On the same day, Petition No. E181 of 2023 (Petition) was filed by the Okiya Omtata Okoiti and six others (Petitioners), on the grounds that the Act is unconstitutional as it was enacted in violation of the Constitution and the Public Finance Management Act, 2012.

The Petitioners argued that the Act was processed in a manner that violated the express provisions of Article 110(3) of the Constitution, as it was not subjected to the preliminary mandatory concurrence of the two speakers of Parliament, as required under the article, and that as a result certain sections in the Act were irregularly and unconstitutionally enacted into law.

Further to this, the Petitioners argued that the constitutional rights of the Petitioners and Kenyans overall would be gravely compromised and violated if the requested orders in the Petition were not granted.

The Cabinet Secretary for the National Treasury and Planning, the Attorney General, the National Assembly and the Speaker of the National Assembly (Respondents) argued that the Bill followed due procedure in being enacted into the Act. The Respondents further argued that they considered all views received from the public and stakeholders, and as a result, some amendments were proposed to the Bill, as contained in the report by the National Assembly’s Departmental Committee on Finance and National Planning.

Issues for determination by the High Court

The High Court summarised the issues for determination as follows:

• whether the orders of 30.6.23 should be set aside;
• whether the test of conservatory orders had been met; and
• whether the matter should be certified as raising a substantial question of law under Article 165(4) of the Constitution.

Whether the orders of 30.6.23 should be set aside

The Petitioners sought the Court to issue the following:

• a conservatory order suspending the Act;
• an interim order of prohibition, prohibiting the respondents and interested parties or their agents from giving effect to the Act;
• conservatory orders suspending certain provisions of the Act;
• an interim order prohibiting the respondents and interested parties from giving effect to certain provisions of the Act;
• confirmation that the Petition raised substantial questions of law and referral of the case the Chief Justice for the enrolment of a bench of an uneven number of judges, not less than three, pursuant to Article 165(4) of the Constitution;
• placement of the Petition for an urgent interpartes hearing before the Chief Justice; and
• issuing of further directions and orders as may be necessary to give effect to these orders and/or favour the cause of justice.

In determining whether the orders of 30.6.23 should be set aside, the High Court considered a similar application for the setting aside of conservatory orders, in the case Okiya Omtata Okoiti v Commissioner General, Kenya Revenue Authority and Two Others [2017] eKLR, the Court held that:

• to set aside conservatory orders, the Court must be satisfied that the applicant will be irreparably injured, absent of a stay;
• it is required to consider whether the issuance of a stay order will substantially injure the other parties interested in the proceedings; and
• it is bound to consider where the public interest lies.

The High Court held that it was satisfied that the Petitioners satisfied the tests for granting conservatory orders. The Court held that it was necessary to issue conservative orders to preserve the substratum of the Petition pending the hearing and determination of the same, and that without the conservatory orders as sought, the Petition was at risk of being rendered a mere academic exercise. The Court observed that it has a constitutional mandate to protect the supremacy of the Constitution by ensuring that all laws conform to the Constitution.

Whether the test of conservatory orders has been met

A conservatory order is one of the appropriate reliefs available to a party who alleges and proves denial, violation or infringement of, or threat to, a right or fundamental freedom in the Bill of Rights. The High Court observed the purpose of conservatory orders is to preserve the substratum of the Petition before the Court pending the hearing and determination of the same. The Court further noted that in the case of Gatirau Peter Munya v Dickson Mwenda Kithinji and Two Others [2014] eKLR, the Supreme Court set out the test for the granting of conservatory orders with three components. A party seeking conservatory orders must demonstrate to the Court that:

• the Petition is arguable and not frivolous;
• unless the orders sought are granted in the suit, were it to succeed, it would be rendered nugatory; and
• it is in the public interest that the orders are granted.

In satisfying the above requirements, the Court found that the Petitioners had established a prima facie case with a probability of success. The Court also found that if the substratum of the Petition is not preserved by having conservatory orders in place, there is imminent danger of rendering the Petition nugatory. The Court further observed that this would militate against public interest as there was a real risk of the public being subjected to an unconstitutional law, should the Petition succeed. Based on this, the Court found that there was merit in granting conservatory orders in respect of the Act under challenge.

Whether the matter should be certified as raising a substantial question of law under Article 165(4) of the Constitution

Article 165(4) of the Constitution provides that: “Any matter certified by the Court as raising a substantial question of law under clause (3)(b) or (d) shall be heard by an uneven number of judges, being not less than three, assigned by the Chief Justice.”

The matters referred to in Article 165(4), are matters that raise a question of:

• whether a right or fundamental freedom in the Bill of Rights has been denied, violated, infringed or threatened;
• whether any law is inconsistent with, or in contravention of the Constitution;
• whether anything said to be done under the authority of the Constitution or of any law is inconsistent with, or in contravention of the Constitution;
• any matter relating to constitutional powers of state organs in respect of county Governments;
• any matter relating to the constitutional relationship between the levels of Government; and
• relating to conflict of laws under Article 191 of the Constitution.

The High Court made an order to certify that this matter raises a substantial question of law and the file be transmitted to the Chief Justice for assignment of a bench of not less than three judges to hear and determine the Petition.

Comment

The suspension of the Act comes at a time when the Government is under immense pressure to collect additional tax revenue to support its ambitious 2023/2024 budget of KES 3,6 trillion. The Act has a mix of wins and losses for taxpayers, and therefore suspending or throwing away all the provisions of the Act is akin to throwing the baby away with the bath water.

The matter is set to be heard by a three-judge bench, however, there is no indication of when the legal challenge on the Act will be finally determined. We do, however, expect that the Petition will be heard on a priority basis considering the weighty issues that it raises and the significant impact on taxpayers and revenue collection.

At the moment, taxpayers are encouraged to take a conservative approach because the Court may, at its own discretion, decide that the Act is constitutional and effective from 1 July 2023. This conservative approach includes making provision for additional taxes introduced by the Act. You can read our analysis of the Act, the effective date of its provisions and the implications in our alert here.