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Court of AppealDismissedMotion under rule 5(2)(b) of the Court of Appeal Rules arising from HCCC No. E831 of 2021

Kamau & 5 others v Registrar of Companies & 10 others (Civil Application E500 of 2023) [2024] KECA 1321 (KLR)

Court of Appeal of Kenya
27 September 2024
2,094 words in judgment
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The bottom line

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Kenya's Court of Appeal refused to pause a High Court order freezing a company's accounts because the applicants offered no proof the appeal would fail without one.

What this practically means

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Executive summary

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This is a ruling of the Court of Appeal at Nakuru (ole Kantai, Lesiit and Gachoka, JJA) dismissing a Motion under rule 5(2)(b) of the Court of Appeal Rules in which six applicants, including Kihuruiini Investments Limited, sought a stay of execution of a High Court order of 23rd June 2023 in HCCC No. E831 of 2021. That order restrained the applicants from withdrawing monies from the company's bank accounts at Equity Bank and Amicas Microfinance and directed the company's estate agent to deposit all future rental income into the company's bank account. The applicants, who claim to be the bona fide directors of the company against a rival faction said to have been elected in September 2021, intended to appeal against the ruling, contending that the High Court lacked jurisdiction to grant orders to respondents who had filed neither suit nor counterclaim. Applying the settled twin principles for stay pending appeal - arguability and nugatory effect - the court accepted that the intended appeal was arguable, but held that the applicants had failed to demonstrate that the appeal would be rendered nugatory. Their allegations that the company's operations had been paralyzed were made without proof, with no particulars of unpaid salaries, statutory obligations or other losses. The court regarded the impugned orders as well-considered interlocutory preservation measures pending trial of the directors' dispute. The Motion was dismissed with costs to the 2nd to 11th respondents.

Questions the Court framed

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

  1. 1.Whether the intended appeal is arguable under the rule 5(2)(b) test
  2. 2.Whether, absent a stay of execution, the intended appeal would be rendered nugatory

Key legal issues

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01

Whether the intended appeal is arguable

Holding

The intended appeal is arguable because it raises the question whether a defendant who has filed neither suit nor counterclaim can be granted injunctive orders

Reasoning

The applicants intend to argue that the High Court Judge exceeded her jurisdiction by granting orders to respondents who had not filed a suit or counterclaim. The court held that whether such a defendant can obtain injunction orders is an arguable point, and an arguable point need only call for a merit decision on appeal, not certain success.

p. 4
02

Whether the appeal would be rendered nugatory absent stay

Holding

The applicants failed to satisfy the nugatory limb because their allegations of paralysis were unsupported by proof, and the impugned orders were interlocutory preservation orders

Reasoning

The court found the High Court had deliberately preserved rental income in the company's accounts pending trial of the directors' dispute, a well-considered decision. The applicants gave no particulars of unpaid salaries, statutory obligations or other operational harm, leaving the court to guesswork, so no nugatory prejudice was demonstrated.

p. 4

Legal principles established

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  • An applicant for stay of execution pending appeal under rule 5(2)(b) must demonstrate both that the intended appeal is arguable and that it will be rendered nugatory absent stay; failure on either limb is fatal
  • An arguable point for purposes of rule 5(2)(b) is not one that must succeed, but one calling for a merit decision on appeal
  • Allegations of paralysis of a company's operations made without proof do not establish the nugatory-aspect limb

Court orders

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  1. 1.The Motion is dismissed
  2. 2.Costs of the Motion are awarded to the 2nd to 11th respondents

The bench

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

majority

Wrote the judgment

majority
majority
On appeal from
High Court of Kenya
HCCC No. E831 of 2021
Jurisdiction invoked
Rule 5(2)(b) of the Court of Appeal Rules

Relief refused

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Stay of execution of the High Court order of 23rd June 2023 restraining the applicants from withdrawing monies from the 6th applicant's bank accounts

The applicants failed to demonstrate that the appeal would be rendered nugatory absent a stay

p. 5

Order restraining the 2nd to 11th respondents from interfering with the management of the 6th applicant or carrying themselves as office bearers/directors pending the intended appeal

The Motion failed on the nugatory-aspect limb, so the whole application was dismissed

p. 5

Costs

Costs of the Motion to the 2nd to 11th respondents (dismissed with costs to the 2nd to 11th respondents)

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.

For an applicant to succeed he must, firstly, demonstrate that the appeal or intended appeal, as the case may be is arguable, which is the same as saying that the appeal is not frivolous
p. 4Rule 5(2)(b) stay principles - arguability limb
Whether or not a defendant who has not filed suit or counter-claim can pray for or be given orders of injunction is an arguable point
p. 4Arguability of intended appeal
Having failed to do so they have not satisfied the second limb of an application of this nature. The Motion fails and is dismissed with costs to the 2nd to 11th respondents.
p. 5Disposition - dismissal with costs

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, "Kamau & 5 others v Registrar of Companies & 10 others (Civil Application E500 of 2023) [2024] KECA 1321 (KLR)", Case Analysis (2024). Motion under rule 5(2)(b) of the Court of Appeal Rules arising from HCCC No. E831 of 2021. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2024/1321/eng@2024-09-27

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