[2022] KEHC 9777 (KLR)

Gilani v Mohammed & another (Civil Case 67 of 2016) [2022] KEHC 9777 (KLR) (21 July 2022) (Ruling)

Neutral citation: [2022] KEHC 9777 (KLR)

Republic of Kenya

In the High Court at Nakuru

Civil Case 67 of 2016

JM Ngugi, J

July 21, 2022

Between

Mohideen A. Gilani

Plaintiff

and

Abdul Mehdi Mohammed

1st Defendant

Farid Mehdi Mohammed

2nd Defendant

Ruling

1. In a plaint dated 27/06/2016, the Respondent sued the Applicants herein for breach of contract and fiduciary duties. The claim revolved around a capital investment of 520,000 dollars plus Kshs. 5 million the Respondent made to a company known as Kwa Ndege Ltd (the “Company”) at the inducement of the Applicants herein. As part of the contract, the Respondent was to acquire a 33. 3% ownership of the Company while the rest of the amount was designated as a loan to the Company which was to be repaid. The Respondent claimed that the Applicants not only failed to repay the amounts but also breached various other contractual obligations respecting disclosure of information about the investment and the Company.

2. Ultimately, the Company went into receivership. The Respondent’s suit was to recover the capital investment. In a judgment dated 03/06/2021, the Learned Ng’etich J. entered judgment in favour of the Respondent for USD 520,000 plus Kshs. 5,000,000 less Kshs. 16,700 plus interests on both sums from the time of filing the suit.

3. At the time of delivery of the Judgment, the Applicants were granted a stay of execution for 45 days.

4. The Applicants then filed the Application now before me, which is dated 15/07/2021 and which seeks the following orders:1. Spent2. Spent3. That the Honourable Court be pleased to grant a stay of execution of the Judgment and Decree delivered on 3rd June 2021 pending the hearing and determination of the Appeal.4. That costs be provided for.

5. The Application is supported by the grounds on the face of it and the affidavit of Abdul Mehdi Mohamed dated 15/07/2021. The Applicants’ case is that they have filed a Notice of Appeal against the Judgment of the Court and requested for typed proceedings to enable them file a record of appeal at the Court of Appeal.

6. It is the Applicants’ contention that they will suffer irreparable harm if they are forced to settle the decretal sum which they are currently unable to pay. The Applicants contend that some of the decretal amount constitutes monies that were utilized in the project undertaken by the parties, who are directors of Kwa Ndege Limited, which is now under receivership by its creditor, Prime Bank.

7. The Applicants contend that unless the said receivership is finalised, they are financially incapable of complying with the terms of the judgment as they would have to sell off the project to enable them to pay the Respondent.

8. The Applicants say that the decretal sum is a colossal one that they are unable to pay given the prevailing economic situation occasioned by the COVID Pandemic. They say that the Respondent is likely to commence execution and his income is unknown and they are apprehensive that he may be unable to refund the decretal sum should their appeal succeed.

9. They contend that it is in the interest of justice that the application be granted to save their appeal from being rendered nugatory and that the Respondent will not be prejudiced if it is granted.

10. The Application is opposed through the Respondent’s Grounds of Opposition dated 28/07/2021 as follows:1. That the application is bad in law, mischievous, frivolous, vexatious, totally incompetent and should be struck out.2. That the application does not meet the threshold for grant of stay of execution as the desired under Order 42 Rule 6(2) of the Civil Procedure Rules, 2010 as they have not annexed to their Supporting Affidavit sworn by Abdul Mehdi Mohammed on the 15th July, 2021, a Draft Memorandum of Appeal demonstrating the arguable appeal.3. That the said application offends the provisions of Order 42 Rule 6(2) of the Civil Procedure Rules, 2010 as the Applicants have not annexed the Decree from which the stay of execution is sort to show the threatened execution. (sic)4. That execution is likely to be put in motion, by itself, does not amount to substantial loss upon the Applicants, since execution is a lawful process through which a successful litigant enjoys the fruits of litigation.5. That the Applicants have not verified that the Plaintiff is a man of straw who would be incapable of refunding the decretal sum once paid. In any event, they are aware that the Plaintiff is a renowned businessman within the city of Nakuru and beyond and has various properties registered in his name.6. That the Applicants have failed to establish that they will suffer substantial loss should this application be denied.7. That the said application is just an attempt by the Applicants to deny the Respondent an opportunity to enjoy the fruits of his Judgment in the claim which has been in Court for now half a decade.8. That no offer of any security for the performance of the decree has been brought forth by the Applicants as required by Order 42 Rule 6 of the Civil Procedure Rules, therefore the Applicant is not deserving of the orders sought in the instant application.9. That allowing this Application would be prejudicial to the Plaintiff herein.10. That the Application should be dismissed with costs to the Plaintiff.11. That without prejudice to the above, if the Court exercises its discretion in favour of the Defendants, then an order for security of costs should be made to the effect that they do deposit the entire decretal award together with interests in a joint interest earning account in the name of their Advocates within 30 days.

11. The Court directed that the Application be canvassed by way of written submissions. The Applicants did not file any submissions despite being given three opportunities to do so. The Respondent’s submissions are dated 30/04/2022. The Respondent submits that for an appeal to be arguable, it must raise at least one arguable point, which is to be derived from a draft Memorandum of Appeal. In the absence of such a draft the Respondent contends that the Court cannot assess arguability and thus the ground of arguability has not been fulfilled. The Respondent cites the cases of Commissioner of Customs v Anil Doshi [2007] eKLR and African Cotton Industries Ltd v Patrick Wambua Ikusya [2021] eKLR.

12. The Respondent concedes that the Application was brought timeously. However, he argues that the issue of receivership was occasioned by the Applicants, who, being directors of Kwa Ndege Limited continued with its operation despite their knowledge that the company was insolvent. The Respondent submits that the Court should not aid the Applicants when they are the authors of their own misfortunes. The Respondent thus relies on the case of Kenya Ports Authority v Fadhil Jua Kisuwa [2017] eKLR for the proposition that the Court should not aid an Applicant who approaches the Court with unclean hands.

13. The Respondent further submits that the Applicants having been sued in their personal capacity makes the issue of receivership moot and that further, the issue of receivership does not trigger a moratorium and thus the Applicants can be sued

14. Consequently, the Respondent contends that the Applicants have failed to establish substantial loss and that the imminence of execution does not amount to substantial loss. He relies on James Wangalwa & Another v Agnes Naliaka Cheseto [2012] eKLR.

15. The Respondent denies that the Applicants have satisfied that he is a man of straw who will be unable to refund the decretal sum should their appeal be successful, a position he contends was reinforced in Michael Ntouthi Mitheu v Abraham Kivondo Musau [2021] eKLR and maintains that he is a renowned businessman.

16. On the issue of security, the Respondent cites the case of Elena D. Korir v Kenyatta University [2012] and submits that the Applicants need to furnish security for performance of the decree. The Respondent relies on the importance of furnishing security stated in Gianfranco Manenthi & Another v Africa Merchant Assurance Company Ltd [2019] eKLR. He further contends that the failure to offer security demonstrates bad faith on the Applicants’ part and cites the case of Focin Motorcycle Co. Limited v Ann Wambui Wangui & Another [2018] eKLR

17. Accordingly, the issue for determination is whether the Applicants have met the threshold for the grant of stay of execution pending appeal.

18. The conditions to be met by an Applicant in order to be entitled to an order for stay are encapsuled in Order 46 Rule 6 in the following terms:6. (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 sub-rule (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.

19. The law regarding the grant of stay of execution is well established in Kenya. Among the legion of authoritative cases establishing it, the judges of the Court of Appeal were both concise and emphatic in Rhoda Mukuma v John Abuoga:It was laid down in M M Butt v The Rent Restriction Tribunal, Civil Application No Nai 6 of 1979, (following Wilson v Church (No 2) (1879) 12 Ch 454 at p 488) that in the case of a party appealing, exercising his undoubted right of appeal, the court ought to see that the appeal is not rendered nugatory. It should therefore preserve the status quo until the appeal is heard.Granting a stay in the High Court is governed by Order XLI rule 4(2), the questions to be decided being – (a) whether substantial loss may result unless the stay is granted and the application is made without delay; and (b) the applicant has given security.

20. In Antonie Ndiaye v African Virtual University [2015] eKLR Gikonyo J. set out the guiding principles in the determining whether to grant a stay of execution or not in these terms:The discretion must be exercised judicially, that is to say, judiciously and upon defined principles of law; not capriciously or whimsically. Therefore, stay of execution should only be granted where sufficient cause has been shown by the Applicant. And in determining whether sufficient cause has been shown, the Court should be guided by the three pre-requisites provided under Order 42 Rule 6 of the Civil Procedure Rules.

21. Hence our decisional law applying Order 42 Rule 6 of the Civil Procedure Rules has set out a four-part test which an Applicant for a stay of execution must satisfy in order to be successful. Such a party must demonstrate that:a.The appeal he has filed is arguable;b.He is likely to suffer substantial loss unless the order is made. Differently put, he must demonstrate that the appeal will be rendered nugatory if the stay is not granted;c.The application was made without unreasonable delay; andd.He has given or is willing to give such security as the court may order for the due performance of the decree which may ultimately be binding on him.

22. The Respondent claims that the Applicants have not demonstrated that they have an arguable appeal. They are right. The Applicant neither attached a Draft Memorandum of Appeal showing what they are dissatisfied with from the judgment of the Court nor given a glimpse of what those arguments are in their supporting affidavit. Indeed, all the Applicants baldly say is that they have filed a Notice of Appeal; and that they are dissatisfied with the judgment of the Court. They give no indication about what arguments they hope to raise on appeal. In the circumstances, the Court is unable to come to the conclusion that the appeal is arguable. This is exacerbated by the fact that the Applicants do not disclose what steps they have taken to perfect their appeal after filing a Notice of Appeal and requesting for proceedings. It is not clear whether the Applicants are still desirous of pursuing the appeal as they do not appear to have taken any further steps beyond filing the Notice of Appeal. Indeed, I note that they have not followed up on the status of proceedings, which I note are ready for collection.

23. A lack of finding that the appeal is not arguable automatically disentitles the Applicants from the relief of stay of execution because it, by proxy, means that there is no sufficient cause to grant it as required by Order 42 Rule 6.

24. It is a pity that the Applicants gave short shrift to this aspect of their Application but it is, unfortunately, symptomatic of how they approached the Application as a whole. They did not, as aforesaid, file submissions to the Application as directed by the Court. Neither did they, in their Application, offer to furnish any security for the due performance of the decree which may ultimately be binding on them.

25. Although the Applicants would probably have prevailed on the requirement to demonstrate that the appeal could be rendered nugatory if stay is not granted, the Court does not reach that stage of consideration because, as aforesaid, the Applicants have failed to demonstrate that their sufficient cause to grant the order. As the Respondent concedes, the Application was timeously filed.

26. It follows that the Application dated 15/07/2021 is unmerited and is hereby dismissed.

27. The Respondent shall also have the costs of this Application.

28. Orders accordingly.

DATED AND DELIVERED AT NAKURU THIS 21ST DAY OF JULY, 2022………………………JOEL NGUGIJUDGE