ADVANCE BRIEF R U L I N G
1. Due to the limited time available to write and deliver an extensive ruling, learned counsel Mr. Mosota for the 1st Interested Party (IP) suggested and I accepted as proper that this court could deliver a skeletal ruling and provide the substance thereof later. That is what follows hereinbelow.
2. The ex-parte applicants herein Angasii Limited filed an ex parte Chamber Summons application dated 11/11/2024 under certificate of urgency seeking leave to apply for orders of certiorari for quashing 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 (GN) giving duty free window to allow importation of 500,000 tons of white grade 1 rice into the country. They also sought orders that the leave operate as a stay.
3. The application was filed under Order 53 Rules 1(1),(2) and (4) of the Civil Procedure Rules, 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) 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 including unfair competition and flooding of the market with cheap imported rice.
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 filed the substantive Notice of Motion dated 20/11/2024 on the same day 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 and repeated in the supporting affidavit sworn on 20/11/2024 by Emmanuel M. Makuto, Senior Litigation Counsel in the Office of the Attorney General.
10. 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.
11. 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.
12. 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 more or less similar to those sought by the Respondents 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.
13. 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 6 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.
14. 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.
15. The single application by the 2nd IP comprising of the six companies was supported by supporting affidavits all sworn on 19/11/2024 by an officer 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,
16. In summary the grounds and the depositions by the 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.
17. The IPs depose 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 rice. For some of them, the rice has already been purchased and shipped into the country and is awaiting offloading at the port while for Arroz the shipment was enroute for delivery to Kenya on 14/11/2024. That the imported rice conforms to international and Kenyan standards issued by the Kenya Bureau of Standards (KEBS) as per certificates of conformity issued.
18. The ex-parte applicant filed common grounds of opposition and a replying affidavit sworn on 22/11/2024 by Julius Jaka Ndaro to all the applications by the respondents and the IPs.
19. The 3rd respondent through its advocate indicated that it was not participating in the proceedings but would wait to abide by the outcome of the court as its duty was to collect the requisite tax if directed to.
20. The court gave directions that all the applications will be considered and disposed of as one as they were addressing similar issues and sought common orders.
21. 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 as considering the applications to set aside the orders would inevitably lead to a determination of the issues. 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.
22. 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.
23. The 3rd and 4th IPs were content with their admissions as IPs and did not wish to participate in the application.
24. 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.
25. 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.”
26. 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
27. 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. The GN has taken effect and the IPs have acted upon it. The goods the subject of the GN are either in the high seas or pending offloading at the port of Mombasa. What happens if the GN expires before they are offloaded? They are also perishable goods in the nature of foodstuffs.
28. 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.” 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.
29. 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 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.
30. At this stage therefore, the remedy lies in this court 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. 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.
31. 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 in court before clearance of the rice from the Port 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.
32. Orders accordingly.
Ruling delivered, dated and signed on the Virtual Platform, Teams
this 27th day of November 2024
HON. JUSTICE ANDAYI W.F.
JUDGE
1. Due to the limited time available to write and deliver an extensive ruling, learned counsel Mr. Mosota for the 1st Interested Party (IP) suggested and I accepted as proper that this court could deliver a skeletal ruling and provide the substance thereof later. That is what follows hereinbelow.
2. The ex-parte applicants herein Angasii Limited filed an ex parte Chamber Summons application dated 11/11/2024 under certificate of urgency seeking leave to apply for orders of certiorari for quashing 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 (GN) giving duty free window to allow importation of 500,000 tons of white grade 1 rice into the country. They also sought orders that the leave operate as a stay.
3. The application was filed under Order 53 Rules 1(1),(2) and (4) of the Civil Procedure Rules, 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) 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 including unfair competition and flooding of the market with cheap imported rice.
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 filed the substantive Notice of Motion dated 20/11/2024 on the same day 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 and repeated in the supporting affidavit sworn on 20/11/2024 by Emmanuel M. Makuto, Senior Litigation Counsel in the Office of the Attorney General.
10. 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.
11. 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.
12. 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 more or less similar to those sought by the Respondents 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.
13. 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 6 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.
14. 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.
15. The single application by the 2nd IP comprising of the six companies was supported by supporting affidavits all sworn on 19/11/2024 by an officer 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,
16. In summary the grounds and the depositions by the 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.
17. The IPs depose 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 rice. For some of them, the rice has already been purchased and shipped into the country and is awaiting offloading at the port while for Arroz the shipment was enroute for delivery to Kenya on 14/11/2024. That the imported rice conforms to international and Kenyan standards issued by the Kenya Bureau of Standards (KEBS) as per certificates of conformity issued.
18. The ex-parte applicant filed common grounds of opposition and a replying affidavit sworn on 22/11/2024 by Julius Jaka Ndaro to all the applications by the respondents and the IPs.
19. The 3rd respondent through its advocate indicated that it was not participating in the proceedings but would wait to abide by the outcome of the court as its duty was to collect the requisite tax if directed to.
20. The court gave directions that all the applications will be considered and disposed of as one as they were addressing similar issues and sought common orders.
21. 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 as considering the applications to set aside the orders would inevitably lead to a determination of the issues. 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.
22. 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.
23. The 3rd and 4th IPs were content with their admissions as IPs and did not wish to participate in the application.
24. 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.
25. 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.”
26. 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
27. 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. The GN has taken effect and the IPs have acted upon it. The goods the subject of the GN are either in the high seas or pending offloading at the port of Mombasa. What happens if the GN expires before they are offloaded? They are also perishable goods in the nature of foodstuffs.
28. 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.” 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.
29. 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 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.
30. At this stage therefore, the remedy lies in this court 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. 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.
31. 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 in court before clearance of the rice from the Port 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.
32. Orders accordingly.
Ruling delivered, dated and signed on the Virtual Platform, Teams
this 27th day of November 2024
HON. JUSTICE ANDAYI W.F.
JUDGE