https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/12297

REPUBLIC OF KENYA IN THE HIGH COURT OF KENYA AT NAKURU CIVIL APPEAL NO. E 229 OF 202 4 BIDII CREDIT…….………………………….…………..…………….. APPELLANT VERSUS SEVENTH DAY ADVENTIST CHURCH (EA) LIMITED……………1ST RESPONDENT SIMON OMBAGI MABERA……………………………….……..………2ND RESPONDENT SAILAS KISANG………………………………………….……..………3RD RESPONDENT (Being an appeal from the judgment of Hon. Ruth Kefa Chebesio (PM) in Nakuru Chief Magistrate’s Court Civil Case No. E4375 of 2022 delivered on 28th September 2024) IN SEVENTH DAY ADVENTIST CHURCH (EA) LIMITED……………………PLAINTIFF SIMON OMBAGI MABERA……………………………….……..………1ST DEFENDANT VERSUS SAILAS KISANG……………………….………………….……..………2RD DEFENDANT BIDII CREDIT…………………………………………………………….3RD DEFENDANT JUDGMENT 1. The background of this matter is that by a Plaint dated 20 April 2022, the 1st Respondent (Plaintiff), instituted the suit against the 2nd Respondent (1st Defendant), the 3rd Respondent (2nd Defendant) and the Appellant (3rd Defendant), seeking for the following Orders: - Civil Appeal No. E229 of 2024 1 a) An Order of Permanent Injunction against the defendants and each one of them,by themselves, agents, employees and/or servants restraining them from repossessing, converting, impounding or in any manner whatsoever interfering with the Plaintiff’s use or possession of motor vehicle registration number KCB 805W Nissan Civilian. b) A Mandatory Injunction compelling the 1st Defendant to execute and deliver to the Plaintiff the documents of transfer and the logbook to motor vehicle registration number KCB 805W Nissan Civilian. c) Costs of the suit. d) Any other orders further orders this Honourable Court deems appropriate in the circumstances. 2. The Plaintiff’s case was that in January 2022, Simon Ombagi Mabera (the 1st Defendant) who traded in the sale of motor vehicles, offered to sell to the Seventh Day Adventist (EA) Church (herein after referred to as “the Church”) motor vehicle registration number KCB 805W Nissan Civilian, which the church agreed. By an agreement dated 22 January 2022, the 1st Defendant being the agent of the 2nd Defendant, sold the motor vehicle to the Plaintiff at a cost of Ksh.1,450,000.00 payable in two installments as follows: Ksh. 1,000,000.00 was payable directly to the 2nd Defendant and the balance of Ksh. 450,000.00 payable to the 1st Defendant within a period of 15 months. The logbook was to be transferred to the Plaintiff upon completion. 3. The Plaintiff averred that it duly paid the 1st installment as agreed, took possession of the vehicle and used it for church transport. On 11 April 2022, the 3rd Defendant sent auctioneers to repossess the motor vehicle from the Plaintiff who was using it to transport children to a church function in Narok. It was then that the Plaintiff discovered that the 1st Defendant had fraudulently and without its knowledge or consent, used the same vehicle Civil Appeal No. E229 of 2024 2 to secure a loan from the 3rd Defendant. He produced a copy of the sale agreement dated 22 January 2022 as evidence thereof. 4. The Plaintiff pleaded that the 1st Defendant acted fraudulently by failing to surrender the log book for safe keeping pending completion as agreed, failing to disclose to the 3rd Defendant that he had no proprietary interest in the vehicle, by obtaining a loan and offering the motor vehicle as security with knowledge that the vehicle had been sold and was in possession of the Plaintiff, acting in a fraudulent and criminal manner. 5. As against the 2nd Defendant, the Plaintiff pleaded fraud as follows; colluding with the 1st Defendant to keep the logbook even after receiving part payment of the purchase price, failing to deliver or release the log book as per the sale agreement and receiving money from the Plaintiff while not intending to honour the terms of the agreement. 6. The Plaintiff also pleaded fraud against the 3rd Defendant on the following grounds; failing to carry out due diligence as required by law before dealing with the 1st Defendant, failing to ascertain that the 1st Defendant qualified to obtain a loan against the security offered, and advancing a loan to the 1st Defendant without undertaking a valuation of the motor vehicle or ascertain the availability or possession or ownership of the vehicle. 7. The 1st and 2nd Defendants failed to enter appearance or file defence within the stipulated time and judgment was entered against them on 8 June 2022. The 3rd Defendant (Appellant) filed defence dated 5 May 2022. Its case was that the 1st Defendant sought a loan facility from the 3rd Defendant to enable him pay off the balance of the purchase price for motor vehicle registration number KCB 805W amounting to Ksh. 450,000.00 out of the total purchase price on Ksh.1,450,000.00. He presented a sale agreement dated 25 January 2022 between him and the 2nd Defendant for the sale of the vehicle as well as the original logbook in the 2nd Defendant’s name. 8. On 4 February 2022, the 3rd Defendant approved the loan, executed a loan agreement with the 1st Defendant where the subject motor vehicle was pledged as security and Civil Appeal No. E229 of 2024 3 disbursed Ksh. 450,000.00 to the 2nd Defendant and Ksh. 300,000.00 to the 1st Defendant as instructed. A charge against the motor vehicle was subsequently registered with the National Transport Safety Authority (NTSA) and a revised logbook was issued on 1st March 2022 bearing the joint names of the 2nd and 3rd Defendant’s herein. 9. That the 1st Defendant defaulted in making the loan repayment as agreed which prompted the 3rd Defendant to engage auctioneers to recover the security, which they did on 11 April 2022 in Narok while it was in the Plaintiff’s custody, possession and use. The 3rd Defendant denied knowledge on the agreement between the Plaintiff and 1st Defendant as well as particulars of fraud as stated by the Plaintiff. The 3rd Defendant produced the sale agreement dated 25 January 2022, affidavit sworn on 4 February 2022, loan agreement dated 4 February 2022, copies of old and new log book and letter dated 10 February 2022 as evidence thereof. 10. After hearing the parties, the trial court rendered judgment in favour of the Plaintiff (1st Respondent) against the Defendants on 28 September 2024 as follows: a. A Permanent Injunction is hereby issued against the defendants and each one of them,by themselves, agents, employees and/or servants restraining them from repossessing, converting, impounding or in any manner whatsoever interfering with the Plaintiff’s use or possession of motor vehicle registration number KCB 805W Nissan Civilian. b. A Mandatory Injunction is hereby issued compelling the 1st Defendant to execute and deliver to the Plaintiff the documents of transfer and the logbook to motor vehicle registration number KCB 805W Nissan Civilian. c. Costs of the suit to be born by the 1st and 2nd Defendants. 11. Aggrieved by the said judgment, the Appellant filed this Appeal vide a Memorandum of Appeal dated 24 October 2024 where it faulted the trial court for: - Civil Appeal No. E229 of 2024 4 a) Ignoring the fact that the 1st Defendant was not the legal and registered owner of motor vehicle KCB 805W hence had no legal capacity to enter into a sale agreement with the Plaintiff or sell the motor vehicle. b) Ignoring the fact that the 1st Defendant only acquired ownership of the motor vehicle after a loan was advanced to him and partly credited to the 2nd Defendant who was then the legal and registered owner. c) Determining the issue of ownership based solely on the sale agreement between the Plaintiff and the 1st Defendant while neglecting to consider the capacity of the 1st Defendant in entering such an agreement. d) Ignoring the fact that there was no evidence to demonstrate that the Plaintiff paid the 2nd Defendant to impute knowledge by the 2nd Defendant of the sale between the Plaintiff and the 1st Defendant. e) Implying that the 1st Defendant was an agent of the 2nd Defendant and hence irregularity validating a sale agreement that had no force in law. f) Elevating the rights on an alleged buyer above those of a secured creditor. g) Directing the 3rd Defendant who was a secured creditor to pursue the 1st Defendant without a substantive finding that the security was irregularly registered. h) Failing to contextualize the facts thus making a blanket decision on issues which it neither perused nor analyzed thereby ignoring the circumstances under which the security was registered. 12. The Appellant prays that this Court allows the appeal, sets aside the trial court’s judgment and award costs of the appeal to the appellant. Civil Appeal No. E229 of 2024 5 13. The appeal was heard by written submissions where the Appellant filed and relied on written submissions dated 9 February 2026 while the 1st Respondent filed and relied on written submissions dated 20 April 2026. Appellant’s Submissions 14. The Appellant submitted that the issues for determination was whether the trial court erred in fact and in law by finding that the alleged rights of the 1 st Respondent ranked higher in priority than the rights of the Appellant as a secured creditor, and whether the 1st Respondent was a bonafide purchaser for value. 15. The Appellant submitted that the motor vehicle in question was a security within the context of Section 2 of the Movable Property Security Rights Act and that he had availed evidence to show that he had entered into a valid security agreement with the 2 nd Respondent and had a registered interest in the said vehicle as a secured creditor. 16. He contested the finding by the trial court that the 1st Respondent was a bonafide purchaser for value, submitting that the doctrine of bonafide purchaser has been extensively addressed in Weston Gitonga & 10 others vs Peter Rugu Gikara & anor (2017) eKLR and Katende vs Haridar & Co ltd (2008) 2 EA 173. He argued that the 1st Respondent did not have title documents which were never transferred to them and instead faulted the trial court for ignoring the fact that the Appellant and the 2nd Respondent were joint registered owners of the motor vehicle pursuant to the loan agreement. 17. The Appellant further faulted the trial court for holding that the 1st Respondent’s rights defeated the Appellants rights since the 2nd Respondent was not the registered owner of the vehicle and lacked legal authority to sell the vehicle thereby vitiating the entire transaction. Civil Appeal No. E229 of 2024 6 18. The Appellant submitted that no evidence was placed before the court to show that the 1st Respondent made part payment of the purchase price to the 3rd Respondent as consideration towards the purchase price, undertook due diligence to establish the actual owners of the vehicle or entered into a valid sale agreement to entitle them legal protection as a bonafide purchaser without notice. 19. The Appellant argued that the sale agreement between the 1st and 2nd Respondents was illegal, null and void ab initial for want of consent for the Appellant who was registered as a joint owner pursuant to the loan agreement, contending further that the 2 nd Respondent had no capacity to enter into the said agreement without the Appellant’s consent. He cited the cases of Merchanised Clearing and forwarding Co. Ltd & 2 others vs Tulip Apartments Ltd & Anor (2000) eKLR and Paul Gatete Wangai vs Capital Realty Ltd & Anor (2020) eKLR to support his arguments.He invited this court to find in his favour and overturn the trial courts findings and orders. 1st Respondent’s Submissions 20. The appellant reiterated that the chronology of events was that the 1st Respondent purchased the subject vehicle from the registered owner, entered into a valid sale agreement, paid the first instalment of Ksh. 1,000,000 to the 3rd Respondent, was granted possession of the vehicle on 25 January 2022 and that the balance was payable within 15 months. That it was agreed that the 2nd Respondent would retain the original log book which was to be handed over to the advocates who witnessed execution of the sale agreement pending completion and transfer, but instead the 2nd Respondent fraudulently obtained a loan facility from the Appellant against the log book without the 1 st Respondent’s knowledge. 21. It was submitted that the loan was advanced on 10 February 2022 while the vehicle had been sold on 25 January 2022 and possession granted to the 1st Respondent. It went on to state that it was curious that the loan was advanced before the security was regularized on 1 March 2022 arguing that this lend credence to the 1st Respondent’s claim that the Civil Appeal No. E229 of 2024 7 Appellant colluded with the 2nd Respondent in their transaction and was fully aware of the 1st respondents interest in the subject motor vehicle. 22. The 1st Respondent further submitted that the Appellant did not conduct any due diligence pointing out that the Appellant’s witnesses testified that he conducted due diligence of the vehicle on the yard owned by Siali Miles Ltd at Nakuru yet the address of the company was Eldoret. It was contended that this could not be true since the motor vehicle had already been sold and released to the 1st Respondent who was using it at that particular time. It was argued that the Appellant cannot seek protection of the law while they actively participated in the fraud. It was thus submitted that the trial court acted on proper principles of law and based on evidence before the court which cannot be faulted. Reliance was placed on Nkube vs Nyamiro (1983) KLR 403. 23. The 1st Respondent denied that it entered into the sale agreement after the vehicle had already been offered as security as contended by the Appellant. It was submitted that to the contrary, the loan agreement was entered into after the vehicle had been sold to the 1st Respondent meaning it was not free of encumberance and that the authorities relied upon by the Appellant were irrelevant in the current set of facts. This court was urged to affirm the trial court’s decision and dismiss the appeal. Analysis and Determination 24. As the first appellate court, pursuant to Section 78 (2) of the Civil Procedure Act, this court has a duty to reconsider and re-evaluate the evidence on the record and draw its own conclusions bearing in mind mind that it did not have the advantage of seeing or hearing witnesses. See Selle & Another vs. Associated Motor Boat Company Ltd [1968] EA 123. 25. Further in Kiruga vs Kiruga & Another (1988) KLR 348 the Court of Appeal held that: - “an appeal court cannot properly substitute its own factual finding for that of a trial court unless there is no evidence to support the finding or unless the judge Civil Appeal No. E229 of 2024 8 can be said to be plainly wrong. An appellate court has jurisdiction to review the evidence in order to determine whether the conclusion reached upon that evidence should stand but this is a jurisdiction which should be exercised with caution.” 26. Having considered the appeal, the evidence adduced before the trial court, judgment by the trial court and the rival submissions herein, the issues for determination in the appeal are: - a. Whether the 1st Respondent acquired good title to the subject motor vehicle. b. Whether the any of the parties herein acted fraudulently. c. Whether the Appellant was a bonafide creditor whose interest in the subject motor vehicle overrode those of the 1st Respondent. a. Whether the 1st Respondent acquired good title to the subject motor vehicle 27. With regard to ownership of the subject motor vehicle, it is trite law that he who alleges must prove. See Sections 107, 108 and 109 of the Evidence Act. It is also trite that the standard of proof in civil cases is on a balance of probability. 28. Evidence before the trial court was that by an agreement dated 25 January 2022, the 2 nd Respondent agreed to sell motor vehicle KCB 805W Nissan Civilian (hereinafter referred to as “the subject motor vehicle”) to the 1st Respondent at an agreed price of Ksh. 1,450,000. It is not in dispute that the 2nd Respondent carried on the business of sale of motor vehicles in the name and style of Lystra Automart. At the time of executing the sale agreement, the 2nd Respondent had disclosed to the 1st Respondent that he had purchased the subject motor vehicle from the 3rd Respondent (Sailas Kisang) who held himself as a director of Saili Miles Ltd, the registered owner of the subject motor vehicle, but had not completed making the full purchase price. 29. The 2nd Respondent thus instructed the 1st Respondent to pay Ksh. 1,000,000 being part of the purchase price to the 3rd Respondent’s bank account at Equity Bank which payment Civil Appeal No. E229 of 2024 9 was duly acknowledged by the 2nd Respondent paragraph 1 (a) of the sale agreement. On the strength of the sale agreement, the 2nd Respondent who was in possession of the vehicle, then handed over the vehicle to the 1st Respondent, which took possession and use of the vehicle until 11 April 2022 when it was repossessed on the instructions of the Appellant. 30. The Appellant challenged the sale agreement between the 1st and 2nd Respondents arguing that it was illegal, null and void ab initial for want of consent from the Appellant who was registered as a joint owner pursuant to the loan agreement, and that the 2nd Respondent had no capacity to enter into the said agreement without the Appellant’s consent. 31. Evidence showed that the Appellant entered into a loan agreement with the 2nd Respondent on 4 February 2022 where the subject motor vehicle was offered and pledged as security, disbursed Ksh. 450,000.00 to the 3rd Respondent and Ksh. 300,000.00 to the 2nd Respondent on 10 February 2022 before effecting the change of particulars in the log book on 1 March 2022. 32. Based on the facts and evidence on record, it is apparent that the sale agreement dated 25 January 2022 between the 1st and 2nd Respondents was executed prior to the signing of the loan agreement on 4 February 2022 and the subsequent change of particulars in the log book on 1 March 2022. It is thus not factual that the 1st Respondent required consent of the Appellant who was clearly not in the picture at that particular moment. 33. As regards whether the 2nd Respondent had capacity to sell, based on the evidence on record, the 2nd Respondent clearly stated that he had acquired beneficial interest in the vehicle having purchased it from the 3rd Respondent who held himself out as a Director of the registered owner, Saili Miles Ltd. This was given credence by the fact that the 2nd Respondent was in physical possession of the vehicle, traded in motor vehicle sales, had the original log book which he showed to the 1st Respondent.This fact was clearly Civil Appeal No. E229 of 2024 10 disclosed in the sale agreement and 1st Respondent was instructed to pay part of the purchase price being Ksh.1,000,000.00 directly to the 3rd Respondent, which it did. 34. Section 8 of the Traffic Act provides that the person in whose name a vehicle is registered shall, unless the contrary is proved, be deemed to be the owner of the vehicle.The law recognizes that there are instances where the registered owner is not the actual owner of the vehicle having passed or otherwise relinquished their interest in a motor vehicle despite the registration status in the log book. This reasoning accords with court’s reasoning in the case of Samwel Mukunya Kamunge vs John Mwangi Kamuru, Civil Application No.34 of 2002, Hon. H. M. Okwengu, J as she then was stated:- “It is true that a certificate of search from the Registrar of motor-vehicle would have shown who was the registered owner of the motor-vehicle according to the records held by the Registrar of motor vehicle. That however is not conclusive proof of actual ownership of the motor vehicle as section 8 of the Traffic Act provides that the contrary can be proved. This is in recognition of the fact that often time’s vehicles change hands but the records are not amended. 35. Despite service, the 2nd and 3rd Respondents herein did not deny, controvert or challenge any of the facts or evidence presented by the Plaintiff (1st Respondent) in the suit. On the basis of the facts and evidence on record as summarized above, the court find that the 2nd Respondent had demonstrated capacity to sell the subject motor vehicle and was capable of passing good title. 36. In the case of Republic vs The Registrar of Titles, Mombasa & 2 Others ex parte Emfil Limited (2012) eKLR, the Court stated as follows: “Moreover, the private law principle of nemo dat quod non habet (see Brown's Legal Maxims, (1939) 10th at p. 546) is only a general principle that where goods are sold by a person who is not the owner and who does not sell under the authority of the owner or with the consent of the owner, the buyer acquires no better title to the goods than the seller and it has important exceptions including sale by apparent owner of Civil Appeal No. E229 of 2024 11 the goods and usage of the market and the buyer acquires good title if he buys in a market overt, in good faith and without notice of defect or want of title on the part of the seller.” 37. The court finds that having purchased the motor vehicle from the 2nd Respondent who was apparent owner and considering the entire transaction as a whole, the 1 st Respondent acquired a good title to the subject motor vehicle. b. Whether the any of the parties herein acted fraudulently 38. The 1st Respondent pleaded fraud against the Appellant, 2nd and 3rd Respondents as enumerated in paragraphs 4, 5 and 6 above. Allegations of fraud must be specifically pleaded and strictly proved with the the burden of proof falling on the party alleging fraud. In the Court of Appeal case of Kuria Kiarie & 2 others vs Sammy Magera (2018) eKLR where it was held: “The next and only other issue is fraud. The law is clear and we take it from the case of Vijay Morjaria v Nansingh Madhusingh Darbar & Another [2000] eKLR, where Tunoi, JA (as he then was) states as follows:“It is well established that fraud must be specifically pleaded and that particulars of the fraud alleged must be stated on the face of the pleading. The acts alleged to be fraudulent must, of course, be set out, and then it should be stated that these acts were done fraudulently. It is also settled law that fraudulent conduct must be distinctly alleged and distinctly proved, and it is not allowable to leave fraud to be inferred from the facts.” 39. As regards the standard of proof, the court in the case of Kinyanjui Kamau vs George Kamau (2015) eKLR expressed itself as follows; “…it is trite law that any allegations of fraud must be pleaded and strictly proved. See Ndolo v Ndolo [2008]1 KLR (G & F) 742 wherein the court stated that: “… we start by saying that it was the Respondent who was alleging that the will was a forgery and the burden to prove that allegation lay squarely on him. Since the Civil Appeal No. E229 of 2024 12 Respondent was making a serious charge of forgery or fraud, the standard of proof required of him was obviously higher than that required in ordinary civil cases, namely proof upon a balance of probabilities; but the burden of proof on the Respondent was certainly not one beyond a reasonable doubt as in Criminal Cases…” In cases where fraud is alleged, it is not enough to simply infer fraud from the facts.” 40. The evidence on record shows that the 2nd and 3rd Respondents acted fraudulently when they sold the subject motor vehicle to the 1st Respondent on 25 January 2022, received payment thereof, handed possession of the vehicle to the 1st Respondent, immediately thereafter pledged the same vehicle as security to obtain credit from the Appellant on 4 February 2022, received money from the Appellant knowing that they did not intend to repay and effecting a change in the ownership of the subject motor vehicle to the joint names of the 2nd Respondent and the Appellant. The conduct by the 2nd and 3rd Respondents leaves no doubt that they acted fraudulently. 41. As regards the Appellant, the particulars of fraud are that they failed to carry out due diligence as required by law before dealing with the 1st Defendant, or ascertain that the 1st Defendant (2nd Respondent herein) qualified to obtain a loan against the security offered and advancing a loan to the 1st Defendant (2nd Respondent) without undertaking a valuation of the motor vehicle or ascertaining the availability or possession or ownership of the vehicle. Whereas the above conduct may have greatly facilitated fraud by the 2 nd and 3rd Respondents, there was no evidence that the Appellant was guilty of fraud. Instead, the Appellant’s conduct is to be weighed against the 1st Respondent’s rights to the subject motor vehicle in determining whether or not the orders granted by the trial court ought to be vacated. c. Whether the Appellant was a bonafide creditor whose interest in the subject motor vehicle overrode those of the 1st Respondent. 42. The Appellant contended that it was a bonafide creditor whose interest overrode those of the 1st Respondent and are protected by law. While relying on Section 2 of the Movable Civil Appeal No. E229 of 2024 13 Property Security Rights Act, the Appellant further contended that it executed a security agreement in form of a loan facility agreement with the 2nd Respondent on 4 February 2022 where its interest in the security pledged, being the subject motor vehicle, was duly registered on 1 March 2022. The cases of Weston Gitonga & 10 others vs Peter Rugu Gikara & anor (2017) eKLR and Katende vs Haridar & Co ltd (2008) 2 EA 173 were cited in support thereof. 43. The doctrine of an innocent purchaser is a foundational equitable principle that shields a party who acts in good faith from prior unrecorded equitable claims to a property. In moveable property, the doctrine is an exception to the foundational legal rule in sale of goods of Nemo dat quod non habet - meaning no one can give what they do not have. However, there is no doctrine known as bonafide creditor in law. 44. As to whether the Appellant acquired interests or rights to the property that override the 1st Respondents, I find that the 2nd Respondent did not have rights to the subject motor vehicle capable of passing to the Appellant by way of security. The rights had already vested in the 1st Respondent who had acquired an equitable right in the motor vehicle that could not be defeated by the fraudulent acts of the 2nd and 3rd Respondents. 45. In such a scenario, the Court of Appeal in the case of Wambui v Mwangi & 3 others (Civil Appeal 465 of 2019) [2021] KECA 144 (KLR) (19 November 2021) (Judgment) held: - - “All transactions stemming from the fraudulent proceedings were all rooted on a fraudulent and illegal decree and could not in law be sanctioned by a court of law as they were null and void ab initio and could not therefore bestow any rights to any party either directly or indirectly affected by those proceedings.” 46. Since the purported charge of the subject motor vehicle by the 2nd Respondent and subsequent transfer and registration in the joint names of the 2nd Respondent and Appellant were marred with fraud and illegalities, the Appellant could not have acquired Civil Appeal No. E229 of 2024 14 any rights to the motor vehicle as security for the loan. Consequently, the trial court was justified to grant the orders as it did. 47. Indeed, there is nothing that precludes the Appellant from seeking recovery of the loan from the 2nd Respondent on the strength of paragraph 9 of the loan agreement dated 4 February 2022 save for attachment of the subject motor vehicle. Final Disposition 48. Accordingly, I find that the appeal lacks merit and is hereby dismissed with costs. 49. It is so ordered. Dated, Signed and Delivered Virtually at Nairobi on this 30th day of July 2026 JOSEPH KIPKOECH BIOMDO JUDGE Civil Appeal No. E229 of 2024 15