Automated Summary
Key Facts
Mtwapa EPZ Limited (applicant) constructed a factory, office, and residential blocks for Coast Apparel EPZ Limited (1st respondent) under a 2017 agreement, financing USD 1,900,000 of a Kshs. 400,000,000 project via a loan from I&M Bank Limited (2nd respondent). The bank issued an irrevocable guarantee of USD 522,599 as rent for the first year of a 10-year lease. Disputes arose, leading to multiple court applications. The Environment and Land Court (Olola, J.) ordered payment under the guarantee to be stopped pending arbitration. Mtwapa appealed, and the Court of Appeal ruled in favor of suspending the payment stop order to prevent irreparable harm, noting the guarantee's obligation and potential statutory notices against the property.
Transaction Type
Construction and lease agreement for factory and office facilities
Issues
- The court considers if it has jurisdiction under Rule 5(2)(b) to issue a stay of execution for the orders dated 31st October 2017. The applicant claims the ruling was issued without jurisdiction, while the respondent argues the orders do not exist as the judge merely extended prior orders. The court references its decision in County Director of Planning & Architecture vs. Makupa Transit Shade Limited to clarify its authority.
- The applicant seeks a declaration that the 31st October 2017 orders are null and void. The court notes this specific prayer cannot be granted under Rule 5(2)(b) as it only authorizes stay of execution, stay of proceedings, or injunction. The court emphasizes it must avoid delving into the merits of the appeal while addressing this procedural issue.
- The court examines if the applicant has demonstrated that its appeal is arguable and that the orders in question would render the appeal nugatory. The applicant claims it faces irreparable harm due to potential statutory notices against the property, while the respondent argues the appeal lacks merit and the orders do not interfere with arbitration proceedings.
- The applicant argues that the orders dated 31st October 2017 were issued without hearing any of the parties and lack jurisdiction. They contend the court had no authority to stop payments under the irrevocable guarantee since no prior application or order compelled the bank to make such payments. The applicant asserts these orders are void and should be declared null and void.
Holdings
The Court of Appeal found that the application has merit and issued an order suspending the execution of the ruling made by Olola, J. on 31st October 2017. The court held that the applicant's appeal is arguable and that the order would be rendered nugatory without suspension, given the potential for irreparable harm from statutory notices. Costs of the application were to abide the outcome of the intended appeal.
Remedies
The Court of Appeal granted the applicant's prayer (b) to suspend the orders made by Olola, J. on 31st October 2017 that the 2nd respondent should not effect any further payment to the applicant under the guarantee, pending the hearing and determination of the intended appeal.
Contract Value
400000000.00
Legal Principles
The Court of Appeal applied the principles governing the grant of a stay of execution under Rule 5(2)(b) of the Court of Appeal Rules. This includes requiring the applicant to demonstrate that their intended appeal is arguable and that the appeal's success would be rendered nugatory without the stay. The court emphasized the discretionary nature of its jurisdiction and cited precedents such as Githunguri vs. Jimba Credit Corporation Ltd. and J.K. Industries Ltd. vs. Kenya Commercial Bank Ltd. to support its reasoning.
Precedent Name
- Githunguri vs. Jimba Credit Corporation Ltd.
- Ishmael Kagunyi Thande vs. Housing Finance of Kenya Ltd.
- J.K. Industries Ltd. vs. Kenya Commercial Bank Ltd.
- Equity Bank Limited vs. West Link Mbo Limited
- County Director of Planning & Architecture, County Government of Mombasa vs. Makupa Transit Shade Limited
Key Disputed Contract Clauses
- The lease agreement between Mtwapa EPZ Limited and Coast Apparel EPZ Limited stipulated that the applicant would construct facilities for the respondent's specifications. The court examined whether the terms of this agreement, particularly the 10-year lease and payment obligations, were validly interpreted to justify halting the bank's guarantee payments.
- The irrevocable guarantee issued by I&M Bank Limited to Mtwapa EPZ Limited for USD 522,599 as first-year rent under a 10-year lease agreement was central to the dispute. The court analyzed whether the Environment and Land Court had jurisdiction to suspend payments under this guarantee, given the bank's contractual obligation to honor it.
Judge Name
- Alnashir Visram
- M. K. Koome
- W. Karanja
Passage Text
- Whether the learned Judge could issue such an order at that stage pending the delivery of the ruling and in light of the circumstances surrounding the applications before him, given that the 2nd respondent is obliged to honour the irrevocable guarantee it issued, is an arguable point.
- We are equally convinced that the applicant stands to suffer irreparable harm in light of the looming statutory notices that may issue against the suit property on account of default in repayment of the loan amount, rendering the intended appeal nugatory should we not issue the orders sought.
- "The Jurisdiction of the Court under rule 5 (2) (b) is not only original but also discretionary. Two principles guide the court in the exercise of that jurisdiction. These principles are now well settled. For an applicant to succeed he must not only show that his appeal or intended appeal is arguable, but also that unless the court grants him an injunction or stay as the case may be, the success of that appeal will be rendered nugatory."
Damages / Relief Type
Suspension of orders preventing I&M Bank from making payments under the guarantee pending appeal