Kairu Enterprises Ltd & 2 others v Housing Finance Co of Kenya Ltd [2006] KECA 43 (KLR)
The bottom line
#Kenya's Court of Appeal blocked a bank from selling a borrower's Ruaraka property, holding that an unreasonably large cash deposit condition made the earlier protection meaningless.
What this practically means
#Executive summary
#Key legal issues
#Whether the intended appeal is arguable under rule 5(2)(b) of the Court of Appeal Rules.
Yes. Whether the life insurance upon the deceased, David Munene Kairu, was a prerequisite for the advance to the first applicant, and the effect of the respondent's delay in informing the applicants that such cover was never processed while premiums were being paid and returned, are not frivolous matters; the allegations of fraud or negligence against the respondent need to be ventilated.
The court examined the letter of offer and its nine special conditions, the additional special conditions requiring annual fire and life insurance premiums, the substitution of Madison Insurance Company for ICEA, the correspondence involving the insurers and brokers, and the payment and refund of premiums evidenced in a letter dated 12th June 2003. Against that record it concluded that the insurance-prerequisite question and the delay question were not frivolous and that the fraud and negligence allegations required full ventilation at trial.
Whether, if the application is refused and the intended appeal eventually succeeds, the results would be rendered nugatory.
Yes. The superior court's injunction was conditional on a Ksh. 9,000,000 deposit which the court found onerous and tantamount to a denial of the injunction; the outstanding balance was now much higher, a sale might not realise the entire amount, damages might not be adequate, and justice would not be met by the sale. The property should be preserved till the intended appeal is heard and finally decided.
The deposit order of 21st February 2006 was based on the balance as it then stood, which the court observed must now be much higher. If the property were sold it was possible the sale would not realise the entire amount outstanding, leaving a balance that might found another suit, so damages might not be adequate. Allowing the sale would risk permitting a party to breach contractual terms on the mere pretext of eventually paying damages, which the court held cannot be the purport of justice.
Whether an injunction granted on a condition the applicants could not satisfy was adequate protection pending the intended appeal.
No. The applicants found the condition of depositing Ksh. 9,000,000 into an interest-bearing account onerous, and the court accepted that it amounted to a denial of an injunction; the conditional order therefore could not stand in the way of an unconditional injunction from the Court of Appeal preserving the property.
The court was aware that the superior court had granted the injunction on condition that the applicants pay Ksh. 9,000,000 into an interest-bearing account in the names of the parties' advocates within 30 days. The applicants regarded that condition as onerous and equivalent to a refusal of the injunction, and the court expressly declined to fault them for that view. That finding fed directly into the nugatory limb and justified the unconditional restraint later ordered.
Legal principles established
#- The jurisdiction of the Court of Appeal under rule 5(2)(b) of the Court of Appeal Rules is both original and discretionary.
- An applicant under rule 5(2)(b) must demonstrate, first, that the appeal or intended appeal is arguable and, secondly, that if the application is refused and the appeal eventually succeeds, the results would be rendered nugatory.
- An injunction granted on a condition the applicant cannot satisfy, such as an onerous monetary deposit, amounts to a denial of the injunction and supports the nugatory limb on appeal.
- Where sale of the charged property may not realise the full outstanding debt, damages may not be an adequate remedy, and a party will not be permitted to breach contractual terms on the mere pretext that it can eventually pay damages; the property may be preserved pending appeal.
Court orders
#- 1.An order of injunction restraining the respondent, Housing Finance Company of Kenya Limited, by itself, its servants, agents or whosoever, from selling, disposing of, transferring, alienating, or in any other way adversely dealing with the property known as L.R. No. 9509/41, Mirema Road, Ruaraka, pending the filing, hearing and determination of the intended appeal.
- 2.Costs in the intended appeal.
- On appeal from
- High Court of Kenya at Nairobi
- H.C.C.C No. 528 of 2005
- Jurisdiction invoked
- Rules 5(2)(b) and 42 of the Court of Appeal Rules
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Kairu Enterprises Ltd & 2 others v Housing Finance Co of Kenya Ltd [2006] KECA 43 (KLR)", Case Analysis (2006). Civil Application No. 73 of 2006. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2006/43/eng@2006-12-01
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.