Palmy Company Limited v Consolidated Bank of Kenya Limited & another [2020] KECA 215 (KLR)

Court of Appeal

6 November 2020

W. Ouko DMD. K. Musinga SKS. Gatembu Kairu

617 words in judgment

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The bottom line

Kenya's Court of Appeal refused to stop a bank selling a borrower's property because the borrower couldn't show money damages wouldn't fix the problem.

What this practically means

Executive summary

This was an application under rule 5(2)(b) of the Court of Appeal Rules by Palmy Company Limited seeking an interlocutory injunction to restrain Consolidated Bank of Kenya Limited and Josrick Merchants Auctioneers from selling, or further advertising for sale, property known as L.R. No. 209/11043 pending an intended appeal against a High Court ruling of Maureen A. Odero, J. dated 29th November 2019 dismissing the applicant's injunction application in H.C.C. Case No. 527 of 2013. The applicant had borrowed Kshs. 35,000,000 from the bank to develop the property, defaulted, and faced a statutory notice of sale and auction advertisement. The applicant argued the property was undervalued and would be sold at a throwaway price, leaving it unable to repay the loan balance and exposed to continued pursuit by the bank. The application was uncontested. Applying the principles summarised in Stanley Kangethe Kinyanjui v Tony Keter, the Court (Ouko, P., Musinga and Gatembu, JJ.A.) was satisfied the intended appeal was arguable, but held the applicant had not shown the appeal would be rendered nugatory if the sale proceeded, since no contention was made that the bank would be incapable of paying damages. Declaratory orders sought were declined for lack of jurisdiction in a rule 5(2)(b) application. The application was dismissed in its entirety with no order as to costs, the application having been unopposed.

Key legal issues

Whether an injunction pending appeal should issue where the appeal is arguable but nugatory-ness is not established

Holding

The application fails because the second limb of the rule 5(2)(b) test was not met

Reasoning

The Court applied the settled principles from Stanley Kangethe Kinyanjui v Tony Keter: arguability alone is insufficient; the applicant must also show the appeal would be rendered nugatory. As the 1st respondent is a bank and no claim was made that it could not pay damages, any prejudice could be cured by an award of damages, so no preservation order was warranted.

p. 1

Whether declaratory orders can be granted in a rule 5(2)(b) application

Holding

No - the Court lacks jurisdiction to grant declaratory orders in such an application

Reasoning

A rule 5(2)(b) application is confined to preservation of the subject matter of an intended appeal pending its hearing and determination. Declaratory relief is a substantive remedy that can only be sought in the substantive appeal or in the trial court, and the Court expressly declined to entertain the declaratory orders sought here.

p. 1

Legal principles established

An applicant under rule 5(2)(b) must demonstrate both that the appeal is arguable and that it would be rendered nugatory if not preserved; failure on the second limb is fatal even where the appeal is arguable
Where an applicant alleges loss of property by sale, it must show that the purchaser or chargee would be unable to compensate in damages; the solvency of a bank respondent cannot be left unchallenged

Court orders

1.The application is dismissed in its entirety
2.No order as to costs

Authorities

Legislation

Court of Appeal RulesRule 5(2)(b)

Cases cited (1)

Stanley Kangethe Kinyanjui v Tony Keter & 5 Others
[2013] eKLR

On appeal from: High Court of Kenya; H.C.C. Case No. 527 of 2013
Jurisdiction invoked: Rule 5(2)(b) of the Court of Appeal Rules

Key timeline

Practical implications

Frequently asked questions

Cite this brief

Caselaw, "Palmy Company Limited v Consolidated Bank of Kenya Limited & another [2020] KECA 215 (KLR)", Case Analysis (2020). Civil Application No. 33 of 2020. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2020/215/eng@2020-11-06

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