https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/10957

NCBA Bank of Kenya PLC v Gulf Fabricators Ltd (Civil Appeal E256 of 2024) [2026] KEHC 10957 (KLR) (17 July 2026) (Judgment) Neutral citation: [2026] KEHC 10957 (KLR) Republic of Kenya In the High Court at Kisumu Civil Appeal E256 of 2024 LM Wachira, J July 17, 2026 Between Ncba Bank Of Kenya Plc Appellant and Gulf Fabricators Limited Respondent (Being an Appeal against part of the Judgement and Decree of Hon. G.C. Serem (Resident Magistrate/Adjudicator) delivered at Kisumu on 7th November 2024 in Kisumu SCCCOMM/E845/2024) Judgment Introduction 1.The Respondent instituted a claim against the Appellant in the Small Claims Court in SCCOMM E845/2024. Its case was that it requested for a loan from the Appellant and that it signed an acceptance letter for the loan. The Respondent asserted that the loan was not disbursed but he was charged the arrangement fee and he sought an order from the court to have the said fee refunded. 2.Vide a Judgement delivered on 7th November 2024, the court found that the Appellant did not have the right to charge the arrangement fee as the loan was never disbursed. Consequently, the court ordered the Appellant to refund the Respondent the sum of Kshs.250,000/- which had been paid as arrangement fees. 3.The Appellant being dissatisfied with part of the said judgement has appealed to this court against the said decision on the following grounds: -“1.The Learned Magistrate erred in law and in fact in seeking to rewrite the contract for the parties.2.The Learned Magistrate erred in law and in fact in ignoring the overwhelming evidence on record, to the effect that the Respondent was sufficiently informed of his obligations, specifically the requirement to pay a non-refundable arrangement fee as delineated in the letter of offer.3.The Learned Magistrate erred in law in failing to appreciate that the Appellant had fulfilled its legal obligation to disclose all necessary information to the Respondent to enable the latter to fully understand and benefit from the loan services provided.4.The Learned Magistrate overlooked the evidence on record to the effect that Section A and Clause 1.3 of the Letter of Offer dated 23rd June 2021 stipulated that the Respondent was required to pay a non-refundable arrangement fee of Kshs.300,000.00/-, yet the Respondent only made a part payment of Kshs.256,000/-.5.The Learned Magistrate overlooked the evidence on record to the effect that Clause 5 of the Letter of Offer dated 23rd June 2021 stipulated that disbursement of the full loan amount was contingent upon payment of the arrangement fee among other preconditions.6.The Learned Magistrate overlooked the evidence on record to the effect that the Respondent failed to pay the full amount of the arrangement fee and further failed to satisfy obligations as to security documentation, which failure rendered the bank unable to disburse the loan facility and ultimately led to the closure of the loan account.7.The Learned Magistrate erred in law by finding that the Respondent was entitled to the refund of Kshs. 250,000/- which amount was part of a non-refundable arrangement fee.8.The Learned Magistrate erred and misdirected herself by failing to follow the time-honored law that parties are bound by the terms of their contract.” 4.Based on the foregoing grounds, the Appellant prayed to have the appeal allowed and the judgment of the Small Claims Court set aside in so far as it awarded the Respondent Kshs.250,000/- together with costs and interest and a declaration that the Respondent was not entitled to a refund of Kshs.250,000/- contending that the sum formed part of a non-refundable arrangement fee under the Letter of Offer dated 23rd June 2021. 5.The appeal was canvassed by way of written submissions. Trial Court Evidence 6.The evidence at trial was that vide a letter of offer dated 23/6/2021 which was varied on 17/8/2021, the parties entered into a loan agreement whereby the Appellant agreed to disburse the sum of Kshs.10,000,000/- to the Respondent and the Respondent to pay an arrangement fee of 3% of the loan amount. 7.Clause 1.3 of the letter of offer stated “‘Arrangement fee’ means the mandatory non-refundable fee paid by the Borrower to the Bank.” And Clause 5.5 thereto stated “The Bank's obligation to make any disbursement of the facilities is also conditional upon the Borrower’s compliance at the relevant time with the terms and conditions of the Bank and there being no breach of or default under the Letter.” 8.Evidence on record is that the loan was never disbursed but the bank went ahead and deducted Kshs.250,000/- which it called arrangement fees. The trial court found that the bank did not have the right to charge the arrangement fees and directed that the amount be refunded to the Respondent. Appellant’s Submissions. 9.In support of the instant appeal, the Appellant filed written submissions dated 10th June 2025. It was submitted that the appeal raised two issues: whether the Respondent had fulfilled its obligations under the Letter of Offer dated 23rd June 2021, as varied on 17th August 2021, and whether the trial court had improperly rewritten the parties' contract. 10.The Appellant contended that the Respondent breached the Letter of Offer by failing to pay the full non-refundable arrangement fee, failing to provide the requisite Tax Compliance Certificate and acceptable security documentation, including a professional undertaking in the prescribed format. It was argued that these were conditions precedent to disbursement of the loan and, having not been satisfied, the Appellant was entitled to decline disbursement, terminate the facility and retain the arrangement fee. Reliance was placed on Oxbridge Limited v Guaranty Trust Bank (Kenya) Limited and William Kazungu Karisa v Cosmas Angore Chanzera for the proposition that parties are bound by the terms of their contract and a party in breach cannot benefit from its own default. The Appellant further argued that the trial court erred in relying on correspondence that lacked proof of delivery to the Appellant 11.On the second issue, the Appellant submitted that the trial court erred by varying the parties' contract contrary to the settled principle that courts cannot rewrite contracts freely entered into by parties. Reliance was placed on National Bank of Kenya Ltd v Pipe plastic Samkolit (K) Ltd & Another, Oxbridge Limited v Guaranty Trust Bank (Kenya) Limited and Margaret Njeri Muiruri v Bank of Baroda (Kenya) Limited to argue that, in absence of fraud, coercion, undue influence or unconscionability, the Letter of Offer remained binding, including the provision making the arrangement fee non-refundable. Respondent’s Submissions 12.The Respondent submitted that the appeal raised three issues: whether the Appellant breached its contractual obligation by failing to disburse the approved loan facility, whether the Respondent was entitled to a refund of the arrangement fees and damages, and whether the Appellant was entitled to retain the charged securities. 13.On whether the Appellant breached its contractual obligation by failing to disburse the approved loan facility, the Respondent contended that the Appellant breached the Letter of Offer by failing to disburse the approved loan despite the Respondent having satisfied all the pre-approval conditions. It was submitted that the Appellant neither issued the requisite notice of cancellation nor reduction of the facility as required under Clause 3.3 of the Letter of Offer, but instead closed the Respondent's account without notice. The Respondent further argued that the Appellant improperly introduced the requirement for a Tax Compliance Certificate after approval of the facility, notwithstanding that the certificate was eventually furnished. 14.Reliance was placed on National Bank of Kenya Ltd v Pipeplastic Samkolit (K) Ltd & Another for the proposition that parties are bound by the terms of their contract and that the Appellant could not depart from the agreed terms. 15.On whether the Respondent was entitled to a refund of the arrangement fees and damages, the Respondent submitted that although the Letter of Offer described the arrangement fee as non-refundable, the loan facility was never disbursed and, consequently, the consideration for the payment wholly failed. It was argued that the Respondent was therefore entitled to restitution of the arrangement fees together with damages for breach of contract, having suffered financial loss, reputational damage and loss of the underlying contract. 16.On whether the Appellant was entitled to retain the charged securities, the Respondent submitted that the Appellant had no lawful basis for continuing to retain the charged securities after failing to disburse the loan facility. Reliance was placed on KCB Ltd v Samuel Kamau Macharia for the proposition that it is inequitable for a bank to retain securities for a facility that was never advanced. The Respondent therefore urged the Court to dismiss the appeal and uphold the judgment of the trial court with costs. Analysis and Determination 17.This being a first appeal, the court is required to reconsider and reevaluate the evidence as adduced before the trial court, this was held in the Court of Appeal case of Peter M. Kariuki v Attorney General (2014) eKLR. I have considered the record of appeal and the rival submissions filed by the parties and the grounds of appeal may be distilled to the following issue for determination: Whether the Learned Magistrate erred in law by ordering the refund of Kshs.250,000/- which was paid as Arrangement fees under the contract between the parties. 18.Vide a letter of offer dated 23/6/2021 which was varied on 17/8/2021, the parties entered into a loan agreement whereby the Appellant agreed to disburse the sum of Kshs.10,000,000/- to the Respondent and to pay an arrangement fee of 3% of the loan amount. The letter of offer and its variation were produced in the record of Appeal from page 32 to 64. Clause 1.3 of the letter of offer stated: “‘Arrangement fee’ means the mandatory non-refundable fee paid by the Borrower to the Bank.” 19.Clause 5.5 thereto stated: “The Bank's obligation to make any disbursement of the facilities is also conditional upon the Borrower’s compliance at the relevant time with the terms and conditions of the Bank and there being no breach of or default under the Letter.” 20.From the Clauses above, it was a term of the contract that the Respondent had the obligation to pay the arrangement fee of 3% of the facility amount and that the disbursement of the facilities was conditional upon the Respondent’s compliance with the terms of the letter of offer. 21.It is not disputed that the Respondent paid an arrangement fee of Kshs.250,000/- which was short of the Kshs.300,000/- required in the agreement. I do agree with the Appellant that this amounted to a breach of the Respondent’s obligations under the agreement. 22.The Appellant contended that the Respondent further breached the terms of the letter of offer by failing to provide a tax compliance certificate and a letter of undertaking that was in the approved format. 23.Page 3 of the letter of offer stated that the Respondent was required to provide a Tax Compliance Certificate and a letter of undertaking in the Appellant’s prescribed format. The Respondent did not rebut this assertion by providing evidence that it availed the said documents as per the letter of offer. 24.It is trite law that a court cannot rewrite a contract for the parties. The Court of Appeal in National Bank of Kenya Ltd v Pipeplastic Samkolit (K)Ltd &another [2001]eKLR held as follows: -“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.” The terms of the contract were in the letter of offer and party obligations were well set out. It was the duty of each of the parties to honor their obligations to perfect the security." 25.In Oxbridge Limited v Guaranty Trust Bank (Kenya) Limited (Civil Case E059 of 2020 [2022] KEHC 14540(KLR) (Commercial and Tax)(31 October 2022) (Judgment) the Court held:-“In conclusion therefore, I find and hold that the plaintiff's obligation under the letters of offer was to ensure that all the documents required to perfect the securities were provided in good order. By failing to provide registrable documents to the bank, it cannot run away from its own failure…………. The basic rule of the law of contract is that the parties must perform their respective obligations in accordance with the terms of the contract executed by them. In this case, the letters of offer had express terms and conditions which bound the plaintiff upon its acceptance. It was an express condition that the plaintiff would furnish the security documents within the prescribed timelines which it failed to thereby breaching the terms of the letters of offer……….I find that the bank undertook all measures to protect its interest by ensuring all the required security documents were available in order to initiate the perfection of security process from the date of issuance of the original letter of offer in March 2016 until its cancellation in November 2016.The bank was therefore entitled to withdraw the letters of offer. I therefore hold that the plaintiff has not proved that the bank has breached any agreements as alleged or at all. [Emphasis added]” 26.My finding is that the trial court erred in finding that the arrangement fee ought to be refunded on the basis that the loan was not disbursed. It was necessary for the arrangement fee to be paid in full and other conditions met before the loan was disbursed and in default of compliance the Appellant was entitled to cancel the disbursement of the facility amount and was not obliged to refund the arrangement fee which was paid partly. 27.In the upshot, I find that the Appeal is merited and I allow it as prayed with costs to the Appellant. JUDGMENT DELIVERED, DATED AND SIGNED VIRTUALLY AT NAIROBITHIS 17TH DAY OF JULY, 2026.…………………………..………………L. M. WACHIRAJUDGEIn the Presence of:Leadys – Court assistantMr. Ojalo for Mr. Mogire for the Appellant.Mr. Siganga for the Respondent.Page 3 of 3