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Court of AppealDismissedCivil Appeal (Application) E006 of 2022· [2022] KECA 1177 (KLR)

Ratemo & another v Credit Bank Limited & another

Court of Appeal
21 October 2022
HOHannah OkwenguLAL. AchodePGP. M. Gachoka
1,388 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 refused to stop a bank from selling charged land, ruling the borrowers could be compensated in damages if their appeal later succeeded.

What this practically means

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Executive summary

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The applicants, a borrower and borrower company, moved the Court of Appeal under rule 5(2)(b) of the Court of Appeal Rules 2010 seeking an injunction restraining the respondents from selling or transferring the charged property, Kajiado/Kaputiei-North/25599, pending an intended appeal against a High Court ruling (Mutuku, J, 30 November 2021) that dismissed their application for an interlocutory injunction to stop an auction of the property. The dispute arose from credit facilities of about Kshs 100,300,000 secured by a first-ranking legal charge over the property, which the applicants defaulted on, leading to advertisement for sale on 25 July 2021. Applying the twin rule 5(2)(b) principles, the court found the grounds on defective and unserved statutory notices arguable, satisfying the first limb. However, the applicants failed the nugatory limb: the property had been valued before the charge was created, so its value was ascertainable, and the 1st respondent, a licensed bank, was capable of compensating the applicants in damages if the appeal succeeded. Relying on Elizabeth Jerono v Consolidated Bank, the court reiterated that charged property becomes a commodity for sale and sentimental attachment is inconsequential. The application was dismissed with costs to the respondents. The ruling binds subordinate courts and the High Court on the rule 5(2)(b) test as applied to injunctions pending appeal in charged-property cases.

Key legal issues

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01

Arguability of the intended appeal

Holding

The grounds that the statutory notices were defective and unserved were arguable, satisfying the first limb

Reasoning

The applicants pleaded in their memorandum of appeal that the statutory notices were defective and were not served. The court found these grounds arguable without deciding whether they would succeed, since success is a matter for the bench hearing the appeal.

p. 3
02

Whether the appeal would be rendered nugatory

Holding

It would not, because the charged property was valued before the charge was created and the 1st respondent, a licensed bank, can compensate the applicants in damages

Reasoning

A valuation preceded creation of the charge, so the property's value can be established even if sold. No argument was made that the bank could not pay damages. Following Elizabeth Jerono v Consolidated Bank, charged property is a commodity for sale and sentimental attachment is inconsequential.

p. 3

Legal principles established

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  • To succeed under rule 5(2)(b) an applicant must satisfy the twin principles of an arguable appeal and that the appeal will be rendered nugatory absent stay or injunction
  • Once a property is given as security for financial accommodation it becomes a commodity for sale, and sentimental attachment is inconsequential

Court orders

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  1. 1.The application for an injunction pending appeal under rule 5(2)(b) is dismissed
  2. 2.Costs of the application awarded to the respondents

Authorities

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Legislation

  • Court of Appeal Rules 2010rule 5(2)(b)
  • Court of Appeal Rules 2010rules 41, 42, 45, 47

Cases cited (5)

  • David Morton Silversein -vs- Atsango Chesoni
    [2002] eKLR

    Applicant must show the appeal is arguable and would be rendered nugatory absent stay

  • Yellow Horse Inns Ltd -vs- AA Kawir Transporters and 4 others
    [2014] eKLR

    One arguable point suffices; no multiplicity required

  • Kenya Commercial Bank Limited v Nicholas Ombija
    [2009] eKLR

    Applicant need not show the arguable point would succeed

  • Reliable Bank Ltd -vs- Norlake Investments
    [2002] 1 EA

    Definition of 'nugatory' - not only worthless or futile but also trifling

  • Elizabeth Jerono v Consolidated Bank of Kenya Limited & another
    [2019] eKLR

    A reputable bank can pay damages; charged property becomes a commodity for sale

On appeal from
High Court of Kenya at Kajiado
Kajiado HCCC Civil Case No. E015 of 2021
Jurisdiction invoked
Rules 5(2)(b), 41, 42, 45 and 47 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, "Ratemo & another v Credit Bank Limited & another", Case Analysis (2022). Civil Appeal (Application) E006 of 2022. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2022/1177/eng@2022-10-21

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