REPUBLIC OF KENYA
IN THE HIGH COURT OF KENYA AT GARSEN
CIVIL APPEAL NO. E004 OF 2026
HASSAN ABDI DAGANE.............................1 ST APPELLANT/APPLICANT
SAMALAND SMARTWORKS
INVESTMENT COMPANY LIMITED…..2 ND APPELLANT/APPLICANT
VERSUS
IBRAHIM ABDI GADANE................................................1 ST RESPONDENT
MOHAMUD ABDI DAGANE………………..…………..2 ND RESPONDENT
(Being an appeal from the Ruling and Order of Hon. Edward Too, Senior Principal Magistrate in MCCOMMSU/E001/2026 at Ijara Mobile Court under Hola Law Court delivered on 13 th February 2026)
RULING
1. The Appellants/Applicants have filed an application dated 20 th February, 2026 seeking for orders that:
(1) Spent
(2) Spent
(3) That pending the hearing and determination of the appeal herein this court be pleased to grant stay of execution of Orders 3 and 4 of the orders issued on 13 th February 2026 and the orders of 15 th January 2026 and affirmed by the court by the orders of 15 th February 2026 in Ijara Mobile Court under Hola Law Court Hola Magistrate`s Court Commercial suit No. E001 of 2026, Ibrahim Dagane and Mohamud Dagane v Hassan Dagane and another.
(4) Spent.
(5) That pending the hearing and determination of the appeal filed herewith, this Honourable Court be pleased to issue orders staying further proceedings in Ijara Mobile Court under Hola Magistrate`s Court Commercial Suit No E001 of 2026, Ibrahim Dagane and Mohamud Dagane v Hassan Dagane and another.
(6) That costs of this application be provided for.
2. The application is based on grounds stated on the face of the application and supported by the affidavit of the 1 st Appellant/ Applicant. The grounds thereof are that the Respondents herein obtained injunctive orders against the Appellants/Applicants as a result of which the 1 st Applicant`s hardware shop was closed down and his motor vehicles impounded by the police. The Applicants consequently filed the appeal pending herein and the instant application seeking for the orders stated above.
3. The application was vehemently opposed by the Respondents.
Background of the case
4. The 1 st Appellant/Applicant herein and the two respondents are brothers. The 1 st Appellant/Applicant operates a hardware shop at Masalani trading centre in Garissa County in the name of the 2 nd Appellant company of which he is the sole director and share-holder. The 1 st Appellant owns 4 lorries that are registered in his name.
5. It is the case for the Respondents that they reside outside the country. That sometimes in the year 2017 they entered into an agreement with the 1 st Applicant for them to finance the setting up of a hardware shop that was to be owned by the two Respondents and the 1 st Appellant was to be an employee and supervisor at the shop. The hardware shop was also meant to offer employment to the other brothers of the Respondents. It was further agreed that the 1 st Appellant was to register a trading company owned by the Respondents in the name of Samaland Construction Company Limited.
6. The Respondents aver that they sent money to the 1 st Respondent for the purposes of setting up the shop and the same started operating. That the 1 st Applicant used some of the money sent to him by the Respondents to buy lorries for business associated with the hardware shop. Later on the Respondents realized that the 1 st Appellant instead of registering the trading company in their name had registered it in his own name. They also realized that he had bought 4 lorries with money they sent to him which he registered in his own name. They also came to learn the 1 st Appellant had changed the name of his initial company from Samaland Construction Company Limited to Samaland Smartworks Investments Company Limited. The Respondents moved to court contending that the 1 st Appellant was in breach of his fiduciary duty owed to the Respondents and sought for orders for the 1 st Appellant to surrender all the operations of the hardware shop to the Respondents.
7. In the meantime, the Respondents sought for temporary orders of injunction to restrain the 1 st Appellant from dealing with the motor vehicles in dispute and for preservatory orders to preserve the hardware shop pending the hearing and determination of the suit.
8. The trial magistrate in a ruling delivered on 13 th February 2026 made the following orders:
1) Spent
2) Spent
3) That an injunction order be issued and is hereby issued restraining the Respondent herein by himself, his officers, agents, servants, employees, representative and any person acting under his name from disposing of, transferring, selling, charging or dealing with motor vehicle of registration numbers KDP 940P, KBA 294N, KCE 652Y and KCL 848N pending the hearing and determination of the suit.
4) That all properties in respect of the subject matter be preserved pending the hearing of the suit.
9. The trial court on the 19 th February 2026 made further orders that in the alternative to the orders stated above the Appellant do provide security in the sum of Ksh.14,700,000/= by either depositing the money in court or providing a bank guarantee from a reputable bank in Kenya for the said sum.
10. Arising from the above orders, the hardware shop was closed and the above stated motor vehicles were impounded by the police and detained at Masalani police station pending the hearing and determination of the suit. The Appellants were aggrieved by the orders of the trial court and filed an appeal that is pending before this court. They, in the time being, filed the application dated 20 th February 2026 seeking for, as stated above, stay of execution and stay of proceedings of the lower court pending the hearing and determination of the appeal herein.
11. The Application for stay of execution and stay of proceedings was canvassed by way of written submissions of the respective counsels appearing for the parties.
Applicants` submissions
12. The Applicants submitted that the issue for determination is whether the court should stay the trial court`s orders pending the hearing and determination of the appeal.
13. It was submitted that the power of the court to grant or refuse an application for stay of execution is discretionary and in that being so the discretion must be exercised judiciously. Reliance was placed in the case of Butt v Rent Restriction Tribunal (1979) KLR where the Court of Appeal stated that:
“1. The power of the court to grant or refuse an application for a stay of execution is a discretionary power. The discretion should be exercised in such a way as not to prevent an appeal.
2. 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 that appeal court reverse the judge’s discretion.
3. 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.
4. The court in exercising its discretion whether to grant [or] refuse an application for stay will consider the special circumstances of the case and unique requirements. The special circumstances in this case were that there was a large amount of rent in dispute and the appellant had an undoubted right of appeal.
5. The court in exercising its powers under Order XLI rule 4(2) (b) of the Civil Procedure Rules, can order security upon application by either party or on its own motion. Failure to put security for costs as ordered will cause the order for stay of execution to lapse.”
14. It was submitted that the application meets the above threshold and is deserving of the orders sought.
15. Further to that, it was submitted that the application has met the threshold for grant of stay of execution pending appeal as set out in order 42 Rules 6 (1) and (2) of the Civil Procedure Rules,2010 which are that the applicant must show that he/she will suffer substantial loss unless the orders sought are granted; show that the application was made without unreasonable delay and thirdly that the applicant has given security for due performance of the decree or order as may ultimately be binding on the applicant.
16. It was submitted that the present application was filed on 20 th February 2026 after delivery of the ruling on 13 th February 2026. Therefore, that the application was filed without unreasonable delay.
17. On the condition for substantial loss, reference was made to the case of Tropical Commodities Suppliers Ltd v International Credit Bank Limited (2014) eKLR where the court stated that:
“… Substantial loss does not represent any particular mathematical formula. Rather, it is a qualitative concept. It refers to any loss, great or small, that is of real worth or value as distinguished from a loss without value or a loss that is merely nominal…”
18. Further reliance was placed in the case of James Wangalwa & another v Agnes Naliaka Cheseto (2012) eKLR where the High Court stated that:
“..Substantial loss is what has to be prevented by preserving the status quo because such loss would render the appeal nugatory.”
19. It was submitted that the effect of the orders issued by the trial court were that the hardware business run by the 2 nd Applicant company in which the 1 st Applicant is the sole director/shareholder stands closed pending the hearing and determination of the suit by the trial court. That the order has led to the motor vehicles being impounded. That the closure of the business has exposed the 1 st Applicant to third party claims for breach of contract as customers who had paid for goods have not been supplied. That the business has existing liabilities which are not being serviced as a result of closure of the business. That the 1 st Applicant is not only incurring substantial loss but faces the risk of losing his clientele as well as suffering irreparable damage to his business reputation and goodwill.
20. It was submitted that the motor vehicles were being utilized in the course of business. That their impoundment has rendered them unavailable to the clients who had already hired them, thus exposing the 1 st Applicant to potential claims. That the motor vehicles are kept at the police station where they are exposed to the elements of weather and thus likely to deteriorate in value by the time the suit is heard and determined. That the 1 st Applicant runs the risk of his business collapsing entirely rendering the substratum of the appeal nugatory. That this is notwithstanding the fact that the Respondents failed to produce any evidence of their ownership of the company nor did they produce evidence establishing employer-employee relationship between them and the 1 st Applicant.
21. It was submitted that the company was registered on 16 th March 2017 while the alleged meeting where registration of the company was discussed took place on the 8 th April 2017. There was thus no proof of ownership of the company by the Respondents. It was submitted that the continued closure of the business and the impoundment of the motor vehicles will occasion substantial loss to the 1 st Respondent that is not only irreparable but one that will render the present appeal a non-starter, thus causing the Applicants to suffer grave injustice.
22. On the issue of security, it was submitted that the power to order for provision of security is a discretionary power that ought to be exercised judiciously and not in a manner as to drive the Applicants from the seat of justice. That the trial court ordered the 1 st Applicant to deposit security in the sum of Ksh.14,700,000/= which amount was not only excessive but arbitrary since the figure was unsupported by any evidence demonstrating that such an amount is due and owing to the Respondents. That to compel them to furnish security of such magnitude would be to unjustly lock them out of their right of appeal. That the 1 st Applicant is willing to provide the log books for the motor vehicles as security.
23. As regards the orders for stay of the trial court`s proceedings, it was submitted that the prayer is moot as this court has since granted interim orders for stay on 9 th March 2026.
24. The Applicants urged the court to grant stay of execution as prayed in the Notice of Motion.
Respondents`submissions
25. The Respondents submitted that the application has failed to meet the threshold for grant of stay of execution pending appeal in that it has not been demonstrated that the Applicants will suffer substantial loss if the orders sought are not granted and more so that they have failed to deposit security as ordered by the trial court.
26. As to what amounts to substantial loss, the Respondents cited the case of Tropical Commodities Suppliers Limited & others v International Credit Bank Limited (in liquidation) (2004) 2 EA 331 as cited above.
27. Reference was also made to the case of Century Oil Trading Company Ltd v Kenya Shell Limited Nairobi (Milimani) HCMCA No. 1561 of 2007 where it was held that:
‘The word “substantial” cannot mean the ordinary loss to which every judgement debtor is necessarily subjected when he loses his case and is deprived of his property in consequence. That is an element which must occur in every case and since the Code expressly prohibits stay of execution as an ordinary rule it is clear the words “substantial loss” must mean something in addition to all different from that…Where execution of a money decree is sought to be stayed, in considering whether the applicant will suffer substantial loss, the financial position of the applicant and that of the respondent becomes an issue. The court cannot shut its eyes where it appears the possibility is doubtful of the respondent refunding the decretal sum in the event that the applicant is successful in his appeal. The court has to balance the interest of the applicant who is seeking to preserve the status quo pending the hearing of the appeal so that his appeal is not rendered nugatory and the interest of the respondent who is seeking to enjoy the fruits of his judgment.’”
28. It was submitted that the orders issued by the trial court were preservatory in nature that they were meant to ensure that the illegality committed by the 1 st Applicant was stopped at its tracks and to prevent further dissipation of the suit property. It was submitted that all the assets that are in possession of the 1 st Applicant are the property of the Respondents as he was an employee of the Respondents who used his managerial position to unjustly enrich himself. That the 1 st Applicant has not demonstrated real, specific or substantial loss.
29. The Respondents submitted that the argument that the motor vehicle impounded by the police will dissipate due to elements of weather is not sufficient evidence of loss as the 1 st Applicant is at liberty in the unlikely event of his success in the suit to claim damages from the Respondents.
30. On the issue of security, the Respondents submitted that the fact that the 1 st Applicant has failed to deposit security as ordered by the trial court proves that the assets that are in his possession are not his and are that the same are at great risk of dissipation if this court does not intervene. However, that in the event that this court is inclined to grant the prayer for stay of execution, the Applicant must be compelled to deposit security for costs lest the Respondents` rights continue being undermined.
31. The Respondents made reliance on the case of Arun c. Sharma v Shana Raikundalia t/a Raikundalia & Co. Advocates (2014) eKLR where it was held that:
“The purpose of the security needed under Order 42 is to guarantee the due performance of such decree or order as may ultimately be binding on the applicant. It is not to punish the judgment debtor…..Civil process is quite different because in civil process the judgment is like a debt hence the applicants become and are judgment debtors in relation to the respondent. That is why any security given under Order 42 Rule 6 of the Civil Procedure Rules acts as security for the due performance of such decree or order as may ultimately be binding on the applicants. I presume the security must be one which can serve that purpose.”
32. Also cited was the case of Samvir Trustee Limited v Guardian Bank Limited (2007) eKLR where it was stated that:
…For the applicant to obtain a stay of execution, it must satisfy this court that substantial loss would result if no stay is granted. It is not enough to merely put forward allegations or assertion of substantial loss, there must be empirical or documentary evidence to support such contention. It means the court will not consider mere assertions of substantial loss on the face value but the court in exercising its discretion would be guided by adequate and appropriate evidence of substantial loss.
33. It was submitted that Respondents have a prima facie case in their claim for ownership of the subject motor vehicles. That the log books that the 1 st Applicant intends to deposit in court are for motor vehicles belonging to the Respondents. Therefore, that the Application has not met conditions for stay of execution pending appeal and the same ought to fail.
Analysis and determination
34. The Applicants are seeking orders for stay of execution pending the hearing and determination of the appeal pending herein. It is trite that the power to grant or refuse an application for stay of execution pending appeal is a discretionary power and that being so it ought to be exercised judiciously. The principles that govern the exercise of discretion were stated in the case of Butt vs Rent Restriction Tribunal (supra ) as cited above. These are that the discretion should be exercised in such a way as not to prevent an appeal. It is however important to note that granting such an order though a matter of discretion should be made in the interests of justice.
35. I have considered the grounds in support of the application, the grounds in opposition thereto and the submissions by the respective counsels for the parties. The application for stay of execution herein is made under Order 42 Rule 6(2) of the Civil Procedure Rules, 2010. An applicant seeking for stay of execution under that rule has to satisfy the court that:
1) Substantial loss may result to him/her unless the order is made;
2) That the application has been made without unreasonable delay; and
3) The applicant has given such security as the court orders for the due performance of such decree or order as may ultimately be binding on him.
36. The issue for determination is therefore w hether the application has met the conditions for stay of execution pending appeal.
37. There is no dispute that the application was made timeously and without any delay. The issues for determination are whether the 1 st Applicant has established that he will suffer substantial loss unless the orders sought are granted and whether he has offered security.
38. The purpose of an application for stay of execution pending appeal is to preserve the subject matter in dispute pending the hearing of the suit. In the case of Consolidated Marine. vs. Nampijja & Another, Civil App.No.93 of 1989 (Nairobi), the Court held that: -
“The purpose of the application for stay of execution pending appeal is to preserve the subject matter in dispute so that the right of the appellant who is exercising his undoubted right of appeal are safeguarded and the appeal if successful is not rendered nugatory”.
39. Arising out of that proposition, a party seeking stay of execution must demonstrate that he will suffer substantial loss unless the orders sought are granted. In the case of Kenya Shell Limited v Kibiru & another (1986) KLR 410 it was observed that:
It is usually a good rule to see if order XLI rule 4 of the Civil Procedure Rules can be substantiated. If there is no evidence of substantial loss to the 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.
40. It is therefore substantial loss that has to be prevented in granting an application for stay of execution pending appeal. What amounts to substantial loss was defined in the case of Tropical Commodities Suppliers Limited & others v International Credit Bank Limited (in liquidation) (supra) that it refers to any loss, great or small, that is of real worth or value as distinguished from a loss without value or a loss that is merely nominal.
41. The 1 st Applicant submits that he continues to suffer substantial loss owing to the continued closure of his business and impoundment of his motor vehicles. That he is the sole owner of the business as shown by business registration name and that he is the registered owner of the motor vehicles in issue.
42. The Respondents on the other hand claim that they are the ones who provided money to set up the business and that the 1 st Applicant was only their employee. That they are owners of the hardware shop and the motor vehicles.
43. The issue in dispute as to who is the owner of the business will be dealt with during the hearing of the suit. The issue now is whether the Applicants have demonstrated that they will suffer substantial loss due to the continued closure of the business in the event that the appeal is determined in their favour.
44. The fact that the business is closed means that the Applicants are incurring losses. The business has as of now been closed for last 4 months. More time will be spent in determining the pending appeal. There is then no doubt that the closure of the business is occasioning losses to the Applicants. The issue on whether or not the Respondents are in a position to refund the loss incurred by the 1 st Applicant in the event that the appeal is determined in his favour was not raised by the parties. That notwithstanding, the Applicants have in my view demonstrated that they will suffer substantial loss if the prayers sought are not granted. The appeal may be rendered nugatory if the orders sought are not granted in the event that they will have difficulty in recovering the loss from the Respondents. If anything, the Respondents can be compensated by way of damages for any fraud by the Applicants in the event that their case against the Applicants is successful. In my view, it does not make commercial sense to keep the hardware shop closed, especially considering that the 1 st Respondent has operated the business for many years.
45. The subject motor vehicles are detained at a police station. The court takes judicial notice that their condition is prone to dissipate due to harsh weather conditions of Masalani area. The requirement that the 1 st Applicant will suffer substantial loss has therefore been demonstrated.
46. On the issue of security for due performance of the decree, the 1 st Applicant submitted that the power to order provision of security is a discretionary power that must be exercised judiciously. That the order by the trial court for him to deposit security of Ksh.14,700,000/= amounts to locking him out of the appeal.
47. In Focin Motorcycle Co. Limited vs. Ann Wambui Wangui & another (2018)eKLR, it was stated that:
“Where the applicant proposes to provide security as the Applicant has done, it is a mark of good faith that the application for stay is not just meant to deny the respondent the fruits of judgment. My view is that it is sufficient for the applicant to state that he is ready to provide security or to propose the kind of security but it is the discretion of the Court to determine the security…....”
48. The 1 st Applicant has offered to deposit the log books of the subject motor vehicles in court as security. The Respondents oppose the same on the ground that the motor vehicles do not belong to the 1 st Applicant. However, that is an issue to be dealt with during the hearing of the suit. In my view, the deposit of the log books in court will ensure that the 1 st Applicant will not be in a position to dispose of the motor vehicles during the hearing of the appeal.
49. The amount of Ksh.14,700,000/= that the trial court ordered the 1 st Applicant to deposit in court as security is in my view a substantial amount of money. It may have the effect of locking the 1 st Appellant out of the appeal in violation of his constitutional right of appeal. The offer to deposit the log books is in my view plausible.
50. In an application for stay of execution pending appeal, the court is required to balance the rights of both parties. The Court in RWW vs. EKW (2019) eKLR addressed its mind to the issue and stated that:
“The purpose of an application for stay of execution pending an appeal is to preserve the subject matter in dispute so that the rights of the appellant who is exercising the undoubted right of appeal are safeguarded and the appeal if successful, is not rendered nugatory. However, in doing so, the court should weigh this right against the success of a litigant who should not be deprived of the fruits of his/her judgment. The court is also called upon to ensure that no party suffers prejudice that cannot be compensated by an award of costs. Indeed, to grant or refuse an application for stay of execution pending appeal is discretionary. The Court when granting the stay however, must balance the interests of the Appellant with those of the Respondent.”
51. In balancing the rights of both parties in this matter, I am of the view that I should grant the application for stay of execution on condition that the 1 st Applicant/Appellant deposits in court the log books for the motor vehicles registration Numbers KDP 940P, KBA 294N, KCE 652Y and KCL 848N as security pending the hearing and determination of the appeal.
52. The upshot is that the application herein has met the conditions for stay of execution pending appeal. I find that it is not in the interests of justice to keep the hardware shop closed and the motor vehicles impounded. Consequently, I make the following orders subject to the condition stated above:
(1) That stay of execution is granted in terms of prayer 3 of the Notice of Motion dated 20 th February 2026 pending the hearing and determination of the appeal herein.
(2) The court grants stay of further proceedings of the suit pending at the lower court as prayed in prayer 5 of the Notice of Motion dated 20 th February 2026 pending the hearing and determination of the appeal herein.
(3) That the costs of the application to abide with the outcome of the appeal.
Orders accordingly.
Delivered, dated and signed at NAIROBI this 15 th day of April 2026
J. N. NJAGI
JUDGE
In the presence of:
Miss Amuka HB for Mr. Mohamud for Appellants/Applicants
Mr. Abdulwakil for Respondents
1 st Respondent - Present
Court Assistant - Jumaa
HCCA. E004 OF 2026 - RULING Page 16 of 16
IN THE HIGH COURT OF KENYA AT GARSEN
CIVIL APPEAL NO. E004 OF 2026
HASSAN ABDI DAGANE.............................1 ST APPELLANT/APPLICANT
SAMALAND SMARTWORKS
INVESTMENT COMPANY LIMITED…..2 ND APPELLANT/APPLICANT
VERSUS
IBRAHIM ABDI GADANE................................................1 ST RESPONDENT
MOHAMUD ABDI DAGANE………………..…………..2 ND RESPONDENT
(Being an appeal from the Ruling and Order of Hon. Edward Too, Senior Principal Magistrate in MCCOMMSU/E001/2026 at Ijara Mobile Court under Hola Law Court delivered on 13 th February 2026)
RULING
1. The Appellants/Applicants have filed an application dated 20 th February, 2026 seeking for orders that:
(1) Spent
(2) Spent
(3) That pending the hearing and determination of the appeal herein this court be pleased to grant stay of execution of Orders 3 and 4 of the orders issued on 13 th February 2026 and the orders of 15 th January 2026 and affirmed by the court by the orders of 15 th February 2026 in Ijara Mobile Court under Hola Law Court Hola Magistrate`s Court Commercial suit No. E001 of 2026, Ibrahim Dagane and Mohamud Dagane v Hassan Dagane and another.
(4) Spent.
(5) That pending the hearing and determination of the appeal filed herewith, this Honourable Court be pleased to issue orders staying further proceedings in Ijara Mobile Court under Hola Magistrate`s Court Commercial Suit No E001 of 2026, Ibrahim Dagane and Mohamud Dagane v Hassan Dagane and another.
(6) That costs of this application be provided for.
2. The application is based on grounds stated on the face of the application and supported by the affidavit of the 1 st Appellant/ Applicant. The grounds thereof are that the Respondents herein obtained injunctive orders against the Appellants/Applicants as a result of which the 1 st Applicant`s hardware shop was closed down and his motor vehicles impounded by the police. The Applicants consequently filed the appeal pending herein and the instant application seeking for the orders stated above.
3. The application was vehemently opposed by the Respondents.
Background of the case
4. The 1 st Appellant/Applicant herein and the two respondents are brothers. The 1 st Appellant/Applicant operates a hardware shop at Masalani trading centre in Garissa County in the name of the 2 nd Appellant company of which he is the sole director and share-holder. The 1 st Appellant owns 4 lorries that are registered in his name.
5. It is the case for the Respondents that they reside outside the country. That sometimes in the year 2017 they entered into an agreement with the 1 st Applicant for them to finance the setting up of a hardware shop that was to be owned by the two Respondents and the 1 st Appellant was to be an employee and supervisor at the shop. The hardware shop was also meant to offer employment to the other brothers of the Respondents. It was further agreed that the 1 st Appellant was to register a trading company owned by the Respondents in the name of Samaland Construction Company Limited.
6. The Respondents aver that they sent money to the 1 st Respondent for the purposes of setting up the shop and the same started operating. That the 1 st Applicant used some of the money sent to him by the Respondents to buy lorries for business associated with the hardware shop. Later on the Respondents realized that the 1 st Appellant instead of registering the trading company in their name had registered it in his own name. They also realized that he had bought 4 lorries with money they sent to him which he registered in his own name. They also came to learn the 1 st Appellant had changed the name of his initial company from Samaland Construction Company Limited to Samaland Smartworks Investments Company Limited. The Respondents moved to court contending that the 1 st Appellant was in breach of his fiduciary duty owed to the Respondents and sought for orders for the 1 st Appellant to surrender all the operations of the hardware shop to the Respondents.
7. In the meantime, the Respondents sought for temporary orders of injunction to restrain the 1 st Appellant from dealing with the motor vehicles in dispute and for preservatory orders to preserve the hardware shop pending the hearing and determination of the suit.
8. The trial magistrate in a ruling delivered on 13 th February 2026 made the following orders:
1) Spent
2) Spent
3) That an injunction order be issued and is hereby issued restraining the Respondent herein by himself, his officers, agents, servants, employees, representative and any person acting under his name from disposing of, transferring, selling, charging or dealing with motor vehicle of registration numbers KDP 940P, KBA 294N, KCE 652Y and KCL 848N pending the hearing and determination of the suit.
4) That all properties in respect of the subject matter be preserved pending the hearing of the suit.
9. The trial court on the 19 th February 2026 made further orders that in the alternative to the orders stated above the Appellant do provide security in the sum of Ksh.14,700,000/= by either depositing the money in court or providing a bank guarantee from a reputable bank in Kenya for the said sum.
10. Arising from the above orders, the hardware shop was closed and the above stated motor vehicles were impounded by the police and detained at Masalani police station pending the hearing and determination of the suit. The Appellants were aggrieved by the orders of the trial court and filed an appeal that is pending before this court. They, in the time being, filed the application dated 20 th February 2026 seeking for, as stated above, stay of execution and stay of proceedings of the lower court pending the hearing and determination of the appeal herein.
11. The Application for stay of execution and stay of proceedings was canvassed by way of written submissions of the respective counsels appearing for the parties.
Applicants` submissions
12. The Applicants submitted that the issue for determination is whether the court should stay the trial court`s orders pending the hearing and determination of the appeal.
13. It was submitted that the power of the court to grant or refuse an application for stay of execution is discretionary and in that being so the discretion must be exercised judiciously. Reliance was placed in the case of Butt v Rent Restriction Tribunal (1979) KLR where the Court of Appeal stated that:
“1. The power of the court to grant or refuse an application for a stay of execution is a discretionary power. The discretion should be exercised in such a way as not to prevent an appeal.
2. 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 that appeal court reverse the judge’s discretion.
3. 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.
4. The court in exercising its discretion whether to grant [or] refuse an application for stay will consider the special circumstances of the case and unique requirements. The special circumstances in this case were that there was a large amount of rent in dispute and the appellant had an undoubted right of appeal.
5. The court in exercising its powers under Order XLI rule 4(2) (b) of the Civil Procedure Rules, can order security upon application by either party or on its own motion. Failure to put security for costs as ordered will cause the order for stay of execution to lapse.”
14. It was submitted that the application meets the above threshold and is deserving of the orders sought.
15. Further to that, it was submitted that the application has met the threshold for grant of stay of execution pending appeal as set out in order 42 Rules 6 (1) and (2) of the Civil Procedure Rules,2010 which are that the applicant must show that he/she will suffer substantial loss unless the orders sought are granted; show that the application was made without unreasonable delay and thirdly that the applicant has given security for due performance of the decree or order as may ultimately be binding on the applicant.
16. It was submitted that the present application was filed on 20 th February 2026 after delivery of the ruling on 13 th February 2026. Therefore, that the application was filed without unreasonable delay.
17. On the condition for substantial loss, reference was made to the case of Tropical Commodities Suppliers Ltd v International Credit Bank Limited (2014) eKLR where the court stated that:
“… Substantial loss does not represent any particular mathematical formula. Rather, it is a qualitative concept. It refers to any loss, great or small, that is of real worth or value as distinguished from a loss without value or a loss that is merely nominal…”
18. Further reliance was placed in the case of James Wangalwa & another v Agnes Naliaka Cheseto (2012) eKLR where the High Court stated that:
“..Substantial loss is what has to be prevented by preserving the status quo because such loss would render the appeal nugatory.”
19. It was submitted that the effect of the orders issued by the trial court were that the hardware business run by the 2 nd Applicant company in which the 1 st Applicant is the sole director/shareholder stands closed pending the hearing and determination of the suit by the trial court. That the order has led to the motor vehicles being impounded. That the closure of the business has exposed the 1 st Applicant to third party claims for breach of contract as customers who had paid for goods have not been supplied. That the business has existing liabilities which are not being serviced as a result of closure of the business. That the 1 st Applicant is not only incurring substantial loss but faces the risk of losing his clientele as well as suffering irreparable damage to his business reputation and goodwill.
20. It was submitted that the motor vehicles were being utilized in the course of business. That their impoundment has rendered them unavailable to the clients who had already hired them, thus exposing the 1 st Applicant to potential claims. That the motor vehicles are kept at the police station where they are exposed to the elements of weather and thus likely to deteriorate in value by the time the suit is heard and determined. That the 1 st Applicant runs the risk of his business collapsing entirely rendering the substratum of the appeal nugatory. That this is notwithstanding the fact that the Respondents failed to produce any evidence of their ownership of the company nor did they produce evidence establishing employer-employee relationship between them and the 1 st Applicant.
21. It was submitted that the company was registered on 16 th March 2017 while the alleged meeting where registration of the company was discussed took place on the 8 th April 2017. There was thus no proof of ownership of the company by the Respondents. It was submitted that the continued closure of the business and the impoundment of the motor vehicles will occasion substantial loss to the 1 st Respondent that is not only irreparable but one that will render the present appeal a non-starter, thus causing the Applicants to suffer grave injustice.
22. On the issue of security, it was submitted that the power to order for provision of security is a discretionary power that ought to be exercised judiciously and not in a manner as to drive the Applicants from the seat of justice. That the trial court ordered the 1 st Applicant to deposit security in the sum of Ksh.14,700,000/= which amount was not only excessive but arbitrary since the figure was unsupported by any evidence demonstrating that such an amount is due and owing to the Respondents. That to compel them to furnish security of such magnitude would be to unjustly lock them out of their right of appeal. That the 1 st Applicant is willing to provide the log books for the motor vehicles as security.
23. As regards the orders for stay of the trial court`s proceedings, it was submitted that the prayer is moot as this court has since granted interim orders for stay on 9 th March 2026.
24. The Applicants urged the court to grant stay of execution as prayed in the Notice of Motion.
Respondents`submissions
25. The Respondents submitted that the application has failed to meet the threshold for grant of stay of execution pending appeal in that it has not been demonstrated that the Applicants will suffer substantial loss if the orders sought are not granted and more so that they have failed to deposit security as ordered by the trial court.
26. As to what amounts to substantial loss, the Respondents cited the case of Tropical Commodities Suppliers Limited & others v International Credit Bank Limited (in liquidation) (2004) 2 EA 331 as cited above.
27. Reference was also made to the case of Century Oil Trading Company Ltd v Kenya Shell Limited Nairobi (Milimani) HCMCA No. 1561 of 2007 where it was held that:
‘The word “substantial” cannot mean the ordinary loss to which every judgement debtor is necessarily subjected when he loses his case and is deprived of his property in consequence. That is an element which must occur in every case and since the Code expressly prohibits stay of execution as an ordinary rule it is clear the words “substantial loss” must mean something in addition to all different from that…Where execution of a money decree is sought to be stayed, in considering whether the applicant will suffer substantial loss, the financial position of the applicant and that of the respondent becomes an issue. The court cannot shut its eyes where it appears the possibility is doubtful of the respondent refunding the decretal sum in the event that the applicant is successful in his appeal. The court has to balance the interest of the applicant who is seeking to preserve the status quo pending the hearing of the appeal so that his appeal is not rendered nugatory and the interest of the respondent who is seeking to enjoy the fruits of his judgment.’”
28. It was submitted that the orders issued by the trial court were preservatory in nature that they were meant to ensure that the illegality committed by the 1 st Applicant was stopped at its tracks and to prevent further dissipation of the suit property. It was submitted that all the assets that are in possession of the 1 st Applicant are the property of the Respondents as he was an employee of the Respondents who used his managerial position to unjustly enrich himself. That the 1 st Applicant has not demonstrated real, specific or substantial loss.
29. The Respondents submitted that the argument that the motor vehicle impounded by the police will dissipate due to elements of weather is not sufficient evidence of loss as the 1 st Applicant is at liberty in the unlikely event of his success in the suit to claim damages from the Respondents.
30. On the issue of security, the Respondents submitted that the fact that the 1 st Applicant has failed to deposit security as ordered by the trial court proves that the assets that are in his possession are not his and are that the same are at great risk of dissipation if this court does not intervene. However, that in the event that this court is inclined to grant the prayer for stay of execution, the Applicant must be compelled to deposit security for costs lest the Respondents` rights continue being undermined.
31. The Respondents made reliance on the case of Arun c. Sharma v Shana Raikundalia t/a Raikundalia & Co. Advocates (2014) eKLR where it was held that:
“The purpose of the security needed under Order 42 is to guarantee the due performance of such decree or order as may ultimately be binding on the applicant. It is not to punish the judgment debtor…..Civil process is quite different because in civil process the judgment is like a debt hence the applicants become and are judgment debtors in relation to the respondent. That is why any security given under Order 42 Rule 6 of the Civil Procedure Rules acts as security for the due performance of such decree or order as may ultimately be binding on the applicants. I presume the security must be one which can serve that purpose.”
32. Also cited was the case of Samvir Trustee Limited v Guardian Bank Limited (2007) eKLR where it was stated that:
…For the applicant to obtain a stay of execution, it must satisfy this court that substantial loss would result if no stay is granted. It is not enough to merely put forward allegations or assertion of substantial loss, there must be empirical or documentary evidence to support such contention. It means the court will not consider mere assertions of substantial loss on the face value but the court in exercising its discretion would be guided by adequate and appropriate evidence of substantial loss.
33. It was submitted that Respondents have a prima facie case in their claim for ownership of the subject motor vehicles. That the log books that the 1 st Applicant intends to deposit in court are for motor vehicles belonging to the Respondents. Therefore, that the Application has not met conditions for stay of execution pending appeal and the same ought to fail.
Analysis and determination
34. The Applicants are seeking orders for stay of execution pending the hearing and determination of the appeal pending herein. It is trite that the power to grant or refuse an application for stay of execution pending appeal is a discretionary power and that being so it ought to be exercised judiciously. The principles that govern the exercise of discretion were stated in the case of Butt vs Rent Restriction Tribunal (supra ) as cited above. These are that the discretion should be exercised in such a way as not to prevent an appeal. It is however important to note that granting such an order though a matter of discretion should be made in the interests of justice.
35. I have considered the grounds in support of the application, the grounds in opposition thereto and the submissions by the respective counsels for the parties. The application for stay of execution herein is made under Order 42 Rule 6(2) of the Civil Procedure Rules, 2010. An applicant seeking for stay of execution under that rule has to satisfy the court that:
1) Substantial loss may result to him/her unless the order is made;
2) That the application has been made without unreasonable delay; and
3) The applicant has given such security as the court orders for the due performance of such decree or order as may ultimately be binding on him.
36. The issue for determination is therefore w hether the application has met the conditions for stay of execution pending appeal.
37. There is no dispute that the application was made timeously and without any delay. The issues for determination are whether the 1 st Applicant has established that he will suffer substantial loss unless the orders sought are granted and whether he has offered security.
38. The purpose of an application for stay of execution pending appeal is to preserve the subject matter in dispute pending the hearing of the suit. In the case of Consolidated Marine. vs. Nampijja & Another, Civil App.No.93 of 1989 (Nairobi), the Court held that: -
“The purpose of the application for stay of execution pending appeal is to preserve the subject matter in dispute so that the right of the appellant who is exercising his undoubted right of appeal are safeguarded and the appeal if successful is not rendered nugatory”.
39. Arising out of that proposition, a party seeking stay of execution must demonstrate that he will suffer substantial loss unless the orders sought are granted. In the case of Kenya Shell Limited v Kibiru & another (1986) KLR 410 it was observed that:
It is usually a good rule to see if order XLI rule 4 of the Civil Procedure Rules can be substantiated. If there is no evidence of substantial loss to the 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.
40. It is therefore substantial loss that has to be prevented in granting an application for stay of execution pending appeal. What amounts to substantial loss was defined in the case of Tropical Commodities Suppliers Limited & others v International Credit Bank Limited (in liquidation) (supra) that it refers to any loss, great or small, that is of real worth or value as distinguished from a loss without value or a loss that is merely nominal.
41. The 1 st Applicant submits that he continues to suffer substantial loss owing to the continued closure of his business and impoundment of his motor vehicles. That he is the sole owner of the business as shown by business registration name and that he is the registered owner of the motor vehicles in issue.
42. The Respondents on the other hand claim that they are the ones who provided money to set up the business and that the 1 st Applicant was only their employee. That they are owners of the hardware shop and the motor vehicles.
43. The issue in dispute as to who is the owner of the business will be dealt with during the hearing of the suit. The issue now is whether the Applicants have demonstrated that they will suffer substantial loss due to the continued closure of the business in the event that the appeal is determined in their favour.
44. The fact that the business is closed means that the Applicants are incurring losses. The business has as of now been closed for last 4 months. More time will be spent in determining the pending appeal. There is then no doubt that the closure of the business is occasioning losses to the Applicants. The issue on whether or not the Respondents are in a position to refund the loss incurred by the 1 st Applicant in the event that the appeal is determined in his favour was not raised by the parties. That notwithstanding, the Applicants have in my view demonstrated that they will suffer substantial loss if the prayers sought are not granted. The appeal may be rendered nugatory if the orders sought are not granted in the event that they will have difficulty in recovering the loss from the Respondents. If anything, the Respondents can be compensated by way of damages for any fraud by the Applicants in the event that their case against the Applicants is successful. In my view, it does not make commercial sense to keep the hardware shop closed, especially considering that the 1 st Respondent has operated the business for many years.
45. The subject motor vehicles are detained at a police station. The court takes judicial notice that their condition is prone to dissipate due to harsh weather conditions of Masalani area. The requirement that the 1 st Applicant will suffer substantial loss has therefore been demonstrated.
46. On the issue of security for due performance of the decree, the 1 st Applicant submitted that the power to order provision of security is a discretionary power that must be exercised judiciously. That the order by the trial court for him to deposit security of Ksh.14,700,000/= amounts to locking him out of the appeal.
47. In Focin Motorcycle Co. Limited vs. Ann Wambui Wangui & another (2018)eKLR, it was stated that:
“Where the applicant proposes to provide security as the Applicant has done, it is a mark of good faith that the application for stay is not just meant to deny the respondent the fruits of judgment. My view is that it is sufficient for the applicant to state that he is ready to provide security or to propose the kind of security but it is the discretion of the Court to determine the security…....”
48. The 1 st Applicant has offered to deposit the log books of the subject motor vehicles in court as security. The Respondents oppose the same on the ground that the motor vehicles do not belong to the 1 st Applicant. However, that is an issue to be dealt with during the hearing of the suit. In my view, the deposit of the log books in court will ensure that the 1 st Applicant will not be in a position to dispose of the motor vehicles during the hearing of the appeal.
49. The amount of Ksh.14,700,000/= that the trial court ordered the 1 st Applicant to deposit in court as security is in my view a substantial amount of money. It may have the effect of locking the 1 st Appellant out of the appeal in violation of his constitutional right of appeal. The offer to deposit the log books is in my view plausible.
50. In an application for stay of execution pending appeal, the court is required to balance the rights of both parties. The Court in RWW vs. EKW (2019) eKLR addressed its mind to the issue and stated that:
“The purpose of an application for stay of execution pending an appeal is to preserve the subject matter in dispute so that the rights of the appellant who is exercising the undoubted right of appeal are safeguarded and the appeal if successful, is not rendered nugatory. However, in doing so, the court should weigh this right against the success of a litigant who should not be deprived of the fruits of his/her judgment. The court is also called upon to ensure that no party suffers prejudice that cannot be compensated by an award of costs. Indeed, to grant or refuse an application for stay of execution pending appeal is discretionary. The Court when granting the stay however, must balance the interests of the Appellant with those of the Respondent.”
51. In balancing the rights of both parties in this matter, I am of the view that I should grant the application for stay of execution on condition that the 1 st Applicant/Appellant deposits in court the log books for the motor vehicles registration Numbers KDP 940P, KBA 294N, KCE 652Y and KCL 848N as security pending the hearing and determination of the appeal.
52. The upshot is that the application herein has met the conditions for stay of execution pending appeal. I find that it is not in the interests of justice to keep the hardware shop closed and the motor vehicles impounded. Consequently, I make the following orders subject to the condition stated above:
(1) That stay of execution is granted in terms of prayer 3 of the Notice of Motion dated 20 th February 2026 pending the hearing and determination of the appeal herein.
(2) The court grants stay of further proceedings of the suit pending at the lower court as prayed in prayer 5 of the Notice of Motion dated 20 th February 2026 pending the hearing and determination of the appeal herein.
(3) That the costs of the application to abide with the outcome of the appeal.
Orders accordingly.
Delivered, dated and signed at NAIROBI this 15 th day of April 2026
J. N. NJAGI
JUDGE
In the presence of:
Miss Amuka HB for Mr. Mohamud for Appellants/Applicants
Mr. Abdulwakil for Respondents
1 st Respondent - Present
Court Assistant - Jumaa
HCCA. E004 OF 2026 - RULING Page 16 of 16