Kashi Court Residents' Association & another (Plaintiff/Claimant) v Developer (Defendant/Applicant) - Application for Security for Arbitral Costs
The bottom line
#A Kenyan court froze a residents' association's challenge to an arbitration award until it deposits Kshs. 7.3 million as security for the developer's costs.
What this practically means
#Executive summary
#Key legal issues
#Applicability of Section 37(2) of the Arbitration Act where setting-aside and enforcement applications are heard together
Section 37(2) empowers the court to order security and stay the setting-aside proceedings even though both applications are before the same court and were directed to be heard together.
The court rejected the Plaintiff's argument that Section 37(2) applies only where the setting-aside application is made in a different jurisdiction or before determination of the enforcement application. The court reasoned that it must first determine the setting-aside application; if that succeeds there is no basis for enforcement, but the discretion under Section 37(2) remains available to protect the award-holder pending that determination.
Whether the application for security was made after inordinate delay
The application, filed within the same month as the directions and within two months of the main applications, was made promptly and was not inordinate.
The Plaintiff argued the Defendant should have sought security before the directions of 23rd September 2020 and relied on authorities condemning dilatoriness. The court found the delay of roughly two months from the filing of the main applications was not inordinate and that the application was properly before the court.
Whether security should be ordered on the facts
Security was ordered because the Plaintiff, a service-charge-funded association, gave no evidence of means or member resolution to meet the arbitral costs.
The court noted the arbitral tribunal had made an order for costs in the Defendant's favour stemming from the Final Award now challenged. The Plaintiff did not deny reliance on service charge, placed no mechanism before the court to meet the costs, and produced no resolution sanctioning the setting-aside application. Security was ordered to protect both parties.
Legal principles established
#- Under Section 37(2) of the Arbitration Act the court may stay proceedings to set aside an award until security is provided, notwithstanding that the setting-aside and enforcement applications are directed to be heard together.
- The test in an application for security for costs is whether the defendant has shown a bona fide defence, not whether the plaintiff has established a prima facie case.
Court orders
#- 1.The Plaintiff/Claimant to deposit into an interest earning account in the joint names of the parties' advocates (Guandaru Thuita & Company Advocates and Majanja Luseno & Company Advocates) within sixty (60) days the sum of Kshs. 7,288,388.00 being security of the assessed Arbitral costs and expenses
- 2.Pending the deposit of Kshs. 7,288,388.00, the proceedings commenced by the Plaintiff by Notice of Motion dated 28th July, 2020 seeking to set aside the Final Award dated 24th January, 2020 are stayed
- 3.Parties are at liberty to apply
- 4.Each party to bear its own costs
- Jurisdiction invoked
- Section 37(2) of the Arbitration Act
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Kashi Court Residents' Association & another (Plaintiff/Claimant) v Developer (Defendant/Applicant) - Application for Security for Arbitral Costs", Case Analysis (2021). Notice of Motion dated 25th September, 2020 (in pending suit with Applications dated 15th July, 2020 and 28th July, 2020). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2021/3036/eng@2021-06-04
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.