The High Court has shielded an asset financier from liability claims following an accident involving a motorcycle under a loan facility.
The court held that banks and motorcycle financiers are insulated from accident liability and cannot be apportioned liability merely because they remain registered owners of financed motorcycles.
The decision came as the court overturned a March 2024 ruling by a Magistrate that had held Watu Nominees Company Ltd jointly liable with a motorcycle rider for injuries arising from a July 30, 2021 road accident.
The court found that Watu had acted only as a financier and exercised no control over the motorcycle’s use.
The judgment arose from a suit filed by accident victim George Gichuki after a collision involving a motorcycle and motor vehicle in Murang’a.
A magistrate at Kenol law courts ordered Watu and rider Peter Macharia to pay Sh197,872 in damages, interest and costs after finding them jointly and severally liable.
Watu appealed, arguing that it financed the motorcycle through an asset-finance agreement and retained its name on the logbook only as security for repayment. It said the borrower collected, controlled and operated the motorcycle independently and was never its employee or agent.
The High Court allowed the appeal, saying Watu had produced extensive documentary evidence proving the commercial relationship. Those documents included the loan agreement, special loan terms, security agreement, dealership invoice, delivery note and loan statements.
“I find and hold that the appellant sufficiently discharged the evidential burden of proof showing the existence of a financing agreement with the second respondent (Macharia) and that it was a mere financier,” the court said in a judgment that reduces litigation exposure for lenders financing hundreds of thousands of motorcycles.
It faulted the trial court for failing to examine that evidence and for shifting the burden of proof onto the financier instead of requiring the injured plaintiff to prove an agency relationship.
“The legal burden of proving agency lay with the first respondent (Gichuki) as the plaintiff,” the judge said, adding that the injured party produced no evidence showing the rider acted on Watu’s behalf.
The court clarified that retaining a name on a logbook as loan security does not automatically expose financiers to accident claims, potentially lowering legal risk across the industry.
It also rejected the lower court’s finding that the rider became Watu’s agent because the financier had not disproved he was authorised to use the motorcycle.
“A financing agreement, without more, cannot be elevated into an agency relationship. The relationship between Watu and the second respondent (Macharia) was purely contractual,” Justice Stephen Mbungi said.
Legal responsibility
The court said the loan agreement expressly recognised the borrower as the beneficial owner with full rights of ownership and control once the motorcycle was released to him.
It found Watu neither directed how the motorcycle was used nor benefitted from its operation.
Justice Mbungi further ruled that registration on a logbook as security does not by itself establish legal responsibility for an accident.
“The mere fact that the appellant’s name appeared in the logbook was not sufficient to establish vicarious liability,” the judge said.
He added that, “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.”
The court set aside the finding of joint liability against Watu and ruled that the rider, Macharia, would solely bear responsibility for the accident.