Bank ordered to pay KPA supplier Sh25m for loss of key tender
Business
By
Joackim Bwana
| Jun 30, 2025
The appellate court has ordered Stanbic Bank Ltd to pay Kenya Haulage Agency Ltd Sh25 million for negligence that occasioned the firm to miss a Kenya Ports Authority (KPA) tender.
The Court of Appeal said the bank failed to issue a security bond valid for 120 days as agreed for the tender to supply ribbed-type pneumatic rubber fenders to KPA.
Justices Agnes Murgor, Pauline Nyamweya and George Odunga said that Stanbic Bank, in honouring its customers’ instructions, had a duty to exercise due diligence and reasonable care and skill.
Kenya Haulage Agency Ltd accused the lender of providing a bank bond of Sh250,000 valid for only 119 days instead of the agreed time, causing KPA to cancel the tender.
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Justice Murgor said the bank’s duty of care involved ensuring the guarantee was issued according to the terms agreed upon, verifying that the amount claimed was within the guarantee’s scope and acting promptly to honour the guarantee upon a valid demand.
“It is our finding that there was a breach of the duty of care which was owed by Stanbic (appellant) in the circumstances, arising from the relationship it had with Kenya Haulage Agency Ltd (respondent) both as its banker and guarantor, and arising from its duty to exercise reasonable care and skill in this regard,” said Justice Murgor.
The judges said the loss of the actual tender was not only foreseeable but also proximate in the circumstances, given the bank’s actual knowledge as regards the purpose of the bank guarantee and the legal effect of that nonconformity.
Justice Murgor said it cannot be argued that the loss of profits arising from the loss of the tender is too remote.
The judges said that the non-conformity by the bank was not a minor deviation or an error or oversight that could be corrected, given that the tender security guarantees that a bidder will honour their submitted bid and sign the contract if awarded.
“We are of the view that the loss of profits the respondent would have made from the subject tender was recoverable since the appellant was responsible for denying it the opportunity to proceed with the tender as a result of its negligent statement,” said Justice Murgor.
According to Kenya Haulage Agency Ltd Director Paul Munyao, KPA informed them on September 28, 2011, that its bid was not successful because the tender security validity was for 119 days and not 120 days as required by the tender documents.
Munyao said they secured a supply of the required goods on a Cost Insurance Freight basis for Sh34.21 million and incurred a loss of Sh25.09 million.
He said the loss was the difference between the declared price of the goods in the tender documents of Sh59.30 million and the purchase price.
In their defence, the bank denied receiving the agency’s letter dated July 12, 2011, with the bid-bond terms and any knowledge of their client bidding for the said tender.
The bank said there was no guarantee that the agency would have won or been successful on the tender. Stanbic said that any loss suffered was too remote and could not be claimed because it was not and could not be within the reasonable contemplation of the bank.