Consolidated Bank of Kenya Limited & 1 other v Chepkonga Chebon
The bottom line
#Kenya's Court of Appeal ruled that a guarantor stays liable when a bank restructures a loan if the guarantee contract allowed such changes.
What this practically means
#Executive summary
#Key legal issues
#Whether restructuring/splitting of the loan discharged the guarantee
No — the charge and deed of guarantee expressly contemplated consolidation, splitting, variation and granting of indulgence, so the restructuring did not discharge the guarantor.
The Court examined clause 10.3 of the Charge permitting the bank to consolidate, split, determine or vary credit, clause 10.51 granting authority to use the charge as security for further facilities, and clause 4 of the Deed of Guarantee allowing the lender to grant time or indulgence without the guarantor's consent, with clause 4.6 preserving liability. Since the variations were contractually contemplated, the guarantor could not be discharged. The trial court's contrary finding rewrote the contract, an error of law. Reliance was placed on Paramount Bank v First National Bank where conversion of an overdraft into a term loan contemplated in the guarantee was held unsustainable as a ground of challenge.
Whether the trial court erred in discharging the guarantor and nullifying the statutory power of sale
Yes — the discharge finding and the declaration that the statutory power of sale was a nullity were erroneous and were set aside in their entirety.
Having found the variation was contemplated in the contract, the Court held the trial court's conclusion that the guarantee was discharged and that the statutory power of sale had not crystallized was erroneous. The Court also reviewed the record and confirmed that all statutory notices were served on the principal borrower and guarantors, and that a valuation of the property was done. The appeal was therefore allowed, the High Court judgment set aside, the suit dismissed, and the bank given liberty to exercise its statutory power of sale.
Service of statutory notices under the Land Act
All requisite statutory notices were served on the principal borrower and guarantors, and a valuation of the property was done.
The Court reviewed the record, including the testimony of DW1 Bernard Javan Oliko that the statutory notice was served on the address used in the charge and guarantee, and confirmed service on the borrower and guarantors. This reversed the trial judge's finding that there was no indication the section 96 notice was issued or served, restoring the bank's ability to exercise its statutory power of sale.
Legal principles established
#- A court cannot rewrite a contract between parties; they are bound by its terms absent pleaded and proved coercion, fraud or undue influence
- Where a guarantee contract expressly contemplates variation, splitting or granting of indulgence to the debtor, the guarantor cannot claim discharge on account of such restructuring
Court orders
#- 1.The judgment delivered on 29th June 2020 is set aside in its entirety
- 2.The suit in the trial court is dismissed with costs to the appellant
- 3.The appellant is at liberty to exercise its statutory power of sale
- 4.The costs of the appeal shall be borne by the respondent
- On appeal from
- High Court at Eldoret (transferred from Environment and Land Court)
- Civil Case No. 62 of 2018 (originally ELC No. 251 of 2024/2015, Eldoret)
- Jurisdiction invoked
- First appellate jurisdiction of the Court of Appeal (appeal as of right against High Court judgment; specific provision not stated in extract)
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Consolidated Bank of Kenya Limited & 1 other v Chepkonga Chebon", Case Analysis (2026). Civil Appeal — Eldoret (number not stated in extract). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1197/eng@2026-06-26
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.