James G. K. Njoroge t/a Baraka Tools & Hardware v Apa Insurance Company Limited & 3 others [2018] KECA 212 (KLR)
The bottom line
#The Court of Appeal ruled that an insurance bond guaranteeing payment expired once the stay application ended, and a guarantee is not a debt that garnishee orders can attach.
What this practically means
#Executive summary
#Key legal issues
#Scope and duration of the insurance Bond as security for the decretal sum
The Bond was pegged to the hearing and determination of the 2nd respondent's stay application dated 10th July 2006; once that application was dismissed on 3rd August 2006, the risk ceased and the Bond expired. The deed of cancellation of 13th September 2006 was superfluous.
The Bond on its face guaranteed the decretal sum only until full hearing and determination of the stay application. The risk insured was execution of the decree during the pendency of that application. Dismissal of the application on 3rd August 2006 extinguished that risk, so the Bond expired by its own terms before the garnishee application of 4th August 2006, and the later cancellation had no legal effect.
Effect of the consent variation of 24th July 2006 made without notice to the insurer
Although the 1st respondent was not represented when the variation was recorded, the variation merely conformed the court order to the terms of the Bond already issued; the insurer was estopped from disowning the Bond on account of the variation.
The court compared the Bond and the variation order and found the variation brought the 11th July order into conformity with the Bond, which already provided that it remained in force until hearing and determination of the 10th July application. Since the variation did not alter the risk, the appellant's contention that the insurer's obligation survived did not assist, and the insurer could not repudiate on the basis of the variation.
Whether garnishee proceedings could lie against the insurer under Order XXII Rule 1(1)
Garnishee proceedings attach a debt due from the garnishee to the judgment debtor. The guarantee under the Bond was not a debt, and no debt from the 1st to the 2nd respondent was demonstrated.
The onus was on the judgment creditor to establish a debt due and recoverable from the garnishee to the judgment debtor, following Petro Sonko v Patel. The Bond only guaranteed payment of the decretal sum during the pendency of the stay application; any money possibly due on discharge of the Bond was neither alleged nor proved, and the insurer's denial of indebtedness stood uncontradicted.
Legal principles established
#- Under section 92 of the Civil Procedure Act, a decree may be executed against a surety only to the extent of the personal liability undertaken, upon sufficient written notice.
- A guarantee limited in duration expires upon the expiry of the period or event specified, and a subsequent purported cancellation is superfluous.
- A garnishee order attaches a debt; the judgment creditor bears the onus of establishing a debt due and recoverable from the garnishee to the judgment debtor, and a guarantee does not amount to an attachable debt.
- A guarantor is estopped from disowning a bond where a court order of variation merely conforms an earlier order to the terms of the bond the guarantor issued.
Court orders
#- 1.Appeal dismissed with costs
- On appeal from
- High Court of Kenya at Nairobi
- H.C. Civil Suit No. 3737 of 1995
- Jurisdiction invoked
- Appeal from the ruling and order of the High Court under the Court of Appeal Rules
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "James G. K. Njoroge t/a Baraka Tools & Hardware v Apa Insurance Company Limited & 3 others [2018] KECA 212 (KLR)", Case Analysis (2018). Civil Appeal No. 118 of 2007. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2018/212/eng@2018-10-26
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.