Safaricom Investment Cooperative v Geminia Insurance Company Limited

Conditions for Building Works” for the construction of an affordable housing residential project in Ruaka labelled “the Miran.” 5. It was a term of the said agreement that the Contractor was to furnish the Plaintiff/Applicant with a Performance Bond equivalent to 10% of the contract price. Additionally, the Contractor was also required to procure an “Advance Payment Bond” to secure specified amounts to be paid to the Contractor so as to enable it to commence or continue the construction project. 6. In alignment with the above terms, the Respondent, on behalf of the Contractor and in favour of the Applicant, issued the following bonds with a validity period of 2nd July 2024: a. The Performance Bond Number PFB/NBI/2022/20073, equivalent to 10% of the Contract sum (Kshs 58,863,906/)=, and b. The Advance Payment Bond Number APB/NBI/2022/000042 in the sum of Kshs 117,727,812/=. 7. Upon the Contractor's default, the Plaintiff demanded payment under the Bonds, but the Defendant declined to honour the call, hence the instant Application. 8. Whereas the Plaintiff contends that the Bonds were unconditional and payable upon demand, the Defendant, on the other hand, argues that the Bonds were conditional and only payable upon proof of default by the Contractor and of actual loss suffered by the Plaintiff. The Defendant asserts that no such proof has been tendered as the Contractor denied liability and referred the dispute to arbitration, which is ongoing. 9. The Defendant further contends that the Bonds limited liability to damages sustained, which required quantification of actual loss before recall. The Plaintiff is accused of frustrating the loss adjustors’ assessment, rendering the claims indeterminate. 10. In the Defendant’s view, the Plaintiff’s application is premature and that its defence to the suit raises triable issues that can only be resolved at a full trial. Submissions 11. The Plaintiff filed written submissions dated 17th April 2025. It argued that the Bonds were unconditional, payable on demand, and independent of the underlying contract. In support of this argument, reliance was placed on Edward Owen Engineering Ltd v Barclays Bank International Ltd [1978] 1 All ER 976 and Sinohydro Corporation Ltd v GC Retail Ltd [2016] eKLR. 12. The Defendant filed submissions dated 14th May 2025. It argued that the Bonds were conditional and tied to proof of default and actual damages. Reliance was placed on County Government of Homa Bay v Oasis Group International (Civil Case No. 13 of 2015) and Pius Kimatya Langat v Co-operative Bank of Kenya Ltd [2017] eKLR for the principle that courts cannot rewrite contracts. Analysis Determination 13. Having considered the pleadings, affidavits, annexures, and submissions, the only issue that arises for determination is whether the Plaintiff has satisfied the threshold for the grant of summary judgment under Order 36 Rule 1 of the Civil Procedure Rules. 14. The law on summary judgment is now well settled. Order 36, Rule 1 of the Civil Procedure Rules 2010 permits the Court to enter judgment where the Defendant has no reasonable defence to the claim. The Order provides: - https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/16531/eng@2025-10-02 2

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15. “Summary judgment [Order 36, rule 1] 1. In all suits where a plaintiff seeks judgment for— a. a liquidated demand with or without interest; or b. ………….. 2. The application shall be supported by an affidavit either of the plaintiff or of some other person who can swear positively to the facts verifying the cause of action and any amount claimed. 3. Sufficient notice of the application shall be given to the defendant which notice shall in no case be less than seven days. 16. The principles governing entry of summary judgment were well stated in Continental Butchery Ltd v Samson Musila Nthiwa [1978] eKLR and reaffirmed in Industrial & Commercial Development Corporation v Daber Enterprises Ltd [2000] eKLR. 17. In Dominion Farms Ltd v Dimond Shield International [2014] KECA 179 (KLR), the Court of Appeal, citing the case of Industrial & Commercial Development Corporation v Daber Enterprises Limited, stated as follows on the applicable principles: “ The principles which guide our courts on applications for summary judgment are well settled. It was stated by this court in Industrial & Commercial Development Corporation v Daber Enterprises Limited [2000] 1 E A 75 that the purpose of proceedings in an application for summary judgment is to enable a plaintiff to obtain a quick judgment where there is plainly no defence to the claim. To justify summary judgement, the matter must be plain and obvious and where it is not plain and obvious a party to a civil litigation is not to be deprived of the right to have his case tried by a proper trial where, if necessary, there has been discovery and oral evidence subjected to cross-examination.” 18. In the present case, the conclusion on whether or not to allow the application and enter summary judgment in favour of the Applicant largely turns on whether the Bonds issued by the Defendant were conditional or unconditional, and whether the conditions for enforcement have been met. 19. The Plaintiff’s position is that the Performance Bond and Advance Payment Bond were demand guarantees, payable unconditionally upon invocation by the beneficiary. The Defendant, however, insists that the Bonds were conditional and tied to proof of default by the Contractor as well as quantification of actual loss suffered by the Plaintiff. 20. The Bonds in question have been annexed to the pleadings. The wording of a guarantee instrument is paramount in determining its nature. Courts have consistently distinguished between “on demand” bonds, which are autonomous and payable upon demand without proof of default, and “conditional” bonds, which require satisfaction of specified conditions precedent, often linked to the performance of the underlying contract. In County Government of Homa Bay v Oasis Group International & Ga Insurance Limited [2017] KEHC 5024 (KLR), Mrima J observed that: “ There is as well concurrence as to the existence of the two types of performance bonds; that is conditional bonds and unconditional or on-demand bonds. Unconditional bonds, as the name suggests, entitles the beneficiary or the Principal to call upon the surety for payment whether or not there has been any default under the main contract as long as the call is https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/16531/eng@2025-10-02 3

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not fraudulent. On the other hand, a conditional bond can only be recalled when specific conditions as specified in the bond are satisfied.” 21. A perusal of the Performance Bond (No. PFB/NBI/2022/20073) and the Advance Payment Bond (No. APB/NBI/2022/000042) reveals that while the instruments reference the underlying construction contract, they also include terms that appear to limit liability to actual loss sustained and make reference to the Contractor’s performance. This language prima facie suggests that the Bonds may not be purely unconditional demand guarantees. 22. The Plaintiff recalled the Bonds on the basis of alleged default by the Contractor. However, the Contractor denied default and invoked arbitration, which is still pending. Given these facts, it cannot be said that the conditions precedent for enforcing the Bonds have been met. Liability is disputed, arbitration is pending, and actual loss remains unquantified. 23. This position is reinforced by the Defendant’s contention that liability under the Bonds was subject to assessment by loss adjustors, a process allegedly frustrated by the Plaintiff. Whether such frustration occurred, and whether the Bonds required proof of actual loss, are factual matters that cannot be determined conclusively at the interlocutory stage. 24. On the second issue, whether the conditions for enforcement have been met, the Plaintiff asserts that a demand was duly made following the Contractor’s default. The Defendant disputes that default has been established, citing the ongoing arbitration between the Plaintiff and the Contractor. In this regard, the Court is alive to the fact that the validity of the call on the Bonds largely depends on the question of breach of the underlying contract, an issue which is, in the view of the Court, properly reserved for determination in arbitration or at a full trial, as the case may be. 25. On whether the Defendant has admitted liability, I find no unequivocal admission. The Defendant’s correspondence and pleadings consistently dispute the unconditionality of the Bonds and the Plaintiff’s entitlement to payment. For purposes of summary judgment, an admission must be plain, clear, and unequivocal. See the case of Choitram & another v Nazari [1984] KECA 47 (KLR), where the Court emphasized that: “ Admissions have to be plain and obvious, as plain as a pikestaff and clearly readable because they may result in judgment being entered. They must be obvious on the face of them without requiring a magnifying glass to ascertain their meaning. Much depends upon the language used. The admissions must leave no room for doubt that the parties passed out of the stage of negotiations onto a definite contract. It matters not if the situation is arguable, even if there is a substantial argument, it is an ingredient of jurisprudence, provided that a plain and obvious case is established upon admissions by analysis. Indeed, there is no other way, and analysis is unavoidable to determine whether admission of fact has been made either on the pleadings or otherwise to give such judgment as upon such admissions any party may be entitled to without waiting for the determination of any other question between the parties. In considering the matter, the judge must neither become disinclined nor lose himself in the jungle of words even when faced with a plaint such as the one in this case. To analyse pleadings, to read correspondence and to apply the relevant law is a normal function performed by judges which has become established routine in the courts. We must say firmly that if a judge does not do so, or refuses to do so, he fails to give effect to the provisions of the established law by which a legal right is enforced. If he allows or refuses an application after having done so that is another matter. In a case under order XII rule 6 he has then exercised his discretion for the order he makes falls within the court’s discretion. The only question then would be whether the judge exercised his discretion properly either https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/16531/eng@2025-10-02 4

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way. If upon a purposive interpretation of either clearly written or clearly implied, or both, admissions of fact the case is plain and obvious there is no room for discretion to let the matter go to trial for then nothing is to be gained by having a trial. The court may not exercise its discretion in a manner which renders nugatory an express provision of the law.” 26. As pointed out in the preceding paragraphs in the Ruling, there is no admission in this case that can be said to be “plain, clear, and unequivocal” as to entitle the Plaintiff to a summary judgment. 27. The upshot is that the Defendant has raised genuine triable issues, namely: the conditional nature of the Bonds; whether default has occurred; whether damages have been sustained and quantified; and whether liability exists in light of the pending arbitration. These are not frivolous defences but substantial issues requiring ventilation at trial. It would be unjust to summarily shut out the Defendant. Disposition 28. For the foregoing reasons, I find that the Plaintiff’s Application dated 11th October 2024 is without merit. The same is hereby dismissed with costs to the Defendant. 29. It is so ordered. SIGNED, DATED, AND DELIVERED IN VIRTUAL COURT THIS 2ND OCTOBER 2025 ADO MOSES JUDGE In the presence of: C/A – Moses Gachucha………….……….. for the Plaintiff/Applicant N/A...………….…..... for the Defendant/Respondent https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/16531/eng@2025-10-02 5

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