Introduction and Background
1. By a Ruling delivered on 5th July 2025 (the impugned Ruling), this Court allowed the decree-holder’s (AFEX’s) application dated 11th January 2023, brought under Order 22 Rule 35 and Order 5 Rule 17 of the Civil Procedure Rules. The effect of that Ruling was to lift the corporate veil of the judgment-debtor company (VANOIL) and hold its directors (the respondents herein) personally liable for the outstanding decretal sum of USD $604,590.60, together with accrued interest and costs.
2. The Court found that the respondents, as officers of VANOIL, had failed to satisfy the decree or disclose assets, and accordingly Ordered that AFEX was at liberty to execute the decree against the respondents in their personal capacity. Aggrieved by the decision of 5th July 2024, the respondents filed an application dated 11th July 2024 seeking leave to appeal against it, and stay of execution of that Ruling pending their intended appeal.
3. This Ruling now determines that application together with the application dated 27th August 2024 filed by (AFEX) under Section 75 of the Civil Procedure Act, Order 42 Rule 6, Order 43 Rules 1,2,3 and Order 51 Rule 15 of the Civil Procedure Rules as well as Rules 41, 43,44,45,75, 92,77(1), 78,79 and 86 of the Court of Appeal Rules.
4. AFEX substantially seeks a review of the ex-parte Orders issued on 15th July 2024 granting interim stay of execution pending the hearing and determination of the respondents’ application and dismissal of the application for incompetence. I find it proper to deal with this application first.
The application of 27th August 2024
5. AFEX’s case is that it holds a decree and certificate of taxation against the respondents amounting to Kshs. 87,028,622.99 plus costs, accruing 18% interest per annum since 28th November 2014. It has been unable to execute due to VANOIL’s lack of assets or presence. Consequently, it sought to examine VANOIL’s directors, which the Court allowed on 5th July 2024 and delivered a Ruling.
6. AFEX asserts that the respondents filed an application seeking a stay of execution of the said Ruling. Interim stay was granted ex parte pending hearing and determination of the application. It contends that the respondents' application is procedurally defective and an abuse of the court process as it is based on a Notice of Appeal filed without leave of the court, contrary to Order 43 of the Civil Procedure Rules and Rule 79 of the Court of Appeal Rules. It further argues that the Notice was not served separately but embedded in the stay application, amounting to a procedural ambush and rendering it null and void.
7. The application is opposed by the respondents vide a replying affidavit sworn on 24th September 2024 by Azim Nathoo. The respondents acknowledge the impugned Ruling which led them to file a Notice of Appeal on 17th July 2024 together with an application for stay and leave to appeal, served on AFEX’s counsel the same day.
Analysis and Determination
8. I have carefully considered the application, response as well as the submissions on record. The main issue for determination is whether the application dated 11th July 2024 is incompetent for want of leave prior to filing the Notice of Appeal. AFEX argues that leave to appeal is a prerequisite and the respondents’ failure to obtain it before filing renders the appeal fatally defective.
9. Section 75(1) of the Civil Procedure Act and Order 43 of the Civil Procedure Rules provide that appeals against certain orders lie only with leave. Order 43 Rule 3 allows an application for such leave either orally at the time of ruling or within 14 days.
10. In Stephen Nyasani Menge v Rispan Onase [2018] eKLR, the court held:
“Under Order 43 rule (3), such leave has to be sought from the court that made the Order, either at the time the Order is made by way of an oral application or within 14 days from the date the Order was made. The requirement is couched in mandatory terms, and my view is that where leave to appeal is a prerequisite before an appeal can be lodged, failure to seek and obtain leave is fatal and consequently, no competent appeal can be lodged against such an Order.” (emphasis mine).
11. In this case, while leave was not sought at the time of ruling, the respondents filed the application within the 14-day window, thus complying with Order 43 Rule 3. The application is therefore competent.
12. Regarding the Notice of Appeal and the challenges raised on it, I believe that once a Notice of Appeal is filed, it signifies the intention to invoke the jurisdiction of the Court of Appeal, and matters touching on the validity or competence of such a notice especially for purposes of striking it out fall squarely within the jurisdiction of the Court of Appeal.
13. Ultimately, I decline to make any definitive finding on the validity or competence of the Notice of Appeal dated 17th July 2025. For the purpose of this application, I take note of its existence and proceed on the basis that any stay granted herein shall be subject to the appellate court’s determination on the validity of the intended appeal. Having found that the application dated 11th July 2025 is otherwise procedurally competent and properly before this Court, and AFEX not having succeeded in its bid to strike it out, I now proceed to consider the application on its merits.
The application dated 11th July 2024
14. The application seeks two substantive Orders; leave to file an appeal against the Ruling and Orders issued on 5th July 2024 (F. Mugambi J), and stay the execution of the said Order and decree, pending the hearing and determination of the applicants’ appeal.
15. The applicants contend, through the affidavit of Azim Nathoo, that they will suffer substantial loss if required to satisfy VANOIL’s liabilities, as they are neither its directors nor shareholders. They maintain that VANOIL is a separate legal entity from Vanoil Kenya Limited and that no prejudice would be caused to AFEX if stay is granted.
16. AFEX opposes the application via a replying affidavit sworn by Steve Kimathi, asserting that the application is a delay tactic and that the applicants continue to shield themselves behind the corporate veil. AFEX states that over USD 1.5 million remains unpaid and that the applicants have not demonstrated substantial loss or offered security as required under Order 42 Rule 6. It is also AFEX’s case that the applicants have failed to satisfy the conditions required for a stay of execution under Order 42 Rule 6 of the Civil Procedure Rules.
17. AFEX, however, proposes that if stay is granted, it should be conditional upon deposit of Kshs. 87,028,622.99 plus costs of Kshs. 677,165.40 in a joint interest-earning account within 14 days.
Analysis and Determination
18. I have carefully considered the application, response and submissions filed by the parties herein. The first issue is whether leave to appeal should be granted. As earlier noted, leave to appeal is not as of right. However, the application for leave was filed within the 14-day limit under Order 43 Rule 3. There is no bar to granting leave, and it is in the interest of justice to allow the respondents to pursue an appeal.
19. The second issue is whether this court should grant a stay of execution over the impugned Ruling. Under Order 42 Rule 6(2), an applicant must show that:
i. Substantial loss may result if the order is not issued;
ii. The application was made without unreasonable delay; and
iii. Security has been offered for the due performance of the decree.
20. These requirements have been well summarized by the Court of Appeal in Butt v Rent Restriction Tribunal [1979] KECA 22 (KLR). The Court stated thus:
i. The power of the court to grant or refuse an application for a stay of execution is a discretionary, and the discretion should be exercised in such a way as not to prevent an Appeal.
ii. The general principle in granting or refusing a stay is, if there is no other overwhelming hindrance, a stay must be granted so that an Appeal may not be rendered nugatory should the Appeal court reverse the judge’s discretion.
iii. Thirdly, a judge should not refuse a stay if there are good grounds for granting it merely because, in his opinion, a better remedy may become available to the Applicant at the end of the proceedings.
iv. Finally, the court in exercising its discretion whether to grant or refuse an application for stay will consider the special circumstances of the case and its unique requirements.
21. In light of the foregoing, it is not in dispute that the application for stay of execution was made without inordinate delay. Regarding substantial loss, the Court of Appeal in the case of Kenya Shell v Benjamin Karuga Kibiru & another [1986] eKLR, stated that:
“If there is no evidence of substantial loss to an applicant, it would be a rare case when an appeal would be rendered nugatory by some other event. Substantial loss in its various forms, is the corner stone of both jurisdictions for granting a stay. That is what has to be prevented. Therefore, without this evidence it is difficult to see why the respondents should be kept out of their money.”
22. The applicants contend that being made to face the liability of VANOIL will cause them substantive and irreparable loss. In balancing the interests of both parties, I note that AFEX is open to conditional stay, and the respondents do not oppose the provision of security. Accordingly, this Court finds that a conditional stay is warranted.
Disposition
23. Accordingly, the application dated 11th July 2024 is allowed on the following terms;
i. Leave to appeal is granted.
ii. Stay of execution of the Ruling of 5th July 2024 is allowed on condition that the applicants shall deposit the amount of Kshs. 20,000,000/= in a joint interest earning account in the name of the advocates for the parties within 30 days of this Ruling. The applicants shall additionally provide to the respondents a bank guarantee of Kshs. 30,000,000/= within the same period.
iii. Failure to comply with the above condition will automatically vacate the stay, and the decree holder (AFEX) shall be at liberty to execute.
iv. Costs shall be in the cause.
DATED, SIGNED AND DELIVERED IN MOMBASA
THIS 16TH DAY OF APRIL 2025
F. MUGAMBI
JUDGE