JETLINK EXPRESS LIMITED v EAST AFRICAN SAFARI AIR EXPRESS LIMITED[2012] eKLR

Key Facts

Issues

• The court examined if the 2009 stay order, which included a Kshs.7.5 million deposit for security, was res judicata regarding the security requirement. The Plaintiff argued the issue had already been decided, but the court found the current application addressed new evidence of asset stripping by the directors, distinguishing it from the original 2009 order. The court held the matter was not res judicata as the new allegations post-dated the original order and presented a different legal context.
• The Defendant sought to invoke the court's inherent powers under Section 1A of the Civil Procedure Act to vary the 2009 stay order. The court analyzed jurisprudence on inherent powers, including cases like Muchiri v A.G and Mediterranean Shipping Co. v International Agriculture Enterprises Ltd, concluding that such powers could be exercised where procedural rules would work injustice. The court found the circumstances justified invoking inherent powers to prevent potential prejudice to the Defendant due to the Plaintiff's financial conduct.
• The court evaluated the adequacy of the Kshs.7.5 million deposit provided by the Plaintiff as security for costs under the 2009 stay order. The Defendant contended this amount was insufficient to cover their US$902,143 claim, while the Plaintiff argued the deposit met the requirement. The court ultimately set aside the original security condition, requiring the Plaintiff to provide additional security of US$902,143 to ensure the Defendant's position was protected during prolonged appellate proceedings.
• The court addressed whether the stay order granted on 18/11/09 pending the Plaintiff's appeal could be varied or set aside. The Defendant argued that the Plaintiff's directors had unjustifiably transferred over Kshs.109 million to their personal accounts, risking asset dissipation. The court considered the application of Section 1A of the Civil Procedure Act and inherent powers to adjust the stay order to secure the Defendant's claim of US$902,143, balancing the Plaintiff's right to appeal with the need to prevent a 'paper judgment' due to potential financial instability.
• The Plaintiff alleged the Defendant's motion was an abuse of process under Mark Omollo Agencies v Daniel Kioko, as proceedings were ongoing during an active appeal. The court rejected this, noting the application sought to vary the stay order (not proceed with judgment) and that the Defendant had not sought to bypass the appeal. The court emphasized the need to balance the Plaintiff's right to appeal with the Defendant's right to a fair trial, particularly given the Court of Appeal's significant backlog.

Holdings

• The court varied the 18/11/09 stay order to require the Plaintiff to provide security for the Defendant's US$902,143 claim. This was based on evidence of asset stripping by the Plaintiff's directors, necessitating a level playing field. The existing Kshs.7.5 million security for costs was also set aside.
• The court rejected the application to secure the Plaintiff's undertaking for damages with a US$902,143 deposit, noting the 2007 order was for security for damages, not the Defendant's claim. The court emphasized that the damages amount had not been assessed or proven to be suffered.
• The court declined to make a costs order for the rejected prayers, acknowledging the Plaintiff's rights were safeguarded by the stay order while the Defendant's claim remains unproven.
• The court dismissed the alternative prayer to set aside the 18/11/09 stay order, finding it would be injurious to the Plaintiff's pending appeal. Proceeding with the Defendant's application while the appeal was pending would risk rendering the appeal nugatory.

Remedies

• The court varied the stay order granted on 18th November 2009, requiring the plaintiff to provide security of US$902,143 within 45 days. The stay will lapse if the plaintiff fails to comply with this new condition.
• The court set aside the prior security deposit of Kshs.7.5 million for costs and directed its release to the plaintiff once the new security of US$902,143 is provided. This adjustment ensures the plaintiff is not burdened with dual security obligations.

Legal Principles

• The ruling clarified that the 2007 injunction required security for damages, not the Defendant's claim itself. The 2009 stay order was initially conditional on a Kshs.7.5 million deposit for costs, which was later varied to require security for the US$902,143 claim.
• The court held that the Defendant's prayer to vary the order of 10th July 2007 was res judicata under Section 7 of the Civil Procedure Act, as the Defendant had previously failed to raise this issue during the 2008 application to strike out the Plaintiff's suit.
• The court evaluated the admissibility of Mr. Kivindyo's affidavits, emphasizing that interlocutory affidavits must disclose sources of information to ensure verifiability. The Plaintiff's admission to the authenticity of some documents led the court to accept these affidavits despite initial concerns.
• The court exercised its inherent power under Section 1A of the Civil Procedure Act to vary the 2009 stay order, balancing the parties' interests and addressing the risk of the Defendant obtaining a 'paper judgment' due to the Plaintiff's financial misconduct and the prolonged appeal process.

Precedent Name

• Bara & 13 others -vs- Maendeleo ya Wanawake
• Church Road Development Co. Ltd -vs- Barclays Bank of Kenya Limited
• Mark Omollo Agencies -vs- Daniel Kioko
• Rawal -vs- Mombasa Hardware Ltd
• Muchiri -vs- Attorney General & 3 others
• Mediterranean Shipping Co. S.A -vs- International Agriculture Enterprises Ltd

Cited Statute

• Civil Procedure Rules
• Civil Procedure Act

Judge Name

• Azangalala J
• Kimaru J
• A. Mabea

Passage Text

• I am satisfied that the Defendant has made a case for the exercise of the inherent jurisdiction of this court and the power donated by Section 1A of the Civil Procedure Act to facilitate the just and proportionate resolution of the dispute between the parties and therefore interfere with the order of 18th November, 2009 of Hon. Kimaru J. I hereby vary that order to the extent that the stay granted therein pending the hearing and determination of the appeal shall continue to be in force on the condition of the Plaintiff providing security in the sum of US$ 902,143 by way of either depositing the same in an interest bearing account in the joint names of the Advocates on record for the parties or by bank guarantee.
• The inherent power of the Court is to be exercised by the Court in very exceptional circumstances... to do justice and to avoid an injustice to the parties before Court. In the application before me, it has not been shown that the procedure for review or appeal would be appropriate... the Court is being asked to mould the relief accordingly.
• I am satisfied from the evidence on record that contrary to the averments in the Replying and Further Affidavits, the directors of the Plaintiff in making the transfers set out in the Affidavit of Mr. Kivindyo, were stripping off the Plaintiff of its liquid assets, money.