Case ID:170173

Bilha W Mwangi & another v Njeri Benson Ngugi & 2 others [2021] eKLR

Case Metadata

Case Number:

Civil Suit 21 of 2020 (Formerly Civil Suit 233 of 2018)

Parties:

Bilha W. Mwangi & Kemboy Julius Kipkosgei t/a Kemboy Law Advocates LLP v Njeri Benson Ngugi, Igeria Arthur Konye & Njoroge David Ngumbu t/a Igeria & Ngugi Advocates

Date Delivered:

05 Feb 2021

Case Class:

Civil

Court:

High Court at Nairobi (Milimani Commercial Courts Commercial and Tax Division)

Case Action:

Judgment

Judge(s):

Maureen Akinyi Odero

Citation:

Bilha W Mwangi & another v Njeri Benson Ngugi & 2 others [2021] eKLR

Advocates:

Kemboy Law Advocates LLP for the Plaintiffs

Njoroge David Ngumbu t/a Igeria & Ngugi Advocates for the Respondents

Court Division:

Commercial Tax & Admiralty

County:

Nairobi

Advocates:

Kemboy Law Advocates LLP for the Plaintiffs

Njoroge David Ngumbu t/a Igeria & Ngugi Advocates for the Respondents

History Advocates:

Both Parties Represented

Case Outcome:

Judgment entered in favour of the Plaintiff’s against the Defendants in the sum of Kshs. 102,378,022.98

Sum Awarded:

Kshs. 102,378,022.98

Disclaimer:

The information contained in the above segment is not part of the judicial opinion delivered by the Court. The metadata has been prepared by Kenya Law as a guide in understanding the subject of the judicial opinion. Kenya Law makes no warranties as to the comprehensiveness or accuracy of the information

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

COMMERCIAL & TAX DIVISION

CIVIL SUIT NO.21 OF 2020

(Formerly Civil Suit No. 233 of 2018)

IN THE MATTER OF : THE CIVIL PROCEDURE ACT (CAP 21

LAWS OF KENYA)

AND

IN THE MATTER OF: THE ADVOCATES ACT (CAP 16 LAWS OF

KENYA)

AND

IN THE MATTER OF: AN APPLICATION FOR ENFORCEMENT

OF A PROFESSIONAL UNDERTAKING

BETWEEN

BILHA W. MWANGI ................................................................1

ST

PLAINTIFF

KEMBOY JULIUS KIPKOSGEI T/A

KEMBOY LAW ADVOCATES LLP.........................................2

ND

PLAINTIFF

V E R S U S

NJERI BENSON NGUGI.......................................................1

ST

DEFENDANT

IGERIA ARTHUR KONYE....................................................2

ND

DEFENDANT

NJOROGE DAVID NGUMBU T/A

IGERIA & NGUGI ADVOCATES.........................................3

RD

DEFENDANT

JUDGMENT

1. Before this Court is the Originating Summons dated

20

th

September 2018

by which the Plaintiffs

BILHA MWANGI

and

KEMBOY JULIUS KIPKOSGEI T/A KEMBOY LAW ADVOCATES LLP

seek the following orders:-

“1. THAT the Defendants NJERI BENSON NGUGI, IGERIA

ARTHUR KONYE, NJORGE DAVID NGUMBU T/A IGERIA & NGUGI ADVOCATES do fulfil his irrevocable and unconditional undertaking dated 7

th

May 2018 and pay the Plaintiffs Kshs. 102,378,022.93 forthwith with interest thereon and [sic] the rate of 14% per annum until payment in full.

2. THAT the Judgment be entered against the Defendants

in the sum of Kshs. 107,378,022 upon their undertaking.

3. THAT the Defendants do bear the costs of this suit.”

2. The Summons was premised upon

Order 37 Rule 3, Order 52 Rule 7

of the

Civil Procedure Rules 2010

, and all enabling provisions of the law and was supported by the Affidavit of even date sworn by

BILHA W. MWANGI

an Advocate of the High Court of Kenya practicing as partner incharge of the Conveyance Department in the firm of

Kemboy Law Advocates LLP

.

3. The Defendants

NJERI BENSON NGUGI, IGERIA ARUTHUR KONYE

and

NJOROGE DAVID NGUMBU T/A IGERIA & NGUGI ADVOCATES

opposed the Summons vide the Replying Affidavit dated

19

th

November 2018

sworn by

BENSON N. NGUGI

, the 1

st

Defendant who is the Managing Partner in the firm of

M/s Igeria & Ngugi Advocates

. The Summons was canvassed by way for written submissions. The Plaintiffs filed their written submissions dated

4

th

June 2020

whilst the Defendants filed submissions dated

4

th

August 2020

.

BACKGROUND

4. On

19

th

June 2017

the Plaintiffs clients entered into an agreement with a third party one

Dr. Samuel Thenya Maina

for the sale of their entire issued share capital in

Adlife Plaza Limited

(hereinafter

‘APL’

) and

Adlife Management Company Limited

(hereinafter

‘AMCL’

),

Adlife Plaza Limited

(

APL

) was then and still is there registered proprietor of the property known as

LR No. 111366

and

Adlife Building

located thereon and the Plaintiffs said clients held the beneficial shares in the said company.

5. The Defendants herein were the law firm which was retained by

Kenya Commercial Bank Ltd

(hereinafter

‘KCB’

) to finance the transaction. By way of a Share Purchase Agreement

(“SPA”)

dated

19

th

June 2017

the Plaintiffs clients offered to sell their shares in

APL

for a consideration of

Kshs. 1,077,000,000/-.

Thereafter by a Deed of Amendment dated

7

th

May 2018

the

SPA

and the consideration was amended and agreed at

Kshs. 1,382,000,000/-.

It was agreed that the consideration would be paid in two lump sums as follows. The sum of

Kshs. 442,000,000/-

was payable before the execution of the agreement and the sum of

Kshs. 940,000,000/-

which

KCB

undertook to pay was to be paid on the completion date. It is common ground that the first lumpsum of

Kshs. 442,000,000/-

was paid out.

6. In order to facilitate the release of the title documents and transfer forms the Defendants acting for

KCB

issued to the Plaintiffs a Professional Undertaking dated

7

th

May 2018

to pay the outstanding balance of

Kshs. 94,000,000/-

on the completion date.

7. The Plaintiffs aver that acting upon that profession at undertaking, they forwarded all the transfer documents to the Defendants as agreed. The purchasers then took full control of

APL

and

AMCL

management and accounts and also took possession of all the companies’ assets. The shares were duly transferred to the purchasers and the property was charged to

KCB

(the Defendants client) for the sum of

Kshs. 940,000,000/-.

The sale was then completed and transfers were effected on the basis of the documents which had been submitted by the Plaintiffs in reliance of the Professional Undertaking made by the Defendants.

8. The Plaintiffs claim that out of the agreed consideration of

Kshs. 1,382,000,000/-

only the sum of

Kshs. 1,279,621,977.07

has todate been paid leaving a balance of

Kshs. 102,378,022.98

outstanding. The Plaintiffs are aggrieved that the Defendants have refused and/or declined to pay that outstanding balance despite constant reminders to do so. That the Defendants acting upon instructions of the Purchasers Advocates have continued to withhold the said balance of

Kshs. 102,378,022.98

without any justifiable cause. Hence the filing of this Originating Summons in order to enforce the Defendants Professional Undertaking.

9. On their part the Defendants concede that they did indeed issue the Plaintiffs with their Professional Undertaking which the Defendants aver was done on the basis of instructions from

KCB

to the Plaintiff on

7

th

May 2018

. That said professional undertaking was issued in exchange for the relevant completion documents as was agreed between the parties.

10. The Defendants cite

Clause 1K

of the undertaking which contained a condition precedent to the fulfillment of the undertaking. That said Clause provided that the undertaking would be honoured

subject to “the sellers warrantees being true and accurate at completion and sellers not otherwise being in breach of their obligation under the Share Purchase Agreement

.”

11. The Defendants claim that prior to completion of registration the firm of

M/s Kaplan & Stratton Advocates

, acting for the purchasers vide their letters dated

20

th

June 2018

and

16

th

July 2018

indicated that the Plaintiffs clients had occasioned a breach thereby stopping the Defendants from honouring the said undertaking.

12. The Defendants allege that upon final registration of the securities on

18

th

July 2018

they wrote to the Plaintiff advising them of the transfer and registration of the charge and requesting that the breaches pointed out by the Purchasers Advocates be addressed to facilitate the finalization of the transfer and release of the outstanding balance. That the Plaintiff in response vide their letter of

19

th

July 2018

requested that an amount of

Kshs. 837,621,977.10

be released to them and further the Plaintiffs requested the Defendant to hold onto the sum of

Kshs. 102,378,022.93

whilst the said breaches were being looked into to ascertain whether the same were valid and ultimately with a view to agreeing whether or not the outstanding amount of

Kshs. 102,378,022.93

was payable. The Defendants claim that at a meeting held on

29

th

August 2018

in the Defendants chambers it was agreed that the Purchasers Auditor undertake a verification process to confirm whether or not this sum of

Kshs. 102,378,022.93

ought to be released. The Defendants state that at said meeting it was agreed that the Plaintiffs clients would not call up the Professional Undertaking issued by the Defendants pending this reconciliation process.

ANALYSIS AND DETERMINATION

13. I have carefully perused the material before me as well as the submissions filed by both parties. In my view two issues arise for determination as follows:-

(i) Was the Professional Undertaking issued dated

7

th

May 2018

unconditional.

(ii) Is the Plaintiff entitled to Judgment as prayed in the Originating Summons dated

20

th

September 2018

.

(i)

Professional Undertaking

14. The Plaintiffs by this summon seek to have the Defendants compelled to honour the Professional Undertaking dated

7

th

May 2018

, issued by the Plaintiffs to the Defendants.

Black’s Law Dictionary – 10

th

Edition

defines an ‘

Undertaking

’ as “

A promise, pledge or engagement

.” The US legal definitions defines an undertaking in the following terms:-

“Undertaking in general means, an agreement to be responsible for something. In legal context, it typically refers to a party agreeing to surety arrangements, under which they will pay a debt or perform a duty if the other person who is bound to pay the debt or perform the duty fails to do so.”

15. It is not in contest that the Defendants acting for

KCB

did issue to the Plaintiffs a Professional Undertaking dated

7

th

May 2018

to pay the outstanding balance of the purchase price in the amount of

Kshs. 940,000,000/-

on the completion date. A copy of said undertaking is annexed at pages

64-70

of the Plaintiffs Bundle of Documents filed on

3

rd

October 2018

which undertaking read inter alias as follows:-

“… we are instructed to undertake to pay the balance of the consideration amounting to the sum Kenya Shillings Nine Hundred and Forty Million only (Kshs. 940,000,000/-) upon

successful registration in favour of the borrower (or his nominee) of the share transfer Forms relating to 100% of the Shares in Adlife Plaza Limited (APL)

and 80% of the shares in Adlife Management Company Limited (AMCL) herein after referred to as “the companies”) and the

successful registration of the charge in favour of KCB over the title relating to LR No. 1/366 and completion of the transaction …

” [own emphasis]

16. The Plaintiffs contend that the Undertaking as issued by the defendants was unconditional and that in the event there was any conditions the same were met. The Plaintiff further submitted that there was no evidence of any breach, nor had there been any determination by a judicial or a quasi-judicial body that the documents submitted in exchange for the undertaking were in any way defective and / or inaccurate. According to the Plaintiffs the only condition attached to the undertaking was the delivery of the documents which documents the Defendants confirm having received, therefore this condition was met.

17. On their part the Defendants submitted that their undertaking was conditional and contend that the conditions attached thereto were not fully met by the Plaintiffs client. The Defendants claim that the Plaintiff consented to monies in question being withheld pending the verification of accounts between all the parties as a condition to the release of the outstanding funds.

18. The principles guiding Professional Undertaking were dealt with in the case of

EQUIP AGENCIES LIMITED –VS- CREDIT BANK LTD. NAIROBI HCCC No. 773 OF 2003

, where Warsame J. stated:-

“An undertaking is usually given to ease and smoothen the path of transactions carried out by Advocates. It is a convenient method or tool to circumvent delay and operational difficulties, so that transactions can be easily, properly, smoothly and fastly conducted between Advocates. It is a contract between Advocates after an offer and acceptance, with a resulting consideration which follows from one Advocate to another. … An undertaking is a promise to do or refrain from doing something or acting in a manner which may prejudice the right of the opposite party.

It means it is an unequivocal declaration of intention addressed to someone who reasonably places reliance on it

. It can be made by an Advocate either personally or through the name of the firm he usually practices under … The breach of professional undertaking can result in lack of mutual or cordial trust between Advocate and invariably puts the administration of justice into disrepute.

The Advocates by relating together through a professional undertaking are officers of the court; therefore as far as possible it is mandatory for them to respect their words for the benefit of mutual continuity of their respective relationship. … The courts have inherent power to commit an Advocate for breach of an undertaking

.” [own emphasis]

19. The Plaintiff herein relying on the professional undertaking performed the conditions upon which the undertaking was to be issued by supplying the requisite documents in order to facilitate completion of the transaction. This is confirmed by the Defendants. As it is the Defendants Clients have already secured a charge over the property in question for the full amount. Similarly the shares in question have been transferred and the purchaser (who was not a party to the undertaking) has taken over control of the assets and management of the Companies. None of the above is denied by the Defendants.

20. The Defendants cite on an alleged breach of the

SPA

pointed out by the Purchasers Advocates. The Purchasers were

not

parties to the undertaking. Aside from the facts that no breach of the warranties has been proved, even if the same were shown to exist, this would be an entirely separate and independent matter not related to the undertaking at all.

21. In

STG MUHIA T/A MUHIA –VS- J. M. CHEGE T/A J. M. CHEGE & COMPANY ADVOCATES [2009]eKLR

the Court stated:-

“A professional undertaking by an Advocate constitutes a separate agreement independent of the transaction that resulted in such an Advocate being required to give.

A professional undertaking can therefore be enforced against an Advocate independent of the transaction in which the transaction in which the professional undertaking was given

.” [own emphasis]

22.. The undertaking was clear that the same was to be honoured upon completion of the sale. The sale is now complete. No other conditions were attached for fulfillment of the Professional Undertaking. The Defendants cannot now seek to plead the cause of a third party in an attempt to evade fulfilling their obligation under the Professional Undertaking. The Defendants are obliged to fulfil the terms of their undertaking dated

7

th

May 2018

and to immediately pay to the Plaintiffs this sum of

Kshs. 102,378,022.93

and I so find.

(ii)

Is the Plaintiff entitled to Judgment

23. Having found that an undertaking was made by the Defendants and further have found that the transaction in question has been completed, this Court hereby enters judgment in favour of the Plaintiff’s against the Defendants in the sum of

Kshs. 102,378,022.98

with interest thereon at the rate of

14%

per annum until payment in full. Costs of this suit are awarded to the Plaintiffs.

Dated in Nairobi this 5

TH

day of FEBRUARY, 2021.

…………………………………..

MAUREEN A. ODERO

JUDGE