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Court of AppealDismissedCivil Application No. 62 of 2010

John Kipkemboi Kilei v Wilfred Rutho Njeru as Interim Liquidator of Lakestar Insurance Company Limited [2010] KECA 162 (KLR)

Court of Appeal
16 July 2010
1,307 words in judgment
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The bottom line

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Kenya's Court of Appeal dismissed a man's attempt to freeze a liquidator's work, ruling you cannot stay an order nobody can execute.

What this practically means

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Executive summary

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This was an application under rule 5(2)(b) of the Court of Appeal Rules seeking an injunction and stay of execution and proceedings pending an intended appeal against a ruling of Khaminwa, J of the High Court delivered on 21st October 2009 in H.C.C.C. No. 363 of 2008. The underlying dispute arose from the winding up of Lakestar Insurance Company Ltd, ordered by Mutungi, J on 27th June 2003, with the respondent appointed interim liquidator. The applicant, describing himself as a contributor and shareholder, alleged the liquidator had sold two company properties at undervalued prices, failed to call meetings of contributors and shareholders, and failed to render accounts. The High Court had dismissed his application for interim relief, vacated the interim orders on the basis of misleading information and non-disclosure of material facts, and ordered the liquidator to file final accounts within three months. Before the Court of Appeal, the applicant sought a stay of execution of the injunction, a stay of proceedings, the appointment of a new liquidator/auditor, and access to specified bank accounts. The Court applied the settled two-limb test: the applicant must show the appeal is arguable and that, absent a stay or injunction, its success would be rendered nugatory. The Court held the intended appeal was not arguable: a negative injunction order cannot be stayed, a new interim liquidator cannot be appointed under rule 5(2)(b), and the applicant's request to stay the filing of accounts contradicted the very relief he had sued for. The Court did not reach the nugatory limb and dismissed the motion with costs to the respondent.

Key legal issues

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01

Whether the intended appeal was arguable

Holding

The intended appeal was not arguable. Two of the four prayers were incapable of being granted (a negative order cannot be stayed; a liquidator cannot be appointed under rule 5(2)(b)), and the remaining prayer sought to stay the very relief (rendering of accounts) the applicant had sued for.

Reasoning

The Court examined each of the applicant's four prayers. It found the stay of execution of the injunction unavailing because negative orders cannot be executed or stayed; the prayer to appoint a new liquidator was outside rule 5(2)(b); and the only order capable of being stayed - the filing of final accounts - was one the applicant himself had sought in the superior court. These considerations led the Court to be highly skeptical of the appeal's success and to find it not arguable, making it unnecessary to consider the nugatory-appeal limb.

p. 3
02

Whether the nugatory limb needed consideration

Holding

Having found the intended appeal not arguable, the Court declined to consider the second limb of the rule 5(2)(b) test.

Reasoning

The rule 5(2)(b) jurisdiction requires an applicant to satisfy both principles - arguability and nugatory-ness. Since the applicant had failed on the first principle, the Court found it unnecessary to go into the second limb, as failure on either limb is dispositive of the application.

p. 3

Legal principles established

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  • An applicant under rule 5(2)(b) must satisfy two principles: that the appeal or intended appeal is arguable, and that unless an injunction or stay is granted the success of the appeal will be rendered nugatory.
  • A negative injunction order, being incapable of execution, is also incapable of being stayed.
  • A new interim liquidator cannot be appointed by way of an application under rule 5(2)(b) of the Court of Appeal Rules.

Court orders

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  1. 1.The motion dated 25th March, 2010 is dismissed
  2. 2.Costs of the application awarded to the respondent
On appeal from
High Court of Kenya at Nairobi (Milimani)
H.C.C.C. No. 363 of 2008
Jurisdiction invoked
Rule 5(2)(b) of the Court of Appeal Rules

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, "John Kipkemboi Kilei v Wilfred Rutho Njeru as Interim Liquidator of Lakestar Insurance Company Limited [2010] KECA 162 (KLR)", Case Analysis (2010). Civil Application No. 62 of 2010. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2010/162/eng@2010-07-16

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