Structural interdicts are part of the remedies that a court could fashion to remedy a violation of fundamental rights and freedoms.

Mitu-Bell Welfare Society v Kenya Airports Authority & 2 others; Initiative for Strategic Litigation in Africa (Amicus Curiae) [2021] eKLR

Petition 3 of 2018

Supreme Court of Kenya

DK Maraga, CJ & P, PM Mwilu, DCJ & VP, MK Ibrahim, SC Wanjala & NS Ndungu, SCJJ

January 11, 2021

Reported by Beryl Ikamari

Constitution Law - fundamental rights and freedoms - enforcement of fundamental rights and freedom - remedies in human rights litigation - structural interdicts - whether structural interdicts were part of the remedies that the court could fashion as an appropriate relief for a violation of fundamental rights and freedoms - Constitution of Kenya 2010, article 23(3).

International Law - applicability of international law in Kenya - effect of articles 2(5) and 2(6) of the Constitution on how international law would take effect in a domestic court in Kenya - whether the  U.N Guidelines on Evictions; General Comment No. 7 were part of the laws of Kenya and were of binding effect either under article 2(5) or article 2(6) of the Constitution - Constitution of Kenya 2010, article 2(5) and 2(6).

Constitution Law - fundamental rights and freedoms - enforcement of fundamental rights and freedom - socio-economic rights - right to housing - principles related to the enforcement of socio-economic rights - when would the right to housing accrue - Constitution of Kenya 2010, article 43(1)(b).

Brief facts

The petitioner was a registered society comprised of residents of Mitumba Village. Mitumba Village and the Mitumba Village Primary School were situated near Wilson Airport. A notice published in the newspapers on September 15, 2011 by the Attorney General gave the residents of Mitumba Village seven days in which to vacate the premises. Despite the fact that the petitioner obtained conservatory orders from the High Court to restrain the demolition of Mitumba Village, the premises were demolished on November 19, 2011. The petitioner sought various declaratory reliefs including those that asserted their ownership of the premises and also stating that the forceful eviction and demolition without a relocation option was illegal, oppressive and violative of the petitioner's rights.

The respondent explained that Mitumba Village was situate in property belonging to the Kenya Airports Authority and that Authority was under a statutory duty to ensure air safety by removing any informal settlement which was on a flight path. The respondents explained that given the ongoing war in Somalia, the village posed a threat.

At the High Court, the findings of the court were that the petitioner (appellants) did not own the suit premises. The newspaper notice which was said to be a reminder notice was found by the High Court to be unreasonable, unconscionable and unconstitutional as there was no other notice preceding it and it required vacation of the suit premises within 7 days. The High Court noted that there was no legislation or guidelines developed in Kenya for the eviction of persons occupying land that they were not legally entitled to occupy.

The High Court made the determination that the right to property included the protection of goods and personal property and it extended to goods and building material that had been destroyed during the demolition. The High Court also found that the eviction and demolition of the premises pursuant to a seven-day notice and the failure to provide alternative accommodation was a violation of the appellant's rights to housing and other socio-economic recognized under the Constitution. Further, the High Court found that evictions could be necessary but due process had to be followed. Due process included the issuance of reasonable notice and the conduct of consultations among those affected by the eviction. Additionally, the High determined that the demolition which left other nearby multi-storied buildings intact was discriminatory. The High Court noted that the demolitions included the demolition of a school and there was no evidence that measures were put in place to protect the needs of vulnerable groups particularly children and that children's rights were violated.

In response to the High Court judgment, the 1^st respondent filed an appeal at the Court of appeal. The Court of Appeal made various findings including findings that were to the following effect -

1. Pamoja Trust was wrongfully given a role reserved for the court, when it was asked to be involved in ascertaining eviction terms and the creation of eviction guidelines because Pamoja Trust had no constitutional mandate of resolving disputes;
2. the concept of partial judgment or interim judgment was unknown to Kenyan law; a court had to finally determine all the issues before it and it would then become functus officio;
3. allowing parties to file affidavits and reports after the judgment introduce secondary litigation of issues that were not raised in the original pleadings;
4. the security and safety of the flight paths was a limitation on enjoyment of the rights and freedoms in the Bill of Rights as permitted under article 24 of the Constitution;
5. there was no legislation in Kenya meant to regulate forcible eviction and resettlement of persons occupying public or private land and before the enactment of such legislation courts had to interpret and apply the law as it was;
6. The 1^st respondent (Kenya Airports Authority) had no mandate to provide policies and programs on provision of shelter and access to housing as directed by the High Court;
7. the trial Court erred in law in issuing orders and directions on un-pleaded issues.
8. the court should not act in vain or issue orders it could not implement and policy formulation was not within the mandate of the courts;
9. the enforcement and implementation of socio-economic rights could not confer propriety rights in the land of another and that the realization of socio-economic rights did not override the provisions of the Limitation of Actions Act;

A second appeal was filed by the appellants at the Supreme Court. They obtained certification that the matter raised issues of general public importance under article 163(4)(b) of the Constitution.

Issues

1. Whether structural interdicts were recognized reliefs in human rights litigation under the Constitution of Kenya, 2010.
2. What was the effect of article 2(5) and 2(6) of the Constitution regarding the applicability of international law in general and international human rights in particular?
3. Whether U.N Guidelines on Evictions; General Comment No. 7 were part of the laws of Kenya and were of binding effect either under article 2(5) or article 2(6) of the Constitution.
4. When would the right to housing under article 43 (1) (b) of the Constitution accrue?

Held

1. The trial court issued interim orders requiring the respondents to furnish the court with information about policies and programmes on provision of shelter and access to housing. However, the Court of Appeal was of the view that the trial court could not reserve for itself any outstanding issue as it became functus officio after the delivery of the judgment. Therefore, the two superior courts held diametrically opposed views regarding structural interdicts or interim orders.
2. Article 23(1) and 23(3) of the Constitution were the launching pad of any analysis into the place and scope of interim orders in Kenya's human rights enforcement architecture. Article 23(3) provided that for a violation of the Bill of Rights the court could grant any appropriate relief including, a declaration of rights, an injunction, a conservatory order, a declaration of legal invalidity of any law that denied, violated, infringed or threatened a right or fundamental freedom in the Bill of Rights that was not justified under article 24 of the Constitution, an order for compensation and an order for judicial review. The list of appropriate reliefs that the court could grant were not exhaustive.
3. The Court of Appeal failed to consider Supreme Court decisions concerning interim reliefs that a court could issue to address the violation of a fundamental right. The appellate court appeared to shut the door on the use of interim reliefs or structural interdicts in human rights and other constitutional litigation.
4. Article 23 (3) of the Constitution empowered the High Court to fashion appropriate reliefs, even of an interim nature, in specific cases, so as to redress the violation of a fundamental right.
5. The doctrine of functus officio retained validity and vitality in both criminal and civil cases but in certain situations the doctrine ought to give way. Subjecting article 23 of the Constitution, on the court's power to fashion appropriate reliefs for human rights violations, to the limitation of the Civil Procedure Act's provisions on the court becoming functus officio after judgment, would stifle the development of court-sanctioned enforcement of human rights as envisaged in the Bill of Rights.
6. Interim reliefs, structural interdicts, supervisory orders or any other orders that could be issued by the courts, had to be specific, appropriate, clear, effective, and directed at the parties to the suit or any other state agency vested with a Constitutional or statutory mandate to enforce the order. Most importantly, the court in issuing such orders, had to be realistic, and avoid the temptation of judicial overreach, especially in policy matters. When issuing interim orders the court could indicate that the orders were interim in nature and that the final judgment had to await the crystallization of certain actions.
7. Article 2(5) of the Constitution provided that the general rules of international law formed part of the laws of Kenya while article 2(6) of the Constitution provided that any treaty or convention ratified by Kenya formed part of the laws of Kenya under the Constitution. However, there were divergent views on the meaning of the provisions. One school of thought was that the article 2(6) of the Constitution transformed Kenya from a dualist to a monist nation meaning that Kenya did not have to incorporate (domesticate) an international treaty into its domestic law before the treaty could take effect. The second school of thought was of the view that international law was subordinate to the Constitution and could only take effect subject to the supreme law of the land. The proponents of the school of thought were not supporters of the view that Kenya was a monist state.
8. The meaning to be attributed to the phrase "shall form part of the law of Kenya” in articles 2(5) and 2(6) of the Constitution was that in determining a dispute, a domestic court of law had to take cognizance of rules of international law to the extent that the same were relevant and not in conflict with the Constitution, statutes or a final pronouncement.
9. Articles 2(5) and 2(6) of the Constitution were both inward looking and outward looking. They were outward looking in the sense that they committed Kenya to conduct its international relations in accordance with its obligations under international law. On the other hand, they were inward looking because they required Kenyan courts of law to apply international law in resolving disputes before them as long as long as the same were relevant, and not in conflict with, the Constitution, local statutes, or a final judicial pronouncement. International law could be applied to fill a lacuna in domestic law in the context of a dispute before a domestic court because international law was part of the laws of Kenya.
10. Articles 2(5) and 2(6) of the Constitution had nothing or little of significance to do with the monist-dualist categorization. Most importantly, the expression “shall form part of the law of Kenya” as used in the articles did not transform Kenya from a dualist to a monist state.
11. Article 2(5) of the Constitution referred to general rules of international law and that did not refer only to peremptory norms of international law or jus cogens. The two main sources of international law were treaties and international customs. Jus cogens was a technical term given to those norms of general international law which were of peremptory force and as a consequence no derogation was allowed. Jus cogens accounted for only a tiny corpus of the general rules of international law. The suggestion by the Court of Appeal that the use of the phrase "general rules of international law" in the Constitution was limited to the evolving concept of jus cogens was inconceivable.
12. The U.N Guidelines on Evictions; General Comment No. 7, at best constituted what was known as international jurisprudence or soft law. UN Resolutions, Declarations, Comments and Guidelines did not ordinarily amount to norms of international law. However, certain UN General Assembly Declarations and Resolutions could ripen into a norm or norms of international law depending on their nature and history leading to their adoption.
13. The U.N Guidelines, General Comment No. 7 did not qualify as general rules of international law, which had a binding effect on members of the international community. However, the Guidelines were intended to breathe life into the right to dignity and the right to housing under the International Covenant on Civil and Political Rights (ICCPR)  and the International Covenant on Civil Economic Social and Cultural Rights (ICESCR) respectively. They therefore constituted soft law in the language of international jurisprudence. The trial court could refer to the Guidelines but they could not be elevated to the status of general rules of international law under article 2(5) of the Constitution.
14. The U.N Guidelines in question were issued pursuant to article 21 of the International Covenant on Economic Social and Cultural Rights (ICESCR). Strictly speaking therefore, they could only be considered under article 2(6) of the Constitution, which referred to international treaties and conventions ratified by Kenya. The Guidelines could not be regarded as being part of the treaty under which they were issued. They were tools or aids directed to State parties to help the latter in implementing the treaty or better fulfilment of their obligations thereunder.
15. The Guidelines were not “binding” upon the states parties, nor were they part of the law of Kenya in the language and meaning of article 2(6) of the Constitution, unless they had ripened into a norm of customary international law, as evidenced by widespread usage.
16. Article 43 (1) (b) of the Constitution provided that every person had the right to accessible and adequate housing and to reasonable standards of sanitation. Further under article 21(1) of the Constitution the State and State organs had the duty to observe, respect, protect, promote, and fulfill the rights and fundamental freedoms in the Bill of Rights. Under article 21(2) of the Constitution, the State had to take legislative, policy and other measures, including the setting of standards in order to achieve progressive realization of the rights guaranteed under article 43 of the Constitution.  Therefore, as a socio-economic right, the right to housing had to be realized progressively.
17. The expression “progressive realization” was neither a stand-alone nor a technical phrase. It simply referred to the gradual or phased-out attainment of a goal-a human rights goal which by its very nature, could not be achieved on its own, unless first, a certain set of supportive measures were taken by the State. The exact shape of such measures would vary, depending on the nature of the right in question, as well as the prevailing social, economic, cultural and political environment. Such supportive measures could involve legislative, policy or programme initiatives including affirmative action.
18. Under article 20(5) of the Constitution, the principles that should guide a court in the enforcement of rights provided for under article 43 of the Constitution, where the state claimed that it did not have resources to implement the right were the following: -

1. it was the responsibility of the State to show that the resources were not available;
2. in allocating resources the State had to give priority to ensuring the widest possible enjoyment of the right or fundamental freedom having regard to prevailing circumstances, including the vulnerability of particular groups or individuals and
3. the court, tribunal or other authority could not interfere with a decision by a state organ concerning the allocation of available resources, solely, on the basis that it would have reached a different conclusion.
19. The court would exercise its powers under article 20(5) of the Constitution by issuing interim orders whose effect was to demand evidence that would exonerate the State from liability. The orders had to be directed at the State organ responsible for the requisite progressive realization measures. That was what the trial court appeared to have done when issuing the interim orders.
20. The question as to when the right to housing accrued depended upon its progressive realization. In turn, its realization depended upon the availability of land and other material resources.
21. An illegal occupation of private land would not create prescriptive rights over that land in favour of the occupants but the same could not be said of an “illegal occupation” of public land. To the contrary, where the landless occupied public land and established homes thereon, they did not acquire title to the land but they had a protectable right to housing over the same. The Constitution of Kenya 2010, radically transformed land tenure in the country by declaring that all land in Kenya belonged the people of Kenya collectively as a nation, communities and individuals. It also created a specific category of land known as public land. Therefore, every individual as part of the collectivity of the Kenyan nation had an interest, however indescribable, however unrecognizable, or however transient, in public land.
22. Faced with an eviction on grounds of public interest, potential evictees that occupied public land, had a right to petition the court for protection. The protection, need not necessarily be in the form of an order restraining the State agency from evicting the occupants, given the fact that the eviction may be entirely justifiable in the public interest. However, under article 23(3) of the Constitution, the court could craft orders aimed at protecting that right, such as compensation, the requirement of adequate notice before eviction, the observance of humane conditions during eviction (U.N Guidelines), the provision of alternative land for settlement, etc.
23. The trial court's orders for the respondents to furnish the trial court with existing state policies and programmes on provision of shelter and access to housing were not of remedial benefit to the appellant. The trial court ought not to have included non-state actors, who were not parties to the suit in its orders.
24. The evictions that the appellant complained of were undertaken in breach of a court order. In the eviction, houses and other property were destroyed. Actions by state organs, carried out in flagrant disregard of court orders, undermined the constitutional order, more so, if they resulted in the violation of citizens’ rights.

Orders: -

1. The appeal dated February 5, 2018 was partially allowed.
2. The proceedings were remitted to the trial court, with instructions that appropriate reliefs be crafted and granted in accordance with the Supreme Court judgment and the pleadings at the High Court.
3. No orders as to costs.

The extent to which the Court of Appeal has jurisdiction in appeals from the High Court on the setting aside of an arbitral award under section 35 of the Arbitration Act.

Geo Chem Middle East v Kenya Bureau of Standards [2020] eKLR

Petition 47 of 2019

Supreme Court of Kenya

PM Mwilu, DCJ &VP, MK Ibrahim, SC Wanjala, Njoki Ndungu & I Lenaola, SCJJ

December 18, 2020

Reported by Beryl Ikamari

Jurisdiction - jurisdiction of the Supreme Court - appellate jurisdiction of the Supreme Court - matters of constitutional interpretation and application - whether the Supreme Court could determine whether the Court of Appeal had jurisdiction to hear and determine an appeal from a High Court decision on the setting aside of an arbitral award under section 35 of the Arbitration Act - Constitution of Kenya 2010, article 163(4)(a).

Jurisdiction - jurisdiction of the Court of Appeal - arbitration matters - the extent to which the Court of Appeal had jurisdiction to hear and determine an appeal from a High Court decision on the setting aside of an arbitral award under section 35 of the Arbitration Act.

Brief facts

The petitioner and the respondent entered into a three years’ contract wherein the petitioner was to provide qualitative and quantitative inspection and testing services of imported petroleum products. The contract could be renewed for a further three years upon expiry. The petitioner alleged that it established a petroleum inspection facility at the Port of Mombasa and despite providing inspection services, the petitioner did not receive payments from marketers.

In a letter dated February 24, 2010, the Kenya Revenue Authority confirmed that it had been appointed to collect inspection fees from marketers on behalf of the respondent. Later, on October 23, 2012, it was acknowledged that the Kenya Revenue Authority had collected the fees and remitted them to the National Treasury. The Permanent Secretary for Industrialization requested the National Treasury to remit that money to the respondent as money due to the petitioner for services rendered. However, the petitioner did not receive the money.

On March 26, 2012, the respondent informed the petitioner that the Government had suspended the contract. The contract for provision of petroleum inspection services provided for a six months' termination notice or for a 14 days' notice for terminations occurring due to a force majeure event. The petitioner filed a claim for the outstanding fees for its services. The matter was referred to arbitration.

The arbitral tribunal made the finding that the suspension of the contract did not constitute termination of the contract as envisaged under the contract and that it was an unlawful termination. The tribunal awarded the petitioner the sum of USD 8, 591, 139/- in respect of the remaining contract period of twenty-nine (29) months as well as USD 3,687,437.21 inclusive of interest and Valued Added Tax for services rendered, and upon deduction of royalties due and owing.

Proceedings for the recognition and enforcement of the arbitral award were instituted by the petitioner at the High Court. On the other hand, the respondent applied for the setting aside of the arbitral award on grounds that the arbitral award contained decisions that went beyond the scope of the reference to arbitration.

The High Court made the finding that an arbitral award could only be set aside on grounds contemplated under section 35 of the Arbitration Act. The High Court stated that it would therefore decline the invitation to ascertain if there were contradictions in various aspects in the decision of the arbitral tribunal. The High Court found that there was no basis to set aside the award and allowed the application for recognition and enforcement.

The respondent subsequently filed an appeal at the Court of Appeal which raised three issues. One was about whether the court had the jurisdiction necessary to handle an appeal from the High Court on the setting aside of an arbitral award and the others were on whether the arbitral tribunal had jurisdiction and whether the arbitral award went against public policy.

The Court of Appeal made the finding that the reference to arbitration and the constitution of the arbitral tribunal was done outside of the time limits provided for under the contract. It also found that the arbitral tribunal determined issues that were outside its scope and that the award which required a state corporation to pay funds in excess of 1 billion Kenya shillings went against public policy.

The appeal before the Supreme Court was based on whether the Court of Appeal had jurisdiction in relation to arbitration matters under section 35 of the Arbitration Act and the Court of Appeal's failure to adjudicate on the issue in its judgment. The respondent also raised a preliminary objection on the premise that the Supreme Court had no jurisdiction to entertain the matter under article 163(4).

Issues

1. Whether the Supreme Court had jurisdiction to hear and determine a matter which was about the Court of Appeal’s jurisdiction on appeals arising from High Court determinations on the setting aside of an arbitral award under section 35 of the Arbitration Act.
2. To what extent did the Court of Appeal have jurisdiction to hear and determine appeals arising from High Court determinations on the setting aside of an arbitral award under section 35 of the Arbitration Act?

Held

1. To determine whether the Supreme Court had jurisdiction to hear and determine the dispute under article 163(4)(a), it was necessary to evaluate whether the contested issues were issues of constitutional controversy that had been determined at the High Court and later at the Court of Appeal. The petitioner raised an issue at the Court of Appeal about whether that court had jurisdiction to hear and determine an appeal from a High Court decision with respect to the award of an arbitral tribunal.
2. The issue about the Court of Appeal's jurisdiction was raised in the petitioner's submissions during the Court of Appeal hearing. However, it mattered not when an objection to jurisdiction was raised because jurisdiction was everything and without it a court would act but in vain.
3. An appeal could lie to the Court of Appeal from a High Court decision under section 35 of the Arbitration Act where in setting aside an arbitral award, the High Court stepped outside the grounds stated in section 35 of the Arbitration Act and made a decision so manifestly wrong and which had completely closed the door of justice to either of the parties.
4. The only issue that properly arose for the determination of the Supreme Court under article 163(4)(a), after a reading of the judgments of the High Court and the Court of Appeal was the issue of whether the Court of Appeal had jurisdiction to hear and determined an appeal from a High Court decision made under section 35 of the Arbitration Act.
5. Arbitration was meant to expeditiously resolve commercial and other disputes where parties had submitted themselves to that dispute resolution mechanism. The role of courts was greatly diminished notwithstanding the narrow window created by sections 35 and 39 of the Arbitration Act.
6. The High Court declined to exercise jurisdiction to interfere with the arbitral award. Therefore, the only question before the Court of Appeal ought to have been whether the High Court had properly declined to exercise jurisdiction under section 35 of the Arbitration Act.
7. The Court of Appeal made the determination that leave for the appeal had been granted and that leave had not been the subject of appeal. In granting leave, the question of jurisdiction of the Court of Appeal was determined and it was said that section 35 of the Arbitration Act did not expressly provide for a chance to appeal to the Court of Appeal but that did not bar a party from seeking redress at the Court of Appeal. The finding suggested that the chance to lodge an appeal at the Court of Appeal was open-ended and it did not tarry with the position of the Supreme Court. Such appeals, according to the Supreme Court were only permissible in a narrow sense. The Supreme Court's position about that was that an appeal to the Court of Appeal on a determination made by the High Court under section 35 of the Arbitration Act was permissible where in setting aside an arbitral award, the High Court stepped outside the grounds set out in the said section 35 and made a decision so grave, so manifestly wrong and which completely closed the door of justice to either of the parties.
8. Leave to appeal, whether wrongfully or rightfully granted, empowered the Court of Appeal to determined whether the High Court ought to have interrogated the arbitration award or not. If it were to determine that the High Court had wrongly declined jurisdiction to so do, the proper and indeed only course of action open to the Court of Appeal, was to remit the matter back to the High Court with directions for the latter to hear the substantive application for setting aside the arbitral award on its merits. Instead, the Court of Appeal stepped into the shoes of the High Court and proceeded to determine a matter that had not been substantively decided by the latter. In so doing, the Appellate Court usurped the jurisdiction of the High Court, as it was not open to it, to take over an arbitration dispute and determined it on its merits when the High Court had not done so.
9. To the extent that the judgment of the Court of Appeal purported to interrogate the merits of an arbitral award, in the absence of the High Court’s pronouncement on the same, the judgment was rendered in excess of jurisdiction. The Court of Appeal prematurely, and in excess of its jurisdiction, sat on an appeal that was not ripe, instead of remitting the same to the High Court for determination.

Orders:-

1. Appeal allowed and the judgment of the Court of Appeal dated November 22, 2019 was set aside.
2. Each party was to bear its costs.

Cases

East Africa

1.    Macharia, & another v Kenya Commercial Bank limited & 2 others [2012] 3 KLR 199 - (Followed)

2.     Nduttu & 6000 others v Kenya Breweries Ltd & 2 others [2012]  2 KLR 804 –(Followed)

3.    Nyutu Agrovet Limited v Airtel Networks Kenya Ltd & another  Petition No12 of 2016; [2019] – (Followed)

4.     Synergy Industrial Credit Limited v Cape Holdings Limited Petition No 2 of 2017; [2019] eKLR)- (Followed)

Statutes

East Africa

1. Constitution of Kenya, 2010 articles 25(c); 50(1); 159(2)(c)(e); 163(4)(a) – (Interpreted)

2. Supreme Court Act, 2011 (Act No 7 of 2011) section 15(2) –(Interpreted)

3. Supreme Court Rules, 2012 (repealed) (Act No 7 of 2011 Sub Leg) rules 9(1); 33(2) –(Interpreted)

4. Arbitration Act (cap 49) sections 10, 17(5);35(2)(iv);36(1) –(Interpreted)

International instrument

1. United Nation Commission on International Trade Law, (UNCITRAL) Model Law  (1985) article 5

Advocates

1. Mr Ngatia for the Petitioner

The investigatory and enforcement mandates of the Capital Markets Authority were constitutional despite being held by the same institution.

Alnashir Popat & 7 others v Capital Markets Authority [2020] eKLR

Constitutional Petition No. 29 of 2019

Supreme Court of Kenya

DK Maraga, CJ & P, MK Ibrahim, SC Wanjala, NS Ndungu & I Lenaola, SCJJ

December 11, 2020

Reported by Beryl Ikamari & George Kariuki

Constitutional Law – Bill of Rights – right to fair administrative action – right to a fair hearing – whether a tribunal could act as both investigator and judge in its own case –  whether the investigatory and enforcement mandate of the Capital Markets Authority were constitutional - Constitution of Kenya 2010, articles 25(C), 35, 47(1) and 50(1); Capital Markets Act (cap 485A), section 11(3)(cc) and 11(3)(h)

Administrative Law – natural justice – impartiality of the decision-maker – legality of the Capital Markets Authority’s investigatory and enforcement – whether actual bias or an appearance of bias was the likely result of having the Capital Markets Authority serve as an investigator and an enforcer in the cases of infractions of the provisions of the Capital Markets Act and the regulations made thereunder.

Brief facts

The petitioners in this case were non-executive directors of Imperial Bank Limited (the bank) which had been put under receivership. The respondent, a statutory regulatory authority established under section 5 of the Capital Markets Act and charged with promoting, regulating and facilitating the development of orderly, fair and efficient capital markets in Kenya.

In August 2015, the respondent approved the bank’s application to issue to the general public a corporate bond of Kshs. 2 Billion. Only the bank’s Managing Director and the Chief Finance Officer were privy to that application.

In September 2015, the managing director passed on and the former head of credit was appointed acting MD and deputized the former CFO. In September, the two caught wind of an array of illegal transactions authorized by the late Managing Director and reported the same to the chair of the non- executive directors. The latter in turn contracted FTI consulting group, to carry out a forensic audit of the bank’s financial affairs and report on its accurate financial position. It also resolved not to utilize the approved bond issue pending the outcome of the investigations by the consultant.

It was found that the former MD had indeed been running a scheme of fraudulent disbursements resulting in losses running into billions of shillings and the board reported the same to Central Bank (CBK) who in turn placed the bank under receivership and appointed the Kenya Deposit Insurance Corporation its Receiver/Manager for a period of twelve (12) months. The appointment also included a declaration of a moratorium on the bank. On the same day, the respondent, on its part, instructed the Nairobi Stock Exchange (NSE) not to proceed with the listing of the bank’s bond issue on the Fixed Income Securities Market Segment until further notice.

Circumstances surrounding the issuance of the bond were brought to the fore by the respondent. In exercise of its statutory authority, it served the petitioners with notices to show cause and required them to respond, within 14 days, to allegations of negligence in the discharge of their mandate as directors of the bank. No hearing took place on the designated day. However, the respondent-appellants claimed that an inquisitorial hearing presided by CMA’s chair took place and a summary ruling entered against the bank’s directors.

The petitioners appealed against that decision at the High Court citing conflict of interest. They said that the CMA had acted as licensee, investigator and judge in the issue of the bond. Additionally, they contended that the authority had acted as juror in its own case. The same officials who had greenlighted the issuance of the bond had gone ahead to rule against its regularity and legality.

At the High Court, the notices sent to the petitioners to show cause were quashed. The court’s reasoning was that there existed a real possibility of bias. By acting in both inquisitorial and enforcement mandate, the authority was likely to be biased. It therefore ought to have delegated its functions to an independent body.

At the Court of Appeal, the authority’s decision was upheld. The Capital Markets Act expressly authorized the overlapping inquisitorial and enforcement functions of the respondent. Therefore, the respondent was expected to make unprejudiced judgement on matters it had investigated.

As a last resort, the appellants called upon the Supreme Court to consider the propriety of the dual statutory mandate granted to the respondent as the sole investigator and enforcer of capital markets infractions in Kenya.

Issues

1. Whether the overlapping investigatory and enforcement roles that the Capital Markets Act vested in the Capital Markets Authority constituted a violation of the rights to fair administrative action and fair hearing as recognized in articles 47(1) and 50(1) (as read with article 25(c)) of the Constitution.
2. Whether section 11(3) (cc) and 11(3)(h) of the Capital Markets Act which authorized the overlapping investigatory and enforcement mandate of the Capital Markets Authority was unconstitutional.
3. Whether the Capital Markets Authority’s attempted enforcement proceedings after conduct of its investigatory role with respect to a bank were biased or likely to be biased against the bank.

Held:

1.    Prior to the enactment of the Capital Markets Act, the capital market in Kenya faced multiple challenges running from illicit intermediaries to lack of a proper legislative guide hence the need for a firm regulatory regime.  Sections 5 and 11(cc) of the Capital Markets Act established the Capital Markets Authority with a mandate to remove impediments, promote wider performance of the general public in the securities commodities market and derivatives and for protection of investor interests. To achieve the objectives, section 13 of the Capital Markets Act granted the authority power to discipline errant members and to regulate and facilitate the development of an orderly, fair and efficient capital market.

2.    The Capital Markets Authority power to inquire, either on its own motion or at the request of any other person, into the affairs of any person which the authority had approved or to which it had granted a license and any public company the securities of which were publicly offered or traded on an approved securities exchange or on an over the counter market.

3.    Tenets of natural justice decreed that, no person should be allowed to be a judge in his or her own cause or in a cause they had an interest in the outcome including situations where one desired or was keen on obtaining a given result. A prosecutor, for example, had an interest in the conviction of a suspect he hauled into court.

4.    There were exceptions to every general rule. The exception to the tenets of natural justice set out under article 25(c) as read with article 47  of the Constitution was enunciated in the Canadian case of Re W. D. Latimer Co. and Attorney-General for Ontario (1973), 2 O.R. (2d) 391 and affirmed in Re W. D. Latimer Co. and Bray (1974).

5.    Where a statute authorized a tribunal to perform tripartite functions, disqualification on the ground of bias ought to have been founded upon some act of the tribunal going beyond the performance of the duties imposed upon it by the enactment pursuant to which investigations were being conducted.

6.    Mere advance information as to the nature of the complaint and the grounds for it was not sufficient to disqualify a tribunal from completing its task.

7.    Where it was clear from an empowering legislation that certain activities which would otherwise be considered "biased" formed an integral part of its operations and the tribunal had not acted outside its statutory authority, the doctrine of "reasonable apprehension of bias" could not be sustained. A tribunal’s structure and responsibilities as well as the manner of the discharge of its mandate ought to be considered.

8. Administrative tribunals were not necessarily supposed to operate like courts of law. That was why they were allowed to be masters of their own procedure albeit having to act fairly as set out in Selvara Jan v. Race Relations Board [1976] 1 ALL ER 12.

9.    For purposes of efficiency and in the carrying out of the objectives of the Capital Markets Act, especially in the expeditious disposal of disputes that arose in the operations of the capital markets, the functions set out in section 11(3) (cc) and 11(3)(h) could not be performed by separate bodies.

10. Section 11(3)(cc) and 11(3)(h) of the Capital Markets Act were not unconstitutional. The overlapping mandate did not render those sections unconstitutional. What would have been unconstitutional would have been the discharge of that dual mandate.

11.  It was important to determine whether the authority’s discharge of a dual mandate in the petitioner’s case was itself likely to be unconstitutional under a critical balancing of articles 47(1) and 50(1).

12.  Among the canons of statutory interpretation was that the historical background of legislation ought to be considered. However, in the promotion of public policy and efficient administration of the securities market in Kenya, the right to a fair administrative action could not be sacrificed at the altar of efficiency or public interest.

13.  Individual rights to be duly notified of a hearing, given adequate prior information and to be granted a fair hearing were so fundamental that they could not be limited by public interest.

14. The Capital Markets Authority could not be allowed to ride roughshod over the non-derogable constitutional rights of investors. It would be counterproductive by scaring away the very prospective investors it sought to entice. 

15. Narrow interests such as fostering investor confidence in the securities market could not be used as an excuse to deprive the directors of their constitutional right to a fair hearing of the allegations against them.

16. Despite the legality of the duality of the respondent’s mandate under section 11(3) (cc) (h) of the Capital Markets Act, in any matter that could be classified as judicial or quasi-judicial, or one where, in the view of a reasonable man conversant with the matter, there was likely to be bias or a reasonable apprehension of bias, the authority ought to have been impartial.

17.  A reasonable apprehension of bias was the key test in determining whether a tribunal had acted impartially. A tribunal was required to observe and accord persons under investigations (and or any person) likely to be adversely affected by their decision a fair process and in particular, it was required to adhere to the principles of natural justice and comply with the provisions of articles 50 (1) and 47 of the Constitution.

18.  Enforcement proceedings were not necessarily administrative merely because the enforcement body was an administrative one. Focus of the enquiry was not whether a particular conduct was an ‘administrative action’, but on the nature of the power being exercised.

19.  An act would be judicial when there was opportunity to be heard and for production and weighing of evidence and a decision was rendered.

20. In the discharge of their statutory mandates, tribunals ought to always first determine whether or not their acts or decisions were judicial or quasi-judicial and whether or not they were likely to adversely affect the rights of persons or bodies under investigation.

21.  The nature of the enforcement proceedings that the authority sought to enforce against the directors for non-appearance bespoke a quasi-judicial process because, based on the material evidence placed before it, the Capital Markets Authority would have had to determine the culpability or otherwise of the directors.

22. Had the directors been found culpable pursuant to section 11(3) (cc) of the Capital Markets Act, the authority would have imposed sanctions on them, including financial penalties.

23.  There was a real possibility of bias in the petitioners’ case. The authority had appraised and approved the bank’s application. The same authority also initiated and conducted preliminary investigations into the bank’s conduct in relation to the application and upon satisfying itself that the bank could have have violated the relevant provisions of the Act and the Regulations, it made a decision to charge the petitioners and went ahead to formulate the requisite charges. It was the same Board of the Capital Markets Authority that also purported to preside over the hearing of the director’s cases. That obviously led to an inescapable appearance of partiality on the Authority’s part.

Orders: -

1. The petitioners’ appeal was allowed to the extent that the respondent would proceed with the enforcement proceedings against the petitioners through its delegated authority under section 11A (1) and/or section 14(1) of the Capital Markets Act.
2. Each party was ordered to bear its own costs.

The Supreme Court has no jurisdiction to hear and determine appeals against the interlocutory decisions of the Court of Appeal.

Clement Kungu Waibara v Annie Wanjiku Kibeh & another [2020] eKLR

Civil Application No 31 of 2020

Supreme Court of Kenya

PM Mwilu, MK Ibrahim, SC Wanjala, NS Ndungu & I Lenaola, SCJJ

December 4, 2020

Reported by Beryl Ikamari

Jurisdiction - jurisdiction of the Supreme Court - appellate jurisdiction - whether the Supreme Court had jurisdiction to hear and determine an appeal arising from an interlocutory decision of the Court of Appeal.

Brief facts

The High Court in H. C. Petition No. 21 of 2020 declared a vacancy in the seat of Member of Parliament for Gatundu North Constituency. An application for a stay of execution of the High Court's decision made by the 1^st respondent was granted on October 28, 2020. The applicant filed a notice of motion seeking leave to institute a Supreme Court appeal against the Court of Appeal decision. The 1^st respondent, in response, filed a notice of preliminary objection whose gist was that the Supreme Court lacked jurisdiction to entertain the application whish arose out of an interlocutory decision of the Court of Appeal and that the court also lacked jurisdiction over decisions that arose from the exercise of discretion by the Court of Appeal under rule 5 (2)(b) of the Court of Appeal Rules, 2010.

Issue

Whether the Supreme Court had jurisdiction to hear and determine an appeal arising from an interlocutory decision of the Court of Appeal.

Held

1. Without a judgment of the Court of Appeal which would create finality to the contested issues and also point the party to the specific limb of article 163(4) of the Constitution on which to invoke the court's jurisdiction, the jurisdiction of the court could not be invoked properly.
2. The invitation to assume jurisdiction over the matter was misguided.

Application struck out. Applicant to pay the attendant costs.

Factors to consider when exercising judicial discretion to extend time for filing an application for review to the Supreme Court

Sammy Mwangangi & 10 others v Commissioner of Lands & 3 others [2020] eKLR

Civil Application No. 21 of 2020

Supreme Court of Kenya

PM Mwilu, DCJ & VP; MK Ibrahim, SC Wanjala, NS Ndungu & I Lenaola, SCJJ

October 9, 2020

Reported by Kakai Toili

Civil Practice and Procedure – extension of time – application for extension of time within which to file an application for review to the Supreme Court – factors to consider when exercising judicial discretion to extend the time for filing the application - whether issues raised in an intended application for review could be determined in an application for enlargement of time to file the intended application - Supreme Court Act, 2012, section 26 and 53.

Brief facts

The applicants filed the instant application seeking enlargement of time to file an application for review of the ruling of the Court of Appeal. The applicants contended that the delay in filing the application for review to the instant court was inadvertent, and was occasioned by delay in the assessment of filing fees and uploading of documents on the court’s e-filing portal. The 3^rd and 4^th respondents in opposing the application submitted that no purpose would be served by the extension as the matter they sought to pursue was not a matter of general public importance, but was one seeking to enforce private rights.

Issues

1. What were the factors to be considered when exercising judicial discretion to enlarge the time for filing an application for review to the Supreme Court?
2. Whether issues raised in an intended application for review could be determined in an application for enlargement of time to file the intended application.

Held

1. Grant or refusal of extension of time was a matter of judicial discretion to be exercised, not subjectively or at whim or by rigid rule of thumb, but in a principled manner in accordance with reason and justice. The applicants had explained, cogently and reasonably, that the delay in filing their application for review of the Court of Appeal’s decision denying them timeous access to the court was not of their own making. The delay of six days was in any event not inordinate and there was no prejudice caused to the respondents, especially the 3^rd and 4^th respondents.
2. The question whether the applicants had established that the issues in contest were of general public importance was a matter that could not be determined in the instant application, it being the gravamen of the intended review application under article 163(5) of the Constitution.
3. Prayer 3 of the motion under consideration seeking orders that the originating motion dated July 22, 2020 under Reference No.SC APP;/E007/2020 be deemed as dully filed was not one for granting in the instant instance. It was best that a proper motion for review under the Constitution, the Supreme Court Act and Rules be filed pursuant to the orders granted.

Application allowed; each party to bear its costs of the application.

Orders:

1. The time within which to file the application for review of the ruling of the Court of Appeal dated July 10, 2020 was enlarged and the same was to be filed within 7 days of the ruling.
2. Directions were to be taken before the Deputy Registrar thereafter.

Factors to consider in awarding costs where a suit involved matters of public interest

Director of Public Prosecution v Michael Sistu Mwaura Kamau & 4 others [2020] eKLR

Petition of Appeal No. 18 of 2019

Supreme Court of Kenya

PM Mwilu DCJ & VP; MK Ibrahim, SC Wanjala, NS Ndungu & I Lenaola, SCJJ

September 23, 2020

Reported by Kakai Toili

Civil Practice and Procedure – costs – awarding of costs – where parties had withdrawn a suit but failed to agree on costs – where the suit involved matters of public interest - what were the factors to consider in awarding costs.

Brief facts

In September 2019 the court recorded a consent order marking the instant petition as withdrawn. The parties were however unable to agree on costs and thus the court directed parties to file submissions limited to the question whether costs should be paid to the respondents consequent upon the withdrawal of the petition. The appellant, the Director of Public Prosecutions, argued that no order as regards costs should be made as the issue of costs was never raised at both the High Court and the Court of Appeal. The respondents, save the 3^rd, 4^th and 5^th respondents disagreed and submitted that costs had to follow the event even as it was a matter of discretion for the court.

Issue

What were the factors to consider in awarding costs where a suit involved matters of public interest?

Held

1. The award of costs would normally be guided by the principle that costs followed the event: the effect being that the party who called forth the event by instituting suit, would bear the costs if the suit failed; but if that party showed legitimate occasion, by successful suit, then the defendant or respondent would bear the costs. However, the vital factor in setting the preference was the judiciously-exercised discretion of the court, accommodating the special circumstances of the case, while being guided by ends of justice. The claims of the public interest would be a relevant factor, in the exercise of such discretion, as would also be the motivations and conduct of the parties, prior-to, during, and subsequent-to the actual process of litigation.
2. Although there was good sense in the basic rule of costs, that costs followed the event, it was not an invariable rule. The ultimate factor on award or non-award of costs was a judicial discretion. Therefore, costs did not, in law, constitute an unchanging consequence of legal proceedings.
3. The fact that the appellant was a public entity was not in itself a reason to deny an opposing but entitled party its costs in appropriate circumstance. Each case had to be looked at in its specific circumstances and costs awarded or denied at the complete discretion of the court.
4. Whereas the appellant had withdrawn the petition when it was ready for hearing and while the respondents had spent time and resources preparing for the hearing, the issues raised in the appeal were of great public interest, the extent of powers bestowed upon the Ethics and Anti-Corruption Commission and whether corruption related offences could be initiated when the Commission was not properly constituted and whether the President could direct the Commission or the Director of Public Prosecutions in the execution of their constitutional mandates. Those matters transcended the specific interests of the parties and had settled in the public sphere thus attracting the public interest. An order of costs against any party would in the circumstances not be fair.

Petition marked as withdrawn; each party to bear its costs of the appeal.