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Court of AppealDismissedCivil Application No. NAI. 321 of 2001

Southern Credit Banking Corporation Ltd v Grandways Ventures Ltd & another [2001] KECA 344 (KLR)

Court of Appeal
9 November 2001
ALA.A. LakhaSBS.E.O. BosireMKM. Keiwua
1,404 words in judgment
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The bottom line

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Kenya's Court of Appeal refused to pause an injunction because money damages could compensate the bank, confirming both stay tests must be met.

What this practically means

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Executive summary

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This is a ruling of the Court of Appeal at Nairobi (Lakha, Bosire and Keiwua JJ.A) on a notice of motion under rule 5(2)(b) of the Court of Appeal Rules in which Southern Credit Banking Corporation Ltd sought a stay of execution of interlocutory injunction orders issued on 14th September 2001 by a Commissioner of Assize, P.K.K. Birech, in Kisumu High Court Civil Case No. 272 of 2001. The injunctions, obtained by Grandways Ventures Ltd, restrained the bank and Reliance Bank Ltd (in liquidation) from dealing with Reliance Centre on parcel Nos. L.R Nos 1870/IX/114, 1870/IX/115 and 1870/IX/968. The High Court had held that the landlord's consent was essential to any assignment of the lease and that a prima facie case had been established. Before the Court of Appeal, the applicant argued that section 40A of the Banking Act overrode the contractual consent requirement, rendering the appeal arguable. The court assumed this may be so but held that an applicant must also satisfy the second limb of the rule 5(2)(b) test: that the appeal would be rendered nugatory without a stay. Applying the principle that nugatory effect turns on reversibility and the adequacy of damages, the court found that any loss from being put out of possession would be temporary, pecuniary and compensable, and possession would be restored if the appeal succeeded. The application therefore failed the second test. A preliminary point on the validity of an unsigned Notice of Appeal was left undecided as academic. The application was dismissed with costs.

Questions the Court framed

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The issues the Court set itself to decide, in its own words.

  1. 1.Whether the applicant has an arguable appeal to warrant a stay of execution under rule 5(2)(b)
  2. 2.Whether the intended appeal would be rendered nugatory if a stay is not granted
  3. 3.Whether an unsigned Notice of Appeal is valid (left undecided as academic)

Key legal issues

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01

The nugatory test under rule 5(2)(b)

Holding

The intended appeal would not be rendered nugatory if a stay were refused because any loss would be pecuniary and compensable in damages, and possession would be restored if the appeal succeeded

Reasoning

The court held that the nugatory inquiry turns on reversibility and adequacy of damages. Loss of possession of office accommodation used for banking would cause only temporary, pecuniary loss, assessable in monetary terms, and possession would be restored on success. Damages were therefore an adequate remedy, so the second test was not met and the application failed notwithstanding possible arguability.

p. 2
02

Arguability of the intended appeal on section 40A of the Banking Act

Holding

The court assumed without deciding that the applicant's argument on section 40A of the Banking Act might render the appeal arguable, but declined to engage with the merits

Reasoning

Counsel for the applicant argued that section 40A of the Banking Act overrides contractual consent requirements, making the landlord's consent otiose. The court observed 'That may well be so' but eschewed any attempt to deal with the merits of the intended appeal, as this was an interlocutory application for stay, not the appeal itself.

p. 2
03

Validity of the unsigned Notice of Appeal

Holding

The court declined to determine whether an unsigned Notice of Appeal was valid because the application had already failed on the nugatory test, rendering the point academic

Reasoning

The 1st respondent raised a preliminary point that the Notice of Appeal dated 14th September 2001 was unsigned, as were the copies served. Counsel for the applicant asserted from the bar that the lodged copy was signed, but there was no evidence. The court heard the motion de bene esse and, having found the application failed, considered it academic to decide the point.

p. 3

Legal principles established

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  • An applicant under rule 5(2)(b) must satisfy both the arguability test and the nugatory test; failure of either disentitles the applicant to a stay
  • An intended appeal is rendered nugatory only if what is sought to be stayed is irreversible, or if it is irreversible, damages cannot reasonably compensate the aggrieved party

Court orders

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  1. 1.The application for stay of execution under rule 5(2)(b) is dismissed
  2. 2.Costs of the application awarded to the respondents

The bench

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One judgment of the whole court — no separate or dissenting opinions.

AL
majority
SB
majority
MK
majority
On appeal from
High Court of Kenya at Kisumu
H.C.C.C. No. 272 of 2001
Jurisdiction invoked
Rule 5(2)(b) of the Court of Appeal Rules

Relief refused

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Stay of execution of the injunction orders pending the intended appeal

The applicant failed the second limb of the rule 5(2)(b) test: the appeal would not be rendered nugatory because damages would adequately compensate it and possession is reversible

p. 2

Costs

In the result this application fails and is accordingly dismissed with costs.

Quotable passages

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Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.

Whether or not an appeal will be rendered nugatory depends on whether or not what is sought to be stayed if allowed to happen is reversible; or if it is not reversible whether damages will reasonably compensate the party aggrieved.
p. 2Definition of the nugatory test under rule 5(2)(b)
If damages will adequately compensate the applicant; or if the act sought to be stayed can reasonably be reversed, then it cannot be said that an appeal or intended appeal will be rendered nugatory unless a stay or injunction is granted.
p. 2Adequacy of damages as negativing nugatory effect
In the result this application fails and is accordingly dismissed with costs.
p. 3Final orders - dismissal of the application

Issues in the judgment

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material

The title of the application names the 2nd respondent as 'Wellance Bank Ltd (In liquidation)' but the body of the ruling repeatedly refers to the 2nd respondent as 'Reliance Bank Limited (in liquidation)'. The correct name is unclear from the judgment itself.

minor

The judgment contains garbled/corrupted text in several passages, including the description of the lease consent clause.

minor

The ruling refers to Mr. Wasuna as counsel for the 'Ist respondent' when raising the preliminary point but introduces him as counsel for the '2nd respondent', an internal inconsistency.

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (6)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Southern Credit Banking Corporation Ltd v Grandways Ventures Ltd & another [2001] KECA 344 (KLR)", Case Analysis (2001). Civil Application No. NAI. 321 of 2001. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2001/344/eng@2001-11-09

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.