[2006] KECA 75 (KLR)

REPUBLIC OF KENYA

IN THE COURT OF APPEAL

AT NAIROBI

CIVIL APPL NO. 179 OF 2006

IRARU HOLDINGS LTD …………….................................………………………………. APPLICANT AND CANADIAN FOODGRAINS BANK ………...……….........................................…..1ST RESPONDENT TRANSAMI (KENYA) LTD (now known as SDV TRANSAMI (K)LTD ….....….2ND RESPONDENT SOCIETE GENERAL DE SURVEILLANCE (SGS) KENYA LTD …............….…… 3RD RESPONDENT

(An application for stay of proceedings pending appeal against ruling of the High Court of Kenya at Nairobi (Milimani Commercial Courts) (Justice F. Azangalala) delivered on 16th Februrary, 2006 in H.C.C.C. NO.1475 OF 2000) ***************** RULING OF THE COURT

Iraru Holdings Limited, the applicant, is a limited liability company, and the plaintiff in NairobiHigh Court Civil Case No. 1475 of 2000, still pending for determination. Canadian Foodgrains Bank (1st respondent); Transami (Kenya) Limited, (2nd respondent); and Societe Generale De Surveillance (SGS) Kenya Limited (3rd respondent) are named as defendants in that suit. The detailed particulars of the claim in that suit against the respondents are not material in the determination of the application before us, which is expressed to be brought under rule 5(2)(b) and 47 of the Court of Appeal Rules (the Rules).

There is a line of authorities, among them, Silverstein v. Chesoni [2002] 1EA 296 (CAK) which set out the principles to guide the Court in applications under rule 5(2)(b), aforesaid. To succeed the applicant must not only show his appeal or intended appeal is arguable, but also that unless he is granted an injunction, stay of execution or stay of proceedings as the case may be, his appeal or intended appeal, if successful, will be rendered nugatory. In the matter before us the applicant wants an order staying proceedings in the aforesaid suit pending determination of an intended appeal against the decision of the superior court (Azangalala J.) dated 16th February, 2006 in Civil Suit No.1475 of 2000, aforesaid. In the said order Azangalala, J., vacated an earlier order by the same court (Mwera, J.) by which a stay of further proceedings had been granted pursuant to the provisions of section 223(a)of the Companies Act, Cap 486 Laws of Kenya, and on the basis that there was, in force, a winding up order, against the applicant made in Nyeri High Court Winding up Cause No.6 of 2002.

Nyeri Winding Up Cause No. 6 of 2002 was filed by one Francis Mwenda Mwongera, a creditor of the applicant. In an interlocutory application in the cause his prayer was that the applicant be restrained by injunction, by itself, its directors or servants and agents, from transferring, pledging, charging or in any way disposing of its assets, pending the hearing and determination of the winding up cause, and“… an order of stay of all civil suits and or proceedings against and or by the applicant …”. Both prayers were granted by the order of the superior court dated 28th October, 2002. On the basis of that order the applicant moved the superior court in Nairobi High Court Civil Case No. 1475, of 2000, under section 223(a), above, for an order staying that suit, and on 15th October, 2003 Mwera, J. granted the stay. The respondents did not challenge that order on appeal. Later however, the 3rd respondent felt that the winding up cause was a “friendly” one meant to help the applicant. It, therefore, moved the superior court, under section 3A of the Civil Procedure Act, and O.50 rule 1 of the Civil Procedure Rules, for an order vacating Mwera J’s order.

Azangalala J. heard that application, and on 27th May 2005, made orders, inter alia, as follows:

“1. The plaintiff is given 60 days within which it should set in motion proceedings to conclude the winding up cause No.6/2002 at Nyeri High Court.

2. In default of (1) above the 2nd and 3rd defendants to move the court in this case as they deem fit.”

The 60 days period, above, expired but the winding up cause had not been determined and no motion had been taken out to have the winding up order vacated. The 3rd respondent renewed its application for the order of stay of proceedings to be varied or set aside. The application bore the date 7th December, 2005. In response to that application the applicant apparently caused one Nahashon Mwiti Mpuko, advocate, to swear an affidavit on 20th January, 2006, to the effect that he, as advocate for the petitioner in Nyeri Winding-Up Cause No.6 of 2002, had taken steps to set down the cause for hearing. In support thereof, he annexed some letters and copies of hearing notices purportedly issued and served for the hearing of the winding up cause; but these were challenged by the respondents as not being genuine.

Azangalala, J. heard the application and allowed it on 16th February, 2006, vacated Mwera, J’s order and that provoked this application and the intended appeal. As we stated earlier, Mwera J’s order was made on 15th October, 2003. The argument raised by the applicant before us is that Azangalala J. lacked the jurisdiction to vacate it, as the winding up order inNyeri High Court Winding Up Cause No. 6 of 2002, is still in force. Whether or not that order is still in force is not in dispute. Mwera J’s order was vacated on the ground that the applicant was indolent in taking any action to vacate it. The respondents argue that because it was in a way beneficial to the applicant, there is no hurry in taking steps to have it vacated.

The power exercisable in an application under section 223(a) of the Companies Act, is discretionary. Mwera J. exercised his discretion under that section and granted the applicant an order staying NairobiHigh Court Civil Case No.1475 of 2000. But suppose it were to be shown either that the applicant is not acting with reasonable dispatch to have the winding up order vacated or to settle whatever debt it was owing which led to the making of the order, is the court helpless with regard to the order staying a suit merely because the winding up order is still in place? Azangalala J. held that the court in exercise of its inherent powers has jurisdiction to order, and he ordered, that the order be vacated. The delay in dealing with the winding up order, is, prima facie, long, and considering the facts and circumstances of this matter we see no arguable point raised by the applicant in support of its intended appeal. We eskew any attempt to say more as the intended appeal is yet to be filed.

Having come to that conclusion regarding the first principle, and in view of what we stated earlier that an applicant must satisfy the two principles for the grant of an order under rule 5(2)(b), of the Rules, we find no necessity of dealing with the second principle, namely the nugatory aspect. Accordingly, we dismiss the application dated 6th July, 2006 with costs.

Dated and delivered this 27th day of October, 2006.

S.E.O. BOSIRE …………………………… JUDGE OF APPEAL

E.M. GITHINJI …………………………… JUDGE OF APPEAL

P.N. WAKI ………………………… JUDGE OF APPEAL

I certify that this is a

true copy of the original.

DEPUTY REGISTRAR