James G. K. Njoroge t/a Baraka Tools & Hardware (a firm) v Kenya Cement Marketing Co Ltd. & 2 others [2019] KECA 647 (KLR)
The bottom line
#Kenya's Court of Appeal ruled that a creditor who accepts new security instead of enforcing original guarantees loses the right to enforce them later.
What this practically means
#Executive summary
#Key legal issues
#Doctrine of election and estoppel against enforcement of guarantees
The appellant, by pursuing the Insurance Bond and Bank Guarantees instead of calling on the 2nd and 3rd respondents, elected one of two inconsistent remedies and was estopped from enforcing the original guarantees.
The appellant did not call upon the 2nd and 3rd respondents to honour their guarantees when judgment was entered; instead it accepted an Insurance Bond and later Bank Guarantees procured pursuant to court orders. There was no indication the new securities were in addition to the original guarantees. The conduct induced the guarantors to believe the original guarantees would not be enforced, so election bars later enforcement.
Novation and discharge by conduct of a guarantee
Acceptance of new securities amounted to a novation and a discharge by conduct of the guarantees issued by the 2nd and 3rd respondents.
Relying on authority on novation and on discharge by conduct, the court held that where parties' conduct evinces an implied agreement to abandon the original obligation and substitute another, the original surety is discharged. The appellant's acceptance of the Insurance Bond and Bank Guarantees, and pursuit of payment from those securities, discharged the 2nd and 3rd respondents.
Secondary nature of a surety's obligation and conditions precedent to enforcement
The guarantees were conditional on the 1st respondent's appeal rights and further orders of the court, and were due and payable only upon determination of the suit; they were incapable of enforcement while those conditions subsisted.
The guarantees were accessory contracts conditioned on the 1st respondent exhausting appeal rights and on further orders of the court, and were payable only if the 1st respondent could not satisfy the decree. At the time the appellant sought to enforce them the conditions were subsisting, and they became enforceable only upon determination of the High Court suit, after which the appellant pursued other securities instead.
Legal principles established
#- A creditor who accepts and pursues new or alternative security for a judgment debt, pursuant to court orders, is estopped from later enforcing the original guarantees, which are thereby discharged by conduct and novation.
- The obligation of a guarantor/surety is secondary and arises only upon the principal debtor's default.
- An election between two inconsistent remedies, once made, is final and cannot be retracted.
Court orders
#- 1.The appeal be dismissed
- 2.No orders as to costs
- On appeal from
- High Court of Kenya at Nairobi
- HC. Civil Suit No. 3737 of 1995
- Jurisdiction invoked
- First appeal to the Court of Appeal under the Court of Appeal Rules from a ruling of the High Court; final orders made under Rule 32(3) of the Court of Appeal Rules following the retirement of a member of the bench
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "James G. K. Njoroge t/a Baraka Tools & Hardware (a firm) v Kenya Cement Marketing Co Ltd. & 2 others [2019] KECA 647 (KLR)", Case Analysis (2019). Civil Appeal No. 218 of 2010. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2019/647/eng@2019-04-05
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.