Lemna Internation Inc v National Housing Corporation [2022] KEHC 13945 (KLR)

Lemna Internation Inc v National Housing Corporation (Miscellaneous Civil Application E299 of 2020) [2022] KEHC 13945 (KLR) (Civ) (12 October 2022) (Ruling)

Neutral citation: [2022] KEHC 13945 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Law Courts)

Civil

Miscellaneous Civil Application E299 of 2020

JN Njagi, J

October 12, 2022

IN THE MATTER OF THE ARBITRATION ACT, 1995 AND IN THE MATTER OF THE ARBITRATION RULES, 1997 AND IN THE MATTER OF ARBITRATION

Between

Lemna Internation Inc

Respondent

and

National Housing Corporation

Applicant

(Being an application for stay of execution of the orders of Hon Justice Said Chitembwe made on November 4, 2021. Miscellaneous Civil Suit E299 of 2020 )

Ruling

1. The applicant herein has filed a notice of motion dated December 20, 2021 seeking for orders that:a.Spentb.Spentc.That this honourable court be pleased to grant orders of stay of execution of the orders of Hon Justice Said Chitembwe made on November 4, 2021 pending the hearing and determination of the intended appeal.d.That the costs of the application be provided for.

2. The application was based on the grounds on the face of the application and supported by the affidavit of William Keittany, the Corporation Secretary of the applicant, and the written submissions of their advocates, Ogetto, Otachi & Co Advocates.

3. The application was in equal measure opposed by the respondent vide the replying affidavit of Joshua Maangi, a director of the respondent, together with the written submissions of their advocates, Nyaencha Waichari & Co Advocates.

4. The background to the application is that respondent had brought up a claim against the applicant that was heard through arbitration and an award entered by the arbitrator, Prof Githu Muigai. The respondent then moved to this court seeking for the adoption of the award of the arbitrator and for the court to calculate the sums due to them on the order on interest awarded to them by the arbitrator. Justice Chitembwe heard the matter and in a ruling dated November 4, 2021, awarded interest to the respondent in the sum of Kshs 80,908,445/=. The applicant was aggrieved and consequently filed the instant application seeking for stay of execution of Justice Chitembwe`s orders pending the hearing and determination of an intended appeal.

5. The applicant contends that in the event the respondent proceeds with execution of the ruling and orders of November 4, 2021 their intended appeal will be overtaken by events and thus rendered nugatory. They argued that the intended appeal raises cogent points of law the determination of which substantially affects the rights of the parties herein. Further that the appeal raises paramount queries as to the judicial parameters of the court in recognition and enforcement of awards under section 36 of the Arbitration Act. That the applicant has an arguable appeal with overwhelming chances of success and unless an order of stay is granted by the court the respondent may proceed to execute the orders. They averred that the application has been made timeously and without delay and no prejudice will be occasioned to the respondent if the orders sought are granted.

6. In opposing the application respondent`s director averred that parties entered into negotiations which resulted in payment of the award but that the same has not been fully settled. He added that the claimant has not demonstrated how execution of the decree in favour of the respondent shall have a negative macro-economic effect on it.

7. The respondent averred that subsequent to the ruling a meeting was held on December 15, 2021 between the parties to explore the possibility of the settlement amount awarded by the court by instalments. That they thereafter sent a letter dated December 15, 2021 setting out its proposal for settlement by three equal instalments of Kshs 26,969,485 or in the alternative they would discount the amount awarded by the court to Kshs 75,000,000 if the said amount was to be paid immediately.

8. They contended that the present application is an afterthought and a delaying tactic as the respondent was ready and willing to settle the sum awarded in the ruling of the court. That it is not true that the respondent shall not suffer any prejudice as the ruling states that no further interest would accrue even if an appeal was filed against the ruling. Consequently, that unless the decretal sum is deposited in an interest earning account pending appeal the respondent shall suffer great loss.

Analysis and Determination - 9. I have examined the application, affidavits, submissions and the record in its entirety and the issue that has arisen for determination is whether to grant a stay of execution pending the hearing and determination of the intended appeal.

10. The principles guiding the grant of a stay of execution pending appeal are well settled. These principles are provided under order 42 rule 6(2) of the Civil Procedure Rules which provides as follows:"No order for stay of execution shall be made under sub rule (1) unless—a.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; andb.such 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."

11. The power of the court to allow or to refuge an application for stay of execution is discretionary and like the exercise of every discretion the same should be done judicially. In the case of Butt v Rent Restriction Tribunal [1982] KLR 417 the court set out the principles for exercise of such discretion as follows: -1. “ The power of the court to grant or refuse an application for a stay of execution is a discretionary power. The discretion should be exercised in such a way as not to prevent an appeal.2. The general principle in granting or refusing a stay is; if there is no other overwhelming hindrance, a stay must be granted so that an appeal may not be rendered nugatory should that appeal court reverse the judge’s discretion.3. A judge should not refuse a stay if there are good grounds for granting it merely because in his opinion, a better remedy may become available to the applicant at the end of the proceedings.4. The court in exercising its discretion whether to grant [or] refuse an application for stay will consider the special circumstances of the case and unique requirements. The special circumstances in this case were that there was a large amount of rent in dispute and the appellant had an undoubted right of appeal.5. The court in exercising its powers under order XLI rule 4(2)(b) of the Civil Procedure Rules, can order security upon application by either party or on its own motion. Failure to put security for costs as ordered will cause the order for stay of execution to lapse.”

12. The first question is whether the application was filed without undue delay. The impugned ruling in this matter was delivered on November 4, 2021 while the present application is filed on December 21, 2021. It is then clear that there was no unreasonable delay in filing of the application.

13. The other question to be considered is whether the applicant will suffer substantial loss if the orders sought are not granted. The respondent argued that the applicant has failed to demonstrate that they will suffer substantial loss if stay orders are not granted.

14. Indeed, the applicant did not show what loss they stand to suffer if the orders sought are not granted. Instead it is the respondent who has shown that they will suffer prejudice if stay of execution is granted as the ruling appealed against states that no further interest would accrue even if an appeal was filed against the ruling. The applicant has therefore not met the condition of establishing substantial loss.

15. An applicant seeking stay of execution ought to satisfy the condition of security. In the case of Gianfranco Manenthi & another v Africa Merchant Assurance Co Ltd [2019] eKLR the court observed that:“The applicant must show and meet the condition of payment of security for due performance of the decree. Under this condition, a party who seeks the right of appeal from a money decree of the lower court for an order of stay must satisfy this condition on security. In this regard, the security for due performance of the decree under order 42 rule 6(1) of the Civil Procedure Rules, it is trite that the winner of litigation should not be denied the opportunity to execute the decree in order to enjoy the fruits of his judgment in case the appeal falls.Further order 42 should be seen from the point of view that a debt is already owed and due for payment to the successful litigant in a litigation before a court which has delivered the matter in his favour. This is therefore to provide a situation for the court that if the appellant fails to succeed on appeal there could be no return to status quo on the part of the plaintiff to initiate execution proceedings where the judgment involves a money decree. The court would order for the release of the deposited decretal amount to the respondent in the appeal….Thus, the objective of the legal provisions on security was never intended to fetter the right of appeal. It was also put in place to ensure that courts do not assist litigants to delay execution of decrees through filing vexatious and frivolous appeals. In any event, the issue of deposit of security for due performance of decree is not a matter of willingness by the applicant but for the court to determine. Counsel for the applicant submitted that he is ready to provide a bank guarantee as security for due performance of the decree.”

16. Similarly in Arun C Sharma v Ashana Raikundalia t/a Rairundalia & Co Advocates & 2others [2014] eKLR the court stated that:“The purpose of the security needed under order 42 is to guarantee the due performance of such decree or order as may ultimately be binding on the applicant. It is not to punish the judgment debtor…..Civil process is quite different because in civil process the judgment is like a debt hence the applicants become and are judgment debtors in relation to the respondent. That is why any security given under order 42 rule 6 of the Civil Procedure Rules acts as security for the due performance of such decree or order as may ultimately be binding on the applicants. I presume the security must be one which can serve that purpose.”

17. In the instant application the applicant has not indicated whether they are ready and willing to furnish security as their application was silent on the issue.

18. The court in RWW v EKW [2019] eKLR, addressed its mind to the purpose of a stay of execution order pending appeal and stated the following:“The purpose of an application for stay of execution pending an appeal is to preserve the subject matter in dispute so that the rights of the appellant who is exercising the undoubted right of appeal are safeguarded and the appeal if successful, is not rendered nugatory. However, in doing so, the court should weigh this right against the success of a litigant who should not be deprived of the fruits of his/her judgment. The court is also called upon to ensure that no party suffers prejudice that cannot be compensated by an award of costs.Indeed, to grant or refuse an application for stay of execution pending appeal is discretionary. The court when granting the stay however, must balance the interests of the appellant with those of the Respondent.

19. In the case of Mohammed Salim t/a Choice Butchery v Nasserpuria Memon Jamat [2013] eKLR the court while upholding the decision in Portreitz Maternity v James Karanga Kabia Civil Appeal No 63 of 1991 stated that:That right of appeal must be balanced against an equally weighty rigid right that of the plaintiff to enjoy the fruits of the judgment delivered in his favour. There must be a just cause for depriving the plaintiff of that right.

20. I have considered that the applicant has a right to exercise its right of appeal and deserves their day in court to ventilate their case. The respondent on the other hand has a judgment in his favour and should not be denied the fruits of the judgment without a just cause. It is the duty of this court to balance the interests of the two competing parties. I am of the view that I should grant orders of stay of execution so as to enable the applicant to proceed with their appeal. However, they are not entitled to a blanket order staying execution without providing security. In balancing the interests of the parties, I consider that the security to be met in the matter should be equivalent to the decretal sum.

21. In the foregoing, the application dated December 20, 2021 is hereby granted in the following terms:a.That there shall be stay of execution of the orders of Hon Justice Said Chitembwe made on November 4, 2021 pending the hearing and determination of the intended appeal on condition that the applicant deposits, within 60 days from the date hereof, a sum of Kshs 80,908,455/= in an interest earning account in the joint names of the advocates for the parties herein.b.In the alternative, the applicant shall provide an irrevocable bank guarantee in the sum of Kshs 80,908,455/= from a reputable bank, to be valid during the pendency of the appeal, within 60 days from the date hereof, failure to which the stay orders shall lapse.c.Costs shall follow the outcome of the appeal.Orders accordingly.

DELIVERED, DATED AND SIGNED AT NAIROBI THIS 12TH DAY OF OCTOBER, 2022. JN NJAGIJUDGEIn the presence of:Miss Mose for applicant.Mrs Nyaencha for respondent.Court Assistant: Ubah30 days R/A.