By Nyakundi Nyamboga
All appears to have been rosy between a Nairobi city law firm, Walker Kontos Advocates, and their client, Industrial Plant (EA) Ltd.
But this changed when "a mutual friend" began making demands on one of them in 2000.
Between 1995 and 1999 the law firm acted for Industrial Plant in a transaction to borrow money from Stanbic Bank. They prepared all documents necessary for the release of the loan, namely a lease agreement, a legal charge and two debentures securing Sh100 million. The debentures were later varied and the liabilities became nil.
Industrial Plant says Walker Kontos prepared a further debenture on March 17, 1999, for Sh200 million to secure borrowing from the bank of a similar amount. The money was never, allegedly, released. However, the law firm has since denied preparing a further debenture.
Industrial Plant’s fortunes began dwindling culminating in the company being placed in receivership, ostensibly after Walker Kontos prepared a notice of appointment of a receiver manager on September 26, 2000, on behalf of the bank.
Losses incurred
Industrial Plant was later to file a suit demanding more than Sh26 billion from Stanbic Bank for what it claims are losses incurred and assets sold at throw away prices after the bank declined to finance it.
Before this suit could be heard, Industrial Plant through Mathews Oseko Advocates filed a separate suit seeking to bar Walker Kontos from representing the bank. In its application dated July 29, last year, the company sought restraining orders, mandatory injunction, permanent injunction and a declaration that Walker Kontos Advocates should not "now or in future continue to act for Stanbic Bank Ltd against the plaintiffs or use the documents and or information confidentially obtained from the plaintiffs".
This application is the subject of the ruling under review in this column. In a nine-page ruling, Justice Joyce Khaminwa barred Walker Kontos Advocates from representing the bank, passing over to Stanbic Bank or its agents or any other parties any documents or information confidentially obtained from Industrial Plant whilst the said law firm was acting for the company.
The judge observed that despite the terms of contractual relationship the defendant "turned against the plaintiffs and was assisting the Stanbic Bank with illegal, null and void documents prepared by them on behalf of the plaintiffs".
There arose disputes on the validity of the further debenture dated March 17, 1999, whether Stanbic Bank had authority to appoint receivers and managers under those debentures.
In litigation that ensued, the law firm chose to side with Stanbic Bank thus contravening the retainer terms with the applicants.
On the hearing date of the application, lawyer George Oraro for Walker Kontos urged the court to find that it would be acting in vain if it granted the prayers sought.
Practice rules
He submitted that when the plaintiff filed this suit, his clients chose to remove themselves from representing Stanbic Bank in the three cases — HCCC 532/2006, HCCC No 689 of 2002 and HCCC No 1855 of 2000 — that are the crux of the present application, and handed them over to Oraro and Company Advocates.
In her ruling, Khaminwa agreed with Mathew Oseko Advocates that the firm of Walker Kontos had breached the provisions of the Advocates Act.
Rule 9 of the Advocates Practice Rules provides that:
"No advocate may appear as such before any court or tribunal in any matter in which he has reason to believe that he may be required to give evidence as a witness, whether verbally or by declaration or affidavit and if while appearing in any matter, it becomes apparent that he will be required as a witness to give evidence, whether verbally or by declaration or by affidavit he shall not continue to appear.
Contract of retainer
Provided that this rule does not prevent an advocate from giving evidence ... on formal or non contentious matters of fact in any matter in which he acts or appears."
The judge found out that although the bank changed lawyers and appointed Oraro and Company Advocates, those ‘advocates’ were taking over the suits previously handled by Walker Kontos Advocates and that the issue of the defendant (Walker Kontos) having breached the tenets of retainer was not in dispute.
Said the judge: "In the present case, it is to be considered that the respondents were acting for the applicants. They came to know their financial status and they must have passed such information to the bank, which immediately rushed to appoint receivers under the debentures.
It is the respondent who filed the appointment with the Registrar of Companies."
When the applicant pleaded the invalidity of securities it was the respondents who rose up to defend the bank. It is clear, therefore, the respondent decided to breach its contract of retainer with the applicants with the knowledge of their financial status."
The fact that Walker Kontos has passed on the briefs in the cases complained of, is an admission that they knew they should not have taken up acting for the bank against their client, Industrial Plant, she noted.
—The writer (nnyamboga@standardmedia.co.ke) is Standard Group Associate Editor — Legal