Jacob Ochieng' Muganda v Housing Finance Company of Kenya Limited [2002] KECA 109 (KLR)

The court restated the settled test from its earlier decision in Trust Bank v Investech: jurisdiction under rule 5(2)(b) is original and discretionary. Arguability and the nugatory aspect must both be demonstrated, and each is assessed against the particular facts. The court applied the test by first isolating which issues the intended appeal would genuinely raise, then asking whether success could be rendered nugatory by the completed auction and the impending transfer to the purchaser.

Counsel for the applicant attacked the statutory notice as defective and illegal. The court examined the notice and found it stated that the applicant had three months to settle the debt, failing which the respondent's statutory rights under section 69 of the Indian Transfer of Property Act as applied to Kenya would be exercised. That satisfied the rule in Eros Chemists that a sale notice must expressly state a three months' period, so the intended challenge to the notice was not arguable.

Although the statutory notice could not be faulted, the court identified one live issue for the intended appeal: the allegation that the sale agreement was executed by a stranger. The court expressly held this arguable, satisfying the first limb of the rule 5(2)(b) test. Arguability alone, however, does not secure relief; the applicant still had to demonstrate that a successful appeal would be rendered nugatory without a stay, and that limb ultimately failed.

The court weighed the nugatory limb against the fact that the block of flats in Nairobi West had already been sold at public auction. It concluded that if irregularity were ultimately proved at the trial of the intended appeal, the applicant's loss could be recovered as damages from the auctioneer under section 26 of the Auctioneers Act. Because an adequate alternative remedy existed, success on appeal would not be rendered nugatory, and the second limb of the test failed.

The court reviewed the history: a conditional injunction requiring monthly repayments lapsed through the applicant's default; a further application to restrain the sale was dismissed; yet he returned seeking to set aside the completed auction. Both the High Court and this court censured that conduct, invoking the maxims that he who comes to equity must do equity and must abide by orders of a court of equity. The conduct weighed decisively in refusing the stay.

Ringera J had held, and the Court of Appeal endorsed as correct in law, that where a valid contract of sale exists following an auction, the mortgagor's equity of redemption is extinguished. The only live question was whether a binding contract had been concluded on 13 September 2001; the judge found none of the alleged irregularities vitiated the sale, and the appellate court proceeded on that footing in concluding that damages, not an injunction, was the applicant's remedy.