Green Power Generation Company Limited v Kenya Power and Lighting Company Limited & another
The bottom line
#A Kenyan court confirmed you can challenge a taxing officer's decision directly, and that VAT cannot be charged on party-and-party costs.
What this practically means
#Executive summary
#Key legal issues
#Whether a review application before the Taxing Master is a precondition to filing a reference
The preliminary objection was dismissed; where reasons are already contained in the taxation ruling, no review application is needed before filing a reference.
Rule 11 of the Advocates Remuneration Order requires only a notice of objection and written reasons before a reference. Courts have held that where the reasons for taxation on disputed items are already in the ruling, there is no need to seek further reasons. The terms 'appeal' and 'review' are statutory and should not be loosely used; rule 11 provides a simple, expeditious reference procedure.
Whether VAT is chargeable on a party and party bill of costs
VAT is not payable on a party and party bill of costs; the taxing officer erred in principle by awarding VAT of Kshs. 134,743.62.
Section 6(1) of the VAT Act 2015 charges tax only on taxable supplies made by a taxable person in the course of business. In party and party costs neither party supplies services to the other; the advocate is not being compensated. VAT could only apply to advocate-client bills or where evidence shows the plaintiff paid VAT. The award of VAT was an error of principle justifying interference.
The standard for interfering with a taxing officer's decision
A court will interfere only where there is a clear error of principle or the sum awarded is manifestly high or low so as to cause injustice.
The court applied the settled principle that a judge on a reference ought not to interfere with the taxing officer's findings unless the taxing officer misdirected himself on a matter of principle or the award is manifestly excessive or low. The award of VAT on a party and party bill amounted to such an error of principle, warranting remission for fresh taxation.
Legal principles established
#- VAT is not payable on a party and party bill of costs as no services are rendered as between the parties
- There is no requirement that a party first file an application for review before the Taxing Officer before filing a reference under rule 11
Court orders
#- 1.The Preliminary Objection dated 18th July 2022 is dismissed with costs
- 2.The Chamber Summons dated 17th December 2021 is allowed
- 3.The Bill of Costs is remitted to the Taxing Master for fresh taxation
- 4.Each party to bear their own costs of the application
- Jurisdiction invoked
- Rule 11(2) of the Advocates Remuneration Order - reference to a judge against a taxing officer's decision
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Green Power Generation Company Limited v Kenya Power and Lighting Company Limited & another", Case Analysis (2023). Environment & Land Case 179 of 2013. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2023/17182/eng@2023-05-02
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.