FULL R U L I N G
1. This full ruling is issued following the brief ruling issued by this court on 27th November 2024 due to the limited time available to write and deliver an extensive ruling at the time. Upon suggestion by learned counsel Mr. Mosota for the 1st Interested Party (IP) I accepted the same as proper that this court could deliver a skeletal ruling and provide the substance thereof later. The full ruling follows herebelow.
2. The ex-parte applicants herein Angasii Limited filed an ex parte chamber summons application dated 11/11/2024 under certificate of urgency seeking the following orders:
a. An Order of CERTIORARI removing to this Honourable Court and quashing the gazette Notice No. 6468 of 29th May, 2024 published on the 31st May, 2024 in a special issue of Kenya gazette Volume CXXVI – NO. 75 by giving a duty-free window for importation of 500,000 tonnes of white grade 1 rice into the country.
b. An order of PROHIBITION to prohibit the Respondents herein and any other person howsoever acting, from implementing, giving effect to, or enforcing the gazette Notice No. 6468 of 29th May, 2024 published on the 31st May, 2024 in a special issue of Kenya gazette Volume CXXVI – NO. 75.
c. The grant of leave to operate as a stay of any acts by Respondents to allow importation into the Country of any duty-free white grade 1 milled rice as contemplated by the gazette Notice No. 6468 of 29th May, 2024 published on the 31st May, 2024 in a special issue of Kenya gazette Volume CXXVI – NO. 75 pending hearing and determination of this case.
3. The application was filed under Order 53 Rules 1(1), (2) and (4) of the Civil Procedure Rules (CPR), sections 8 & 9 of the Law Reform Act (Cap. 26) Laws of Kenya and all other enabling provisions of the law.
4. The facts and the grounds relied upon for the said orders sought were laid down in the statutory statement dated 10/11/2024 filed alongside the chamber summons and as are pertinent are that:
a. the applicant, an artificial person and public spirited is aggrieved by the 2nd respondent, the Cabinet Secretary for National Treasury and Economic Planning’s improper application of section 114(2) of the East African Community Customs Management Act, 2004 (EACCM Act) as read together with item 20-part B of the 5th schedule to the Act, through the stated gazette notice for there is no gazetted or referenced emergency in the said gazette notice as contemplated under the Act. That this has led to serious violations of the applicant’s fundamental rights and freedoms under Article 10, 47, 73, 75, 129 and 153(4) of the Constitution and fair administrative action by the respondents.
b. the 2nd respondent acted ultra vires as he has no jurisdiction to issue such directive as in the GN herein stated where no such emergency is identified. The said decision is thus in excess of jurisdiction, ultra vires, unreasonable, in breach of rules of natural justice and constitutes an abuse of power for failure to adhere to the law, best financial practice on tax exemption.
c. the granting of tax exemptions is illegal, ultra vires, unreasonable, in breach of rules of natural justice and constitutes an abuse of power calling for this court’s intervention
d. the exemption will lead to the loss of billions of government revenue without any guarantee of subsidized consumer foods for emergency relief for there are no guidelines on how the waiver of duty will be passed to the consumers and this is against public policy.
e. that the manner of choosing the government agents/companies for the importation of the duty-free grade 1 white rice is not known thereby leaving room for favouritism, opaqueness, lack of transparency and accountability in the entire process thus violating the laws and Article 10 of the Constitution.
f. that the powers under this law have very clear application and the same should be done sparingly and not whimsically. That the actions of the respondent must always pass the test of lawfulness, reasonableness and rationality.
g. that Article 201 of the Constitution calls for openness, accountability and public participation in all national financial matters. The public finance system is required to promote an equitable society and in particular fair sharing of the burden of taxation.
5. The other grounds dwell majorly on the effects of the tax exemption to the business of the parties involved in the business of sale of rice in the country including unfair competition from those to benefit from the tax exemption and flooding of the market with cheap imported rice and that the said goods are available within the East African Common Market.
6. The court granted leave as prayed and directed the same to operate as stay for 21 days within which the substantive motion should have been filed by the ex-parte applicant.
7. The ex-parte applicant subsequently filed the substantive Notice of Motion dated 20/11/2024.
8. The 1st and 2nd respondents were aggrieved by the court’s orders and on 20/11/2024 they filed a notice of motion of even date under certificate of urgency seeking orders to suspend, stay, set aside, vary and/or review the orders of leave to operate as stay granted on 11/11/2024 pending the hearing and determination of their application and for the court to lift and set aside the said orders of 11/11/2024 pending hearing and determination of the substantive notice of motion.
9. The grounds in support of the application are set out on the face thereof. They are that the ex parte applicant deliberately omitted to disclose material facts to the court at the time of filing the said application that the waiver on import duty provided in the GN lapses on 30/11/2024 and yet the stay orders subsist for 21 days until 2/12/2024. In that case, the cause of action will effectively have lapsed thereby denying the Respondents an opportunity to be heard on the issues raised by the ex-parte applicant in its application. Consequently, the orders have caused great injustice and prejudice to the respondents and affected parties.
10. The Interested Parties (IPs) Arroz Rice Supply Limited, 1st Interested Party; Gulf Bakers Limited (together with Paragon Commodities Limited, Majeed Impex Limited, Guru Leela Commodities (Ke) Limited, Beaucop Commodities Limited, Mehran Commodities Limited) as 2nd Interested Party; One Commodities Limited, 3rd Interested Part and Aaran Agencies Limited & Abrish Enterprises Limited as 4th Interested Party sought and were granted leave to be joined to the proceedings as such, the court being satisfied that they were affected by the court’s orders granted on 11/11/2024 for leave granted to the applicant to operate as stay of the GN under consideration.
11. At the same time the 1st and 2nd Interested Parties (the 2nd IP comprising of 6 applicants under one title) filed respective applications seeking orders that the court discharge, vary, or set aside the orders issued on 11/11/2024 for leave granted to the applicant to operate as stay of the GN under consideration.
12. The 2nd IP, Gulf Bakers and the 5 others in their common application also prayed for an order that the 3rd Respondent, the Commissioner of Customs be restrained from levying or demanding customs duty from the six IPs as a precondition to customs clearance of rice consignments (grade 1 white milled rice) approved for importation before 11/11/2024 and arrived in Kenya prior to 30/11/2024.
13. The application by Arroz Rice Supply Ltd (Arroz) is based on some 54 grounds complete with submissions, and further expounded in a supporting affidavit sworn by Geoffrey Korir, operations manager of Arroz.
14. The grounds are that the publishing of the said GN was legal and Arroz had acted on the same on 27/9/2024 and obtained an allocation from the Agriculture and Food Authority of 2500 tonnes of the rice. It had placed an order for the same and the consignment was loaded at the port of Mundra, India on shipment to Kenya and was due for delivery on 14/11/2024. That the ex-parte order is causing great hardship, inconvenience and financial loss to Arroz and it will be forced to close down business and incur losses amounting to billions of shillings if the ex-parte order remains in force. It attached copies of various bills of lading to the supporting affidavit.
15. Arroz further avers that it had secured importation of 8000 metric tonnes of the said rice and the ex-parte order adversely affects its business and legitimate expectation. That the ex-parte applicant had waited until only three weeks to the lapse of the GN to seek the orders complained of. By the time the substantive motion is heard, the GN will have lapsed. That the GN had been fully implemented by the time the orders were sought and so the same cannot serve any useful purpose. That other traders had already benefitted from the GN by importing the said rice and the ex-parte applicant had not challenged the same and consequently, the order was discriminatory and violates Arroz’s right to legitimate expectation to benefit from the said GN as it had already made an importation of the said rice and it will face a tax demand of USD 500,000/= yet other traders had already benefitted from the tax-free importation.
16. That the ex-parte applicant had not shown that it had sought for information regarding shortage of rice in the country leading to the publishing of the GN or that it had applied for a review to the Respondents of the decision to publish the GN or that the process of publication of the GN was not above board and that it had been affected adversely due to procedural improprieties.
17. That the ex-parte orders are not in the interest of the public which is a primary consideration when granting an order of stay. The application had not met the public interest threshold and the same tilts in favour of fully implementing the GN. That it had not shown how the country was set to lose tax through the implementation of the said GN but rather the duty-free rice is intended to shield the public from high cost of living.
18. The single application by the 2nd IP comprising of the six companies was supported by supporting affidavits all sworn on 19/11/2024 by a director from each of the companies. The supporting affidavits were sworn as follows: Gulf Bakers Limited by Ibrahim Abdi Mohammed a director of the company, Paragon Commodities Limited by Labhesh Gir, a director of the company, Majeed Impex Limited by Syed Majeed Uddin, a director of the company, Guru Leela Commodities (Ke) Limited by Lekhoo Mal, a director of the company, Beaucop Commodities Limited by Mahesh, a director of the company and Mehran Commodities Limited Anand Kumar Lohano, a director of the company,
19. In summary the grounds and the depositions by the 2nd IPs are to the effect that they are all beneficiaries of the GN the subject of the proceedings herein and the orders issued herein are greatly prejudicial to each one of them and consequently they are dissatisfied and pray, as the respondents that the order be discharged, lifted, suspended, varied or set aside.
20. The 2nd IP’s grounds in support of the application and supporting affidavits are majorly in line with those of Arroz. They aver further that each of them relied on the GN and applied to the Agriculture and Food Authority for allocation of a quota to import and supply the rice as per the GN. The rice had already been purchased and shipped into the country and is awaiting offloading at the port of Mombasa. That the imported rice conforms to international and Kenyan standards issued by the Kenya Bureau of Standards (KEBS) as per certificates of conformity issued. That the 3rd Respondent, the Commissioner of Customs had declined to permit clearance of their respective consignments duty-free as provided for in the GN. That if tax is imposed as demanded by the 3rd Respondent, the same will become unaffordable to the ultimate consumers. In the circumstances, the 2nd IPs will not be able to clear the imported which will ultimately lead to its condemnation for destruction and mwananchi will ultimately bear the brunt of the loss.
21. The 2nd IPs also aver that the ex-parte applicant failed to disclose material facts to the court that the GN was properly and procedurally issued under Article 43 of the Constitution, the Agriculture and Food Authority Act (Cap. 317) Laws of Kenya, the Crops Act (Cap. 318) laws of Kenya and the Crops (Food Crops) Regulations, 2019 L.N. No. 217 of 2019 all which permit the 2dn Respondent in collaboration with the Cabinet Secretary for Agriculture to issue the impugned GN and the EACCM Act does not require a separate emergency situation to be gazette prior to issuance of the a gazette notice on importation of duty-free rice as alleged by the ex-parte applicant.
22. That the ex-parte applicant also concealed an important document from the court while seeking the stay orders being the Crops (Food Crops) Regulations, 2019 L.N. No. 217 of 2019 which provides for the prequalification through a licensing regime of importers of food commodities into the country including rice. Therefore, the allegation by the ex-parte applicant that the manner of choosing the government agents to import the duty-free rice was not clear is not true. The non-joinder of the Cabinet Secretary for Agriculture of the Agriculture and Food Authority renders the proceedings herein defective.
23. The ex-parte applicant filed common grounds of opposition to all the applications by the respondents and the IPs and a replying affidavit sworn on 22/11/2024 by Julius Jaka Ndaro to all the applications by the respondents and the IPs. It avers that there is no concealment of material facts or important documents and that there is nothing wrong with the timing of the application. The rest of the grounds and depositions mirror what has been averred in its -ex-parte application leading to the issue of the orders now challenged by the Respondents and the IPs.
24. The 3rd respondent Commissioner of Customs through its advocate made an oral submission and indicated that it was not participating in the proceedings but would wait to abide by the outcome of the applications as its duty was to collect the requisite tax if directed to.
25. The 3rd and 4th IPs were content with their admissions as IPs and did not wish to participate in the applications.
26. When the applications by the Respondents and the IPs came up for directions for hearing, learned counsel for the ex-parte applicant urged the court and impressed upon the respondents and the applicants to proceed with the main notice of motion which had been filed by the time the applications were coming up. He submitted that the court in considering the applications to set aside the orders would inevitably lead to a determination of the issues in the main notice of motion. Learned counsels for the respondents had no problem with that approach. However, learned counsels for the IPs felt that the applications had to be disposed of before the main motion. The court directed that the applications by the respondents and the IPs be disposed of first.
27. The court gave directions that the applications to set aside the ex-parte orders of stay would be considered and disposed of concurrently as one application as they were addressing similar issues and sought common orders. I am satisfied that the factors to be considered in consolidating cases as set out in the case of Mombasa HCCC No. 992 of 1994 Nyati Security Guards and Services Ltd vs Municipal Council of Mombasa [2004] eKLR are satisfied. The High Court said that the main purpose of consolidation is to save costs, time and effort and to make the conduct of several actions more convenient by treating them as one action. The factors are that there are two or more suits or matters pending in the same court where: -
a. Some common question of law or fact arises in both or all of them; or,
b. The rights or relief claimed in them are in respect of, or arise out of the same transaction or series of transactions, or
c. For some other reason it is desirable to make an order for consolidating them.
28. Learned counsels for the ex-parte applicant, the 1st and 2nd respondents and the 1st and 2nd Interested Parties filed submissions urging their respective positions on the application.
29. The issue for determination is whether or not this court should review the order of leave to operate as stay pending further directions of the court granted herein on 11/11/2024.
30. Learned counsels for the parties made submissions largely in line with the grounds in support of the application and the depositions in the supporting affidavits reproduced above.
31. On the issue of the court’s powers to lift or set aside the ex-parte orders for stay learned counsels for the Respondents and Interested Parties urged that such powers are available to this court. They cited the cases of Republic v Vice Chancellor Moi University, Moi University & Dean, School of Medicine Moi University Ex-Parte Benjamin J. Gikenyi Magare [2018] KEHC 5531 (KLR) and In the matter of an Application by Justus Nyangaya & Others, Nairobi Misc. Civil Case No.1133 of 2002 on that issue.
32. Learned counsel for the Respondents submitted that the gazette notice was for information to all members of the public and any trader/importer was free to make the relevant application and the applicant had not demonstrated whether he was refused and or other traders were refused authorization and thus the issue of unfairness or discrimination does not arise.
33. Learned counsel for the IPs submits that the issuance of the GN by the Cabinet Secretary was in exercise of prerogative powers which cannot be made subject of judicial review. He supports his submission with the Malawian case of In re: Ministry of Finance Ex-Parte SGS Malawi Limited (Civil Application 40 of 2003)[2003] MWHC 41 (9 June 2003) in which the English case of Council for the Civil Service Union v Minister for the Civil Service {1985] 1 A.C 374 at 418.
34. Learned counsel further submits that the ex-parte applicant failed to disclose to the court that there is a clear law governing the selection of importers of grain under Regulation 12 of the Crops (Food Crops) Regulations 2019 (L.N. No. 217 of 2019). Further that under Article 43 of the Constitution, the Agriculture and Food Authority Act, the Crops Act permit the Cabinet Secretary for Agriculture and the Agricultural and Food Authority to declare a grain shortage in the country and deem such shortage to be an emergency.
35. In his submissions, learned counsel for the ex-parte applicant submits that the court exercised its discretion in granting the orders of stay as provided for under Order 53 Rule 1(4). He submits further that the order of stay is meant to preserve the subject matter of the proceedings or render nugatory the substantive notice of motion. That the the Judicial Review application by the ex-parte applicant has a high degree of success and that damages are not an adequate remedy, especially in a public interest case as this one.
36. Learned counsel submits further that there was no gazette emergency as required under Item 20 part B of the 5th schedule made under section 114 (2) of the East African Community Customs Management Act 2004. Further that neither of the IPs are government agents as envisaged under the Act. For these reasons, learned counsel submits, that the main motion is not only arguable but strong. He has cited the case of Nairobi High Court JR Application No. 93 of 2020 Republic v the Cabinet Secretary for National Treasury and Planning & another and the Strategic Food Reserve Trust Fund and 41 Others (Interested Parties) Ex-parte Okiya Omtatah Okoiti.
37. According to learned counsel the main motion will be centered around Section 114 of the EACCM Act 2004 and Part B of the Fifth Schedule to the Act which are the issues in contention.
38. As submitted by learned counsel, these are the issues to be canvassed in the main motion and the court cannot delve into them at this point. The issue at this point is whether or not the stay orders can be lifted, varied or vacated.
39. Learned counsel cites the English case of R (H). vs Ashworth Special Hospital Authority (2003) 1 WLR 127, it was held that such a stay halts or suspends proceedings that are challenged by a claim for judicial review, and the purpose of a stay is to preserve the status quo pending the final determination of the claim for judicial review.
40. Learned counsel submits that the main factor in determining whether or not to set aside the orders of stay is whether the decision or action sought to be stayed has been fully implemented or not. He supports his submission with the case of George Philip M Wekulo vs. The Law Society of Kenya & Another Kakamega (2005) eKLR where it was held that if the decision sought to be quashed has been fully implemented leave ought not to operate as a stay, as there is nothing remaining to be stayed. (See also also R vs Capital Markets Authority ex parte Joseph Mumo Kivai & Another (2012) eKLR. Learned counsel submits that there is no allegation that the decision sought to be challenged herein has been fully implemented and the interested parties want the stay vacated so that implementation can proceed. Therefore, the threshold for setting aside the stay has not been achieved.
41. Learned counsel further supports his submissions with the cases of Republic vs Cabinet Secretary for Transport & Infrastructure & 4 Others ex parte Kenya Country Bus Owners Association and 8 Others, (2014) eKLR and James Opiyo Wandayi vs Kenya National Assembly & 2 Others, (2016) eKLR, where the High Court held that it is only where the decision in question is complete that the Court cannot stay the same.
42. Learned counsel submits that the public interest in collection of taxes is paramount in this case and in any case, if the main motion is defeated any taxes paid by the IPs can be refunded as provided for under section 47 of the Tax Procedures Act.
43. Learned counsel submits further that there is no allegation that this court exercised discretion injudiciously or whimsically and lifting the order of stay would kill the Judicial Review Application and the substratum of the main motion will be lost.
44. On the issue of material non-disclosure, the gazette notice was produced in evidence supporting the application for leave and so there cannot be material non-disclosure.
45. I have considered the several applications by the respondents and the IPs, the grounds in support thereof and the supporting affidavits as well as the responses by the ex-parte applicant and the submissions by learned counsels.
46. I will start with the issue of the supporting affidavit by the 1st and 2nd Respondents not being commissioned as submitted by learned counsel for the ex-parte applicant. Indeed, the said affidavit by Emmanuel M. Makuto does not bear the stamp of a Commissioner for Oaths. In the case of Pius Njogu Kathuri v Joseph Kiragu Muthura & 3 Others [2018] eKLR the court citing with approval the case of Omusotsi v. The Returning Officer Mumias East Constituency, Independent Electoral and Boundaries Commission and Benjamin Washiali Jomo, Election Petition No 9 of 2017, the High Court Kakamega held that;
“An affidavit can only be commissioned by a commissioner for oaths and officials of the court allowed to do so under the Act…the petition as filed is not supported by the affidavit of the petitioner as required by rule 12 (1) (b), of the Elections Rules.” The petition does not comply with the mandatory provisions of the law. The petition filed without the said documents is not a competent petition. The petition is a still birth that should not be allowed to see the light of day. The petition is accordingly struck out with costs.”
47. Likewise, in the present application, the affidavit which was not commissioned by a Commissioner for Oaths is not an affidavit. I therefore agree with learned counsel for the ex-parte applicant that there is no affidavit supporting the motion but mere statements. Order 51, rule 4 upon which the application is anchored provides that every notice of motion shall state in general terms the grounds of the application, and where any motion is grounded on evidence by affidavit, a copy of any affidavit intended to be used shall be served. In the case of the respondents, the court shall only consider the grounds in support of the application but not the supporting affidavit.
48. That the court can vary an order of stay granted upon leave to apply for an order of Prohibition or an order of Certiorari within a given time frame as directed by the court is provided for under Order 53 Rule 4(1) that:
“The grant of leave under this rule to apply for an order of Prohibition or an order of Certiorari shall, if the Judge so directs, operate as a stay of the proceedings in question until the determination of the application or until the Judge orders otherwise.”
49. The manner in which the court should approach an application such as the present ones by the respondents and the IPs was explained in the case of Judicial Commission of Inquiry into the Goldenberg Affair and Others v. Job Kilach, CA 77/2003. The Court of Appeal referring to the case of Ex-parte Harbage and the words of MAY L. J. quoted a passage on page 14 thus:-
“The next point to make is that although appeal does lie to this court against an ex-parte order made by a judge of High Court…nevertheless in his judgment in that case Sir Donalds on MR [1983] 3 All E.R. 589 at page 593 said:
“I have said ex-parte orders are essentially provisional in nature. They are made by the judge on the basis of evidence and submissions emanating from one side only. Despite the fact that the Applicant is under duty to make full disclosure of all relevant information in his possession whether or not it assists his application this is no basis for making a definite order and every judge knows this. He expects at a later stage to be given opportunity to review his provisional order in the light of evidence and argument adduced by the other side and in so doing he is not hearing an appeal from himself and in no way feels inhibited from discharging or varying his original order. This being the case it is difficult if not impossible to think of circumstances in which it would be proper to appeal to this court against an ex parte order without just giving the High Court judge an opportunity of reviewing it in light of argument from the defendant and reaching a decision.”
50. The grounds upon which the ex parte orders can be reviewed, varied, set aside or lifted are as set out in the case of In the matter of an Application by Justus Nyangaya & Others, Nairobi Misc. Civil Case No.1133 of 2002 observed;
“However, the courts have set aside ex parte orders obtained in judicial review proceedings following non-disclosure of material facts, concealment of material documents and on misrepresentation.
51. The respondents and the IPs therefore need to show that there was either non-disclosure of material facts, concealment of material documents or that there was misrepresentation on the part of the ex-parte applicant.
52. It is the respondents’ and IPs’ position that the ex-parte applicant failed to disclose a material fact being that the GN and therefore the cause of action lapses on 30/11/2024 after which date there will be nothing else to litigate upon. The respondents and the IPs will not have been afforded an opportunity of being heard and therefore will suffer an injustice and prejudice. They have further cited the case of Republic v Vice Chancellor Moi University & 3 others Ex-Parte Benjamin J. Gikenyi Magare [2018] eKLR where in an application to vacate stay orders in a judicial review application the High Court, H. Omondi, J. (as she then was) stated;
“To request the court to re-look at the background leading to the issuance of stay, is in my view not asking the court to sit on appeal on orders of a court of equal status. It is simply telling the court to reconsider the orders issued in light of the fact that the beneficiary of those orders concealed or did not disclose all the material facts prevailing. All the other issues raised will be better addressed at the hearing of the main motion.”
53. The fact that the GN complained of was due to expire within a very short time of the applicant seeking leave to and the same to operate as a stay is material to the present applications. The same was not brought to the attention of the court at the time of seeking the leave by the ex-parte applicant. Secondly, the the GN has taken effect and the IPs have acted upon it. It is also not disputed that from the time the GN was issued in May, 2024, other persons should have benefitted from the same. Therefore, even though the GN is still in the process of implementation, it would appear that a large portion of it has been acted upon. The IPs herein aver that they have already imported the rice the subject of the GN as the last consignment was to be delivered at the port of Mombasa on 14/11/2024 which is now past. That makes the GN substantially implemented save for the clearance of the goods at the port.
54. According to the IPs, the goods the subject of the GN are pending clearance at the port of Mombasa. What happens if the GN expires before they are offloaded means that they will be subjected to the normal tax regime, thereby adversely affecting the IPs, unlike their counterparts in the business who have already cleared their consignments and their goods are already in the market. They are also perishable goods in the nature of foodstuffs.
55. The issue of whether or not the tax-exemption is in the public interest and in accordance with the law will be properly canvassed at the hearing of the main motion.
56. Remembering that JR proceedings are mainly concerned with the fairness of the process by which the decision sought to be challenged was arrived at rather than the substance thereof, the main issue before the court for determination in the main motion will be whether the 2nd respondent acted without powers in issuing the said GN. In the event that he is found to have acted without powers, is there a remedy to the situation? I believe there is. The main concern raised by the ex-parte applicant Angasii Limited in its averments and depositions is captured in the statement that “the end result of such exemption is the loss of government revenue in the tune of billions of shillings without any guarantee of any subsidized consumer foods for emergency relief as there are no guidelines on how such benefit will be passed onto the final consumers.”
57. The IPs have indeed deposed that they took advantage of the tax exemption to apply for permits to import the duty-free rice and that they are likely to lose substantial business and money if the orders of stay subsist beyond the date the GN is set to expire.
58. The main issue is therefore the loss of government revenue in the form of taxes through the exemption of duty on the imported rice. Although the ex-parte applicant has not set out the amount of government revenue to be lost, it is apparent that a tax exemption in itself means no collection of taxes on the particular goods and therefore loss of revenue for the government and the tax payers at large. The IPs have indicated that they are likely to lose tens of millions of shillings in taxes with Arroz quoting USD 500,000/= which at a conservative exchange rate at the moment of KShs 125 to 1 USD would translate to KShs 62,500,000/= which is not a small sum of money considered either as tax collected by the government through the 3rd Respondent or the loss occasioned to Arroz if it has to pay the same.
59. At this stage therefore, the remedy lies in this court balancing the interests of both sides and putting in place measures to ensure that in the event that the applicant is vindicated at the hearing of the main motion that the 2nd respondent acted without authority, then the requisite taxes due should be collected but if not then the IPs do not incur such huge losses in their businesses. Otherwise, it will be a double loss both to the government and the Interested Parties if the orders of leave to operate as a stay are maintained because the goods in question being perishable they could easily go to waste. Yet it was not by the fault of the Interested parties that a window was provided for them to take advantage and import into the country duty free grade 1 white rice.
60. It is apparent from the averments and depositions in the present application and depositions by the parties that there is is a public interest angle to the dispute herein. On the one-hand the ex-parte applicant argues that the public interest tilts in favour of retaining the orders of stay so that the government does not lose taxes through the duty-free importation of the commodities herein, the IPs on their part argue that the public interest tilts in favour of ensuring the supply of foodstuff to address the emergency food situation declared by the Cabinet Secretary for Agriculture.
61. In the case of Munir Sheikh Ahmed v Capital Markets Authority [2018] eKLR Lady Justice P. Nyamweya (as she then was) held as follows:
“The second factor that comes to play in the exercise of discretion whether or not to grant a stay in judicial review proceedings is that of the public interest. The public interest as an overriding factor when determining whether or not to grant stay orders was explained by Majanja J. in R vs Capital Markets Authority Ex-parte Joseph Mumo Kivai & Another (supra), where the learned judge held that judicial review proceedings are public law proceedings for vindication of private rights, and for this reason public interest is a relevant consideration in the granting of stay orders.
62. In the present case, there is public interest exhibited by both sides to the dispute. In the case of Sun Africa Hotels Limited, Nyali Sun Africa Beach & Hotels&Spa; Limited v Kenya Revenue Authority, Commissioner of Domestic Taxes, Board of Management- Hospital & Nyali Hotels International Ltd [2018] KEHC 3026 (KLR) cited by learned counsel for the ex-parte applicant, the High Court, Nyamweya, J. (as she then was) in a Judicial Review application for leave to operate as stay granted the same on condition that the applicant provides a bank guarantee as security.
63. In the circumstances, considering the various authorities cited by learned counsels for the parties herein, I find that the following orders comment to me for this court to grant on the applications by the 1st and 2nd Respondents as well as the 1st and 2nd Interested Parties:
a. The orders of stay following the grant of leave issued herein on 11/11/2024 granting the applicant Angasii Ltd leave to apply for orders of certiorari to quash and orders of prohibition against implementing, giving effect to, or enforcing Gazette Notice No. 6468 of 29/5/2024 published on 31/5/2024 in special issue of Kenya Gazette Volume CXXVI-No. 75 giving duty free window to allow importation of 500,000 tons of white grade 1 rice into the country are hereby lifted on condition that each of the Interested Parties herein and any other person affected by the said order from the date of the order being 11/11/2024 shall provide a bank guarantee of KShs Ten Million (KShs 10,000,000/=) from a reputable bank to be filed in court or to deposit into this court an equivalent sum of money as security before clearance of the rice from the port of Mombasa as per the quota allocated to such Interested Party or any such affected person as per the Gazette notice stated herein.
b. The costs of the applications shall be in the cause.
64. Orders accordingly.
This Full Ruling is delivered, dated and signed and transmitted to all parties through uploading on the Judiciary Case Management System (CTS) on the this 10th day of December 2024
1. This full ruling is issued following the brief ruling issued by this court on 27th November 2024 due to the limited time available to write and deliver an extensive ruling at the time. Upon suggestion by learned counsel Mr. Mosota for the 1st Interested Party (IP) I accepted the same as proper that this court could deliver a skeletal ruling and provide the substance thereof later. The full ruling follows herebelow.
2. The ex-parte applicants herein Angasii Limited filed an ex parte chamber summons application dated 11/11/2024 under certificate of urgency seeking the following orders:
a. An Order of CERTIORARI removing to this Honourable Court and quashing the gazette Notice No. 6468 of 29th May, 2024 published on the 31st May, 2024 in a special issue of Kenya gazette Volume CXXVI – NO. 75 by giving a duty-free window for importation of 500,000 tonnes of white grade 1 rice into the country.
b. An order of PROHIBITION to prohibit the Respondents herein and any other person howsoever acting, from implementing, giving effect to, or enforcing the gazette Notice No. 6468 of 29th May, 2024 published on the 31st May, 2024 in a special issue of Kenya gazette Volume CXXVI – NO. 75.
c. The grant of leave to operate as a stay of any acts by Respondents to allow importation into the Country of any duty-free white grade 1 milled rice as contemplated by the gazette Notice No. 6468 of 29th May, 2024 published on the 31st May, 2024 in a special issue of Kenya gazette Volume CXXVI – NO. 75 pending hearing and determination of this case.
3. The application was filed under Order 53 Rules 1(1), (2) and (4) of the Civil Procedure Rules (CPR), sections 8 & 9 of the Law Reform Act (Cap. 26) Laws of Kenya and all other enabling provisions of the law.
4. The facts and the grounds relied upon for the said orders sought were laid down in the statutory statement dated 10/11/2024 filed alongside the chamber summons and as are pertinent are that:
a. the applicant, an artificial person and public spirited is aggrieved by the 2nd respondent, the Cabinet Secretary for National Treasury and Economic Planning’s improper application of section 114(2) of the East African Community Customs Management Act, 2004 (EACCM Act) as read together with item 20-part B of the 5th schedule to the Act, through the stated gazette notice for there is no gazetted or referenced emergency in the said gazette notice as contemplated under the Act. That this has led to serious violations of the applicant’s fundamental rights and freedoms under Article 10, 47, 73, 75, 129 and 153(4) of the Constitution and fair administrative action by the respondents.
b. the 2nd respondent acted ultra vires as he has no jurisdiction to issue such directive as in the GN herein stated where no such emergency is identified. The said decision is thus in excess of jurisdiction, ultra vires, unreasonable, in breach of rules of natural justice and constitutes an abuse of power for failure to adhere to the law, best financial practice on tax exemption.
c. the granting of tax exemptions is illegal, ultra vires, unreasonable, in breach of rules of natural justice and constitutes an abuse of power calling for this court’s intervention
d. the exemption will lead to the loss of billions of government revenue without any guarantee of subsidized consumer foods for emergency relief for there are no guidelines on how the waiver of duty will be passed to the consumers and this is against public policy.
e. that the manner of choosing the government agents/companies for the importation of the duty-free grade 1 white rice is not known thereby leaving room for favouritism, opaqueness, lack of transparency and accountability in the entire process thus violating the laws and Article 10 of the Constitution.
f. that the powers under this law have very clear application and the same should be done sparingly and not whimsically. That the actions of the respondent must always pass the test of lawfulness, reasonableness and rationality.
g. that Article 201 of the Constitution calls for openness, accountability and public participation in all national financial matters. The public finance system is required to promote an equitable society and in particular fair sharing of the burden of taxation.
5. The other grounds dwell majorly on the effects of the tax exemption to the business of the parties involved in the business of sale of rice in the country including unfair competition from those to benefit from the tax exemption and flooding of the market with cheap imported rice and that the said goods are available within the East African Common Market.
6. The court granted leave as prayed and directed the same to operate as stay for 21 days within which the substantive motion should have been filed by the ex-parte applicant.
7. The ex-parte applicant subsequently filed the substantive Notice of Motion dated 20/11/2024.
8. The 1st and 2nd respondents were aggrieved by the court’s orders and on 20/11/2024 they filed a notice of motion of even date under certificate of urgency seeking orders to suspend, stay, set aside, vary and/or review the orders of leave to operate as stay granted on 11/11/2024 pending the hearing and determination of their application and for the court to lift and set aside the said orders of 11/11/2024 pending hearing and determination of the substantive notice of motion.
9. The grounds in support of the application are set out on the face thereof. They are that the ex parte applicant deliberately omitted to disclose material facts to the court at the time of filing the said application that the waiver on import duty provided in the GN lapses on 30/11/2024 and yet the stay orders subsist for 21 days until 2/12/2024. In that case, the cause of action will effectively have lapsed thereby denying the Respondents an opportunity to be heard on the issues raised by the ex-parte applicant in its application. Consequently, the orders have caused great injustice and prejudice to the respondents and affected parties.
10. The Interested Parties (IPs) Arroz Rice Supply Limited, 1st Interested Party; Gulf Bakers Limited (together with Paragon Commodities Limited, Majeed Impex Limited, Guru Leela Commodities (Ke) Limited, Beaucop Commodities Limited, Mehran Commodities Limited) as 2nd Interested Party; One Commodities Limited, 3rd Interested Part and Aaran Agencies Limited & Abrish Enterprises Limited as 4th Interested Party sought and were granted leave to be joined to the proceedings as such, the court being satisfied that they were affected by the court’s orders granted on 11/11/2024 for leave granted to the applicant to operate as stay of the GN under consideration.
11. At the same time the 1st and 2nd Interested Parties (the 2nd IP comprising of 6 applicants under one title) filed respective applications seeking orders that the court discharge, vary, or set aside the orders issued on 11/11/2024 for leave granted to the applicant to operate as stay of the GN under consideration.
12. The 2nd IP, Gulf Bakers and the 5 others in their common application also prayed for an order that the 3rd Respondent, the Commissioner of Customs be restrained from levying or demanding customs duty from the six IPs as a precondition to customs clearance of rice consignments (grade 1 white milled rice) approved for importation before 11/11/2024 and arrived in Kenya prior to 30/11/2024.
13. The application by Arroz Rice Supply Ltd (Arroz) is based on some 54 grounds complete with submissions, and further expounded in a supporting affidavit sworn by Geoffrey Korir, operations manager of Arroz.
14. The grounds are that the publishing of the said GN was legal and Arroz had acted on the same on 27/9/2024 and obtained an allocation from the Agriculture and Food Authority of 2500 tonnes of the rice. It had placed an order for the same and the consignment was loaded at the port of Mundra, India on shipment to Kenya and was due for delivery on 14/11/2024. That the ex-parte order is causing great hardship, inconvenience and financial loss to Arroz and it will be forced to close down business and incur losses amounting to billions of shillings if the ex-parte order remains in force. It attached copies of various bills of lading to the supporting affidavit.
15. Arroz further avers that it had secured importation of 8000 metric tonnes of the said rice and the ex-parte order adversely affects its business and legitimate expectation. That the ex-parte applicant had waited until only three weeks to the lapse of the GN to seek the orders complained of. By the time the substantive motion is heard, the GN will have lapsed. That the GN had been fully implemented by the time the orders were sought and so the same cannot serve any useful purpose. That other traders had already benefitted from the GN by importing the said rice and the ex-parte applicant had not challenged the same and consequently, the order was discriminatory and violates Arroz’s right to legitimate expectation to benefit from the said GN as it had already made an importation of the said rice and it will face a tax demand of USD 500,000/= yet other traders had already benefitted from the tax-free importation.
16. That the ex-parte applicant had not shown that it had sought for information regarding shortage of rice in the country leading to the publishing of the GN or that it had applied for a review to the Respondents of the decision to publish the GN or that the process of publication of the GN was not above board and that it had been affected adversely due to procedural improprieties.
17. That the ex-parte orders are not in the interest of the public which is a primary consideration when granting an order of stay. The application had not met the public interest threshold and the same tilts in favour of fully implementing the GN. That it had not shown how the country was set to lose tax through the implementation of the said GN but rather the duty-free rice is intended to shield the public from high cost of living.
18. The single application by the 2nd IP comprising of the six companies was supported by supporting affidavits all sworn on 19/11/2024 by a director from each of the companies. The supporting affidavits were sworn as follows: Gulf Bakers Limited by Ibrahim Abdi Mohammed a director of the company, Paragon Commodities Limited by Labhesh Gir, a director of the company, Majeed Impex Limited by Syed Majeed Uddin, a director of the company, Guru Leela Commodities (Ke) Limited by Lekhoo Mal, a director of the company, Beaucop Commodities Limited by Mahesh, a director of the company and Mehran Commodities Limited Anand Kumar Lohano, a director of the company,
19. In summary the grounds and the depositions by the 2nd IPs are to the effect that they are all beneficiaries of the GN the subject of the proceedings herein and the orders issued herein are greatly prejudicial to each one of them and consequently they are dissatisfied and pray, as the respondents that the order be discharged, lifted, suspended, varied or set aside.
20. The 2nd IP’s grounds in support of the application and supporting affidavits are majorly in line with those of Arroz. They aver further that each of them relied on the GN and applied to the Agriculture and Food Authority for allocation of a quota to import and supply the rice as per the GN. The rice had already been purchased and shipped into the country and is awaiting offloading at the port of Mombasa. That the imported rice conforms to international and Kenyan standards issued by the Kenya Bureau of Standards (KEBS) as per certificates of conformity issued. That the 3rd Respondent, the Commissioner of Customs had declined to permit clearance of their respective consignments duty-free as provided for in the GN. That if tax is imposed as demanded by the 3rd Respondent, the same will become unaffordable to the ultimate consumers. In the circumstances, the 2nd IPs will not be able to clear the imported which will ultimately lead to its condemnation for destruction and mwananchi will ultimately bear the brunt of the loss.
21. The 2nd IPs also aver that the ex-parte applicant failed to disclose material facts to the court that the GN was properly and procedurally issued under Article 43 of the Constitution, the Agriculture and Food Authority Act (Cap. 317) Laws of Kenya, the Crops Act (Cap. 318) laws of Kenya and the Crops (Food Crops) Regulations, 2019 L.N. No. 217 of 2019 all which permit the 2dn Respondent in collaboration with the Cabinet Secretary for Agriculture to issue the impugned GN and the EACCM Act does not require a separate emergency situation to be gazette prior to issuance of the a gazette notice on importation of duty-free rice as alleged by the ex-parte applicant.
22. That the ex-parte applicant also concealed an important document from the court while seeking the stay orders being the Crops (Food Crops) Regulations, 2019 L.N. No. 217 of 2019 which provides for the prequalification through a licensing regime of importers of food commodities into the country including rice. Therefore, the allegation by the ex-parte applicant that the manner of choosing the government agents to import the duty-free rice was not clear is not true. The non-joinder of the Cabinet Secretary for Agriculture of the Agriculture and Food Authority renders the proceedings herein defective.
23. The ex-parte applicant filed common grounds of opposition to all the applications by the respondents and the IPs and a replying affidavit sworn on 22/11/2024 by Julius Jaka Ndaro to all the applications by the respondents and the IPs. It avers that there is no concealment of material facts or important documents and that there is nothing wrong with the timing of the application. The rest of the grounds and depositions mirror what has been averred in its -ex-parte application leading to the issue of the orders now challenged by the Respondents and the IPs.
24. The 3rd respondent Commissioner of Customs through its advocate made an oral submission and indicated that it was not participating in the proceedings but would wait to abide by the outcome of the applications as its duty was to collect the requisite tax if directed to.
25. The 3rd and 4th IPs were content with their admissions as IPs and did not wish to participate in the applications.
26. When the applications by the Respondents and the IPs came up for directions for hearing, learned counsel for the ex-parte applicant urged the court and impressed upon the respondents and the applicants to proceed with the main notice of motion which had been filed by the time the applications were coming up. He submitted that the court in considering the applications to set aside the orders would inevitably lead to a determination of the issues in the main notice of motion. Learned counsels for the respondents had no problem with that approach. However, learned counsels for the IPs felt that the applications had to be disposed of before the main motion. The court directed that the applications by the respondents and the IPs be disposed of first.
27. The court gave directions that the applications to set aside the ex-parte orders of stay would be considered and disposed of concurrently as one application as they were addressing similar issues and sought common orders. I am satisfied that the factors to be considered in consolidating cases as set out in the case of Mombasa HCCC No. 992 of 1994 Nyati Security Guards and Services Ltd vs Municipal Council of Mombasa [2004] eKLR are satisfied. The High Court said that the main purpose of consolidation is to save costs, time and effort and to make the conduct of several actions more convenient by treating them as one action. The factors are that there are two or more suits or matters pending in the same court where: -
a. Some common question of law or fact arises in both or all of them; or,
b. The rights or relief claimed in them are in respect of, or arise out of the same transaction or series of transactions, or
c. For some other reason it is desirable to make an order for consolidating them.
28. Learned counsels for the ex-parte applicant, the 1st and 2nd respondents and the 1st and 2nd Interested Parties filed submissions urging their respective positions on the application.
29. The issue for determination is whether or not this court should review the order of leave to operate as stay pending further directions of the court granted herein on 11/11/2024.
30. Learned counsels for the parties made submissions largely in line with the grounds in support of the application and the depositions in the supporting affidavits reproduced above.
31. On the issue of the court’s powers to lift or set aside the ex-parte orders for stay learned counsels for the Respondents and Interested Parties urged that such powers are available to this court. They cited the cases of Republic v Vice Chancellor Moi University, Moi University & Dean, School of Medicine Moi University Ex-Parte Benjamin J. Gikenyi Magare [2018] KEHC 5531 (KLR) and In the matter of an Application by Justus Nyangaya & Others, Nairobi Misc. Civil Case No.1133 of 2002 on that issue.
32. Learned counsel for the Respondents submitted that the gazette notice was for information to all members of the public and any trader/importer was free to make the relevant application and the applicant had not demonstrated whether he was refused and or other traders were refused authorization and thus the issue of unfairness or discrimination does not arise.
33. Learned counsel for the IPs submits that the issuance of the GN by the Cabinet Secretary was in exercise of prerogative powers which cannot be made subject of judicial review. He supports his submission with the Malawian case of In re: Ministry of Finance Ex-Parte SGS Malawi Limited (Civil Application 40 of 2003)[2003] MWHC 41 (9 June 2003) in which the English case of Council for the Civil Service Union v Minister for the Civil Service {1985] 1 A.C 374 at 418.
34. Learned counsel further submits that the ex-parte applicant failed to disclose to the court that there is a clear law governing the selection of importers of grain under Regulation 12 of the Crops (Food Crops) Regulations 2019 (L.N. No. 217 of 2019). Further that under Article 43 of the Constitution, the Agriculture and Food Authority Act, the Crops Act permit the Cabinet Secretary for Agriculture and the Agricultural and Food Authority to declare a grain shortage in the country and deem such shortage to be an emergency.
35. In his submissions, learned counsel for the ex-parte applicant submits that the court exercised its discretion in granting the orders of stay as provided for under Order 53 Rule 1(4). He submits further that the order of stay is meant to preserve the subject matter of the proceedings or render nugatory the substantive notice of motion. That the the Judicial Review application by the ex-parte applicant has a high degree of success and that damages are not an adequate remedy, especially in a public interest case as this one.
36. Learned counsel submits further that there was no gazette emergency as required under Item 20 part B of the 5th schedule made under section 114 (2) of the East African Community Customs Management Act 2004. Further that neither of the IPs are government agents as envisaged under the Act. For these reasons, learned counsel submits, that the main motion is not only arguable but strong. He has cited the case of Nairobi High Court JR Application No. 93 of 2020 Republic v the Cabinet Secretary for National Treasury and Planning & another and the Strategic Food Reserve Trust Fund and 41 Others (Interested Parties) Ex-parte Okiya Omtatah Okoiti.
37. According to learned counsel the main motion will be centered around Section 114 of the EACCM Act 2004 and Part B of the Fifth Schedule to the Act which are the issues in contention.
38. As submitted by learned counsel, these are the issues to be canvassed in the main motion and the court cannot delve into them at this point. The issue at this point is whether or not the stay orders can be lifted, varied or vacated.
39. Learned counsel cites the English case of R (H). vs Ashworth Special Hospital Authority (2003) 1 WLR 127, it was held that such a stay halts or suspends proceedings that are challenged by a claim for judicial review, and the purpose of a stay is to preserve the status quo pending the final determination of the claim for judicial review.
40. Learned counsel submits that the main factor in determining whether or not to set aside the orders of stay is whether the decision or action sought to be stayed has been fully implemented or not. He supports his submission with the case of George Philip M Wekulo vs. The Law Society of Kenya & Another Kakamega (2005) eKLR where it was held that if the decision sought to be quashed has been fully implemented leave ought not to operate as a stay, as there is nothing remaining to be stayed. (See also also R vs Capital Markets Authority ex parte Joseph Mumo Kivai & Another (2012) eKLR. Learned counsel submits that there is no allegation that the decision sought to be challenged herein has been fully implemented and the interested parties want the stay vacated so that implementation can proceed. Therefore, the threshold for setting aside the stay has not been achieved.
41. Learned counsel further supports his submissions with the cases of Republic vs Cabinet Secretary for Transport & Infrastructure & 4 Others ex parte Kenya Country Bus Owners Association and 8 Others, (2014) eKLR and James Opiyo Wandayi vs Kenya National Assembly & 2 Others, (2016) eKLR, where the High Court held that it is only where the decision in question is complete that the Court cannot stay the same.
42. Learned counsel submits that the public interest in collection of taxes is paramount in this case and in any case, if the main motion is defeated any taxes paid by the IPs can be refunded as provided for under section 47 of the Tax Procedures Act.
43. Learned counsel submits further that there is no allegation that this court exercised discretion injudiciously or whimsically and lifting the order of stay would kill the Judicial Review Application and the substratum of the main motion will be lost.
44. On the issue of material non-disclosure, the gazette notice was produced in evidence supporting the application for leave and so there cannot be material non-disclosure.
45. I have considered the several applications by the respondents and the IPs, the grounds in support thereof and the supporting affidavits as well as the responses by the ex-parte applicant and the submissions by learned counsels.
46. I will start with the issue of the supporting affidavit by the 1st and 2nd Respondents not being commissioned as submitted by learned counsel for the ex-parte applicant. Indeed, the said affidavit by Emmanuel M. Makuto does not bear the stamp of a Commissioner for Oaths. In the case of Pius Njogu Kathuri v Joseph Kiragu Muthura & 3 Others [2018] eKLR the court citing with approval the case of Omusotsi v. The Returning Officer Mumias East Constituency, Independent Electoral and Boundaries Commission and Benjamin Washiali Jomo, Election Petition No 9 of 2017, the High Court Kakamega held that;
“An affidavit can only be commissioned by a commissioner for oaths and officials of the court allowed to do so under the Act…the petition as filed is not supported by the affidavit of the petitioner as required by rule 12 (1) (b), of the Elections Rules.” The petition does not comply with the mandatory provisions of the law. The petition filed without the said documents is not a competent petition. The petition is a still birth that should not be allowed to see the light of day. The petition is accordingly struck out with costs.”
47. Likewise, in the present application, the affidavit which was not commissioned by a Commissioner for Oaths is not an affidavit. I therefore agree with learned counsel for the ex-parte applicant that there is no affidavit supporting the motion but mere statements. Order 51, rule 4 upon which the application is anchored provides that every notice of motion shall state in general terms the grounds of the application, and where any motion is grounded on evidence by affidavit, a copy of any affidavit intended to be used shall be served. In the case of the respondents, the court shall only consider the grounds in support of the application but not the supporting affidavit.
48. That the court can vary an order of stay granted upon leave to apply for an order of Prohibition or an order of Certiorari within a given time frame as directed by the court is provided for under Order 53 Rule 4(1) that:
“The grant of leave under this rule to apply for an order of Prohibition or an order of Certiorari shall, if the Judge so directs, operate as a stay of the proceedings in question until the determination of the application or until the Judge orders otherwise.”
49. The manner in which the court should approach an application such as the present ones by the respondents and the IPs was explained in the case of Judicial Commission of Inquiry into the Goldenberg Affair and Others v. Job Kilach, CA 77/2003. The Court of Appeal referring to the case of Ex-parte Harbage and the words of MAY L. J. quoted a passage on page 14 thus:-
“The next point to make is that although appeal does lie to this court against an ex-parte order made by a judge of High Court…nevertheless in his judgment in that case Sir Donalds on MR [1983] 3 All E.R. 589 at page 593 said:
“I have said ex-parte orders are essentially provisional in nature. They are made by the judge on the basis of evidence and submissions emanating from one side only. Despite the fact that the Applicant is under duty to make full disclosure of all relevant information in his possession whether or not it assists his application this is no basis for making a definite order and every judge knows this. He expects at a later stage to be given opportunity to review his provisional order in the light of evidence and argument adduced by the other side and in so doing he is not hearing an appeal from himself and in no way feels inhibited from discharging or varying his original order. This being the case it is difficult if not impossible to think of circumstances in which it would be proper to appeal to this court against an ex parte order without just giving the High Court judge an opportunity of reviewing it in light of argument from the defendant and reaching a decision.”
50. The grounds upon which the ex parte orders can be reviewed, varied, set aside or lifted are as set out in the case of In the matter of an Application by Justus Nyangaya & Others, Nairobi Misc. Civil Case No.1133 of 2002 observed;
“However, the courts have set aside ex parte orders obtained in judicial review proceedings following non-disclosure of material facts, concealment of material documents and on misrepresentation.
51. The respondents and the IPs therefore need to show that there was either non-disclosure of material facts, concealment of material documents or that there was misrepresentation on the part of the ex-parte applicant.
52. It is the respondents’ and IPs’ position that the ex-parte applicant failed to disclose a material fact being that the GN and therefore the cause of action lapses on 30/11/2024 after which date there will be nothing else to litigate upon. The respondents and the IPs will not have been afforded an opportunity of being heard and therefore will suffer an injustice and prejudice. They have further cited the case of Republic v Vice Chancellor Moi University & 3 others Ex-Parte Benjamin J. Gikenyi Magare [2018] eKLR where in an application to vacate stay orders in a judicial review application the High Court, H. Omondi, J. (as she then was) stated;
“To request the court to re-look at the background leading to the issuance of stay, is in my view not asking the court to sit on appeal on orders of a court of equal status. It is simply telling the court to reconsider the orders issued in light of the fact that the beneficiary of those orders concealed or did not disclose all the material facts prevailing. All the other issues raised will be better addressed at the hearing of the main motion.”
53. The fact that the GN complained of was due to expire within a very short time of the applicant seeking leave to and the same to operate as a stay is material to the present applications. The same was not brought to the attention of the court at the time of seeking the leave by the ex-parte applicant. Secondly, the the GN has taken effect and the IPs have acted upon it. It is also not disputed that from the time the GN was issued in May, 2024, other persons should have benefitted from the same. Therefore, even though the GN is still in the process of implementation, it would appear that a large portion of it has been acted upon. The IPs herein aver that they have already imported the rice the subject of the GN as the last consignment was to be delivered at the port of Mombasa on 14/11/2024 which is now past. That makes the GN substantially implemented save for the clearance of the goods at the port.
54. According to the IPs, the goods the subject of the GN are pending clearance at the port of Mombasa. What happens if the GN expires before they are offloaded means that they will be subjected to the normal tax regime, thereby adversely affecting the IPs, unlike their counterparts in the business who have already cleared their consignments and their goods are already in the market. They are also perishable goods in the nature of foodstuffs.
55. The issue of whether or not the tax-exemption is in the public interest and in accordance with the law will be properly canvassed at the hearing of the main motion.
56. Remembering that JR proceedings are mainly concerned with the fairness of the process by which the decision sought to be challenged was arrived at rather than the substance thereof, the main issue before the court for determination in the main motion will be whether the 2nd respondent acted without powers in issuing the said GN. In the event that he is found to have acted without powers, is there a remedy to the situation? I believe there is. The main concern raised by the ex-parte applicant Angasii Limited in its averments and depositions is captured in the statement that “the end result of such exemption is the loss of government revenue in the tune of billions of shillings without any guarantee of any subsidized consumer foods for emergency relief as there are no guidelines on how such benefit will be passed onto the final consumers.”
57. The IPs have indeed deposed that they took advantage of the tax exemption to apply for permits to import the duty-free rice and that they are likely to lose substantial business and money if the orders of stay subsist beyond the date the GN is set to expire.
58. The main issue is therefore the loss of government revenue in the form of taxes through the exemption of duty on the imported rice. Although the ex-parte applicant has not set out the amount of government revenue to be lost, it is apparent that a tax exemption in itself means no collection of taxes on the particular goods and therefore loss of revenue for the government and the tax payers at large. The IPs have indicated that they are likely to lose tens of millions of shillings in taxes with Arroz quoting USD 500,000/= which at a conservative exchange rate at the moment of KShs 125 to 1 USD would translate to KShs 62,500,000/= which is not a small sum of money considered either as tax collected by the government through the 3rd Respondent or the loss occasioned to Arroz if it has to pay the same.
59. At this stage therefore, the remedy lies in this court balancing the interests of both sides and putting in place measures to ensure that in the event that the applicant is vindicated at the hearing of the main motion that the 2nd respondent acted without authority, then the requisite taxes due should be collected but if not then the IPs do not incur such huge losses in their businesses. Otherwise, it will be a double loss both to the government and the Interested Parties if the orders of leave to operate as a stay are maintained because the goods in question being perishable they could easily go to waste. Yet it was not by the fault of the Interested parties that a window was provided for them to take advantage and import into the country duty free grade 1 white rice.
60. It is apparent from the averments and depositions in the present application and depositions by the parties that there is is a public interest angle to the dispute herein. On the one-hand the ex-parte applicant argues that the public interest tilts in favour of retaining the orders of stay so that the government does not lose taxes through the duty-free importation of the commodities herein, the IPs on their part argue that the public interest tilts in favour of ensuring the supply of foodstuff to address the emergency food situation declared by the Cabinet Secretary for Agriculture.
61. In the case of Munir Sheikh Ahmed v Capital Markets Authority [2018] eKLR Lady Justice P. Nyamweya (as she then was) held as follows:
“The second factor that comes to play in the exercise of discretion whether or not to grant a stay in judicial review proceedings is that of the public interest. The public interest as an overriding factor when determining whether or not to grant stay orders was explained by Majanja J. in R vs Capital Markets Authority Ex-parte Joseph Mumo Kivai & Another (supra), where the learned judge held that judicial review proceedings are public law proceedings for vindication of private rights, and for this reason public interest is a relevant consideration in the granting of stay orders.
62. In the present case, there is public interest exhibited by both sides to the dispute. In the case of Sun Africa Hotels Limited, Nyali Sun Africa Beach & Hotels&Spa; Limited v Kenya Revenue Authority, Commissioner of Domestic Taxes, Board of Management- Hospital & Nyali Hotels International Ltd [2018] KEHC 3026 (KLR) cited by learned counsel for the ex-parte applicant, the High Court, Nyamweya, J. (as she then was) in a Judicial Review application for leave to operate as stay granted the same on condition that the applicant provides a bank guarantee as security.
63. In the circumstances, considering the various authorities cited by learned counsels for the parties herein, I find that the following orders comment to me for this court to grant on the applications by the 1st and 2nd Respondents as well as the 1st and 2nd Interested Parties:
a. The orders of stay following the grant of leave issued herein on 11/11/2024 granting the applicant Angasii Ltd leave to apply for orders of certiorari to quash and orders of prohibition against implementing, giving effect to, or enforcing Gazette Notice No. 6468 of 29/5/2024 published on 31/5/2024 in special issue of Kenya Gazette Volume CXXVI-No. 75 giving duty free window to allow importation of 500,000 tons of white grade 1 rice into the country are hereby lifted on condition that each of the Interested Parties herein and any other person affected by the said order from the date of the order being 11/11/2024 shall provide a bank guarantee of KShs Ten Million (KShs 10,000,000/=) from a reputable bank to be filed in court or to deposit into this court an equivalent sum of money as security before clearance of the rice from the port of Mombasa as per the quota allocated to such Interested Party or any such affected person as per the Gazette notice stated herein.
b. The costs of the applications shall be in the cause.
64. Orders accordingly.
This Full Ruling is delivered, dated and signed and transmitted to all parties through uploading on the Judiciary Case Management System (CTS) on the this 10th day of December 2024