https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1195

Consolidated Bank of Kenya Ltd & another v Kandie (Suing Through Attorney John Kamar) (Civil Appeal E090 of 2021) [2026] KECA 1195 (KLR) (26 June 2026) (Judgment) Neutral citation: [2026] KECA 1195 (KLR) Republic of Kenya In the Court of Appeal at Eldoret Civil Appeal E090 of 2021 PM Gachoka, WK Korir & L Ndolo, JJA June 26, 2026 Between Consolidated Bank of Kenya Limited 1st Appellant Protus Wanga t/a Timeless Dolphin Auctioneers 2nd Appellant and William Kimutai Kandie (Suing Through Attorney John Kamar) Respondent (An appeal against the judgement and decree of the High Court of Kenya at Eldoret (O. Sewe, J.) delivered on 30th September, 2020 in HCCC No. 37 of 2019 (Formerly ELD ELC No. 9 of 2015 Civil Suit 37 of 2019 ) Judgment 1.The respondent instituted a claim in the Environment and Land Court (ELC)Eldoret No. 9 of 2015, vide a plaint dated 19th January 2015 which was amended on 4th December 2017 seeking an injunction against the intended statutory sale of his parcel of land known as ELDORET/ MUNICIPALITY BLOCK 14/255 and a declaration that there was a discharge of the guarantee agreement, arising from a breach of the law occasioned by the actions of the 1st appellant. The facts supporting his claim were that the respondent provided his title to the suit land, as security to guarantee a loan facility for the sum of Kshs. 13,000,000/-, advanced to Lomsons Enterprises Limited by the 1st appellant. He set out a plethora of reasons as the basis of the orders sought including, but not limited to, lack of service of the requisite statutory notices, erroneous amounts in the notification of sale, breach of the loan contract and non-compliance with the Land Act. 2.In response, the appellants entered appearance and filed an amended statement of defence dated 13th December 2017. In it, the appellants averred that the respondent pledged security to secure a debt, for the entire sum of Kshs. 76,023,660/- out of which Kshs. 65,953,176/- remained outstanding and Kshs. 11, 334,706.46 was in arrears. The appellants further averred that the respondent was served with all the requisite statutory notices but neglected to exercise his right to equity of redemption. They stated that the court should only consider a breach and remedy the same without issuing a permanent injunction. Ultimately, they prayed that the suit be dismissed with costs. 3.After a full trial and in a judgement dated 30th September 2020, the trial Judge, Sewe, J. found that under clause 2.1 of the Deed of Guarantee & Indemnity, the parties agreed that the guarantor would unconditionally guarantee to pay the lender on demand and discharge the debtors’ obligations without a deduction, set-off or counterclaim. The Judge held;“Accordingly, for the purpose of the loan transaction, the plaintiff’s liability would arise upon default by the principal debtor and upon demand for payment by the 1st defendant.” 4.The learned Judge pointed out that spousal consent was obtained from one Grace Jeptepkeny Lagat for purposes of the charge and it was imperative that she be served with the 40 days’ notice as per section 96(3)(c) of the Land Act, which service was not proved. 5.Additionally, the learned judge found that, although a notice under section 90 of the Land Act had been served, there was no indication that a notice under section 90(6)(1) of the said statute had been served on the respondent. The judge held as follows on that issue:“Having carefully considered the evidence presented herein by the 1st defendant, including the Bundle of Documents marked the Defendant’s Exhibit 1B, there appears to be no indication that the Section 96 notice was ever issued by the 1st defendant or served on the plaintiff. It is instructive that the provision is couched in peremptory terms and is therefore a mandatory requirement.” 6.Relying on the testimony of DW1, the learned Judge found that the amount owing at the time of commencement of exercise of the statutory power of sale was Kshs. 6,796,497.90. The Judge considered the issue on the restructuring of the loan and found that the respondent was never notified of the same and therefore, could not be held to account for the restructured facility as he was not privy to the same. The judge held;“In view of the express admission by DW1, that the plaintiff was neither a party to the restructure nor was he notified thereof for purposes of concurrence, there is no basis upon which the plaintiff can be held to account for the restructured facility to which he was not privy.” 7.The learned Judge held that the restructure had the effect of fully discharging the respondent from his obligation as a guarantor, stating that;“Granted, the facilities were not increased from what was offered in the initial Letter of Offer dated 16 May 2012; nevertheless, it was significant that the nature of the facilities were converted from 12 months’ overdrafts and invoice discounting to term loans in the names of the individual guarantors. I am therefore satisfied that the restructuring fundamentally altered the initial obligations as conceived and committed to by the parties and therefore ought to have been done with the participation and consent of the plaintiff. In any event, the plaintiff not having participated in the restructure cannot be held to account on those altered terms. Consequently, it is my finding that the restructure has the effect of fully discharging the plaintiff from his obligations as a guarantor for purposes of the initial Letter of Offer as well as the subsequent Letter of Offer dated 7 November 2012.” 8.The learned judge then issued the following orders:a.That a declaration be and is hereby issued that the 1st defendant’s intended exercise of its statutory power of sale is a nullity.b.That a declaration be and is hereby issued that the plaintiff is discharged from his obligations as a guarantor; and that the Charge executed by him in favour of the 1st defendant over Land Parcel No. ELDORET MUNICIPALITY/BLOCK 14/255 be discharged forthwith.c.That a permanent injunction be and is hereby issued restraining the defendants by themselves or their agents or servants, from selling, advertising for sale or in any manner whatsoever dealing with or disposing of Land Parcel No. ELDORET MUNICIPALITY/BLOCK 14/255.d.That costs of the suit be borne by the 1st defendant.” 9.The appellants are dissatisfied with these findings. They filed their notice of appeal dated 16th October 2020. They also filed a memorandum of appeal of even date. The appellants raised 4 grounds challenging the judgment of the learned Judge. We have taken the liberty to summarize them as follows: the learned judge erred in ignoring the appellants’ evidence and finding in favour of the respondent who had not proved his case; that the learned judge erred by making a declaration that the appellants’ exercise of their right to statutory power of sale was a nullity; and that the learned judge erred in making a declaration that the respondent be discharged from his obligation as a guarantor. 10.In the premises, the appellants urged this Court to allow the appeal with costs and set aside the judgement of the High Court dated 30th September 2020. 11.When the appeal was heard virtually on 21st April 2026, learned counsel, Mr. Mukhabani, held brief for learned counsel, Mr. Siboe for the appellants while learned counsel Mr. Mogambi appeared for the respondent. Both parties opted to rely on their written submissions. The appellants’ written submissions are dated 20th March 2026 while the respondent’s submissions are dated 2nd April 2026. 12.After summarizing the facts set out in the suit leading up to this appeal, the appellants submitted that the learned judge erred in discharging the respondent from his obligations and ordering a discharge of the charge over the suit property despite the clear existence of an outstanding debt. In particular, the appellants state that the court erred in failing to appreciate that the accommodation of the co-guarantors was contractual and lawful, and by treating the same as a variation of the terms of the guarantee. 13.The appellants highlighted the terms of clause 10.3 of the agreement and clause 4 of the guarantee, urging that the court misapplied the law. They relied on Paramount Bank Limited vs. First National Bank of Kenya Limited & 2 Others (2023) KECA 1424 KLR and National Bank of Kenya Limited vs. Pipelastic Samkolit (K) Limited & Another (2001) KECA 362 KLR to support this proposition. 14.It was argued that the respondent did not deny the existence of the facility or his execution of the guarantee. Counsel maintained that the order for discharge was premature and that under section 85 of the Land Act, a discharge should only be perfected after fulfilment of the requisite obligation. 15.Secondly, the appellants contended that failure to serve the notices does not invalidate the already served notices, pointing out that the remedy lies in issuing the said notices, and not a discharge or declaration of the intended sale a nullity. The appellants further contend that the court never took into account the fact that the respondent did not discharge his burden of proof to the required standard. They state that at the time of commencement of the suit, that is 21st January 2015, the loan was already due, and no evidence was tendered to the effect that the respondent’s equity of redemption had been clogged. 16.The appellants further submitted that the bank prorated the debt among the guarantors according to their documents limiting the respondent to Kshs. 13,000,000/-. They therefore maintain that the demand for Kshs. 6,792,497.90 was legitimate. 17.The appellants argued that the judge based her findings and reliefs on matters not pleaded, pointing out that it was never pleaded that the accommodation given to the co-guarantors, prejudiced the respondent, yet, the court discharged the charge on account of the variation of the initial contract, which was not in issue before the court. In so doing, it was urged that, the court based its decision on unpleaded facts rendering it a nullity. 18.On the part of the respondent, it was conceded that the respondent charged the property as a guarantor for the amount of Kshs. 13,000,000/-. The respondent stated that by a restructuring the agreement dated 7th November 2012, between the appellant and the principal debtor, the overdrafts initially granted were converted to a term loan of Kshs. 76, 023, 660/- repayable over 60 months at Kshs. 1,972,096/- monthly. The respondent adds that he was never consulted on the conversion of the overdraft. 19.Referring to DW1’s testimony, learned counsel stated that the changes were made without the respondent’s consultation leading to an automatic discharge. He urged that this failure to engage the respondent on the changes was an act in bad faith, relying on the sentiments in Halsbury’s Laws of England 5th Edition volume 49 at page 561 paragraph 1214 where the learned authors observed;“A guarantor will also be discharged if the creditor acts in bad faith towards him, or connives at the default by the principal debtor in respect of which the guarantee is given” 20.Further, he urged that the said sentiments are also contained in Halsbury’s Laws of England, 4th edition volume 20 (1) paragraph 324 at page 210 where it is explained;“The basis of the principle that a guarantor is discharged by an agreement between the creditor and the principal - debtor which has the effect of varying the guarantee, is that it is the clearest and most evident equity not to carry on any transaction without the privity of the guarantor who must necessarily have a concern in every transaction with the principal debtor, and which cannot as a guarantor be made liable for default in the performance of a contract which is not the one of which the fulfilment of which he had guaranteed”. 21.He placed reliance on the holding in Holme vs. Brunskill (1878) 3 QBD 495 and Cooperative Bank of Kenya Limited vs. Washington Otieno Ogindo (2012) eKLR in augmenting that argument. 22.According to the respondent, the appellants failed to comply with the mandatory requirements of a valuation report and 40 days’ notice as required by law, rendering the intended exercise of the statutory power of sale in contravention of section 97(2) of the Land Act. For this position, he placed reliance on the decision in David Ngugi Ngaari vs. Kenya Commercial Bank Limited (2015) eKLR. 23.Lastly, it was argued that the learned judge’s findings were supported by the pleadings, the evidence adduced before her and the law. Counsel fortified that submission with the holding in Odd Jobs vs. Mubea (1970) EA 476 and urged us to dismiss the appeal. 24.We have considered the memorandum of appeal, the submissions and the authorities cited by the parties, examined the record of appeal and analyzed the law. As a first appellate court, an appeal is by way of a retrial and the principles upon which this Court acts in such an appeal are well settled. Briefly put, they are that this Court must reconsider the evidence, evaluate it itself and draw its own conclusions though it should always bear in mind that it has neither seen nor heard the witnesses and should make due allowance in this respect. [See Gitobu Imanyara & 2 others vs. Attorney General [2016] eKLR]. 25.To formulate the germane issues for determination, it is important that we summarize the facts as captured in the record of appeal before us. From the record, the respondent called PW1, one John Kibet Kamara, described as a purchaser of the suit land from William Kandie. He stated that he came to know that William Kandie had obtained a loan of Kshs. 13,000,000/- from the 1st appellant and charged the property as security after purchasing the land. Kamara further testified that the respondent appointed him as his agent vide a Power of Attorney dated 13th January 2015. It was his testimony that the redemption notice indicated that Kshs. 66,673,424.60 was due yet the respondent had only committed to an amount of Kshs. 11,000,000/-. He learnt through the newspapers that the property was to be sold, adding that there was a failure by the bank to comply with the law. 26.The 1st appellant, in its defence, called DW1, Bernard Javan Oliko, its employee. He stated that William Kandie furnished his property known as Eldoret Municipality Block 14/255 as security as a guarantor for a loan to Lomsons Enterprises Limited for Kshs. 76,023,660/- which was disbursed but was never repaid. Oilko testified that a notice was issued to the borrower vide P.O Box 817-30100 Eldoret and also to the Guarantor and there was no response. Consequently, they issued instructions to the 2nd appellant for the sale of the charged property. 27.Upon considering the submissions by the parties, we find that the following issues arise for determination; whether the learned judge erred in giving an order for the discharge of the charge over Eldoret Municipality Block 14/255 on the basis of the restructuring of the loan agreement; whether the order for the nullification of the exercise of the statutory power of sale by the 1st appellant is legally tenable ; and whether the judge issued prayers that had not been pleaded. 28.We will first answer the question whether the learned judge granted reliefs not sought in the pleadings. We note that the issue of discharging the guarantee, having not been pleaded, was raised by the appellants. We are alive to the ruminations of the Court on this issue, in the case of Ann Wairimu Wanjohi vs. James Wambiru Mukabi [2021] eKLR that:“Although it is desirable that where necessary the pleadings should be amended to bring in all the issues, Odd Jobs - Versus - Mubea (supra) remains good law, that in limited circumstances where an unpleaded issue is crucial to the matters in issue the court may determine a suit on the unpleaded issue, provided both parties have clearly addressed the unpleaded issue in their evidence or submissions, and left the matter for the determination of the court. However, such determination will not extend to determining or awarding a relief that was not specifically sought in the pleadings.”[Emphasis ours] 29.However, upon considering the pleadings, specifically the Amended Plaint dated 4th December 2017, it is evident that the respondent had pleaded the issue that since the appellant changed the terms of the guarantee, the court should grant an order for discharge of the charge. Therefore, this ground of appeal fails. 30.The next issue we will deal with is the question of whether the restructure of the loan facility amounted to a variation of the guarantee agreement. On the issue of the discharge of the charge, which was premised on a breach arising from the variation by way of ‘splitting’ the loan, it is not disputed that there was a variation of sorts in the guarantee agreement. It was the evidence of DW1, Benard Javan Oliko, during his cross examination, that there was a restructure of the facility which comprised of the overdraft facility being converted into a term loan. This was what was referred to as splitting of the loan. 31.We have perused the charge. Clause 10.3 states:“ 10.3The Bank shall be at liberty without affecting its rights hereunder at anytime:- 10. 3.1Consolidate, split, determine or vary any credit to or accounts of the charger and mode of repayment thereof.” 32.Clause 10.51 provides;“Pursuant to section 82(1) in the LA, the Chargor hereby gives irrevocable authority to the bank to utilize this charge instrument as security to give further financial accommodation by way of a loan, time credit, banking facilities, overdraft advances and other financial facilities to the charger or others for whom the charger is a surety on a current or continuing account.” 33.Attention is also drawn to clause 4 of the Deed of Guarantee which provides: 4.The Lender may in its absolute discretion as it thinks fit and without the consent of the Guarantor and without releasing or reducing or otherwise affecting whatsoever the liability of the Guarantor under this guarantee or the validity of the security hereby created do any of the following; … 4. 3grant time or indulgence to or compound with the Debtor or any other person; … 4. 6...And the security hereby created shall not be discharged nor shall the liability of the Guarantor under Clause 2 be affected by anything which would not have discharged, released, reduced or otherwise affected the liability of the Guarantor if the Guarantor had been a principal debtor of the Lender instead of a guarantor.” 34.Looking at the terms of the charge and the guarantee, it is apparent that the variation referred to was contemplated in the guarantee contract. Faced with a similar set of facts in Paramount Bank Limited vs. First National Bank Limited & 2 others [2023] KECA 1424 (KLR), the Court held as follows at paragraph 50;“We have thoroughly studied the impugned guarantees. We are in consonance with the trial Judge’s finding that the variation was contemplated in the two guarantees which are both worded in identical terms as follows:“ .... bill discounting facilities or any other accommodation.”The wording of the guarantee instruments was not limited to bills discounting facilities but it extended to “any other accommodation.” Consequently, we find that the conversion of the outstanding, balance into a loan facility fell into the category of “any other accommodation” and, as a result, the efforts by the appellant to have its obligation under the impugned guarantees discharged is unmerited.” 35.We are in agreement with the appellants that the learned judge misapplied the holding in David Harris vs. Middle East Bank Kenya Limited & 3 Others (2019) eKLR, when determining the issues herein, as in that decision, the variation was in the original facility, whereas in this scenario, the variation was in the guarantee. In the David Harris case, the appellant never executed the second guarantee which resulted in an increase and extension in exposure of the guarantor without his consent. In this particular instance, the respondent executed the guarantee, and the variation, contemplated by the clauses in the Deed of Guarantee and the Charge, did not prejudice the respondent. 36.It is trite that a court cannot rewrite a contract between parties. In National Bank of Kenya Ltd vs. Pipelastic Samkolit (K) Ltd & another (2001) KECA 362 KLR the Court held;“Having directed himself so far quite properly, the learned judge proceeded to assume (when there was no basis for such an assumption) that the appellant bank would be willing to waive some of the interest charged. Stepping into the shoes of the appellant bank the learned judge decided that a large part of the interest would or could be waived. This, in our view, is a serious misdirection on the part of the learned judge. A Court of law cannot re-write a contract between the parties. The parties are bound by the terms of their contract, unless coercion, fraud or undue influence are pleaded and proved. There was not the remotest suggestion of coercion, fraud or undue influence in regard to the terms of the charge.”[Underlining ours] 37.In finding that the splitting of the loan was a variation, meriting the discharge of the charge without settlement of the liability, the trial court erred. That decision amounted to a rewriting of the terms of the guarantee. Specifically, there was an express term that security could not be discharged by anything which would not have discharged the liability of the guarantor had he been a principal debtor. 38.We shall deal with the nullification of the appellant’s statutory power of sale in its entirety. As already stated, the learned Judge erroneously found that the variation was a breach capable of discharging the charge and that the statutory power of sale could not crystallize in the circumstances. It is clear that the nullification of the statutory power of sale was premised on an erroneous interpretation of the terms of the deed of guarantee and the charge and was therefore, equally erroneous. 39.It is clear from our analysis that the appellant adduced cogent evidence that it advanced a loan facility, that the respondent signed a guarantee of 13 million shillings, that the variation was done in accordance with the charge document, that the principal borrower defaulted and that all the requisite notices were served on the principal borrower and all the guarantors. In view of this, the finding by the trial judge that the guarantee by the respondent was discharged as a result of the variation of the terms was erroneous. 40.The upshot of our analysis is that the present appeal is meritorious. Accordingly, we allow the appeal in the following terms:1.The judgement delivered on 30th September 2020 is hereby set aside in its entirety.2.The suit in the trial court is dismissed with costs to the appellant. 3.Consequently, the appellant is at liberty to exercise the statutory power of sale. 4.The costs of the appeal shall be borne by the respondent. DATED AND DELIVERED AT ELDORET THIS 26TH DAY OF JUNE, 2026.M. GACHOKA C.Arb, FCIArb.......................................JUDGE OF APPEALW. KORIR......................................JUDGE OF APPEALL. M. NDOLO......................................JUDGE OF APPEALI certify that this is a true copy of the original.SignedDEPUTY REGISTRAR