Tax waiver legislation based on country by country agreements have to comply with the Constitution
Headnote: The petitioner challenged the constitutionality of Legal Notice No 15 of 2021 and Legal Notice No 27 of 2021 on grounds that the legal notices exempted Japanese employees, consultants and companies involved in the projects financed by a loan by Japan to Kenya. The petitioner contended that the Legal Notices were discriminatory on grounds of nationality and race and were unconstitutional for not having been subjected to public participation. The petitioner also contended that section 13(2) of the Income Tax Act was unconstitutional to the extent that it authorized Income Tax waivers through a notice in the Kenya Gazette issued by the Cabinet Secretary for National Treasure and Planning against the dictates of article 210 of the Constitution that required all money bills to be passed by the National Assembly. The court held that the tax waiver legislation based on country by country agreements had to comply with the Constitution and must be on the basis of reciprocity, non-discrimination, equality and tax neutrality. The court held that the legal notices were discriminatory and unconstitutional. Section 13(2) of the Income Tax Act was also declared to be unconstitutional for violating article 210 of the Constitution.

Matindi v CS, National Treasury & Planning & 4 others (Constitutional Petition E280 of 2021) [2023] KEHC 1144 (KLR) (Constitutional and Human Rights) (17 February 2023) (Judgment)
Neutral Citation: [2023] KEHC 1144 (KLR)
High Court at Nairobi
DK Magere, J
February 17, 2023
Reported by John Ribia
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Tax Law – tax waivers – waivers based on loan agreements issued by a foreign state to Kenya – where a loan agreement from a foreign state to Kenya specified that the nationals of the country that had financed the project in Kenya and that were working on the project were exempt from paying income tax - whether the income generated from companies, employees and consultants that were nationals of a country that had granted Kenya a loan, and that were working on the project funded by the loan, qualified to be exempt from income tax - whether the income generated from companies, employees and consultants that were nationals of a country that had granted Kenya a grant, and that were working on the project funded by the grant, qualified to be exempt from income tax - Income Tax Act (Cap 470) section 13(2), schedule 1, part 1, paragraph 21; External Loans and Credits Act (Repealed) (cap 22) section 5
Tax Law – tax waivers – body with power to issue tax exemptions – elements – form and content - what elements should a tax waiver fulfil to be acceptable in law - whether the Cabinet Secretary for National Treasury and Planning had the power to grant tax waives - Whether tax waiver legislation based on country by country agreements had to comply with the Constitution and must be on the basis of reciprocity, nondiscrimination, equality and tax neutrality – Constitution of Kenya, 2010 article Income Tax Act (Cap 470) section 13(2), schedule 1, part 1, paragraph 21
Constitutional Law – arms of government – separation of powers - powers of the judiciary vis-à-vis the legislature – where an applicant sought for parliamentary reports to be invalidated due to their manner in which they were drafted - whether the doctrine of separation of powers estopped the High Court from invalidating a gazette notice on account of the gazette notice having errors that may confuse the reader - whether the judiciary had no powers to superintend on the legislature on how to draft their reports - whether the National Assembly abdicated its role by surrendering the powers to legislate on a money bill to the Cabinet Secretary for National Treasury and Planning – Constitution of Kenya, 2010 articles 1, 3(1), 10, 24, 27, 35, 53, 54, 55, 56, 57, 73, 75, 94, 95, 97, 106, 114, 118, 120, 159, 201, 210, 260; schedule 5; paragraph 7(1)
Constitutional Law – public participation – public participation on legislative instruments - whether Legal Notice No. 15 of 2021 was unconstitutional for want of public participation – Constitution of Kenya, 2010 article 10 and 210

Brief Facts
The petitioner was aggrieved the financing agreements between the Government of Kenya and Japan entered on various dates between August 16, 2010 and September 18, 2010 that exempted Japanese companies, Japanese Consultants and Japanese employees involved in the projects under those financing agreements from the provisions of the Income Tax Act, 1975. The exemptions in the financial agreements were brought to life in Legal Notice No 15 of 2021 and Legal Notice No 27 of 2021.
The petitioner contended that the Legal Notices were discriminatory on grounds of nationality and race and were unconstitutional for not having been subjected to public participation. The petitioner also contended that section 13(2) of the Income Tax Act was unconstitutional to the extent that it authorized Income Tax waivers through a notice in the Kenya Gazette issued by the Cabinet Secretary for National Treasure and Planning against the dictates of article 210 of the Constitution that required all money bills to be passed by the National Assembly.
The arguments from the respondents were that that grants and loans were from foreign sources hence Kenya to defer to the foreign authority.

Issues
  1. Whether the doctrine of separation of powers estopped the High Court from invalidating a gazette notice on account of the gazette notice having errors that may confuse the reader.
  2. Whether the judiciary had powers to superintend the legislature on how to draft Parliamentry reports.
  3. What elements should a tax waiver fulfil to be acceptable in law?
  4. Whether tax waiver legislation that was based on agreements between two states that had the effect of indemnifying nationals from one country from paying taxes violated the principle of neutrality of tax and was discriminatory
  5. Whether the income generated from companies, employees and consultants that were nationals of a country that had granted Kenya a loan, and that were working on the project funded by the loan, qualified to be exempt from income tax under paragraph 21 part 1 of the first schedule to the Income Tax Act
  6. Whether the income generated from companies, employees and consultants that were nationals of a country that had granted Kenya a grant, and that were working on the project funded by the grant, qualified to be exempt from income tax under paragraph 21 part 1 of the first schedule to the Income Tax Act
  7. Whether tax waiver legislation based on country by country agreements must comply with the Constitution and must be on the basis of reciprocity, non-discrimination, equality and tax neutrality.
  8. Whether the Cabinet Secretary for National Treasury and Planning had the power to grant tax waives.
  9. Whether the National Assembly abdicated its role by surrendering the powers to legislate on a money bill to the Cabinet Secretary for National Treasury and Planning.
  10. Whether Legal Notice No. 15 of 2021 was unconstitutional for want of public participation.

Held
  1. The Constitution should be interpreted in a holistic manner, within its context, and in its spirit.
  2. The errors related to the 2 gazette notices both named as 27/2021 could be classified de minimis non curat lex (law is not concerned with small things). They were small and inconsequential errors, for which the law provided no remedy. The regulations covered by the 2 notices were not impugned in terms of content or procedure. They had identifiers embedded within the notices, the legislative supplement number and the subject matter. One notice was in legislation supplement no 21 and another in no 13. They caused no confusion to a fairly average intelligent reader.
  3. The reports of the National Assembly met minimum requirements of article 20 of the Constitution which provided that official documents ought to be in English or Kiswahili. Whether the reports were confusing was not justiciable. Confusion was a subjective matter. The National Assembly regulated its own procedures. Reports needed to be intelligible to the immediate consumers of the business of Parliament.
  4. If parliamentary reports were jumbled up, it was not the business of the court to intervene and as such the same was not justiciable. The reports may be consumed by members of the public, among others. However, that did not create a justiciable right as against parliament.
  5. doctrine of separation of powers required each of the three arms of government to stick to its lane. The court refrained from passing judgment on the quality and state of the reporting in Parliament.
  6. Unless Parliament concealed or did not disclose some documents, there could be no justiciable cause over the contents and the intelligibility of a house report or the manner in which the house ran its affairs. That was not to say that they had a carte blanche to have unintelligible reports. It meant that question of accountability for those reports did not lie here.
  7. The judiciary or the executive had no powers to superintend on the legislature on how to draft their reports. It only the people who could recall their representatives for making such mistakes. People had 5 years cycle to improve the reports. If they could not do so, the court could not intervene.
  8. e court would not engage in a debate on the competence of reports of the August house or such reports as may be having missing pages. Even if pages were missing, it was not the problem of the National Assembly but whoever brought incomplete report. The court could not trace any report of the clerk of the National Assembly declining to supply a complete record to the petitioner.
  9. laims over the twin notices Nos 27 were dismissed. There was no correlation between the alleged errors related to Gazette Notice number 27 of 2021 the content thereunder. The duty to number the Kenya Gazettes was not and could not be placed on the shoulder of the Cabinet Secretary. The issue of gazette notices with similar names should first be taken up with the Government Printer before being litigated upon.
  10. Article 260 of the Constitution defined legislation as an Act of Parliament and laws made by county assemblies. Under section 9 of the Statutory Instruments Act, the regulatory impact assessment was not to be carried out except in very specific circumstances.
  11. Section 13(1) of the Income Tax Act was introduced by section 9 of Act No 8 of 1978 that stated that the income specified in party 1 of the First schedule, which accrued in or was derived from Kenya shall be exempt from tax so specified. Therefore, any instrument purporting to exercise powers made under another act was a statutory instrument
  12. Section 13(2) of the Income Tax Act provided on tax exemptions, article 210 of the Constitution provided that there could be no blanket exemption. The extent of waivers meant the amount waived. Every waiver must:
    1. be authorized by legislation.
    2. Each waiver must be reported to the Auditor General.
    3. Each waiver must be accompanied by a reason for such a waiver, and
    4. there should be a public record of the waiver and amount waived
  13. Constitution required for each waiver to be placed in public record and for the same to be reported. No tax or licensing fees may be imposed, waived or varied except as provided by legislation. While on the other hand under 13(2) of the Income Tax Act required that waivers shall be exempt from tax to the extent specified in the notice.
  14. The supreme law of the land on waivers was enshrined in article 210 of the Constitution. The Income Tax Act, was amended to accord to the new Constitutional dispensation vide section 7(1) of the Fifth Schedule to the Constitution which stated that all law in force immediately before the effective date continued in force and was to be construed with alterations, adaptations, qualifications and exceptions necessary to bring it in conformity with the Constitution. Ipso Facto, notice fell far short of even the Act that it purported it relied on since the extent of waiver was not given.
  15. The waiver purported to be according to some financing agreements. Exemption was individualized and the amount waived must be specified and to whom it applied and the auditor general ought to be informed. Section 13(2) of the Income Tax Act gave power to exempt income or a class of income. It did not give power to exempt people or a class of people. For taxation to be fair reasonable and proportionate, it had to have an element of neutrality and should be able to apply without discrimination unless it was for clearance of historical injustices and marginalization.
  16. The financing agreements were not part of the public records that covered the waiver. A person reading the Legal Notice was sent to look for the financing agreements to find the contents and terms of the waiver. However, the Constitution required that the extent be in the notice itself.
  17. The notice did not cover all workers involved in the projects financed by Japan, but Japanese companies, Japanese consultants and Japanese employees. There was no reason accompanying the same. There was no indication of the amount of tax waived as required under article 210 of the Constitution that the extent of waiver to be specified.
  18. he criteria of race or ethnicity did not bring with it the sense of neutrality of tax. There should always be a way one could meet criteria for waiver. A good example of compliance with the percepts in article 210 of the Constitution was the waiver under the Persons with Disabilities Act in which there were qualifying persons and an objective criteria and not birth that was used to determine waiver provided under the relevant statute. Such expenditures were personalized and the amounts were known. The trouble with the contents of the instant notice was that it was omnibus and covered all Japanese consultants, employees and companies involved in the specified projects. The extent of involvement was not set out and the upper and lower limits were also not provided and as a result the cost benefit analysis was not, and could not be done.
  19. Such blanket exemptions of nationals of one state, reeked of economic apartheid and were not reasonable and justifiable in an open and democratic society based on human dignity, equality and freedom. Kenyans were highly taxed, subjecting Kenyans working for those Japanese companies and projects to tax and have the Japanese workers from janitors to CEOs, walk home tax free defeated equal pay for equal work mantra.
  20. The nature of taxation was that it could cause economic disparities and as such it widened the economic gap. The blanket waiver especially on the loans which was a burden to the very tax payers for generations served no purpose. In order to quell embers of colonialism, where only Africans were paying certain taxes, it was important that the country consulted its people whether they were willing to accept such transgressions.
  21. Kenya’s struggle against racism was enshrined in article 27 of the Constitution that provided that every person was equal before the law and had the right to equal protection and equal benefit of the law. Article 27 prohibited discrimination by the State based on race. Article 27(6) sought to realize the right to equality by undertaking the State to take legislative and other measures, including affirmative action programmes and policies designed to redress any disadvantage suffered by individuals or groups because of past discrimination. Any measure under article 27(6) shall adequately provide for any benefits to be on the basis of genuine need. That was the reason for existence for the disclosure of the reason for waiver to ascertain genuine need.
  22. The effect of the waiver was economic apartheid, where, equal pay for equal work was thrashed. Japanese employees working in the same organization, ended up with all their money, and which in cause of the local Kenyans and Kenyan resident and up paying. Taxing only Kenyans and letting Japanese companies compromised the constitutional protection under article 27 of the Constitution. Even expatriates working for the same companies most of whom were non-resident but were not Japanese and up paying more than their Japanese contacts parts.
  23. The right to equal treatment could not be derogated from. If for any reason the state was interested in waivers, there should be legislation which legislation, which in itself did not discriminate. If the legislation was discriminatory, then there should be strict compliance with article 24 of the Constitution.
  24. limitation was not valid unless the legislation specifically expressed the intention to limit that right or fundamental freedom, and the nature and extent of the limitation. The delated legislation on tax waivers in the impugned notice breached article 27 without expressly referring to it and justifying the same.
  25. Without reasons being given for the discriminatory blanket waiver, Legal Notice No 15 of 2021 dated 15/2/2021 was not justifiable in an open and democratic society. It was anathema to equality and financial prudence. The Constitutional imperative was that all waivers must be by legislation. There was no legislation on the authority to issue waiver for Japanese companies, Japanese consultants and Japanese employees in the specified agreements set out in the schedule.
  26. Practice from the 1960s was to have agreements singularly or specifically legislated upon. Under the External Loans and Credits Act, parliament always had a say on the type of interest and conditions for grant of loans. Full disclosure on conditions and amounts was paramount. Even in the External Loans and Credits Act which predated the Constitution, amounts were crucial and the minster was not authorized to waive tax.
  27. The existing first schedule to the Income Tax Act named specifically the bodies to be exempted. However, if the extend the same to certain office holders or nationals of certain states, in particular without reciprocity hence subjugating the Constitution to that of the Japanese Empire. That was unconstitutional since it was only parliament that had the obligation and responsibility to impose tax, by extension un-impose by legislation
  28. The duty to impose tax, carried with it the duty, by legislation to un-impose tax. The National Assembly abdicated its role by surrendering the powers to legislate on a money bill to the Cabinet Secretary. He simply drew some gazette notice to be placed before an overwhelmed committee on delegated legislation, who despite not receiving satisfactory answers rubber stamped the Cabinet Secretary’s request. That was contrary to article 210 of the Constitution.
  29. Although the definition legislation included county legislation, it was only the National Assembly that could originate a money bill. The Cabinet Secretary had no power to grant blanket tax waiver. That was in contravention of article 27 and 210 of the Constitution. The waiver had to follow the normal route on legislation. Waiving tax through delegated legislation did not meet the Constitutional imperative on money bills under article 114(3) of the Constitution. Article 114 sufficiently covered matters dealing with foreign loans and taxes or waivers incidental thereto as provided for under article 210 of the Constitution.
  30. Public participation had foundational basis in article 10 and 256 of the Constitution. It was a tool the people reserved for themselves in light of history of Kenya. The importance of public participation could not be waived. Parliament waived the right to public participation in publishing the legal notices on grounds that the legal notices were not statutory instruments.
  31. Public participation was not limited to statutory instruments. It was related to all legislation and even decisions on hiring of Constitutional office holders. Parliament had no power to exclude public participation in legislation and other business. Parliament should be more geared towards public participation and not less of it. Legal Notice No 15 of 2021 was a statutory instrument and required go through public participation. The National Assembly breached the Constitution by failing to carry out public participation.
  32. Parliament waived the need of public participation. They had power to determine the nature of public participation having regard to the nature of the issue. The more technical and wide the effects, the more the need to engage in public participation. The decision by parliament to waive public participation were made without requisite authority, was null and void ab initio.
  33. Loans were not equivalent to foreign sources. Whereas a grant was a foreign source, it was doubtful whether a loan, concessionary or otherwise qualified of a foreign source as the country was bound to repay the same from internal sources.
  34. o the extent that a grant was not an entitlement, the court would not deal with it as it was subject to the wishes of the grantor. The petition did not show how grants were affected by the notices. That was because they were not loans covered under article 114 of the Constitution and were not a burden on the national debt and were not entitlements. Those were gratuitous payments or receipts which were governed by the donor’s postulations. The same did not apply to loans which the country was bound re-pay.
  35. An order compelling carrying out a duty had to be given only when the duty had been breached. It could not be given in anticipation. The court declined to compel the Kenya Revenue Authority to do its duty since there was no evidence that they had failed to carry out their duties. That was because, they were not under obligation to collect the income tax before the declaration was made.
  36. nce the court re-ignited the duty today, it could not be placed on their shoulders at the pain of contempt when thy had not declined to carry out their duty. The order was not ripe as of today. It could only be addressed once the same was ripe and justiciable.
Petition partly allowed.
Orders
  1. Declaration issued that the 1st respondent violated the Constitution by exempting Japanese companies, Japanese consultants and Japanese employees as set out in Legal Notice No. 15 of 2021 dated February 15, 2021 published on February 26, 2021 as issue No 17.
  2. Declaration issued that Legal Notice No 15 of 2021 dated February 15, 2021 published on February 26, 2021 as issue No 17 was unconstitutional by itself and in its effect as it was contrary to articles 27 and 210 of the Constitution and had not been subjected to public participation. The said notice was quashed.
  3. Declaration issued that section 13(2) of the Income Tax Act was unconstitutional to the extent that it authorized Income Tax waivers through a notice in the Gazette and for specified persons without regard to the dictates of article 210 of the Constitution. To the extent of the inconsistency, in particular the use of the Kenya Gazette, instead of legislation, to effect tax waiver, was struck down.
  4. Declaration issued that exemption or waiver of tax income could only be granted the National Assembly through national legislation after the same passes as a money bill as provided under article 114(3) of the Constitution; after public participation and in strict compliance with article 210 of the Constitution, which legislation would require that there be:
    1. A public record of each waiver and the reasons for the waiver.
    2. Each waiver, and the reason for it shall be reported to the Auditor General.
    3. As per the dictate of article 27 of the Constitution, there could be no waiver based on national origin, race, colour, marital status, health status, ethic society, religion, conscience, belief culture, dress, language or birth.
  5. Declaration issued that legislation on tax waiver involving country by country agreements must comply with the Constitution and must be on the basis of reciprocity, nondiscrimination, equality and tax neutrality.
  6. Declaration issued that the National Assembly had no power to authorize waiver of tax other than through legislation contemplated and in strict compliance with article, 210 of the Constitution.
  7. Grants were not affected by the instant decision as they were not a not loans covered under article 114 of the Constitution and were not a burden on the national debt and were not entitlements.
  8. The claims regarding the mingling of reports by the National Assembly were not justiciable as parliament had a right to regulate its own procedure and on the basis of the doctrine of separation of power.
  9. The named state officers were implementing the law before its unconstitutionality was pronounced and were acting in good faith.
  10. Income Tax covered under Legal Notice dated February 15, 2021 published on February 26, 2021 as issue No 17 was collectable with effect from the date of quashing of the impugned unconstitutional Legal Notice No 15 of 2021.
  11. The court declined to compel the Kenya Revenue Authority to do its duty since there was no evidence that they had failed to carry out their duties.
  12. Each party was to bear its own costs.


Kenya Law
Case Updates Issue 04/23-24
Case Summaries
JURISDICTION

Jurisdiction of the Employment and Labour Relations Court in matters of alleged violation of human rights and fundamental freedoms by employers

Headnote: The petitioners in the instant case alleged that the 1st, 2nd and 3rd respondents had embarked on an unlawful and unfair termination of their employment. The 1st and 2nd respondents argued that the court lacked jurisdiction to determine the petition. The court held that it had jurisdiction to determine the matter of alleged unlawful and unfair termination of employment on grounds of redundancy and also the jurisdiction to enforce alleged violation of human rights and fundamental freedoms by the respondents. The court noted that its jurisdiction was in flux and a moving target and that had created uncertainty on what the jurisdiction of the court was and that it was about time the Supreme Court rendered itself authoritatively on the matter.

Arendse & 182 others v Meta Platforms, Inc & 3 others; Kenya Human Rights Commission & 8 others (Interested Parties) (Constitutional Petition E052 of 2023) [2023] KEELRC 921 (KLR) (20 April 2023) (Ruling)
Neutral citation: [2023] KEELRC 921 (KLR)

Employment and Labour Relations Court at Nairobi
MN Nduma, J
April 20, 2023
Reported by Kakai Toili
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Jurisdiction - jurisdiction of the Employment and Labour Relations Court (ELRC) - jurisdiction in matters of alleged violation of human rights and fundamental freedoms by employers against employees - whether the ELRC had jurisdiction in matters of alleged violation of human rights and fundamental freedoms by employers against employees - whether privity of contract was an essential element in establishing violations of human and fundamental freedoms by a person in control and authority over another - Constitution of Kenya, 2010, articles 162(1) and (2).
Civil Practice and Procedure - preliminary objections - nature of preliminary objections - what was the appropriate way in which a party ought to raise a preliminary objection.

Brief Facts
The petitioners were nationals of various countries engaged as Facebook Content Moderators. The petitioners averred that they were engaged by the 1st and 2nd respondents to work in Kenya and that the recruitment was done through the 3rd respondent. The petitioners alleged that the 1st, 2nd and 3rd respondents had embarked on an unlawful and unfair termination of their employment for the sole reason that one of the moderators formerly engaged by the 1st and 2nd respondents through the 3rd respondent filed a constitutional petition challenging the gross violation of moderators ’ rights by the 1st, 2nd and 3rd respondents. The petitioners thus claimed that the 1st and 2nd respondents had orchestrated a sham redundancy to be undertaken by the 3rd respondent.
The petitioners alleged that their human rights and fundamental freedoms had been violated, continue being violated and were further threatened during the sham redundancy process. The 1st and 2nd respondents filed a notice of motion application seeking among other orders that the petition be struck out and/or dismissed as against them on among other grounds that the court lacked jurisdiction to entertain, hear and determine the petition. The 1st and 2nd respondents’ application was premised on among other grounds that; they were foreign corporations who were neither formally present, domiciled nor trading in Kenya over whom the court could not as a matter of right or law assume jurisdiction.

Issues:

  1. Whether the Employment and Labour Relations Court had jurisdiction in matters of alleged violation of human rights and fundamental freedoms by employers against employees .
  2. Whether privity of contract was an essential element in establishing violations of human and fundamental freedoms by a person in control and authority over another.
  3. What was the nature of a preliminary objection?
  4. What was the appropriate way in which a party ought to raise a preliminary objection ? Read More..

Held:

  1. A preliminary objection was one that raised a pure point of law argued on the assumption that all the facts pleaded by the other side were correct. It could not be raised if any fact had to be ascertained. The preliminary objection raised by the 1st and 2nd respondent fell short of the mandatory requirements of a preliminary objection – it did not constitute a pure point of law argued on the assumption that all the facts pleaded by the other side were correct. There was a plethora of facts raised by the petitioners in the petition and the supporting affidavits which were yet to be ascertained.
  2. For a court to be said to be acting extra territorially, the violations complained of by the petitioners must have been committed outside the jurisdiction of the court. That was not the case in the instant petition. The raft of alleged violations by the 1st, 2nd, and 3rd respondents were said to have been committed in Kenya and within a work space provided by the 1st and 2nd respondents. Privity of contract was not an essential element in establishing violations of human and fundamental freedoms by a person in control and authority over another.
  3. The 1st and 2nd respondents had been properly served with the court processes and had rightly been placed within the territorial jurisdiction of the court to enable them to defend the case brought against them by the petitioners as they were already justly and effectively doing through duly appointed firm of advocates.
  4. The jurisdiction of the court to hear and determine matters was founded under article 162(1) and (2) of the Constitution of Kenya, 2010. The jurisdiction of the court was in flux and a moving target. That had created uncertainty on what the jurisdiction of the court was and it was about time the Supreme Court rendered itself authoritatively on the matter. Almost every other matter before the court started with a challenge on the jurisdiction of the court due to the lingering uncertainty. That led to uneconomical use of the court’s time and to the case backlog.
  5. The court had jurisdiction to determine the matter of alleged unlawful and unfair termination of employment on grounds of redundancy by the 1st, 2nd and 3rd respondents and also the court had jurisdiction to enforce alleged violation of human rights and fundamental freedoms by the 1st, 2nd, 3rd and 4th respondents against the petitioners as set out in the petition and the supporting documents.
  6. The instant dispute arose from an employer – employee dispute. The court would consider the nature and extent of liability with regard to the alleged breaches and violations of the Constitution arising and or related to employment and labour relations in Kenya. It was immaterial whether the alleged violations occurred in a physical or virtual space within the jurisdiction of the court in Kenya.
  7. The court distinguished its decision in Nairobi ELRC Petition No E071 of 2022 – Daniel Motaung v Sama Source Kenya EPZLimited T/A Sama and 2 Others where the court held that the petitioners in that case had not sought leave to serve summons on the 2nd and 3rd respondents in terms of Order 5, rule 21 of Civil Procedure Rules and therefore the court found that it was not satisfied that it had assumed jurisdiction over the 2nd and 3rd respondents in that matter. The court however did not strike out the 2nd and 3rd respondents from the petition but gave the petitioners opportunity to comply with Order 5 rule 22 of the Civil Procedure Rules.
  8. The alleged failure by the petitioners to disclose material facts was without merit. The dispute of facts alluded to by the 1st and 2nd respondents shall be fully ventilated, considered and determined upon hearing of the suit on the merits.
  9. Whereas pure points of law may be raised in any manner and the court may discern them from pleadings and raise the same suo moto, it was appropriate for a party who wished to raise a preliminary objection to do so by a notice of preliminary objection or in a statement of defence where appropriate to avoid unnecessary arguments on the manner in which the points of law had been taken up by the objectors.

Preliminary objections dismissed with costs in the cause.
Orders

  1. Due to the nature of the matter and the interim orders in place, considering that the court had just commenced its leave, the matter was referred to the Principal Judge to allocate the matter to another judge within the Judicial Review and Labour Relation’s Division to hear and determine the pending application and the petition on the merits on a priority basis.
  2. The interim orders were extended pending the hearing and determination of the notice of motion dated March 17, 2023.
CIVIL PRACTICE AND PROCEDURE

Circumstances in which a court could issue orders for stay

Headnote: The instant application sought the stay of execution of a decree/order resulting from a judgment delivered by the Court of Appeal pending the determination of the appeal. The instant court reiterated that an applicant must satisfy the court that the appeal was arguable and was not frivolous; that unless the orders of stay were granted, the appeal would be rendered nugatory; and that it was in the public interest that the order of stay be granted.

Kenya Airports Authority v Otieno, Ragot & Company Advocates (Petition (Application) E011 of 2023) [2023] KESC 56 (KLR) (Civ) (16 June 2023) (Ruling)
Neutral citation: [2023] KESC 56 (KLR)

Supreme Court of Kenya
MK Koome, CJ, PM Mwilu, DCJ & V-P, MK Ibrahim, SC Wanjala & NS Ndungu, SCJJ
June 16, 2023
Reported by Kakai Toili


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Civil Practice and Procedure - orders - orders for stay - what were the circumstances in which a court could issue orders for stay.

Brief facts
The applicant filed the instant application seeking a stay of execution of the decree/order resulting from the judgment delivered by the Court of Appeal on May 19, 2023 in Civil Appeal No 39 of 2017 and as a consequence to stay the hearing of the enforcement proceedings pending before the High Court and any other consequential orders arising therefrom pending the hearing and determination of the petition of appeal.
The applicant contended that it had retained the services of the respondent to represent it in a suit filed by various plaintiffs in which the plaintiffs claimed that the court proceeded to strike out the suit with costs; and that the respondent demanded to be paid advocate-client costs based on the certificate of costs derived from party-to-party costs for the sum of Kshs 151, 650, 000. Since the applicant and respondent could not agree on fees, the respondent filed their bill of costs which was taxed at Kshs 8,759,022.74. That finding was upheld upon a reference before the High Court. On appeal, the impugned decision court increased the fees by one half in the sum of Kshs 196,044,750.50.

Issue:

  1. What were the circumstances in which a court could issue orders for stay? Read More..

Held:

  1. Under section 23A of the Supreme Court Act, the court had jurisdiction to issue an order for stay of execution, an injunction, a stay of further proceedings or any other conservatory or interim orders, on such terms as the court may deem fit. An applicant must satisfy the court that the appeal was arguable and was not frivolous; that unless the orders of stay were granted, the appeal would be rendered nugatory; and that it was in the public interest that the order of stay be granted.
  2. The gist of the appeal, as certified by the Court of Appeal as one of general public importance, involved a determination of the proper interpretation of the provisions of Schedule VI, Part A and B of the Advocates Remuneration Order and the extent to which such interpretation limited the exercise of the taxing officer’s judicial discretion in taxation of advocate – client bill of costs especially where the value of the subject matter of the dispute was not substantiated. In light of the pending application in Application No E015 of 2023 to review the certification, the appeal was arguable and not frivolous.
  3. The impending and imminent execution of the decree arising from the impugned decision in the proceedings pending before the High Court and the amounts involved risked rendering the appeal nugatory should the same be concluded pending the hearing and determination of the appeal.

Application allowed.
Orders

  1. Pending the hearing and determination of the petition of appeal against the judgment delivered on May 19, 2021, the court ordered a stay of execution of the decree/order resulting from the judgment delivered by the Court of Appeal on May 19, 2023 in Civil Appeal No 39 of 2017 and as a consequence to stay the hearing of the enforcement proceedings pending before the High Court in Kisumu HCCC Misc Civil Cause 95 of 2011 and any other consequential orders arising therefrom.
  2. The costs of the application to abide the outcome of the appeal.