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Court of AppealDismissedCivil Application E061 of 2021· [2022] KECA 448 (KLR)

Anfakari Limited & 3 others v Fidelity Commercial Bank Ltd

Court of Appeal
18 March 2022
SKS. Gatembu KairuPNP. NyamweyaJLJ. Lesiit
2,409 words in judgment
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The bottom line

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Kenya's Court of Appeal refused to stop a bank from selling charged Malindi land, ruling that an arguable appeal alone cannot block a property sale.

What this practically means

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Executive summary

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The Applicants, a company and its three director-guarantors, moved the Court of Appeal under Rules 5(2)(b), 42 and 47 seeking an injunction restraining Fidelity Commercial Bank from advertising for sale, auctioning or otherwise disposing of LR No. 749 (Original No 703/10) Malindi in exercise of its statutory power of sale, pending an intended appeal against the High Court's dismissal of their suit challenging the bank's demand and the validity of the charge. The High Court (Nyakundi, J.) had dismissed the suit, finding the loan advanced, secured by the charge, the directors personally liable as guarantors, and the bank's power of sale accrued on default. Counsel for the Applicants argued a defective charge, absence of a company resolution, non-issue of the statutory 90-day notice, and that sale of property worth over Kshs.100 million to recover about Kshs.6 million would render the appeal nugatory. The Respondent contended there was no arguable appeal and that any shortfall after realisation would be surrendered. Applying the settled two-limb Rule 5(2)(b) test, the court found the challenge to execution of the charge arguable, but held the Applicants failed the nugatory limb: substantial loss is not itself a ground under Rule 5(2)(b), the Applicants willingly charged the property knowing its value and risk, and damages would adequately compensate them if the appeal later succeeded. The application was dismissed with costs to the Respondent.

Key legal issues

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01

Whether the intended appeal was arguable

Holding

The ground contesting the validity of execution of the charge instrument was arguable and the Applicants should be heard on it.

Reasoning

The Applicants consistently contested the validity of execution of the charge, on grounds that the directors did not execute it and no company resolution authorised it. The court found divergence of facts on these issues and held the ground arguable, though arguability alone was insufficient.

p. 4
02

Whether the appeal would be rendered nugatory if the injunction was not granted

Holding

It would not, because the Applicants could be compensated by damages if the property were sold and the appeal later succeeded.

Reasoning

The court held that substantial loss is not a ground under Rule 5(2)(b), that the Applicants willingly charged the property knowing its value and risk, and that there was no assertion the Respondent could not pay damages. The nugatory limb therefore failed.

p. 5

Legal principles established

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  • To succeed under Rule 5(2)(b) an applicant must demonstrate both that the appeal is arguable and that it would be rendered nugatory absent the order; one limb alone is insufficient.
  • Likelihood of suffering substantial loss is not itself a ground for granting stay or injunction under Rule 5(2)(b).

Court orders

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  1. 1.Injunction pending hearing and determination of the intended appeal declined
  2. 2.Notice of Motion dated 3rd December 2021 dismissed with costs to the Respondent

Authorities

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Legislation

  • Court of Appeal RulesRule 5(2)(b)
  • Court of Appeal RulesRule 42
  • Court of Appeal RulesRule 47
  • Court of Appeal RulesRule 75
  • Court of Appeal RulesRule 59

Cases cited (5)

  • Madhupaper International v Kerr
    Civil Application No. 116 of 2015

    That the order for injunction is discretionary and depends on the nature of the case

  • Mrao Ltd v First American Bank & Others
    Civil Appeal 39 of 2002

    The test of a prima facie case required for grant of injunction

  • Trust Bank Limited and another v Investech Bank Limited and 3 Others
    [2000] eKLR

    The jurisdiction under Rule 5(2)(b) is original and discretionary; applicant must show an arguable appeal and that it would be rendered nugatory

  • Chris Mungga N. Bichage v. Richard Nyagaka Tongi & 2 Others
    [2013] eKLR

    Restatement of the settled two-limb test for stay, injunction or stay of proceedings under Rule 5(2)(b)

  • Wambugu Road Estate Limited & another v Kesharia & another
    (Civil Application 227 of 2019) [2021] KECA 218 (KLR)

    That likelihood of suffering substantial loss is not a ground for stay under Rule 5(2)(b)

On appeal from
High Court of Kenya at Malindi
High Court Civil Suit No 11 of 2017
Jurisdiction invoked
Rules 5(2)(b), 42 and 47 of the Court of Appeal Rules

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, "Anfakari Limited & 3 others v Fidelity Commercial Bank Ltd", Case Analysis (2022). Civil Application E061 of 2021. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2022/448/eng@2022-03-18

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