Pema Holdings Limited v Tropical Farm Management (Kenya) Ltd & another [2008] KECA 274 (KLR)
The bottom line
#The Court of Appeal stopped a Kenyan bank from auctioning two farms worth over Ksh.200 million, but only because the owner offered a bank guarantee covering the full debt.
What this practically means
#Executive summary
#Key legal issues
#Whether the intended appeal was arguable
The Court found the question whether the second respondent was a mortgagee in possession through its relationship with the first respondent to be an arguable point fit for the intended appeal.
The Court held that whether the statutory power of sale had arisen depended on whether, over the 25-year period from 1974, the bank had conducted itself in a manner suggesting it was a mortgagee in possession, and that its relationship with the first respondent (which managed the farms and through which credit monies were disbursed) needed full ventilation. That factual exercise belongs to the appeal; the Court's only task was to decide arguability, which it did in the applicant's favour.
Whether refusal of the injunction would render the intended appeal nugatory
Given the subject properties were valued at over Ksh.200 million, whose full value may not be realised at a public auction, and given the applicant offered a bank guarantee covering the whole outstanding debt, the Court found the nugatory test satisfied.
The Court observed that a sale of properties valued at over Ksh.200 million would not be a small loss and that such value may not be realised at a public auction. It noted the applicant's offer to furnish a bank guarantee for Ksh.9,185,745/25, which the second respondent neither contradicted by affidavit nor addressed in submissions, and found the offer reasonable, granting the injunction conditional on that guarantee.
Legal principles established
#- An applicant under rule 5(2)(b) must satisfy two tests: the appeal or intended appeal must be arguable, and the appeal must not be rendered nugatory if the stay or injunction is refused.
- The Court on a rule 5(2)(b) application only decides whether an issue is arguable; it does not determine the merits of the dispute.
- Disputes as to amounts cannot stop a mortgagee from exercising its statutory power of sale once the power has arisen.
Court orders
#- 1.Subject to the applicant furnishing a bank guarantee from a reputable bank covering the amount of Ksh.9,185,745/25 within THIRTY (30) days of the date of the ruling, the second respondent, its agents, servants and or employees are restrained from selling, putting up for sale by public auction or private treaty
- 2.The second respondent, its agents, servants and or employees are restrained from transferring or in any other way disposing of the applicant's properties L.R. No. 4929/2 and L.R. No. 4744 Makuyu till the intended appeal is heard and determined
- 3.Costs of the application shall be in the intended appeal
- On appeal from
- High Court of Kenya at Nairobi
- H.C.C.C No. 520 of 2007
- Jurisdiction invoked
- Rule 5(2)(b) of the Court of Appeal Rules (application for injunction pending an intended appeal)
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Pema Holdings Limited v Tropical Farm Management (Kenya) Ltd & another [2008] KECA 274 (KLR)", Case Analysis (2008). Civil Appli No. 55 of 2008 (UR 31/2008). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2008/274/eng@2008-05-09
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.