[2019] KEST 112 (KLR)

Tellam International Limited & another v Kenya Bureau of Standards (Tribunal Appeal 2 of 2019) [2019] KEST 112 (KLR) (5 July 2019) (Ruling)

Neutral citation: [2019] KEST 112 (KLR)

Republic of Kenya

In the Standards Tribunal

Tribunal Appeal 2 of 2019

GM Mburu, Chair, H Sigei, MS Makhandia, P Mungai & L Abdiwahid, Members

July 5, 2019

Between

Tellam International Limited

1st Appellant

Seatel Investments Limited

2nd Appellant

and

Kenya Bureau of Standards

Respondent

Ruling

Introduction 1. The first and second Appellants (referred to Appellants hereafter) are limited liability companies licensed to trade as cargo consolidators with consolidation warehouses located in China and deconsolidation warehouses located in Nairobi.

2. The Respondent is a body corporate established under Section 3 of the Standards Act, Cap 496 of the Laws of Kenya (Standards Act) whose functions among others include promoting standardization in industry.

3. The appellants have similar complaints against the Respondent and jointly filed this appeal on 29th April 2019 being dissatisfied by the Respondents decision to suspend the 1st and 2nd Appellants Cargo Consolidators License number KEBS/PVOC/CRC/024 and KEBS/PVOC/CRC/011 respectively.

4. The decision to suspend the Appellants license was contained in two separate letters dated 11th April 2019 and addressed to the Appellants separately indicating that the Appellants license had been suspended from operating under the consolidating guidelines on account of the Appellants being under investigation by other Government Agencies. The Appellants were advised to consult the Kenya Revenue Authority (KRA) for more information regarding the suspension.

Summary 5. The appellants applied for consolidators license and provided all the necessary documentation and underwent requisite vetting. Their applications were successful and they were issued with licenses serialized by the Respondent as KEBS/PVOC/CRC/024 and KEBS/PVOC/CRC/011 respectively. The licenses were valid for a period of one year starting from 1st October 2018 and expiring on 30th September 2019.

6. As licensed cargo consolidators, the Appellant’s business activity entails collection of goods on behalf of small traders who cannot afford to individually load a full container, the small traders will be charged for the volume of space their goods occupy in the shared container. The goods under consolidation are subject to Pre-Export Verification of Conformity by the Respondents Agents.

7. The cause of action arose on 23rd November 2018 when the Pre- Export Verification of Conformity Agents of the Respondents refused to inspect the appellant’s goods citing an email communication that they had received from the Respondent informing them that the Appellant’s license had been withdrawn.

8. The Appellants separately and jointly made attempts to engage the Respondent in a bid to unlock the stalemate upon which the Respondent wrote to the Appellants individually and separately on 11th April 2019 informing them that their license had been suspended from operating under the consolidating guidelines on account the Appellants being under investigation by other Government Agencies. The appellants were advised to consult the Kenya Revenue Authority (KRA) for more information.

9. Both parties were represented and agreed to have the matter dispensed with by way of written submissions. The Respondent filed its Statement of Response and submissions on 7th June 2019 while the Appellants filed their submissions on 13th June 2019.

Appellant’s Case 10. The Appellants contends that they had a valid consolidators license issued by the Respondent and barely two months after the Appellants were issued with the license, the Respondent without communicating to the Appellants suspended the Appellant’s licenses on account of being requested by the KRA to withdraw the Appellants licenses because there were on-going investigations on the Appellants being carried out by the KRA for offences relating to concealment, undervaluation and importation of illicit goods.

11. It is the appellant’s contention that the Respondent did not grant the Appellants an opportunity to be heard before taking the action of suspending their licenses. The Appellants seek to rely on Article 47 of the Constitution and Section 4 of the Fair Administrative Actions Act, 2015 which stipulates the guidelines and requirements for fairness on any administrative action including being subjected to a reasonable and procedurally fair process including being given notice, information and rationale for a decision and an opportunity to be heard. The Appellants also sought to rely on the case of the Republic v Ministry of Education & 3 others Exparte Compit Eduction Centre [2019] eKLR.

Respondent’s Case 12. The Respondent’s case is anchored on the fact that on 8th November 2018 the Respondent was notified by the KRA that the Appellants were under investigations for offences relating to concealment, undervaluation and importation of illicit goods and that the KRA had recommended that the Respondent withdraws the Appellant’s consolidator’s license.

13. The Respondents argued that the Appellants violated the conditions contained in the Kenya Bureau of Standards Pre-Export Verification of Conformity to Standards, Route D: Inspection of Consolidated Cargo Imports (PVoC Standards) by involving themselves in offences relating to concealment, undervaluation and importation of illicit goods. The said PVoC Standards provides that a consolidator who imports prohibited or concealed goods commits an offence and shall be liable to penalties stipulated under the various relevant acts administered in Kenya.

14. The Respondent also sought to rely on Section 10A of the Standards Act which empowers the Respondent to cancel or suspend a license where the Respondent is satisfied that some conditions have not been complied with. The Respondent also invoked Article 21(1) of the Constitution which mandates the Respondent as a State Organ with the responsibility to observe, respect, protect, promote and fulfil the rights and fundamental freedoms in the Bills of Rights. The Respondent also sought to rely on Article 46 (1) of the constitution on consumer protection.

15. The Respondent invoked several precedents including Keroche Industries Limited v Kenya Revenue Authority & 5 Others Nairobi HCMA No. 743 of 2016 [2007] KLR 240, Nguruman Limited v Jan Bonde Nielsen & 2 Others [2014] eKLR and Root Capital Incorporated v Tekangu Farmers Co-operative Society Ltd & another [2016] eKLR.

Issues for Determination 16. This Honourable Tribunal identified the following two issues for determination;1. Was the suspension of the license justified?2. Was the process of suspension fair?

Was the suspension of the license justified? 17. On the first issue this Tribunal is guided by the Law in place which should provide a roadmap on which circumstances a license can be suspended.

18. The Standards Act Cap 496 Section 10A provides that:1. The Bureau may where it is satisfied that the holder of a permit;-a.has not complied with any condition specified therein; orb.has not manufactured any commodity to which the permit relates to the relevant Kenya Standards of approved specification, as the case may be orc.has ceased to manufacture the commodity to which the permit relates, cancel, suspend the operation of, a permit; and suspension under this subsection may be for such period, not exceeding one year, as the Bureau deems fit.

19. Further, Clause 4. 3.2 of the Pre-Export Verification of Conformity to Standards, Route D: Inspection of consolidated Cargo Imports provides that a consolidator who imports prohibited or concealed goods commits an offence and shall be liable to penalties stipulated under various relevant Acts Administered in Kenya.

20. The question at hand is whether the Appellants flouted these provisions. It is not disputed by both the Appellants and the Respondent that there were allegations from the KRA that the Appellant was under investigation for offences relating to concealment, undervaluation and importation of illicit goods.

21. We find nothing wrong in KRA instituting investigations on the Appellants and informing the Respondent of the impending investigations as they have a statutory duty to carry out investigations to verify the said allegations. While the Tribunal must and should treat these allegations as serious and if proved should amount to flagrant flouting of the conditions under which the Consolidation License was issued this Tribunal must also warn itself that allegations remain just mere suspicion unless proved.

22. Based on the evidence before us there is no indication whatsoever that Respondent carried further investigations or even followed up with the KRA to verify whether the allegations were proved. It is noteworthy that the letter informing the Respondent of the alleged offences by the KRA is dated 18th November, 2018 and the Appellants filed the appeal to this Tribunal on 29th April, 2019. The Respondent had adequate time to initiate their own investigation and or engage the KRA to confirm the allegation.

23. It clear to this Tribunal that the allegations have not been proved and they remain as such to date. It’s trite law that suspicion cannot take place of hard facts. In the absence of any cogent evidence to prove that the Appellants indeed committed or was involved in the alleged offences, this Tribunal has no option but to arrive at a finding that the Appellant did not flout any of the conditions under which consolidators license was issued.

Was the process of suspension fair? 24. The Appellant in their submissions alleged that they were not given any opportunity to be heard before any action suspending their license was taken. This allegation was made in the application and in the affidavit of Erick Muthomi Micheni paragraphs 9 - 13 that the Respondent acted by sending an email on 23rd November, 2018 through one Mr. Emmanuel Nguzo to all inspection agencies directing that the Appellants were not authorized to transact under the PVoC Program.The email read;“Kindly note that the below cargo consolidators are under investigation by KRA and as such their licenses remains withdrawn until further notice. They are not therefore authorized to transact under the PVoC program”.

25. It listed among others the Appellants herein.

26. This communication was not copied to the Appellants. The Appellants only came to learn about it upon the exclusion and rejection of their cargo by the inspection agents. Upon this realization, they wrote through their lawyers on 4th December, 2018 to the Respondent seeking to know about the alleged withdrawal of their licenses. The Respondent did not respond prompting another letter on 5th April, 2019 from the Appellants. The letter of 5th April, 2019 was responded to on 11th April, 2019.

27. We wish to reproduce the relevant portions of the letter of 11th April, 2019 as follows;“.... that the said license No. KEBS/PVOC/CRC/024: Tellam International Limited was temporarily suspended from operating under the consolidation guidelines and not withdrawn as stated in your letter.That the suspension was as a result of the consolidator being under investigation by other Government Agencies.For more information, we advise that you consult Kenya Revenue Authority...”

28. A similar letter was issued on the same day to the 2nd Appellant. It is this response, the Appellants submit, that triggered the filing of the present complaint. The Appellants state that in the action undertaken by the Respondent, there was outright non-compliance with the law in according them an opportunity to be heard on the alleged investigation by the KRA. We note that the KRA is not a party to this appeal and needless to say this Tribunal does not have jurisdiction over the KRA.

29. Fair administrative action is provided for in the Bill of Rights of the Constitution of Kenya under Article 47 as follows;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.

30. Section2 (2) of the Fair Administrative Act defines administrative action as“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.”

31. The Respondent is therefore obligated by the Constitution and the Fair Administrative Action Act, 2015 under Section 4(2) to give written reasons for any administrative action that is taken against the Appellants or any other party for that matter. The Act provides under Section 4(1) that every person has the right to administrative action which is expeditious, efficient, lawful, reasonable and procedurally fair.

32. What the Constitution requires is the notification of the intention to take action against a person likely to be adversely affected thereby and the reasons for the intended action. It entails an opportunity to the applicant to be heard on the circumstances alleged to constitute satisfactory reasons for taking of adverse action like the action in this case where the license is being suspended.

33. Reliance was made in the case of Republic v. County Director of Education, Nairobi& 4 others Ex parte Abdukadir Elmi Robleh [2018] where it was stated that“....whereas the authority concerned may well have proper reasons to act in the manner it intends to act, where its decision is tainted by procedural impropriety, the same cannot stand...”In the circumstances of the present case, the Respondent did not bother to notify the Appellants of intended action. It also did not respond, upon a demand made to it until after a period of over four (4) months.

34. The decision to temporarily suspend the Appellant’s license was done in blatant breach of rules of natural justice. Such a decision cannot be cured by what the Respondent in its submissions termed as the guidance to it by Article 21 (1) and 46(1) of the Constitution of Kenya. As a State Agent, the Respondent is enjoined to apply the Constitutional and statutory provision as established.

35. Even where refuge would be sought on the public interest constituent, the refuge is unavailable in the circumstances of this appeal since the Appellants comprised the same public to be protected in law. There was exhibition of outright bad faith in the failure or neglect on the part of the Respondent to notify the Appellant of the intended action and even after the impugned action was taken and upon receipt of a demand letter enquiring on the status of its license by the Appellants, the response that eventually ensue asked them to seek further clarification from a third party (KRA).

36. It is admitted at paragraph 8 of the replying affidavit of Emmanuel Nguzo that the notification to the Appellants that their license had been suspended was done on 11th April, 2019 yet the suspension was done on 23rd November, 2018.

37. In the case of Onyango Oloo v Attorney General [1986-1989] EA 456 it was held that a decision in breach of the rules of natural justice is not cured by holding that the decision would otherwise have been right. Since the principle of natural justice is violated, it matters not that the same decision would have been arrived at.

38. In the case of Republic v Kenya Revenue Authority exparte Aberdare Freight Services Ltd & 2 Others [2004] 2 KLR 530. It was stated that a Tribunal or body whether it be judicial or quasi- judicial must not vary the scope of its powers and duties as a result of its own errors or conduct of others. The Respondent did not have to act the way it did owing to the actions of other entities, in this case the alleged investigations by KRA.

39. In view of the foregoing we uphold the appeal and order as follows:1. The Respondent’s decision to suspend the Appellant’s licences serial numbers KEBS/PVOC/CRC/024 and KEBS/PVOC/CRC/011 respectively is hereby quashed.2. Each party to bear its costs to this appeal.

DATED AND DELIVERED AT NAIROBI THIS 5TH DAY OF JULY, 2019GLADYS MUTHONI MBURU - (CHAIRPERSON)HILLARY SIGEI - (MEMBER)MOSES SANDE MAKHANDIA - (MEMBER)PETER MUNGAI- (MEMBER)LUL ABDIWAHID- (MEMBER)Delivered in the presence of:1. .......................2. .......................