Rachuonyo & Rachuonyo Advocates v Kenya National Capital Corporation Limited [2022] KEHC 3324 (KLR) | Taxation Of Costs | Esheria

Rachuonyo & Rachuonyo Advocates v Kenya National Capital Corporation Limited [2022] KEHC 3324 (KLR)

Full Case Text

Rachuonyo & Rachuonyo Advocates v Kenya National Capital Corporation Limited (Civil Miscellaneous Application E1082 of 2020) [2022] KEHC 3324 (KLR) (Civ) (1 July 2022) (Ruling)

Neutral citation: [2022] KEHC 3324 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Law Courts)

Civil

Civil Miscellaneous Application E1082 of 2020

EC Mwita, J

July 1, 2022

Between

Rachuonyo & Rachuonyo Advocates

Plaintiff

and

Kenya National Capital Corporation Limited

Client

Ruling

1. This is a reference by National Bank Limited the Client) through Chamber Summons dated October 4, 2021 brought under Paragraph 11(2) of the Advocates Remuneration Order. The application seeks to set aside the ruling of the taxing officer delivered on dated July 9, 2021, allowing the bill of costs by Rachuonyo & Rachuonyo Advocates (Advocates) at Kshs. 66. 937,813. 50. The application further seeks an order remitting the bill of costs for taxation afresh with directions on the correct approach the taxing officer should take in taxing items 2 and 11 on instruction fee, as well as items on attendance and correspondence.

2. The application is based on the grounds on its face; the supporting affidavit sworn by Samuel Mundia on October 4, 2021 and written submissions dated March 22, 2022. The Client’s case as can be seen from the grounds, affidavit and submissions, is that the advocate-client bill of costs dated September 22, 2020 proceeded through written submissions and a ruling was delivered on July 9, 2021 taxing the bill of costs at Kshs. 66. 937,813. 50. In doing so, the taxing officer proceeded on the basis that the value of the subject matter could be determined from the judgment of the court in the suit. The taxing officer however not only adopted the amount of Kshs. 156,938,000 allowed pursuant to the plaint together with interest at 12% as representing the value of the subject matter, but also added Kshs. 550,000,000 to arrive at a colossal sum of Kshs. 806,159,660 as the ultimate value of the subject matter, thus the taxing officer misdirected himself and erred in principle.

3. The client further asserted that the taxing officer failed to identify the scale and edition of the Advocates Remuneration Order used; erroneously considered the claim of Kshs. 550,000,000 which was disallowed in the judgment as constituting part of the value of the subject matter contrary to the terms of the judgment and factored interest on the judgment sum, thus proceeded against settled principle that instruction fee is a static item fully earned upon receipt of instructions, acting on those instructions and that instruction fee is earned the moment a defence is filed. Reliance was placed on Joreth Limited v Kigano & Associates Advocates[2002] eKLR.

4. The client also cited the decision inFirst American Bank of Kenya Limited v Gulab P. Shah & 2 others[2002] eKLR that full instruction fee to defend a suit is earned the moment a defence is filed and subsequent progress of the matter is irrelevant to the item of fees.

5. The client argued that once the value of the subject matter was determined in the judgment as Kshs. 156,938,000, the taxing officer could not factor in interest as that went against the principle that instruction fee is a static item earned the moment a defence is filed. The client relied on Bio Medical Laboratories Ltd v Attorney General [2014] eKLR that the judgment sum cannot be enhanced by the amount of accumulated interest when calculating party and party costs.

6. The client further asserted that the taxing officer erred in principle for determining instruction fee on the value of the counter claim by factoring in interest.

7. Regarding attendances and correspondences, the client argued that the taxing officer committed an error of principle by allowing those items without taking into account its submissions and the provisions of Schedule 6B of all the applicable edition(sic) of the scale of fees to the Advocate Remuneration Order. The client urged the court to allow the reference as prayed.

Response 8. The advocates filed a replying affidavits sworn by Clifford Owour Rachuonyo on November 9, 2021and written submissions dated February 3, 2022. The advocates argued that the client did not deny during taxation that they defended an aggregate amount of Kshs. 806, 159,660, made up of surrender of full sale proceeds realized in exercise of statutory power and claim for special damages for wrongful sale of the property where the client had sought to recover market price of Kshs. 550,000,000. The court dismissed the plaintiff’s claim for wrongful sale but allowed the plaintiff’s claim at Kshs. 156, 938,000 for special damages considering the pleaded and affirmed market value of Kshs. 550,000,000.

9. According to the advocates, the amount of Kshs. 550,000,000 was reduced by Kshs. 88,062,000 being the value of the portion of the property occupied by squatters, thus bringing the final allowed amount to the difference of Kshs. 461,938,000 less the amount realized in the sale, leaving Kshs. 305,000,000. The client maintained that the value of the subject matter was Kshs. 550,000,000 and they successfully reduced the client’s exposure from that amount to Kshs. 156,938,000. The advocates contended that the aggregate claims totaled to Kshs. 806,159,660 and, therefore, the taxing officer was not in error.

10. Regarding interest, the advocates argued that interest was awarded from the date of judgment thus the claim for interest had fully crystalized and no further determination was outstanding. According to the advocates the taxing officer did not take into account interest in determining instruction fee.

11. The advocates asserted that in law, an advocate’s remuneration is not bound by the outcome of the brief instructed to take on behalf of the client. The advocates relied on Njogu & Co Advocates v National Bank of Kenya Limited [2016] eKLR. The Advocates maintained that ascertained and allowed instruction fee was reasonable.

12. On whether the taxing officer identified correct scales applicable under the Advocate Remuneration Order, the advocates argued in the affirmative. It was their case that the applicable Remuneration Order was not in dispute and that the taxing officer applied the 2006 edition in taxing instruction fee and which the client had recognized in its submissions dated December 11, 2020 (Para 5). In any case, the advocates argued, the business of defending the suit was stated to have been conducted in January 2014.

13. Regarding increase of costs on correspondence and attendances by one-half, the advocates argued that this is a statutory requirement on which the taxing officer had no discretion. The advocates relied on Central Bank of Kenya v Makecha & Company Advocates [2019] eKLR for the argument that in the absence of an agreement for fees between the client and the advocate, the taxing master has no discretion to exercise since the law entitles the advocate to party and party costs plus one half.

14. The advocates further relied on Rachuonyo & Rachuonyo Advocates v National Bank of Kenya Limited (Misc Application No. E767 of 2020) and Masore Nyang’au & Co Advocates v Ken salt Limited [2019] eKLR for the same proposition. The advocates urged that the reference be dismissed with costs.

Determination 15. This reference challenges the decision of the taxing officer on a number of items. This is clear from the notice of objection dated July 25, 2021following the tax officer’s decision dated 9th July 2021 and delivered virtually on the same day. The notice of objection objected to item Nos. 2, 11, 19,21,22, 46,47,49,51,95,112,155,169,183,188,189,192,193,95,201,202,207 and 227.

16. A taxing officer exercises judicial discretion when taxing a bill of costs and this court will not interfere with that exercise of discretion unless it is demonstrated that the taxing officer wrongly exercised the discretion such as taking into account a wrong principle to call for interfering by this court. (Nyangito & Co Advocates v Doinyo Lessos Creameries Ltd(HCCMISC. Cause No. 843 of 2013).

17. In Vipul Premchand Haria v Kilonzo & Co Advocates [2020] eKLR, it was held that a taxing officer is entitled to use his discretion to assess instruction fee as he considers just, taking into account among others the nature and importance of the cause or matter.

18. InRogan-Kemper v Lord Grosvenor (No.3) [1977] KLR 303]; [1977] eKLR, Law, J.A. stated:A Judge will not substitute what he considers to be the proper figure for that allowed by the taxing officer unless in the judge’s view, the sum allowed by the taxing officer is outside reasonable limits so as to be manifestly excessive or inadequate.

19. In Bank of Uganda v Banco Arabe Espaniol, (Civil Application No. 29 of 2019), Mulenga, JSC., writing for the Supreme Court of Uganda, stated that even if it is shown that the taxing officer erred in principle, the judge should interfere only if satisfied that the error substantially affected the decision on quantum and that upholding the amount allowed would cause injustice to one of the parties.

20. It is on the basis on the basis of these principles that the court will approach the matter at hand.

Instruction fee 21. The main dispute appears to be on instruction fee, items 2 and 11. The client’s case as can be seen from the arguments put forward, is that the taxing officer was erred in principle in identifying the value of the subject matter for purposes of determining instruction fee. According to the client, the taxing officer should have applied the amount in the judgment. The client also argued that the taxing officer took into account interest as part of the value of the subject matter thus erred in principle. The advocates held the position that the taxing officer was right in identifying the value of the subject matter and applied correct principle in determining instruction fee.

22. The law is settled that for purposes of determining instruction fee, the taxing officer should identify the value of the subject matter from the pleadings, judgment or settlement. Where this is not possible, the taxing officer should use his discretion to assess such instruction fee as he considers just, taking into account, amongst other matters, the nature and the importance of the cause or the matter, the interest of the parties, general conduct of the proceedings, any direction by the trial judge and all other relevant circumstances. Joreth Ltd v Kigano & Associates Advocates(supra).

23. I have read the decision of the taxing officer and in particular, the decision on instruction fee. The taxing officer took into account various amounts in arriving at the instruction fee. These included what was said to be the market value of the property, namely; Kshs 550,000,000; the amount that the won, Kshs. 156,938,000; the amount client was awarded in the counterclaim being Kshs. 305,000,000 and interest on the various amounts to arrive at instruction fee.

24. Whereas the taxing officer is required to identify the value of the subject matter from the pleadings, judgment or settlement, that does not, in my view, include interest. When the law talks about identifying the value of the subject from the pleadings, judgment or settlement, that cannot certainly include interest. Allowing interest to be taken into account as forming part of the value of the subject matter would be stretching the meaning of value of subject matter identifiable from pleadings, judgment or settlement too far. Allowing such an approach, nothing would stop a taxing officer from taking into account costs awarded as forming part of the value of the subject.

25. The Value of the subject matter for purposes of instruction fee should be what has been either pleaded in the pleadings, awarded in the judgment or in the settlement, but cannot certainly include interest awarded. I agree with the client that the taxing officer applied a wrong principle in identifying the value of the subject matter for purposes of determining instruction fee.

Scale of fees 26. Regarding scale of fees, the client argued that the taxing officer did not identify the applicable scale of fee. The advocates took the view that that was not in issue before the taxing officer, and, therefore, it should not engage the court here. I have read the decision of the taxing officer in this respect. There is no trace of the argument on which scale of fees was applicable. That notwithstanding, the taxing officer stated clearly that the applicable Advocates Remuneration was the 2006. That said, I have not traced ay submission by the client that any other scale of fees other that the Remuneration of Oder 2006 was applicable. It is up to the parties to raise specific issues for the taxing officer’s determination and where not determined call on this court to do so in the reference. If an issue was not raised before the taxing officer, it cannot be raised before this court for the first time.

Correspondence and attendance 27. The client ‘s case with regard to these items is that the taxing officer committed an error of principle by allowing those items without taking into account its submissions and the provisions of Schedule 6B of the applicable edition. The client did not, however, identify the applicable edition other than saying Schedule 6B of the scale of fees to the Advocate Remuneration Order.

28. I have read the taxing officer’s decision on these items, I do not agree with the argument that the taxing officer did not take into account submissions made by the client on these items. A reading of the ruling and, in particular, paragraphs 9 through 11, shows that the taxing officer considered the arguments and objections raised against some items and indeed some of the objections were upheld. At paragraph 12, the taxing officer clearly stated that the arguments raised by way of submissions were “not sufficient to deny a fee known in law.” The taxing officer was alive to the submissions made and took them into account when considering the objections raised regarding items on correspondence and attendance.

29. Schedule 6 B to the Advocates Remuneration Order provides that as between the advocate and client, the minimum fee is, (a), that provided under 6A increased by 50%, or fees agreed between the parties under Paragraph 57 of the order increased by 50%. Paragraph 6B states plainly that the increase by 50% is to include all proper attendances to the client and all necessary correspondences. This does not in any way mean that increase by 50% is inclusive of attendance and correspondence.

30. My understanding is that the fee charged for attendance and correspondence forms part of the party and party costs. It is the party and party costs that are then increased by 50%. That is; after the taxing officer determines the total amount to award as party and party costs, that amount is increased by 50% when the bill of costs under consideration is that between advocate and client. I see no fault on the part of the taxing officer in relation to these items.

31. Having considered the reference and submissions by parties, I am satisfied that the taxing officer erred in principle in determining items 2 and 11 (instruction fee) when he took into account interest which should not have formed part of the value of the subject matter.

32. Regarding the scale of fees used, the taxing officer did indicate at paragraph 12 that he was considering the bill under Schedule 6 of the 2006 Advocates Remuneration Order. However, he did not show how he arrived at the amount awarded as instruction fee except giving the figures. I, however, see no fault in relation to the items on attendance and correspondence.

33. In the end, the reference partially succeeds. The taxing officer’s decision on items 2, and 11 (instruction fee), is hereby set aside. The advocate-client bill of costs dated September 22, 2020 is hereby remitted to the taxing officer for taxation afresh on items 2 and 11 only with directions that the taxing officer to identify the value of the subject matter as required by law. The subject matter for purposes of determining instruction fee on items 2 and 11 shall not, however, include interest. The taxing officer shall also indicate how instruction fee is arrived at showing clear calculations in arriving at the amount allowed.

34. The rest of the items shall remain as determined and allowed in the decision dated July 9, 2021, except the total amount finally allowed in the bill.

35. As the error was occasioned by the court, there shall be no order as to costs

DATED SIGNED AND DELIVERED AT NAIROBI THIS 1ST DAY OF JULY 2022E C MWITAJUDGE