[2022] KEHC 411 (KLR)

Wangari v Kenya Revenue Authority & another (Constitutional Petition 8 of 2020) [2022] KEHC 411 (KLR) (5 May 2022) (Ruling)

Neutral citation: [2022] KEHC 411 (KLR)

Republic of Kenya

In the High Court at Nakuru

Constitutional Petition 8 of 2020

JM Ngugi, J

May 5, 2022

In the Matter of the Constitution of Kenya 2010 and In the Matter of the Enforcement of the Bill of Rights Under Articles 22 (1) of the Constitution of Kenya and in the Matter of Application of the Provisions of Articles 19, 20, 21, 22, 23, 40 and 47 of the Constitution of Kenya on Bill of Rights

Between

Lucy Wambui Wangari

Petitioner

and

Kenya Revenue Authority

1st Respondent

ABSA Bank Kenya PLC

2nd Respondent

Ruling

1. The matter herein concerns Bank Account Number 100xxxx held by the Petitioner with the 2nd Respondent. The Petitioner’s case is that by a letter dated 12/03/2020 from the 1st Respondent to the 2nd Respondent and copied to her, the 1st Respondent alleged that the Petitioner was a director of an enterprise known as Njewanga Enterprises, which the 1st Respondent claimed owed it a sum of Kshs. 19,946,829. 19 in unpaid taxes. The Petitioner says that despite her contestations that she was not affiliated with the said enterprise, the 2nd Respondent, upon instructions from the 1st Respondent proceeded to freeze her bank account, thereby denying her access to it.

2. The Petitioner claims that the 1st Respondent is unlawfully demanding her to pay the alleged sum and that she stands to be greatly prejudiced by the Respondents’ conduct. It is upon this allegation that the Petitioner filed the Petition dated 12/06/2020, in which she claims violation of her right to fair administrative action under Article 47 and her right to property under Article 40 of the Constitution.

3. Accordingly, the Petitioner seeks a declaration that the freezing of her account is unlawful, a declaration that her right to property has been violated, a declaration that she is not associated with the enterprise and costs of the Petition.

4. Simultaneously, the Petitioner also filed an application dated 12/06/2020 in which she seeks reactivation of the said bank account pending the hearing and determination of the main Petition.

5. The 1st Respondent has brought the Preliminary Objection dated 06/11/2020 by which it prays to have both the Petition and the Application struck out with costs. The reasons given therein are that:1. The Tax Procedures Act confers original jurisdiction upon the Tax Appeals Tribunal for tax disputes such as the one that is currently before this Honourable Court, and the High Court can only take up appellate jurisdiction in such an instance.2. The application and the Petition offend Section 52, 53 & 56(2) of the Tax Procedures Act, Section 79(1) (b) and 9(2) of the Fair Administrative Actions Act, Section 12 of the Tax Appeals Tribunal Act; Rules 3 and 5 of the Tax Appeals Tribunal (Appeals to the High Court) Rules 2015: Articles 23(2) of the Constitution of Kenya.

6. The Preliminary Objection was argued by way of written submissions. The 1st Respondent’s Submissions are dated 10/11/2020. It submits that the Preliminary Objection pertains to issues of jurisdiction and the procedure one ought to take in challenging a decision made under Tax Law. It argues that while the High Court has unlimited original jurisdiction in criminal and civil matters, the interpretation of this unlimited jurisdiction should be one that promotes constitutional values.

7. The 1st Respondent submits that the Tax Procedures Act is a limb of the Constitution and refers to the objects and purpose of the Act set out under Section 2 and the definition of an ‘appealable decision’ under Section 3 of the same Act. It argues that the sole reason why an appealable decision is distinguished from a tax decision is because each has a distinct process of being challenged within the Tax Procedures Act.

8. According to the 1st Respondent, the first line of challenging a tax decision is by lodging an objection, which must therefore graduate to an appealable decision before being lodged at the Tax Appeals Tribunal. The 1st Respondent argues that in this case, the Agency Notice issued under the provisions of Section 42 of the Tax Procedures Act, does not fall under the definition of a tax decision under Section 3 of the Tax Procedures Act and is therefore an appealable decision. It is also the 1st Respondent’s submission that an appealable decision begins its life at the Tax Appeals Tribunal under Section 52 of the Tax Procedures Act. The 1st Respondent’s argument is therefore that the Petitioner ignored the procedure for challenging Agency Notices.

9. The 1st Respondent contends further that the Tax Procedures Act requires a party aggrieved by a decision of the Tax Appeals Tribunal to appeal the same at the High Court on questions of law and a second and final appeal at the Court of Appeal. It argues that the danger of approaching the High Court at the first instance is that it limits the right of appeal to only one (Court) and expands the jurisdiction of the High Court from matters of law to matters of fact, making tax administration unpredictable.

10. The 1st Respondent cites the provisions of the Fair Administrative Actions Act which it says also provides the procedures for challenging an administrative decision, particularly Section 2 which it says requires a party to only apply to Court after exhausting all the internal mechanisms for challenging a decision. It relies on the cases of The Registered Trustees, Kenya Railways Staff Retirement Benefits Schee v Chairman Rent Restriction Tribunal & 99 Others[2018] eKLR and Republic v Kenya Revenue Authority Ex-parte New Frarims Wholesalers Limited & 3 Others[2017] eKLR

11. On the issue of procedure, the 1st Respondent has cited numerous authorities including Rich Productions Limited v Kenya Pipeline Company & another [2014] eKLR, Diana Kethi Kilonzo & another v Independent Electoral & Boundaries Commission & 10 others [2013] eKLR, David Ramogi & 4 others v The Cabinet Secretary, Ministry of Energy & Petroleum & 7 others [2017] eKLR, John Harun Mwau v Peter Gastrow & 3 Others [2014] eKLR and George Owino Mulanya v 4 Others v Achieng Odonga & Another [2017] eKLR. The 1st Respondent maintains that the forum of first instance is the Tax Appeals Tribunal.

12. The Petitioner’s submissions are dated 13/01/2021. The Petitioner submits that the present Petition cannot be determined by the Tax Appeals Tribunal since it raises Constitutional issues of violation of the Petitioner’s rights. This, the Petitioner contends is outside the jurisdiction of the Tax Appeals Tribunal.

13. The Petitioner also contends that she is not challenging the decision made by the Commissioner but rather, the process used by the 1st Respondent in causing her account to be frozen. She argues that the decision to issue an agency notice was materially influenced by the contested allegation that she is a director of Njewanga Enterprises. She points to the error in the notice, that is the 1st Respondent issuing the Notice to a Lucy Wangui Wangari yet her name is Lucy Wambui Wangari.

14. The Petitioner argues that the 1st Respondent being an administrative body is bound by the rules of natural justice and failing to consider the Petitioner’s denial of affiliation with the said Njewanga Enterprises amounts to unreasonableness under Section 7(2) of the Fair Administrative Action Act.

15. The Petitioner also maintains that the Agency Notice was never served on her and that she only learnt of it when she visited the 2nd Respondent’s offices and realized she could not access her account. She contends that this is a violation of her constitutional rights under Article 23, 47 and 165 which cannot be dislodged by the 1st Respondent.

16. The Petitioner relies on Republic v Independent Electoral and Boundaries Commission (IEBC) Ex-parte National Super Alliance (NASA) Kenya & 6 Others[2017] eKLR and submits that she has established exceptional circumstances to make the exhaustion principle applicable. She says that the exceptional circumstances are that “the Petitioner has suffered and continues to suffer financial distress as she is completely barred from accessing her bank account as the money held in the frozen account is what she depends [on] for her survival.” She says that what is being demanded is “a colossal sum …. Considering she does not have the financial ability to raise that amount of money….and is currently unable to meet her financial obligations.”

17. From the foregoing, the single issue for determination is whether the Petition is rightfully before this Court or whether the exhaustion doctrine debars it from consideration. To be clear, there is no question that the High Court has unlimited jurisdiction under Article 165 of the Constitution. However, the Courts have developed the exhaustion doctrine, as a prudential doctrine, in consonance with the Constitution pursuant to Article 159 thereof as a judicial policy aimed at ensuring access to justice and the efficient administration of justice.

18. In the present case, the Petitioner does not dispute that she receives an “agency notice” from the 1st Respondent. Her contention is that the “agency notice” was given unprocedurally and in violation of her right to fair administrative action. She also denies that she is the correct target of the “agency notice.” What the Petitioner does not dispute is that the “agency notice” is an appealable decision by dint of section 52 of the Tax Procedures Act. The arguments the Petitioner raises before this Court can find their home at the Tax Appeals Tribunal. As our decisional law has held the exhaustion doctrine is of “esteemed juridical lineage in Kenya” and is in line with Article 159 of the Constitution. The 3-judge bench of the High Court in R vs. Independent Electoral and Boundaries Commission (I.E.B.C) Ex Parte National Super Alliance (NASA) Kenya and 6 others [2017] eKLR felicitously put it thus:42. This doctrine is now of esteemed juridical lineage in Kenya. It was perhaps most felicitously stated by the Court of Appeal in Speaker of National Assembly v Karume [1992] KLR 21 in the following oft-repeated 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.43. While this case was decided before the Constitution of Kenya 2010 was promulgated, many cases in the Post-2010 era have found the reasoning sound and provided justification and rationale for the doctrine under the 2010 Constitution. We can do no better in this regard than cite another Court of Appeal decision which provides the Constitutional rationale and basis for the doctrine. This is Geoffrey Muthiga Kabiru & 2 others – vs- Samuel Munga Henry & 1756 others [2015] eKLR, where the Court of Appeal stated that: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.

19. In the circumstances of this case, I would conclude that this suit is not ripe: the Petitioner ought, in the first instance, to approach the Tax Appeals Tribunal as stipulated in section 52 of the Tax Procedures Act as read with section 12 of the Tax Appeals Tribunal Act, 2013, and only come to Court as a last resort. She has not demonstrated that the alternative forum created by statute is inaccessible, un-affordable, would amount to unreasonable delay or is otherwise ineffective.

20. The upshot is that the Preliminary Objection dated 06/11/2020 succeeds. The Petition is hereby dismissed in its entirety as being premature.

21. The Petitioner shall also pay the costs of this suit.

22. Orders accordingly.

DATED AND DELIVERED AT NAKURU THIS 5TH DAY OF MAY 2022………………………JOEL NGUGI**JUDGE*