[2005] KEHC 602 (KLR)
The court held that the fact of the plaintiff company being in liquidation is sufficient to require security for costs, unless the company can demonstrate its ability to pay. The plaintiff failed to provide evidence of its liabilities, and merely showing a credit balance was insufficient. The burden was on the...
Source-derived case information.
- Citation
- [2005] KEHC 602 (KLR)
- Parties
- Plaintiff: Marshall T. Osanya (Court Appointed Interim Liquidator, Stallion Insurance Company Limited in Liquidation); Defendant: Kenya Ports Authority
- Court
- High Court
- Court Station
- High Court at Nairobi (Milimani Commercial Courts)
- Jurisdiction
- Kenya
- Case Number
- Civil Case 364 of 2005
- Procedural Posture
- Civil Case / Ruling on Application for Security for Costs
- Outcome
- Application for security for costs allowed.
- Judges
- PJ Ransley
- Legal Topics
- Security for Costs, Company in Liquidation, Burden of Proof, Court Discretion
- Source Language
- en
Source-derived case record
Summary, issues, holding and outcome
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Parties
Marshall T. Osanya (Court Appointed Interim Liquidator, Stallion Insurance Company Limited in Liquidation)
Plaintiff
Kenya Ports Authority
Defendant
Procedural Posture
Civil Case / Ruling on Application for Security for Costs
Legal Issues
- 1 Whether the defendant is entitled to security for costs from a plaintiff company in liquidation.
- 2 Whether the plaintiff has discharged the onus of proving its ability to pay costs if unsuccessful.
Ratio Decidendi
The court held that the fact of the plaintiff company being in liquidation is sufficient to require security for costs, unless the company can demonstrate its ability to pay. The plaintiff failed to provide evidence of its liabilities, and merely showing a credit balance was insufficient. The burden was on the plaintiff to prove solvency, not on the defendant to prove insolvency. The court exercised its discretion to order the plaintiff to provide security for costs in the sum of Kshs.400,000, to be deposited in an interest-earning account or secured by a reputable bank guarantee within two weeks.
Court Disposition
Application for security for costs allowed.
Orders
- The plaintiff shall provide security for costs in the sum of Kshs.400,000 within two weeks, either by depositing the sum in an interest-earning account in the names of the parties' advocates or by producing a bank guarantee by a reputable bank for the sum, conditioned on payment if the defendant succeeds in its...
- Costs in cause.
Full Case Text
Judgment text and source record
26 paragraphs
REPUBLIC OF KENYA
IN THE HIGH COURT OF KENYA
AT NAIROBI (MILIMANI COMMERCIAL COURTS)
Civil Case 364 of 2005
MARSHALL T. OSANYA …………………...……………………………PLAINTIFF
(Court Appointed Interim Liquidator
Stallion Insurance Company Limited in
Liquidation)
VERSUS
KENYA PORTS AUTHORITY …………………………………..…….DEFENDANT
RULING
The Applicant which is the Defendant in the suit applies for security for costs under Order 25 rules 1 and 6 of the Civil Procedure Rules which gives the court a discretion to order security for costs.
The Applicant’s ground for seeking this Order is that the Respondent/Plaintiff is in liquidation.
The Applicant further relies on Section 401 of the Companies Act which states:-
“Where a limited company is plaintiff in any suit or other legal proceeding, any judge having jurisdiction in the matter may, if it appears by credible testimony that there is reason to believe that the company will be unable to pay the costs of the defendant if successful in his defence, require sufficient security to be given for those costs, and may stay all proceedings until the security is given.”
Mr. Gachuhi for the Applicant also relied in the case of Attorney General v Africa Cooperative Society Ltd. (2002) E.A. page 325 a case in which Mpagi – Bahigeine JA of the Uganda Court of Appeal stated at page 328, relying on two English cases, that it has been held that where a company is in liquidation, this fact, in the absence of evidence, to the contrary, gives the court sufficient reasons to believe that if the Defendant were successful in his Defence the assets of the Company would be insufficient to pay his costs.
The fact of the Respondent being in liquidation is apparent from the pleadings.
In a Replying affidavit the interim liquidator Mr. Marshall Tito Osanya depones that the Applicant is ignorant of the Respondent’s assets and cannot prove its inability to pay.
Annexed to the Affidavit is a Certificate of Balance showing that there is a sum of Kshs.3,120,628. 15 to the credit of the Respondent. However, there is no statement of its liabilities annexed.
I accept the statement made in the case cited above that where a Company is in liquidation the onus of showing it can pay costs in a suit instituted by it lies on it. It is not for the Applicant to prove what its assets and liabilities are.
It is axiomatic that a Company in liquidation is unable to pay its debts otherwise it would not be in liquidation.
In this case the Applicant has been brought to court and it is only just that it should be assured of its costs in the event that its Defence succeeds.
In this case in the exercise of my discretion, I rule that the Respondent provides security for costs in the sum of Kshs.400,000/=, which the Respondent has not challenged as being reasonable, within two weeks from today by either depositing this sum in an interest earning account in the names of parties advocates or producing a Bank Guarantee by a reputable bank for this sum conditioned on payment in the event the Applicant succeeds in its defence. Costs in cause.
Dated and Delivered at Nairobi this 18th day of October, 2005.
P. J. RANSLEY
JUDGE