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Court of AppealAllowedCivil Application No. 94 of 2014 (UR 77 of 2014)· [2014] KECA 548 (KLR)

Hashmukhlal Virchand Shah & 2 others v Investment & Mortgages Bank Limited [2014] KECA 548 (KLR)

Court of Appeal
13 June 2014
RNR.N. NambuyeAMA.K. MurgorJMJ. Mohammed
3,717 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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Kenya's Court of Appeal stopped a bank from selling charged Mombasa property pending appeal, confirming both Rule 5(2)(b) tests must be satisfied and one arguable point suffices.

What this practically means

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Executive summary

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The applicants, chargors and guarantors of a facility secured by property known as Mombasa/Block XXVI/380-Kizingo, sued Investment & Mortgages Bank Limited in HCCC No. 27 of 2013 seeking injunctions and a declaration that the sum recoverable against the property was limited to twenty million shillings. Havelock J dismissed their interim injunction application with costs on 24 April 2014, holding that the Land Act No. 6 of 2012 did not apply to them. The applicants lodged a notice of appeal and moved the Court of Appeal under Rule 5(2)(b) for an interlocutory injunction preserving the property pending the intended appeal. The respondent opposed on the grounds that the applicants were not proper parties (the loan having been taken by a company), that the issues were res judicata from prior suits, and that no undertaking as to damages had been offered. The Court, in a unanimous ruling by Nambuye, Murgor and Mohammed JJ.A, held that the applicants had properly invoked the Court's jurisdiction, that the intended appeal raised bona fide arguable points (including compliance with the Land Act before realization of security and whether the ceilings in the three charges could be consolidated), and that without preservative orders the substratum of the High Court litigation would be put beyond the applicants' reach. The Court held that an undertaking as to damages is not a criterion under Rule 5(2)(b) and declined to impose one given the dispute over the quantum of the debt. The application was allowed in terms of prayer (2), with costs to abide the outcome of the intended appeal.

Key legal issues

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01

Threshold for relief under Rule 5(2)(b)

Holding

The Court found both limbs satisfied: the intended appeal raised arguable points and, being against refusal of an injunction over charged land not yet sold, the appeal would be rendered nugatory without preservative orders.

Reasoning

The Court reaffirmed that Rule 5(2)(b) jurisdiction is discretionary but must not preempt the main appeal. It identified five arguable points, including proper parties, compliance with the Land Act before realizing security, and the ceiling of indebtedness under the charges. Because the High Court litigation had not been finally determined, sale of the property would put the substratum of the litigation out of the applicants' reach. Both ingredients being met, the application was allowed in terms of prayer (2).

p. 5
02

Undertaking as to damages

Holding

Failure to offer an undertaking as to damages is not a criterion under Rule 5(2)(b), and here the dispute over the quantum of the debt meant no such condition was imposed.

Reasoning

The respondent argued the application should fail for want of an undertaking as to damages. The Court held that undertaking is not among the Rule 5(2)(b) criteria, though in money-decree cases it may be imposed as a precondition. Given the live dispute over the amount of the outstanding debt forming the basis of the intended realisation of security, the circumstances did not invite such an indulgence.

p. 5
03

Prior unsuccessful injunction applications

Holding

The applicants' failure to secure injunctive relief in other similar applications goes to the merits of the intended appeal and the Court declined to pronounce on it.

Reasoning

The respondent argued that the applicants had failed in numerous similar injunction applications, including Civil Suit No. 259 of 2010. The Court held that this issue touches the merits of the intended appeal and that any pronouncement could prejudice or pre-empt the outcome of the appeal, so it was unsafe to make findings on it at this interlocutory stage.

p. 6

Legal principles established

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  • Both limbs of the Rule 5(2)(b) test - arguability of the appeal and the nugatory-venture test - must be satisfied before relief can be granted.
  • An arguable appeal need not be one that will necessarily succeed; a single bona fide arguable point suffices.
  • An undertaking as to damages is not one of the criteria for relief under Rule 5(2)(b), though the Court may impose one as a condition where a money decree is involved.

Court orders

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  1. 1.An order of interlocutory injunction restraining the respondent from advertising for sale, disposing or selling by public auction or private treaty or otherwise interfering with the applicants' ownership, interest or occupation of property known as Mombasa/Block XXVI/380, Kizingo Mombasa pending the hearing and determination of the intended appeal
  2. 2.Costs of the application to abide the outcome of the intended appeal

Authorities

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Legislation

  • Court of Appeal Rules 2010Rule 5(2)(b)
  • Court of Appeal Rules 2010Rule 75
  • Land ActSection 96(3)
  • Land ActSection 78(1)
  • Land Registration Act 2012
  • Registered Land Act (RLA)

Cases cited (16)

  • Mbogo and another versus Shah
    [1968] EA 93
  • Giella versus Cassman Brown & Co. Ltd
    [1973] EA 358
  • Banana Will Investment Limited versus Pan African Bank Limited & 2 others
    [1987] KLR 351
  • Githunguri versus Jimba Credit Corporation Ltd
    [1988] KLR 838
  • Oraro & Rachier Advocates versus Co-Operative Bank of Kenya Ltd
    Nairobi Civil Application No. Nai 358 of 1999 (UR 149 of 1999)
  • Judicial Commission of Inquiry into the Goldenberg Affairs & 3 others versus Kilach
    [2003] KLR 249
  • Mrs. Surinder Kumari Mediratta versus Kenya Commercial Bank and 2 others
    Nai 131 of 2005 (UR.74/05)
  • Stanley Kangethe Kinyanjui versus Tony Ketter and five others
    Civil Application No. 31 of 2012; [2013] eKLR
  • Jimmy Wafula versus Fidelity Commercial Bank Ltd
    [2013] eKLR
  • E.N.W. versus PWM and 3 others
    [2013] eKLR
  • Humphrey Kilambo Mcharo versus Kenya Commercial Bank Ltd
    [2005] eKLR
  • Reuben and 9 others vs. Nderitu and another
    [1989] KLR 459
  • Damji Pragji Mandavia versus Sara Lee House Hold & Body Care (K) Ltd
    Civil Appeal No. Nai 345 of 2004
  • Halai & Another versus Tharton & Turpin [1963] Ltd
    [1990] KLR 365
  • Joseph Gitahi Gachau & another versus Pioneer Holdings (A) Ltd & 2 others
    Civil Application No. 124 of 2008
  • Reliance Bank Ltd versus Nor Lake Investment Ltd
    [2002] 1EA 227
On appeal from
High Court of Kenya at Nairobi
Nairobi Commercial & Admiralty Division (Milimani) Civil Suit No. 27 of 2013
Jurisdiction invoked
Rule 5(2)(b) of the Court of Appeal Rules 2010

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (20)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Hashmukhlal Virchand Shah & 2 others v Investment & Mortgages Bank Limited [2014] KECA 548 (KLR)", Case Analysis (2014). Civil Application No. 94 of 2014 (UR 77 of 2014). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2014/548/eng@2014-06-13

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