Consolidated Bank has suffered a Sh203 million setback after the High Court dismissed its claims in a dispute over a stalled software upgrade, ruling that the lender itself caused the project delays by failing to pay licence fees.
The court found that the government-owned bank breached a 2022 contract with MFI Technology Solutions Limited, which had been tasked with upgrading and maintaining the bank’s core banking system.
The upgrade, a key platform for handling daily transactions and regulatory reports, could not proceed because the bank did not meet its financial obligations. The ruling highlighted that invoking a performance guarantee without fulfilling payment terms was unlawful.
The agreement, carried out with Indian software developer Intellect Design Arena Limited, included a $1.334 million licence fee secured by a $243,600 performance guarantee.
The original terms required the bank to pay half of the fee on signing and the remainder within 60 days. Weeks after signing, the bank proposed spreading the balance into four monthly payments of $333,500 from August to November 2022—a plan the vendors accepted.
Despite the adjustment, the bank paid only $213,375 by April 2023. In June 2023, it terminated the contract and called on the performance guarantee, claiming the vendors had misrepresented the system and failed to deliver a functioning upgrade.
The vendors contested the bank’s actions, arguing that the project could not continue without the agreed licence payments.
“The first defendant (Consolidated Bank) admits that it did not pay the installments as revised,” the court noted, citing internal correspondence where the bank cited cash-flow issues for its default.
Judges emphasized that payment of the licence fee was a condition for continuing the upgrade. The suspension of implementation was a direct consequence of non-payment, meaning the bank could not use delays as grounds to claim non-performance by the vendors.
“A party in default cannot rely on its own breach to allege non-performance by the counterparty,” the ruling stated. The decision confirms that the bank’s actions violated the contract and leaves it liable for the full Sh203 million in favour of the technology firm.
