Background
1. By a Notice of Motion, dated 5th August, 2025, the Appellant seeks the following orders;
a) THAT this application be certified as urgent and be heard ex parte in the first instance.
b) THAT pending hearing and determination of this application inter partes, the Honourable Court be pleased to order a stay of execution of the ex parte Judgment delivered on 17th May 2024, together with the ensuing Decree and all consequential orders thereon, including the application for execution and warrants of attachment and sale both dated 28th July 2025 taken out by Ms Jovan H. Kariuki T/A Moran Auctioneers.
c) THAT pending hearing and determination of the appeal, the Honourable Court be pleased to order a stay of execution of the ex parte Judgment delivered on 17th May 2024, together with the ensuing Decree and all consequential orders thereon, including the application for execution and warrants of attachment and sale both dated 28th July 2025 taken out by Ms Jovan H. Kariuki T/A Moran Auctioneers.
d) THAT the Honourable Court be pleased to recall, review, and/or set aside the warrants of attachment and sale dated 31st July 2025 taken out by Ms Jovan H. Kariuki Moran Auctioneers for being invalid and bad in law.
e) THAT the Honourable Court be pleased to issue an order that the auctioneer's costs and/or any other related costs thereon be borne by the Respondent.
f) That the costs of this application be provided for.
g) THAT this Honourable Court be pleased to issue other or further orders as it may deem just and fit to serve the interests of justice.
Appellant/Applicant’s case
2. The Appellant asserts that the proceedings in the lower court were fundamentally flawed, as they were conducted without its knowledge or participation following its placement under receivership. It is contended that, although a claim had been filed against it by the Respondent seeking terminal benefits, a receiver and manager had already been lawfully appointed over the Appellant on 31 May 2022. The appointment was duly publicised, including through the Kenya Gazette. Despite this, the Receiver was never served with the statement of claim or any pleadings, resulting in the case proceeding uncontested and culminating in an ex parte judgment rendered on 17 May 2024.
3. The Appellant argues that the failure to serve the Receiver denied it the opportunity to be heard and resulted in an irregular judgment. When it became aware that the Respondent had initiated execution proceedings, it filed an application in the trial court on 30 July 2024, seeking to set aside the ex parte judgment, the decree, and all related proceedings, and to obtain leave to defend the claim. However, the trial court rejected that application, hence the current appeal.
4. The Appellant further argues that the trial magistrate erred in law and in fact by refusing to set aside the ex parte judgment, despite the Appellant having demonstrated sufficient cause, including failure to serve the Receiver and the presence of a draft defence raising triable issues.
5. The Appellant argues that, as a company in receivership, its assets are under the Receiver’s control for the benefit of secured and other creditors in accordance with the statutory order of priority. Accordingly, the Respondent’s enforcement proceedings by attachment and the proposed sale of its assets are unlawful and breach insolvency principles, as they constitute an improper attempt by a single decree-holder to circumvent the established priority regime.
6. The Appellant further argues that unless the application is granted, it will suffer significant loss, including the sale of its assets to the disadvantage of secured and higher-ranking creditors, and will be permanently denied the opportunity to defend the claim. It therefore urges the court to intervene in the interests of justice and to prevent what it describes as an irregular and prejudicial execution process.
Respondent’s case
7. The Respondent contends that the Appellant’s application lacks merit and is intended to delay enforcement of a lawful judgment. As a preliminary point, the Respondent submits that the Court lacks jurisdiction to determine issues relating to receivership status and creditor priority, as those matters are pending before the High Court and the Court of Appeal in separate proceedings.
8. On the issue of service, the Respondent firmly disputes the Appellant’s claim that it was unaware of the suit. He maintains that the Appellant was duly and properly served with summons to enter an appearance and the statement of claim, as evidenced by affidavits of service and court records. According to the Respondent, the Appellant’s failure to participate in the proceedings was deliberate, rather than due to lack of notice. Consequently, the ex parte judgment was lawfully obtained after the Appellant failed to enter an appearance despite being served.
9. The Respondent further argues that the Appellant previously sought to set aside the ex parte judgment in the trial court on similar grounds, and that application was dismissed. Accordingly, the current application merely rehashes issues already resolved, and the Appellant is not entitled to discretionary relief, having failed to defend the suit when given the opportunity.
10. Regarding receivership, the Respondent contends that the Appellant was not under receivership when the claim arose and was pursued, and that the claim had already crystallised before any such receivership. He also maintains that the receivership was not in effect at times due to court orders, and that the Appellant has failed to disclose this fully. On that basis, the Respondent argues that his claim has priority and is not invalidated by the alleged receivership.
11. The Respondent further disputes the Appellant’s assertion of substantial loss, contending that no specific or irreparable loss has been proven that cannot be redressed by damages. Moreover, he notes that the Appellant has not provided security for the proper enforcement of the decree as mandated under Order 42 Rule 6(2)(b) of the Civil Procedure Rules.
12. The Respondent asserts that the execution proceedings were properly initiated after judgment was entered in his favour, and that the Appellant’s claims of illegality are baseless. He describes the application as a tactic to delay and hinder his enjoyment of the benefits of the judgment, and requests that the Court dismiss it with costs.
Appellant’s submissions
13. The Appellant/Applicant contends that it has met the legal criteria for a stay of execution pending appeal under Order 42 Rule 6 of the Civil Procedure Rules. It asserts that, without a stay, it will incur substantial loss because the execution is being enforced against a company in receivership, whose assets are subject to a crystallised floating charge in favour of a secured creditor. The Appellant claims that such execution would unlawfully diminish the secured assets and compromise the statutory order of priority among creditors, thereby rendering the appeal futile.
14. In support of the principles governing stay, the Appellant relies on Butt v Rent Restriction Tribunal [1982] KLR 417, Kenya Shell Ltd v Benjamin Karuga Kibiru & Another [1986] KLR 410, and RWW v EKW [2019] eKLR.
15. The Appellant further argues that the execution proceedings, including the warrants of attachment and sale, are invalid and unlawful because they were carried out against a company already in receivership. It contends that upon the appointment of the receiver, all assets came under the receiver’s control and were no longer subject to attachment by an execution creditor. Therefore, any attachment or sale of such assets without prior approval is void ab initio.
16. On this point, the Appellant cites Lochab Brothers v Kenya Furfural Co. Ltd [1983] eKLR, Desbro (Kenya) Ltd v General Printers Ltd; I&M Bank Ltd (Objector) [2021] eKLR, and Dennish Owino Omega v Mumias Sugar Co. Ltd (Under Receivership) [2021] eKLR.
17. It is also submitted that the Respondent unlawfully instructed auctioneers to carry out execution in breach of insolvency law, and therefore should bear the auctioneer’s costs pursuant to section 26 of the Auctioneers Act.
18. Finally, the Appellant argues that it has an arguable appeal, especially regarding the trial court’s refusal to set aside the ex parte judgment despite the lack of service on the Receiver and the existence of a draft defence raising triable issues.
Respondent’s submissions
19. The Respondent asserts that the Appellant’s application dated 5 August 2025 is unjustified and should be dismissed, as it appears solely intended to delay and hinder the enforcement of a legitimate judgment. He maintains that the case at the trial court was properly initiated through a statement of claim dated 5th May 2022, and that the Appellant was duly served with a summons to appear, as evidenced by an affidavit of service on record. Despite such service, the Appellant failed to enter an appearance or defend the claim, resulting in a regular ex parte judgment issued on 17th May 2024 for the amount of Kshs. 1,058,716.20, plus costs and interest.
20. The Respondent further asserts that the Appellant previously lodged an application before the trial court seeking to set aside the aforementioned judgment on similar grounds, which application was dismissed on 23 July 2025. The current application, therefore, represents a repetition of issues already adjudicated and constitutes an abuse of the court process.
21. Regarding service and awareness of the claim, the Respondent maintains that the Appellant’s assertion of unawareness of the proceedings is untrue, as proper service was effected and is confirmed by the court records. He attributes the case’s undefended status to the Appellant’s intentional failure to participate.
22. Regarding receivership, the Respondent argues that when the claim was filed, the Appellant was still a going concern and not under receivership, so the claim crystallised before any such appointment. He further states that the alleged receivership was subject to litigation and was revised by the High Court in Milimani High Court Commercial Case No. E021 of 2022. Between 12 July 2022 and 4 November 2022, the Appellant was not under receivership, following orders issued in Civil Appeal No. 261 of 2022 at the Court of Appeal. Based on this, the Respondent contends that issues of receivership and creditor priority are not properly before this Court and fall within the jurisdiction of the pending proceedings in the superior courts.
23. In support of the jurisdictional objection, the Respondent relies on Owners of the Motor Vessel "Lillian S" v Caltex Oil (Kenya) Ltd [1989] KLR 1.
24. The Respondent also contends that the Appellant lacks the authority to bring the present application, as the appointment of the receiver was declared illegal and the receiver was restrained from acting by the High Court in Commercial Case No. E201 of 2022. He further argues that not all assets of the Appellant are subject to the alleged debentures, and that movable assets not covered by the charge are available for attachment and sale in execution of the decree.
25. Finally, the Respondent argues that the execution process was lawfully initiated after a valid judgment and that the Appellant’s claims of illegality are unfounded. He prays for the Court to dismiss the application with costs, contending that costs should follow the event in accordance with section 27 of the Civil Procedure Act.
Analysis and Determination
26. The application before the Court is for a stay of execution pending appeal and to set aside the warrants of attachment and sale. The decision depends on three key issues: whether the Court has jurisdiction, whether the Appellant has satisfied the threshold for a stay under Order 42 Rule 6 of the Civil Procedure Rules, and whether the execution process is lawful in light of the alleged receivership.
27. Concerning jurisdiction, the Respondent contends that this Court lacks the authority to rule on matters pertaining to receivership and creditor priority owing to ongoing proceedings in the High Court and Court of Appeal. While jurisdiction is undeniably a fundamental aspect, as outlined in Owners of the Motor Vessel "Lillian S" v Caltex Oil (Kenya) Ltd [1989] KLR 1, I must state that the Respondent has, whether deliberately or unintentionally, misconstrued the context in which the Appellant references and intends to rely on its status as an enterprise under receivership, in the instant application.
28. I find it not at all challenging to conclude that, contrary to the Respondent’s position, the Applicant has not invited this Court to make a determination on any issue arising from the receivership and/or the relationship between the receiver and the Appellant’s creditors. All that it has done is to point out that it is under receivership, a fact the Respondent has not denied, and that, as execution was commenced and proceeded without leave of Court, the process is unlawful. The mention of the receivership position serves only to demonstrate that the appeal is not frivolous but has a chance of success, and to satisfy the condition of substantial loss as required under Order 42 Rule 6.
29. I now turn to consider whether the Appellant has met the threshold for the grant of an order for stay pending appeal. The relevant principles to be considered in an application for stay pending appeal were aptly outlined in Butt v Rent Restriction Tribunal [1982] KLR 417. The Court held that,
“If there is no other overwhelming hindrance, a stay ought to be granted so that an appeal, if successful, may not be nugatory. A stay which would otherwise be granted ought not to be refused because the judge considers that another, which in his opinion will be a better remedy, will become available to the applicant at the conclusion of the proceedings.
It is in the discretion of the court to grant or refuse a stay but what has to be judged in every case is whether there are or not particular circumstances in the case to make an order staying execution. It has been said that the court, as a general rule, ought to exercise its best discretion in a way so as not to prevent the appeal, if successful, from being nugatory.”
30. In RWW v EKW [2019] KEHC 6523 (KLR), the Court held that no order for stay of execution shall be made unless the court is satisfied that substantial loss may result to the applicant, the application has been made without unreasonable delay, and such security as the court orders for the due performance of the decree has been given.
The court held 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.”
31. This Court remains cognizant of the acknowledged fact that, at the commencement of the execution proceedings, the Appellant company was under receivership. It is my considered opinion that the law is unequivocal: legal proceedings must not be initiated against an entity that is under receivership or execution proceedings, unless initiated or continued with leave. In light of this, I am persuaded that the execution proceedings were irregularly commenced. The attachment that was carried out cannot be sanctioned.
32. On this ground, I shall allow the application, but direct that, pending the hearing and determination of the instant appeal, there shall be a stay of execution, subject to the Appellant depositing the entire decretal sum in court within 30 days. The Appellant shall pay auctioneers' charges, to be agreed upon or assessed in court. This order has been necessitated by the circumstances of the matter, including the fact that the Appellant did not sufficiently demonstrate that the suit in the lower court was commenced whilst the Appellant was under receivership.
Read Signed and Delivered this 30th Day of April 2026.