[2022] KEHC 16586 (KLR)

CIC Insurance Group Ltd v Wahome (Civil Appeal E499 of 2021) [2022] KEHC 16586 (KLR) (Civ) (15 December 2022) (Ruling)

Neutral citation: [2022] KEHC 16586 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Law Courts)

Civil

Civil Appeal E499 of 2021

CW Meoli, J

December 15, 2022

Between

CIC Insurance Group Ltd

Applicant

and

Joseph Ndiangui Wahome

Respondent

(Originating from the judgement in Nairobi Milimani SCCC No. 102 of 2021)

Ruling

1. The motion dated September 30, 2021 by CIC Insurance Group Ltd (hereafter the applicant) seeks to stay execution of the judgement in Nairobi Milimani SCCC No 102 of 2021 pending hearing and determination of the appeal herein. The motion is expressed to be brought under section 1A, 1B, 3A & 95 of the Civil Procedure Act (CPA) and order 42 rule 6 of the Civil Procedure Rules (CPR),inter alia, and is premised on the grounds on the face of the motion as amplified in the supporting affidavit sworn by Lydia Wairimu Mwangi.

2. To the effect that the applicant being dissatisfied with the said judgment delivered on July 14, 2021 in favour of John Ndiangui Wahome (hereafter the respondent), has preferred the appeal which is arguable, and with an overwhelming chance of success and that execution is imminent and unless the motion is granted the applicant may suffer loss that cannot be compensated thus rendering the appeal nugatory. The deponent further expresses the applicant’s willingness to abide by any conditions imposed in respect of stay and concludes by asserting that it is in the interest of justice and fairness that the motion be allowed.

3. The respondent opposes the motion through a replying affidavit dated September 29, 2021. He attacks the appeal and application which he views as intended to deny him the fruits of successful litigation. He accuses the applicant of inordinate and unexplained delay in filing the instant motion which he describes as an afterthought. Further, he deposes that the applicant has not demonstrated substantial loss but, in the alternative, pleads with the court to order provision of security in the event it is persuaded to grant the motion.

4. The motion was canvassed by way of written submissions. As regards the applicable principles, counsel for the applicant anchored his submissions on the provisions of order 42 rule 6 of the Civil Procedure Rules. On the issue of substantial loss he called to aid the decisions inSilverstein v Chesoni [2002] 1 KLR 867 and John Gachanga Mundia v Francis Muriira Alias Francis Muthika & Another [2016] eKLR to assert that unless the stay order is granted the applicant’s business operations are likely to be halted on account of execution; that the respondent’s financial means are unknown hence there is no guarantee he would reimburse the decretal sum should the appeal succeed; and that in the circumstances, the applicant is likely to suffer substantial loss and the appeal rendered nugatory should execution proceed.

5. Counsel further asserted that the motion was filed expeditiously to avert execution pending appeal. On security, counsel expressed the applicant’s willingness to provide such security as the court may order. In conclusion it was submitted that the motion has been filed in good faith and in exercise of the applicant’s statutory right of appeal and that it is in the interest of justice that the court exercises its discretion in favour of the applicant. That any prejudice likely to be visited on the respondent can be compensated by an award of costs.

6. On behalf of the respondent, counsel equally anchored his submissions on the provisions of order 42 rule 6 of the Civil Procedure Rules. Responding to the applicant’s submissions on substantial loss, counsel cited the decisions in James Wangalwa & Another v Agnes Naliaka Cheseto [2012] eKLR and Michael Ntouthi Mitheu v Abraham Kivondo Musau[2021] eKLR to argue that the applicant has not demonstrated how substantial loss is likely to occur. CitingFMS v MAS [2021] eKLR counsel reiterated that there was inordinate delay in filing the instant motion and no explanation has been proffered.

7. On security, counsel relied on the decision in Gianfranco Manethi & Another v Africa Merchant Assurance Co Ltd [2019] eKLR to submit that the court ought to order the applicant to pay to the respondent one half of the decretal sum and deposit the balance in a joint interest account in the name of the advocates as a condition for stay pending appeal. He asserted however that the motion ought to be dismissed for failing to satisfy the prerequisite conditions necessary to warrant the stay of execution.

8. The court has considered the material canvassed in respect of the motion. The parties’ affidavit material and submissions raised issues touching on the merits of the appeal that are a preserve of the appellate court. It is pertinent to state that at this interlocutory stage, the court is not concerned with the merits of the appeal.

9. It is trite that the power of the court to grant stay of execution of a decree pending appeal is discretionary, however the discretion should be exercised judicially. See Butt v Rent Restriction Tribunal[1982] KLR 417. The applicant’s prayer for stay of execution pending appeal, is brought under order 42 rule 6 of the Civil Procedure Rules which provides that: -“(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 subrule (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”.

10. The cornerstone consideration in the exercise of the discretion is whether the applicant has demonstrated the likelihood of suffering substantial loss if stay is denied. One of the most enduring legal authorities on the issue of substantial loss is the case ofKenya Shell Ltd v Kibiru & Another [1986] KLR 410. The principles enunciated in this authority have been applied in countless decisions of superior courts, including those cited by the parties herein. Holdings 2, 3 and 4 of the Shell case are especially pertinent. These are that:“1. …..2. In considering an application for stay, the Court doing so must address its collective mind to the question of whether to refuse it would render the appeal nugatory.3. In applications for stay, the court should balance two parallel propositions, first that a litigant, if successful should not be deprived of the fruits of a judgment in his favour without just cause and secondly that execution would render the proposed appeal nugatory.4. In this case, the refusal of a stay of execution would not render the appeal nugatory, as the case involved a money decree capable of being repaid.”

11. The decision of Platt Ag JA, in the Shell case, in my humble view set out two different circumstances when substantial loss could arise, and therefore giving context to the 4th holding above. The Platt Ag JA (as he then was) stated inter alia that:“The appeal is to be taken against a judgment in which it was held that the present respondents were entitled to claim damages…It is a money decree. An intended appeal does not operate as a stay. The application for stay made in the High Court failed because the gist of the conditions set out in order XLI rule 4 (now order 42 rule 6(2)) of the Civil Procedure Rules was not met. There was no evidence of substantial loss to the applicant, either in the matter of paying the damages awarded which would cause difficulty to the applicant itself, or because it would lose its money, if payment was made, since the respondents would be unable to repay the decretal sum plus costs in two courts… (emphasis added)”

12. The learned Judge continued to observe that: -“It is usually a good rule to see if order XLI rule 4 of the Civil Procedure Rules can be substantiated. If there is no evidence of substantial loss to the applicant, it would be a rare case when an appeal would be rendered nugatory by some other event. Substantial loss in its various forms, is the cornerstone of both jurisdictions for granting stay. That is what has to be prevented. Therefore, without this evidence, it is difficult to see why the respondents should be kept out of their money.” (Emphasis added)

13. Earlier on, Hancox JA in his ruling observed that“It is true to say that in consideration [sic] an application for stay, the court doing so must address its collective mind to the question of whether to refuse it would,... render the appeal nugatory. This is shown by the following passage of Cotton L J in Wilson Vs Church (No 2) (1879) 12ChD 454 at page 458 where he said:-“I will state my opinion that when a party is appealing, exercising his undoubted right of appeal, this court ought to see that the appeal, if successful, is not rendered nugatory.”As I said, I accept the proposition that if it is shown that execution or enforcement would render a proposed appeal nugatory, then a stay can properly be given. Parallel with that is the equally important proposition that a litigant, if successful, should not be deprived of the fruits of a judgment in his favour without just cause.”

14. First, in my view, the delay of two months in bringing the application is not inordinate. The motion was filed within reasonable time after judgment. On the cornerstone consideration in an application of this nature, the language used in the applicant’s affidavit concerning substantial loss is that the applicant is apprehensive that it stands to suffer loss which cannot be compensated if execution were to proceed. In submissions, the applicant expounds on the said loss by raising new factual matters. The provisions of order 42 rule 6 envision substantial loss as defined in the Shell case and the applicant must show by affidavit how the loss is likely to occur. That said, I am prepared to take the applicant’s inelegant deposition to mean that the applicant fears it may be unable to recover any sums paid over in execution if the appeal succeeds, thus risks incurring substantial loss which event would render the appeal nugatory.

15. The respondent on his part did not rebut the foregoing assertions in his affidavit but argued in submissions that the applicant has not demonstrated substantial loss by showing that the goods likely to be attached in execution are tools of trade and exempted under section 44 of the Civil Procedure Act. Further that the submission of the applicant as to the respondent’s means has not been demonstrated and cannot be justification for granting stay. One is tempted, looking at the foregoing, to conclude that none of the parties fully appreciated substantial loss as envisaged in the provisions of order 42 rule 6 (1) & (2) and related caselaw.

16. In the oft cited case of National Industrial Credit Bank Ltd v Aquinas Francis Wasike & Anor. (2006)eKLR the Court of Appeal stated that:“This court has said before and it would bear repeating that while the legal duty is on an applicants 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 applicants to know in detail the resources owned by a respondent or the lack of them. Once an applicant expresses a reasonable fear that 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 – see for example section 112 of the Evidence Act, chapter 80 Laws of Kenya.”

17. The decretal sum herein is Kshs 579,208/-. This is a substantial sum. As indicated the applicant’s affidavit material more of less alluded to apprehension about the respondent’s capacity to repay this sum in the event of the appeal succeeding. Thus, the burden shifted upon the respondent to controvert the assertion by proving his own means. He failed to do so. As stated in the Shell case, substantial loss as would render the appeal nugatory is what must be prevented.

18. Difficulty in the recovery of decretal sums upon a successful appeal, not just the impossibility of such recovery, is a relevant factor in considering the likelihood of substantial loss to an applicant. Or in the alternative, and in proper cases, such demonstrated difficulty would qualify as sufficient reason (as anticipated in order 42 rule 6(1) of the Civil Procedure Rules) to be considered by the court. Whatever the case, in the exercise of its discretion, the court must balance the competing interests of the parties so as not to prejudice the matter pending appeal.

19. InNduhiu Gitahi & Another v Anna Wambui Warugongo [1988] 2 KAR, the court citing the decision of Sir John Donaldson M. R in Rosengrens Vs Safe Deposit Centres Limited [1984] 3 ALLER 198 and Others, held that:“We are faced with a situation where a judgment has been given. It may be affirmed, or it may be set aside. We are concerned with preserving the rights of both parties pending that appeal. It is not our function to disadvantage the defendant while giving no legitimate advantage to the plaintiff……It is our duty to hold the ring even-handedly without prejudicing the issue pending the appeal…”

20. In view of all the foregoing, the court will exercise its discretion in favor of the applicant by granting the motion dated September 30, 2021 on condition that the applicant does within 45days deposit the decretal sum into an interest earning account in the joint names of the parties’ respective advocates. The costs of the motion will abide the outcome of the appeal.

DELIVERED AND SIGNED ELECTRONICALLY AT NAIROBI ON THIS 15TH DAY OF DECEMBER 2022. C.MEOLIJUDGEIn the presence of:Ms. Kendi h/b for Mr. Maundu for the applicantMr. Wahome h/b for Mr. Ambani for the respondentC/A: Adika