Mukanusi v Uganda Revenue Authority (Civil Appeal Reference 5 of 2022) [2023] UGCA 357 (14 August 2023)

Full Case Text

## THE REPUBLIC OF UGANDA

## IN THE COURT OF APPEAL OF UGANDA AT KAMPALA

## CIVIL REFERENCE NO. 05 OF 2022

(Arising from Taxation Application No. 60 of 2020)

(Arising from Civil Appeal No.06 of 2011)

HOPE MUKANUSI APPLICANT

### VERSUS

UGANDA REVENUE AUTHORITY RESPONDENT

# CORAM: HON. MR. JUSTICE GEOFFREY K|RYABW|RE, J. A.

## RULING

## INTRODUCTION

This is a Reference by Hope Mukanusi (the Applicant) against the Ruling of the Taxing officer in T. A. No. 6012020. The Applicant preferred the following grounds of Reference:

20 1) That the taxing officer erred in law, principle and fact by entertaining two Bills of costs filed by the Respondent in the same matter and taxing the second Bill which was never served upon the Appellant.

2) That the learned raxing officer erred in law and principle by awarding professional fees to the Respondent after Ruling that the Respondent was not entitled to 25 instruction and or professional fees.

The Applicant prayed for the following remedies: -

- a) That an order setting aside the ruling of the learned taxing officer in T. A. No. 6012020 be issued by this Honourable court. - b) That the Respondent's second Bill of Costs filed on 24th of November, 2021 be expunged. - 5 - c) That the first Bill of costs filed by the Respondent on 13rh November 2020 and served upon the Appellant be taxed by this Honourable court in accordance with the correct taxing principles. - d) That the Applicant be awarded the costs of this reference.

# FACTUAL BACKGROUND

On 1Oth March 2020, the Appellant filed her bill of costs, which was subsequently taxed and allowed on 27th August, 2021 al Ug Shs 26,000,000/= of which Ug Shs 6,500,000/= was recoverable as costs. 10

On the '1 3th of November, 2020 the Respondent filed its first bill of Costs which was served upon the Appellant in court. Subsequently, on 24th November 2021 lhe Respondent filed

a second Bill of Costs, which was not served upon the Appellant. The second Bill was taxed and allowed at UGX 5,930,000/= on 2d June 2022. 15

## REPRESENTATION

At the hearing of the Reference, the Applicant was represented by Mr. Daniel Rutiba while Mr. Sam Kwerit appeared for the Respondent.

# 20 GROUND 1

That the learned Taxing Officer erred in law, principle and fact by entertaining two bills of costs filed by the Respondent, and taxing the second bill which was never served upon the Applicant.

## APPLICANT'S SUBMISSIONS

25 Counsel for the Applicant submitted that the Respondent filed two bills of costs in the same matter. One filled on 13rh November 2020 and the other on 24th November 2020. He submitted that the first bill of costs was for the sum of Ug Shs 23,79'l ,000/= while the second bill of costs was for the sum of Ug Shs 58,733,400/=.

counsel for the Applicant submitted that the Taxing officer taxes the second bill and allowed a sum of Ug shs 5,930,000/=. He argued that during the proceedings of 13th January 2022, counsel for the Respondent admitted that there was no affidavit of service of the second bill of costs dated 24th November 2021 . He further argued that the record did not show that the first bill of costs was withdrawn.

He submitted that during the taxation hearing the Applicant opposed item 1-27 (these items covered instruction fees) of the bill of costs that had been served on them 13rH November 2020. He submitted that it was the first bill of costs that was correct for taxation because the second bill of costs had items covering professional fees (items 1-57) which

was wrong. He argued that this showed that it was the first bill of costs that which was meant for taxation. 10

counsel for the Applicant concluded his submissions by submitting that the Respondent misled the court by filing two bills of costs in the same matter. He prayed that the second bill be struck out and the first bill be taxed with the guidance of this court.

#### RESPONDENT'S SUBMISSIONS 15

First counsel for the Respondent submitted that the proceedings as captured in the record of reference did not reflect the true account of what transpired in court before the Taxing officer. This was because part of the proceedings was not captured in the record.

Counsel for the Respondent submitted that the Respondent filed its bill of costs of a sum of Ug shs 23,791,0oo1= which was withdrawn and had not been served on counsel for the Applicant. He argued that the Applicant's submission that the Respondent's bill of costs was never withdrawn is not true. He submitted that it was because of the letter wlthdrawing the bill of costs that the taxing officer proceeded to tax the fresh bill of costs filed on 24rh November 2021 . 20

As to there being no affidavit of service of the bill of costs filed on 24rh November, 2021, counsel for the Respondent conceded that there was no affidavit of service. However, counsel submitted that there was evidence of a whatsApp chat between the Applicant,s counsel and the clerk of counsel for the Applicant that he was served. He submitted that 25

service of court process electronically has come to be recognized in Uganda as one acceptable means of service in Uganda.

He also submitted that if that service was found not to be effective, the Applicant's counsel was served during the proceedings of the Tax Application before the Tax Master on 'l3rh

5 January 2022.

> He further argued that counsel for the Applicant was aware and alive to which bill was being taxed and being considered by the court because of the WhatsApp conversations with the Respondent's clerk.

### COURT'S FINDINGS

I have read the Reference in this Application and the Affidavits for and against it. lhave also addressed my to the submissions of both Counsel and the authorities supplied to Court for which I am grateful. 10

The established position of judicial practice is that, save in exceptional cases. a Judge will not alter a fee allowed by the Taxing Officer, merely because in his opinion he should

- have allowed a higher or lower amount, Bank of Uganda v Banco A,rabe Espaniol Supreme Court Civil Application No.23 of 7999 (per Mulenga JSC, as he then was). He further held lhat, an exceptional case is where it is shown expressly or by inference lhat in assessing and arrivrng at the quantum of the fee allowed, the taxing officer exercised, or applied a wrong principle. 15 - The application of a wrong principle can be inferred from an award of an amount which is manifestly excessive or manifestly low. Furthermore. if it is shown that the Taxing Officer erred on principle then the Judge should only interfere on being satisfied that the error substantially affected the decision on quantum and that upholding the amount allowed would cause injustice to one of the parties. See Mugenyi v Hoima District 20 - Administration TAXATION APPEAL No. 35 OF 2017 25

It is also well established in case law that the mandatory Rules of taxation should be followed in taxation proceedrngs. ln the case of Attorney General v Uganda Blanket Manufactures SC Civil Application 17l1993 Odoki J (as he then was) held that: -

"...the intention of the rules is to strike the right balance betuveen the need to a ow advocates adequate remuneration for their work and the need to reduce rhe costs fo a reasonable level so as to protect the public from excessive fees. The spirit behind the rules is to provide some general guidance as to what is a reasonable level of Advocates. fees .

ln this matter, the Applicant was awarded la ot lhe costs of Appeal and the Respondent was awarded % of its costs.

According to a letter written to the Registrar of this court dated 24th November 2021 lhe first bill of costs was never served on the Applicant. paragraph 1 of that letter reads: -

The respondent filed a bill of costs in this honorable courl on 13h November, 2020 but the sarne u/as not served on the Appe ant.

The purpose of this letter is to withdraw the bilt of costs ealier filed and to inform you that we intend to file a fresh one as per attached.

It is apparent to me that no action has ever been taken on the Bill of costs from the Respondent dated 24th November, 2020. 15

secondly a perusal of the taxation hearing before the learned Registrar of the 4th November, 2021; 1Jr December, 2021 ; 13th Janu ary,2022 and 22nd February 2022 there is no objection as to the allegation of two Bills of costs and indeed it is not a matter canvassed in the learned Registrar's Ruling. The first time the issues of two Bills of Costs is objected to is after the Taxation Ruling was rendered on the 2nd June, zo22.lt is then that Counsel for the Applicant is recorded to say: -

> " .. .l want to make a Reference because there are two bitts of cost. .."

The Registrar then replies: -

it is your right

25 Ifind therefore that the contestation with regard to two Bills of costs was an afterthought.

It is therefore my finding that this the first bill of costs was withdraw by virtue of the letter from the Respondent dated 24th November 2021. Furthermore, since the said Bill of Costs was not acted upon by the Cou(, I see no prejudice to the Applicant.

This ground is therefore dismissed

# 5 Ground 2

That the learned Taxing Officer erred in law and principle by awarding professional fees to the Respondent after Ruling that the Respondent was not entitled to instruction and or professional fees.

## APPLICANT'S SUBMISSIONS

- 10 Counsel for the Applicant submitted that although the Taxing Officer rightly held that the Respondent was not entitled professional fees since its attorneys patd employees who to conducted its defence. The is flnding notwithsta nd ing, the learned Registrar then proceeded to allow professional fees items in the bill she taxed. The items that fell under that category included Drafting, Attendances, Professional copying and compiling. Counsel argued that all those items were professional items under the Advocates - 15 (Remuneration and Taxation of costs) Rules and cannot be considered as disbursements.

He further submitted thal salaried in house lawyers are not entitled to instructions fees he relied on the case of Total (U) v Uganda Revenue Authority Reference No. 26 /2003.

## RESPONDENT'S SUBMISSIONS

- 20 Counsel for the Respondent submitted the Reference was misguided and wrongly filed before the court because the entire Application was opposed to the quantum of taxed costs in T. A. 60 of 2020. He submitted that the crux of the civil Reference was to set aside the quantum of taxed costs and not review the principles upon which the said bill of costs was taxed. - 25 ln Alternative, counsel for the Respondent submitted that the learned Taxing Officer did not error in awarding professional fees which were awarded under her discretion that was exercised judiciously.

counsel for the Respondent submitted that no professional fees were denied by the Tax officer and counsel for the Applicant had not directed court in which part of the Ruling the Respondent had been denied both instruction and professional fees. He submitted that the Taxing officer properly awarded professional fees to the Respondent having taken

5 into account the fact that it was only represented by in-house counsel.

He submitted that courts are enjoined to award costs to successful litigants unless there are intervening circumstances that would othenrvise require the same order to be denied.

Counsel for the Respondent submitted that the taxing officer duly exercised discretion judicially and awarded costs of Ug shs 5,930,00/= an amount that was consistent with the circumstances. He argued that the Applicant had not demonstrated anywhere that the discretion was not exercised judicially nor indicated any inconsistency in the award in the circumstances of this case.

## COURT'S FINDINGS

It is the contention of the Applicant that the Respondent was not was not enti ed professional fees since their Attorneys were paid employees of the URA with a duty conduct its defence. ln Alternative, counsel for the Respondent submitted that the learned Taxing officer did not error in awarding professional fees which were awarded under her discretion that was exercised judiciously. 15

counsel for the Respondent also put up a preliminary objection that the Application was misguided and wrongly filed because the entire Application was opposed to the quantum of taxed costs. He premised his argument on Rule 110(4) of the Judicature (court of Appeal Directions). The said Rule provides: - 20

"Except as provided in sub rule (3) of this rule, there shall be no reference on the question of quantum only.

Ifind that this Reference is not about the quantum only but the crux of the Reference is whether professional fees should be awarded to in house counsel. To the extent of this finding, the preliminary objection cannot stand and is over ruled. 25

I will now deal with the issue of whether the Taxing Master awarded professional fees to in-house counsel.

ln the case of Total (Uganda) Ltd v Uganda Revenue Authority Reference No. 26 of 2003 this court held;

- 5 "The principle of costs is to fairly reimburse the successful pafty for what he had spent in the case- lt is not in dispute that the Respondent incurred no expense on payment of instruction fee to lts in-house lawyers to handle lhe case nor is there any evidence that that amount would be handed over to the lawyer. ln Zuberi (supra) the court held that the taxing master erred in law to award item of instruction fees to the respondent who had - not paid it. On that principle it is my view that the taxing officer in the instant case also fell into the same trap. The Respondent had paid no instruction fees; lf was therefore wrong in principle to allow it that item. The respondent's payment of high salary and payment of bonus to its in -house lawyers to motivate them cannot justify award of instruction fee where it had not been paid." 10 - ln The lnspector of Government v Godfrey Magezi Taxation Cause No. 1 of 2015 EACJ one of the questions for determination was whether the Attorney General was entitled to instruction fees plus perusals and drawing and service. The court relied on the East African case of Zuberi v Returning Officer and Another [1970] EA 33. 15

"ln Zuberi v Returning Officer and Another [1970] EA 33 a Tanzania High Court Civil Case No. 10 of 1 970 the judge-dealt with the lssue of whether a state attorney can charge instruction fees. The judge held as fol/ows: "The question arises whether instruction fees are included in the order of coutt when it awarded costs to the respondent who in the present b// of costs is a returning officer and not the successfu/ candidate. Mr. Kirita submitted that it does not while Mr. Lubuva said it does. /t is a fact that neither of the respondents paid any fees to the State Attorney who represented them at the hearing of the petition, who again is paid salary by the Republic and he represented the Attorney General and normally represents the Attorney General in court. /f ll ls so, can the respondent get any instruction fees? /s the Attorney General orthe Republic entitled to instruction fees amounting to Shs. 2, 000/- when in fact this sum is not shown to have been spent by anyone 20 25 30

or paid by anyone to anybody? I refer to para. SBS of Halsbury's Law of England, 3rd ed. Vol. 14, on page 320. lt says:

"The Director of Public Prosecutions and his assistant or representatives are to be paid such allowances as the Treasury may approve for expenses for the purposes of Part lll of the Representation of the peoptes Act 1949 other than his general duties of making inquiries into corrupt or illegal practices which he is informed have occurred and of instituting prosecutions which appear to be required- rhe costs incurred in defraying fhe expenses of the Director of pubtic prosecutions incurred for this purpose including remuneration of his representatives are in the first instance to be paid by the Treasury"

The operative words have been underlined by me which are "expenses" ,,other than his general duties " and 'bosts incurred,,. The word ,,expenses,, suggesl money actually spent and not "instruction fees". As for ,,other than his general duties " are not instruclions lo the state attorney who is a representative of the Attorney General to defend the petition and conduct the hearing of the petition a paft of his general dufies, as a state attorney? The words ',costs incurred', would mean money actually spent and not instruction fees.

ln the above case, it was found that the Attorney General was not entitled to instruction fees also taxed off items that flow from instruction fees.

20 The likening of an in house counsel being paid professional fees as would be to an advocate who owns a private law firm with income from clients when the in house counsel is paid a monthly salary does sit well with the principle of adequate remuneration for work done. The same is true of likening the reimbursement for expenses, where an in house lawyer works out of a yearly budget unlike an advocate in private practice who has to 25 charge for expenses when he or she gets work. The reimbursement for the in house lawyer would go to the organisation and not to the in house lawyer. The same analogy of an in house lawyer would apply to a state Attorney who earns a salary and has their expenses budgeted out of the Consolidated fund/Treasury. So items in the normal course of work of an in-house counsel or State Attorney like instruction fees, drafting court 30 documents, perusal of court documents, attendance to court for filing and or hearings

would not be allowable. The case for taxing off disbursements in a bill of costs is different as these expenses have to be proved before the Registrar or shown to be reasonable.

ln this instant case the Taxing Officer also found that in-house lawyers were not entitled to instruction fees. She held. -

"... The issue of instruction fees for in-house lawyers is not a matter of equality as costs were generally granted to both parties. The Respondenl ls Uganda Revenue Authority whose employees are representing it in Court not another person instructing them. The employees are paid sa/arles not instruction fees. I thereby find that in-house Lawyers are not entitled to instruction fees and ltax off the same . . ." 10 5

Clearly the Registrar was alive to the legal position of taxation of costs in relation to inhouse lawyers- and taxed them off.

Counsel for the Applicant complained that the even though the taxing officer found that the Respondent was not entitled to professional fees she allowed items that follow under the category of professional fees like attendances, professional copying and compiling. His argument was that they also flow from instruction fees.

I agree with counsel for the Applicant that attendances, professronal copying and compiling flow from and are in addition to professional fees and therefore should have been taxed off. What the Registrar appears to have done is to allow "attendances" by

- Clerk and Counsel at Court which in my view is wrong because these items are extension of instruction fees for which in-house counsel and their clerks are paid a salary. The same is true for charging copies made of original documents. The costs that in-house counsel or counsel for the Attorney General can rightly claim are disbursements which are subject to proof of expenditure. ln this case I reconsider the disbursements taxed off as I find then 20 - to reasonable and not excessive and therefore allow them. I would recommend that Appellate and trial Courts should be alive to the legal position as to taxation of costs for in-house counsel when awarding costs and not award them in general terms as they would to an Advocate in private practice. This is because the bulk of the costs lie in instruction fees which will be taxed off anyway. 25

10 I

## Re-taxation

$\mathbf{r} = \mathbf{r}^{\mathbf{r}}$

Having found as I have I now will re-tax the Respondents Bill of costs as follows below: -

| Item | Date | Particulars | Amount | Taxed off | |----------------|------------|------------------------------------------------------------------------------------------------|------------|------------------| | Part A | | | | | | $\mathbf{1}$ | 29/07/2921 | To instructions to defend respondent | 40,000,000 | All | | $\mathsf{2}$ | 17/08/2020 | To perusal of Appellant's letter requesting for record of proceedings from High Court | 100,000 | All | | 3 | 21/07/2010 | To perusal of the Appellant's Notice of Appeal | 300,000 | All | | $\overline{4}$ | 17/01/2011 | To perusal of Appellant's memorandum of Appeal | 200,000 | All | | $\mathsf{S}$ | | To perusal of Appellant's certificate of correctness of the Record of Appeal | 100,000 | All | | 6 | | To drawing Respondents notice of address for service | 300,000 | All | | $\overline{7}$ | | To perusing record of proceedings and other contents of the record of | 400,000 | All |

11 | P $\mathbb{P}_{\geq 0}$ $\mathcal{P}$

| | | Appeal of over 3000 folios | | | |----|-------------|--------------------------------------------------------------------------------------------|---------|-----| | 8 | | To attendance by clerk to file Respondent's notice of address for service | 20,000 | Alt | | I | | To clerk serving the Respondent's notice of Address for service | 50,000 | Ail | | 10 | 14t06t2018 | To perusal of Applicant's list of authorities and attachments of over 2000 folios | 200,000 | Ail | | | | To perusal of Appellant's written submissions. | 300,000 | Ail | | 11 | 31t07t2018 | To drawing Respondents wrilten submissions | 300,000 | AI | | IZ | 31107 t2018 | To making 6 copies thereof | 300,000 | Ail | | 13 | 31t07 t2018 | To attendance by clerk to file Respondent's written submissions | 20,000 | Alt | | 14 | 31t07 t2018 | To attendance by clerk to file Respondent's written submissions on Appellant | 20,000 | Ail |

12 I

| '15 | 31t07t2018 | To drawing and compiling Respondent's list of authorities | 300,000 | Alt | |-----|-------------|-----------------------------------------------------------------------------|---------|-----| | '16 | 31t07t2018 | To making 6 copies thereof | 300,000 | AI | | | 31t07t2018 | To attendance to court by clerk to file list of authorities | 20,000 | AII | | 18 | 06/09/20'18 | To attendance to serve Appellant by clerk to file list of authorities | 20,000 | Ail | | '19 | 19/06/18 | To attendance of Court by Counsel when matter was adjourned | 300,000 | Ail | | )n | 31107t18 | To attendance of Court by Counsel when matter was adjourned | 300,000 | Ail | | a1 | 11t10t18 | To attendance of Court by Counsel for hearing Appeal | 300,000 | Ail | | 22 | 15t11119 | To attendance of Court by Counsel to receive Judgment in the matter | 300,000 | Ail | | | 26t11t19 | To perusal of letter dated 26t11t2019 | 100,000 | Ail | | 24 | 03t03t20 | To drawing /extracting decree from judgment | 300,000 | Alt |

| 1E:, | 03t03t20 | To preparing 2 extra copies thereof | 100,000 | Ail | |------|-------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|-----| | 26 | 09/03/20 | To attendance to court by clerk to file the decree | 20,000 | All | | )7 | 11103120 | To attendance by clerk to pick endorsed copy of decree by court | 20,000 | AI | | 28 | 11tO3t20 | To attendance by clerk to serve a copy of decree to Appellant | 20,000 | Ail | | )o | _ \?)t11t20 | To attendance by counsel for a meeling in . discussion to tax Appellant's Bill of costs interparties at Respondent's premises | 200,000 | Alt | | 30 | 19t01t21 | To attendance by Counsel before the Deputy Registrar of court and giving feedback: parties directed to file written submissions on Item 1 of the Appellant's Bill of Costs. | 100,000 | AI | | 31 | 21t01t2021 | To perusal of letter dated 1910112021 from the Appellant | 100,000 | Alr |

| JZ | 21t01t2021 | To perusal of letter dated 191011202'l from the Appellant | '100,000 | Ail | |----|------------|----------------------------------------------------------------------------------------------------------------------------------|----------|-----| | JJ | 02t03t2021 | To drafting submissions in opposition to instruction fees in Appellant's Bill of Costs | 300,000 | Ail | | 34 | o2t03t2021 | To making 2 extra copies thereof | 100,000 | Ail | | 35 | 02t03t2021 | To compiling list of authorities to the Respondent's submissions | 300,000 | Ail | | 36 | 02t03t2021 | To making two extra copies thereof | 100.000 | Ail | | JI | 02t03t2021 | To clerk to file Respondent's written submissions and list of authorities | 20,000 | Ail | | J6 | o2t03t2021 | To attendance by clerk to serve a copy of Respondent's submissions and list of authorities on the Appellant | 20,000 | Ail |

| 39 | 29103t2021 | To perusing Appellant's submissions in reply to Respondent's submissions and list of authorities of over 2000 folios | 200,000 | Ail | |----|---------------|-------------------------------------------------------------------------------------------------------------------------------------|---------|-----| | 40 | 27t08t2021 | To perusing Appellant's submissions and list of authorities over 2.000 folios | 200,000 | Alr | | 41 | _(?) t10t2o21 | To perusal of Notice to show cause why attachment should not issue | 100.000 | AII | | 42 | 01t11t2021 | To draft affidavit in reply to execution application | 300,000 | All | | 43 | 01t11t2021 | To making 2 extra copies thereof | 100,000 | AI | | 44 | 01t11t2021 | To attendance by clerk to file affidavit in reply on Appellant | 20,000 | All | | 45 | | To attendance to court by clerk to file serve | 20,000 | Alt |

| | | affidavit in reply to | | | |-----|-------------|----------------------------|----------|------| | | | appellant | | | | 46 | 04t11t2021 | To attendance to court | 300,000 | Ail | | | | by counsel to show | | | | | | cause why execution | | | | | | should not issue | | | | 47 | o3t11t2021 | To perusal of letter dated | '100,000 | Ail | | | | 0511112021 from the | | | | | | appellant and | | | | | | attachment thereto | | | | 48 | 17 t11t2021 | To drafting letter | 100,000 | Ail | | | | comm unicating | | | | | | computations to | | | | | | appellant | | | | 49 | 18t11t2021 | To attendance to court by | 20,000 | Ail | | | | clerk to file letter | | | | 50 | 18t11t2021 | To attendance to court by | 20,000 | Ail | | | | clerk to serve letter on | | | | | | Appellant | | | | 5'1 | 10t11t2021 | To drawing Bill of Costs | 300,000 | AII | | 5t | | To making 3 copies | 60,000 | Ail | | | | thereof | | | | E) | | To drawing and | 100,000 | lntt | | | | extracting taxalion | | | | | | hearlng notices | | | | 54 | | To attendance by clerk to | 20,000 | Ail | | | | file Bill of Costs | | | | | | | | |

77 I

| 55 ]D | To attendance to court by clerk to serve Bill of Costs and hearing notice 1i, To attendancdy counsel to tax bill of costs | 20,000 100,000 | All AII | |----------|---------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------|------------------------------------| | | To attendance by counsel to tax bill of costs in original Bill of Sum | 100,000 Subtotal | Alt Ail 48,630,000 | | | Costs | 48,630,000 VAT 18% 8,753,400 Subtotal Part A 57,383,400 | Taxed off Subtotal Part A =0 | | Pa rt B | As in bill of costs | '1 ,350,000 | Subtotal Part B =0 |

## Final Result

The Court allowed The Respondent's Bill of Cost at % so the Respondents Bill of Costs is taxed and allowed at Ug Shs 1 ,O12,5OO|=.

## lso Order.

18 I

$t_2$ Dated at Kampala this....................................

JUSTICE GEOFFREY KIRYABWIRE, J. A.

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