[2021] KEHC 6047 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA

AT NAIROBI

JUDICIAL REVIEW APPLICATION NO. E056 OF 2020

PROTO ENERGY LIMITED..................................................................APPLICANT

VERSUS

ENERGY AND PETROLEUM REGULATORY AUTHORITY......RESPONDENT

AND

HASHI ENERGY LIMITED.................................................INTERESTED PARTY

RULING

1. Proto Energy Limited, the Applicant herein, is a limited liability Company incorporated in Kenya under the provisions of the Companies Act, and is engaged in the business of supply of liquefied petroleum gas (LPG) and in cylinders and other related businesses. The Energy and Petroleum Regulatory Authority, (the Respondent) is a statutory body established under Section 9 of the Energy Act, and exercising licensing authority over the petroleum business under section 74 of the Petroleum Act, Act No.2 of 2019. Hashi Energy Limited, the Interested Party, is a Limited Liability Company incorporated in Kenya under the provisions of the Companies Act, that is also engaged in the business of supply of liquefied petroleum gas (LPG) and cylinders, and is a licensee of the Respondent.

2. The application that is the subject of this ruling is the Applicant’s Chamber Summons dated 19th August 2020, seeking leave to commence judicial review orders against the Respondent. The Applicant is seeking the following orders in its application:

i) THAT this Application is hereby certified as urgent and service thereof is dispensed with in the first instance.

ii) THAT leave be granted to the Applicants to apply for an Order of Certiorari to remove into the High Court for purposes of it being quashed, the decisions made by the Respondent to license and or renew the licenses for the storage filling & wholesale of liquefied petroleum gas in cylinders of Hashi Energy Limited being licenses numbers EPRA/LPG/8498, EPRA/LPG/8499, EPRA/LPG/8492, EPRA/LPG/8491, EPRA/LPG/8495, EPRA/LPG/8470, EPRA/LPG/8418, EPRA/LPG/8264, EPRA/LPG/8267, EPRA/LPG/8268, EPRA/LPG/8269, EPRA/LPG/8411 & EPRA/LPG/8263.

iii) THAT leave be granted to the Applicants to apply for an Order of Mandamus compelling the Respondent to rescind its decision to license and or renew the licenses for storage, filling & wholesale of liquefied petroleum gas in cylinders of Hashi Energy Limited being licenses numbers EPRA/LPG/8498, EPRA/LPG/8499,EPRA/LPG/8492,EPRA/LPG/8491,EPRA/LPG/8495,EPRA/LPG/8470,EPRA/LPG/8418,EPRA/LPG/8264,EPRA/LPG/8267,EPRA/LPG/8268, EPRA/LPG/8269, EPRA/LPG/8411 & EPRA/LPG/8263.

iv) THAT leave be granted to the Applicants to apply for an Order of Prohibition against the Respondent from licensing and or renewing the licenses for the storage filling &wholesale of liquefied petroleum gas in cylinders of Hashi Energy Limited being licenses numbers EPRA/LPG/8498, EPRA/LPG/8499, EPRA/LPG/8492,EPRA/LPG/8491,EPRA/LPG/8495,EPRA/LPG/8470,EPRA/LPG/8418,EPRA/LPG/8264,EPRA/LPG/8267,EPRA/LPG/8268,EPRA/LPG/8269,EPRA/LPG/8411& EPRA/LPG/8263.

v) THAT grant of leave hereby operates as stay of the decisions of the Respondent to license and or renew the licenses for the storage, filling & wholesale of liquefied petroleum gas in cylinders of Hashi Energy Limited being licenses numbers EPRA/LPG/8498, EPRA/LPG/8499, EPRA/LPG/8492, EPRA/LPG/8491, EPRA/LPG/8495, EPRA/LPG/8470, EPRA/LPG/8418, EPRA/LPG/8264, EPRA/LPG/8267, EPRA/LPG/8268, EPRA/LPG/8269, EPRA/LPG/8411&EPRA/LPG/8263.

vi) THAT all necessary and consequential orders or directions be given.

vii) THAT the costs of this application be in the cause.

3. The said application is supported by a statement dated 19th August 2020, and a verifying affidavit sworn on the same date by Nicholas Kokito, the Applicant’s Legal Services Manager. This Court gave directions that the said application be canvassed inter partes, and that parties file responses and submissions thereon. The Applicant thereupon filed submissions dated 13th November 2020, the Respondent has filed Grounds of Opposition and submissions both dated 9th October 2020, while the Interested Party filed a replying affidavit dated 6th October 2020 sworn by Peter Onasis Ochieng Loch, its Managing Director, and submissions dated 27th January 2021.

4. A summary of the parties’ respective cases on the leave and stay orders sought is set out in the following sections.

The Applicant’s Case

5. The Applicant averred that as part of the conditions of its licensing by the Respondent, it became a member of the LPG Cylinder Exchange Pool and the LPG Cylinder Exchange Pool Agreement, and as a result, as at 4th August 2019, it was owed Kshs. 4,191,962. 10 by the Interested Party after the delivery of cylinders under the LPG Cylinder Exchange Pool. Further, that the Applicant was also owed Kshs. 2,901,845,900 by the Interested Party in unpaid storage charges, and extended credit facilities by transfer of its cylinder deposit to the Interested Party to the amount of Kshs. 91,031,671. 72.

6. According to the Applicant, the fact that the Interested Party is indebted to it is not in dispute and the Respondent is aware of this fact. Further, that under Rule 10 of the Seventh Schedule of the Petroleum (Liquefied Petroleum Gas) Regulations,2019, the Respondent is prohibited and injuncted from licensing or renewing LPG licenses of parties with outstanding debts from the operations of the LPG Cylinder Exchange Pool. In addition, that the Applicant being a creditor to the Interested Party has not written any letter confirming clearance of the debt, yet the Respondent has renewed the licenses for the storage filling & wholesale of liquefied petroleum gas in cylinders of Hashi Energy Limited being licenses numbers EPRA/LPG/8498, EPRA/LPG/8499, EPRA/LPG/8492, EPRA/LPG/8491, EPRA/LPG/8495, EPRA/LPG/8470, EPRA/LPG/8418, EPRA/LPG/8264, EPRA/LPG/8267, EPRA/LPG/8268, EPRA/LPG/8269, EPRA/LPG/8411 & EPRA/LPG/8263.

7. Therefore, that the said decision is illegal, irrational, unreasonable and made with procedural impropriety, arbitrarily, and in abuse of powers vested in it. The Applicant also contended that appeals from licensing decisions of the Respondents lie with the Energy and Petroleum Tribunal, which has not yet been constituted. In conclusion, it was deponed that unless the orders sought are granted, the Respondent will pursue illegal and unlawful action and continue to act arbitrarily and continue to interfere with the Applicant’s legitimate expectation.

The Respondent’s Case

8. The Respondent opposed the Applicant’s application on grounds that the application was immature as the Applicant has not exhausted all available remedies before invoking court intervention. The Respondent also argued that the suit was bad in law, as under the doctrine of exhaustion where there is a clear procedure for redress of any particular grievance prescribed by an Act of Parliament, the procedure should be strictly followed. It was also contended that the application offends Section 9 of the Fair Administrative Action Act No.4 of 2015, Further, that the Applicant has not satisfied the exceptional circumstance requirement under section 9(4) of the Fair Administrative Action Act. Lastly, the Respondent argued that in a judicial review application, the Court is not concerned with reviewing the merits of the decision in respect of which the application for judicial review is made, but the decision making process itself.

The Interested Party’s Case

9. The Interested Party’s case is that the Applicant has deliberately suppressed material information and is in breach of its uberrima fides obligation to this Court, in that there is in existence a High Court suit between the same parties and on the same subject matter vide Milimani Civil Application No. E180 of 2020, where the Applicant sued and sought similar orders. It is further averred that, in the said proceedings the High Court determined that the Applicant’s claim was premature as the parties had submitted to a dispute resolution mechanism which the Applicant had not exhausted. It was his deposition that the Applicant’s has failed to comply with the Orders made in the case referred to and that the current proceedings are perforce an abuse of process. Further, that the Applicant’s failure to disclose the existence of the above court proceedings invalidates the Applicant’s current proceedings.

10. It was deponed that the Applicant did not file the current proceedings in good faith and that it is clear that the Applicant intended to file the same application before another court with the hope that favourable orders would surreptitiously be issued. The Interested Party detailed the events that have taken place in the instant proceedings, indicating that there was deliberate late service of process and the Courts directions

11. The Interested Party also explained the procedures of operation of the exchange pool agreement and deponed that in June 2018, the Applicant declared that it had cylinders belonging to the Interested Party at its Kabati and Mombasa warehouses and in accordance with the prevailing exchange pool regulations and protocols, the Interested Party dispatched three collection trucks to collect the cylinders from the Applicant’s declared storage depot at Kabati. Of the three trucks, only one truck cylinders was released by the Applicant to the Interested Party. then proceeded to illegally and unlawfully detain the Interested Party’s other trucks. Applicant’s response to the exchanges between the Parties was that the Interested Party’s remaining trucks would only be released upon the issuance of bank guarantees, a condition that was neither envisaged nor acknowledged under the exchange pool scheme.

12. It his disposition that in disregard of the dispute resolution mechanisms provided for under the exchange pool arrangement, the Applicant filed Milimani Civil Application No. E180 of 2020, which was dismissed by the High Court compelling adherence to, invocation and of, the dispute resolution mechanisms under the exchange pool arrangement. Further, that in compliance with the court order, the Applicant on 4th September 2019 raised a formal complaint to the pool secretariat, to which the Interested Party filed its report and response to the exchange pool secretariat sub-committee, and has never been summoned before the pools sub-committee.

13. While reiterating that the Applicant was not acting in good faith, the Interested Party averred that as per Legal Notice 100, there was an express prohibition against any cylinder exchange after 25th June 2019, and that the last day for reconciliation and collection of cylinders was gazetted as 31st December 2019. Further, that after the expiry of the notice, the Respondent wrote to the Interested Party on 7th February, 2020 giving it a seven (7) days’ notice to collect all their cylinder’s failure to which the Respondent would permit the Applicant to dispose of the cylinders. Subsequently, that the Applicant wrote to the Respondent seeking to dispose/ rebrand the cylinders in their possession, a request that was acceded to by Interested Party. Consequently, that the Respondent granted the Applicant authority to dispose/rebrand the cylinders as per the legal notice. It was thus the Interested Party’s deposition that all rights of the parties were extinguished by these requests, notification, permissions with respect to all cylinders, and which facilitated the Interested Party to obtain clearance from the Ministry of Petroleum.

14. In conclusion, the Interested Party therefore stated as follows;

a. That there is no jurisdiction in judicial review for collection of disputed debts or enforcement of disputed commercial claims;

b. That judicial review does not lie where facts and subject matter are in disputed;

c. That judicial review deals with the process and not the merits of decisions made by public bodies;

d. That failure to disclose the existence of directly related proceedings in other courts is fatal to this application.

e. That the concealment of material information known to the Applicant is fatal to application.

f. That the legal notices completely extinguish the Applicant’s claims and the application should be dismissed for violation of laws

g. That reasonable provisions were enacted to enable the parties to deal and conclude any claims arising out of the Exchange Pool Program and that the Applicant was the author of its own misfortune when it failed to fully comply.

The Submissions

15. The parties in their submissions urged various aspects of the law on leave to commence judicial review proceedings. The Applicant’s counsel cited the decisions in Republic vs County Council of Kwale ex parte Kondo & 57 Others (1998)1 KLR (E&L) and Republic vs Inland Revenue Commission Ex parte National Federation of self-employed and Small Business Ltd (1982) AC 617 on the purpose of obtaining leave to apply for judicial review, and the case of Republic vs. Kenya Revenue Authority ex parte Kaycorp Real Advisory Limited (2010) on the requirements for leave to be granted. It was submitted that the act by the Respondent to renew the licenses of the Interested Party despite the clear evidence on the debt it owes the ex parte Applicant, is illegal, irrational and unfair and contrary to section 77 (2) of the Petroleum Act, No.2 of 2019 and paragraph 10(1) of the Seventh Schedule of the Energy (Liquefied Petroleum Gas) Regulations, 2019, Legal Notice No.100 of 2019. Further, that the Respondent in enforcing this requirement on other licenses whilst exempting the Interested Party from the same licensing conditions is in itself discriminatory.

16. On the issue of the applicable principles on whether leave granted to commence judicial review proceedings should operate as stay, the Counsel cited Order 53 Rule 1(4) of the Civil Procedure Rules, and various cases, including R vs Ashworth Special Hospital Authority (2003) 1 WLR 127, George Philip M Vekulo vs Law Society of Kenya & Another Kakamega [2005] eKLR and Taib A. Taib vs The Minister of Local Government & Others[2006] eKLR. The Applicant submitted that the harm being occasioned by the Respondent’s decision to renew the license of the Interested party is of a continuing nature in that for every day that goes by the Interested Party continues to trade with the cylinder exchange deposit that it ought to have transferred to the ex parte Applicant. Further, that the Interested Party has in its possession customer deposits for its cylinders which are now being stored at the ex parte Applicant's expense. The Interested Party has refused to collect its cylinders and also transfer the customers’ deposits.

17. The Respondent on its part submitted that the suit herein offends the doctrine of exhaustion of statutory available remedies, and that while the Applicant conceded that it did not approach the Energy and Petroleum Tribunal as it was yet to be constituted, there is also a Complaints Sub-committee in existence established under the LPG cylinder exchange pool agreement provided for under the Energy (Liquefied Petroleum Gas) Regulations 2009. Further, that the Applicant has not disclosed whether it lodged a complaint with the Committee. The Respondent in buttressing this argument cited the cases ofSpeaker of National Assembly vs Karume(1992) KLR 21and Geoffrey Muthinja Kabiru & 2 Others vs Samuel Munga Henry & 1756 Others (2015) eKLR , and the provisions of section 9 of the Fair Administrative Action Act. Lastly, it was submitted that there is no application by the Applicant to be exempted as provided by section 9(4) and thus the application should not stand.

18. The Interested Party’s submissions were that the doctrine of uberrimes fides is applies in strict terms to judicial review proceedings which are initiated as ex parte proceedings, and cited the holding to this effect in the case of R vs District Land Adjudication Officer of Igembe & Others ex parte M'Mwirichia Kirema M'Kuciana Meru Misc. App No. 6 of 2011. It was submitted that the proceedings herein were never instituted bona fides but were initially filed with the sole purpose and intent of obtaining ex parte leave and for the leave to act as a stay so that the ex parte Applicant could use such an order to intimidate and damage the Interested Party’s business.

19. The Interested Party’s counsel further submitted that the Applicant does not have a recognized claim which can give rise to a judicial review process, and relied on the holding in the case of R vs The Kenya Revenue Authority & Others ex parte Suzan General JLT T/A Suzan Duty Free, Nairobi Misc. Civil Appl. No. 287 of 2018 that a resolution of the issues raised by the Applicant would require this Court to handle conflicting evidential matters, and to delve into the merits of the case. Lastly, the Counsel submitted that assuming the Applicant had a cause of action, the same has been extinguished by express operation of law, as the legal regime came to an end with the gazettement of Legal Notice No.100 of 2019. Counsel therefore contended that the leave application seeks to achieve an unreasonable, illegal and irrational outcome to the prejudice of the Respondent and the Interested Party.

The Determination

20. I have considered the Chamber Summons application dated 19th August 2020 and the arguments thereon by the parties, and note that the applicable law for leave to commence judicial review proceedings, namely Order 53 Rule 1 of the Civil Procedure Rules. The main reason for the said leave as explained by Waki J. (as he then was), in Republic vs. County Council of Kwale & Another Ex Parte Kondo & 57 Others,Mombasa HCMCA No. 384 of 1996,is to ensure that an applicant is only allowed to proceed to substantive hearing if the Court is satisfied that there is a case fit for further consideration.

21. While in most cases it is self-evident that the matter should proceed to judicial review, there are a number of preliminary factors that a Court considers and addresses at the leave stage. These factors have been enumerated in Judicial Review: Principles and Procedure by Jonathan Auburn et al at paragraph 26. 05 as follows:

1. whether the enactment, action, decision, or failure to act that is being challenged is amenable to judicial review;

2. whether the claimant has capacity to bring a claim for judicial review;

3. whether the claimant has a sufficient interest to bring a claim for judicial review;

4. whether the particular challenge brought by the claimant is one that may be brought by the judicial review procedure, and whether it is appropriate to bring it by that procedure;

5. whether the claim is otherwise an abuse of process;

6. whether all or some of the grounds of challenge relied upon by the claimant are sufficiently meritorious to justify the grant of permission;

7. whether the claim has been brought promptly;

8. whether there are any discretionary grounds that justify the refusal of permission in the exercise of the court's discretion.

22. It therefore follows that the case must in the first place be one that is amenable to or appropriate for judicial review, and one that does not weigh against the exercise of the Court’s discretion. This is for the reason that in judicial review, the Court is being asked to review the lawfulness of an enactment, decision, action or failure to act in the exercise of a public function. Therefore, judicial review concerns the exercise of public duties and not private duties. Other grounds that may influence the exercise of the Court’s discretion in this regard are the availability of an adequate alternative remedy, prematurity of a claim, delay, and where the claim would cause great prejudice and hardship to third parties or the public interest. Lastly, the extent and limits of this Court’s judicial review jurisdiction as set out in Article 165(6) of the Constitution must also be borne in mind.

23. Once a case is found to be amenable to and appropriate for the exercise of the Court’s discretion to grant leave, it is trite that the Court then ought not to delve deeply into the arguments of the parties, but should make cursory perusal of the evidence before it and make the decision as to whether an applicant’s case is sufficiently meritorious to justify leave. It was explained by Lord Bingham in Sharma vs Brown Antoine(2007) I WLR 780, that a ground of challenge is arguable if its capable of being the subject of sensible argument in court, in the sense of having a realistic prospect of success.

24. In the present application, three arguments have been fronted by the Respondent and Interested Party against the exercise of this Court’s discretion to grant leave, which must be addressed. The first is that of availability of an alternative dispute resolution mechanism, the amenability of the dispute herein to resolution by judicial review, and that the application is in abuse of process of Court.

25. On the first argument, Article 159 (2)(c) of the Constitution obliges the courts while exercising judicial authority, to be guided by the principles among others- that alternative forms of dispute resolution including reconciliation, mediation, arbitration and reconciliation and traditional dispute resolution mechanisms shall be promoted. Section 9(2) of the Fair Administrative Action Act in addition provides as follows;

“The High Court or a subordinate court under subsection (1) shall not review and administrative action or decision under the Act unless the mechanisms including internal mechanism for appeal or review and all remedies available under any other law are first exhausted.

26. The LPG Cylinder Exchange Pool was in this respect established under Regulation 14 of the Energy (Liquefied Petroleum Gas) Regulations, 2009, which provided as follows as regards its regulation:

(l)There is established an LPG Cylinder Exchange Pool to regulate the exchange of LPG cylinders among the LPG marketing companies.

(2) The management of the LPG Cylinder Exchange Pool shall be vested in the LPG Cylinder Exchange Pool Committee.

(3) The membership of the LPG Cylinder Exchange Pool Committee shall consist of-

(a) one representative from the Ministry of Energy:

(b) one representative from the Kenya Bureau of Standards;

(c) six representatives from LPG marketing companies.

(4) The LPG Cylinder Exchange Pool Committee shall, with the approval of the Commission, draw an LPG Cylinder Exchange Pool Agreement to govern the relationships among the LPG marketing companies and the operations of the Pool…..”

27. As regards any challenges to licensing decisions, Regulation 17 of the Energy (Liquefied Petroleum Gas) Regulations, 2009 further states as follows;

“Any person aggrieved by an order or decision of the Commission made under these Regulations may, within thirty days of receipt of such order or decision appeal to the Tribunal.”

Section 25 of the Energy Act establishes the Energy and Petroleum Tribunal referred to in the regulation, and under section 36 of the Act, the said Tribunal has appellate jurisdiction over all decisions made by the Respondent and any licensing authority under the Act.

28. There are thus two dispute resolution mechanisms provided by the Regulations- the LPG Cylinder Exchange Pool Committee and the Tribunal. availability of an alternative statutory remedy is a material consideration in the exercise of the Court’s discretion to grant leave, and the main reason is that judicial review is a remedy of last resort, and Courts require other avenues of redress to be first utilised. It is trite that under the Fair Administrative Action Act, one ought to exhaust all internal mechanisms and alternative dispute resolution mechanisms before moving this Court for judicial review proceedings.

29. Exhaustion of alternative remedies is also now a constitutional imperative under Article 159 (2)(c) of the Constitution, and is exemplified by emerging jurisdiction on the subject, which was initially stated in Speaker of National Assembly vs Karume(supra)in the following words:

“Where there is a clear procedure for redress of any particular grievance prescribed by the Constitution or an Act of Parliament, that procedure should be strictly followed. Accordingly, the special procedure provided by any law must be strictly adhered to since there are good reasons for such special procedures.”

30. The doctrine of exhaustion of alternative remedies was further explained by the Court of Appeal in Geoffrey Muthinja Kabiru & 2 Others vs Samuel Munga Henry & 1756 Others (supra)as follows:

“It is imperative that where a dispute resolution mechanism exists outside courts, the same be exhausted before the jurisdiction of the Courts is invoked. Courts ought to be fora of last resort and not the first port of call the moment a storm brews….. The exhaustion doctrine is a sound one and serves the purpose of ensuring that there is a postponement of judicial consideration of matters to ensure that a party is first of all diligent in the protection of his own interest within the mechanisms in place for resolution outside the courts. The Ex Parte Applicants argue that this accords with Article 159 of the Constitution which commands Courts to encourage alternative means of dispute resolution.”

31. The Court is however granted discretion to exempt an applicant from such mechanisms in exceptional circumstance under section 9(4) of the Fair Administrative Action Act. The exceptional circumstances arise where the alternative mechanisms would not serve the values enshrined in the Constitution or law, particularly, where the dispute resolution mechanism established under an Act is not competent to resolve the issues raised in an application, or where it is not available or accessible to the parties for various demonstrated reasons.

32. In the present application, the parties herein do not dispute that the Tribunal under the Energy Act is yet to be constituted. However, both the Respondent and Interested Party have referred to the existence of another dispute resolution system in place under the Energy (Liquefied Petroleum Gas) Regulations, 2009, namely, a Complaints Sub-committee, and which is already being utilized. This fact, and the fact that the High Court ordered the Applicant to utilize this alternative dispute resolution method in a ruling delivered in Milimani Civil Application No. E180 of 2020, were not disputed by the Applicant. The Applicant has also not shown any exceptional circumstances as to why it should be exempted from the alternative dispute resolution.

33. As to the argument on the amenability of the dispute herein to judicial review, it is evident that the indebtedness or otherwise of the Interested Party to the Applicant is contested, and will require to resolved first, before the legality or otherwise of the Respondent’s actions and decisions with respect to the licencing of the Interested Party can be determined. The dispute as regards the indebtedness is one that can only be resolved through examination of the parties’ evidence in this regard and legal argument thereon in a normal civil trial process, and not through judicial review proceedings.

34. This finding also leads me to the last argument as regards the present application being in abuse of the process of Court. The Applicant did not dispute that the issue it has raised herein about the debts it is owed by the Interested Party was also raised in Milimani Civil Application No. E180 of 2020,and did not disclose this fact. Therefore, this application is essentially a collateral attack on, and intended to subvert the ruling delivered by a Court of concurrent jurisdiction, and is clearly in abuse of the process of Court.

The Disposition

35. In the premises, it is the finding of this Court that the Applicant’s has not demonstrated an arguable case and its application by Chamber Summons dated 19th August 2020 is not merited for the foregoing reasons.

36. I accordingly order as follows:

I. The prayers sought in theApplicant’s Chamber Summons dated 19th August 2020 are hereby declined, and the said application is hereby dismissed.

II. The Applicant shall pay the Interested Party’s costs of theChamber Summons dated 19th August 2020.

37. Orders accordingly.

DATED AND SIGNED AT NAIROBI THIS 18TH DAY OF JUNE 2021

P. NYAMWEYA

JUDGE

DELIVERED AT NAIROBI THIS 18THDAY OF JUNE2021

J. NGAAH

JUDGE