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Court of AppealDismissedCivil Application 91 of 2008

COASTAL BOTTLERS LIMITED v COMMISSIONER OF DOMESTIC TAXES [2009] KECA 190 (KLR)

Court of Appeal of Kenya
31 July 2009
ROR.S.C. OmoloSBS.E.O. BosireJOJ.W. Onyango Otieno
1,097 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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The Court of Appeal refused to halt tax recovery because Coastal Bottlers showed no evidence its appeal would be pointless if it paid.

What this practically means

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Executive summary

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Coastal Bottlers Ltd sought an order under Rule 5(2)(b) and Rule 42 of the Court of Appeal Rules staying execution and statutory recovery proceedings under the Customs & Excise Act, pending an intended appeal against the decision of Nyamu and Wendoh, JJ of 30 April 2008 in H.C. Misc. Civil Application No. 1756 of 2005, which rejected the applicant's application for prohibitory, certiorari and mandamus orders against a tax demand of Ksh.137,128,368. The Court noted that the High Court had merely rejected the prayers for prerogative orders and had made no order capable of being enforced, which explained the curious framing of the prayer. Assuming without deciding that the intended appeal was arguable, the Court held that the applicant still had to show that the success of the appeal would be rendered nugatory if stay were refused. Drawing on Oraro & Rachier Advocates v Co-operative Bank and Reliance Bank v Norlake Investments, the Court weighed the hardship to both sides. The respondent's counsel established that the applicant had already paid the outstanding principal tax of Ksh.62,000,000, that no further penalty or interest was accruing on the remaining balance of penalties and interest, and that the applicant had applied to the Minister for a waiver. No evidence, such as a balance sheet, supported the applicant's apprehension that payment would paralyze its operations. The Court therefore found no nugatory effect and dismissed the motion, with costs in the intended appeal. The decision binds subordinate courts on the evidentiary burden under Rule 5(2)(b).

Questions the Court framed

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The issues the Court set itself to decide, in its own words.

  1. 1.Whether the intended appeal is arguable
  2. 2.Whether the success of the intended appeal would be rendered nugatory if stay of execution and statutory recovery proceedings is not granted

Key legal issues

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01

Whether the intended appeal would be rendered nugatory if stay is refused

Holding

No nugatory effect was shown. The principal tax of Ksh.62,000,000 had already been paid without serious effect on operations, no further penalty or interest was accruing, and the balance was under waiver consideration by the Minister; moreover no evidence such as a balance sheet supported the claim of impecuniosity.

Reasoning

The court accepted the respondent counsel's uncontradicted statements that the principal tax had been paid and no further penalty or interest was being charged. The applicant's director's apprehension that payment would paralyze operations was contradicted by the fact of the Ksh.62 million payment and the absence of evidence, e.g. a balance sheet, showing business jeopardy. The nugatory principle from Oraro & Rachier and Reliance Bank was not satisfied on these facts.

p. 2
02

Whether there was any order capable of being stayed

Holding

The High Court merely rejected the prayers for prohibition, certiorari and mandamus and made no enforceable order, which explains the curious framing of the prayer seeking stay of statutory recovery proceedings rather than of an order.

Reasoning

Because the High Court decision was a rejection of prerogative orders, there was nothing enforceable to stay; the applicant instead framed its prayer against the respondent's statutory recovery mechanisms under the Customs & Excise Act. The court noted this curiously framed prayer but proceeded to determine the application on the nugatory-ness threshold.

p. 1

Legal principles established

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  • An applicant under Rule 5(2)(b) must, in addition to showing an arguable appeal, demonstrate that the success of the intended appeal would be rendered nugatory if stay is not granted.
  • Nugatory-ness is assessed by weighing the claims and hardship of both sides, on evidence, not on mere apprehension.
  • A stay cannot issue where there is no order capable of being enforced against the applicant.

Court orders

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  1. 1.The applicant's notice of motion under Rule 5(2)(b) is dismissed
  2. 2.Costs of the dismissed motion to be in the intended appeal

The bench

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One judgment of the whole court — no separate or dissenting opinions.

RO
majority
SB
majority
JO
majority
On appeal from
High Court of Kenya at Nairobi
H.C. Misc. Civil Application No. 1756 of 2005
Jurisdiction invoked
Rule 5(2)(b) and Rule 42 of the Court of Appeal Rules

Relief refused

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Stay of execution and statutory recovery proceedings under the Customs & Excise Act pending the hearing and determination of the intended appeal

The principal tax had already been paid, no further penalty or interest was being charged, and there was no evidence that payment of the balance would render the intended appeal nugatory or force the applicant out of business

p. 2

Costs

The costs of the dismissed motion shall be in the intended appeal.

Quotable passages

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Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.

the applicant was still obliged to show to the Court that the success of the intended appeal would have been rendered nugatory if we refuse to grant the order of stay now sought before us
p. 2Rule 5(2)(b) nugatory-ness threshold
In dealing with the issue whether or not success in the intended appeal will be rendered nugatory if a stay is not granted the court ought to weigh the claim of both sides.
p. 2Balance of convenience test as stated in Oraro & Rachier
We accordingly order that the applicant's notice of motion under Rule 5 (2) (b) be and is hereby dismissed. The costs of the dismissed motion shall be in the intended appeal.
p. 2Final orders dismissing the application

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (1)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "COASTAL BOTTLERS LIMITED v COMMISSIONER OF DOMESTIC TAXES [2009] KECA 190 (KLR)", Case Analysis (2009). Civil Application 91 of 2008. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2009/190/eng@2009-07-31

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.