T.S.S. Grain Millers Limited (Under Administration) v Nic Bank Kenya Plc [2022] KEHC 12161 (KLR)

T.S.S. Grain Millers Limited (Under Administration) v Nic Bank Kenya Plc (Civil Suit 13 of 2018) [2022] KEHC 12161 (KLR) (14 June 2022) (Ruling)

Neutral citation: [2022] KEHC 12161 (KLR)

Republic of Kenya

In the High Court at Mombasa

Civil Suit 13 of 2018

OA Sewe, J

June 14, 2022

Between

T.S.S. Grain Millers Limited (Under Administration)

Plaintiff

and

Nic Bank Kenya Plc

Defendant

Ruling

[1]Before the court for determination is the Notice of Motion dated December 5, 2019. It was filed herein on December 6, 2019 by the plaintiff pursuant to Sections 1A and 3A of the Civil Procedure Act, Chapter 21 of the Laws of Kenya, and Order 42 of theCivil Procedure Rules for orders that:[a]Spent[b]That the Court be pleased to grant an injunction to restrain the defendant from selling and/or disposing off the property known as Mombasa/Block I/373 pending the hearing and determination of the intended appeal from the decision dated October 25, 2019;[c]Spent;[d]That there be an order for the costs of the application.

[2]The application was premised on the grounds that the plaintiff has filed a Notice of Appeal against the decision of the Court (Hon PJ Otieno, J) made on October 25, 2019; and that the effect of the order being appealed is to allow the defendant to proceed with the sale by public auction or otherwise deal with the property known as Mombasa/Block I/373 (hereinafter, “the suit property”). The plaintiff averred that it is imperative that the status quo be maintained so as to preserve the efficacy of any orders that may be made at the appellate forum; and thereby preserve the applicant’s right to a fair determination of its grievance.

[3]The application was supported by the affidavit sworn by Fatma Tahir Sheikh Said on December 5, 2019 in which it was averred that on the October 25, 2019, the Court dismissed the plaintiff’s suit; and along with it went the injunctive order that had been given in the suit, restraining the defendant from selling and/or disposing off the suit property. She further averred that the plaintiff’s erstwhile counsel, Mr Gikandi Ngibuini, overlooked the need to make an oral application for an injunction to maintain the status quo pending further remedial action; including the intended appeal.

[4]Ms Said further averred that, since a Notice of Appeal had already been filed by the plaintiff, it was only fair and just that the orders sought be granted. She annexed to her affidavit a newspaper advertisement carried in the People Daily newspaper of November 25, 2019, to demonstrate that the defendant was poised to sell the suit property on Monday, December 9, 2019 (see Annexure FT-3). She added that, in the absence of the orders sought, the intended appeal will not only be rendered nugatory, but the substratum of the appeal will have dissipated altogether; thereby defeating the ends of justice.

[5]On behalf of the defendant, a Replying Affidavit was filed herein on 9th September 2021, sworn by its Senior Legal Counsel, Mr Stephen Atenya. Mr Atenya averred that the plaintiff’s intended appeal lacks merit and is merely a gimmick intended to delay the exercise of the defendant’s statutory power of sale over the suit property. He further averred that the plaintiff had not demonstrated how the intended appeal would be rendered nugatory, having failed to show that the defendant had no financial means to compensate it in the event of success on appeal.

[6]Mr Atenya further deposed that the suit property was pledged to the defendant as security with the full knowledge that the same would be sold in the event of default in repayment of the loan facility granted to the plaintiff. He added that, the plaintiff having failed, refused or neglected to repay the loan facility, has not come to Court with clean hands. He pointed out that the outstanding sum stood at Kshs 1,019,559,914. 74 and USD 24,644,292. 47 as at 27th May 2021 and asserted that the plaintiff is utterly undeserving of the injunction sought. He annexed a copy of the plaintiff’s Statements of Account to the Replying Affidavit as Annexure “SAE1” to confirm the status of the plaintiff’s indebtedness.

[7]Directions were thereafter given on November 22, 2021 that the application dated December 5, 2019 be canvassed by way of written submissions. Thus, Mr Omollo, learned counsel for the plaintiff, filed his written submissions herein on February 11, 2022, relying chiefly on the principle established in Erinford Properties Ltd v Cheshire County Council [1974] 2 AllER 488. He acknowledged that Order 42 Rule 6 of the Civil Procedure Rules deals with situations where there is a decree capable of execution; and that in the instant case, there is no such order or decree; but submitted that, nevertheless, there is need to preserve the status quo pending appeal.

[8]Mr Omollo also invoked the inherent power of the court as reserved under Section 3A of the Civil Procedure Act on the ground that there is no specific provision to meet the plaintiff’s situation. He relied on Taparu v Roitei [1967] EA 618 andJooma & Jaffer v Bhamra [1967] EA 326 for the proposition that recourse to the Court’s inherent jurisdiction is warranted where there is no specific remedy to meet the case.

[9]On the merits, Mr Omollo submitted that the suit property is commercial property; and that, unless the order of injunction is granted, the defendant will proceed and sell the same, thereby destroying the substratum of the appeal and occasioning the plaintiff substantial loss. He further urged the Court to find, on the basis of DJ Lowe & Company Limited v Credit Agricole Indosuez [HCCC No. 235 of 2010] and James Juma Muchemi v Barclays Bank[2011] eKLR, that the Court has jurisdiction to grant injunction pending appeal, notwithstanding that the application for injunction pending the hearing and determination of the suit had been dismissed by the same court.

[10]On her part, Ms Mburu for the defendant urged the Court, in her written submissions dated February 15, 2022, to rely on the principles pronounced in Madhupaper International Limited v Kerr[1985] eKLR and Patricia Njeri & 3 Others v National Museum of Kenya [2004] eKLR, namely:(a)That an order of injunction pending appeal is a discretionary relief that ought not to be granted in circumstances where the appeal is frivolous;(b)The discretion should be refused where it would inflict greater hardship than it would avoid;(c)The applicant must show that to refuse the injunction would render the appeal nugatory;(d)the Court should also be guided by the principles in Giella v Cassman Brown [1973] EA 358.

[11]On the merits of the appeal, Ms Mburu recounted the proceedings herein and the fact that the matter proceeded by way of Case Stated; and urged the Court to find that since consent of the Administrator had been obtained to dispose of the suit property, there can be no valid appeal. She further pointed out that no draft Memorandum of Appeal had been annexed to the plaintiff’s application to give the Court an opportunity of examining the grounds of appeal. Counsel further reiterated the defendant’s stance that, in view of the large sums due from the plaintiff by way of outstanding loan (Kshs 1,019,559,914. 74 and USD 24,644,292. 47 as at May 27, 2021), granting an injunction would inflict greater injustice than it would avoid. She added that, since the plaintiff’s default is not in dispute, it cannot be said the appeal will be rendered nugatory or that the principles inGiella v Cassman Brown have been established. According to her, the value of the suit property is quantifiable and therefore no harm would befall the plaintiff which cannot be redressed by an award of damages, in the event of a successful appeal.

[12]Mr Omollo filed Further Submissions herein on February 24, 2022 reiterating his stance that the arguability of the appeal is not a factor for consideration in an application of this nature; as it would only be relevant in an application brought under Rule 5(2)(b) of the Court of Appeal Rules. He accordingly urged the Court to, instead follow the path taken by Hon Mabeya, J in James Muchemi v Barclays Bank (supra); the plaintiff having invoked the inherent jurisdiction of the Court.

[13]I have given careful consideration to the application dated December 5, 2019 in the light of the grounds set out on the face thereof, as well as the averments in the pertinent affidavits. I have likewise paid attention to the written submissions filed herein by learned counsel, including the authorities cited therein. The background facts are not in dispute; namely, that the plaintiff filed this suit challenging the intended sale of the suit property by the defendant pursuant to the defendant’s statutory power of sale. The plaintiff was granted interim injunction which was later extended to last pending the hearing of the application. Thereafter, upon consolidation of this case with Mombasa HCCC No 65 of 2017, directions were given that the matters be handled by way of Case Stated and canvassed by way of written submissions. The sole question for determination was whether there had been compliance with Section 560 of theInsolvency Act by the time the suits were filed.

[14]In its Judgment dated October 25, 2019, the Court came to the conclusion that: 16. …when the suit No 13 of 2018 was filed, the parties in HCCC No 65/2017 had negotiated and agreed that the suit property be sold and a consent duly granted. The foundation of the suit is pleaded at paragraph 9 of the plaint as follows:-“The Plaintiff avers that the intended sale is unlawful because it is expressly prohibited by section 560(1)(a) of the Insolvency ActNO 18 of 2015 since the Plaintiff is under Administration.”17. For the purpose of this suit and the issue for determination, that ground of the suit is misconceived if not wholly false. I do find that the suit when filed on 5/3/2018 there was in existence a valid consent by the administrator. Accordingly the claim cannot be sustained as framed. It lacks merit and it is therefore dismissed with costs to the defendant.”

[15]That is the Order in respect of which the plaintiff filed the Notice of Appeal dated October 31, 2019. It is true therefore that the instant application does not fall squarely within the ambit of Order 42 Rule 6 of the Civil Procedure Rules, there being no decree pending execution. Nevertheless, the Court does have the inherent jurisdiction to grant such orders as the justice of the case may require. Accordingly, the plaintiff made its approach under Section 1A and 3A of the Civil Procedure Act as well as the Erinford principle. In Erinford Properties Case (supra) it was held that:“No human being is infallible and for none are there more public and authoritative explanations of their errors than for judges. A judge who feels no doubt in dismissing a claim to an interlocutory injunction may, perfectly consistent with this decision, recognize that his decision might be reversed and that the comparative effects of granting or refusing an injunction pending an appeal are such that it would be right to preserve the status quo pending the appeal.”

[16]The Erinford principle was followed by the Court of Appeal in Madhupaper International Ltd v Kerr (supra) wherein it was held that:“Where a judge dismisses an application for interlocutory injunction, he has jurisdiction to grant the unsuccessful applicant an injunction pending an appeal against the dismissal and there is no inconsistency in doing so as the purpose of granting the injunction would be to prevent the decision of the appellate court from being nugatory should the appeal succeed.”

[17]In the premises, the question to pose is whether, in the circumstances of this case, the conditions for the grant of an injunction pending appeal have been met. In this respect, I would agree with Mr Omollo that the arguability of the appeal is not a relevant factor, granted that the impugned order was made by this Court. That ground would be more pertinent in an application before the Court of Appeal under Rule 5(2)(b) of theCourt of Appeal Rules. Hence the key issue to focus on herein is whether granting the orders sought would inflict more hardship than it would avoid.

[18]In this regard, I have weighed the competing interests of the parties and noted that the sum outstanding from the plaintiff is a huge amount of money; such that as at 27th May 2021 Kshs 1,019,559,914. 74 and USD 24,644,292. 47 were due. The plaintiff is under administration and the Court was satisfied that the applicable provisions of the law were adhered to before the suit property was advertised for sale. On the other hand, there is absolutely no averment in the Supporting Affidavit sworn by Fatma Tahir Sheikh Said to show the exceptional hardship the plaintiff stands to suffer, aside from sale of the suit property. Unlike in the case of James Juma Muchemi & Partners Ltd v Barclays Bank of Kenya Ltd (supra) no indication was given as to the value of the charged property, its location and whether irreparable harm would ensue in the event it is sold as proposed. More importantly, no attempt was made to demonstrate that an appeal has, in fact, been instituted, granted the provisions of Rules 82 and 83 of the Court of Appeal Rules vis-à-vis the Notice of Appeal dated October 31, 2019.

[19]In the premises, I am not persuaded that the plaintiff’s application for injunction pending appeal is merited. That being my view, the application dated December 5, 2019 is hereby dismissed but with no order as to costs.It is so ordered.

DATED, SIGNED AND DELIVERED VIRTUALLY AT MOMBASA THIS 14TH DAY OF JUNE 2022. .............................................OLGA SEWEJUDGE