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Court of AppealDismissedCivil Application No. NAI 187 of 2018· [2018] KECA 269 (KLR)

Trapos Limited & 2 others v I & M Bank Limited & another [2018] KECA 269 (KLR)

Court of Appeal
12 October 2018
William OukoW. OukoMartha Karambu KoomeM.K. KoomeASAsike-Makhandia
1,709 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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The Court of Appeal refused to stop the auction of a charged Karen home, holding that sentimental attachment alone cannot justify an injunction pending appeal.

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 to restrain I & M Bank Limited and an auctioneer from selling L.R No. 1160/689 (I.R No. 84262) at Karen, pending an intended appeal against a High Court ruling (F. Tuiyott, J., dated 19 June 2018) which had declined to stop the auction of the property. The dispute arose from an Advisory and Arranging Mandate Agreement between the first applicant and CFC Stanbic Bank, secured by a Standby Letter of Credit issued by the bank and a charge over the suit property, which was the second and third applicants' matrimonial home. CFC called up the SBLC, the bank paid out approximately Kshs. 25 million, and exercised its statutory power of sale. The Court of Appeal (Ouko, P., Koome and Makhandia JJ.A) found the intended appeal arguable on the 13 draft grounds, including the bank's alleged negligence and bad faith in honouring the SBLC demand. However, the applicants failed to demonstrate that the appeal would be rendered nugatory without an injunction: they did not explain the substantial loss they would suffer, sentimental attachment to a matrimonial home offered as security was not a consideration, and no argument was advanced that damages would be inadequate. The application was dismissed with costs in the appeal. The decision below was not disturbed, as this was an interlocutory application in a contemplated appeal.

Key legal issues

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01

Arguability of the intended appeal

Holding

The intended appeal was arguable on the 13 grounds in the draft memorandum, including whether the bank was negligent in honouring the SBLC demand and whether there was default.

Reasoning

The court considered the draft memorandum of appeal based on 13 grounds and entertained no doubt that the intended appeal was arguable, identifying as live issues the bank's alleged negligence in honouring CFC's demand, whether the applicants were in default, and whether the conditions for a temporary injunction were satisfied. However, the court refrained from expressing conclusive views since the appeal was yet to be filed.

p. 2
02

Whether the intended appeal would be rendered nugatory

Holding

The applicants failed to discharge the onus of demonstrating that the intended appeal would be rendered nugatory if the injunction was not granted; substantial loss was the cornerstone and was not shown.

Reasoning

Applying the principle that substantial loss is the cornerstone of the Rule 5(2)(b) jurisdiction, the court found that the applicants merely asserted the property was their matrimonial home without explaining the substantial loss they would suffer. Sentimental attachment could not, without more, be a consideration since the property was a matrimonial home even when charged as security, and no argument was made that damages would be inadequate.

p. 2

Legal principles established

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  • An applicant under Rule 5(2)(b) must satisfy both the arguability of the intended appeal and that the appeal will be rendered nugatory if the injunction is not granted; failure on either limb is fatal.
  • Sentimental attachment to a property, even a matrimonial home offered as security, does not without more constitute substantial loss for purposes of a Rule 5(2)(b) injunction; the applicant must show the appeal will be rendered nugatory.
  • Where it is not argued that the respondent would be incapable of paying damages arising from the sale, substantial loss is not demonstrated.

Court orders

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  1. 1.Application for an injunction pending the hearing and determination of the intended appeal dismissed
  2. 2.Costs will be in the appeal

Authorities

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Legislation

  • Court of Appeal RulesRule 5(2)(b)
  • Land Actstatutory notices
  • Auctioneers Rulesnotification of sale

Cases cited (3)

  • Giella V. Cassman Brown & Co. Ltd
    (1973) E.A. 358
  • Reliance Bank Ltd (In Liquidation) V Norlake Investments Ltd
    Civil Application No. Nai. 93 of 2002 (UR)
  • Kenya Shell Limited V Kibiru & Another
    Civil Application No. NAI. 97 of 1986
On appeal from
High Court of Kenya at Nairobi
HCCC No. 235 of 2018
Jurisdiction invoked
Rule 5(2)(b) of the Court of Appeal Rules (application for injunction pending intended appeal)

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, "Trapos Limited & 2 others v I & M Bank Limited & another [2018] KECA 269 (KLR)", Case Analysis (2018). Civil Application No. NAI 187 of 2018. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2018/269/eng@2018-10-12

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