[2022] KEHC 15990 (KLR)

Pioneer Credit Limited v Kavai & 2 others (Civil Appeal E612 of 2021) [2022] KEHC 15990 (KLR) (Civ) (1 December 2022) (Ruling)

Neutral citation: [2022] KEHC 15990 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Law Courts)

Civil

Civil Appeal E612 of 2021

CW Meoli, J

December 1, 2022

Between

Pioneer Credit Limited

Applicant

and

Boniface Orojo Kavai

1st Respondent

Auto Industries Limited

2nd Respondent

John Sifuna

3rd Respondent

Ruling

1. The motion dated October 7, 2021 by Pioneer Credit Limited (hereafter the applicant) seeks to stay execution of the judgment delivered in Nairobi Milimani CMCCNo 419 of 2019 pending the hearing and determination of the instant appeal. The motion is expressed to be brought under section 3A, 3B & 79G of the Civil Procedure Act (CPA) and Order 22 Rules 22 of theCivil Procedure Rules (CPR), inter alia. It is premised on the grounds on the face of the motion as amplified in the supporting affidavit sworn by Joshua Ogutu, described as the General Manager of the applicant duly authorized, conversant, and therefore competent to swear the affidavit.

2. The affidavit is to the following effect. That the applicant herein is aggrieved and dissatisfied with the ruling of the lower court delivered on August 31, 2021 in Nairobi Milimani CMCC No 419 of 2019, the resultant judgment and decree in favour of Boniface Orojo Kavai (hereafter the 1st respondent), and has preferred an appeal which is arguable and has a high chance of success. The deponent proceeds to express apprehension that the applicant will suffer irreparably if compelled to pay the decretal sum before the appeal herein is determined as it may never recover the monies paid out should the appeal succeed. Because, the 1st respondent has no known means of income to repay the decretal sum should the appeal be successful.

3. He deposes further that unless an order to stay of execution is granted the applicant shall suffer substantial loss rendering the appeal nugatory and that the 1st respondent does not stand to suffer any prejudice which cannot be remedied by an award of costs and or interest. He expresses the applicant’s willingness to comply with any order imposed for provision of security. He concludes by asserting that the applicant has approached promptly moved the court.

4. The 1st respondent filed a replying affidavit dated February 25, 2022. The gist thereof addresses issues touching on the merits of the appeal, but he also expresses strong opposition to the motion. In his view, the motion is an abuse of the court process and is intended to unlawfully deprive him of the fruits of successful litigation.

5. The motion was canvassed by way of written submissions. As regards the applicable principles, counsel for the applicant anchored his submissions on the provisions of order 42 rule 6 of theCivil Procedure Rulesand the decision in Tarbo Transporters Ltd v Absalom Dova Lumbasi [2021] eKLR. Submitting on arguability of the appeal counsel cited the decision inTree Shade Motor Ltd v D.T Dobie & Another [1995-1998] 1EA 324 as cited with approval in James Wanyoike & 2 Others v CMC Motors Group Limited & 4 Others [2015] eKLR. He contended that the appeal herein raises arguable grounds, and that the applicant ought to be accorded an opportunity to ventilate the same.

6. On substantial loss counsel called to aid the decision in Mukuma v Abuoga [1988] eKLR as cited with approval in Baiba Dhidha Mjidho v Van Leer East Aftrica Ltd (Greif) (K) Ltd (A Business of Grief Bros Co-op [2006] eKLR. He asserted that substantial loss will be visited on applicant should the court decline to grant stay of execution as the applicant will be unable to recover the decretal sum should the appeal succeed. That the applicant being a financial institution can compensate the 1st respondent through costs for any prejudice suffered. In conclusion it was submitted that the instant motion and appeal were filed expeditiously, and that the applicant was willing to provide security. The court was urged to allow the motion as prayed.

7. On behalf of the 1st respondent, counsel submitted substantively on the merits of the appeal. However, in addressing the motion counsel called to aid the decisions in Michael Kamau Gakundi v Daima Bank Limited & Another [2012] eKLR and Victory Constructions v B.M [2019] eKLRto assert that the applicant has failed to advance any substantial reasons to warrant this court exercise to its discretion to stay execution pending appeal. In conclusion the court was urged to find that the motion herein lacks merit and to dismiss it with costs. The 2nd and 3rd respondents opted not participate in the instant motion.

8. The court has considered the material canvassed in respect of the motion. As earlier observed in this ruling, both the applicant and 1st respondent have by their affidavit material and submissions extensively addressed the merits of the substantive appeal. However, at this interlocutory stage, the court is not concerned with the merits of the appeal.

9. The power of the court to grant stay of execution of a decree pending appeal is discretionary, however the discretion should be exercised judicially. SeeButt v Rent Restriction Tribunal [1982] KLR 417. The applicant’s motion is primarily expressed to be brought under order 22 rule 22 of the Civil Procedure Rules. However, based on the prayers therein, the motion falls under the provisions of order 42 rule 6 of the Civil Procedure Rules which provides that: -“(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 subrule (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”.

10. The cornerstone consideration in a motion to stay execution is whether the applicant has demonstrated the likelihood of suffering substantial loss if stay is denied. One of the most enduring legal authorities on the issue of substantial loss is the case of Kenya Shell Ltd v Kibiru & Another [1986] KLR 410. The principles enunciated in this authority have been applied in countless decisions of superior courts, including those cited by the parties herein. Holdings 2, 3 and 4 of the Shell Caseare especially pertinent. These are that:-“1. …..2. In considering an application for stay, the court doing so must address its collective mind to the question of whether to refuse it would render the appeal nugatory.3. In applications for stay, the court should balance two parallel propositions, first that a litigant, if successful should not be deprived of the fruits of a judgment in his favour without just cause and secondly that execution would render the proposed appeal nugatory.4. In this case, the refusal of a stay of execution would not render the appeal nugatory, as the case involved a money decree capable of being repaid.”

11. The decision of Platt Ag JA, in the Shell case, in my humble view sets out two different circumstances when substantial loss could arise, and therefore giving context to the 4th holding above. The Platt Ag JA (as he then was) stated inter alia that:“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 the 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… (emphasis added)”

12. The learned Judge continued to observe that: -“It is usually a good rule to see if Order XLI Rule 4 of theCivil Procedure Rulescan 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.” (Emphasis added)

13. Earlier on, Hancox JA in his ruling observed that“It is true to say that in consideration [sic] an application for stay, the court doing so must address its collective mind to the question of whether to refuse it would,... render the appeal nugatory. This is shown by the following passage of Cotton L J in Wilson v Church (No 2) (1879) 12ChD 454 at page 458 where he said:-“I will state my opinion that when a party is appealing, exercising his undoubted right of appeal, this court ought to see that the appeal, if successful, is not rendered nugatory.”As I said, I accept the proposition that if it is shown that execution or enforcement would render a proposed appeal nugatory, then a stay can properly be given. Parallel with that is the equally important proposition that a litigant, if successful, should not be deprived of the fruits of a judgment in his favour without just cause.”

14. The applicant has expressed apprehension that it stands to suffer substantial loss if compelled to pay the decretal sum before the appeal is determined on merit as it may never recover the monies, emphasizing that the 1st respondent has no known means of income. And that such eventuality would render their appeal, if successful, nugatory occasioning the applicant substantial loss. The 1st respondent for his part did not proffer any affidavit material to controvert the said assertions.

15. In the oft-cited case of National Industrial Credit Bank Ltd the Court of Appeal stated that:“This court has said before and it would bear repeating that while the legal duty is on an applicants to prove the allegation that an appeal would be rendered nugatory because a respondent would be unable to pay back the decretal sum, it is unreasonable to expect such applicants to know in detail the resources owned by a respondent or the lack of them. Once an applicant expresses a reasonable fear that a respondent would be unable to pay back the decretal sum, the evidential burden must then shift to the respondent to show what resources he has since that is a matter which is peculiarly within his knowledge – see for example section 112 of the Evidence Act, Chapter 80 Laws of Kenya.”

16. Thus, the applicant having demonstrated a reasonable apprehension concerning the 1st respondent’s financial ability to reimburse any decretal sum paid out should the appeal succeed, the burden shifted on the 1st respondent to controvert the assertion by proving his own means. He has not tendered evidence of his means. The decretal sum in question is Kshs 671,860. 03/- which is a substantial sum. In the circumstances, it appears likely that the Applicant stands to suffer substantial loss and its appeal rendered nugatory if stay is not granted. As stated in the Shell case, substantial loss in its various forms, is the cornerstone of the court’s jurisdiction for granting stay, and what has to be prevented.

17. Regarding security, it is trite that the court is obligated to balance the rights of both the parties to an application of this nature. The words of the court inNduhiu Gitahi & Another v Anna Wambui Warugongo [1988] 2 KAR, citing the decision of Sir John Donaldson M R in Rosengrens v Safe Deposit Centres Limited [1984] 3 ALLER 198 and others, are apt“We are faced with a situation where a judgment has been given. It may be affirmed, or it may be set aside. We are concerned with preserving the rights of both parties pending that appeal. It is not our function to disadvantage the defendant while giving no legitimate advantage to the Plaintiff……It is our duty to hold the ring even-handedly without prejudicing the issue pending the appeal……”

18. Lastly, while the impugned ruling was delivered on August 31, 2021 the appeal was filed on September 24, 2021 and the instant motion presented on October 12, 2021. It can be stated therefore that the applicant moved the court expeditiously. In view of all the foregoing, the court finds that the applicant’s motion is merited and the same is hereby allowed. On condition that the applicant shall deposit as security for the due performance of the decree, the entire decretal sum, into an interest earning account in the joint names of the parties’ advocates within 45 (forty-five) days of this ruling. The costs of the motion will abide the outcome of the appeal.

DELIVERED AND SIGNED ELECTRONICALLY AT NAIROBI ON THIS 1ST DAY OF DECEMBER 2022. C.MEOLIJUDGEIn the presence of:Ms. Muyaa h/b for Mr. Kuria for the ApplicantRespondent: N/AC/A: Adika