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Court of AppealAllowedCivil Application No. NAI 321 of 2014 (UR 243/2014)· [2015] KECA 831 (KLR)

Elegance Investment Limited & another v Anthony Chinedu Ifedigbo [2015] KECA 831 (KLR)

Court of Appeal
27 March 2015
GKG.B.M. KariukiPKP. O. KiageJMJ. Mohammed
2,321 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 the winding-up of Elegance Investment Limited, ruling the appeal raised real issues and executing the decree could not be undone.

What this practically means

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Executive summary

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This is a single-judgment ruling of the Court of Appeal at Nairobi (G.B.M. Kariuki, Kiage and J. Mohammed, JJ.A) on a Notice of Motion by Elegance Investment Limited and its director-shareholder Joyce Akinyi Ochieng under Rule 5(2)(b) of the Court of Appeal Rules, seeking stay of execution of a decree winding up the company, issued by Ogola, J of the High Court on 19 May 2014 in Winding Up Cause No. 19 of 2009. The High Court had wound up the company on just and equitable grounds under Sections 218 and 219 of the Companies Act, Cap 486, reasoning that the deportation of the respondent (the 2nd applicant's estranged husband and co-shareholder) reduced membership below the statutory minimum, and that annual returns for 2012 and 2013 were unfiled. The applicants argued the appeal was arguable - citing pending litigation over a sub-lease of the Deep West Resort, alleged ulterior motives behind the petition, and the judge's failure to consider alternatives to winding up - and that execution would render any successful appeal nugatory since the deported respondent could not be made to restore distributed assets. The respondent countered that no arguable appeal existed and that distribution in specie posed no irreparable harm. Applying the settled twin tests from Ishmael Kagunyi Thande v HFCK, the court found both limbs satisfied, allowed the application, stayed execution of the winding-up decree pending the intended appeal, and ordered that costs of the application abide the outcome of the appeal. The decision below was not disturbed at this interlocutory stage.

Key legal issues

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01

Whether the intended appeal is arguable

Holding

The grounds raised in the draft memorandum of appeal, including the alleged abuse of process in winding up the company before determination of the sub-lease dispute and the alleged ulterior motives behind the petition, are arguable and not frivolous.

Reasoning

The court examined the draft grounds of appeal, which raised issues of pending litigation over the Deep West Resort sub-lease, abuse of court process, and ulterior motives arising from sour matrimonial relations. It found these grounds raised matters worthy of consideration on appeal, satisfying the first limb of the Rule 5(2)(b) test without needing to establish that the appeal would succeed.

p. 4
02

Whether the appeal, if successful, would be rendered nugatory

Holding

If the winding-up decree were executed and the company's assets distributed in specie, they could not be recovered on a successful appeal because the respondent was a deported persona non grata, rendering the appeal nugatory.

Reasoning

The court accepted the 2nd applicant's sworn averments that once the company is wound up and assets distributed according to shareholding, recovery would be impossible given the respondent's deportation to Nigeria. Applying the principle that nugatoriness is assessed case by case, the court found this a deserving case for the exercise of its discretion under Rule 5(2)(b).

p. 4

Legal principles established

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  • An applicant under Rule 5(2)(b) must satisfy the twin tests of an arguable appeal and that the appeal, if successful, will be rendered nugatory absent the orders sought.
  • An arguable appeal need not be one that must succeed; nugatoriness is a question of fact dependent on the circumstances of each case.

Court orders

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  1. 1.Stay of execution of the decree issued in Winding Up Cause No. 19 of 2009 on 19th May 2014 pending the hearing and determination of the intended appeal
  2. 2.Costs of the application to abide by the outcome of the appeal

Authorities

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Legislation

  • Companies Act, Cap 486Sections 218 and 219
  • Court of Appeal RulesRule 5(2)(b)

Cases cited (10)

  • Kenya Airports Authority v Mitu-Bell Welfare Society & Another
    [2014] e-KLR
  • Engineers Registration Board v Jessee Waweru Wahome & Others
    [2013] e-KLR
  • Wardpa Holdings Limited & 3 Others v Emmanuel Waweru Lima Mathai & Another
    [2012] e-KLR
  • Consolidated Bank of Kenya Ltd v Florence Wairumu Mbugua & Another
    [2014] e-KLR
  • Ishmael Kagunyi Thande v HFCK
    Civil Appln NAI No. 157 of 2006
  • Equity Bank Limited v West Link Mbo Limited
    Civil Appln No. NAI 78 of 2011
  • Reliance Bank Ltd v Norlake Investments Ltd
    (2003) 1 EA 232
  • Madhupaper International Limited v Kerr
    [1985] e-KLR
  • Kileleshwa Service Station Limited v Kenya Shell Limited
    [2008] e-KLR
  • Maureen Waitherа Mwenje & Anor v David Kinyanjui Njenga & 2 Others
    [2014] e-KLR
On appeal from
High Court of Kenya at Nairobi
H.C. Winding Up Cause No. 19 of 2009
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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Later judgments citing this (2)

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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, "Elegance Investment Limited & another v Anthony Chinedu Ifedigbo [2015] KECA 831 (KLR)", Case Analysis (2015). Civil Application No. NAI 321 of 2014 (UR 243/2014). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2015/831/eng@2015-03-27

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