Madhupaper International Ltd v Kerr [1985] KECA 76 (KLR)
The bottom line
#What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether the High Court retains jurisdiction to grant an injunction pending appeal after dismissing the interlocutory injunction (Erinford jurisdiction)
- 2.Whether this Court has its own jurisdiction under rule 5(2)(b) of the Court of Appeal Rules to grant an injunction pending appeal
- 3.Whether the company had made out its claim for an injunction to preserve its property until the appeal is heard
Key legal issues
#Erinford jurisdiction of the High Court to grant an injunction pending appeal
The High Court judge erred in holding that an application for an injunction pending appeal had to be made to the Court of Appeal; the trial judge has jurisdiction to grant the unsuccessful applicant an injunction pending an appeal against his own dismissal of the interlocutory injunction.
Following Erinford Properties Ltd v Cheshire County Council and the principle in Wilson v Church (No 2), the court held there is no inconsistency in a judge who has just refused an injunction granting one pending appeal, since the purpose is to prevent the appellate court's decision being nugatory should it reverse the judge. Both courts have concurrent jurisdiction and the High Court should exercise its own.
Court of Appeal's own jurisdiction under rule 5(2)(b) to grant injunctions pending appeal
The Court of Appeal has an independent statutory-rule-based jurisdiction to grant an injunction pending appeal, exercisable judicially where a notice of appeal has been lodged under rule 74 and on such terms as the court thinks just.
The amended rule 5(2)(b), introduced by L N 18 of 1984 with effect from February 8, 1984, confers on the Court of Appeal a discretion of its own. It is exercised judicially and not in a whimsical or arbitrary fashion. The court emphasized it was not sitting on appeal from O'Connor J's ruling in dealing with this application.
Whether the company deserved an injunction pending appeal on the facts
The application was refused: the company's undertaking in damages was not acceptable given its financial straits, it was probably in breach of two debenture covenants, and the injunction would inflict greater hardship than it would avoid.
The court examined the parties' financial health, noting an unsatisfied judgment of over Kshs 1.7 million against the company, liabilities of about Kshs 163 million against net assets of some Kshs 56 million, and no payment of the Kshs 51 million demanded. The Bank and KCFC were contractually entitled under the debentures to appoint receivers, and any invalidity in the October demand was cured by the lapse of time without payment.
Rights of a debenture holder to appoint receivers
A debenture holder entitled to appoint a receiver may exercise that right even if doing so causes loss to the company or its unsecured creditors; the receivers were appointed under contractual debentures, not by the court or under a statute.
Relying on Cuckmere Brick Co Ltd v Mutual Finances Ltd and Re Potters Oils Ltd, the court held there was no duty on the Bank to refrain from appointing receivers merely because the company was set on the Thika venture. The receivers were appointed under the debentures, which are agreements between the parties, and are not officers of the court.
Legal principles established
#- A High Court judge who has dismissed an interlocutory injunction retains jurisdiction to grant the unsuccessful applicant an injunction pending appeal, and it is preferable for the High Court to exercise that concurrent jurisdiction.
- Since February 8, 1984 the Court of Appeal has its own jurisdiction under rule 5(2)(b) of the Court of Appeal Rules to grant an injunction pending an appeal, provided a notice of appeal has been lodged in accordance with rule 74 and on such terms as the court thinks just.
- The purpose of an injunction pending appeal is to ensure that a successful appeal is not rendered nugatory.
- An injunction pending appeal should be refused where the appeal is frivolous or where granting it would inflict greater hardship than it would avoid.
- A debenture holder with a contractual right to appoint a receiver is under no duty to refrain from exercising its rights because doing so might cause loss to the company or its unsecured creditors.
Court orders
#- 1.The application for an injunction pending appeal is refused
- 2.The ex parte injunction granted on November 19, 1985 and modified by consent on November 22, 1985 is lifted
The bench
#One judgment of the whole court — no separate or dissenting opinions.
Wrote the judgment
Wrote the judgment
Wrote the judgment
- On appeal from
- High Court of Kenya at Nairobi
- Nairobi High Court Civil Suit 3435 of 1985
- Jurisdiction invoked
- Rule 5(2)(b) of the Court of Appeal Rules as amended by clause 3 of the Court of Appeal (Amendment) Rules 1984 (L N 18 of 1984)
Relief refused
#Interlocutory injunction pending appeal restraining the receivers, the Bank and KCFC from interfering with the company's business, taking possession of its undertaking or keeping it under receivership
The company failed to establish an acceptable undertaking in damages and the injunction would probably inflict greater hardship than it would avoid; the appeal would not be rendered nugatory since damages would be adequate
Costs
No final costs order recorded; the court stated 'We will now hear the advocates on the appropriate order for costs.'
Quotable passages
#Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.
The application is refused and the ex parte injunction lifted.
The learned judges of the High Court should take note of this concurrent jurisdiction which the two courts have and exercise theirs.
under rule 5(2)(b) the court has its own jurisdiction to grant an injunction pending an appeal since February 8, 1984 when it was provided for by clause 3 of the Court of Appeal (Amendment) Rules 1984
There are cases, however, where it would be wrong to grant an injunction pending appeal. These would include where the appeal is frivolous or to grant it would inflict greater hardship than it would avoid.
It is correct law that a debenture holder which has this right is under no duty to refrain from exercising its rights because doing so might cause loss to the company or its unsecured creditors.
It is a matter for this court's discretion according to the rule. It is exercised judicially and not in whimsical or arbitrary fashion.
Issues in the judgment
#The judgment records no final costs order; it ends by reserving the question of costs for further argument, so the costs disposition is incomplete on the face of the judgment.
The judgment gives inconsistent dates for the short-notice demand, first October 25, 1985 and later October 28.
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Madhupaper International Ltd v Kerr [1985] KECA 76 (KLR)", Case Analysis (1985). Civil Application No. NAI 116 of 1985. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/1985/76/eng@1985-12-16
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.