Hastings Irrigation (K) Ltd v Standard Chartered Bank (K) Ltd & 2 others [1987] KECA 67 (KLR)
The bottom line
#The Court of Appeal refused to stop a bank from selling a defaulting borrower's assets, ruling that courts won't disturb a validly appointed receivership without compelling reasons.
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 court should grant an interlocutory injunction restraining the sale of the applicant's assets pending the intended appeal
- 2.Whether the appointment of the receivers and managers under the debenture was valid
- 3.Whether the court should interfere with the conduct of a validly appointed receivership
Key legal issues
#Validity of the appointment of receivers under the debenture
The appointment of the receivers and managers on February 4, 1987 was a valid exercise of the power contained in the debenture, given the company's admitted default and perpetual breaches of its covenants
The applicant's own refinancing proposals admitted that it perpetually defaulted on the loan and was continually overdrawn beyond the authorised limit, bringing into play clause 11 of the debenture. No objection was made to the appointment for the first six months of the receivership, and counsel virtually conceded the appointment was valid. The indebtedness of over Kshs 11.5 million exceeded the Kshs 6 million security limit, itself constituting a breach.
Interference with the conduct of a receivership
The court will not interfere with the conduct of a validly appointed receivership unless the receivers' conduct is shown to be seriously oppressive or contrary to recognized principles of law and commercial practice; here the bank and receivers had exercised maximum restraint
The receivers desisted from enforcing the security while credible negotiations were ongoing, and the bank even granted the applicant a first option to purchase the debenture. The claim that the bank had exercised maximum restraint was justified. The court declined to adopt the respondents' extreme position that it had no jurisdiction over a statutory power of sale, but held that clear and compelling reasons were required and none existed on the material filed.
Whether the cited authorities justified the grant of an injunction
Neither authority relied on by the applicant concerned the exercise of a power of appointing a receiver under a debenture or the conduct of a receivership after a valid appointment
Jan Mohamed v Madhani concerned the requirement of immediate danger to property to justify an ex parte injunction; Musa Simlani was a decision on its own facts and did not bind the court. Neither addressed debenture-holders' powers or receivership conduct, so neither supported the relief sought.
Legal principles established
#- The inherent jurisdiction under rule 1(3) may only be invoked in the absence of other specific remedies
- A prior decision of the Court of Appeal on its own facts does not bind the court to follow a particular course on a different application
- The court will not interfere with a validly appointed receivership absent clear and compelling reasons, such as serious oppression or conduct contrary to law and commercial practice
Court orders
#- 1.The application for an interlocutory injunction pending appeal was refused
- 2.No order as to costs of the ex parte application
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
- Jurisdiction invoked
- Rule 5(2)(b) of the Court of Appeal Rules, as amended by Legal Notice No. 14 of 1984
Relief refused
#Interlocutory injunction restraining the respondents from proceeding with the sale of the applicant's assets pending the hearing of the application inter partes
The appointment of the receivers was a valid exercise of the power in the debenture and no clear and compelling reasons were shown to justify interference with the receivership
Costs
Since the respondents have incurred no costs in attending the ex parte application, no order in that respect is necessary.
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 balance of convenience is the third limb of the test, not the balance of probabilities.
it does not seem to us appropriate for the court to interfere in the passage of the receivership unless it can be shown that the conduct of the receivers and managers is seriously oppressive, or not in accordance with the recognized principles of law and of commercial practice
we certainly think that we should not interfere with a validly appointed receivership unless there are clear and compelling reasons for us to do so. No clear or compelling reasons, in our judgment, appear on the present material filed in this application. It is accordingly refused.
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Hastings Irrigation (K) Ltd v Standard Chartered Bank (K) Ltd & 2 others [1987] KECA 67 (KLR)", Case Analysis (1987). Civil Application (ex parte). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/1987/67/eng@1987-12-02
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.