A determination that interest rates on loans/facilities were completely liberalised and not subject to regulation would be an interpretation that was contrary to the objective of the Banking Act

Headnote: The main issue was of whether banks and financial institutions were required to seek approval of the Cabinet Secretary responsible for matters relating to Finance (Cabinet Secretary) envisaged under section 44 of the Banking Act, before increasing rates of interest on loans and/or facilities advanced to their customer. Section 44 of the Banking Act played a different regulatory role yet complementary to that which capped interest rates played. By requiring bank/financial institutions to seek approval of the Cabinet Secretary before an increase in interest rates, it ensured that there was some check and balance or oversight to ensure that consumers of the loan facilities were not exploited and that the rates were reasonable. That was quite evident from the Banking (Increase of Rate of Banking and Other Charges) Regulations, Legal Notice No. 34 of 2006, formulated in relation to section 44 of the Banking Act. The Regulations set out the procedure of seeking the approval envisioned thereunder as well as the process of considering such an application. It provided an elaborate process involving the Governor of CBK and the Cabinet Secretary who were better placed to tell whether the proposed interest rates were in line with the government’s policy and the inflation rate amongst other necessary considerations. To hold that interest rates on loans/facilities were completely liberalised and not subject to regulation would be an interpretation that was contrary to the objective of the Banking Act.

Stanbic Bank Kenya Limited v Santowels Limited (Petition E005 of 2023) [2024] KESC 31 (KLR) (28 June 2024) (Judgment)
Neutral citation: [2024] KESC 31 (KLR)
The Supreme Court of Kenya
MK Koome, CJ & P, PM Mwilu, DCJ & V-P, MK Ibrahim, SC Wanjala & NS Ndungu, SCJJ
June 28, 2024
Reported by Robai Nasike Sivikhe
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Constitutional Law – interpretation of statutes – interpretation of section 44 of the Banking Act - whether the term “rate of banking” as employed by the legislature under Section 44 of the Banking Act included and covered interest rates charged/applied by banks on loans/facilities advanced – whether the term “rate of banking” as employed by the legislature under section 44 of the Banking Act included and covered interest rates charged/applied by banks on loans/facilities advanced – whether the interpretation that section 44 of the Banking Act extended to interest rates would be in contravention of the Legislature’s intention to liberalise the interest rate regime – whether banks and financial institutions were required to seek approval of the Cabinet Secretary responsible for matters relating to Finance (Cabinet Secretary) envisaged under section 44 of the Banking Act, before increasing rates of interest on loans and/or facilities advanced to their customers – Banking Act, section 44 and 52
Contract Law – contracts – terms of a contract – terms of a contract viz-a-viz legal provisions – claims that mutually agreed upon terms of a contract superseded the interest terms as set by the law and regulatory bodies - whether a contract that was mutually agreed by parties might provide the bank with the absolute/unlimited discretion to alter/vary interest rates on loans – whether the issue of interest rate determination was simply a contractual matter subject to mutual negotiation by the institutions and their customers.
Civil Practice and Procedure – appeals – appeals to the Supreme Court – application for certification – where the Court of Appeal certified or declined to certify a matter as one of general public importance – the procedure to be followed where a party was aggrieved by the Court of Appeal’s decision to certify or decline to certify a matter as one of general public importance – whether a party aggrieved by the Court of Appeal’s decision to certify or decline to certify a matter as one of general public importance, could raise an objection at the hearing of the appeal, by the Supreme Court – Constitution of Kenya, 2010, Article 163 (5); Supreme Court Rules, 2020, rule 33 (2) & (3)
Civil Practice and Procedure – appeals – cross-appeals – process of lodging cross-appeals at the Supreme Court – certification of a cross-appeal application as one raising a matter of general public importance – whether a party filing a cross-appeal ought to ensure that it was certified as a matter raising issues of general public importance – Constitution of Kenya, 2010, Article 163 (4) (b); Supreme Court Rules, 2010, rule 47
Words and phrases – definitions – definition of – rates – an amount paid or charged for a good or service the rate for a business – Black’s Law Dictionary, 8th edition (2004), pp. 3956

Brief Facts
The appeal was premised on Article 163(4)(b) of the Constitution. It was filed according to leave issued by the Court of Appeal that certified the matter as being of general public importance. The matter revolved around the question of whether banks and financial institutions were required to seek approval of the Cabinet Secretary responsible for matters relating to Finance (Cabinet Secretary) envisaged under section 44 of the Banking Act, before increasing rates of interest on loans and/or facilities advanced to their customers. Concomitantly, whether the issue of interest was simply a contractual matter subject to mutual negotiation by the institutions and their customers.
Stanbic Kenya Limited (the appellant) and Santowels Limited (the respondent) were in a bank/customer relationship which led to the appellant granting the respondent several facilities between 1993 and 1997. The pertinent terms of the said facilities were that they could be renewed and/or extended; the rate of interest was 3% per annum above the appellant’s base lending rate; and the appellant reserved the right to vary the rate of interest. Periodically, the appellant notified the respondent of interest adjustments whenever they occurred, and the respondent paid the interest as and when it fell due. However, in 2002 the parties’ relationship became difficult as the respondent began having doubts concerning the interest charged by the appellant. Consequently, the respondent paid the outstanding debt and closed its accounts with the appellant in the same year.
Nonetheless, in 2003 the respondent engaged Interest Research Bureau (K) Ltd, to audit and/or verify the accuracy of the interest charged on the facilities. In addition, the respondent notified the appellant of the said engagement vide a letter dated June 11, 2003, and requested the appellant to accord the Interest Research Bureau (K) Ltd the necessary cooperation. Thereafter, correspondence relating to a recalculation of interest was exchanged between Interest Research Bureau (K) Ltd and the appellant. Ultimately, according to Interest Research Bureau (K) Ltd’s computation, the appellant had overcharged interest on the facilities granted to the respondent. In turn, the appellant through a letter dated October 30, 2003, disputed the said computation which it termed as inaccurate. What was more, the appellant denied any liability on its part, and that was what escalated the dispute to a long litigation before the two superior courts below and the existing appeal.

Issues
  1. Whether a party aggrieved by the Court of Appeal’s decision to certify or decline to certify a matter as one of general public importance could raise an objection at the hearing of the appeal, by the Supreme Court.
  2. Whether a party filing a cross-appeal ought to ensure that it was certified as a matter raising issues of general public importance.
  3. Whether the term “rate of banking” as employed by the legislature under Section 44 of the Banking Act included and covered interest rates charged/applied by banks on loans/facilities advanced.
  4. Whether the interpretation that section 44 of the Banking Act extended to interest rates would be in contravention of the Legislature’s intention to liberalise the interest rate regime.
  5. Whether banks and financial institutions were required to seek approval of the Cabinet Secretary responsible for matters relating to Finance (Cabinet Secretary) envisaged under section 44 of the Banking Act, before increasing rates of interest on loans and/or facilities advanced to their customers.
  6. Whether a contract that was mutually agreed by parties might provide the bank with the absolute/unlimited discretion to alter/vary interest rates on loans.
  7. Whether the issue of interest rate determination was simply a contractual matter subject to mutual negotiation by the institutions and their customers.
Held:
  1. Certification of an intended appeal as raising issue(s) of general public importance or the decision declining such certification by the Court of Appeal was only subject to review by the Supreme Court. Article 163(5) of the Constitution limited the orders that the Supreme Court could issue as either affirming, varying or overturning the Court of Appeal’s decision on certification. However, Rule 33(2) and (3) of the Supreme Court Rules, 2020 set out the timeline, procedure and parameters of seeking review of certification. In particular, it prescribed that such review should be sought within 14 days of the Court of Appeal’s decision on certification through an Originating Motion.
  2. The Court of Appeal certified the appellant’s appeal in its ruling dated February 17, 2023. The point at which an objection ought to have been raised had long passed. The procedure and parameters for seeking review as delineated under Rule 33(2) and (3) of the Supreme Court Rules were not merely technical requirements that could be wished away. Compliance ensured good order, certainty and predictability in the disposal of disputes/matters before the Court and in the administration of justice. In any event, the challenge by the respondent’s counsel was raised from the bar during the hearing of the appeal depriving the appellant of adequate opportunity to prepare and respond to the same. It would be an affront to justice to allow such practice especially where the procedure and the parameters of raising such a challenge were provided and known to a litigant, like the respondent. Accordingly, the respondent’s contention simply rang hollow and was dismissed.
  3. Rule 47 of the Supreme Court Rules merely set out the form that a cross-appeal should take and in no way acted as a carte blanche for respondents to file cross-appeals. A cross-appeal was a separate and independent appeal that had to be considered on its terms and merits, independent of the main appeal. The respondent’s cross-appeal should have been brought within the realm of the appellant’s appeal which was filed following certification under Article 163(4)(b) of the Constitution. Therefore, the respondent should have sought certification of the issues raised in its cross-appeal before lodging the same. The Supreme Court could only be seized of a matter, in the instant case, the cross-appeal, where its jurisdiction was properly invoked. In the circumstances, the cross-appeal was defective and was struck out.
  4. Only the appellant’s appeal fell for the Supreme Court’s consideration. The grounds of appeal within, the reliefs sought and the submissions thereto went beyond the scope of the certification by the Court of Appeal. The Court of Appeal certified the interpretation of sections 44 and 52 of the Banking Act as issues of general public importance based on the uncertainty occasioned by contradictory decisions of the superior courts below. The appellant, in its application for certification, had listed seven (7) questions as issues of general public importance. Perhaps, the concluding paragraph in the Court of Appeal’s ruling may have contributed to the appellant exceeding the parameters of the certification.
  5. In an application for certification, it was important for the Court of Appeal to specifically formulate or delineate the issues it deemed were of general public importance, and warranted consideration by the Supreme Court. Such formulation would not only guide litigants from going off on a tangent but would act as an indicator of whether an appeal lodged according to certification under Article 163(4)(b) of the Court of Appeal exceeded the parameters under which it was admitted. In the matter at hand, the issue of limitation as raised by the appellant did not fall within the ambit of the Court’s jurisdiction under Article 163(4)(b). It entailed revisiting the factual findings of either the High Court or Court of Appeal on that issue, which was not within the scope of the Supreme Court’s mandate in an appeal such as the instant one which was lodged under Article 1634(b).
  6. The preamble of the Banking Act set out that the primary objective of the Act was related to regulating the business of banking in the country. Section 44 of the Banking Act provided that, no institution shall increase its rate of banking or other charges except with the prior approval of the Minister. Section 2 of the Act, which sets out the definition of words used in the Act, did not define the term “rate of banking”. The rate of banking related to charges for the banking business/service offered by a bank/financial institution, banking business includes the advancement of loans/facilities.
  7. Section 31A of the Banking Act provided for the disclosure of information on loans in the following terms: A bank or financial institution shall, before granting a loan to a borrower disclose all the charges and terms relating to the loan. The use of the word “charges” relating to loans in section 31A could not be interpreted in any other way other than to mean that it included interest relating to loans. A bank/financial institution charged interest in return for advancing a loan/facility to its customer. Accordingly, the term “rate of banking” as employed by the legislature under Section 44 of the Banking Act included and covered interest rates charged/applied by banks on loans/facilities advanced. In addition, the marginal note to Section 44 referred to, “Restrictions on increase in bank charges”.
  8. The repeal of section 39 of the CBK Act and section 33B of the Banking Act had not liberalised interest rates that banks/financial institutions could charge on loans. Most countries both developed and developing regulated interest rates. The overarching reason for interest rate capping and/or regulation was to protect consumers from exploitative rates, to increase access to finance and to make credit affordable. The effect of the repeal of section 39 of the CBK Act and section 33B of the Banking Act did not completely liberalise the interest rates that banks/financial institutions could charge. Rather, it meant that regulation through capped interest rates was no longer in force. All along, the regulation through the capping of interest rates simply set the parameters within which banks/financial institutions and their customers could negotiate or interact on the issue of interest rates.
  9. Section 44 of the Banking Act played a different regulatory role yet complementary to that which capped interest rates played. By requiring bank/financial institutions to seek approval of the Cabinet Secretary before an increase in interest rates, it ensured that there was some check and balance or oversight to ensure that consumers of the loan facilities were not exploited and that the rates were reasonable. That was quite evident from the Banking (Increase of Rate of Banking and Other Charges) Regulations, Legal Notice No. 34 of 2006, formulated in relation to section 44 of the Banking Act. The Regulations set out the procedure of seeking the approval envisioned thereunder as well as the process of considering such an application. It provided an elaborate process involving the Governor of CBK and the Cabinet Secretary who were better placed to tell whether the proposed interest rates were in line with the government’s policy and the inflation rate amongst other necessary considerations. To hold that interest rates on loans/facilities were completely liberalised and not subject to regulation would be an interpretation that was contrary to the objective of the Banking Act.
  10. The interpretation of section 44 of the Banking Act that it did not completely liberalise the interest rates that banks/financial institutions could charge, did not prohibit or prevent banks/financial institutions from bargaining and entering into a mutual contract with respect to an interest rate that could be applied to loan facilities. However, interest rates on loans/facilities were subject to the regulation under Section 44 of the Banking Act. While a contract that was mutually agreed by parties might provide the bank with the discretion to alter/vary interest rates on loans, that discretion was not absolute/unlimited due to the objective of bank regulation.
  11. Once interest was agreed upon, and an agreement was entered into which in effect gave a lender the discretion to vary the interest, the discretion could not be exercised willy nilly to charge exorbitant interest. Even though under section 52 of the Banking Act, a failure to comply with section 44 of the Banking Act would not, in and of itself, render the contract between the parties void, section 52 (3) of the Act prohibited financial institutions from recovering interest or other charges which exceeded the maximum permitted under the provisions of the Act.
  12. It was trite law that the banker and customer relationship was based on the principles of contract law, but that relationship was rarely reduced to a single written contract. The banker and customer relationship was, therefore, governed by a variety of written terms under contract law, supplemented by implied contractual terms introduced and developed by the courts, statute and voluntary codes of banking practice. While the mandate, or contract, would contain some of the terms of the legal agreement, such terms did not attempt to exhaustively define the features of the banker and customer relationship. Interest rates on loans and facilities advanced by banks/financial institutions were subject to the regulatory process under section 44 of the Banking Act. In addition, such banks/financial institutions were required to seek the Cabinet Secretary’s approval under section 44 of the Banking Act before increasing interest rates on loans and/or facilities advanced to its customers.
  13. The appellant was required to seek the Cabinet Secretary’s approval before increasing the rate of interest on the facilities advanced to the respondent. Nonetheless, Gazette Notice No. 1617 of 1990 was revoked by Gazette Notice No. 3348 of July 23, 1991. On its part, the High Court got it right by finding that Gazette Notice No. 1617 of 1990, which prescribed a capped interest rate of 16.5% per annum, was properly revoked by Gazette Notice No. 3348 of July 23, 1991. The court went on to correctly find that section 39 of the CBK Act which gave the Governor discretion to cap interest rates also entailed the power not to set any limits on interest rates. As to why it later found the very same capped rate of 16.5% applied to the facilities which were advanced between 1993 and 1997, after the said revocation, was not clear. Once the capped rate of 16.5% was revoked, and no other capped rate was provided despite section 39 of the CBK Act being in force, that meant that the said rate of interest was not applicable and so to speak there was no capped rate of interest by the Governor of CBK.
  14. On the refund of the amount awarded to the respondent, which had since been paid by the appellant, the award of the sum of Kshs. 10,499,411.74 was based on the contractual computation by Interest Rates Advisory Centre Ltd (IRAC). Both the High Court and Court of Appeal considered the report as well as the evidence of the consultant who prepared the same and they found that the respondent had established the overcharged interest based on the contractual computation. Those concurrent findings by the said courts were based on evidence, that the Supreme Court could not delve into. Besides, nothing had been put forth by the appellant to warrant the Court to find otherwise. Consequently, the prayer for a refund of the award granted to the respondent failed.
Appellant’s appeal and respondent’s cross-appeal were dismissed.
Orders
  1. A declaration was issued that interest rates on loans and facilities advanced by banks/financial institutions were subject to the regulatory process under section 44 of the Banking Act. In that, such banks/financial institutions were required to seek the approval of the Cabinet Secretary responsible for matters relating to Finance before increasing interest rates on loans and facilities advanced.
  2. Each party to bear their own costs of the appeal and cross appeal before the Court.
  3. Directions made that the sum of Kshs. 6,000 deposited as security for costs upon lodging of the appeal be refunded to the appellant.


Kenya Law
Case Updates Issue 005/24-25
Case Summaries
CONSTITUTIONAL LAW The President’s action of establishing a Commission of Inquiry into the Shakahola Tragedy was unconstitutional

Headnote: The petition challenged the action by the President of Kenya to establish the ‘Commission of Inquiry into the Shakahola Tragedy’. The court held that the President’s action of establishing a Commission of Inquiry and assigning it the parallel mandate to those assigned by the Constitution to Independent Offices and Commissions and various legislation undermined their powers and authority and was thus unconstitutional. In addition, section 3 of the Commission of Inquiry Act that allowed the President unrestricted discretion to appoint a Judge and assign tasks to such a Judge in the executive branch did not align with the constitutional principle of separation of powers and was therefore a threat to the independence of the Judiciary. To that extent, Section 3 of the Commission of Inquiry Act was unconstitutional.

Azimio La Umoja One Kenya Coalition Party v President of Kenya & 9 others; Kenya National Commission on Human Rights (Interested Party) (Petition E153 of 2023) [2024] KEHC 8251 (KLR) (Constitutional and Human Rights) (11 July 2024) (Judgment)

Neutral citation: [2024] KEHC 8251 (KLR)

High Court at Nairobi

LN Mugambi, J

Reported by Robai Nasike Sivikhe

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Constitutional Law – – executive – the president – immunity of the president – protection from legal proceedings – joinder of the president to legal proceedings – whether the joinder of the president as a party to the petition, in light of the provisions on immunity from legal proceedings involving the president – Constitution of Kenya, 2010, article 143

Constitutional Law – constitutional commissions – commissions of inquiry – president’s power to set up a commission of inquiry – where the mandate of the commission of inquiry into the Shakahola Tragedy seemed to overlap with the mandates of Independent Constitutional Offices and Commissions – whether the President went beyond the scope of authority granted to him in establishing a Commission of Inquiry into Shakahola Tragedy – whether the president had assigned the Commission of Inquiry into the Shakahola Tragedy the mandates that constitutionally belonged to Independent Constitutional Offices and Commission hence the action violated the Constitution – Constitution of Kenya, 2010, Article 249 (2) (a)

Constitutional Law – the constitutionality of statutes – the constitutionality of section 3 of the Commission of Inquiry Act – where section 3 of the Commission of Inquiry Act gave the president power to establish a commission of inquiry – whether section 3 of the Commission of Inquiry Act gave the president unrestricted discretion in the establishment of commissions of inquiry, hence was unconstitutional – Commission of Inquiry Act, section 3

Brief Facts
The Petition challenged the action by the President of Kenya to establish the ‘Commission of Inquiry into the Shakahola Tragedy’. The president allegedly granted it the mandate that usurped the powers of and undermined the authority of established Constitutional institutions, State organs, State Officers and the independence of the Judiciary, hence violating the Constitution. According to the petitioner, one of the key suspects in the ‘Shakahola Massacre’ was arrested following a discovery of bodies on a piece of land that he was linked to in Kilifi County. On May 4, 2023, the President of Kenya through Gazette Notice No.5660 established a ‘Commission of Inquiry into the Shakahola Tragedy’. The petitioner impugned the President’s action of forming the Commission of Inquiry. The petitioner contended that it amounted to usurpation and undermining of the powers duly assigned to constitutional institutions, State Organs and State Officers. Specifically, the initiative led to usurpation of the powers and mandate of the Judiciary, the National Police Service, the Director of Public Prosecution and the Public Service Commission’s mandate, Parliament, the Independent Police Oversight Authority, and the Kenya National Human Rights Commission. Equally, the petitioner stated that the establishment of the Commission of Inquiry was a breach of the Commission for Administrative Justice's function to investigate any conduct in state affairs or any act or omission in public administration by any State Organ or State Public Officer. The petitioner further alleged that the action undermined the Senate’s authority in forming an ad-hoc committee whose functions mirrored those of the established Commission of Inquiry. As a consequence, the petitioner faulted the President’s action of forming the Commission of Inquiry into the Shakahola Tragedy for being in contravention of the Constitution.

Issues:

  1. i. Whether the joinder of the president as a party to the petition, in light of the provisions on immunity from legal proceedings involving the president
  2. Whether the president went beyond the scope of authority granted to him in establishing a commission of inquiry into the Shakahola tragedy.
  3. Whether the president had assigned the commission of inquiry into the Shakahola tragedy the mandates that constitutionally belonged to independent constitutional offices and commissions hence the action violated the constitution.
  4. Whether section 3 of the Commission of Inquiry Act gave the president unrestricted discretion in the establishment of commissions of inquiry, hence was unconstitutional.

Held:

  1. The President enjoys constitutional immunity from legal proceedings under article 143 of the Constitution. The President or a person performing the functions of the office of the President could not be sued during their tenure of office for acts or omissions relating to those functions. Such actions ought to be brought against the President via the Attorney General. The President could not be joined as a party in a suit concerning an act done in the execution of official duties as President. Including the President as a party in the instant petition was thus improper as it was contrary to Article 143 of the Constitution. The 1st respondent should not have been joined as a Party in the instant Petition.
  2. Article 165 (3) (d) (ii) of the Constitution conferred the High Court with the jurisdiction to determine whether anything said to be done under the authority of the Constitution or any law was inconsistent with or in contravention of the Constitution hence it had the duty to determine the constitutionality and legality of the President’s executive decision under the principle of checks and balances. Should the Court find that the President’s decision was made outside of the scope of his authority or in violation of constitutional principles and values, the Court must invalidate the decision. The basis for invalidation was Article 2 of the Constitution which proclaimed the Constitution to be the supreme law of the Republic that bound all persons and State Organs at both levels of Government and asserted that no person could claim or exercise State authority except as authorised by the Constitution. Further, any act or omission in contravention of the Constitution was invalid.
  3. To enhance greater accountability and the rule of law, the Constitution introduced independent constitutional commissions and offices and gave them specific mandates to boost the observance of constitutional values. It also shielded them from interference in the execution of their mandates from other arms of government or persons. Article 249 (2) (a) of the Constitution provided that the Commissions and holders of Independent Offices were subject only to the Constitution and the law.
  4. The terms of reference of the Commission of Inquiry into Shakahola Tragedy were set up by the President on May 4, 2023, through Gazette Notice No.5660. The first four terms of reference were investigative in nature, inquiring into issues of death, human rights abuses, individual/ public institution lapses, and security shortfalls, all related to the Shakahola Tragedy. The investigation of deaths and identification of persons and organizations who bore the greatest responsibility and recommendation of the specific actions to be taken against such persons; was a responsibility that belonged to the National Police Service which had the exclusive mandate to investigate crime. Indeed, the investigation of deaths (homicide) was specifically assigned to the Directorate of Criminal Investigation which was under the National Police Service.
  5. Article 245 (4) (b) of the Constitution provided that the Cabinet Secretary could give directions on any matter concerning policy for the National Police Service, but no person could give direction to the Inspector General concerning the investigation of any particular offence or offences. The Constitution however recognized that the Director of Public Prosecution under Article 157 (4) of the Constitution could direct the Inspector General of the National Police Service to investigate any information or allegation of criminal conduct and the Inspector General shall comply with any such direction. A harmonious reading of the Constitution ensured that those provisions sustained each other rather than destroyed the other.
  6. It was difficult to see how the action of the President using the powers under the Commission of Inquiry Act could constitutionally confer the mandate of the police to investigate crime and purport to bestow it on a Commission of Inquiry. It was not constitutionally viable to establish a Commission of Inquiry with a parallel mandate of investigating offences of death committed in Shakahola as that was a specific mandate of the police. The appropriation of the 5th respondent’s specific mandate by the President was evident and could not stand.
  7. One of the terms of reference was the violation of human rights, where the Commission of Inquiry was to inquire into ‘torture, inhumane and degrading treatment of members and other persons linked to the Good News.’ The interested party, the Kenya National Commission on Human Rights (KNCHR) had the mandate to receive and investigate complaints about alleged abuses of human rights and take steps to secure appropriate redress where human rights have been violated. The powers and functions of the KNCHR were elaborated in the Kenya National Commission on Human Rights Act. By creating a Commission of Inquiry to “inquire into torture, inhumane and degrading treatment of members and other persons linked to the Good News’ the 1st respondent had unilaterally seized the Interested Party’s explicit mandate and allocated it to a Commission of Inquiry he created. That action was thus unconstitutional.
  8. The President should respect the specific mandate given to the Independent Offices and Commissions under the Constitution. He could not create extra-constitutional bodies to undertake specific functions belonging to agencies created by the Constitution. He could not use general powers to override specific powers. Specific or detailed provisions of a legal instrument should prevail over more general provisions. Although the President was under an obligation to embody the observance of human rights in the performance of his responsibilities, that did not give him the latitude to appropriate specific responsibilities assigned to other constitutional bodies.
  9. Taking away the specific duties of a Constitutional or Statutory body and assigning them to a body created by the President was undermining the independent Constitutional bodies and Offices. It was an abrogation of the Constitution. Plucking the various constitutional mandates and unilaterally concentrating them on a Commission of Inquiry was unconstitutional, null and void. Reading the mandates of the CAJ side by side with the terms of reference of the Commission of Inquiry, one could not escape the glaring overlap between the Commission of Inquiry into Shakahola Tragedy, and the Constitutional and Statutory responsibilities of the Commission on Administrative Justice.
  10. The President assigned the Commission of Inquiry into Shakahola Tragedy a mandate that the Constitution specifically set aside for Independent Constitutional bodies and Offices. The President had no authority to confer specific constitutional mandates belonging to Independent Constitutional Commissions and independent offices using the powers derived from a Statute hence that action was unconstitutional.
  11. The Parliamentarians who sat to pass the Commission of Inquiry Act in 1961 were guided by the experiences of the time and could not thus be assumed to have been in tune with Kenya’s constitutional values and principles heralded by the promulgation of the Constitution of Kenya 2010. Consequently, the Commission of Inquiry Act was one of those legislations that must be read with necessary modification as required by section 7 of the Sixth Schedule which provided that all laws in force immediately before the effective date continued to be in force and shall be construed with alterations, adaptations, qualifications and exceptions necessary to bring it into conformity with the Constitution.
  12. Unlike pre-2010, the Constitution radiated constitutionalism in which the government had limited powers and neither arm was superior nor subservient to others in the execution of mandated functions. The principle of separation of powers, the expanded Bill of Rights and the national values and principles of governance were key constitutional features. The President could only exercise the powers and responsibilities bestowed on him and could not arrogate to himself any of the powers assigned to any other arm or Independent Office or Commission.
  13. Turning to the separation of powers doctrine, the 1st respondent indicated that before the appointment of Justice Lesiit to the Commission into Shakahola Tragedy, the President consulted with the Chief Justice. That could perfectly be so, but the consultation was out of a pure act of deference, not as a result of any binding legal obligation. Section 3 of the Commission of Inquiry Act did not oblige the President to consult. It did not embody that important constitutional safeguard whenever the President found it necessary to appoint a Judge to undertake such an assignment. The President could exercise that power as he pleased if he decided so, and there lay the threat to the principle of constitutional separation of powers and the independence of the Judiciary.
  14. Such extensive discretional power to appoint anyone, including a serving Judge for tasks within the executive was a vestige of the past unrestrained executive power that was filtering to even the Judicial arm. To the extent that the President may discretionarily gazette and assign a serving Judge for an assignment within the executive branch as he pleased, was inimical to the separation of powers and a potential threat to judicial independence. The scheme of things signified by section 3 of the Commission of Inquiry Act had no place in the existing constitutional dispensation. Judicial independence as a constitutional value was diluted by unbridled application of section 3 of the Commission of Inquiry Act to the extent that it allowed the President to appoint whomever he pleased, including serving Judges to perform tasks within the executive branch. Section 3 of the Commission of Inquiry Act was a relic of the imperial presidency and was not aligned with the current constitutional values and principles on separation of powers and independence of the Judiciary hence unconstitutional, null and void.
  15. The President’s action of establishing a Commission of Inquiry and assigning it the parallel mandate to those assigned by the Constitution to Independent Offices and Commissions and various legislation undermined their powers and authority and was thus unconstitutional. In addition, section 3 of the Commission of Inquiry Act that allowed the President unrestricted discretion to appoint a Judge and assign tasks to such a Judge in the executive branch did not align with the constitutional principle of separation of powers and was therefore a threat to the independence of the Judiciary. To that extent, Section 3 of the Commission of Inquiry Act was unconstitutional.

Petition allowed.

Orders

.
  1. A declaration was issued that the decision of the President of the Republic of Kenya made on May 4, 2023, in the Kenya Gazette No. 5660 establishing the Commission of Inquiry into Shakahola Tragedy and attempting to confer powers of Independent Constitutional Commissions and Offices (the respondents and the Interested Party) to the said Commission of Inquiry was unconstitutional, null and void.
  2. A declaration was issued that to the extent that section 3 of the Commission of Inquiry Act gave the President unrestrained discretionary power to appoint a serving Judge to the Commission of Inquiry undermined the principle of separation of powers and was a threat to the independence of the Judiciary and was therefore unconstitutional, null and void.
  3. An order of certiorari was issued quashing the Kenya Gazette No. 5660 made on May 4, 2023, by the President of the Republic of Kenya.
  4. There shall be no orders as to costs.
CONSTITUTIONAL LAW

The main issue that arose was the question of the jurisdiction of the high court to call for, review, examine or quash the communication and the recusal order of the Supreme Court that denied a lawyer an audience before it. The court held that one of the issues that the High Court was called upon to determine, was whether the communication of January 18, 2024 was an administrative action or a judicial decision. That was a question of fact that could only be determined upon hearing parties. The issues raised in the petition could not be determined through interlocutory proceedings, namely; the motion application and preliminary objection, when a claim of infringement of fundamental rights and freedoms in the Bill of Rights had been raised.

Law Society of Kenya v Supreme Court of Kenya & another; Abdulahi SC & 19 others (Interested Parties) (Petition E026 of 2024) [2024] KEHC 7819 (KLR) (Constitutional and Human Rights) (28 June 2024) (Ruling)

Neutral citation: [2024] KEHC 7819 (KLR)
High Court at Nairobi
EC Mwita, J
Reported by Robai Nasike Sivikhe
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Constitutional Law – jurisdiction – jurisdiction of the high court – where jurisdiction of the High Court was disputed since the petition questioned a communicated decision of the Supreme Court - whether the High Court had jurisdiction to call for, review, examine or quash the communication and the recusal order of the Supreme Court that denied a lawyer an audience before it - whether the High Court had jurisdiction to determine whether the Supreme Court judges who recused themselves from hearing various cases, in tandem with the impugned communication, ought to be enjoined in the Constitutional Petition, in a personal capacity – Constitution of Kenya, 2010, article 165 (5) & (6)

Brief facts:

The petition was triggered by the communication from the 2nd respondent to the 1st interested party, informing him that the Supreme Court had decided that he would not have an audience before it by himself, his associates, or any advocate holding his brief. Other events followed giving effect to that communication. The petitioner, the umbrella body representing lawyers in Kenya, filed the instant petition challenging that action on grounds of unconstitutionality. On being served with the petition, the Supreme Court, the Registrar (the respondents) and the 3rd -10th interested parties, filed a motion application together with a notice of preliminary objection challenging the petition. In the motion application, the respondents and the 3rd – 10th interested parties sought two orders; namely, that the names of the 3rd – 10th interested parties be struck out from the petition and the petition be struck out.

The motion application was predicated on the grounds that the 3rd - 10th interested parties enjoy judicial immunity under article 160(5) of the Constitution as read with sections 6 of the Judicature Act and 45(1) of the Judicial Service Act, thus no proceedings could be instituted against them. Further, the petition was fatally defective for seeking orders against them and a court hierarchically higher than the instant court, contrary to article 163(7) of the Constitution. They again stated that the challenge to the communication was premature as the 1st, 2nd and 11th – 20th interested parties had not exhausted the statutory remedies in section 21A of the Supreme Court Act. It was the respondent's and 3rd – 10th Interested parties’ case, that by dint of Article 165(5) and (6) of the Constitution, the court lacked jurisdiction to call for, review, examine or quash the communication and the recusal order. They also stated that the petition did not disclose a reasonable cause of action or any justiciable question.

Issues:

  1. Whether the High Court had jurisdiction to call for, review, examine or quash the communication and the recusal order of the Supreme Court that denied a lawyer an audience before it.
  2. Whether the High Court had jurisdiction to determine whether the Supreme Court judges who recused themselves from hearing various cases, in tandem with the impugned communication, ought to be enjoined in the Constitutional Petition, in a personal capacity.

Held:

  1. Jurisdiction was the power or authority given to a court to hear and determine a dispute presented before it. The challenge to the jurisdiction of the Court to hear a matter was a threshold question. The court had to weigh the objection carefully and determine the fundamental question, namely; whether it had jurisdiction over the matter. If the court determined that it had no jurisdiction to hear a matter, it was the end of that matter and the court should not take any further step, but down its tools.
  2. The jurisdiction of the High Court was provided for in article 165(3) of the Constitution. The import of article 165(3) was to authorise the High Court to decide all matters other than those reserved for other courts as contemplated in article 162 (2) and as restricted by article 165(6). The sweep of the constitutional authorisation given to the High Court could not not be lightly taken, or given up on request or application. That was; the High Court had wide jurisdiction to hear and determine various matters that could be brought before it. Whether or not the Court has jurisdiction to hear and determine the instant petition must, therefore, be viewed through the prism of article 165(3)(b) and (d) (ii).
  3. The issues raised in the instant petition centre on whether the impugned communication was an administrative action subject to the review jurisdiction of the High Court, or not. There was also the underlying question of whether rights or fundamental freedoms in the Bill of Rights had been denied, violated, infringed or threatened through the impugned action; or whether the action was inconsistent with, or in contravention of, the Constitution and the law.
  4. What was before the High Court was a constitutional petition brought under article 22 as read with articles 23(1) and 165(3) of the Constitution, challenging what the petitioner perceived to be constitutional infractions on various articles of the Constitution. The petitioner wanted the High Court to exercise its mandate under article 165(3) (b) and (d)(ii) to investigate and determine the veracity, or otherwise of the alleged infringements and redress the violations, if any.
  5. One of the issues that the High Court was called upon to determine, was whether the communication of January 18, 2024 was an administrative action or a judicial decision. That was a question of fact that could only be determined upon hearing parties. The issues raised in the petition could not be determined through interlocutory proceedings, namely; the motion application and preliminary objection, when a claim of infringement of fundamental rights and freedoms in the Bill of Rights had been raised.
  6. It was not a must that a petition challenging violations or infringements of constitutional rights and fundamental freedoms in the Bill of Rights had to succeed. Rather, it was a cardinal principle in Kenya’s constitutional architecture and philosophy, that a petitioner who had got to the court on the basis that rights and fundamental freedoms in the Bill of Rights had been violated or infringed, should be accorded an opportunity to be heard so that the court could make an informed decision on the issue, rather than shut out such a petitioner from the seat of justice at the preliminary stage unless that was an open and shut case.
  7. The issues raised were not idle. They fell within the ambit of article 23(1) as read with article 165(3)(b)(d)(ii) and, therefore, under the jurisdiction of the High Court. The court had to determine whether indeed, rights and fundamental freedoms in the Bill of Rights had been denied, violated, infringed or were threatened through the impugned action. The High Court had to also decide whether both the actions complained in that petition and those issues raised by the respondents and 3rd -10th interested parties against the petition, were inconsistent with, or in contravention of, the Constitution. Courts were the protectors of the Constitution and the fundamental values embedded in it, that was; the rule of law, fundamental justice and preservation of the democratic process.
  8. The 7 prayers sought in the petition were declarations of unconstitutionality and orders mandamus and certiorari. The petition also sought any other relief the court could deem fit and just to grant. No positive and or substantive orders had been sought against the 3rd to 10th interested parties either in their official or personal capacities. In the circumstances, whether the 3rd – 10th interested parties had been wrongly joined into those proceedings was an issue that should also be determined if, on the basis of the prayers sought in the petition, their being joining as interested parties offended any of the provisions of the Constitution, or statute. There was a need to hear the petition and determine it on merit.

The motion application and the preliminary objection were dismissed. No order as to costs.