[2020] KEHC 5842 (KLR)

[2020] KEHC 5842 (KLR)

The court held that the performance bond in question was an independent and unconditional obligation by the bank to pay the beneficiary, Kipeto Energy Limited, upon demand, regardless of any disputes between the contractor and employer. The only recognized exception to this rule is fraud, which must be specifically...

Source-derived case information.

Citation
[2020] KEHC 5842 (KLR)
Parties
Applicant: Haidco Limited; Respondent: Kipeto Energy Limited; Respondent: Jamii Bora Bank
Court
High Court
Court Station
High Court at Nairobi (Milimani Commercial Courts)
Jurisdiction
Kenya
Case Number
Civil Case 121 of 2019
Procedural Posture
Miscellaneous Application / Ruling on Interlocutory Injunction and Interim Measures of Protection Pending Arbitration
Outcome
Application for temporary injunction dismissed; prayer 4 of the Notice of Motion dated 21st May 2019 allowed with no order as to costs.
Judges
F Tuiyott
Legal Topics
Performance Bonds, Interim Injunctions, Arbitration Referral, Contractual Breach, Fraud Exception, Liquidated Damages
Source Language
en
Commercial and Corporate Civil Procedure Performance Bonds Interim Injunctions Arbitration Referral Contractual Breach Fraud Exception Liquidated Damages

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Parties

Haidco Limited

Applicant

Kipeto Energy Limited

Respondent

Jamii Bora Bank

Respondent

Procedural Posture

Miscellaneous Application / Ruling on Interlocutory Injunction and Interim Measures of Protection Pending Arbitration

  1. 1 Whether the High Court should grant a temporary injunction restraining the release or payment of the performance bond pending arbitration.
  2. 2 Whether the demand for payment under the performance bond by the defendant was fraudulent or unconscionable, warranting court intervention.
  3. 3 Whether the dispute between the parties should be referred to arbitration as per the contract.

Ratio Decidendi

The court held that the performance bond in question was an independent and unconditional obligation by the bank to pay the beneficiary, Kipeto Energy Limited, upon demand, regardless of any disputes between the contractor and employer. The only recognized exception to this rule is fraud, which must be specifically pleaded and proved. In this case, Haidco Limited did not allege or provide evidence of fraud or unconscionable conduct by Kipeto in calling the bond. The court found that the dispute regarding payments, contract performance, and entitlement to sums under the contract were matters for arbitration as per the parties' agreement. The court further held that it would not interfere...

Court Disposition

Application for temporary injunction dismissed; prayer 4 of the Notice of Motion dated 21st May 2019 allowed with no order as to costs.

Orders

  • The Notice of Motion dated 14th May 2018 is dismissed with costs.
  • Prayer 4 of the Notice of Motion dated 21st May 2019 is allowed with no order as to costs.