Penelope Combo v National Bank of Kenya Ltd

2. THAT this Honourable Court be pleased to order a stay of any further proceedings in the superior court in Milimani HCCC No 440 of 2003 pending the hearing and determination of the intended appeal against the ruling and order of the Honourable Lady Justice Lesiit dated 26th October 2007. 3. THAT this Honourable Court be pleased to order a stay of registration of any transfer, conveyance, Lease or any dealing of (sic) the property known as LR No. 7741/71, Nairobi which may take place pending the hearing and determination of this application. 4. The costs of and incidental to this application abide the result of the intended appeal.” The salient facts relied on by the applicants as set out in the affidavit of Anthony in support were as follows:Penelope and Anthony are the joint registered owners of the property known as LR No. 7741/71 situated in Kitisuru within the Nairobi area which property is hereinafter referred to as the “Kitisuru Property”. In 1997 a company called Olerai Nurseries Ltd. (ONL) of which Anthony was a director and shareholder applied for a loan of USD 1,000,000 from the European Investment Bank (EIB) to start a flower project. The application was submitted through the NBK being one of the institutions nominated by the Central Bank of Kenya (CBK) to participate in the implementation and disbursement of funds under the “Global Private Enterprise III Programme.” Anthony claimed that it was the duty and obligation of the NBK to pursue and secure the EIB Funds and generally to observe all the terms and conditions set by the CBK to regulate the processing and disbursement of the funds. Anthony further claimed that the NBK, in breach of its fiduciary/contractual duty, failed, inter alia, to pursue diligently the loan application by ONL to the EIB and/or failed to accord the application priority. On or about 21st January 1998, in anticipation of the delayed EIB funding, ONL applied for and NBK agreed to advance to ONL, a short term loan in the sum of US Dollars 500,000 to finance the proposed flower project pending the approval of the EIB funding and a letter of offer was duly executed. Penelope and Anthony were required by NBK to sign a legal Charge dated February 1998 in favour of NBK to secure the bridging finance of USD 500,000. Penelope agreed to execute the demanded charge upon, she claims, receiving express representations from NBK and her husband, Anthony, that the flower project intended to be undertaken by ONL under the direct supervision of Anthony and NBK was a viable project, and further on the assurance that EIB would adequately fund the project to the tune of US dollars one million to ensure its success. Penelope further claimed that it was represented by the NBK that it would at all times observe the terms of the Contract of lending as per the terms of the Letter of Offer dated 21st January 1998 as well as the terms of the Charge document dated 19th February 1998. The applicants are aggrieved by the fact that, according to them, the NBK thereafter breached the agreed terms of the contract of lending as incorporated in the letter of offer and the Charge document and advanced the principal debtor only USD 305,000 in staggered installments hence varying the terms of the lending. Furthermore, according to the applicants, NBK “failed to diligently pursue the EIB funding as a result of which ONL’s project suffered due to under capitalisation and as a consequence of which it finally collapsed.” In addition to the above, the applicants claim, inter alia, that the Statutory Notice served by NBK is fatally defective, null and void and the statutory power of sale has not accrued to the defendant/respondent for the following main reasons:-

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1. No valid Statutory Notice was sent or served on Penelope who was a guarantor of the loan by the bank. She was entitled to such notice before the statutory power of sale could be exercised. Miss Njiru learned counsel for the respondent NBK referred the court to exhibits ZKM 3A and C to the defendant’s replying affidavit which documents, counsel submitted, were the Statutory Notices sent to both guarantors. 2. The Charge document was not properly executed. The principles applicable to applications of this nature were recently summarised in the ruling of this Court in Civil Application No. NAI 157 2006 between Ishmael Kagunyi Thande and Housing Finance of Kenya Ltd (unreported) In these terms:“The Jurisdiction of the Court under rule 5(2) (b) is not only original but also discretionary. Two principles guide the court in the exercise of that jurisdiction. These principles are now well settled. For an applicant to succeed he must not only show that his appeal or intended appeal is arguable, but also that unless the court grants him an injunction or stay as the case may be, the success of that appeal will be rendered nugatory.” (See Githunguri v. Jimba Credit Corporation Ltd. No 2 [1988] KLR 838. J.K. Industries Ltd. v. Kenya Commercial Bank Ltd [1982-88].)” We have come to the conclusion that, if no stay is granted, there is a very real risk that the Kitisuru property, which is the matrimonial home of the two elderly applicants, will be sold by the respondent Bank before the appeal can be heard. However before we grant the stay sought we also need to be satisfied that the intended appeal, against the decision of Lesiit J. in the superior court, is arguable and not frivolous. The application before Lesiit J was brought under Order XXXIX of the Civil Procedure Rules and filed by Penelope and Anthony seeking in short that NBK be restrained from selling the Kitisuru property. Lesiit J found that the applicants’ loss, if any, could be adequately compensated by an award of damages and that the scales of convenience were tilted in favour of the NBK and she dismissed the application before her by Penelope and Anthony in its entirety. We are satisfied that the learned Judge was right in finding that “the applicant’s loss, if any, resulting from a sale of the Kitisuru property could be adequately compensated by an award of damages.” This being the position we find that the case for granting the stay sought has not been established. We therefore dismiss the application by Penelope Combos and Anthony Combos by Motion dated 22nd November 2007 with costs to the respondent National Bank of Kenya. Dated and delivered at Nairobi this 29th day of February, 2008. E. O. O’KUBASU ………………………….. JUDGE OF APPEAL E. M. GITHINJI …………………………..

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JUDGE OF APPEAL W. S. DEVERELL ………………………….. JUDGE OF APPEAL I certify that this is a true copy of the original. DEPUTY REGISTRAR

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