Civil Appeal E034 of 2021

Case Metadata
Case Number:	Civil Appeal E034 of 2021
Parties:	Garsu Pasaulis, UAB v Systemedia Technologies Limited
Date Delivered:	28 Apr 2022
Case Class:	Civil
Court:	High Court at Nairobi (Milimani Commercial Courts Commercial and Tax Division)
Case Action:
Judge(s):	WA Okwany
Citation:	Garsu Pasaulis, UAB v Systemedia Technologies Limited (Civil Appeal E034 of 2021) [2022] KEHC 298 (KLR) (Commercial and Tax) (28 April 2022) (Ruling)
Advocates:	Mr. Khaseke for the Appellant/Respondent, Mr. Atonga for Respondent/Applicant
Court Division:	Commercial and Tax
County:	Nairobi
Advocates:	Mr. Khaseke for the Appellant/Respondent, Mr. Atonga for Respondent/Applicant
Disclaimer:	The information contained in the above segment is not part of the judicial opinion delivered by the Court. The metadata has been prepared by Kenya Law as a guide in understanding the subject of the judicial opinion. Kenya Law makes no warranties as to the comprehensiveness or accuracy of the information

Garsu Pasaulis, UAB v Systemedia Technologies Limited (Civil Appeal E034 of 2021) [2022] KEHC 298 (KLR) (Commercial and Tax) (28 April 2022) (Ruling)

Neutral citation: [2022] KEHC 298 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts Commercial and Tax Division)

Civil Appeal E034 of 2021

WA Okwany, J

April 28, 2022

Between

Garsu Pasaulis, UAB

Appellant

and

Systemedia Technologies Limited

Respondent

Ruling

1.Through a ruling delivered by the Chief Magistrates Court in CMCC No. 165 of 2020 on 30^th March 2021, the court dismissed the appellant’s suit on the basis that the appellant was a foreign entity with no registered place of business in Kenya. Aggrieved by the said ruling, the appellant filed the instant appeal. The respondent however filed the application dated 23^rd June 2021 seeking the following orders; -1)That the Honourable Court be pleased to Order and direct the Appellant to furnish security for costs to the tune of 36,625 euros or the equivalent of Kshs. 4,783,958/= cash deposit being half of the liquidated amount claimed by the Appellant in the Lower Court Civil Milimani CMCC No.165 of 2020: Garsu Pasaulis, UAB -vs- Systemedia Technologies Limited within fourteen (14) days and the said security be deposited at KCB Bank, head office Kencom Branch, Nairobi in a joint interest earning account agreeable to the Advocates on record for both parties; Failure which the Appeal herein be dismissed with costs to the Applicant.2)That pending provision of the security for costs by the Appellant, all other and/or further proceedings in the Appeal be stayed.3)That the costs of this Application be awarded to the Respondent/Applicant.

2.The application is supported by the affidavit of the respondent’s Sales and Marketing Manager Mr. Geofffrey Mutua Munywoki and is premised on the grounds that; -a.That the Appellant, an alleged Lithuanian, entity filed a suit in Milimani CMCC No.165 of 2020: Garsu' Pasaulis, UAB -vs- Systemedia Technologies Limited for breach of contract claiming 73,250 euros against the Respondent/Applicant.b.The Respondent filed a bona fide defence to the suit and counterclaim for 177,962.50 Euros and in addition filed a Notice of Preliminary Objection disputing the legal capacity of the Appellant to file suit in Kenya. The Respondent is vehemently opposed to the Appeal.c.That vide a Ruling on the Respondent’s Preliminary Objection delivered on 30th March, 2021 the Milimani Commercial Chief Magistrates Court Hon. E. Kagoni (PM) sustained the Respondent’s Preliminary Objection and dismissed the Plaintiff's/Appellant’s suit finding that the Appellant is a foreign entity with no registered or principal place of business in Kenya and that it has no locus/legal capacity whatsoever to institute and sustain a suit in Kenya.d.That the Appellant is a foreign entity whose legal status cannot be ascertained as it is not resident in Kenya, has no registered place of business in Kenya and neither does it have a known place of business or office whether principal or a subsidiary in Kenya. It has no physical or telephone contact that is known to the world or those dealing with it.e.Further the Appellant has its residence in Lithuania, a non- commonwealth country that has adopted and pursues the civil law system that completely varies from our common law system and practices.f.That Lithuania where the Appellant Company is allegedly based is a country that has no reciprocal foreign judgments enforcement with Kenya and it would prove very difficult to enforce any ruling, judgment, order or decree from court against the Appellant in a non-reciprocating jurisdiction whose legal system is completely different from Kenya’s.g.That the financial standing of the Appellant is also unknown to the Applicant. Further it has no known assets within Kenya and if the Applicant successfully succeeded in its Defence and/or Appeal and was awarded costs by this court, the same may not be recovered without undue difficulty. The Applicant would therefore suffer irreparable harm and financial loss given that the claim and Respondent’s counterclaim in the Lower Court are for a substantial sum of more than 177, 962 euros.h.That unless the Appellant avails security for costs for due performance of the decree, the Applicant may have a paper Judgment that is merely academic as it would not be able to enforce the same against the Appellant. The whole Court process would be rendered academic occasioning great prejudice to the Respondent. It is therefore imperative and necessary that the Appellant avails security for the due performance of any order or decree that may be ultimately binding upon it.i.That this application has been made promptly and without undue delay and the special circumstances surrounding the Appeal creates a prima facie case that calls for the Appellant to provide security for costs. This Application has been made before the Lower Court matter or this Appeal have proceeded for full hearing on merit.j.That ultimately, should the Respondent be successful, having to take legal action in a foreign jurisdiction would be an invariably expensive and time-consuming business/exercise. That from the pleadings filed, the Appellant has not shown that although resident out of the jurisdiction of the court it has substantial fixed or permanent or certain property within the jurisdiction which can be accessed by judicial process should the Respondent succeed in defending the claim or appeal against it and get an order for its costs.k.That the Appellant being a foreign entity in Lithuania, the Applicant has no way of knowing the precise address or other contacts of the Appellant and therefore has no way of tracing whether the Appellant has any assets and means of paying the costs of this suit/Appeal if the same be dismissed, that even if the same were traced and identified it would be unduly difficult for the Applicant to rely on the official or legal process of Lithuania, a country that practices civil law and not common law to recover costs. The process of recovering costs, if awarded, would be too tedious and tenacious.l.That the Application is made in the best interest of justice and furthering the administration of justice so as to avoid engaging in an academic exercise and to secure the Applicant’s interest who may be faced with the prospects of total failure to recover costs as duly ordered after a successful defence of the Appeal and even the Lower Court suit. This is a fit and proper case to order security for costs to be paid by the Appellant.

3.The appellant opposed the application through the replying affidavit of its Director Ana Janauskiene who states that the application lacks merit, is based on speculation, and that the appellant is able to meet costs should the appeal be unsuccessful. She asserts that the respondent is able to ascertain the appellant’s precise address for purposes of tracing its assets, as they have been business partners.

4.The application was canvassed by way of written submissions which I have considered. The main issue for determination is whether an order for security for costs should issue against the appellant. The respondent’s case is premised on the claim that the appellant is a foreign entity with no registered place of business in Kenya and that in the event the respondent succeeds in its defence or appeal, it would be difficult to recover costs. The respondent submitted that Luthuania has no reciprocal foreign judgment enforcement in Kenya and that it would be difficult to enforce any order or decree against the appellant.

5.The appellant, on the other hand, argued that it is not enough to merely state that the respondent is a foreign company with no known assets but that the applicant must demonstrate that should the appeal be unsuccessful, the appellant would be unable to meet the costs.

6.The law governing security of costs is set out under Order 26 of the Civil Procedure Rules which provides as follows: -“1.In any suit the court may order that security for the whole or any part of the costs of any defendant or third or subsequent party be given by any other party.2.If an application for security for costs is made before a defence is filed, there shall be filed with the application an affidavit setting out defence the grounds of the defence together with a statement of the deponent’s belief in the truth of the facts alleged.3.Where it appears to the court that the substantial issue is which of two or more defendants is liable or what proportion of liability two or more defendants should bear no order for security for costs may be made.4.In any suit brought by a person not residing in Kenya, if the claim is founded on a bill of exchange or other negotiable instrument or on a judgment or order of a foreign court, any order for security for costs shall be in the discretion of the court.5.(1)If security for costs is not given within the time ordered and if the plaintiff is not permitted to withdraw the suit, the court shall, upon application, dismiss the suit.(2)If a suit is dismissed under subrule (1) and the plaintiff proves that he was prevented by sufficient cause from giving the required security for costs the court may set aside the order dismissing the suit and extend the time for giving the required security.6.(1)Where security by payment has been ordered, the party ordered to pay may make payment to a bank or a reputable financial institution in the joint names of himself and the defendant or in the names of their respective advocates when advocates are acting.

7.In Patrick Ngetakimanzi vs Marcus Mutuamuluvi & 2 Others- High Court Election Petition No. 8 of 2013 it was held that: -“Security of costs ensures that the respondent is not left without recompense for any costs or charges payable to him. The duty of the court is therefore to create a level ground for all the parties involved, in this case, the proportionality of the right of the petitioner to access to justice vis-a-vis the respondent's right to have security for any costs that may be owed to him and not to have vexatious proceedings brought against him.”

8.Further in Gatirau Peter Munya vs Dickson Mwenda Githinji & 2 Others, CA No. 38 of 2013 [2014] eKLR, the Supreme Court emphasized that: -“In an application for further security for costs, the Applicant ought to establish that the Respondent, if unsuccessful in the proceedings, would be unable to pay costs due to poverty. It is not enough to allege that a Respondent will be unable to pay costs in the event that he is unsuccessful. And the onus is on the Applicant to prove such inability or lack of good faith that would make an order for security reasonable.”

9.In Shah vs Shah [1982] KLR 95 it was held that: -“The general rule is that security is normally required from Plaintiff’s resident outside the jurisdiction, but as was agreed in the court below, a court has discretion, to be exercised reasonably and judicially, to refuse to order that security be given”.

10.In Kibiwott & 4 others vs The Registered Trustees of Monastery of Victory Nakuru, HCCC No 146 of 2004 the court observed that an applicant for security of costs has to prove that the opposing party will not be able to pay the costs to be awarded in the event of the suit filed by such a party being unsuccessful.

11.In the present suit, it is not disputed that the appellant is a foreign company with no known assets or registered offices in Kenya. In an application for security for costs, the court is required to consider the place of residence of the appellant and its ability to pay costs. I find that the applicant has presented reasonable grounds to justify its apprehension that the appellant may not be in a position to pay its costs should the appeal be unsuccessful. I note that the appellant has not allayed the applicant’s fears by producing its the financial records or business registration documents before this court. In balancing the interest of both parties, I find that it will be just to order that the appellant deposits security of costs as prayed by the respondent.

12.I therefore find that the instant application has merit and I make the following orders: -a)That the Appellant shall deposit security of costs in the sum of Kshs. 4,783,958 within 60 days from the date of the ruling.b)That the said costs shall be deposited in a joint interest earning account at Kenya Commercial Bank, Head Office, Kencom Branch, Nairobi in the names of advocates for both parties.c)That in the event of failure to comply with orders in a) and b) hereinabove, the appeal herein shall be deemed as dismissed with costs to the applicant.

DATED, SIGNED AND DELIVERED VIRTUALLY AT NAIROBI THIS 28^TH DAY OF APRIL 2022.W. A. OKWANYJUDGEIn the presence of: -Mr. Khaseke for the Appellant/Respondent.Mr. Atonga for Respondent/ApplicantCourt Assistant-Sylvia

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