Introduction
1. The Plaintiff, Autofine Limited, a company engaged primarily in the provision of mechanical and related services, filed an Amended Plaint dated 12th January 2022 seeking, inter alia, expectation damages for loss of profits amounting to Kshs. 3,114,767,989/-, goodwill, and other consequential losses allegedly arising from the 1st Defendant’s failure to disburse a credit facility and the 2nd Defendant’s alleged negligence in its supervisory role over the 1st Defendant.
2. The Plaintiff’s case is that it sought credit facilities from the 1st Defendant to support its business operations. Negotiations culminated in a Letter of Offer dated 19th November 2018 and a subsequent Further Letter of Offer dated 12th March 2019.
3. The Plaintiff alleges that the 1st Defendant, through its manager, Mr. Charles Mwangi, induced the Plaintiff to reject a KES 70,000,000 facility from Mayfair Bank by promising a superior offer.
4. It was also the Plaintiff's case that the 1st Defendant sneaked an onerous condition (Clause 18(c)) into the offer letter, requiring a letter from Equity Bank that the 1st Defendant allegedly knew was impossible to obtain.
5. The Plaintiff contended that despite paying Kshs. 881,811 to the 1st Defendant in fees and registering a legal charge on its property, the 1st Defendant refused to draw down the facility, leading to the collapse of the Plaintiff's business.
6. As against the 2nd Defendant, the Plaintiff alleged that the 2nd Defendant was negligent in its statutory duty to supervise the 1st Defendant, thereby allowing these alleged misdeeds to occur.
7. The Plaintiff therefore prayed for, among others, the following reliefs against the 1st Defendant:
i. Refund of Kshs. 811,881, being fees paid to the 1st Defendant for loan negotiation and loan transactional charges.
ii. Damages for loss of future profits, quantified at Kshs 3,114,767,989.
8. The Defendants filed their respective defences and denied the Plaintiff’s claim.
The 1st Defendant’s Case
9. The 1st Defendant, Eco Bank Kenya Limited, filed their amended statement of defence dated 1st July 2024, and denied that it entered into any binding or unconditional contract obligating it to disburse funds to the Plaintiff. It averred that the Letters of Offer dated 19th November 2018 and 12th March 2019 were expressly subject to fulfilment of stipulated conditions precedent, which were never satisfied by the Plaintiff.
10. According to the 1st Defendant, the proposed invoice discounting facility was conditional upon, inter alia, execution and perfection of security documents, and procurement of third-party confirmations, including written confirmation from Equity Bank excluding certain receivables from its security arrangements. It avers that the Plaintiff failed to comply with these requirements.
11. The 1st Defendant denied breaching the Letters of Offer and contends that no obligation to disburse could arise in the absence of fulfilment of the conditions precedent. It further pleads that no waiver of any condition was granted, whether expressly or impliedly, and that any variation or waiver was contractually required to be in writing.
12. The 1st Defendant pleaded that there was no misrepresentation, concealment, or bad faith. It asserted that the Plaintiff was fully aware of the terms of the facility, having considered and approved them through its Board of Directors prior to execution.
13. In respect of fees paid by the Plaintiff, the 1st Defendant pleads that such fees were contractually stipulated as non-refundable, irrespective of whether the facility was drawn down, and that the Plaintiff paid the same voluntarily pursuant to the Letters of Offer.
14. The 1st Defendant denied liability for any alleged loss of business, goodwill, or future profits and pleads that the claimed losses are speculative, remote, not pleaded with particularity, and not recoverable in law. It further avers that no causal nexus exists between the alleged losses and its conduct.
15. The 1st Defendant denied that it owed or breached any fiduciary duty to the Plaintiff and avers that the relationship between the parties was purely contractual. It therefore prayed that the suit against it be dismissed with costs.
The 2nd Defendant’s Case
16. The 2nd Defendant, Central Bank of Kenya, filed their amended statement of defence dated 9th February 2022 and denied any liability, averring that it was at all material times a stranger to the contractual relationship between the Plaintiff and the 1st Defendant.
17. The 2nd Defendant pleaded that its mandate is derived from statute and is limited to regulation and supervision of banking institutions at a systemic and prudential level. It averred that its role does not extend to participation in, approval of, or oversight over individual commercial transactions or loan negotiations between banks and their customers.
18. The 2nd Defendant denied breaching any statutory duty, pleading that it duly discharged its mandate through the issuance of prudential and consumer protection guidelines and through risk-based supervision of licensed banks.
19. It was the 2nd Defendant’s further case that no complaint or report concerning the Plaintiff’s dealings with the 1st Defendant was ever lodged with it, and that in the absence of such notice, no basis arose for regulatory intervention.
20. The 2nd Defendant denied that any act or omission on its part caused or contributed to the Plaintiff’s alleged loss and avers that the Plaintiff’s claims are speculative, misconceived, and unsustainable in law.
21. According to the 2nd Defendant, it is neither a necessary nor a proper party to the dispute, and that no cause of action is disclosed against it.
22. The 2nd Defendant therefore prayed that the suit against it be dismissed with costs.
Hearing
23. The matter proceeded for hearing on various dates between 7 November 2024 and 26 May 2025, when parties called their respective witnesses.
Plaintiff’s Witnesses
24. The Plaintiff called two witnesses, namely Sancho Lule Kibutu (PW1), a Director of Autofine Limited, and Thomas Nduati Kinandu (PW2), the Managing Director and founder of the Company. Both witnesses adopted their respective written statements dated 26 March 2021 as their evidence in chief.
25. PW1 and PW2 testified that Autofine Limited had, for over two decades, grown into a reputable automotive service and repair company, employing over 200 employees and earning industry recognition, including being voted “best garage” for three consecutive years between 2015 and 2017. PW1 described the Company’s strong financial performance, noting average annual revenue growth of 30% between 2012 and 2017, and average net profit growth of 89% during the same period. They attributed this growth to strategic management, aggressive target setting, and careful cost control.
26. Both witnesses stated that the Company embarked on significant expansion between 2016 and 2017, including enlarging its workshop space and reallocating the service division to an independent facility. This expansion, though necessary to meet rising demand, strained the Company’s working capital, prompting the Board to resolve in 2017 that external financing should be sought.
27. To this end, in August 2018, the Company engaged one George Robert Mbugua as a financial consultant. Through him, the directors were introduced to Charles Mwangi, who presented himself as the Branch Manager of the 1st Defendant’s Westlands Branch. According to both PW1 and PW2, Mwangi assured the Company that it would easily obtain financing from the 1st Defendant due to his close relationship with the Bank’s Managing Director. At the time, the Plaintiff was sourcing financing from various institutions and made known to Mwangi its urgent financial needs.
28. PW2 testified that after analysing the Company’s financial documents, Mwangi initially offered a financing package of KShs. 90,000,000, comprising KShs. 30,000,000 to take over the Plaintiff’s existing loan with Equity Bank, and KShs. 60,000,000 as an invoice discounting facility. Relying on these assurances, the Plaintiff opened accounts with the 1st Defendant on 20 August 2018 and began channeling the bulk of its business transactions through these accounts in an attempt to expedite the loan approval process.
29. However, on 29 August 2018, the 1st Defendant altered the terms and informed the Plaintiff that it would only offer KShs. 60,000,000 as a revolving facility—removing the KShs. 30,000,000 intended for the Equity Bank loan takeover. Although surprised by this revision, the Plaintiff accepted the reduced facility due to the urgency of its financial situation. The Bank subsequently imposed further conditions, including requiring all insurance clients to channel payments through the 1st Defendant and demanding the release of the all asset debenture held by Equity Bank. Equity Bank refused to release that debenture, a fact communicated repeatedly to the 1st Defendant.
30. Despite these challenges, the Plaintiff continued to comply with all additional instructions imposed by the 1st Defendant. Around October 2018, Mayfair Bank offered the Plaintiff a facility of Kshs. 43,500,000, which both PW1 and PW2 testified would have injected crucial working capital and yielded a projected return of Kshs. 14,700,000 within the first year. However, Mwangi allegedly prevailed upon the Plaintiff to reject this offer, promising that the 1st Defendant would provide a superior package.
31. The negotiations eventually resulted in an offer letter dated 19 November 2018, providing for an invoice discounting facility of Kshs. 17,000,000, later amended to Kshs. 20,000,000 on 12 March 2019. The Plaintiff executed all requisite documents and also provided an alternative property (Title No. Nairobi/Block 113/42) after the 1st Defendant advised that the lease renewal issues affecting the primary property (L.R No. 209/80/4) would cause delays. The 1st Defendant registered a charge of KShs. 6,000,000 over that property and subsequently issued a revised facility amount of KShs. 6,000,000—representing only a fraction of the funds earlier promised.
32. PW2 testified that in early May 2019, the 1st Defendant requested invoices and other documents in preparation for draw down, which the Plaintiff provided. However, despite daily follow up and repeated assurances from Mwangi that the funds were about to be disbursed, the 1st Defendant failed, neglected, or refused to release the facility. After the Plaintiff escalated the matter to the Head of Credit, communication from the 1st Defendant ceased altogether. PW2 further stated that Mwangi, upon learning of the escalation, sent a message threatening to sabotage the Company’s efforts to obtain the facility.
33. Both witnesses testified that the Plaintiff had, throughout an eight month period, been induced to reject alternative financiers and had been strung along by the 1st Defendant’s repeated but unfulfilled assurances.
34. They stated that the failure to obtain financing during this prolonged period crippled the Company’s operations, causing loss of clients, loss of business opportunities, reputational damage, and ultimately the collapse of a once thriving enterprise employing over 200 people. They asserted that the 1st Defendant acted negligently, maliciously, and in breach of contractual and fiduciary obligations, resulting in severe financial loss to the Plaintiff
35. In cross-examination, PW1 confirmed that the Letters of Offer were subject to conditions precedent and that the Plaintiff did not obtain written confirmation from Equity Bank excluding the relevant receivables from its security arrangements. He further confirmed that no funds were ever disbursed to the Plaintiff.
36. PW1 also confirmed that the Plaintiff did not lodge any formal complaint with the 2nd Defendant concerning the conduct of the 1st Defendant.
37. PW2, in cross-examination, confirmed that he did not prepare or audit the financial projections relied upon by the Plaintiff and that the projections were based on management assumptions. He further confirmed that the Plaintiff continued to engage other financial institutions during the period in question.
1st Defendant’s Witness
38. The 1st Defendant called Gladys Vundi, who testified as DW1. She stated that she is the Branch Manager of the 1st Defendant at Fortis Branch and had, upon reading the Bank’s records, become aware of the facts surrounding the dispute.
39. DW1 testified that the Plaintiff was at all material times a customer of the 1st Defendant. She referred to a board resolution dated 20 August 2018, by which the Plaintiff voluntarily resolved to open accounts with the Bank. Pursuant to that resolution, the Plaintiff opened account numbers 0300135038973 701 and 0300135038973 702.
40. According to DW1, by a Letter of Offer dated 19 November 2018, the 1st Defendant extended to the Plaintiff an Invoice Discounting Facility of Kshs 17,000,000. The facility was intended to discount up to 80% of the net invoice value from seven named insurance companies, including Fidelity Shield, First Assurance, Jubilee, APA, Madison, Britam and CIC. She testified that the facility required payment of a non refundable 2% facility fee upon acceptance.
41. DW1 further stated that the Letter of Offer expressly required the Plaintiff to obtain from Equity Bank a letter confirming exclusion of receivables from the aforementioned insurance companies. Additionally, the Plaintiff was required to provide a First Legal Charge for KShs 17,000,000 over property known as L.R No. 209/804/4, registered in the name of Julia Mwihaki Kinandu. She emphasised that under clause 10(c) of the Letter of Offer, the Bank’s obligation to disburse the funds was conditional upon full compliance by the Plaintiff with all terms.
42. DW1 testified that the Plaintiff did not comply with two key conditions:
i. It failed to procure the required letter from Equity Bank confirming exclusion of receivables, and
ii. It failed to create the First Legal Charge over L.R 209/804/4, having also failed to obtain necessary consent from the Management Company of the property.
43. DW1 further informed the Court that on 12 March 2019, the Bank issued a Variation Letter of Offer enhancing the facility amount to KShs 20,000,000. Under this Variation, the Plaintiff was required to provide, inter alia, a First Legal Charge of KShs 6,000,000 over property Nairobi/Block 113/42, also belonging to Julia Mwihaki Kinandu. The Variation made clear that all original conditions of the Letter of Offer of 19 November 2018 remained in force.
44. DW1 stated that the Plaintiff again failed to comply with the requirement to obtain the Equity Bank letter, which failure she said made it impossible for the Bank to disburse the facility. She confirmed that the Bank ultimately discharged the registered charge over Nairobi/Block 113/42 in 2021.
45. DW1 categorically denied that the Bank ever offered the Plaintiff a facility of KShs 90,000,000 or KShs 60,000,000, and stated that any email communication referencing KShs 60,000,000 (such as an email dated 29 August 2018) was merely a pre contractual proposal and could not bind the Bank. She emphasised that all facilities issued by the Bank must be documented through a formal letter of offer, which was never issued for the alleged sums.
46. She further disputed the Plaintiff’s assertion that it was financially sound during negotiations. DW1 testified that the Plaintiff’s accounts showed that it had made a loss of KShs 10,000,000 in 2017, and that its accounts with Equity Bank and Mentor Sacco were in arrears. She also stated that as at 17 October 2018, the Plaintiff had been listed with the Credit Reference Bureau for defaulting on facilities advanced by SBM Bank.
47. DW1 denied allegations that the Bank induced the Plaintiff to reject financing from Mayfair Bank, stating that the Bank did not at any point prevail upon the Plaintiff to reject the alleged offer of KShs 43,500,000. She also denied that any terms in the Letter of Offer had been concealed, insisting that the requirement for the Equity Bank letter was “conspicuous” and that the Plaintiff signed the Letter of Offer before an advocate, demonstrating full understanding and acceptance of the terms.
48. DW1 maintained that the facility remained undisbursed solely because the Plaintiff failed to meet mandatory pre-disbursement conditions. She stated that the Plaintiff did not bring significant business to the Bank and that the Bank bore no responsibility for any loss the Plaintiff claimed to have suffered.
49. In cross-examination, DW1 confirmed that the Plaintiff paid certain fees pursuant to the Letters of Offer and that the facility was never drawn down. She asserted that the 1st Defendant did not prevent the Plaintiff from seeking alternative financing.
50. The witness concluded her testimony by stating that the suit was speculative, disclosed no cause of action, and should be dismissed with costs.
2nd Defendant’s Witness
51. The 2nd Defendant, Central Bank of Kenya, called one witness.
52. Mr. Stephen K’Odera, a Senior Portfolio Manager (Banks), testified as DW2 and adopted his written witness statement and the 2nd Defendant’s bundle of documents as his evidence-in-chief. He testified on the statutory mandate of the 2nd Defendant as the regulator of banking institutions.
53. The witness stated that the 2nd Defendant’s role does not extend to participation in individual lending transactions or loan negotiations between banks and customers, and that its supervision is exercised through risk-based oversight and issuance of prudential guidelines.
54. He testified that the 2nd Defendant did not receive any complaint from the Plaintiff regarding the 1st Defendant’s conduct and that no report was made by the 1st Defendant that would have triggered regulatory intervention.
55. In cross-examination, DW2 confirmed that the 2nd Defendant issues consumer protection guidelines applicable to banks and that regulatory action is undertaken upon receipt of complaints or supervisory triggers.
Determination and Analysis
56. Upon conclusion of the oral testimony, parties filed written submissions. The Plaintiff’s submissions are dated 02 April 2025. The 1st Defendant filed their submissions dated 14 July 2025, whilst those of the 2nd Defendant are dated 27 June 2025.
57. Having considered the pleadings, witnesses’ testimonies, the submissions, and the applicable law, the Court finds the following issues as requiring the Court’s determination:
i. Whether the 1st Defendant breached its contractual obligations to the Plaintiff
ii. Whether the 2nd Defendant breached its statutory duty of supervision and is liable in negligence
iii. Whether the Plaintiff is entitled to the reliefs sought.
iv. Who should pay costs?
Whether the 1st Defendant breached its contractual obligations to the Plaintiff
58. It is settled law that the burden of proof under Sections 107–109 of the Evidence Act rests upon the Plaintiff, who must prove both the existence of a duty and breach thereof.
59. In Anne Wambui Ndiritu –vs- Joseph Kiprono Ropkoi & Another [2005] 1 EA 334, the Court held as follows:
“As a general proposition under Section 107 (1) of the Evidence Act, Cap 80, the legal burden of proof lies upon the party who invokes the aid of the law and substantially asserts the affirmative of the issue. There is however the evidential burden that is case upon any party the burden of proving any particular fact which he desires the court to believe in its existence which is captured in Sections 109 and 112 of the Act.”
60. In this case, the Plaintiff contended the 1st Defendant breached or failed to fulfil its contractual obligations to the Plaintiff by failing to disburse funds under a facility agreement, thereby leaving the Plaintiff without alternative financing and precipitating the collapse of its business.
61. The specific allegations were that, despite securing a legal charge over the Plaintiff’s property and receiving deposits from the Plaintiff’s clients, the 1st Defendant’s manager, Mr. Charles Mwangi, dissuaded the Plaintiff from taking up a Kshs. 70,000,000/- facility from Mayfair Bank, with a promise that the 1st Defendant was to offer a superior facility.
62. Further, that the 1st Defendant acted fraudulently and deceitfully by issuing Letters of Offer dated 19th November 2018 and 12th March 2019 containing conditions it knew were impossible to fulfill. Specifically, Clause 18(c) thereof, which required the Plaintiff to obtain a letter from Equity Bank confirming exclusion of receivables from certain insurance companies, while knowing very well that Equity Bank Ltd had in the past declined similar requests.
63. The 1st Defendant denies all the allegations and asserts that it is the Plaintiff who failed to meet the conditions precedent for the disbursement of the facility, and that there were no fraudulent or deceitful actions from its end since the Plaintiff voluntarily executed the offer letter, with the conditions attached.
64. It is common ground that the parties executed Letters of Offer dated 19th November 2018 and 12th March 2019. It is clear from the Letters of Offers that there were express conditions precedent inbuilt therein, including a letter from Equity Bank excluding receivables from specified insurers, and notices/acknowledgments of assignment from insurers. It is also clear from the offer letter that any waiver or variation of the conditions was to be reduced to writing in the form of a renewal, extension, or replacement letter.
65. The Court notes that the Plaintiff, in the present case, conceded that the Equity Bank exclusion letter envisaged by Clause 18(c) was never obtained, and that APA Insurance’s acknowledgment was not procured. The Plaintiff’s contention that the 1st Defendant waived Clause 18(c) via an email dated 3rd May 2019 from its branch manager and/or by oral assurances is, in the view of the court, unmeritorious and legally unsustainable.
66. I have carefully reviewed the said email of 3rd May 2019, and note that while narrowing a list of operational deliverables, it did not evince a clear, unequivocal waiver of Clause 18(c) in the contractual sense required by the Letters of Offer. No formal written variation was demonstrated. In any event, an alleged waiver by conduct cannot prevail where the contract expressly requires all variations and waivers to be in writing. To hold otherwise would be to defeat the very purpose of the no-waiver clause freely agreed by the parties.
67. Given the parole evidence rule, which prohibits parties from introducing extrinsic evidence where the terms of a contract have been reduced into writing, and the explicit no waiver clause in the agreements (see Clause 10(b) of the Letter of Offer dated 19th November 2018), the alleged waiver by the 1st Defendant (through Mr. Mwangi), cannot prevail over signed agreements, nor can estoppel be invoked to rewrite an unambiguous commercial contract between parties of equal bargaining power.
68. In Fidelity & Commercial Bank Ltd V Kenya Grange Vehicle Industries Ltd (2017) eKLR, the Court of Appeal, [Ouko, Kiage and Murgor JJA], while considering the parole evidence rule, stated as follows; -
“So that where the intention of parties has in fact been reduced to writing, under the so called parol evidence rule, it is generally not permissible to adduce extrinsic evidence, whether oral or written, either to show the intention, or to contradict, vary or add to the terms of the document, including implied terms. Courts adopt the objective theory of contract interpretation, and profess to have the overriding aim of giving effect to the expressed intentions of the parties when construing a contract. This is what sometimes is called the principle of four corners of an instrument, which insists that a document's meaning should be derived from the document itself, without reference to anything outside of the document (extrinsic evidence), such as the circumstances surrounding its writing or the history of the party or parties signing it.
In Prudential Assurance Company of Kenya Limited V Sukhwender Singh Jutney and Another, Civil Appeal No. 23 of 2005 the Court citing a passage in Odgers Construction of Deeds and Statutes (5th edn.) at p.106 emphasized that in construing the terms of a written contract;
“It is a familiar rule of law that no parol evidence is admissible to contradict, vary or alter the terms of the deed or any written instrument. The rule applies as well to deeds as to contracts in writing. Although the rule is expressed to relate to parol evidence, it does in fact apply to all forms of extrinsic evidence.”
69. It is settled law, as espoused in National Bank of Kenya Ltd v Pipeplastic Samkolit (K) Ltd & another [2001] KECA 362 (KLR), that the Court cannot interfere with the contract between parties unless invited and for a good reason, including fraud, undue influence, and illegality. In this case, no reason has been demonstrated by the Plaintiff to warrant the court’s interference with the parties' clear intentions as expressed in the agreements.
70. Further, the Plaintiff’s admitted inability to obtain at least one critical acknowledgment (APA Insurance) means the conditions precedent, even on the Plaintiff’s own case, remained unsatisfied.
71. The Court notes that it was invited by the Plaintiff to draw an adverse inference under Section 119 of the Evidence Act due to the 1st Defendant’s failure to call the relationship manager (Mr. Charles Mwangi). While a court may draw such an inference, it cannot be used to contradict explicit contractual text or to manufacture a waiver contrary to the agreed variation mechanism. An adverse inference cannot be used to contradict written contractual terms or to create a contractual obligation where none exists.
72. On balance, the Court finds and holds that no breach has been proved by the Plaintiff. In the absence of satisfied conditions precedent or a compliant written waiver, the 1st Defendant was, in law, entitled to withhold disbursement, pending full compliance with the conditions precedent, as per the parties’ agreement.
73. Courts are slow to interfere with clear, negotiated banking contracts, particularly where facilities are expressly conditional. To impose liability in the absence of satisfied conditions precedent would undermine commercial certainty and convert conditional offers into guarantees, a result neither contemplated by the parties nor supported by law.
74. Regarding the Plaintiff’s argument that Clause 18(c) of the Offer Letter was an onerous term concealed under “Special Conditions” and not adequately highlighted to its directors, contrary to the principle in Thornton v Shoe Lane Parking Ltd [1970] EWCA Civ 2, the Court agrees with the 1st Defendant’s submissions that the principle requiring notice of onerous terms applies only where such terms are incorporated by reference, not where they are expressly included in the signed contract.
75. It is settled law that a party to a contract is bound by the clause because they signed the document. It did not matter that they had not read the document before signing. It also did not matter that they were unaware of the clause. This is the principle in L’Estrange v F Graucob Ltd [1934] 2KB 394, cited by the Court of Appeal in Securicor Courier (K) Ltd v Benson David Onyango & another [2008] KECA 349 (KLR), that:
“When a document containing contractual terms is signed, then, in the absence of fraud, or, I will add, misrepresentation, the party signing it is bound, and it is wholly immaterial whether he has read the document or not.”
76. In this case, it is not disputed that the Plaintiff’s directors signed each page of the Offer Letter, including the page containing Clause 18(c). The Plaintiff, having signed the Offer Letters, it was therefore contractually bound to the terms of the agreement, and cannot therefore plead non-disclosure by the other party – the 1st Defendant.
77. Finally, concerning the Plaintiff’s arguments that the 1st Defendant sabotaged the offer from Mayfair Bank, the Court finds that no evidence was adduced to show that the Plaintiff was prevented from returning to Mayfair Bank after negotiations with the 1st Defendant. The claim is therefore dismissed for lack of evidentiary support. In any event, the Plaintiff remained at all material times free to pursue alternative financing and demonstrated no legal restraint imposed by the 1st Defendant.
Whether the 2nd Defendant breached its statutory duty of supervision and is liable in negligence
78. The Plaintiff alleged that the 2nd Defendant failed in its statutory duty under Section 4A of the Central Bank of Kenya Act and Section 33(4) of the Banking Act to supervise the 1st Defendant effectively. According to the Plaintiff, the regulator’s passive approach and reliance on complaints, created an environment of impunity for banks.
79. Citing Teachers Service Commission v WJ & 5 others [2020] KECA 741 (KLR), the Plaintiff argued that regulators can be held liable for wrongful acts within the regulated activity.
80. The Plaintiff contends that publishing Prudential Guidelines without consistent enforcement is inadequate and that the 2nd Defendant should have detected the 1st Defendant’s misconduct through tools such as mystery shopping and continuous supervision. It argues that the 2nd Defendant’s negligence emboldened the 1st Defendant to act with impunity, thereby causing the Plaintiff’s loss.
81. The 2nd Defendant denied the Plaintiff’s assertions and asserted that its statutory mandate under Section 4A of the Central Bank of Kenya Act and Section 33(4) of the Banking Act is to regulate and supervise banking institutions at a system
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1. The Plaintiff, Autofine Limited, a company engaged primarily in the provision of mechanical and related services, filed an Amended Plaint dated 12th January 2022 seeking, inter alia, expectation damages for loss of profits amounting to Kshs. 3,114,767,989/-, goodwill, and other consequential losses allegedly arising from the 1st Defendant’s failure to disburse a credit facility and the 2nd Defendant’s alleged negligence in its supervisory role over the 1st Defendant.
2. The Plaintiff’s case is that it sought credit facilities from the 1st Defendant to support its business operations. Negotiations culminated in a Letter of Offer dated 19th November 2018 and a subsequent Further Letter of Offer dated 12th March 2019.
3. The Plaintiff alleges that the 1st Defendant, through its manager, Mr. Charles Mwangi, induced the Plaintiff to reject a KES 70,000,000 facility from Mayfair Bank by promising a superior offer.
4. It was also the Plaintiff's case that the 1st Defendant sneaked an onerous condition (Clause 18(c)) into the offer letter, requiring a letter from Equity Bank that the 1st Defendant allegedly knew was impossible to obtain.
5. The Plaintiff contended that despite paying Kshs. 881,811 to the 1st Defendant in fees and registering a legal charge on its property, the 1st Defendant refused to draw down the facility, leading to the collapse of the Plaintiff's business.
6. As against the 2nd Defendant, the Plaintiff alleged that the 2nd Defendant was negligent in its statutory duty to supervise the 1st Defendant, thereby allowing these alleged misdeeds to occur.
7. The Plaintiff therefore prayed for, among others, the following reliefs against the 1st Defendant:
i. Refund of Kshs. 811,881, being fees paid to the 1st Defendant for loan negotiation and loan transactional charges.
ii. Damages for loss of future profits, quantified at Kshs 3,114,767,989.
8. The Defendants filed their respective defences and denied the Plaintiff’s claim.
The 1st Defendant’s Case
9. The 1st Defendant, Eco Bank Kenya Limited, filed their amended statement of defence dated 1st July 2024, and denied that it entered into any binding or unconditional contract obligating it to disburse funds to the Plaintiff. It averred that the Letters of Offer dated 19th November 2018 and 12th March 2019 were expressly subject to fulfilment of stipulated conditions precedent, which were never satisfied by the Plaintiff.
10. According to the 1st Defendant, the proposed invoice discounting facility was conditional upon, inter alia, execution and perfection of security documents, and procurement of third-party confirmations, including written confirmation from Equity Bank excluding certain receivables from its security arrangements. It avers that the Plaintiff failed to comply with these requirements.
11. The 1st Defendant denied breaching the Letters of Offer and contends that no obligation to disburse could arise in the absence of fulfilment of the conditions precedent. It further pleads that no waiver of any condition was granted, whether expressly or impliedly, and that any variation or waiver was contractually required to be in writing.
12. The 1st Defendant pleaded that there was no misrepresentation, concealment, or bad faith. It asserted that the Plaintiff was fully aware of the terms of the facility, having considered and approved them through its Board of Directors prior to execution.
13. In respect of fees paid by the Plaintiff, the 1st Defendant pleads that such fees were contractually stipulated as non-refundable, irrespective of whether the facility was drawn down, and that the Plaintiff paid the same voluntarily pursuant to the Letters of Offer.
14. The 1st Defendant denied liability for any alleged loss of business, goodwill, or future profits and pleads that the claimed losses are speculative, remote, not pleaded with particularity, and not recoverable in law. It further avers that no causal nexus exists between the alleged losses and its conduct.
15. The 1st Defendant denied that it owed or breached any fiduciary duty to the Plaintiff and avers that the relationship between the parties was purely contractual. It therefore prayed that the suit against it be dismissed with costs.
The 2nd Defendant’s Case
16. The 2nd Defendant, Central Bank of Kenya, filed their amended statement of defence dated 9th February 2022 and denied any liability, averring that it was at all material times a stranger to the contractual relationship between the Plaintiff and the 1st Defendant.
17. The 2nd Defendant pleaded that its mandate is derived from statute and is limited to regulation and supervision of banking institutions at a systemic and prudential level. It averred that its role does not extend to participation in, approval of, or oversight over individual commercial transactions or loan negotiations between banks and their customers.
18. The 2nd Defendant denied breaching any statutory duty, pleading that it duly discharged its mandate through the issuance of prudential and consumer protection guidelines and through risk-based supervision of licensed banks.
19. It was the 2nd Defendant’s further case that no complaint or report concerning the Plaintiff’s dealings with the 1st Defendant was ever lodged with it, and that in the absence of such notice, no basis arose for regulatory intervention.
20. The 2nd Defendant denied that any act or omission on its part caused or contributed to the Plaintiff’s alleged loss and avers that the Plaintiff’s claims are speculative, misconceived, and unsustainable in law.
21. According to the 2nd Defendant, it is neither a necessary nor a proper party to the dispute, and that no cause of action is disclosed against it.
22. The 2nd Defendant therefore prayed that the suit against it be dismissed with costs.
Hearing
23. The matter proceeded for hearing on various dates between 7 November 2024 and 26 May 2025, when parties called their respective witnesses.
Plaintiff’s Witnesses
24. The Plaintiff called two witnesses, namely Sancho Lule Kibutu (PW1), a Director of Autofine Limited, and Thomas Nduati Kinandu (PW2), the Managing Director and founder of the Company. Both witnesses adopted their respective written statements dated 26 March 2021 as their evidence in chief.
25. PW1 and PW2 testified that Autofine Limited had, for over two decades, grown into a reputable automotive service and repair company, employing over 200 employees and earning industry recognition, including being voted “best garage” for three consecutive years between 2015 and 2017. PW1 described the Company’s strong financial performance, noting average annual revenue growth of 30% between 2012 and 2017, and average net profit growth of 89% during the same period. They attributed this growth to strategic management, aggressive target setting, and careful cost control.
26. Both witnesses stated that the Company embarked on significant expansion between 2016 and 2017, including enlarging its workshop space and reallocating the service division to an independent facility. This expansion, though necessary to meet rising demand, strained the Company’s working capital, prompting the Board to resolve in 2017 that external financing should be sought.
27. To this end, in August 2018, the Company engaged one George Robert Mbugua as a financial consultant. Through him, the directors were introduced to Charles Mwangi, who presented himself as the Branch Manager of the 1st Defendant’s Westlands Branch. According to both PW1 and PW2, Mwangi assured the Company that it would easily obtain financing from the 1st Defendant due to his close relationship with the Bank’s Managing Director. At the time, the Plaintiff was sourcing financing from various institutions and made known to Mwangi its urgent financial needs.
28. PW2 testified that after analysing the Company’s financial documents, Mwangi initially offered a financing package of KShs. 90,000,000, comprising KShs. 30,000,000 to take over the Plaintiff’s existing loan with Equity Bank, and KShs. 60,000,000 as an invoice discounting facility. Relying on these assurances, the Plaintiff opened accounts with the 1st Defendant on 20 August 2018 and began channeling the bulk of its business transactions through these accounts in an attempt to expedite the loan approval process.
29. However, on 29 August 2018, the 1st Defendant altered the terms and informed the Plaintiff that it would only offer KShs. 60,000,000 as a revolving facility—removing the KShs. 30,000,000 intended for the Equity Bank loan takeover. Although surprised by this revision, the Plaintiff accepted the reduced facility due to the urgency of its financial situation. The Bank subsequently imposed further conditions, including requiring all insurance clients to channel payments through the 1st Defendant and demanding the release of the all asset debenture held by Equity Bank. Equity Bank refused to release that debenture, a fact communicated repeatedly to the 1st Defendant.
30. Despite these challenges, the Plaintiff continued to comply with all additional instructions imposed by the 1st Defendant. Around October 2018, Mayfair Bank offered the Plaintiff a facility of Kshs. 43,500,000, which both PW1 and PW2 testified would have injected crucial working capital and yielded a projected return of Kshs. 14,700,000 within the first year. However, Mwangi allegedly prevailed upon the Plaintiff to reject this offer, promising that the 1st Defendant would provide a superior package.
31. The negotiations eventually resulted in an offer letter dated 19 November 2018, providing for an invoice discounting facility of Kshs. 17,000,000, later amended to Kshs. 20,000,000 on 12 March 2019. The Plaintiff executed all requisite documents and also provided an alternative property (Title No. Nairobi/Block 113/42) after the 1st Defendant advised that the lease renewal issues affecting the primary property (L.R No. 209/80/4) would cause delays. The 1st Defendant registered a charge of KShs. 6,000,000 over that property and subsequently issued a revised facility amount of KShs. 6,000,000—representing only a fraction of the funds earlier promised.
32. PW2 testified that in early May 2019, the 1st Defendant requested invoices and other documents in preparation for draw down, which the Plaintiff provided. However, despite daily follow up and repeated assurances from Mwangi that the funds were about to be disbursed, the 1st Defendant failed, neglected, or refused to release the facility. After the Plaintiff escalated the matter to the Head of Credit, communication from the 1st Defendant ceased altogether. PW2 further stated that Mwangi, upon learning of the escalation, sent a message threatening to sabotage the Company’s efforts to obtain the facility.
33. Both witnesses testified that the Plaintiff had, throughout an eight month period, been induced to reject alternative financiers and had been strung along by the 1st Defendant’s repeated but unfulfilled assurances.
34. They stated that the failure to obtain financing during this prolonged period crippled the Company’s operations, causing loss of clients, loss of business opportunities, reputational damage, and ultimately the collapse of a once thriving enterprise employing over 200 people. They asserted that the 1st Defendant acted negligently, maliciously, and in breach of contractual and fiduciary obligations, resulting in severe financial loss to the Plaintiff
35. In cross-examination, PW1 confirmed that the Letters of Offer were subject to conditions precedent and that the Plaintiff did not obtain written confirmation from Equity Bank excluding the relevant receivables from its security arrangements. He further confirmed that no funds were ever disbursed to the Plaintiff.
36. PW1 also confirmed that the Plaintiff did not lodge any formal complaint with the 2nd Defendant concerning the conduct of the 1st Defendant.
37. PW2, in cross-examination, confirmed that he did not prepare or audit the financial projections relied upon by the Plaintiff and that the projections were based on management assumptions. He further confirmed that the Plaintiff continued to engage other financial institutions during the period in question.
1st Defendant’s Witness
38. The 1st Defendant called Gladys Vundi, who testified as DW1. She stated that she is the Branch Manager of the 1st Defendant at Fortis Branch and had, upon reading the Bank’s records, become aware of the facts surrounding the dispute.
39. DW1 testified that the Plaintiff was at all material times a customer of the 1st Defendant. She referred to a board resolution dated 20 August 2018, by which the Plaintiff voluntarily resolved to open accounts with the Bank. Pursuant to that resolution, the Plaintiff opened account numbers 0300135038973 701 and 0300135038973 702.
40. According to DW1, by a Letter of Offer dated 19 November 2018, the 1st Defendant extended to the Plaintiff an Invoice Discounting Facility of Kshs 17,000,000. The facility was intended to discount up to 80% of the net invoice value from seven named insurance companies, including Fidelity Shield, First Assurance, Jubilee, APA, Madison, Britam and CIC. She testified that the facility required payment of a non refundable 2% facility fee upon acceptance.
41. DW1 further stated that the Letter of Offer expressly required the Plaintiff to obtain from Equity Bank a letter confirming exclusion of receivables from the aforementioned insurance companies. Additionally, the Plaintiff was required to provide a First Legal Charge for KShs 17,000,000 over property known as L.R No. 209/804/4, registered in the name of Julia Mwihaki Kinandu. She emphasised that under clause 10(c) of the Letter of Offer, the Bank’s obligation to disburse the funds was conditional upon full compliance by the Plaintiff with all terms.
42. DW1 testified that the Plaintiff did not comply with two key conditions:
i. It failed to procure the required letter from Equity Bank confirming exclusion of receivables, and
ii. It failed to create the First Legal Charge over L.R 209/804/4, having also failed to obtain necessary consent from the Management Company of the property.
43. DW1 further informed the Court that on 12 March 2019, the Bank issued a Variation Letter of Offer enhancing the facility amount to KShs 20,000,000. Under this Variation, the Plaintiff was required to provide, inter alia, a First Legal Charge of KShs 6,000,000 over property Nairobi/Block 113/42, also belonging to Julia Mwihaki Kinandu. The Variation made clear that all original conditions of the Letter of Offer of 19 November 2018 remained in force.
44. DW1 stated that the Plaintiff again failed to comply with the requirement to obtain the Equity Bank letter, which failure she said made it impossible for the Bank to disburse the facility. She confirmed that the Bank ultimately discharged the registered charge over Nairobi/Block 113/42 in 2021.
45. DW1 categorically denied that the Bank ever offered the Plaintiff a facility of KShs 90,000,000 or KShs 60,000,000, and stated that any email communication referencing KShs 60,000,000 (such as an email dated 29 August 2018) was merely a pre contractual proposal and could not bind the Bank. She emphasised that all facilities issued by the Bank must be documented through a formal letter of offer, which was never issued for the alleged sums.
46. She further disputed the Plaintiff’s assertion that it was financially sound during negotiations. DW1 testified that the Plaintiff’s accounts showed that it had made a loss of KShs 10,000,000 in 2017, and that its accounts with Equity Bank and Mentor Sacco were in arrears. She also stated that as at 17 October 2018, the Plaintiff had been listed with the Credit Reference Bureau for defaulting on facilities advanced by SBM Bank.
47. DW1 denied allegations that the Bank induced the Plaintiff to reject financing from Mayfair Bank, stating that the Bank did not at any point prevail upon the Plaintiff to reject the alleged offer of KShs 43,500,000. She also denied that any terms in the Letter of Offer had been concealed, insisting that the requirement for the Equity Bank letter was “conspicuous” and that the Plaintiff signed the Letter of Offer before an advocate, demonstrating full understanding and acceptance of the terms.
48. DW1 maintained that the facility remained undisbursed solely because the Plaintiff failed to meet mandatory pre-disbursement conditions. She stated that the Plaintiff did not bring significant business to the Bank and that the Bank bore no responsibility for any loss the Plaintiff claimed to have suffered.
49. In cross-examination, DW1 confirmed that the Plaintiff paid certain fees pursuant to the Letters of Offer and that the facility was never drawn down. She asserted that the 1st Defendant did not prevent the Plaintiff from seeking alternative financing.
50. The witness concluded her testimony by stating that the suit was speculative, disclosed no cause of action, and should be dismissed with costs.
2nd Defendant’s Witness
51. The 2nd Defendant, Central Bank of Kenya, called one witness.
52. Mr. Stephen K’Odera, a Senior Portfolio Manager (Banks), testified as DW2 and adopted his written witness statement and the 2nd Defendant’s bundle of documents as his evidence-in-chief. He testified on the statutory mandate of the 2nd Defendant as the regulator of banking institutions.
53. The witness stated that the 2nd Defendant’s role does not extend to participation in individual lending transactions or loan negotiations between banks and customers, and that its supervision is exercised through risk-based oversight and issuance of prudential guidelines.
54. He testified that the 2nd Defendant did not receive any complaint from the Plaintiff regarding the 1st Defendant’s conduct and that no report was made by the 1st Defendant that would have triggered regulatory intervention.
55. In cross-examination, DW2 confirmed that the 2nd Defendant issues consumer protection guidelines applicable to banks and that regulatory action is undertaken upon receipt of complaints or supervisory triggers.
Determination and Analysis
56. Upon conclusion of the oral testimony, parties filed written submissions. The Plaintiff’s submissions are dated 02 April 2025. The 1st Defendant filed their submissions dated 14 July 2025, whilst those of the 2nd Defendant are dated 27 June 2025.
57. Having considered the pleadings, witnesses’ testimonies, the submissions, and the applicable law, the Court finds the following issues as requiring the Court’s determination:
i. Whether the 1st Defendant breached its contractual obligations to the Plaintiff
ii. Whether the 2nd Defendant breached its statutory duty of supervision and is liable in negligence
iii. Whether the Plaintiff is entitled to the reliefs sought.
iv. Who should pay costs?
Whether the 1st Defendant breached its contractual obligations to the Plaintiff
58. It is settled law that the burden of proof under Sections 107–109 of the Evidence Act rests upon the Plaintiff, who must prove both the existence of a duty and breach thereof.
59. In Anne Wambui Ndiritu –vs- Joseph Kiprono Ropkoi & Another [2005] 1 EA 334, the Court held as follows:
“As a general proposition under Section 107 (1) of the Evidence Act, Cap 80, the legal burden of proof lies upon the party who invokes the aid of the law and substantially asserts the affirmative of the issue. There is however the evidential burden that is case upon any party the burden of proving any particular fact which he desires the court to believe in its existence which is captured in Sections 109 and 112 of the Act.”
60. In this case, the Plaintiff contended the 1st Defendant breached or failed to fulfil its contractual obligations to the Plaintiff by failing to disburse funds under a facility agreement, thereby leaving the Plaintiff without alternative financing and precipitating the collapse of its business.
61. The specific allegations were that, despite securing a legal charge over the Plaintiff’s property and receiving deposits from the Plaintiff’s clients, the 1st Defendant’s manager, Mr. Charles Mwangi, dissuaded the Plaintiff from taking up a Kshs. 70,000,000/- facility from Mayfair Bank, with a promise that the 1st Defendant was to offer a superior facility.
62. Further, that the 1st Defendant acted fraudulently and deceitfully by issuing Letters of Offer dated 19th November 2018 and 12th March 2019 containing conditions it knew were impossible to fulfill. Specifically, Clause 18(c) thereof, which required the Plaintiff to obtain a letter from Equity Bank confirming exclusion of receivables from certain insurance companies, while knowing very well that Equity Bank Ltd had in the past declined similar requests.
63. The 1st Defendant denies all the allegations and asserts that it is the Plaintiff who failed to meet the conditions precedent for the disbursement of the facility, and that there were no fraudulent or deceitful actions from its end since the Plaintiff voluntarily executed the offer letter, with the conditions attached.
64. It is common ground that the parties executed Letters of Offer dated 19th November 2018 and 12th March 2019. It is clear from the Letters of Offers that there were express conditions precedent inbuilt therein, including a letter from Equity Bank excluding receivables from specified insurers, and notices/acknowledgments of assignment from insurers. It is also clear from the offer letter that any waiver or variation of the conditions was to be reduced to writing in the form of a renewal, extension, or replacement letter.
65. The Court notes that the Plaintiff, in the present case, conceded that the Equity Bank exclusion letter envisaged by Clause 18(c) was never obtained, and that APA Insurance’s acknowledgment was not procured. The Plaintiff’s contention that the 1st Defendant waived Clause 18(c) via an email dated 3rd May 2019 from its branch manager and/or by oral assurances is, in the view of the court, unmeritorious and legally unsustainable.
66. I have carefully reviewed the said email of 3rd May 2019, and note that while narrowing a list of operational deliverables, it did not evince a clear, unequivocal waiver of Clause 18(c) in the contractual sense required by the Letters of Offer. No formal written variation was demonstrated. In any event, an alleged waiver by conduct cannot prevail where the contract expressly requires all variations and waivers to be in writing. To hold otherwise would be to defeat the very purpose of the no-waiver clause freely agreed by the parties.
67. Given the parole evidence rule, which prohibits parties from introducing extrinsic evidence where the terms of a contract have been reduced into writing, and the explicit no waiver clause in the agreements (see Clause 10(b) of the Letter of Offer dated 19th November 2018), the alleged waiver by the 1st Defendant (through Mr. Mwangi), cannot prevail over signed agreements, nor can estoppel be invoked to rewrite an unambiguous commercial contract between parties of equal bargaining power.
68. In Fidelity & Commercial Bank Ltd V Kenya Grange Vehicle Industries Ltd (2017) eKLR, the Court of Appeal, [Ouko, Kiage and Murgor JJA], while considering the parole evidence rule, stated as follows; -
“So that where the intention of parties has in fact been reduced to writing, under the so called parol evidence rule, it is generally not permissible to adduce extrinsic evidence, whether oral or written, either to show the intention, or to contradict, vary or add to the terms of the document, including implied terms. Courts adopt the objective theory of contract interpretation, and profess to have the overriding aim of giving effect to the expressed intentions of the parties when construing a contract. This is what sometimes is called the principle of four corners of an instrument, which insists that a document's meaning should be derived from the document itself, without reference to anything outside of the document (extrinsic evidence), such as the circumstances surrounding its writing or the history of the party or parties signing it.
In Prudential Assurance Company of Kenya Limited V Sukhwender Singh Jutney and Another, Civil Appeal No. 23 of 2005 the Court citing a passage in Odgers Construction of Deeds and Statutes (5th edn.) at p.106 emphasized that in construing the terms of a written contract;
“It is a familiar rule of law that no parol evidence is admissible to contradict, vary or alter the terms of the deed or any written instrument. The rule applies as well to deeds as to contracts in writing. Although the rule is expressed to relate to parol evidence, it does in fact apply to all forms of extrinsic evidence.”
69. It is settled law, as espoused in National Bank of Kenya Ltd v Pipeplastic Samkolit (K) Ltd & another [2001] KECA 362 (KLR), that the Court cannot interfere with the contract between parties unless invited and for a good reason, including fraud, undue influence, and illegality. In this case, no reason has been demonstrated by the Plaintiff to warrant the court’s interference with the parties' clear intentions as expressed in the agreements.
70. Further, the Plaintiff’s admitted inability to obtain at least one critical acknowledgment (APA Insurance) means the conditions precedent, even on the Plaintiff’s own case, remained unsatisfied.
71. The Court notes that it was invited by the Plaintiff to draw an adverse inference under Section 119 of the Evidence Act due to the 1st Defendant’s failure to call the relationship manager (Mr. Charles Mwangi). While a court may draw such an inference, it cannot be used to contradict explicit contractual text or to manufacture a waiver contrary to the agreed variation mechanism. An adverse inference cannot be used to contradict written contractual terms or to create a contractual obligation where none exists.
72. On balance, the Court finds and holds that no breach has been proved by the Plaintiff. In the absence of satisfied conditions precedent or a compliant written waiver, the 1st Defendant was, in law, entitled to withhold disbursement, pending full compliance with the conditions precedent, as per the parties’ agreement.
73. Courts are slow to interfere with clear, negotiated banking contracts, particularly where facilities are expressly conditional. To impose liability in the absence of satisfied conditions precedent would undermine commercial certainty and convert conditional offers into guarantees, a result neither contemplated by the parties nor supported by law.
74. Regarding the Plaintiff’s argument that Clause 18(c) of the Offer Letter was an onerous term concealed under “Special Conditions” and not adequately highlighted to its directors, contrary to the principle in Thornton v Shoe Lane Parking Ltd [1970] EWCA Civ 2, the Court agrees with the 1st Defendant’s submissions that the principle requiring notice of onerous terms applies only where such terms are incorporated by reference, not where they are expressly included in the signed contract.
75. It is settled law that a party to a contract is bound by the clause because they signed the document. It did not matter that they had not read the document before signing. It also did not matter that they were unaware of the clause. This is the principle in L’Estrange v F Graucob Ltd [1934] 2KB 394, cited by the Court of Appeal in Securicor Courier (K) Ltd v Benson David Onyango & another [2008] KECA 349 (KLR), that:
“When a document containing contractual terms is signed, then, in the absence of fraud, or, I will add, misrepresentation, the party signing it is bound, and it is wholly immaterial whether he has read the document or not.”
76. In this case, it is not disputed that the Plaintiff’s directors signed each page of the Offer Letter, including the page containing Clause 18(c). The Plaintiff, having signed the Offer Letters, it was therefore contractually bound to the terms of the agreement, and cannot therefore plead non-disclosure by the other party – the 1st Defendant.
77. Finally, concerning the Plaintiff’s arguments that the 1st Defendant sabotaged the offer from Mayfair Bank, the Court finds that no evidence was adduced to show that the Plaintiff was prevented from returning to Mayfair Bank after negotiations with the 1st Defendant. The claim is therefore dismissed for lack of evidentiary support. In any event, the Plaintiff remained at all material times free to pursue alternative financing and demonstrated no legal restraint imposed by the 1st Defendant.
Whether the 2nd Defendant breached its statutory duty of supervision and is liable in negligence
78. The Plaintiff alleged that the 2nd Defendant failed in its statutory duty under Section 4A of the Central Bank of Kenya Act and Section 33(4) of the Banking Act to supervise the 1st Defendant effectively. According to the Plaintiff, the regulator’s passive approach and reliance on complaints, created an environment of impunity for banks.
79. Citing Teachers Service Commission v WJ & 5 others [2020] KECA 741 (KLR), the Plaintiff argued that regulators can be held liable for wrongful acts within the regulated activity.
80. The Plaintiff contends that publishing Prudential Guidelines without consistent enforcement is inadequate and that the 2nd Defendant should have detected the 1st Defendant’s misconduct through tools such as mystery shopping and continuous supervision. It argues that the 2nd Defendant’s negligence emboldened the 1st Defendant to act with impunity, thereby causing the Plaintiff’s loss.
81. The 2nd Defendant denied the Plaintiff’s assertions and asserted that its statutory mandate under Section 4A of the Central Bank of Kenya Act and Section 33(4) of the Banking Act is to regulate and supervise banking institutions at a system
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