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Court of AppealDismissedCivil Application No. Nai. E036 of 2021 (Motion dated 22nd January 2021)· [2021] KECA 45 (KLR)

Wanjohi v Njuguna & 3 others (Civil Application E019 of 2020) [2021] KECA 45 (KLR)

Court of Appeal of Kenya
23 September 2021
2,136 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~9 min to read original · ~4 min brief

The bottom line

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Kenya's Court of Appeal refused to stop a bank from selling charged property, confirming injunction applicants must prove both an arguable appeal and that damages wouldn't suffice.

What this practically means

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Executive summary

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The applicant, Michael Mwangi Wanjohi, moved the Court of Appeal under Rule 5(2)(b) of the Court of Appeal Rules, 2010 seeking an injunction restraining the 4th respondent, a financial institution, from realizing security over L.R No. 209/12513, Moi Avenue, Nairobi, a property owned by Ndonga Limited and charged to secure a Kshs 100,000,000 loan facility. He complained that a High Court ruling of 18th December 2020 had overlooked his claim that the loan was unlawfully obtained without proper board approval and that the charge was illegally registered. He had been granted leave to institute a derivative claim on behalf of the company against the 1st to 3rd respondents. The 4th respondent opposed, contending that the board had validly authorized the transaction and that damages would be an adequate remedy. Applying the settled twin principles from Stanley Kangethe Kinyanjui v Tony Ketter & Others, the court found the applicant had failed on both limbs: the undisputed facts - board authorization, the applicant's absence from the register of directors at the material time, and the bank's ignorance of internal wrangles - meant no arguable appeal was demonstrated; and the nugatory test failed because damages would be adequate, the derivative claim could still be pursued, and the 4th respondent, as a financial institution, could refund any damages awarded. The court deliberately made no definitive findings on the merits. The motion was dismissed with costs to the 4th respondent. The bench of Murgor, Sichale and ole Kantai JJA delivered a single unanimous judgment.

Key legal issues

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01

Whether the intended appeal is arguable

Holding

The applicant did not demonstrate an arguable appeal; the undisputed facts were that the loan facility was approved by the board, the applicant and 1st respondent were not directors at the time, and the 4th respondent was unaware of internal wrangles.

Reasoning

The court reviewed the undisputed facts: the facility of Kshs 100,000,000 was granted after the company presented board minutes authorizing it as a condition precedent; the applicant and 1st respondent were not listed directors when the facility was granted; and the 4th respondent was not aware of internal shareholder wrangles. These facts were uncontested, so no bona fide arguable ground was demonstrated. The court refrained from final findings to avoid embarrassing the bench hearing the appeal.

p. 4
02

Whether the appeal would be rendered nugatory without the injunction

Holding

The nugatory test failed because damages would be an adequate remedy, the applicant retained leave to pursue a derivative claim against the 1st to 3rd respondents, and the 4th respondent, a financial institution, could refund any damages awarded.

Reasoning

The court found the applicant had not shown that damages would be inadequate. It noted the High Court ruling of 18th December 2020 granted him leave to institute a derivative claim on behalf of Ndonga Limited against the 1st, 2nd and 3rd respondents, so his grievance could still be pursued. Further, the 4th respondent being a financial institution was capable of satisfying any award of damages on appeal, making the sale of the charged property a reversible event.

p. 4

Legal principles established

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  • An applicant under Rule 5(2)(b) must satisfy the twin principles of an arguable appeal and that the appeal would be rendered nugatory if stay or injunction is not granted; both limbs must be established.
  • An arguable appeal need not necessarily succeed; it is sufficient that a single bona fide arguable ground is raised and the appeal is not frivolous.
  • In considering a Rule 5(2)(b) application, the Court must not make definitive or final findings of fact or law that may embarrass the hearing of the main appeal.
  • An appeal will not be rendered nugatory where what is sought to be stayed is reversible or where damages will reasonably compensate the aggrieved party.

Court orders

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  1. 1.The motion dated 22nd January 2021 is dismissed
  2. 2.Costs of the application to the 4th respondent

Authorities

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Legislation

  • Court of Appeal Rules, 2010Rule 5(2)(b)
  • Court of Appeal Rules, 2010Rule 75

Cases cited (1)

  • Stanley Kangethe Kinyanjui vs. Tony Ketter & Others
    [2013] eKLR
On appeal from
High Court of Kenya at Nairobi
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, "Wanjohi v Njuguna & 3 others (Civil Application E019 of 2020) [2021] KECA 45 (KLR)", Case Analysis (2021). Civil Application No. Nai. E036 of 2021 (Motion dated 22nd January 2021). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2021/45/eng@2021-09-23

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