Niti Distributors Limited v Occidental Insurance Company Limited [2019] KEHC 12318 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

COMMERCIAL AND TAX DIVISION

CIVIL SUIT NO.396 OF 2014

NITI DISTRIBUTORS LIMITED.....................................PLAINTIFF/RESPONDENT

VERSUS

OCCIDENTAL INSURANCE COMPANY LIMITED....DEFENDANT/APPLICANT

RULING

1. This ruling is in respect to the application dated 25th March 2019 in which the applicant/defendant seeks the following orders:

1. Spent

2. That there be a temporary stay of execution of the judgment delivered on the 7th day of February, 2019 by the Honourable Justice J. A. Makau pending the hearing and determination of this application.

3. That there be a temporary stay of execution of the judgment delivered on the 7th day of February, 2019 by the Honourable Justice J. A. Makau pending the hearing and determination of the intended appeal.

4. Those costs of this application be in the cause.

2. The application is supported by the affidavit of the applicants Legal Manager sworn on 2th March 2019 and further affidavit sworn on 18th April 2019.  The applicant’s also premised on the grounds that:

1. That the applicant is dissatisfied with the entire judgment of the court delivered on 7th February 2019 and has commenced the process of appeal.

2. That the plaintiff is however at the verge of executing the judgment.

3. That unless the orders sought herein are granted the plaintiff will proceed with execution to the detriment of the applicant who will suffer irreparably and its intended appeal rendered nugatory.

4. That the application has been filed without unreasonable delay.

5. That the respondent will not suffer any prejudice if the application is allowed.

6. That it is in the wider interests of justice that this application be allowed.

3. The respondent opposed the application through the replying affidavit of its Finance Director one Mr. Manish Shah who avers that the applicant has not provided evidence that it will suffer substantial loss if an order of stay of execution is not granted.  He states that the decree holder is financially sound and will be able to repay the decretal sum should the appeal be successful.  He attached at copy of the respondents bank statement as annexure “MS1” to the said replying affidavit.

4. He further states that the security offered by the applicant is not adequate and/or suitable in the circumstances of this case and that an order of stay of execution will greatly prejudice the respondent.

5. I have considered the instant application and the response filed by the respondent. I have also perused and considered the written submissions filed by the parties’ respective advocates.  The main issue for determination is whether the applicant has made out a case for the issuance of orders of stay of execution pending appeal.  Order 42 Rule 6  of the Civil Procedure Rules  stipulates as follows  on the subject of stay pending appeal:

(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 which such 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—

(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; and

(b) 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.

(3) Notwithstanding anything contained in sub rule (2), the court shall have power, without formal application made, to order upon such terms as it may deem fit a stay of execution pending the hearing of a formal application.

(4) For the purposes of this rule an appeal to the Court of Appeal shall be deemed to have been filed when under the Rules of that Court notice of appeal has been given.

(5) An application for stay of execution may be made informally immediately following the delivery of judgment or ruling.

(6) Notwithstanding anything contained in sub rule (1) of this rule the High Court shall have power in the exercise of its appellate jurisdiction to grant a temporary injunction on such terms as it thinks just provided the procedure for instituting an appeal from a subordinate court or tribunal has been complied with.

6. The Court of Appeal in Butt v Rent Restriction Tribunal[1982] KLR 417gave guidance on how a court should exercise discretion and held that:

“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.”

7. On the first condition for stay regarding the issue of delay in filing the application, I find that there has been no delay in filing the instant application as the judgment appealed against was delivered on 7th February 2019 and the instant application filed on 25th March 2019.

8. Turning to the question of whether the applicant will irreparable/substantial loss if the decree is executed, I find that the applicant has demonstrated that its current financial position is such that it stands to suffer substantial loss if the decretal sum is paid to the respondent.  The applicant has attached a copy of its bank statement for the period of 1st January 2019 to 31st January 2019 to show that it is experiencing financial strains due to low business.  The said statement shows that as at 31st January 2019, the credit balance on applicants account was kshs 23,070,397. 32.  In the circumstances of this case, one can say that the applicant’s business would be paralyzed if it paid the decretal sum of kshs 23,018,842.

9. Turning to the issue of the provision of security for the due performance of the decree, I note that the applicant offered security by way of bank guarantee in the sum of kshs 12,500,000. The applicant argued that it does not know of the respondent’s physical address or attachable assets that it can fall back on should the appeal be successful and the bank statement attached to the replying affidavit is not sufficient proof of the respondent’s ability to repay the decretal sum. My finding is that the respondent’s bank statement attached to the replying affidavit provides sufficient proof that it is a going concern with a sound financial standing such that it is capable of refunding the decretal sum should the same be paid to it only for the appeal to succeed. In the Court of Appeal decision in the case of National Industrial Credit Bank Limited vs Aquinas Francis Wasike & another (UR) as cited by the High Court in Stanley Karanja Wainaina & another v Ridon Anyangu Mutubwa [2016] eKLR it was held that:

“This court has said before and it would bear repeating that while the legal duty is on an applicant to prove the allegation that an appeal would be rendered nugatory because a respondent would be unable to pay back the decretal sum, it is unreasonable to expect such an applicant to know in detail the resources owned by a respondent or lack of them.  Once an applicant expresses a respondent would be unable to pay back the decretal sum, the evidential burden must then shift to the respondent to show what resources he has since that is a matter which is peculiarly, within his knowledge.”

10. My above findings on the issues of substantial loss and security for the due performance of the decree notwithstanding, I find that courts have held the view that in an application for stay of execution pending appeal, the court must balance the interests of the applicant, as litigant aggrieved by the decision of this court and who has the right to appeal and the interests of the respondent, as a successful litigant who is entitled to fruits of its decree.  In carrying out the delicate balance, I will allow the application for stay of execution pending appeal but on following conditions.

a) That the applicant pays the sum of kshs 5 million to the respondent being party of the decretal sum within 30 days from the date of this ruling.

b) That the applicant furnishes a bank guarantee in the sum of kshs 12,500,000 as security for the due performance of the decree within 30 days from the date of this ruling.

c) In the event of failure to comply with conditions a) and b) above the stay of execution orders will automatically lapse and the respondent will be at liberty to execute the decree for the full decretal sum.

d) I make no orders at to costs.

Dated, signed and delivered in open court at Nairobi this 27th day of June 2019.

W. A. OKWANY

JUDGE

In the presence of;

Mr. Haris for Mutua for the plaintiff/respondent

Mr. Muriuki for the defendant/applicant

Court Assistant - Ali