HIGH COURT HAS CLARIFIED THAT TAXATION OF INSTRUCTION FEES SHOULD BE BASED ON THE PLEADINGS, JUDGMENTS, OR SETTLEMENTS AND, WHERE NOT ASCERTAINABLE, SHOULD RELY ON PRINCIPLES OF LEGAL COST ASSESSMENT.

The High Court has emphasised that taxation of a bill of costs particularly assessment of instruction fees should be based on the pleadings, judgments, or settlements and, where not ascertainable, should rely on established principles of legal cost assessment.

Justice Mubiru has further clarified that the failure to ascribe the correct value to the subject matter constitutes an error of principle. The Taxing Officer has a duty to consider each item in the bill of costs and provide justifications for decisions made.

Facts The case revolved around a dispute arising from a loan agreement (Mezzanine Term Facility Agreement) executed on December 11, 2014, between the respondents and Vantage Mezzanine Fund II Partnership. When repayment issues arose, the respondents filed Civil Suit No. 988 of 2019. The appellant contested the proceedings, arguing that the dispute should be resolved through arbitration as per the contract's arbitration clause. The Court upheld this position on June 16, 2021, referring the matter to arbitration and dismissing the suit.

Subsequently, the appellant filed a bill of costs, which the Deputy Registrar taxed on October 17, 2024. The Registrar awarded UGX 104,099,300/=, including UGX 90,000,000/= as instruction fees. The Registrar ruled that the subject matter value of the suit was indeterminate, rejecting the argument that it was USD 26,486,633.78 (the loan balance).

Dissatisfied, the appellant appealed, arguing that the instruction fees awarded were unfairly low and that the Registrar failed to apply proper taxation principles. The appellant sought an increase in fees based on the subject matter value.

Conversely, the respondents cross-appealed, arguing that the instruction fees were excessive and that the case was never fully heard. They maintained that the suit was about the legality of the loan agreement, not a monetary claim, making its value unascertainable.

The High Court determined whether the instruction fees were appropriately awarded and whether the taxation decision should be revised.

Holding

The Court evaluated the two claims advanced by the Plaintiffs:

(1) the primary contention that the demand for payment was null, void, and unenforceable due to the illegality of the credit facility agreement; and

(2) the alternative contention that the amount claimed was unconscionable, excessive, and extortionate.

The learned Deputy Registrar correctly determined that the primary question in the suit was the legality of the credit facility agreement. However, the Court found that she erred in classifying the existence and accuracy of the loan debt as a secondary matter contingent upon the primary question.
The Court clarified that all three contentions presented by the Respondents were cumulative rather than mutually exclusive, requiring evidentiary proof before any preliminary legal ruling could be made.

The Court stated that, for purposes of taxation of a bill of costs, the value of the subject matter of a suit should be determined from the pleadings, judgment, or settlement. However, if the value is not ascertainable from these, the Taxing Officer is entitled to exercise discretion in assessing an instruction fee deemed just taking into account, amongst other matters, the nature and the importance of the cause or the matter, the interest of the parties, general conduct of the proceedings, any direction by the trial judge and all other relevant circumstances.

The Court further guided that it is the value of the claim or question before the Court which constitutes the material over which there is litigation, and not the value of the property to which it relates or from which it springs, which is the determining factor.

Additionally, the Court emphasized that it is the duty of the Taxing Officer to consider each and every item presented in the bill of costs.

Misdirection in Determining the Value of the Subject Matter
The learned Deputy Registrar held that the suit primarily concerned the legality of the credit transaction rather than the determination of the loan debt’s accuracy or recoverability.
While acknowledging that the suit was not for direct recovery, the Court found that relief from the obligation to pay a specified sum was central to the dispute.
- The Court emphasized that the "subject matter" of litigation is the primary right asserted and relief sought, rather than the underlying property or contract.
- It reaffirmed that the value of a claim is based on the legal issue at stake, not the property involved, citing Cooper v. Nevill [1959] 1 EA 74 at 76.
- The Court ruled that the subject matter value in High Court Civil Suit No. 988 of 2019 was the sum of USD 26,486,633.78, as this was the amount from which the Respondents sought relief.
Valuation of Interlocutory Applications
The Court addressed Misc. Application No. 201 of 2020 (seeking a stay on account of an arbitration agreement), Misc. Application No. 1106 of 2019 (seeking a temporary injunction), and Misc. Application No. 0548 of 2021 (seeking leave to appeal out of time).
- It distinguished between applications affecting substantive rights (e.g., determining whether a dispute should be arbitrated) and those of procedural nature.
- It held that since the applications were interlocutory and did not directly determine pecuniary value, their valuation for taxation purposes should be assessed based on standard statutory minimums.
Principles for Taxation of Costs
The Court restated the principles governing taxation, particularly the assessment of instruction fees:
- The value of the subject matter should be determined from pleadings, judgment, or settlement, but where not ascertainable, discretion must be exercised judiciously as held in Joreth Ltd v. Kigano & Associates [2002] 1 EA 92.
- The Taxing Officer must consider the importance, complexity, and volume of work, without arbitrarily inflating fees.
- Citing the decision In Republic v. Minister of Agriculture Ex parte Samuel Muchiri W’Njuguna [2006] 1 EA 359, the Court emphasized the need to justify high fees based on demonstrated complexity and industry.
- The Court criticized the learned Deputy Registrar for failing to distinguish between ascertainable and unascertainable subject matter values, thereby committing an error of principle.
Failure to Consider Items in the Bill of Costs
- The Court reaffirmed that the Taxing Officer must evaluate each item in a bill of costs and provide reasoned justifications for the exercise of discretion as held in Joseph Byamugisha t/a J.B. Byamugisha Advocates v. National Social Security Fund, H.C. Civil Appeal No. 0016 of 203.
- The decision highlighted the need for transparency in taxation decisions, ensuring that advocates and litigants understand the basis of cost assessments.

Implications for Practitioners

Legal practitioners should be mindful that claims premised on illegality and unconscionability may be considered cumulatively, requiring evidentiary proof before a preliminary ruling can be sought.
In taxation matters, practitioners should ensure that pleadings clearly establish the value of the subject matter to avoid discretionary valuation.
When handling interlocutory applications, lawyers must distinguish between substantive and procedural matters, as this affects cost valuation.
Taxing Officers must provide detailed reasoning when awarding costs, particularly where complexity, industry, or case importance is cited as justification for higher fees.