order (ARO) provides as follows:“(1)Should any party object to the decision of the taxing officer, he may within fourteen days after the decision give notice in writing to the taxing officer of the items of taxation to which he objects.(2)The taxing officer shall forthwith record and forward to the objector the reasons for his decision on those items and the objector may within fourteen days from the receipt of the reasons apply to a judge by chamber summons, which shall be served on all the parties concerned, setting out the grounds of his objection.”

26. The Respondent opposed the Application arguing that the Applicant breached the above mandatory provisions of Rule 11 by not notifying the Taxing Officer that it was objecting to taxation of Items 1 & 11 of the taxation. It suffices to say that the provision of Paragraph 11 of the ARO is not couched in mandatory terms; in that the Applicant may file an application within 14 days if there is need for reasons for it;

27. This Court has perused the impugned Taxing Officer’s decision and it is clear that the Taxing Officer introduced alien reliefs that the suit related to, inter alia, a dispute over land, fraud, rectification and cancellation of title, injunctive reliefs, demolition of parts of the suit property and further, that the value of the subject matter was not ascertainable. This court is satisfied that the reliefs referred to by the Taxing Officer did not form part of the Plaint.

28. It would therefore be improper for the Court to ignore the apparent error made by the Taxing Officer and proceed to determine the issues raised therein.

Findings and Determination 29. In light of the forgoing reasons this court makes the following findings and determinations;i.The application is found to have merit and it is hereby allowed; the Taxing Officer is found to have applied the wrong principles in taxing the Bill of Costs;ii.The decision of the Taxing Officer dated April 15, 2021 is hereby set aside;iii.The Bill of Costs dated January 12, 2021 be and is hereby remitted for re-taxation before any other Taxing Officer and be heard on a priority basis with directions that the costs be taxed on a full indemnity basisin accordance with the decree dated November 12, 2020. iv.There shall be no order as to costs on this applicationv.Mention on October 25, 2022 before the Deputy Registrar for directions.Orders Accordingly.

DATED SIGNED AND DELIVERED ELECTRONICALLY AT NAIROBI THIS 7TH DAY OF OCTOBER, 2022. HON. A. MSHILAJUDGEIn the presence of;Mulinzi holding brief for Allen Waiyaki for the PlaintiffNo appearance for the DefendantLucy--------------------------------Court Assistant