Background and Introduction
1. By way of an application dated 21st February 2025, the 1st and 2nd defendants seek an order compelling the plaintiff to deposit security for costs in respect of the present suit. The application is supported by the affidavits of Hellen Kimoi Kiplagat. The defendants contend that the plaintiff has instituted proceedings against them seeking judgment in the substantial sum of Kshs. 121,617,453/= together with interest. They confirm having filed their defence to the claim. It is their case that the nature of the dispute, given the amount involved, is expected to be complex, extensive, and costly to litigate. It is in this context that they bring the present application, mindful of the significant legal costs they will inevitably incur in defending the matter.
2. They further emphasize that the plaintiff is a company registered in India, with no known assets, business operations, or physical presence in Kenya, raising serious concerns about the enforceability of any costs order that may be made in favor of the defendants should they succeed at trial. The defendants therefore submit that the risk of unrecoverable costs is real and substantial.
3. The application is opposed through a replying affidavit sworn by Hashiraj Manjunath Goli on 19th May 2025. In that affidavit, the plaintiff contends that the defendants have not placed before the Court sufficient evidence of its financial position to justify the assertion that it would be unable to meet any costs order. The plaintiff emphasizes that the defendants have been in business with it for a considerable period, as evidenced by the Consultancy Agreement dated 9th February 2016, and therefore ought to be aware of its financial standing.
4. The plaintiff attached financial statements in support of its position, asserting that these demonstrate its financial stability. It further argues that the amount of security sought by the defendants is grossly inflated and disproportionate to the circumstances of the case. The plaintiff maintains that it has a good and arguable claim, and that requiring it to deposit such a large sum would unjustly impede its access to justice.
Analysis and Determination
5. Order 26 Rule 1 of the Civil Procedure Act provides the framework under which a Court may order a party to furnish security for costs. This provision empowers the Court, in appropriate circumstances, to protect a defendant against the risk of being unable to recover legal costs should the plaintiff’s claim fail. Both parties have referred me to judicial precedents that illuminate the principles guiding the exercise of this discretion.
6. In Westmont Holdings SDN BHD v Central Bank of Kenya & 2 others [2023] KESC 11 (KLR), the Supreme Court reaffirmed that security for costs is not automatic but discretionary, and that the discretion must be exercised judiciously, bearing in mind the need to balance fairness to both parties. Similarly, in Hajar Services Limited v Peter Nyangi Mwita [2020] eKLR, the Court emphasized that the order serves a protective function, which is to ensure that defendants are not exposed to unrecoverable costs while at the same time safeguarding the plaintiff’s right of access to justice.
7. The same principles were echoed in Barrack Ofulo Otieno v Instarect Limited [2015] KESC 3855 (KLR), where the Court observed that the discretion must be exercised cautiously, taking into account the plaintiff’s financial position, the merits of the case, and the potential impact on access to justice. In Kings Investment Management Co Ltd v Rivatex East Africa Limited (2021) eKLR, the Court reiterated that the purpose of security for costs is not to bar a litigant from pursuing a claim but to strike a fair balance between the competing interests of the parties.
8. Taken together, these judicial pronouncements confirm that an order for security for costs is a discretionary remedy, designed to protect defendants from undue risk while ensuring that plaintiffs are not unjustly prevented from prosecuting their claims. The discretion conferred upon the Court must therefore be exercised judiciously, with due regard to the circumstances of each case, the financial position of the plaintiff, the magnitude of the claim, and the overarching principle of access to justice.
9. From the records before the Court, it is evident that the plaintiff is a company incorporated in India, with its principal address and operations situated outside this jurisdiction. The financial statements it has produced are prepared in India and, while that is not a problem, I note that there is no evidence that they have been audited by an independent auditor, which undermines the weight on which they can be relied upon. The unaudited financial statements alone, without other evidence of dealings such as tax compliance certificates gives a vague picture of the company’s true financial standing.
10. Further, beyond the consultancy agreement with the defendants, the plaintiff has not demonstrated any other substantive business activities or assets within Kenya. The absence of local presence creates a real and substantial apprehension that, should the claim fail, the defendants will encounter serious difficulty in enforcing any costs order against the plaintiff, further noting that the claim before this Court is for a substantial sum of Kshs. 121,617,453/= together with interest.
11. At this stage, I am alive to the fact that the Court is not being asked to determine the merits of the plaintiff’s case. That is a matter reserved for the substantive hearing. However, it is worth noting that in a Ruling delivered on 18th October 2024, this Court observed that the plaintiff had failed to establish exclusive ownership rights over the biomass energy concept. While this pronouncement does not dispose of the claim, it does cast doubt on certain aspects of the plaintiff’s case, and it remains to be seen how these issues will unfold at the full hearing.
12. The plaintiff has argued that the proposed sum of Kshs. 10,000,000/= as security is inflated. The defendants, however, submit that the figure represents a reasonable estimate of the expenses likely to be incurred in defending a claim of this magnitude. The Court retains discretion to adjust the amount to ensure that it is proportionate and not oppressive. Nonetheless, the principle of requiring security remains sound, particularly in light of the issues that I have raised. An order for security in these circumstances should not prejudice the plaintiff’s right to prosecute its claim. On the contrary, it should serve the protective function envisaged under Order 26 Rule 1 of the Civil Procedure Act
Disposition
13. Accordingly, and in light of the foregoing analysis, I am satisfied that this is a proper case for the Court to exercise its discretion under Order 26 Rule 1 of the Civil Procedure Act. The application is therefore allowed to the extent that the plaintiff shall deposit security for costs in the sum of Kshs. 7,000,000/= within thirty (30) days from the date hereof. The said sum shall be deposited in an interest‑earning account, to be opened jointly in the names of counsel for both parties. There shall be no orders as to costs.
1. By way of an application dated 21st February 2025, the 1st and 2nd defendants seek an order compelling the plaintiff to deposit security for costs in respect of the present suit. The application is supported by the affidavits of Hellen Kimoi Kiplagat. The defendants contend that the plaintiff has instituted proceedings against them seeking judgment in the substantial sum of Kshs. 121,617,453/= together with interest. They confirm having filed their defence to the claim. It is their case that the nature of the dispute, given the amount involved, is expected to be complex, extensive, and costly to litigate. It is in this context that they bring the present application, mindful of the significant legal costs they will inevitably incur in defending the matter.
2. They further emphasize that the plaintiff is a company registered in India, with no known assets, business operations, or physical presence in Kenya, raising serious concerns about the enforceability of any costs order that may be made in favor of the defendants should they succeed at trial. The defendants therefore submit that the risk of unrecoverable costs is real and substantial.
3. The application is opposed through a replying affidavit sworn by Hashiraj Manjunath Goli on 19th May 2025. In that affidavit, the plaintiff contends that the defendants have not placed before the Court sufficient evidence of its financial position to justify the assertion that it would be unable to meet any costs order. The plaintiff emphasizes that the defendants have been in business with it for a considerable period, as evidenced by the Consultancy Agreement dated 9th February 2016, and therefore ought to be aware of its financial standing.
4. The plaintiff attached financial statements in support of its position, asserting that these demonstrate its financial stability. It further argues that the amount of security sought by the defendants is grossly inflated and disproportionate to the circumstances of the case. The plaintiff maintains that it has a good and arguable claim, and that requiring it to deposit such a large sum would unjustly impede its access to justice.
Analysis and Determination
5. Order 26 Rule 1 of the Civil Procedure Act provides the framework under which a Court may order a party to furnish security for costs. This provision empowers the Court, in appropriate circumstances, to protect a defendant against the risk of being unable to recover legal costs should the plaintiff’s claim fail. Both parties have referred me to judicial precedents that illuminate the principles guiding the exercise of this discretion.
6. In Westmont Holdings SDN BHD v Central Bank of Kenya & 2 others [2023] KESC 11 (KLR), the Supreme Court reaffirmed that security for costs is not automatic but discretionary, and that the discretion must be exercised judiciously, bearing in mind the need to balance fairness to both parties. Similarly, in Hajar Services Limited v Peter Nyangi Mwita [2020] eKLR, the Court emphasized that the order serves a protective function, which is to ensure that defendants are not exposed to unrecoverable costs while at the same time safeguarding the plaintiff’s right of access to justice.
7. The same principles were echoed in Barrack Ofulo Otieno v Instarect Limited [2015] KESC 3855 (KLR), where the Court observed that the discretion must be exercised cautiously, taking into account the plaintiff’s financial position, the merits of the case, and the potential impact on access to justice. In Kings Investment Management Co Ltd v Rivatex East Africa Limited (2021) eKLR, the Court reiterated that the purpose of security for costs is not to bar a litigant from pursuing a claim but to strike a fair balance between the competing interests of the parties.
8. Taken together, these judicial pronouncements confirm that an order for security for costs is a discretionary remedy, designed to protect defendants from undue risk while ensuring that plaintiffs are not unjustly prevented from prosecuting their claims. The discretion conferred upon the Court must therefore be exercised judiciously, with due regard to the circumstances of each case, the financial position of the plaintiff, the magnitude of the claim, and the overarching principle of access to justice.
9. From the records before the Court, it is evident that the plaintiff is a company incorporated in India, with its principal address and operations situated outside this jurisdiction. The financial statements it has produced are prepared in India and, while that is not a problem, I note that there is no evidence that they have been audited by an independent auditor, which undermines the weight on which they can be relied upon. The unaudited financial statements alone, without other evidence of dealings such as tax compliance certificates gives a vague picture of the company’s true financial standing.
10. Further, beyond the consultancy agreement with the defendants, the plaintiff has not demonstrated any other substantive business activities or assets within Kenya. The absence of local presence creates a real and substantial apprehension that, should the claim fail, the defendants will encounter serious difficulty in enforcing any costs order against the plaintiff, further noting that the claim before this Court is for a substantial sum of Kshs. 121,617,453/= together with interest.
11. At this stage, I am alive to the fact that the Court is not being asked to determine the merits of the plaintiff’s case. That is a matter reserved for the substantive hearing. However, it is worth noting that in a Ruling delivered on 18th October 2024, this Court observed that the plaintiff had failed to establish exclusive ownership rights over the biomass energy concept. While this pronouncement does not dispose of the claim, it does cast doubt on certain aspects of the plaintiff’s case, and it remains to be seen how these issues will unfold at the full hearing.
12. The plaintiff has argued that the proposed sum of Kshs. 10,000,000/= as security is inflated. The defendants, however, submit that the figure represents a reasonable estimate of the expenses likely to be incurred in defending a claim of this magnitude. The Court retains discretion to adjust the amount to ensure that it is proportionate and not oppressive. Nonetheless, the principle of requiring security remains sound, particularly in light of the issues that I have raised. An order for security in these circumstances should not prejudice the plaintiff’s right to prosecute its claim. On the contrary, it should serve the protective function envisaged under Order 26 Rule 1 of the Civil Procedure Act
Disposition
13. Accordingly, and in light of the foregoing analysis, I am satisfied that this is a proper case for the Court to exercise its discretion under Order 26 Rule 1 of the Civil Procedure Act. The application is therefore allowed to the extent that the plaintiff shall deposit security for costs in the sum of Kshs. 7,000,000/= within thirty (30) days from the date hereof. The said sum shall be deposited in an interest‑earning account, to be opened jointly in the names of counsel for both parties. There shall be no orders as to costs.