Background
1. This appeal arises from the ruling of the Chief Magistrate’s Court at Kisumu in Civil Suit No. 74 of 2015, delivered on 19th February 2021 by Hon. W. K. Onkunya, Senior Resident Magistrate. The dispute originated from a claim by African Touch Safaris Limited (then a Plaintiff) against Aggarwal & Sons Ltd (then a Defendant) regarding the non-payment of Kshs. 411,181/= for air tickets issued by the Respondent to the Appellant’s agents/servants.
2. The Respondent, African Touch Safaris Limited, filed the suit seeking payment of Kshs. 411,181/= plus costs and interest, claiming that the Appellant had failed to settle the amount despite several demands.
3. By consent, the trial court entered judgment in favor of the Respondent, awarding the claimed amount of Kshs. 411,181/- plus interest and costs in the sum of Kshs. 111,724/=. However, the Respondent faced difficulties in executing the judgment, leading to an application dated 3rd November 2020 seeking to lift the corporate veil of Aggarwal & Sons Ltd and hold its directors personally liable for the decretal sum.
4. On 30th November 2020, the trial court allowed the veil-lifting application ex parte, as the Appellant failed to attend court despite being duly served. Upon learning of this, the Appellant moved the court through an application dated 1st December 2020, seeking to set aside the ex parte orders on the basis that its former counsel had failed to diarize the matter.
5. In its ruling dated 19th February 2021, the trial court allowed the Appellant’s application and set aside the ex parte orders and granted the Appellant leave to respond to the Respondent’s application for lifting the corporate veil on condition that the Appellant pays Kshs. 40,000/= as thrown-away costs within 14 days.
6. Aggrieved by the decision, the Appellant, Attin Kumar Aggrawal, filed the present appeal challenging the award of Kshs. 40,000/= as throwaway costs, arguing that:
i. The Learned Magistrate earned in law and in fact in ordering and/or directing that the Appellant do pay to the Respondent the sum of Kshs. 40,000/- as thrown away costs.
ii. The Order directing the Appellant to pay thrown away costs of Kshs.40,000 was not supported by law or facts of the case thus the said decision was made in error of law and fact.
iii. The Order directing the Appellant to pay thrown away costs of Kshs.40,000 on an application was punitive, egregious, an abuse of discretion and with intent to punish the Appellant and not to meet the ends of justice.
iv. The Order directing the Appellant to pay thrown away costs is lacking in legal foundation as the purported “thrown away” costs is unknown in the Civil Procedure Act and Civil Procedure Rules.
7. The appeal was canvassed by way of written submissions. The Appellant’s submissions were dated 26th November 2024, while the Respondent’s submissions were dated 3rd December 2024.
Appellant’s Submissions
8. The Appellant submitted that the trial court erred in awarding Kshs. 40,000/= as thrown-away costs, arguing that the award was excessive, unjustified, and unsupported by law or facts. The Appellant challenged the trial magistrate’s ruling, contending that the award of thrown-away costs lacked a proper legal foundation and was disproportionate. The Appellant maintained that while courts have discretion in awarding costs, such discretion must be exercised judicially and with valid reasoning.
9. The Appellant further argued that the trial magistrate wrongly relied on the case of Kenya Pipeline Company Limited v Mafuta Products Limited (2014) eKLR, which is distinguishable from the present case. According to the Appellant, in the Kenya Pipeline case, the delay was for over four years before seeking to set aside an interlocutory judgment, which amounted to inordinate delay and laches. In contrast, the Appellant submitted, the delay was for only two days after the orders were issued on 30th November 2020, demonstrating diligence on the part of the Appellant, rather than delay. The Appellant submitted that while the ruling in the Kenya Pipeline case was based on a party’s failure to act within a reasonable time, the present case involved a genuine mistake by the Appellant’s counsel in diarizing the matter.
10. The Appellant also faulted the trial magistrate for failing to consider that its failure to attend court was due to an inadvertent mistake by its new counsel, who had misdiarised the hearing date. The Appellant submitted that this was a genuine and excusable error that did not warrant punitive costs.
11. Relying on the decision in the case of United India Insurance Co. Ltd v East African Underwriters (Kenya) Ltd [1985] EA 898, the Appellant asserted that this Court should not interfere with award of costs since the trial court misdirected itself in law, misapprehended the facts, or took into account irrelevant considerations. The Appellant maintained that the trial magistrate misapplied the law by awarding excessive costs without valid reasoning, thereby warranting interference by the appellate court.
12. Additionally, the Appellant argued that the trial magistrate erred in awarding thrown-away costs without providing justification for how the figure of Kshs. 40,000/- was reached. Citing the case of Sheila Wambui Muturi v Peter Macharia Muiru [2021] eKLR, where the court held that an award of thrown-away costs must be supported by reasons, and failure to do so renders the award arbitrary and unfair. Similarly, in the present case, the Appellant maintained that the thrown-away costs were imposed unfairly and without any justification.
13. In conclusion, the Appellant prayed that the appeal be allowed, the order for thrown-away costs of Kshs. 40,000/= be set aside, and that it be substituted with an order awarding only standard costs as per the Advocates Remuneration Order, 2014. The Appellant further prayed for the costs of this appeal and costs incurred in the trial court to be borne by the Respondent.
Respondent’s Submissions
14. On its part, the Respondent submitted that the award of Kshs. 40,000/= as thrown-away costs was justified, proportionate, and within the trial court’s discretion. The Respondent contended that costs are a compensatory measure meant to indemnify the successful party for the expenses and inconvenience caused by the opposing party’s actions. The Respondent relied on Section 27 of the Civil Procedure Act, which grants courts discretionary power in awarding costs, provided that such discretion is exercised judicially.
15. The Respondent further argued that the Appellant failed to demonstrate any legal basis for interfering with the trial court’s exercise of discretion. It was submitted that the Appellant had benefited from the court’s discretion in having the ex parte orders set aside, and as such, it could not seek to avoid the consequence of paying costs, which was a reasonable condition imposed by the trial court. The Respondent relied on, among others, the case of Republic v Rosemary Wairimu Munene, Ex parte Applicant v Thururu Dairy Farmers Co-operative Society Limited, where the court held that costs follow the event and are meant to compensate the successful party for the process of prosecuting or defending a case.
16. The Respondent also submitted that the Appellant failed to prove that the award of Kshs. 40,000/= was excessive or disproportionate. The Respondent relied on Halsbury’s Laws of England, 4th Edition, Vol. 10, which states that courts have absolute discretion in awarding costs, provided they do so in accordance with reason and justice. Similarly, in Narok HCCC 1 of 2019, Haraf Traders Limited v Narok County Government [2022] eKLR, the court outlined several factors to be considered when awarding costs, including the conduct of the parties, the circumstances leading to the litigation, and the inconvenience caused. The Respondent submitted that these factors justified the trial court’s decision to impose costs on the Appellant.
17. The Respondent further relied on the case of Scherer v Counting Instruments Ltd [1986] 1 WLR 615, as cited in County Government of Tana River & Another v Hussein Fumo Hiribae [2021] eKLR, where the court held that the normal rule is that costs follow the event, and a successful party has a reasonable expectation of being awarded costs. The Respondent submitted that the Appellant unjustifiably caused delays in the litigation, forcing the Respondent to seek relief from the court, and should therefore be required to compensate the Respondent for the inconvenience caused.
18. Moreover, the Respondent disputed the Appellant’s assertion that the trial court did not explain the basis for the award of Kshs. 40,000/=. The Respondent submitted that the trial magistrate clearly outlined the reasoning for awarding costs, and that the amount was determined based on the circumstances of the case, including the resources expended by the Respondent due to the Appellant’s failure to attend court. The Respondent maintained that unless the Appellant could demonstrate that the trial court acted injudiciously, there was no valid reason for the appellate court to interfere with the award of costs.
19. In conclusion, the Respondent prayed that the award of Kshs. 40,000/- in costs by the trial court be upheld and the appeal be dismissed with costs, as the Appellant had failed to demonstrate any legal or factual basis for overturning the trial court’s decision.
Analysis And Determination
20. Having considered the application and the parties' rival submissions as well as the record of the trial court, I find that the only issue arising for my determination is whether the award of Kshs. 40,000/- in throwaway costs by the trial court was excessive, unjustified, and without any legal basis.
21. To answer the above question, it is the duty of this court to review the evidence as it stands against the impugned order of the trial court (see Peters v. Sunday Post Ltd [1958] EA 429).
22. The law governing the award of costs in civil suits is set out in Section 27 (1) of the Civil Procedure Act (CPA), which provides as follows:
“27. Subject to such conditions and limitations as may be prescribed, and to the provisions of any law for the time being in force, the costs of and incidental to all suits shall be in the discretion of the court or judge, and the court or judge shall have full power to determine by whom and out of what property and to what extent such costs are to be paid, and to give all necessary directions for the purposes aforesaid; and the fact that the court or judge has no jurisdiction to try the suit shall be no bar to the exercise of those powers: Provided that the costs of any action, cause or other matter or issue shall follow the event unless the court or judge shall for good reason otherwise order.”
23. It is trite law that while the court has discretion in awarding costs, that discretion must be exercised judicially and not arbitrarily. The award of costs is not automatic. It is a matter of judicial discretion, to be exercised based on reason, justice, and fairness. In Party of Independent Candidates of Kenya v. Mutula Kilonzo & 2 Others [2013] eKLR, the Supreme Court stated:
‘’The general rule is that costs follow the event. However, the court has discretion to make any other order depending on the circumstances of the case.’’
24. Similarly, in Supermarine Handling Services Ltd v. Kenya Revenue Authority [2010] eKLR, the Court of Appeal held that:
‘’ Costs of any action, cause or other matter or issue shall follow the event unless the court or Judge shall for good reason otherwise order. See Section 27 (1) of the Civil Procedure Act.
In the case Devram Dattan v Dawda [1949] EACA 35 it was held,
“It is well established that when the decision of such a matter as the right of a successful litigant to recover his costs is left to the discretion of the Judge who tried his case, that discretion is a judicial discretion, and if it be so its exercise must be based on facts....If, however, there be, in fact, some grounds to support the exercise by the trial Judge of the discretion he purports to exercise, the question of the sufficiency of those grounds for this purpose is entirely a matter for the Judge himself to decide, and the Court of Appeal will not interfere with his discretion in that instance.”
Thus, where a trial court has exercised its discretion on costs, an appellate court should not interfere unless the discretion has been exercised unjudicially or on wrong principles. Where it gives no reason for its decision the Appellate Court will interfere if it is satisfied that the order is wrong. It will also interfere where reasons are given if it considers that those reasons do not constitute “good reason” within the meaning of the rule.’’
25. From the above provision, it is clear that the award of costs, including throwaway costs, is discretionary and, like all other costs, is equally governed by the provisions of Section 27 of the Civil Procedure Act. The argument by the Appellant that the award of throwaway costs lacks legal basis is therefore, in my view, not merited. See the case of County Government of Tana River & Gafi Hiribae V Hussein Fumo Hiribae [2021] KEHC 5909(KLR) where Nyakundi J stated as follows:
“In my view the award of costs either in the classification defined in section 27 as those that follow the event or throwaway costs as it’s in the case herein, the uniting factor is closely linked to adjudicative procedures before courts by a litigating party. These procedures can consume time, energy and money. This award of costs may be one route to improve due diligence and efficiency in our legal system as whole………In my strong view the respondent being awarded throwaway costs are to cater for substantial indemnity costs to reflect time that was wasted and would be duplicated when the trial is rescheduled.”
26. The Appellant has in this appeal invited the Court to reconsider whether the award of Kshs. 40,000/- was justified based on the facts, evidence, and applicable legal principles. In answering this question, the Court has to be guided by the above principles that an award of costs should not on appeal, be disturbed unless it is shown that the trial magistrate misdirected herself or applied the wrong principles, leading to an unjust outcome.
27. The fundamental principle in any award of costs, whether general costs under Section 27 or thrown-away costs, is that they must be fair, reasonable, and linked to the actual expenses incurred by the successful party. Courts must be cautious not to impose costs that operate as penalties rather than compensatory relief.
28. A review of the trial court record reveals that the trial magistrate ordered the Appellant to pay to the Respondent throwaway costs in the sum of Kshs 40,000/- within 14 days of the Ruling as one of the conditions for setting aside the trial court’s order of 30th November 2020. The Appellant argued that the trial court did not take into account that the delay on its part in making the application for setting aside the ex-parte order was only two days, and therefore not inordinate, and therefore the costs, as awarded by the trial court, were excessive.
29. First, as indicated above, the award of costs, including thrown away costs, is a matter for the discretion of the trial court, and this Court can only interfere in instances where it is demonstrated that the said discretion has not been reasonably exercised.
30. It is critical to note that the argument by the Appellant that they expeditiously applied for the setting aside of the ex-parte order is not one of the major considerations in the award of thrown away costs, rather it is only relevant where a court is to make a determination on whether or not to set aside an ex-parte order. As rightly submitted by the Respondent, costs are compensatory and are simply intended to compensate the successful party for the trouble taken in prosecuting or defending the case.
31. The law is clear that an appellate court should only interfere with a discretionary order where there has been an error of principle or a manifestly unjust outcome. In Mbogo & Another v. Shah [1968] EA 93, the Court of Appeal stated:
“A court of appeal should not interfere with the exercise of the discretion of a judge unless it is satisfied that the judge in exercising his discretion has misdirected himself in some matter and as a result arrived at a wrong decision, or unless it is manifest from the case as a whole that the judge has been clearly wrong in the exercise of his discretion and that as a result there has been misjustice.”
32. Given the foregoing, I find no legal basis upon which to interfere with the finding of the trial court. Consequently, I find this appeal devoid of merit and it is hereby dismissed with costs to the Respondent.
33. It is so ordered.
SIGNED, DATED, and DELIVERED IN VIRTUAL COURT
THIS 24TH DAY OF APRIL 2025
ADO MOSES
JUDGE
In the presence of:
Moses – Court Assistant.
Siwolo – for the Appellant
Chirchir - h/b for Kesey for the Respondent