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Court of AppealPartially AllowedCivil Application No. 50 of 2020

Mayfair Insurance Company Limited & another v Nakuru Polyplast Limited & 3 others [2021] KECA 958 (KLR)

Court of Appeal
19 February 2021
1,808 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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Kenya's Court of Appeal paused collection of a Kshs. 64.85 million insurance judgment, but only because Mayfair agreed to deposit half the money in a joint account within 45 days.

What this practically means

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Executive summary

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This is a ruling of the Court of Appeal at Nairobi (Nambuye, Karanja and Sichale JJ.A) on a notice of motion under Rule 5(2)(b) of the Court of Appeal Rules by Mayfair Insurance Company Limited and TeeVee Insurance Brokers Limited seeking stay of execution of the High Court at Nakuru judgment (Rachel Ng'etich, J.) of 14th May 2020, which awarded Nakuru Polyplast Limited Kshs. 64,850,000 under a fire insurance policy, plus costs. The applicants argued the intended appeal was arguable and would be rendered nugatory, relying principally on Stanley Kangethe Kinyanjui v Tony Ketter and Kenya Hotel Properties v Willesden Investments. The respondents opposed, contending that the supporting affidavits were hearsay from counsel who never participated in the trial, and that the notice of appeal was incompetent for being filed in the wrong registry and lacking the Deputy Registrar's signature. The Court held those defects were matters for a striking-out application, not a Rule 5(2)(b) application, and that the application was properly before it. Applying Joseph Gitahi Gachau v Pioneer Holdings, it found the arguability limb satisfied, and applying the extended meaning of 'nugatory' from Reliance Bank v Norlake Investments, it found the nugatory limb demonstrated given the colossal decretal sum and the respondent's alleged closure. The application was allowed, with stay granted conditionally on deposit of 50% of the decretal amount in a joint interest-earning account within 45 days, failing which the stay lapses and execution may issue. No costs order was made on the application. The decision affirms the established two-limb test for stay under Rule 5(2)(b) and binds subordinate courts and the High Court on that standard.

Questions the Court framed

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The issues the Court set itself to decide, in its own words.

  1. 1.Whether the application under Rule 5(2)(b) is properly before the Court given the alleged defects in the notice of appeal
  2. 2.Whether the intended appeal is arguable
  3. 3.Whether the intended appeal will be rendered nugatory if stay of execution is not granted

Key legal issues

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01

Competence of the application despite alleged defects in the notice of appeal

Holding

The application was properly before the Court; a notice of appeal filed and stamped in the Environment and Land Court and forwarded to the Court of Appeal, and questions of signature by the registrar, are matters for a striking-out application, not a Rule 5(2)(b) application.

Reasoning

The Court found the notice of appeal was duly filed and stamped in the Environment and Land Court and forwarded to the Court of Appeal as required. It declined to interrogate at that stage whether the notice was lodged in the proper registry or whether it bore the registrar's signature, holding those were matters for a strike-out application. It was therefore satisfied the application was properly before it.

p. 2
02

Arguability of the intended appeal

Holding

The limb on arguability was demonstrated; the intended appeal was not frivolous.

Reasoning

Applying the principle that an arguable appeal need not be one that will succeed, and citing Joseph Gitahi Gachau & Another v Pioneer Holdings (A) Ltd, the Court accepted that the grounds raised - including the trial judge's treatment of the insurance policy terms, alleged connivance in the fire, expert evidence, residual value and quantum - were not frivolous and met the arguability threshold.

p. 3
03

Whether the appeal would be rendered nugatory

Holding

The nugatory aspect was demonstrated given the substantial decretal sum, the difficulty of recovery if paid out, and the assertion that the respondent had closed down operations.

Reasoning

The Court gave 'nugatory' its full meaning, including trifling, and applied the test of reversibility or adequacy of damages. It weighed the substantial amount involved, the applicants' assertion that the respondent had closed its operations, and the arduousness of recovery if the decretal sum were paid out and the appeal later succeeded, concluding the nugatory limb was satisfied.

p. 3

Legal principles established

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  • An arguable appeal is not necessarily one that will succeed; the arguability limb is satisfied if the appeal is not frivolous.
  • The term 'nugatory' bears an extended meaning beyond worthless, futile or invalid, and includes trifling.
  • Whether an appeal will be rendered nugatory depends on whether what is sought to be stayed is reversible or, if not reversible, whether damages will reasonably compensate the aggrieved party.
  • Defects in the notice of appeal, such as filing in the wrong registry or lack of the Deputy Registrar's signature, are not grounds for refusal of relief under Rule 5(2)(b); they may be raised in an application to strike out the notice of appeal.

Court orders

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  1. 1.Stay of execution of the judgment and orders appealed against granted, on condition that the applicants deposit 50% of the decretal amount in an interest earning joint account in the names of counsel for both parties within 45 days from the date of the ruling, pending hearing and determination of the intended appeal
  2. 2.Failing the deposit, the stay orders to stand discharged, leaving the respondent at liberty to execute for the entire decretal amount plus interest and costs

The bench

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One judgment of the whole court — no separate or dissenting opinions.

majority
majority
majority
On appeal from
High Court of Kenya at Nakuru
H.C.C.C. No. 41 of 2017
Jurisdiction invoked
Rule 5(2)(b) of the Court of Appeal Rules

Relief refused

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Unconditional stay of execution without security

Stay granted only on condition of a 50% deposit of the decretal amount within 45 days

p. 3

Costs

No costs order made in the ruling; the trial court's costs order (costs to the plaintiff from the 1st defendant, and plaintiff to pay the interested party's costs) is what is subject to stay. The Court of Appeal made no express order on the costs of the application.

Quotable passages

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Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.

we allow the application and grant stay of execution of the judgment and orders appealed against on condition that the applicants deposit 50% of the decretal amount in an interest earning joint account in the names of counsel for both parties within 45 days from the date hereof pending hearing and determination of the intended appeal, failing which the stay orders will stand discharged leaving the respondent at liberty to execute for the entire decretal amount plus interest and costs.
p. 3Final orders - conditional stay of execution
we are satisfied that given that an arguable appeal is not necessarily one that will succeed, the applicants' intended appeal is not frivolous
p. 3Arguability limb under Rule 5(2)(b)
Whether or not an appeal will be rendered nugatory depends on whether or not what is sought to be stayed if allowed to happen is reversible; or if it is not reversible whether damages will reasonably compensate the party aggrieved.
p. 3Nugatory-ness test
It does not only mean worthless, futile or invalid. It also means trifling
p. 3Meaning of 'nugatory'

Issues in the judgment

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minor

The judgment states the notice of appeal was filed on 28th February, 2020 against a judgment dated 14th May, 2020, an apparent internal date inconsistency.

minor

The trial court's costs order quoted in the judgment refers to an 'interested party', but no interested party appears in the cause title of this application.

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, "Mayfair Insurance Company Limited & another v Nakuru Polyplast Limited & 3 others [2021] KECA 958 (KLR)", Case Analysis (2021). Civil Application No. 50 of 2020. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2021/958/eng@2021-02-19

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