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Court of AppealPartially AllowedCivil Application No. 279 of 2015 (UR 237/2015)· [2016] KECA 590 (KLR)

Anita Chelagat O’donovan & 2 others v Fredrick Kwame Kumah & 2 others [2016] KECA 590 (KLR)

Court of Appeal
6 May 2016
EGE. M. GithinjiGKG. B. M. KariukiJOJ. Otieno-Odek
4,821 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 protected a family facing eviction, but only if they paid Kshs 1.5 million as security, and refused to stop the bank selling other properties.

What this practically means

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Executive summary

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This is a ruling of the Court of Appeal at Nairobi (Githinji, G.B.M. Kariuki and Otieno-Odek, JJ.A) on a Notice of Motion dated 12th November 2015 brought under Rule 5(2)(b) of the Court's Rules by the O'Donovan applicants seeking injunctions pending an intended appeal (Civil Appeal No. 300 of 2015) against a ruling of C. Kariuki J in HCCC No. 131 of 2015. The applicants, who had charged three properties to secure a loan from National Bank of Kenya, sought to restrain the purchasers (Kumah and Wanjohi) from evicting them from the Loresho property, to restrain the bank from selling two other charged properties, and to stay the High Court proceedings. The court applied the twin Rule 5(2)(b) principles: it found the intended appeal arguable, noting triable issues on whether the bank properly exercised its statutory power of sale and whether the private treaty sale, concluded before expiry of the 45-day statutory redemption period, was valid. It also found the appeal would be rendered nugatory if the applicants, in possession, were evicted. However, it rejected the clogging-of-equity argument as not a tenable ground, held that no material challenged the bank's exercise of power of sale over the two remaining properties, and declined prayers (b) and stay of High Court proceedings. The court granted a conditional injunction restraining eviction, conditioned on the applicants depositing Kshs.1.5 million in a joint interest-earning account within 90 days, failing which the injunction lapses. The motion was partially allowed with costs in the appeal.

Key legal issues

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01

Twin principles for Rule 5(2)(b) relief

Holding

Arguability and nugatory-ness must both be demonstrated; the intended appeal disclosed arguable triable issues on the propriety of the statutory power of sale and the validity of the private treaty sale

Reasoning

The court found arguable issues including whether the bank properly exercised its statutory power of sale, whether the sale agreement was entered into before expiry of the 45-day statutory redemption period, and whether the purchasers were bona fide purchasers for value. A single arguable point suffices, and several triable issues were disclosed.

p. 6
02

Nugatory-ness and eviction of applicants in possession

Holding

The appeal would be rendered nugatory if the applicants, who are in possession, were evicted from the Loresho property while the legal propriety of the sale agreement is in issue

Reasoning

Relying on Aguthi Enterprises Limited v Hussein Ibrahim Nuni, the court held that because the applicants remained in possession and the validity of the sale was contested, eviction would destroy the substratum of the intended appeal; hence an injunction was warranted.

p. 6
03

Clogging the equity of redemption by escalating the debt

Holding

A dispute over the amount due, including an alleged escalation from Kshs.20 million to Kshs.128 million, is not a tenable ground for injunctive relief against a chargee

Reasoning

Guided by Joseph N.K. Arap Ngok v EABS Bank Limited and Priscillah Krobought v Kenya Commercial Finance Co. Ltd, the court held that disputes on accounts or amounts due under a charge do not justify restraining the chargee's statutory power of sale.

p. 6
04

Indemnity does not displace prejudice to registered proprietors

Holding

The applicants' possession of the Loresho property while indebted and while keeping the registered proprietors out of possession is prejudice that cannot be countenanced; hence only a conditional injunction was granted

Reasoning

The court rejected the submission that the bank's indemnity to the purchasers eliminated prejudice, noting the applicants had been in default since 1994 and occupied the property without servicing the loan. To mitigate prejudice, a conditional injunction requiring a Kshs.1.5 million deposit was crafted.

p. 7

Legal principles established

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  • For an injunction or stay under Rule 5(2)(b), the applicant must show the appeal is arguable and that it would be rendered nugatory if the orders are not granted
  • On arguability, a single arguable point suffices
  • An injunction to restrain a chargee or mortgagee from exercising its statutory power of sale will not be granted solely because there is a dispute on the amount due
  • In a Rule 5(2)(b) application the court must preserve the status quo and balance the likely loss or prejudice to both sides

Court orders

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  1. 1.Pending the hearing and determination of the intended appeal being Civil Appeal No. 300 of 2015, an injunction restraining the 1st and 2nd respondents from evicting the applicants from LR Nairobi Block 90/143 Loresho South or interfering with their quiet enjoyment, granted on conditions
  2. 2.The applicants shall deposit Kshs.1,500,000 in a joint interest-earning account as deposit and security for rent within 90 days, in default of which the injunction shall automatically lapse and be discharged
  3. 3.The account shall be opened in the joint names of counsel for the applicants and all three respondents in a bank other than the 3rd respondent, to be agreed, failing which the sum shall be deposited with the Registrar of this Court
  4. 4.Prayers (b) and (3) of the Notice of Motion, being restraint on sale of LR Nairobi Block 209/11315 and 209/11316 and stay of High Court proceedings, are declined and no stay of the High Court suit is granted
  5. 5.Costs in the appeal

Authorities

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Legislation

  • Court of Appeal RulesRule 5(2)(b)
  • Lands ActSection 90(1)
  • Lands ActSection 96(1)
  • Lands ActSection 98
  • Lands ActSection 99(2) and (3)
  • Lands ActSection 99(4)

Cases cited (11)

  • Githunguri vs. Jimba Credit Corporation Ltd. (No. 2)
    (1988) KLR 838
  • J.K. Industries Ltd. vs. Kenya Commercial Bank Ltd.
    [1982 – 88] 1 KAR 1088
  • Reliance Bank Limited (In Liquidation) vs. Norlake Investments Limited
    Civil Application No. 98 of 2002 (unreported)
  • Chris N. Bichage -v- Richard Nyagaka Tongi & 2 Others
    (2013) eKLR
  • Antoine Ndiaye -v- African Virtual University
    (2015) eKLR
  • Kenya Kazi Security Services Limited -v- Kenya National Private Security Workers Union
    (2013) eKLR
  • Ishmael Kagunyi Thande -v- Housing Finance Company of Kenya Limited
    Civil Application No. NAI 157 of 2006
  • Kenline Agencies Limited -v- Housing Finance Company of Kenya Limited & Another
    (2007) eKLR
  • Joseph N.K. Arap Ngok & another -v- EABS Bank Limited
    (2015) eKLR
  • Priscillah Krobought -v- Kenya Commercial Finance Co. Ltd.
    CA No. 227 of 1995
  • Aguthi Enterprises Limited -v- Hussein Ibrahim Nuni
    (2015) eKLR
On appeal from
High Court of Kenya at Nairobi
HCCC No. 131 of 2015
Jurisdiction invoked
Rule 5(2)(b) of the Rules of this Court (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, "Anita Chelagat O’donovan & 2 others v Fredrick Kwame Kumah & 2 others [2016] KECA 590 (KLR)", Case Analysis (2016). Civil Application No. 279 of 2015 (UR 237/2015). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2016/590/eng@2016-05-06

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