[2022] KEHC 1583 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA

AT NAIROBI

CIVIL CASE NO. 140 OF 2014

PIUS KAMAU NGANGA.................................................................................PLAINTIFF

VERSUS

SPERO AFRICA LIMITED...........................................................................DEFENDANT

JUDGMENT

The plaintiff and the defendant entered into a lease agreement on 27th October 2011 involving motor vehicle registration number KBP 595Y Toyota Prado. The plaintiff leased the said motor vehicle to the defendant for a period of one year at an agreed monthly charge of Kshs.200,000. The motor vehicle got lost while in the custody of the defendant sometimes in January, 2012. The plaintiff by his plaint dated 2nd May, 2014 is seeking Kshs.3,600,000 being the value of the vehicle, Kshs.200,000 monthly from January, 2012 until payment of the value of the vehicle being compensation for loss of user of the vehicle, interest and costs.

The matter proceeded to full hearing with each party calling one witness. PW1 KAMAU NG’ANG’A is the plaintiff. He relied on his witness statement. He also produced his list of documents as exhibits one to thirteen. It is his evidence that he leased his vehicle to the defendant for purposes of car hire. The agreement stipulated that it was his responsibility to take out a comprehensive insurance policy which he did and was valid from September 2011 to September 2012. The insurance policy sticker was on the vehicle. The insurance policy was part of premium financing from the bank which financed the purchase of the vehicle.

PW1 further testified that the vehicle was stolen. His insurers repudiated his claim. According to him the lease agreement stated that the defendant was to pay the drivers salary but there was no clause in the agreement barring the defendant from hiring out the vehicle on self-drive basis. The defendant was to return the vehicle after one year. The defendant called to inform him that the vehicle had been stolen.

DW1 JOHN MBURU NJOROGE is the defendant’s transport manager. He also relied on his witness statement and produced his list of documents as exhibits one to four. It is his evidence that the defendant leased the vehicle from the plaintiff. The vehicle was hired out to one John Bett who disappeared with it. Part of the terms of the lease agreement was to return the vehicle in good condition. It was the plaintiff’s responsibility to take a comprehensive insurance policy for the vehicle. The vehicle had a tracking system. The tracking system located the vehicle in Dar-es-Salaam.

It is DW1’s further evidence that the defendant did not breach any of the terms of the lease agreement. At times the defendant hires our vehicles together with a driver. John Bett was to drive himself as it was hired on self-drive basis. If the owner of a leased vehicle insists that the hirer should be chauffer driven, then the defendant used to enter into another agreement and notify the insurance company the details of the driver.

Counsel for the plaintiff submitted that there was a valid car lease agreement between the plaintiff and the defendant. The agreement is binding and is enforceable. The defendant took possession and control of the vehicle on 17th September, 2011 until the end of January, 2012 when it was stolen. The agreed monthly fee was Kshs.200,000. Counsel further submitted that the defendant was supposed to hire a driver. The defendant breached the agreement by hiring out the vehicle to a self-drive client. Counsel referred to the case of JOHN SAKIIT SAKAJA –V- PRIVATE DEVELOPMENT CO. LTD (2005) eKLR where the court stated:-

"The Defendant held the Plaintiff's said motor vehicle in circumstances that imposed a duty of care on the Defendant to take reasonable care or precaution to protect the same from theft."

It was also contended that the defendant had a duty of care on the vehicle and was expected to protect it from theft. Counsel urged the court to award the plaintiff damages as pleaded for breach of contract. It is the plaintiff’s position that he is entitled to the monthly fee of Kshs.200,000 from January, 2012 until the date of delivery of judgment in this suit. Further reliance was placed on the case of CONSOLATA ANYANGO OUMA –V- SOUTH NYANZA SUGAR CO. LTD (2015) eKLR where it was stated:-

“As a general principle, the purpose of damages for breach of contract is, subject to mitigation of loss, the claimant is to be put as far as possible in the same position he would have been if the breach complained of had not occurred. This is principle is encapsulated in the Latin phrase restitution in integrum (see Kenya Industrial Estates Ltd v Lee Enterprises Ltd NRB CA Civil Appeal No. 54 of 2004 [2009] eKLR, Kenya Breweries Ltd v Natex Distributors Ltd Milimani HCCC No. 704 of 2000 [2004] eKLR). The measure of damages is in accordance with the rule established in the case of Hadley v Baxendale (1854) 9. Exch. 341 that the measure of damages is such as may be fairly and reasonably be considered arising naturally from the breach itself or such as may be reasonably contemplated by the parties at the time the contract was made and a probable result of such breach (see Standard Chartered Bank Limited v Intercom Services Ltd & Others NRB CA Civil Appeal No. 37 of 2003 [2004] eKLR). Such damages are not damages at large or general damages but are in the nature of special damages and they must be pleaded and proved (see Coast Bus Service Ltd v Sisco Murunga Ndanyi & 2 others, NRB CA Civil Appeal No. 192 of 92 (UR) and Charles C. Sande v Kenya Co-operative Creameries Ltd, NRB CA Civil Appeal No. 154 of 1992 (UR).”

On his part, counsel for the defendant submitted that it is not disputed that the two parties entered into a car lease agreement on 27th October, 2011 involving motor vehicle number KBP 595Y. The vehicle was to be hired out to 3rd parties. While the vehicle was in the custody of the defendant, it was stolen. It was submitted that the defendant cannot be held liable for the loss of the vehicle. Under the terms of the agreement it was stated that the vehicle was to be comprehensively insured by the owner. It is the plaintiff’s insurers who are liable for settling any liability arising from theft of the vehicle.

It was further submitted that there is no proof that the plaintiff took out a comprehensive insurance cover for the vehicle. No certificate of insurance was produced. The plaintiff’s allegation that the insurer repudiated the claim was not supported by any document. According to the defendant the lease agreement did not provide that the vehicle was to be hired out on self-drive only. The plaintiff is the author of his own misfortune and his recourse is to the insurance company. Counsel relies on the case of WILLIAM KAZUNGU KARISA –V—COSMUS ANGORE CHANZERA (2006) eKLR where the court stated:-

“The basic rule of the law of contract is that the parties must perform their respective obligation in accordance with the terms of the contract executed by them.

The defendant further contend that that valuation report for the vehicle was done three months before the vehicle was lost and cannot be an accurate reflection of the true value of the vehicle. Further, that the lease agreement was for only twelve months and the plaintiff cannot claim damages for unlimited period.

There is no dispute that the parties herein entered into a car lease agreement. The defendant took possession of the vehicle from 17th September, 2011 although the agreement was signed later on 27th October, 2011. It is also not disputed that the lease agreement was for twelve months and was to end on 17th September,2012. Further, parties are in agreement that the vehicle was stolen sometimes on 21st January 2012 having been hired out by the defendant to their client by the name John Bett. Parties are equally in agreement that the monthly leas fee was Kshs.200,000/-.

The dispute herein raises the following issues:

1) Whether the vehicle registration number KBP 595Y was comprehensively insured.

2) Whether the plaintiff’s recourse lies with his insurance company.

3) Whether the defendant is liable for the loss of the vehicle.

The defendant maintain that it was a term of the lease agreement that the plaintiff take out a comprehensive motor vehicle policy. DW1 testified that the defendant normally insist on a comprehensive insurance cover for purposes of any eventuality. On his part, the plaintiff contend that he took out a comprehensive policy that was paid for by the bank which financed the purchase of the vehicle.

The plaintiff produced the log book for motor vehicle KBP 595Y Toyota Land Cruiser. The logbook indicate that the vehicle was jointly owned between the plaintiff and Consolidated bank of Kenya. The plaintiff also produced a letter of offer from Consolidated bank dated 6th September, 2011. The bank was to finance the purchase of the vehicle to the tune of Kshs.2,800,000. The terms of the loan provide for “securities”. One of the securities states:-

(d) “comprehensive insurance cover for the asset to be purchased, with bank’s interest duly noted as loss payee to be obtained from a reputable insurance company approved by the bank.”

There is also paragraph (d) under the sub title “other conditions” which states:-

“The bank requires that you comprehensively insure the vehicle/asset by reputable insurance company previously approved by the Bank and to keep the vehicle/asset so insured at all times.”

The plaintiff also produced a letter dated 23rd January, 2012 addressed “To whom it may concern” The letter is from Consolidated bank and states that it had financed the plaintiff to purchase the motor vehicle registration number KBP 595Y.

Another document produced by the plaintiff is a valuation report dated 17th November 2011 by Regent Automobile Valuers & Assessors Limited. The report is for motor vehicle KBP 595Y and it does indicate that the vehicle was insured by Corporate Insurance Company under policy number 01/088/1/910475/2011. The vehicle was valued at Kshs.3,600,000. There is also a motor insurance proposal form from Corporate Insurance Company Limited for the vehicle. The proposal indicate that the policy was to cover the period 14th September 2011 to 13th September 2012. The computed premium on the form is about Kshs.307,426/-.

The plaintiff also produced a certified copy of the insurance policy and a claim form that was received by the insurer on 25th January, 2012. The claim form indicate that the vehicle was leased out to the defendant. The car lease agreement dated 27th October 2011 states under “Terms and Conditions” as follows:-

“The car shall be a comprehensive insured vehicle covering four passengers. The car owner will ensure the fulfilment of mandatory inspection.”

It is also stated that the vehicle must possess a valid comprehensive insurance.

It is the plaintiff’s evidence that the insurance sticker was on the vehicle. The defendant in its defence at Paragraphs 5 and 9 makes reference to the insurance company and maintain that the plaintiff’s recourse lies with Corporate Insurance Company Limited. From all that information on insurance, I do find and hold that indeed the leased vehicle had a valid comprehensive insurance cover. The bank which financed the purchase of the vehicle confirmed that it had facilitated the purchase of the vehicle and one of its conditions was the availability of a comprehensive insurance policy. There are documents from Corporate Insurance Company which do confirm that the vehicle was comprehensively insured. There was no breach of contract on the part of the plaintiff.

The next issue is whether the plaintiff’s recourse lies with his insurers. The defendant reiterate that it was incumbent upon the vehicle owner to obtain a comprehensive insurance cover. In the event of any eventuality, the owner would be compensated by his insurers. Assuming the insurers compensated the plaintiff after the loss of the vehicle, would the defendant escape liability? Had the insurers paid the plaintiff’s claim, they would have still pursued the defendant herein under the doctrine of subrogation so as to diminish their losses. The insurer is entitled to seek compensation from a culpable third party who is the cause of the tort which led to the realization of the risk. The defendant is not privy to the insurance policy between the plaintiff and his insurers. He cannot benefit from that arrangement if found to be the cause of the loss. Even if the car lease agreement required that the car owner provide a comprehensive insurance company, that in itself does not absolve the defendant from liability where it is found to have been negligent. The claim by the plaintiff’s insurers under subrogation would have still been instituted under the plaintiff’s name.

The facts show that the vehicle was in possession of the defendant. The lease agreement provided that after the expiry of the twelve months lease period, the vehicle was to be returned to the plaintiff. The vehicle was stolen while in possession of the defendant. According to the plaintiff, when he was notified about the loss of the vehicle, the car track system traced it at a place called Nyansiongo about 46 kilometres away from Kisii. The defendant did nothing to pursue the vehicle which managed to reach Dar-es-salaam the following day. The plaintiff fulfilled his part of the contract. The defendant’s work arrangement led to the loss of the vehicle. The vehicle was not recovered. I am satisfied that the plaintiff’s recourse lies with the defendant. The defendant cannot be the beneficiary of the comprehensive insurance policy. The plaintiff testified that the insurer repudiated the claim. Even if the insurer paid the claim, still the defendant is culpable and cannot be the beneficiary of the insurance cover.

I do find that the defendant is liable for the loss of the vehicle. The vehicle was purchased from Car Soko on 10th September 2011. The defendant took possession of the vehicle on 17th September 2011, the day the vehicle was handed over to the defendant. It was stolen on 21st January 2012. The valuation report was just over two months when the vehicle was stolen. The vehicle was valued at Kshs.3,600,000. Given the short period involved, I do find that the vehicle’s value was still Kshs.3. 6million. I see no need of applying a flat percentage depreciation computation of the vehicle. The defendant did not provide any evidence as to how the vehicle had been used during those two months. I do find that the value of the stolen vehicle was Kshs.3,600,000/-.

The plaintiff is also claiming a sum of Kshs.200,000 monthly from January, 2012 until payment of the value of the vehicle is made. I have found that the defendant breached the agreement by failing to ensure that it was returned to the owner after the expiry of the lease period. The lease agreement was for one year and was to lapse on 17th September 2012. The plaintiff is entitled to be placed in the same position he was in before the breach of contract occurred. Restitution of a contracting party should not lead to unfair enrichment. The plaintiff was entitled to the lease fee upto the end of the lease in September, 2012. That is a period of nine (9) months and this gives a total sum of Kshs.1,800,000. I am of the considered view that granting the plaintiff a sum of Kshs.200,000 from January, 2012 until the sum of Kshs.3,600,000 is paid will amount to injustice. It is now almost ten (10) years from January, 2012 to date. That would translate to Kshs.24 million (Kshs. 2,400,000 monthly). I do not think that such an award can be held to be within the meaning of restitution. I do find that the sum of Kshs.1. 8million is adequate compensation to the plaintiff.

In the end, I do find that the plaintiff has proved his case on a balance of probabilities. He is entitled to the value of the stolen vehicle as well as the agreed lease fee for the remaining period. Judgment is hereby entered for the plaintiff against the defendant as follows:-

a) Kshs. 3,600,000 for loss of motor vehicle KBP 595Y.

b) Kshs.1,800,000, loss of lease fee.

c) Interest on (a) and (b) at court rates.

DATED AND SIGNED AT NAIROBI THIS 14TH DAY OF MARCH, 2022.

.................................

S.J. CHITEMBWE

JUDGE