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Court of AppealDismissedCivil Appli. NAI No. 134 of 2008 (UR 86/2008)· [2008] KECA 94 (KLR)

Mukua Tutuma v Co-operative Bank of Kenya Ltd [2008] KECA 94 (KLR)

Court of Appeal of Kenya
17 October 2008
ROR.S.C OmoloJOJ.W. Onyango OtienoDAD.K.S Aganyanya
2,337 words in judgment
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The bottom line

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Kenya's Court of Appeal refused to stop a bank from selling charged property because money damages could compensate the borrower if he later won.

What this practically means

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Executive summary

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This is a ruling of the Court of Appeal at Nairobi on a notice of motion dated 19th June 2008 brought by Mukua Tutuma under rule 5(2)(b) of the Court of Appeal Rules, seeking an injunction to restrain Co-operative Bank of Kenya Ltd from advertising, selling or interfering with L.R. No. 209/9692 Nairobi pending an intended appeal against a High Court ruling of Warsame J dated 23rd April 2008, which had dismissed his application for a temporary injunction in H.C.C.C No. 263 of 2007. The background was a Ksh.10,000,000 loan advanced in 2001 to the applicant and his two brothers trading as Tutuma General Stores, secured by a charge over the applicant's land; the applicant fell behind in repayment and the bank issued a statutory notice threatening to exercise its statutory power of sale. The Court restated the settled rule 5(2)(b) principles: an applicant must show an arguable appeal and that its success would be rendered nugatory if the application is refused. The Court found the intended appeal not arguable on the material before it, while expressly reserving the position for the full hearing. It went on to hold, assuming arguability, that refusal of the injunction would not render the appeal nugatory, since the property had been knowingly offered as commercial security and the bank could refund the proceeds plus damages should the applicant ultimately succeed. The application was dismissed with costs to the respondent. The decision binds the High Court and subordinate tribunals on the rule 5(2)(b) test and its application to charged commercial property.

Key legal issues

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01

Arguability of the intended appeal

Holding

On the material before the Court, the intended appeal was not arguable; the Court was careful to state this was provisional and based only on the application stage material.

Reasoning

The Court perused the record, the superior court ruling and rival submissions, and found it difficult to appreciate that the intended appeal was arguable. It expressly limited its conclusion to the material then available, noting the position may differ at the hearing of the full appeal, while going on to consider the second limb on a without-prejudice assumption.

p. 3
02

Whether refusal of the injunction would render the intended appeal nugatory

Holding

It would not: the property was offered as commercial security and the bank could refund sale proceeds plus damages if the appeal succeeded.

Reasoning

The Court accepted the superior court's reasoning that the property was business premises offered as loan security and was thus a commercial commodity. It found no basis to believe the bank could not make good any loss the applicant would suffer through the sale should he eventually succeed, so the second rule 5(2)(b) principle was not satisfied.

p. 4

Legal principles established

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  • An applicant for an injunction or stay of execution under rule 5(2)(b) of the Court of Appeal Rules must demonstrate that the appeal or intended appeal is arguable, and that its success would be rendered nugatory if the application is refused; both limbs must be satisfied.
  • A borrower who knowingly offers business premises as security for a loan, knowing that failure to repay may result in its sale, cannot complain that the mortgagee exercises its statutory power of sale; adequate compensation in damages defeats the nugatory-ness limb.

Court orders

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  1. 1.The notice of motion dated 19th June 2008 seeking an injunction pending the intended appeal is dismissed
  2. 2.Costs of the application to the respondent

Authorities

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Legislation

  • Transfer of Property Act (1882) of Indiasections 69(1) and 100A
  • Indian Transfer of Property (Amendment) Act 1959section 52
  • Registration of Titles Act Chapter 281 Laws of Kenyasection 46
  • Law of Contract Act Chapter 23 Laws of Kenyasection 3(3)
  • Court of Appeal Rulesrule 5(2)(b)

Cases cited (2)

  • Giella vs. Cassman Brown
  • Githunguri vs. Jimba Credit Corporation (No. 2)
    [1988] KLR 838
On appeal from
High Court of Kenya at Milimani Commercial Courts, Nairobi
H.C.C.C No. 263 of 2007
Jurisdiction invoked
Rule 5(2)(b) of the Court of Appeal Rules (application for injunction pending intended appeal)

Key timeline

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Practical implications

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Frequently asked questions

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Cite this brief

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Cite this brief

Caselaw, "Mukua Tutuma v Co-operative Bank of Kenya Ltd [2008] KECA 94 (KLR)", Case Analysis (2008). Civil Appli. NAI No. 134 of 2008 (UR 86/2008). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2008/94/eng@2008-10-17

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