[2022] KEHC 2456 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA

AT NAIROBI

CONSTITUTIONAL AND HUMAN RIGHTS DIVISION

(Coram: A.C. Mrima, J.)

CONSTITUTIONAL PETITION NO. 61 OF 2017

-BETWEEN-

LAW SOCIETY OF KENYA.......................................................PETITIONER

-VERSUS-

1. ATTORNEY GENERAL

2. CABINET SECRETARY FOR FINANCE

3. PRINCIPAL SECRETARY NATIONAL TREASURY... RESPONDENTS

JUDGMENT

Introduction:

1. The Petitioner herein, The Law Society of Kenya,(hereinafter referred to as ‘The LSK’or ‘the Society’) is a statutory body established under The Law Society of Kenya Act No. 21 of 2014 (hereinafter referred to as ‘The LSK Act’).

2. Section 4 of the LSK Act sets its core functions and objects to include, assisting the Government and the Courts in matters relating to legislation, the administration of justice and the practice of law in Kenya, upholding the Constitution, advancing the rule of law and ensuring that all persons who practise law in Kenya or provide legal services in Kenya meet the standards of learning, professional competence and professional conduct that are appropriate for the legal services they provide.

3. The Petitioner posited that it is a non-profit making establishment that sources its revenue from membership fees, practising certificates fees, workshop fees and training courses. It claimed that it holds Fixed Deposit Accounts in which excess members’ funds are deposited. It is its case that the said accounts accrue interest which is used to finance the Society’s activities and at no point has the interests been distributed to its members.

4. On its foregoing nature, functions and operations, the Petitioner posited that the interest earned from the funds in its Fixed Deposit Accounts ought to be exempt from corporation tax.

5. The Respondents are of the contrary position.

The Petition:

6. In its Petition dated 23rd February, 2017 supported by the Affidavit sworn by the then Society’s Chief Executive Officer one Mercy Wambua on even date, the Petitioner sought to challenge the decision of The Cabinet Secretary for Finance and The Principal Secretary, National Treasury, (the 2nd and 3rd Respondents herein respectively) declining its request to be exempted from being charged the corporation tax (hereinafter referred to as ‘the impugned tax’) in respect of interest earned it its Fixed Deposit Accounts.

7. On the background of the dispute, the Petitioner posited that, by a letter dated 31st March, 2015 the Society lodged an application before the Principal Secretary, National Treasury seeking exemption from the impugned tax.

8. The Petitioner averred that its application was informed by Section 13(2) of the Income Tax Act, which provision donates power to the Cabinet Secretary to exempt certain income or class of income from tax.

9. The Petitioner claimed that by a letter dated 27th July, 2015 it was notified by the 3rd Respondent that its tax exemption application was declined because the supporting grounds were insufficient.

10. Disgruntled, the Petitioner instituted this suit. It was its case that despite complying with all the necessary procedures and requirements in its application, the 2nd and 3rd Respondents failed to give sufficient reasons why its application was denied. This, the Petitioner asserted, was in violation of its right to fair administrative action under Article 47(1) and (2) of the Constitution and Section 4(2) and (3) of Fair Administrative Actions Act (hereinafter referred to as ‘the FAA Act’).

11. The Petitioner posited that the Respondents failed to address themselves to the merits of the issues raised in its application and to the extent that its decision was rendered without following any objective, transparent and open process, it violated Article 10 of the Constitution that guarantees good governance, equity and transparency as national values and principles that bind all State organs, State officers, public and all other persons when they apply the Constitution or any other law.

12. It was the Petitioner’s case that it was subjected to differential treatment by the 2nd and 3rd Respondents in comparison to similar professional bodies that are listed as Income Tax Exempt bodies including Kenya Accountants and Secretaries National Examination Board (KASNEB), the Kenya Medical Association (KMA), The Institute of Certified Public Accountants of Kenya (ICPSK)in violation of Article 27 of the Constitution.

13. It was urged that the 2nd and 3rd Respondents have an obligation under Article 3 to uphold and respect the Constitution and to act in accordance to the standards set out in the FAA Act.

14. On the foregoing factual matrix, the Petitioner prayed for the following reliefs: -

a. A declaration that the decision of the 3rd Respondent denying The Petitioner corporate tax exemption status is in violation of Article 3,10, 27 and 47 of the Constitution of Kenya 2010 and hence the decision is unconstitutional, null and void.

b. An order compelling the 2nd and 3rd Respondent’s to grant the Petitioner Corporation Tax Exemption status pursuant to its request.

c. In the alternative, an order for judicial review of the 3rd Respondent’s decision declining to grant the Petitioner Corporation Tax Exemption status.

d. Such other orders as this Honourable Court shall deem fit and just to grant.

e. Cost of this Petition.

15. The Petitioner filed written submissions dated 11th October, 2018. It reiterated its case as in the Petition. To demonstrate the incidence of discrimination, it submitted that the Respondents’ statement to the effect that “a request for review is considered on its own merit and not on precedence” was discriminatory.

16. The Petitioner relied in Peter K. Waweru -vs- Republic (2006) eKLR where discrimination was defined as: -

…affording different treatment to different persons attributable wholly or mainly to their descriptions.

…discrimination also means unfair treatment or denial of normal privileges to persons… a failure to treat all persons equally where no reasonable distinction can be found between those favoured and those not favoured.

17. On the parameters of discrimination, the Petitioner relied on the decision in Mohammed Abduba Dida -vs- Debate Media Limited & Another (2018) eKLR which cited with approval the decision in Jacquess Charl Hoffman -vs- South African Airways, CCT 17 of 2000 where, in making an assessment on incidence of discrimination, the Court must make the following three inquiries:

This Court has previously dealt with challenges to statutory provisions and government conduct alleged to infringe the right to equality. Its approach to such matters involves three basic enquiries: first, whether the provision under attack makes a differentiation that bears a rational connection to a legitimate government purpose. If the differentiation bears no such rational connection, there is a violation of Section 9(1). If it bears such a rational connection, the second enquiry arises. That enquiry is whether the differentiation amounts to unfair discrimination. If the differentiation does not amount to unfair discrimination, the enquiry ends there and there is no violation of Section 9(3). If the discrimination is found to be unfair, this will trigger the third enquiry, namely, whether it can be justified under the limitations provision. Whether the third stage, however, arises will further be dependent on whether the measure complained of is contained in a law of general application.

18. On the foregoing, the Petitioner submitted that the Respondents’ action not only lacked rational connection to a legitimate Government purpose but also amounts to unfair discrimination.

19. Regarding violation of Article 47 of the Constitution on the right to fair administrative action, the Petitioner quoted the decision in Judicial Service Commission -vs- Mbalu Mutava & Another (2015 eKLR where it was observed that: -

The term procedurally fair used in Article 47(1) by proper construction imports and subsumes to a certain degree, the common law including rules of natural justice which means that common law is complementary to right to administrative action.

20. It was also submitted that the 3rd Respondent had abused its discretion and this Court had discretion to determine the circumstances under which they can interfere with exercise of discretion by a statutory body on the following basis: -

…this Court is empowered to interfere with the exercise of discretion in the following situations:

1. Where there is an abuse of discretion;

2. Where the decision-maker is in breach of the duty to act purposefully.

3. Where the decision maker is in breach of the duty to act fairly;

4. Where the decision maker has failed to exercise statutory discretion reasonably;

5. Where the decision maker acts in a manner to frustrate the purpose of the Act donating power;

6. Where the decision maker fetters the discretion given;

7. Where the decision maker fails to exercise discretion;

8. Whether decision maker is irrational and unreasonable.

21. The Petitioner reiterated that this Court allows the Petition as prayed.

Respondents’ case:

22. The Respondents opposed the Petition through Grounds of opposition dated 10th March 2017. From the outset, it was submitted that the Court would be usurping the constitutional and statutory mandate of the Respondents if it granted the Petitioner the exemption from the impugned tax.

23. The Respondents stated that the issuance of the orders sought would be an affront to the doctrine of separation of powers.

24. It was further their case that the Petitioner did not demonstrate any breach of Article 47 of the Constitution or the FAA Act in its decision and that the reasons for the decision were disclosed to the Petitioner.

25. The Respondents further claimed that the Petitioner had not demonstrated in what way its decision was discriminatory.

26. In the end, it was stated that the decision to decline exemption status was made pursuant to constitutional and statutory conferred power.

27. In their written submissions dated 9th October, 2018, the Respondents identified the issues for determination as follows: -

i. Whether the Petitioner’s right under Article 47 of the Constitution was violated.

ii. Whether the 2nd and 3rd Respondents discharged their duty by giving reasons for their decision refusing the application by the Petitioner.

iii. Whether the action by the 2nd and 3rd Respondents refusing the application amounted to discrimination against the Petitioner.

iv. Whether this Honourable Court can issue orders compelling the 2nd and 3rd Respondents to grant the Petitioner the impugned tax exemption status pursuant to the Petitioner’s request.

28. In rejecting the contention that it violated the Petitioner’s right to fair administrative action under Article 47 of the Constitution, the Respondents stated that they followed due process in making their decision and did so expeditiously, efficiently, lawfully and in a procedurally fair manner.

29. It was submitted that there was no evidence tendered to prove violation of the right to fair administrative action. It claimed that the right to give the Petitioner reasons as provided for under Article 47(2) did not apply to the circumstances of the Petition since the said Article contemplated a situation where a right or fundamental freedom is involved.

30. It was further submitted that the granting of impugned tax exemption was not a right or a fundamental freedom and as such the Petitioner cannot claim violation of Article 47(2) of the Constitution.

31. To buttress the foregoing, reliance was placed on Judicial Service Commission -vs- Mbalu Mutava & Another(2015) eKLR where it was observed that: -

… So construed, I venture to hold that the word “right” in Article 47(2) means a right under the Bill of Rights and that the framers of the Constitution intended that reasons for the decision should only be given in matters of right where a right under the Bill of rights has been or is likely to be adversely affected by the administrative decision and not otherwise.

32. In bringing out the import of Section 13(2) of Income Tax Act, the Respondents submitted that the wording of the section is permissive and as such is upon the Minister to grant exemption or not. It was echoed that the exercise of the discretion was not a right that the Petitioner could claim violation under Article 47(2) of the Constitution.

33. On the second issue as to whether the 2nd and 3rd Respondents discharged their duty, the Respondent referred to its letter of 27th July, 2015 where it informed the Petitioner of the reasons it declined its application.

34. They submitted, therefore, that the Petitioner knew why its application was rejected. The Respondents then submitted that if the Petitioner formed the opinion that he had not been given sufficient reasons it would, pursuant to Section 6 of the FAA Act requested for more information.

35. On the third issue regarding discrimination, the Respondents submitted that they treat each case of application for exemption on its merits and not based on whether another organization or association has been granted exemption. It was its case that the Petitioner had not demonstrated evidence of discrimination.

36. Reliance was placed on the decision in Trusted Society of Human Rights Alliance & 3 Others -vs- Judicial Service Commission & Another (2016) eKLR where it was observed that: -

… It is upon a person alleging differential treatment to place before the Court material which would go to show that this is the case.

37. On the issue as to whether this Court ought to grant the orders as prayed, the Respondents submitted that Courts should not direct administrative bodies on how to exercise their discretion. It stated that the use of the word “may”in Section 13(2) of Income Tax Act means that the action in question is not mandatory.

38. Support was found in the Court of Appeal decision in Kenya Wildlife Service -vs- Joseph Musyoki Kalonzo(2017) eKLR and in Pastificio Lucio Garofalo SPA -vs- Security and Fire Equipment Co. (2001) 1 EA 184 where in the latter it was stated that: -

….. To my mind the use of the word ‘may’ shows the Court has discretion in the matter.

39. In their further opposition, the Respondents submitted that the discretionary nature of the Income Tax Act allowed the Minister to deny or accept applications for exemption. The decision in Republic -vs- The Principal Secretary Ministry of Mining Ex-parte Airbus Helicopter Southern Africa (PTY) Ltd was relied upon where it was observed: -

…. It is trite law that where the body concerned has a discretion on what decision to make, the court cannot direct it to decide in a particular manner.

40. On the foregoing, the Respondents urged that the Petition be dismissed with costs.

Issues for determination:

41. The facts giving rise to this dispute are not in contest. Therefore, the resolution of the following issues will conclusively settle the dispute: -

a. Whether the Respondents’ decision declining tax exemption violated the Petitioner’s right to fair administrative action under Article 47 of the Constitution.

b. Whether the Respondent’s conduct fell short the constitutional threshold under Article 3 and 10 of the Constitution on national values and Principles.

c. Whether denial of tax exemption discriminated against the Petitioner in violation of Article 27 of the Constitution.

d. What remedies, if any, ought to issue?

42. I will deal with each of the issues separately.

Analysis and determination:

a. Whether the Respondents’ decision declining tax exemption violated the Petitioner’s right to a fair administrative action under Article 47 of the Constitution:

42. The resolution of this issue calls for an interrogation of the contents of both the Petitioner’s letter seeking exemption and the Respondent’s letter declining the exemption.

44. The Petitioner’s request for exemption was made on its behalf by PKF Taxation Services Ltd,a Tax Compliance and Tax Consulting Company, (hereinafter referred to as ‘the Taxation Company’).

45. The letter is dated 31st March. 2015 and is addressed to the Cabinet Secretary for Finance.

46. In the letter, the taxation company demonstrated how the Petitioner was eligible for the exemption of the impugned tax. It informed the Cabinet Secretary that the Petitioner was a members’ association for lawyers in Kenya. It enumerated all the Petitioner’s sources of income. It further stated that the Petitioner’s income on interest was utilized for members’ activities and that it is the only gross investment receipt as defined under Section 21 of the Income Tax Act.

47. Relying on Sections 13(2), and 21(1) and paragraph 10 of the First Schedule of the Income Tax Act, the taxation company further posited that the Petitioner was excluded from the impugned tax.

48. The taxation company also acknowledged that Section 21 of the Income Tax Act excluded gross investment income from taxation.

49. On the foregoing justification, the taxation company stated that the Petitioner was eligible for exemption on all receipts received from members as provided for under Section 21(1) of Income Tax Act as well as the gross investment income. It urged the Respondents to accordingly make a declaration of exemption.

50. In declining the request, the 3rd Respondent in its letter dated 27th July, 2015 stated in essence as follows: -

…After due consideration, your request has been declined. The grounds to support the waiver are not sufficient. Request for tax exemption is considered on its own merit and not on precedence.

51. It is the decision by the Respondents that prompted the institution of these proceedings. I will hereinafter refer the decision contained in the Respondents’ letter dated 27th July, 2015 to as ‘the impugned decision’.

52. The overarching question regarding the propriety of the impugned decision is, therefore, a look at Article 47 of the Constitution and provisions of FAA Act and the principles thereon as interpreted by superior Courts.

53. The Constitution provides as follows in Article 47 as follows: -

47. Fair administrative action

(1) Every person has the right to administrative action that is expeditious, efficient, lawful, reasonable and procedurally fair.

(2) If a right or fundamental freedom of a person has been or is likely to be adversely affected by administrative action, the person has the right to be given written reasons for the action.

(3) Parliament shall enact legislation to give effect to the rights in clause (1) and that legislation shall—

(a) provide for the review of administrative action by a court or, if appropriate, an independent and impartial tribunal; and

(b) promote efficient administration.

54. The legislation contemplated in Article 47(3) of the Constitution is the FAA Act.

55. Section 4 of the FAA Act adds flesh to Article 47 of the Constitution in the following manner: -

(1) Every person has the right to administrative action which is expeditious, efficient, lawful, reasonable and procedurally fair.

(2) Every person has the right to be given written reasons for any administrative action that is taken against him.

(3) Where an administrative action is likely to adversely affect the rights or fundamental freedoms of any person, the administrator shall give the person affected by the decision-

(a) prior and adequate notice of the nature and reasons for the proposed administrative action;

(b) an opportunity to be heard and to make representations in that regard;

(c) notice of a right to a review or internal appeal against an administrative decision, where applicable;

(d) a statement of reasons pursuant to section 6;

(e) notice of the right to legal representation, where applicable;

(f) notice of the right to cross-examine or where applicable; or

(g) information, materials and evidence to be relied upon in making the decision or taking the administrative action.

(4) The administrator shall accord the person against whom administrative action is taken an opportunity to-

(a) attend proceedings, in person or in the company of an expert of his choice;

(b) be heard;

(c) cross-examine persons who give adverse evidence against him; and

(d) request for an adjournment of the proceedings, where necessary to ensure a fair hearing.

(5) Nothing in this section, shall have the effect of limiting the right of any person to appear or be represented by a legal representative in judicial or quasi-judicial proceedings.

(6) Where the administrator is empowered by any written law to follow a procedure which conforms to the principles set out in Article 47 of the Constitution, the administrator may act in accordance with that different procedure.

56. In this discussion, it is imperative to look at the following definitions under Section 2 of the FAA Act.

‘administrative action’ includes –

(i) The powers, functions and duties exercised by authorities or quasi-judicial tribunals; or

(ii) Any act, omission or decision of any person, body or authority that affects the legal rights or interests of any person to whom such action relates;

‘administrator’ means ‘a person who takes an administrative action or who makes an administrative decision’.

‘decision’ means any administrative or quasi-judicial decision made, proposed to be made, or required to be made, as the case may be.

“failure” in relation to the taking of a decision, includes a refusal to take the decision.

57. Courts have also weighed in on the meaning and implication of Article 47 and section 2 and 4 of the FAA Act. In Civil Appeal 52 of 2014 Judicial Service Commission vs. Mbalu Mutava & Another (2015) eKLR the Court of Appeal addressed itself on the above. The Court 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.

58. The South African Constitutional Court in President of the Republic of South Africa and Others vs. South African Rugby Football Union and OthersCCT16/98) 2000 (1) SA 1 ring-fenced the importance of fair administrative action as a constitutional right. The Court while referring to Section 33 of the South African Constitution which is similar to Article 47 of the Kenyan Constitution stated as follows: -

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…

59. The right was further discussed inRepublic v Fazul Mahamed & 3 Others ex-parte Okiya Omtatah Okoiti [2018] eKLR. The Court had the following to say:

25. In John Wachiuri T/A Githakwa Graceland & Wandumbi Bar & 50 Others vs The County Government of Nyeri & Ano[39] the Court emphasized that there are three categories of public law wrongs which are commonly used in cases of this nature.

These are: -

a. Illegality- Decision makers must understand the law that regulates them. If they fail to follow the law properly, their decision, action or failure to act will be "illegal". Thus, an action or decision may be illegal on the basis that the public body has no power to take that action or decision, or has acted beyond it powers.

b. Fairness - Fairness demands that a public body should never act so unfairly that it amounts to abuse of power. This means that if there are express procedures laid down by legislation that it must follow in order to reach a decision, it must follow them and it must not be in breach of the rules of natural justice. The body must act impartially, there must be fair hearing before a decision is reached.

c. Irrationality and proportionality - The Courts must intervene to quash a decision if they consider it to be demonstrably unreasonable as to constitute 'irrationality" or 'perversity' on the part of the decision maker. The benchmark decision on this principle of judicial review was made as long ago as 1948 in the celebrated decision of Lord Green in Associated Provincial Picture Houses Ltd vs Wednesbury Corporation: -

If decision on a competent matter is so unreasonable that no reasonable authority could ever have come to it, then the Courts can interfere...but to prove a case of that kind would require something overwhelming...

60. There is no doubt the decision not to exempt the Petitioner from the impugned tax is an administrative action. I say so because the decision adversely affected the rights of the Petitioner. One of the Petitioner’s rights allegedly adversely affected is the right to equality and freedom from discrimination under Article 27 of the Constitution. As such, the decision had to pass the constitutional and statutory tests of lawfulness, reasonableness and procedural fairness.

61. On the lawfulness of the impugned decision, it is the position that the Income Tax Act grants the power to the Cabinet Secretary to exempt a person or entity from a certain tax or class of taxes. To that extent, there was a legal basis upon which the impugned decision was taken. The impugned decision was, therefore, not illegal.

62. As to whether there was procedural fairness in reaching the impugned decision, there is evidence that the Petitioner applied for exemption of the impugned tax and the Respondents replied to the request. The Petitioner did not contend that the Respondents failed to act within a certain defined procedure in dealing with the application. This Court cannot, therefore, fault the Respondents on the limb of procedure.

63. There is the issue of reasonability in the decision making. In order to prove that a decision was unreasonable, a party must demonstrate that the impugned decision was so unreasonable that no reasonable authority could ever have come to it. In other words, the party ought to prove that the decision was arbitrary.

64. Speaking to the concept of arbitrariness, the Court of Appeal in MalindiCivil Appeal 56 of 2014 Mtana Lewa v Kahindi Ngala Mwagandi [2015] eKLR made reference to theBlack’s Law Dictionary 8th Editionthat defined arbitrariness in the following manner: -

in it connotes a decision or an action that is based on individual discretion, informed by prejudice or preference, rather than reason or facts.

65. The High Court in Civil Suit No. 3 of 2006 Kasimu Sharifu Mohamed vs. Timbi Limited [2011] eKLRreferred to Oxford Advanced Learner’s Dictionary A. S. Horby Sixth Edition Edited by Sally Wehmeiner which defines the term ‘arbitrary in the following way: -

the term arbitrary in the ordinary English language means an action or decision not seeming to be based on a reason, system and sometimes, seeming unfair.

66. The Supreme Court of China in Sharma Transport vs. Government of A. Palso (2002) 2 SCC 188 had the occasion to interrogate the meaning and import of the term ‘arbitrarily’. The Court observed as follows: -

The expression ‘arbitrarily’ means: in an unreasonable manner, as fixed or done capriciously or at pleasure, without adequate determining principle, not founded in the nature of things, non-rational, not done or acting according to reason or judgment, depending on the will alone.

67. The term ‘arbitrariness’ had earlier on been defined by the Court (Supreme Court of China) in Shrilekha Vidyarthi vs. State of U.P (1991) 1 SCC 212when it comprehensively observed as follows;

The meaning and true import of arbitrariness is more easily visualized than precisely stated or defined. The question, whether an impugned act is arbitrary or not, is ultimately to be answered on the facts and in the circumstances of a given case. An obvious test to apply is to see whether there is any discernible principle emerging from the impugned act and if so, does it satisfy the test of reasonableness. Where a mode is prescribed for doing an act and there is no impediment in following that procedure, performance of the act otherwise and in a manner which does not disclose any discernible principle which is reasonable, may itself attract the vice of arbitrariness. Every State action must be informed by reason and it follows that an act uninformed by reason, is arbitrary. Rule of law contemplates governance by laws and not by humour, whims or caprices of the men to whom the governance is entrusted for the time being. It is trite that be you ever so high, the laws are above you'. This is what men in power must remember, always.

68. The contention in this matter rests on the insufficiency of the reasons for refusal to grant the exemption as contained in the Respondents’ letter dated 27th July, 2015. According to the Petitioner, no adequate reasons or at all were given for the refusal to grant the exemption.

69. I have carefully considered the Petitioner’s application for exemption and the Respondent’s letter dated 27th July, 2015. The application was made on behalf of the Petitioner by a professional Tax Compliance and Tax Consulting firm, PKF Taxation Services Ltd. The application was quite elaborate. It contained the Petitioner’s profile, its sources of income, the interest income, the relevant legal provisions and a detailed justification of the exemption.

70. The application was responded to by the Respondents’ one-page letter. The letter had only one relevant paragraph to the application. As captured elsewhere above, the relevant paragraph read as follows:

…After due consideration, your request has been declined. The grounds to support the waiver are not sufficient. Request for tax exemption is considered on its own merit and not on precedence.

71. There were nine distinct reasons which were advanced by the Petitioner in support of the application. All those reasons were responded to in the above single paragraph and in the words “The grounds to support the waiver are not sufficient”.

72. On a balanced scale, it is this Court’s position that the Respondents’ response was too simplistic and lacking in content as to give any reasonable person the understanding of the reasons behind the refusal of the application. There was need for the Respondents to come out clearly and respond to each of the grounds made in support of the application. The Petitioner was, therefore, entitled to a well-reasoned response as to why its application was rejected.

73. The response left the Petitioner at cross-roads. The Petitioner was not able to point out the inadequacy of the grounds it tendered in support of the application. Further, the Respondents did not request for more information so as to close the gap of inadequacy.

74. Putting it differently, there was extreme insufficiency of explanation from the Respondents given the manner the application was made in detail. Infact, the response was tantamount to refusing to give any reasons or at all.

75. In order to put the matter in a clear perspective, I will draw a parallel on how matters are handled in Court. The law bestows upon a Court the duty to give reasons in every decision it makes. A Court cannot decide a matter by simply stating like ‘the grounds advanced in support of the suit are not sufficient’.Such a decision would not stand the test of reasonability or rationality. In fact, such a decision breeds impunity and, in real sense, it is not a decision or at all.

76. Returning to the matter at hand, this Court finds and hold that the reasons given by the Respondents in answer to the application for exemption did not meet the tests of reasonability, fairness, irrationality and proportionality as discussed in John Wachiuri T/A Githakwa Graceland & Wandumbi Bar & 50 Others vs The County Government of Nyeri & Anothercase (supra) for the reasons were insufficient.

77. In sum, this Court returns the verdict that the Respondents’ response to the Petitioner’s application for exemption was in contravention of Article 47 (1) and (2) of the Constitution as well as Section 4(1) and (2) of the Fair Administrative Actions Act for failing to give sufficient reasons in support of the decision to decline the Petitioner’s application for exemption of the impugned tax.

b. Whether the Respondents’ conduct fell short of the constitutional threshold under Articles 3 and 10 of the Constitution on national values and principlesof governance:

78. This issue is closely linked to the foregoing issue.

79. Articles 3 and 10 of the Constitution provides as follows respectively: -

3. Defence of this Constitution

(1) Every person has an obligation to respect, uphold and defend this Constitution.

(2) Any attempt to establish a government otherwise than in compliance with this Constitution is unlawful.

10. National values and principles of governance

(1) The national values and principles of governance in this Article bind all State organs, State officers, public officers and all persons whenever any of them—

(a) applies or interprets this Constitution;

(b) enacts, applies or interprets any law; or

(c) makes or implements public policy decisions.

(2) The national values and principles of governance include—

(a) patriotism, national unity, sharing and devolution of power, the rule of law, democracy and participation of the people;

(b) human dignity, equity, social justice, inclusiveness, equality, human rights, non-discrimination and protection of the marginalised;

(c) good governance, integrity, transparency and accountability; and

(d) sustainable development.

80. The High Court in Mombasa High Court Constitutional Petition No. 159 of 2018 consolidated with Constitutional Petition No. 201 of 2019 William Odhiambo Ramogi & 3 Others vs. The Attorney General & Others (2020) eKLR reiterated the supremacy of the Constitution as follows: -

115. The starting point is the Constitution. Article 2 inter alia declares the Constitution as the supreme law of the land which binds all persons and all State organs at both levels of government. It also provides that the validity or legality of the Constitution is not subject to any kind of challenge and that any law that is inconsistent with it is void to the extent of that inconsistency. Further, any act or omission in contravention of the Constitution is invalid. Article 3 places an obligation upon every person to respect, uphold and defend the Constitution. (emphasis added).

81. Expounding on Article 10 of the Constitution, the Court of Appeal in Independent Electoral and Boundaries Commission (IEBC) v National Super Alliance (NASA) Kenya & 6 Others, Civil Appeal No. 224 of 2017; [2017] eKLRheld that:

In our view, analysis of the jurisprudence from the Supreme Court leads us to the clear conclusion that Article 10 (2) of the Constitution is justiciable and enforceable immediately. For avoidance of doubt, we find and hold that the values espoused in Article 10 (2) are neither aspirational nor progressive; they are immediate, enforceable and justiciable. The values are not directive principles. Kenyans did not promulgate the 2010 Constitution in order to have devolution, good governance, democracy, rule of law and participation of the people to be realized in a progressive manner in some time in the future; it could never have been the intention of Kenyans to have good governance, transparency and accountability to be realized and enforced gradually. Likewise, the values of human dignity, equity, social justice, inclusiveness and non-discrimination cannot be aspirational and incremental, but are justiciable and immediately enforceable. Our view on this matter is reinforced by Article 259(1) (a) which enjoins all persons to interpret the Constitution in a manner that promotes its values and principles.

Consequently, in this appeal, we make a firm determination that Article 10(2) of the Constitution is justiciable and enforceable and violation of the Article can found a cause of action either on its own or in conjunction with other Constitutional Articles or Statutes as appropriate.

82. The Constitution, therefore, bind all State organs, State officers, public officers and all persons whenever any of them applies or interprets the Constitution, enacts, applies or interprets any law, or makes or implements public policy decisions. Such persons are called upon to be bound by the national values and principles of governance in their undertakings. The Respondents herein were not an exception.

83. By arbitrarily deciding to summarily reject the Petitioner’s application without given any adequate reasons for the rejection, the Respondents ran contra the principles of good governance, integrity, transparency and accountability.

84. As public officers, the Respondents remained were under the sole constitutional and legal duty to apply the relevant values and principles in discharging public functions. In this case, the 2nd and 3rd Respondents failed to do so in the manner they handled the Petitioner’s application for tax exemption.

85. As a result, the Respondents, and in particular the Principal Secretary in the National Treasury, failed to uphold and defend the Constitution.

86. The conduct of the Principal Secretary in the National Treasury in responding to the Petitioner’s application did not, therefore, meet the threshold in Articles 3 and 10 of the Constitution.

c. Whether denial of tax exemption discriminated against the Petitioner in violation of Article 27 of the Constitution.

87. The Court has considered this issue in light of the finding that no sufficient grounds were given by the Respondents to justify the refusal to grant the exemption of the impugned tax.

88. One of the basis of the Petitioner’s application was that the Respondents had previously granted exemption on all incomes of professional organizations like KASNEB, ICPAK, ICPSK among others.

89. This Court takes the position that it is premature for this issue to be considered. The Petitioner ought to wait for the reasons to be availed after which it will determine whether Article 27 of the Constitution will by then be infringed.

90. As such, this Court declines to consider the issue.

d. What remedies, if any, ought to issue?

91. The Petition has to a great extent succeeded. Whereas the Petitioner has failed to prove the infringement of its right under Article 27 of the Constitution, it has nevertheless proved that the Respondents’ impugned decision was not constitutionally firm in terms of Articles 3, 10 and 47 of the Constitution.

92. It is, therefore, the duty of this Court to fashion what is referred to as appropriate reliefs.

93. Speaking of appropriate reliefs, the Court of Appeal in Total Kenya Limited vs Kenya Revenue Authority (2013) eKLRheld that even in instances where there are express provisions on specific reliefs a Court is not precluded from making any other orders under its inherent jurisdiction for ends of justice to be met to the parties. The High Court in Simeon Kioko Kitheka & 18 Others vs. County Government of Machakos & 2 Others (2018) eKLR held that Article 23 of the Constitution does not expressly bar the Court from granting conservatory orders where a challenge is taken on the constitutionality of legislation.

94. In Republic Ex Parte Chudasama vs. The Chief Magistrate’s Court, Nairobi and AnotherNairobi HCCC No. 473 of 2006, [2008] 2 EA 311, Rawal, J (as she then was) stated that:

While protecting fundamental rights, the Court has power to fashion new remedies as there is no limitation on what the Court can do. Any limitation of its powers can only derive from the Constitution itself. Not only can the court enlarge old remedies, it can invent new ones as well if that is what it takes or is necessary in an appropriate case to secure and vindicate the rights breached. Anything less would mean that the Court itself, instead of being the protector, defender, and guarantor of the constitutional rights would be guilty of the most serious betrayal. See Gaily vs. Attorney-General [2001] 2 RC 671; Ramanoop vs. Attorney General [2004] Law Reports of Commonwealth (From High Court of Trinidad and Tobago); Wanjuguna vs. Republic [2004] KLR 520…The Court is always faced with variety of facts and circumstances and to place it into a straight jacket of a procedure, especially in the field of very important, sensitive and special jurisdiction touching on liberties and rights of subjects shall be a blot on independence and many facetted jurisdiction and discretionary powers of the High Court. See The Judicial Review Handbook(3rd Edn) by Michael Fordham at 361.

95. The Constitutional Court of South Africa in Fose vs. Minister of Safety & Security [1977] ZACC 6emphasized the foregoing as follows: -

Appropriate relief will in essence be relief that is required to protect and enforce the Constitution. Depending on the circumstances of each particular case the relief may be a declaration of rights, an interdict, a mandamus or such other relief as may be required to ensure that the rights enshrined in the Constitution are protected and enforced. If it is necessary to do so, the courts may even have to fashion new remedies to secure the protection and enforcement of these all important rights.

96. One of the reliefs sought is an order compelling the 2nd and 3rd Respondents to grant the exemption as per the Petitioner’s request.

97. A like scenario was considered by the Court of Appeal at Kisumu in Civil Appeal Nos. 89 and 90 of 2011West Kenya Sugar Company Limited vs. Kenya Sugar Board & Butali Sugar Mills Limited (2014) eKLR where the High Court at Kisumu had issued a mandamus directing the then Kenya Sugar Board to issue a manufacturing license to Butali Sugar Mills Limited on being satisfied that Butali Sugar Mills Limited had met all the requisite requirements for issuance of a manufacturing license but the Kenya Sugar Board, then the regulator in the sugar sector, was unreasonably not discharging its duty.

98. The Court of Appeal in allowing an appeal by West Kenya Sugar Company Limited against the order of the High Court held that the High Court did not have the jurisdiction to order the Kenya Sugar Board to issue a manufacturing license. Instead, the Court of Appeal directed the Kenya Sugar Board to expeditiously hear and determine the application by Butali Sugar Mills Limited for the manufacturing license in accordance to law and with notice to all necessary parties including West Kenya Sugar Company Limited.

99. This Court, therefore, has no jurisdiction to compel the Respondents to grant the application made by the Petitioner.

Disposition

100. In the end, the Petition dated 23rd February, 2017 is determined in the following manner: -

a. A declaration hereby issues that the Respondents’ letter dated 27th July, 2015 in response to the Petitioner’s application for exemption of corporation tax dated 31st March, 2015 was in contravention of Article 47(1) and (2) of the Constitution as well as Section 4(1) and (2) of the Fair Administrative Actions Act for failing to give sufficient reasons for declining to grant the exemption in issue.

b. A declaration hereby issues that the Respondents’ conduct in failing to give sufficient reasons in rejecting the Petitioner’s application for exemption of corporation tax dated 31st March, 2015 was in contravention of Articles 3 and 10 of the Constitution for failing to uphold the principles of good governance, integrity, transparency and accountability and to uphold and defend the Constitution.

c. An Order ofCertiorari,be and is hereby issued, calling, removing, delivering up to this Honourable Court and quashing or revoking theRespondents’ letter dated 27th July, 2015.

d. The Respondents shall forthwith re-consider the Petitioner’s application for exemption dated 31st March, 2015 and in the event it declines to allow the application, the Respondents shall give reasons thereof.

e.Pending the Respondents’ response in (d) above, the Respondents whether by themselves and/or through their agents, servants, representatives or any other Government entity shall not demand for the impugned corporation tax from the Petitioner.

f. The Respondents shall bear the costs of the Petition.

Orders accordingly.

DELIVERED, DATED AND SIGNED AT NAIROBI THIS 10TH DAY OF FEBRUARY, 2022

A. C. MRIMA

JUDGE

Judgmentvirtually delivered in the presence of:

Mr. Waweru,Counsel for the Petitioner.

Miss. Mwangi,Learned State Counsel instructed by the Honourable Attorney General for the Respondents.

Elizabeth Wanjohi –Court Assistant