Jagjivan Singh Trading t/a Spancrete v Menengai Investments Ltd [1995] KECA 145 (KLR)
The bottom line
#Kenya's Court of Appeal confirmed that an indemnity agreement need not be in writing, and a debtor must repay whoever settles their debt.
What this practically means
#Executive summary
#Key legal issues
#Whether the employer could terminate under clause 25 despite alleged breach in failing to include payments in interim certificates
The appeal ground failed because there was no agreed or proved fact that certificates had been issued and left unpaid, or that the architect had refused to include materials in certificates; whether that occurred is a matter for the arbitrator.
The questions in the case stated rested on facts agreed or proved before the arbitrator, numbered 1-24. None of those facts stated that a certificate had been issued which the respondent was obliged to pay and failed to pay. The judge could not therefore have found that the respondent was in breach and precluded from terminating under clause 25. Determining whether certificates were issued and unpaid, and whether materials were notified to the architect, is a question of fact reserved to the arbitrator.
Whether the respondent was a volunteer liable to recover monies paid to KCFC absent a written guarantee
The arrangement between the respondent and KCFC was an indemnity, not a guarantee, so section 3(1) of the Law of Contract Act did not require it to be in writing, and the respondent was entitled to recover from the appellant as principal debtor.
KCFC gave a true guarantee to KCB, the appellant being the principal debtor with primary liability. The respondent merely undertook to make good any loss KCFC suffered in giving that guarantee; that is a contract of indemnity assuming primary liability, which falls outside section 3(1). The appellant knew of the arrangement and had failed to repay the overdraft; it would be unjust to allow him to escape reimbursement. The judge was right to hold the appellant liable.
Whether the appellant was liable for the extra interest accrued between 1978 and 1981
The appellant, as principal debtor who could not repay at all, could not complain that the respondent took about three years to complete repayment to KCFC.
The duty to repay KCB lay primarily with the appellant, who failed to discharge it except to the extent of one certificate. When KCB called on KCFC under the guarantee and KCFC paid, the respondent became liable to indemnify KCFC including accrued interest. A debtor who cannot pay cannot fault the indemnifier for the speed of its own reimbursement; the complaint had no substance and ground 5 failed.
Whether the arbitrator may set off the respondent's recovery against monies owed to the appellant
Nothing is wrong in principle with the arbitrator offsetting what the respondent recovers against what the appellant might owe, to be determined by the arbitrator.
Ground 6 concerned the arbitrator's ability to offset mutual debts. The court found no error of principle: the arbitrator will determine whether the respondent owes the appellant any money and, if so, may offset it against the appellant's liability. The ground was dismissed along with the others.
Legal principles established
#- Whether certificates were issued and unpaid, and whether materials delivered to the site were brought to the architect's notice, are questions of fact for the arbitrator unless the parties give more facts in the case stated
- Section 3(1) of the Law of Contract Act (the writing requirement for guarantees) does not apply where the surety assumes a primary liability; contracts of indemnity fall outside the section
- A party who requests another to guarantee or secure its debt is not a volunteer when it pays pursuant to that request, and a principal debtor cannot complain of the manner or timing of the indemnifier's payment
Court orders
#- 1.The appeal wholly fails and is dismissed
- 2.Costs of the appeal to the respondent
- On appeal from
- High Court at Nairobi
- HCCC No 2485 of 1985
- Jurisdiction invoked
- Appeal from the ruling of the High Court on a case stated under section 22(1) of the Arbitration Act, with leave to appeal granted by the High Court
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Jagjivan Singh Trading t/a Spancrete v Menengai Investments Ltd [1995] KECA 145 (KLR)", Case Analysis (1995). Civil Appeal No 100 of 1988. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/1995/145/eng@1995-09-21
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.