H F Fire Africa Ltd v A M R Gharieb [2004] KECA 132 (KLR)
The bottom line
#Kenya's Court of Appeal refused to stop a former director from competing while an appeal was pending, because money damages would adequately compensate the company.
What this practically means
#Executive summary
#Key legal issues
#The twin test under rule 5(2)(b) of the Court of Appeal Rules for interlocutory relief pending appeal.
The applicant must satisfy both limbs - an arguable intended appeal and nugatory-ness if relief is refused; the application failed because damages would be an adequate remedy and the Agency Agreement remained in force.
The court framed its task as deciding whether the applicant had met the rule 5(2)(b) test: the intended appeal must be arguable and not frivolous, and it must be shown that if it eventually succeeded it would be rendered nugatory unless the orders were granted. Examining the substance, the court found the Agency Agreement still governed the parties and that damages would adequately compensate the applicant, so the wide injunctions were refused. It expressly avoided firm conclusions to prevent prejudice to the suit and the intended appeal.
Whether wide interlocutory injunctions geared to the specific enforcement of restraint-of-trade covenants should issue where damages are an adequate remedy.
No - where the Agency Agreement is still in force and damages would adequately compensate the applicant, such orders should not be granted, particularly where the covenants were ruled void by the High Court.
The court characterised the orders sought as 'very wide and far reaching' and as geared towards the specific enforcement of restrictive covenants the learned Judge had ruled to be void. Interlocutory injunctive relief is protective rather than final; with the Agency Agreement still operative and an inquiry as to damages available at trial, specific enforcement of the covenants by interlocutory order served no legitimate purpose. The Notice of Motion was therefore dismissed with costs to the respondent.
The statutory framework governing contracts in restraint of trade in Kenya and the validity of the covenants in the parties' agreements.
The Court endorsed the High Court's approach that Cap. 24 governs restraint-of-trade covenants and its conclusion that the restrictive covenants in the parties' agreements were 'not only suspect but void'.
The court held that the learned Judge 'correctly' identified the Contracts in Restraint of Trade Act (Cap. 24) as the governing statute and quoted section 2 in full: a covenant is not void merely because it restrains trade, but the High Court may declare it void where, having regard to the nature of the trade, the period, the area and all the circumstances, it is unreasonable in the interests of the parties or the public. The judge's finding that the covenants were suspect and void was left undisturbed.
Legal principles established
#- An applicant under rule 5(2)(b) of the Court of Appeal Rules bears the burden of showing both that the intended appeal is arguable and not frivolous, and that, if it ultimately succeeds, it would be rendered nugatory unless the orders sought are granted.
- Where any loss the applicant may suffer can be adequately compensated by an award of damages, the Court will decline wide and far-reaching interlocutory injunctive orders, including orders geared towards the specific enforcement of restrictive covenants.
- Restraint-of-trade covenants in Kenya are governed by a specific statute, the Contracts in Restraint of Trade Act (Cap. 24), under which a covenant is not void merely because it restrains a lawful trade, but may be declared void by the High Court where it is unreasonable in the interests of the parties or the public.
Court orders
#- 1.The Notice of Motion application brought under rule 5(2)(b) of the Court of Appeal Rules and dated 19th February 2004 is dismissed.
- 2.The applicant is to pay the costs of the application to the respondent.
- On appeal from
- High Court of Kenya at Nairobi (Milimani Commercial Courts)
- H.C.C.C. No. 665 of 2003
- Jurisdiction invoked
- Rule 5(2)(b) of the Court of Appeal Rules - the Court's jurisdiction to grant an injunction pending appeal
Key timeline
#Practical implications
#Frequently asked questions
#Later judgments citing this (4)
#Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.
- Cynthia Patricia Sicobo & Another v. Alexandre Gerniers & Another[2012] KEHC 3741 (KLR)12 Mar 2012
- In the Matter of a Winding-Up Cause - Application for Stay of Proceedings Pending Appeal[2011] KEHC 4336 (KLR)21 Oct 2011
- Stephen Njoya Waweru & 8 Others v Registrar of Companies & 9 Others (ex parte)[2008] KEHC 2191 (KLR)11 Jul 2008
- Sunrise Properties Limited v [1st Defendant] & Others[2007] KEHC 163 (KLR)22 Nov 2007applied
Cite this brief
#Cite this brief
Caselaw, "H F Fire Africa Ltd v A M R Gharieb [2004] KECA 132 (KLR)", Case Analysis (2004). Civil Application No. NAI. 32 of 2004 (19/2004 UR). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2004/132/eng@2004-03-19
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.