https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1042

Cytonn Intergrated Project LLP v SMB Bank (K) Ltd & another (Civil Application E102 of 2026) [2026] KECA 1042 (KLR) (29 May 2026) (Ruling) Neutral citation: [2026] KECA 1042 (KLR) Republic of Kenya In the Court of Appeal at Nairobi Civil Application E102 of 2026 LK Kimaru, LM Njuguna & JO Okello, JJA May 29, 2026 Between Cytonn Intergrated Project LLP Applicant and SMB Bank (K) Ltd 1st Respondent Official Receiver 2nd Respondent (Being an application for injunction pending an appeal from the ruling and order of the High Court of Kenya at Nairobi (Commercial and Tax Division) (Dr. Freda Mugambi, J.) dated 18th December, 2025 in HCCOMM No. E199 OF 2024) Ruling 1.Before us is a notice of motion dated 10th February 2026, filed pursuant to rules 1 (2) and 5 (2) (b) of this Court’s Rules. The applicant seeks an order to restrain the 1st respondent by itself or its agents, from offering for sale, selling, and transferring property, LR No. Kiambaa/Ruaka/6667 (hereinafter “the suit property”) pending the hearing and determination of its intended appeal. The applicant also seeks to have the 2nd respondent restrained from entering and remaining on the suit property, from collecting rent or purchase price of the premises erected on the property, or otherwise interfering with the management of the property, pending the hearing and determination of its intended appeal. 2.In support of the motion, the applicant’s Legal Manager, Adamskey Dudi, swore an affidavit on 10th February 2026. Written submissions dated 3rd March 2026 were filed. 3.The broader context of this matter involves a real estate investment structure where Cytonn High Yield Solutions (“CHYS”) and Cytonn Real Estate Project Notes (“CPN”) collected funds from various financiers and channelled them into various Special Purpose Vehicles, including the applicant, Cytonn Integrated Project LLP, to finance projects such as “The Alma”, a real estate development on suit property. 4.The dispute started way back in 2019, when the applicant approached the 1st respondent, SBM Bank (K) Limited (“the bank”), for a construction loan and secured a first-ranking legal charge dated 23rd August 2019 of Kshs 650,000,000/-, a further legal charge dated 18th August 2022 for the principal sum of Kshs 129,000,000/- and a fixed and floating debenture for the principal sum of Kshs 779,000,0000/- dated 19th August 2022. To secure these facilities, the applicant granted the bank a first-ranking legal charge and a fixed and floating debenture over the suit property. 5.The situation changed in October 2019 when Cyntonn High Yield Solutions LLP (CHYS) was placed under administration. Vide its decision of 6th January 2023 in Nairobi HCC0MMP No. E063 of 2021 in Re Cyntonn High Yields Solution LLP (in Liquidation), the High Court (Mabeya, J.) found that the administration had failed and placed CHYS under liquidation, and the 2nd respondent was appointed as the official receiver. The learned Judge issued preservation orders over properties registered to various special- purpose vehicles, including the suit property. 6.Pursuant to the preservation order, the 1st respondent moved to court vide application dated 17th February 2023 seeking variation of the preservation order. This resulted in a consent order between the 1st respondent (SBM Bank (K) Limited and the 2nd respondent (“the official receiver”) dated 1st August 2023, which was adopted as an order of the court on 30th November 2023. Vide the consent, the 1st respondent was permitted to proceed with its recovery options, including its statutory power of sale of the suit property. 7.The applicant and other aggrieved parties challenged these developments through a series of consolidated appeals (Civil Appeal Nos. E091/2024, E092/2024, E093/2024 & E094/24. This Court heard the appeals and dismissed them vide its judgment of 21st November 2025 and affirmed the validity of the preservation orders and the liquidation process. This Court also made a pronouncement regarding the consent dated 1st August 2023, which we shall delve into later in this ruling. 8.Concurrent with the proceedings before this Court, the applicant initiated HCCOMM No. E199 of 2024 in the High Court, seeking once again to restrain the 1st respondent from exercising its statutory power of sale over the suit property. Through the impugned ruling of 18th December 2025, (the High Court, Dr. Freda Mugambi, J.), declined to grant the injunction, holding that the bank’s actions were in strict compliance with the law and that the applicant’s rights were subject to the ongoing liquidation process. 9.Aggrieved by that ruling, the applicant has approached this Court yet again, under rule 5 (2) (b) of this Court’s Rules, seeking injunctive orders against the 1st and 2nd respondents pending the determination of its intended appeal against the ruling of 18th December 2025. 10.In the grounds in support of the Motion, and the supporting affidavit of Adamskey Dudi, the legal manager of the applicant, it states that unless the orders prayed for are granted, the applicant risks losing the suit property as the 1st respondent has issued a notice dated 23rd January 2026 seeking to realize the security over the property. 11.The deponent argues that the applicant is a separate entity from Cyntonn High Yield Solutions, LLP, and further contends that preservation orders made against the entity were unlawful, as the applicant was not the subject of the administration in the said cause. The applicant also complains about the consent entered into between the respondents, claiming that it is unlawful. Additionally, the applicant faults the 1st respondent for failing to give any commitment in respect to the applicant’s proposal contained in the letter dated 25th July 2025. 12.The 1st and 2nd respondents, in opposing the application, filed their respective replying affidavits sworn on 11th March 2026 and 19th February 2026, respectively. 13.Paul Kaguru, the 1st respondent’s legal director, avers that the applicant has failed to satisfy the dual threshold for an injunction pending appeal. He highlights the unequivocal admission of indebtedness by the applicant in its letter dated 25th July 2025, and further highlights the applicant’s wrongful diversion of Kshs 672,534,397.21/- in apartment sales proceeds to other banks instead of remitting them to the 1st respondent as required by the loan agreement. 14.Regarding the consent, the deponent maintains that it is a valid and binding order of the court and characterizes the present application as a delaying tactic by the applicant to hide its failures in complying with its repayment obligations. 15.In the affidavit of Mark Gakuru on behalf of the official receiver, the deponent argues that the application is res judicata, having been conclusively determined by this Court in Civil Appeal No E091 of 2024, which affirmed the validity of the preservation orders and the liquidation process. The deponent contends that the applicant is engaged in forum shopping and asserts that granting of the orders would prejudice over 3000 investors who have been waiting for the realization of their investments since January 2023. 16.During the inter partes hearing of the application on 5th May 2026, Mr. Nelson Havi, SC, and Mr. Odhiambo appeared for the applicant, Ms. Mutisya appeared for the 1st respondent, while Ms. Mugo and Mr. Njenga appeared for the 2nd respondent. All counsel briefly highlighted their written submissions, which they had previously filed before us. 17.On the arguability of the intended appeal, Mr. Havi, SC, contended that there is an arguable appeal on the refusal by the learned Judge to consider whether or not the applicant had established a prima facie case regarding its claims of inducement to breach contract, and unjust enrichment on the respondents if they are allowed to sell the suit property. Counsel placed reliance on the case of E Muriu Kamau & Another vs. National Bank of Kenya Limited [2009] eKLR on the principle of proportionality and the necessity of creating a level playing ground for all parties before the court. The cases of Trust Bank Limited & Another vs. Invest Tech Bank Limited [2000] eKLR; Export Processing Zones Authority vs. Kapa Oil Refineries Limited & Others [2014] eKLR; Keziah Njambi Maingi vs. Barclays Bank of Kenya Limited [2014] eKLR; and Stanley Kangethe Kinyanjui vs. Tony Ketter & 5 Others [2013] eKLR were cited as additional relevant authorities regarding the threshold for an arguable appeal. 18.On the nugatory aspect, counsel contended that the appeal would be rendered nugatory without the order of injunction sought, as the 1st respondent will proceed to realize its security as intended on the 4th of June 2026 through auction, and the substratum of the appeal will be lost. 19.Ms. Mutisya, for the 1st respondent, argued that the appeal is not arguable because it fails to raise any triable issues, particularly because the applicant had admitted its indebtedness and could not again seek equitable relief to stop the exercise of the statutory power of sale. Counsel pointed out that this Court had already dealt with the question of the preservation order as well as the consent entered into by the 1st and 2nd respondents. The 1st respondent placed reliance on the cases of Eri Limited vs. Velji [2021] KECA 306 (KLR); and John Nduati Kariuki t/a Johester Merchants vs. National Bank of Kenya Ltd [2006] eKLR, for the principle that a mortgagee cannot be restrained from exercising the power of sale unless the amount due is paid into court, Multimedia University & Another vs. Professor Gitile N. Naituli [2014] eKLR: regarding the requirement for the Applicant to demonstrate the nugatory limb and Mukua Tutuma vs. Co-operative Bank of Kenya Ltd [2008] eKLR: To support the argument that real estate used as security becomes a merchantable commodity, and its realization does not cause irreparable harm as any harm can be settled through damages. 20.On the nugatory aspect, counsel submitted that the appeal will not be rendered nugatory as the 1st respondent is a reputable banking institution that can compensate any damages ordered should the appeal be successful. 21.Mr. Njenga, for the 2nd respondent, largely echoed submissions by counsel for the 1st respondent and submitted that the issues raised by the applicant had already been determined by this Court and accused the applicant of abusing the court process and of forum shopping. 22.In rejoinder, Mr. Havi, SC submitted on the principles governing injunctions by this Court, stating that this Court focuses on the arguability of the intended appeal. Counsel denied the argument that the intended appeal is res judicata and maintained that the applicant is properly before this Court. 23.We have considered the notice of motion, the supporting affidavit, the replying affidavits, the submissions of both parties, the authorities cited and the law. This being a rule 5(2)(b) application, it turns on consideration of the issues set out by this Court in the case of Ahmed Musa Ishmael vs. Kumba ole Ntamurua & 4 Others [2014] eKLR, where this Court stated:“The principles upon which we exercise our jurisdiction under rule 5(2)(b) of the Court of Appeal Rules are notorious. See, for instance, Dhiman v Shah [2008] KLR 165, Bob Morgan Systems Limited & Anor v Jones [2004] 1KLR 94. An applicant must show that he has an arguable appeal and further that unless we grant the orders sought, his appeal, if successful, will be rendered nugatory. An arguable appeal need not raise a multiplicity of explorable points; a single one would suffice. That point or points need not be such as must necessarily succeed on full consideration of the appeal – it is enough that it is a point on which there can be a bona fide question to be explored and answered within the context of an appellate jurisdiction. The second limb, and both must be established, is an indication that stays or injunctions are not automatic. Rather, they are granted to preserve the integrity of the appellate process so as not to render any eventual success a mere pyrrhic victory devoid of substance or sucker by reason of intervening laws, harm, or destruction that turns the appeal into a mere academic ritual…As this Court stated in David Kamau Gakuru vs. National Industrial Credit Bank Limited, Civil Appeal No 84 of 2001, an injunction, being an equitable remedy, cannot be granted to a party who has demonstrated openly by his conduct that he is undeserving of the equitable relief.” 24.In Reliance Bank Limited vs. Norlake Investments Limited [2002] 1 EA 227, this 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 two principles the Court has developed help the Court to discern the will of the law under Rule 5(2)(b) of the Court’s Rules, and in discerning the will of the law, the Court, in the exercise of its discretion, must take into account all the relevant circumstances presented in a particular case.” 25.The issues that arise, therefore, are whether the applicant has established an arguable appeal and whether it has demonstrated the need for orders of injunction that have been sought to preserve the substratum of the appeal so that the appeal is not rendered an academic exercise. 26.From the grounds listed in the memorandum of appeal, the appellant complains that the learned Judge erred: in holding that the appellant was under liquidation by the 2nd respondent, and property Land Reference no. Kiambaa/Ruaka/667 was in lawful control of the 2nd respondent; in holding that the appellant had not made out a prima facie case with a high probability of success on the cause of action for inducement to breach contract by the 2nd respondent; in holding that the appellant had not made out a prima facie case with a high probability of success on the breach of contract and frustration of contract by the 1st respondent; and, in failing to consider whether the appellant had made out a prima facie case with a high probability of success on the cause of action for unjust enrichment by the 1st respondent. 27.While appreciating that we cannot, at this stage, go too deep into the merits of the intended appeal, we must take all relevant circumstances involving this case when determining the prayers sought in this application. Looking at the first ground raised, we cannot help but agree that it relates to the finding of this Court in Civil Appeal No. E091 OF 2024 as consolidated with E092, E093 & E094 of 2024 on the status of the SPVs relating to the broader context of this case. Even though the trial court was faulted for issuing a blanket preservatory order, this Court at paragraph 37 of its decision found that all the SPVs, including the applicant herein, were all Cyntonns for purposes of the liquidation and therefore under the control of the 2nd respondent. That was the position Mugambi, J. took in her ruling, when she referred to this Court’s determination at paragraph 28 of her decision that “the issue had been determined and could not be reopened.” 28.On the three remaining grounds, no matter how one looks at them, they all relate to challenging the consent that was entered into by the respondents herein. Again, this Court in the aforementioned decision at paragraph 54 gave a determination on the procedure to take when challenging a consent order. 29.Even though a low threshold is set for arguability, it is clear to this Court that the applicant is seeking to reopen issues that this Court has previously dealt with. 30.If this Court were to give the applicant the benefit of doubt and find that it has at least one ground of appeal, the applicant is required to prove that its appeal would be rendered futile if the injunctive orders are not granted. In Stanley Kang’ethe Kinyanjui vs. Tony Ketter & 5 Others (supra), this Court held that whether an appeal will be rendered futile depends on whether what should be stayed or injuncted, if permitted, is irreversible; or if it is not reversible, whether damages would reasonably compensate the injured party. In the present case, the applicant does not dispute its indebtedness to the 1st respondent or that the suit property was offered as security for the loan facilities extended to it by the 1st respondent. Any findings in its favour by this Court after the 1st respondent’s exercise of the statutory power of sale can be adequately compensated with damages. 31.In the end, we find that the applicant has failed to meet the threshold for the second limb, and therefore has failed to establish the twin principles for consideration in an application under rule 5(2) (b) of this Court’s Rules. Accordingly, the applicant’s motion is hereby dismissed with costs to the respondents. DATED AND DELIVERED AT NAIROBI THIS 29TH DAY OF MAY 2026.L. KIMARU……………………………JUDGE OF APPEALL. NJUGUNA……………………………JUDGE OF APPEALDR. J. OKELLO……………………………JUDGE OF APPEALI certify that this is a true copy of the originalSignedDEPUTY REGISTRAR