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Court of AppealDismissedCivil Application No. NAI 211 of 2016 (UR.164/2016)· [2018] KECA 865 (KLR)

Shah Munge & Partners Ltd v National Social Security Fund Board of Trustees & 2 others; Southern Bell Limited (Interested Party)

Court of Appeal
19 January 2018
WKW. KaranjaHOHannah OkwenguJMJ. Mohammed
2,281 words in judgment
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The bottom line

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Kenya's Court of Appeal refused to stop execution of a Kshs.258 million judgment because a solvent public body can refund money if the appeal later succeeds.

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 (Karanja, Okwengu and J. Mohammed, JJ.A) on Shah Munge & Partners Ltd's notice of motion under Rule 5(2)(b) of the Court of Appeal Rules seeking an injunction and stay of execution of a High Court judgment of Azangalala, J. dated 23rd October 2009, which entered judgment against the applicant for Kshs.258,133,330 plus interest and costs in a dispute over Treasury Bill Number 1471 involving breach of contract and negligence claims by the National Social Security Fund against the applicant and the Central Bank of Kenya. The applicant argued its intended appeal was arguable on liability for breach of contract and on whether the 1st respondent instructed it to place funds with Euro Bank's liquidators, and that execution against its only asset, NSE shares valued at about Kshs.78 million against a decretal sum plus interest of about Kshs.790 million, would render the appeal nugatory. The 1st respondent countered that the appeal was neither arguable nor nugatory, being a public body capable of refunding any execution proceeds. The Interested Party, Southern Bell Limited, claimed ownership of 1,575,000 NSE shares and supported the application. Applying the settled twin-principle test from Stanley Kang'ethe Kinyanjui v Tony Ketter, the court found the appeal arguable but held it would not be rendered nugatory since the 1st respondent could refund monies if the appeal succeeded. The application was dismissed with costs to the 1st respondent. The ruling binds subordinate courts and the High Court on the requirement that both limbs of Rule 5(2)(b) be satisfied.

Key legal issues

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01

Whether the intended appeal is arguable

Holding

The appeal was arguable on the ground whether the applicant was liable to the 1st respondent for breach of contract.

Reasoning

The court applied the settled principle that an arguable appeal need not succeed but must not be frivolous, and a single bona fide arguable ground suffices. It declined to delve into the merits, which are for the bench hearing the main appeal, and found the breach-of-contract ground arguable.

p. 4
02

Whether the appeal would be rendered nugatory if stay and injunction are denied

Holding

The appeal would not be rendered nugatory because the 1st respondent, a public body with substantial assets, could refund any monies executed if the appeal succeeds.

Reasoning

Applying Reliance Bank Ltd v Norlake Investments Ltd, nugatory-ness depends on the circumstances of each case and the conflicting claims of both sides. The 1st respondent's capacity to refund the decretal amount meant execution would be reversible, so the nugatory limb failed.

p. 5

Legal principles established

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  • An applicant under Rule 5(2)(b) must satisfy both twin principles: arguability and nugatory-ness; satisfying only one is insufficient.
  • Where a respondent is shown capable of refunding monies paid under a decree, the appeal will not be rendered nugatory by execution.

Court orders

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  1. 1.Declined to grant an injunction and stay of execution pending the hearing and determination of the intended appeal
  2. 2.Dismissed the application with costs to the 1st respondent

Authorities

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Legislation

  • Court of Appeal RulesRule 5(2)(b)
  • Court of Appeal RulesRule 75
  • Internal Loans ActCap 420
  • Capital Markets Authority Actnull

Cases cited (8)

  • Stanley Kang'ethe Kinyanjui v Tony Ketter & 5 others
    [2013] eKLR

    Summary of jurisprudence on Rule 5(2)(b) applications: twin principles of arguability and nugatory-ness.

  • Ruben & 9 Others v Nderitu & Another
    (1989) KLR 459

    Rule 5(2)(b) exercises original and discretionary jurisdiction, not an appeal from the trial judge's discretion.

  • Halai & Another v Thornton & Turpin (1963) Ltd.
    (1990) KLR 365

    Court becomes seized of the matter only after notice of appeal is filed under Rule 75.

  • David Morton Silverstein v Atsango Chesoni
    Civil Application No. Nai 189 of 2001

    Whether an appeal will be rendered nugatory depends on each case's own facts and peculiar circumstances.

  • Damji Pragji Mandavia v Sara Lee Household & Body Care (K) Ltd
    Civil Application No. Nai 345 of 2004

    A single bona fide arguable ground suffices; court must not make definitive findings at the interlocutory stage.

  • Joseph Gitahi Gachau & Another v Pioneer Holdings (A) Ltd. & 2 others
    Civil Application No. 124 of 2008

    An arguable appeal is one that ought to be argued fully; it need not necessarily succeed.

  • Reliance Bank Ltd v Norlake Investments Ltd
    [2002] 1 EA 227

    Meaning of 'nugatory' includes worthless, futile, invalid and trifling; factors considered case by case.

  • International Laboratory for Research on Animal Diseases v Kinyua
    [1990] KLR 403

    Where impecunity of respondent is alleged as rendering appeal nugatory, onus shifts to respondent to rebut by evidence.

On appeal from
High Court of Kenya at Nairobi
Commercial & Admiralty Civil Suit No. 1175 of 2002
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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Cite this brief

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Cite this brief

Caselaw, "Shah Munge & Partners Ltd v National Social Security Fund Board of Trustees & 2 others; Southern Bell Limited (Interested Party)", Case Analysis (2018). Civil Application No. NAI 211 of 2016 (UR.164/2016). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2018/865/eng@2018-01-19

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