Auctioneers must not charge professional fees multiple times as doing so amounts to unjust enrichment, the Court of Appeal has ruled.
In a judgment, the courts clarified that an auctioneer must identify an asset’s reserve price and place himself in one applicable band and rate, and not all of them as published in the Auctioneers Act.
The fourth schedule of the Act states the charges for professional fees and different bands which the auctioneer and creditors like a bank, agree before commencing work.
The work could be based on the value of the property, the stage of the matter or the amount of work, among others.
“That in our view, and in agreement with the trial court would be improper, as it would then defeat the purpose for the Fourth Schedule in breaking down the amount chargeable for the reserve price into the different three bands,” Justices Asike Makhandia, Fatuma Sichale and Hellen Omondi ruled.
The Judges said to hold otherwise would in effect amount to benefiting from all scales. “That would amount to unjust enrichment or double charging as it were,” the court said.
The Court of Appeal judges made the decision in a case filed Garam Investments and Gulf African Bank, over a property belonging to Mr Ibrahim Hussein Mahadi and Mahadi Energy.
The auctioneer was contracted by the lender to sell Mr Mahadi’s property in Nairobi’s South C area, to recover a loan of Sh36 million.
On two occasions, Mr Mahadi obtained court orders stopping the sale of the property. The bank and the auctioneer could not agree on the fee to charge.
Both the bank and the auctioneer moved to court in 2017 and the magistrate hearing the case settled on a fee of Sh508,426. Garam disagreed arguing that it was entitled to more money, saying the bands outlined be applied cumulatively.
The matter proceeded to the High Court and the judge hearing the case agreed with the magistrate saying the auctioneer cannot charge fees on the different bands and thereafter accumulate the total.