LJA persuades the High Court to dismiss a USD 1.6 million claim against Mayfair Insurance Company

We advised and successfully represented Mayfair Insurance Company Limited (a major regional insurance and financial services provider) in a suit filed by a well-known global construction equipment supplier PERI Formwork Scaffolding Engineering (Pty) Ltd for payment of USD 1.6 million under payment guarantees issued by Mayfair on behalf of a local developer, White Lotus Projects Limited under the International Chamber of Commerce Uniform Rules for Demand Guarantees No. 758.

Upon White Lotus defaulting on payment, PERI demanded payment from Mayfair Insurance who informed them that the guarantees were cancelled for want of payment of premium.

PERI filed a suit against White Lotus seeking recovery of supplied equipment and payment due to it for the supply and lodged a complaint with the Insurance Regulatory Authority (IRA) against Mayfair Insurance. The IRA dismissed PERI’s complaint as PERI had already recovered the equipment from White Lotus through that suit and sold it to a third party. PERI was awarded the outstanding payment USD 1.7 Million in the suit against White Lotus but nonetheless filed suit against Mayfair Insurance for recovery under the guarantees, despite having deprived Mayfair of its right of subrogation.

This matter raised important issues of whether demand under an on-demand guarantee ought to be honoured even if this would amount to double recovery on account of a judgment already delivered for payment arising out of the same contract and would have significant ramifications for the manner in which payment guarantees operate.

The High Court of Kenya in Nairobi in dismissing the suit against Mayfair agreed with LJA’s argument that the matter was res judicata and the Plaintiff was seeking over-compensation.