Kamau & 35 others v Commissioner General, Kenya Revenue Authority & another (Constitutional Petition E161 of 2022) [2022] KEHC 10284 (KLR) (Constitutional and Human Rights) (14 July 2022) (Ruling)
Neutral citation:
[2022] KEHC 10284 (KLR)
Republic of Kenya
Constitutional Petition E161 of 2022
AC Mrima, J
July 14, 2022
Between
Faith Kamau & 35 others
Petitioner
and
The Commissioner General, Kenya Revenue Authority
1st Respondent
The Hon. Attorney General
2nd Respondent
Ruling
1.The proceedings herein were instituted by persons, allegedly, engaged in the business of distributing and vending purified water to their customers.
2.The institution of these proceedings was prompted by a Notice issued by the Kenya Revenue Authority, the 1st Respondent herein, dated July 17, 2021 (hereinafter referred to as ‘the impugned notice’) calling for the Petitioners and all those in like business to obtain an Excise license and to comply with the corresponding tax obligations.
3.Aggrieved by the impugned notice, the Petitioners sought the Court’s intervention through the filing of a Petition and an application by way of a Notice of Motion both dated April 12, 2022.
4.The Petition and the application are both opposed.
5.The application was orally heard on May 26, 2022, hence, this ruling.
The Application:
6.The following orders are sought for in the application: -1.The application and annexed petition be certified urgent and be heard ex parte in the first instance.2.Pending the hearing and determination of this application interpartes, a Conservatory order be and is hereby issued restraining the 1st Respondent whether acting jointly or severally by themselves, their servants, agents, representatives or howsoever otherwise from the implementation. further implementation, administration, application and/or enforcement of the Public Notice issued on July 17, 2020 by imposing fines, seizing water refillers assets or requiring water refillers to obtain an excise license to operate a water refill shop.3.Pending the hearing and determination of this Petition, a Conservatory Order be and is hereby issued restraining the 1st Respondent whether acting jointly or severally by themselves, their servants, agents, representatives or howsoever otherwise from the implementation, further implementation. Administration, application and/or enforcement of the Public Notice issued on July 17, 2020 by imposing fines, seizing water refillers assets or requiring water refillers to obtain an excise license to operate a water refill shop.4.That pending the hearing and determination of the Petition and petition an order do issue reinstating the water tanks, water refilling machines and any other asset that the 1st Respondent has unlawfully seized in the enforcement of the impugned and unlawful Public Notice of July 17, 2020.5.That the costs of this application be granted.
7.The application was supported by two Affidavits sworn by Mary Wangui Mwangi, the 18th Petitioner herein. They were sworn on April 8, 2022 and May 22, 2022 respectively. It was further supported by the Petitioners’ List of Authorities.
8.The application was opposed by both Respondents.
Analysis:
9.I have carefully considered the application, the pleadings, the responses thereto, the parties’ submissions and the decisions referred to and I, hereby, discern the following areas of discussion:i.The nature of conservatory orders;ii.The guiding principles in conservatory applications; andiii.The applicability of the principles to the applications.
10.I will deal with the above sequentially.
11.Before I do so, I must state that due to time constraints, I will not reproduce the parties’ cases and submissions verbatim, but will definitely consider all what is on record. Needless to say, the parties’ oral submissions were well put forth and captured all the parameters of the application. Parties also referred to some judicial decisions.
The nature of conservatory orders
12.In Civil Application No. 5 of 2014 Gatirau Peter Munya -v- Dickson Mwenda Kithinji & 2 others (2014) eKLR, the Supreme Court discussed, at paragraph 86, the nature of conservatory orders as follows: -
13.The Court in Nairobi Civil Appeal 151 of 2011 Invesco Assurance Co. Ltd vs. MW (Minor suing thro' next friend and mother (HW) [2016] eKLR defined a conservatory order as follows: -
14.In Judicial Service Commission vs. Speaker of the National Assembly & another [2013] eKLR the Court had the following to say about the nature of conservatory orders: -
15.Conservatory orders are, therefore, aimed at preserving the substratum of the matter pending the determination of the main issues in dispute.
16.Given the interlocutory nature of conservatory orders, it is argued, that there is need for a Court to exercise caution when dealing with any request for such prayers. I agree with that proposition for the reason that matters which are the preserve of the main Petition ought not to be dealt with finality at the interlocutory stage.
17.The foregoing was fittingly captured by Ibrahim, J (as he then was) in Muslim for Human Rights (Milimani) & 2 Others vs Attorney General & 2 others (2011) eKLR. The Learned Judge, correctly so, stated as follows: -
18.The decisions in Centre for Rights Education and Awareness (Creaw) & 7 others v. Attorney General (2011) eKLR, Platinum Distillers Limited vs. Kenya Revenue Authority (2019) eKLR and Kenya Association of Manufacturers & 2 Others vs. Cabinet Secretary – Ministry of Environment and Natural Resources & 3 others (2017) eKLR also variously vouch for the cautionary approach.
19.A Court, therefore, dealing with an application for conservatory orders must maintain the delicate balance of ensuring that it does not delve into issues which are in the realm of the main Petition. In this discourse, I will, therefore, restrain myself from dealing with such issues.
The guiding principles in conservatory applications
20.The principles for consideration by a Court in exercising its discretion on whether to grant conservatory orders have been developed by Courts over time. They are now well settled.
21.The locus classicus is the Supreme Court in Gatirau Peter Munya -v- Dickson Mwenda Kithinji & 2 others case (supra) where at paragraph 86 stated the Court stated as follows: -
22.In Board of Management of Uhuru Secondary School vs. City County Director of Education & 2 others [2015] eKLR, the Court summarized the principles for grant of conservatory orders as: -(i)The need for the applicant to demonstrate an arguable prima facie case with a likelihood of success, and to show that in the absence of the conservatory orders, he is likely to suffer prejudice.(ii)The second principle is whether the grant or denial of the conservatory relief will enhance the constitutional values and objects of a specific right or freedom in the Bill of Rights.(iii)Thirdly, the Court should consider whether, if an interim conservatory order is not granted, the petition or its substratum will be rendered nugatory.(iv)Whether the public interest will be served or prejudiced by a decision to exercise discretion to grant or deny a conservatory order.
23.In Wilson Kaberia Nkunja vs. The Magistrate and Judges Vetting Board and others Nairobi High Court Constitutional Petition No.154 of 2016 (2016) eKLR the Court summarized three main principles for consideration on whether to grant conservatory orders as follows: -(a)An applicant must demonstrate that he has a prima facie case with a likelihood of success and that unless the court grants the conservatory order, there is a real danger that he will suffer prejudice as a result of the violation or threatened violation of the Constitution.(b)Whether, if a conservatory order is not granted, the Petition alleging violation of, or threat of violation of rights will be rendered nugatory; and(c)The public interest must be considered before grant of a conservatory order.
24.The above principles are, however, not exhaustive. Depending on the nature of the matter under consideration, there may be other parameters which a Court ought to look into. Such may include the effect of the orders on the determination of the case, whether there is eminent danger to infringement of the human rights and fundamental freedoms under the Bill of Rights, the applicability of the doctrine of presumption of constitutionality of statutes, whether the Applicant is guilty of laches, the doctrine of proportionality, among many others.
The applicability of the principles to the application:
(i)A prima-facie case:
25.A prima facie case was defined in Mrao vs. First American Bank of Kenya Limited & 2 others (2003) KLR 125 to mean: -
26.In a ruling rendered on February 8, 2021in David Ndii & others v Attorney General & others [2021] eKLR, the Court had the following to say about a prima-facie case: -
27.What constitutes a prima-facie case was further dealt with by the Court of Appeal in Mirugi Kariuki -vs- Attorney General Civil Appeal No. 70 of 1991 (1990-1994) EA 156, (1992) KLR 8. The Court, in an appeal against refusal to grant leave to institute judicial review proceedings by the High Court, stated as follows: -
28.In Re Bivac International SA (Bureau Veritas) (2005) 2 EA 43, the Court while expounding on what a prima-facie case or arguable case is, stated that such a decision is not arrived at by tossing a coin or waving a magic hand or raising a green flag, but instead a Court must undertake an intellectual exercise and consider without making any findings, the scope of the remedy sought, the grounds and the possible principles of law involved.
29.The Court of Appeal in Nairobi Civil Appeal No. 44 of 2014 Naftali Ruthi Kinyua vs. Patrick Thuita Gachure & another (2015) eKLR while dealing with what a prima facie case is, made reference to Lord Diplock in American Cyanamid vs. Ethicon Limited (1975) AC 396, when the Judge stated thus: -
30.In sum, therefore, in determining whether a matter discloses a prima-facie case, a Court must look at the case as a whole. It must weigh, albeit preliminarily, the pleadings, the factual basis, the respective parties’ positions, the remedies sought and the law. In so doing, a Constitutional Court must be guided by Articles 22(1) and 258(1) of the Constitution which provisions are on the right to institute Court proceedings whenever a right or fundamental freedom in the Bill of Rights has been denied, violated or infringed, or is threatened or the when the Constitutionhas been contravened, or is threatened with contravention.
31.In the Petition, the Petitioners sought the following prayers: -a)A declaration that the Public Notice issued on July 17, 2020by the 1st Respondent is illegal, unlawful unconstitutional and contravenes the provisions of Article 10, 27, 47, 201(b)(i) and 210 (1) of the constitution and as such null and void ab initio:b)A declaration that the 1st Respondent classifying water refilling as manufacturing subject to the imposition of Excise Duty under Section 5 of the Excise Duty Act is unlawful and contravenes the provisions of Article 201(b)(i) and 210 (1) of the constitution and as such null and void ab initio:c)A declaration that the subsequent actions by the 1st Respondent in imposing the requirement of an excise license on water refillers is in contravention of Section 15 of the Excise Duty Act and the provisions of Article 201(b)(i) and 210 (1) of the constitution and as such null and void ab initio:d)A declaration that the Petitioners constitutional rights of having their property not arbitrary seized as guaranteed under Article 31(b) and 40 of the Constitution has been violated and infringed by the 1st Respondent.e)Reinstitution of the water tanks, water refilling machines and any other asset that the 1st Respondent has unlawfully seized in the enforcement of the impugned and unlawful Public Notice of July 17, 2020.f)General damages for illegal seizure, closing of the Petitioners shops and unlawful imposition of excise duty and fines on the Petitioners.g)An order of prohibition be and is hereby issued restraining the 1st Respondent whether acting jointly or severally by themselves, their servants, agents, representatives or howsoever otherwise from the implementation, further implementation, administration, application and/or enforcement of the Public Notice issued on July 17, 2020by imposing fines, seizing water refillers assets or requiring water refillers to obtain an excise license to operate a water refill shop.h)The costs consequent upon this Petition be provided for.i)Any other remedy or such other orders as this Honourable Court may deem just and expedient in the circumstances to remedy the violation of the Petitioners fundamental constitutional rights and freedoms.
32.The Petition challenged inter alia the constitutionality of both the impugned notice and the classification of the water refilling businesses as manufacturing subject to the imposition of Excise Duty.
33.The Respondents vehemently opposed the Petitioners’ positions. They contended that the water refilling businesses were manufacturing within the meaning of the Excise Duty Act and the Regulations made thereunder. They attempted to demonstrate how the Petitioners’ businesses were transformed from merely distributing and vending to manufacturing courtesy of Section 2 of the Public Health Act. The Respondents further contended that the impugned notice was constitutional.
34.There is no doubt that this matter is indeed contentious. It raises issues which call for further interrogation.
35.Going by the current state of the record and what a prima-facie case has been defined to mean, it is this Court’s finding that the matter raises a prima facie case.
ii. Whether the Petitioners will suffer prejudice and the case rendered nugatory unless the conservatory orders are granted
36.The Black’s Law Dictionary 10th Edition Thomson Reuters at page 1370 defines ‘prejudice’ as follows: -
Damage or detriment to one’s legal rights or claims.
37.Will any party, therefore, suffer any damage or detriment if the conservatory orders are not granted? Generally, any contravention or threat to contravention of the Constitutionor any infringement or threatened infringement of human rights and fundamental freedoms in the Bill of Rights is an affront to the people of Kenya. That is the express purport of the Preamble and Chapter 1 of the Constitution.
38.Courts must, in dealing with Petitions brought under the various provisions of the Constitution, be careful in determining the prejudice at least at the preliminary stages. I say so because, at such stages of the proceedings, the provisions of the Constitutionalleged to have been infringed or threatened with infringement are yet to be subjected to legal scrutiny.
39.As such, the damage or threat thereof to the rights and fundamental freedoms or to the Constitutionmust be so real that the Court can unmistakably arrive at such an interim finding. Such a breach or threat should not be illusory or presumptive. It must be eminent.
40.In impugning that any damage is likely to be visited upon the Petitioners, the Respondents posited that some of those in the Petitioners’ business had long complied with the Excise Duty Act. Reference was made to the fact that some had previously and formally admitted to charges under the Excise Duty Act and the offences thereof compounded. They paid the requisite fines and penalties.
41.It was the Respondents position that the Petitioners, having admitted and complied with the provisions of the law, cannot be allowed to approbate and reprobate on the very issue.
42.There is also the contention that one of the effects of the conservatory orders sought in the application is to suspend a legislation. To that end, the doctrine of presumption of constitutionality and legality of statutes was referred to.
43.The doctrine generally fronts that unless proved otherwise, statutes are deemed constitutional and valid and may only be suspended in the clearest of cases and where the statute is a threat to life and limb or to the Bill of Rights.
44.In Kizito Mark Ngaywa v. Minister of State for Internal Security and Provincial Administration & another [2011] eKLR, the High Court (Mohamed, J (as he then was) had the following to say on the issue: -
45.The applicability of the doctrine of presumption of constitutionality and legality of a statute was further dealt with by the Court of Appeal alongside the aspect of public interest. That was in Attorney General & another v Coalition for Reform and Democracy & 7 others [2015] eKLR.
46.In the matter, the High Court had suspended some provisions of the Security Laws (Amendment) Act. The State appealed the decision. In dismissing the appeal, the Court of Appeal had the following to say:
47.In this case, the Respondents contended that the Petitioners have not demonstrated any irreparable prejudice which they stand to suffer neither have they demonstrated a case for the suspension of the law.
48.Have the Petitioners demonstrated a real threat to life and limb or infringement of the Bill of Rights at this point in time?
49.It is the Petitioners’ contention that if the application is not allowed, they will be unlawfully compelled to comply with the requirements of the Excise Duty Act and their businesses will be forced to close down. To that end, they contended that they will lose their investments and be forced to lay off their staff.
50.Whereas this Court clearly understands the precarious position the Petitioners are in, it cannot negate the fact that some of those in the Petitioners’ business have already complied with the law. This Court takes note of the fact that the allegation by the Petitioners that those who were found to be in contravention of the Excise Duty Act, admitted to the relevant offences and paid fines and penalties, did so against their will, cannot stand since those who were involved did not depose to such allegations. There is, therefore, preliminary evidence of compliance with the law on the part of some of the Petitioners.
51.Given the foregoing state of affairs and for this Court to conclusively deal with the matter, the Court will have to interrogate the issues on the constitutionality and legality of the impugned notice and whether the Petitioners fall within the description of manufacturers under the law. Such issues cannot be subject of an interlocutory application, but of the main hearing of the Petition. (See the Court of Appeal in Civil Application Nai. 31 of 2016 Alfred N. Mutua v Ethics & Anti-Corruption Commission (EACC) & 4 others [2016] eKLR).
52.Further, in the event the rest of the Petitioners comply with the prevailing law and the impugned notice and they make payments as demanded, there is no submission made that in the event the Petition succeeds the Respondents will not be able to be reimburse the payments made by the Petitioners.
53.On the other hand, the Respondents contended that the taxes in issue fall within the category of consumption taxes in that they are borne by the consumers such that if they are not collected, then there was no any other way to recover the same even when the Petition fails.
54.The Respondents have, therefore, demonstrated that the suspension of the part of the statute will occasion a lacuna in their operations which, if left unfilled, even for a short while, is likely to cause very grave consequences to the general populace. I say so because the country inter alia depends on taxes to fund its budget such that if the budget is not properly funded by the collection of taxes then it is the general populace which stands to suffer.
55.This Court is, therefore, not persuaded that the Petitioners have laid a basis to unseat the doctrine of presumption of constitutionality and legality of statutes in this matter. The Court is also not persuaded that unless the application is allowed, the Petitioners stand to suffer real prejudice.
56.As to whether the Petition will be rendered otiose in the absence of the orders sought, this Court takes the contrary position. The issues raised in the Petition go beyond the interlocutory application. In the main, the Petition seeks to declare several actions of the Respondents unconstitutional among other prayers.
57.It is, now, the finding of this Court that the Petition survives even in the absence of the orders sought in the application.
58.On the basis of the foregoing, the issue at hand is answered in the negative.
iii. Public interest:
59.‘Public interest’ is defined by the Black’s Law Dictionary 10th Edition at page 1425 as: -
60.Broadly speaking, the Constitutionand the laws govern the people. As such, the Constitutionremains supreme and the laws are always presumed to be constitutional until the contrary is proved. In a matter, therefore, where the constitutionality of a statute is impugned or an issue arises as to whether the Constitutionis contravened, Courts must weigh, with care and at a preliminary stage, the alleged breach against the provisions of the Constitutionand the doctrine of presumption of constitutionality and legality of statutes.
61.It is in public interest that taxes are paid so as to enable the larger public be sustained in terms of service provision.
62.On the basis of the foregoing, and in the exceptional circumstances in this matter, this Court finds that public interest tilts in favour of the Respondents. It is in public interest that the impugned notice and the law be adhered to pending the outcome of the Petition.
Disposition:
63.The above analysis yields that the Petitioners have not, in the meantime, successfully laid a basis for the grant of the orders sought in the application.
64.That being the case, the application is unsuccessful. However, given the nature of the Petition herein, there is need for appropriate directions and for expeditious disposal of this matter.
65.In the end, the following orders hereby issue: -a.The Notice of Motion dated April 12, 2022is hereby dismissed.b.The Petition to be heard by way of reliance on the pleadings, affidavit evidence and written submissions.c.The Respondents shall within 14 days hereof file and serve responses to the Petition, if not yet.d.The Petitioners shall, thereafter, and within 14 days of service file any supplementary responses, if need be, together with written submissions on the Petition.e.The Respondents shall file and serve their respective written submissions within 14 days of service.f.Further directions to issue on a date suitable to the Court and the parties.Orders accordingly.
DELIVERED, DATED AND SIGNED AT NAIROBI THIS 14TH DAY OF JULY, 2022.A.C. MRIMAJUDGE