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Supreme CourtPartially AllowedPetition 16 (E023) of 2021

Westmont Holdings SDN BHD v Central Bank of Kenya & 2 others

Supreme Court of Kenya
17 February 2023
Philomena Mbete MwiluP.M. MwiluMohammed Khadhar IbrahimM.K. IbrahimSmokin Charles WanjalaS.C. WanjalaNjoki Susanna NdunguNjoki NdunguIsaac LenaolaI. Lenaola
13,176 words in judgment
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·~53 min to read original · ~4 min brief

The bottom line

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Supreme Court says courts cannot use security for costs to block genuine appeals.

What this practically means

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The Supreme Court ruled that ordering a party to deposit huge sums as security for costs before their case can be heard may violate the constitutional right to access justice. While security for costs is legal, it must be reasonable and not punish a litigant. In this case, the Court of Appeal ordered Kshs 20 million – one million times the normal amount – which effectively blocked the appeal. The Supreme Court set aside that order and sent the case back for hearing.

Executive summary

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The Supreme Court of Kenya allowed an appeal against a Court of Appeal ruling that had ordered the appellant, Westmont Holdings Limited, to deposit Kshs 20,000,000 as further security for costs as a condition precedent to the hearing of its appeal. The Supreme Court certified the matter as one of general public importance, framing the issue as whether an order for security for costs is unreasonable if it impedes access to justice. The Court held that while the imposition of security for costs is constitutional, it must be exercised judiciously and not in a manner that stifles genuine claims or punishes a litigant. The Court found that the Court of Appeal's order was unreasonable because: the appellant had already paid the nominal security; the sum was one million times the nominal amount; the respondent had not discharged its burden of proving the appellant's inability to pay costs; the subject matter sum (Kshs 185,000,000) was already in the respondent's possession; and the order effectively struck out the appeal without a hearing on the merits. The Supreme Court set aside the Court of Appeal's order, dismissed the application for security for costs, and remitted the matter to the Court of Appeal for determination on the merits. The Court also established comprehensive guiding principles for courts to consider when making orders for security for costs, drawing from Kenyan and international jurisprudence. Each party was ordered to bear its own costs.

Questions the Court framed

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The issues the Court set itself to decide, in its own words.

  1. 1.Whether an order for security for costs is unreasonable as it impedes a litigant's access to justice by imposing a condition precedent before the latter can be heard, contrary to articles 48, 50 and 159 of the Constitution.

Key legal issues

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01

Is it unconstitutional to impose an order for security for costs?

Holding

The imposition of security for costs by a court is in itself constitutional, as it serves to balance the right to access to justice and the protection of defendants from irrecoverable costs.

Reasoning

The court examined the constitutional provisions (articles 48, 50, 159) and the legal framework for security for costs in Kenya and other jurisdictions. It held that security for costs is a legitimate tool to prevent frivolous litigation and protect defendants, but it must be exercised judiciously and not in a manner that impedes access to justice. The court set out guiding principles for courts to consider when making such orders.

p. 23
02

Is it constitutional to impose a condition precedent (an 'unless' order) to an order for security for costs?

Holding

A court may impose a condition precedent when imposing an order for security for costs in special and exceptional circumstances, provided it is reasonable and does not impede a party's access to justice.

Reasoning

The court distinguished between statutory requirements (e.g., election petitions) and discretionary orders. It held that an 'unless' order is not unconstitutional per se, but must be exercised in a manner that is reasonable and not punitive. The court found that in this case, the condition precedent was unreasonable because it stifled the appellant's access to justice.

p. 25
03

When does an order for security for costs become unreasonable?

Holding

An order for security for costs becomes unreasonable when it is used to punish, castigate, or deter a party from pursuing a genuine claim, or when it places a barrier on the path to justice that obstructs the right to access to justice.

Reasoning

The court held that reasonability is determined on a case-by-case basis. In this case, the Court of Appeal's order for Kshs 20,000,000 was unreasonable because: the appellant had already paid the nominal security; the sum was one million times the nominal amount; the respondent had not discharged its burden of proving the appellant's inability to pay costs; the subject matter sum (Kshs 185,000,000) was already in the respondent's possession; and the order effectively struck out the appeal without a hearing on the merits.

p. 27

Legal principles established

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  • Security for costs orders must balance the right to access justice with the need to protect defendants from irrecoverable costs.
  • Courts cannot use security for costs to punish, castigate, or deter a genuine claim.
  • A condition precedent (unless order) for security is only allowed in special cases like election petitions.
  • The party seeking security must prove the other party cannot pay costs if it loses.
  • An order that effectively strikes out a case without a hearing on merits is unreasonable and unconstitutional.

Court orders

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  1. 1.A declaration that the order for security for costs made in Civil Application No. 37 of 2017 delivered on December 8, 2017 is unreasonable as it impedes the appellant's access to justice by imposing a condition precedent before a matter can be heard contrary to articles 48, 50 and 159 of the Constitution of Kenya.
  2. 2.The appeal be allowed and the order of the Court of Appeal in Civil Application No. 37 of 2017 delivered on December 8, 2017 be set aside and in its place an Order do issue dismissing the notice of motion application dated October 13, 2017.
  3. 3.The matter is hereby remitted to the Court of Appeal for determination of the appeal on merit.

The bench

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One judgment of the whole court — no separate or dissenting opinions.

Philomena Mbete Mwilu
P.M. MwiluDCJ
Currently serving
majority
Mohammed Khadhar Ibrahim
majority
Smokin Charles Wanjala
S.C. WanjalaSCJ
Currently serving
majority
Njoki Susanna Ndungu
Njoki NdunguSCJ
Currently serving
majority
Isaac Lenaola
I. LenaolaSCJ
Currently serving
majority
On appeal from
Court of Appeal at Nairobi
Civil Appeal (Application) No. 37 of 2017
Jurisdiction invoked
Article 163(4)(b) of the Constitution of Kenya (certified as a matter of general public importance)

Relief refused

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An order allowing Civil Appeal No. 37 of 2017 (Westmont Holdings Limited v Central Bank of Kenya) as prayed in the memorandum of appeal dated February 9, 2017

The Supreme Court declined to assume jurisdiction over the merits of the appeal, stating that the Court of Appeal was ready to dispose of the appeal on the merits and that determining the matter at this stage would deny the parties the opportunity to appeal and interfere with their right to access justice.

p. 28

Costs

Each party shall bear their own costs.

Quotable passages

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Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.

A declaration be and is hereby made that the order for the security of costs made in Civil Application No 37 of 2017 delivered on December 8, 2017 is unreasonable as it impedes the appellant's access to justice by imposing a condition precedent before a matter can be heard contrary to articles 48, 50 and 159 of the Constitution of Kenya.
p. 29 Final orders - declaration of unconstitutionality
This appeal be allowed and the order of the Court of Appeal in Civil Application No 37 of 2017 delivered on December 8, 2017 be set aside and in its place an Order do issue dismissing the notice of motion application dated October 13, 2017.
p. 14 Final orders - setting aside Court of Appeal order
The matter is hereby remitted to the Court of Appeal for determination of the appeal on merit.
p. 29 Final orders - remittal for hearing
Each party shall bear their own costs.
p. 29 Costs order
security or further security for costs should not be used (a) to discriminate; (b) to punish; (c) to castigate; and (d) as a penal measure against a party in a manner that would deter such a party to pursue its claim as a result of failure to deposit the prerequisite costs.
p. 26 Proper purpose of security for costs
Thus, in determining whether it is appropriate to make an order that a party gives security for costs, the court may have regard to the following matters and such other matters as it considers relevant in the peculiar circumstances of each case
p. 23 Guiding principles for security for costs

Key timeline

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2017-10-13
Respondent files notice of motion for security for costs in Court of Appeal.
2017-12-08
Court of Appeal orders Westmont to deposit Kshs 20 million as security before hearing appeal.
2023
Supreme Court allows appeal, sets aside security order, remits case for hearing on merits.

Practical implications

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For lawyers

New guidelines for security for costs motions

When seeking security for costs, you must now address specific factors: prospects of success, genuineness of proceedings, impecuniosity, whether the order would stifle access to justice, and public importance. The burden is on the applicant to prove the other party cannot pay. Avoid seeking punitive amounts; courts will scrutinize proportionality.

For businesses

Protection against excessive litigation costs

If you are a defendant facing a weak claim, you can still apply for security for costs, but you must provide evidence of the plaintiff's inability to pay. The court will not automatically grant huge sums. Ensure your application is reasonable and does not appear to block the other side from accessing justice, or it may be dismissed.

For individuals

Your right to appeal cannot be priced out

If a court orders you to pay a large deposit before your case can be heard, you can challenge it as unconstitutional if it effectively blocks your access to justice. The Supreme Court says such orders must be reasonable. You can argue that the amount is punitive, especially if you have already paid nominal security or the other party holds the disputed funds.

Frequently asked questions

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What is security for costs in Kenya and when is it ordered?+

Security for costs is a deposit a court may order a party to pay to cover the other side's legal fees if they lose. In Kenya, it is ordered to prevent frivolous cases, but the Supreme Court now requires courts to balance this with the right to access justice and not use it to block genuine claims.

Can a Kenyan court order me to pay security before my appeal is heard?+

Yes, but only in special circumstances and if the amount is reasonable. The Supreme Court says such an order must not punish you or block your appeal. If the amount is huge and you cannot pay, you can argue it violates your constitutional right to access justice under articles 48 and 50.

What did the Supreme Court decide in Westmont Holdings v Central Bank of Kenya?+

The Supreme Court ruled that the Court of Appeal's order for Kshs 20 million security was unreasonable because it was one million times the normal amount and effectively blocked the appeal. The Court set aside the order and sent the case back for hearing, establishing new guidelines for security for costs.

How does the Westmont case affect access to justice in Kenya?+

It strengthens access to justice by preventing courts from using security for costs as a barrier. Courts must now consider whether the order would stifle a genuine claim. This protects litigants, especially those with limited funds, from being locked out of court by excessive financial demands.

Later judgments citing this (25)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Westmont Holdings SDN BHD v Central Bank of Kenya & 2 others", Case Analysis (2023). Petition 16 (E023) of 2021. Source: https://new.kenyalaw.orghttps://new.kenyalaw.org/akn/ke/judgment/kesc/2023/11/eng@2023-02-17

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