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Court of AppealAllowedCivil Application No. Nai. 164 of 2010

Trade Winds Express Limited & another v Eurocraft Agencies Limited [2010] KECA 12 (KLR)

Court of Appeal of Kenya
10 December 2010
1,625 words in judgment
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The bottom line

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Kenya's Court of Appeal halted High Court proceedings because continuing them would have made a later appeal pointless.

What this practically means

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Executive summary

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Trade Winds Express Limited and Barry Michael Tomlinson, defendants in H.C.C.C. No. 543 of 2003, applied under Rule 5(2)(b) of the Court of Appeal Rules for a stay of proceedings pending an intended appeal against a ruling of Khaminwa, J. delivered on 16th October 2009. That ruling allowed Eurocraft Agencies Limited's application under Order XIX Rules 1 and 2 of the Civil Procedure Rules for the appointment of independent auditors to examine, verify and report on the accounting position between Eurocraft and Trade Winds, in a suit alleging that irregular payments of Shs.76,509,743.55 were made to Trade Winds in breach of Tomlinson's fiduciary duties as Managing Director of Eurocraft. An earlier stay application had been dismissed by Njagi, J. on the ground that the nugatory test was not satisfied, though he found the appeal arguable. The applicants filed Civil Appeal No. 207 of 2010 against Khaminwa, J.'s ruling. Before the Court of Appeal (Tunoi, O'Kubasu and Githinji, JJ.A.), the applicants argued that the dispute was not an accounting matter but raised allegations of fraud and breach of fiduciary duty requiring trial and determination of preliminary questions before accounts were taken. The Court held the appeal arguable and, applying Butt v Rent Restriction Tribunal, found that if stay were refused the auditors' report would probably lead to determination of the suit before the appeal was heard, making it impossible to re-wind the clock and defeating the appeal and the overriding objective. The Court allowed the application and stayed the High Court proceedings, with costs in the appeal.

Questions the Court framed

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

  1. 1.Whether the intended appeal against the order for appointment of independent auditors is arguable
  2. 2.Whether the appeal, if successful, would be rendered nugatory unless a stay of proceedings is granted

Key legal issues

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01

Arguability of the intended appeal

Holding

The appeal was arguable, having regard to the pleadings, the grounds resisting the application for accounts, the findings of Njagi, J. and the grounds of appeal.

Reasoning

The applicants contended that the dispute was not in essence an accounting matter but raised allegations of fraud and abuse of office which must be tried by the court before accounts were taken. Njagi, J. had already found the intended appeal raised arguable points. The Court, without considering the merits of the filed appeal in detail, held that taking the pleadings, the grounds of resistance, the earlier findings and the grounds of appeal together, the appeal was indeed arguable.

p. 3
02

Whether the appeal would be rendered nugatory absent stay

Holding

Yes - if auditors took accounts and filed them in court, the suit would probably be determined before the appeal was heard, and a successful appeal could not unwind the process.

Reasoning

The Court reasoned that if stay were refused, auditors would take accounts and file them in court, the applicants would pay half the auditor's fees, and the suit would probably be determined before the appeal was heard. A successful appeal could not then re-wind the clock, defeating the appeal and the overriding objective of facilitating the just resolution of the appeal and the suit.

p. 3

Legal principles established

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  • On a Rule 5(2)(b) application the applicant must satisfy the court both that the appeal is arguable and that, unless stay is granted, the appeal if successful would be rendered nugatory.
  • The court on a stay application ought to exercise its discretion so as to prevent a successful appeal from being rendered nugatory.
  • Where an order made in the course of proceedings, if implemented, would make it impossible to restore the position on appeal and defeat the appeal's purpose, the Court of Appeal will grant a stay of proceedings.

Court orders

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  1. 1.Stay of proceedings in High Court Civil Suit No. 543 of 2003 granted in terms of the application pending the hearing and determination of the intended appeal
  2. 2.Costs of the application to be costs in the appeal

The bench

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

majority
majority
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On appeal from
High Court of Kenya at Milimani Commercial Courts, Nairobi
H.C.C.C. No. 543 of 2003
Jurisdiction invoked
Rule 5(2)(b) of the Court of Appeal Rules (application for stay of proceedings pending intended appeal)

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.

In the result, we allow the application and grant a stay of proceedings in terms of the application. Costs shall be costs in the appeal.
p. 3Final orders - stay of proceedings granted
In the peculiar circumstances of the dispute, it is just to grant the order of stay.
p. 3Discretion to grant stay
If the appeal is ultimately successful it would be impossible to re-wind the clock and the whole purpose of the appeal would have been defeated.
p. 3Nugatory value test

Key timeline

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Practical implications

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Frequently asked questions

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Cite this brief

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Cite this brief

Caselaw, "Trade Winds Express Limited & another v Eurocraft Agencies Limited [2010] KECA 12 (KLR)", Case Analysis (2010). Civil Application No. Nai. 164 of 2010. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2010/12/eng@2010-12-10

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