[2019] KEHC 3639 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NYAHURURU

J.R. NO.12 OF 2017

REPUBLIC.....................................................................................................APPLICANT

VERSUS

COUNTY GOVERNMENT OF NYANDARUA....................................RESPONDENT

AND

COUNTY ASSEMBLY OF NYANDARUA...............................INTERESTED PARTY

NYANDARUA RECREATIONAL & ENTERTAINMENT

SELF HELP GROUP & 12 OTHERS............EX-PARTE/SUBJECTS APPLICANTS

JUDGMENT

By the Notice of Motion dated 10/5/2017, the 12 Ex-parte applicants brought this application against the County Government of Nyandarua and County Assembly of Nyandarua seeking the following Judicial Review orders:

(a) An order of certiorari do issue to remove to this court and quash the decision by the County Government of Nyandarua to charge separately for single business permits and Alcoholic Drinks Control Licenses in respect of the same businesses operated by the applicants in contravention of the Nyandarua County Finance Act, 2016;

(b) An order of prohibition do issue restraining the respondent from demanding, levying, charging, collecting, retaining or howsoever imposing double charges for business licenses upon members of the 1st applicant in contravention of the Nyandarua County Finance Act, 2016 or any other subsequent Finance Act of the County;

(c) Costs of the application for leave and substation motion.

The grounds upon which the application was premised are that the respondent had issued the applicants with invoices/demands notes for payment of single business permits and liquor licenses for the same business in contravention of the Constitution and Fair Administrative Actions Act, 2015 and the Nyandarua County Finance Act, 2016 because it amounts to double taxation; that the demand is unreasonable, irrational, manifestly unjust, oppressive and interference with the applicant’s social-economic rights; that the demand is made in bad faith and motivated by irrelevant considerations and an abuse of its administrative powers.

The application was also supported by the affidavit of Josphat Muiru Ndegwa, Chairman of the first applicant and 2nd applicant. He described the 1st applicant as a Self-Help Group whose membership is drawn from operators of liquor selling outlets in Nyandarua and is regulated under the Ministry of Labour, Social Security and Services (See JNN 1a-c); certificate of registration and list of members who are aggrieved.

It is deponed that the Nyandarua County Alcoholic Drinks Control Act was enacted by the Interested Party in 2014 to provide for licensing and regulation of production, sale and distribution, consumption and outdoor advertising of Alcoholic Drinks and connected purposes. It was assented to on 26/8/2014; that on 29/10/2015, the County Executive Committee Members for Education, Culture and Social Services published the Nyandarua County Alcoholic Drinks Regulations, 2015 pursuant to Section 60(1) of the Act. Applications for licenses would be made under Section 11(2) of the Act.

That in 2010, the Interested Party also enacted The Nyandarua County Finance Act, 2006 which provided for taxes, fees, cess, licenses and charges for drinks and other revenue raising measures; that the applicants were to pay for permits and licenses under codes 512 – 568 where code 1440 of the schedule provides that Alcoholic Drinks Control licenses per business premises is to be charged as per the Nyandarua Alcoholic Drinks Control Act and Regulations.

Mr. Chege submitted that there is no provision under the Nyandarua Alcoholic Drinks Control Act 2014 and Regulations for payment of permit and license fees for operation of liquor outlets; that the only fees payable in respect of permit and licenses as stipulated under the Finance Act; that the respondent has been charging for both single business permit and liquor license which amounts to double taxation and is therefore discriminatory as no other class of business people within the County receive similar treatment.

Counsel also submitted that it also amounts to selective application of the law, an abuse of power, is arbitrary, vague and unreasonable; that the respondent has refused to accept partial payment for both single business permits and liquor licenses and the applicants therefore fear arrest and criminal prosecution.

Mr. Chege cited the following decisions in support of his argument:

(1) Kamani v Kenya Anti-Corruption Commission, 2007 EA 112;

(2) Suchan Investment Ltd v Ministry of National Heritage and Culture and 30 others (2016) eKLR.

Stephen Kinja, a director in charge of Revenue in the County Government of Nyandarua filed an affidavit opposing the application. He admitted that indeed the respondent enacted the Nyandarua County Alcoholic Drinks Control Act, 2015 and the Regulations in 2015 which were to provide for control, licensing and regulation of production, sale, distribution and consumption of alcoholic drinks; that the said Act and Regulations do provide for issuance of licenses; taxes, fees and charges for services and other revenue raising measures. He deponed that the applicants are required to obtain Business Permits under the Act; that business of production, sale of alcohol has its peculiar aspects and hence need to control it; that the control and regulation of the alcohol business involves huge extra expenses and hence a license has to be applied for and paid for; that the Act establishes the County Alcoholic Drinks Control Board made of 11 members; the Sub-County Committees made up of 7 members and the County Alcoholic Drinks Control Enforcement Committee; that the committee undertakes the functions of licensing, protection of persons under 18 years from exposure to alcohol. Public education; rehabilitation; that the said activities require huge capital outlay and hence requirement for license fees; that before 2010, the alcohol business used to be controlled by the National Government under the Alcoholic Drinks Control Act to which the applicants used to pay fees and obtain licenses.

Lastly, he deponed that the orders of certiorari and prohibition are not effective remedies and should not issue as the County Laws have been lawfully implemented.

Mr. Chege, counsel for the applicants also submitted that the dispute herein arose from the respondent’s decision to charge the applicants twice, for single business permits under the Finance Act of the County Government, 2016 and the Alcoholic Drinks Control Act enacted by the County Assembly in 2014; that there is no specific provision for charging of fees under the Nyandarua County Alcoholic Drinks Act but that the County Executive members for Education, Culture and Social Services had published the Alcoholic Drinks Regulations, 2015 under Section 60(1) of the County Alcoholic Drinks Control Act which provides for payment of fees for licenses, taxes, cess and charges; that code 512 – 568, Nyandarua County Finance Act provide for licenses payable for particular licenses relating to bar, restaurants and lodges and also code 1440 provides for Alcoholic Drinks Control Licenses though the amount payable is not stipulated and that the fee chargeable under code 1440 has been left to the whims of the enforcing officer. Counsel urged that the exercise of the administrative discretion to charge twice for liquor license is unreasonable, unconstitutional and irrational; that he law does not envisage two licenses for the same premises and that amounts to double taxation. It was further argued that there is no other business in the County that is taxed twice and the decision to tax the applicants twice is discriminatory as against that class of business people; that it is oppressive, malicious and capricious and a breeding ground for corruption; that the respondent is abusing its powers by leaving the determination of the amounts to be charged on the employees.

The applicants further argued that the liquor licenses operate for very few hours, that is, 6 hours during the week days from 5. 00 p.m. to 11. 00 p.m. and for 9 hours during the weekend, from 2 p.m. to 11. 00 p.m. yet the liquor licenses are much more expensive as compared to other businesses which operate for 24 hours. Counsel also urged that apart from the two licenses, the applicants pay Kshs.1,000/= - Kshs.2,000/= for Health Inspection and Kshs.1,000/= towards license application and Kshs.650 – Kshs.1,200/= for food and hygiene license per business.

Counsel submitted that the respondent has not demonstrated that the County expends huge capital expenses due to alcoholic licenses to justify the imposition of the two licenses; that the allegation that the taxes are used to rehabilitate alcohol abusers is untrue because there is no such institution in Nyandarua and that general enforcement and control of alcohol and drug abuse is undertaken by the National Government under the Alcoholic Drinks Control Act No.4 2010 through National Authority for Campaign against Alcohol and Drug Abuse (NACADA).

On the other hand, Mr. Mutonyi, counsel for the respondent submitted that the requirement that the applicants pay for licenses under both the Finance Act and Alcoholic Drinks Control Act does not amount to double taxation; that the same business is taxed by different persons holding different interests; that Alcohol business is a controlled business because it is a chain and its taxed through production, sale, distribution and consumption; that different legislation governs the business:

(1) The Sub-County Alcoholic Drinks Committee created under Section 8, 9, 10, 11 and 13 of the Act;

(2) That the County Alcoholic Act Control Board establishes treatment and Rehabilitation Centers (Section 4);

(3) That Alcoholic Drinks Enforcement Committee Co-Ordinates enforcement of the Act, monitoring, evaluation and creates awareness;

Counsel submitted that all these institutions have to be funded and persons serving therein paid.

Mr. Mutonyi further submitted that a person can be taxed several times for different interests; that Alcoholic Drinks Control ceased to be a function of the National Government in 2010 in the 4th Schedule which provides that it had become the function of the County Government; that from 2013, the County Governments enacted laws to control alcoholic drinks and the National Legislation no longer applies to the County Government. Counsel denied that the alcohol traders were the only ones paying for two licenses but that there are other businesses that pay for different licenses for example:

(1) Hotels and Restaurants under Section 98 of the Tourism Act – Under the Tourism Regulatory Authority:-

(2) Under Section 5(4) of Banking Act and Regulation 4 of the Banking Regulations 1969 and Bank Regulations, 1994 each Bank pays an annual fee of Kshs.400,000/= to Central Bank of Kenya but is also required to take out single business permit under the Finance Act, 2016;

(3) Code 625 – 695(3) Section 4, 5 and 13 of the Betting Lotteries and Governing Act and the second Schedule of the Betting Lotteries and Governing Regulations 1966 – provides for license fees for persons engaging in Betting and Gaming and so does the Finance Act, 2010 under codes 761 and 795 which requires them to obtain single business permits.

(4) Regulation 2014, they provide for license fees and also code 503 – 569 of the Finance Act, the same businesses pay single business permits;

As to the orders sought, Mr. Mutonyi urged that an order of certiorari cannot issue because the impugned decision has not been exhibited and no evidence of when the decision was made and who made it; that the applicant was not specific; that the applicants have not claimed that the Acts are illegal or unconstitutional or breach of rules of natural justice; that the respondent is just implementing the law as passed by the County Assembly under Section 3 & 4 of the Finance Act as read with 1st schedule; and Section 7 & 9 of the Nyandarua Alcohol Drinks Control Act which requires applicants to obtain a license after paying the prescribed fee. Counsel relied on the decision of Captain Geoffrey Kinjoga Murungi v Attorney General (1990 – 1994) EA 413 on the scope of the order of certiorari; that if the applicants want to attack the legislation, they should have sought a declaration.

On prohibition, counsel urged that the decision to charge the two licenses has already been made and has been implemented and so an order of prohibition cannot issue; and that there is no evidence that the respondent acted in breach of rules of natural justice or in excess or without jurisdiction.

Having set out the pleadings and the rival submissions by counsel, I think that the issues for consideration are:

(1) Whether the application is defective for failure to exhibit the impugned decision;

(2) What is the scope of Judicial Review orders of certiorari and prohibition;

(3) Whether the respondent made any decisions that can be subject to Judicial Review;

(4) Whether the respondent’s requirement that the applicants obtain single business permit under the Finance Act, 2016 and the Alcoholic Drinks Control License under the Nyandarua County Alcoholic Drinks Control Act, 2014 amounts to double taxation;

(5) Whether the orders of certiorari and prohibition can issue;

(6) Who bears the costs.

Whether the application is incompetent for failure to attach the decision:

It was the respondent’s submission that the application is incompetent because the applicants have not annexed the impugned decision. In my view, not all administrative decisions must be in writing. There are verbal decisions for which one can seek an order of certiorari. For this view, I am supported by the decision of Justice Muriithi in Kabarnet Misc.App.2 of 2018 (JR) John Kipkoech Rotich and 29 others v Eldama Ravine Sub-County Alcoholic Drinks Regulations.

In this case, the respondents have enacted a law and regulations. Those were arrived at after deliberations and in my view that amounts to a decision.

Whether the respondents have enacted the impugned laws providing for taxation:

Although Mr. Mutonyi argued that the applicants have not demonstrated who made the decision to charge the applicants with the licenses under challenge, in its own affidavit sworn by Stephen Kinja, and dated 7/11/2017, he admitted to the respondent enacting the Nyandarua Alcoholic Drinks Control Act, 2014 and Regulations, 2015 and the Nyandarua County Finance Act, 2016. The admission is contained at paragraph 3 – 7 of the affidavit which I quote:

“3. That it is true that the Respondent has enacted the Nyandarua Alcoholic Drinks Control Act, 2014 and the Nyandarua County Alcoholic Drinks Regulations, 2015 to provide for the control, licensing and regulation of the production, sale, distribution and consumption of alcoholic drinks and other purposes connected thereto.

4. That the said Act and Regulations have provided for the issuance of licenses and the procedures thereof.

5. That the respondent enacted the Nyandarua County Finance Act, 2016 to provide for various taxes, fees, licenses and charges for services and for other revenue raising measures by the County Government and for matters incidental thereto.

6. That the applicants are required to obtain Business Permits under the Nyandarua County Finance Act, 2016.

7. That the business relating to the production, sale, distribution and consumption of alcohol is a controlled business under the specialized Nyandarua Alcoholic Drinks Control Act, 2014. ”

The Nyandarua County Finance Act, 2016 was enacted in 2016 by the respondent pursuant to Article 209(3) and (4) of the Constitution that allows County Governments to impose taxes and charges for services for purposes of raising revenue under Sub-Article 4 of the Article.

Article 209(3)-(4) reads as follows:

“3. A county may impose:-

a.property rates;

b.entertainment taxes; and

c.any other tax that it is authorized to impose by an Act of Parliament.

4. The national and county governments may impose charges for the services they provide.”

At codes 512 to 568, the applicants are required to obtain a single business permit.

In 2014, the County Assembly of Nyandarua County Alcoholic Drinks Control Act, 2014 provide for licensing and regulation of production, sale, distribution, consumption and outdoor advertising of alcoholic drinks and for convenience purposes.

The Regulations made under the Act were made in 2015, Section 11(2) of the Nyandarua County Alcoholic Drinks Act, empowers a sub-committee to issue a license upon an application if there is no objection.

Although code 512 – 568 make provision for charging licenses, fees, code 1440 of the same Act provides for Alcoholic Drinks Control License for business premises to be charged under the Alcoholic Drinks Control Act and Regulations.

I have noted that indeed under the Nyandarua County Alcoholic Drinks Control Act and the Regulations, there is no provision on how much payable in respect of the liquor licenses.

What is a license?

Black’s Law Dictionary (10th Ed.2014) defines license to mean:

“A privilege granted by a State or City upon the payment of a fee, the recipient of the privilege then being authorized to do some act or series of acts that would otherwise be impermissible. A license in this sense is a method of governmental regulation exercised under the police power, as with a license to drive a car, operate a taxi, service, keep a dog in the city or sell crafts.”

Having looked at both the Nyandarua Finance Act and the Nyandarua County Alcoholic Drinks Control Act, and the Regulations made thereunder, both of them provide for the charging of license fees.

The respondent denies that the charging of licenses under both Acts is double taxation and justified it by contending that there are many businesses that require more than one license to operate example under the Tourism Act, the Banking Act and the Betting Lotteries and Gaming Act which pay licenses under the Act and under the Finance Act.

What is double taxation?

Black’s Law Dictionary 5th Edition, 1979, defines double taxation:

“To constitute ‘double taxation’, that tax must be imposed on the same property by same governing body during same taxing period and for same taxing purpose.”

From the above definition of what double taxation means, it does not apply to the taxation under Section 98 of the Tourism Act and Finance Act or the Banking Act because that tax is paid to different entities. In this regard, the tax is levied by the Nyandarua Finance Act and the Nyandarua County Alcoholic Drinks Act ant it goes to same entity, the County Government of Nyandarua during the same period of time.

The other justification for charging for the two licenses is that the Regulation and Control of alcohol involves huge extra expenses. Whereas it is true that there are likely side effects that alcoholic drinks cause to the health and wellbeing of the consumers, it is indeed true that the public need to be protected from its harmful effects, the controlling and regulating the produce, flow, distribution and even sale of the said drinks. However, there is no justification for charging another license.

In fact, the respondent has not demonstrated that they have taken any extra steps in regulating and controlling the said use, sale or distribution of the alcohol that would justify the two permits. There is no evidence that anything has been done towards protection of persons under 18 years that are exposed to alcohol.

There is no doubt that the entire licensing function has been devolved to the County Government by dint of paragraph 4© of the Article 209 of the Constitution and the 4th Schedule. However, the County Government which charged with that authority must act within its powers and in good faith and not pass laws that are oppressive to the citizens. I echo the sentiments of Justice Mumbi Ngugi the case of Dickson Mati T/A Machete Auctioneers and others v Nairobi County Government and another (2016) eKLR where she held that County Governments have a Constitutional mandate to raise revenue but they must bear in mind the provisions of Article 209 of the Constitution.

Again in Real Deals Ltd & 3 others v Kenya National Highway Authority (2015) eKLR J. Odunga held as follows:

“Where a State donates power to an authority, the authority ought to ensure that the power that it exercises are within the four corners of the statute under which it purports to exercise its authority.”

In the exercise of its authority, the respondent must act in good faith and within the confines of the law but if the authority fails to observe the law, then the court must intervene and quash the said decision.

In this case, I am satisfied that the charging of license fees both under the Finance Act and the Alcoholic Drinks Act amounts to double taxation which is discriminatory, oppressive and contrary to the law.

As submitted by the applicants, under the Alcoholic Drinks Control Act and the Regulations, the fee chargeable to the various types of licenses is not specified. It is therefore left to the discretion of the enforcement officer concerned and that in my view, will be open to abuse and arbitrariness. It is vague and hence unsustainable.

Whether the orders sought can issue:

In nature and scope of Judicial Review remedies was discussed by J. Nyamu in Kamau v Kenya Anti-Corruption Commission (2007) IEA 112:

“The remedy of Judicial Review is concerned with reviewing not the merits of the decision in respect of which the application for judicial review is made, but the decision making process. It is important to remember in every case that the purpose of the remedy of Judicial Review is to ensure that the individual is given fair treatment by the authority to which he has been subjected and that it is not part of that purpose to substitute the opinion of the Judiciary of individual Judges for that of the authority constituted by law to decide the matters in question.”

Double taxation is illegal, oppressive and discriminatory in nature. It is also oppressive and hence contrary to rules of natural justice and in my view, an order of certiorari must issue to call for the decision to pay for the license twice to be quashed. The provisions for licensing must be contained in either the Finance Act or the Nyandarua County Alcoholic Drinks Control Act and one of the acts must be quashed.

Whether an order of prohibition can issue:

The decision in Kenya National Executive Council v Republic Ex-Parte Geoffrey Gathenyi Njoroge Cr.266/1991 defines the purview of an order of prohibition to be:

“What does an ORDER OF PROHIBITION do and when will it issue” It is an order from the High Court directed to an inferior tribunal or body which forbids that tribunal or body to continue proceedings therein in excess of its jurisdiction or in contravention of the laws of the land. It lies, not only for excess of jurisdiction or absence of it but also for a departure from the rules of natural justice. It does not, however, lie to correct the course, practice or procedure of an inferior tribunal, or a wrong decision on the merits of the proceedings – see HALSBURY’S LAW OF ENGLAND, 4th Edition, and Vol.1 at pg.37 paragraph 128.

The point we are making is that an order of prohibition is powerless against a decision which has already been made before such an order is issued. Such an order can only prevent the making of a decision. That, in our understanding, is the efficacy and scope of an order of prohibition.”

Prohibition can lie to stop proceedings that are still ongoing. In this case however, once an order of certiorari has issued to quash the decision to tax twice, issuing an order of prohibition would be making an order in vain. The said order will, therefore, not issue.

In the end, I grant an order of certiorari to call for and quash the decision by the respondent to tax the applicants twice as contained in code 1440 of the Nyandarua Finance Act and Nyandarua Alcoholic Drinks Control Act and Regulations so far as they relate to the Liquor Licenses.

Applicants will have costs of the application.

Dated, Signed and delivered at Nyahururu this 17thday of October, 2019.

.........................

R.V.P Wendoh

JUDGE

PRESENT:

Ms. Ngethe holding brief for Mr. Chege for applicant

Respondent – absent

Nyagah – Court assistant