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ELCDismissed(Application dated 12th September 2013 in Notice of Motion under sections 165 and 166 of the Companies Act)· [2014] KEELC 419 (KLR)

Tasmac Limited v Roberto Macri & 4 others [2014] KEELC 419 (KLR)

High Court of Kenya
11 April 2014
OAO. A. Angote
3,448 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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The High Court in Malindi refused to force a foreign company suing in Kenya to pay security for costs because it owned valuable assets locally.

What this practically means

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Executive summary

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The 1st, 2nd and 3rd Defendants applied under Order 26 Rules 1 and 6 of the Civil Procedure Rules for security for costs of Kshs. 31,075,000 from the Plaintiff, a company registered in Mauritius under a Category 2 Global Business Licence, contending that if successful they would be unable to identify or reach those liable for costs. The application was made in a suit in which the Plaintiff, holding 480 of 1000 shares in Nassau Limited, seeks orders under sections 165 and 166 of the Companies Act for the appointment of an inspector to investigate the company's affairs, complaining that it was excluded from Blue Marlin Resort and that the Defendants were not validly appointed as directors. The Defendants also alleged that the signature on the Plaintiff's Replying Affidavit was forged, but made no formal application to expunge it. The Interested Party submitted that security could only be ordered if the Plaintiff had no prima facie case and was impecunious. Applying Shah v Shah, Angote J held that the test is whether the defendant has shown a bona fide defence, not whether the plaintiff has a prima facie case. Although foreign residence ordinarily attracts security, the Plaintiff's 480 shares in Nassau Limited, which owns land valued at Kshs. 800 million, were known assets within the jurisdiction available for attachment. The Defendants' Replying Affidavit failed to explain the change in shareholding or compliance with pre-emption clauses, so no bona fide defence was shown. The application was dismissed with costs; the Preliminary Objection dated 7th November 2013 was not addressed as it was not before the court.

Key legal issues

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01

Whether residence abroad of the plaintiff justifies an order for security for costs

Holding

No, not where the plaintiff has known assets within the jurisdiction that can be attached to defray costs

Reasoning

The court traced the English and Kenyan authorities establishing that residence abroad confers jurisdiction to order security, but that the order is grounded on the difficulty and cost of enforcing a costs order against a foreign plaintiff. Since the Plaintiff holds 480 admitted shares in Nassau Limited, a Kenyan company owning the resort property valued at Kshs. 800 million, enforcement would be straightforward and security was unnecessary.

p. 6
02

Whether the Defendants demonstrated a bona fide defence

Holding

They did not; their Replying Affidavit did not explain how the shareholding changed or whether pre-emption clauses in the Articles were followed

Reasoning

Applying Shah v Shah, the second limb of the test required the Defendants to show a bona fide defence. The court examined the pleadings and found the Defendants' Replying Affidavit silent on how the shareholding of Nassau Limited changed and whether the Plaintiff was consulted under clauses 3 and 5 of the Articles of Association. The Plaintiff had raised serious issues requiring a response.

p. 6

Legal principles established

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  • Where a foreign plaintiff has known assets within the jurisdiction, an order for security for costs need not be made merely because the plaintiff is registered abroad
  • The test on an application for security for costs is not whether the plaintiff has a prima facie case but whether the defendant has shown a bona fide defence (Shah v Shah)

Court orders

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  1. 1.The 1st, 2nd and 3rd Defendants' Application dated 12th September 2013 is dismissed
  2. 2.Costs of the application awarded to the Plaintiff

Authorities

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Legislation

  • Civil Procedure Rules, 2010Order 26 Rules 1 and 6
  • Companies Actsections 165 and 166

Cases cited (10)

  • Parmex Limited vs Austin & Partners Limited
    (2006) e KLR
  • Pacras T. Swai -Vs- Kenya Breweries Ltd.
    (2004) e KLR
  • Indemnity Insurance Company of North America & Others -Vs- Kenya Airfreight Handling Ltd. & Another
    Civil Case Number 531 of 1999
  • In Re Percy Kelly Nickel, Cobalt and Chrome Iron Mining Company
    (1875-76) CLD 531
  • Two Tone Building Africa Ltd. -vs- Coca Cola East & Central Africa Pty Ltd
    NRB Hccc. No. 542 of 2012
  • Cosmos Holidays Plc -vs- Dhanjal Investments Limited
    NRB Hccc No. 112 of 2012
  • Shah Vs Shah
    (1982) KLR 95
  • Crozat Vs Brogden
    (1894) 2 QB 30
  • Thune and Another Vs London Properties Ltd. & Others
    (1990) 1 ALL ER 972
  • Barkely Administration Inc. Vs Mc. Clerllard
    (1990) 1 All ER 972
Jurisdiction invoked
Order 26 Rules 1 and 6 of the Civil Procedure Rules, 2010

Key timeline

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Practical implications

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Frequently asked questions

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Cite this brief

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Cite this brief

Caselaw, "Tasmac Limited v Roberto Macri & 4 others [2014] KEELC 419 (KLR)", Case Analysis (2014). (Application dated 12th September 2013 in Notice of Motion under sections 165 and 166 of the Companies Act). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2014/419/eng@2014-04-11

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