George Gikubu Mbuthia & 2 others v Housing Finance Company (K) Limited & 2 others [2018] KECA 610 (KLR)

Court of Appeal

11 May 2018

M. Warsame

W. Ouko AMA. K Murgor

1,417 words in judgment

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The bottom line

Kenya's Court of Appeal confirmed courts can force litigants with a track record of unpaid costs to deposit security before pursuing a suit.

What this practically means

Executive summary

This Court of Appeal ruling at Nairobi (Warsame, Ouko & Murgor JJ.A) dismissed an appeal against a ruling of Okwengu J. in E.L.C No. 358 of 2009 ordering the appellants to deposit Kshs.5,000,000 as security for costs, with the suit stayed pending compliance. The underlying dispute, dating from 1990, concerns ownership of L.R 36/11/1 Eastleigh Section II Nairobi and had spawned multiple suits by the 1st appellant, several of which were dismissed with costs that remained unpaid. The respondents sought security for costs under Order XXV Rules 1, 5 and 6 of the Civil Procedure Rules, relying on the appellants' history of multiple suits, unpaid costs, and lack of demonstrated financial ability to meet costs if the suit failed. The appellate court applied the Mbogo v Shah principle that an appellate court will not interfere with a lower court's exercise of discretion unless the decision is clearly wrong, owing to misdirection, reliance on improper matters, or failure to consider relevant matters. The court held the trial judge properly appreciated the issues, correctly placed the burden on the respondents, and rightly treated the appellants' past failure to pay costs as an indicator of inability to pay. It also endorsed the purpose of security for costs as protecting parties and mitigating against limitless litigation, avoiding resort to striking out suits. The appeal was accordingly dismissed.

Key legal issues

Whether the Court of Appeal could interfere with the trial court's discretion ordering security for costs

Holding

The appeal fails because the trial court did not exceed the limits set in Mbogo v Shah; the discretion was properly exercised and the decision was not clearly wrong.

Reasoning

The court applied the classic Mbogo v Shah test: interference is warranted only where the discretion was exercised on wrong principles, on extraneous matters, or upon failure to consider relevant matters resulting in a wrong conclusion. The judge had correctly considered the appellants' multiple suits, unpaid costs in previous suits, and absence of evidence of financial ability, and so her order was within the perimeters of judicial discretion.

p. 2

The onus and purpose of an application for security for costs

Holding

The purpose of security for costs is to protect a litigant from a plaintiff who cannot pay costs if unsuccessful; the onus rests on the respondents to prove inability or lack of good faith, and the trial judge found they had discharged it.

Reasoning

The court drew on Upward Scale Investments to define the purpose of security for costs: to enable a litigant unable to pay costs to be prevented from carrying on litigation except upon terms protecting the other parties. The order also protects both parties by averting the harsher remedy of striking out the suit. The trial judge was alive to the burden on the applicants and found it discharged.

p. 2

Legal principles established

An appellate court will not interfere with the exercise of discretion by an inferior court unless satisfied that the decision is clearly wrong, because of misdirection, reliance on wrong matters, or failure to consider relevant matters leading to a wrong conclusion.
The purpose of an order for security for costs is to disable a litigant unable to pay costs from carrying on litigation except upon terms affording protection to the other parties, and the onus of proving inability or lack of good faith lies on the applicant.
A litigant's past failure to pay costs awarded in previous suits is a proper indicator of inability to pay costs should the current suit fail, and may ground an order for security for costs.

Court orders

1.The appeal is dismissed
2.The order of Okwengu J. directing the appellants to deposit Kshs.5,000,000 as security for costs, and the stay of the suit pending compliance, are affirmed

Authorities

Legislation

Civil Procedure RulesOrder XXV Rules 1, 5 & 6

Cases cited (2)

Mbogo & Another v Shah
(1968) 1 EA 93
Upward Scale Investments Co. Ltd & 7 others v Mwangi Keng'ara & Co. Advocates
[2017] eKLR

On appeal from: High Court of Kenya at Nairobi; E.L.C No. 358 of 2009
Jurisdiction invoked: First appellate jurisdiction over appeals from the High Court (Court of Appeal Rules; underlying appeal from High Court ruling)

Key timeline

Practical implications

Frequently asked questions

Cite this brief

Caselaw, "George Gikubu Mbuthia & 2 others v Housing Finance Company (K) Limited & 2 others [2018] KECA 610 (KLR)", Case Analysis (2018). Civil Appeal No. 173 of 2010. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2018/610/eng@2018-05-11

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.