https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/10930

**REPUBLIC OF KENYA** **IN THE HIGH COURT OF KENYA AT MURANG’A** **CIVIL APPEAL NO. E015 OF 2024** WATU NOMINEES COMPANY LTD……………….……………………………..... APPELLANT VERSUS GEORGE GICHUKI MURITHI.................................................... 1ST RESPONDENT PETER MACHARIA MUTHOGA................................................. 2ND RESPONDENT ***(Being an appeal from the Judgment and Decree of Hon. in Kenol Magistrate Court Civil Suit No. MCCC/E009/2022 delivered on 18th March, 2024)*** **JUDGMENT** **Introduction** 1. This is a first appeal from the judgment of the Honourable Magistrate in Kenol Magistrate Court Civil Suit No. MCCC/E009/2022 delivered on 18th March, 2024. The trial court found the Appellant and the 2nd Respondent jointly and severally liable for damages arising from a road traffic accident that occurred on 30th July, 2021 involving motor vehicle registration number KCY 168L and motorcycle registration number KMFK 192L. 2. The Appellant, being aggrieved by the said judgment, lodged the instant appeal on grounds that the trial court erred in law and in fact by: a. Finding the Appellant as the current owner of motorcycle registration KMFK 192L at the time of the accident for purposes of apportioning liability; b. Finding that the 2nd Respondent was the Appellant's agent; c. Finding the Appellant vicariously liable for the actions of the 2nd Respondent. **Background Facts** 1. The 1st Respondent filed a Plaint dated 24th October, 2022 seeking special damages arising from a road traffic accident which occurred on 30th July, 2021 involving motor vehicle number KCY 168L and motorcycle registration number KMFK 192L. 2. The Appellant filed a Statement of Defence dated 19th April, 2023 denying the claim and stating that it was a mere financier. The Appellant contended that it had entered into an asset finance loan agreement with the 2nd Respondent herein, in which the principal loan amount was disbursed directly towards the purchase price of the subject motorcycle. The Appellant maintained that its interest in the said motorcycle was purely as security for the due performance of the loan to the 2nd Respondent, and that the 2nd Respondent as the rider of the motorcycle was not its agent. 3. The hearing proceeded before the trial court on 18th January, 2024, and judgment was delivered on 18th March, 2024. The trial court found that the rider (2nd Respondent) and the financier (Appellant) were liable jointly and severally and entered judgment against them for Kshs. 197,872/= plus interest and costs. 4. In arriving at the said finding, the trial court stated: ***it is noted that the 1st Defendant is the owner of motor cycle registration number KMFK 192L and that the motor vehicle was not under its control at the time of the accident. Being the case, the principles of vicarious liability are clear. However, the rider, the 2nd Defendant was in control of the motor vehicle. There is no evidence adduced to prove contrary that the rider was not authorized to ride the said motor vehicle by the 1st Defendant…*** **Appellant’s Submissions** 1. The Appellant submitted that it tendered sufficient evidence to prove that it had entered into a loan agreement with the 2nd Respondent. The Appellant produced the loan agreement, loan special terms, security agreement, invoice from the seller, borrower's indemnity, delivery note, and loan statement (citations from Record of Appeal, pages 113-132). 2. It was submitted that the trial court failed to interrogate the evidence tendered and erroneously placed the burden of proving agency upon the Appellant, whereas the legal burden at all times remained with the 1st Respondent as the Plaintiff. The Appellant relied on **Tabitha Atsinga Musambi v Standard Limited & another [2019]** where the court held that pleadings are not evidence until proved. 3. The Appellant submitted that a financing agreement cannot be elevated into an agency relationship, and that the 2nd Respondent was not under the control of the Appellant. Reliance was placed on **Swaleh Abdalla & 4 Others vs. Pollman Tours & Safaris Ltd** and **Diamond Trust Bank Limited vs. Richard Mwangi Kamotho & 2 Others [2017] eKLR**. 4. On the issue of ownership, the Appellant submitted that Section 8 of the Traffic Act recognizes that there may be actual, possessory, or beneficial ownership independent of registration. The Appellant relied on **Nancy Ayemba Ngaira –Vs- Abdi Ali, Msa HCCA No. 107 of 2008 [2010] eKLR** and **David Ogol Alwar v Mary Atieno Adwera & Another [2021] eKLR**. 5. The Appellant also relied on **Consolidated Bank of Kenya Limited v Mwangi & another (Civil Appeal E056 of 2021) [2022] KEHC 3104 (KLR)** where the court held that ownership of a motor vehicle does not, of itself, establish liability for an accident, and **Watu Nominees Co. Ltd v. Josephine Nyambeki & 3 Others [2025] eKLR** where it was held that a financier of a motor vehicle, without more, does not render it liable for an accident involving the vehicle in possession of the borrower. 6. It was submitted that the Appellant's name was included in the logbook strictly for securing the loan advanced, and the Appellant had no control over how the motorcycle was utilized once released to the borrower. The Appellant prayed that the appeal be allowed with costs. **1st Respondent's Submissions** 1. The 1st Respondent submitted that the trial court correctly found the Appellant liable as the registered owner of the motorcycle. It was argued that under Section 8 of the Traffic Act, the person in whose name a vehicle is registered shall, unless the contrary is proved, be deemed to be the owner. The 1st Respondent relied on **Nzikoa Ngao -v- Silas Thiani Nkunga** where the Court of Appeal held that the burden was on the appellant to prove he was not the owner of the vehicle at the time of the accident. 2. The 1st Respondent submitted that the mere production of a loan agreement does not constitute proof of transfer of ownership, and no evidence was tendered to show that the alleged loan agreement was followed by an actual transfer in the records of the Registrar. Reliance was placed on **Ahmed Ali Twhair t/a Kilindini Royal Transport Services v MJ Clarke Limited (Civil Suit E073 of 2021) [2022] KEHC** regarding the requirement for formal transfer under Section 9 of the Traffic Act. 3. On vicarious liability, the 1st Respondent cited **Kansa vs Solanki, EA 318** and **Geoffrey Chege Nuthu v M/s Anverali & Brothers** to argue that the Appellant remained the legal owner and was thus presumed to exercise control over the motorcycle and the actions of the 2nd Respondent. 4. The 1st Respondent prayed that the appeal be dismissed with costs. **Issues for Determination** 1. Upon careful consideration of the Record of Appeal, the grounds of appeal, the submissions by both parties, and the applicable law, the following issues arise fordetermination: a. Whether the Appellant discharged the evidential burden of proof that it was a mere financier of the 2nd Respondent; b. Whether an agency relationship existed between the Appellant and the 2nd Respondent; c. Whether the Appellant was vicariously liable for the actions of the 2nd Respondent. **Analysis and Determination** **Whether the Appellant discharged the evidential burden of proof that it was a mere financier of the 2nd Respondent** 1. The Appellant tendered extensive documentary evidence before the trial court demonstrating the existence of a financing agreement between itself and the 2nd Respondent. The documents included: * The loan agreement at pages 113-120 of the Record of Appeal, clearly indicating the borrower as Peter Macharia Muthoga (the 2nd Respondent); * The Loan Special Terms at page 121 confirming the loan amount of Kshs. 127,900/- and the repayment terms; * The Security Agreement at page 123 creating security rights under the Movable Property Security Rights Act, 2017; * The invoice from Black Spider Auto Tech addressed to the 2nd Respondent for the purchase of the motorcycle; * The delivery note at page 128 confirming that the 2nd Respondent collected the motorcycle from the dealership; * The loan statement at pages 129-132 of the Record of Appeal. 1. Section 107(1) of the Evidence Act (Cap 80 Laws of Kenya) provides that when a person is bound to prove the existence of any fact, it is said that the burden of proof lies on that person. The Appellant, having alleged the existence of a financing agreement, bore the burden of proving that fact. In my view, the Appellant adduced sufficient documentary evidence to discharge this burden. 2. The trial court, with respect, failed to interrogate the evidence tendered by the Appellant. The trial magistrate made a blanket declaration that the Appellant failed to prove that the 2nd Respondent was not its authorized rider, without considering the documentary evidence showing the nature of the relationship between the parties. The 1st Respondent did not controvert the Appellant's evidence regarding the loan agreement. As held in **Tabitha Atsinga Musambi v Standard Limited & another [2019]**, pleadings are not evidence until proved, and the 1st Respondent failed to challenge the Appellant's documentary evidence. 3. I find and hold that the Appellant sufficiently discharged the evidential burden of proof showing the existence of a financing agreement with the 2nd Respondent and that it was a mere financier of the 2nd Respondent on the security of motorcycle registration KMFK 192L. **Whether an agency relationship existed between the Appellant and the 2nd Respondent** 1. The trial court found that the 2nd Respondent was the Appellant's agent on the basis that the Appellant failed to disprove that the 2nd Respondent was not authorized to ride the motorcycle. This finding was erroneous for several reasons. 2. First, the legal burden of proving agency lay with the 1st Respondent as the Plaintiff. As stated by this court in **Watu Nominees Company Limited v Josephine Nyambeki Ombaso & 3 Others [2025] KEHC 5520 (KLR)** , a party seeking to hold a financier liable is under a legal obligation to demonstrate that there was a further relationship between the financier and the borrower other than the mere financing of the purchase. The 1st Respondent adduced no evidence to prove any agency relationship between the Appellant and the 2nd Respondent. The 1st Respondent's witness testified during cross-examination that he was not aware whether the 2nd Respondent was acting under the instructions of the Appellant. 3. Second, the trial court erroneously shifted the burden of proof to the Appellant. The law is clear that the legal burden of proof remains static and rests with the party who asserts the existence of a fact. In the absence of any evidence from the 1st Respondent to prove agency, the trial court ought not to have placed the burden on the Appellant to disprove agency. 4. Third, a financing agreement, without more, cannot be elevated into an agency relationship. The relationship between the Appellant and the 2nd Respondent was purely contractual: the Appellant financed the purchase of the motorcycle, and the 2nd Respondent was to repay the loan in weekly installments. The Appellant had no control over how the 2nd Respondent utilized the motorcycle once it was released to him. The loan agreement explicitly provided at paragraph 1.4 that the borrower was the beneficial owner of the vehicle with full rights of ownership and control. 5. In **Swaleh Abdalla & 4 Others vs. Pollman Tours & Safaris Ltd** , Khaminwa J (as she then was) held that a financier has no interest in the business carried on by the hirer of the vehicle, and the vehicle was not being driven by a driver, agent, or servant of the financier. This position was affirmed in **Diamond Trust Bank Limited vs. Richard Mwangi Kamotho & 2 Others [2017] eKLR**. 6. More recently, in **Watu Nominees Company Limited v Ombaso & 3 Others [2025] KEHC 5520 (KLR)** , Mrima J stated: *"There has, as well, been several Court determinations on the liability of a financier arising from the above setting. For instance, the Court's* in **Abson Motors Limited vs. Tabitha Syombua Mutua & Another [2019] eKLR**, **Diamond Trust Bank Limited vs. Richard Mwangi Kamotho & 2Others [2017] eKLR** and **Swaleh Abdalla & 4 Others vs. Pollman tours & Safaris Limited***took the correct position that a financier of a motor vehicle, without more, does not render it liable out of an accident involving the vehicle which is in the possession of the borrower."* 1. Similarly, in **Mogo Auto Limited v Kariuki & another [2025] KEHC 7982 (KLR)** , **Mrima J** reiterated: ***"In other words, apart from the financier being registered as the owner or co-owner of the vehicle, a party seeking to hold the financier liable is under a legal obligation to demonstrate that there was a further relationship between the financier and the borrower other than the mere financing of the purchase."*** 1. In the present case, the 1st Respondent failed to demonstrate any further relationship between the Appellant and the 2nd Respondent beyond the financing arrangement. I therefore find and hold that no agency relationship existed between the Appellant and the 2nd Respondent. **Whether the Appellant was vicariously liable for the actions of the 2nd Respondent** 1. Vicarious liability arises where there exists a relationship between two parties, typically master and servant, or principal and agent, and where the wrongful act or omission occurs in the course of that relationship. The test for establishing vicarious liability was stated in the Court of Appeal case of **Sumer Singh Bachu v Nicholas Wainaina Kago Waweru [1976] eKLR** as follows: ***"where a person owns a vehicle which is driven by another person, even with the permission of the owner, that owner will not be vicariously liable in tort for the negligence of the driver unless it is established that the driver was acting as a servant or agent of the owner, or was using the vehicle for the benefit of the owner or for something in which the owner had an interest either alone or jointly with the driver."*** 1. In **Consolidated Bank of Kenya Limited v Mwangi & another [2022] KEHC 3104 (KLR)** , Majanja J held: ***"Ownership of a motor vehicle does not, of itself, establish liability for an accident. The plaintiff must prove that the owner is vicariously liable for the acts of the driver of the motor vehicle by showing that the driver is an employee or agent."*** 1. In **First Assurance Company Limited v BNM (Minor suing through next friend MM) & another [2024] KEHC 1857 (KLR)** , Majanja J (as he then was) held that the statutory presumption of ownership under Section 8 of the Traffic Act may be rebutted by contrary evidence, and that mere registration as owner is prima facie evidence only. 2. The Appellant tendered evidence demonstrating that: * The 2nd Respondent was the borrower and beneficial owner of the motorcycle; * The 2nd Respondent collected the motorcycle from the dealership; * The Appellant's interest in the motorcycle was strictly as security for the loan; * The Appellant had no control over the use of the motorcycle; * The motorcycle was not being used for the Appellant's benefit at the time of the accident. 1. The 1st Respondent adduced no evidence to prove that the 2nd Respondent was under the control of the Appellant or that the motorcycle was being used for the Appellant's benefit at the time of the accident. The mere fact that the Appellant's name appeared in the logbook was not sufficient to establish vicarious liability. 2. In **NCBA Bank (Formerly National Industrial Credit Bank Kenya PLC) v Shikanga & another [2025] KEHC 8180 (KLR)** , Bett J held that registration of a financier as co-owner to secure financial interest does not invite risk or liability. The court emphasized that there was no proof of any agency relationship between the financier and the borrower, and the vehicle was not being driven on the financier's behalf or for its benefit. 3. The police abstract (page 31 of the Record of Appeal) indicated that the 2nd Respondent was the rider of the motorcycle at the time of the accident. The 1st Respondent's own witness confirmed that the 2nd Respondent was in control of the motorcycle. There was no evidence that the 2nd Respondent was acting as the Appellant's agent or employee. 4. I therefore find and hold that the trial court erred in finding the Appellant vicariously liable for the actions of the 2nd Respondent. The Appellant, being a mere financier, cannot be held liable for an accident involving a motorcycle that was in the possession and control of the borrower, in the absence of evidence establishing agency or control. **Conclusion** 1. For the reasons set out above, I find that the trial court erred in law and in fact in holding the Appellant jointly and severally liable for the accident. The Appellant adduced sufficient evidence to prove that it was a mere financier and that no agency relationship existed between itself and the 2nd Respondent. The 1st Respondent failed to discharge the burden of proving that the 2nd Respondent was the Appellant's agent or that the Appellant was vicariously liable for the 2nd Respondent's actions. 2. The trial court's finding that the Appellant was liable merely because its name appeared in the logbook and because it failed to disprove that the 2nd Respondent was not authorized to ride the motorcycle was erroneous and contrary to the established principles of law regarding the liability of financiers. The doctrine of vicarious liability cannot apply in the absence of evidence of a master-servant or principal-agent relationship, and mere registration as owner for security purposes does not constitute such a relationship. **Orders** 1. In light of the foregoing, the appeal is merited. I make the following orders: a. The appeal be and is hereby allowed; b. The Judgment and Decree of the trial court in Kenol Magistrate Court Civil Suit No. MCCC/E009/2022 delivered on 18th March, 2024 is hereby set aside insofar as it relates to the Appellant; c. The finding that the Appellant is jointly and severally liable for the accident with the 2nd Respondent is hereby set aside and substituted with a finding that the Appellant was not liable for the accident; d. The 2nd Respondent shall solely shoulder the liability for the accident; e. The Appellant shall have the costs of this appeal and the costs of the suit in the trial court as against the 1st Respondent. 2. Right of Appeal 30 days. **DATED, SIGNED AND DELIVERED AT KAKAMEGA ONLINE THIS 17th DAY OF JULY, 2026.** **S.N MBUNGI** **JUDGE** **In the presence of:-** **CA:** Angog’a/Velma Mr. Otieno for the Appellant present online. Omita for the Respondent present online.