[2017] KEHC 3276 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA

CONSTITUTIONAL PETITION NO. 3 OF 2017

[Consolidating ELDORET CONSTITUTIONAL PETITION NO. 4 OF 2016]

BETWEEN

RAIPLY WOODS (K) LTD................................................................PETITIONER

VERSUS

BARINGO COUNTY................................................................1ST RESPONDENT

BARINGO COUNTY ASSEMBLY........................................2ND RESPONDENT

ATTORNEY GENERAL........................................................3RD RESPONDENT

THE KENYA FOREST SERVICE.......................................INTERESTED PARTY

AND

ELDORET CONSTITUTIONAL PETITION NO. 9 OF 2016

TIMSALES (K) LIMITED.................................................................PETITIONER

AND

COUNTY GOVERNMENT OF BARINGO & 2 OTHERS........RESPONDENTS

AND

THE KENYA FOREST SERVICE.........................................INTERESTED PARTY

RULING

1. This is a ruling on an application for stay of execution by Notice of Motion dated 9th August 2017 in following terms as relevant:

“That pending the hearing and determination of the intended appeal there be a stay of release of funds deposited in court and implementation of and execution of the judgment of this Honourable Court delivered on 28th July 2017. ”

2. The grounds upon which the application if founded, apart from asserting that the intended appeal is arguable and raises serious legal issues are set at grounds 5, 6, 7, and 8 of the application and restated in the supporting affidavit at paragraphs 7, 8, 9, 10 and 11 as follows:

“AFFIDAVIT OF JOAN KORIR DATED 9TH AUGUST 2017

7. That the intended appeal will be rendered nugatory if stay is not granted for reasons inter-alia:

(a) That the petitioners/respondents in reliance of the impugned judgment, seek for release of funds deposited in court to defeat any outcome of the intended appeal and/or the outcome of the appeal in the superior court.

(b) That the petitioners/respondents shall equally commence execution of the impugned damages awarded and defeat any outcome of the intended appeal and/or the outcome of the appeal in the superior court.

(c ) That the petitioners physical whereabouts or assets status are unknown and the applicant stands to suffer irreparably were they allowed to execute the judgment of this Honourable Court and the funds deposited thereto released and disappear.

8. That the applicants stand to suffer irreparably if stay of implementation of the judgment delivered on 28th July, 2017 for reasons inter-alia:

(a) That the impugned Finance Act is the heart and soul of the 1st respondent/Applicant and implementation of the judgment of this Honourable Court shall cause crippling challenges to the provision of essential and crucial services to the constituents of Baringo County.

(b) That I am informed by the 1st respondent/applicant Ecosystem Conservator, and the Forest Coordinator, which information I verily believe to be true and correct, that Baringo County has a total gazette forest cover of 70. 252 hectares out of which 16,523. 76 hectares are under plantation of forest with the rest being catchment, biodiversity and conservation arrears and implementation of the judgment of this Honourable Court shall not only deprive the 1st applicant millions of revenue but also deprive the local community all the accruing benefits arising from harvesting of forest produce by the petitioners/respondents.

(c) That it is therefore impossible to attain 10% forest cover of land in Kenya under Article 61(1) (d) if 1st respondent/applicant cannot generate revenue from exploitation of forests within its locality.

9. That there is real danger that unless the application is heard urgently the intended appeal will be rendered nugatory.

10. That it is in the best interest of justice that the substratum of this suit is preserved so that the eventual determination of the superior court is not rendered nugatory.

11. That this application has been brought without undue delay, in good faith and in the best interest of justice.”

3. In reply affidavit, Philip Varghese, a director of the petitioner companies makes their substantive response at paragraphs 3 -9 as follows:

“REPLYING AFFIDAVIT OF PHILIP VARGHESE DATED 18TH AUGUST, 2017

3. THAT the subject application is based on a misapprehension of the judgment dated 28th July, 2017 and the previous orders of the Court. The prayers sought to stay implementation and execution of the said judgment cannot be lawfully issued as set out below.

4. THAT from paragraph 96 of the subject judgment, it is evident that this Honourable Court granted the following categories of orders:-

(i) Three declaratory orders No. 1, 2 and 3

(ii) An order of prohibition – order No. 4.

(iii) An order of Permanent Injunction – order No. 5

(iv) The order for refund to the Petitioners of the monies deposited in court as a condition for the grant of the conservatory order pending hearing and determination of the petition.

(v) An award to each of the Petitioners of Ksh. 3,000,000 as general damages for breach of their constitutional rights.

5. THAT I earnestly believe that orders 1-3 of the subject judgment cannot be stayed as all that this Honourable Court did was to discharge its jurisdiction to interpret the Constitution, uphold the Rule of law and enforce fundamental rights and freedoms.

6. THAT by the same token orders 4 and 5 of the subject judgment should not be stayed as the same are incidental to the declaration of unconstitutionality section 10 of the 2nd scheduled of the Baringo Finance Act, 2015 or its successor and correct interpretation of the relevant provisions of the Constitution.

7. THAT I believe strictly speaking that the order for refund is largely superfluous as the issue of refund had already been dealt with by the previous orders of the Court as follows.

8. THAT by a Ruling dated 7th April, 2016 in Eldoret High Court Petition No. 4 of 2016 Raiply Woods (K) Ltd vs Baringo County Government and 2 others, the Honourable Mr Justice George Kanyi Kimondo dismissed the First Petitioners’ Notice of Motion dated 25th February, 2016 and ordered the Petitioner to deposit the sum of Ksh. 4,955,160 into court within 30 days pending hearing and determination of the Petition. Annexed hereto marked “PV1” is a true copy of the said order dated 7th April, 2016.

9. THAT by a consent order made on 28th July, 2016 before Honourable Lady Justice C W Githua in Eldoret High Court Constitutional Petition No. 9 of 2016 Timesales (K) Ltd vs County Government of Baringo & 2 others the parties agreed, inter-lia, that the Petitioner shall deposit in Court the cess charges payable and the said monies shall be released to the successful party within 14 days of the judgment/ Annexed hereto marked “PV2” is a true copy of the Consent Order dated 28th July, 2016. ”

4. The 3rd respondent did not file a replying affidavit.

5. By its judgment delivered on 28th July 2017, the Court made the following Orders:

1. A Declaration that the Baringo County Assembly has, by reason of Articles 62(3), 185(2) and 209 of the Constitution, no authority to enact a law providing for the levying of Cess in respect of forest produce from the State forests owned and managed by the national Government through theKenya Forest Service within Baringo County.

2. A Declaration thatSection 10 of the Second Schedule of the Baringo County Finance Act, 2015 violates the provisions of Articles 185 (2) and 209 of the Constitution to the extent that it empowers the 1st respondent to levy Cess in respect of State forests owned and managed by the national government through Kenya Forest Service within Baringo County.

3. A Declaration that the imposition of forest produce Cess by the 1st and 2nd Respondents against the Petitioners in respect of forest produce from state forests owned and managed by the national government through Kenya Forest Service within Baringo County violates the principle of fair taxation under in Article 201 (b) (i) of the Constitution.

4. An Order of Prohibition to prohibit the 1st and 2nd Respondents from acting upon the provision for the levying of Cess on forest produce from state forests owned and managed by the national Government through the Kenya Forest Service under section 10 of the 2nd Schedule of the Baringo Finance Act 2015 or its successor.

5. An Order of Permanent Injunction to restrain the 1st Respondent from making any demand for cess or recovering from the Petitioners any arrears of cess on forest produce from state forests pursuant to section 10 of the Second Schedule of the Baringo County Finance Act, 2015.

6. An order for the refund to the Petitioners of monies deposited into Court as a condition for the grant of the conservatory order herein pending the determination of the Petition.

7. An award to each Petitioner the sum of Ksh.3,000,000/- as general damages to be paid by the 1st Respondent County Government for breach of the petitioners’ constitutional right to equal protection of the law, right to property and right to fair administrative action under, respectively, Articles 27 (1), 40 and 47 of the Constitution.

8. The Petitioners’ prayers for an order forcompensation of the Petition by the First Respondent for illegal detention of their trucks and consequential proceedings be borne by the 1st and 2nd Respondentsis declined.

6. The principles for the grant of stay of execution and or proceedings before the Subordinate Court and the High Court are set out in Order 42 rule 6 of the Civil Procedure Rulers in the following terms:

“[Order 42, rule 6. ] Stay in case of appeal.

6. (1) No appeal or second appeal shall operate as a stay of execution or proceedings under a decree or order appealed from except appeal case of in so far as the court appealed from may order but, the court appealed from may for sufficient cause order stay of execution of such decree or order, and whether the application for such stay shall have been granted or refused by the court appealed from, the court to which such appeal is preferred shall be at liberty, on application being made, to consider such application and to make such order thereon as may to it seem just, and any person aggrieved by an order of stay made by the court from whose decision the appeal is preferred may apply to the appellate court to have such order set aside.

(2) No order for stay of execution shall be made under subrule (1) unless—

(a) the court is satisfied that substantial loss may result to the applicant unless the order is made and that the application has been made without unreasonable delay; and

(b) such security as the court orders for the due performance of such decree or order as may ultimately be binding on him has been given by the applicant.

(3) Notwithstanding anything contained in subrule (2), the court shall have power, without formal application made, to order upon such terms as it may deem fit a stay of execution pending the hearing of a formal application.”

7. An applicant of stay of execution before the High Court is required to demonstrate a sufficient cause for the stay of execution or proceedings and

Sufficient Cause and Substantial loss

8. With the support of the 3rd respondent, the 1st and 2nd Respondent applicants emphasised the probable suits for refund of monies already paid by other loggers for the forest produce as a consequence of the declaration of unconstitutionality of the provisions of the County Finance Act 2015 allowing such cess and its resultant impact on the ability of the County Government to provide services for its people. The need to provide for service to the people of the Baringo using revenue generated from the forest products harvested in the County was urged as sufficient cause for the stay. It was argued that the public interest in such provision of services outweighed the petitioners’ private interest. See R. v. County Government of Migori ex p. INB Managemnet Consuting Ltd. (2017) eKLR and Gatirau Peter Munya v Dickson Mwenda Githinji & 2 Ors. (2014) eKLR. In seeking stay of release of the funds deposited into court, the respondents argued that the petitioners may not be able to refund the amounts, if the appeal is successful and the appeal would accordingly be rendered nugatory.

9. For the petitioners, it was contended that a declaration of unconstitutionality cannot be stayed and in any event the court cannot consistently with the right to access to justice prevent any aggrieved person from coming to court to seek recovery of monies paid under the unconstitutional provisions. It was further contended that there was no evidence of substantial loss as the revenue alleged obtained from such other loggers was not demonstrated and that it had not been shown that the petitioners would unable to repay the amounts deposited in court. As regards the stay of execution of the money part of the judgment for the award of general damages in the sum of Ksh.6,000,000/- the statutory protection of section 21 of the Government Proceedings Act was proffered.

Provision of Security

10. It was common ground that the County Government was part government for purposes of section 21 of the Government Proceedings Act, see Josphat Gathee Kibuchi v. Kirinyaga County Council (2015) eKLR per Muchemi, J., with the applicant urging therefore that security should not be ordered in discretion as done by Sergon, J. in Kenya National High way Authority v. Zenith Steel Fabricators Ltd and Anor. (2017) eKLR; and the respondent petitioners urging that the grant of stay of execution was accordingly unnecessary as there was already a statutory stay because execution could not be levied against the government by virtue of section 21 (4) of the Government Proceedings Act.

Delay in presenting the application

11. It was conceded that the application had been filed timeously with delay, and that that condition for the grant of a stay of execution under Order 42 rule 6 (1) of the Civil Procedure Rules had been met.

Determination

12. I have considered the application and the affidavits filed by the parties and the respective submissions thereon. I accept that on first principles the object of an order for stay of execution or proceedings pending appeal is the preservation of the status quo so that if the appeal is successful, it should not be rendered nugatory. See the long history of cases on the subject since Wilson v. Church, no. 2 (1879) 12 Ch D 454, Erinford Properties Ltd. v. Cheshire County Council (1974) 2 ALL ER 448, Bhutt v. Rent Restriction Tribunal (1979) (1982) KLR 417, Madhupaper v. Kerr (1985) KLR 840 and Board of Governors Moi High School Kabarak & Anor. Malcom Bell SC Appl. Nos 12 and 13 of 2012.

13. Shall the respondents’ appeal be rendered nugatory or to the same effect shall the respondent suffer substantial loss? There is no prospect of execution on the amount of damages awarded by the Court because the respondent county Government is statutorily protected from execution in the clear provisions of section 21 of the Government Proceedings Act as follows:

“save as aforesaid no execution or attachment or process in the nature thereof shall be issued out of any such court for enforcing payment by the Government of any such money or costs as aforesaid, and no person shall be individually liable under any order for the payment by the Government, or any Government department, or any officer of the Government as such, of any money or costs.”.

14. The applicant did not show the amounts it stands to lose by way of revenue from forest produce. Counsel only referred to the amounts allegedly due from the petitioners as a pointer to the total losses it would incur if the other timber dealers did not pay the cess. The Court is therefore not able to assess with exactitude the amount of loss of revenue from non-payment of cess on forest produce which the judgment of the court declared unconstitutional. The Court is, however, willing to accept that the declaration of unconstitutionality may open floodgate of litigation by other traders seeking refunds for monies already paid as cess. While these amounts are not ascertained, the very litigation for recovery and the subsequent budgetary provisions to meet such refunds will no doubt cause great hardship, which is sufficient cause in public interest for grant of suspension of the declaration of unconstitutionality, before a final determination of the matter by the appeal. Consistently with the right to access justice under Article 48 of the Constitution, this Court cannot stop any aggrieved person to seek to protect his interest before the Court, it only suspends the precedent value of the judgment in this case.

15. Is there sufficient cause for stay of release of the money deposited in the court? The applicant has not had use of the money which is deposited into court and it therefore cannot justify its retention by reason of need to provide for services to the people of the County or on any loss of revenue by refund of paid cess. The prayer for non release of the money deposited into court is purely as a security for the eventual recovery thereof should the appeal be successful. For the Court to exercise its discretion in this regard, it must be shown that the respondents would be unable to refund the money if it were released and the appeal was successful. No such evidence of the respondents’ impecuniosity was placed before the Court as to justify such a order for stay of release. The applicant did not discharge the initial evidential burden of the financial status of the respondent as would justify the calling on the petitioners to demonstrate their means of meeting the refund of monies deposited into court, if the appeal succeeds.

16. Moreover, the funds deposited into court were the subject of a consent order of the parties for their release 14 days after the determination by the Court. This Court having determined that the provision for the levying of cess is unconstitutional, the orders of the court with consent of the parties take effect. The said orders are not affected by the suspension of the declaration of unconstitutionality for the protection of the county Government from an avalanche of law suits for refund of cess while the appeal from the determination is pending.

17. Although the County Government enjoys a statutory protection under section 21 of the Government Proceedings Act, the same is only against execution outside the terms of the section and since the petitioners may in accordance with the provisions of the section seek to recover the payment of the award of damages, there shall be an order for stay of execution thereof pending appeal.

Orders

18. Accordingly, for the reasons set out above, the Court grants the application for stay of execution of the Judgment of the Court made on 28th July 2017 upon the terms and to the extent as follows:-

1. The declarations 1, 2 and 3 issued by the Court in its judgment of 28th July 2017 are in public interest suspended pending the determination of appeal filed by the 1st and 2nd respondents in the Court of Appeal.

2. There shall be a stay of execution of the order for the payment of general damages to the petitioners pending determination of the appeal.

3. For avoidance of doubt, the petitioners are entitled to a refund of the monies deposited by them into court pending determination of the petition, in accorders with the order of the Court made on 7th April 2016 in Eldoret HC Petition No. 4 of 2016 and 28th July 2016 in Eldoret HC Petition No. 9 of 2016.

19. Costs in the Cause.

DATED AND DELIVERED THIS 15TH DAY OF SEPTEMBER, 2017.

EDWARD M. MURIITHI

JUDGE

APPEARANCES

Mr. Kibe Mungai with Mr. Juma Kiplenge & Ms. Mwaniki for the Petitioners

Mr. Kibii for the 1st and 2nd Respondents

Mr. Odongo for the 3rd and 4th Respondents.