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Court of AppealDismissedCourt of Appeal appeal against ruling in High Court reference under Rule 11(2) of the Advocates (Remuneration) Order· [2016] KECA 85 (KLR)

D Njogu & Company Advocates v National Bank of Kenya Ltd [2016] KECA 85 (KLR)

Court of Appeal of Kenya
25 November 2016
AVAlnashir VisramHOH. M. OkwenguFSF. Sichale
3,427 words in judgment
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The bottom line

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Kenya's Court of Appeal refused to let a law firm collect fees from a deal it knew broke the rules on how advocates must be paid.

What this practically means

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Executive summary

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This was a first appeal to the Court of Appeal against a ruling of the High Court (Warsame J, as he then was) of 24th April 2007, which upheld a Taxing Master's ruling striking out the appellant advocate's bill of costs claiming Kshs. 39,194,009.03 against National Bank of Kenya Limited. The Taxing Master had found a valid and enforceable agreement on advocate/client costs existed between the parties. The appellant contended the agreement, reflected in a letter of 28th July 1999, contravened sections 45 and 46(c) and (d) of the Advocates Act because it provided for fees less than the prescribed scale and for further payment contingent on success in litigation. The Court, in a unanimous judgment of Visram, Okwengu and Sichale JJA, agreed that the agreement was illegal: recovery of a substantial part of the fees depended on success against the bank's customers, and full recovery presupposes success in litigation, offending section 46(c) and (d). However, invoking Patel v Singh and Archbolds (Freightage) Ltd v S Spanglett Ltd, the Court held a contract contravening a statute is void ab initio and unenforceable, and that the appellant, a firm of advocates deemed aware of the law, was estopped by its conduct from seeking the court's aid to escape the illegality and revert to taxation under the Advocates Remuneration Order it had deliberately ignored; doing so was an abuse of process. The appeal was dismissed with costs, affirming the decision below. The judgment binds lower courts on the effect of statutory illegality in advocates' fee agreements and on the estoppel of advocates who knowingly contract illegally.

Key legal issues

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01

Validity of the remuneration agreement under sections 45 and 46 of the Advocates Act

Holding

The agreement, reflected in the letter of 28th July 1999, was conditional on success and provided for fees less than the prescribed scale, thereby contravening section 46(c) and (d) of the Advocates Act and rendering it illegal.

Reasoning

Section 45 permits advocates and clients to agree on remuneration, but that discretion is expressly made subject to section 46. The letter provided that for contentious work fees were 30% of scale fees subject to a limit of Kshs. 200,000, with the balance recoverable only from the bank's customer, which was possible only if the suit succeeded, and allowed a further 30% whenever full recovery was made. Full recovery is possible only upon success in litigation. Recovery of a substantial part of the fees was therefore contingent on success, contravening section 46(c) and (d).

p. 5
02

Whether a party to an illegal agreement, knowing the law, can invoke the court's aid to escape it

Holding

No. The appellant, a firm of advocates deemed aware of the law, is estopped by its conduct from seeking the court's intervention to avoid the illegal agreement and claim under the Advocates Remuneration Order.

Reasoning

Relying on Patel v Singh and the passage quoted from Archbolds (Freightage) Ltd v S Spanglett Ltd, the court held that a contract contravening a statute is void ab initio. However, the appellant initiated the litigation by filing the bill of costs on the strength of the illegal agreement. Citing Warsame J's reasoning, the court endorsed the principle that no court will lend its aid to a party who founds his case on an illegal contract, and it is an abuse of process for the appellant to base its fees on the Order it deliberately ignored.

p. 6
03

Standard of interference on a first appeal involving exercise of discretion

Holding

The appellate court will not interfere with the exercise of discretion unless the judge misdirected himself, arrived at a wrong decision, or was clearly wrong in the exercise of discretion and occasioned injustice.

Reasoning

As a first appeal, the court is mandated under Rule 29(1) of the Court's Rules and Selle v Associated Motor Boat Company Ltd to re-appraise the evidence and draw inferences of fact. Where the judgment under appeal involves exercise of discretion, the principles in PIL Kenya Ltd v Oppong apply. On the facts, the court found no basis to disturb the Judge's upholding of the Taxing Master's ruling striking out the bill of costs.

p. 3

Legal principles established

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  • Any agreement for advocates' remuneration that is conditional on success of the litigation, or that provides for payment at rates less than those prescribed by the Advocates (Remuneration) Order, is prohibited by section 46(c) and (d) of the Advocates Act and is illegal and unenforceable.
  • A contract that contravenes a statute is illegal, void ab initio and unenforceable.
  • An advocate who willingly and knowingly enters into a fees agreement contrary to the Advocates Act and the Advocates Remuneration Order cannot maintain proceedings to avoid that illegal agreement by reverting to taxation under the Order; the court will not lend its aid and the advocate is estopped by conduct.

Court orders

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  1. 1.The appeal is dismissed with costs to the respondent
  2. 2.The ruling of the Taxing Master striking out the Bill of Costs, as upheld by the High Court, stands

Authorities

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Legislation

  • Advocates Actsection 45(1)
  • Advocates Actsection 46(c) and (d)
  • Advocates Actsection 44
  • Advocates Actsection 46(1)
  • Advocates (Remuneration) OrderRule 11(2)
  • Advocates Remuneration OrderRule 3 (now repealed)
  • Advocates Remuneration Orderparagraph 3
  • Exchange Control Actsection 3(1)
  • Court of Appeal RulesRule 29(1)

Cases cited (8)

  • National Bank of Kenya Ltd v Mahesh Manubhai Patel
    Mombasa Miscellaneous Civil Application No. 583 of 2003
  • Ahmednassir, Abdikadir & Co. Advocates v National Bank of Kenya Ltd
    High Court Misc. Civil Case No. 753 of 2004
  • Ahmednassir, Abdikadir & Co. Advocates v National Bank of Kenya Ltd
    High Court Misc. Application No. 750 of 2004
  • Abok James Odera t/a A. J. Odera & Associates v John Patrick Machira t/a Machira & Company Advocates
    [2013] eKLR
  • Selle v Associated Motor Boat Company Ltd
    [1968] EA 123
  • PIL Kenya Ltd v Oppong
    [2009] KLR 442
  • Patel v Singh (2)
    [1987] KLR 585
  • Archbolds (Freightage) Ltd v S Spanglett Ltd
    [1961] 1 QB 374
On appeal from
High Court of Kenya
Reference under Rule 11(2) of the Advocates (Remuneration) Order arising from the Bill of Costs in High Court Civil Suit No. 229 of 2001, Shimmers Plaza Limited v National Bank of Kenya Limited
Jurisdiction invoked
First appeal to the Court of Appeal under its appellate jurisdiction, guided by Rule 29(1) of the Court of Appeal Rules

Key timeline

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Practical implications

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Frequently asked questions

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Cite this brief

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Cite this brief

Caselaw, "D Njogu & Company Advocates v National Bank of Kenya Ltd [2016] KECA 85 (KLR)", Case Analysis (2016). Court of Appeal appeal against ruling in High Court reference under Rule 11(2) of the Advocates (Remuneration) Order. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2016/85/eng@2016-11-25

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.