Kenya Revenue Authority v Universal Corporation Ltd
The bottom line
#Kenya's Court of Appeal threw out a Kshs 3 million fee award, ruling that legal costs must reflect what the case was actually about, not the tax amount demanded.
What this practically means
#Executive summary
#Key legal issues
#Whether basing instruction fees on the value of the subject matter was an error of principle where the dispute was a judicial review challenge to the legality of a tax demand
Yes. The subject matter was not the Kshs 427,918,035 demanded but the legality of the appellant's decision-making process; the taxing officer erroneously treated the demanded sum as the sum in dispute.
Both the High Court judgment and the Court of Appeal judgment in the underlying appeal made clear that the dispute concerned whether the KRA had power to make the demand, not the quantum of taxes. Following Peter Muthoka, once judgment has been entered the subject matter value is ascertained from the judgment, not the pleadings. The taxing officer's reference to 'the sum in dispute' was therefore a misdirection on a matter of principle warranting interference.
Whether the taxing officer failed to consider relevant factors under paragraph 9(2) of the Third Schedule
Yes. She considered only the sum in dispute and the nature of the appeal and generalised, without specifying how she exercised her discretion, contrary to the guidance in the W'Njuguna case.
Paragraph 9(2) obliges the taxing officer to consider the amount involved, nature, importance and difficulty of the appeal, the interests of the parties, other costs allowed, the general conduct of proceedings, the fund or person to bear the costs, and all other relevant circumstances. The ruling did not show how these were considered, which the court decried in W'Njuguna; failure to consider relevant factors is an error of principle.
Whether non-participation in taxation bars a reference
No. An error of law or principle vitiates the taxation regardless of the referring party's non-attendance.
The respondent argued the reference was a disguised re-taxation by a party that failed to attend. The court accepted that dilatory conduct is disfavoured but held that the existence of an error of law or principle does not depend on participation; if demonstrated, non-participation will not cure the error.
The appropriate remedy upon finding an error of principle
Remittal to a different taxing officer for re-taxation, as the general rule, since relevant factors remained to be considered.
Citing Arthur v Nyeri Electricity Undertaking, Steel & Petrol and First American Bank, the court held that where errors of principle are found the normal practice is to remit for re-assessment unless the error could not have materially affected the assessment. Since several relevant factors were unconsidered, remittal to a taxing officer other than Hon. Ogombe was appropriate.
Legal principles established
#- Where a dispute has been determined and judgment rendered, the real subject matter for purposes of instruction fees is determined by the terms of the judgment rather than the pleadings
- A party's non-participation in taxation does not bar a reference where an error of law or principle in the taxation is demonstrated
- Courts will interfere with a taxing officer's award only in exceptional circumstances - error of law or principle, or manifest excess or inadequacy
- Failure to take into account relevant factors under paragraph 9(2) of the Third Schedule constitutes an error of principle
- The normal practice on finding errors of principle is to remit to a taxing officer for re-assessment, and the taxing officer must specify how discretion was exercised
Court orders
#- 1.The appellant's reference is allowed
- 2.The taxing officer's ruling dated 3rd March 2023 is set aside
- 3.The matter is remitted back for re-taxation by a taxing officer other than Hon. Ogombe
- 4.Each party will bear its own costs of the reference
- On appeal from
- Taxing Officer, Court of Appeal (Hon. Ogombe, Deputy Registrar)
- Party and Party Bill of Costs dated 4th February 2021 (arising from Civil Appeal No. 150 of 2018)
- Jurisdiction invoked
- Rule 117 of the Court of Appeal Rules (reference from the decision of a taxing officer)
Key timeline
#Practical implications
#Frequently asked questions
#Later judgments citing this (1)
#Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.
- Autoports Freight Terminals Limited v Kenya Ports Authority[2025] KECA 1297 (KLR)18 Jul 2025
Cite this brief
#Cite this brief
Caselaw, "Kenya Revenue Authority v Universal Corporation Ltd", Case Analysis (2024). Reference under rule 117 of the Court of Appeal Rules (arising from Civil Appeal No. 150 of 2018). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2024/1103/eng@2024-08-19
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.