Introduction and Background .
1. The Plaintiff, The Mauritius Commercial Bank Limited, is a company incorporated in the Republic of Mauritius and licensed to operate as a bank. By a Plaint dated 16th June 2016, subsequently amended on 20th April 2020, it seeks judgment against the Defendants jointly and severally for USD 6,500,000.00, together with interest and costs.
2. The claim arises from the Plaintiff's payment of USD 6,500,000.00 to FirstRand Bank Limited of South Africa, trading through Rand Merchant Bank ("RMB"), pursuant to Standby Letters of Credit ("SBLCs") issued by the Plaintiff. The SBLCs were issued at the request of Imperial Bank Limited ("Imperial Bank"), the 1st Defendant's banker, as security for the 1st Defendant's obligations under a Revolving White Fuels Facility Agreement dated 26th June 2007 ("the Facility Agreement") between the 1st Defendant and RMB. The Plaintiff's case is that, upon making those payments, it became subrogated to RMB's rights and securities and is entitled to reimbursement from the Defendants.
3. The 1st Defendant, Jade Petroleum Limited, is a limited liability company incorporated in Kenya. The 2nd, 3rd and 4th Defendants are sued as guarantors of the 1st Defendant's obligations to RMB.
4. Under the Facility Agreement dated 26th June 2007, RMB made available to the 1st Defendant a revolving facility and letter of credit issuance facility in an aggregate amount of USD 10,000,000.00, later increased to USD 14,000,000.00. The facility was secured, among other securities, by a Guarantee and Indemnity executed by the 2nd, 3rd and 4th Defendants in favour of RMB and by SBLCs issued by the Plaintiff at the request of Imperial Bank.
5. In 2009, RMB required additional security in the form of SBLCs issued by a tier-one bank. The Plaintiff thereafter issued five SBLCs, with an aggregate value of USD 6,500,000.00, at Imperial Bank's request on behalf of the 1st Defendant.
6. On 5th November 2015, RMB notified the 1st Defendant that the SBLCs were approaching expiry and required their extension or repayment of the amount then outstanding, stated to be USD 7,500,000.00.
7. The 1st Defendant responded on 6th November 2015. It explained that, because Imperial Bank had been placed under receivership, it was unable to extend the SBLCs or repay the outstanding sums and sought more time. Importantly, the letter did not deny the indebtedness. It was signed by the 3rd Defendant, Mr. Pandya, on behalf of the 1st Defendant.
8. On 18th November 2015, RMB declared an Event of Default and demanded immediate repayment of the outstanding sums. The 1st Defendant did not pay. RMB then called upon the Plaintiff to honour the SBLCs, and the Plaintiff remitted a total of USD 6,500,000.00 to RMB between 4th and 31st December 2015.
9. On 23rd February 2016, RMB and the Plaintiff executed a Subrogation and Transfer Agreement. Under that agreement, and to the extent of the USD 6,500,000.00 paid by the Plaintiff, RMB transferred and subrogated to the Plaintiff its rights, title, interests, securities and privileges under the relevant Finance Documents, together with the right to take steps necessary to recover the amount paid.
10. PW1 accepted in cross-examination that he could not confirm whether the 1st Defendant or the guarantors had been notified of the Subrogation and Transfer Agreement.
11. On 21st April 2016, the Plaintiff's advocates issued a demand to the 2nd, 3rd and 4th Defendants stating that the Plaintiff had acquired RMB's rights, title, interests and securities under the Subrogation and Transfer Agreement. The demand sought USD 6,500,000.00 pursuant to the Guarantee and Indemnity and referred to interest at LIBOR plus 3.50% per annum, compounded monthly.
12. The service of those demands became an issue at trial. In particular, the address used for Mr. Pandya differed from the address appearing in the Guarantee and Indemnity. The guarantors denied receipt, and the Plaintiff did not produce proof of service.
13. The suit was initially heard ex-parte, and default judgment was entered against all the Defendants on 2 nd August, 2016. The default judgment was subsequently set aside by Lady Justice Odero on 5 th October, 2018, paving the way for the matter to be heard on its merits.
14. The matter was heard on 10th and 11th February 2025, 23rd July 2025, and concluded on 16th September 2025. The Plaintiff called Mr. Vishal Mungur (PW1). The 1st Defendant called Mr. Vishal Pankaj Somaia (DW1). The 2nd Defendant, Mr. Pankaj Vrajlal Vallabh Somaia (DW2), testified in support of the guarantors' case. The 3rd and 4th Defendants did not attend the hearing or give evidence.
15. I have considered the pleadings, the evidence, the written and oral submissions, and the applicable law. I now turn to the issues for determination.
Issues for determination .
16. The parties filed an agreed List of Issues dated 30th May 2022 containing sixteen issues. In my view, they may conveniently be resolved under the following five broad questions:
a. Whether the Plaintiff’s claim is statute- barred under the Limitation of Actions Act?
b. Whether the Plaintiff is entitled to recover the sum of USD 6,500,000.00 from the Defendants under the doctrine of subrogation and/or unjust enrichment?
c. Whether the Defendants are jointly and severally liable to compensate the Plaintiff for the sum of USD 6,500,000.00 paid and interest?
d. Whether the underlying Facility Agreement was discharged by frustration, fundamental variation or breach by RMB?
e. Which of the parties ought to bear the costs?
Analysis and Determination.
17. The Plaintiff bears the burden of proving the facts on which its claim depends. Sections 107(1) and (2) of the Evidence Act place that burden upon the party who asks the Court to find in its favour on the basis of asserted facts. The applicable standard is proof on a balance of probabilities. In Miller v Minister of Pensions [1947] 2 All ER 372, Lord Denning described that standard in the following terms:
“That degree is well settled. It must carry a reasonable degree of probability, but not so high as is required in criminal cases. If the evidence is such that the tribunal can say: We think it more probable than not; the burden is discharged, but, if the probabilities are equal, it is not. Thus, proof on a balance or preponderance of probabilities means a win, however narrow. A draw is not enough. So, in any case is which the tribunal cannot decide one way or the other which evidence to accept, where both parties’ explanations are equally (un) convincing, the party bearing the burden of proof will lose because the requisite standard will not have been attained.
18. The Court of Appeal expressed the same idea more shortly in James Muniu Mucheru v National Bank of Kenya Limited [2019] KECA 1058 (KLR): “Courts will make a finding based on which party’s version of the story is more believable .” I apply that standard to each issue.
Whether the Plaintiff’s claim is statute- barred under the Limitation of Actions Act.
19. The Plaintiff submitted that the suit was brought within the six-year limitation period. As against the 1st Defendant, it contended that the cause of action accrued when the Plaintiff paid RMB between 4th and 31st December 2015 and thereby became subrogated to RMB's rights. As against the guarantors, it submitted that the cause of action accrued upon the demand of 21st April 2016, or when the period allowed in that demand expired on 28th April 2016. The suit was filed on 8th June 2016.
20. The Defendants relied on section 4(1)(a) of the Limitation of Actions Act, which bars an action founded on contract after six years from the date the cause of action accrued. They also relied on Pius Kimaiyo Langat v Co-operative Bank of Kenya Limited [2017] eKLR .
21. The chronology is not seriously in dispute. On 5th November 2015, RMB demanded repayment of the outstanding sums. The 1st Defendant replied on 6th November 2015 and sought additional time to pay. That response is important because it acknowledged an outstanding liability. The letter stated, in part:
“We would only be in a position to ...repay…once Imperial Bank Ltd reopens for business… we had previously requested that Rand Merchant Bank extend us some time to repay the full facility… we do understand that Rand Merchant Bank intends to demand immediate repayment of all sums outstanding. We would like to confirm that until Imperial Bank opens, we shall unfortunately not be in a position to repay these sums as we are currently experiencing a liquidity constraint.”
22. Following that default, RMB made demand on the Plaintiff on 7th December 2015 for USD 6,500,000.00 under the SBLCs. The demands appear at pages 129 to 137 of the Plaintiff's bundle.
23. The Plaintiff honoured the SBLCs and paid RMB a total of USD 6,500,000.00 between 4th and 31st December 2015. The SWIFT confirmations at pages 163 to 167 of the Plaintiff's bundle identify the transaction by reference to “Jade Petroleum”.
24. I am therefore satisfied that the Plaintiff's reimbursement claim arose, at the latest, in December 2015 when it paid RMB. It was also upon payment that the Plaintiff's equitable right of subrogation arose.
25. The original Plaint was filed on 8th June 2016 and the Amended Plaint on 22nd April 2021. Both were filed within six years of the December 2015 payment.
26. As regards the 2nd, 3rd and 4th Defendants, the Plaintiff issued a demand under the Guarantee on 21st April 2016, giving time for payment until 28th April 2016. On the Plaintiff's case, the contractual claim against the guarantors therefore accrued no later than that date.
27. The guarantors argued that no valid demand was served and that, for that reason, no cause of action ever crystallised against them. That submission raises an important question, but it concerns the enforceability of the Guarantee rather than whether this suit was brought more than six years after the material events. The Plaintiff's payment occurred in December 2015 and the demand relied upon was issued in April 2016. The suit followed in June 2016.
28. The evidence also shows that the guarantors were aware of the underlying default. The 3rd Defendant signed the 1st Defendant's letter of 6th November 2015, and DW2 accepted in cross-examination that default by the principal debtor exposed the guarantors to liability under the Guarantee.
29. DW2 further accepted that he was a signatory to the Guarantee and was aware of the role played by the SBLCs. He expressly stated that “without the SBLC the credit facility would not have been available to Jade” and that “MCB is paying the amount”.
30. Accordingly, although I will deal separately with whether the demand was properly served and whether contractual liability under the Guarantee crystallised, the limitation defence cannot succeed. The events on which the Plaintiff relies all occurred within months of the filing of the suit.
31. The limitation question should therefore be kept distinct from the merits of the Plaintiff's title to recover. Whether recovery ultimately rests on subrogation, assignment, the Guarantee, or restitution does not alter the fact that the relevant payment was made in December 2015 and the suit was filed in June 2016.
32. I find that the suit is not statute-barred against any of the Defendants. I will return to the effect of the disputed demand when considering the guarantors' liability.
Whether the Plaintiff is entitled to recover the sum of USD 6,500,000.00 from the Defendants under the doctrine of subrogation and/or unjust enrichment?
33. The commercial arrangement can be reduced to its essentials. RMB advanced a revolving facility to the 1st Defendant. Imperial Bank acted as the 1st Defendant's banker and intermediary. The Plaintiff, a tier-one bank, issued SBLCs securing part of the 1st Defendant's obligations to RMB. When the 1st Defendant defaulted, RMB called the SBLCs and the Plaintiff paid USD 6,500,000.00.
34. The Plaintiff therefore seeks, as the paying surety, reimbursement from the principal debtor and the benefit of the securities held by RMB. Put simply, it seeks to “step into the shoes” of RMB to the extent of the payment it made.
35. The Defendants resist the claim principally on the ground that the Plaintiff was not a party to the Facility Agreement and therefore lacks privity of contract.
The law on subrogation:
36. It is useful at the outset to distinguish subrogation from assignment. An assignment transfers an existing chose in action from the assignor to the assignee. Equitable subrogation, by contrast, arises by operation of law upon the relevant payment and places the payer, to the extent necessary to prevent unjust enrichment, in the position of the creditor whose claim has been discharged.
37. I point out that difference because the Defendants place considerable weight on the absence of notice of the Subrogation and Transfer Agreement. Notice may be material to the perfection or enforcement of an assignment against a debtor. In Standard Bank Limited v D L Patel Press (Kenya) Limited [1985] KECA 65 (KLR) , the Court of Appeal considered notice in the context of an equitable assignment. That principle does not mean, however, that an equitable right of subrogation depends upon the debtor's prior consent. A subrogee acquires only derivative rights: it can obtain no better right than the original creditor had and remains subject to the same substantive defences and contractual conditions.
38. The restitutionary foundation of subrogation is also consistent with Chase International Investment Corporation & Another v Laxman Keshra & 3 Others [1978] KECA 7 (KLR) , as restated in Marteve Guest House Limited v Njenga & 3 others [2022] KECA 539 (KLR) . The claimant must establish that the defendant received a benefit, that the benefit was at the claimant's expense, and that it would be unjust for the defendant to retain it. Each element must be proved.
39. The Plaintiff relied on the persuasive decision of the House of Lords in Banque Financiere de la Cite v Parc (Battersea) Ltd and others [1999] 1 AC 221, where subrogation was treated as a restitutionary remedy that does not depend upon a contractual intention to subrogate.
40. Lord Hoffmann explained the principle at pages 231 to 234 in the following terms:
“Subrogation is also used to describe an equitable remedy to reverse or prevent unjust enrichment which is not based upon any agreement or common intention of the party enriched and the party deprived…
It is a mistake to regard the availability of subrogation as a remedy to prevent unjust enrichment as turning entirely upon the question of intention, whether common or unilateral…
It should be recognised that one is dealing with a restitutionary remedy and that the appropriate questions are therefore, first, whether the defendant would be enriched at the plaintiff’s expense; secondly, whether such enrichment would be unjust; and thirdly, whether there are nevertheless reasons of policy for denying a remedy. ” (Emphasis mine)
41. On page 236, he continues in the following terms:
“As Millet L.J. pointed out in Boscawen v Bajwa [1996] 1 W.L.R. 328, 335, subrogation is not a right or a cause of action but an equitable remedy against a party who would otherwise be unjustly enriched. It is a means by which the court regulates the legal relationships between a plaintiff and a defendant or defendants in order to prevent unjust enrichment. A plaintiff’s legal relations with a defendant who would otherwise be unjustly enriched are regulated as if the benefit of the security is assigned to the plaintiff. (Emphasis mine)
42. The same principles are discussed in The Modern Contract of Guarantee, 4th Edition, Sweet & Maxwell , at pages 780 to 782 and 797 to 801. The propositions relevant to this case are these:
i. All the guarantors who contributed towards the payment of the principal debt were entitled to be subrogated to the creditor’s rights against the debtor.
ii. A guarantor’s right of subrogation is founded on the general rules of equity and does not depend on a special stipulation in the contract of guarantee. It rests on the guarantor’s equity not to have the entire burden of the debt cast upon him simply by the creditor’s choice not to resort to its other remedies or securities. It is only fair and equitable that a guarantor should be placed in the same position as a fully-paid creditor who declines to enforce such remedies or securities or who deals with them to the prejudice of the guarantor.
iii. In relation to the scope and remedy of subrogation, the equitable principle of subrogation entitles a surety, upon payment of the whole of the principal debt or upon performance of the principal obligation, to an assignment of all the securities held by the creditor in respect of the principal debt or obligation.
43. Mitchell and Watterson, in Subrogation Law and Practice at paragraphs 1.04 to 1.06 and 3.10 to 3.15, make the same distinction. In summary:
i. Subrogation rights derive from several different sources. They also work in several different ways, depending on the relationship between the parties.
ii. Subrogation arises in the law of guarantee . When a surety pays a creditor in respect of a guaranteed debt, his payment discharges the creditor’s personal right of action against the principal debtor and also any securities which the principal debtor has given the creditor to secure repayment of the debt.
iii. The law of unjust enrichment gives the surety a direct personal claim against the principal debtor for reimbursement, and the additional right to be treated as though he has acquired the creditor’s securities for his own benefit. (Emphasis mine)
44. Several of those texts refer to the English Mercantile Law Amendment Act, 1856. I bear in mind that, by virtue of section 3(1)(c) of the Judicature Act, statutes of general application in force in England on 12th August 1897 apply in Kenya, subject to the qualifications in that section. In any event, the authorities are persuasive and the principles accordingly remain relevant to the equitable doctrine before this Court.
45. The Defendants submitted that the 1st Defendant was not a party to the Subrogation and Transfer Agreement of 23rd February 2016, did not execute or consent to it, and was not notified of it.
46. They further argued that subrogation, being a restitutionary remedy rather than a legal assignment, cannot confer rights greater than those available under a properly notified assignment. They relied on Orakpo v Manson Investments Ltd [1978] AC 95, Boscawen v Bajwa [1996] 1 WLR 328 and Bank of Cyprus UK Ltd v Menelaou [2015] UKSC 66 to emphasise that subrogation is a remedy, not an independent cause of action, and remains subject to applicable defences.
47. I do not accept, however, that the Plaintiff was a stranger to the transaction in any practical sense. DW1 described the role of the SBLCs in the following terms:
“The SBLC were a security document that is paid by call and it was paid by the Plaintiff… the SBLC is a promise to pay by the bank on behalf of the applicant.
48. The documentary evidence points in the same direction. RMB's letter of 5th November 2015 identified the outstanding loans, the SBLCs securing them, and the institutions that issued those SBLCs. It stated, in part:
“ The principle amount of loans presently outstanding, and secured by the SBLC’s is $7,500,000… the respective issuing institutions are as follows:
1. MCB Ltd $1000,0000 22 nd November 2015
2. Citi Bank
3. MCB Ltd $1,500,000 29 December 2015
4. MCB Ltd $1,500,000 29 December 2015
5. MCB Ltd $1,500,000 26 January 2015
6. MCB Ltd $1,000,000 1 st February 2016
We confirm having been advised by the borrower that the above SBLCs will not be extended by the respective issuing institutions. Failure by the Borrower to procure extension or replacement…will constitute an Event of Default”
49. DW2 also accepted in cross-examination that “SBLC numbers 1 and 3to 6 are issued by MCB” and that “we did not challenge the letter”.
50. I am therefore not persuaded that the rule of privity, standing alone, defeats the claim. I have considered Agricultural Finance Corporation v Lengetia Limited [1985] KECA 58, where the Court of Appeal stated that “a general rule a contract affects only the parties to it, and cannot be enforced by or against a person who is not a party, even if the contract is made for his benefit and purports to give him the right to sue or to make him liable upon it”. That principle is not in dispute. The present claim, however, is founded principally on subrogation and restitution, doctrines which operate independently of privity.
51. Upon paying USD 6,500,000.00 to RMB under the SBLCs, the Plaintiff became subrogated in equity to RMB's rights to the extent of that payment. No separate agreement by the 1st Defendant was required to create that equitable right.
52. The payment discharged part of the 1st Defendant's indebtedness to RMB. It also affected the securities held by RMB, including the guarantees. To the extent permitted by the terms of those securities, subrogation entitled the Plaintiff to be treated as having the benefit of them. Whether the guarantees were themselves enforceable against the 2nd, 3rd and 4th Defendants is a separate question which I address under the next issue.
53. There is also the written Subrogation and Transfer Agreement of 23rd February 2016. The Plaintiff relies upon that agreement as an additional contractual mechanism by which RMB transferred its rights and securities.
54. Clauses 1.1 and 1.2 of the Subrogation and Transfer Agreement provide, without reservation and to the extent of the Plaintiff's payment, for the transfer and subrogation of RMB's rights, title, interests, securities and privileges under the Facility Agreement and related security documents.
55. The Plaintiff further states that the original instruments, including the Facility Agreement, guarantees, letters of credit, demand letters and payment confirmations, were delivered to it under the Subrogation and Transfer Agreement.
56. The absence of a direct contract between the Plaintiff and the 1st Defendant is therefore not determinative. The equitable right of subrogation arose from payment, while the written agreement recorded and transferred RMB's corresponding rights.
57. Nor does the assignment aspect of the arrangement alter the result on the facts of this case. The Facility Agreement expressly permitted RMB to assign or transfer its rights, and the Defendants have not shown that the absence of prior notice invalidated the equitable subrogation which had already arisen by operation of law.
58. It was also within the 1st Defendant's contemplation that, if RMB called the SBLCs, the issuing bank would pay and would thereafter seek recourse. That commercial consequence follows from the very purpose for which the SBLCs were procured.
59. Each SBLC was issued at the request of Imperial Bank, the 1st Defendant's banker, for the benefit of RMB. RMB's letter of 5th November 2015 expressly identified the Plaintiff as the issuer of the relevant SBLCs.
60. I therefore find that the lack-of-privity defence does not bar the Plaintiff's claim against the 1st Defendant. The evidence establishes that the 1st Defendant borrowed under the facility, defaulted, and that the Plaintiff paid USD 6,500,000.00 when RMB called the SBLCs. To that extent, the Plaintiff is entitled to reimbursement from the 1st Defendant.
61. As to formal notice of the subrogation, the equitable right arose on payment and did not depend upon the 1st Defendant's consent. The Plaintiff nevertheless takes its rights subject to the same substantive defences and contractual conditions that could have been raised against RMB.
62. The Plaintiff also submitted that the Facility Agreement itself did not require notice before RMB assigned its rights. I agree, for the following reasons:
i. Clause 27.1 permits assignment and transfer by the lender and does not impose a requirement that the 1st Defendant first be notified.
ii. Clause 27.2 concerns disclosure of information by RMB and provides, subject to applicable law, for notice of disclosure. It does not impose a condition precedent to an assignment under clause 27.1.
63. Accordingly, the contractual notice provisions relied upon by the Defendants do not defeat the Plaintiff's right of subrogation or the transfer of RMB's rights.
64. DW2 was cross-examined on the role of the SBLCs and the payments made by MCB. His evidence was:
“I am not aware of the SBLC I don't know the details. Without the SBLC the credit facility would not have been available to Jade. Out of the SBLC MCB paid the 4.5m$. this was paid on behalf of Imperial Bank. I don't know the connection. Rand did not accept the SBLC from Imperial and so Imperial approached MCB. This was then accepted by Rand and then Jade was able to access the facility.”
65. That evidence is consistent with the documentary record. Subrogation arose by operation of law when the Plaintiff paid RMB, and it placed the Plaintiff in RMB's position to the extent of that payment. Prior notice to the debtor was not necessary to create the equitable right.
66. The Defendants also contended that, because RMB did not provide statements of account, the amount claimed was not proved. I do not accept that submission.
67. First, in the letter of 6th November 2015 at page 160 of the PRBD, the 1st Defendant did not deny the indebtedness. It asked for additional time to repay. DW1 accepted in cross-examination that the letter acknowledged that the 1st Defendant owed RMB money.
68. Margaret Nieri Miururi v Bank of Baroda (Kenya) Ltd [2014] KECA 319 (KLR), relied upon by the Defendants, is distinguishable. There, the amount due was itself in dispute. Here, the 1st Defendant acknowledged an outstanding debt and sought time to pay it.
69. Second, the Plaintiff produced the SBLCs and the SWIFT confirmations evidencing payments to RMB. The Defendants did not produce evidence showing that the USD 6,500,000.00 had already been repaid or that the sum paid by the Plaintiff was not due. DW1 admitted during cross examination that he was not aware of any payment made by Jade directly to the Plaintiff.
70. Section 112 of the Evidence Act is also relevant. Where a fact is especially within a party's knowledge, the burden of proving or disproving that fact rests upon that party. Accordingly, if the entire amount had been repaid in full, the Defendants ought to have demonstrated this by way of evidence. This was not done.
71. The Defendants relied on a schedule at page 15 of their Trial Bundle showing Kshs. 832,117,226.00 in interest and charges. This evidence was inadequate. They did not, however, produce receipts or other primary evidence showing that those sums represented repayment of the principal debt. DW1 himself accepted that the schedule recorded finance costs rather than payments.
72. DW1 stated that
" Page 15 D bundle, summary of the costs associated with the financial instruments. Guarantees issued by Jade and the rates being charged by Imperial for the facilities and the security docs provided and bank charges and fees. In the witness statement shows that 1st D paid 832,117,226. This shows interest charges and fees raised by the second financiers, not payments paid. Payments were made but not here. Payments to Rand -- shows at 303,947,684 .”
73. The Defendants therefore failed to prove that the amount paid by the Plaintiff had already been discharged or was otherwise not recoverable.
74. For those reasons, I find on a balance of probabilities that the Plaintiff became subrogated to RMB's rights upon payment of USD 6,500,000.00 and is entitled to recover that sum from the 1st Defendant. The position of the guarantors, including the effect of the Guarantee, the 2010 variation and the demand, falls for determination under the next issue.
Whether the Defendants are jointly and severally liable to compensate the Plaintiff for the sum of USD 6,500,000.00 paid and interest .
75. The Plaintiff's case is that all four Defendants are jointly and severally liable for USD 6,500,000.00. As against the 2nd, 3rd and 4th Defendants, it relies on the Guarantee and Indemnity, the continuing-security clause, subrogation, and unjust enrichment.
76. The Plaintiff submitted that clause 6 made the Guarantee a continuing security. It relied on Standard Chartered Financial Services Limited v Manchester Outfitters (Suiting Division) Limited Now Called King Woolen Mills Limited & 2 others [2025] KESC 68 (KLR) for the proposition that a financier need not take fresh security for every subsequent advance where the existing security, properly construed, remains valid and undischarged.
77. The Plaintiff also relied on unjust enrichment. It argued that its payment extinguished the 1st Defendant's debt to RMB pro tanto and, at the same time, relieved the guarantors of their contingent exposure to RMB to the extent of USD 6,500,000.00.
78. The 1st Defendant maintained its lack-of-privity, frustration and performance defences. It relied, among other authorities, on Agricultural Finance Corporation v Lengetia Limited [1985] KECA 58 and the statement that "as a general rule a contract affects only the parties to it, and cannot be enforced by or against a person who is not a party."
79. The guarantors argued that the Guarantee was discharged by the Second Amendment of 14th July 2010. They relied on Holme v Brunskill (1878) 3 QBD 495 and David Harris v Middle East Bank Kenya Limited & 3 others
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1. The Plaintiff, The Mauritius Commercial Bank Limited, is a company incorporated in the Republic of Mauritius and licensed to operate as a bank. By a Plaint dated 16th June 2016, subsequently amended on 20th April 2020, it seeks judgment against the Defendants jointly and severally for USD 6,500,000.00, together with interest and costs.
2. The claim arises from the Plaintiff's payment of USD 6,500,000.00 to FirstRand Bank Limited of South Africa, trading through Rand Merchant Bank ("RMB"), pursuant to Standby Letters of Credit ("SBLCs") issued by the Plaintiff. The SBLCs were issued at the request of Imperial Bank Limited ("Imperial Bank"), the 1st Defendant's banker, as security for the 1st Defendant's obligations under a Revolving White Fuels Facility Agreement dated 26th June 2007 ("the Facility Agreement") between the 1st Defendant and RMB. The Plaintiff's case is that, upon making those payments, it became subrogated to RMB's rights and securities and is entitled to reimbursement from the Defendants.
3. The 1st Defendant, Jade Petroleum Limited, is a limited liability company incorporated in Kenya. The 2nd, 3rd and 4th Defendants are sued as guarantors of the 1st Defendant's obligations to RMB.
4. Under the Facility Agreement dated 26th June 2007, RMB made available to the 1st Defendant a revolving facility and letter of credit issuance facility in an aggregate amount of USD 10,000,000.00, later increased to USD 14,000,000.00. The facility was secured, among other securities, by a Guarantee and Indemnity executed by the 2nd, 3rd and 4th Defendants in favour of RMB and by SBLCs issued by the Plaintiff at the request of Imperial Bank.
5. In 2009, RMB required additional security in the form of SBLCs issued by a tier-one bank. The Plaintiff thereafter issued five SBLCs, with an aggregate value of USD 6,500,000.00, at Imperial Bank's request on behalf of the 1st Defendant.
6. On 5th November 2015, RMB notified the 1st Defendant that the SBLCs were approaching expiry and required their extension or repayment of the amount then outstanding, stated to be USD 7,500,000.00.
7. The 1st Defendant responded on 6th November 2015. It explained that, because Imperial Bank had been placed under receivership, it was unable to extend the SBLCs or repay the outstanding sums and sought more time. Importantly, the letter did not deny the indebtedness. It was signed by the 3rd Defendant, Mr. Pandya, on behalf of the 1st Defendant.
8. On 18th November 2015, RMB declared an Event of Default and demanded immediate repayment of the outstanding sums. The 1st Defendant did not pay. RMB then called upon the Plaintiff to honour the SBLCs, and the Plaintiff remitted a total of USD 6,500,000.00 to RMB between 4th and 31st December 2015.
9. On 23rd February 2016, RMB and the Plaintiff executed a Subrogation and Transfer Agreement. Under that agreement, and to the extent of the USD 6,500,000.00 paid by the Plaintiff, RMB transferred and subrogated to the Plaintiff its rights, title, interests, securities and privileges under the relevant Finance Documents, together with the right to take steps necessary to recover the amount paid.
10. PW1 accepted in cross-examination that he could not confirm whether the 1st Defendant or the guarantors had been notified of the Subrogation and Transfer Agreement.
11. On 21st April 2016, the Plaintiff's advocates issued a demand to the 2nd, 3rd and 4th Defendants stating that the Plaintiff had acquired RMB's rights, title, interests and securities under the Subrogation and Transfer Agreement. The demand sought USD 6,500,000.00 pursuant to the Guarantee and Indemnity and referred to interest at LIBOR plus 3.50% per annum, compounded monthly.
12. The service of those demands became an issue at trial. In particular, the address used for Mr. Pandya differed from the address appearing in the Guarantee and Indemnity. The guarantors denied receipt, and the Plaintiff did not produce proof of service.
13. The suit was initially heard ex-parte, and default judgment was entered against all the Defendants on 2 nd August, 2016. The default judgment was subsequently set aside by Lady Justice Odero on 5 th October, 2018, paving the way for the matter to be heard on its merits.
14. The matter was heard on 10th and 11th February 2025, 23rd July 2025, and concluded on 16th September 2025. The Plaintiff called Mr. Vishal Mungur (PW1). The 1st Defendant called Mr. Vishal Pankaj Somaia (DW1). The 2nd Defendant, Mr. Pankaj Vrajlal Vallabh Somaia (DW2), testified in support of the guarantors' case. The 3rd and 4th Defendants did not attend the hearing or give evidence.
15. I have considered the pleadings, the evidence, the written and oral submissions, and the applicable law. I now turn to the issues for determination.
Issues for determination .
16. The parties filed an agreed List of Issues dated 30th May 2022 containing sixteen issues. In my view, they may conveniently be resolved under the following five broad questions:
a. Whether the Plaintiff’s claim is statute- barred under the Limitation of Actions Act?
b. Whether the Plaintiff is entitled to recover the sum of USD 6,500,000.00 from the Defendants under the doctrine of subrogation and/or unjust enrichment?
c. Whether the Defendants are jointly and severally liable to compensate the Plaintiff for the sum of USD 6,500,000.00 paid and interest?
d. Whether the underlying Facility Agreement was discharged by frustration, fundamental variation or breach by RMB?
e. Which of the parties ought to bear the costs?
Analysis and Determination.
17. The Plaintiff bears the burden of proving the facts on which its claim depends. Sections 107(1) and (2) of the Evidence Act place that burden upon the party who asks the Court to find in its favour on the basis of asserted facts. The applicable standard is proof on a balance of probabilities. In Miller v Minister of Pensions [1947] 2 All ER 372, Lord Denning described that standard in the following terms:
“That degree is well settled. It must carry a reasonable degree of probability, but not so high as is required in criminal cases. If the evidence is such that the tribunal can say: We think it more probable than not; the burden is discharged, but, if the probabilities are equal, it is not. Thus, proof on a balance or preponderance of probabilities means a win, however narrow. A draw is not enough. So, in any case is which the tribunal cannot decide one way or the other which evidence to accept, where both parties’ explanations are equally (un) convincing, the party bearing the burden of proof will lose because the requisite standard will not have been attained.
18. The Court of Appeal expressed the same idea more shortly in James Muniu Mucheru v National Bank of Kenya Limited [2019] KECA 1058 (KLR): “Courts will make a finding based on which party’s version of the story is more believable .” I apply that standard to each issue.
Whether the Plaintiff’s claim is statute- barred under the Limitation of Actions Act.
19. The Plaintiff submitted that the suit was brought within the six-year limitation period. As against the 1st Defendant, it contended that the cause of action accrued when the Plaintiff paid RMB between 4th and 31st December 2015 and thereby became subrogated to RMB's rights. As against the guarantors, it submitted that the cause of action accrued upon the demand of 21st April 2016, or when the period allowed in that demand expired on 28th April 2016. The suit was filed on 8th June 2016.
20. The Defendants relied on section 4(1)(a) of the Limitation of Actions Act, which bars an action founded on contract after six years from the date the cause of action accrued. They also relied on Pius Kimaiyo Langat v Co-operative Bank of Kenya Limited [2017] eKLR .
21. The chronology is not seriously in dispute. On 5th November 2015, RMB demanded repayment of the outstanding sums. The 1st Defendant replied on 6th November 2015 and sought additional time to pay. That response is important because it acknowledged an outstanding liability. The letter stated, in part:
“We would only be in a position to ...repay…once Imperial Bank Ltd reopens for business… we had previously requested that Rand Merchant Bank extend us some time to repay the full facility… we do understand that Rand Merchant Bank intends to demand immediate repayment of all sums outstanding. We would like to confirm that until Imperial Bank opens, we shall unfortunately not be in a position to repay these sums as we are currently experiencing a liquidity constraint.”
22. Following that default, RMB made demand on the Plaintiff on 7th December 2015 for USD 6,500,000.00 under the SBLCs. The demands appear at pages 129 to 137 of the Plaintiff's bundle.
23. The Plaintiff honoured the SBLCs and paid RMB a total of USD 6,500,000.00 between 4th and 31st December 2015. The SWIFT confirmations at pages 163 to 167 of the Plaintiff's bundle identify the transaction by reference to “Jade Petroleum”.
24. I am therefore satisfied that the Plaintiff's reimbursement claim arose, at the latest, in December 2015 when it paid RMB. It was also upon payment that the Plaintiff's equitable right of subrogation arose.
25. The original Plaint was filed on 8th June 2016 and the Amended Plaint on 22nd April 2021. Both were filed within six years of the December 2015 payment.
26. As regards the 2nd, 3rd and 4th Defendants, the Plaintiff issued a demand under the Guarantee on 21st April 2016, giving time for payment until 28th April 2016. On the Plaintiff's case, the contractual claim against the guarantors therefore accrued no later than that date.
27. The guarantors argued that no valid demand was served and that, for that reason, no cause of action ever crystallised against them. That submission raises an important question, but it concerns the enforceability of the Guarantee rather than whether this suit was brought more than six years after the material events. The Plaintiff's payment occurred in December 2015 and the demand relied upon was issued in April 2016. The suit followed in June 2016.
28. The evidence also shows that the guarantors were aware of the underlying default. The 3rd Defendant signed the 1st Defendant's letter of 6th November 2015, and DW2 accepted in cross-examination that default by the principal debtor exposed the guarantors to liability under the Guarantee.
29. DW2 further accepted that he was a signatory to the Guarantee and was aware of the role played by the SBLCs. He expressly stated that “without the SBLC the credit facility would not have been available to Jade” and that “MCB is paying the amount”.
30. Accordingly, although I will deal separately with whether the demand was properly served and whether contractual liability under the Guarantee crystallised, the limitation defence cannot succeed. The events on which the Plaintiff relies all occurred within months of the filing of the suit.
31. The limitation question should therefore be kept distinct from the merits of the Plaintiff's title to recover. Whether recovery ultimately rests on subrogation, assignment, the Guarantee, or restitution does not alter the fact that the relevant payment was made in December 2015 and the suit was filed in June 2016.
32. I find that the suit is not statute-barred against any of the Defendants. I will return to the effect of the disputed demand when considering the guarantors' liability.
Whether the Plaintiff is entitled to recover the sum of USD 6,500,000.00 from the Defendants under the doctrine of subrogation and/or unjust enrichment?
33. The commercial arrangement can be reduced to its essentials. RMB advanced a revolving facility to the 1st Defendant. Imperial Bank acted as the 1st Defendant's banker and intermediary. The Plaintiff, a tier-one bank, issued SBLCs securing part of the 1st Defendant's obligations to RMB. When the 1st Defendant defaulted, RMB called the SBLCs and the Plaintiff paid USD 6,500,000.00.
34. The Plaintiff therefore seeks, as the paying surety, reimbursement from the principal debtor and the benefit of the securities held by RMB. Put simply, it seeks to “step into the shoes” of RMB to the extent of the payment it made.
35. The Defendants resist the claim principally on the ground that the Plaintiff was not a party to the Facility Agreement and therefore lacks privity of contract.
The law on subrogation:
36. It is useful at the outset to distinguish subrogation from assignment. An assignment transfers an existing chose in action from the assignor to the assignee. Equitable subrogation, by contrast, arises by operation of law upon the relevant payment and places the payer, to the extent necessary to prevent unjust enrichment, in the position of the creditor whose claim has been discharged.
37. I point out that difference because the Defendants place considerable weight on the absence of notice of the Subrogation and Transfer Agreement. Notice may be material to the perfection or enforcement of an assignment against a debtor. In Standard Bank Limited v D L Patel Press (Kenya) Limited [1985] KECA 65 (KLR) , the Court of Appeal considered notice in the context of an equitable assignment. That principle does not mean, however, that an equitable right of subrogation depends upon the debtor's prior consent. A subrogee acquires only derivative rights: it can obtain no better right than the original creditor had and remains subject to the same substantive defences and contractual conditions.
38. The restitutionary foundation of subrogation is also consistent with Chase International Investment Corporation & Another v Laxman Keshra & 3 Others [1978] KECA 7 (KLR) , as restated in Marteve Guest House Limited v Njenga & 3 others [2022] KECA 539 (KLR) . The claimant must establish that the defendant received a benefit, that the benefit was at the claimant's expense, and that it would be unjust for the defendant to retain it. Each element must be proved.
39. The Plaintiff relied on the persuasive decision of the House of Lords in Banque Financiere de la Cite v Parc (Battersea) Ltd and others [1999] 1 AC 221, where subrogation was treated as a restitutionary remedy that does not depend upon a contractual intention to subrogate.
40. Lord Hoffmann explained the principle at pages 231 to 234 in the following terms:
“Subrogation is also used to describe an equitable remedy to reverse or prevent unjust enrichment which is not based upon any agreement or common intention of the party enriched and the party deprived…
It is a mistake to regard the availability of subrogation as a remedy to prevent unjust enrichment as turning entirely upon the question of intention, whether common or unilateral…
It should be recognised that one is dealing with a restitutionary remedy and that the appropriate questions are therefore, first, whether the defendant would be enriched at the plaintiff’s expense; secondly, whether such enrichment would be unjust; and thirdly, whether there are nevertheless reasons of policy for denying a remedy. ” (Emphasis mine)
41. On page 236, he continues in the following terms:
“As Millet L.J. pointed out in Boscawen v Bajwa [1996] 1 W.L.R. 328, 335, subrogation is not a right or a cause of action but an equitable remedy against a party who would otherwise be unjustly enriched. It is a means by which the court regulates the legal relationships between a plaintiff and a defendant or defendants in order to prevent unjust enrichment. A plaintiff’s legal relations with a defendant who would otherwise be unjustly enriched are regulated as if the benefit of the security is assigned to the plaintiff. (Emphasis mine)
42. The same principles are discussed in The Modern Contract of Guarantee, 4th Edition, Sweet & Maxwell , at pages 780 to 782 and 797 to 801. The propositions relevant to this case are these:
i. All the guarantors who contributed towards the payment of the principal debt were entitled to be subrogated to the creditor’s rights against the debtor.
ii. A guarantor’s right of subrogation is founded on the general rules of equity and does not depend on a special stipulation in the contract of guarantee. It rests on the guarantor’s equity not to have the entire burden of the debt cast upon him simply by the creditor’s choice not to resort to its other remedies or securities. It is only fair and equitable that a guarantor should be placed in the same position as a fully-paid creditor who declines to enforce such remedies or securities or who deals with them to the prejudice of the guarantor.
iii. In relation to the scope and remedy of subrogation, the equitable principle of subrogation entitles a surety, upon payment of the whole of the principal debt or upon performance of the principal obligation, to an assignment of all the securities held by the creditor in respect of the principal debt or obligation.
43. Mitchell and Watterson, in Subrogation Law and Practice at paragraphs 1.04 to 1.06 and 3.10 to 3.15, make the same distinction. In summary:
i. Subrogation rights derive from several different sources. They also work in several different ways, depending on the relationship between the parties.
ii. Subrogation arises in the law of guarantee . When a surety pays a creditor in respect of a guaranteed debt, his payment discharges the creditor’s personal right of action against the principal debtor and also any securities which the principal debtor has given the creditor to secure repayment of the debt.
iii. The law of unjust enrichment gives the surety a direct personal claim against the principal debtor for reimbursement, and the additional right to be treated as though he has acquired the creditor’s securities for his own benefit. (Emphasis mine)
44. Several of those texts refer to the English Mercantile Law Amendment Act, 1856. I bear in mind that, by virtue of section 3(1)(c) of the Judicature Act, statutes of general application in force in England on 12th August 1897 apply in Kenya, subject to the qualifications in that section. In any event, the authorities are persuasive and the principles accordingly remain relevant to the equitable doctrine before this Court.
45. The Defendants submitted that the 1st Defendant was not a party to the Subrogation and Transfer Agreement of 23rd February 2016, did not execute or consent to it, and was not notified of it.
46. They further argued that subrogation, being a restitutionary remedy rather than a legal assignment, cannot confer rights greater than those available under a properly notified assignment. They relied on Orakpo v Manson Investments Ltd [1978] AC 95, Boscawen v Bajwa [1996] 1 WLR 328 and Bank of Cyprus UK Ltd v Menelaou [2015] UKSC 66 to emphasise that subrogation is a remedy, not an independent cause of action, and remains subject to applicable defences.
47. I do not accept, however, that the Plaintiff was a stranger to the transaction in any practical sense. DW1 described the role of the SBLCs in the following terms:
“The SBLC were a security document that is paid by call and it was paid by the Plaintiff… the SBLC is a promise to pay by the bank on behalf of the applicant.
48. The documentary evidence points in the same direction. RMB's letter of 5th November 2015 identified the outstanding loans, the SBLCs securing them, and the institutions that issued those SBLCs. It stated, in part:
“ The principle amount of loans presently outstanding, and secured by the SBLC’s is $7,500,000… the respective issuing institutions are as follows:
1. MCB Ltd $1000,0000 22 nd November 2015
2. Citi Bank
3. MCB Ltd $1,500,000 29 December 2015
4. MCB Ltd $1,500,000 29 December 2015
5. MCB Ltd $1,500,000 26 January 2015
6. MCB Ltd $1,000,000 1 st February 2016
We confirm having been advised by the borrower that the above SBLCs will not be extended by the respective issuing institutions. Failure by the Borrower to procure extension or replacement…will constitute an Event of Default”
49. DW2 also accepted in cross-examination that “SBLC numbers 1 and 3to 6 are issued by MCB” and that “we did not challenge the letter”.
50. I am therefore not persuaded that the rule of privity, standing alone, defeats the claim. I have considered Agricultural Finance Corporation v Lengetia Limited [1985] KECA 58, where the Court of Appeal stated that “a general rule a contract affects only the parties to it, and cannot be enforced by or against a person who is not a party, even if the contract is made for his benefit and purports to give him the right to sue or to make him liable upon it”. That principle is not in dispute. The present claim, however, is founded principally on subrogation and restitution, doctrines which operate independently of privity.
51. Upon paying USD 6,500,000.00 to RMB under the SBLCs, the Plaintiff became subrogated in equity to RMB's rights to the extent of that payment. No separate agreement by the 1st Defendant was required to create that equitable right.
52. The payment discharged part of the 1st Defendant's indebtedness to RMB. It also affected the securities held by RMB, including the guarantees. To the extent permitted by the terms of those securities, subrogation entitled the Plaintiff to be treated as having the benefit of them. Whether the guarantees were themselves enforceable against the 2nd, 3rd and 4th Defendants is a separate question which I address under the next issue.
53. There is also the written Subrogation and Transfer Agreement of 23rd February 2016. The Plaintiff relies upon that agreement as an additional contractual mechanism by which RMB transferred its rights and securities.
54. Clauses 1.1 and 1.2 of the Subrogation and Transfer Agreement provide, without reservation and to the extent of the Plaintiff's payment, for the transfer and subrogation of RMB's rights, title, interests, securities and privileges under the Facility Agreement and related security documents.
55. The Plaintiff further states that the original instruments, including the Facility Agreement, guarantees, letters of credit, demand letters and payment confirmations, were delivered to it under the Subrogation and Transfer Agreement.
56. The absence of a direct contract between the Plaintiff and the 1st Defendant is therefore not determinative. The equitable right of subrogation arose from payment, while the written agreement recorded and transferred RMB's corresponding rights.
57. Nor does the assignment aspect of the arrangement alter the result on the facts of this case. The Facility Agreement expressly permitted RMB to assign or transfer its rights, and the Defendants have not shown that the absence of prior notice invalidated the equitable subrogation which had already arisen by operation of law.
58. It was also within the 1st Defendant's contemplation that, if RMB called the SBLCs, the issuing bank would pay and would thereafter seek recourse. That commercial consequence follows from the very purpose for which the SBLCs were procured.
59. Each SBLC was issued at the request of Imperial Bank, the 1st Defendant's banker, for the benefit of RMB. RMB's letter of 5th November 2015 expressly identified the Plaintiff as the issuer of the relevant SBLCs.
60. I therefore find that the lack-of-privity defence does not bar the Plaintiff's claim against the 1st Defendant. The evidence establishes that the 1st Defendant borrowed under the facility, defaulted, and that the Plaintiff paid USD 6,500,000.00 when RMB called the SBLCs. To that extent, the Plaintiff is entitled to reimbursement from the 1st Defendant.
61. As to formal notice of the subrogation, the equitable right arose on payment and did not depend upon the 1st Defendant's consent. The Plaintiff nevertheless takes its rights subject to the same substantive defences and contractual conditions that could have been raised against RMB.
62. The Plaintiff also submitted that the Facility Agreement itself did not require notice before RMB assigned its rights. I agree, for the following reasons:
i. Clause 27.1 permits assignment and transfer by the lender and does not impose a requirement that the 1st Defendant first be notified.
ii. Clause 27.2 concerns disclosure of information by RMB and provides, subject to applicable law, for notice of disclosure. It does not impose a condition precedent to an assignment under clause 27.1.
63. Accordingly, the contractual notice provisions relied upon by the Defendants do not defeat the Plaintiff's right of subrogation or the transfer of RMB's rights.
64. DW2 was cross-examined on the role of the SBLCs and the payments made by MCB. His evidence was:
“I am not aware of the SBLC I don't know the details. Without the SBLC the credit facility would not have been available to Jade. Out of the SBLC MCB paid the 4.5m$. this was paid on behalf of Imperial Bank. I don't know the connection. Rand did not accept the SBLC from Imperial and so Imperial approached MCB. This was then accepted by Rand and then Jade was able to access the facility.”
65. That evidence is consistent with the documentary record. Subrogation arose by operation of law when the Plaintiff paid RMB, and it placed the Plaintiff in RMB's position to the extent of that payment. Prior notice to the debtor was not necessary to create the equitable right.
66. The Defendants also contended that, because RMB did not provide statements of account, the amount claimed was not proved. I do not accept that submission.
67. First, in the letter of 6th November 2015 at page 160 of the PRBD, the 1st Defendant did not deny the indebtedness. It asked for additional time to repay. DW1 accepted in cross-examination that the letter acknowledged that the 1st Defendant owed RMB money.
68. Margaret Nieri Miururi v Bank of Baroda (Kenya) Ltd [2014] KECA 319 (KLR), relied upon by the Defendants, is distinguishable. There, the amount due was itself in dispute. Here, the 1st Defendant acknowledged an outstanding debt and sought time to pay it.
69. Second, the Plaintiff produced the SBLCs and the SWIFT confirmations evidencing payments to RMB. The Defendants did not produce evidence showing that the USD 6,500,000.00 had already been repaid or that the sum paid by the Plaintiff was not due. DW1 admitted during cross examination that he was not aware of any payment made by Jade directly to the Plaintiff.
70. Section 112 of the Evidence Act is also relevant. Where a fact is especially within a party's knowledge, the burden of proving or disproving that fact rests upon that party. Accordingly, if the entire amount had been repaid in full, the Defendants ought to have demonstrated this by way of evidence. This was not done.
71. The Defendants relied on a schedule at page 15 of their Trial Bundle showing Kshs. 832,117,226.00 in interest and charges. This evidence was inadequate. They did not, however, produce receipts or other primary evidence showing that those sums represented repayment of the principal debt. DW1 himself accepted that the schedule recorded finance costs rather than payments.
72. DW1 stated that
" Page 15 D bundle, summary of the costs associated with the financial instruments. Guarantees issued by Jade and the rates being charged by Imperial for the facilities and the security docs provided and bank charges and fees. In the witness statement shows that 1st D paid 832,117,226. This shows interest charges and fees raised by the second financiers, not payments paid. Payments were made but not here. Payments to Rand -- shows at 303,947,684 .”
73. The Defendants therefore failed to prove that the amount paid by the Plaintiff had already been discharged or was otherwise not recoverable.
74. For those reasons, I find on a balance of probabilities that the Plaintiff became subrogated to RMB's rights upon payment of USD 6,500,000.00 and is entitled to recover that sum from the 1st Defendant. The position of the guarantors, including the effect of the Guarantee, the 2010 variation and the demand, falls for determination under the next issue.
Whether the Defendants are jointly and severally liable to compensate the Plaintiff for the sum of USD 6,500,000.00 paid and interest .
75. The Plaintiff's case is that all four Defendants are jointly and severally liable for USD 6,500,000.00. As against the 2nd, 3rd and 4th Defendants, it relies on the Guarantee and Indemnity, the continuing-security clause, subrogation, and unjust enrichment.
76. The Plaintiff submitted that clause 6 made the Guarantee a continuing security. It relied on Standard Chartered Financial Services Limited v Manchester Outfitters (Suiting Division) Limited Now Called King Woolen Mills Limited & 2 others [2025] KESC 68 (KLR) for the proposition that a financier need not take fresh security for every subsequent advance where the existing security, properly construed, remains valid and undischarged.
77. The Plaintiff also relied on unjust enrichment. It argued that its payment extinguished the 1st Defendant's debt to RMB pro tanto and, at the same time, relieved the guarantors of their contingent exposure to RMB to the extent of USD 6,500,000.00.
78. The 1st Defendant maintained its lack-of-privity, frustration and performance defences. It relied, among other authorities, on Agricultural Finance Corporation v Lengetia Limited [1985] KECA 58 and the statement that "as a general rule a contract affects only the parties to it, and cannot be enforced by or against a person who is not a party."
79. The guarantors argued that the Guarantee was discharged by the Second Amendment of 14th July 2010. They relied on Holme v Brunskill (1878) 3 QBD 495 and David Harris v Middle East Bank Kenya Limited & 3 others
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