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Court Annexed Tax ADR in Kenya

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There are numerous provisions under the Civil Procedure Act, Cap. 21, Laws of Kenya, on the use of Alternative Dispute Resolution (ADR) in conflict management and are relevant to the resolution of tax disputes. In July 2009, Parliament passed a raft of proposals for amendment to the Civil Procedure Act to introduce ADR. Essentially, these were proposed amendments to sections 1 and 81 of the Civil Procedure Act which have so far been enacted into law. For starters, the amendment introduced section 1A (1) of the Civil Procedure Act which outlined the overriding objective of the Act as to facilitate the just, expeditious, proportionate and affordable resolution of civil disputes governed by the Act.

The Civil Procedure Act enjoins the Judiciary to exercise its powers and interpretation of the civil procedure to give effect to the overriding objective above. In effect, this implies that the court in its interpretation of laws and issuance of orders will ensure that the civil procedure shall, as far as possible, not be used to inflict injustice or delay the proceedings and thus minimize the litigation costs for the parties. This provision also serves as a basis for the court to employ rules of procedure that provide for use of Alternative Dispute Resolution mechanisms, to ensure that they serve the ends of the overriding objective.

Section 14 of the Tax Appeals Tribunal Act, No. 40 of 2013 exempts the provisions of Cap. 21. In particular, the Act provides that the provisions of the Civil Procedure Act (Cap. 21) shall not apply to the proceedings of the Tribunal. On the other hand, section 32 of the Act clearly states that the High Court shall hear appeals from the Tribunal in accordance with rules set out by the Chief Justice. However, the Tax Procedures Act does not exempt the Civil Procedure Act and tax appeals to High Court are similar to other Civil Disputes that are referred to High Court and therefore subject to Civil Procedure. Therefore, the provisions of Civil Procedure Act and Civil Procedure Rules on ADR are applicable to tax disputes.

Court annexed arbitration

Court-annexed arbitration can arise as a result of the application of the Arbitration Act (as Amended in 2009) and also under supervision of the court under the Civil Procedure Act. Under the Civil Procedure Act, the courts involvement in the arbitral process is specifically provided for in Section 59 and Order 46 of the Civil Procedure Rules, 2010. Section 59 of the Act provides for references of issues to arbitration, which references are to be governed in a manner provided for by the rules. Order 46 rule 1 provides that; “Where in any suit all the parties interested who are not under disability agree that any matter in difference between them in such suit shall be referred to arbitration, they may, at any time before judgment is pronounced, apply to the court for an order of reference.”

Under Order 46 Rule 2, the arbitrator is to be appointed in a manner that the parties have agreed upon. However, where no arbitrator or umpire (under rule 4) has been appointed the court under rule 5 may, on application by the party who gave the notice to the other to appoint, and after giving the other party an opportunity of being heard, appoint an arbitrator or umpire, or make an order superseding the arbitration and in such case the court shall proceed with the suit. Where an award has been made pursuant to arbitration under the Rules, rule 10 requires that that the persons who made it shall sign it, date it and cause it to be filed in court within 14 days together with any depositions and documents which have been taken and proved before them.

A court has the power to modify or correct an award under rule 14 if it is imperfect or contains an obvious error, if a part of the award is upon a matter not referred to arbitration or if it contains a clerical mistake or error from an accidental slip or omission. The court also has power to remit an award for reconsideration by the arbitrator under rule 15. Rule 18 provides that the court shall, upon due notice to the other parties, enter judgment according to the award and upon such that judgment a decree shall follow thereof. No appeal shall lie from such decree except in so far as the decree is in excess of, or not in accordance with the award.

Order 46 Rule 20 of the Civil Procedure Rules provides that; “Nothing under this Order may be construed as precluding the court from adopting and implementing, of its own motion or at the request of the parties, any other appropriate means of dispute resolution (including mediation) for the attainment of the overriding objective envisaged under sections 1A and 1B of the Act.” Order 46 Rule 20 read together with Sections 1A and 1B of the Civil Procedure Act therefore obligates the court to employ ADR mechanisms to facilitate the just, expeditious, proportionate and affordable resolution of all civil disputes governed by the Act. Under Order 46 rule 20 (2) it is provided that a court may adopt any ADR mechanism for the dispute and may issue appropriate orders or directions to facilitate the use of that mechanism. Judges will thus need to be adeptly trained on ADR mechanisms so as to be in a position to issue directions and orders in relation to the particular mechanism and that will lead to the attainment of the overriding objective under sections 1A and 1B of the Act.

Mediation and other ADR Mechanisms

The clamor to introduce court-annexed mediation led to the enactment of section 81 (2) (ff) of the Civil Procedure Act, as amended by the Statute Law (Miscellaneous Amendment) Act No. 6 of 2009. Section 81 (2) (ff) provides for the selection of mediators and the hearing of matters referred to mediation under the Act. Parties who have presented their cases to court now are able to have their matter referred to mediation by the court for resolution. The Statute Law (Miscellaneous Amendments) Act amended sections 2 and 59 of the Civil Procedure Act to provide for mediation of disputes.

Section 2 of the Civil Procedure Act has been amended to define mediation as an informal and non-adversarial process where an impartial mediator encourages and facilitates the resolution of a dispute between two or more parties, but does not include attempts made by a judge to settle a dispute within the course of judicial proceedings. Section 59 of the Civil Procedure Act has also been amended to introduce the aspect of mediation of cases as an aid to the streamlining of the court process. This includes the establishment of a Mediation Accreditation Committee appointed by the Chief Justice to determine and apply the criteria for the certification of mediators, propose rules for the certification of mediators, maintain a register of qualified mediators, enforce such code of ethics for mediators as may be prescribed and set up appropriate training programmes for mediators.

The law now requires the court either at the request of the parties, where it deems appropriate to do so or where the law provides so, to refer a dispute presented before it to mediation.73 Where a dispute is referred to mediation, the parties are enjoined to select for that purpose a mediator whose name appears in the mediation register maintained by the Mediation Accreditation Committee. Such reference should, however, be conducted in accordance with the mediation rules. Section 59B (4) provides that an agreement between the parties to a dispute as a result of mediation be recorded in writing and registered with the court and is enforceable as if it were a judgment of that court. No appeal lies against such agreement.

Under Section 59C, a suit may be referred to any other method of dispute resolution where the parties agree or where the court considers the case suitable for referral. Under Section 59C (2), any such other method of alternative dispute resolution shall be governed by such procedure as the parties themselves agree to or as the Court may, in its discretion, order. Any settlement arising from a suit referred to any such other alternative dispute resolution method by the Court or agreement of the parties shall be enforceable as a judgment of the Court and no appeal shall lie in respect of such judgment. Further, all agreements entered into with the assistance of qualified mediators shall be in writing and may be registered and enforced by the Court. Pursuant to Order 46 rule 20 (3) it is only after a court-mandated mediation fails that the court shall set the matter down for hearing and determination.

Clearly, these provisions of the Civil Procedure Act are not, in my view, really introducing mediation per se, but merely setting up a legal process where a court can coerce parties to mediate and the outcome of the mediation taken back to court for ratification. These amendments have introduced a mediation process which is formal and annexed to the procedures governing the conduct of cases in the High Court. Informal mediation which may not require the use of writing is not provided for. Hence, it can be said that the codification of mediation rules in the Civil Procedure Act merely reflect the concept of mediation as viewed from the Western perspective and not in the traditional, political and informal perspective where it could lead to a resolution of the conflict.

*This article is an extract from published article “The Alternative Dispute Resolution (ADR) Framework for Tax Dispute Resolution in Kenya,” by Dr. Kariuki Muigua, PhD, the African Arbitrator of the Year 2022, Kenya’s ADR Practitioner of the Year 2021 (Nairobi Legal Awards), CIArb (Kenya) ADR Lifetime Achievement Award 2021 and ADR Publisher of the Year 2021. Dr. Kariuki Muigua is a Foremost Dispute Resolution Expert in Africa ranked among Top 6 Arbitrators in Kenya by Chambers and Partners, Leading Environmental Law and Natural Resources Lawyer and Scholar, Sustainable Development Advocate and Conflict Management Expert. Dr. Kariuki Muigua is a Senior Lecturer of Environmental Law and Dispute resolution at the University of Nairobi School of Law and The Center for Advanced Studies in Environmental Law and Policy (CASELAP). He has published numerous books and articles on Environmental Law, Environmental Justice Conflict Management, Alternative Dispute Resolution and Sustainable Development. Dr. Muigua is also a Chartered Arbitrator, an Accredited Mediator, the Africa Trustee of the Chartered Institute of Arbitrators and the Managing Partner of Kariuki Muigua & Co. Advocates. Dr. Muigua is recognized as one of the leading lawyers and dispute resolution experts by the Chambers Global Guide 2022. 

References

Muigua, K., “The Alternative Dispute Resolution (ADR) Framework for Tax Dispute Resolution in Kenya,” Available at: http://kmco.co.ke/wp-content/uploads/2022/02/ADR-of-Tax-Disputes-in-Kenya-Article-by-Dr-Kariuki-Muigua-00000002.pdf (accessed on 20th June 2022).

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Former KCB Company Secretary Sues Over Unlawful Dismissal

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Former KCB Group Company Secretary Joseph Kamau Kania who has sued the Bank for Unlawful Dismissal

Former KCB Group Company Secretary Joseph Kamau Kania has sued the lender seeking reinstatement or be compensated for illegal sacking almost three years ago. Lawyer Kania was the KCB Group company secretary until restructuring of the lender in 2021 that saw some senior executives dropped.

Through the firm of Senior Counsel Wilfred Nderitu, Kamau wants the court to order KCB Group to unconditionally reinstate him to employment without altering any of the contractual terms until his retirement in December 2025.

In his court documents filed before Employment and Labour Relations Court, the career law banker seeks the court to declare the reorganization of the company structure a nullity and amounted to a violation of his fundamental right to fair labour practices as guaranteed in Article 41(1) of the Constitution. He further wants the court to declare that the position of Group Company Secretary did not at any time cease to exist within the KCB Group structure.

He further urged the Employment Court to declare that the recruitment and appointment of Bonnie Okumu, his former assistant, as the Group Company Secretary, in relation to the contemporaneous termination of his employment, was unprocedural, insufficient and inappropriate to infer a lawful termination of his employment.

“A declaration that the factual and legal circumstances of the Petitioner’s termination of employment were insufficient and inappropriate to infer a redundancy against him, and that any redundancy declared by the KCB Group in relation to him was therefore null, void and of no legal effect and amounted to a violation of his fundamental right to fair labour practices as guaranteed in Article 41(1) of the Constitution,” seeks lawyer Kamau.

Kamau says he was subjected to discriminatory practices by the KCB Bank Group in violation of his fundamental right to equality and freedom from discrimination as guaranteed in Article 27 of the Constitution and the termination of his employment was unfair, unjustified, illegal, null and void.

Lawyer Kamau further seeks the court to declare that the Non-Compete Clause in the 2016 Contract is unenforceable by the KCB Group as against him and is voidable by him as against the Bank ab initio, byreason of the termination of the Petitioner’s employment having been a violation of Articles 41(1) and 47(1) and (2) of the Constitution, and of the Employment Act.

He also wants the Employment Court to find that finding that KCB’s group legal representation by Messrs of Mohammed Muigai LLP Advocates law firm in respect of his claim for unlawful termination of employment resulted in a clear conflict of interest by reason of the fact that a Founding and Senior Partner at the said firm lawyer Mohammed Nyaoga is also the Chairman of the CBK’s Board of Directors.

“A Declaration that the circumstances of KCB’s legal representation by Messrs. Mohammed Muigai LLP Advocates resulted in a violation of the Petitioner’s fundamental right to have the employment dispute decided independently and impartially, as guaranteed in Article 50(1) of the Constitution,” seeks lawyer Kamau.

Kamau is seeking damages against both KCB Group and Central Bank of Kenya jointly and severally for the violation of his constitutional and fundamental right to fair labour practices.

He wants  further wants court to declare that CBK is liable to petitioner on account of its breach of statutory duty to effectively regulate KCB Group to ensure that KCB complied with the Central Bank of Kenya Prudential Guidelines and all other Laws, Rules, Codes and Standards, and that, as an issuer of securities, it complied with capital markets legislation.

Kamau through his lawyer Nderitu told the court that he was involved in Shareholder engagement in introducing the Group aide-mémoire that significantly improved the management of the Annual General Meetings, including obtaining approval without voting through the Memorandum and Articles of Association of Kenya Commercial Bank Limited among others.

He said that during his employment at KCB Bank Kenya and with the KCB Group, he initially worked well with former KCB CEO Joseph Oigara until 2016 when the CEO allegedly started sidelining him by removing the legal function from his reporting line.

He further claims he was transferred from the Group’s offices at Kencom House to its offices Upper Hill under the guise that the Petitioner was merely to support the KCB Group Board.

He adds that at that point his roles were given to Okumu for reasons that were not related to work demands.  He stated that Oigara at one time proposed that he should leave his role in the KCB Group and go and serve as the Company Secretary of the National Bank of Kenya Limited, a subsidiary of the Group, a suggestion which he disagreed with to Oigara’s utter annoyance.

Kamau stated that his work was thenceforth unfairly discredited, leading to his being taken through a disciplinary process whose intended outcome failed miserably, and the Petitioner was vindicated.

“More specifically, the Petitioner contends that the purported creation of a new organizational structure towards the end of 2020 was in fact Oigara’s orchestration targeted to remove certain individuals by requiring them to undergo interviews in the pretext that new roles were created, and amounted to a further violation of the Petitioner’s fundamental right to fair labour practices under Article 41(1) of the Constitution,” said in his court documents.

He further adds that this sham reorganization demonstrates how the role of the KCB Group Company Secretary purportedly ceased to be and was then very briefly replaced with a new role of the KCB Group General Counsel. The role of KCB Group Company Secretary then ‘resurfaced’ immediately thereafter, in total violation of legal and regulatory requirements.

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Court of Appeal Upholds Eviction of Radcliffes from Karen Land

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Adrian Radcliffe, the Expatriate Squatter, Evicted from Karen Property by Innocent Purchaser for Value

The Court of Appeal has stayed the decision of the Environment and Land Court purporting to reinstate Adrian Radcliffe into possession of the 5.7 Acre Karen Land by Kena Properties Ltd after eviction by the lawful owners in February 2022. Adrian Radcliffe who was evicted by Kena Properties Ltd, the innocent purchaser of the Land for value.

Before his eviction, Mr. Radcliffe had been living on the land as a squatter expatriate for 33 years without paying any rent. Since he moved into the property as a tenant, he only paid deposit for the land in August 1989 despite corresponding severally with the owner of the land. His attempt to acquire the land by adverse possession claim filed in 2005 was dismissed by Court in 2011 on the basis that he has engaged with the owner of the land July 1997 and agreed to buy the land which he failed to do. The High Court [Justice Kalpana Rawal as she then was] concluded that:

“His [Mr. Adrian Radcliffe] averments that he did not have any idea of the whereabouts of the Defendant and that he could possibly be not alive, were not only very sad but mala fide in view of the correspondence on record addressed by him to the Defendant’s wife. I would thus find that the averments made by him to the contrary are untrue looking to the facts of this case.”

On 10th March 2022, Mr. Adrian Radcliffe and Family purported to obtain court orders for reinstatement into the land. However, the Court of Appeal issued an interim stay of execution of the said orders. The Court of Appeal has now granted the application of Kena Properties Ltd and stayed the execution of the Environment and Land Court Order pending the hearing and determination of the Appeal.

The Court also stayed the proceedings at the Environment and Land Court on the matter during the pendency of the Appeal. In effect, the eviction orders issued by the Chief Magistrate Court for eviction of Mr. Adrian Radcliffe in favour of Kena Properties as the purchaser of the property for value were upheld and the company now enjoys unfettered ownership and possession of the suit property until the conclusion of the Appeal.

The Court of Appeal in granting the orders sought by Kena Properties Ltd concurred with Kena Properties Ltd that as the property owner it had an arguable appeal with a high probability of success which would be rendered nugatory if Adrian Radcliffe a trespasser was to resume his unlawful possession of the suit property, erect structures thereon, recklessly use or abuse the said suit property as he deems fit. In any case, that is bound to fundamentally alter the state of the suit property and render it unusable by Kena Properties Ltd as the property owner.

At the same time, the Appellate Court rubbished the argument of Adrian Radcliffe in opposition to the application for stay that he has been in occupation of the suit property for more than 30 years and that he and his family were unlawfully evicted from the suit property on 4th February, 2022. The Court also rejected Radcliffe’s claim that Kena Properties Ltd has no valid title to the suit property and held that as the purchaser, the company was entitled to enjoy ownership and possession of their property during the pendency of the appeal.

The Court dismissed claims of Mr. Adrian Radcliffe that Kena Properties Ltd as the property owner acquired title to the suit property illegally and unprocedurally finding to the contrary. Further, it rejected Adrian Radcliffe’s claim that Kena Properties as the purchaser cannot evict a legal occupier of a property putting paid to the claim that he was a legal occupier at the time of eviction.

As a matter of fact, Mr. Adrian Radcliffe cannot claim to be the legal occupier of the property having attempted to acquire it by adverse possession before the High Court thwarted his fraudulent scheme on 28th February 2011. Mr. Radcliffe did not appeal the 2011 High Court decision meaning it is still the law that he is not the owner of the land nor the legal occupier of the land having attempted to adversely acquire against the interests of the lawful owner who sold it to Kena Properties.

Mr. Adrian Radcliffe is a well-to-do Water, Sanitation and Hygiene (WaSH) UNICEF consultant and former UN employee (who has been earning hefty House Allowance). Many have wondered why he has been defaulting in paying rent for 33 years on the prime plot of land in Karen while living large and taking his kids to most expensive schools in Kenya. No question, a local Kenyan could never have gotten away with such selfish impunity.

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Review: Journal of Conflict Management and Sustainable Development, Vol. 9, No. 1

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The Journal of Conflict Management and Sustainable Development, Volume 9, Issue No. 1, which is edited by and published by Dr. Kariuki Muigua, PhD is out and stays true to the reputation of the journal in providing a platform for scholarly debate on thematic areas in the fields of Conflict Management and Sustainable Development. The current issue published in September 2022 covers diverse topics including Resolving Oil and Gas Disputes in Africa; National Environment Tribunal, Sustainable Development and Access to Justice in Kenya; Protection of Cultural Heritage During War; The Role of Water in the attainment of Sustainable Development in Kenya; Property Rights in Human Biological Materials in Kenya; Nurturing our Wetlands for Biodiversity Conservation; Investor-State Dispute Resolution in a Fast-Paced World; Status of Participation of Women in Mediation; Business of Climate Change and Critical Analysis of World Trade Organization’s Most-Favored Nation (MFN) Treatment.

Dr. Wilfred A. Mutubwa and Eunice Njeri Ng’ang’a in “Resolving Oil and Gas Disputes in an Integrating Africa: An Appraisal of the Role of Regional Arbitration Centres” explore the nature of disputes in the realm of oil and gas in Africa taking a look into the recent continental and sub-regional developments in a bid to establish regional integration. Additionally, it tests the limits of intra-African trade and dispute resolution and the imperatives for the African regional courts and arbitration centres. In “National Environment Tribunal, Sustainable Development and Access to Justice in Kenya,” Dr. Kariuki Muigua discusses the role played by the National Environment Tribunal (NET) in promoting access to justice and enhancing the principles of sustainable development in Kenya. The paper also highlights challenges facing the tribunal and proposes recommendations towards enhancing the effectiveness of the tribunal.

Dr. Kenneth Wyne Mutuma in “Protecting Cultural Heritage in Times of War: A Case for History,” argues that cultural heritage is at the heart of human existence and its preservation even in times of war is sacrosanct. It concludes that it is thus critical for states to take positive and tangible steps to ensure environmental conservation and protection during war within the ambit of the existing international legal framework. In “The Role of Water in the attainment of Sustainable Development in Kenya,” Jack Shivugu critically evaluates the role of water in the attainment of sustainable development in Kenya and argues water plays a critical role in the attainment of the sustainable development goals both in Kenya and at the global stage. The paper interrogates some of the water and Sustainable Development concerns in Kenya including water pollution, water scarcity and climate change and suggests practical ways to enhance the role of water in the Sustainable Development agenda.

Dr. Paul Ogendi in “Collective Property Rights in Human Biological Materials in Kenya,” reflects on property rights in relation to human biological materials obtained from research participants participating in genomic research. He argues that property rights are crucial in genomic research because they can help avoid exploitation or abuse of such precious material by researchers. In “Nurturing our Wetlands for Biodiversity Conservation,” Dr. Kariuki Muigua notes that Wetlands have a vital role in not just delivering ecological services to meet human needs, but also in biodiversity conservation. Wetlands are vital habitat sites for many species and a source of water, both of which contribute to biodiversity protection. The paper examines the role of wetlands in biodiversity conservation and how these wetland resources might be managed to improve biodiversity conservation.

Oseko Louis D. Obure in “Investor-State Dispute Resolution in a Fast-Paced World,” preponderance of disputes between States or States and Investors created need for a robust, effective, and efficient mechanisms not only for the resolution of these disputes but also their prevention. He notes that developing states lead in being parties to Investor-State Disputes (ISD) particularly as respondents. He proceeds to conceptualize and problematize investor-state disputes resolution in a fast-paced world. Lilian N.S. Kong’ani and Dr. Kariuki Muigua in “Status of Participation of Women in Mediation: A case Study of Development Project Conflict in Olkaria IV, Kenya” review the status of participation of women in mediation to resolve conflicts between KenGen and the community. The paper demonstrates a need for further democratization of the mediation processes to cater for more participation of women to enhance the mediation results and offer more sustainable resolutions.

Felix Otieno Odhiambo and Melinda Lorenda Mueni in “The Business of Climate Change: An Analysis of Carbon Trading in Kenya analyses the business of carbon trading in the context of Kenya’s legal framework. The article examines the legal framework that underpins climate change into the Kenyan legal system and provides an exposition of the concept of carbon trading and its various forms. Michael Okello, in “Critical Analysis of World Trade Organisation’s Most-Favored Nation (MFN) Treatment: Prospects, Challenges and Emerging Trends in the 21st Century,” highlights the rationale behind MFN treatment and also restates the vision of multilateral trade to achieve equitable and special interventions with respect to trade in goods, services and trade related intellectual property rights in the affected states.

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