TRANSOUTH CONVEYORS LIMITED v KENYA REVENUE AUTHORITY & ANOTHER [2007] KECA 209 (KLR)

The court restated the settled principles from Reliance Bank Ltd (In Liquidation) v Norlake Investments Ltd as the starting point for every rule 5(2)(b) application. Both limbs are cumulative and must be satisfied before preservative orders issue. The court then worked through each limb on the facts, first concluding that the intended appeal was arguable - a point conceded by counsel for KRA - before turning to whether refusal of the orders sought would render the appeal nugatory.

Although several issues were raised by counsel for Transouth, the court emphasised that a solitary arguable issue is enough. The central issue it identified was whether either respondent had any legal basis whatsoever for the decisions made and the notices issued that adversely affected the applicant - the conflicting directions on the importation window for the COMESA duty free sugar quota. Counsel for KRA having conceded that the intended appeal was not frivolous, the arguability limb was satisfied without difficulty.

The court invoked the qualification to the usual money-decree principle, under which an appeal is not rendered nugatory where the respondent is capable of repaying the decretal sum. Where refusal of a stay is grounded purely on the applicant's ability to be monetarily compensated but undue hardship would result, the interests of justice favour securing the applicant's position. The court feared the duty free quota would be exhausted before the appeal was heard, locking the applicant out, and that paying duty it had not provided for would seriously disrupt its operations.

While acknowledging that Emukule J had exercised an unfettered discretion in granting leave and in directing that it not operate as a stay, the court stressed that its own discretion under rule 5(2)(b) is equally original and unfettered. It is therefore not confined to correcting the judge's exercise of discretion and may craft orders that meet the justice of the particular matter. That is what it did here, conditioning clearance of the consignment on a banker's guarantee rather than granting the stay sought.

In tailoring relief, the court declined prayers 1 and 2 of the motion because granting them would have determined the intended appeal before the court considered it. Prayer 3, which would have reserved 5,000 metric tons of the 89,000 metric ton quota and limited importation to 84,000 metric tons, was refused because it could interfere with the rights of importers who were not parties to the dispute and could encroach on the sanctity of the COMESA Treaty terms. Instead, conditional relief securing the applicant's position was fashioned.