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Court of AppealDismissedCivil Application No. E366 of 2020· [2021] KECA 753 (KLR)

Elite Intelligent Transport Systems Limited v Gulf African Bank Limited & 1 other

Court of Appeal
19 March 2021
RNR.N. NambuyeASAsike-MakhandiaSKS. ole Kantai
1,165 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 refused to stop the auction of Elite Intelligent Transport Systems' assets because Gulf African Bank can repay their value if the appeal later succeeds.

What this practically means

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Executive summary

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This is a single-judgment ruling of a three-judge bench of the Court of Appeal at Nairobi (Nambuye, Asike-Makhandia and Kantai, JJ.A.) on an application under rule 5(2)(b) of the Court of Appeal Rules by Elite Intelligent Transport Systems Limited. The applicant sought an injunction restraining Gulf African Bank Limited and Garam Auctioneers from attaching, auctioning or disposing of its equipment, motor vehicles, machines and property known as L.R. No. 1160/339 pending an intended appeal against the ruling of Majanja, J. of 20th November 2020 in H.C.C.C. No. E240 of 2020, in which the High Court had dismissed an injunction application and granted a conditional stay requiring payment of Ksh.20,000,000 - a condition the applicant had not met. The applicant argued that the loan facility was a Musharakah Islamic banking partnership to be serviced by proceeds of a Kenya Rural Roads Authority road contract, and that attachment of its tools of trade would cripple the project and render the appeal nugatory. The court applied the established twin-principle test: arguability and nugatory-ness. It found the grounds of appeal arguable, holding that a single arguable point suffices and that an arguable appeal need not necessarily succeed. However, it held the applicant failed the nugatory limb: the applicant had unchallenged evidence of failure to pay the debt by October 2020 as pleaded, had not met the conditional stay, and the bank was capable of repaying the value of the secured assets if the appeal succeeded. The Motion was dismissed with costs. The decision below was not disturbed; the intended appeal remains pending.

Key legal issues

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01

Whether the intended appeal is arguable

Holding

Yes - the grounds concerning the express/implied term that the facility would be serviced by KeRRA contract proceeds and the Musharakah Islamic banking facility are arguable points.

Reasoning

The draft memorandum of appeal raised the alleged term that the bank's facility would be serviced by proceeds of the KeRRA contract, and the nature of the Musharakah partnership facility under Islamic banking principles. The court found these genuine, not idle, points. Relying on its precedent that a single arguable point suffices, the first limb of the rule 5(2)(b) test was satisfied.

p. 2
02

Whether the intended appeal would be rendered nugatory absent stay

Holding

No - the respondents' attachment of the assets would not render the appeal nugatory because the bank can restore the value of the secured assets if the appeal succeeds.

Reasoning

The respondents showed the applicant pleaded an expectation of Ksh.203,916,252.80 from KeRRA in October 2020 to settle the debt, that no such payment was made (unchallenged), and that a conditional stay (payment of Ksh.20,000,000) granted by the High Court was not met. The 1st respondent being a reputable bank capable of repaying the value of the assets, the nugatory limb failed and the application was dismissed.

p. 2

Legal principles established

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  • An applicant under rule 5(2)(b) must demonstrate both that the appeal (or intended appeal) is arguable and that it would be rendered nugatory absent stay; both limbs must be satisfied.
  • A single arguable point suffices to satisfy the first limb of the rule 5(2)(b) test.
  • An arguable appeal need not be one that must succeed; it is one that ought to be argued fully before the Court.

Court orders

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  1. 1.The Motion brought under rule 5(2)(b) seeking an injunction restraining the respondents from dealing with, advertising, auctioning, transferring or disposing of the applicant's equipment, motor vehicle, machines and property L.R. No. 1160/339 pending the intended appeal is dismissed
  2. 2.Costs of the Motion awarded to the respondents
On appeal from
High Court of Kenya at Nairobi
H.C.C.C. No. E240 of 2020
Jurisdiction invoked
Rule 5(2)(b) of the Court of Appeal Rules - original jurisdiction of the Court of Appeal in applications for stay of execution or injunction pending appeal

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, "Elite Intelligent Transport Systems Limited v Gulf African Bank Limited & 1 other", Case Analysis (2021). Civil Application No. E366 of 2020. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2021/753/eng@2021-03-19

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