[2023] KEHC 26272 (KLR)

Maina v Kagendo (Civil Appeal E157 of 2023) [2023] KEHC 26272 (KLR) (6 December 2023) (Ruling)

Neutral citation: [2023] KEHC 26272 (KLR)

Republic of Kenya

In the High Court at Nakuru

Civil Appeal E157 of 2023

HM Nyaga, J

December 6, 2023

Between

Nicholas Macharia Maina

Appellant

and

Fridah Muguongo Kagendo

Respondent

Ruling

1. This ruling is in respect to the application dated 26th July,2023 wherein the applicant seeks for an order of stay of execution of the decree together with all consequential orders emanating from the Judgement of the Small Claims Court at Nakuru, delivered on 29th June,2023 pending the hearing and determination of the Appeal. The applicant also seeks costs of the Application.

2. The application is supported by the applicant’s affidavit sworn on the even date and is premised on the grounds that; -i.The learned Adjudicator erred in law in failing to determine it lacked jurisdiction to hear the claim and that the claim offends Section 12(1) of the Small Claims Court Act,2016. ii.From the claim filed at the Small Claims Court by the Respondents herein, it is without doubt that the parties herein are members of Sheria Sacco and that the root of the dispute emanates from a loan advanced to the Appellant/Applicant, which loan the Respondent alleges to have fallen in arrears resulting to the deduction from his account noting that he was a Guarantor to the Appellant.iii.It is thus apparent that the relationship between the parties is that of Debtor-Guarantor to a loan issued by a Sacco.iv.It shall not matter that the Sacco has recovered from the Respondent, what matters is that the dispute emanates from Debtor-Guarantee relationship and only the Co-operatives Tribunal can hear and determine such disputes in line with the provisions of the Co-operatives Act.v.The adjudicator ought to have downed the tools since Jurisdiction is everything.vi.This application has been made expeditiously.vii.The intended appeal is arguable and has good prima facie prospects of success.viii.The Applicant is now threatened with imminent attachment if the orders are not stayed, reviewed and or set aside.ix.It is apparent that the balance of convenience tilts in the Applicant’s favour.x.In the circumstances it is just for the orders sought to be granted.

3. The respondent opposed the application through Replying Affidavit sworn on 4th August,2023 wherein he states that the application is a nonstarter, frivolous and vexatious, and an abuse of the court process since the Applicant has not attached a copy of the judgement he seeks to stay and the decree.

4. She deposes that the Appeal does not raise any triable issues since the issues therein were dealt with at the preliminary stage during trial and the Applicant did not appeal against the said ruling.

5. She contends that the Applicant’s intention is to delay this matter in order to deny her the fruits of her judgement and that she has suffered and continue to suffer irreparable loss and damage since almost all her savings were deducted and she now has to start saving afresh.

6. She avers that this being a money decree, security ought to be deposited as a condition for grant of orders of stay of execution.

7. She states that this application lacks merit and ought to be dismissed with costs. But should the court be inclined to allow the application, the applicant be ordered to deposit the entire decretal amount plus costs in court or in a joint interest earning account in the names of the advocates on record pending the hearing and determination of the Appeal.

8. The Application was canvassed through written submissions.

Applicant’s Submissions 9. The Applicant submitted that in the exercise of discretion this court must be satisfied on twin principles which are that the Appeal is arguable and that if the orders sought are not granted and the appeals succeeds, the appeal will be rendered nugatory.

10. On whether the Appeal is arguable, the Applicant submitted that he has raised one ground on jurisdiction which is arguable. To buttress his submissions, reliance was placed on the case of Stanley Kangethe Kinyanjui vs Tony Ketter & 5 others [2013] eKLR; Jumbo North (E.A.) Limited vs Wilder Wangira [2020] eKLR which quoted the case of Kenya Ports Authority vs Modern Holdings [E.A] Limited [2017] eKLR; & Lemita Ole Lemein vs Attorney General & 2 others [2020] eKLR.

11. On jurisdiction the applicant cited the case of Republic vs Coopertive Tribunal and 2 others Ex Parte Jackson Wekesa Abala (2019) eKLR.

12. In regards to whether the Appeal will be rendered nugatory, the Applicant submitted that in the event stay orders are not granted, execution and/or attachment will ensue thus rendering the Appeal nugatory. He posited that no prejudice will be occasioned to the respondent if the orders sought are granted. He also argued that damages may not be adequate to compensate the appellants as the respondent has not demonstrated capacity to repay or indemnify the Appellant.

13. The applicant urged the court in allowing the application not to attach any conditions thereto.

Respondent’s Submissions 14. The Respondent submitted that an applicant in an application for stay of execution of a decree or an order pending appeal is obliged to satisfy the conditions set out in order 42 Rule6(2) of the Civil Procedure Rules.

15. The Respondent argued that from the application the applicant does not state what substantial loss he will suffer if execution was to proceed and has also not proposed any security.

16. The Respondent urged this court to balance the interests of the parties herein by ordering the applicant to deposit the full decretal sum in court or in an advocates joint account.

17. In support of his submissions, the respondent relied on the following cases;i.James Wangalwa & another v Agnes Naliaka Cheseto [2012] eKLRii.RWW v EKW [2019] eKLRiii.Mwaura Karuga T/A Limit Enterprises Ltd. –vs- Kenya Bus Services Ltd & 4 Others [2015] eKLR

Issues for determination 18. After careful analysis of the above application and the supporting affidavit and Replying affidavits plus the submissions of the respective parties, in my view there are two issues for determination;a.Whether the Small Claims Court had jurisdiction to entertain the suit before it;b.If the answer to (a) above is in the affirmative, whether the applicants have met the prerequisite for grant of stay of execution pending appeal.

19. The dispute herein involved the parties as members of the Sheria Sacco Limited. The claim is for recovery of Ksh. 288,234/- which was deducted from the respondent as a guarantor of a loan advanced to the appellant by the Sacco when the respondent defaulted on the same.

20. The question is-which court had the jurisdiction to hear and determine the matter. Section 76 of the Cooperative Societies Act provides as follows;“Disputes(1)If any dispute concerning the business of a co-operative society arises—(a)among members, past members and persons claiming through members, past members and deceased members; or(b)between members, past members or deceased members, and the society, its Committee or any officer of the society; or(c)between the society and any other co-operative society, it shall be referred to the Tribunal.(2)A dispute for the purpose of this section shall include—(a)a claim by a co-operative society for any debt or demand due to it from a member or past member, or from the nominee or personal representative of a deceased member, whether such debt or demand is admitted or not; or(b)a claim by a member, past member or the nominee or personal representative of a deceased member for any debt or demand due from a co-operative society, whether such debt or demand is admitted or not;(c)a claim by a Sacco society against a refusal to grant or a revocation of licence or any other due, from the Authority.”

21. In Robert Gathigani Njagi vs John Mutual Manda [2020] eKLR the court was faced with a matter similar to this one. It held as follows;“The plaint clearly reflects that the Plaintiff’s case is based on a Sacco loan at a time when both the Plaintiff and the Defendant have pleaded to have been members of the Sacco. The Defendant was sued as the one advanced the loan wherein the Plaintiff is reflected as one of the guarantors. The Plaintiff further pleaded that upon default in the repayment of the loan, the sum of Ksh.410,027. 37 was deducted from his Sacco Account. It is therefore evident that the dispute herein involves a Sacco loan and in my view falls within the business of the society and therefore falls within the ambit of Section 76 of the Sacco Societies Act.”Similarly, in Joyce Muthoni Njoroge & 2 others vs Joshua Gachie & another [2021] eKLR the court held as follows;“The applicant indeed invoked Sections 76 and 77 of the Co-operative Societies Act. Section 76 on settlement of disputes, which provides:“(1)If any dispute concerning the business of a co-operative society arises-a.among members, past members and persons claiming through members, past members and deceased members; orb.between members, past members or deceased members, and the society, its Committee or any officer of the society; orc.between the society and any other co-operative society, it shall be referred to the Tribunal.” (Emphasis added)The provision is a mandatory provision that obligates members of co-operative societies to resolve their disputes through that forum and no other.By Section 75 (5) of that Act, that Tribunal has unlimited geographical and pecuniary jurisdiction in matters of co-operatives disputes. Further, recourse during proceedings or in respect of orders and awards of the Tribunal can only be appealed to the High Court.”

22. Also, in Republic vs Cooperative Tribunal and 2 others 2019 eKLR the court held the following in regard to section 76 of the Act;“A literal and ordinary interpretation of the section is that where the parties to a dispute are current or past members of a co-operative society, or members of a cooperative society and the society, or between two co-operative societies; and the subject matter of the dispute is the business of a co-operative society, then the dispute shall be referred to the Tribunal. Section 76(2) proceeds to give examples of such disputes and is not exhaustive in this respect. In the present application it is not in dispute that the Applicant and Interested Parties are members of the Law Society of Kenya Sacco, which is a co-operative society. It is also not in dispute that the Interested Parties guaranteed a loan which was advanced to the Applicant by the Law Society of Kenya Sacco.The specific relief sought by the Interested Parties in their claim before the Respondent in Co-operative Tribunal Case No 149 of 2018 was a refund by the Applicant of Kshs 400,000/= and Kshs 150,000/= to be paid to their respective Law Society of Kenya Sacco Accounts. Their dispute thus concerned the refund by the Applicant of monies they paid to settle his loan obligations with the Law Society of Kenya SACCO. It is thus my finding that the Respondent was properly seized of the claim filed before it by the Interested Parties in in Co-operative Tribunal Case No 149 of 2018, as it involved the business of refund of a loan payment to the Law Society of Kenya Sacco by the Interested Parties on behalf of the Applicant , who are both members of the said Sacco.”

23. From the above authorities, it is clear that there is a question as to whether the Small Claims Court was the right forum to have handled the Dispute.

24. The Small Claims Court, which is basically a magistrate’s court may have had no jurisdiction to handle the matter. This is a matter that the parties will have to canvass in the Appeal.

25. The principles upon which the court may stay the execution of orders appealed from are well settled. Order 42 Rule 6 of the Civil Procedure Rules stipulates that:“No appeal or second appeal shall operate as a stay of execution or proceedings under a decree or order appealed from except 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 orders set aside.” 26. Thus under Order 42 Rule 6(2) of the Civil Procedure Rules, an applicant should satisfy the court that:a.Substantial loss may result to him/her unless the order is made;b.That the application has been made without unreasonable delay; andc.The applicant has given such security as the court orders for the due performance of such decree or order as may ultimately be binding on him.

27. These principles were enunciated in Butt vs Rent Restriction Tribunal [1979] the Court of Appeal stated what ought to be considered in determining whether to grant or refuse stay of execution pending appeal. The court said that: -“The power of the court to grant or refuse an application for a stay of execution is discretionary; and the discretion should be exercised in such a way as not to prevent an appeal.Secondly, the general principle in granting or refusing a stay is, if there is no other overwhelming hindrance, a stay must be granted so that an appeal may not be rendered nugatory should the appeal court reverse the judge’s discretion.Thirdly, a judge should not refuse a stay if there are good grounds for granting it merely because, in his opinion, a better remedy may become available to the applicant at the end of the proceedings.Finally, the Court in exercising its discretion whether to grant or refuse an application for stay will consider the special circumstances and its unique requirements. The court in exercising its powers under Order XLI Rule 4(2) (b) of the Civil Procedure Rules, can order security upon application by either party or on its own motion. Failure to put security of costs as ordered will cause the order for stay of execution to lapse.”

28. Under the head of substantial loss, an applicant must clearly state what loss, if any, they stand to suffer. This principle was enunciated in the case of Shell Ltd vs Kibiru and Another [1986] KLR 410 Platt JA set out two different circumstances when substantial loss could arise as follows: -“The appeal is to be taken against a judgment in which it was held that the present respondents were entitled to claim damages….It is a money decree. An intended appeal does not operate as a stay. The application for stay made in the high Court failed because the gist of the conditions set out in Order XLI Rule 4 (now Order 42 Rule 6(2)) of the Civil Procedure Rules was not met. There was no evidence of substantial loss to the applicant, either in this matter of paying the damages awarded which would cause difficulty to the applicant itself, or because it would lose its money, if payment was made, since the Respondents would be unable to repay the decretal sum plus costs in two courts….”

29. The learned judge continued to observe that: -“It is usually a good rule to see if Order XLI Rule 4 of the Civil Procedure Rules can be substantiated. If there is no evidence of substantial loss to the applicant, it would be a rare case when an appeal would be rendered nugatory by some other event. Substantial loss in its various forms is the cornerstone of both jurisdictions for granting stay. That is what has to be prevented. Therefore, without this evidence, it is difficult to see why the respondents should be kept out of their money.”

30. The Applicant in this matter contends that he stands to suffer irreparable damages as execution will ensue thus rendering the Appeal nugatory.

31. In James Wangalwa & Another vs Agnes Naliaka Cheseto (supra) the Court held;“No doubt, in law, the fact that the process of execution has been put in motion, or is likely to be put in motion, by itself, does not amount to substantial loss. Even when execution has been levied and completed, that is to say, the attached properties have been sold, as is the case here, does not in itself amount to substantial loss under Order 42 Rule 6 of the CPR. This is so because execution is a lawful process.The applicant must establish other factors which show that the execution will create a state of affairs that will irreparably affect or negate the very essential core of the Applicant as the successful party in the appeal. This is what substantial loss would entail, a question that was aptly discussed in the case of Silverstein N. Chesoni [2002] 1KLR 867, and also in the case of Mukuma V Abuoga quoted above. The last case, referring to the exercise of discretion by the High Court and the Court of Appeal in the granting stay of execution, under Order 42 of the CPR and Rule 5(2) (b) of the Court of Appeal Rules, respectively, emphasized the centrality of substantial loss thus:“…the issue of substantial loss is the cornerstone of both jurisdictions. Substantial loss is what has to be prevented by preserving the status quo because such loss would render the appeal nugatory.”

32. In the above matter, the decree was pursuant to a regular judgment and decree of the court. The court found that the decree holder was entitled to execution.

33. In the present application, the legality or validity of the decree has been questioned, on the basis of jurisdiction. The execution thereof, in my view, is likely to cause substantial loss to the applicant.

34. I therefore find that the applicant has succeeded on this particular limb.

35. On whether the application has been made without unreasonable delay, I have noted the Applicant is seeking stay of execution of the judgement that was delivered on 29th June,2023. That judgement has not been annexed. However, the respondent does not dispute that it was delivered on the above date. The present application was filed on 27th July,2023. it is my finding therefore that the instant application was filed timeously.

36. Regarding the issue of security for costs, I note that the applicant has not offered or expressed willingness to furnish security for due performance for such decree as may ultimately issue against him. In fact, he urges the court not to attach any conditions thereto in granting the orders sought. His basis for that stance has to be the argument that the trial Court had no jurisdiction.

37. In a matter where jurisdiction is not in issue, an appellant has to furnish security for the court to determine its sufficiency. This position was upheld in the case of Equity Bank Ltd vs Taiga Adams Company Ltd [2006] eKLR where the court held thus:“of even greater impact is the fact that an applicant has not offered security at all, and this is one of the mandatory tenets under which the application is brought ...let me conclude by stressing that of all the four, not one or some, must be met before this court can grant an order of stay...” which principle was also emphasized in Carter & Sons Ltd –vs- Deposit Protection Fund Board & 3 Others.

38. To succeed, an applicant seeking the stay of a regular and lawful judgment or decree must satisfy all the three conditions for grant of stay. The court in Trust Bank Limited vs Ajay Shah & 3 Others, [2012] eKLR at page 23 stated that: -“The conditions set out in Order 42 Rule 6(2) (a) and (b) are cumulative. All the three must be satisfied before a stay can be granted. The Applicant only satisfied one condition and failed to satisfy the others. For the foregoing reasons, I find that the Plaintiff's Notice of Motion dated 24th April, 2012 it without merit."

39. Although the Applicant herein has only succeeded on two limbs of his application, as I have stated, the question of jurisdiction of the trial court negates the requirement for security. The enforcement of the security may turn out to be erroneous if the court is to find that the Trial Court had no jurisdiction.

40. The upshot is that it is my finding that the appellant/Applicant has met the criteria for stay of execution pending appeal.

41. Consequently, I allow the Application dated 26th July,2023 on the following terms;i.There shall be a stay of execution of the decree of the lower court, pending hearing and determination of this appeal.ii.The appellant to file and serve the record of appeal within 45 days from the date hereof.iii.The matter shall be listed after this Court’s vacation for directions on the appeal.iv.The costs of the application shall abide by the outcome of the appeal.

42. It is so ordered.

DATED, SIGNED AND DELIVERED AT NAKURU THIS 6TH DAY OF DECEMBER, 2023. H. M. NYAGA,JUDGE.In the presence of;C/A KipsugutMr. Wairege for ApplicantN/A for Respondent