Stanbic Bank has lost a bid to dodge a Sh32.4 million ($250,860) payout to a firm that lost a lucrative contract because of an error by the lender.
In a judgement on June 5, 2025, Court of Appeal judges said Stanbic erred when it issued a bid bond valid for 119 instead of 120 days, an action that cost Kenya Haulage Agency Limited a contract by the Kenya Ports Authority (KPA).
“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, and the legal effect of that non-conformity, and it cannot, therefore, be argued that the loss of profits arising from the loss of the tender is too remote,” the three-judge bench comprising Justices Agnes Murgor, Pauline Nyamweya and George Odunga said.
“In the end, we reach the same decision as did the High Court, but for different reasons and on a different basis, as explained in this judgment. This appeal is accordingly dismissed in its entirety with costs to the respondent,” the court added.
The case arose from a 2011 tender floated by KPA for the supply of 10 pneumatic rubber fenders. Kenya Haulage Agency Limited submitted a bid for the contract, which required bank-issued tender security of Sh250,000 valid for 120 days.
The company instructed its bankers, CFC Stanbic, to issue the guarantee accordingly.
However, when the bid bond was issued, it was valid for only 119 days instead of the required 120 days. This discrepancy proved fatal to the agency’s bid, as KPA disqualified it, citing non-compliance with the mandatory bond validity period.
Kenya Haulage sued the bank, claiming it had already secured the goods for delivery and stood to make a profit of $250,860 (Sh32.4 million).
CFC Stanbic Bank denied any wrongdoing, arguing that it had merely acted on the instructions of Kenya Haulage’s director, and had not been informed of the 120-day requirement. The bank also maintained that there was no guarantee Kenya Haulage would have won the tender even if the bond had been compliant and that any loss claimed was too remote and speculative.
At the High Court, Justice Patrick Otieno ruled in favour of Kenya Haulage, finding that the bank had indeed received the client's instructions, which were clear on the 120-day requirement. The judge awarded the agency $250,860 (Sh32.4 million) in special damages.
On appeal, the bank sought to overturn the High Court ruling, arguing that the judge had wrongly treated the case as a breach of contract.
The Court of Appeal agreed that the High Court had mischaracterised the cause of action. Nonetheless, it upheld the judgment, finding that the bank owed a duty of care to the client under their banker–customer relationship.
The court held that the bank’s failure to follow express instructions amounted to negligence and that the loss suffered which included the forfeited opportunity and resulting profit was both foreseeable and directly caused by the bank’s error.
“In the present appeal, the appellant's duty of care involved ensuring the guarantee was issued according to the terms agreed upon with the Respondent (Kenya Haulers Agency), verifying that the amount claimed was within the guarantee's scope, and acting promptly to honour the guarantee upon a valid demand.
The Respondent has provided evidence that the guarantee issued by the Appellant was not in accordance with their instructions, and was valid for 119 instead of 120 days as requested, and this fact was not controverted by the Appellant,” the court said.
