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ELRCAllowedChamber Summons dated 22nd November, 2023· [2024] KEELRC 1011 (KLR)

M M Kimuli & Co Advocates v Brinks Security Services Limited (Miscellaneous Case E127 of 2023) [2024] KEELRC 1011 (KLR)

High Court of Kenya
17 April 2024
JGJACOB GAKERI
2,110 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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Kenya's High Court ruled that advocates don't need to prove they paid VAT before it can be included in their taxed legal fees.

What this practically means

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Executive summary

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This was a reference by way of Chamber Summons dated 22nd November 2023, brought under Section 3A of the Civil Procedure Act and Rule 11(1) and (2) of the Advocates (Remuneration) Order, 2009, seeking to set aside or review the Taxing Master's ruling of 14th November 2023. The applicant, an advocate whose Advocates/Client Bill of Costs dated 9th June 2023 was taxed at Kshs.226,630/=, objected to the Taxing Master's decision to tax off VAT of Kshs.38,798/= on the ground that he had not furnished proof of payment of the tax. The applicant argued that VAT is not an advance tax; it is assessed and accounted to the Kenya Revenue Authority upon issuance of an invoice, receipt of payment, or rendering of services, and since his fees remained unpaid he could not possibly have evidence of payment. The respondent maintained that the Taxing Master was correct, as no evidence of payment, invoice or electronic tax register receipt was tendered. The court, applying the authorities including Ngatia & Associates Advocates v Interactive Gaming and Lotteries Ltd and Spire Bank Ltd v Mamicha & Co. Advocates, held that VAT is a statutory charge on legal services and that insistence on proof of payment, where the advocate has neither received payment nor issued an invoice, constituted an error of principle justifying interference. The Taxing Master's finding on VAT was set aside and the Bill remanded for inclusion of VAT. Each party was to bear its own costs. Judgment delivered virtually at Nairobi on 17th April 2024 by Dr. Jacob Gakeri, Judge.

Key legal issues

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01

Whether proof of payment of VAT is required before VAT can be allowed on taxation of an Advocate-Client Bill of Costs

Holding

VAT is a statutory charge accountable to KRA on issuance of invoice, receipt of payment, or rendering of services; where the advocate has not been paid, proof of payment cannot be demanded and taxing off VAT for want of proof is an error in principle

Reasoning

The court held that VAT on legal services is chargeable by statute and becomes accountable to KRA at different points - issuance of invoice, receipt of payment, or rendering of services. Since the applicant had neither received payment nor issued an invoice, he could not possibly have availed proof of payment. The Taxing Master's insistence on proof of payment therefore rested on an erroneous principle, justifying the court's interference with the ruling on that item only.

p. 5

Legal principles established

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  • Requiring proof of payment of VAT as a precondition to awarding VAT in an Advocate-Client Bill of Costs, where fees remain unpaid, is an error of principle

Court orders

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  1. 1.The Taxing Master's finding on VAT is set aside
  2. 2.The Advocates-Client Bill of Costs is remanded to the Taxing Master for inclusion of VAT
  3. 3.Each party to bear their own costs

Authorities

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Legislation

  • Civil Procedure ActSection 3A
  • Advocates (Remuneration) Order, 2009Rule 11(1) and (2)
  • Value Added Tax ActSection 9(3)
  • Constitution of KenyaArticle 159(2)(d)
  • Constitution of KenyaArticle 48
  • Civil Procedure RulesOrder 21 Rule 1
  • Civil Procedure ActSection 1B

Cases cited (10)

  • Pyramid Motors Ltd v Langata Gardens Ltd
    (2015) eKLR
  • Spire Bank Ltd v Mamicha & Co. Advocates & another
    (2020) eKLR
  • Kenya Commercial Bank Ltd v Stage Coach Management Ltd
    (2017) eKLR
  • Ngatia & Associates Advocates v Interactive Gaming and Lotteries Ltd
    (2017) eKLR
  • Ann Kimani & Co. Advocates v Kenindia Assurance Co. Ltd
    (2010) eKLR
  • JP Machira & Co. Advocates v MDC Holdings Ltd & 2 others
  • Amuga & Co. Advocates v Arthur Maina
    (2002) eKLR
  • Aoro v Were
    (Miscellaneous Reference Application E019 of 2022) (2022) KEHC 14628 (KLR)
  • Republic v Ministry of Agriculture & 2 others Ex Parte Muchiri W. Njuguna & 2 others
    (2006) eKLR
  • Kipkorir, Tito & Kiara Advocates v Deposit Protection Fund Board
    (2005) eKLR
Jurisdiction invoked
Section 3A of the Civil Procedure Act (Cap 21) and Rule 11(1) and (2) of 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, "M M Kimuli & Co Advocates v Brinks Security Services Limited (Miscellaneous Case E127 of 2023) [2024] KEELRC 1011 (KLR)", Case Analysis (2024). Chamber Summons dated 22nd November, 2023. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2024/1011/eng@2024-04-17

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