[2017] KEHC 2364 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

CONSTITUTIONAL & HUMAN RIGHTS DIVISION

PETITION NO. 4 OF 2017

IN THE MATTER OF ARTICLES 19, 20, 21, 22, 23, 47, 258 AND 260 OF THE CONSTITUTION OF KENYA

AND

IN THE MATTER OF CONTRAVENTION OF RIGHTS AND FUNDAMENTAL FREEDOMS UNDER ARTICLE 47 OF THE CONSTITUTION OF KENYA

AND

IN THE MATTER OF THE FAIR ADMINISTRATIVE ACTION ACT NO. 4 OF 2015, THE VALUE ADDED TAX ACT 2013, THE INCOME TAX ACT AND THE KENYA REVENUE AUTHORITY ACT

BETWEEN

GIBB AFRICA LIMITED..........................PETITIONER

VERSUS

KENYA REVENUE AUTHORITY.............RESPONDENT

JUDGMENT

The petitioners' case

1. The crux of the Petitioners' case can be summarized in the following paragraphs:-

a. That on 6th June 2016, the Respondent audited its business and raised a tax demand of Ksh. 112,981, 522/=.

b. The Petitioner through its tax consultant responded to the said letter on 20th July 2016 stating that:- (i) it is a key player in the construction industry mainly employed by the Government of Kenya; (ii) that the Government of Kenya owed it Ksh. 393 Million as at June 2016, a colossal sum which had affected its operations including payment of taxes; (iii) that the Petitioner was willing to pay the outstanding debt.

c. On 27th September 2016, the Petitioner wrote to the Respondent stating that:- (i) the Government through its Ministries, state corporations and counties owe it Ksh. 500/= Million for work done; (ii) that the Government was taking long to pay the sums, which adversely affected the Petitioner's cash flow and its inability to meet its obligations including payment of taxes; (iii) he Petitioner proposed to pay monthly instalments of Ksh. 10,000,000/= Million subject to receipt of money from the Government and a lump sum payment of Ksh. 71,000,000/= Million upon receipt of money from Kenya National Highways Authority (KenHA;(iv)the Petitioner did not receive the said payment, hence , it was unable to honour the above proposal; (v) It explained its aforesaid inability in a subsequent meeting held on 18th November 2016.

d. In the above meeting, the Petitioner explained to the Respondent that it was forced to discount certain unpaid invoices with its Banker(s) at a very high cost in order to meet its urgent obligations among them taxes and wages. The Respondent asked for copies of the invoices which were not discounted and consented to the proposal to discount some invoices as aforesaid. However, the discounted invoices could barely cover wages and crucial operational expenses. Although the Petitioner could not remit all taxes, it was able to remit withholding tax and withholding VAT to the Respondent.

e. By a letter dated 18th November 2016, the Petitioner notified the Respondent of:- (i) the aforesaid measures to mitigate its losses; (ii) it had no objection to the Respondent collecting the outstanding invoices which were not discounted from the Government Ministries/agencies as well as Machakos County Government, (iii) the amount collected could be used to settle the Petitioner's tax liability, (excluding penalties and interests); (iv) the Petitioner was entitled to a waiver of penalties and interests on the principal taxes since its inability to pay the outstanding taxes within time was solely caused by non-settlement of invoices by Government agencies; (v) the Petitioner notified the Respondent that the Government owed the Petitioner the sum of Ksh. 444,437,343/= out of which Ksh. 235,923,441/= had been discounted leaving a balance of Ksh. 208,513,902/=; (vi)that sums from the discounted invoices were payable to the Petitioners Bankers.

f. By a letter dated 1st December 2016 the Respondent demanded payment of Ksh. 283,737,490/= comprising of Ksh. 215,050,652/= on account of VAT, Ksh. 67,692,854/= on account of PAYE and Ksh. 993,984/= on account of withholding tax. The Petitioner's agents responded on 6th December 2016 reiterating the services it provides such as design, architectural and engineering projects for Government, its Ministries and agencies, and that the Government agencies and Ministries had to a large extent not paid the Petitioner for services rendered contributing to the Petitioners inability to meet its tax obligations ans reiterated the Petitioner was committed to settling outstanding principal taxes as and when payments are received from the Government.

g. On 15th December 2016, the Respondent issued thirteen agency notices to various entities and demanded that the recipients of the said notices pay the sum of Ksh., 283,737,490/= being the sum of taxes allegedly due from the Petitioner. The Petitioners avers that the agency notices are in total disregard of the agreement between the parties of 18th December 2016, unreasonable and procedurally unfair.

h. The Petitioner avers that due to the said notices, its bank froze its account crippling its operations, hence it could not meet its obligations and that the discounted sum of Ksh. 208,513,902/= owed to the Petitioner by the Government could be utilized to pay the unpaid taxes.

i. The Petitioner also states that discounting entails the Petitioner submitting certain invoices to its banker who then advance money to it to the tune of eighty per cent of the face value of the invoice. Upon payment of the invoices by the Government agencies, the Bank collects the money owed to it on the discounted invoices. And that the Petitioner had discounted invoices up to the limit available in its facility with its Bank.

j. Owing to delay of payment by the Government, the Petitioner was faced with two options, namely, to cease operating or find an alternative way of funding its operations. Ceasing to operate would lead to loss of employment to 150 employees and loss of investment and loss of tax to the Respondent, hence the Petitioner opted for the more sensible option and engaged the Respondent and that by its conduct on 18th November 2016, the Respondent approved the continuing discounting of invoices by the Petitioner.

2. The Petitioner challenges the Agency Notices on grounds that it violates its rights and fundamental freedoms in the Bill of Rights under the Constitution and International Convention on Social Economic Rights. The Petitioner cites violation of articles 40 (1) & 47 (1) of the Constitution and Section 4 of the Fair Administrative Action Act[1]and states that the Respondent acted in bad faith, improper motive and violated its Right to legitimate expectation.

3. The Petitioner invites this court to declare that the Agency Notices violate its Right to Fair Administrative Action, null and void and quash the same. Also sought is a declaration that the notices violate its right to property and that the Respondent is only entitled to Ksh. 166,719,702/= being the principal taxes payable upon the Petitioner being paid by the Government.

Respondents' Replying affidavit

4. In opposition to the Petition is the Replying affidavit of Nancy Jemutai, an officer in the enforcement unit within the Respondents' Domestic Taxes filed on 4th April 2017 stating that:- (i) the Respondent made various demands to the Petitioner the latest being dated 1st December 2016 demanding Ksh. 283,737,490/= inclusive of interests and penalties; (ii) that the Petitioner failed to honour the demands; (iii) the Respondent was forced to issue agency notices dated 15th December 2017 to various debtors of the Petitioner in accordance with Section 42 of the Tax Procedures Act;[2] (v) that the tax demanded amounting to Ksh. 283,737,490/= comprises of arrears arising from an audit assessment of Ksh. 112,981,522/= inclusive of penalties and interest which tallies with the Petitioner's amount stated in their letter of September 27th 2016 and also the tax arrears resulting from unpaid self-assessment tax declared by the Petitioner on iTax for the periods (a) Ksh. 48,647,544/= due for PAYE for the months of February 2014 to April 2014 and April 2016 to September 2016, (b) Ksh. 122,108,423 due for VAT for the months of February 2014 to June 2014, August to November 2014, December 2015 to May 2016, July and August 2016.

5. She also averred that in the event the Petitioner disputes the amounts demanded, then the right forum to adjudicate the dispute is the Tax Appeals Tribunal and not this court. She denied the existence of an agreement with the Petitioner and stated if such an agreement existed, then the same was without prejudice and that having been served with the notices as per the law, it was upon the agents to respond to the Respondent stating the amount they each owed to the Petitioner and not the Petitioner to direct the Respondent on how the agency notices are to be served. She added that the delay by Government Ministries and agents to pay the Petitioner is independent of the Petitioners operations to recover tax arrears, hence, the Respondent acted within the law and that there is a danger of the Government losing revenue if the agency notices are lifted.

Issues for determination

6. Upon analysing the opposing positions presented by the parties, I find that the following issues fall for determination, namely; (a)whether or not this court has jurisdiction to hear and determine this matter;(b)whether or not the agency notices violate the Petitioners right to a Fair Administrative Action; (c) whether the petitioners' right to legitimate expectation has been violated.(d)whether the Agency Notice violates the Petitioners' right to property.

(a) Whether or not this court has jurisdiction to hear and determine this matter.

7. On principle it seems to me that in general a Court is bound to entertain proceedings that fall within its jurisdiction. Put differently, a court has no inherent jurisdiction to decline to entertain a matter within its jurisdiction.

8. The Petitioners' counsel submitted that:-

(a)the issues raised in this Petition are predicated upon the violation of the Constitution and Fair Administrative Actions Act, which matters are within the jurisdiction of this court as opposed to the Tax Appeals Tribunal;

(b) that the Petitioner does not contest it is liable to pay tax, but the core issue is that the parties agreed on a specific manner in which the sums owed would be collected through specific and targeted agency notices but the Respondent reneged on the said agreement;

(c) that the issues raised in this Petition are of constitutional character which are matters within the jurisdiction of this court as opposed to the Tribunal.[3]

9. The Respondents' counsel submitted that the issues raised herein are purely Judicial Review matters and should therefore adjudicated by a "Judicial Review court" or the Tax Appeals Tribunal. In our hierarchy of courts, there is nothing like a "Judicial Review court", hence I am unable to comprehend what counsel meant by this submission. What we have is a Judicial Review Division presided over by a High Court judge appointed under article 165.

10. But my reading of paragraph 16 of the Respondents counsels' submissions leads me to the conclusion that counsel meant that he Petitioner ought to have filed a Judicial Review Application as opposed to a Constitutional Petition. If that is the case, then, I am unable to agree with this submission.

11. Article 165(1) of the Constitution establishes the High Court and vests in it vast powers including the power to ‘determine the question whether a right or fundamental freedom in the Bill of Rights has been denied, violated, infringed or threatened’ and the jurisdiction ‘to hear any question respecting the interpretation of the Constitution.’Sub article (6) provides that "The High Court has supervisory jurisdiction over the subordinate courts and over any person, body or authority exercising a judicial or quasi-judicial function." Sub-article(7) provides that "the High Court may call for the record of any proceedings before any subordinate court or person, body or authority referred to in clause (6), and may make any order or give any direction it considers appropriate to ensure the fair administration of justice."

12. Article 23 (1) grants this court authority to uphold and enforce the Bill of Rights. It reads:-

23. (1) The High Court has jurisdiction, in accordance with Article 165, to hear and determine applications for redress of a denial, violation or infringement of, or threat to, a right or fundamental freedom in the Bill of Rights.

(3) In any proceedings brought under Article 22, a court may grant appropriate relief, including—

(a) a declaration of rights;

(b) an injunction;

(c) a conservatory order;

(d)a declaration of invalidity of any law that denies, violates, infringes, or threatens a right or fundamental freedom in the Bill of Rights and is not justified under Article 24;

(e) an order for compensation; and

(f) an order of judicial review.

13. It follows that this court has powers to grant Judicial Review orders or fashion such reliefs as may be appropriate to meet the ends of justice. Such orders can be granted in a Constitutional Petition such as this Petition if warranted. Thus, the objection premised on the ground that this matter ought to have been filed as a Judicial Review fails.

14. The other objection is that the Petitioner ought to have moved to the Tax Appeals Tribunal. Section 51 of the Tax Procedures Act[4] provides for objections to tax decisions. It reads:-

Objection to tax decision

51 (1) A taxpayer who wishes to dispute a tax decision shall first lodge an objection against that tax decision under this section before proceeding under any other written law.

15. Section 52of the Act provides for appealable decisions to be appealed at the Tax Appeals Tribunal. Section 12 of the Tax Appeal Tribunal[5]provides that:-

12. Appeals to the Tribunal

"Aperson who disputes the decision of the Commissioner on any matter arising under the provisions of any tax law may, subject to the provisions of the relevant tax law, upon giving notice in writing to the Commissioner, appeal to the Tribunal, Provided that such person shall before appealing, pay a non-refundable fee of twenty thousand shillings."

16. Section 32 of the Tax Appeals Tribunal[6] provides that decisions of the Tribunal are appealable to the High Court.

17. The Petitioner was aggrieved by agency notices. The above provision provides that "a person who disputes the decision of the commissioner on any matter arising under the provisions of any tax law, subject to the provisions of the relevant tax law...appeal to the Tribunal..". My reading of this provision and Section 83of the Income Tax Act[7] is that the law establishes a clear procedure for adjudicating disputes arising from the decision of the Commissioner of Income Tax which include the Agency Notices the subject of these proceedings.

18. I am also aware that where a specific dispute resolution mechanism is prescribed by the Constitution or a statute, parties should to resort to that mechanism first before purporting to invoke the inherent jurisdiction of the High Court.[8]

19. The question that follows is, should this court decline jurisdiction owing to the above clear provisions of the law establishing a dispute resolution mechanism. I am conscious of the fact that the right of access to court is indeed foundational to the stability of an orderly society. It ensures the peaceful, regulated and institutionalised mechanisms to resolve disputes. The right of access to court is a bulwark against vigilantism, and the chaos and anarchy which it causes. Construed in this context of the rule of law, access to court is indeed of cardinal importance. As a result, very powerful considerations would be required for its limitation to be reasonable and justifiable. This is the test the court should bear in mind when invited to decline jurisdiction.

20. The question that follows is are there powerful considerations for this court to hold that the Petitioner is properly before this court. The Petitioner has alleged violation of constitutional Rights which it feels cannot be addressed through the procedures laid down by the tax laws discussed above.

21. The need to maintain confidence in the administration of justice makes it imperative that there should be a remedy. The need for an effective remedy in a case may justify this court in taking the exceptional course of entertaining a dispute where the court is satisfied that the laid down statutory mechanism may not provide an effective remedy to the aggrieved party or if it is clear the dispute disclosed by the facts substantially or wholly lies outside the scope of the laid down statutory mechanism. What will be of the greatest importance is that it should be clearly established that a significant injustice has probably occurred or will occur and that there is no alternative effective remedy within the statutory established mechanism.

22. It is also important to bear in mind the need for this court to developcommon law where necessary to meet the interests of justice. The guiding principle in exercising such powers is the interests of justice. In this Petition, the Petitioner has raised issues touching on violation of its constitutional rights which in my view cannot be addressed in the statutory laid down dispute resolution mechanism. My reading of Articles 165 and 23 of the Constitution leaves me with no doubt that this court has powers to entertain this case and determine whether or not the Petitioners rights to legitimate expectation and fair administrative action have been violated or threatened. I am persuaded that an effective remedy for such violations if proved is not available through the legal mechanism under the relevant tax laws enumerated above. Put bluntly, the laid down mechanism cannot address constitutional violations such as those alleged in this Petition.

23. The Constitution is also concerned that the entire legal system, including tax laws must accord with the broader values of the Constitution. The courts are obliged to prevent the restriction of those rights if they are directly threatened.

24. In a constitutional democracy like ours, where the substantive enjoyment of rights has a high premium, it is important that any existing statutory remedy be an effective one. A remedy will be effective if it is objectively implemented, taking into account the relevant principles and values of administrative justice present in the Constitution and our law. Factors such as these will be taken into account when a court determines whether exceptional circumstances exist, making it in the interests of justice to intervene.

25. The “deepest norms” of the Constitution should determine whether the alleged breach of a fundamental right involves explicit constitutional adjudication, or whether it could safely be left to the statutory provisions. In my view, the actions complained of in these proceedings must be scrutinised to decide whether they accord with the demands of the Constitution. Thus, this dispute is properly before this court.

(b) Whether or not the agency notices violate the Petitioners right to a Fair Administrative Action.

26. Counsel for the Petitioner submitted that the agency notices violates the Petitioners' right to fair administration action[9]and that the Respondent is bound by the provisions of the Bill of Rights.[10] Counsel argued that the Respondent appreciated the Petitioner's predicament which led to the agreements in question, and that had the Respondent adhered to the agreements, the tax liability would have been satisfied, hence the refusal is unreasonable in that it defies logic.

27. Counsel cited the test or unreasonableness set out in Associated Provincial Picture Houses Ltd vs Wednesbury Corporation.[11]Counsel reiterated that the decision violates Article 47 of the Constitution and that by demanding taxes that were not lawfully due, the Petitioner acted unreasonably.

28. The Respondents' counsel submitted that the tax liability is a legal obligation and that the decision to issue the Agency Notice was not unreasonable, that the notice was issued in conformity with the law and that the agreement relied upon was not binding. Further the law places the onus on the applicant to demonstrate that the decision was absurd that no sensible person could ever dream that it lays within the powers of the authority[12]and insisted that the Petitioner has not demonstrated that the decision is unreasonable.

29. It is settled law that Public bodies, no matter how well-intentioned, may only do what the law empowers them to do. That is the essence of the principle of legality, the bedrock of our constitutional dispensation, which is enshrined in our constitution. It follows that for the impugned legal notice to be allowed to stand, it must be demonstrated that the same is grounded on law.

30. As such, the Agency Notices must conform to the doctrine of legality. Put differently, if the Agency Notice has no foundation in law, then, it would amount to undermining the legality principle which, is inextricably linked to the Rule of Law. Discussing the principle of legality, the South African court in the case of AAA Investments (Pty) Ltd vs Micro Finance Regulatory Council and another stated as follows:-

“(t)he doctrine of legality which requires that power should have a source in law, is applicable whenever public power is exercised . . . . Public power . . . can be validly exercised only if it is clearly sourced in law"[13]

31. Courts are similarly constrained by the doctrine of legality, i.e to exercise only those powers bestowed upon them by the law.[14] The concomitant obligation to uphold the Rule of Law and, with it, the doctrine of legality, is self-evident. In this regard, the first Respondent is constrained by that doctrine to enforce the law by ensuring that its decisions including the impugned Agency Notices conform to the relevant provisions of the law.[15]

32. The respondent has not only a statutory duty but also a moral duty to uphold the law and to ensure due compliance with the tax laws. It would in general be wrong to whittle away the obligation of the Respondent as a public body to uphold the law and enforce compliance with tax laws. A lenient approach could be an open invitation to the first Respondent to act against its legal mandate.

33. My understanding of the Petitioners case is that the legal mandate of the Respondent to issue the Agency Notice is not disputed. The bone of contention is that there was an agreement and that the Respondent disregarded the agreement.

34. Article 47 of the Constitution provides that every person has a right to administrative action that is expeditious, efficient, lawful, reasonable and procedurally fair. The Fair Administrative Action Act[16] was enacted to illuminate and expand the values espoused under Article 47of the Constitution. Section 4(3) of the Act provides the broad parameters which bodies undertaking administrative action have to adhere.

35. In Judicial Service Commission vs. Mbalu Mutava & Another[17] the Court of Appeal held that:-

“Article 47(1) marks an important and transformative development of administrative justice for, it not only lays a constitutional foundation for control of the powers of state organs and other administrative bodies, but also entrenches the right to fair administrative action in the Bill of Rights. The right to fair administrative action is a reflection of some of the national values in article 10 such as the rule of law, human dignity, social justice, good governance, transparency and accountability. The administrative actions of public officers, state organs and other administrative bodies are now subjected by article 47(1) to the principle of constitutionality rather than to the doctrine of ultra vires from which administrative law under the common law was developed.”

36. The importance of fair administrative action as a Constitutional right was appreciated in the South African case of President of the Republic of South Africa and Others vs. South African Rugby Football Union and Others[18] where it was held as follows with regard to similar provisions on just administrative action in Section 33 of the South African Constitution:-

“Although the right to just administrative action was entrenched in our Constitution in recognition of the importance of the common law governing administrative review, it is not correct to see section 33 as a mere codification of common law principles. The right to just administrative action is now entrenched as a constitutional control over the exercise of power. Principles previously established by the common law will be important though not necessarily decisive, in determining not only the scope of section 33, but also its content. The principal function of section 33 is to regulate conduct of the public administration, and, in particular, to ensure that where action taken by the administration affects or threatens individuals, the procedures followed comply with the constitutional standards of administrative justice. These standards will, of course, be informed by the common law principles developed over decades…”

37. Section 107(1) of the Evidence Act[19] provides that:-

"whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts must prove that those facts exist."

38. The above provision reminds this court to take cognisant of the legal maxim that omnia praesumuntur legitime facta donec probetur in contrarium(all things are presumed to have been legitimately done, until the contrary is proved). In Republicvs. Kenya Power & Lighting Company Limited & Another[20] the court observed that:-

“It is not enough for an applicant in judicial review proceedings to claim that a tribunal has acted illegally, unreasonably or inbreach of rules of natural justice. The actual sins of a tribunal must be exhibited for judicial review remedies to be granted.”

39. It must always be remembered that judicial review is concerned with the process a statutory body employs to reach its decision and not the merits of the decision itself. Once it has been established that a statutory body has made its decision within its jurisdiction following all the statutory procedures, unless the said decision is shown to be so unreasonable that it defies logic, the court cannot intervene to quash such a decision or to issue an order prohibiting its implementation since a judicial review court does not function as an appellate court.

40. Besides, the purpose of judicial review is to prevent statutory bodies from injuring the rights of citizens by either abusing their powers in the execution of their statutory duties and function or acting outside of their jurisdiction. Judicial review cannot be used to curtail or stop statutory bodies or public officers from the lawful exercise of power within their statutory mandates.[21]

41. Section 7 (2) of the Fair Administrative Action Act[22]provides for grounds of review which include bias, procedural impropriety, ulterior motive, failure to take into account relevant matters, abuse or discretion , unreasonableness, violation of legitimate expectation or abuse of power.

42. The Petitioner admits its legal obligation to pay taxes. It admits some amounts are due but states that the decision to issue Agency Notices is unreasonable because the Respondent disregarded an existing agreement and also issued notices for "amounts that were not legally due."

43. The existence of the agreement is contested. On record at page 16 of the Petitioners bundle of documents is a letter dated 10th November 2016 in which the Respondent states inter aliathat "having not honoured your proposal, we are now forwarding the debt to our enforcement unit as per the agreement contained in the minutes of the meeting."This raises doubts as to whether there was an agreement. At page 29 is another letter from the Respondent demanding the arrears immediately to avoid enforcement measures.

44. It appears if at all there was an agreement, it was not honoured. The agency notices were issued in conformity with Section 42 of the Tax Procedures Act.[23] If at all the Respondent issued a notice for an incorrect tax amount, then this is a tax dispute and can be resolved through the statutory mechanisms discussed earlier but not by way of a constitutional Petition.

45. In light of the provisions of Section 42 of the Tax Procedures Act,[24] the principle of legality discussed above which requires the first Respondents' actions to conform with the law, I find that the notices did not in any manner offend the relevant provisions of the tax laws or the Fair Administrative Action Act.[25]

46. It should be emphasized that the Respondent is statutorily mandated to collect taxes as provided under the law and provided its action fall within the law, this court will not intervene. Put differently, the question is whether, properly construed, the issuance of the agency notices conforms to the above sections and the constitution.

47. When the constitutionality or legality of a decision made by a public body in the exercise of its statutory mandate is questioned, the duty of the court is to determine whether the impugned decision is capable of being read in a manner that is constitutionally compliant or as in the present case whether it can be read in a manner that conforms to the relevant statute. Every act of the state or public bodies must pass the constitutional test, put differently, it must conform to the principal of legality.

48. A contextual or purposive interpretation of the challenged decision must of course remain faithful to the actual wording of the statutes, namely the Fair Administrative Action Act,[26]the Constitution and the relevant tax laws. The challenged decision must be capable of sustaining an interpretation that would render it compliant with the constitution and the statutes, otherwise the courts are required to declare it unconstitutional and invalid.

49. A contextual interpretation of the impugned decision, therefore, must be sufficiently clear to accord with the rule of law. Mindful of the imperative to read the challenged decision in conformity with the Constitution and the relevant statute, I find and hold that the Agency notices are inconformity with the law and are not tainted by illegality either on the alleged unreasonableness or otherwise.

50. Section 42confirms the mandate of the Respondent to issue Agency Notices. The other crucial question which must be answered is what is the standard by which the validity of Agency Notice and conformity with the Fair Administrative Action Act[27] and Article 47 of the constitution should be judged. In this regard such a question should be answered with reference to the standards of review laid down by courts when the validity of a statute is challenged which include two main standards:-

a. The first is the “rationality” test. This is the standard that applies to all legislation under the rule of law;

b. The second, and more exacting standard, is that of “reasonableness” or “proportionality”, which applies when legislation limits a fundamental right in the Bill of Rights. Article 24 (1) of the Constitution provides that such a limitation is valid only if it is “reasonable and justifiable in an open and democratic society.”

51. It is important to mention that the Agency Notice is "reasonably related" to a legitimate purpose, that is to enable the Respondent fulfill its statutory mandate of collecting taxes. In determining reasonableness, relevant factors include:-(a) whether there is a "valid, rational connection" between the Agency Notice and a legitimate and public interest to justify it, which connection cannot be so remote as to render the Agency Notice arbitraryor irrational. In this regard I hold the view that collecting taxes lawfully due is a legitimate purpose. (b)the second consideration is whether there are alternative means of exercising the asserted right that remain open to the affected person. In this regard, the Petitioner has the option of questioning the amounts or validity of the notice under the statutory laid down mechanism.

52. It is equally important that the court should also as far as possible, avoid any decision or interpretation which would bring about the result of rendering the system unworkable in practice or create a situation that will go against clear provisions of the law governing the subject in issue. In this case, the law and the Agency Notice in question are designed at maintaining and ensuring collection of taxes and performance of the functions of the Respondent.

53. It is my view that the Agency Notice has not been shown to be unreasonable and or violating the Petitioners Right to fair Administrative Action as alleged. It is logically related to the legitimate purpose of collecting revenue as provided under the law. It does not deprive the petitioner the opportunity to challenge the amounts at the right forum if not properly tabulated or if unreasonable.

(c) whether the Agency Notice violates the Petitioners Right to legitimate expectation.

54. Addressing the subject of legitimate expectation, H. W. R. Wade & C. F. Forsyth[28] at pages 449 to 450, thus:-

“It is not enough that an expectation should exist; it must in addition be legitimate….Firstof all, for an expectation to be legitimate it must be founded upon a promise or practice by the public authority that is said to be bound to fulfil the expectation….. Second, clear statutory words, of course, override an expectation howsoever founded….. Third, the notification of a relevant change of policy destroys any expectation founded upon the earlier policy…."

“An expectation whose fulfillment requires that a decision-maker should make an unlawful decision, cannot be a legitimate expectation. It is inherent in many of the decisions, and express in several, that the expectation must be within the powers of the decision-maker before any question of protection arises. There are good reasons why this should be so: an official cannot be allowed in effect to rewrite Acts of Parliament by making promises of unlawful conduct or adopting an unlawful practice.” (Emphasis added)

55. It follows that statutory words override an expectation howsoever founded. Thus, a decision maker cannot be required to act against clear provisions of a statute just to meet ones expectations otherwise his decision would be out rightly illegal and a violation of the principle of legality, a key principle in Rule of Law. There cannot be legitimate expectation against the clear provisions of a statute. The relevant provisions of the law cited earlier clearly show that the first Respondents decision is grounded on the relevant statutory provisions, in particular Section 42discussed above.

(d) whether the Agency Notice violates the Petitioners' right to property

56. The Petitioner states that Agency Notices violates it's Right to property under article 40 of the Constitution in that if the Agency Notices are left to stand, the Petitioners debtors my comply with them in which event the Respondent will collect multiple times more than what is legally due. This is rather speculative and the question of what is legally due can in my view be determined by way of an objection as stipulated under the law.

57. The Right to property is not absolute. A common way of determining whether a decision that limits rights is justified is by asking whether the decision in question is proportionate. Former President of the Supreme Court of Israel, Aharon Barak, said proportionality can be defined as ‘the set of rules determining the necessary and sufficient conditions for a limitation on a constitutionally protected right by a law to be constitutionally protected’. [29]

58. Leading Authors G. Huscroft, B. Miller and G. Webber (eds) have authoritatively stated the jurisprudence of proportionality includes this ‘serviceable—but by no means canonical—formulation’ of the test:--

i. Does the legislation (or other government action) establishing the right’s limitation pursue a legitimate objective of sufficient importance to warrant limiting a right?

ii. Are the means in service of the objective rationally connected (suitable) to the objective?

iii. Are the means in service of the objective necessary, that is, minimally impairing of the limited right, taking into account alternative means of achieving the same objective?

iv. Do the beneficial effects of the limitation on the right outweigh the deleterious effects of the limitation; in short, is there a fair balance between the public interest and the private right?[30]

59. Proportionality has been called the ‘most important doctrinal tool in constitutional rights law around the world for decades’[31] and ‘the orienting idea in contemporary human rights law and scholarship.’ A classic discussion of the principle of proportionality may be found in the 1986 Canadian Supreme Court case of R vs Oakes[32] where Dickson CJ said that to establish that a limit is reasonable and demonstrably justified in a free and democratic society, two central criteria must be satisfied.

a. First, the objective, which the measures responsible for a limit on a constitutional right or freedom are designed to serve, must be ‘of sufficient importance to warrant overriding a constitutionally protected right or freedom’. The standard must be high in order to ensure that objectives which are trivial or discordant with the principles integral to a free and democratic society do not gain protection. I find that the decision by the Respondent does not meet this test.

b. Secondly, the means chosen must be ‘reasonable and demonstrably justified’, which involves ‘a form of proportionality test’ with three components: First, the measures adopted must be carefully designed to achieve the objective in question. They must not be arbitrary, unfair or based on irrational considerations. I find that the decision complained of does not meet this test.

60. In each case, Dickson CJ said, courts will be ‘required to balance the interests of society with those of individuals and groups’.[33]It is my view that it is in public interest that taxes must be paid. I find and hold that the Agency Notices do not infringe on the Petitioners Rights to property. I also note that the Petitioner is not challenging its tax obligations.

61. In view of my conclusions herein above, I decline to grant the reliefs sought in this petition. Accordingly, I dismiss this petition with no orders as to costs.

Orders accordingly.

Dated at Nairobi this 9thday ofNovember ,2017

John M. Mativo

Judge

[1]Act. No. 4 of 2015

[2] Act No. 29 of 2015. Section 42 provides: Power to collect tax from person owing money to a taxpayer

(1) This section applies when a taxpayer is, or will become liable to pay a tax and—

(a) the tax is unpaid tax; or (b) the commissioner has reasonable grounds to believe that the taxpayer will not pay the tax by the due date for the payment of the tax.

(2) The Commissioner may, in respect of the taxpayer and by notice in writing, require a person (referred to as the "payer")—

(a) who owes or may subsequently owe money to the taxpayer; (b) who holds or may subsequently hold money, for or on account of, the tax payer; (c)who holds or may subsequently hold money on account of some other person for payment to the taxpayer; or (d) who has authority from some other person to pay money to the taxpayer, to pay the amount specified in the notice to the Commissioner, being an amount that shall not exceed the amount of the unpaid tax or the amount of tax that the Commissioner believes will not be paid by the taxpayer by the due date.

(3) When a notice served under subsection (2) requires a payer to deduct a specified amount from a payment of a salary, wages or other similar remuneration payable at fixed intervals to the taxpayer, the amount required to be deducted by the payer from each payment shall not exceed twenty per cent of the amount of each payment of salary, wages, or other remuneration (after the payment of income tax).

(4) This section shall apply to a joint account when—

(a) all the holders of the joint account have unpaid tax liabilities; or (b) the taxpayer can withdraw funds from the account (other than a partnership account) without the signature or authorization of the other account holders.

(5) A payer shall pay the amount specified in a notice under subsection (2) by the date specified in the notice, being a date that that does not occur before the date that the amount owed by the payer to the taxpayer becomes due to the taxpayer or held on the taxpayer's behalf.

(6) When a taxpayer who has been served with a notice under subsection (2) fails to comply with the notice by reason of a lack of monies held by the payer on behalf of, or due by the payer to the taxpayer, the payer shall notify the Commissioner in writing within seven days of receiving the notice, setting out the reasons for the payer's inability to comply.

(7) When the Commissioner is notified by a payer under subsection (6) that the payer is unable to pay the amount due, the Commissioner shall within a period of thirty days, in writing to the payer—

(a) accept the notification and cancel or amend the notice issued under subsection (2); or

(b) reject the notification.

(8) The Commissioner shall notify the payer in writing of a revocation or amendment of a notice given under subsection (2) where the taxpayer pays the whole or part of the tax due or has made an arrangement satisfactory to the Commissioner for the payment of the tax.

(9) The Commissioner shall serve the taxpayer with a copy of a notice served on a payer under this section.

(10) A payment made by a payer to the Commissioner in accordance with a notice issued under this section is treated as having been made on behalf of the taxpayer and shall discharge the payer of any liability to the taxpayer or any other person.

(11) The Commissioner shall credit any amount paid by a payer under this section against the tax owed by the taxpayer.

(12) The Commissioner may require, in writing, any person, within a period of at least thirty days, to provide a return to the Commissioner showing any monies which may be held by that person for a taxpayer referred to in subsection (1) or monies held by that person which are due to a taxpayer referred to in subsection (1).

(13) A taxpayer who without reasonable cause fails to comply with a notice or a requirement by the Commissioner under this section shall be personally liable for the amount specified in the notice or requirement.

[3]Counsel cited Bernard Murage vs Fineserve Africa Limited & 3 Others {2015} eKLR & Wananchi Group (Kenya) Ltd vs The Communications Commission of Kenya, Pet. No. 98 of 2012

[4] Act No. 29 of 2015

[5] Act No. 40 of 2013

[6] Ibid

[7] Cap 471, Laws of Kenya

[8] See Kones vs. Republic & Another Ex parte Kimani Wa Nyoike & 4 Others {2008} 3 KLR (ER) 296) & Speaker of the Nationa Assembly vs Karume, Civil Application No. NAI 92 of 1992

[9] Counsel cited Article 47 of the Constitution & Section 4 (3) (a), (b), (d) & (g) of the Fair Administrative Action Act

[10] Counsel cited Samura Engineering Ltd & Others vs Kenya Revenue Authority {2012}eKLR

[11] {1948}1 KB 223

[12] Counsel cited R vs. Kenya Power & Lighting Co Ltd & Another {2013}eKLR

[13] AAA Investments (Pty) Ltd v Micro Finance Regulatory Council [2006] ZACC 9;2007 (1) SA 343 (CC).

[14] National Director of Public Prosecutions vs Zuma, Harms DP

[15] Daniel I. Aluvaala & Another vs. Council of Legal Education & Another, Pet. No. 254 of 2017

[16] Act No. 4 of 2015

[17] {2015} eKLR,Civil Appeal 52 of 2014

[18](CCT16/98) 2000 (1) SA 1, at paragraphs135 -136

[19] Cap 80, Laws of Kenya

[20]{2013} eKLR

[21] See Githua JinRepublic vs. Commissioner of Customs Services ex-parte Africa K-Link International Limited Nairobi HC Misc. JR No. 157 of 2012 [2012] eKLR

[22] Act No. 4 of 2015

[23] Supra Note 2

[24] Ibid

[25] Act No 4 of 2015

[26] Supra

[27] Ibid

[28] Administrative Law, by H.W.R. Wade, C. F. Forsyth, Oxford University Press, 2000

[29]Aharon Barak, Proportionality: Constitutional Rights and Their Limitations (Cambridge University Press, 2012) 3.

[30]G Huscroft, B Miller and G Webber (eds), Proportionality and the Rule of Law: Rights, Justification, Reasoning (Cambridge University Press, 2014). Cf Aharon Barak:

[31] Kai Moller, ‘Proportionality: Challenging the Critics’ (2012) 10 International Journal of Constitutional Law 709, 709.

[32] R v Oakes [1986] 1 SCR 103 [69]–[70].

[33] Ibid