Ftg Holland v Afapack Enterprise Limited & another [2013] eKLR

Kenya Law

Automated Summary

Key Facts

FTG Holland (Dutch company) sued Afapack Enterprise Limited and Afa Chemicals Limited for €314,660.20. Respondents denied the debt and counterclaimed €118,731.50, seeking security from the foreign applicant. Trial judge (Kimondo, J.) ordered security due to applicant's lack of Kenyan assets and risk of obstructing counterclaim execution. Applicant appealed to Court of Appeal, arguing the security order was excessive and would cripple its business. The appeal was granted as the security amount (Kshs.13M equivalent) was deemed to risk rendering the appeal nugatory.

Transaction Type

Supply of goods dispute

Issues

  • The second issue centered on the trial judge's interpretation of the respondents' application. The applicant argued the judge misapplied the principles for furnishing security under Order 39 rule 5 instead of the arrest and attachment provisions under Order 39 rule 1, raising questions about the correctness of the legal framework applied in the ruling.
  • The court addressed whether the respondents met the legal requirements to obtain an order for arrest and attachment before judgment under Order 39 rule 1 of the Civil Procedure Rules. This included evaluating if the applicant, a foreign company, had demonstrated sufficient assets to meet the counterclaim and whether the trial judge correctly applied the principles for such an order.

Holdings

  • The Court of Appeal determined that the applicant's appeal is arguable, as the respondents failed to satisfy the requirements for the orders sought, and it was questionable whether the trial judge correctly treated the application as one for security under Order 39 rule 5 instead of arrest and attachment under Order 39 rule 1.
  • The Court granted the applicant's application for stay of execution without imposing conditions, noting the respondents' counterclaim of €118,731.50 (approximately Kshs.13 Million) had not crystallized and was merely an ordinary claim at that stage.

Remedies

  • The Court granted the applicant's application for a stay of execution pending the lodgment, hearing and determination of its intended appeal from the High Court ruling dated 19th March 2013. This relief was granted on the grounds that the appeal is arguable and the security requirement would cause severe hardship to the applicant's operations.
  • The applicant was awarded costs against the respondents in relation to the stay of execution application. The Court found the respondents' opposition to the stay application unmeritorious, given the applicant's demonstrated arguable grounds for appeal and the potential business harm from complying with the security requirement.

Legal Principles

  • The court emphasized that the burden of proof lies with the applicant to demonstrate that the respondents' apprehensions about the foreign company's potential to abscond or obstruct execution are unfounded. It also noted that the respondents had to establish the necessity for security orders under the applicable rules.
  • The court applied the principle of substance over form by prioritizing the 'overriding objective of doing substantial justice' over procedural technicalities, particularly in ordering security for costs despite the application being technically under Order 39 rule 1.

Precedent Name

  • RELIANCE BANK LIMITED vs. NORLAKE INVESTMENTS LIMITED
  • KURIA KANYOKO t/a AMIGOS BAR & RESTAURANT vs. MOSES KINUTHIA NDERU & OTHERS

Cited Statute

  • Civil Procedure Act
  • Civil Procedure Rules

Judge Name

  • D.K. MUSINGA
  • W. OUKO
  • J. MOHAMMED

Passage Text

  • We think that it is an arguable ground whether the respondent satisfied the requirements for grant of the orders which they had sought.
  • The applicant did not file a replying affidavit to the respondents' application and thus failed to controvert the respondents' contention that it had no attachable assets in Kenya.
  • The applicant is a foreign company with no known assets in Kenya and there was a real likelihood that in the event the respondents succeeded in their counterclaim they would be obstructed in execution of any decree against the applicant.

Damages / Relief Type

  • Monetary damages for unpaid invoices: €314,660.20
  • Counterclaim for recovery of overpayment: €118,731.50