Victrociset S.P.A. Kenya v Commissioner of Domestic Taxes [2018] KEHC 8009 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA

AT NAIROBI

JUDICIAL REVIEW NO.  28 OF 2018

IN THE MATTER OF AN APPLICATION  BY THE APPLICANT

FOR  LEAVE  TO APPLY FOR JUDICIAL REVIEW BY WAY OF

AN ORDER OF CERTIORARI, PROHIBITION AND  DECLARATION

PURSUANT TO ORDER 53  OF THE CIVIL PROCEDURE  RULES, 2010.

IN THE MATTER OF TAX APPEAL TRIBUNAL ACT

IN THE MATTER OF TAX PROCEDURES ACT

IN THE MATTER OF THE FAIR ADMINISTRATIVE ACTION ACT, 2015

BETWEEN

VICTROCISET S.P.A. KENYA......................................APPLICANT

VERSUS

THE COMMISSIONER OF DOMESTIC TAXES...RESPONDENT

RULING ON REVIEW

1. On 7th February 2018 this court delivered a ruling granting the exparte applicant herein Vitrociset S.P.A leave to apply for Judicial Review orders against the respondent Commissioner of Domestic Taxes.

2. The court also  ordered that  the leave so granted  do operate  as stay of implementation of the decision by the respondent   whereupon the latter issued Agency notices to the exparte applicant’s  Bankers on 15th January 2018 and  effectively  froze  the bank  accounts  held by  the applicant  at the Diamond  Trust Bank Limited.

3. The applicant dutifully filed and  served the notice of motion as  directed  by the court. However, on 21st February 2018 the applicant’s counsel Mr Kashindi brought to the attention of the court that his client  was  experiencing challenges implementing the conditional stay orders of this court which provided that the stay was conditional  upon the applicant providing a bank guarantee of shs  50 million within  14  days.

4. The court after giving directions on compliance with the processes of filing of document to ready the hearing of the main  application, did direct the applicant to make an appropriate application regarding   implementation  of the order of  7th February  2018.

5. On 22nd February 2018 the applicant lodged an application dated the same day seeking for variation of the order of 7th February 2018 requiring the applicant to provide a security of a bank guarantee of 50,000,000 as a condition for granting a stay.

6. Secondly, that the court does direct that the Security of shs 7,905497 and advance taxes amounting kshs 6,381,929 which was already deposited with the respondent be the basis of conditional stay.  Finally, costs be borne by the respondent.

7. The grounds  upon which the  application is predicated  are inter alia, that the applicant is unable  to execute  the  bank guarantee  in question as ordered by the court because the bank requires  deposit of similar amount in the applicant’s account which the applicant  cannot  raise at once as  it is in the service  industry and most  of its finances  are operational  and  held up with its customers  who cannot  deposit  in the bank as a result  of the freezing  order.

8. Further, that the applicant has a history of  fulfilling its tax obligations, that it is not a flight risk and that even while the tax dispute was pending before  the tribunal, it  paid  over 300,000,000 in taxes.

9. It was averred  that unless the orders sought are granted, the orders  of 7th February  2018  will not be implemented as a result of which the applicant  is threatened  with ceasing  its operations  as it cannot receive or access funds from the bank to pay its  suppliers, staff  salaries  etc which then  necessitates  review  of the conditions given by this court for stay.

10. It was further averred that this court should exercise is inherent power to reconsider the mater in order to meet the ends of justice and to prevent hardship and irreparable harm and prejudice and continued breach of fundamental rights of the applicant.

11. In opposing  the motion for review  of the orders of 7th February  2018, the respondent filed grounds of opposition on 28th February  2018  contending  that the  motion is resjudicata, that it offends Order 45 (1) of  the Civil Procedure Rules on review of orders in that the  threshold  for review has not been met; that the application for review is an  attack on the discretion of the court; that all  evidence  set  out in the  motion  were within  the applicant’s possession and  knowledge as  at the time  when the order  which is sought  to be reviewed  was made; that there  are no  new matters  disclosed  in the  motion which  could  not have  been obtained with due diligence; that there is no error or mistake apparent on the face of the record;   That the application is a gross  abuse of court process; that  the applicant  has an appeal pending from  the Tax Appeals Tribunal case No. 21/2017, being HCCA No 1/2018: that the applicant’s accounts are not frozen but open to receiving  monies and that the applicant’s  banks are obligated  to release to it monies; that this court should not go into the  merits  but concern itself  with the procedure  of the respondent  in issuing Agency Notices pursuant  to  a valid judgment of the Tax Appeals Tribunal; that therefore the applicant’s  application dated  22nd February 2018 must be dismissed as the court cannot grant futuristic orders as there is no proper order by the court to review hence the application is frivolous and vexatious and an abuse of the court process only meant to delay and halt the collection of the taxes found to be due and  payable.

12. The  parties’ advocates urged the application orally on 28th February 2018 with Mr Kashindi  advocate submitting on behalf  of the exparte applicant tax payer and Miss Mburugu  submitting  on behalf  of the respondent  tax collector.

13. The submissions by both counsels substantially mirror the applicant’s assertions and the contentions by the respondent.  It is therefore not necessary to reproduce them here.

14. However, Miss Mburugu relied on some authorities which I shall refer to in my determination.

15. Having considered the application  by the applicant, the grounds  of opposition by the respondent  and the  respective  parties’  oral  submissions and authorities cited, the main question to be determined  in this matter is  whether the  application for review  is merited.

16. The respondent contends that this matter  is resjudicata  because  the court considered  the matters  raised herein by the applicant  when dealing with the application for leave and stay and  arrived  at the decision which is sought  to be  reviewed hence  it cannot  review  its own orders  in the absence  of evidence  of new and  important  matter, error  apparent  on  record  and  further, that this court  cannot be  asked at  this stage to consider  merits of  the matter or to review its own  orders  which  are discretionary  orders.  Reliance was placed on Order 45 Rule (1) of the Civil Procedure Rules on review whose substantive law is Section 80 of the Civil Procedure Act Cap 21 Laws of Kenya.

17. The question therefore which arises from the above  submissions  is whether this court  is functus  officio  and  cannot  review  its own  orders  especially where the threshold  for review  as stipulated  in Order  45  Rule  (1)  of the Civil Procedure Rules  was  allegedly  not met by the applicant  in its application  dated 22nd February  2018.

18. The Court of Appeal  in Biren Amritlal Shah & Another vs  Republic & 3 Others [2013] e KLR expressed itself  thus, regarding whether or not the court in Judicial Review  proceedings brought  under  Section  8(5) of the Law  Reform Act could review its own orders:-

“ It  is therefore  quite clear  that appeals  in respect of orders made under judicial review lie with the Court of Appeal.  Therefore, in answering the question whether the High Court had jurisdiction to entertain a review application.  We agree  with the learned  judge of the  High Court  that, in exercising  its special  jurisdiction  under  the Law Reform Act, the High court had  no jurisdiction to review  its previous  order.”

19. However, in its  earlier  decision made in  2011 which  decision  was not referred to in the latter [2015] decision of Biren Amritlal case, the same  Court of Appeal held in Nakumatt Holdings Ltd vs The Commissioner of Value Added Tax [2011] e KLRthat the Superior Court  in the matter  before the court  had the residual  power to correct  its own  mistakes, and that  to the extent  that the court has  no powers under  Order 45 of the Civil procedure Rules to review its own orders made in Judicial Review.

20. Honourable Odunga J in Republic vs Kenya Revenue Authority  exparte  Paragon Electronics Ltd[2015] e KLRdealing with the same  issue of review of the court’s own orders in judicial review proceedings, and  citing  the above  two cases of the  Court of Appeal held, inter alia:

“……I agree that the Court of Appeal’s decision in Biren Amritlal Shah & another vs Republic (supra) cannot be  faulted.  However, as the Court of Appeal appreciated in Nakumatt Holdings Limited vs Commissioner of Value Added  Tax [2011] e KLR, the Superior Court in the  matter before the court has the residual power to correct its own mistakes.  Accordingly, where a mistake is shown to have been committed which is remediable by the court the same ought to be corrected by the court in the exercise of its inherent  jurisdiction.  In my view, where  a mistake  has been brought  to the attention of the court which is capable of being remedied, be it  by review  or otherwise, I do not  see any  bar to the  court invoking its inherent powers to do so, the nature of the proceedings  in question notwithstanding.”

21. The court  went further and stated  that:

“However, whether the court will exercise such powers in Judicial Review proceedings, depends on the nature of the prayer sought and then impact on the said proceedings.  Where  Judicial Review proceedings have been determined and the  applicant does not  set out to set aside  the order determining  the same, but seeks  orders which  are totally unrelated  to the matter  which  was  placed  before the court for  determination.  It is  my view  that the provisions of Section 8(2) and (3)  of the Law  Reform Act, become  relevant .

The provisions state:

(2)  In any case  in which  the High Court  in England is, by virtue  of the provisions  of Section 7  of the Administration of Justice Act empowered to make an order of mandamus , prohibition or certiorari, the High Court  shall  have  power to make a  like order.

(3)  No return shall be made to any  such order, and no pleadings  in prohibition  shall be  allowed, but  the order  shall be  final, subject to the right to appeal there from conferred by Subsection (5) of this Section.

In my view what this Section means is that once a determination is made, he court  ought  not to  revisit  the proceedings  already determined save for  the limited purpose  of either implementing its orders or where the court is moved to set aside its decision(emphasis added).”

22. In the instant case, the court  made an order staying  the decision made  by the respondent  on  15th January  2018  vide  letters to the applicant’s bankers  appointing  them as  agents for   tax  collection from the applicant’s  accounts and  effectively, allegedly, freezing the applicant’s operational  accounts  thereby paralyzing  its  operations.

23. The court in granting the applicant  leave to apply for judicial review  orders also ordered  that the leave so granted  shall operate  as stay of  the  agency  notices  and of the  freezing  of the applicant’s  bank account  conditional  upon the  applicant  securing  a bank  guarantee  of shs 50 million within  14  days  of  7th February  2018.

24. The applicant  returned  to  court  through an application dated 22nd February, 2018 subject of this ruling complaining  that it is  unable  to implement  the  court’s  order of  conditional  stay because  its funds  are all  tied up by the freezing  orders of  the  respondent   and that it  cannot raise the sh 50 million to deposit  in a bank  as demanded to issue a  bank guarantee.

25. Further, that it is in the service industry and its operations and services  have been paralyzed due  to the freezing  order.  The applicant has also given a  history of its tax disputes  with the  respondent  and  demonstrated  how it  has been  diligently  settling  taxes  due despite the  dispute, and which matters are not controverted by the respondent tax collector by way of an affidavit.

26. Although the respondent  claims that the applicant  is a flight risk  because its contract  with  the Kenyan Government  lapsed  and that  it is a subsidiary of an Italian Company, the court did  pronounce  itself  on this  matter in its  ruling dated  7th February  2018  hence it  cannot revert to that issue.

27. Further, albeit the respondent  heavily  relied on the  threshold  for review  set out  in Order  45(1)  of the Civil Procedure Rules, it is now clear that  those provisions  are inapplicable  to proceedings for  Judicial Review.

28. In Judicial  Review, the power  of the court  to review  or vary  its own orders  is limited to  for purposes  of either  implementing  its orders  or where the court is moved  to set aside  its decision.

29. It therefore follows that the decisions relied on by the respondent’s counsel namely, Abdullahi, Mohamud vs Mohamud Kahiye [2015] e KLR and Francis Origo & Another Kimali Mungals (CA 149/2001 and Stephen Gathua Kimani vs Nancy Wanjira Wauingi t/a Providence Auctioneers [2010] e KLRare inapplicable to the circumstances of this case, as they all relate to review in purely civil cases.

30. This court’s  jurisdiction  to review  or vary  its orders can thus  be  exercised  only  in exceptional circumstances  when the court is called  upon to invoke  its inherent powers  to ensure  that its  orders  are enforced.  This is so because  courts of  law do not make orders  in vain  and  therefore  it would make  no judicial sense to make or issue orders which are incapable of implementation, which  would in  essence  defeat  the purpose  for which the orders  were sought  and  granted.

31. This is  a court of law and  a court of justice  which exists  and  exercises  judicial authority derived  from the people  and in  doing  do so it must  ensure  that  justice is  administered without due regard  to procedural  technicalities  and that  the purposes and principles of the Constitution shall be protected and  promoted  as espoused in  Article 159 of the Constitution.  It follows that where  a court of law gives  a remedies  which in this case is  a  conditional  stay which  has turned out to be  an illusory  with a result   that it is  practically  a mirage, the  court will not  shirk  from its  constitutional mandate  to ensure  that a person’s right to a fair hearing as stipulated in Article 50(1) of the Constitution  and  Article  48  on access to justice  for all persons and that if any fee is required, it  shall be reasonable  and shall  not  impede  access  to justice,, and the right to fair Administrative Justice as stipulated in Article 47 of the Constitution are actualized.

32. It would, in my view, be  a denial of the very  remedy  of stay that the court gave on 7/2/2018 if the  court makes  an order  which  the beneficially thereof  finds it impossible  to  enjoy.  Where the  party  returns  to the temple of  justice  and  sufficiently  explains  the difficulties  encountered in implementing  the order, it is upon the court to  consider whether  such complaint is made  in good faith.

33. It has not  been shown that the application by the applicant  is made  in  bad faith  or that it is an abuse  of the court process.

34. In Chege  Kimotho & Others vs Vesters  & Another [1988] KLR 45, citing  with approval Midland  Bank Trust Company vs  Green [1982] 2 WLR 130, it  was held:

“The law is a living thing.  It adapts  and  develops  to  fulfill  the needs  of living  people whom it  both govern  and serves.  Like  clothes it should  be made  to fit people.  It must  never be  strangled by the dead hands  of long discarded  custom, belief, doctrine  or principle.”

35. As  was  eloquently  put by Odunga J  in Republic vs  Kenya Revenue Authority Exparte  Paragon  Electronics  Ltd[2015]  e KLR  and  which  authority  I adopt, the principles  espoused  therein albeit  the circumstances  are slightly  different  from this case:

“The Law must, of necessity, adapt itself; it cannot lay still.  It must adapt to the changing social condition.  The court in the modern society in which  we  live cannot deny  a deserving  litigant  a remedy .  The courts  have recognized that  unlawful interference with a citizens rights gives rise to  a  right to claim  redress  and if the exparte applicant has a  right  he must  of necessity  have the  means  to vindicate  it  and a  remedy  if they  are injured  in the enjoyment  or exercise of it; and  indeed, it is a vain thing  to imagine  a right  without a  remedy; for want  of right  and want  of remedy are reciprocate  whether or not they will be able to prove that their rights have been  contravened  or infringed  is another  matter all together ( See Rookes vs  Bernard [1964] AC  1129; Ashby vs While [1703] 2 Ld  Raym, 938; 92 ER 126. ”

36. In the Republic vs Returning Officer of Kamukunji  Constituency  & The Electoral Commission  of Kenya HC MCA 13/2008the court held, inter alia, that:

“Just as  nature  abhors  a vacuum, even the  enforcement  of the rule of law  abhors a vacuum or a gap, in its enforcement.  The court proceeded to uphold the  jurisprudence  that helps  to  illuminate  the  dark spots  and  shadows  in all circumstances, so that  justice as  a beacon of light  and  democratic ideals  are practiced  and  hailed all the times  over  the hills, valleys, towns  and homes.  In  this beautiful land of Kenya. The mantle  of justice the and rule  of law must  cover  all corners  of Kenya  in all  stations.  Courts have a continuing obligation to be the foremost protectors  of the rule of law.”

37. The applicant has returned to this court seeking to have the orders of 7th February 2018 implemented without difficulties.  This court must   be willing to be facilitative  of the execution of its orders so as to make  the   rule of law  a reality, not to strangle  the rule of law.

38. It is  for that reason that I must  invoke the inherent  powers and  jurisdiction of the court to  facilitate or inject  life in the rule of law  implementation process.  This court believes in  and  has  not once but severally made it clear that investors  must be facilitated  to do  business, provide employment  opportunities for the young people  of Kenya  and pay taxes  from which the Governments  at both National and  County levels  can render  efficient  services  to its citizens..

39.  An Investor is like a cow which gives us milk. We must not slaughter it.  If we do, we only  get meat from it.  The milk stops flowing.  Meat is  short term whereas milk is long term.  We must therefore endeavour to nurture the cow so that it continues  to give us  milk.  That should the attitude of Kenya Revenue Authority our National Tax Collector.  It must  not strangle  tax payers.  It  must be  facilitative  of tax payers.  It must be incentive-based not execution- based. The tax collector should not endeavour to strangle investors and taxpayers or treat them with disdain.

40. For all the above reasons, I find that the motion for review is merited.  It is hereby granted.  The earlier order of 7th February 2018  on stay  is hereby reviewed  and varied and  substituted with an order of unconditional stay of enforcement of the respondent’s  letters  of 15th January  2018  until these Judicial Review proceedings are heard and determined  on merits.

41. The court declines to make any orders on the  security  deposited with the respondent by the applicant  during the  pendency  of the Tax  Appeals Tribunal’s dispute  as that is a matter  which is  outside  the armbit  of this  matter since the specific dispute  is subject of the appeal proceedings pending in the Civil(Tax and  Commercial Division ) of the High Court.

42. Each party shall bear their own costs of this application for review.

Dated, signed and delivered in open court at Nairobi this 2nd day of March, 2018.

R.E. ABURILI

JUDGE

In the presence of:

Miss Musau for the exparte applicant

Mr Koima h/b for Carole Mburugu for the Respondent

CA: Kombo

Howev