Wafaa Industries Limited v Nic Bank Limited & another [2021] KEELC 3192 (KLR)
The bottom line
#Kenya's Environment and Land Court refused to force a company to deposit Kshs. 68 million as security for costs because the applicant proved nothing about its ability to pay.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether the 2nd Defendant demonstrated that the Plaintiff would be unable to pay costs if its suit is dismissed, so as to warrant an order for security for costs
- 2.Whether the Application dated 18th March, 2020 was brought bona fide or to stifle the Plaintiff's claim
Key legal issues
#Whether the 2nd Defendant discharged the burden of proving the Plaintiff's inability to pay costs
The 2nd Defendant did not discharge the burden; there was no evidence of insolvency or that the Plaintiff was an entity of straw, and its assertions that the Plaintiff owns other properties were not shown to be false.
The court held the burden always rests on the defendant. The Plaintiff's Plaint listed immovable properties, which the 2nd Defendant did not disprove. No evidence of insolvency or non-existence of the Plaintiff was adduced, and no attempt was made to show the Plaintiff was an entity of straw. Mere apprehension, as held in Wamukoya v Makokha, does not warrant security for costs.
Balancing access to justice against the defendant's interest in securing costs
The court must weigh the injustice to the plaintiff of being stifled by a security order against the injustice to the defendant of being unable to recover costs; here the forgery plea is not frivolous, so the Plaintiff should be allowed to prosecute its suit.
Relying on Article 50 of the Constitution and Ocean View Beach Hotel, the court held that a litigant with a prima facie discernible claim should not be impeded. The Plaintiff's forgery claim could only be rebutted by the 1st Defendant after evidence was adduced, so ordering security would stifle a proper claim.
Legal principles established
#- The burden of proving that a plaintiff will be unable to pay costs if unsuccessful lies on the defendant applying for security for costs; mere apprehension is not enough.
- The test on an application for security for costs is whether the defendant has shown a bona fide defence, not whether the plaintiff has a prima facie case.
- The court has a complete discretion whether to order security for costs, to be exercised reasonably and judicially.
Court orders
#- 1.The Application dated 18th March, 2020 is dismissed with costs
The bench
#One judgment of the whole court — no separate or dissenting opinions.
Wrote the judgment
- Jurisdiction invoked
- Order 26 Rule 1 of the Civil Procedure Rules; Article 50 of the Constitution (access to justice) considered
Relief refused
#Order that the Plaintiff provide security for costs of Kshs. 68,927,200 by cash deposit or bank guarantee
No evidence that the Plaintiff is insolvent or an entity of straw; mere apprehension of inability to pay is insufficient; the claim based on forgery is not frivolous and the Plaintiff should not be stifled
Dismissal of the suit against the 2nd Defendant in default of furnishing security
The principal prayer for security having failed, the consequential prayer necessarily failed
Costs
The Application dated 18th March, 2020 dismissed with costs to the Plaintiff
Quotable passages
#Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.
The rationale for security for costs is to ensure firstly that a person is not left without recompense for costs that might be awarded to him in the event that the unsuccessful party is unable to pay the same due to poverty
It is not enough to allege that a Respondent will be unable to pay costs in the event that he is unsuccessful. The same must be proven.
That being the case, and in the absence of evidence to show that the Plaintiff is insolvent, the Plaintiff should be allowed to prosecute the suit without being stifled.
For those reasons, I dismiss the Application dated 18th March, 2020 with costs.
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Wafaa Industries Limited v Nic Bank Limited & another [2021] KEELC 3192 (KLR)", Case Analysis (2021). Not stated in the judgment (Plaint dated 2nd October, 2019; Notice of Motion dated 18th March, 2020). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2021/3192/eng@2021-05-21
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.