D. N. NJOGU & CO. ADVOCATES v NATIONAL BANK OF KENYA LIMITED [2007] eKLR

Key Facts

Transaction Type

Issues

• The primary issue is the validity of an agreement dated 28th July 1999, where the advocate accepted 30% of the scale fees (subject to a limit of Kshs.200,000/=) for contentious and non-contentious work, with the balance recoverable from the bank's customer. The applicant argues this agreement violates Section 46 of the Advocates Act Cap 16, which prohibits success-based fee arrangements. The respondent contends the agreement complies with Rule 3 of the Advocates Remuneration Order, allowing fees below the scale if over Kshs.10,000/=. The court must determine whether the agreement is enforceable under the Act and if the taxing master erred in upholding its validity.
• The judge emphasizes that parties must be held to their contracts unless vitiating factors exist. The issue is whether the court can intervene to invalidate the agreement when the applicant (advocate) willingly accepted its terms and later seeks to repudiate it after deriving benefits.
• The applicant asserts the agreement's condition of payment upon success conflicts with Section 46(c) and (d) of Cap 16, which bar advocates from stipulating fees solely based on case success. The respondent argues the agreement does not tie payment to success but rather defines an entitlement upon instructions. The court must assess if the agreement's structure falls within the prohibited categories under the Act.
• The applicant claims Rule 3 (permitting fees over Kshs.10,000/=) cannot legalize an agreement violating Section 46. The respondent argues the agreement adheres to Rule 3 and that Section 46 does not apply because the payment is not contingent on success. The court must resolve the interplay between these provisions.
• The judge references the possibility of the agreement being champertous, implying the advocate may have gained an unfair advantage by accepting reduced fees in exchange for future recovery from the bank's customer. The issue is whether such terms violate the Act's principles and if the advocate can now challenge the agreement after benefiting from it.

Holdings

Remedies

• The court dismisses the reference challenging the taxing master's decision, upholding the preliminary objection that the agreed fees were valid under the contract.
• The court decides not to order costs against the Advocate due to varying interpretations of the agreement by the High Court, dismissing the application with no costs implications.

Legal Principles

• The court upheld the principle that valid contracts between parties are binding and enforceable, emphasizing that parties must be held to their agreements under Section 45(1) of the Advocates Act Cap 16. The ruling stressed that an advocate cannot later claim the contract is invalid if they knowingly accepted its terms and benefited from it.
• The decision clarified that costs taxation cannot override private agreements on fees if they comply with Rule 3 of the Advocates Remuneration Order (fees above Kshs.10,000). The court emphasized that advocates must not accept fees below the prescribed scale unless explicitly allowed by law, aligning with Sections 36 and 46 of Cap 16.
• The court addressed whether the agreement (30% of scale fees) was unconscionable under Section 46 of Cap 16. It concluded that the advocate, as a legal professional, knowingly accepted the terms and cannot later claim illegality for personal advantage, reinforcing that unconscionable terms are invalid if they contravene statutory obligations.

Precedent Name

• Ahmednasir, Abdikadir & co. Advocates vs National Bank of Kenya
• In the matter of Maina Njanga & Co. Advocates vs National Bank of Kenya

Key Disputed Contract Clauses

• This clause allows advocates to claim an extra 30% of scale fees when full recovery is achieved in contentious cases. The Applicant contended this created an impermissible success-based payment structure under Section 46(d) of the Advocates Act, while the Respondent argued it was a legitimate entitlement based on instructions, not case outcomes.
• The agreement's contentious work clause stipulates 30% of scale fees (capped at Kshs.200,000) for the advocate, with an additional 30% recoverable from the bank's customer upon full recovery. This clause was central to the dispute, as the Applicant argued it violated Section 46 of the Advocates Act by linking fees to litigation success.
• The non-contentious work clause mirrors the contentious work provision, offering 30% of scale fees (capped at Kshs.200,000) with an additional 30% recoverable from the bank's customer. The Applicant challenged this as a disguised success-based arrangement, while the Respondent asserted compliance with Rule 3 of the Advocates Remuneration Order.

Cited Statute

• Advocates Remuneration Order
• Advocates Act

Judge Name

Passage Text

• The law provides that an Advocate can enter into a contract on payment of fees. And if he decides to bind himself to a sum far below the scale allowed, then he cannot be heard to rubbish the contract.
• Now that the marriage has broken down the parties must fulfill and abide by the rules of their earlier engagement which regulated their relationship.
• It would seem that at the time of making the contract the Advocate had the intent to solicit work from the bank, thereby breaking the law. And in my view at the time of performance he must be held back to the contents and effects of the alleged contract.