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ELCDismissedNot stated in judgment (application dated 26/9/18 in pending suit)· [2019] KEELC 3983 (KLR)

Kihiumwiri Farmers Company Limited v Breeze Investments Company Ltd & 3 others [2019] KEELC 3983 (KLR)

Environment and Land Court
28 March 2019
JKJ. G. Kemei
2,002 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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A Kenyan court refused to force a plaintiff to deposit Kshs. 3 million because the defendant only alleged, but never proved, the plaintiff couldn't pay costs.

What this practically means

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Executive summary

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The 1st Defendant moved the Environment and Land Court at Murang'a under Order 26 Rules 1, 5 and 6 of the Civil Procedure Rules seeking an order that the Plaintiff deposit security for costs of Kshs. 3,000,000 into a joint interest account, contending that the Plaintiff had been wound up, conducted no economic activity, owned no attachable assets, had failed to pay its share of survey fees ordered by consent, had delayed prosecuting the suit, and had withdrawn an earlier suit in the Milimani courts without paying costs. The Plaintiff, through the affidavit of its director and chairman Phares Mwangi Njoroge, opposed the application as a ploy to scuttle the main suit, asserting that it is a land buying company owning vast tracts of land worth millions, that the suit land itself is available for attachment, that non-compliance with the survey orders resulted from the parties opting for a private surveyor, and that the 1st Defendant was in breach of orders of 24/10/17 by continuing to develop the suit property. The 2nd to 4th Defendants did not respond. The court set out the purpose of security for costs and the applicable principles: the applicant must prove, not merely allege, that the plaintiff would be unable to pay costs at the end of trial. On the evidence, the claims of winding up and lack of assets were unsupported; no audited accounts were produced; and the record showed no admission by the Plaintiff of inability to pay survey fees. The application was dismissed with costs in the cause, and the parties were directed to progress the case to trial without delay.

Key legal issues

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01

Whether the 1st Defendant discharged the burden of proving the Plaintiff's inability to pay costs

Holding

The application was dismissed because the Applicant adduced no evidence of the Plaintiff's insolvency, winding up or lack of assets

Reasoning

The claim that the Plaintiff was wound up and owned no assets was unsupported; no winding-up order or audited financial statements were produced. The Plaintiff deponed that it owns large tracts of land that could be sold. The court record showed no admission by the Plaintiff that it could not pay survey fees. The discretion under Order 26 must therefore be exercised against the Applicant.

p. 2
02

The purpose and limits of security for costs orders

Holding

Security for costs protects defendants and deters frivolous litigation, but courts must not bar parties with just claims from accessing justice

Reasoning

The court set out the balancing exercise: the order protects defendants dragged to court from losing even their costs and prevents useless litigation, yet courts must ensure genuine claimants are not shut out. Guided by precedent, the discretion is unfettered but the result must be reasonable, and the applicant bears the onus of proving inability to pay.

p. 2
03

Whether the Plaintiff's conduct regarding survey fees justified the inference of impecuniosity

Holding

The court record did not support the Applicant's allegations about unpaid survey fees

Reasoning

A perusal of the record showed the consent of 23/10/17 requiring the District Surveyor to visit the locus with costs shared equally was varied by consent to the Director of Survey. The 1st Defendant's own counsel had remarked that the fees were too high. There was no record of the Plaintiff stating it could not pay, nor evidence that the 1st Defendant itself paid the fees.

p. 3

Legal principles established

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  • An applicant for security for costs must prove, not merely allege, that the plaintiff will be unable to pay costs at the end of the trial; mere inability is not enough

Court orders

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  1. 1.The Notice of Motion dated 26/9/18 seeking security for costs is dismissed
  2. 2.Costs of the application shall be in the cause
  3. 3.Parties should take steps to progress the case to trial without delay

Authorities

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Legislation

  • Civil Procedure RulesOrder 26 Rules 1, 5 & 6

Cases cited (4)

  • Marco Tools & Explosives Ltd V Mamujee Brothers Ltd
    [1988] KLR 730
  • Europa Holdings Limited Vs Circle Industries (UK)
    BCLC 320 CA
  • Kibiwott & 4 others Vs The Registered Trustees of Monastery of Victory Nakuru
    HCCC No 146 of 2004
  • Gatirau Peter Munya Vs Dickson Mwenda Githinji & 2 Others
    CA No. 38 of 2013 [2014] eKLR
Jurisdiction invoked
Order 26 Rules 1, 5 & 6 of the Civil Procedure Rules

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, "Kihiumwiri Farmers Company Limited v Breeze Investments Company Ltd & 3 others [2019] KEELC 3983 (KLR)", Case Analysis (2019). Not stated in judgment (application dated 26/9/18 in pending suit). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2019/3983/eng@2019-03-28

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