https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1030

Home Afrika Ltd v I&M Bank Ltd & another (Civil Appeal (Application) E174 of 2026) [2026] KECA 1030 (KLR) (29 May 2026) (Ruling) Neutral citation: [2026] KECA 1030 (KLR) Republic of Kenya In the Court of Appeal at Nairobi Civil Appeal (Application) E174 of 2026 LK Kimaru, LM Njuguna & JO Okello, JJA May 29, 2026 Between Home Afrika Limited Applicant and I&M Bank Limited 1st Respondent Mitini Scapes Development 2nd Respondent (Being an application for injunction pending appeal against the ruling of the High Court at Nairobi (J.W.W. Mong’are, J.) delivered on 19th March, 2026 in HCCC No. E026 of 2026) Ruling 1.The notice of motion dated 2nd April, 2026, is filed by the applicant pursuant to rule 5(2)(b) of the Court of Appeal Rules, 2022 seeking a temporary injunction to restrain the 1st respondent from proceeding with the exercise of the statutory power of sale over the property known as Unit No. 2 on the 5th floor of Morning Side Office Park erected on Land Reference No. 2/704 together with parking bays 74, 75, 80 & 81 on the ground floor and 169, 170, 171 & 172 (hereinafter referenced to as the suit property) on the basement pending the hearing and determination of the appeal. 2.The applicants’ case is premised on the grounds stated on the face of the application and its supporting affidavit of Jane Nyokabi Gathoni, the applicant’s Managing Director, sworn on 2nd April, 2026 on behalf of the applicant. The application was opposed. A replying affidavit sworn by Peris Chege, the Head of the Legal Department of the 1st respondent on behalf of the 1st respondent was filed in opposition to the application. 3.Mr. Owiti Learned Counsel and Mr. Ayieko learned counsel appeared for the applicant, Naomi Mutisya, learned counsel appeared for the 1st respondent while learned counsel Mr. Owino appeared for the 2nd respondent. 4.Before delving on the parties’ submissions, we must give a brief factual background in order to put this application in context. The applicant herein guaranteed some loan facilities which the 1st respondent advanced to the 2nd respondent. It also provided the 1st respondent with additional security in form of a legal charge over the suit property. The 1st respondent advertised the suit property for sale the 2nd respondent who is the principal borrower defaulted in its loan repayment obligation. The applicant has filed an application for injunction seeking to restrain the 1st respondent from selling the suit property in a suit before the High Court. The trial court was informed by the 2nd respondent that it had repaid the loan facilities and nothing was left outstanding. The 2nd respondent argued that it did not agree with the 1st respondent’s assertion that it is indebted to it and filed a suit being Nairobi High Court Civil Case No. E603 of 2025 - Mitini Scapes Development Limited vs I & M Bank Ltd to challenge the amount of debt owing which suit is still pending before the High Court. 5.The High Court in its ruling delivered on 19th March, 2026, dismissed the applicant’s application for injunction holding that the 2nd respondent’s indebtness had been admitted. The applicant has since filed notice of appeal seeking to challenge the High Court’s ruling before this court. 6.Hearing of this application was by way of written submissions and oral highlights by the learned counsel. The applicant filed their written submissions dated 21st April, 2026. The application is opposed by the 1st respondent vide the 1st respondent’s replying affidavit sworn by Peris Chege dated 4th May, 2026. They also filed written submissions dated 4th May, 2026 together with a list of authorities of same date; the 2nd respondent also filed its replying affidavit sworn by Mbugua Gecaga dated 22nd April, 2026 and written submissions dated 27th April, 2026. 7.The applicant in its submission has identified a single issue for the court’s determination that is, whether this court should issue a temporary injunction to restrain the 1st respondent from proceeding with exercising its statutory power of sale over the suit property pending the hearing and determination of the intended appeal. 8.In its submission, the applicant submits that it has met the two tests for grant of an injunction under rule 5(2)(b) of the Rules of this court. It relies on the case of National Industrial Credit Bank Ltd vs Aquinas Francis Wasike & Another [2006] KECA 333 (KLR) where the court identified test to be applied while considering an application for such injunction. The two-limb test is whether the appeal is arguable and not a frivolous one and secondly, whether the intended appeal would be rendered nugatory if the stay or injunction is not granted. 9.As to arguability, the applicant avers that the intended appeal is arguable because, the trial court erred in fact by finding that the 2nd respondent specifically admitted indebtedness to the 1st respondent when it did not; secondly, the ruling by the trial court failed to consider and interrogate the contents of the 2nd respondent’s replying affidavit sworn on 23rd January, 2026 by Mbugua Gecaga; and thirdly, the issue of default is pending determination in the 2nd respondent’s case and thus the trial court ought not to have created a situation where the liability of the applicant, who is a guarantor, to crystalize when the issue of default is yet to be determined. The applicant submits that the entire purported sale of the suit property is illegal and would amount to unjust enrichment by the 1st respondent if allowed to proceed. The applicant relies on the case of Chase International Investment Corporation & Another vs Laxman Keshra & 3 Others [1978] eKLR. 10.On the nugatory aspect, the applicant avers that the lose the applicant, its employees and the general public will suffer if the suit property is sold would be irreversible and cannot be easily compensated by an award of damages because the suit property houses the applicant’s head offices which if sold, would lead to collapse of the business; the applicant is a publicly listed company and that the sale of its offices would lead to members of the public losing their investments and finally, that the applicant’s employees who exceed 700 would lose their jobs resulting to a loss of livelihood to about 3,000 people in a tough economic environment. The applicant relies on the case of Stanley Kangethe Kinyanjui vs Tony Ketter & 5 Others [2013] KECA 378 (KLR). 11.The applicant urges this court to allow its application dated 21st March, 2025 with costs to be borne by the 1st respondent. 12.The 2nd respondent supports the application by the applicant. In its affidavit by Mbugua Gecaga sworn on 22nd April, 2026, he deposed that he is a Director of the 2nd respondent and fully supports the applicant’s application dated 2nd April, 2026. He deposed that the applicant provided a third-party security in favour of the 1st respondent to secure the 2nd respondent’s loan facility by charging the suit property, which property serves as the applicant’s head office. He deposed that the charge amount was limited to Kshs 50,000,000/=. In its written submissions dated 27th April, 2026, the 2nd respondent identified a single issue for determination to wit, whether the court should issue a temporary injunction pending the applicant’s intended appeal. 13.The 2nd respondent relies on the case of National Industrial Credit Bank Ltd vs Aquinas Francis Wasike & Another [2006] KECA 333 (KLR) where the court identified the two limbs to be satisfied for an application for stay i.e., whether the appeal is or intended appeal is arguable and not frivolous and secondly whether, if the injunction is not granted and the appeal succeeds, such success would have been rendered nugatory. 14.On arguability, the 2nd respondent submits that the intended appeal is arguable because the trial court misapprehended the evidence by incorrectly finding that there was an admission of indebtness, whereas the 2nd respondent’s replying affidavit expressly denied any debt and highlighted a pending suit on the same issue. The 2nd respondent relies on the case of Mbogo & Another vs Shah [1968] EA 93. It further submits that as a guarantor, the applicant’s liability is contingent upon actual default by the principal debtor, which is disputed. 15.On the nugatory aspect, the 2nd respondent submits that the sale of the suit property, if allowed to proceed, would cause irreversible harm that cannot be compensated by an award of damages for reasons that the suit property is the applicant’s head office, the applicant employs over 700 staff and the sale would lead to mass unemployment, and finally that the applicant being a publicly listed company, the sale would permanently destroy shareholder value and public confidence. 16.The 2nd respondent closed its submissions by urging this court to allow the notice of motion dated 2nd April, 2026 as prayed because both limbs have been overwhelmingly satisfied. 17.The 1st respondent opposed the application vide its affidavit sworn on 4th May, 2026 by Peris Chege, the head of the Legal Department of the 1st respondent. The 1st respondent avers that the suit property was sold by the 1st respondent on 16th April, 2026 in exercise of its statutory power of sale. She pointed out that the purchaser had not been enjoined in these proceedings. It deposed that in the circumstances, the injunctive relief has been overtaken by events, was moot and incapable of being granted as there is no subsisting subject matter capable of preservation. 18.In its submission dated 4th May, 2026, the 1st respondent submits that the suit property having been sold, the equity of redemption was extinguished on 16th April, 2026 when the sale took place. It submits further that an applicant must demonstrate both limbs of arguability and nugatory aspect in order to succeed in an application for stay. It relies on the case of Eri Limited vs Velji, Civil Application No. 47 of 2020 [2021] KECA (KLR). 19.On the first limb of arguability, the 1st respondent submits that the applicant failed to demonstrate that the intended appeal raises any arguable issue deserving the consideration of this Court. It relies on the case of Mbuthia vs Jumba Credit Finance Corporation and Another [1986-1989] 1EA 340 (CAK) where the court held that the mortgagor’s right of redemption is lost as soon as the mortgagee either sells the mortgaged property by public auction or enters into a binding contract in respect thereof. It further submits that a chargee can only be restrained from the exercise of its statutory power of sale if the amount owed is repaid; and that the intended appeal does not raise any arguable point. The application should therefore be dismissed with costs to the 1st respondent. 20.We have considered the application before us and considered the parties’ submission, both written and oral. It is trite law that the jurisdiction of this court under rule 5(2)(b) of the Court of Appeal Rules, is original and discretionary and that for an applicant to succeed, the applicant should demonstrate that the intended appeal is arguable and not frivolous and also that unless the order sought is granted, the intended appeal or appeal if successful, the success will be rendered nugatory. We have a plethora of authorities on this subject. In Bob Morgan Systems Ltd 7 Another vs Jones [2004] 1 KLR 194, this court stated—“The powers of the court under rule 5(2)(b), aforesaid, are specific. The court will grant a stay or injunction, as the case may be if satisfied, firstly, that the applicant has demonstrated that his appeal or intended appeal is arguable; and secondly. That unless a stay or injunction is granted, his appeal or intended appeal if successful, will be rendered nugatory.” 21.We must bear in mind the foregoing in determining the application before us. We have given a brief factual background to this matter right from the suit in the High Court to the present application. The first issue to be considered is whether in view of the factual position and the submissions by counsel, the applicant has demonstrated that it has an arguable appeal. As it has been stated time without number, an arguable appeal does not mean an appeal that will succeed but one which raises issues for consideration by the court. From the applicant’s submissions and the 2nd respondent’s submissions, it would appear that the applicant strong point is that there is a dispute as to whether the debt has been fully settled or not. The 2nd respondent pointed out that in their view, they are disputing the indebtness to the 1st respondent. It therefor follows that as the indebtness is disputed, the sale of the suit property belonging to the applicant who is a guarantor should not have taken place. In our view, these are not frivolous issues but matters that call for closer scrutiny during the hearing of the intended appeal. Hence, we can safely conclude that the issue raised is arguable. On our part, we are satisfied that the applicant has demonstrated that the intended appeal is arguable. 22.On the second issue on whether the intended appeal will be rendered nugatory if the order craved for is not granted, it has to be noted that the suit property is a commercial property serving as the head office of the applicant. It has further been submitted by both the applicant and the 2nd respondent that the sale of the suit property will lead to lose of employment to 700 hundred staff and a loss of value of the shares by the investors. The reasons though are not convincing. The applicant has not disputed the fact that it was a guarantor for the 2nd respondent and this was done with clear knowledge that it is a public listed company dealing with the public as investors. 23.It is trite law that once a property is offered as security to secure a loan from a financial institution, it assumes a merchantable quality that is shorn of its sentimental value and is liable to be sold in the event of default to repay the loan that was advanced to the borrower. The applicant and the 2nd respondent understood this risk. The thrust of the applicant’s application is that it disputes the amount owed and therefore this court should exercise its discretion and restrain the 1st respondent from the exercise of its statutory power of sale pursuant to the instrument of charge. That cannot be sufficient legal basis, bar any other reason, for this court to exercise discretion in the applicant’s favour. A dispute as to the amount outstanding cannot be a basis to grant an injunction to prevent a mortgagee or chargee from exercising its statutory power of sale where there is default (See Mrao Ltd vs First American Bank of Kenya & 2 others [2003] KLR 125. 24.Secondly, the 1st respondent told the court that the suit property was sold on 16th April, 2026 by the 1st respondent in exercise of its statutory power of sale. It deposed that in the circumstances, the injunctive relief sought has been overtaken by events, is moot and incapable of being granted as there is no subsisting subject matter capable of preservation. We have also been told that the 1st respondent is a reputable bank and can adequately compensate the applicant in the event that they succeed on appeal. 25.We are satisfied that the refusal to grant the injunction sought would not render the intended appeal nugatory. Since the applicant has not satisfied us on the nugatory aspect, we find that the application cannot be granted. Both limbs must be satisfied before this court can exercise its discretion and grant the application sought. 26.For the reasons above, the application dated 2nd April, 2026 lacks merit and is hereby dismissed with costs to the 1st respondent. DATED AND DELIVERED AT NAIROBI THIS 29TH DAY OF MAY, 2026.L. KIMARU............................JUDGE OF APPEALL. NJUGUNA............................JUDGE OF APPEALDR. J. O. OKELLO............................JUDGE OF APPEALI certify that this is a true copy of the original.Signed.DEPUTY REGISTRAR