[1] Upon being granted leave to file a substantive application, the ex parte applicant, Mazeras Kenya (EPZ) Limited, filed its Notice of Motion dated 21st February 2024. The application was filed pursuant to Section 3A of the Civil Procedure Act, Chapter 21 of the Laws of Kenya and the provisions of the Constitution of Kenya, the Fair Administrative Action Act, the Export Processing Zones Act, the Tax Procedures Act, Stamp Duty Act and all other enabling provisions of the law seeking that:
[a] An order of Prohibition prohibiting the respondent from assessing, levying, demanding, recovering or collecting from the ex parte applicant any or any additional stamp duty and any penalties or interest thereon in respect of the Transfer of Land Reference No. 1043/III/54, Mazeras, by Kenya Suitcase Manufacturers Limited to the ex parte applicant.
[b] Any other or further relief, directions or orders as the Court may deem just and fair in the circumstances of this case, be made.
[c] The costs of the application be provided for.
[2] The application was premised on the Statement of Facts and the Verifying Affidavit of Sailesh Dayalal Shah sworn on 16th October 2023, which were filed alongside the Chamber Summons application for leave. The ex parte applicant averred that it is a registered EPZ company, duly licenced under the Export Processing Zone Act, (CAP 517, hereinafter, “the EPZ Act”) and the registered legal owner of the parcel of land known as Land Reference Number 1043/III/54 Mazeras (hereinafter, “the suit property”). The ex parte applicant (hereinafter, “the applicant”) explained that it purchased the suit property from Kenya Suitcase Manufacturers Limited. It further averred that the said property was duly transferred into its name vide a Transfer dated 23rd October 2017; which Transfer was thereafter registered at the Land Titles Registry, Mombasa, on the 6th December 2017.
[3] The applicant further averred that, by virtue of being a licensed EPZ Developer Operator under the EPZ Act, the Transfer of the suit property was exempt from stamp duty pursuant to Section 29(2)(e) of the EPZ Act. It therefore stated that, in accordance with Section 17(1) of the Stamp Duty Act and Regulation 5 of the Stamp Duty Regulations, it made an application to the Collector of Stamp Duty for adjudication of stamp duty on the Transfer of the suit property and expressly set out the basis for exemption and the grounds therefor.
[4] The applicant explained that the said application was accompanied by a letter dated 5th October 2017 from the Export Processing Zone Authority addressed to the Collector of Stamp Duty, confirming that it is a duly licensed EPZ Developer Operator and that the Transfer was exempt from stamp duty by virtue of Section 29(2)(e) of the EPZ Act. The applicant further averred that, on 7th November 2017, the Transfer was adjudicated upon and found to be exempt from stamp duty and the respondent’s agent as Collector of Stamp Duty, C.K Muchiri, affixed a stamp on the Transfer certifying that it was exempt from stamp duty pursuant to Section 29(2)(e) of the EPZ Act.
[5] The applicant was therefore aggrieved that, four years after the adjudication and certification of the Transfer as being exempt from stamp duty, the respondent, by a letter dated 11th January 2022, purported to demand a sum of Kshs. 16,799,428/= in respect of the said Transfer under the threat of withdrawal of the applicant’s Tax Compliance Certificate as well as enforcement action under the Tax Procedures Act (TPA). It averred that it responded by filing an Objection through its tax agent, RSM (Eastern Africa) Consulting Limited, challenging the Demand Notice, by way of a letter dated 13th January 2022.
[6] According to the applicant, since the respondent failed to render a decision on the Objection within 60 days as was expected, neither the Demand Notice nor any other subsequent demands emanating from the respondent were enforceable. It took issue with the fact that the respondent purported to issue an Objection Decision on 22nd June 2022, over 5 months after receipt of the Objection Notice.
[7] The applicant stated that it appealed the decision to the Tax Appeals Tribunal (TAT), as advised by the respondent in its decision dated 22nd June 2022, but that the TAT ruled that it lacked the jurisdiction to hear appeals relating to stamp duty on the ground that the SDA is not a “tax law” as defined under Section 3 of the TPA. On that basis, the appeal was dismissed. It was therefore the apprehension of the applicant that, given the dismissal of its appeal, the Demand Notice and the Objection Decision remained in place and were enforceable by the respondent to its detriment; yet its valid objection was yet to be heard and determined on merit.
[8] Convinced that the respondent did not have the power, whether under the SDA or the TPA or any other applicable law, to re-assess, demand, levy or collect stamp duty or additional stamp duty after assessment pursuant to Section 17(1) of the SDA, nor powers under the TPA to make an objection decision under Section 51(8) of the Act, the applicant moved the Court for a judicial review order of Prohibition, contending that the Demand Notice and the Objection Decision are ultra vires. The applicant also asserted that the respondent acted in violation of the provisions of the Fair Administrative Action Act (“the FAA Act”) by failing to provide it with substantive reasons and/or legal basis for altering its decision. It therefore contended that it has good grounds for seeking the order of Prohibition, to prohibit the respondent from re-assessing, levying, demanding, enforcing or recovering any or any additional stamp duty from it in respect of the Transfer of the suit property.
[9] In response to the application, the respondent relied on the Replying Affidavit sworn by one of its officers, Ms. Christine Mwanja. The respondent acknowledged that the applicant is a licensed Export Processing Zone Developer Operator; and that it purchased the suit property from Kenya Suitcase Manufacturers Limited at a cost of Kshs 300 million. It however took issue with the fact that the applicant did not declare or pay stamp duty, yet the vendor declared and paid Capital Gains Tax to the tune of Kshs. 12, 914,837/=.
[10] The respondent confirmed that, upon an assessment being done, it raised and additional Stamp Duty Demand dated 18th October 2021 for Kshs. 16,799,428, being principal tax of Kshs. 15,999,456 and a penalty of Kshs. 799,972.80. The respondent further averred that, in response to the demand, the applicant lodged a late manual objection via a letter dated 13th January 2022.
[11] In the respondent’s view, Section 117(1)(j) of the SDA is not applicable to the transfer of land. It deposed further that Section 29(2(e) of the EPZ Act relates to the business activities of an export processing zone enterprise, in respect of which transfer of property is not encompassed. Hence, the respondent reiterated its stance that it properly exercised its powers under Section 2 of the SDA as the Collector of Stamp duty to recover underpaid stamp duty.
[12] The application was canvassed by way of written submissions, pursuant to the directions given herein on 26th February 2024. The applicant relied on its written submissions dated 12th March 2024 in which it proposed the following two issues for determination:
[a] Whether the respondent’s actions were ultra vires, illegal or irrational and therefore null and void ab initio; and
[b] Whether the applicant had legitimate expectation not to pay stamp duty after such duty was exempted under the EPZ Act.
[13] In support of the first issue, the applicant submitted that a public officer or entity can only exercise such administrative power as has been properly conferred by law and even then for the purposes for which such power has been conferred. It therefore contended that, having granted it exemption as a Collector of Stamp Duty, the respondent had no residual authority to reassess duty payable or make a demand as it purported to do, for the reason that the SDA is not a tax law for purposes of Section 3 of the TPA. The applicant relied on the following authorities to buttress its arguments:
[a] Republic v Commissioner General, Kenya Revenue Authority & 2 others; Cup of Joe Limited (Ex Parte) [2022] KEHC 201 (KLR);
[b] Republic v Kenya Revenue Authority; Khamis & another (Ex Parte applicant) [2023] KEHC 21876 (KLR);
[c] Kenya Revenue Authority v Export Trading Co. Ltd [2022] KESC 31 (KLR);
[d] Kenya Revenue Authority v Doshi Iron Mongers & another [2016] eKLR as confirmed by the Court of Appeal in Kenya Revenue Authority v Doshi Iron Mongers & another [2024] KECA 176.
[14] On legitimate expectation, the applicant submitted that it had acquired the legitimate expectation that the subject Transfer was exempt from stamp duty upon an adjudication being done to that end by the respondent pursuant to Section 17 of the SDA. It submitted therefore that, for the respondent to renege on that decision four years later by purporting to demand payment of stamp duty under a totally different legal regime was not only illegal but also unreasonable. The applicant relied on the decision of the Supreme Court in Kenya Revenue Authority v Export Trading Co. Ltd [2022] KESC 31 and urged that its application be allowed and the orders sought granted.
[15] The respondent filed written submissions dated 23rd April 2024 in response to the applicant’s written submissions. It proposed the following two issues for determination:
[a] Whether the actions complained of are amenable to judicial review by the Court; and,
[b] Whether the respondent’s actions infringe on the applicant’s legitimate expectation.
[16] The respondent acknowledged that the principles of judicial review are well settled and well captured by the authorities cited by the applicant in its submissions at paragraphs 3.2.1 to 3.2.5 in so far as they speak to the statutory prerogative given to statutory bodies. Hence, the respondent posited that the present case is a dispute on the appropriate procedure for the recovery of unpaid stamp duty under the SDA.
[17] The respondent made reference to Sections 5 and 49 of the SDA and submitted that contracts for transfer of property are subject to stamp duty; and therefore the applicant was under obligation to pay stamp duty in respect of the subject Transfer. According to the respondent, upon the realization that the applicant did not pay duty, an assessment was done and a demand made in accordance with the applicable law.
[18] The respondent also made reference to the two dispute resolution mechanisms provided for in the SDA, namely, recovery of underpaid stamp duty as a civil debt under Section 29 of the SDA and the right of appeal to the High Court under Section 18 of the Act.
[19] On whether the respondent executed its mandate legitimately, reference was made to Kenya Revenue Authority v Export Trading Company Limited (Petition 20 of 2020) [2022] KESC 31 (KLR) (Civ) (17th June 2022) (Judgment), to support the submission that, actions in pursuit of unpaid duty cannot be said to be unreasonable. According to the respondent, payment of stamp duty on transfer instruments is not at all exempted under the SDA, whether under Section 29(2)(e) or Section 117(1)(j) of the SDA. It posited that exemptions under the aforementioned sections are limited to licences for business activities of an export processing zone enterprise.
[20] From the standpoint of Section 29 of the SDA, the respondent submitted that the demand letter was simply one of the steps envisaged under Order 3 Rule 2(d) of the Civil Procedure Rules. The case of Joseph Kigunda v Kenya Broadcasting Corporation [2018] eKLR was cited to buttress the respondent’s submission that demand letters serve a crucial role; often demonstrating an attempt at amicable dispute resolution prior to litigation.
[21] Further to the foregoing, the respondent contended that it was the applicant who commenced the procedure under the TPA by filing an Objection to the demand letter vide its letter dated 13th January 2022. Accordingly, the respondent submitted that it cannot be faulted for conveying its decision in respect of that letter of objection. It posited that, instead of filing an Objection, the applicant ought to have appealed to the High Court from the assessment, in line with the provisions of Section 18 of the SDA.
[22] In response to the applicant’s submissions on legitimate expectation, the respondent relied on Kenya Revenue Authority v Export Trading Company Ltd (supra), Council of Civil Service Unions and others v Minister for the Civil Service [1983] UKHL 6; [1984] 3 All ER 935 and Communications Commission of Kenya & 5 others v Royal Media Services Ltd & 5 others [2014] eKLR and urged the Court to find that payment of duty is a statutory obligation and therefore does not fall within the realm of legitimate expectation.
[23] The respondent concluded its submissions by asserting that the application before the Court lacks merit, and is merely calculated at curtailing its lawful mandate to collect stamp duty. On that account, the respondent prayed for the dismissal of this suit with costs.
[24] In its further written submissions dated 12th May 2024, the applicant reiterated its assertion that it followed the process set out under Section 17 of the SDA which resulted in the Collector of Stamp Duty exempting the subject Transfer from stamp duty. The applicant submitted that, once that decision was made and endorsed on the Transfer instrument, it was immutable. According to the applicant, an assessment under the TPA cannot be used to reverse the decision of the Collector made under the SDA, since the SDA is not a “tax law” for purposes of that Act.
[25] The applicant pointed out that, what is under review in these proceedings is not the merit of the respondent’s decision but whether, in seeking to reverse its own decision and unilaterally demanding stamp duty from an exempted transaction of Transfer, the respondent acted in excess of jurisdiction. The applicant urged the Court to find that the respondent’s action was ultra vires and therefore amenable to judicial review.
[26] On legitimate expectation, the applicant underscored the provisions of Section 17 of the SDA pursuant to which the respondent made a decision to exempt the Transfer instrument from payment of stamp duty and submitted that the respondent lacks the power to go back on that exemption as it was functus officio. Therefore, the applicant urged the Court to find in its favour and grant the orders sought.
[27] I have carefully considered the application dated 21st February 2024, the averments in support thereof as well as the respondent’s response to the application. I have similarly given careful consideration to the written submissions filed by the parties. It is common ground that the applicant is a registered EPZ company, duly licenced under the EPZ Act. Copies of the applicant’s licences for the years 2017, 2018, 2019, 2020, 2021, 2022 and 2023 were exhibited as annexures to the applicant’s Supporting Affidavit and marked Annexure “SDS 1”.
[28] There is further no dispute that the applicant is the registered owner of the suit property, having purchased the same from Kenya Suitcase Manufacturers Limited. Among the documents relied on by the applicant was the instrument of Transfer dated 23rd October 2017. A copy thereof was annexed to the Supporting Affidavit and marked Annexure “SDS 2”. The document shows, on the face of it, that it was presented at the Land Titles Registry on 6th December 2017 and was duly registered.
[29] The parties are further in agreement that about four years later, the respondent sent a Demand Notice for what it deemed to be arrears of stamp duty in the sum of Kshs. 16,799,428.80 vide a letter to the applicant dated 11th January 2022. A copy of the letter was likewise annexed to the applicant’s Supporting Affidavit and marked Annexure “SDS 4”. It is manifest that the applicant promptly responded to the demand vide a letter dated 13th January 2022, objecting to the entire amount of duty demanded, contending that as a licenced EPZ company it was exempt from stamp duty pursuant to Section 29(2)(e) of the EPZ Act. A copy of the Objection letter was also annexed to the applicant’s Supporting Affidavit.
[30] The respondent belatedly considered the applicant’s Objection and rendered its decision thereon on 22nd June 2022, rejecting the Objection. It took the view that:
“…any previous exemption that might have been given based on section 117(1)(j) of the stamp duty Act or section 29(2)(e) EPZ Act was done erroneously. Hence, the exemption referenced in your objection is not supported by the law. Through the assessment…the Commissioner rectified the erroneous exemption…”
[31] The respondent advised the applicant of its right to appeal to the TAT from the decision or, alternatively, to seek review of the decision of the Commissioner under the alternative dispute resolution mechanism provided for under Section 55 of the TPA. Being aggrieved by the decision, the applicant appealed to the TAT but the appeal was found to be incompetent and was therefore struck out on 15th September 2023. Copies of the respondent’s Objection decision and the judgment of the TAT were likewise annexed to the applicant’s Supporting Affidavit and marked Annexures “SDS 6” and “SDS 7”.
[32] As correctly pointed out by the applicant, the effect of the decision of the TAT was that there remained an obligation on its part to comply with the respondent’s Objection decision. It was that state of affairs that triggered this litigation.
[33] It is well settled that judicial review proceedings are more concerned with the decision-making process as opposed to the merits of the decision taken by a public body or official. Thus, in the case of Uwe Meixner & another v Attorney General [2005] eKLR, the Court of Appeal stated:
“…judicial review is concerned with the decision making process and not with the merits of the decision itself. Judicial review deals with the legality of decisions of bodies or persons whose decisions are susceptible to judicial review. A decision can be upset through certiorari on a matter of law if on the face of it, it is made without jurisdiction or in consequence of an error of law. Prohibition restrains abuse or excess of power…”
[34] Since judicial review reliefs are now anchored in the Constitution, it is imperative to give them consideration from a broader perspective than before. In Judicial Service Commission v Mbalu Mutava [2015] eKLR, the Court of Appeal held that:
“Article 47(1) marks an important and transformative development of administrative justice for, it not only lays a constitutional foundation for control of the powers of state organs and other administrative bodies, but also entrenches the right to fair administrative action in the Bill of Rights. The right to fair administrative action is a reflection of some of the national values in article 10 such as the rule of law, human dignity, social justice, good governance, transparency and accountability. The administrative actions of public officers, state organs and other administrative bodies are now subjected by Article 47(1) to the principle of constitutionality rather than to the doctrine of ultra vires from which administrative law under the common law was developed.”
[35] Accordingly, the Supreme Court, in the case of Saisi & 7 others v Director of Public Prosecutions & 2 others (Petition 39 & 40 of 2019 (Consolidated)) [2023] KESC 6 (KLR) (Civ) (27 January 2023) (Judgment) explained that, while judicial review is concerned with the decision making process and not with the merits, under the Fair Administrative Action Act the court is at liberty to undertake some measure of merit review. Here is what the apex court had to say:
“73…The Fair Administrative Actions Act provides the parameters of judicial review to be the power of the court to review any administrative or quasi-judicial act, omission or decision of any person, body or authority that affects the legal rights or interests of an aggrieved person. The judicial review court examines various aspects of an act, omission or decision including whether the body or authority whose decision is being challenged has done something which it had no lawful authority to do. It may have abused or misused the authority which it had. It may have departed from procedures which either by statute or at common law as a matter of fairness it ought to have observed. As regards the decision itself it may be found to be perverse, or irrational, or grossly disproportionate to what was required…
74. It is our considered opinion that the framers of the Constitution when codifying judicial review to a constitutional right, the intention was to elevate the right to fair administrative action as a constitutional imperative not just for state bodies, but for any person, body or authority. It was a clarion call to ensure that the constitutional right to fair administrative actions permeated every aspect of the lives of Kenyans, from their engagements with educational facilities such as universities, to employer-employee relationships, to engaging with public bodies in whatever capacity, or any body, person or authority that exercises quasi- judicial functions. We further take the view, that this approach is consistent with realizing the right of access to justice because justice can be obtained in other places besides a courtroom.
75. In order for the court to get through this extensive examination of section 7 of the FAAA, there must be some measure of merit analysis. That is not to say that the court must embark on merit review of all the evidence. For instance, how would a court determine whether a body exercising quasi-judicial authority acted reasonably and fairly “in the circumstances of the case”, without examining those circumstances and measuring them against what is reasonable or fair, and arriving at the conclusion that the action taken was within or outside the range of reasonable responses…”
[36] In the premises, the applicant had the onus to demonstrate that the decision or act complained of is tainted with illegality, irrationality or procedural impropriety, or is otherwise deficient in terms of proportionality. In the case of Pastoli v Kabale District Local Government Council and Others [2008] 2 EA 300 it was held:
“In order to succeed in an application for judicial review, the applicant has to show that the decision or act complained of is tainted with illegality, irrationality and procedural impropriety...Illegality is when the decision-making authority commits an error of law in the process of taking or making the act, the subject of the complaint. Acting without jurisdiction or ultra vires, or contrary to the provisions of a law or its principles are instances of illegality. It is, for example, illegality, where a Chief Administrative Officer of a District interdicts a public servant on the direction of the District Executive Committee, when the powers to do so are vested by law in the District Service Commission...Irrationality is when there is such gross unreasonableness in the decision taken or act done, that no reasonable authority, addressing itself to the facts and the law before it, would have made such a decision. Such a decision is usually in defiance of logic and acceptable moral standards...Procedural Impropriety is when there is a failure to act fairly on the part of the decision-making authority in the process of taking a decision. The unfairness may be in non-observance of the Rules of Natural Justice or to act with procedural fairness towards one to be affected by the decision. It may also involve failure to adhere and observe procedural rules expressly laid down in a statute or legislative Instrument by which such authority exercises jurisdiction to make a decision.”
[37] The applicant has faulted the respondent’s decision to demand stamp duty on the Transfer dated 23rd October 2017 on two grounds, namely, ultra vires and legitimate expectation. Consequently, the two issues for determination, as aptly articulated by the parties in their written submissions are:
[a] Whether the respondent’s actions were ultra vires, illegal or irrational and therefore null and void ab initio; and
[b] Whether the applicant had legitimate expectation not to pay stamp duty after such duty was exempted under the EPZ Act.
A. On Ultra Vires:
[38] As was pointed out in Okiya Omtatah Okoiti & 3 Others v Anne Waiguru, the Cabinet Secretary, Devolution and Planning & 6 others [2021] eKLR:
“An act is ultra vires when the decision making authority commits an error of law in the process of taking the decision or making the act, the subject of the complaint. Acting without jurisdiction or ultra vires or contrary to the provisions of law or its principles renders the decision made laced with illegality.”
[39] The applicant’s contention was that, by virtue of being a licensed EPZ Developer Operator under the EPZ Act, it was exempt from paying stamp duty in respect of the Transfer of the suit property. It relied on Section 29(1) and (2) of the EPZ Act, which states:
29. The export processing zone enterprises, the export processing zone developers and the export processing zone operators shall be granted exemption from all existing and future taxes and duties payable under the Excise Duty Act (Cap. 472) and Value Added Tax Act (Cap. 476) on all export processing zone imports for use in the eligible business activities of the export processing zone enterprise including machinery and equipment, spare parts, tools, raw materials, intermediate goods, construction materials and equipment, office equipment and supplies, and transportation equipment subject to the limitations on goods specified in the Second Schedule to this Act and according to the conditions specified in the Excise Duty Act (Cap. 472) and the Value Added Tax Act (Cap. 476).
(2) Subject to subsection (1) and without prejudice to any other written law, the export processing zone enterprise, export processing zone developers and the export processing zone operators shall be granted the following exemptions—
(a)…
(b)…
(c)…
(d)…
(e)exemption from stamp duties on the execution of any instruments relating to the business activities of an export processing zone enterprise;”
[40] The applicant has adduced credible evidence to demonstrate that the Export Processing Zone Authority was convinced that the subject Transfer was exempt from stamp duty and supported its application for exemption. The respondent, as the Collector of Stamp Duty, was similarly satisfied that the instrument was exempt from stamp duty and committed itself to that decision by stamping the Transfer instrument with an exemption stamp.
[41] The respondent now contends, that the exemption contemplated under Section 29(2)(e) of the EPZ Act is confined to instruments relating to the business activities of the operator and does not apply to transfer of land. The argument was hinged on Section 117 (1) (j) of the Stamp Duty Act, which provides: -
117. Exemptions from stamp duty
(1) There shall be exempt from stamp duty under this Act—
(b)…
(c)…
(d)…
(e)…
(f)…
(g)…
(h)…
(hh)…
(i)…
(j)the exemption of all instruments with respect to licences of business activities of an export processing zone enterprise licenced under the Export Processing Zones Act (Cap. 517);
(k)…
[42] How are the two provisions to be understood? The oft preferred rule of construction is the plain language rule. As was pointed out in Alcoholic Beverages Association of Kenya v Kenya Film and Classification Board & 2 others [2017] eKLR:
“There are numerous rules of interpreting a statute, but in my view and without demeaning the others, the most important rule is the rule dealing with the statutes plain language. The starting point of interpreting a statute is the language itself. In the absence of any expressed legislative intention to the contrary, the language must ordinarily be taken as conclusive.
The duty of the Court is neither to enlarge the scope of the legislation or the intention of the legislature when the language of the provision is plain and unambiguous. The Court cannot rewrite, recast or reframe the legislation for the very good reason that it has no power to legislate. The power to legislate has not been conferred on the courts. The Court cannot add words to a statute or read words into it which are not there… Interpretation must depend on the text and the context. They are the bases of interpretation. One may well say if the text is the texture, context is what gives the colour. Neither can be ignored. Both are important. That interpretation is best which makes the textual interpretation match the contextual.[25] Statutory construction should be a narrow pursuit, not a broader one:-
"[C]anons of construction are no more than rules of thumb that help courts determine the meaning of legislation, and in interpreting a statute a court should always turn first to one, cardinal canon before all others.... [C]ourts must presume that a legislature says in a statute what it means and means in a statute what it says there. When the words of a statute are unambiguous, then, this first canon is also the last: “judicial inquiry is complete.”[26]
A word in a statutory provision is to be read in collocation with its companion words. The pristine principle based on the maxim noscitur a sociis (meaning of a word should be known from its accompanying or associating words) has much relevance in understanding the import of words in a statutory provision.[27]
[43] Accordingly, from my reading of the context of Section 117 (1) (j) of the Stamp Duty Act and the subsections surrounding subsection (1)(j), I take the view that, from its plain meaning, subsection (1)(j) simply adopts the exemptions permitted and contemplated under Section 29(2)(e) of the EPZ Act; and therefore the go-to provision in this instance is not Section 117(1)(j) of the SDA but Section 29(2)(e) of the EPZ Act. It is instructive therefore that Section 29(2)(e) is not limited to licences; but rather, provides for exemption of stamp duty “on the execution of any instruments relating to the business activities of an export processing zone enterprise.”
[44] For land purposes, the Land Act defines an instrument in, Section 2 thereof, as follows: -
“instrument” means a writing, including an enactment which creates or affects legal or equitable rights and liabilities and includes any covenant or condition expressed in an instrument or implied in a instrument under this Act or any other law relating to land and, except where otherwise provided includes, any variation of an instrument;
[45] In the same vein, Section 2 of the Land Act defines a transfer as follows:
“transfer” means the passing of land, a lease or a charge from one party to another by an act of the parties and not by operation of the law and includes the instrument by which such passing is effected;
[46] The applicant offered credible proof that it presented the Transfer instrument to the Collector of Stamp Duty for adjudication with a view of exemption. Such a request is permissible under Section 17(1) of the SDA and Regulation 5 of the Stamp Duty Regulations. Attached to the document was a letter dated 5th October 2017 written by the Chief Executive of the Export Processing Zones Authority to the Collector of Stamp Duty supporting the application for exemption. It states:
“This is to confirm that Mazeras Kenya EPZ Limited is a duly licensed Export Processing Zones (EPZ) Developer operating on EPZ licence No. DVP/0000612 valid till 7th March, 2018.
Pursuant to the provisions of S. 29 (2) (e) of the EPZ Act (Cap 517) Laws of Kenya all EPZ enterprises are exempted from payment of stamp duty on execution of any instruments relating to their business activities.
Kindly grant stamp duty exemption on the transaction referenced above…”
[47] It was on that basis that the Collector of Stamp Duty exempted the Transfer from stamp duty and stamped the document accordingly, convinced that the Transfer related to the business activities of the applicant. Indeed, Section 17(3), (4) and (5) of the SDA are explicit that:
(3) If the collector is of the opinion that the instrument is not chargeable with any duty it shall be stamped with a particular stamp denoting that it is not chargeable with any duty.
(4) If the collector is of the opinion that the instrument is chargeable with duty he shall assess the duty with which it is in his opinion chargeable, and when the instrument is stamped in accordance with the assessment it shall be stamped with a particular stamp denoting that it is duly stamped. (5) Every instrument stamped with the particular stamp, denoting either that it is not chargeable with any duty or that it is duly stamped, shall be admissible in evidence and available for all purposes notwithstanding any objection relating to duty.”
[48] For the respondent to reverse that decision as it purported to do, it had to demonstrate not only that it had the requisite jurisdiction in that regard, but also that it had reasonable grounds for the variation. No particular provision of the law, other than Section 117(1)(j) of the SDA was cited by the respondent to support the assertion that the adjudication was erroneously done. As has been pointed out hereinabove, the issue before the Court is not the merits of the impugned decision but whether the respondent, as the Collector of Stamp Duty, had the jurisdiction to reverse its decision as it purported to do four years later.
[49] The respondent gave no convincing response. It simply posited, erroneously so in my view, that if the applicant was dissatisfied with the Demand Notice then it ought to have appealed pursuant to Section 18 of the SDA. That avenue is available to persons dissatisfied with the adjudication process provided for under Section 17 of the Act. The applicant was not dissatisfied with the exemption and therefore had not reason to appeal. Moreover, in faulting the applicant for appealing to TAT under the provisions of the TPA, the respondent appeared to have overlooked the fact that, in its decision on the applicant’s Objection, it advised the applicant that:
“If you wish to appeal to this decision you may do so to the Tax Appeals Tribunal in accordance with the provisions of the Tax Appeals Tribunal Act 2015. Should you however wish to engage the Commissioner after lodging the appeal, you may apply for the case to be reviewed under Alternative dispute resolution as provided under section 55 of the Tax Procedures Act 2015.”
[50] In the light of the foregoing, it is my finding that there was no legal basis for the respondent to reverse its decision in connection with the exemption of the subject Transfer from stamp duty; and therefore that the Demand Notice was issued ultra vires the powers of the respondent. In Martin Wanderi & 106 others v Engineers Registration Board & 10 others, SC Petition No 19 of 2015; [2018] eKLR the Supreme Court held:
“[126] In examining article 47(1) of the Constitution, the starting point is a presumption that the person exercising the administrative power has the legal authority to exercise that authority. Once satisfied as to the lawfulness of the power exercised, is when the court will delve into inquiring whether in the carrying out of that administrative action, there was violation of article 47(1). This is the test of legality. So that the question of the unlawfulness or otherwise to act is at the onset of the inquiry. Where the act done was ultra vires the mandate of the administrative entity, the act is void ab initio and the inquiry stops there as there is an outright violation of the Constitution. The question of legality or the lawfulness of an act lies at the core article 47(1).”
B. On Legitimate Expectation:
[51] In this instance, there is another reason why the decision of the respondent is untenable, and it is the doctrine of legitimate expectation. The Supreme Court of Kenya had occasion to discuss the doctrine in Communications Commission of Kenya & 5 Others vs. Royal Media Services Ltd & 5 Others [2014] eKLR and had the following to say:
[263] “Legitimate expectation” is a doctrine well recognized within the realm of administrative law, as is clear from the English case, In re Westminster City Council, [1986] A.C. 668 at 692 (Lord Bridge):
“…the courts have developed a relatively novel doctrine in public law that a duty of consultation may arise from a legitimate expectation of consultation aroused either by a promise or by an established practice of consultation”.
[264] In proceedings for judicial review, legitimate expectation applies the principles of fairness and reasonableness, to the situation in which a person has an expectation, or interest in a public body retaining a long-standing practice, or keeping a promise.
[265] An instance of legitimate expectation would arise when a body, by representation or by past practice, has aroused an expectation that is within its power to fulfil. A party that seeks to rely on the doctrine of legitimate expectation, has to show that it has locus standi to make a claim on the basis of legitimate expectation.
[52] Upon reviewing both local and comparative jurisprudence on the point, the Supreme Court concluded thus at paragraph [269] of its Judgment:
“The emerging principles may be succinctly set out as follows:
a. there must be an express, clear and unambiguous promise given by a public authority;
b. the expectation itself must be reasonable;
c. the representation must be one which it was competent and lawful for the decision-maker to make; and
d. there cannot be a legitimate expectation against clear provisions of the law or the Constitution.
[53] In the instant case, an express and unambiguous assurance was given by the respondent to the applicant that the instrument was exempt from stamp duty. The applicant was therefore content that the issue had been settled and was understandably aggrieved by the demand for duty and penalties four years down the line. Had it been told outright that the exemption was not available, it probably would not have accrued any penalties in that regard for over 4 years. It was therefore not only illegal for the respondent to purport to demand duty on the transfer as it purported to do, but it was also unreasonable in the circumstances for such duty to be demanded four years later without any justification for that belated administrative action.
[54] In the Export Trading Co. Ltd case (supra) at paragraphs 48 and 56, the Supreme Court held:
“We reiterate the findings by the High Court and Court of Appeal and hold that the appellant acted unfairly in demanding for the alleged short levied duty almost 4 years after the initial assessment and payment of the duty so assessed were irrational and did not accord the respondent its right to fair administrative action and we shall explain why…
It is also incomprehensible how the appellant, four years after the assessment of duty, demanded for payment of extra duty when it sat on its laurels having itself assessed the duty payable. This act is unreasonable for the reason that, first, it is totally irrational and unreasonable to require the respondent to carry the burden of being aware of any mistakes made by the Tradex Simba system, a system run by the appellant. Second, it is also incomprehensible how the respondent should be made to suffer the consequences of the actions of the appellant of failing to input the correct rate in a system it had full control over. This line of reasoning, is with respect, misguided. It misses the point that judicial review is not concerned with the merits of the case but the decision making process.”
[55] I therefore find it apt to reiterate the expressions of Lord Hailsham of St Marylebone in Chief Constable of the North Wales Police v. Evans [1982] 1 WLR 1155 that:
“The purpose of judicial review is to ensure that the individual receives fair treatment, and not to ensure that the authority, after according fair treatment, reaches on a matter which it is authorized by law to decide for itself, a conclusion which is correct in the eyes of the court.”
[56] Consequently, I am satisfied that the applicant is entitled to an order of Prohibition as sought. The Court of Appeal in the case of Kenya National Examination Council v Republic Ex Parte Geoffrey Gathenji Njoroge & 9 others [1997] eKLR, had occasion to pronounce itself on the scope and efficacy of the relief. Here is what it had to say:
“…What does an ORDER OF PROHIBITION do and when will it issue? It is an order from the High Court directed to an inferior tribunal or body which forbids that tribunal or body to continue proceedings therein in excess of its jurisdiction or in contravention of the laws of the land. It lies, not only for excess of jurisdiction or absence of it but also for a departure from the rules of natural justice. It does not, however, lie to correct the course, practice or procedure of an inferior tribunal, or a wrong decision on the merits of the proceedings – See HALSBURY’S LAW OF ENGLAND, 4th Edition, Vol.1 at pg.37 paragraph 128…”
[57] In the result, I find merit in the applicant’s Notice of Motion dated 21st February 2024. The same is hereby allowed and orders given as hereunder:
[a] An order of Prohibition be and is hereby granted prohibiting the respondent from assessing, levying, demanding, recovering or collecting from the ex parte applicant any or any additional stamp duty and any penalties or interest thereon in respect of the transfer of Land Reference No. 1043/III/54, Mazeras, by Kenya Suitcase Manufacturers Limited to the ex parte applicant.
[b] Each party to bear their own costs of the application.
It is so ordered.
DATED, SIGNED AND DELIVERED VIRTUALLY AT MOMBASA THIS 6TH DAY OF NOVEMBER 2024