Youth Enterprise Development Fund Board v Rafiki Micro Finance Bank Limited [2020] eKLR Case Summary

Court
High Court of Kenya at Nairobi, Commercial & Tax Division
Category
Civil
Judge(s)
F. Tuiyott
Judgment Date
October 05, 2020
Country
Kenya
Document Type
PDF
Number of Pages
3
Explore the Youth Enterprise Development Fund Board v Rafiki Micro Finance Bank Limited [2020] eKLR case summary. Discover the key legal findings and implications of this important ruling.

Case Brief: Youth Enterprise Development Fund Board v Rafiki Micro Finance Bank Limited [2020] eKLR

1. Case Information:
- Name of the Case: Youth Enterprise Development Fund Board v. Rafiki Micro Finance Bank Limited
- Case Number: HCCC NO. 384 OF 2016
- Court: High Court of Kenya at Nairobi, Commercial & Tax Division
- Date Delivered: 5th October 2020
- Category of Law: Civil
- Judge(s): F. Tuiyott
Country: Kenya

2. Questions Presented:

The court was tasked with resolving three central legal issues:
a) Whether the Defendant breached the terms and conditions of the loan granted by the Plaintiff.
b) Whether the Defendant is liable to repay the loan sum of Kshs.100,000,000 with accrued interest.
c) Which party is liable for the costs of the case.

3. Facts of the Case:
The Plaintiff, Youth Enterprise Development Fund Board (YEDFB), is a corporate body established under the State Corporations Act, tasked with providing loans to micro-finance institutions for the benefit of youth enterprises. The controversy arose from a Deed of Guarantee dated 26th November 2012, where YEDFB extended a loan of Kshs.100,000,000 to Rafiki Micro Finance Bank Limited (the Defendant) for onward lending. As part of the agreement, Rafiki was required to provide a Bank Guarantee, which it did through Chase Bank. However, after Chase Bank was placed under receivership, YEDFB demanded a new guarantee, claiming Rafiki breached the contract by failing to comply with various covenants, including the provision of support during evaluations and making insufficient loan disbursements.

4. Procedural History:
Following the alleged breaches, YEDFB issued a Notice of termination of the Guarantee on 30th June 2016 and demanded repayment of the loan. Rafiki contested the termination, asserting that the Chase Bank Guarantee remained valid despite the bank's receivership. The court was presented with witness statements, documents, and written submissions from both parties to determine the matter.

5. Analysis:
- Rules: The court examined the terms of the Deed of Guarantee, particularly the security clause requiring Rafiki to provide a valid bank guarantee and the obligations of both parties under the Credit Guarantee Scheme Operational Policies and Procedures.
- Case Law: The court referenced prior cases that addressed breaches of contract and the implications of guarantees, though specific cases were not detailed in the judgment. The court emphasized the necessity of adhering to contractual obligations and the consequences of non-compliance.
- Application: The court found that Rafiki did not breach the contract regarding the bank guarantee, as the original guarantee was valid despite the bank's receivership. However, Rafiki admitted to a lack of cooperation during evaluations, which constituted a breach. The court determined that YEDFB was justified in terminating the contract and demanding repayment. Rafiki's arguments for a reconciliation of liabilities were dismissed due to a lack of evidence.

6. Conclusion:
The court ruled in favor of YEDFB, ordering Rafiki to pay Kshs.100,342,693 plus interest at a rate of 6% per annum above the Central Bank of Kenya's prime lending rate until full payment. This ruling underscores the importance of adhering to contractual terms and the consequences of breaches in financial agreements.

7. Dissent:
There were no dissenting opinions noted in the judgment. The court's decision was unanimous in its findings regarding the breaches and the obligations of the parties.

8. Summary:
The ruling in Youth Enterprise Development Fund Board v. Rafiki Micro Finance Bank Limited highlights the critical nature of compliance with contractual obligations in financial agreements. The court's decision to hold Rafiki liable for the outstanding loan and interest serves as a reminder of the legal implications of failing to meet contractual terms, particularly in the context of guarantees and financial support mechanisms.

Document Summary

Below is the summary preview of this document.

  • Youth-Enterprise-Development-Fund-Board-v-Rafiki-Micro-Finance-Bank-Limited-[2020]-eKLR-Case-Summary_2247_0.jpg

This is the end of the summary preview.

Related Documents

View all summaries