A foreign company embroiled in legal tussles in Kenya cannot use its bank accounts as security for costs to be incurred in the litigation, the High Court has ruled.
An order for security protects a party (often a defendant) against the risk that they will win at trial and be awarded their costs, but then not be able to enforce an order against the other (losing) party, either within the jurisdiction or abroad.
Justice Alfred Mabeya said owning a bank account per se cannot be said to be an adequate asset to cover security for costs.
“This is so because money is a very fluid asset. It can be liquidated with a stroke of a pen,” explained the judge.
He was ruling in a dispute pitting a Netherlands fresh products logistics company Panalpina Airflo BV against Flower City Kenya Limited.
The court allowed a request by the Kenyan entity for an order directing the logistics firm to deposit security for costs amounting to Sh2,053,865 in a joint interest-earning account.
The company’s case was that Panalpina Airflo BV was a foreign outfit incorporated in the Netherlands and had no known assets in Kenya.
In the premises, the Kenyan firm was apprehensive that it would not recover the costs for defending the suit and was likely to suffer prejudice unless the orders were granted.
The foreign company through its official Peter Verner Kristensen had opposed the request saying it had bank accounts in Kenya where it would make payments and that it held a legal charge over a Nairobi property for Sh125 million.
In his ruling, Justice Mabeya said the Netherlands firm is a corporation that is resident out of Kenya and there was no assurance that it would still be around until the suit is determined thus the request by the local firm had merit.
“From the record, it is not disputed that the plaintiff is a company residing outside the jurisdiction of Kenya. However, it produced a legal charge as well as a certificate of title for LR. Number 9042/603 Nairobi shows that it has property in the country. That may be the case but there was no evidence to show that the charge may not be discharged during the pendency of the suit,” said the judge.
It was also not demonstrated that the foreign company will still be having a presence within Kenya until the conclusion of the suit.
The judge said for security, a party has to show that the opposing side may not be in a position to meet the costs of the suit.
“Further, a court would readily grant an order for security for costs when a plaintiff is not ordinarily resident within the jurisdiction,” he said.