Paul Makatu & another v Quandrant Services [2016] KEHC 5895 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA

AT NAIROBI

CIVIL   APPEAL NO.  278 OF 2015

PAUL MAKATU……… ………………………………..1^ST APPELLANT

VEKARIA CONSTRUCTION LIMITED………..........…2^ND APPELLANT

VERSUS

QUANDRANT SERVICES ……………........…………….  RESPONDENT

RULING 

Vide a notice of motion dated  11^th June 2015  and filed on 11^th June  2015  under certificate  of urgency  the appellant/applicant seeks from this court  orders:

a. Spent

b. Spent

c. That there  be stay of execution  of the judgment  and decree  in CMCC 8089 of 2002 at Nairobi Milimani pending hearing and determination of the appeal herein.

d. That costs of this application do abide the outcome of the appeal.

The application was brought under the provisions of Section 3A of the Civil Procedure Act, Order 42 Rule 6 of the Civil Procedure Rules and all other enabling provisions of the law.

The said application was predicated on the grounds that:

1. Judgment  was given in favour  of the Respondent  in CMCC 8089/2002 Nairobi Milimani, wherein  liability was apportioned  at 5% against the  respondent and special damages  awarded were kshs  1,232,645 plus  costs and interest.

2. That the applicants being dissatisfied with the said judgment have lodged an appeal as it is of the view that the court’s finding on both liability and quantum was erroneous.

3. That the applicants is apprehensive   that the respondent will commence the execution process and it is therefore necessary that this application be heard urgently to avoid adverse action to the applicant.

4. That unless the orders sought are granted the applicant will suffer substantial and irreparable loss as disclosed in the appellant’s supporting affidavit.

The application is further supported by the affidavit sworn by Sarabjit  Signh Sehmi the project  manager  of the  2^nd appellant/applicant on 11^th  June 2015 wherein he deposes on the facts o the case giving  rise  to the cause  of action in the trial courts  while faulting   the trial court for reaching  a finding that she did  and contending  that the  appellant’s business  would be  crippled and grind to a halt   if  it were to pay the  decretal sum which  would be  in excess  of three(3,000,000) million  since the  Chinese Contractors  have taken  over construction  projects from local contractors  like the appellant.

That the stay will not prejudice  the respondent in any way; the  appeal is  arguable  and has  overwhelming chances of success and that  the appellant is ready to provide  a bankers guarantee as security or in the alternative  an insurance bond  should the court insist  on a security to  be provided.  They also propose in the alternative to settle 50% of the judgment sum.

The application  by the appellant  is opposed  by the respondent who  filed grounds of opposition dated 19^th  June 2015  and a replying  affidavit  sworn by Fred Ncruba Ojiambo Senior Counsel  on 16^th July  2015  and filed on the same day contending  principally that  the averments  by  the appellant  are irrelevant  as the appellant  is only  required to satisfy the conditions  set out in Order 42  Rule 6(2)  of the Civil Procedure  Rules, which they  have not  satisfied  to warrant  grant  of the orders of stay of execution pending  appeal.  More specifically, it is  contended  by the respondent that it has not   been shown that  the appellants will suffer  substantial loss if  stay is not  ordered; it has not  been demonstrated that the respondent  is incapable  of  reimbursing  the decretal sum if paid out  and the appeal succeeds; the proposal  for bank  guarantee and or insurance  bond is  inacceptable; the appellants  in the lower court had sought  a finding that liability be  apportioned equally between the plaintiff and defendants in the trial court;the respondent is not aware of any counterclaim that is referred to in the affidavit by the applicant and that it is only aware of the defence filed on 19th September 2005.  The respondent  contends  that it is  amenable  to payment  of a substantial part of the  decretal sum  and deposit of  the balance  in a  joint interest  earning account.

The parties advocates agreed to canvas the application by way of written submissions.  The applicants filed theirs on 5th October 2015 whereas the respondent filed theirs on 19^th October 2015 which submissions mirror the depositions in the parties’ rival affidavits.

Worth of mentioning is that the  submissions by the applicant  substantially focus on the merits  of the appeal as filed, which  though relevant, is not a  key determining factor at this stage  since the court will  have occasion to hear the appeal  on merits at the opportune time and therefore it would be  prejudicial to the outcome  of the main appeal  if this court  were to engage  in a mini trial thereof without according  parties equal opportunity to be heard on merit.

In considering whether or not to grant stay of execution of decree pending appeal, the court is called upon to consider whether: 

a. The applicant  shall suffer substantial  loss if  stay is  denied; if the application was  made timeously and whether security for due performance  of decree is available and may in its discretion for sufficient  cause shown  under Order  42 Rule  6 grant such orders.

On the first  requirement it is worth noting that the order for stay is intended  to preserve and  protect  the subject  matter of the  dispute  to avoid a situation  where should  the appeal be successful, it is  rendered  nugatory.

In M.M. Butt V The Rent Restrictions Tribunal CA Civil Application Nairobi 6/79 Madan JA was categorical that:

“It is in the discretion of the court to grant or refuse a stay but what has to be judged in every case is whether there are or not particular circumstances in the case to make an order staying an execution.  It has been said that the court as a general rule ought to exercise its best discretion in a way so as to not to prevent the appeal, if successful, from being nugatory ……..per Brett L.J. in WILSON V Church No. 212 CH D [1879] 454.”

Thus, what the applicant needs to establish on an application for stay in a money decree is that if the money is paid in execution of the decree then the intended   appeal will be rendered nugatory.

In the case of Kenya Shell V Karuga [1982-1988]1 KAR 1022 Platt J.A stated that:

“…………it is unusually a good rule to see if Order 41 Rule 4 (now Order 42 Rule 6) of the Civil Procedure Rules can be substantiated.  If there is no evidence  of substantial  loss to  the  applicant,  it would be  a rare  case when   an appeal would  be rendered  nugatory by some  other event.”  The Learned Judge  of appeal emphasized   that substantial  loss in its various  forms  is  the corner stone  of the jurisdiction  under Order 41 Rule 4 (now  Order  42 Rule 6)  of the Civil Procedure Rules.

The appellants/applicants  herein  have stressed  on the merits  of the appeal and deposed  that  their business  will be  grounded if  the decretal sum which is  substantial, in excess of 3 million is paid out to the  respondent company, they will suffer substantial loss. The appellants have not stated that   if the appeal is successful, the respondent would not be in a position to refund the decretal sum if paid out to them.  The appellants  are however willing to either  give a bank guarantee or insurance  bond and in the alternative, to settle  half of  the judgment  sum and the  balance to be  secured in the interest  earning account  to be held  by both parties advocates.  The question that emerges is where is the loss anticipated?  There is no suggestion  that the appellants  are on the verge of collapse  and therefore  cannot  raise  the decretal sum and if  they are not in the position to pay the decretal sum ,what  a contradiction that they would be willing to settle half  and  the rest  to be deposited in  an interest earning  account.

The type of argument raised that the sum of about shs 3 million is so much was rejected ion the SHELL case (supra) wherein Gachuhi JA stated:

“ it is not sufficient  by merely  stating that the sum of  shs  201,380 is a lot of money  and the  applicant would  suffer loss if the money is  paid.  What sort of loss would this be?  In an application of this nature, the applicant should show the damages s it would suffer if the order for stay is not granted.  What assurance can there be of an appeal succeeding.  On the other hand, granting   the stay would be denying a successful litigant of the fruits of his judgment.”

This court fully associates itself with the pronouncements of the Learned Judges of Appeal in the Shell (supra) case.  I do not find any evidence to show that once the money is paid to the decree holder/respondent herein then it will be beyond the reach and control of the applicant.

The persuasive  cases cited  by the applicant Kenya Orient Insurance Company Limited  V Paul Mathenge  Gichuki & Another  [2014]  e KLR  HCC Petition 322/211 –Crywan Enterprises  Ltd V Kenya Revenue Authority are not binding on this court and  I am not  inclined  to rely on them even on the issue of  deposit  of security.  The other decision relied on go the merits of the appeal. 

Furthermore, I do not think that  refusal to grant stay in this case would be tantamount  to  doing an injustice  to the appellant as the circumstances  do not reveal  any injustice  capable of being suffered  by the appellant  if stay is  rejected  hence the case of  S.M. Mwenesi V Shirley Luckhurst and  Another  [2000] e KLR  is irrelevant .

In the end, I find that the applicants have not demonstrated that they will suffer any loss let alone substantial loss if stay is not granted.

On the requirement for filing  of the application  without inordinate  or undue  delay, the motion  was  lodged in 11th June  2015  within  30  days of the delivery  of judgment   in the lower court  on 15^th May  2015.  In my view, the application was filed timeously.

On the  requirement  for security  for the due  performance  of decree, the appellants  have  deposed and submitted that in view  of the very meritorious  appeal they should be  allowed to give bank guarantee or insurance  bond or  in the alternative  that they  settle half  of the judgment  sum and the rest to be deposited  in an interest  earning  account to  be held by both  parties’  advocates. In other words, the applicant does not resist depositing security for the due performance of decree.

The  respondent however  rejects  any other  form of security other than the decretal sum and urges that  a  substantial sum  be paid to them and the balance  be deposited in an  interest earning  account as  sought  by the appellants.

Having considered  the rival  positions  and the requirements  under the provisions  of Order  42 Rule  6 of the Civil  Procedure   Rules,  and noting  the willingness of the parties to have the  decretal sum secured pending appeal, albeit the appellant  has  not demonstrated   substantial  loss, I would in my discretion  order as follows:

1. That there shall be  stay of execution of decree in Nairobi CMCC 8089 of 2002  pending hearing and determination of this appeal conditional  upon the appellant paying to the respondent half  of the decretal sum inclusive  of costs to be determined  in accordance  with an approved sealed decree of the court.  Such payment shall be effected with 21 days from the date of delivery of this ruling.  The balance  of the decretal  sum shall be deposited  in a joint interest  earning  bank account  to be opened and  operated  by both counsels  for the  parties  hereto within 21 days from the date hereof.  The subject bank shall be a Commercial Bank of good repute.

2. In default  thereof, and unless  such time as fixed  is enlarged  by this court  on an application  the orders  of stay granted herein shall lapse  and  execution shall issue.

The costs of this application shall be in the appeal.

Dated, signed and delivered in open court at Nairobi this 27^th day of January 2016.

R.E. ABURILI

JUDGE

27/1/2016

Coram R.E. Aburili J.

C.A. Adline

Mr Muturi for appellant

Mr Wambua for respondent

Court – Ruling   read and   pronounced in open court   as scheduled.

R.E. ABURILI

JUDGE

Mr Muturi – I humbly pray for 45 days to comply instead of 21 days for purposes of depositing the half in a joint interest earning account.

Mr Wambua - The applicant can pay half in 21 days and deposit security within 30 days.

R.E. ABURILI

JUDGE

COURT- The applicant seeks for enlargement of time to deposit half security.  The request is not opposed save for the period sought of 45 days which the respondent concedes 30 days.  Balancing  the interest of both parties, I would  exercise my discretion and enlarge the period for depositing  of half decretal sum to  40 days  instead of 21 days from the date hereof.  I note the applicant has taken the earliest opportunity to seek for review/ variation o the courts order.  I so order.

R.E. ABURILI

JUDGE

27/1/2016