CFC Stanbic Bank Limited v Kenya Haulage Agency Limited (Civil Appeal E041 of 2022) [2025] KECA 1034 (KLR)
The bottom line
#Kenya's Court of Appeal confirmed a bank must pay over USD 250,000 for issuing a bid bond valid 119 days instead of the required 120.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether the cause of action pleaded and proved was breach of contract or negligence, and whether the trial judge erred in determining an unpleaded issue of breach of contract
- 2.Whether the appellant owed and breached a duty of care to the respondent in issuing the bid bond
- 3.Whether the loss of US$ 250,860 claimed was recoverable, or was pure economic loss that was too remote and not recoverable
Key legal issues
#Whether breach of contract was pleaded
Breach of contract was not pleaded; the pleaded cause of action was negligence, and the trial judge erred by making a finding on an unpleaded issue
The plaint particularised negligence and lack of care in issuing the bid bond, not the terms of a contract or particulars of breach. Pleadings serve to alert the opposing party to the case to be met and to define the issues for trial. Courts are confined to issues flowing from the pleadings or framed by the parties. The trial judge's finding of breach of contract therefore could not stand.
Whether the appellant owed and breached a duty of care
Yes - as banker and guarantor the appellant owed a duty of care to issue the guarantee per the customer's instructions and breached it by issuing a 119-day validity instead of the requested 120 days
The bank-customer relationship carries mutual duties; a bank executing a customer's instructions must exercise reasonable care and skill to an objective banker's standard. The request expressly required 120 days validity, the bank knew the guarantee was the tender security, and the 119-day validity was not controverted. Breach of duty and causation were established by the KPA rejection letter.
Whether the lost tender profits were recoverable or too remote pure economic loss
The loss of profits from the tender was recoverable - it was foreseeable and proximate given the appellant's actual knowledge of the purpose and legal effect of the guarantee
The claim was for pure economic loss arising from a negligent statement/act, for which recovery requires more than foreseeability: proximity arising from the tortfeasor's knowledge that the specific claimant will suffer loss. The bank knew the guarantee was the tender security and had to be valid for 120 days, and non-conformity with a mandatory tender requirement was not a correctable minor deviation.
First appellate court's duty
A first appeal is reheard on the evidence, with departure from trial findings only where unsupported by evidence, based on wrong principles, or injudicious discretion
Relying on Selle v Associated Motor Boats, Jabane v Olenja and Mbogo v Shah, the Court reconsidered and evaluated the evidence and drew its own conclusions of fact and law, reaching the same outcome as the High Court but on a different basis.
Legal principles established
#- Courts must determine cases on issues flowing from the pleadings; a trial judge errs by determining an issue not pleaded by the parties
- A bank honouring its customer's instructions owes a duty to exercise due diligence and reasonable care and skill, and is liable in negligence for failing to do so
- Pure economic loss is recoverable in negligence only where foreseeability is supplemented by proximity - knowledge by the tortfeasor that the specific claimant will suffer loss
Court orders
#- 1.The appeal is dismissed in its entirety
- 2.Costs of the appeal awarded to the respondent
The bench
#One judgment of the whole court — no separate or dissenting opinions.
- On appeal from
- High Court of Kenya at Mombasa
- Mombasa HCCC No 180 of 2012
- Jurisdiction invoked
- First appeal to the Court of Appeal under the Court of Appeal's appellate jurisdiction (the judgment does not cite a specific constitutional/statutory provision)
Relief refused
#Setting aside the High Court award of USD 250,860 and substitution with dismissal of the respondent's claim
The Court found a breach of duty of care by the appellant and held the loss of profits from the tender was foreseeable and proximate, not too remote
Costs
Costs of the appeal awarded to the respondent; the judgment does not state an express order on costs of the High Court
Quotable passages
#Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.
It is thus our finding that the trial Judge erred by making a finding on an issue which was not pleaded, namely breach of contract, and by failing to interrogate the issue and cause of action that was specifically pleaded
In honouring its customer's instructions, a bank is under a duty to exercise due diligence as well as reasonable care and skill
We therefore find that the loss of the actual tender was not only foreseeable but also a proximate loss in the circumstances, given the appellant's actual knowledge as regards the purpose of the bank guarantee
In the end we reach the same decision as did the High Court, but for difierent reasons and on a difierent basis, as explained in this Judgment. This appeal is accordingly dismissed in its entirety with costs to the respondent.
Issues in the judgment
#Case name appears inconsistently in the judgment - respondent's counsel cited 'Hedly Bryne & Co Ltd v Heller & Partners' while the court's own discussion renders it 'Hedley Byrne & Co Ltd v Heller & Partners Ltd'; the Hedley v Raxendale citation also appears to be a garbled rendering of Hadley v Baxendale as printed
The respondent's director is referred to as 'Paul Munyao' in the defence narrative but signs the request letter as 'Patrick Munyao, Managing Director'
KPA letter quoted with a typo ('for 119 days and 120 days as required') where the context indicates 'not 120 days'
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "CFC Stanbic Bank Limited v Kenya Haulage Agency Limited (Civil Appeal E041 of 2022) [2025] KECA 1034 (KLR)", Case Analysis (2025). Civil Appeal (Mombasa), memorandum of appeal dated March 9, 2022. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2025/1034/eng@2025-06-05
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.