https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/11971

REPUBLIC OF KENYA IN THE HIGH COURT OF KENYA AT NAIROBI COMMERCIAL AND TAX DIVISION CORAM: F. MUGAMBI, J CIVIL SUIT NO. 836 OF 2010 COMM DUBAI CASH AND CARRY LIMITED ………………… APPLICANT BETWEEN APA INSURANCE LIMITED …………….….………… RESPONDENT VERSUS RULING Introduction and Background 1. By a ruling dated 27th May 2025 this Court allowed the respondent’s application and granted a conditional stay of execution pending the hearing and determination of their appeal. The order was conditional upon the respondent furnishing the applicant with a bank guarantee in the sum of Kshs. 24,849,863/= within thirty (30) days, in default of which the stay was to lapse automatically without further reference to the Court. HCCC 836 OF 2010 RULING Page 1 2. What falls for determination now is whether that condition was met, and if not, what legal consequence follows. Since the said ruling was delivered, two guarantees have, at different points, been placed before the Court. The first dated 24th June 2025, and a replacement dated 26th May 2026, roughly 11 months later. 3. To bring these into context, the respondent forwarded to the applicant and to the Deputy Registrar what it described as a bank guarantee, under cover of a letter dated 24th June 2025. The applicant’s advocates, Messrs. Taib Ali Taib Advocates, rejected the instrument, raising several objections. They were concerned that no communication or instrument had been received from the issuing bank, that is NCBA, that the copy supplied to the Court was neither drafted with nor approved by them. 4. They further took issue with the fact that it was addressed to the wrong party, that it did not name the applicant as beneficiary in the terms ordered by the Court, that it was neither stamped nor HCCC 836 OF 2010 RULING Page 2 registered as required by law, that its validity period contravened the terms of the order, which contemplated security pending the hearing and determination of the appeal rather than a fixed calendar date and that it did not expressly secure the sum of Kshs. 24,849,863/= as ordered. 5. The applicant’s Counsel gave notice to the respondents that as a consequence of these defects, they were in breach of the order of 27th May 2025 and that the conditional stay had therefore lapsed by operation of law. A further letter dated 6th January 2026 repeated this position. Both letters went unanswered. It was not until the replying affidavit of Ruth Mbalelo, a Legal Officer of the respondent company, sworn on 19th March 2026, that the respondent conceded some of the defects and indicated a willingness to correct the guarantee. A supplementary affidavit sworn by Aisha Taib on 14th June 2026 confirms that a replacement guarantee, dated 26th May 2026, was in fact issued and forwarded. 6. The single issue for determination is whether the conditional stay of execution granted on 27th May HCCC 836 OF 2010 RULING Page 3 2025 lapsed automatically upon the respondent's failure to furnish a valid and compliant bank guarantee within the thirty (30) days stipulated, in accordance with Order 42 Rule 6(2)(c) of the Civil Procedure Rules and the express terms of the order, and, if so, whether the applicant is entitled to leave to execute the decree. Analysis and Determination 7. The order of 27th May 2025 was conditional and self-executing. It did not require the applicant to even move the Court for a declaration of default, and it did not leave room for an indefinite or open- ended period of compliance. It fixed a period of thirty (30) days from the date of the order and expressly provided that, in default, the stay ‘shall lapse automatically and without further recourse to this Court’. This fact is not controverted even by the respondents. 8. It is equally not disputed that the 30-day period expired long before either the purported first guarantee of 24th June 2025 could be tested for compliance, or the replacement guarantee of 26th May 2026 was issued. It is clear that the HCCC 836 OF 2010 RULING Page 4 replacement guarantee issued on 26th May 2026 falls approximately 11 months outside the window fixed by the order. A self-executing order cannot be resuscitated by a party's unilateral decision, many months later, to correct defects it does not even fully admit to having caused. Therefore, on this ground alone, the application would succeed even though as I have said, it was not necessary in light of the self-executing orders. 9. I do also find it necessary to state, as was held in Arun C. Sharma V Ashana Raikundalia T/A A. Raikundalia & Co. Advocates & 2 Others, [2014] eKLR (Gikonyo J), that the purpose of security under Order 42 is to guarantee the due performance of such decree or order as may ultimately bind the applicant, and not to punish the judgment debtor. That purpose, however, is only realized if the security actually functions as security. It is only fair to the respondent, in whose favour the decree stands, that the instrument tendered as security be one that is executable without untold difficulty, and that it adequately protects the party to whom it is given. HCCC 836 OF 2010 RULING Page 5 10. This is not a novel proposition. It is the very standard the Court of Appeal laid down in Nduhiu Gitahi V Warugongo, [1988] KLR 621; 1 KAR 100; [1988–92] 2 KAR 100, where it held that so long as the opposite party can be adequately protected, security should be given in a manner least disadvantageous to the party furnishing it, but that principle in my view cuts both ways. Just as an appellant who ultimately succeeds should not be left unable to recover its money, a respondent holding a decree should not, if the appeal fails, find it difficult or impossible to realize that decree. 11. Measured against that standard, the replacement guarantee would fail the test even though it is affirmed that a properly drafted Bank guarantee ought to be an ideal form of security. The reason is that the replacement guarantee is drafted in a manner that makes realization, in the ordinary course, difficult if not impossible for the very party it purports to protect. 12. A beneficiary, in this case the applicant, who has never had the original instrument placed in its HCCC 836 OF 2010 RULING Page 6 possession, yet is required to produce that original as a precondition to payment, is in no better a position than if no security had been furnished at all. Quite telling, is the respondent's silence on why the applicant was never put in possession of the original guarantee despite having raised the issue severally. Despite having had every opportunity in its affidavits to explain the omission, the respondent has offered none. 13. Additionally, the replacement guarantee ties its expiry to 1st June 2029 or the occurrence of certain earlier events. While that period is considerably more generous than the 12 months fixed in the first instrument, it does not follow that the difficulty is thereby cured. The risk that the guarantee may lapse before the appeal is disposed of is not a remote one but a real possibility inherent in any instrument that ties its life to a calendar date rather than to the event it is meant to secure, namely, the final determination of the appeal. Consequently, I am convinced that a security that may expire before the very contingency it is meant to answer has even arisen cannot be said to HCCC 836 OF 2010 RULING Page 7 adequately protect the party in whose favour it is given. 14. Even without considering all the other issues raised by the applicant, on these grounds alone I would agree that the purported security is not reliable. Disposition 15. For the foregoing reasons, and mindful of this Court's duty to safeguard the interests of both parties, the application is therefore allowed in the following terms: i. A declaration is hereby issued that the conditional stay of execution granted on 27th May 2025 lapsed automatically by operation of law upon the defendant/appellant's (respondent herein), failure to furnish a valid and proper bank guarantee in compliance with Order 42 Rule 6(2)(c) of the Civil Procedure Rules and the express terms of the order granting the stay. ii. The plaintiff (applicant) is at liberty to execute the decree herein HCCC 836 OF 2010 RULING Page 8 forthwith, and may take all necessary and lawful steps towards that end. iii. The defendant (respondent) shall bear the costs of this Application. DATED, SIGNED AND DELIVERED AT NAIROBI THIS 31 ST DAY OF JULY 2026. F. MUGAMBI JUDGE Delivered in presence of: Ms Aisha for Taib, SC for plaintiff/applicant Odongo h/b for Meege for defendant/respondent Court Assistant: Lillian HCCC 836 OF 2010 RULING Page 9