[2023] KEHC 23073 (KLR)

Shiv Consruction Company Limited v Mospa Limited & 6 others (Civil Suit E002 of 2022) [2023] KEHC 23073 (KLR) (3 October 2023) (Ruling)

Neutral citation: [2023] KEHC 23073 (KLR)

Republic of Kenya

In the High Court at Eldoret

Civil Suit E002 of 2022

RN Nyakundi, J

October 3, 2023

Between

Shiv Consruction Company Limited

Plaintiff

and

Mospa Limited

1st Defendant

Timothy Kipsimnyan Chesire

2nd Defendant

Isaiah Toroiitich Chesire

3rd Defendant

Hornbill development Company Limited

4th Defendant

Estate of of the Late Reuben Kiplagat Chesire

5th Defendant

Alice Jepchumba Chesire

6th Defendant

Barbara Jerono Chesire

7th Defendant

Ruling

1. By a notice of motion dated August 30, 2023 the applicant seeks orders that: -1. Spent.2. Pending the hearing and determination of this application, this honourable court be pleased to grant stay of execution of its ruling delivered on August 2, 2023 and of any decree and orders that ensue therefrom.3. Pending the hearing and determination of the applicants’ intended appeal, this honourable court be pleased grant a stay of execution of its ruling delivered on August 2, 2023 and of any decree and orders that ensue therefrom.4. This honourable court be pleased to direct that the plaintiff/respondent effects transfer of the property LR No 10146 (CR 46235) provided by the 1st defendant under clause 3 of the settlement agreement dated October 1, 2020 which it hold as security in settlement of the judgment sum.5. Upon transfer of the said security by the plaintiff/respondent to itself, and order do issue discharging the defendants/applicants from their obligations under the settlement agreement dated October 1, 2020. 6.This honourable court be pleased to make such further or other orders as it may deem appropriate and7. Costs of this application be provided for.

2. The application is premised on the grounds therein and it is further supported by the affidavit sworn by Timothy Kipsimnyan Chesire on August 30, 2023.

The Applicants’ Case 3. The applicants’ case is that vide a ruling delivered on August 2, 2023, a copy of which the applicants maintain was not immediately available to them, this court entered judgment in favour of the plaintiff/respondent in the sum of Kshs 24,458,695. 33/= plus interest and costs and further issued an order striking out the defendants’/applicants’ statement of defence dated March 25, 2022.

4. The applicants contend that that in the said ruling the court disregarded their evidence and further misdirected itself on inter alia; the nature of the correspondence it determined to be an offer and acceptance in determining that the parties had negotiated a settlement. The applicants further contend that the court also disregarded the settlement agreement dated October 1, 2020 and did not address itself as to is import despite their evidence as to its existence and purport.

5. The applicants contend that the settlement agreement dated October 1, 2020 remains valid and binding between the parties. Further that the respondent herein has in its possession property known as LR No 10146 (CR 46235) provided as security by the applicants under clause 3 of the settlement agreement that is capable of settling the judgment sum awarded.

6. The applicants further deposed that pursuant to clause 3. 1 of the settlement agreement, the 1st defendant supplied the respondent with the requisite documentation for the perfection of the security, property LR No 10146 CR 46235 in accordance with clause 3 of the settlement agreement. The applicant contend that the said security was in the name of the 4th defendant/applicant and that the respondent raised no objection to this.

7. The applicants further deposed that upon receipt of the valuation report in respect of LR No 10146 (CR 46235), the respondent intimated its concerns of the adequacy of the security, following which the 1st defendant/applicant informed the respondent of its willingness to provide a supplemental security for any shortfall there may be after the issuance of the final certificate. The applicants contend that to date the respondent remains in custody of the transfer documents for LR No 10146 (CR 46235) as stipulated under the settlement agreement.

8. The applicants added that in its ruling dated August 2, 2023, the court herein established that the negotiated settlement between the parties is a different and distinct transaction from the mode of payment.

9. According the applicants the settlement agreement dated October 1, 2020, was not annulled by the court’s ruling of August 2, 2023 and such the provisions of the settlement agreement as to the settlement of the debt are still valid and enforceable.

10. The applicants added that clause 3. 3 of the settlement agreement provides that upon failure of the 1st defendant/applicant to pay the owed amount with one month then the 1st defendant/applicant shall forfeit the said security in recovery of debt. That the said clause further stated that this forfeiture shall constitute a full and final settlement of any outstanding balance and that the 1st defendant shall thereupon stand discharged from any claims.

11. According to the applicants, the court herein is mandated to ensure that the terms of an agreement between parties are realised and enforced. As, such the applicants deposed that this court has the power to issue an order for the respondent herein to transfer the property to itself in satisfaction of the outstanding amount.

12. The applicants are aware that the (15) days stay of execution granted by this court has since lapsed and that execution is now imminent. The applicants are apprehensive that unless this instant application is heard and determined on priority basis then the respondent will seek to extract the decree and execute it against them.

13. The applicants contend that they will suffer substantial damages if the ruling delivered on August 2, 2023 is executed before the application herein is heard and determined.

The Respondent’s Case 14. The application is opposed by the respondent vide the replying affidavit sworn on September 15, 2023 by Dilipkumar Dhanji Sutar, the respondent’s director.

15. According to the respondent, the application herein is frivolous, vexatious, scandalous and an abuse of court process as its solely aimed at delaying this instant suit, defeating the ends of justice and preventing it from enjoying the fruits of the judgment dated August 2, 2023 wherein the court entered judgement in its favour for the sum of Kshs 25,458,695. 33/=on account of admission of the indebtness by the applicants.

16. The respondent maintains that this instant application is made in bad faith and as a tactic to delay the expeditious disposal of the suit for reasons: That the statutory timelines to file an appeal has lapsed. That the applicant have already fully occupied the suit property and now is occupied by rent paying tenants and hence have nothing to lose. That the applicants forcefully took occupation of the suit property without issuance of an occupation certificate by the architect. That the applicants have been in occupation of the suit property since the year 2020 and have refused to repay it construction costs and expenses of Kshs 25,458,695/=. That the outstanding amount on account of construction expenses of Kshs 25,458,695/= are intended to pay suppliers of construction materials, loans and services offered in the construction of the mall. That suppliers and debtors are of its neck for payment for their dues yet the applicants have given it a deaf year on the payment of the admitted outstanding amount of Kshs 25,458,695/=.

17. The respondent contends that there are no arguable issues in the applicants appeal for reasons: That the application for stay judgment dated August 2, 2023 seeks to have it compelled to transfer security to itself and is notably not denying indebtness to the respondent. That the applicants acknowledge existence of negotiations arising after the settlement agreement dated October 1, 2021 and the correspondences thereof. That applicants acknowledge thatLR No 10146 (CR 46235) was merely used as a security for payment of debt and not actually to settle the debt. That the grounds of appeal have not been filed and availed to the court as exhibit. That the statutory timelines preferable for an appeal has long lapsed as the court granted interim stay for 15 days from August 2, 2023. That no application for leave to file appeal out of time has been filed clearly showing the laxity and lack of seriousness by the applicants to prefer an appeal if granted stay. That applicants have not shown willingness to deposit security equivalent to the decretal amount in persuading the court they have a real interest in the suit and in and demonstrating that they have a good case.

18. The respondent further deposed that the settlement agreement dated October 1, 2021 is not enforceable as alleged by the applicants. That long after signing the said agreement parties began negotiations in a bid to find an amicable solution to the stalemate that had arisen since the said agreement had failed to offer a lasting solution to the subsisting dispute. Further that the above notwithstanding, clause 3. 3 of the said agreement which the applicants seek to rely on is not enforceable as the said security was not accepted by it and registration did not happen as the said security was never transferred and registered in its favour. The respondent added that the said security was also registered in the name of a third party and further that the valuation report did not indicate its forced market sale value and thus putting the respondent at the risk of severe financial loss.

19. In the end, the respondent urged the court in the event that it were to grant stay then the same should be on condition that the applicants herein deposit Kshs 25,458,695/= in a joint interest earning accounting in the names of the parties advocates on record.

20. The application was canvassed vide written submissions. The applicants through their Advocates Mohammed Muigai filed their submissions on September 22, 2023 while respondent through its Advocates Kipkorir Cheruiyot & Kigen filed its respective submissions on September 27, 2023. I have keenly read and considered the same and I need not to reproduce them here.

Analysis and Determination 21. The application for stay of judgment is primarily governed by the terms of order 42 rule 6 of the Civil Procedure Rules. The conditions to be met by an applicant in order to be entitled to an order for stay are provided in the following terms:6. (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 sub-rule (1) unless—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; andSuch 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.

22. Regarding stay of execution order 42 rule 6 of theCivil Procedure Rules governs the conditions to be met by a party to the proceedings seeking stay of execution of the judgment. It provides that the application must be filed without undue delay. At the hearing of the application, it must be demonstrated that the applicant will suffer substantial loss if the order on stay is denied. That the court considering the application does factor security for due performance of the decree.

23. The approach to be adopted by the court on an application for stay of execution is outlined in several decisions of the High Court and Court of Appeal including the cases of Reliance Bank Ltd v Nor Lake Investments Ltd{2002} 1EA 227, Githunguri v Jimba Credit Corperation Ltd {1988} KLR 838, Damji Pragji Mandavia v Sara Lee Household and Body Care Ltd CA No 345 of 2004, National Bank of Kenya Ltd v Jivraj Rai Shi and Brothers Ltd civil application No 153 of 2002.

24. The principles enunciated in the above decisions are as follows for grant of a stay of execution pending appeal thus:(1).That there is sufficient cause for the grant of the order for stay of execution of the decree or order.(2).That the application has been made without unreasonable delay.(3).That the substantial loss may result to the applicant unless the order is made.(4).That the successful party is entitled to the enjoyment of the fruits of his or her success.

25. While on the other hand, the aggrieved party is entitled to exercise his or her constitutional right of appeal and the intended appeal succeeding should not be rendered nugatory.

26. Further to the above, stay may only be granted for sufficient cause and that the court in deciding whether or not to grant the stay and that in light of the overriding objective stipulated in sections 1A and 1B of the Civil Procedure Act, the court is no longer limited to the foregoing provisions.

27. On whether this application has been filed timeously. The ruling herein was delivered on August 2, 2023. The applicants filed the application herein on August 31, 2023 which in my view has been brought without unreasonable delay.

28. With regard to substantial loss. The applicants contend that unless the order for a stay of execution is granted, the respondent will move to recover the judgment sum from them. The respondent on its part is of the view that the applicants are intent on hindering it from enjoying the fruits of its judgment and further have no intent of pursuing the intended appeal.

29. As to what substantial loss is, it was observed in James Wangalwa & another v Agnes Naliaka Cheseto [2012] eKLR, that: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 ... 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.”

30. Further to the above, the legal position is that substantial loss entails that which has to be prevented by maintaining the status quo of the parties involved, otherwise the appeal will be rendered nugatory.

31. The court, in RWW v EKW [2019] eKLR, considered the purpose of a stay of execution order pending appeal, in the following words:"The purpose of an application for stay of execution pending an appeal is to preserve the subject matter in dispute so that the rights of the appellant who is exercising the undoubted right of appeal are safeguarded and the appeal if successful, is not rendered nugatory. However, in doing so, the court should weigh this right against the success of a litigant who should not be deprived of the fruits of his/her judgment. The court is also called upon to ensure that no party suffers prejudice that cannot be compensated by an award of costs.9. Indeed to grant or refuse an application for stay of execution pending appeal is discretionary. The court when granting the stay however, must balance the interests of the appellant with those of the respondent.”

32. Upon considering the rival positions above, I am of the view that in the circumstances of this case, the applicants have reasonably demonstrated the manner in which they stand to suffer substantial loss if an order for a stay of execution is denied.

33. As to security of costs, I note that the applicants have not offered to make any provision for security for the due performance of the decree or for security for costs. The law is clear that the provision of security for the due performance of the decree is a mandatory requirement in the granting of an order for a stay of execution. However, this court is not bound by the type of security offered by an applicant. It can make appropriate orders which serve the interest of justice taking into account the fact that money depreciates unless it is kept in an interest earning account for the period of the appeal.

34. With regard to prayer (4) and (5) of the motion, the applicants can have the issues therein substantively addressed on appeal.

35. In the end therefore, the motion dated August 30, 2023, is hereby allowed in terms of prayer (3), giving rise to the following orders: -i.There shall be a stay of execution of the ruling delivered on August 2, 2023 on the condition that the applicants herein deposits the entire decretal sum in an interest earning account to be held in the joint names of the parties’ advocates on record within (60) days from today, failure of which the order for stay shall automatically lapse.ii.Costs of the application to abide by the result of the appeal.It is hereby so ordered.

DATED SIGNED AND DELIVERED AT ELDORET THIS 3RD DAY OF OCTOBER, 2023. ..............................R. NYAKUNDIJUDGElitigation@mohammedmuigai.com,kcandkigenIIp@gmail.co