Weekly Newsletter 024/2019



Kenya Law

Weekly Newsletter


Advocates working in Public Service are entitled to a non-practising allowance or prosecutorial allowance.
Erastus K Gitonga & 4 others v National Environmental Management Authority & another [2019] eKLR
Cause 547 of 2018
Employment and Labour Relations Court at Nairobi
B Ongaya, J
April 10, 2019
Reported by Beryl Ikamari & Mathenge Mukundi
Download the Decision
 
Employment Law-discrimination in employment-what amounts to discrimination in employment-effect of pay of different wages for equal work or work of equal value-whether the denial of the non-practising allowance and prosecutorial allowance by the respondent amounted to discrimination and unfair labour practices-Employment Act, 2007, section 5.
Employment Law-contract of service-particulars of a contract of service-job description and remuneration-criterion to be used where an employee claimed an allowance and other benefits that were not in the written contract of service-whether advocates working in Public Service were entitled to a grading equivalent to those working at State Law Agencies when computing the non-practising allowances and prosecutorial allowances- Employment Act, 2007, section 10.
Employment Law-contract of service-terms in a contract of service-claim that a contract of service included a term that allowed for certain employees to be paid non-practising allowances-party that bore the burden of proving or disproving an alleged term of employment-Employment Act, 2007, section 10 (7).
  
Brief Facts:
The claimants were advocates of the High Court of Kenya employed by the respondent as legal officers on a full-time basis, and on permanent and pensionable terms of service. After working for some time they were appointed and gazetted as public prosecutors by the Director of Public Prosecutions for purposes of cases arising under the Environmental Management and Co-ordination Act. The claimants were claiming both non-practising allowances and prosecutorial allowances which they alleged to be entitled to after having worked as legal officers and public prosecutors for the respondent.

 Issues:
  1. Whether advocates working in public service were entitled to non-practising allowances and prosecutorial allowances.
  2. Whether an employer in public service was bound to comply with the law, regulations, and policies issued or emanating from the Public Service Commission in the exercise of its constitutional public service functions and powers.
  3. What was the criterion to be used where an employee claimed an allowance and other benefits that were not contained in the written contract of service?
  4. Whether the advocates were entitled to a grading equivalent to those working at State Law Agencies when computing the non-practising allowances and prosecutorial allowances.
  5. Whether the denial of the non-practising allowances and prosecutorial allowances amounted to discrimination and unfair labour practices.
 Held:
  1. The respondent was not one of the entities excluded from the Commission’s constitutional functions and powers. Although, the respondent was a body corporate established under the Environmental Management and Co-ordination Act, in exercise of its statutory functions and powers particularly recruiting, appointing, promoting, disciplining, removing public officers and any other human resource function, it was strictly bound to comply with the law, regulations and policies as would be in force and as issued or promulgated by the Commission.
  2. The respondent’s exercise of human resource or employment functions and powers, as envisaged in section 16 and other provisions of the Environmental Management and Co-ordination Act, had to be construed and brought to conformity with the constitutional functions and powers of the Public Service Commission as amplified in the provisions of the Public Service Commission Act, 2017. The respondent and other public bodies or authorities falling under the Commission’s constitutional authority were bound to undertake their human resource functions in accordance with the provisions of the Public Service Commission Act, 2017 and the public service regulations and policies as would be put in place by the Commission from time to time.
  3. Where an employer in public service experienced difficulties in implementing general public service regulations, policies, decisions, and directives as had been issued by the Commission, the employer should seek and obtain from the Commission, the variation or clarifications and alterations being sought.
  4. The circular on payment of non-practising allowance to employees in the legal subsector of the public service applied to the claimants’ service because it clearly applied to the entire public service. It appeared to apply to all lawyers in the public service and for so long as the claimants established that they were in public service with similar professional legal duties, they would be entitled to the allowance even without being gazetted as prosecutors.
  5. From the circular, the use of prosecutorial allowance was meant to simply designate the allowance and not to have it paid exclusively to those involved in criminal prosecutions. The circular was binding upon the respondent and if the respondent failed to specifically provide for the terms of the circular in the claimants’ contracts of service, the Court had jurisdiction to correct the unjustified omission.
  6. Under section 10(1) of the Employment Act, 2007 particulars of a written contract of service included job description and remuneration. The ranks, grades or job groups were clearly part of the job description and applicable remuneration like in the instant case where the allowances were pegged on the grading by the circulars. Section 10 (7) of the Employment Act, 2007 provided that if in any legal proceedings an employer failed to produce a written contract or the written particulars prescribed in subsection (1) the burden of proving or disproving an alleged term of employment stipulated in the contract should be on the employer. The respondent failed to discharge the statutory burden to disprove the equivalency of the job groups or ranks as urged by the claimants. The allowances as claimed applied to the claimants’ contract of service and the respondent failed to include the equivalency of its grading structure in consonance with the grading in the circulars so as to confer the claimants the two allowances in the issue. In absence of any other material before the Court on the equivalency of the grades, the claimants’ established that on a balance of probability, the equivalency of grades as urged were applicable.
  7. Every person had the right to fair labour practices as per article 41 (1) of the Constitution. Article 41 (2) of the Constitution enumerated the rights of every worker which included the right to fair remuneration. Articles 27(4) and (5) of the Constitution prohibited discrimination by the state or by any person. Section 5 of the Employment Act, 2007 provided that an employer should promote equal opportunity in employment and strive to eliminate discrimination in any employment policy or practice. No employer should discriminate directly or indirectly, against an employee or prospective employee or harass an employee or prospective employee. An employer had to pay his employees equal remuneration for work of equal value.
  8. The Public Service Commission Human Resource Policy, 2016 provided for non-discrimination in employment and that the Government should promote equality of opportunity in employment and would not discriminate directly or indirectly against an employee on any ground. Article 2 of the International Labour Organisation Discrimination (Employment and Occupation) Convention, 1958 provided that each Member for which the Convention undertook to declare and pursue a national policy designed to promote, by methods appropriate to national conditions and practice, equality of opportunity and treatment in respect of employment and occupation, with a view to eliminating any discrimination in respect thereof.
  9. The failure to pay the claimants the two allowances amounted to adverse or disadvantageous treatment that was not equal to the other public officers holding similar offices. The respondent had subjected them to unequal pay by denying them the two allowances because persons holding similar positions in the public service continued to enjoy the allowances. The principle that equal work should receive equal pay in its true form would be extended to an analogous situation, namely, that work of equal value should receive equal pay. Those premises had not been enshrined as principles of law in the unfair labour practice definition. They were principles of justice, equity, and logic which would be taken into account in considering whether an unfair labour practice had been committed. For example, the payment of unequal pay for equal work or work of equal value in the context of unfair discrimination.
  10. The respondent denied the claimants the two allowances that were payable to others in public service performing similar work or work of equal value as was performed by the claimants. The denial of the two allowances amounted to unequal treatment and therefore unfair discrimination that was founded upon arbitrary or unreasonable grounds. The respondent failed to show that the circulars were not intended to apply to the claimants. The intention in the circular was that the allowances applied to all in the legal subsector towards harmonisation of their terms of service.
Application allowed.
Orders:-
  1. The declaration that the respondent subjected the claimants to unequal treatment amounted to discrimination and unlawful labour practice by denying them a non-practice allowance and prosecutorial allowance.
  2.  The declaration that the respondent’s action of not paying the 1st to 5th claimants a non-practicing allowance and prosecutorial allowance was unlawful, wrongful and unfair.
  3. The respondent to pay non-practising allowance accruing to the claimants from the date of filing the claim and for the duration of service of the claimants. The rate of the allowance should be as issued by applicable government circulars or otherwise as would be set by a lawful competent authority.
  4. The claimants should serve the judgment upon the Public Service Commission, within 7 days from the date of the judgment, towards the Commission’s consideration of issuing the relevant Gazette Notice under section 98 of the Public Service Commission Act, 2017 to harmonize prevailing grading levels and to provide for equivalency of job groups, grades, and ranks applicable in the public service or bodies under its constitutional and statutory functions and powers, the Commission to consider publishing the Gazette Notice not later than January 2, 2020.
  5. The respondent to pay the claimants’ costs of the suit.
Kenya Law
Case Updates Issue 025/2019
Case Summaries

LAND LAW A public body or state organ is not required to have title for the land it was using or occupying to prove ownership of the same

Kenya Agricultural and Livestock Research Organization (KALRO) v County Government of Kitui [2019] eKLR
ELC Petition 18 of 2018
Environment and Land at Machakos
O A Angote, J
March 22, 2019
Reported by Chelimo Eunice

Download the Decision

Land Law-public land-holding and management of public land-whether a public body or state organ was required to have title for the land it was using or occupying to prove ownership of the same-where a state organ had been occupying and utilising public land without having title to the same-  Constitution of Kenya, 2010, article 62(1)(b).
Constitutional Law-devolution-levels of government-devolved governments-distribution of functions between levels of government-which level of government was responsible for promotion, streamlining, coordinating and regulating research in crops, livestock, genetic resources and biotechnology-where the Constitution or national legislation did not assign a function to either levels of government -Constitution of Kenya, 2010, article 62.
Brief facts:
The petitioner was the successor of Kenya Agricultural Research Institute (KARI) which operated the Kenya Agricultural and Livestock Research Organization (KALRO) Ithookwe Dryland Research Sub-Centre from around the year 1979. The petitioner claimed that it owned, occupied, ran and carried out agricultural research activities at the suit land since its establishment in 1979. It averred that despite the respondent being aware of, acknowledging and recognizing the petitioner’s ownership, possession and occupational rights over the suit land, the respondent wrongfully entered and took possession of the suit land.
The respondent opposed the suit arguing, among others; that the petitioner had never purchased or acquired the suit land; that the respondent and its predecessor in title had always been the legal owner of the suit land; that the use of the suit land by the petitioner was out of the respondent’s goodwill; that upon the promulgation of the Constitution, the functions and powers of aspects of agriculture, including research, were vested in county governments and that the respondent was merely carrying out its constitutional mandate of agriculture including crop and animal husbandry.

Issues:

  1. Whether it was mandatory for a public body or state organ to have title for the land it was using or occupying to prove ownership of the same.
  2. Which level of government was responsible for promotion, streamlining, coordinating and regulating research in crops, livestock, genetic resources and biotechnology since the law did not assign it to either levels of government?
  3. How was public and trust land managed?Read More..

Held :

  1. The suit land had been used and operated from time to time since 1979 by the petitioner’s predecessor Kenya Agricultural Research Institute (KARI) for agricultural and research purposes.  It was not until the year 2018, that the respondent entered the suit land and erected green houses, sank a borehole and built a water pen covering approximately 3 acres of the suit land.
  2. The Certificate of Official Search produced by the petitioner showed that the suit land was registered in the name of the then Kitui County Council on May 5, 1977.  In the same year, the suit land was reserved for Ithookwe Sub-Station for agriculture research, which was an establishment of the petitioner’s predecessor, KARI.  The petitioner and its predecessor were state organs. Considering that the suit land was registered in 1977, the law applicable was the repealed Constitution and the Registered Land Act (repealed).
  3. Under the repealed Constitution, all trust land vested in county council within whose area of jurisdiction it was situated, except for any body of water that immediately before December 12, 1964 was vested in the Government of Kenya and minerals or mineral oils.
  4. Section 115(2) of the repealed Constitution provided that county councils were to hold trust land vested in them for the benefit of the persons ordinarily resident on that land. The repealed Constitution further provided the manner in which trust land could be removed from the purview of communal ownership of the people.
  5. From the provisions of section 117(1) of the repealed Constitution, county council could set apart trust land for use and occupation by a public body. The setting apart of trust land for public purpose happened in the whole country, whereby several public bodies like schools, hospitals, national parks, stadiums, bus parks, public spaces, and agricultural research centres were set up.
  6. In some instances, the trust land that was set apart for public purpose was reserved by issuance of titles in the name of the respective county councils and specifically stating the purpose for which the land had been reserved for. In other instances, such land was reserved either by way of approved part development plans or duly registered maps.  In few instances, the concerned public bodies would be registered as the proprietors of the land so set apart.
  7. The suit land had always been used and occupied by the petitioner’s predecessor (KARI) before the petitioner took over its functions, assets and liabilities in the year 2003.  It was reserved for agricultural research purposes, and handed over to the petitioner’s predecessor as at the time of registration in 1977. The issue of processing the title in the name of KARI was to be placed before the Education Housing and Social Services Council Committee.  That seemed not to have been done.
  8. Article 62(1) (b) of the Constitution defined public land to include land lawfully held, used or occupied by any state organ, except any such land that was occupied by the state organ as lessee under a private lease. Such land vested in the national government in trust for the people of Kenya, and was to be administered on their behalf by the National Land Commission.
  9. Article 62(1) (b) of the Constitution, just like the repealed Constitution, did not require a public body or state organ to have a title for the land it was using or occupying to prove ownership of the same.  All that a state organ was supposed to prove was that it was lawfully holding, using or occupying land except in a situation where it had leased the land from a private person.
  10. Being the custodians of the records of its predecessor, the burden of proving that the suit land was not lawfully set apart for research purposes was on the respondent and not the petitioner. The respondent had failed to do so.
  11. Having reserved the land for agricultural research purposes in 1977, and having handed over the land to the petitioner and its predecessor who had continued to use it for the reserved public purpose, the petitioner and its predecessor were entitled to the said land. The suit land was being lawfully held, used and occupied by the petitioner, which was a state organ, and was public land pursuant to the provision of article 62(2) (b) of the Constitution.
  12. Although it was true that agriculture, including crops and animal husbandry; livestock sale yards; county abattoirs; plant and animal disease control; and fisheries, was devolved to the county governments pursuant to the Fourth Schedule of the Constitution, the Constitution was silent on which level of government was responsible for promotion, streamlining, coordinating and regulating research in crops, livestock, genetic resources and biotechnology in Kenya, which function  was being undertaken by the petitioner.
  13. In a situation where the Constitution or national legislation did not assign a function to a county, then such a function or power belonged to the national government.Consequently, it was erroneous for the respondent to hold the view that it could take over the functions of the petitioner, and all the land reserved for such factions just because agriculture was devolved to counties.
  14. The purported takeover of the suit land by the respondent was an infringement of the petitioner’s right to own property as provided under article 40 of the Constitution.  The respondent, therefore, had to vacate the suit land.
  15. Although the Court had unfettered discretion to order for damages for trespass, no evidence was placed before it to show that the petitioner was utilizing the land as at the time the respondent cleared it and drilled a borehole, built a water pan and put up tanks. Consequently, and in the absence of evidence on the damage that was occasioned on the land by the respondent, the Court declined to order for the payment of damages for trespass.

Petition allowed with costs.
Orders:

  1. Declaration issued that the petitioner was entitled to exclusive and unimpeded right of possession, occupation and use of all the suit land.
  2. Declaration issued that the respondent, whether by itself, servants or agents or otherwise howsoever, had no right, interest and or title to the suit land and were wrongfully in occupation of the same, if at all, and were accordingly trespassers on the same.
  3. Declaration issued that the respondent, whether by itself, officers, servants or agents or otherwise howsoever, were not entitled to remain on the suit land.
  4. Permanent injunction issued restraining the respondent, whether by itself, officers, assigns, servants, agents or otherwise howsoever, from entering, accessing, occupying, remaining on or continuing in occupation of the petitioner’s property or any portion of the suit land and or occupying, possessing and or erecting any structures thereon.
  5. The respondent ordered to give vacant possession of the petitioner’s property.
CONTRACT LAW A constructive trust arises where a person who is a fiduciary or a person in the position of trust purchases property through undue influence

Mombasa Bricks and Tiles Ltd and 5 others v Arvind Shah and 7 others [2019] eKLR
Civil Appeal 117 of 2018
Court of Appeal at Mombasa
A Visram, W Karanja, M K Koome, JJA
April 4, 2019
Reported by Ian Kiptoo

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Contract Law - undue influence –meaning of - where trust was placed on 1st respondent based on expertise and family ties - where trust was placed on 1st respondent to salvage business - what amounted to undue influence in a transaction where a fiduciary or a person in the position of trust offered financial advice to another
Contract Law – bargains - unconscionable bargains - elements establishing unconscionable bargain - what were the elements needed to be established for a transaction to amount to an unconscionable bargain
Company Law - veil of incorporation - lifting the veil - where the respondent was the main actor behind the veil of the respondent companies - where transaction was tainted with undue influence from the 1st respondent - under what circumstances could a court lift a company’s veil of incorporation
Property law – trusts – constructive trusts vis-a-vis resulting trusts – what was the distinction between a constructive trust and a resulting trust
Property law – trusts - constructive trust – circumstances where a constructive trust arose – where respondent was in a position of trust – where respondent offered to help appellants reorganize and restructure their business - where property was transferred as a result of undue influence – whether a constructive trust was established where property was purchased, through undue influence, by a fiduciary or a person in the position of trust from a person who it offered financial advice
Words and Phrases - a necessary party - definition of - on more or less similar terms as a party who, being closely connected to a lawsuit, should be included in the case-Black’s Law Dictionary 19th Edition pg.1232

Brief Facts:
The dispute that had pitted the appellants against the respondents revolved around the proprietorship of the suit land initially registered in favour of the 1st appellant together with a brick making plant, maize milling factory and other developments which were subsequently transferred and/or assigned to the 4th -7th respondents. The 1st - 4th appellants sought a declaration that the 4th - 7th respondents held the suit properties in trust for the 1st appellant and   declaration that the shares held by 1st and 3rd respondents in the 4th -7th respondents were for the benefit of the 1st appellant.
The appellants averred that the Trial Court misapprehended the case before it thus arriving at the wrong conclusion. That at the center of the dispute was whether a fiduciary, or a person in the position of trust, could purchase or take property of a person who it offered financial advice; that the Trial Court failed to address its mind on the nature of the relationship between the 1st respondent on one hand and the 1st, 2nd and 3rd appellants on the other; and the effect of such a relationship on the resulting transactions. Further, that it was immaterial whether the 1st respondent paid consideration for the suit land and such a transaction on account of his fiduciary duty should be set aside as a matter of right.
The respondents contended that the 1st appellant’s resolution, sale agreement and transfer of the suit land spoke for themselves. According to the 1st respondent, when he set out to offer his assistance/advice he did not do so on a philanthropic or charitable basis. He did so as a business venture expecting returns and benefits for his effort. It was on that basis that he mobilized not only his resources but those of his family members and companies associated with them to salvage the assets in question.

Issue:

  1. What amounted to undue influence in a transaction where a fiduciary or a person in the position of trust offered financial advice to another?
  2. What were the elements needed to be established for a transaction to amount to an unconscionable bargain?
  3. Under what circumstances could a court lift a company’s veil of incorporation?
  4. What was the distinction between a constructive trust and a resulting trust?
  5. Whether a constructive trust was established where property was purchased,through undue influence, by a fiduciary or a person in the position of trust from a person who it offered financial advice..Read More..

Held :

  1. The term locus standi meant a right to appear in court and, conversely, to say that a person had no locus standi meant that he had no right to appear or be heard in such and such a proceeding. A party was deemed to be properly joined in a suit if his/her presence was necessary for the determination of the real issue(s) in controversy.
  2. The parties were well suited for purposes of the determination of the dispute in issue. Each party played one role or the other. With respect to the 1st appellant, the law recognized a company as a distinct legal personality capable of suing or being sued in its name. It was for that reason that it was not necessary for a company’s directors or shareholders to be enjoined in a suit which the company was a party to. In any event, there was no complaint advanced by any of the 1st appellant’s shareholders or directors that the appeal was instituted without the requisite authorization.
  3. In Royal Bank of Scotland v Etridge (No.2) [2002] A.C. 773, undue influence was defined as the taking of unfair advantage, misuse of influence, abuse of trust and confidence and a connotation of impropriety. The foregoing suggested that undue influence entailed the misuse of one person’s position of influence he/she had over another to induce the other to enter into a transaction which was substantially not to his interest or benefit. It was for that reason that the rationale behind the doctrine of undue influence was to ensure that the influence of one person over another was not abused. The doctrine was concerned with the manner in which the intention and/or consent of a person to enter into any given transaction was obtained.
  4. It was not possible to explicitly set out the criterion of determining instances and circumstances when a person could be said to have exerted undue influence over another. That was because from the very definition given inRoyal Bank of Scotland v Etridge (No.2) [2002] A.C. 773, it was clear that undue influence could take many forms. Likewise, circumstances under which one person acquired influence over another and the manner in which the influence could be abused could vary from one case to another. Nonetheless, undue influence could either be through overt acts of improper pressure or coercion or could be inferred from the circumstances of the relationship between the parties as discussed in the Royal Bank of Scotland case.
  5. Whether or not a transaction was the end result of undue influence was a matter of fact. The general rule was that he, who asserted the wrong, in the instant case the appellants, bore the burden of proving the same. It was common ground that the 1st, 2nd and 3rd appellants sought the 1st respondent advice based firstly, on his perceived expertise, and secondly, on account of their close and trusted family relationship that he would help the 1st appellant out of its dire circumstances. The trust and confidence was evidenced by the fact that the proposals he made to the appellants’ were accepted.
  6. The relationship between two individuals could be such that, without more, one of them was disposed to agree a course of action proposed by the other. Relevant was whether one party had reposed sufficient trust and confidence in the other, rather than whether the relationship between the parties belonged to a particular type of relationship.
  7. All the transactions were spearheaded by the 1st respondent.  He did not deny that the resolution which was executed by the 1st appellant’s directors emanated from him. Despite the respondents contending that the 1st appellant was represented by Messrs Singh Gitau Advocates in the sale agreement, it was rather strange that save for the sale agreement indicating as much, there was no correspondence from the said advocates with respect to the transaction on record. It was clear that it was the 8th respondent through a letter dated August 18, 2005 under the hand of the 1st respondent, who forwarded the duly executed sale agreement to HHM. That scenario gave credence to the 2nd and 3rd appellants’ evidence that it was the 1st respondent who delivered the sale agreement to the 3rd appellant for execution by the 1st appellant’s directors.
  8. The 4th - 7th respondents had no assets to their name upon their incorporation nor did the 1st - 3rd respondents transfer any assets to the said companies. Rather, the assets they held came from the 1st appellant namely, the suit land, brick making plant and maize milling factory, following the sale of the suit land to the 8th respondent. The purchase price of the said assets was Kshs 27,000,000 as per the sale agreement. While cognizant that a court was not concerned with the adequacy of consideration, when it came to the question of enforceability of a contract, there was the glaring question why the 1st appellant would agree to the said purchase price while all evidence pointed to the fact that the estimated value of the suit land was substantially over and above the said price.
  9. The Court was not in agreement with the respondents’ contention that the suit land was valued at Kshs 27,000,000; nor with the arithmetical formula set out in the their submissions with a bid to convince it otherwise. It was given that the parties did not agree on the value of the suit land but the evidence on record corroborated that it was around Kshs 150,000,000. For instance, when the 8th respondent initially made an application for a loan on July 21, 2005 to purchase the suit land to Giro bank, before the incorporation of the 4th respondent, it disclosed the estimated value as over Kshs 150,000,000. The 4th respondent in a letter dated November 21, 2008 to Giro Bank also disclosed as much.
  10. A letter dated October 18, 2005 from HHM calling for payment of further stamp duty by the 8th respondent on account that the property had been valued at higher value than what was reflected in the transfer. In any event, it was never within the contemplation of the parties that the suit land should be sold for a paltry Kshs 27,000,000 and that 1st respondent would become one half owner.
  11. In as much as the 1st, 2nd, 3rd and 8th respondents were adamant that they sourced financial facilities for the purchase of the suit land and working capital for the 4 - 7th respondents on the security of their own resources and/or resources of related companies and even went ahead to repay the facilities, the record bore otherwise. In particular, the letter of offer dated August 11, 2005 of the aforementioned loan by Giro Bank to the 4th respondent which was accepted set out the security of the said facility at clause 7.
  12. The bulk of the evidence on record showed that financial facilities extended to the 4th - 7th respondents were substantially secured by the suit land, brick making plant or the maize milling plant. It could not be taken away from the 1st, 2nd and 8th respondents that in certain instances they supplemented the securities in question by giving shares held by the 2nd respondent and her daughter in Mumias Sugar with respect to Kshs 50, 000, 000 loan, personal and corporate guarantees, and in the case of Kshs.10, 000, 000 loan to the 6th respondent, a charge over the 8th respondent property.
  13. Repayment of those facilities was met by the 4th - 7th respondents out of the proceeds of the businesses they conducted. A further confirmation that that was the mode of operation was a letter dated May 25, 2008 by the 4th respondent to Giro Bank. As the record showed the 1st respondent paid the deposit of Kshs 2,600,000 towards the purchase price of Kshs 27,000,000. However, the same was refunded to him by the appellants by cheque made out to Simpoo Investments, a company associated with the 1st respondent. The balance of the purchase price was paid by a loan secured by the 1st respondent from Giro Bank using the 1st appellant’s property and land.
  14. The appellants did establish that they had placed their trust in the 1st respondent to salvage the suit properties. In addition, the transactions and the arrangement that resulted from his proposal gave rise to more questions than answers. Consequently, the circumstances gave rise to a presumption of undue influence on the part of the 1st respondent as set out in the Royal Bank of Scotland case. The net effect was that the documents which gave rise to the arrangement the parties found themselves in did not reflect the true and independent consent of the 1st to the 4th appellants.
  15. The transactions and the arrangement that resulted from the 1st respondents’ proposal met the criteria of being regarded as unconscionable bargains. For the doctrine to be applicable three elements had to be established; first that the bargain had to be oppressive to the complainant in overall terms; second that it could only apply when the complainant was suffering from certain types of bargaining weakness; and third that the other party had to have acted unconscionably in the sense of having knowingly taken advantage of the complainant.
  16. Notwithstanding the effect of a company’s incorporation, in some cases the court would pierce the corporate veil in order to enable it to do justice by treating a particular company, for the purpose of the litigation before it, as identical with the person or persons who controlled that company. That would be done not only where there was fraud or improper conduct but in all cases where the character of the company, or the nature of the persons who controlled it, was a relevant feature. In such case the court would go behind the mere status of the company as a separate legal entity distinct from its shareholders, and would consider who were the persons, as shareholders or even as agents, directing and controlling the activities of the company.
  17. The 1st respondent was the main actor behind the veil of the 3rd and 8th respondent companies all of whom were party to the transactions which were tainted by undue influence. It was evident from the record that he treated the said companies as an extension of himself. Neither the 1st respondent nor the 3rd and 8th respondents could hide behind the veil of incorporation more so; since it was apparent it was used for covering the 1st respondent’s improper conduct. Therefore, the corporate veil of the said companies was lifted and deemed to be one and the same with respect to the transactions in issue.
  18. Not only did the 1st and 3rd respondents hold the shareholding in the 4th -7th respondent companies in trust for the 1st appellant but that the 4th respondent held the suit land in trust for the 1st appellant as well. In the absence of an express trust, trusts were created by operation of the law. Those fell within two categories; constructive and resulting trusts. A constructive trust was an equitable remedy imposed by the court against one who had acquired property by wrong doing. It arose where the intention of the parties could not be ascertained. If the circumstances of the case were such as would demand that equity treated the legal owner as a trustee, the law would impose a trust.
  19. A constructive trust would automatically arise where a person who was already a trustee took advantage of his position for his own benefit, with constructive trusts, proof of parties’ intention was immaterial; for the trust would nonetheless be imposed by the law for the benefit of the settlor.  Imposition of a constructive trust was thus meant to guard against unjust enrichment.
  20.  The fact that the 4th respondent’s title was registered under section 23 of the repealed Registration of Titles Act, the same was impeachable in the circumstances stated. The registration of title to land was absolute and indefeasible to the extent, firstly, that the creation of such title was in accordance with the applicable law and secondly, where it was demonstrated to a degree higher than the balance of probability that such registration was procured through persons or body which claimed and relied on that principle had not himself or itself been part of a cartel which schemed to disregard the applicable law and the public interest.
  21. The 1st appellant remained the true and beneficial proprietor of the suit land and as such, only the 1st appellant could maintain a suit for trespass against the 5th and 6th appellants. Accordingly, the imposition of payment of mesne profits by the 5th and 6th appellants was unwarranted. Similarly, the order directing assessment of the rent payable had no basis.

Appeal allowed, cross-appeal dismissed
Orders

  1. Declaration that the shares held by the 1st and 3rd respondents in the 4th - 7th respondents were held in trust for the 1st appellant or its nominees.
  2. Declaration that the suit land was held in trust for the 1st appellant or its nominees.
  3. The sale agreement dated August 31, 2005 and the transfer of the suit land to the 4th respondent was nullified.
  4. The transfer of the suit land to the 1st appellant or nominees was subject to the existing encumbrances on the title thereto.
  5. Parties were to meet their obligations towards repayment of any existing loans.
  6. The circumstances surrounding the dispute called for lifting of the corporate veil of the 3rd and 8th respondent companies.
  7. In light of the afore stated reasons there was no basis:
    1. for the imposition of payment of mesne profits on the 5th and 6th appellants;
    2. for the audit of the accounts held by the 5th and 6th appellants; and
    3. for appointment of an inspector under section 165 of the Companies Act.
  8. Costs awarded to the appellants both at the High Court and Court of Appeal.
CONSTITUTIONAL LAW County legislation cannot impose land rates or other fees on land used for mining and controlled under national legislation.

Tata Chemicals Magadi Limited v County Government of Kajiado & 2 others [2019] eKLR
Petition 2 of 2019
High Court at Kajiado
R Nyakundi, J
May 3, 2019
Reported by Beryl Ikamari & Mathenge Mukundi

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Constitutional Law-national values and principles of governance-public participation-threshold to be met in the fulfilment of public participation requirements -whether the County Assembly was obliged to consider views expressed during a public participation exercise in relation to a County Bill -what was the effect of failing to consider expressed views emerging from a public participation exercise-Constitution of Kenya, 2010, articles 196 & 201, County Governments Act, 2012, section 115.
Constitutional Law-statutes-legislation-hierarchy of legislation-between national legislation and county legislation which should prevail over the other-circumstances in which national legislation prevailed over county legislation-whether the county legislation could impose land rates on land controlled under the national legislation as it was used in part for mining-Constitution of Kenya, 2010, article 191.
Taxation Law-imposing taxes and charges-types of taxes that a county government had the power to impose-property rates-whether a county government had the power to levy land rates on the petitioner’s parcel of land which was partly used for mining-Constitution of Kenya, 2010, article 209 (3) & (4).
Constitutional Law-county legislation-gazettement of county legislation-effect of failure to gazette county legislation-whether the failure to gazette Kajiado County Finance Bills 2015/2016, 2016/2017 and 2017/2018 meant that they were null and void.
Constitutional Law-enforcement of fundamental rights and freedoms-remedies for violations of fundamental rights and freedoms-special damages-whether the Court could award special damages where there was a failure by the petitioner to specifically plead and prove special damages.

Brief facts:
The petitioner, a company involved in the manufacture of soda ash, was aggrieved by the 1st respondent’s decision to impose land rates and other fees on the parcel of land on which it was located. The levying of additional charges or fees would adversely affect the viability of the company’s operations. The 1st respondent had enacted the Kajiado County Finance Bills 2013/2014, 2015/2016, 2016/2017 and 2017/2018, which purported to increase land rates to Kshs 11,000- per acre and Kshs 14,000/- per acre respectively. That was an exponential increase in rates which was untenable and unsustainable as the petitioner had been operating with a negative net worth and had been kept going by line of credit through a scheduled debt amortization of USD11 million from the parent company, which was due for refinancing on January 17, 2019. It was averred that the Kajiado County Finance Bill 2018/2019, which purported to prescribe land rates at Kshs. 20,000 per acre was unreasonable and failed to meet legitimate expectations.
It was agreed by consent that the 2nd and 3rd respondents be struck out from the suit on the basis that no reasonable cause of action was shown against them.

Issues:

  1. Whether a county legislation could impose land rates on land used for mining and under the control of the government.
  2. What were the circumstances in which national legislation would prevail over county legislation?
  3. What was the effect of failing to consider views expressed during public participation events as related to enactments of a county assembly?
  4. Whether the Kajiado County Finance Act 2014 and the subsequent Kajiado County Finance Bills 2015/2016, 2016/2017 and 2017/2018 were unconstitutional, for not being gazetted, being inconsistent with national legislation, failure to meet public participation requirements and constitutional requirements on taxation and tax equity, contrary to the provisions of articles 191 (2) and (3), 196, 201, 209(3) and 209 (5) of the Constitution.
  5. Whether a county government had the power to levy land rates on a parcel of land, given that part of it was used for mining soda ash.
  6. Whether the Court ought to grant general and punitive damages as sought by the petitioner.
  7. Whether the petition was res judicata on grounds that the dispute had been subjected to prior court proceedings.
  8. Whether the dispute should be referred to arbitration as there was an arbitration clause in an agreement between the petitioner and the 1st respondent. Read More...

Held:

  1. The issues raised in the petition went beyond the ambit contemplated in the arbitration clause in the agreement between the petitioner and the 1st respondent. Additionally, the agreement's validity was thrown to question by the petitioner.
  2. The 1st respondent enacted the Kajiado County Rating Act (Act No. 4 of 2016) to provide for the imposition of rates. Before that enactment, it relied on the extant national legislation to levy rates as it had power to do so under section 8 of the County Governments Act. In the absence of a County Rating Act, the County Government had powers to rely on the existing national legislation to impose rates but that situation was not one that should continue in perpetuity. Accordingly, the 1st respondent had the power to levy rates and had exercised that power correctly.
  3. The provisions of the Kajiado County Finance Act, 2014 and the Kajiado County Rating Act and any other subsequently gazetted Acts relating to the levying of rates ought to be suspended in as far as they applied to the petitioner until the area upon which rates would be imposed by the 1st respondent could be ascertained. The suspended Acts were in conflict with the Mining Act, 2016 which was national legislation. Article 191 of the Constitution provided that national legislation would prevail over county legislation if it applied uniformly throughout Kenya and it was aimed at preventing unreasonable action by a county that would be prejudicial to the economic, health or security interests of Kenya or impeded the implementation and maintenance of national economic policies.
  4. The petition sought a declaration that the Kajiado Finance Act, 2014 offended several constitutional provisions and ought to be impugned. The petitioner questioned the 1st respondent’s powers under article 209(3) of the Constitution and the manner in which said powers were exercised. Concomitantly, the petition raised other issues that were not subject to any deliberations in the cases referred to the Court by the 1st respondent. The petition was not res judicata.
  5. In examining the constitutionality of a statute it had to be assumed that the Legislature understood and appreciated the needs of the people and the law it enacted was directed at problems which were made manifest by experience and the elected representatives assembled in a Legislature enacted laws which they considered to be reasonable for the purpose for which they were enacted. There was a rebuttable presumption that legislation was constitutional hence the onus of rebutting the presumption rested on those who challenged that legislation’s status
  6. Failure to gazette Kajiado County Finance Bills 2015/16, 2016/17, 2017/18 did not render them unlawful as the 2014 Finance Act was still applicable until another Finance Act was gazetted.
  7. The constitutional and statutory provisions, namely, article 201(a) of the Constitution provided that all aspects of public finance should be guided by certain principles including the principle that there should be openness and accountability, including public participation in finance matters.  Section 115 of the County Government Act provided that public participation in the county planning processes had to be mandatory and be facilitated through mechanisms provided from part VIII of the Act.
  8. Public participation played an integral role in both legislation and policy functions of the Government whether at the national or county level. Article 196 (b) of the Constitution required the County Assembly to facilitate public participation and involvement in the legislation and other business of the assembly and its committees. The County Assembly, therefore, had a constitutional obligation to facilitate public participation on policy formulation, the legislative process and any other decision affecting residents of the county.
  9. Public participation ought to be real and not illusory and should not to be treated as a mere formality for the purposes of fulfilment of the constitutional dictates.  It was the County Assembly’s duty in enacting legislation to ensure that the spirit of public participation was attained both quantitatively and qualitatively, and do whatever was reasonable to ensure that as many of their constituents in particular and Kenyans, in general, were aware of the intention to pass legislation and especially where the legislation in question involved such important aspects as payment of taxes and levies.
  10. There was no authority for the proposition that the views expressed by the public were binding on the Legislature if they were in direct conflict with the policies of the Government. The Government certainly could be expected to be responsive to the needs and wishes of minorities or interest groups, but Kenya’s constitutional system of government would be unable to function if the Legislature were bound by those views. Public participation in the legislative process, which the Constitution envisaged, was supposed to supplement and enhance the democratic nature of majority rule, not to conflict with or even overrule or veto it.
  11. The Kajiado County Finance Act, 2014 was passed with appropriate regard being given to public participation. The failure of the County Government to consider the expressed views of the petitioner did not render the Act itself unconstitutional.
  12. It was not for the courts to decide what an appropriate or right or wise legislative provision was. That power fell squarely with the Legislature, the courts would only intervene if, in the face of the claims, a particular statute or part thereof contravened the Constitution. The Court could not purport to direct the 1st respondent on how to exercise its duty of levying rates. The 1st respondent had the mandate of legislating on the calculation of the rates payable with regard to the revenue it ought to raise. Consequently, the Court could not enter into the arena of deciding what fee was reasonable, convenient or proper to be levied. That was the exclusive jurisdiction of the County Government.
  13.  Article 62 (1) (f) of the Constitution categorised minerals as comprising public land and section 6 of the Mining Act, 2016 provided that every mineral- in its natural state in, under or upon land in Kenya, in or under a lake, river, stream, or watercourses in Kenya vested in the National Government. The National Government's control over minerals vested in it should be exercised in accordance with the provisions of the Act. The soda ash under lakes Magadi and Natron mined by petitioner fell squarely under the definition of a mineral in the First Schedule of the Mining Act, 2016. It was excluded from rating by virtue of it being under the control of the National Government.
  14. The petitioner had a lease over a vast area of property. Some of it was utilized for mining, meaning that it was within the National Government's control, while part of it was not. For the part not utilized for mining, rates ought to accrue to the 1st respondent. It was necessary to determine the acreage for which rates could be levied.
  15. That soda ash mined by the petitioner was a natural resource of great importance to the country’s economy. It was the duty of the Court to ensure that the taxation powers of the 1st respondent were not exercised in a way that prejudiced the national economic policy or the national mobility of goods. In the tax regime, the principle of proportionality and ability to pay should be taken into consideration by any system of government. The ratio of the sum so proposed on rates and taxes on real estate should not be excessive. A country’s tax regime was a key policy instrument that supported or discouraged any foreign or local investment.
  16. Article 159(2)(c) of the Constitution empowered the Court to promote alternative forms of dispute resolution including reconciliation, mediation, arbitration, and traditional dispute resolution mechanisms. The National Government and other relevant stakeholders ought to be brought on board in pursuit of a lasting conclusion to the dispute. Section 12 of the Mining Act, 2016 empowered the Cabinet Secretary for mining to administer the Act, including negotiating for mineral rights.
  17. The petitioner prayed for Kshs 72,664,002/= in general and punitive damages but despite couching that amount as general damages, it was ultimately an amount relating to special damages. Special damages should not only be specifically pleaded but also strictly proved. Without evidence to support the claim for that amount of damages, the prayer for damages would fail.
  18. The petitioner was obliged to place evidence of damage suffered before the Constitutional Court before liability was determined. There had to be damage suffered as a result of the breach of constitutional rights before the Court could exercise its discretion to award damages in the nature of compensatory damages to be assessed. If there was no damage shown, the second stage of the award was not available as a matter of course. It was only if some damage had been shown that the Court could exercise its discretion whether or not to award compensatory damages. In the instant case, there was no evidence of damage suffered as a result of the breaches.

Application partly allowed.

Orders:-

  1. The Kajiado County Finance Act, 2014 was validly enacted.
  2. In line with the objectives of article 159(2)(c) of the Constitution on alternative dispute resolution, the petitioner and the 1st respondent should submit themselves to a comprehensive consultative process under the supervision of the Court and in conjunction with the National Government, (the lead ministry and convenor being that of petroleum and mining)   with a view of negotiating the amount of land rates payable by the petitioner in the period since the commencement of the Kajiado County Finance Act, 2014 and distinguishing the exact acreage of land leased by the petitioner upon which the 1st respondent could levy the agreed rates as a devolved function.
  3. Such process contemplated above should be concluded within 6 months from the date of the judgment.
  4.  Pending the outcome of the process contemplated in (ii) above, an order of prohibition was issued to prohibit the 1st  and 3rd respondents by themselves or their servants, agents, and/or assignees from trespassing, entering, remaining on, closing, locking, blocking or in any other manner whatsoever and howsoever interfering with the petitioners premises, factories, gates and properties situated in Kajiado and Magadi in the County of Kajiado; the 145 kilometre  Railway line stretch was under the jurisdiction of Kenya Railways and not the County Government.
  5. An order for certiorari was issued to quash the decisions and demands of the 1st respondent contained in the letters dated February 14, 2018 and the demands made by the 1st respondent's agent, Regional Business Connection Limited, in the letters dated December 12, 2018 and December 19, 2018 directing the petitioner to remit Kshs 17,448,485,646/- to the 1st respondent on account of the alleged arrears of land rates and royalties. In the petition, there was clear evidence in terms of the Fourth Schedule of the Constitution and the Mining Act which fortified the petitioner’s contention.
  6. Pending the outcome of the process contemplated in (ii) above, the provisions of the Kajiado County Finance Act, 2014 relating to the imposing of land rates were suspended in as far as they related to the petitioner and mines and mineral extractives and until a proper alienation was undertaken to make sense of facial and applied challenges of the statute.
  7. Each party was to bear its own costs
CIVIL PRSCTICE AND PROCEDURE Courts can extend the term served by a judgment-debtor committed to a civil jail within the maximum six months term

Innocent G Ondieki v Julius Nakaya Kabole [2019] eKLR
Miscellaneous Civil Application 13 of 2018
High Court at Kakamega
W Musyoka, J
May 9, 2019
Reported by Ian Kiptoo

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Civil Practice and Procedure - execution of a decree - committal to civil jail – claim by judgment-debtor that service of notice to show cause was not properly done – where judgment-debtor did not wish to cross-examine the process server - under what circumstances could a judgment-debtor challenge an order for committal to civil jail – Civil Procedure Act, section 38; Civil Procedure Rules, order 22 rule 31 (1)
Civil Practice and Procedure - execution of a decree - committal to civil jail – extension of jail term – court’s discretion - whether a court could extend the term served by a judgment-debtor committed to civil jail - Civil Procedure Act, section 42 (1)

Brief facts:
The respondent filed the instant application that he be released from civil jail on terms that were judicious or on execution of a personal bond pending the hearing and determination of the application on the grounds that; he had never been served with the court process in respect to the miscellaneous cause which brought about the costs he was now asked to pay; that the civil imprisonment was unfair as he was never aware of the taxing of the bill of costs against him as the applicant never served him with the same.
 The applicant opposed the application stating that the orders sought to be set aside were non-existent therefore there was nothing to be set aside. Further, that the application had not been amended to capture the proper dates and as such the same could not be allowed as prayed. In addition, that the respondent had been arrested in execution of the certificate of costs that had not been appealed against and which was still in force.

Issues:

  1. Under what circumstances could a judgment-debtor challenge an order for committal to civil jail?
  2. Whether a court could extend the term served by a judgment-debtor committed to a civil jail within the maximum six months term.Read More...

Relevant Provisions of the Law
Civil Procedure Act, Cap 21
Section 38
Subject to such conditions and limitations as may be prescribed, the Court may, on application of decree holder, order execution of the decree –

 (a) by delivery of any property specifically decreed,
 (b) by attachment and sale, or by sale without attachment of any property,
 (c) by attachment of debts
 (d) by arrest and detention in prison of any person
 (e) by appointing a receiver or
 (f) in such other manner as the nature of relief granted may require.

 Provided that where the decree is for payment of money, execution by detention in prison shall not be ordered unless after giving the judgment-debtor an opportunity of showing cause why he should not be committed to prison, the Court, for reasons to be recorded in writing is satisfied –

 (a) that the judgment-debtor with the object or effect of obstructing or delaying the execution of the decree –

(i) is likely to abscond or leave the local limits of the jurisdiction of the Court or
 (ii) has after the institution of the suit in which the decree was passed, dishonestly transferred, concealed or removed any part of his property, or committed any other act of bad faith in relation to his property.

 (b) That the judgment-debtor has or has had since the date of the decree, the means to pay the amount of the decree or some substantial part thereof and refuses or neglects, or has refused or neglected, to pay the same, but in calculating such means there shall be left out of account any property which by or under any law, or custom having the force of law for the time being in force, is exempt from attachment in execution of the decree, or
 (c) That the decree is for a sum of money which the judgment debtor was bound in a fiduciary capacity to account.’

Held:

  1. The right to commit a judgment-debtor to civil Jail was provided for under section 38 of the Civil Procedure Act which provided for powers of the court to enforce execution. It should however be noted that the Court could, at any time, review its orders based on the grounds advanced by the respondent. The main ground ought to be that the rules were not adhered to by the court and the parties.
  2. The application had not been premised on any provision of the law and therefore the Court, in the interest of justice, could only rely on the face of the application and the affidavit in support thereof. No such orders were issued on April 23, 2019 and thus there were no orders capable of being set aside if the Court went by the date that was stated in the application.
  3. The only viable ground of setting aside an order for committal to civil jail was when the respondent challenged the mode or manner in which the said orders were attained. Section 38 of the Civil Procedure Act provided a limitation of the courts’ power to order execution of a decree by way of detention in prison.
  4. Section 38 of the Civil Procedure Act prohibited the court from making an order of execution of any decree for the payment of money unless the judgment-debtor had first been given an opportunity of showing cause why he should not be committed to prison. Even where the judgment- debtor had been given such notice to show cause, the court had to itself be satisfied and give reasons in writing for that. Those limitations were further re-stated under order 22 rule 31 (1) of the Civil Procedure Rules. A notice to show cause could be issued requiring the judgment-debtor to show cause and where he failed to appear, a warrant of arrest was issued.
  5. In the instant cause, the matter came up for notice to show cause on the March 20, 2019. On that day, the applicant filed an affidavit of service, deponed, on March 15, 2019. In the affidavit, the process server gave an elaborate account of how he served the respondent. It was on the basis of that affidavit of service that the Deputy Registrar proceeded to issue warrants of arrest against the respondent.
  6. A perusal of the Court record showed that the respondent was indeed served. The respondent was once a client of the applicant, who had to have become familiar to him and to places where he could be found or traced. In addition, the respondent had not proposed to cross-examine the process server to challenge the veracity of his averments in the affidavit of service. In Grand Creek LLC & Another vs. Nathan Chesangmoson [2015] eKLR, the Court allowed a similar application on the basis that the judgment debtor wished to cross-examine the process server to establish the veracity of the affidavit of service.
  7. The service had not been successfully challenged. The Deputy Registrar considered the affidavit of service, found and held that the service was proper. Therefore, the service of the notice to show cause was proper and the respondent had not offered any sufficient reason to warrant the setting aside of the orders made on the April 3, 2019.
  8. Section 42 (1) of the Civil Procedure Act allowed detention in execution of a decree for a period not exceeding six months. That simply set the maximum limit of detention to six months, whether it was done by way of one sentence, or several sentences, aggregating to a maximum of six months. However, what was important was that due process had to be followed.
  9. The respondent had served a term of 30 days in prison. The maximum term for civil imprisonment was six months; the same could be ordered in one sentence or could be extended in several sentences to amount to the six months. It should, however, be noted that the extension of such term could not be done on an oral application in court, a formal application for the same ought to be made and the judgment-debtor be granted a chance to respond to the same.

Application dismissed with no order as to costs.

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