Magnate Ventures Limited v Credit Bank Plc

5. On 6.10.2021, the plaintiff called on the two performance bonds upon learning of Hebei’s nonperformance of the contract. It delivered the letters calling for the payment of the performance bonds at the defendant’s offices at Mercantile House, Koinange street on 7.10.2021. 6. The plaintiff contended that the defendant failed to credit its accounts and / or communicate any reasonable justification for non-payment. 7. On 15.10.2021, Hebei filed HCCC E866 of 2021 before this court seeking to restrain the plaintiff from making a call on the bonds. 8. Through a plaint dated 25.2.2022, the plaintiff filed this suit claiming breach of contract, fraud, trust and fiduciary obligations. 9. The plaintiff sought entry of judgment against the defendant for: a. The sum of Kshs. 62,263,936.00/- plus interest thereon at court rates from 7.10.2021 until payment in full. b. The sum of USD 474,634.00 plus interest thereon at court rates from 7.10.2021 until payment in full. c. General damages for fraud. d. General damages for breach of contract. e. General damages for breach of trust and/ or breach of fiduciary obligations. f. Exemplary damages as a result of the defendant’s fraud, fraudulent conspiracy and wilful misconduct. g. Costs of the suit and interest thereon. Defence 10. The defendant filed its statement of defence dated 1.4.2022 denying the claim. It contended that the call up for payment of the performance bonds was marred by fraud, misrepresentation, suppression of material facts, dishonesty, and malice. 11. The defendant asserted that having been served with the court order restraining them from issuing the performance bonds, it could not have issued them as that would amount to contempt of court. 12. The defendant also was firm that it was a party to the suit by Hebei. Ruling dated 24.3.2023 13. Through a ruling dated 24.3.2023, the court held that: “ 19. ...the defendant denied the contract between the plaintiff and Hebei as well as issuing the ‘on demand bonds. ...The on demand bonds themselves were produced as Exhibit ‘A’ to the supporting affidavit. Although the defendant had denied the terms of the said ‘on demand’ bonds, the terms set out therein turned out to be as pleaded by the plaintiff in the plaint. Therefore, denial of existence of the contract and the ‘on demand’ bonds were a non issue.” 20. The only reason advanced by the defendant for not honoring the ‘on demand’ bonds was that it had been served with an order restraining the calling up of the https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/7143/eng@2026-04-16 2

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‘on demand’ bonds. That suit was HCCC COMM No. E866 of 2021 Hebei Tuofa Telecommunication and Electric Equipment Manufacturing Company Ltd vs. Magnate Ventures Ltd. 14. 21. The subject order and pleadings in the said suit were produced by the plaintiff in the supporting affidavit. The order was issued on 18/10/2021. It restrained the plaintiff from calling up the ‘on demand’ bonds pending the inter-partes hearing of the application. A subsequent order made on 7/12/2021 extended that order for a period of 45 days only and the court indicated that after the expiry of that period, the said order would automatically lapse. 22. ...by the time the order of 18/10/2021 was being made, the plaintiff had already called on the ‘on demand’ bonds on 7/10/2021 and the order did not act retrospectively. Secondly, that order expired 45 days after 7/12/2021, that is, by 22/1/2022. The present suit was filed on 25/2/2022 way after the subject order had expired. In this regard, the existence of that order cannot be an issue either for trial or a defence to the demand on the performance bonds. 23. The other issue that the defendant raised was alleged fraud. There were no particulars of facts that were pleaded for the alleged fraud that were pleaded. That of course is contrary to the provisions of Order 2 Rule 10(1)(a) and (b) of the Civil Procedure Rules. Particulars of the alleged fraud failing, the allegation does not lie. It was upon the defendant to clearly set out the facts relied on to show that there was existence of fraud. 24. Having considered what the defendant raised as issues, it is imperative to now consider the nature of the claim before court. The plaintiff’s claim is two-fold, a liquidated claim based on the ‘on demand’ bonds and a claim for general damages for fraud, breach of contract, trust/fiduciary duty and exemplary damages. Of course, the claims for damages must be proved through trial and not summarily.” The court allowed the plaintiff’s application for summary judgment in terms of prayers 4 and 5 of the notice of motion dated 12/4/2022. Partial decree issued on 6.4.2023 15. Through a partial decree issued on 6.4.2023, judgment was entered for the plaintiff against the defendant for Kshs. 62,263,936.00/- and USD 474,634.00/- plus interest thereon at court rates from 7.10.2021 until payment in full. 16. At the trial, the plaintiff’s witnesses acknowledged that the defendant has already settled the performance bonds and that the plaintiff seeks reliefs c-g. Evidence 17. The trial commenced on 6.3.2025. The plaintiff called its legal manager, Maureen Wakahia as PW1. She adopted her witness statement dated 25.2.2022, reflecting the facts of the case as of that date, as her evidence in chief. 18. Ms. Wakahia stated that the performance bonds have been paid up by the defendant and that the plaintiff’s claim is for general damages. She stated that the bonds were paid after the ruling of 24.3.2023 by Hon. Mabeya J. and that auctioneers had to be sent for the payments to be made. https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/7143/eng@2026-04-16 3

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19. At cross examination, Ms. Wakahia admitted that the plaintiff was not an account holder with the defendant bank. She confirmed that there was a temporary injunction issued in HCCC E866 of 2021 Hebei Tuofa Telecommunication and Electric Equipment Manufacturing Co. Ltd v Magnate Ventures Ltd. 20. Ms. Wakahia stated that the injunction was issued after the plaintiff had called up the performance bonds. 21. Upon re-examination, Ms. Wakahia stated that there arose a relationship as well as an obligation. 22. The plaintiff called its managing director, Mr. Stanley Kinyanjui as PW2. He adopted his witness statement dated 25.2.2022 as his evidence in chief. He stated that he is the majority shareholder, managing director and chief executive officer of the plaintiff. 23. Mr. Kinyanjui stated that the performance bonds had no conditions attached. He also stated that on 15.10.2021 Hebei obtained ex parte order stopping the payments. He learnt about the order on 16.10.2021. He stated that the order was to stop the demand, but the demand had already been made. 24. Mr. Kinyanjui explained that Hebei used the demands for payment of the performance bonds to go to court while the defendant bank used the court order as justification for non-payment. He claimed that this shows that the defendant did not intend to pay the performance bonds. 25. Mr. Kinyanjui stated that the defendant paid the performance bonds on 20.4.2023. 26. Mr. Kinyanjui was firm that the defendant bank owed the plaintiff a fiduciary duty and obligation to pay the performance bonds on first demand. He indicated that the bank’s actions show that it did not intend to pay. 27. Mr. Kinyanjui explained that the guarantee issued by the defendant was backed by security of cash or cash equivalent. That therefore, the defendant was enjoying the resources until 20.4.2023. He contended that the defendant’s intention was to benefit from the bonds to the plaintiff’s detriment. 28. Mr. Kinyanjui indicated that the plaintiff did not inform Hebei that it had called up the performance bonds. That the defendant shared its letters with Hebei which thereafter filed its claim before the court. 29. Upon cross examination, Mr. Kinyanjui maintained that the bonds had no conditions attached. He also maintained that the defendant had no right to object to payment of the bonds. He indicated that this suit was filed about four and a half months after the default in payment of the bonds. 30. Mr. Kinyanjui was firm that the defendant owed the plaintiff a fiduciary duty based on the guarantee. He confirmed that he has not reported the bank for banking fraud. 31. Mr. Kinyanjui stated that the plaintiff was not obligated to inform Hebei before calling up the bonds. He indicated that following the suit that was instituted by Hebei, they were supposed to proceed for arbitration, but Hebei abandoned the arbitration. 32. In re-examination, Mr. Kinyanjui clarified that in Hebei’s case, the defendant’s name was struck out after amendment of the plaint. He further mentioned that the defendant did not offer to pay the bonds before this suit was filed. 33. The defendant called Mr. Francis Ngaruiya, its head of legal as DW1. He adopted his witness statement dated 20.7.2023 as his evidence in chief. He produced the defendant’s bundle of documents dated 20.7.2023, marked as DExh 1, 2 and 3. https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/7143/eng@2026-04-16 4

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34. Upon cross-examination, Mr. Ngaruiya stated that the defendant did not pay the performance bonds because it was sued by Hebei and the court order stopped the calling up of the bonds. 35. Mr. Nyaruiya admitted that the defendant did not participate in Hebei’s suit. He stated that honouring a bond is calling up of a bond. 36. Mr. Ngaruiya disclosed that Hebei’s agent, Adrian Investment’s account was to be debited. When asked whether the defendant put the interests of Hebei and Adrian Investment before the plaintiff’s he mentioned that the bonds were not a direct investment and that Adrian Investment’s account did not have the money and that the account was to be overdrawn. Submissions 37. The plaintiff filed primary and supplementary written submissions dated 15.8.2025 and 23.9.2025. 38. The plaintiff submitted that the defendant engaged in fraud, fraudulent conspiracy and willful misconduct against it. It submitted that this was by refusing to pay the performance bonds after it issued the demands. It also faulted the defendant for forwarding the copies of the demand letters to Hebei which used the demand letters to file suit and obtain an injunction. The plaintiff argued that forwarding the letters was breach of fiduciary obligations that bound Credit Bank to place its interests first. The defendant was obligated to pay upon the first written demand and without any reference to any other party, including Hebei. 39. The plaintiff highlighted that as per paragraphs 21 and 21 of the ruling of 24.3.2023, the court observed that the court orders of 18.10.2021 were not directed to the defendant but only barred the plaintiff from calling up the performance bonds. However, the plaintiff had already called up the payment of the performance bonds before the injunctive orders were issued. 40. The plaintiff also submitted that the defendant engaged in fraud by allowed Hebei to interfere with its decision-making process. 41. The plaintiff faulted the defendant for relying on the court order obtained by Hebei to refuse to pay the performance bonds. It highlighted that the defendant did not participate in Hebei’s case. It still did not pay the performance bonds after the injunctive orders expired on 22.1.2022, prompting the plaintiff to file this suit. 42. The plaintiff highlighted that the defendant filed defence which was held to raise no triable issues with respect to its claim for breach of contract. That despite the court’s ruling of 24.3.2023, the defendant refused to pay and it was constrained to engage auctioneers to execute the partial decree and it was only then that the defendant paid through its undisclosed agent, Aidrian Investment. 43. The plaintiff submitted that from the date the demands were issued the defendant continued to hold and trade with money meant to benefit it. It therefore contended that the defendant continued to derive profits from the money held. It argued that the fact that payment was done by Aidrian Investment confirms that the on-demand bonds were backed with cash. 44. The plaintiff contended that the defendant’s actions were meant to buy more time for it to continue holding the money owed to it. It faulted the defendant for exacerbating the already dire situation. The plaintiff stated that it was constrained to engage other parties after Hebei’s breach. It thus faced economic hardship as it did so without the money due to it under the performance bonds. 45. The plaintiff also highlighted that the defendant exhibited fraudulent conduct and wilful misconduct by failing to reveal its relationship with Aidrian Investment, only mentioning it in cross-examination. https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/7143/eng@2026-04-16 5

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That it ought to have disclosed this. That it was fraudulent for the defendant to state that it was bound to protect Aidrian Investment before the plaintiff’s interests. 46. The plaintiff submitted that it is entitled to punitive/exemplary damages on grounds that the defendant’s actions of the were fraudulent and meant to earn an unfair advantage against it. It submitted that exemplary damages should be awarded in this case to punish and deter the defendant for its actions which it described as egregious and unconscionable but also calculated to earn it profits. 47. The plaintiff relied on Nation Media Group Limited & another v Wambui & another (Civil Appeal 270 of 2018) [2023] KECA 89 (KLR) and Bank of Baroda (Kenya) Limited v Timwood Products Ltd [2008] eKLR where the courts held that exemplary damages should be awarded where the conduct of a defendant was calculated to earn a profit. 48. The plaintiff relied on the decision of the Supreme Court of Canada in Whiten v Pilot Insurance CO. 2002 1 S.C.R for the proposition that where a defendant has not only breached its contract with a plaintiff but also engaged in a conduct that amounts to a separate actionable wrong, a Court must not hesitate to award exemplary damages in order to punish and deter such actions. 49. The plaintiff relied on the House of Lords decision in Her Majesty's Attorney General v Blake and Another [2000] UKHL 45 to assert that the breach of contract could justify an order for disgorgement of profits against the party in breach if it derived some benefit from the breach. That in the circumstances, since the defendant engaged in wilful misconduct when it breached its contract which is not rebutted and earned profits because of the prolonged breach, an order for disgorgement of profits is merited. 50. The plaintiff also relied on the Supreme Court of Canada’s decision in Strother v 3464920 Canada Inc., 2007 SCC 24 (CanLII), [2007] 2 SCR 177 to the effect that even where a plaintiff has not proven any loss occasioned by a breach of fiduciary obligation by a defendant, it was still necessary to disgorge profits to deter breach of fiduciary obligations especially when such breach occurs due to conflict of interests. 51. The plaintiff cited Supreme Court of New York in Howard v Pooler, AD3d, 2020 NY Slip Op 03347 [4th Dept June 12, 2020] where it was held that it was not necessary for a Plaintiff to demonstrate any loss suffered because of breach of a fiduciary obligation by a defendant. It further relied on the English case of Rukhadze and others v Recovery Partners GP Ltd and another ([2025] UKSC 10) and Family Bank Limited v Panda Co-operative Savings and Credit Society [2022] eKLR. 52. As regards the principles applicable to performance bonds, the plaintiff relied on Mennonite Board In Eastern Africa v Mayfair Insurance Company Limited & another (Commercial Case E452 of 2022), Kenindia Assurance Company Limied v First National Finance Bank Limited [2008] eKLR, Kenindia Assurance Company Limied v First National Finance Bank Limited [2008] eKLR and Sinohydro Corporation Limited v GC Retail Limited & another [2016] eKLR. 53. The plaintiff argued that since there is no contention about the existence of the contract between it and the defendant as well as the breach of contract by the defendant, it is entitled to general damages for breach of contract. 54. The plaintiff contended that the defendant breached its fiduciary obligations, uncontroverted by the defendant which failed to respond to allegations thereof in its summary judgment application. 55. The plaintiff postulated that under the performance bonds, the defendant held the bonds in trust for it as the beneficiary with a clear obligation to pay immediately on demand. https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/7143/eng@2026-04-16 6

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56. The plaintiff relied on Mukuha v Waweru Munyi Jackson t/a Waweru Munyi & Co Advocates (Civil Case E951 of 2021) [2022] KEHC 16682 (KLR) and the Supreme Court of Canada’s decision in Strother v 3464920 Canada Inc., 2007 SCC 24 (CanLII), [2007] 2 SCR 177 on fiduciary relationship and responsibilities. 57. The plaintiff relied on Arthi Highway Developers Limited v West End Butchery Limited & 6 others [2015] eKLR on fraud. 58. The plaintiff submitted that the plaintiff’s director was authorized to file the suit and that the issue of lack of authorization was not raised by the defendant in its pleadings. Therefore, it claimed that this was not an issue before the court. 59. The defendant filed written submissions dated 10.9.2025. It argued that the plaintiff has not proved fraud to the required standard. It also submitted that the plaintiff has not specifically pleaded fraud, conspiracy and wilful default. It contended that allegations are mere suspicions and speculations. It relied on Christopher Ndaru Kagina v Esther Mbandi Kagina & another [2016] KEHC 3192 (KLR) and Jennifer Nyambura Kamau v Humphrey Nandi Civil Appeal 342 of 2010 [2013] eKLR. 60. The defendant submitted that it did not owe the plaintiff any fiduciary duties. It argued that the relationship it had with the plaintiff was contractual and regulated only by the terms of the on-demand performance bond and nothing external to the terms contained in the bond. It added that there was no further obligation on it beyond the terms and conditions contained in the bond. 61. The defendant relied on Kenindia Assurance Company Limited v First National Finance Bank Limited, Civil Appeal No. 328 of 2002 and Edward Owen Engineering Ltd v Barclays Bank International Ltd (1978) 1 ALL ER. 976. 62. The defendant asserted that the plaintiff has not placed any evidence before the court to enable it award exemplary damages for fraud. 63. The defendant relied on Family Bank Limited v Panda Co-operative Savings and Credit Society [2022] KEHC 1796 (KLR) on disgorgement, to assert that the plaintiff has not proven that the defendant was its trustee with respect to the impugned performance bond. It asserted that the claim for disgorgement of profits applies where there is a fiduciary duty. It added that courts have not recognized restitutionary damages for breach of contract. 64. The defendant relied on Kenya Tourist Development Corporation v Sundowner Lodge Limited [2018] KECA 312 (KLR), to submit that general damages for breach of contract is not tenable. 65. The defendant urged the court to award costs of the suit and interest based on its discretion. It also urged the court to dismiss claims c-g. Analysis and Determination 66. The issues for determination are whether the plaintiff has proved its claims for fraud, breach of trust/ fiduciary obligations and whether it is entitled to reliefs c-g. 67. The standard of proof in a civil claim is on a balance of probabilities. The burden of proof is upon the claimant. Section 107(1) of the Evidence Act provides that: “ (1) Whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts must prove that those facts exist.” https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/7143/eng@2026-04-16 7

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Fraud 68. Fraud must be specifically pleaded and strictly proved. The standard of proof is higher than on a balance of probabilities as required in civil cases but lower than beyond reasonable doubt as required in criminal cases. Agingu v Owiti & 2 others [2025] KECA 188 (KLR) 69. The particulars of fraud pleaded by the plaintiff, rephrased and condensed, are: a. Failing to honour the demands for payment of the “on demand performance bonds when there are no reasonable grounds and/ or a legitimate basis for countermanding the demands. b. Fraudulently obtaining and colluding with Hebei to release copies of demands to the defendant for payment of the performance bonds with a view to enabling Hebei to obtain court orders to its detriment. c. Allowing Hebei to interfere with the defendant’s decision-making process. d. Being an accessory to false misrepresentation to this court by Hebei to unlawfully obtain court orders. e. Otherwise frustrating the payment of to the plaintiff of the value of the bonds. f. Unjustly enriching itself by converting the monies due and payable to the plaintiff to its own use. 70. Fraud consists of some deceitful practice or willful device, resorted to with intent to deprive another of his right, or in some manner to do him an injury. As distinguished from negligence, it is always positive, intentional. Black’s Law Dictionary, 2nd Edition 71. From the particulars and from the testimony of Mr. Kinyanjui, the plaintiff’s claim for fraud is based on the defendant’s collision with Hebei to obtain a court order to restrain the calling up of the performance bonds and the refusal to pay the bonds based on the court order obtained by Hebei. 72. At the trial and in its submissions, the defendant maintained that it could not pay the performance bonds based on the court order of 18.10.2021 which restrained the calling up of the performance bonds. 73. The plaintiff faulted the defendant for forwarding the demands dated 6.10.2021 for payment of the performance bonds. It claimed that the defendant colluded with Hebei to release copies of demands to the defendant for payment of the performance bonds with a view to enabling Hebei to obtain court orders to its detriment. 74. Collusion is an agreement between two or more persons to defraud a person of his rights by the forms of law or to obtain an object forbidden by law. Black's Law Dictionary, 4th Edition 75. It is often inferred from the conduct of the parties, particularly where their actions are inconsistent with bona fide dealing. 76. Collusion is rarely proved by direct evidence. The court is therefore entitled to infer its existence from the relationship between the parties, nature of acts complained of, their sequence and the relationship between those events, the timing of the transactions, the absence of commercial rationale, and any conduct suggesting a shared improper purpose. 77. Where a party acts in a manner that is inconsistent with honest commercial practice, the court may properly infer an intention to deceive. https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/7143/eng@2026-04-16 8

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78. In the present case, the evidence supports the plaintiff’s claim that the defendant released the demands for payment of the performance bonds to Hebei after they were issued. Hebei then used the copies of the demands to obtain the orders in HCCC E866 of 2021. Thereafter, the defendant cited the court orders as its reason for not paying the performance bonds. 79. The plaintiff produced copies of the demands for payment of the performance bonds. The plaintiff also produced copies of the pleadings in HCCC E866 of 2021. The demands dated 6.10.2021 were annexed to the affidavit sworn by Hebei’s in support of its application for temporary injunctive orders. They were mentioned at paragraph 8 of the said affidavit. 80. As earlier noted, at paragraph 13 above, in the ruling of 24.3.2023, the court found that the only reason advanced by the defendant for not honouring the ‘on demand’ bonds was that it had been served with an order issued on 18.10.2021 restraining the calling up of the ‘on demand’ bonds in HCCC COMM No. E866 of 2021. 81. The court examined that the subject order of 18.10.2021 restrained the plaintiff from calling up the ‘on demand’ bonds pending the inter-partes hearing of the application. That a subsequent order made on 7.12.2021 extended that order for a period of 45 days only and the court indicated that after the expiry of that period, the said order would automatically lapse. 82. The court found that by the time the order of 18.10.2021 was issued, the plaintiff had already called on the ‘on demand’ bonds on 7.10.2021 and the order did not act retrospectively. 83. It also found that the subject order expired 45 days after 7.12.2021, that is, by 22.1.2022. 84. The court concluded that the existence of that order could not be a defence to the demand on the performance bonds. Therefore, this finding defeats the defendant’s argument that the payment of the performance bonds was barred by the order which restrained the calling up of the performance bonds. 85. It was a legal requirement that the defendant paid the on-demand performance bonds once the plaintiff called them up through issuing the demands. 86. The sequence of events after the plaintiff called up the payment of the on-demand performance bonds suggest a coordinated effort between the defendant and Hebei to avoid payment of the performance bonds by the defendant after they had been called up by the Plaintiff. 87. The court finds that there was collusion between the defendant and Hebei to avoid payment of the performance bonds. Internal arrangement 88. At the trial, the defendants witness revealed that the performance bonds were not a direct investment; that the funds meant to pay the performance bonds were to be debited from Hebei’s agent, Adrian Investment’s account and that that Adrian Investment’s account did not have the money and that the account was to be overdrawn. 89. The defendant sought to justify the failure to honour the performance bonds on this basis. 90. The payment of a performance bond is an independent obligation governed by the terms under the performance bond. 91. Thus, the defendant’s reliance on the internal arrangements cannot be invoked to excuse the nonpayment after the issuance of valid demands for payment of the performance bonds. Its reliance on https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/7143/eng@2026-04-16 9

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the internal arrangement considered alongside the finding of collusion, further buttresses the court’s conclusion that there was a wider scheme to avoid payment. Breach of trust and ffduciary obligations 92. The plaintiff pleaded that the defendant breached trust and fiduciary obligations to it by: a. Placing its own interests and those of Hebei ahead of the plaintiff’s. b. Allowing itself to be in conflict of interest by retaining the monies due upon the “on demand” bonds and applying monies for personal or commercial gain. c. Failing to give such care and concern to its banking responsibilities and functions. 93. Mr. Kinyanjui admitted that the plaintiff is not a customer of the bank. 94. In common law, a bank's liability to a non-customer primarily arises when the bank possesses reasonable grounds to suspect fraud by its customer but fails to make necessary inquiries. Equity Bank (Kenya) Limited v Don Ogalloh Riaro & another [2019] KECA 317 (KLR) It may also arise where the loss suffered by the third party was foreseeable. General damages for fraud 95. The court has found the defendant culpable for fraud. 96. The plaintiff prayed for general damages at the rate of 10% of the combined value of the two bonds (Kshs. 123,491,722) amounting to Kshs. 12,349,172. 97. However, damages for fraud are meant to restore the plaintiff to the position it had been but for the defendant’s fraudulent actions. In the circumstances, the plaintiff was awarded special damages for breach of contract which was sufficient to compensate it for the loss incurred due to the defendant’s fraudulent actions. Therefore, the court declines the claim for general damages for fraud. Exemplary damages on account of fraud, fraudulent conspiracy and wilful misconduct. 98. Exemplary damages are not compensatory and are meant to punish the defendant and deter similar conduct. 99. The court may award exemplary damages in appropriate circumstances where the defendant’s conduct is so egregious to warrant punishment and deterrence. Matumbi v Tanui [2026] KECA 253 (KLR) 100. In the present case, the court has found that the defendant’s actions were calculated to defeat the plaintiff’s rights to payment of the performance bonds immediately upon issuance of the demands. 101. The integrity of performance bonds in commercial transactions depends on the certainty that they will be honoured according to their terms. 102. The defendant’s conduct in the circumstances of this case cannot be condoned by the court. It is conduct that is egregious. In the circumstances, the court finds that the award of exemplary damages for fraud is necessary to punish and deter the fraudulent actions. 103. The plaintiff submitted that the defendant’s actions were calculated to earn monetary benefit at its expense. It also submitted that the exemplary damages be equated to the profits to be disgorged from the defendant calculated as Kshs. 40,340,629. This is using a rate of 14% per annum multiplied by the combined value of the binds (Kshs. 123,491,722) and the number of years between the issuance of the bonds and the day of execution (2 years 4 months). https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/7143/eng@2026-04-16 10

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104. The defendant however argued that exemplary damages do not apply in this case. 105. In its supplementary submissions, the plaintiff argued that an order for disgorgement would still stand on its own under the omnibus prayer for any other relief that the court may deem fit to grant. 106. The defendant contended that disgorgement of profits cannot be awarded because they are restitutionary and Kenyan courts have not recognized restitutionary damages for breach of contract. It cited Family Bank Limited v Panda Co-operative Savings and Credit Society [2022] KEHC 1796 (KLR) for the proposition that disgorgement is a remedy that was available in a breach of trust relationship. It thus argued that the disgorgement of profits cannot be granted as the plaintiff has not established a trust relationship with it. 107. The defendant added that to award disgorgement of profits would lead to unjust enrichment of the plaintiff. 108. The court is inclined to find that the plaintiff is not entitled to disgorgement of profits. As earlier noted, the exemplary damages are punitive and not restitutionary. Disgorgement of profits is restitutionary and is not appropriate to award in addition to the special damages awarded for breach of contract and interest thereon. 109. The circumstances of the case show that the defendant intended to derive a benefit from the delay in payment of the performance bonds as it did not have access to the money or security necessary to pay them immediately. 110. The defendant acted in bad faith by failing to disclose this to the plaintiff prior to the issuance of the performance bonds. 111. By delaying the payment, the defendant exposed the plaintiff to unnecessary risk. 112. The court has considered the circumstances of the case, the sum of the performance bonds, the period of the delay in payment. 113. In the court’s view, exemplary damages of Kshs. 1,500,000/- is appropriate in the circumstances. General damages for breach of trust and/ or breach of ffduciary obligations 114. Having found no merit in the claim for breach of trust and/ or breach of fiduciary obligations, the claims for general damages for each fail. General damages for breach of contract 115. Generally, there can be no damages for breach of contract. Except, inter alia, when the conduct of the respondent is shown to be oppressive, high handed, outrageous, insolent or vindictive. Fit- Tight FASteners Limited v Akiba Bank Limited [2026] KECA 139 (KLR) 116. Following the positive finding on the claim for exemplary damages for fraud, the court dismisses the claim for general damages for breach of contract. Costs of the suit and interest thereon 117. Due to the principle that costs follow the event, since the plaintiff claim for breach of contract and fraud were successful, I find that it is entitled to the costs of the suit and interest thereon. https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/7143/eng@2026-04-16 11

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Conclusion 118. 119. In conclusion, judgment is entered for the plaintiff against the defendant for: 1. Exemplary damages of Kshs. 1,500,000/- for fraud. 2. Costs and interest of the suit. The other claims fail. DATED, SIGNED AND DELIVERED AT NAIROBI THROUGH MICROSOFT TEAMS ONLINE APPLICATION THIS 16TH DAY OF APRIL, 2026 ------------F. GIKONYO M JUDGE In the presence of: Wilfred Nderitu S.C/Waigwa for Plaintiff Ms. Kipkesei for Respondent CA- Ivan/Aggrey https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/7143/eng@2026-04-16 12

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