[2022] KEHC 12035 (KLR)

TDF Advertising Limited v Impact Africa Limited (Civil Appeal E604 of 2021) [2022] KEHC 12035 (KLR) (Civ) (21 July 2022) (Ruling)

Neutral citation: [2022] KEHC 12035 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Law Courts)

Civil

Civil Appeal E604 of 2021

JK Sergon, J

July 21, 2022

Between

TDF Advertising Limited

Applicant

and

Impact Africa Limited

Respondent

(... .There be stay of execution of the judgment and decree of the Principal Magistrate’s Court at Nairobi CMCOMMSU No 987 of 2019 delivered on August 31, 2021)

Ruling

1. The appellant/applicant filed a notice of motion dated September 23, 2021 under the provisions of sections 1A, 1B and 3A of the Civil Procedure Act, cap 21, order 42 rule 6 (1), (2) and (6) and order 51 rule 1 of the Civil Procedure Rules. The prayers before this court are;i.Spentii.Spentiii.There be stay of execution of the judgment and decree of the Principal Magistrate’s Court at Nairobi CMCOMMSU No 987 of 2019 delivered on August 31, 2021 pending the hearing and determination of the appeal filed herein.iv.That the costs of this application be provided for.

2. The application is premised on the grounds on the face of it, and the supporting affidavit of Susan Mbithe, the applicant’s Chief Accounting Officer, sworn on November 23, 2021. The application is brought on the ground that the appellant being aggrieved by the judgment of Hon Kagoni EM Principal Magistrate in Milimani Commercial Court Suit No 987 of 2019, has lodged an appeal by way of memorandum of appeal dated September 23, 2021 and filed on September 30, 2021. That the appeal has a high probability of success as it raises fundamental and pertinent issues of law and that unless stay of execution is granted, the appeal will be rendered nugatory. Further that the applicant will suffer substantial loss, as the respondent will execute against it and since the respondent is of unknown means if the decretal sum is paid, it may not be recovered should the appeal succeed. The applicant further avers that the application was made without unreasonable delay and ought to be granted in the interests of equity and justice.

3. The applicant avers that judgment was delivered without notice and in the absence of the parties so no stay of execution was granted to the applicant. The applicant further stated that the court ought to balance the interest of both the judgment debtor and those of the decree holder especially since the decretal amount is a substantial amount. It is the applicant’s contention that the decretal amount of Kshs 7,500,000 was awarded on condition that the respondent produces 3rd party invoices. However, the trial court did not issue directions on the production of the invoices.

4. It is the applicant’s submissions that it has met the threshold for grant of the orders sought as set out under order 42 rule 6 (2) of the Civil Procedure Rules and the case of Masiss Mwita v Damaris Wanjiku Njeri [2016] eKLR where Justice Mativo cited with authority the case of Elena D Korir v Kenyatta University [2014] eKLR where Justice Nzioka Wa Makau held that;a.“The application must meet a criteria set out in precedent and the criteria is best captured in the case of Halai & another v Thorton & Turpin (1963) Ltd [1990] KLR 365 where the Court of Appeal Gicheru JA, Chesoni & Cockar Ag JA (as they all were) held that :-b.The High Court’s discretion to order a stay of execution of its order or decree is fettered by three conditions. Firstly the applicant must establish a sufficient cause, secondly the court must be satisfied that substantial loss would ensue from a refusal to grant stay and thirdly the applicant must furnish security. The application must of course be made without unreasonable delay.c.An addition the issue of whether the intended appeal will be rendered nugatory is critical as was held in the case of Hassan Guyo Wakalo v Straman East Africa Ltd [2013] eKLR as follows:-d.“In addition, the applicant must prove that if the orders sought are not granted and his Appeal eventually succeeds, then the same shall have been rendered nugatory. These twin principles go hand in hand and failure to prove one dislodges the other.”

5. On sufficient cause, the applicant maintains that the application was made within 23 days after the delivery of the judgment and there is no unreasonable delay. Further, the applicant submits that it has an arguable appeal as the trial court erred in law and fact in finding that the respondent was entitled to USD 68,753. 93 together with interest and costs subject to production and analysis of third party invoices. It is further submitted on behalf of the applicant that it will suffer irreparable loss if the orders are not granted and the respondent proceeds to execute for the decretal amount which is unlikely to be recovered in the event the appeal succeeds. To this end, the applicant has relied on the case of Prilscot Company Limited v Monica Heho [2015] eKLR and the case of Bonface Kariuki Wahome v Peter Nziki Nyamai & another[2019] eKLR.

6. On security for costs, the applicant maintains that it is not possible to make a finding on the issue of deposit of security for performance since the decretal sum is yet to be determined by the court. The applicant has made reference to the case of HGEvSM [2020] eKLR where the court cited with authority the case of Arun C Sharma v Ashana Raikundalia t/a Rairundalia & Co Advocates & 2 others [2014] eKLR where it was held;“The purpose of the security needed under order 42 is to guarantee the due performance of such decree or order as may ultimately be binding on the applicant. It is not to punish the judgment debtor.”

7. In opposition, the respondent states that the present application has been misfiled and that the same ought to have been filed at the Commercial & Tax Division since the dispute arises out of a commercial contract. Further, that the applicant’s assertion that it has an arguable appeal is farfetched since it admitted the debt in court and offered to pay a lesser amount. The respondent contends that the applicant will not suffer any prejudice if the decretal amount is deposited in court or in a joint interest earning account as security held by both advocates.

8. In their submissions, the respondent has maintained that the appellant has not fulfilled the conditions set out under order 42 rule 6 (2) of the Civil Procedure Rules as he has failed to demonstrate how it will suffer substantial loss and further has failed to give security for due performance of the decree as may be ultimately be binding on the applicant. Reference has been made to the case of Antoine Ndiaye v African Virtual University [2015] eKLR where Justice Gikonyo emphasized on the conditions to be satisfied for grant of orders of stay of execution pending appeal. The respondent has further submitted that the grant of the orders sought, will deprive, restrict and is aimed at subverting the respondent’s interests in realizing the fruits of its judgment. To buttress its submissions, the respondent has referred to the case of RWW v EKW [2019] eKLR, the case of Machira T/a Machira & Co Advocates v East African Standard (No 2)[2002] KLR 63 where the court held that in granting stay orders, the court ought to balance the rights of a successful litigant to enjoy the fruits of his judgment vis-a-vis the appellant’s right of appeal.

9. It is the respondent’s submission that the appellant has failed to submit any financial records to the court demonstrating how it will suffer substantial loss. The respondent has referred to the case of Kenya Shell Limited v Kibiru [1986] KLR 410 at page 416;“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 corner stone of both jurisdictions for granting a 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.”

10. The respondent submits that if the court deems it fit to grant the orders for stay, then it should be a conditional stay, on the basis that all the decretal sums, plus costs are deposited in court or an interest earning account, in the same currency that was awarded by the court. The respondent has made reference to the case of Focin Motorcycle Co Limited v CS Ann Wambui Wangui & another [2018] eKLR where the court held that provision of security is a mark of good faith by the applicant that the application for stay is not just meant to deny the respondents the fruits of judgment.

Analysis and Determination; 11. This is an application that invokes the discretionary powers of the court which must be exercised judiciously. It is brought under order 42 rule 6(1) of the Civil Procedure Rules, 2010 which empowers this court to stay execution, either of its judgement or that of a court whose decision is being appealed from, pending appeal. The conditions to be met before stay is granted are provided for under rule 6(2) of order 42 and states as follows:a.“No order for stay of execution shall be made under sub-rule (1) unless–1. 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; and2. 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.”

12. The Court of Appeal in Butt v Rent Restriction Tribunal [1982] KLR 417 gave guidance on how a court should exercise discretion and held that:"1. The power of the court to grant or refuse an application for a stay of execution is a discretionary power. The discretion should be exercised in such a way as not to prevent an appeal.2. 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 that appeal court reverse the judge’s discretion.3. 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.4. The court in exercising its discretion whether to grant [or] refuse an application for stay will consider the special circumstances of the case and unique requirements. The special circumstances in this case were that there was a large amount of rent in dispute and the appellant had an undoubted right of appeal.5. 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 for costs as ordered will cause the order for stay of execution to lapse.”

13. The application has been filed within a month after the delivery of judgement by the trial court on August 31, 2021. The appellant/applicant filed a memorandum of appeal dated September 23, 2021 and an application for stay of execution equally dated on the September 23, 2021. I find that there was no inordinate delay on the part of the applicant in filing the present application.

14. The applicant has submitted that it is likely to suffer substantial loss if stay of execution is not granted and the respondent proceeds to execute. The applicant’s contention is that the respondent will be unable to repay the decretal amount of USD 68,753 in the event the appeal succeeds. The respondent on the other hand has submitted that they were in business together with the applicant, who knew very well of the fees chargeable, and therefore, the loss if any, is an ordinary one that a judgment debtor is subjected to when he loses his case. The issue of substantial loss was discussed in the case of James Wangalwa & another v Agnes Naliaka Cheseto [2011] eKLR where the court held that substantial loss entails establishment of other factors which show that execution will create a state of affairs that will irreparably affect the applicant’s position in case the appeal is successful.

15. Further, the Court of Appeal in National Industrial Credit Bank Ltd v Aquinas Francis Wasike & another [2006] eKLR opined that once an applicant expresses 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. On this ground, I am satisfied that the applicant has established that it will suffer substantial loss if the intended execution is not stayed especially where the respondent had already sought to institute execution of the lower court award. It follows therefore that if the respondent manages to execute against the applicant, and the applicant’s intended appeal succeeds, then not only will the applicant suffer substantial loss but the appeal will also be rendered nugatory.

16. The appellant/applicant has indicated its readiness to furnish security for the due performance of the decree while the respondent is categorical that the applicant do deposit the total decretal sum in an interest joining account of the parties’ advocates. I agree with the respondent/appellant that deposit of the decretal amount in an interest joint account of the parties’ advocate would be sufficient security while balancing the parallel interests of both parties.

17. In the circumstances, I direct that the decretal amount be deposited in an interest earning account in the joint names of the advocates for the appellant/applicant and the respondent within 45 days from the date of the ruling. Costs of the application to abide the outcome of the appeal.

DATED, SIGNED AND DELIVERED ONLINE VIA MICROSOFT TEAMS AT NAIROBI THIS 21ST DAY OF JULY, 2022……………………….JK SERGONJUDGEIn the presence of:………………………………. for the appellant/applicant………………………………. for the respondent