Aar Insurance Kenya Ltd v Thika Water & Sewarage Company Ltd; KCB Bank Kenya Ltd (Interested party) [2022] KEHC 1392 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA

AT NAIROBI

CIVIL APPEAL NO. E412 OF 2021

AAR INSURANCE KENYA LTD...........................................................APELLANT

VERSUS

THIKA WATER & SEWARAGE COMPANY LTD.........................RESPONDENT

KCB BANK KENYA LTD....................................................INTERESTED PARTY

RULING

1. The respondent/applicant in this instance has filed the Notice ofMotion dated 24th December, 2021. The motion is supported by the grounds set out on its face and the facts deponed in the affidavit sworn by Emily Nafula Nyongesa. The applicant is seeking for the orders hereunder:

i.  Spent

ii. THAT an order be and is hereby granted extending the timelines within which the performance guarantee Ref.No. MD2100600002C issue by the interested party, is to be enforced pending the determination of the appeal.

iii.  THAT in the alternative to prayer no. (ii) above a mention date be set on priority basis and before the 31st December 2021, for parties to appear before the Honourable Duty Judge for purposes of recording a consent and having the timelines for enforcement of the performance guarantee Ref.No. MD2100600002C extended pending the final determination of the suit.

iv. THAT this honourable court be pleased to make any such order or further orders it may deem fit, fair and just in the circumstances and in the interest of justice.

v.THAT the costs of this application be granted.

2.  In opposition to the Summons, the replying affidavit sworn byJocelyn Oballa on 20th January, 2022 was filed on behalf of the interested party.

3.  When the Motion came up for interparties hearing the parties respective advocates chose to rely on the averments made in their respective affidavits.

4.  I have considered the grounds laid out on the body of the Motion, the facts deponed in the affidavits supporting and opposing the Motion and the brief oral arguments.

5.  The applicant avers that the appellant entered into a contract with the interested party, that should the appellant breach the contract between them and the respondent, then the interested party should pay the respondent the sum specified in the performance guarantee.

6.  The applicant avers that the contract between them and the respondent crystallized, and that the respondent went to claim and enforce the performance bond instead of the appellant fulfilling their part of the bargain, the appellant went ahead and filed an application to prevent the respondent from recovering or making any demand or claim arising from the said performance guarantee issued by the interested party.

7.  The applicant further avers that the court, after hearing their motion, dismissed it, and that they filed an appeal against the judgment as well as an application for a stay of execution since they were dissatisfied with it. When the issue came up for hearing, the respondent agreed to retain the status quo on the specified terms in order to expedite the application and subsequent hearing of the appeal in the interest of justice.

8.  The applicant  depones that court similarly directed that the appeal be fast tracked and heard on priority basis given the performance guarantee was to lapse within specified time lines.

9.  The applicant further depones that the plans to fix nearer dates before the registry have proven futile and the term of the performance bond is to lapse precisely on 31st December 2021 and that the applicant is apprehensive that if the timelines for the execution and/are enforcement of the performance bond are not extended then the subject of the appeal which is either to allow or restrain the respondent from enforcing the said performance bond will be overtaken by events and the whole appeal will be considered to be an academic exercise.

10. In response, the Interested party avers that the subject guarantee (the performance guarantee Ref No. MD2100600002C expired  on  31st December 2021and subsequently and as per the terms thereof the cash margin was refunded to the applicant’s account

11. The interested party states that they have however in view of the dispute pending before the magistrate court and this court, restricted the subject amount pending further directions and outcome from this court.

12. The real issue for determination is whether the order for extending the timelines within which the said performance guarantee issued by the interested party should be granted pending the determination of the appeal.

13. In Halsbury’s Laws of England, Fourth edition, Volume 41 at Page 819 on Performance Guarantees and Bondsstates as follows ;

“960. Nature and effect. Some commercial contracts include provision for one party, often the seller, to procure a so-called performance guarantee or bond from a bank or an insurance or other company in favour of the other contracting party. A performance guarantee or bond commonly provides for payments to be made on the demand of the beneficiary. The contractual obligations arising under such guarantees or bonds are separate from and not dependent upon those existing under the sale contract between the seller and the buyer.” (emphasis mine)

14. After a careful consideration of the rival submissions and upon further consideration of the material placed before this court, I find that not plausible grounds have been advanced to enable this court grant the order sought.  No good reason was advanced to justify extension of the timelines of the performance guarantee.

15. The application dated 24. 12. 2021 lacks merit. It is dismissed with costs.

DATED, SIGNED AND DELIVERED ONLINE VIA MICROSOFT TEAMS AT NAIROBI THIS 18TH DAY OF MARCH, 2022.

…….….…………….

J. K. SERGON

JUDGE

IN THE PRESENCE OF:

................................................FOR THE APPELLANT

.............................................FOR THE RESPONDENT

.................................. FOR THE INTERESTED PARTY