Associated Automobile Distributors (K) Ltd v Mombasa County Government, (Formerly Municipal Council of Mombasa); Oanda, Mombasa County Executive Committee Member Finance & another (Contemnor) [2025] KEHC 2082 (KLR)

Associated Automobile Distributors (K) Ltd v Mombasa County Government, (Formerly Municipal Council of Mombasa); Oanda, Mombasa County Executive Committee Member Finance & another (Contemnor) (Judicial Review Miscellaneous Application 53 of 2006) [2025] KEHC 2082 (KLR) (Judicial Review) (6 February 2025) (Ruling)

Neutral citation: [2025] KEHC 2082 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Law Courts)

Judicial Review

Judicial Review Miscellaneous Application 53 of 2006

RE Aburili, J

February 6, 2025

Between

Associated Automobile Distributors (K) Ltd

Applicant

and

Mombasa County Government, (Formerly Municipal Council Of Mombasa)

Respondent

and

Evans Oanda, Mombasa County Executive Committee Member Finance

Contemnor

Gloria Mwasi, Chief Officer (Finance) Mombasa County Government

Contemnor

Ruling

1. For determination is the Notice of Motion dated 4th November 2024 brought under Article 159 of the Constitution and Section 1A,1B and 3A of the Civil Procedure Act. The application brought by the Exparte applicant decree holder seeks the following orders:1. That the Application herein be certified urgent and be heard in the first instance.2. That the suspension of the warrants of arrest against Evans Oanda, the Mombasa County Executive Committee Member in Charge of Finance, or the current holder of the office, be immediately lifted and the said Evans Oanda be committed to civil jail for six months.3. That the Honourable Court be pleased to issue an order directing the Respondent to pay the Applicant the sum of Kshs.65,935,475. 04 in full settlement of the decretal sum within seven (7) days without option of instalments.4. That the costs of this Application be provided for.

2. The application is supported by the affidavit sworn on the even date by Bejul Gudka who introduces himself as the director of the applicant company, Associated Automobile Distributors(K) Ltd.

3. The bone of contention between the parties before this Court is the alleged non-compliance with the court’s order dated 23rd August 2024 where Honourable Justice Ngaah ordered as follows:1. That the Warrants of arrest against Mr. Oanda or any other accounting officer of the County Government of Mombasa are suspended and Mr. Oanda is hereby released from custody on the following conditions:i.That the County Government of Mombasa shall settle the decretal amount by monthly instalments of Kshs.5,000,000 commencing 30th of September 2024 until payment in full.ii.That in default of payment of any one instalment the Order suspending the Warrants shall be discharged and the accounting officer of Mombasa County Government Shall be committed to Civil Jail for Six Months.iii.That The matter shall be mentioned in Court on 5th of November 2024 to confirm the progress towards payment of the first two instalments for the months of September,2024 and October 2024. iv.That Parties are at liberty to engage and enter into negotiations on how instalments can be reviewed upwards to mitigate the effects the taxpayer will be exposed to as a result of the executed term of settlement of the decretal sum.

4. The applicant’s case is that the respondents have failed to comply with the above conditional orders and that in September 2024, they only remitted the sum of Kshs.4,663,793. 10 instead of Kshs.5,000,000. 00. It is further contended that the October 2024 instalment remains entirely unpaid.

5. According to the applicant, Mombasa County Government had misrepresented the nature of payment made in September 2024 to the Kenya Revenue Authority categorizing it as “management, professional training, or consultancy fees” instead of payment of decretal sum/satisfying judgment. This, according to the applicant is what led to a deduction for withholding tax, thereby reducing the amount remitted.

6. The respondents, it is urged, acknowledged this mistake in their letter dated 9th October 2024 and conceded that judgment debts are not subject to taxation and that the applicant pursue a refund directly from Kenya Revenue Authority.

7. It is the applicant’s case that the respondent surpassed its revenue collection in the financial year 2023/2024 according to the County Governments Budget Implementation Report for the Financial Year 2023/2024.

8. The applicant also states that as the respondent had been granted an opportunity to file and serve the response to the application on two occasions that is on 9th December 2024 and 16th January 2024 but have failed to do the same, any documents filed thereafter should be struck out by the Court. However, this issue was settled by a ruling of the court on the same allowing the respondent’s replying affidavit to be on record, in the interest of justice.

9. In response, the respondent filed a Replying Affidavit sworn on 23rd January 2025 by Jimmy Waliaula who introduces himself as the County Attorney of Mombasa County Government.

10. In the affidavit, Mr. Waliaula deposes that the payment of Kshs.5,000,000. 00 was made through the Integrated Financial Management System IFMIS which is the respondent’s standard mode of payment thereby occasioning the Kenya Revenue Authority to automatically withhold tax obligation.

11. According to the deponent, the applicant was informed on the need to liaise with Kenya Revenue Authority for a refund. It is further contended that the applicant’s averments that the recovery of the amounts withheld by KRA would be highly challenging and may give rise to further disputes is merely speculative.

12. Mr. Waliaula also deposes that contrary to what the applicants claim, the respondent made payment for the October, November and December instalments as is evidenced by what he calls payment receipts attached to his affidavit.

13. It is also the respondent’s contention that they are continually dedicated to observe the orders of this court and that although it is true that the respondent achieved significant growth in revenue collection for the year 2023/2024, the same is remitted to the consolidated fund which is under the control of the National Government.

14. Further, that despite counties having not received financial remittance from the National Government, the respondent has shown commitment and good faith towards settling the decretal sum.

15. The respondent is apprehensive that if the orders sought in the application dated 4th November 2024 are granted, it will cripple the provision of essential services such as health and that it will also bring to a standstill the collection of revenue, financing of county projects and even the payment of salaries as the officers involved, who are the contemnors herein, are key components of ensuring timely revenue collection by virtue of the positions they hold.

16. The application was canvassed by way of oral submissions.

17. On behalf of the applicant, Mr. Murage argued that as seen in the letter annexed to the applicant’s supplementary affidavit from the firm’s bankers in September 2024, there was non-compliance with the court’s orders while in October, there was no single remittance by the respondent.

18. He submitted that when the September instalment was paid, Mr. Oanda was in remand and therefore it was not because of a negotiated settlement that the funds were remitted. Counsel lamented that they had not received a single phone call, sms or even email from the respondent on the said issue. It was also his submission that the respondent was capable of paying the whole amount that is owed.

19. Counsel submitted that it is the tax payer who is suffering the accruing interest and that litigation must come to and end and also that court orders must be obeyed.

20. Counsel for the respondent in response submitted that the issue of contempt is not a light matter and referred the court to annexure ‘BG2’ in the supplementary affidavit which according to him, shows that the 1st respondent had at all times endeavoured to comply save that the January 2025 instalment was made on 13th January 2025 instead of 5th January 2025 due to the Christmas break. It was also Mr. Mbogo’s submission that the January instalment would be made by 5th February 2025.

21. Mr. Mbogo also submitted that after consulting his client, he had informed the applicant to liase with KRA on the erroneous deduction but the applicant instead applied to this court. Mr Mbogo further submitted that it would be malicious to pay the decretal amount all at once as collections by the respondent are made to the National Treasury and allocations made.

22. Counsel urged the court to dismiss the application and for the court to bar the applicant from making any further applications as long as the respondent is complying.

23. In a rejoinder, counsel for the applicant Mr. Murage urged that the respondents should have corrected the error as annexure ‘BG2’ is clear on the nature of transaction saying it is consultancy fees. He also urged that the respondent has not shown any inability to pay the whole amount and that the decree is 25 years old and the respondent and contemnors are impeding access to justice by the applicant.

Analysis and Determination 24. I have considered the application and the opposition thereto as pleaded and argued by both parties’ counsel. It is a well-established principle of law that judgments or orders rendered by a competent court of law must be obeyed by the parties involved. Where a party fails to comply with the terms of a judgment or court order, enforcement mechanisms, including contempt of court proceedings, where there is evidence of brazen disobedience, may be employed. The violation of court orders undermines the rule of law and public confidence in the judicial system.

25. The Supreme Court in the case of Justus Kariuki Mate & another v Martin Nyaga Wambora & another [2017] eKLR Neutral citation: [2017] KESC 1 (KLR)reiterated this position in the following terms:“80. Be it restated that the Court’s word is the people’s solemn edict calling for obedience; but it is precisely the sanctity of that word, that dictates utmost care, focus and assiduity, in the Judge’s undertaking.The context is set out in the Judgment of Romer LJ in Hadkinson v Hadkinson [1952] 2 All ER 567:It is the plain and unqualified obligation of every person against, or in respect of, whom an order is made by a court of competent jurisdiction to obey it unless and until that order is discharged. The uncompromising nature of this obligation is shown by the fact that it extends even to cases where the person affected by an order believes it to be irregular or even void.81. To the same effect, the Judicial Committee of the Privy Council, in Isaacs v Robertson [1984] 3 All ER 140 remarked that, in no case had it been held that “any order of a court of unlimited jurisdiction [falls] in a category of court orders that can simply be ignored because they are void ipso facto without there being any need for proceedings to have them set aside.82. Comparative judicial experience gives yet another classic pronouncement of the same point: M v. Home Office and Another [1992] 4 All ER 97 in the following terms:An order which is made by a court with unlimited jurisdiction is binding unless and until it is set aside. Common sense suggests that this must be so. Were it otherwise court orders would be consistently ignored in the belief, sometimes justified, that at some time in the future they would be set aside. This would be a recipe for chaos.”

26. I have no doubt in my mind that the respondent and contemnors alike in this case are aware of the above principles for, where co0ntempt of court ends, anarchy reigns. They are also aware of this Court’s order 1(ii) to the effect that in default of payment of any one instalment, the Order suspending the Warrants shall be discharged and the accounting officer of Mombasa County Government shall be committed to Civil Jail for Six Months.

27. There is apparently no challenge to this Court’s discretion to lift the suspension of the warrant of arrest where there is non-compliance with the conditional orders of the court.

28. However, can the matter before this court be considered as one that would warrant the court to take such measures and not only lift the suspension of the warrants of arrest but also order that the respondents settle the entire decretal amount at once because of the alleged default and secondly, because they are said to be liquid enough to settle the said decree owing to the hefty revenue collections for the past financial year?

29. In my humble opinion, the answer to this is no. The applicant will ask why the court has come to this conclusion despite there being a decree that is yet to be fulfilled 25years later. In the supplementary affidavit, the applicant has annexed ‘BG2’ which is a letter from Nelly Kendi, the Relationship Manager Gold Banking at NCBA Bank.

30. The letter’s subject reads ‘RE: COMPANY CONFIRMATION OF PAYMENTS RECEIVED INTO ACCOUNT 7828840018 FROM MOMBASA COUNTY GOVERNMENT IN 2024-2025’ and thereunder, is a list of transactions dating between 20th June 2024 to 13 January 2025 is seen.

31. Examining the schedule of payment, I can see and note that on 20th September 2024, counsel for the applicant received the sum of Kshs.4,663,793. 10 which amount counsel has confirmed was received from the respondent albeit less the sum of Kshs.336,206. 09 which the respondent explains, was deducted by Kenya Revenue Authority and which as can be seen from the back and forth between the parties, no application for a refund has been made. Below this payment are other payments of Kshs.5,000,000. 00 made on 5th November 2024, 4th December 2024 and 13th January 2025 respectively.

32. Going by the directions given by the court which did not state the date by which the monthly instalment was to be paid, and the first instalment was made on 5th September 2024, the last three remittances are obviously for the months of October, November and December 2024. This position is fortified by Mr. Mbogo’s submission and undertaking that his clients will make the January instalment on 5th February 2025.

33. The above evidence that the respondent has indeed been complying with this court’s conditional order is incontestable. Further, I observe that the payment made on 13th January 2025 was because of the Christmas Holiday, noting also that most offices take breaks during such period, fortified by Order 50 Rule 3 of the Civil Procedure Rules, which provide that time does not run between 21st December and 13th January, except in cases of injunctions.

34. For the above reason, I find that if this court was to remain punitive at every perceived default, it would not be facilitative of the process of settlement of the decree herein which is the oldest in the court. The court nonetheless remain sfirm on compliance of orders I see no reason to lift the suspension of the warrants of arrest issued against the Mr. Evans Oanda, the Mombasa County Executive Committee Member in Charge of Finance, or the current holder of the office on grounds of non-compliance with court orders.

35. I hasten to add that the applicant has indeed waited for settlement of the decree for 25 years now and that is unacceptable. However, now that the respondents and contemnors are settling the decree on terms, they should be accorded the opportunity to do so as public officials and this court should not be seen to jeopardize the said settlement.

36. The applicant has also sought for this court to issue an order directing the respondent to pay the sum of Kshs. 65,935,475. 04 in full. In response, the respondent and the contemnors argue that allowing this prayer would have dire consequences on the respondent’s functions including on essential services such as health.

37. I reiterate that the Court acknowledges the longstanding nature of the dispute between the parties herein. However, it would be against public interest if it was to order the respondent to pay the amounts owing all at once which amount includes the interest accrued over the many years, conscious of the fact that indeed, that order would negatively impact on essential services offered by the respondent County to the public.

38. I am alive to the issue of accruing interest and the impact it has on the tax payer. However, this issue was addressed by the court by my brother Ngaa J in order 1(iv) when he stated thus:“That Parties are at liberty to engage and enter into negotiations on how instalments can be reviewed upwards to mitigate the effects the taxpayer will be exposed to as a result of the executed term of settlement of the decretal sum.”

39. On the deficit for the month of September 2024, I direct the respondent to lodge a refund application with Kenya Revenue Authority, since the remittance to Kenya Revenue Authority was erroneous. This being settlement of a decree, the taxman has no hand in it. It is not income being received by the exparte applicant. Furthermore, the money does not belong to the applicant’s counsel but to his client. I therefore find no basis upon which the taxation was being levied on the same. The error was made by the respondent who should seek for refund. Pending that refund, the respondent should make good the deficit and pay the applicant to cover the shortfall of Kshs. 336,206. 09.

40. In light of the above and save for the erroneous taxation of the instalment payment for September 2024, I find that the applicant’s application dated 4th November 2024 lacks merit and I dismiss it with no orders as to costs as there is a decree that is yet to be satisfied.

41. Noting that what remains in this matter is settlement of decree of the court, unless there is default, and where there shall occur such default, the applicant will be at liberty to, not make written applications, but write to court seeking for directions upon which the court shall re open the matter for enforcement of the warrants of arrest. However, to ensure the contemnor appreciates the magnitude of this matter, Mr. Evans Oanda the CEC Finance, of the respondent herein Mombasa County Government is hereby directed to appear in court virtually on 20th February, 2025 for the court to issue further directions.

42. Orders accordingly.

DATED, SIGNED AND DELIVERED AT NAIROBI THIS 6TH DAY OF FEBRUARY 2025 VIRTUALLY VIA MICROSOFT TEAMS.R.E. ABURILIJUDGE