Paragon Electronics Limited v Velos Enterprises Limited [2024] KECA 1399 (KLR)

Paragon Electronics Limited v Velos Enterprises Limited (Civil Application E264 of 2024) [2024] KECA 1399 (KLR) (11 October 2024) (Ruling)

Neutral citation: [2024] KECA 1399 (KLR)

Republic of Kenya

In the Court of Appeal at Nairobi

Civil Application E264 of 2024

DK Musinga, JW Lessit & A Ali-Aroni, JJA

October 11, 2024

Between

Paragon Electronics Limited

Applicant

and

Velos Enterprises Limited

Respondent

(An application for stay of execution against the Ruling and Order of the High Court of Kenya at Nairobi (Mong’are, J.) delivered on 29th April 2024 in HCCC No. 289 of 2009 consolidated with HCCC No. 285 of 2010 Civil Case 289 of 2009 )

Ruling

1. Before the Court is the applicant’s notice of motion dated 7th May 2024 made under sections 3A and 3B of the Appellate Jurisdiction Act, rule 5(2) (b) and 49 of the Court of Appeal Rules, 2022 and Articles 50, 159(2)(d) and 164 of the Constitution, seeking stay of proceedings, execution and/or implementation of the impugned ruling pending the hearing and determination of the appeal.

2. The application is supported by the grounds on the face of it, an affidavit dated 7th May 2024, and a supplementary affidavit dated 18th July 2024, both sworn by Bulent Gulbahar, a representative of the applicant. It is the applicant’s case that the High Court (Mong’are, J.) in the impugned ruling of 29th April 2024 sat on appeal of its judgment (Ogola, J.) made on 23rd October 2015, without jurisdiction; that the judge dealt with an issue that was res judicata relating to the sublease of 2007, No. I.R. 111891, and whether the said sub-lease was in satisfaction of the agreement for sale dated 23rd August 2006; yet the court (Ogola, J.) in the judgment of 23rd October 2015 found that the sublease was not in satisfaction of the agreement for sale dated 23rd August 2006 and ordered that a separate title be issued to the applicant; that further, the judge denied the applicant its right to the sum of Kshs.119,340,000. 00 owed under the judgment of 23rd October 2015; that the respondent/judgment debtor has a track record of contempt of court, perjury, and conspiracy to defeat and pervert the administration of justice; that the applicant has filed a notice of appeal, requested for certified typed proceedings and a certified copy of the ruling of 29th April 2024 and has served the same upon the respondent; has filed a draft memorandum of appeal; that the application has been brought without delay; the applicant has an arguable appeal; and that the appeal will be rendered nugatory unless a stay of execution is granted.

3. The applicant has listed the intended grounds of appeal as that are a replica of the grounds on the face of the application and in addition stating that the learned judge erred by misapprehended the evidence that showed that the sublease I.R. 111891 had been extinguished by the illegal sub-division of the mother title 209/16027, orchestrated by the respondent in the year 2010; by holding that the respondent had produced a valid search on L.R. No. 209/16027 showing the existence of sublease I.R. 111891, yet no search could have been conducted on the extinguished mother title L.R. No. 209/16027; by ordering the release of the sum of Kshs.69,540,498 million held in the joint account to the judgment debtor; by holding that the applicant brought the application of 30th May 2023 with delay, long after judgment, yet the application of 30th May 2023 was brought within a few weeks of the new evidence having come to the attention of the applicant.

4. In opposing the application, the respondnet filed a replying affidavit dated 18th June 2024 sworn by Jatinder Singh Mehta, a director of the respondent, who deposed that; in its ruling dated 29th April, 2024 the court did not sit on appeal of the judgement of 23rd October 2013, but the ruling was in exercise of the powers vested in the court under section 34 of the Civil Procedure Act; that in its judgment (Ogola, J.) the court had ordered for a separate title to issue; in the impugned ruling (Mong’are, J.) defined what constitutes a title and found that the respondent had satisfied the judgment; further, the applicant alluded to a sum of Kshs.118,340,000, yet the sum is a non-issue; further the intended appeal will not be rendered nugatory as the applicant has been in occupation of the property whose title is in dispute; and has had the title which is sublease I.R. 111891 since its registration on 24th July 2008 in its name; there is no allegation that the respondent cannot pay back the sum if ordered by the court; that by a court order the respondent deposited Kshs.69,540,496 in a joint account, being proceeds of garnishee proceedings; further, the applicant has not demonstrated the loss it is likely to suffer if the 3rd and 7th garnishees at the High Court settle their rental obligations owed to the respondent, being rent arrears.

5. The crux of the matter before the trial court was whether the respondent had satisfied the decree by issuing the applicant with the sublease dated 9th May 2007 for the suit property; an office block known as Block C that was erected on L.R. No. 290/16027. Before the court were three applications for determination.

6. The first application dated 30th May 2023 by the applicant sought leave to file a further affidavit to produce new evidence vide the affidavit of John K. Barreh filed on 22nd May 2023. The same was opposed by the respondent in grounds of opposition dated 9th June 2023 and a replying affidavit. The second dated 15th August 2017 was filed by the respondent. It sought declaration of satisfaction of the judgment of 23rd October 2015 and decree of 3rd November 2015. The application was opposed by the applicant inter alia on grounds that the application was bad in law as the court had no jurisdiction to grant declaratory orders under Order 3 rule 9 of the Civil Procedure Rules sought by a post-judgment application; that the application was res judicata as it had to do with the issue of the sublease; that the court was functus officio. The respondent also filed the third application dated 10th July 2023. It sought for an order directing the 3rd and 7th garnishees to pay all the outstanding rental arrears of Kshs. 177,175,030. 65/- as of June 2023 to it, or as directed by the court within 30 days, and to forthwith honour their rental obligations through payment of monthly rent to it as and when it fell due. In response, the applicant filed grounds of opposition and argued that the court lacked jurisdiction to preside over any issues or obligations that may arise between a landlord and a tenant to unpaid rent and that the orders sought did not form the basis of the suit.

7. According to the court, the issues for determination were whether the applicant had made out a case for a grant of leave to file a further affidavit to produce new evidence; whether the respondent had satisfied the judgment of 23rd October 2015, and whether the court ought to order the 3rd and 7th garnishees to pay the monthly arrears of Kshs. 177,175,030. 65 /- as of 26thJune 2023 to the respondent and to forthwith pay their monthly rent to the respondent.

8. The court noted that the respondent had satisfied the judgment of 23rd October 2015 and decree of 3rd November 2015 and, hence found that the 3rd application was merited. The court ordered as follows:a.The application by the applicant dated 30th May, 2023 be dismissed for want of merit with costs.b.The application by the respondent dated 15th August, 2015 be allowed with costs.c.The sum of Kshs.69,540,498 held in the joint account held by the parties’ respective advocates be released to the respondent.d.The application by the respondent dated 10th July 2023 be allowed as prayed with costs.

9. Turning back to the application before us, the applicant filed submissions and a list of authorities both dated 18th July 2024. In the submissions, the applicant relies on the case of Trust Bank Limited & Another vs. Investec Bank Limited & 3 Others [200] eKLR, where the Court delineated the jurisdiction and principles for granting a stay of execution, injunction, or stay of proceedings by this Court. On whether the appeal is arguable, the applicant relies on Stanley Kang’ethe Kinyanjui vs. Tony Ketter & 5 Others [2013] eKLR, and argues that it has attached a draft memorandum of appeal which shows that the appeal has an overwhelming chance of success and not just arguable. The applicant further finds aid in the case of Kenya Medical Lab Technicians & Technologists Boards vs. Prime Communications Limited [2014] eKLR, where the Court held that in considering whether an arguable appeal has been made out, it is not a requirement that the appeal would in the end necessarily succeed. On the nugatory aspect, the applicant relies on Ahmed Musa Ismael vs. Kumba Ole Ntamorua & 4 Others, (Civil Application No. 256 of 2013), where the Court was of the view that there is a need to preserve the subject matter.

10. The applicant further submits that it has been left with no valid sublease and/or separate title as ordered in the judgment of 23rd October 2015 and thus stands to suffer a total loss of approximately Kshs.500,000,000; that the respondent will likely engage again in illegal activities such as disposing of the illegally obtained subtitles L.R. No. 209/19115 and 209/19116 and/or cause a default on the substantive loans of USD 1,000,000 and Kshs.301,000,000 respectively taken from I & M Bank, hence it is evident that this appeal will be rendered nugatory if the ruling is not stayed and or status quo has been ordered.

11. In opposition the respondent filed submissions dated 22nd July 2024. It submits that the applicant has no arguable appeal; that the ruling was in exercise of the powers vested in the High Court under section 34 of the Civil Procedure Act: that under the judgment, what constituted title had not been defined, and all that the judge ordered was that a separate title be issued in accordance with the sale agreement dated 23rd August 2006: that vide the impugned ruling the court defined what title constituted and went ahead to find that the respondent had satisfied the judgment; that the intended appeal raises issues that were not canvassed in the High Court, and the supporting affidavit introduces matters of alleged contempt by the respondent which were not the basis of the findings in the ruling.

12. On the nugatory aspect, the respondent relies on the case of Kenya Shell Limited vs. Benjamin Karuga Kibiru & Another [1986] eKLR, where the Court found that the supporting affidavit had not set out any information to show that the appeal would be nugatory, though it was loud in its claim that the appeal would fail and no reasons were given why the appeal would be rendered nugatory.

13. In response to the contention by the applicant on loss it would suffer if the funds held in the joint account was to be released to the respondent, it submits that the applicant was not directed to pay anyone, hence no loss arises in this regard; further that it has not put its financial position on the table, neither shown how it will be affected if stay is not granted; that the sum of Kshs.69,540,498 in the joint account was deposited by the respondent on account of a garnishee application filed by the applicant and the release back to the respondent results in no loss to the applicant: that the applicant has been in possession and has title to the suit properties since its registration on 24th July 2008 and therefore the substratum of the dispute being the applicant’s title will not be taken away; that the respondent owns substantial properties which have been leased to tenants and has a clear source of funds stemming from the rent; and further the applicant has not demonstrated what loss it stands to suffer if the 3rd and 7th garnishees settle the rental obligations owed to the respondent that are in arrears. In support of its contention, the respondent relies on the case of Emirates Airlines Limited vs. Stephen Chase Kisaka [2015] eKLR, where the Court held that it behooves the applicant to satisfy the twin principles.

14. As regards the prayer for stay of proceedings, it submits that the ruling determined all the issues with finality. There are no proceedings capable of being stayed. In support of this argument the respondent relies on the Supreme Court case of Sonko vs. Clerk, County Assembly of Nairobi City & 11 Others, (Petition 11(E008) of 2022) KESC 32 (KLR).

15. To succeed in an application under rule 5 (2)(b) of this Court’s Rules, an applicant has to satisfy the twin principles that are enumerated in many decisions of this Court namely:i.An applicant must demonstrate that they have an arguable appeal; andii.That the intended appeal (or appeal if already filed), if successful, will be rendered nugatory if the execution of the decree, order of proceedings is not stayed.

16. On the first limb of these twin principles, this Court held in David Morton Silverstein vs. Atsango Chesoni [2002] eKLR that for an order of stay to be issued, the applicant must first demonstrate that the appeal or intended appeal is arguable, that is, it is not frivolous, and that the appeal or intended appeal, would in the absence of a stay, be rendered nugatory. The appellant has listed several grounds of its intended appeal. It is not for us at this point to determine whether the grounds will in the end succeed. However, we do not find the grounds frivolous, they need to be ventilated at a full hearing.

17. On the nugatory aspect, this Court in the case of Stanley Kang’ethe Kinyanjui vs. Tony Ketter & 5 Others (supra) stated that:ix.The term “nugatory” has to be given its full meaning. It does not only mean worthless, futile, or invalid. It also means trifling.x.Whether or not an appeal will be rendered nugatory depends on whether or not what is sought to be stayed if allowed to happen is reversible; or if it is not reversible whether damages will reasonably compensate the party aggrieved.”Further, this Court in the case of Permanent Secretary Ministry of Roads & Another vs. Fleur Investment Limited [2014] eKLR referred to the holding in the case of Reliance Bank Limited vs. Norlake Investment Ltd [2002] E. A. where the Court stated:“….. what may render the success of an appeal nugatory must be considered within the circumstances of each particular case. The term ‘nugatory’ has to be given its full meaning. It does not only mean worthless, futile or invalid. It also means trifling.”The court further went on to state that; -“A trifling appeal is one of very little importance, one whose determination is of little or no legal consequence because of a past event(s) or an earlier finding by a court of law.”

24. This case revolves around the title to the suit property and the meaning given by two High Court decisions (a judgment and a subsequent ruling). The matter involves colossal amounts of money being held on account of garnishee proceedings arising from the judgment. We therefore see the need to preserve the status quo pending the hearing and determination of the appeal to avert any likely loss to the parties.

24. In the circumstances, therefore, we order stay of the implementation of the ruling of the High Court (Mong’are, J.) of 29th April 2024 pending hearing and determination of the appeal. Costs will abide by the outcome of the appeal.

DATED AND DELIVERED AT NAIROBI THIS 11TH DAY OF OCTOBER, 2024. D. K. MUSINGA, (P.).......................................JUDGE OF APPEALJ. LESIIT........................................JUDGE OF APPEAL ALI-ARONI........................................JUDGE OF APPEALI certify that this is a true copy of the original.SignedDEPUTY REGISTRAR