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Court of AppealDismissedCivil Application No. 72 of 2020· [2020] KECA 359 (KLR)

Panchamatia & 3 others v Prime Bank Limited & another (Civil Application 72 of 2020) [2020] KECA 359 (KLR)

Court of Appeal of Kenya
7 August 2020
2,978 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 dismissed borrowers' bid to halt their Kisumu properties' auction, ruling a dismissal order cannot be stayed and one property was already sold.

What this practically means

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Executive summary

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This is a ruling of the Court of Appeal (Nambuye, Koome and Asike-Makhandia, JJ.A) on a notice of motion dated 3rd July 2020 seeking stay of execution and a temporary injunction pending an intended appeal against the ruling of the High Court at Kisumu (Cherere, J.) of 24th June 2020, which dismissed the applicants' injunction application seeking to restrain Prime Bank Limited and Garam Investment Auctioneers from auctioning Kisumu/Municipality/Block 12/310 and Kisumu/Municipality/Block 6/63. The dispute arose from loan facilities extended to the 2nd and 3rd applicants, secured by guarantees and indemnities executed by the 1st and 4th applicants against the suit properties. The applicants invoked Section 3A of the Appellate Jurisdiction Act, Rules 5(2)(b), 41 and 47 of the Court of Appeal Rules, 2010 and the court's inherent power, contending the intended appeal was arguable and would be rendered nugatory if the properties were sold. The court accepted that the intended appeal was arguable but held that the order sought to be stayed was a negative order - a dismissal - incapable of being stayed, following Western College of Arts and Applied Sciences v Oranga. On the nugatory test, the applicants failed to demonstrate that the respondents could not pay damages; moreover, Block 12/310 had already been sold by public auction to Pasaka Ventures Limited, rendering relief in respect of it futile. The application was accordingly dismissed with costs to the 1st respondent. The decision binds subordinate courts on the principle that negative orders cannot be stayed and that an applicant must satisfy both limbs of the Rule 5(2)(b) test.

Key legal issues

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01

Whether a stay of execution can issue against a negative order

Holding

A negative order dismissing an application cannot be stayed because there is nothing to execute or enforce

Reasoning

The order the applicants sought to stay was the High Court's dismissal of their injunction application. Following Western College of Arts and Applied Sciences v Oranga, execution can only lie in respect of costs; the High Court ordered no party to do or refrain from doing anything or to pay any sum. The court therefore had no mandate to grant a stay in the manner prayed for.

p. 4
02

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

Holding

The applicants failed the nugatory test because they did not show the respondents would be unable to pay damages, and one suit property had already been sold at auction

Reasoning

Although the court accepted the appeal was arguable, the applicants did not demonstrate that damages would not adequately compensate them. Further, Kisumu Municipality/Block 12/310 had been sold to Pasaka Ventures Limited for Kshs. 24,100,000 with a deposit paid, so any order regarding it would be granted in vain and in futility.

p. 4
03

Whether the intended appeal is arguable under Rule 5(2)(b)

Holding

The appeal was arguable, an arguable appeal not needing to be one that will ultimately succeed

Reasoning

The applicants annexed a memorandum of appeal raising nine grounds, including challenges to the judge's findings on the guarantors' discharge, the arising of the statutory power of sale and the absence of a prima facie case. The court was satisfied the applicants intended to present an arguable appeal, subject to the usual caution that it may not ultimately succeed.

p. 4

Legal principles established

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  • A negative order, such as an order dismissing an application, is incapable of being stayed because there is nothing to stay
  • An applicant under Rule 5(2)(b) must satisfy both twin principles - that the appeal is arguable and that it will be rendered nugatory if stay is not granted
  • Whether or not an appeal will be rendered nugatory depends on whether what is sought to be stayed is reversible, or whether damages will reasonably compensate the aggrieved party
  • The applicant bears the burden of demonstrating that the respondent would be unable to pay damages should the appeal succeed

Court orders

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  1. 1.The application dated 3rd July 2020 is dismissed
  2. 2.Costs of the application awarded to the 1st respondent
On appeal from
High Court of Kenya at Kisumu
Nairobi Commercial Case No. 2 of 2020
Jurisdiction invoked
Section 3A of the Appellate Jurisdiction Act and Rule 5(2)(b), Rules 41 and 47 of the Court of Appeal Rules, 2010, and the inherent power of the court

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, "Panchamatia & 3 others v Prime Bank Limited & another (Civil Application 72 of 2020) [2020] KECA 359 (KLR)", Case Analysis (2020). Civil Application No. 72 of 2020. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2020/359/eng@2020-08-07

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