[2022] KEHC 502 (KLR)

Chase Bank (K) Limited v Majid Al Futtaim Hypermarkets Limited (Civil Case 444 of 2017) [2022] KEHC 502 (KLR) (Commercial and Tax) (2 June 2022) (Ruling)

Neutral citation: [2022] KEHC 502 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts Commercial and Tax Division)

Civil Case 444 of 2017

WA Okwany, J

June 2, 2022

Between

Chase Bank (K) Limited

Plaintiff

and

Majid Al Futtaim Hypermarkets Limited

Defendant

Ruling

Background 1. The plaintiff instituted this suit through the plaint dated August 14, 2017 seeking judgment against the defendant for the following orders: -a.The sum of Kshs. 10,573,524 being the cost of setting up the plaintiff’s sales outlet.b.Damages for loss of revenue.c.Cost.

2. The defendant responded to the plaint through the defence and counterclaim dated September 17, 2019.

3. The plaintiff thereafter filed the application dated June 4, 2021 seeking leave to substitute the Plaintiff, Chase Bank Limited, with Chase Bank Limited (In Liquidation) and for leave to prosecute the suit as such.

4. The application is brought under Section 1A, 1B and 3A of the Civil Procedure Act, Section 56 (2) of the Kenya Deposit Insurance Act and Order 1 Rule 9 & 10, Order 51 Rule 1 of the Civil Procedure Rules 2010 and Article 159(2) (d) of the Constitution.

5. The application is supported by the affidavit of the applicant’s legal officer Mr. Kevin Kimani and is based on the grounds that: -a.The Plaintiff instituted the suit on August 14, 2017 at which point the Plaintiff had just been placed under Receivership and the Kenya Deposit Insurance Corporation appointed as its Receiver.b.Vide Gazette Notice No. 3651 of April 16, 2021, the Central Bank of Kenya appointed the Kenya Deposit Insurance Corporation as Liquidator of Chase Bank Kenya Limited (in Receivership) pursuant to Section 50 (6) of the Kenya Deposit Insurance Act, 2012 and Section 9 (1) and (5) of the Banking Act.c.Concomitantly, the Central Bank of Kenya vide Gazette Notice No. 3652 of April 16, 2021, revoked the Plaintiff's license with immediate effect pursuant to Section 6(1)(a) of the Banking Act.d.Pursuant to Section 56 (2) of the Kenya Deposit Insurance Act, upon the appointment of the Liquidator, this Honourable Court’s sanction ought to be sought for the continuance of this Suit.e.The institution of this Suit predates the appointment of the Liquidator, hence the necessity to substitute the Plaintiff herein.f.The substitution of the Plaintiff is necessary for the determination of the real dispute as between the parties which dispute should be heard on its merits.g.No prejudice and/or injustice will be occasioned to the Defendant by the grant of the orders sought in the matter.h.In the premises, it is just, fair and equitable that an order for substitution of the party do issue to enable the fair and just determination of this Suit.

6. The respondent opposed the application through the replying affidavit of its Country Finance Manager Mr. Alaa Ahmed Mahmoud Abdo El-Gindy who states that by a press release dated April 17, 2021, the plaintiff was declared insolvent and incapable of satisfying any adverse court order against it in favour of the defendant. He avers that the plaintiff should be ordered to deposit security of costs as a condition for the granting of the leave sought in the application.

7. The application was canvassed by written submissions.

8. I have considered the application, the defendant’s response, the submissions by counsel and the authorities cited. The main issue for determination is whether the applicant has made out a case for the granting of the orders sought in the application and whether the court should make an order for security for costs as a condition for the granting of the said orders.

9. In Patrick Ngetakimanzi v Marcus Mutuamuluvi & 2 others - High Court Election Petition No. 8 of 2013 it was held that:-“Security of costs ensures that the respondent is not left without recompense for any costs or charges payable to him. The duty of the court is therefore to create a level ground for all the parties involved, in this case, the proportionality of the right of the petitioner to access to justice vis-a-vis the respondent's right to have security for any costs that may be owed to him and not to have vexatious proceedings brought against him.”

10. Further in Gatirau Peter Munya v Dickson Mwenda Githinji & 2 others, CA No. 38 of 2013 [2014] eKLR, the Supreme Court emphasized that: -“In an application for further security for costs, the Applicant ought to establish that the Respondent, if unsuccessful in the proceedings, would be unable to pay costs 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. And the onus is on the Applicant to prove such inability or lack of good faith that would make an order for security reasonable.”

11. The law governing security of costs is set out under Order 26 of the Civil Procedure Ruleswhich provides as follows :-1. In any suit the court may order that security for the whole or any part of the costs of any defendant or third or subsequent party be given by any other party.2. If an application for security for costs is made before a defence is filed, there shall be filed with the application an affidavit setting out defence the grounds of the defence together with a statement of the deponent’s belief in the truth of the facts alleged.3. Where it appears to the court that the substantial issue is which of two or more defendants is liable or what proportion of liability two or more defendants should bear no order for security for costs may be made.4. In any suit brought by a person not residing in Kenya, if the claim is founded on a bill of exchange or other negotiable instrument or on a judgment or order of a foreign court, any order for security for costs shall be in the discretion of the court.5(1)If security for costs is not given within the time ordered and if the plaintiff is not permitted to withdraw the suit, the court shall, upon application, dismiss the suit.(2)If a suit is dismissed under subrule (1) and the plaintiff proves that he was prevented by sufficient cause from giving the required security for costs the court may set aside the order dismissing the suit and extend the time for giving the required security.6. (1) Where security by payment has been ordered, the party ordered to pay may make payment to a bank or a reputable financial institution in the joint names of himself and the defendant or in the names of their respective advocates when advocates are acting.

12. It is not disputed that the plaintiff is insolvent and under receivership. The question which the court has to grapple with is whether the mere fact that a company is insolvent and unable to pay costs is a ground for the granting of orders for security of costs. In the case of Indigo Garments (E P Z) Ltd (In Receivership) vs Apex Apparels (E P Z) Ltd [2004] eKLR the court held that: -“...receivership may suggest financial difficulty but it is not conclusive evidence of want of means as liquidation is.”

13. I have perused the pleadings filed herein and I note that the plaintiff’s claim is not frivolous or an abuse of the court process. At this interlocutory stage in the proceedings, the court cannot say that conclusive evidence has been presented to show that the plaintiff will be unable to pay costs its current financial status notwithstanding. It is therefore my finding that an order of security of costs may jeopardize the plaintiff’s recovery plan.

14. In the circumstances of this case, I am unable to find that there is a basis for granting an order for security of costs. I however find that the application dated June 4, 2021 has merit and I therefore allow it as prayed with no orders as to costs.

DATED, SIGNED AND DELIVERED VIRTUALLY AT NAIROBI THIS 2ND DAY OF JUNE 2022. W. A. OKWANYJUDGEIn the presence of: -Ms Jemutai for Kuyo for Defendant.Ms Macharia for Nyamodi for Plaintiff.Court Assistant- Sylvia