Gazelle Limited & Promaco Limited v Samuel Kuria Mbugua & Trisquare Limited [2017] KEHC 2294 (KLR) | Stay Of Execution | Esheria

Gazelle Limited & Promaco Limited v Samuel Kuria Mbugua & Trisquare Limited [2017] KEHC 2294 (KLR)

Full Case Text

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT KIAMBU

CIVIL APPEAL NO. 124 OF 2017

GAZELLE LIMITED………...……………………………..1STAPPLICANT

PROMACO LIMITED……….……………………………2NDAPPLICANT

VERSUS

SAMUEL KURIA MBUGUA……………………………1STRESPONDENT

TRISQUARE LIMITED………………….……………..2NDRESPONDENT

RULING

1. The Applicants filed an application by way of a Notice of Motion dated 16/08/2017 (“Application”) and brought under sections 1A, 1B, 3A and 65 of the Civil Procedure Act 2010 and Order 42 Rule 6 of the Civil Procedure Rules seeking, in the main, for orders that there be a stay of execution of the ruling and order made in Kikuyu SPMCC No. 21 of 2017 on 14/07/2017 pending the hearing and determination of the appeal filed herein.

2. The Application is based on the grounds on the face of it and supported by the affidavit of Christian Lau Larsen, a director of the Applicants.

3. Briefly, the facts are as follows. The Applicants filed Kikuyu SPMCC No. 21 of 2017seeking orders to release their goods as well as damages for wrongful interference and detention of the goods. They simultaneously filed an application seeking an injunction to restrain the Respondents from disposing of the goods pending the hearing and determination of the suit.

4. The application seeking injunctive relief together with another application by the Applicants challenging the capacity of the 1st Respondent to act on behalf of the 2nd Respondent without a Board Resolution, was heard inter partes by way of written submissions. The Honourable H. I. Mwendwa gave a reasoned ruling on 14/07/2017

5. In the ruling, which is challenged on appeal, the Applicants were partly successful: they got the injunction they sought – but conditionally so. The condition was that they were to pay to the 2nd Respondent, within 21 days, Ksh. 837,306/=. The amount ordered to be paid, represented what the Court thought was a provisional amount of rents owed by the Appellants to the 2nd Respondent.  The Learned Magistrate’s reasoning was that the 2nd Respondent had served the Appellants with a demand notice on 16/05/2016. He therefore formed the provisional view that rents were owed from at least that date. The Learned Magistrate also dismissed the Applicant’s application to have the 2nd Respondent’s defence struck out.

6. The Applicants were aggrieved by both decisions of the Learned Magistrate. They have timeously filed their Memorandum of Appeal seeking a reversal of both findings. They also filed the present Application for stay.

7. The Application is opposed. The Respondents filed a Replying Affidavit sworn by the 1st Respondent on 11/09/2017. I have gleaned the following major points from that lengthy affidavit:

(a) The Respondents are persuaded that the Application is “not only frivolous, fatally defective, misconceived, bad in law, an egregious abuse of the Court process, but also the interim orders were granted irregularly on 18/08/2017…”

(b) The  Respondents  think  that  the  Application  is  a “cosmetic face lift so as to circumvent the conditional orders issued by Learned Magistrate on 14/07/2017” which were not complied with.

(c) The Respondents complain that the Applicants are guilty of non-disclosure of very pertinent material facts. The material facts which the Respondents think were not disclosed was the fact that the Applicants had unsuccessfully sought a stay of execution in the lower Court. The lower Court declined the request on the ground that the orders it had granted were conditional in nature.

(d) The Respondents also complain that the Applicants are guilty of inordinate delay since they were to comply with the Court orders within 21 days of the ruling.

8. The rest of the Replying Affidavit is dedicated to demonstrating why the Applicant’s appeal and, indeed, their whole suit in the lower Court is hopeless and is likely to fail on its merits. The Respondents have urged me to dismiss the Application with costs.

9. On its part, the Applicants’ main points on this Application is that the Learned Magistrate erred in law and fact in determining at the interlocutory stage that there was a landlord-tenant relationship between the Applicants and the 2nd Respondent warranting the order for the Applicants to pay the amount ordered. They are also aggrieved by the fact that the Learned Magistrate issued a conditional injunction yet he had concluded that the Applicants had an arguable case. Additionally, they are aggrieved by the finding that the 2nd Respondent’s Statement of Defence was properly filed.

10. The Applicants argue that the stay is merited because the goods are still detained by the Respondents and if a stay is not granted, the Respondents might dispose the goods rendering the intended appeal nugatory. The Applicants aver that the goods are both specialized and some are perishable hence the need for orders for release to be given imminently.

11. Both parties cited to me a number of authorities in aid of their positions. The Applicants relied on the famous Butt v Rent Restriction Tribunal [1982] KLR 417; Mbuthia v Jimba Credit Finance Corporation & Another [1988] KLR1; James Wangalwa Another v Agnes Naliaka Cheseto Nairobi Misc App. No. 42 of 2011; and Geoffrey Muriungi & Another v John Rukunga Nairobi Civ. App. No. 15 of 2018. On their part, the Respondents relied on: Machira T/A Machira & Co. Advocates

12. Applications for stay of execution are governed, primarily, by the terms of Order 42 Rule 6 of the Civil Procedure Rules. The conditions to be met by an Applicant in order to be entitled to an order for stay are encapsuled in that Rule in the following terms:

(1) No appeal or second appeal shall operate as a stay of execution or proceedings under a decree or order appealed from except appeal case of in so far as the court appealed from may order but, the court appealed from may for sufficient cause order stay of execution of such decree or order, and whether the application for such stay shall have been granted or refused by the court appealed from, the court to whichsuch appeal is preferred shall be at liberty, on application being made, to consider such application and to make such order thereon as may to it seem just, and any person aggrieved by an order of stay made by the court from whose decision the appeal is preferred may apply to the appellate court to have such order set aside.

(2) No order for stay of execution shall be made under sub-rule (1) unless—

The court is satisfied that substantial loss may result to the applicant unless the order is made and that the application has been made without unreasonable delay; andSuch security as the court orders for the due performance of such decree or order as may ultimately be binding on him has been given by the applicant.

13. The law regarding the grant of stay of execution is well established in Kenya. Among the legion of authoritative cases establishing it, the judges of the Court of Appeal were both concise and emphatic in Rhoda Mukuma v John Abuoga:

It was laid down in M M Butt v The RentRestriction Tribunal, Civil Application NoNai 6 of 1979, (followingWilson v Church (No2) (1879) 12 Ch 454 at p 488) that in the case of a party appealing, exercising his undoubted right of appeal, the court ought to see that the appeal is not rendered nugatory. It should therefore preserve the status quo until the appeal is heard.

Granting a stay in the High Court is governed by [the former] Order XLI rule 4(2), the questions to be decided being – (a) whether substantial loss may result unless the stay is granted and the application is made without delay; and (b) the applicant has given security.

14. Hence, under our decisional law from the Court of Appeal and this Court – including the cases cited by both the Applicants and the Respondents -- to be successful in an application for stay, an Applicant has to satisfy a four-part test. It must demonstrate that:

i. The appeal it has filed is arguable;

ii. It is likely to suffer substantial loss unless the order is made. Differently put, it must demonstrate that the appeal will be rendered nugatory if the stay is not granted;

iii. The application was made without unreasonable delay; and

iv. It has given or is willing to give such security as the court may order for the due performance of the decree which may ultimately be binding on him.

15. On the first aspect as to whether the intended appeal is arguable and not frivolous, see Kenya TeaGrowers Association & Another vs Kenya Planters & Agricultural Workers Union Civil Application Nai. No. 72 of 2001wherein the Court addressed what is considered to be an arguable appeal thus,

He (the applicant) need not show that such an appeal is likely to succeed. It is enough for him to show that there is at least one issue upon which the Court should pronounce its decision.

16. Hence, demonstration of the existence of even one arguable point will suffice in favour of an Applicant. From my perusal of the Application and the Memorandum of Appeal, it is eminently patent that the appeal filed herein is arguable. At least two issues readily present themselves for determination by the Appellate Court: whether the Learned Magistrate fell into error by definitively deciding the question of landlord-tenant relationship between the parties at the interlocutory stage and whether the Statement of Defence on record is properly on record given the Applicants’ objection that the 1st Respondent did not have the requisite board resolution to defend the suit on behalf of the 2nd Respondent and yet the defence was not brought in the vein of a derivative law suit.

17. Turning to the second limb of the four-part test on the grant of stay of execution, the question is whether the appeal would be rendered nugatory if stay orders are not granted. The Applicants’ argument in this regard is that the goods which are detained by the Respondents are “specialized” goods and some of them are, in fact, perishable or, at least, easily damaged. It is the Applicants’ position that a party should not unlawfully dispose another party’s goods at the pain that they be paid monies which the other party contests as not due. The test, the Applicants’ lawyer insisted, was not whether the loss was irreparable but whether it was substantial.

18. I do agree that the appropriate test is whether the Applicants would suffer substantial loss if stay is not granted. However, the proper question is what is at stake if stay is not granted. In the lower Court, the Applicants asked for an injunction against the sale of their goods. They got it. However, that injunction was conditioned on them paying Kshs. 837,306/= to the Respondents. Any stay the Applicants could be get from this Court would be a stay against the order that they pay Kshs. 837,306/= to the Respondents. The stay is not against the sale of their specialized goods which are detained by the Respondents. There is no necessary order permitting the Respondents to sell the Applicants’ detained goods.  Whether the goods are sold or not is dependent on the actions that the Applicants take. If they pay the amount ordered by the Court even as they wait to prosecute their appeal, the goods will be released to them. If they fail to pay, the goods will be sold off.

19. The implication is obvious: the stay sought is not against an order that their goods be sold. The stay sought is against the Court’s direction that they pay Kshs. 837,306/=. For the Applicants to deserve such an order, they would have to demonstrate that they would suffer substantial loss if they paid that amount. The Applicants have made no attempt at all to demonstrate what substantial loss they would suffer if they paid the amount to the Respondents during the pendency of their appeal. Typically, when the issue in question is the payment of money, an applicant for stay is required to show that either she will be unable to recover the paid amounts to the Respondent or that payment of the amounts in question would somehow so substantially affect the operations of the applicant that if stay is not granted the applicant would suffer catastrophically. The latter case occurs when a large sum of money is involved relative to the operations or financial status of the applicant.

20. In the present case, the Applicants have not alleged or demonstrated either state of affairs. Instead, they pivot their argument on substantial loss solely on the fact that the goods are specialized and the Respondents should not be allowed ton“unlawfully” dispose of them.

21. Needless to say, this does not meet the test of substantial loss. The ball is, figuratively, in the Applicants’ court. They can avoid the disposal of their goods by complying with the Court’s orders. If they succeed on appeal before this Court, they will, of course, get a refund of the monies they paid out.

22. The question whether this Application was brought without inordinate delay is moot given my finding on the second limb of the test of whether to grant a stay. However, had I to reach that factor, I would have no doubt in my mind that the present Application was brought without inordinate delay. The Application was brought 33 days after the delivery of the ruling and I am not prepared to say that was an inordinate delay given facts that are well known to the parties and the Court: that the Country was in the throes of General Elections during that period. I would also have held that the Applicants had offered security for the due performance of the order or decree which might ultimately be binding on them.

23. In the end, therefore, it is my conclusion that the Applicants have not satisfied the conditions for the grant of stay of execution. Consequently, the Application dated 16/08/2017 is dismissed with costs.

24. Given the procedural posture of this case and the potential for confusion regarding what the implications of this disposition, I direct as follows:

(a) The Applicants’ to abide by the Order of the Learned H. I. Mwendwa given on 14/07/2017 within fourteen (14) days of the day hereof;

(b) Failure to comply with (a) above will result in the Respondents being at liberty to dispose the goods in their detention through auction, sale or any other lawful means to recover their demanded rents; and

(c) The Applicants shall pay the costs of this Application.

25. Orders accordingly.

Delivered at Kiambu this 2ndday of November, 2017.

……………………………………

JOEL NGUGI

JUDGE