Five Forty Aviation Limited v Kenya Revenue Authority & 3 others [2017] KECA 626 (KLR)
The bottom line
#Kenya's Court of Appeal ruled that KRA could not fairly demand over Ksh.100 million under aviation charges that had already been revoked after a reform process the airline participated in.
What this practically means
#Executive summary
#Key legal issues
#Scope of judicial review jurisdiction
Judicial review is concerned with the process, not the merits, of a public body's decision.
The Court restated that a court exercising judicial review jurisdiction examines procedural regularity, excess of jurisdiction, natural justice and due process, not the sufficiency of evidence or the wisdom of the decision. It adopted the Ransa and Wednesbury formulations, and the Municipal Council of Mombasa passage, to frame the questions it would address: whether the decision-makers had power, whether affected persons were heard, and whether relevant considerations were taken into account.
Unfairness of demanding payment under a revoked Legal Notice
Issuing demand and agency notices after the repeal of Legal Notice No. 100 of 2011, without considering the unfairness of applying it, was unreasonable and amenable to judicial review.
Although the impugned Legal Notice remained in force until revoked and Legal Notices 109 and 110 of 2012 could not operate retroactively, the Court found a grey area: the 2nd respondent involved the appellant in a reform committee whose report was adopted and led to revocation. The 2nd respondent had a duty to explain to the industry and the 1st respondent what to expect after the review. Calling on the appellant to pay charges that had brought genuine grievances, without weighing aspects of unfairness, was unreasonable and should have been quashed.
Legitimate expectation
The involvement of the appellant in the reform process and adoption of its recommendations gave rise to a legitimate expectation that charges would not be levied under the repealed Legal Notice.
The Court distinguished the cases cited by the respondents on legitimate expectation, noting that there the respondents admitted the problem with Legal Notice No. 100 of 2011 and involved the appellant in fixing it. Since the demand and agency notices were issued after the repeal, the appellant was justified in expecting charges to be levied under the prior or new regulations. The respondents failed to consider whether applying the revoked rates would produce conspicuous unfairness, and the notices should have been quashed with fresh decisions directed.
Non-arbitrary exercise of collection discretion
The 1st respondent's statutory discretion in determining levies must be exercised reasonably, not capriciously or arbitrarily.
The Court accepted that the 1st respondent has a statutory mandate to collect taxes on behalf of the 2nd respondent, but held that the discretion involved in determining levies where a person has failed to pay must be exercised reasonably. Invoking Wednesbury, the Court held that a repository of discretion must direct itself properly in law, consider relevant matters and exclude irrelevant ones; failure to consider the unfairness of applying the revoked notice rendered the demand unreasonable.
Legal principles established
#- A public body exercising statutory discretion in the assessment or collection of levies must not exercise that discretion capriciously or arbitrarily; where a regulator has involved an affected party in reforming the very charges, demanding payment under the revoked instrument without considering unfairness is unreasonable and amenable to judicial review.
- Where a regulator involves a stakeholder in a committee whose recommendations are adopted and lead to repeal of the impugned charges, the stakeholder has a legitimate expectation that it will not be condemned to pay charges under the repealed Legal Notice.
Court orders
#- 1.Appeal allowed
- 2.Order of the High Court dismissing the Notice of Motion dated 7th December 2012 set aside and substituted with an order allowing the Notice of Motion
- 3.Matter referred to the respondents for fresh consideration taking into account all aspects of unfairness in applying Legal Notice No. 100 of 2011
- 4.Appellant awarded costs of the appeal and costs in the High Court
- On appeal from
- High Court of Kenya at Nairobi
- High Court Judicial Review Misc. Appl. No. 420 of 2012
- Jurisdiction invoked
- First appeal from the High Court in judicial review proceedings under the Civil Aviation Act Cap 394 and the KRA Act (no specific appellate provision stated in the judgment)
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Five Forty Aviation Limited v Kenya Revenue Authority & 3 others [2017] KECA 626 (KLR)", Case Analysis (2017). Civil Appeal No 134 of 2015. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2017/626/eng@2017-03-31
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.