Bulk Medicals Ltd v Paramount Universal Bank Ltd & 2 others [2006] KECA 14 (KLR)
The bottom line
#Kenya's Court of Appeal stopped bank-appointed receivers from running Bulk Medicals' business, but only after the company secured a bank guarantee for the full debt.
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 intended appeal is arguable and not frivolous
- 2.Whether, if the injunction sought is not granted, the success of the intended appeal would be rendered nugatory
- 3.Where the balance of convenience lies
Key legal issues
#Whether the intended appeal raised arguable issues
The Court found some arguable issues, so the first limb of the Rule 5(2)(b) test was satisfied.
The Court reviewed the draft memorandum of appeal, which raised grounds concerning prima facie case, the debt calculations, the receivers' conduct and the 'Donde' Act, and concluded that some of the grounds were arguable and not frivolous.
Whether success of the intended appeal would be rendered nugatory without injunctive relief
The nugatory limb was satisfied because actions taken by the receivers before any decision granting an injunction might be irreversible.
The Court reasoned that if the receivers were left in control and the applicant ultimately succeeded on appeal, actions already taken by the receivers could not be undone, rendering a successful appeal nugatory. The Court also weighed the balance of convenience against the Bank, and addressed it by conditioning the injunction on a bank guarantee securing the whole debt found due, thereby protecting both sides.
Balance of convenience and appropriate conditions
The balance of convenience favoured grant of the injunction, but on condition that the applicant procure a bank guarantee for the full amount found due.
The Court noted that if the receivers were removed, much of the value of the applicant company could evaporate before the appeal was heard, diminishing the benefit of the receivership to the Bank. The applicant had offered a bank guarantee in the superior court, but the Court observed that the letter from Prime Capital & Credit Ltd 'does not appear to be a bank', and so tailored a guarantee condition acceptable to the Bank.
Legal principles established
#- An applicant under Rule 5(2)(b) must satisfy the court that the intended appeal is arguable (not frivolous) and that the appeal will be rendered nugatory if the relief sought is not granted.
- Interim relief pending appeal may properly be conditioned on security, such as a bank guarantee, to protect the respondent where the balance of convenience favours the applicant.
Court orders
#- 1.Injunction restraining the respondents from running and managing the applicant's business operations, assets and bank accounts, or from acting or purporting to act as receiver-managers, or from selling, disposing of, offering for sale or alienating any of the applicant's properties, machinery, equipment, assets or stock pending hearing and determination of the intended appeal, subject to the applicant first procuring a bank guarantee in favour of Paramount Universal Bank Ltd
- 2.Mandatory injunction compelling Paramount Universal Bank Ltd to reinstate the applicant in the running and management of its business
- 3.The bank guarantee to be provided within 14 days of the order
- 4.Costs of the application to be in the intended appeal
The bench
#One judgment of the whole court — no separate or dissenting opinions.
- On appeal from
- High Court of Kenya at Nairobi (Milimani)
- H.C.C.C. No. 249 of 2006
- Jurisdiction invoked
- Rule 5(2)(b) of the Court of Appeal Rules
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 Court should not grant such relief under Rule 5 (2) (b) of the Court of Appeal Rules unless it is satisfied that the intended appeal is arguable or, put in other words, not frivolous.
The applicant is further required to satisfy the Court that if the relief sought is not granted, success in the intended appeal will be rendered nugatory.
An injunction is hereby issued restraining the respondents whether by themselves their agents, employees or otherwise howsoever from the running and management of the applicant's business operations, assets and bank accounts
A mandatory injunction compelling Paramount Universal Bank Ltd. whether by themselves, their employees or servants to reinstate the applicant in the running and management of its business.
The bank guarantee to be provided within 14 days of this order.
Issues in the judgment
#The judgment inconsistently refers to the intended appeal and guarantee referencing case numbers - the header states the appeal is from H.C.C.C. No. 249 of 2006, but the guarantee clause refers to the debt being found due in 'High Court Civil Case No.273 of 2006', which is this Court's application number, possibly an error.
The draft memorandum of appeal refers to the 'Donde' Act as a ground, but the judgment does not resolve this ground; the Court simply found arguable issues without addressing each ground.
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Bulk Medicals Ltd v Paramount Universal Bank Ltd & 2 others [2006] KECA 14 (KLR)", Case Analysis (2006). Civil Application No. 273 of 2006. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2006/14/eng@2006-12-08
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.