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Court of AppealAllowedCivil Application No. NAI 275 of 2017 (UR 214/2017)· [2018] KECA 679 (KLR)

Harit Sheth Advocates v Nzioka & Co Advocates [2018] KECA 679 (KLR)

Court of Appeal
21 March 2018
RNR. N. NambuyeMohamed Abdulahi WarsameM. WarsameSKS. Gatembu Kairu
1,055 words in judgment
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The bottom line

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Kenya's Court of Appeal halted enforcement of a Kshs.25 million fee decree against a law firm, but only because it secured the debt with a bank guarantee.

What this practically means

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Executive summary

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This is a single-judge-authored ruling of a three-judge bench of the Court of Appeal at Nairobi (Nambuye, Warsame and Gatembu Kairu, JJ.A) on an application under Rule 5(2)(b) of the Court of Appeal Rules, 2010 seeking stay of a ruling by Sergon, J. dated 22nd September 2017 in H.C.C.C. No. 187 of 2015 (O.S). The underlying dispute concerned outstanding legal fees of Kshs.25,000,000 owed to Nzioka & Co. Advocates, secured by a professional undertaking contained in letters dated 29th March 2013 and 5th April 2013. Sergon, J. had allowed a motion dated 10th November 2016 enforcing the undertaking, finding that decretal sums of Kshs.2,400,000,000 had been remitted. The applicant, Harit Sheth Advocates, which had taken over the litigation from the respondent, contended before the Court of Appeal that it had an arguable appeal, principally on whether a consent order dated 27th April 2016 amended the original contractual relationship, and that payment of the decree would render the appeal nugatory. Applying the twin principles governing Rule 5(2)(b) applications, the court found the appeal arguable and held that the Kshs.25,000,000 money decree, if paid without security, would cause disproportionate prejudice. It allowed the application, granting stay conditional on the applicant providing a bank guarantee of Kshs.25,000,000 and filing the record of appeal within thirty days, with automatic discharge in default. Costs of the application were ordered to abide the appeal. The High Court ruling itself was not disturbed; the court only stayed its execution pending the intended appeal.

Key legal issues

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01

Arguability of the intended appeal

Holding

The intended appeal is arguable because whether the consent order dated 27th April 2016 amended the original contractual relationship is a fundamental legal issue, and the claim that final payment had not been received is not frivolous.

Reasoning

The court found one bona fide ground sufficient: the effect of the consent order recorded on 27th April 2016 and filed on 4th May 2016 on the original contractual relationship required determination on appeal. The contention that the applicant's firm had yet to receive final payment on behalf of the plaintiffs could not be dismissed as frivolous, satisfying the first limb.

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02

Nugatory value of the intended appeal

Holding

The appeal would be rendered nugatory if the Kshs.25,000,000 money decree were paid out without security, so stay was warranted conditioned on a bank guarantee.

Reasoning

The court weighed the respondent's right to enjoy the fruits of its judgment against the applicant's exposure to irreparable prejudice. Execution involved a money decree of Kshs.25,000,000, not a meager sum; if paid without security, the applicant would suffer prejudice disproportionate to any hardship to the respondent, justifying a conditional stay.

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Legal principles established

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  • On a Rule 5(2)(b) application the applicant must show both that the intended appeal is arguable and that it will be rendered nugatory unless stay is granted.
  • In weighing the nugatory limb the court must balance the respondent's right to enjoy the fruits of judgment against the applicant's interest in ventilating the appeal without suffering irreparable loss.

Court orders

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  1. 1.Stay of the ruling of Sergon, J. dated 22nd September 2017 and of enforcement proceedings, subject to conditions
  2. 2.The applicant shall provide a bank guarantee of Kshs.25,000,000/= from a reputable bank within thirty (30) days from the date of the ruling
  3. 3.The applicant shall within thirty (30) days file and serve the record of appeal
  4. 4.In default of compliance with any of the conditions, the orders of stay shall be automatically discharged and the application shall stand dismissed
  5. 5.Costs of the application shall abide the appeal

Authorities

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Legislation

  • Court of Appeal Rules, 2010Rule 5(2)(b)

Cases cited (2)

  • Ishmael Kagunyi Thande vs. Housing Finance of Kenya Ltd
    Civil Application No. Nai. 157 of 2006
  • Reliance Bank Ltd vs Norlake Investments Ltd
    [2002] 1EA 227
On appeal from
High Court of Kenya at Nairobi
H.C.C.C. No. 187 of 2015 (O.S)
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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Cite this brief

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Cite this brief

Caselaw, "Harit Sheth Advocates v Nzioka & Co Advocates [2018] KECA 679 (KLR)", Case Analysis (2018). Civil Application No. NAI 275 of 2017 (UR 214/2017). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2018/679/eng@2018-03-21

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