Paramount Bank Ltd v First National Bank Ltd & 2 others (Civil Appeal (Application) 468 of 2018) [2026] KECA 202 (KLR)
The bottom line
#The Court of Appeal refused Paramount Bank permission to take its guarantee dispute to the Supreme Court, confirming that broad guarantee wording covers later changes to a borrower's facilities.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether the intended appeal to the Supreme Court raises matters of general public importance within the meaning of Article 163(4) of the Constitution
- 2.Whether the judgment of the Court of Appeal created uncertainty in the law as regards the doctrine of discharge by variation of a guarantee
Key legal issues
#Whether the judgment of the Court of Appeal created uncertainty in the law on discharge of a guarantee by variation, sufficient to constitute a matter of general public importance
No. The judgment merely restated the doctrine of discharge by variation and found on the specific facts that the variation was contemplated by the guarantees, which covered 'any other accommodation'.
The Court examined the holdings of both courts below and found they reaffirmed the doctrine that substantial, uncontemplated variation discharges a guarantee. The Court of Appeal found that the guarantees were not limited to the bills discounting facility but extended to 'any other accommodation', so the conversion of the outstanding balance into a loan facility was covered and could not discharge the guarantor. The applicant's claim of confusion was based on a selective, even mischievous, reading of the judgment, and certification principles under Phillipus Steyn were not met.
Whether a guarantee is discharged after the principal borrower has discharged his obligation, given an alleged nil balance
The principle is undisturbed; the nil balance was explained by the transfer of the debit balance to a loan account, not by payment of the debt.
The applicant argued that the principal borrower had paid the 1st respondent, citing a witness's reference to a nil balance. The Court of Appeal had already addressed this: the nil balance arose because the debit balance of Kshs 14,738,436.95 was transferred to the loan account, and there was no reason to disbelieve that explanation. The Court saw no departure from the well-established principle that payment by the principal debtor discharges the guarantee.
Legal principles established
#- Both the High Court and the Court of Appeal affirmed the doctrine that substantial variation of the principal contract without the knowledge of the guarantor discharges the guarantee; the question in each case is whether the variation was within the contemplation of the parties and covered by the guarantee instrument.
- Contested facts between the parties, and mere dissatisfaction with concurrent findings, cannot form the basis of a certificate to appeal to the Supreme Court.
- Discharge by the principal borrower of his obligation discharges the guarantee.
Court orders
#- 1.The application for certification is dismissed
- 2.Costs of the application awarded to the 1st respondent
The bench
#One judgment of the whole court — no separate or dissenting opinions.
Wrote the judgment
Wrote the judgment
Wrote the judgment
- On appeal from
- Court of Appeal (decision sought to be appealed to the Supreme Court) / High Court
- Not stated
- Jurisdiction invoked
- Article 163(4) of the Constitution (application for certification of a matter of general public importance for appeal to the Supreme Court)
Relief refused
#Certificate that the intended appeal to the Supreme Court raises matters of general public importance
The alleged confusion occasioned to the law on discharge of guarantees by variation does not exist; the applicant's contentions rest on a selective reading of the judgment
Costs
The application was dismissed with costs to the 1st respondent.
Quotable passages
#Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.
We find no merit in this application and dismiss the same with costs to the 1st respondent. It is so ordered.
we are satisfied that the applicant has not demonstrated that the intended appeal to the Supreme Court raises any matters of general public importance within the meaning of the Phillipus Steyn v. Giovanni Gnecchi-Ruscone decision.
The two courts did not depart from the doctrine of discharge by variation., They only found, on the specific facts of the case before them, that there was no uncontemplated variation and therefore the question of discharge by variation could not arise.
If anything, they are a crisp restatement of those principles.
Issues in the judgment
#The 1st respondent's written submissions are dated '31st January 2004', an apparent typographical error given the Court of Appeal judgment of 15th December 2023 and submissions dated 5th February 2024.
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Paramount Bank Ltd v First National Bank Ltd & 2 others (Civil Appeal (Application) 468 of 2018) [2026] KECA 202 (KLR)", Case Analysis (2026). Not stated in the judgment. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2026/202/eng@2026-02-06
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.