INSOLVENCY LAW NOTES (Summary Notes)

 Insolvency

BANKRUPTCY

• Debtors application 

• Creditors application

• Discharge from bankruptcy

• Alternatives

• Voluntary arrangement 
• Instalment order
• No asset procedure

CORPORATE INSOLVENCY

• Liquidation

• Members Voluntary Liquidation 
• Creditors Voluntary Liquidation 
• Liquidation by the Court

• Alternatives

• Administration
• Company Voluntary Arrangement

•The Insolvency the UK Insolvency Act   2015  in Kenya borrows heavily  from Act of 1986.

•With its adoption of the Insolvency Act 2015 Kenya has become the 40th State in the world to have enacted legislation based on the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross-Border Insolvency.

•The following are the highlights of the act

• It enables persons and entities to continue to operate as going concerns so that ultimately they may be able to meet their financial obligations to their creditors in full or at least to the satisfaction of those creditors
• The act also provides for management of the debtors alternative procedures affairs for the benefit of to insolvency e.g the creditors
• The act also provides for and unincorporated bodies Liquidation procedures for incorporated (whether solvent or otherwise)
•  It also provides provisions for alternatives to liquidation like administration
•  Another aim is to whole than would adjudged bankrupt achieve be the a better outcome for case if those persons the creditors as a and entities were
•  Rehabilitating the debtor is also targeted at honest but unfortunate debtors.
• There is also a provision for cross-border insolvency.

The Insolvency Practitioner

Bankruptcy

• Acts as the bankruptcy trustee or interim trustee in respect of the person’s property or as permanent or interim trustee in the sequestration of the person’s estate
• A trustee under a deed
• as supervisor of a voluntary arrangement

Companies

• Acts as the liquidator, provisional liquidator, administrator of the company; • a supervisor of a voluntary arrangement
• a supervisor of a voluntary arrangement

 

• A person who, not being the holder of an authorisation, purports to act as an insolvency practitioner in relation to a company or a natural person commits an offence and is on conviction liable to a fine not exceeding five million shillings. Sec 5 of the Insolvency Act 2015

Qualifications

• holds a degree from a university recognized in Kenya;
• has at least five years' relevant professional experience as a member of a professional body recognized under section 7 of the Act;
• has at least two years' experience in insolvency practice before commencement of the Act;
• has worked under the apprenticeship of an insolvency practitioner for at least four years
• satisfies the requirements of Chapter 6 of the Constitution.
• An advocate who has worked for the Official Receiver for not less than two years automatically qualifies to Act as an Insolvency Practitioner.

Bankruptcy

•Originally the law governing the insolvency regime in respect of enacted in the year 1938, modelled after the English 1914 Bankruptcy

•debtor adjudging the debtor bankrupt on- es an order in respect of a

(a)accordance with section 17 - 31 of the Insolvency Act 2015; made in 

(b)on the application of the debtor made in accordance with section 32

 

•The creditor's application for bankruptcy order shall be in form of a petition in Form 3 set out in the First Schedule and shall be accompanied by the following documents—

• verifying affidavit which shall be in Form 4 set out in the First Schedule;
• proof of the debt which shall be in Form 5 set out in the First Schedule; and
• the application for appointment of trustee which shall be Form 9 of the First schedule.

•The petition shall be preceded by a statutory demand and shall be in Form 6 set out in the First Schedule.

> An application for a bankruptcy order by the debtor may be made by way of a bankruptcy petition and shall be in Form 10 set make application for out in the First Schedule.

The petition shall be accompanied by the following documents -

• an affidavit to the petition which shall be in Form 8 set out in the First Schedule;
• statement of debtors financial position which shall be called a "statement of affairs",  and shall, be in Form 11 set out in  the First Schedule; and 
• application for appointment of trustee which shall be in Form 9 of the First Schedule

•Once an application for bankruptcy is made then an interim trustee is appointed to take over the matters of the debtor

•The next stage is the appointment of a trustee( could be the Official Receiver or an Insolvency Practitioner)

•The purpose of a trustee is to manage the debtors affairs.

•The bankrupts property after declaration of bankruptcy vests in the trustee and the same will apply to any subsequent acquisition or passing of property into the bankrupts estate.

•The Bankrupt is then to lodge statement of his financial position with bankruptcy trustee(Sec 50). This is to ascertain the true financial position of the debtor. It is an offence under the Act to hide any pertinent information during the public examination

•Here the Creditors get other interested parties to inspect the financial statements as well as including unsecured creditors

• After the public examination a meeting can be convened by the official receiver or the creditors to chart a way forward in relation to the outstanding creditors

• Once the debts of a bankrupt individual or of the company are ascertained, they will be paid out to creditors. 

• The Second Schedule to the Act sets out preferential debts in order of their priority as follows:

First priority claims

• These include the costs of the bankruptcy process i.e.

1. The bankruptcy trustee’s/liquidator’s/administrator’s remuneration;
2. Reasonable costs incurred during the court proceedings; and
3. Costs incurred by the creditor to preserve the bankrupt’s assets.

• This is provided for under section 247 of the Act (for bankrupts), section 473 (for companies in liquidation) and section 615 (for companies under administration).

Second priority claims

Include the following:  

i. Wages and salaries payable to employees of the bankrupt during the four months before the commencement of bankruptcy. Each employee is entitled to a maximum of Kshs. 200,000. (including holiday pay and compensation for redundancy and for loss of employment before, or because of the bankruptcy/liquidation)

ii. Statutory deductions from employees (e.g. PAYE, NSSF, NHIF).

iii. Amounts that are preferential claims under section 175(2) and (3) of the Act, which are for services relating to the bankrupt’s business records and has a lien over such documents (having not been paid). Advocates and accountants would fall in this category. The maximum amount payable is capped at Kshs. 200,000.

iv. Other amounts required by other written law (especially those paid by the buyer to a seller on account of the purchase price of goods).

Third priority claims

Third priority claims are the taxes payable by the bankrupt such as income tax, customs duty and excise duty which are unpaid.

• Claims  having  the  same  priority  rank  equally among themselves and are payable in full, unless the  property  of  the  bankrupt is insufficient to meet them whereupon they shall be paid out in equal proportions to the creditors. 
• After the payment of the debts, any surplus is to be applied in paying outstanding interest on debts since the commencement of the bankruptcy.

Discharge from Bankruptcy

• S. 254.(l) A bankrupt is automatically discharged from bankruptcy three years after the bankrupt lodged a statement of the bankrupt's financial position in accordance with section 50, but may apply to be discharged earlier.

•Automatic discharge was not found in Cap 53. One had to go to court to get a discharge order and sometimes the court would hold that the bankrupt order remain in force thus tying many down in their ability to recover.

•Similarly a creditor can apply to court to cancel the discharge 

•A Trustee can also object to discharge

 

Look at

•Assets a bankrupt can retain Sec 161-167 •Final Meeting of creditors Sec 253

•Bankruptcy offences Sec 289-302 i.e anything that would aggravate the circumstances of the bankrupt, or selling of assets or not keeping proper records. These offences have been enhanced and clearly enumerated unlike in cap 53

•Duties of the Bankrupt Sec 140-148

•Powers of the Bankruptcy trustee - power to summon and examine,

•Restrictions during Bankruptcy Sec 149 - 160

 

Alternatives to Bankruptcy

•The Insolvency Act 2015 by the introduction of Part IV thereof makes provisions for alternative procedures to bankruptcy, instead of the usual foreclosure mechanism and distribution of the assets of a non-performing debtor.

•The administration procedure facilitates the rescue of a company or the better realization and application of its assets. Here an insolvent company is allowed  to continue trading with protection from its creditors through a statutory moratorium.

•Thus corporate rehabilitation for failed enterprises by the administrators comes into play. In this regard a debtor can enter into a proposal for financial restructuring subject to the agreement of creditors.

•Voluntary arrangements- a "supervisor" in relation to a voluntary arrangement, means the person who is for the time being performing the functions imposed as a result of the approval of the arrangement by the creditors of the debtor; 

•The supervisor is responsible for implementing and supervising a voluntary arrangement

•A summary instalment order (Sec 323) is an order made by the Official Receiver directing the debtor to pay the debtor's debts- 

(a) in instalments or in some other way; and 

(b) in full or to the extent that the Official Receiver considers practicable in the particular circumstances of the case.

• No asset procedure (sec 343) 

(a) the debtor has no realizable assets; 

(b) the debtor has not previously been admitted to the no-asset procedure; 

(c) the debtor has not previously been adjudged 

(d) the debtor has total debts that are not less than one hundred thousand shillings and not more than four million shillings; and 

(e) the debtor does not have the means to repay any amount towards those debts.

Notices in Bankruptcy

• Under Section 9. (1) of the regulations, A notice relating to a bankruptcy shall identify the bankrupts  address in which the bankrupt has resided in the proceeding period of twelve months before the issuance of the bankruptcy order; 

• the principal trading address, if different from the bankrupt's residential address; 

• the bankrupt's date of birth; 

• the bankrupt's occupation; 

• any other name by which the bankrupt has been known; 

• and any name or style ,other than the bankrupt' own name, under which- the bankrupt carried on business; and  how any debt owed to a creditor was incurred. 

Corporate Insolvency

•  A company becomes insolvent if it does not have enough assets to cover its debts and/or it cannot pay its debts on the due dates

• Liquidation

• Members Voluntary Liquidation
• Creditors Voluntary Liquidation
• Liquidation by the Court

• Administration

• Company Voluntary Arrangement

Liquidation

•Members Voluntary Liquidation

•This can occur when the specific object of forming the company has expired and the company in a general meeting has passed a resolution providing for its voluntary liquidation .

•Sec 394 provides that a notice of the resolution shall be published within 14 days after the passing of the resolution in the:

• •In the Kenya Gazette
• •Once in at least two papers of national circulation •On the companies website
• •Additionally notice has to be given to any holder of a floating charge. 

• Additionally notice has to be given to any holder of a floating charge. 

• On or after the commencement of liquidation a company shall cease to carry out any business, except as may be beneficial to the liquidation

• Members in a members one or more liquidators,

• Members in a members voluntary liquidation the company shall appoint one or more liquidators, This must be a qualified IP practitioner Sec 399

• Any transfer of shares or changes in the directorship or shareholding

• Liquidator manages the process of liquidation

• Upon appointment of the liquidator all powers of the directors cease

• Ensures meetings are held with the creditors so as to have an agreeable formula as to the liquidation

• There is also a provision to convert the members voluntary liquidation to a creditors liquidation

• Look at Creditors Voluntary Liquidation Sec 405

•Liquidation by the court Sec 423

• Only the High Court has jurisdiction to supervise the liquidation of Companies (Sec 424)  

* Section 425 provides the circumstances a company may be liquidated by the Court

• The liquidator has various powers in the act to ensure that the liquidation process is carried out effectively sec 460 -470

• The end result at the culmination of the Liquidation process is that the company stands dissolved

 Administration of Insolvent companies

•The objectives of administration are to maintain the company as a going concern, to achieve a better outcome for the company’s creditors as a whole than would likely to be the case if the company were liquidated and to realize the property of the company in order to make a distribution to one or more secured or preferential creditors

•An administrator is appointed to mange the affairs and property of the company in the context provided for under the Act,

•Appointment of administrators can be 

• •By an administration order of the court 
• •By the holder of a floating charge
• •By the company or its directors

•Additionally an application can be made to the court for an administration order in respect of the company by

• •The company itself 
• •The directors
• •Any other person of a class prescribed by the insolvency regulations e.g Holder of a floating charge

•While a company is under administration

• •A resolution for the liquidation of the company may not be made
• •The court may not make an order for the liquidation of the company 

•Administration automatically ends after 12 months Sec 593 however this can be extended

 

Company Voluntary Arrangements

 • The provisions with respect to the voluntary arrangement for an insolvent company are similar to those for an insolvent natural person. 

 • Therefore, there are restrictions where a proposal’s effect is to affect a secured creditor’s right to enforce their security. 

• A voluntary arrangement once approved, is binding on every person, including the secured creditor.

• There is a moratoria on debt payments when company directors propose voluntary arrangement

• The implications of a moratorium are that the company is restricted in obtaining credit or paying its debts and liabilities during this period. 

• Further, any steps taken to enforce any security over the company’s property can only be done with the approval of the Court and the Court may impose some conditions on such an approval. Also, approval of the Court is required where proceedings are commenced against the company or its property.

• A company in respect of which a moratorium has effect may dispose of any of its property only if there are reasonable grounds for believing that the disposal will benefit the company and the disposal is approved by the moratorium committee.

 • It is important to note however that a company may transfer property as if it were not subject to the security only where the holder of the security consents or the Court gives its approval

• Supervisors this is a person appointed to supervise the voluntary arrangement: He/she can convene and chair meetings with the creditors(See sec 134 of the Regulations on the conduct of meetings)

• Under sec 631 certain persons can challenge the decisions at the meetings in voluntary agreements

 Cross Border Insolvency Part 13

• With the adoption of the Insolvency Act 2015 Kenya has become the 40th State in the world to have enacted legislation based on the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross-Border Insolvency. 

• Section 720

• Purpose is to provide

• Corporation between the courts and other competent authorities of Kenya and foreign states
• Fair and administration of cross border insolvencies
• Application of  reliefs from foreign proceedings: application made to court (Sec 17 of the Fifth Schedule)
• Court of ensure protection of local creditors
• Co-operation with foreign Representatives e,g communication of notices
• Provision for concurrent Proceedings

• Look at Companies not eligible for administration (sec 640)

CAB RANK RULE

INTRODUCTION

1.1 THE CAB RANK RULE:

The role of a lawyer in the dispensation of justice is of paramount importance. The cab rank rule dictates that an advocate has a duty to provide legal representation, where workload and expertise permit.[1] A lawyer has the duty to accept any work in a field in which he professes himself competent to practice, at a court which he normally appears, and at usual rates.[2]

It stems from the legal principle of the presumption of innocence and the right to legal representation, rights of which are reiterated in Article 50[3] of the Constitution. In the absence of such a rule, it might be difficult for an unpopular person to get legal representation. In Powell v Alabama[4], nine illiterate black men were charged with the offence of rape of two white girls. A judge appointed an advocate from the bar to represent the accused but he took up the case with reluctance and did not give the accused time to prepare for their case. The accused were convicted and on appeal the Supreme Court quashed their conviction on the grounds that they did not have adequate time to prepare for their defense. (For instance in Kenya, Philip Onyancha, a serial killer was shunned by lawyers who did not want to represent him. Paul Muite, Senior Counsel was criticized by members of the public when he took up the matter.)

The supreme court of India in A.S Mohamed Rafi v State of Tamil Nadu Rep.By Hom Dept & Others[5], went further to say that the cab rank rule is the cornerstone of the legal profession, and where an advocate because of his moral convictions or personal beliefs refuses to take a brief, he is stepping into the role of a judge.[6] Every person, ‘no matter however wicked, depraved, vile, degenerate, perverted, loathsome, execrable, viscous, or repulsive he may be regarded as society has a right to be defended in a court of law and correspondingly it is the duty of the lawyer to defend him.’[7]

It should be noted therefore that legal representation does not mean that an advocate has endorsed the actions of his client. A lawyer does not need to feel “personally committed” to her client’s case to be able to provide legal services.[8]

RELEVANCE OF THE CAB RANK RULE:

The rule plays a pivotal role in the administration of justice from an early stage Lord Irvine was able to identify that,

“The Cab rank rule is one of the glories of the bar. It underscores that every member of the bar is obliged, without fear or favor, to represent clients who offer themselves regardless of how unpopular they may be in the community or elsewhere”

The cab rank rule is important because

                    i.            It ensures that even the most unpopular and anti-social are entitled to effective and independent legal representation by a lawyer.

                   ii.            The rule operates in the public interest and in the interest of justice.

                 iii.            It protects lawyers who takes on unpopular cases and reassures the public that they are entitled to representation even if their case is controversial in nature.

                 iv.            The rule seems to reinforce the idea that clients rather than lawyers are “in charge” in the relationship and not unrelated to discourage in various ways the entrepreneurial approach to legal practice so typical of the legal system.

Like most legal rules however, it is subject to exceptions which will be discussed below:

 

·       A lawyer may refuse to take a case where he feels he lacks the sufficient experience or competence to handle the matter.

·       If having regard to his other professional commitments he will not have time to take the brief.

·       Where a situation of conflict of interest would arise.

·       If he is not going to be properly paid or paid at all.

·       If the work involved is more than a lawyer would undertake in a year.

·       Where the potential liability for professional negligence in respect of the case would exceed the level of professional indemnity which is reasonably available in the market for him to accept.

 

   

2.      THE KENYAN POSITION ON THE CAB RANK RULE:

 

The cab-rank rule is not well developed and entrenched in the Kenyan legal system. This is partly because most Kenyan lawyers are jacks of all trades and a master of none i.e. they pursue all types of cases and do not specialize.[9] That said there are some general requirements by the Law Society of Kenya regarding professional work.

 

a)      As soon as is practical, after receipt of instructions, a lawyer should satisfy himself that there is any reason why he ought not to accept it.

b)      A lawyer is not considered to have accepted client’s instructions unless he has had opportunity to consider it and has expressly accepted it.

Generally, a lawyer should exercise due diligence and avoid engaging in conduct which is:

Ø  Dishonest or otherwise illegal;

Ø  prejudicial to the administration of justice; or

Ø  Likely to diminish public confidence in the legal profession.

Professor Tom Ojienda in “Professional Ethics: A Kenyan perspective” expounds on the cab rank rule, he states that an advocate is largely obliged to take instructions from any client, he should not discriminate on age, color, creed, gender……[10] He goes further to say that an advocate may decline instructions where,

                    i.            He does not have enough time.

                   ii.            Where there is conflict of interest.

                 iii.            His client wants to take certain action purely to injure someone else.

                 iv.            The instructions given are not clear.

                   v.            A client does not want to pay fees.

We shall turn our focus specifically the matter of conflict of interest.

3.      CONFLICT OF INTEREST:

Conflict of interest is, as aforementioned, an exception to the cab rank rule. The concept of conflict of interest stems from the general assertion that no man can serve two servants. A conflict of interest arises where a lawyer has a private or personal interest in a matter sufficient to at least appear to influence the objective of his duties.[11]Thus where there is a conflict of interest a lawyer has competing interests or loyalties that are or potentially adverse with each other and may cloud his objectivity.[12] The international Bar Association has codified the principle in the 1988 International Code of Ethics stating that:

‘Lawyers should never represent conflicting interests in litigation. In non-litigation matters, lawyers should do so only after having disclosed all conflicts or possible conflicts of interest to all parties. This rule also applies to lawyers in a firm.’ [13]

Where a lawyer is convinced that conflict of interest arises or is likely to arise, he should disqualify himself, similarly where a lawyer is convinced that a conflict of interest would arise on the part of counsel on the other side, he should make an application to the court to have that counsel disqualified.[14]

4.      BROAD CATEGORIES WHERE CONFLICT OF INTEREST  MAY ARISE

Conflict of interest generally arises in four ways,

                      i.            Where a lawyers personal interests and the interests of a client are in conflict:

 

A lawyer should avoid taking a brief where his personal interests would be in competition with that of his client. For example where litigations involve close relatives of the lawyer. The emotional attachment and the personal interest of the advocate would almost certainly cloud objectivity. Similarly, it would be imprudent for a lawyer to have a sexual relationship with his client; such a relationship will almost always affect the rational thinking of an advocate. Another example would be where an advocate enters into business transactions with a client or where a lawyer is a director in a company, such an advocate cannot accept a brief to represent that same company. Electoral Commission of Kenya Blasto[15], in this particular case the chairman of the Electrol Commission of Kenya, who was also an advocate of the High Court, was barred from representing ECK in a suit. It was held there would be a conflict of interests as this could embarrass the case at a later stage.

 

                    ii.            Where a lawyer is representing two clients simultaneously:

 

Where an advocate is representing two advocates simultaneously, conflict of interest might arise and especially, but not exclusively, in matters of litigation. This may occur when an advocate in furthering the case of one client, would be likely to reveal information which would hurt the case of the other client. For example, in land matters a lawyer should refrain from acting for both a vendor and purchaser in the case of a sale, or mortgagor/charger and mortgagee/charge in the case of a mortgage/charge. King Woolen Mills v Kaplan and Stratton Advocates.[16] This is because the nature of relationship between a client and an advocate is essentially fiduciary. This position is reiterated in the Advocate Practicing Rules of 1966.

A broader perspective of this is in the case of a law firm. A conflict of interest may arise where one advocate in the same firm represents an opposing party in a case where a member of the same firm is representing the other.

 

                  iii.            In cases of Successive Representation:

This occurs when an advocate loyalty to a present client is in conflict with his loyalty to a former client. An advocate may be disqualified where there is likely to be a breach of confidential information especially where the interests of the former and current client are adverse or have the potential to be. In Simba Hills Farm Limited v Sultan Hasham Llaji & 5 others:[17] An application was made for the disqualification of barring advocates from conducting that suit on the ground that the advocate for the plaintiff had previously acted for the 3^rd and 4^th defendants in a previous suit. The court rightly held that there was a conflict of interest and the firm could not continue to act for the plaintiff as it was possible that as former counsel for the said defendants, he could have come across information that would be prejudicial to the defendants.

 

                  iv.            Where the lawyer owes a duty to a third party:

 

Where a lawyer owes a duty to a third party and the rights of those third parties are adverse to those of a lawyer’s client, it would be imperative for a lawyer to disqualify himself. It would also be a valid ground for advocate on the opposing side to apply for disqualification. In Francis Mugo & 22 others v James Bress Muthee & 3 others,[18] the firm was disqualified from conducting the suit because the defendant had intended to call an advocate from that firm as a witness. Rule 9 of the Advocate Practicing Rules states that where an advocate believes that he will be called as a witness in a matter he should not appear before a court presiding over the same matter.

Similarly in Delphis Bank Limited v Channah Singh Chatthe and 6 others[19] The court held that “The right to legal representation or advocate particularly in civil suit may be put to serious test if there is a conflict of interest which may endanger the equally hallowed principle of confidentiality in advocate-client fiduciary relationships or where the advocate would double up as a witness. There is otherwise no general rule that an advocate cannot act for one party in a matter and then and act for opposing party in subsequent litigation. The test (emphasis not mine) which has been laid down in authorities is whether real mischief or real prejudice will in all human probability result.” 

5.      CONFLICT OF INTEREST IN DEPTH

                    I.            Advocates Practicing Rules 1996

Highlights some of the cases when an advocate may not represent a client in a suit. According to the rules an advocate cannot represent a client in relation to transactions relating to land where:

                                                                   i.            In case of a sale, for both the vendor and the purchaser.

                                                                 ii.            In case of a lease, for both the lessor and the lessee.

                                                                iii.            In case of a mortgage/charge, for both the mortgagor/chargor and the mortgagee/chargee. 

                  II.            Litigations involving relatives such as a husband and wife in a divorce case or also in a case involving a close family member.

 

                III.            Simultaneous representation:

Which is when one advocate represents two clients who are adversaries in a case.

 

                IV.            An advocate representing two clients in different cases and arguing a legal position in one case that might potentially have negative consequences in the other clients’ case pending in court.

 

                  V.            Successive representation:

Occurs when an advocate represents a client in a matter which may be adverse to a former client. An advocate may be disqualified when there is evidence of likelihood of breach of confidential information. This would occur especially where the interests of the former and the current client are really and truly adverse in nature and if the past and the current matters are closely related in some way.

 

In Simba Hills Farm Limited v Sultan Hasham Llaji & 5 others:

An application was made for the disqualification of barring advocates from conducting that suit on the ground that the advocate for the plaintiff had previously acted for the 3^rd and 4^th defendants in a previous suit. The court rightly held that there was a conflict of interest and the firm could not continue to act for the plaintiff as it was possible that as former counsel for the said defendants, he could have come across information that would be prejudicial to the defendants.

 

King Woolen Mills v Kaplan and Stratton Advocates.

Held: the fiduciary relationship created by the retainer between the client and advocate demands that the knowledge acquired by the advocate while acting for the client be treated as confidential and should not be disclosed to anyone else without the clients consent. That fiduciary relationship exists even after conclusion of the matter for which the retainer was created.

In that case, the court disqualified the firm of advocates from continuing to act against its former client.

See also    Francis Mugo & 22 others vs. James Bress Muthee & 3 others (2005) eKLR

                            

                VI.            Expected witness:

Where an advocate maybe called as a witness in a case, the he cannot act for that client in the same matter. This is done so as to protect the interest of the client because of the probability that the testimony could harm his clients case.

 

Francis Mugo & 22 others vs. James Bress Muthee & 3 others (2005) eKLR

The firm was disqualified from conducting the suit because the defendant had intended to call an advocate from that firm as a witness.

 

Rule 9 of the Advocate Practicing Rules states that where an advocate believes that he will be called as a witness in a matter he should not appear before a court presiding over the same matter.

 

Delphis Bank Limited v Channah Singh Chatthe and 6 others

The court held that “The right to legal representation or advocate particularly in civil suit may be put to serious test if there is a conflict of interest which may endanger the equally hallowed principle of confidentiality in advocate-client fiduciary relationships or where the advocate would double up as a witness. There is otherwise no general rule that an advocate cannot act for one party in a matter and then and act for opposing party in subsequent litigation. The test (emphasis not mine) which has been laid down in authorities is whether real mischief or real prejudice will in all human probability result.”

 

              VII.             Advocate enters into business with a client. E.g your client selling you his piece of land.

 

            VIII.            Law firm conflicts:

Law firms or other advocates with the same firm can also have conflict of interests. For example where an attorney in the same firm represents an opposing party in a case where a member of the firm is representing the other.

 

                IX.            An advocate representing a client in a civil dispute while accepting fees from litigants who have opposing point of views.

 

                  X.            In the case of an advocate should not accept instructions to act for the company.

 

                XI.            In the case where an advocate who is a member of a county government executive committee to act for a client who is against the county government.

 

Further a minister cannot act on behalf of a ministry or the government. An advocate who is a commissioner of any commission or a member of any tribunal may not appear in court on behalf of the same commission/tribunal.

 

Electoral Commission of Kenya Blasto

In this particular case the chairman of the Electrol Commission of Kenya (the late Samuel Kivuitu), who was also an advocate of the High Court, was barred from representing ECK in a suit. It was held there would be a conflict of interests as this could embarrass the case at a later stage.

6.      Disqualification:

 

The proper way of applying for a disqualification is through a notice of motion. One may contrast the case of Strathmore Research and Consulting Centre v Paul Maina Gacaria [20] where counsel applied for a disqualification of the opposing counsel rightly through a notice of motion with Charles Gitonga Kariuki v Akulei Farmers Company Limited[21] where counsel brought a similar application through a preliminary objection.  The objection was thrown out on the obvious fact that a preliminary objection can only be brought on a point of law.

 

The onus is on the person alleging conflict of interest as held in the Gitonga case supra. An applicant is required to establish and present the court with evidence that would persuade the court to reach a conclusion that there could be a conflict of interest.  Further in Kiambu Service Store v Mbu-i-Kamiti Farmers & 3 others,[22] it was held that the court should be told the truth and be acquainted with the relevant facts that would lead to a conflict of interest.

7.      Appraisal of the concept of Conflict of Interest:

The right to legal representation is a right protected by the Constitution,[23] and every person is entitled to it. Even where a party alleges conflict of interest the onus lies on them to prove it and they should even go further to prove that real prejudice may be caused. It therefore remains that there is no general duty for an advocate not to act because there may be conflict of interest.[24]

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[1] ‘Standing for Justice: The Lawyers role in the Client Selection Process ‘Earl A Chernieck and Shelby Z C Austin.

[2] http://en.wikipedia.org/wiki/Cab-rank_rule.

[3] Article 50 (2)a, provides for the presumption of innocence, article 2(g) provides for the right to choose and be represented by an  advocate, and to be informed of this right promptly. Similarly, article 2(h) provides the right to be provided with an advocate by the State and at state expense, if substantial injustice would otherwise result, and to be informed of this right promptly.

[4] 287 US 45 1932

[5] Criminal Appeal No.2310 of 2010.

[6] Ibid.

[7] Ibid.

[8] Rondell v Worsely [1967]3 ALL ER 993 at 1029; Stropincky v Nathonson 19M.D.L.R

[9] ‘Professional Ethics: A Kenyan Perspective ‘ Professor Tom Ojienda and Katarina Juma.

[10] Ibid., Note 9.

[11] ‘Lawyers conflict of interest’ Ramone Mullerat.

[12] Ibid., Note 9.

[13] Rule 16 of the 1988 International Code of Ethics.

[14] Application made through Notice of Motion.

[15] Civil Appeal No. 71 of 1988

[16] (1994)EA 244 at 250

[17] (2006) eKLR

[18] (2005) eKLR

[19] Civil Appeal 136/2005

[20] 2012 eKLR

[21] 2007 eKLR

[22] Civil Suit 546/1998

[23] Ibid.,n3

[24] Ibid.,9