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On demand performance bonds delayed payment and proved collusion — Nairobi Case and Document Guide

Decision analysed: Magnate Ventures Limited v Credit Bank PLC — [2026] KEHC 7143 (KLR) — 16 April 2026

Court: High Court at Nairobi Milimani Commercial and Tax Division

The dispute

A project company held two bank-issued on-demand performance bonds of KSh 62,263,936 and USD 474,634, valid until May 2022. Demands dated 6 October 2021 were delivered on 7 October. The bank did not pay. The contractor obtained a later order restraining calling up the bonds, extended only for a limited period. A 2023 partial ruling dealt with the bond debt; payment followed on 20 April 2023. The remaining trial concerned fraud and additional damages, with evidence about shared demand letters and the bank’s internal funding arrangements.

What the Court decided

The final 2026 judgment found collusion and awarded KSh 1.5 million exemplary damages for fraud, plus costs and interest of the suit. It refused separate general damages for fraud, contract, trust or fiduciary breach and disgorgement. The bond principal had already been paid after the earlier partial decision, so the final exemplary award is not a new second principal award. The mirror labels the outcome Dismissed, but the judicial final order expressly awards the exemplary damages and says the other claims fail.

What this decision does and does not establish

On-demand bond liability follows the wording of the independent guarantee and a complying demand; internal arrangements do not automatically excuse the bank. Fraud requires particular pleading under Order 2 rule 10 and strict proof above ordinary probability but below criminal proof. A later order must be read for its precise scope, parties and duration. Do not assume a beneficiary who is not a bank customer has a fiduciary relationship or equate every delay with fraud. General damages and disgorgement are not automatic additions to paid principal and interest.

Choose a document for the procedural task

Plaint for Non Payment of Two On Demand Performance Bonds

Complete parties, service details, jurisdiction, limitation, related proceedings, material facts, particulars and exact prayers. Check Orders 3 and 4 and the required verifying affidavit, witness statements, document list and copies. Special damages need specific pleading and proof; fraud needs particularization under Order 2 rule 10. This core specimen is not the whole filing pack. Court fee, summons and service must be completed under current directions.

Bank Defence Relying on a Contractor Injunction Against Calling a Bond

Answer each plaint allegation with precise admissions, denials and the actual defence. Check summons, appearance, defence deadlines, witnesses and documents, and any court directions. Plead exclusions, fraud and other material matters with the required particulars. Disputed facts are not a pure preliminary objection. Do not claim missing records exist or treat an unsuccessful historical position as settled law.

Company Witness Statement Establishing Demand Delivery and Later Bond Payment

Use the witness own first-person account, distinguish observed events from information supplied by others and give sequential bundle-page references. ELRC rules 7 and 35 govern witness statements; additional statements require the applicable leave. In civil suits follow the case directions and required witness pack. A statement is not a substitute for expert evidence and remains subject to adoption, document production and cross-examination.

Beneficiary Submissions on Particularized Fraud and Later Injunction Expiry

Identify the issue, pleaded position, admitted evidence and bundle pages. Submissions do not introduce new facts or exhibits. Follow current directions on filing, length, authorities and service. Distinguish a requested amount from the actual award, a losing historical argument from the holding and a liability finding from proof of every damages head.

Submissions Opposing Duplicate General Damages and Disgorgement After Bond Payment

Identify the issue, pleaded position, admitted evidence and bundle pages. Submissions do not introduce new facts or exhibits. Follow current directions on filing, length, authorities and service. Distinguish a requested amount from the actual award, a losing historical argument from the holding and a liability finding from proof of every damages head.

Primary source and reconstruction

Read the original judgment: [2026] KEHC 7143 (KLR)

The judicial text reproduced on SheriaHub was read, including the reasons and final orders. This is a reconstruction from the reported decision, not a copy of a signed court filing. Where publication metadata and the judgment differ, the judgment controls. Check later appeals and the applicable version of procedural rules before relying on the case.

These documents are newly drafted educational reconstructions, not original filed pleadings or matters handled by our team. The original decision may identify participants; the specimens replace identifying details with bracketed fields. Losing positions remain marked unsuccessful. An advocate must adapt jurisdiction, evidence, prayers and procedure to the actual case.