Madhupaper International Limited v Kerr [1985] KECA 116 (KLR)
The bottom line
#Kenya's Court of Appeal refused to stop receivers Madhupaper's banks appointed, confirming lenders can enforce debenture rights even if that harms a struggling company.
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 interlocutory injunction pending an appeal from its own refusal of such an injunction (Erinford jurisdiction)
- 2.Whether the Court of Appeal has its own independent 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 was heard, or whether the appeal was frivolous or the injunction would inflict greater hardship than it would avoid
Key legal issues
#Whether the High Court judge erred in refusing to grant an interim injunction pending appeal on the ground that the application should be made to the appeal court
The High Court has jurisdiction, following Erinford Properties v Cheshire County Council, to grant an injunction pending appeal from its own refusal; it is preferable for the High Court to deal with such applications.
The court held Megarry J in Erinford had jurisdiction to preserve the subject matter pending appeal; the purpose is to prevent the appeal being rendered nugatory if successful. Cotton LJ's principle in Wilson v Church (No 2) supports this. The Court of Appeal stressed the advantage of the trial judge who knew the facts and law, and directed High Court judges to exercise this concurrent jurisdiction rather than deflect applicants to the appeal court.
The test for granting an injunction pending appeal under the court's rule 5(2)(b) jurisdiction
The court applies a discretionary test: whether the applicant has made out its claim for an injunction to preserve its property until the appeal is heard, refused where the appeal is frivolous or the injunction would cause greater hardship.
The court framed the test as whether the company made out its claim for a preservative injunction, or whether the application should fail because the appeal is frivolous or the injunction would worsen its position. Applying it, the company failed: its undertaking in damages was unacceptable given an unsatisfied judgment and liabilities of about Kshs 163 million against net assets of about Kshs 56 million, it was probably in breach of two debenture covenants, and the Thika project was a distant prospect.
Whether the Bank and KCFC were contractually entitled to appoint receivers under the debentures despite prejudice to the company
Yes; the debenture holder's contractual right to appoint a receiver may be exercised even if it causes loss to the company or its unsecured creditors, and the draconian debenture terms, accepted on legal advice, made the moneys immediately payable on breach.
The court reviewed the December 1981 debenture's terms: repayment on demand, clause 11 rendering principal immediately payable on breach of covenant, and power to appoint receivers on demand. The company was probably in breach (ceasing to bank solely with the Bank; an unsatisfied judgment exposing it to execution or winding up). Following Cuckmere Brick and Re Potters Oils, no duty to refrain from exercising the right existed. The receivers were appointed under the debenture, not by the court or statute, and are not officers of the court.
Legal principles established
#- The High Court has jurisdiction to grant an injunction pending an appeal from its own refusal of an interlocutory injunction; there is no inconsistency in doing so, and the High Court and Court of Appeal enjoy concurrent jurisdiction over such applications.
- The Court of Appeal has its own independent jurisdiction to grant an injunction pending an appeal under rule 5(2)(b) of the Court of Appeal Rules, exercisable judicially upon the conditions that a notice of appeal has been lodged and on such terms as the court thinks just.
- 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 previously granted and modified by consent is lifted
The bench
#One judgment of the whole court — no separate or dissenting opinions.
- On appeal from
- High Court at Nairobi
- Civil Suit 3438 of 1985
- Jurisdiction invoked
- Rule 5(2)(b) of the Court of Appeal Rules, as inserted by clause 3 of the Court of Appeal (Amendment) Rules 1984 (L N 18 of 1984)
Relief refused
#Extension of the ex parte injunction / injunction pending appeal preserving the company's property and restraining the receivers
The company failed to show its undertaking in damages was acceptable given its creditors and financial straits, was probably in breach of debenture covenants, and an injunction would probably inflict greater hardship than it would avoid
Costs
No final costs order recorded; the court stated 'We will now hear the advocates on the appropriate order for costs.' The earlier High Court dismissal of the summons was with costs on the higher scale.
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.
when a party is appealing, exercising his undoubted right of appeal, the court ought to see that the appeal if successful is not nugatory.
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.
The learned judges of the High Court should take note of this concurrent jurisdiction which the two courts have and exercise theirs.
It is a matter for this court's discretion according to the rule. It is exercised judicially and not in whimsical or arbitrary fashion.
The application is refused and the ex parte injunction lifted. We will now hear the advocates on the appropriate order for costs.
Issues in the judgment
#Inconsistent High Court suit number within the judgment: the coram/header and appeal description refer to Civil Suit 3438 of 1985, but the narrative says the plaint 'was the beginning of Nairobi High Court Civil Suit 3435 of 1985'.
Inconsistent dates for the final demand: the narrative first states the demand was made on October 11, 1985, but later refers to 'the half hour or so the company had in which to meet them on October 28'.
No final costs order is recorded; the judgment ends with the court intending to hear counsel on costs.
Key timeline
#Practical implications
#Frequently asked questions
#Later judgments citing this (3)
#Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.
- Kirui v Fedha & another (Environment and Land Appeal E078 of 2025) [2026] KEELC 1247 (KLR)[2026] KEELC 1247 (KLR)5 Mar 2026applied
- Nderitu v Muhotetu Farmers Company Ltd & another (Civil Application E135 of 2024) [2025] KECA 1227 (KLR)[2025] KECA 1227 (KLR)4 Jul 2025
- Kenya Electricity Transmission Co Ltd v Kasina & another (Environment and Land Appeal E023 of 2025) [2025] KEELC 3759 (KLR)[2025] KEELC 3759 (KLR)13 May 2025
Cite this brief
#Cite this brief
Caselaw, "Madhupaper International Limited v Kerr [1985] KECA 116 (KLR)", Case Analysis (1985). Civil Application No NAI 116 of 1985. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/1985/116/eng@1985-12-16
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.