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Court of AppealDismissedCivil Application No NAI 140 of 1995 (65/95)· [1995] KECA 140 (KLR)

Uhuru Highway Development Ltd v Central Bank of Kenya & 2 others [1995] KECA 140 (KLR)

Court of Appeal of Kenya
14 July 1995
14,396 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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Kenya's Court of Appeal dismissed Uhuru Highway Development Ltd's bid to stop the sale of the Grand Regency Hotel, because the company hid key facts from the court when getting its emergency order.

What this practically means

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Executive summary

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Uhuru Highway Development Ltd (UHDL) applied to the Court of Appeal under rule 5(2)(b) of the Court of Appeal Rules for a temporary injunction restraining the Central Bank of Kenya from selling the Grand Regency Hotel (LR No 209/9514, Nairobi) or enforcing its charge and guarantee pending an intended appeal against the ruling of Ole Keiwua J in HCCC No 29 of 1995. The High Court had set aside an ex parte injunction obtained from Githinji J on 6th January 1995 on the ground of material non-disclosure, and had also dismissed UHDL's application for an interlocutory injunction on the merits under the Giella v Cassman Brown principles. Kwach JA, delivering the leading ruling with which Cockar CJ and Omolo JA agreed in separate rulings, held that UHDL had concealed material facts from Githinji J: two of three cheques issued towards the Shs 2.5 billion debt had been dishonoured, the letter of 28th November 1994 showing Pattni's repudiation of the 29th September 1994 agreement was withheld, and service of the statutory notice was concealed. The court also found no arguable appeal: default was undeniable, the statutory notice was properly served, and a chargee will not be restrained merely because the amount due is disputed. CBK's capacity to pay damages meant the appeal could not be rendered nugatory. The application was dismissed with costs to CBK.

Key legal issues

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01

Duty of full and frank disclosure on ex parte applications

Holding

UHDL deliberately concealed the dishonoured cheques, the 28th November 1994 repudiation letter and the statutory notice; the ex parte order was properly set aside

Reasoning

The applicant annexed three cheques but did not reveal that two had been dishonoured, creating a false impression of payment; it withheld the letter showing Pattni had repudiated the 29th September 1994 agreement and concealed service of the statutory notice. The court endorsed setting aside orders obtained on a misleading affidavit and observed judges should grant ex parte injunctions only in exceptional cases.

p. 8
02

Test for injunction pending appeal under rule 5(2)(b)

Holding

The applicant failed both limbs: the intended appeal was not arguable and damages were an adequate remedy, so no nugatory prejudice arose

Reasoning

The court restated the Githunguri principles of arguability and nugatory-ness. On arguability it found the concealment findings and merits fatal; on nugatory-ness it accepted CBK's capacity to pay damages for the hotel, so the appeal could not be rendered nugatory by the sale.

p. 19
03

Restraining exercise of statutory power of sale

Holding

A chargor cannot obtain an injunction merely by disputing the amount due; default and proper statutory notice were established

Reasoning

The court applied Halsbury and Bharmal Kanji Shah: the mortgagee is not restrained merely because the amount due is disputed. Default was undeniable, the notice complied with the Transfer of Property Act in essential respects, and the last-known address was properly served.

p. 9
04

Illegality as a defence to enforcement of security

Holding

A party cannot resist enforcement by pleading that the public funds it received were paid in breach of the law

Reasoning

Omolo JA held that even if the CBK payments to Pattni breached the Central Bank of Kenya Act, the applicant who benefited from public resources could not invoke that illegality to retain the gains, as that would reward looting of public funds.

p. 20
05

Movables not covered by the charge

Holding

The charge covered only the land and buildings; CBK could not lawfully sell the hotel's furniture and chattels under it

Reasoning

Kwach JA noted clause 7(c)(ii) of the charge treated furniture and chattels as the chargor's, and CBK held no debenture over movables; had the application been founded on that ground alone he would have granted the injunction. But the application challenged the charge itself, which was prima facie valid.

p. 10

Legal principles established

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  • An ex parte applicant owes the court a duty of full and frank disclosure of all material facts, failing which the order will be set aside and the court may decline to hear the merits at all
  • On rule 5(2)(b) applications the test is that the appeal is arguable and would be rendered nugatory if unsuccessful
  • A court will not restrain a mortgagee/chargee from exercising its statutory power of sale merely because the amount due is in dispute

Court orders

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  1. 1.The application under rule 5(2)(b) for a temporary injunction pending appeal is dismissed
  2. 2.Costs of the application to the Central Bank of Kenya
On appeal from
High Court of Kenya at Nairobi
HCCC No 29 of 1995
Jurisdiction invoked
Rule 5(2)(b) of the Court of Appeal Rules

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (1)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Uhuru Highway Development Ltd v Central Bank of Kenya & 2 others [1995] KECA 140 (KLR)", Case Analysis (1995). Civil Application No NAI 140 of 1995 (65/95). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/1995/140/eng@1995-07-14

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.