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Court of AppealAllowedCivil Application No. 83 of 2018

Elex Products East Africa Limited v Business Partners International Kenya Sme Fund & another [2020] KECA 31 (KLR)

Court of Appeal of Kenya
18 December 2020
1,776 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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The Court of Appeal stopped the auction of Elex Products' assets pending its appeal, confirming Kenyan courts will block irreversible enforcement when an appeal is arguable.

What this practically means

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Executive summary

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This is a ruling with reserved reasons in a single-judge-panel matter before the Court of Appeal at Nairobi, in which Elex Products East Africa Limited sought an injunction pending an intended appeal against the High Court ruling of Olga Sewe, J delivered on 20th November 2015 in HCCC No. 610 of 2014, which had declined an interlocutory injunction over the respondents' intended sale of the applicant's securities. The application was brought under Rules 5(2)(b) and 42 of the Court of Appeal Rules and was prompted by the respondents instructing auctioneers to proclaim the applicant's movable and immovable property for sale without a court order. The respondents filed no replying affidavit, so the application was determined on the applicant's pleadings, affidavits and written submissions. Applying the well-established twin principles for relief under Rule 5(2)(b) — an arguable intended appeal and the nugatory-ness test — the court found all six grounds of the draft memorandum of appeal arguable, including allegations of undue influence, unequal bargaining power and the erroneous grant of specific performance. On the second limb, the court noted the absence of any response or assurance from the respondents that they would compensate the applicant for substantial loss should the appeal succeed. Both limbs being satisfied, the court affirmed the interim orders granted on 2nd November 2020 restraining the respondents from attaching the applicant's assets pending the hearing and determination of the intended appeal, with costs to await the appeal's outcome.

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 is arguable
  2. 2.Whether the intended appeal, if successful, would be rendered nugatory unless an injunction pending appeal is granted

Key legal issues

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01

Whether the intended appeal is arguable

Holding

All six grounds of the intended appeal, including undue influence, unequal bargaining power, and erroneous grant of specific performance, were found arguable.

Reasoning

The court paraphrased six grounds in the draft memorandum of appeal, including challenges to the validity of the agreements, alleged undue influence producing an unequal 'horse and rider' relationship, entitlement to relief from an unequal bargain, and the erroneous grant of specific performance. Applying the principle that it is sufficient if a single bona fide arguable ground is raised, the court was satisfied all grounds were arguable notwithstanding that they may not ultimately succeed.

p. 2
02

Whether the appeal would be rendered nugatory if the injunction is not granted

Holding

The nugatory limb was satisfied because the threatened auction of the applicant's movable and immovable properties was unrebutted and the respondents gave no assurance of compensating the applicant should the appeal succeed.

Reasoning

The threatened action was an auction of the applicant's movable and immovable properties. The respondents filed no replying affidavit, made no response about their preparedness to make good any loss, and gave no indication of an assurance to compensate should the appeal succeed. The applicant pleaded substantial loss, a position not controverted, so the second prerequisite was met.

p. 3

Legal principles established

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  • Relief under Rule 5(2)(b) requires satisfaction of twin principles: that the intended appeal is arguable and that it will be rendered nugatory if the relief sought is not granted; both limbs must be satisfied.
  • An arguable appeal is not one which must necessarily succeed but one which ought to be argued fully before the court, one which is not frivolous; a single bona fide arguable ground suffices.
  • Whether an appeal will be rendered nugatory depends on whether what is sought to be stayed is reversible, or if not, whether damages will reasonably compensate the aggrieved party.

Court orders

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  1. 1.Prayer 2 of the application dated 21st March 2018 seeking an injunction to restrain the respondents from attaching for sale the applicant's movable and immovable assets was granted pending the delivery of the ruling on 18th December 2020 (interim orders of 2nd November 2020)
  2. 2.Costs of the application to abide the outcome of the ruling on 18th December 2020
  3. 3.Affirmation of the interim orders issued on 2nd November 2020 pending hearing and determination of the intended appeal
  4. 4.Costs of the application to await the outcome of the intended appeal

The bench

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

majority
majority
majority
On appeal from
High Court of Kenya at Nairobi, Milimani Commercial and Admiralty Division
HCCC No. 610 of 2014
Jurisdiction invoked
Rules 5(2)(b) and 42 of the Court of Appeal Rules

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.

the exercise of the Court’s mandate under the said rule is purely discretionary and which discretion is unfettered, albeit subject to an applicant seeking relief under the said Rule satisfying the twin principles required to be satisfied before granting relief under the said rule namely that the intended appeal/appeal is arguable. Second, that the same will be rendered nugatory if the relief sought is not granted.
p. 2Rule 5(2)(b) threshold principles
an arguable appeal is not one which must necessarily succeed but one which ought to be argued fully before the court, one which is not frivolous
p. 2Definition of an arguable appeal
We affirm the interim orders we issued on 2nd November 2020 pending hearing and determination of the intended appeal/appeal.
p. 3Final orders
Costs of the application to await the outcome of the intended appeal.
p. 3Costs disposition

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, "Elex Products East Africa Limited v Business Partners International Kenya Sme Fund & another [2020] KECA 31 (KLR)", Case Analysis (2020). Civil Application No. 83 of 2018. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2020/31/eng@2020-12-18

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