Alma Tuju & 4 others v East African Development Bank & 2 others [2020] KECA 196 (KLR)
The bottom line
#Kenya's Court of Appeal halted insolvency proceedings and receiver enforcement against the Tuju family and Dari Limited until their appeal over a UK judgment debt is decided.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether the preliminary objections based on res judicata can be determined as a pure point of law without ascertaining facts
- 2.Whether the preliminary objection based on the applicants' alleged contempt of court should be determined as a preliminary issue
- 3.Whether the applicants have satisfied the twin requirements of arguability and the nugatory aspect under rule 5(2)(b) to warrant a stay of the insolvency proceedings and the enforcement of the statutory demand notices
Key legal issues
#Whether res judicata could be raised as a preliminary objection against the stay applications
The objection failed because the parties were not agreed on the facts, such as whether there was one or two loan facilities, and the single Judge's earlier order merely settled the terms of an order without determining the applicability of the stay to the insolvency proceedings.
Applying the Mukisa Biscuits test and the Supreme Court's restatement, a preliminary objection must be a pure question of law. Here factual disputes existed, notably whether there was one or two loan facilities, and the previous ruling of 19th June 2020 did not decide whether the stay applied to the insolvency proceedings. Res judicata requires the issue to have been directly and substantially in issue and finally determined by a competent court, which was not established without ventilating the facts.
Whether the contempt-based preliminary objection in Civil Application No. 203 of 2020 should bar the applicants' right of audience
The objection was overruled as premature because the issue of contempt is itself a subject of the intended appeal and would be a substantive issue in the main appeal.
The court held it would be premature and prejudicial to determine the contempt issue as a threshold matter, since the fairness of the contempt findings will be examined in the appeal. The entire proceedings should be considered in determining the motion rather than disabling the applicants from being heard at the interlocutory stage.
Whether the applicants satisfied the twin requirements of arguability and nugatory aspect under rule 5(2)(b)
Arguability had already been found by a differently constituted bench in Civil Application No. 49 of 2020, and the appeal would be rendered nugatory without a stay because the insolvency proceedings and enforcement notices rest on the same UK judgment and facility agreement under challenge.
The court found the issue of recognition and enforcement of the UK judgment remains live in Civil Appeal No. 70 of 2020, and the statutory demand notices cannot be divorced from that judgment. Since the insolvency proceedings and enforcement notices are all anchored on the same debt instrument, failing to stay them would render the appeal nugatory. The motions were therefore granted as prayed.
Legal principles established
#- A preliminary objection must raise a pure point of law on assumed facts; it cannot be raised where facts must be ascertained or where the exercise of judicial discretion is sought.
- An application for stay under rule 5(2)(b) must satisfy the twin principles of arguability and the nugatory aspect.
- Where enforcement measures such as statutory demand notices and insolvency proceedings are anchored on a judgment whose recognition and enforcement is under appeal, a stay will be granted to preserve the appeal.
Court orders
#- 1.Preliminary objections in Civil Applications Nos. 202, 204, 205 and 206 of 2020 overruled
- 2.Preliminary objection in Civil Application No. 203 of 2020 overruled
- 3.Stay of proceedings in the insolvency causes (E001, E002, E003, E004 of 2020 and E469 of 2019) pending the hearing and determination of Civil Appeal No. 70 of 2020
- 4.Stay of enforcement of the statutory demand notices dated 20th January 2020 pending the hearing and determination of Civil Appeal No. 70 of 2020
- 5.In Civil Application No. 203 of 2020: stay of proceedings in HCCC No. E479 of 2019 and stay of enforcement of the notice of appointment of receivers and managers dated 23rd December 2019, pending the hearing and determination of Civil Appeal No. 70 of 2020 and the intended appeal against the ruling of 8th July 2020
The bench
#One judgment of the whole court — no separate or dissenting opinions.
Wrote the judgment
Wrote the judgment
Wrote the judgment
- On appeal from
- High Court of Kenya at Nairobi
- High Court Insolvency Cause No. E002 of 2020 (and related insolvency causes E001, E003, E004 of 2020 and E469 of 2019; HCCC No. E479 of 2019)
- Jurisdiction invoked
- Rule 5(2)(b) of the Court of Appeal Rules (application for stay of proceedings pending appeal)
- Consolidated with
- Civil Application No. 203 of 2020, Civil Application No. 204 of 2020, Civil Application No. 205 of 2020, Civil Application No. 206 of 2020
Quotable passages
#Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.
It raises a pure point of law which is argued on the assumption that all facts pleaded by the other side are correct. It cannot be raised if any fact has to be ascertained or if what is sought is the exercise of judicial discretion.
the applicants must satisfy this Court that they have an arguable appeal and that if the orders sought are not granted, the intended appeal will be rendered nugatory.
We therefore, find that the applicants have satisfied the twin requirements of Order 5(2)(b) of the Court Rules. Accordingly, we grant the motions and issue orders as prayed by the applicants.
Issues in the judgment
#The judgment itself notes confusion over the year of filing of the application subject of the 19th June 2020 ruling, and an inconsistent date for Warsame, JA's ruling, resolved as typographical errors.
Typographical inconsistencies in the numbering of the applications, e.g. 'Nos. 202, 204, 205 and 2006 of 2020', where 2006 appears to be an error for 206.
The judgment records the clarification order by Warsame, J as dated 14th June 2020, which post-dates the ruling of 19th June 2020 it purportedly clarified; the court itself flags this as an inconsistency.
No order as to costs appears in the judgment despite the disposition; the closing orders are silent on costs.
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Alma Tuju & 4 others v East African Development Bank & 2 others [2020] KECA 196 (KLR)", Case Analysis (2020). Civil Application No. 202 of 2020 (Consolidated with Civil Applications Nos. 203, 204, 205 and 206 of 2020). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2020/196/eng@2020-11-20
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.