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ELCAllowedChamber Summons dated 10th October 2016 (Reference from taxation)· [2017] KEELC 1858 (KLR)

Mwai & Company Advocates v Richard Wangondu Makanga [2017] KEELC 1858 (KLR)

High Court of Kenya
19 September 2017
EOE. O. Obaga
758 words in judgment
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The bottom line

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Kenya's High Court confirmed that when a legal transaction is not completed, advocates may only charge reduced fees under Schedule V of the Remuneration Order, not full Schedule I instruction fees.

What this practically means

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Executive summary

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This ruling determines a reference by Richard Wangondu Makanga, a client, against a taxing officer's decision in a bill of costs filed by his former advocates, Mwai & Co. Advocates. The applicant had instructed the advocates to purchase 1,875 shares in Nairobi Theatres Limited, owners of Embassy Cinema, for Kshs.180,000,000. The transaction was rescinded and the Kshs.24,000,000 deposit refunded. The advocate's bill of 37 items was taxed at Kshs.2,610,000 inclusive of VAT, with instruction fees on item No. 1 assessed under Schedule I of the Advocates Remuneration Order 2009. The taxing officer rejected items 2 to 37 because there was no evidence of an election under paragraph 22(1) to be remunerated under Schedule V, yet she still taxed item No. 1 under Schedule I, reasoning that fees are earned on instruction regardless of the transaction's outcome. Obaga J held that this was erroneous: the taxing officer failed to consider paragraphs 18(a) and (f), which must not be read in isolation. Paragraph 18(f) expressly provides that where business referred to in subparagraphs (a) and (c) is not completed, remuneration is that prescribed in Schedule V. Since the transaction's non-completion was undisputed, Schedule V was the correct basis. The court set aside the taxing officer's ruling on item No. 1 and referred the bill back for fresh taxation under Part II of Schedule V before a different taxing officer, awarding the applicant costs of the application.

Key legal issues

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01

Correct schedule for taxing the instruction fee where the transaction was not completed

Holding

The taxing officer erred in applying Schedule I instead of Schedule V; her ruling on item No. 1 was set aside.

Reasoning

The transaction for the purchase of 1875 shares in Nairobi Theatres Limited was rescinded and the Kshs.24,000,000 deposit refunded, so it was undisputed that the business was not completed. Paragraph 18(f) of the Advocates Remuneration Order expressly provides that where business referred to in subparagraph (a) and (c) is not completed, remuneration is that prescribed in Schedule V. The taxing officer taxed under Schedule I on the basis that fees are earned on instruction regardless of outcome, but failed to address paragraphs 18(a) and (f), which cannot be read in isolation.

p. 2

Legal principles established

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  • Where a non-contentious transaction instructed by a client is not completed, the remuneration is to be that prescribed in Schedule V of the Advocates Remuneration Order, and fees do not remain chargeable under Schedule I merely because they are earned on instruction.

Court orders

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  1. 1.Set aside the taxing officer's ruling as relates to item No. 1 of the bill of costs
  2. 2.Direct that the bill be referred back for fresh taxation in accordance with Part II of Schedule V before a different taxing officer
  3. 3.Applicant to have costs of the application

Authorities

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Legislation

  • Advocates Remuneration OrderSchedule I, item No. 1
  • Advocates Remuneration OrderSchedule V, Part II
  • Advocates Remuneration OrderParagraph 18(a) and (f)
  • Advocates Remuneration OrderParagraph 22(1)
Jurisdiction invoked
Reference against a taxing officer's decision on an advocate-client bill of costs under the Advocates Remuneration Order 2009

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, "Mwai & Company Advocates v Richard Wangondu Makanga [2017] KEELC 1858 (KLR)", Case Analysis (2017). Chamber Summons dated 10th October 2016 (Reference from taxation). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2017/1858/eng@2017-09-19

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