Garnet Mining Ltd v Mugo [1981] KECA 5 (KLR)
The bottom line
#Kenya's Court of Appeal ruled that a company appealing a winding-up order must pay security for costs or lose its appeal.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether further security for costs, in respect of both past and future costs, should be ordered from the appellant company in respect of its appeal against a winding-up order
- 2.Whether the respondent contributory should be protected from liability to pay any proportion of her own costs if the appeal fails
Key legal issues
#Whether further security for costs should be ordered from a company in liquidation appealing a winding-up order
The application was allowed and security of Kshs 150,000 ordered, covering both past High Court costs and future appeal costs, with the appeal to be struck out in default.
The court applied the general rule from In re Photographic Artists’ Co-operative Supply Association that a company appealing a winding-up order must give security, since otherwise frivolous appeals are encouraged. It noted the respondent was a 50% shareholder who would effectively pay half of any costs awarded against the company, and that her High Court costs remained unpaid despite repeated requests. It followed In re EK Wilson and Sons Ltd, adapting the order to cover past costs, holding the contributory entitled to protection from paying any proportion of her own costs if successful.
Whether the absence of evidence of insolvency defeats an application for security for costs
The court was not deterred by the absence of direct evidence that the company could not pay; the circumstances of non-payment and shareholding sufficed.
Counsel for the company argued there was no evidence the company would be unable to pay costs if it lost, stressing that a company is a legal entity in the same position as an individual. The judge rejected this, observing that the respondent's 50% shareholding meant she would in effect bear half of any costs awarded, and that none of her High Court costs had been paid. These practical realities outweighed the formal legal-entity argument and justified ordering security.
Legal principles established
#- Where a company appeals from a winding-up order, security for costs is the general rule, since otherwise frivolous appeals would be encouraged.
- An application for security for costs may be entertained where a company in liquidation appeals alone without joining anyone personally responsible for costs.
- A contributory petitioner who is successful should not bear any proportion of the costs of a failed appeal promoted by those concerned with the company; security should be procured from the promoters of the appeal.
Court orders
#- 1.That the company procure, on or before October 7, 1981, some sufficient person to give security to the satisfaction of the Deputy Registrar in the sum of Kshs 150,000 conditioned to answer costs awarded to the petitioner on the appeal and to secure the costs ordered to be paid by the company to the petitioner in the High Court
- 2.That in default of such security, upon certification in writing by the petitioner's advocates to the Deputy Registrar, the appeal be struck out without further order
- 3.That the company pay to the petitioner her costs occasioned by the appeal, including her costs in the High Court and the costs of this application, to be taxed if not agreed
- 4.The parties were reminded of their right under rule 54 to have the decision referred to the full court if dissatisfied
The bench
#One judgment of the whole court — no separate or dissenting opinions.
Wrote the judgment
- On appeal from
- High Court of Kenya
- Not stated in the judgment
- Jurisdiction invoked
- Rule 104(1) of the Court of Appeal Rules (application for security for costs on appeal)
Relief refused
#The company's opposition to the application for further security
The court found no merit in the submission that there was no risk of non-recovery, noting the unpaid High Court costs and the respondent's 50% shareholding
Costs
The company do pay to the petitioner her costs occasioned by the said appeal including her costs in the High Court and the costs of this application, the costs of the appeal and of this application to be taxed if not agreed.
Quotable passages
#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 general rule is that where a company appeals from a winding-up order, security for costs “must be given, to adopt any other view would encourage frivolous appeals.”
I consider this to be a proper case in which to order further security, and I allow this application with costs.
That the company do on or before October 7, 1981, procure some sufficient person on their behalf to give security (to the satisfaction of the Deputy Registrar of the Court of Appeal in case the parties differ) in the sum of Kshs 150,000
in default of the company so procuring such security by the time aforesaid it is ordered that upon the advocates for the petitioner certifying such fact in writing to the aforesaid Deputy Registrar the said appeal be thereupon struck out without further order
Issues in the judgment
#The judgment does not state the case number, neutral citation, the identity/name of the company, or the date and details of the High Court winding-up decision being appealed.
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Garnet Mining Ltd v Mugo [1981] KECA 5 (KLR)", Case Analysis (1981). Not stated in the judgment. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/1981/5/eng@1981-07-07
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.