Republic v Commissioner of Domestic Taxes (Large Tax Payers Office) Commissioner of Taxes Ex-parte Ukwala Supermarket Limited, Ukwala Supermarket Nakuru Limited & Ukwala Supermarket Kisumu Limited [2017] KEHC 9665 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

MILIMANI LAW COURTS

JUDICIAL REVIEW DIVISION

MISC. APPLICATION NO. 319 OF 2015

BETWEEN

REPUBLIC…….............................................................................................APPLICANT

VERSUS

THE COMMISSIONER OF DOMESTIC TAXES

(LARGE TAX PAYERS OFFICE)......................................................1ST RESPONDENT

THE COMMISSIONER OF TAXES…..…….............................….2ND RESPONDENT

EX-PARTE:UKWALA SUPERMARKET LIMITED.......1ST EX PARTE APPLICANT

UKWALA SUPERMARKETNAKURU LIMITED…........2ND EX PARTE APPLICANT

UKWALA SUPERMARKETKISUMU LIMITED…......…1ST EX PARTE APPLICANT

RULING

Applicant/Respondent’s Case

1. By a Notice of Motion dated 28th September, 2017, the Applicants in the instant application who are the Respondents in the main application, The Commissioner of Domestic TaxesandThe Commissioner of Income Taxes (hereinafter referred to as “the Respondents”), seek substantially orders that this Court stays execution of the certificate of taxation issued herein pending the hearing and determination the reference therefrom. It also seeks that leave be granted for extension of time to give notice and to file a reference under paragraph 11(2) and (2) respectively of the Advocates Remuneration Order, 2009.

2. According to the Respondents, following the filing of the Bill of Costs by the applicant on 5th April, 2017, it was directed that the said taxation be canvassed by way of written submission. On 5th June, 2017 when the matter was mentioned for confirming compliance and fixing a ruling date, the advocate for the Respondents requested a colleague to hold her brief as she was indisposed and was later informed by the advocate holding brief that the taxation was slated for hearing on 17th August, 2017.

3. However on 17th August, 2017 when the said advocate attended Court she was informed that the taxing officer was not ready to deliver the ruling. To the Respondents herein, the 2nd and 3rd ex parte applicants herein (hereinafter referred to as “the applicants”) failed to give notification of the date of ruling from 17th August, 2017 to 31st August, 2017 with the result that the same was delivered ex parte.

4. It was averred that the Respondents only came to know about the fact of the ruling on receipt of certificate of taxation vide a letter dated 25th September, 2017 from the said applicants’ advocates in which it was indicated that their costs were taxed in the sum of Kshs 5,527,620. 00.

5. It was the Respondents’ complaint that the Taxing Officer failed to take into consideration the fact that the matter had been settled by a consent, that the amount in dispute was Kshs 101,289,654. 00 and not Kshs 946,465,175. 00 which was what was taken in consideration.

6. It was the Respondents’ case that the said applicants denied the applicant the chance to oppose the ruling by failing to inform the applicant of the ruling date or the outcome thereof in good time with the result that by the time the Respondent received the certificate of taxation the window for appealing the decision had lapsed.

7. The Respondents are however the Respondents’ case that the actions of the said applicants were mala fides. To the Respondent, it acted with utmost urgency upon receipt of the said certificate and knowing about the delivery of the ruling.

8. It was the Respondents’ case that the funds used to pay the said costs comes from the public hence the importance that the applicant be heard.

2nd and 3rd Ex Parte Applicants’ Case

9. The application was opposed by the applicants.

10. According to the ex parte applicants they were just parties to the proceedings in question and not the authors of the ruling and the reasons thereof. Accordingly they were not under a duty to inform the respondents of the date of the impending ruling. In their view this was a duty placed on the Taxing Officer.

11. It was therefore confirmed that when the matter came up for delivery of the ruling on 17th August, 2017, none of the parties attended. However out of diligence, their advocates managed to peruse the court file and read the handwriting proceedings of the said date and noted that the delivery of the ruling was deferred to 31st August, 2017. To the applicants, they expected the Respondent to similarly exercise such diligence.

12. It was therefore contended that the grounds upon which the application for enlargement of time was based had no basis.

Determinations

13. I have considered the application, the affidavits both in support of and in opposition to the application as well as the submissions and authorities cited.

14. That this Court has the jurisdiction to extend time for filing a reference is not in doubt. This position was reaffirmed in First American Bank of Kenya Ltd vs. Gulab P Shah & 2 Others Nairobi (Milimani) HCCC No. 2255 of 2000 [2002] 1 EA 65 where it was held the court has unfettered discretion under sub paragraph (4) of rule 11 of the Advocates Remuneration Order to extend time prescribed by sub paragraph (1) and (2) of the same rule within which to give notice of objection to the decision on taxation and to file a reference to a Judge in respect of such taxation. In fact that Court appreciated that the law is not that the High Court is only vested with inherent power and jurisdiction to prevent abuse of the Court process or to further the ends of justice only in matters falling within the Civil Procedure Actand Rules but that the Court is clothed with inherent powers and jurisdiction all the time in all causes irrespective of legislative or other juridical foundations of any such cause or matter before it as the juridical root of the Court’s inherent power does not lie in section 3A of the Civil Procedure Act but in the nature of the High Court as a Superior Court of judicature.

15. In the said case the Court set out the factors to be considered in deciding whether or not to grant such an application and these are (i). the explanation if any for the delay; (ii). the merits of the contemplated action, whether the matter is arguable one deserving a day in Court or whether it is a frivolous one which would only result in the delay of the course of justice; (iii). Whether or not the Respondent can adequately be compensated in costs for any prejudice that he may suffer as a result of a favourable exercise of discretion in favour of the applicant.

16. In this case the reasons for the delay are placed squarely on the doorstep of the Court in failing to notify the Respondents of the adjourned date for the delivery of the ruling. The record of the proceedings is clear that on 4th July, 2017 when the matter came up for mention for compliance and for further orders, the ruling date was, in the presence of the parties fixed for 17th August, 2017 at 2. 30 pm. However on the said date none of the parties were represented and the ruling itself was not ready so the delivery thereof was deferred to 31st August, 2017 in the absence of the parties.

17. The usual procedure in such cases is that the parties would be notified of the next adjourned date by the Court. There does not seem to have been such notification. Whereas, it is true that the ex parte applicants cannot be blamed for failing to notify the Respondents of the adjourned date, it is clear that the failure by the Respondents to be present for the delivery of the ruling cannot be blamed on the Respondents since it is a known practice that in matters where delivery of rulings and judgements are pending Court files are usually in the custody of the presiding officers of the Court. Accordingly I find that there was a satisfactory reason for the delay.

18. As the facts subsequent to the delivery of the ruling are not contested I cannot find that there was inordinate delay in filing this application. I am also satisfied that the grounds upon which the Respondents intend to file the reference cannot be termed as frivolous. On prejudice or whether the respondent can be compensated, the Respondents are government departments. Therefore either way the reference goes, the applicants are secured.

19. In the premises the prayer for enlargement of time is merited. Accordingly time is hereby extended to the Respondent within which to file reference within a period of 7 days from the date of delivery of this ruling. Accordingly the requirement for notification under rule 11(1) of the Advocates Remuneration Order is hereby dispensed with.

20. Regarding stay, as I have stated above, no prejudice will be caused by the granting of stay. I have perused the court record but have failed to see the submissions which were filed by the Respondents at the time of the taxation. However from the ruling and the reasons therefor, it is stated that the Respondents had offered Kshs 300,000. 00 in respect of item 1. In the premises I grant a stay of execution on condition that the reference is filed within 7 days and that Kshs 400,000. 00 is paid to the applicants in the main application within 10 days from the date of this ruling. In default of compliance the application shall be deemed to have been dismissed with costs.

Dated at Nairobi this 7th December, 2017

G V ODUNGA

JUDGE

Delivered in the presence of:

Mr Owala for the ex parte applicants

CA Ooko