Trust Bank Limited v Midco International (K) Limited & 4 others [2022] KEHC 176 (KLR)

Trust Bank Limited v Midco International (K) Limited & 4 others (Civil Suit 366 of 2001) [2022] KEHC 176 (KLR) (Commercial and Tax) (8 March 2022) (Ruling)

Neutral citation: [2022] KEHC 176 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts Commercial and Tax Division)

Commercial and Tax

Civil Suit 366 of 2001

DAS Majanja, J

March 8, 2022

Between

Trust Bank Limited

Plaintiff

and

Midco International (K) Limited

1st Defendant

Ciem Investments Limited

2nd Defendant

Piyush Manubhai Patel

3rd Defendant

Pankaj Vrajlal Somaia

4th Defendant

Jay Shah

5th Defendant

Ruling

1. On 7th July 2020, the court dismissed the Plaintiff’s suit with costs being awarded to the 1st, 4th and 5th Defendants. The costs have now been assessed and certified by the court as due and payable to them. The Plaintiff, having evinced its intention to appeal against the judgment to the Court of Appeal, has now filed the Notice of Motion dated 27th July 2021 made,inter alia under, Order 42 Rule 6 of the Civil Procedure Rules (“the Rules”) principally seeking to conserve the status quo or the rights of the parties prior to the court’s judgment and stay further proceedings to execute, or enforce the decree of the awarded costs pending hearing and determination of the intended appeal.

2. The application is supported by the supporting affidavit of Thomas E. Osama, the Plaintiff’s Senior Officer Resolution sworn on 27th July 2021. It is opposed by the 4th Defendant through the Grounds of Opposition dated 18th August 2021 and by the 5th Defendant through the Grounds of Opposition dated 27th October 2021 together with his replying affidavit sworn on 30th November 2021. The parties have also filed written submissions in support of their respective positions.

Analysis and Determination 3. From the application, depositions and submissions, the main issue for determination is whether the court ought to stay the execution of the costs taxed and certified and these proceedings and also whether it is to issue conservatory orders maintaining the status quo of the parties before the court’s judgment pending hearing and determination of the intended appeal. I am in agreement with the 4th Defendant that this court has already pronounced itself on the merits of this case and the Plaintiff’s factual arguments on the merits of this case are not of any use to it in this application. In any case, the merits or otherwise of the decision appealed against is a matter for the appellate court.

4. It is common ground that the principles that guide the court in an application for stay of execution and proceedings pending an appeal are grounded in Order 42 Rule 6 of the Rules. In order to succeed, the applicant must demonstrate substantial loss may result unless the order of stay is made. It must also demonstrate that the application has been brought without undue delay and lastly, the applicant must give such security as the court may order for the due performance of the decree or order as the case may be.

5. The 4th and 5th Defendants have first impugned the application for being filed late and that the Plaintiff has not offered any explanation for the delay. Indeed, it is common ground that this application has been filed just over one year since the court’s judgment. However, I note that the same was filed just one month after the court issued certificates of taxation for KES. 3,410,345. 50 and KES. 3,443,430. 50 as due and payable to the 4th and 5th Defendants respectively. The Plaintiff seeks to stay execution of these certified costs. I find that there has been no unreasonable delay in the filing of this application as the same was made just one month after the certificates of costs were issued by the court.

6. The next condition the Plaintiff is to satisfy is that security of costs has been given. The Plaintiff has urged the court to dispense with this requirement due to the peculiar circumstances of this case. It urges that the claim against the Defendant is by the Liquidator who is seeking to recover the debts or assets of the company so as to pay thousands of the Plaintiff's depositors who lost their hard-earned savings through mismanagement of the Plaintiff by its officers in conjunction with some customers. That the Plaintiff's funds or money was unlawfully transacted in the bank accounts of the 1st and 2nd Defendants by Bank officers without the authorization or mandate of the Defendants as the owners of the Bank Accounts which is contrary to the provisions of the Banking Act (Chapter 488 of the Laws of Kenya).

7. The Plaintiffs arguments, are in my view, not so peculiar, to warrant different considerations or preclude it from fulfilling this otherwise mandatory condition for grant of stay of execution. While the absence of any offer of security by the Plaintiff is not necessarily a ground to refuse the application, the court may yet order security if it is necessary to do so in order to do justice in the case.

8. The last condition to be fulfilled is whether the Plaintiff has demonstrated that substantial loss will be occasioned upon it. This prima facie means that if the appeal succeeds, the Defendants would not be in a position to make full restitution (Halai & another v Thornton & Turpin (1963) Ltd NRB CA Civil Application No. NAI 15 of 1990 [1990] eKLR). The Plaintiff states that 1st Defendant no longer trades and its offices or assets are unknown to the Plaintiff. That the 5th Defendant resides in Dubai and his assets in this country are unknown to the Plaintiff and the whereabouts of the 4th Defendant are also unknown to the Plaintiff. The Plaintiff adds that the 4th Defendant never even appeared in Court at the trial of the case to give evidence in support of his defence.

9. The 4th Defendant also responds that he resides in Nairobi and was duly represented at the trial by his advocates then on record who chose not to call him as a witness as the case against him was hopelessly untenable. Further, that he is a man of means and will be able to refund the costs in the unlikely event that the Plaintiff succeeds in the intended appeal.

10. The 5th Defendant depones that he has assets in Kenya and that the Plaintiff is improperly trying to shift the court’s attention from the fact that it is indebted to the 5th Defendant on account of costs which have been awarded in various suits and that even if there was an order that could be stayed in this case, the 5th Defendant reiterates that the Plaintiff has not met the test for stay of execution pending appeal.

11. As a general rule, the applicant bears the burden of proving that the respondent will not be in a position to refund the decretal sum (see Caneland Ltd & 2 Others v Delphis Bank Ltd Civil Application No. NAI 344 of 1999). The law, however appreciates that it may not be possible for the applicant to know the respondent’s financial means. All an applicant can reasonably be expected to do, is to swear, upon reasonable grounds, that the respondent will not be in a position to refund the decretal sum if it is paid over to him and the pending appeal was to succeed, but is not expected to go to extraordinary lengths to investigate the respondent’s position. In this case therefore, while the legal burden still remains on the applicant, the evidential burden shifts to the respondent to show that he would be in a position to refund the decretal sum as those are matters peculiarly within his knowledge (see Kenya Posts & Telecommunications Corporation v Paul Gachanga Ndarua Civil Application No. Nai. 367 of 2001 [2001]eKLR; ABN Amro Bank, N.K. v Le Monde Foods Limited Civil Application No. 15 of 2002 (UR)).

12. I have considered the facts and circumstances, I have outlined and I take the following view of the matter. The Plaintiff is under liquidation hence the funds it is expected to pay out are those for the benefit of all creditors including the Defendants who have an award of costs in their favour. If the amount due is paid out, I agree with the Plaintiff that there is no evidence that the amount may be refunded. I say so because the Defendants did not discharge the evidential burden cast on them that they have means to do so. Since liquidation of the Plaintiff is an ongoing process, I think it is in the interests of justice that the taxes costs be preserved to await determination of the intended appeal.

13. Although I have concluded that an order of stay is merited in the circumstances of the case, I wish to comment on the prayer seeking conservatory orders maintaining the status quo of the parties before the judgment of the court. The principles for grant of conservatory orders were laid down by the Supreme Court in Gatirau Peter Munya v Dickson Mwenda Kithinji & 2 others SCK Application No. 5 of 2014 [2014] eKLR where it was held that:(86)“Conservatory orders” bear a more decided public-law connotation: for these are orders to facilitate ordered functioning within public agencies, as well as to uphold the adjudicatory authority of the Court, in the public interest. Conservatory orders, therefore, are not, unlike interlocutory injunctions, linked to such private-party issues as “the prospects of irreparable harm” occurring during the pendency of a case; or “high probability of success” in the supplicant’s case for orders of stay. Conservatory orders, consequently, should be granted on the inherent merit of a case, bearing in mind the public interest, the constitutional values, and the proportionate magnitudes, and priority levels attributable to the relevant causes.

14. As the court stated, a conservatory order is a public law remedy. Although this suit involves a public institution, the subject of the suit is a private law claim resolved by applying ordinary private law principles. Further, no public interest involved in resolving the matter.

15. For the reasons stated above, I allow Plaintiff’s application dated 27th July 2021 on the following terms:a.There shall be a stay of execution of the order of payment of costs certified in favour of Defendants pending the hearing and determination of the appeal from the judgment and decree dated 7th July 2020 on the terms set out hereunder.b.The certified costs shall be deposited in a joint interest earning account in the names of the Advocates for the parties within 30 days from the date hereof.c.In the event of non-compliance with the aforesaid orders, the stay shall lapse automatically.d.The stay order shall remain in force for one year unless otherwise extended by this court or the Court of Appeal.

SIGNED AT NAIROBID. S. MAJANJAJUDGEDATED AND DELIVERED AT NAIROBI THIS 8TH DAY OF MARCH 2022. A. MABEYAJUDGEMr Oyatsi instructed by Shapley Barret and Company Advocates for the Plaintiff.Mr Nyakundi instructed Auta Nyakundi and Company Advocates for the 4th Defendant.Mr Kimani, SC with Mr Adano instructed by Wetang’ula Adan and Company Advocates for the 5th Defendant.