Rene & Hans Advocates LLP v Kirika t/a A. N. Kirika & Company Advocates [2022] KEHC 46 (KLR)

Rene & Hans Advocates LLP v Kirika t/a A. N. Kirika & Company Advocates (Miscellaneous Application E907 of 2021) [2022] KEHC 46 (KLR) (Commercial and Tax) (4 February 2022) (Ruling)

Neutral citation: [2022] KEHC 46 (KLR)

Republic of Kenya

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

Commercial and Tax

Miscellaneous Application E907 of 2021

DAS Majanja, J

February 4, 2022

Between

Rene & Hans Advocates LLP

Plaintiff

and

Allan A. N. Kirika t/a A. N. Kirika & Company Advocates

Defendant

Ruling

1. The parties to this suit are Advocates. The Plaintiff has invoked Rule 122 of the Law Society of Kenya Code of Standards of Professional Practice and Ethical Conduct, June 2016 and moved the Court by the Originating Summons dated 8th November 2021 seeking an order directing the Defendant to pay it KES. 4,000,000. 00 in terms of the Defendant’s professional undertaking dated 2nd August 2021 and its addendum dated 21st October 2021 (“the Undertaking”) and costs of the suit.

2. The Summons is supported by the affidavit of Hans Oichoe, an Advocate and partner in the Plaintiff firm, sworn on 8th November 2021. The Defendant filed a replying affidavit sworn on 7th December 2021. The advocates made oral submissions in support of their respective positions.

3. The facts emerging from the application and deposition are common ground. The Defendant’s clients, Leonard Musembi Mutisya and Peter Musyimi Mendeli, owned a property; Konza North/Konza North Block 2 (Malili) 157 which they wished to sell to certain purchasers but they required some money to meet incidental expenses including demarcating the land. They approached the Plaintiff’s client, Oceanic Communication Limited, to advance them KES. 1,500,000. 00 in consideration for a return on investment amounting to KES 2,000,000. 00. This arrangement was secured by the Undertaking under which the Defendant undertook to pay to the Plaintiff KES. 3,500,000. 00 within 60 days from the date of the Undertaking.

4. The sum of KES. 3,500,000. 00 became due on 2nd October 2021 whereupon the Plaintiff issued the demand letter dated 5th October 2021. In response, the Defendant explained in the letter dated 8th October 2021 that the sale of the suit property required to satisfy the Undertaking has been delayed beyond its client’s control. Thereafter, the parties engaged in discussions which were memorialized in the Plaintiff’s letter dated 21st October 2021 in which the Plaintiff accepted to extend time for compliance on condition that the money payable was revised to KES. 4,000,000. 00 which would be paid before 2nd November 2021. However, the Defendant endorsed on the letter that he had not agreed on the 50% interest for every 30 days.

5. The Defendant admits that he issued the Undertaking and states that he intends to honour it. He however states that there was, “implied and mutual understanding by both parties that the substratum of the P.U. was exclusively the sale proceeds of the property …. and which the clients of the Defendant were disposing to an interested prospective buyer at an agreed price of KES. 40,000,000. 00. ’’ The Defendant states that it was clear that his clients did not have any other source of income and that the money would be paid upon payment of the sale price but the sale was delayed due to unforeseen circumstances.

6. The Defendant depones that in the event the sale contemplated under the Undertaking fails, his clients are disposing of another property in Nairobi and will be able to settle the matter. He points out that the Plaintiff has not furnished the court with evidence or information of receipt of the funds from the underlying transaction. He accuses the Plaintiff of being unreasonable and lacking patience by rushing to court.

7. The parties’ submissions mirrored their contentions in their depositions. The issue for resolution is whether the Undertaking was absolute or conditional. The Plaintiff takes the position that the Undertaking was absolute and irrevocable and made without reference to the underlying transaction. It relies on the Code of Standards of Professional Practice and Ethical Conduct (GN No. 5212 of 26th May 2017) which, at Clause 9, provides that an advocate has a duty to honour any professional undertaking given in the course of their practice in a timely manner. The obligation to honour a Professional undertaking remains until the undertaking is performed, released or excused. The Defendant submits that the Undertaking was based on a transaction that is yet to materialize hence the court should not enforce it. He however commits to meeting the terms of the Undertaking.

8. The nature of an Advocates’ undertaking was explained by the Court of Appeal in Harit ShethT/AHarit Sheth Advocate v K. H. Osmond T/A K. H. Osmond AdvocateNRB CA Civil Appeal No. 276 of 2001 [2011] eKLR as follows:One last point we need to comment on is the submission by Mrs. Rashid, that the appellant and his client should have followed the debtor, […], to recover the money it owes. In her view this case is peculiar and the Court should depart from the usual practice of enforcing professional undertakings. With due respect to the learned counsel, a professional undertaking is given to an advocate on the authority of his client. It is based on the relationship which exists between the advocate and his client. An advocate who gives such a professional undertaking takes a risk. The risk is his own and he should not be heard to complain that it is too burdensome and that someone else should shoulder the responsibility of recovering the debt from his own client. A professional undertaking is a bond by an advocate to conduct himself as expected of him by the court to which he is an officer. No matter how painful it might be to honour it, the advocate is obliged to honour it if only to protect his own reputation as an officer of the court. The law gives him the right to sue his client to recover whatever sums of money he has incurred in honouring a professional undertaking. He cannot however sue to recover that amount unless he has first honoured his professional undertaking.

9. The Defendant’s case is that the Undertaking was conditional and based on the understanding that the monies to satisfy the Undertaking would come from the underlying sale. It is also accepted in law that an undertaking may be conditional. In Conrad Masinde Nyukuri & Another v Robson Harris & Another MLD HCCC No. 17 of 2017 (OS) [2021] eKLR the court cited with approval the following passage was from Halsbury’s Laws of England (4th Ed.) Vol. 44(1), pl 222, 223, 224, that, “If an undertaking is conditional, the condition must be fulfilled before the undertaking will be enforced.” Likewise, the Court of Appeal in Arthur K. Igeria t/a Igeria & Co. Advocates v Michael Ndaiga NRB CA Civil Appeal No. 51 of 2008 [2017] eKLR observed as follows:For the court to enforce a professional undertaking, it must be satisfied that the undertaking is clear in its terms and that there is no dubiety or ambiguity as to what the advocate has professionally undertaken. Secondly, that what is undertaken is capable of being performed. Thirdly, that if the undertaking is contingent on the happening or occurrence of an event, such event has occurred or happened.

10. Whether an undertaking is conditional or not depends on its written terms. What the court is giving effect to is the agreement between the parties hence it is important to have the terms of the Undertaking which states as follows:2nd August, 2021Rene & Hans Advocates LLP,NAIROBIDear Sirs,RE: PROFESSIONAL UNDERTAKING in respect of intended sale of Title No. KONZA NORTH/KONZA NORTH BLOCK 2 (MALILI) 157 owned by LEONARD MUSEMBI MUTISYA & PETER MUSYIMI MENDELI.At the instructions of our above-mentioned clients, we write to you as follows: -1. Our clients are in the process of disposing their above-mentioned property to a third party (one Ibrahim Osman Omar among other interested parties) for an amount of Kes. 40,000,000/=.

2. That in the meantime, they are in urgent need of financial accommodation of Kes. 1,500,000/= which they intend to utilize for some private commercial purpose as well as to re-demarcate the said land to facilitate the sale.

3. That our clients have already discussed and agreed with your client (Oceanic Communications Limited) about the financing the said Kes. 1,500,000/= which shall be deposited to Account: A. N. KIRIKA & COMPANY ADVOCATES – CLIENTS ACCOUNT No. 01003150024482 at Sidian Bank Limited, Kenyatta Avenue Branch.

4. That our clients have agreed to pay to your client a sum of Kes. 2,000,000/= being Profit/Return on Investment for the money mentioned in paragraph No. 3 above. The purpose of this letter therefore is to confirm that we irrevocably and unconditionally undertake to pay to you, or to your order the sum of Kes. 3,500,000/= (Kenya Shillings Three Million Five Hundred Thousands only) within 60 days from the date hereof through your account: RENE & HANS ADVOCATES LLP, Account Number, 011xxxxxxxxxxx at Co-operative Bank of Kenya Limited, City Hall Branch, Nairobi.

That we acknowledge that unless and until the said amount of Kes. 3,500,000/= is paid to yourselves as aforesaid, we shall not be discharged from our undertaking and obligations herein and you shall be at liberty to exercise all rights under the Laws of Kenya.Further, we hereby irrevocably confirm and undertake that we are sorely liable and responsible for the full compliance with this undertaking.We further hereby confirm that any breach and/or default by our Advocate shall be deemed to be a breach and/or default by ourselves and consequent to which our undertaking herein shall materialize.We confirm that time is of the essence in respect of our obligations herein.Yours faithfully,FOR: A. N. KIRIKA & COMPANY(signed)ALLAN N. KIRIKA

11. While it is true that the underlying transaction between the parties was the sale transaction between the parties, the terms of the undertaking were unconditional, clear and unequivocal. This is why counsel for the Defendant in his submissions emphasized that he would honour the Undertaking and that his clients were making efforts to dispose of another property in order to settle the matter. Since the Undertaking is unconditional and the Defendant has indeed agreed to honour it, I see no reason to disallow the application. As I understand, what the Defendant seeks is time to honour the Undertaking.

12. As regards the addendum dated 21st October 2021, I reject the Plaintiff’s attempt to include it as part of the Undertaking. As I have stated, an undertaking is an agreement. While it is clear that there some discussions which led to the Plaintiff writing that letter to the Defendant setting out the terms of the oral agreement, when it was put to the Defendant, he endorsed it with remarks denying the proposed agreement. In other words, there was no consensus ad idem. I therefore hold that the Undertaking is limited to the letter dated 2nd August 2021.

13. Since the Defendant insists that it intends to honour the Undertaking, I now order as follows:a.The Defendant is directed to honour the Undertaking contained in the letter dated 2nd August 2021 within thirty (30) days of this order by paying to the Plaintiff KES. 3,500,000. 00. b.The issue of costs is hereby reserved upon compliance with (a) above.**

DATED AND DELIVERED AT NAIROBI THIS 4TH DAY OF FEBRUARY 2022. D. S. MAJANJAJUDGECourt of Assistant: Mr M. OnyangoMr Oichoe instructed by Rene and Hans Advocates LLP for the Plaintiff.Mr Kirika instructed by A. N. Kirika and Company Advocates for the Defendant.