Background
1. Before the Court for determination is an Originating Summons [OS] dated 28/3/2023. It is brought under Order 52 Rule 7 & 10, Order 37 Rule 14 & 15 of the Civil Procedure Rules as well as Section 1A, IB, 3 and 3A of the Civil Procedure Act, for determination of the following questions:
i. Whether the Respondent issued a professional undertaking through the two letters dated 4th October 2022 and the undertaking dated 13th October 2022?
ii. Whether the conditions required for the professional undertakings have been met?
iii. Whether the Respondent has failed to discharge its professional undertaking as per the agreed terms?
iv. Whether this court should enforce the said professional undertakings by ordering the payment of Kshs 18,321,428.00.?
v. Whether the Applicant is entitled to interest on the said sum of Kshs. 18,321,428.00.?
vi. Whether it is therefore equitable to grant the declarations and prayers sought?
vii. Whether the Respondent should be condemned to pay the costs of this Summons?
2. To provide context, the applicant, as a landowner, entered into a Joint Venture Agreement (hereinafter a JVA) with a company known as HIMS Homes Limited (hereinafter HHL), which acted as the developer. The purpose of this agreement was to develop and sell houses. According to the agreement, two units would be developed on the applicant's titles: unit 6 on title number NGONG/NGONG/60658 and unit 18 on title number NGONG/NGONG/60664 (referred to hereafter as the units).
3. The sharing of sale proceeds was stipulated in the JVA. In addition to the applicant’s share of the proceeds, HHL, through its director (the respondent), was advanced Kshs. 3,000,000/= by the applicant. This amount was to be repaid using the proceeds received by the respondent from the sale of the units. An additional Kshs. 1,000,000/= was to be added, bringing the total amount payable to Kshs. 4,000,000/=.
4. The applicant’s claim is based on professional undertakings issued by the respondent on various dates under the name of Mulwa and Partners Advocates. The applicant contends that despite receiving the proceeds from the sale of the two units, the respondent has not paid the applicant’s share of the profits from the sales as stipulated in the JVA. Furthermore, the respondent has not refunded the money lent by the applicant or returned the completion documents. The applicant asserts that this constitutes a breach of the professional undertakings.
5. The OS is opposed by way of a replying affidavit sworn by the respondent on 5th April 2023. Equally, both parties filed their respective written submissions dated 7/6/2023 and 22/6/2023. By consent of the parties it was agreed to compromise the other interlocutory applications so as to allow the Court to determine the substantive OS.
Analysis and determination:
6. The jurisprudence on enforcement of professional undertakings in now well crystalized. The Court of Appeal in Harit Sheth T/A Harit Sheth Advocate V K. Osmond Advocates, [2011] eKLR held that:
“A professional undertaking is a bond by an advocate on the authority of his client. It is based on the relationship which exists between the advocate and his client. An advocate who gives such a professional undertaking takes a risk. The risk is his own and he should not be heard to complain that it is too burdensome and that someone else should shoulder the responsibility of recovering the debt from his own client. A professional undertaking is a bond by an advocate to conduct himself as expected of him by the court to which he is an officer. No matter how painful it might be to honour it, the advocate is obliged to honour if only to protect his own reputation as an officer of the court.”
7. In as far as the requirements for enforcing a professional undertaking are concerned, I rely on the writings in the Halsbury’s Laws of England, 4th Edition by Lord Hailsham of St. Marylebone, Vol. 44(1), pages 222, 223 and 224. The following are outlined as key considerations:
a) It must be shown that the undertaking was given by the solicitor personally, and not merely as agent on behalf of his client;
b) It must also be given by the solicitor, not as an individual, but in his professional capacity as a solicitor;
c) The undertaking must be clear in its terms. The whole of the agreement to which it relates must be before the Court, and the undertaking must be one which is not impossible ab initio for the solicitor to perform; and
d) If the undertaking is conditional, the condition must be fulfilled before the undertaking will be enforced.
8. In the dispute at hand, the JVA and its terms are not in dispute and neither are the undertakings. The two (2) letters of undertaking dated 4/10/2022 are attached to the applicant’s bundle of documents. Both letters, written on the letterhead of Mulwa and Partners Advocates and titled "UNDERTAKING TO PAY," are addressed to the applicant. They are signed by the respondent in her capacity as an advocate and pertain separately to house 6 on NGONG/NGONG/60658 and house 18 on NGONG/NGONG/60664. The content of the letters is substantially similar except for the references to the respective units and amounts due thereon.
9. Each letter states partly as follows:
“We confirm that the final balances due and payable to you are (vide separate letters) Kshs. 6,335,714/= less disbursements 650,000/= (for unit 6); Kshs. 7,985,714/= less disbursements 680,000/= (for unit 18).
We request for title deed no. (60658 and 60664 vide separate letters) so that completion process may be completed.
We undertake to hold the title solely to hand over to the Bank’s Advocates for them to finalize the completion process for the Financier. We undertake to return the title within forty (40) days of receipt of the title if we are not in receipt of final purchase consideration from the purchaser’s advocates. We further undertake to forward your dues within 24 hours of receipt thereof.”
10. The 3rd letter of undertaking is the one dated 13/10/2022 also attached to the applicant’s supporting documents. The same is captioned UNDERTAKING TO PAY KSHS. 4M. It is on the respondent’s law firm letter head and is signed by the respondent. By the said letter of undertaking the respondent firm confirms: our undertaking to remit to you Kshs. 4,000,000/= being a refund of Kshs. 3m advanced to HIMS Homes by yourself and Kshs. 1m top up…We undertake to forward the Kshs. 4m within 24 hours of our receipt of the final dues from the financiers of units 6 and 18.
11. The respondent does not deny having written the letters of undertaking to the applicant, and their authenticity has not been questioned. The undertakings are clear and unambiguous. On the face of it, the undertakings provided by the respondent include the following commitments:
i. The titles to the units would be returned within 40 days of their receipt from the applicant if the respondent did not receive the purchase price from the units.
ii. If the purchase price was received, it would be remitted to the applicant within 24 hours of receipt.
iii. The Kshs. 4,000,000 advanced to HHL would be remitted within 24 hours of receipt of the purchase price for units 6 and 18.
12. Based on the evidence before the Court, the answer to the first issue is affirmative: there were three professional undertakings issued by the respondent to the applicant in her capacity as an advocate, through the letters dated 4/10/2022 and 13/10/2022.
13. The next issue is whether the conditions required for the professional undertakings have been met. I note that the respondent mainly blames the applicant for breaching the JV Agreement, thus causing difficulty in enforcing the undertaking and frustrating the performance of the contract. She therefore argues that there has been no breach of the undertaking as alleged by the applicant.
14. The respondent claims that the applicant’s breaches prompted her to terminate the contractual relationship between the parties as provided for in Clause (q) of the JVA. She asserts, though without presenting any evidence to the Court, that a surveyor has been instructed to review the amounts due to each party under the contract.
15. From the letters of undertaking, the condition precedent for the payment of Kshs. 4,000,000/= and the dues for the two units was the receipt of the purchase price from the purchasers’ financiers upon the completion of the transactions. The evidence before the Court shows that the respondent did release the original titles to the units. The respondent acknowledges receipt on 19th January 2023.
16. The applicant asserts that the two units were sold to Carolyne Mokeria and Daniel Mutisya Kinai, respectively, and the final dues were paid to the respondent. He relies on annexure MLM3 of his Further Affidavit sworn on 7/6/2023, which includes evidence from the land registry indicating that the transfers were effected from the applicant to the third-party purchasers. Notably, the respondent does not deny the sale of the two units covered by the letters of undertaking.
17. While the respondent points to other breaches in the JVA, none relate directly to units 6 and 18, which are the subjects of the undertakings. In Karanja V J.K. Koskei E.J. Ruto & Manda T/A Koskei Momla & Co. Advocates, [2017] eKLR, this Court held that a transfer is completed by the registration of the transferee as the proprietor of land or interest. In the absence of any evidence to the contrary, this Court concludes that the transactions were completed and the condition precedent was fulfilled.
18. The final dues having been paid by the financiers of the third-party purchasers to the respondent, and the successful registration of the transfers from the applicant to the third-party purchasers, means that the professional undertakings crystallized. The respondent was therefore required by law to release the monies due under the professional undertakings to the applicant. Consequently, my answer to the second issue is in the affirmative.
19. Regarding whether the respondent has failed to discharge her professional undertaking as per the agreed terms, the respondent contends that the applicant has not made a case for the grant of the orders sought in the OS. She also claims that the applicant owes her in excess of Kshs. 40,000,000/= by way of legal fees and contractual dues.
20. The respondent has not provided any evidence that she has honored the undertaking issued to the applicant. Instead, she argues that the undertaking is unenforceable due to the applicant’s breach of the JV Agreement.
21. The respondent’s argument suggests that she is entitled to hold the monies as a lien for the applicant’s alleged breach. However, the decision of the Court of Appeal in Waruhiu K’owade & Ng’ang’a Advocates V Mutune Investment Limited states that:
“The term ‘undertaking’ must be subjected to a liberal interpretation to include situations where an advocate who receives money based on a professional undertaking should perform the terms of the undertaking. Should the advocate utilize the money for any other purpose, then they are obliged to refund it. Any money or documents given and received on the strength of a professional undertaking cannot be utilized for any other purpose than what they are intended for. It is outside the mandate of an advocate to use or convert an undertaking for an event other than what it was intended for and agreed between the parties. A professional undertaking protects all parties to a transaction, and it is not open for one party to unilaterally refuse to comply with the terms of that undertaking.”
22. The Court equally emphasized as follows:
“A professional undertaking is a binding contract between the donor and the donee, who are advocates. It should be adhered to with a standard of ethics higher than that of the marketplace. Professional undertakings between lawyers are fundamental to the relationship that governs their activities, transactions, and actions. They embody the practice of the legal profession in a methodical, courteous, and ethical manner. The immediate offer and acceptance of a professional undertaking trigger significant transactions and financial relationships which must be observed by both sides. The conditions, terms, and implications must be strictly adhered to for the legal profession to thrive and for advocates to deal with each other freely and openly.”
23. The nature of an undertaking requires the respondent to discharge the professional undertaking first and then pursue any alleged breaches by the applicant afterward. It must be remembered that this Court's jurisdiction to enforce undertakings of this nature under the Civil Procedure Rules is a summary jurisdiction intended to oversight officers of the Court.
24. In enforcing undertakings, the Court is guided not by considerations of contract or securing legal rights but by ensuring the honesty of advocates to avoid eroding public confidence in the administration of justice. This approach is intended to enforce honorable conduct on the part of the Court’s officials and not to adjudicate legal rights, as observed in Patel V Kairu, [1999] 2 EA 297 (CAK) and Waruhiu K’owade & Ng’ang’a Advocates, [supra].
25. It is my finding that the respondent has not discharged her professional undertaking as per the agreed terms and is not entitled to hold the monies as a lien. Even if the applicant owes the respondent money, the funds meant to discharge the professional undertaking cannot be used to offset such a liability.
26. I now move to the next issue, which is whether this Court should enforce the said professional undertakings by ordering the payment of Kshs. 18,321,428/=. The applicant has urged this Court to compel the respondent to pay Kshs. 18,321,428/= arising from the professional undertakings of 4th and 13th October 2022.
27. Having found that there was indeed an undertaking issued by the respondent in her capacity as an advocate of the High Court of Kenya and that the condition precedent for the undertaking has been met, no other order commends itself to me but to find that the undertakings issued on 4th and 13th October 2022 are enforceable and to order the enforcement of the same.
28. The letter of undertaking issued on 4/10/2022 relating to unit 6 confirms that the amount due to the respondent is Kshs. 6,335,714/= less disbursements of Kshs. 650,000/=. The undertaking with respect to unit 18 is Kshs. 7,985,714/= less disbursements of Kshs. 680,000/=. The applicant has not taken issue with the contents of the letters. As such, I find that the amount due under both letters of undertaking is therefore Kshs. 5,685,714 for unit 6, Kshs. 7,305,714 for unit 18, and the Kshs. 4,000,000/= advanced to HIMS Homes.
29. The totality of this is that the applicant is entitled to the amount of Kshs. 16,991,428/=. The applicant has also claimed interest on this amount. The Courts have held that the essence of awarding interest on a claim is to compensate a party for their loss, ensuring that they receive a return equivalent to what they would have earned had the payment been made on time. As such, the applicant is entitled to interest at a commercial rate from the date of registration until payment in full, together with costs. This answers to all the issues raised in the OS.
Disposition:
30. The OS dated 28/3/2023 is allowed and it is hereby ordered that:
i. The respondent shall pay to the applicant the amount of Kshs. 16,991,428/=, in honoring the professional undertakings given on 4th and 13th October 2022, together with interest calculated at commercial rates from the date of completion of registration of unit 6 and 18, until payment in full within.
ii. Payment shall be made 30 days from the date of this judgment, failing which the applicant shall be at liberty to execute the same.
iii. The applicant shall also have the costs of the application.