Supreme Court sets down standard guidelines on factors to be considered whilst making an order for security for costs

The Supreme Court on 17 February 2023 delivered a judgment in the case of Westmont Holdings SDN BHD v Central Bank of Kenya & 2 others [Petition No. 16 (E023) of 2021] (the Westmont Case) in which it outlined standard guiding principles that courts ought to consider when making an order for security for costs.

Security for costs is defined as money, property, or a bond deposited in court by a suing party to secure the payment of litigation costs (while the case is ongoing) and to protect the sued party if eventually the suing party loses.

Background of the Westmont Case

The Appellant (Westmont) had filed an appeal before the Court of Appeal, challenging a decision delivered by the High Court against it. Before the appeal was heard, the Respondent (CBK) filed an application seeking that the Appellant deposits security for costs in the sum of Kes. 87,620,000.00, on the basis that it had been awarded costs by the High Court. The Court of Appeal allowed CBK’s Application and ordered the Appellant to deposit Kes 20,000,000.00 as security for costs, failure to which the appeal would be struck out.

Aggrieved by the ruling of the Court, the Appellant filed the instant appeal before the Supreme Court, claiming that the order for security for costs violated various provisions of the Constitution including Article 48 (access to justice), Article 50 (right to a fair hearing), Article 159 (duty of the court to disregard technicalities in dispensing justice), and Article 259 (duty of the court to promote the purpose, values and principles of the Constitution and to advance the rule of law, human rights and fundamental freedoms).

Supreme Court Determination

The Supreme Court certified the matter as one of significant public importance and identified one issue for determination: “Whether an order for security for costs is unreasonable as it impedes a litigant’s access to justice by imposing a condition precedent before the latter can be heard, contrary to Articles 48, 50 and 159 of the Constitution”.

The Court noted that the law grants the Court of Appeal discretion to make an order for security for costs and that the imposition of security for costs is constitutional. The court however noted that there were no clear guiding principles on what a court considers when making such an order. To address this gap, the court listed the following twenty one principles that ought to be considered by every court in imposing security for costs:

• the prospects of success or merits of the proceedings,
• the genuineness of the proceedings,
• the impecuniosity of the plaintiff,
• whether the plaintiff's impecuniosity is attributable to the defendant's conduct,
• whether the plaintiff is effectively in the position of a defendant,
• whether an order for security for costs would stifle the proceedings and/or impede access to justice,
• whether the proceedings involve a matter of public importance,
• whether there has been an admission or payment in court,
• whether delay by the plaintiff in commencing the proceedings has prejudiced the defendant,
• the costs of the proceedings,
• whether the security sought is proportionate to the importance and complexity of the subject matter in dispute,
• the timing of the application for security for costs,
• whether an order for costs made against the plaintiff would be enforceable within the republic of Kenya,
• the ease and convenience or otherwise of enforcing a Kenyan court judgment or order in the country of a non-resident plaintiff or appellant.
• if the plaintiff is a natural person, an order for security for costs cannot be made merely on account of his or her impecuniosity.
• security for costs is to be given in such manner, at such time and on such terms (if any) as the court may by order direct.
• if the plaintiff fails to comply with an order under this rule, the court may order that the proceeding on the plaintiff's claim for relief in the proceedings be dismissed.
• the provisions of any Act under which the court may require security for costs to be given such as the Elections Act.
• a second motion for security for costs will not succeed unless there is an unforeseen and material change in circumstances since the first order for security. An example of an unforeseen and material change in circumstances might be where a plaintiff has come into a sum of money sufficiently large that they could no longer make an impecuniosity argument.
• the defendant seeking increased security bears the onus of demonstrating a significant gap between the security ordered and the actual expenses which were not foreseeable and that in hindsight the original request for security for costs was based on an assessment of the complexity of the case which hindsight has established was not realistic.
• the jurisdiction to increase or decrease the amount of security already ordered should not be exercised lightly or be used to second guess the court that made the original order, whether on consent or otherwise, unless the gap between what was ordered and what later appears to be necessary is significant.

Having considered the above principles, the Supreme Court found that the Court of Appeal’s imposition of security for costs worth Kes 20,000,000.00 would lock out the Appellant from accessing justice, noting that the amount was one million times above the set nominal amount of Kes. 2,000.00 already paid at the time of filing the appeal. The requirement for security for costs was therefore set aside.

This decision will provide a useful guide to all courts when making an order for security for costs and will ensure that a balance is struck between the right of a litigant to access justice and the right of the opposing party to security for costs.

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Read the original publication at IKM Advocates.