Bhogal & 3 others v Sheikh & Gregory (Joint Receivers and Managers of Sam-Con Limited (In Receivership) & 3 others (Civil Appeal 94 of 2019) [2025] KECA 1666 (KLR)
The bottom line
#A guarantor in Kenya must prove the entire debt was fully paid—partial payments don't remove liability, and the Court of Appeal dismissed both sides' appeals.
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 appellants proved that they had settled their liability in full
- 2.Whether the appellants were liable to pay the interests accruing from their liability and whether the said interests were paid
- 3.Whether the learned Judge erred in her award on costs
Key legal issues
#Whether the appellants proved that they had fully settled their liability of Kshs 45,000,000 under the guarantees and mortgages
The appeal fails: the appellants did not discharge the burden of proving full settlement of the debt; partial payments of Kshs 16,066,302.95 left a balance of Kshs 28,933,698 unpaid.
The guarantor bears the burden of proving either that the principal debtor settled the full liability or that the guarantor fulfilled its own obligation. The principal debtor, Sam Con, did not adduce evidence. Payments made by or on behalf of the principal debtor, including receiver sales proceeds, were not shown to have fully satisfied the debt. On the balance of probabilities, the appellants failed to prove full satisfaction and remain liable to the extent of the guarantee.
Whether the unpaid balance attracted interest and incidentals (cross-appeal)
The cross-appeal fails because the respondents led no evidence of the quantum of incidentals, a fact especially within their knowledge under section 112 of the Evidence Act, and the finding that interest had been suspended was not challenged.
Although the trial court found the maximum guaranteed sum was Kshs 45 million plus incidentals, the finding that interest had been suspended was not expressly challenged on appeal. The respondents, who possessed the account information, adduced no evidence of how much was due as incidentals, so the trial Judge could not be faulted for excluding them from the judgment.
Whether the trial court's order that each party bear its own costs should be disturbed
The costs order is undisturbed: neither party was wholly successful, and the judicial discretion under section 27 of the Civil Procedure Act was properly exercised.
Costs follow the event unless the court for good reason otherwise orders. 'The event' may be read distinctively so that costs of particular issues go to the party succeeding on them. Since the appellants succeeded only in part and the respondents only in part, no party was wholly successful, and the trial Judge's discretion, though briefly reasoned, was not exercised on wrong principles.
The duty of a first appellate court
A first appellate court must subject the entire evidence and judgment to a fresh and exhaustive examination and reach its own conclusions, while making allowance for not having seen or heard the witnesses.
Anchored in rule 31(1)(a) of the Court of Appeal Rules and section 78 of the Civil Procedure Act, and underscored in Selle v Associated Motor Boat Co. and Peters v Sunday Post, the first appellate court re-evaluates the record but interferes with factual findings only where they are unsupported by the evidence, founded on a misapprehension of the law, or based on wrong principles.
Legal principles established
#- A guarantor can only escape liability by proving, on a balance of probabilities, that the principal debtor settled the full liability or that the guarantor fulfilled its full obligation under the guarantee; proof of part payment is insufficient.
- A contract of guarantee is an accessory contract creating a secondary obligation that arises only upon the default of the principal debtor.
- Where a fact is especially within the knowledge of a party, that party bears the burden of proving it, so a creditor claiming interest and incidentals must lead evidence of their quantum.
- A first appellate court must re-evaluate, reassess and reanalyse the evidence and draw its own conclusions, while allowing for the fact that it did not see or hear the witnesses.
- Costs follow the event, but 'the event' is a collective noun: where separate issues are litigated and neither party wholly succeeds, each party may bear its own costs.
- An appellate court will not interfere with a trial judge's discretion on costs unless it was exercised unjudicially or on wrong principles.
Court orders
#- 1.The appeal is dismissed
- 2.The Notice of Cross Appeal is dismissed
- 3.No order as to costs
The bench
#One judgment of the whole court — no separate or dissenting opinions.
- On appeal from
- High Court of Kenya (Nakuru)
- Not stated in the judgment (original suit over LR No. 455/21 Nakuru Municipality)
- Jurisdiction invoked
- First appeal to the Court of Appeal under rule 31(1)(a) of the Court of Appeal Rules as read with section 78 of the Civil Procedure Act
Relief refused
#Appellants' claim that they fully paid and overpaid the guaranteed debt of Kshs 45,000,000 and were entitled to unconditional release of the suit property
The appellants failed to discharge the burden of proving that the debt was settled in full; it is not enough to prove some payments were made
Respondents' cross-appeal seeking interest and incidentals on the unpaid balance of Kshs 28,933,698
The respondents did not adduce evidence of how much was due on account of incidentals, a fact especially within their knowledge
Appellants' challenge to the trial court's order that each party bear its own costs
Neither party was wholly successful; the trial Judge's discretion on costs was properly exercised
Costs
Both the appeal and the cross appeal were dismissed with no order as to costs ('we dismiss them but with no order as to costs')
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 not enough to simply prove that payments were made by or on behalf of the principal debtor. What is required is evidence that the debt was settled in full.
Therefore, for the guarantor to succeed in avoiding liability, it must prove that the amount received from or on behalf of the principal debtor fully satisfied the debt. If it fails to do so, it will be liable to the extent of the guarantee.
The surety is therefore under a secondary obligation which is dependent upon the default of the principal and which does not arise until that point.
In civil proceedings, when any fact is especially within the knowledge of any party to those proceedings, the burden of proving or disproving that fact is upon him.
Consequently, both the appeal and the cross appeal fail and we dismiss them but with no order as to costs.
It is so ordered.
Issues in the judgment
#The judgment inconsistently states the unpaid balance figure: the trial court's order records Kshs 28,933,698 while the recital of the trial judgment records Kshs 28,993,689
The citation of Robert Njoka Muthara is inconsistent within the judgment: (2014) eKLR in the trial court recital and [2017] eKLR in the respondents' submissions
Rhesa Shipping Co SA v Edmunds is cited with the year {1955} 1 WLR 948, which appears to be an incorrect year for that report
The case title/number of the present appeal is not expressly stated in the judgment text; only the trial court's suit property (LR No. 455/21) and the cross-appeal date are given
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Bhogal & 3 others v Sheikh & Gregory (Joint Receivers and Managers of Sam-Con Limited (In Receivership) & 3 others (Civil Appeal 94 of 2019) [2025] KECA 1666 (KLR)", Case Analysis (2025). Court of Appeal Appeal (not explicitly numbered in judgment text; appeal from Nakuru High Court suit over LR No. 455/21). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2025/1666/eng@2025-10-21
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.