[2007] KECA 48 (KLR)

REPUBLIC OF KENYA

MENNO TRAVEL SERVICES LIMITED………………………..APPLICANT

AND

KEMBI GITURA T/A

KEMBI GITURA & COMPANY ADVOCATES……………..RESPONDENT

(Application for stay pending the determination of an intended appeal from the Ruling and Order of the High Court of Kenya at Nairobi (Kasango, J) dated 13th March, 2007

in

H.C.MISC. CA. NO. 986 OF 2003)

*********************

RULING OF THE COURT

This application expressed to be brought under rule 5(2)(b) of this Court’s Rules seeks two orders that:-

“1. Pending the lodging, hearing and determination of the applicant’s intended appeal:-

(a) Proceedings in Miscellaneous Civil Application No. 986 of 2003, in the matter of an arbitration between Kembi Gitura t/a Kembi Gitura & Company Advocates vs. Menno Travel Service Limited be stayed.

(b) The execution of the decree issued on 8th June, 2004; the order issued on 30th March, 2006 directing amongst others, that the applicant’s shares in Menno Plaza Limited be attached and sold through a broker and the order of 13th March, 2007 in Miscellaneous Civil Application No. 986 of 2003, in the matter of an arbitration between Kembi Gitura t/a Kembi Gitura & Company Advocates vs. Menno Travel Services Limited be stayed.

2. The costs of and incidental to this application abide the result of the appeal.”

The decree emanates from the dismissal by the superior court (Kasango, J) on 22nd February, 2007 of an application by the applicant, a judgment debtor in that court, under section 37 of the Arbitration Act No. 4 of 1995, which had sought orders that the recognition or enforcement of the Arbitral Award dated 21st May, 2002 together with all consequential proceedings and order be refused and that the resultant decree and order be set aside ex debito justiciae.

The circumstances that gave rise to the dispute between the parties may be briefly summarized from the record as follows. The applicant was at all material times the registered leasehold proprietor of ALL THAT piece of land situate in the City of Nairobi known as L.R. No. 209/8180 hereinafter referred to as “the property”. The applicant intended to put up a multi-storeyed building on the property and approached some financial institutions, including Kenya National Capital Corporation Limited (KENYAC), to fund its intended project. It is common ground that the applicant experienced financial problems and this led to it failing to service the loan which soon fell into grave arrears. This was said to be due to what the applicant itself termed “depression in the national economy”. At the time material to the suit the applicant owed KENYAC approximately Shs.60,000,000/=, or thereabouts. It is apparent that in order to forestall KENYAC from selling the property, the applicant, through the firm of Messrs. Kembi – Gitura, Advocates, filed suit being HCCC No. 1580 of 1996 in which the applicant was granted a temporary injunction restraining KENYAC from selling the property until the suit was heard inter-partes.

The respondent is an advocate of the High Court of Kenya practicing in the firm of Messrs. Kembi-Gitura & Co. Advocates.

The crux of the dispute is the Agreement made on the 14th of April, 1997 between the applicant and the respondent. The respondent states that he rendered services to the applicant pursuant to that Agreement for which he claims to be entitled to Kshs.10 million pursuant to Clause 5 of the said Agreement which reads:-

“In consideration of the Advocate successfully negotiating the loan and on the offer thereof being accepted by the Client, the Client shall, on successful completion of the security documentation pay to the advocate a consultancy and/or negotiation fee in the sum of Kenya shillings Ten Million (Kshs.10,000,000/00) to be deducted from the total loan proceeds.”

The respondent contends that pursuant to the Agreement he successfully negotiated on behalf of the applicant loan facilities with the Co-operative Bank of Kenya Ltd. and the applicant accepted the terms of such loan facilities and completion of security documentation in favour of the said bank to secure such loan facility; and consequently, the applicant was bound to pay to the respondent Kshs.10 million plus interest.

The applicant avers that the respondent did not perform the tasks for which the amount was expressed to be payable; and moreover, it maintains, it did not receive any loan from which the said sum of Ksh.10,000,000/= could be deducted as stipulated under the Agreement. It contended that the payment thereof would constitute unjust enrichment to the respondent. Subsequently, on the petition of the respondent, the dispute was referred to arbitration by Mr. G.B.M. Kariuki (as he then was) on his appointment by the Law Society of Kenya as an arbitrator and by his award dated 21st May, 2002 he held:-

“The claimant has succeeded in establishing his claim and I am satisfied that the claimant is entitled to the amount he seeks. I award the claimant the sum of Shs. 10 million – plus interest thereon at the rate of 20% p.a. from 29. 10. 99 until payment.”

As stated earlier in this ruling, an application to refuse recognition or enforcement of the Arbitral Award was dismissed by the superior court. The applicant being aggrieved timeously filed a notice of appeal under rule 74 of this Court’s Rules and subsequently this application.

In order to succeed in the application, the twin principles now well established in applications of this nature must be shown to exist. It must be shown that the intended appeal is not frivolous or is arguable, which is the same thing. It must also be shown that the intended appeal shall, if successful, be rendered nugatory unless the order for stay is granted – see S.M. GITHUNGURI VS. JIMBA CREDIT CORPORATION LTDC.APPL NO. 161/88and J.K. INDUSTRIES LTD VS. KENYA COMMERCIAL BANK LTD[1982-88] KAR.

It will be argued, inter alia, the learned counsel for the applicant Mr. Havi, submitted that the learned Judge erred in law in dismissing and holding that the appellant’s application was essentially for setting aside of the Arbitral Award and not for refusal of recognition or enforcement of the Arbitral Award, and should have been brought under Section 35 and not Section 37 of the Arbitration Act; the learned Judge ignored the law that foreign awards become enforceable in Kenya only after they have been converted to a judgment and decree in the foreign country and will not reach a Kenyan court in the rudimentary form of an award; that the learned Judge erred in not recognizing and upholding the High Court’s inherent jurisdiction to set aside, quash nullities and to ensure that the ends of justice are met and prevent an abuse of the process of the Court stemming from the provisions of Section 60 of the Constitution; that the learned Judge erred in failing to consider and decide whether or not the relationship between the parties hereto was that of Advocate – Client, that the Agreement in respect thereof was obtained in contravention of the provisions of Section 46 of the Advocates Act and that the Agreement and the Arbitration Clause were illegal and void ab initio.

As for the nugatory aspect, Mr. Havi avers that if we do not grant the orders sought the respondent will proceed and execute the award, decree and order for attachment of and transfer of the applicant’s shares in Menno Plaza Limited, thus, making the applicant lose its lifetime investment. This, Mr. Havi argued, would cause more hardship than would serve the cause of justice. He referred us to the decisions in BUTT VS. RENT RESTRICTION TRIBUNAL[1982] KRL I and ORARO & RACHIER ADVOCATES VS. CO-OPERATIVE BANK OF KENYA LTD [1999] LLR 118 (CAK). We note that the common vein running through these cases is that each case was considered on its merits as regards arguability of the appeal and the respective merits of the parties’ cases before the discretion to grant stay was made.

The application was opposed by Mr. Kairu, learned counsel for the respondent, on the ground, mainly, that there was no single bona fide arguable ground of appeal. He contended that the applicant has not shown that he was incapable of repaying the decretal sum should the intended appeal succeed.

We have given careful consideration to the rival contentions and submission of counsel. Obviously, we cannot make definitive or final findings of fact at this stage lest we prejudice the intended appeal. We are however prepared to hold without deciding that the intended appeal is arguable and not frivolous. The main fear expressed by the applicant is the sale of shares in Menno Plaza Limited which it avers will be lost forever if sold. We are informed from the bar that the shares have been valued and the respondent may cause them to be sold at any time. However, the respondent is not averse if the decretal sum is secured in an account with any bank. The order that commends itself upon us is that we should grant the stay as regards the sale of the shares only but on terms since the applicant has not given any valid reasons as to why the proceedings in H.C.MISC. CIVIL APPLIC. NO. 986 OF 2003 should be stayed. In the result we grant the application for stay as sought in the Notice of Motion subject to the applicant depositing the sum of Shs.10,000,000 in an interest bearing account with a reputable bank in the joint names of the two counsel for the parties within 30 days from the date of this ruling. In default the application shall stand dismissed. The costs herein shall be in the intended appeal.

DATED and DELIVERED at NAIROBI this 6th day of July, 2007.

P.K. TUNOI

………………………

JUDGE OF APPEAL

S.E.O. BOSIRE

……………………….

JUDGE OF APPEAL

E.M. GITHINJI

……………………....

JUDGE OF APPEAL

I certify that this is a true copy of the original.

DEPUTY REGISTRAR