HARVEER INVESTMENTS COMPANY LTD V EQUITORIAL COMMERCIAL LTD & 3 OTHERS [2009] KECA 138 (KLR)
The bottom line
#Kenya's Court of Appeal stopped a bank from selling charged land because no loan money was actually disbursed, restating that injunction applicants must satisfy two tests.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether the intended appeal is arguable
- 2.Whether, absent an injunction, the intended appeal, if successful, would be rendered nugatory
Key legal issues
#Test for grant of injunction or stay pending appeal under rule 5(2)(b)
The applicant must establish both an arguable appeal and that the appeal would be rendered nugatory if the orders are not granted; either limb alone does not suffice, and the Court was satisfied both were met.
The Court restated the settled two-limb test for rule 5(2)(b) applications. On arguability, it found it arguable whether the bank could exercise a power of sale where it had disbursed no money on the charge and where coercion had been alleged. On nugatory aspect, weighing the expired statutory notice, the imminence of the threatened sale and inadequacy of damages, it concluded the appeal could be rendered nugatory without an injunction.
Whether a bank may exercise a statutory power of sale over a charge for which no consideration was disbursed
It is arguable that a bank cannot properly exercise a power of sale where it lent no money on the charge, where no charge documents were executed for part of the amount demanded, and where coercion in execution of the charge was alleged against the bank.
It was conceded the bank disbursed no money to the applicant on the charge documents, no guarantee documents were executed for Kshs.7 million, and the alleged fraud had not been shown to benefit the applicant. Coercion was alleged against the bank in obtaining execution of the charge. The Court held these questions arguable but expressly left them for determination in the intended appeal or at trial.
Legal principles established
#- An applicant under rule 5(2)(b) must satisfy both the arguability and the nugatory-likelihood tests; satisfying one alone is insufficient.
Court orders
#- 1.An injunction issued restraining the 1st respondent from exercising the power of sale over land parcel No. Nairobi/Block 91/344, pending the hearing and final determination of the applicant's intended appeal, or until further order of the Court of Appeal or the superior court
- 2.Costs of the application to be in the intended appeal
The bench
#One judgment of the whole court — no separate or dissenting opinions.
- On appeal from
- High Court of Kenya at Nairobi, Milimani Commercial Courts
- H.C.C.C. No. 128 of 2009
- Jurisdiction invoked
- Rule 5(2)(b) of the Court of Appeal Rules
Quotable passages
#Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.
It is now well settled that for an application under that provision to be successful, the applicant is obliged to show not only that the appeal or intended appeal is arguable, but also that the success of that appeal will be rendered nugatory unless the orders sought are granted. Satisfying one condition and not the other will not suffice.
Accordingly, we allow the motion dated 12th June 2009, and order that an injunction issue restraining the 1st respondent from exercising the power of sale over land parcel No. Nairobi/Block 91/344, pending the hearing and final determination of the applicant's intended appeal, or until further order of this Court or the superior court. The costs of the application shall be in the intended appeal.
Weighing one thing against another, we consider that unless the injunction prayed for is granted the applicant's intended appeal, if successful, may well be rendered nugatory.
Issues in the judgment
#The name of the judge of the High Court is rendered inconsistently in the judgment as both 'Lesiit J.' and 'Lesiit J' versus 'Lessit J.' and 'Lesiit J.' in the header, a minor internal inconsistency.
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "HARVEER INVESTMENTS COMPANY LTD V EQUITORIAL COMMERCIAL LTD & 3 OTHERS [2009] KECA 138 (KLR)", Case Analysis (2009). Civil Application 172 of 2009 (UR 116/2009). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2009/138/eng@2009-09-25
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.