In the context of Banking and Finance law, fiduciary duty is the legal principle requiring financial institutions to act in the best interest of their clients. When a bank assumes an advisory role, whether in relation to lending, or financial planning, it is obligated to uphold transparency, fairness, and integrity. The bank should facilitate understanding and informed decision-making, rather than navigating the transaction to its own advantage at the customer’s expense.

What does good faith entail?

Acting in good faith is a commitment to honesty, transparency, and fairness in all dealings. It includes:

• Exercising due diligence in all transactions;
• Obtaining prior and informed consent for any action affecting a client’s account;
• Providing clear and comprehensive explanations of loan terms;
• Avoiding conflicts of interest, particularly where product recommendations may disproportionately benefit the bank; and
• Disclosing all material information, including associated risks, costs, and implications.

In essence, where the bank holds information that may materially affect a client’s decision-making, it is obliged to disclose it fully and not withhold it as proprietary or confidential information.

Case analysis.

In Sieley & 3 others (suing as the administrators of the estate of the late Nathaniel Kibitok Sieley) vs. Kenya Commercial Bank Limited & another; Kimutai & another (Third party) (Civil Suit 23 of 2019) (2025) KEHC 12889 (KLR) (19th September, 2025) (Judgement), the concept of fiduciary duty is highlighted.

1. Brief facts.

The Plaintiffs, the lawful administrators of the estate of Nathaniel Kibitok Sieley (the deceased), sued Kenya Commercial Bank (KCB) and its Nandi Hills Branch Manager (the Defendants). The deceased was a long-time, key customer of KCB. On 14th February, 2019, the deceased’s account, which held KES. 24,069,373.60, was closed online and the entire balance was fraudulently paid out to undisclosed persons.

The Defendants argued they were not complicit, stating they acted upon a Certificate of Confirmation of Grant (“Grant”) from the High Court of Nakuru (Succession Cause No. 3 of 2013) that named Luke Kimutai as the administrator and sole beneficiary. KCB claimed this Grant was authenticated by the court registry upon inquiry.

However, the court found that the Grant was fake, created within a non-genuine court file that shared a case number with an authentic file concerning a different estate. Key evidence demonstrating the Defendants’ negligence included; ignoring prior protests from the deceased’s well-known family, failing to require an amended Grant despite the fake Grant having an incomplete account number, failing to obtain mandatory “Know Your Customer” (KYC) documents for Luke Kimutai and failing to produce any evidence, such as paper trail, transfer records, showing the funds were actually disbursed to Luke Kimutai. The fraud was described as a “well-orchestrated scheme” and an “inside job” involving unscrupulous persons within KCB and the High Court at Nakuru.

The Defendants sought indemnity by joining Luke Kimutai and the Attorney General (representing the Judiciary) as third parties.

• Issues.

The court determined two broad issues:

1. Breach of fiduciary duty: Whether the Defendants breached their duty of care to the deceased’s estate by paying funds to a fraudster, and if so, whether they should compensate the estate for the loss; and
2. Indemnity: If the Defendants were found liable, whether the third parties should indemnify the Defendants for the compensation paid to the Plaintiffs.
3. Judgment.

The court relied on principles governing the bank-customer relationship and civil procedure:

• Fiduciary duty-The bank-customer relationship is contractual and imposes a fiduciary duty, a duty of utmost good faith, trust, and candour. The bank is required to exercise “reasonable care and skill” in its operations, an objective standard that includes protecting the customer from fraud by unauthorized persons.
• Burden of proof: The Plaintiffs bear the legal burden of proof, which is met on a balance of probabilities.
• Third party procedure: The determination of liability between the Defendant and a third party requires the mandatory application for and issuance of third-party directions under Order 1 Rule 22 of the Civil Procedure Rules.

The court found that the Plaintiffs proved their claims against the Defendants. The judgment was entered against the 1st Defendant (KCB) and the 2nd Defendant (Branch Manager), jointly and severally.

1. Liability of Defendants: The court held that the Defendants breached their duty of care to the deceased’s estate by failing to take reasonable care and conduct due diligence, which ultimately facilitated the loss of funds. The Defendants’ failure to act on obvious “red-flags” meant they could not shift the blame entirely to the Judiciary for issuing fake documents.
2. Liability of third parties: The court held that it could not determine the issue of indemnity against either the 1st or 2nd third parties.
3. For the 2nd third party (Attorney General/Judiciary), the Defendants failed to file the mandatory application for third party directions (Order 1 Rule 22), providing no foundation to determine liability between KCB and the Judiciary.
4. For the 1st Third Party (Luke Kimutai), no adverse orders could be made as there was no evidence demonstrating satisfactory service of the third-party notice upon him.

Final Orders:

1. The Defendants were ordered to reinstate the bank account and restore the sum of KES. 24,069,373.60;
2. The restored sum is to attract interest from 14th February, 2019, at the previous rate; and
3. The Plaintiffs were awarded the costs of the suit.

Conclusion.

Fiduciary duty, when applicable, serves as a safeguard in the bank-customer relationship. The Sieley case illustrates how failure to uphold this duty can result in significant financial and procedural consequences. As financial transactions grow in complexity, the principle of good faith remains a practical and necessary standard. Whether reviewing a loan, managing an account, or seeking advice, borrowers benefit from institutions that prioritise clarity, accountability, and responsible conduct.

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