The High Court has found Equity Bank Limited negligent after a client’s vehicle logbook was retained for years and the car was inexplicably transferred to a third party’s name, even though the borrower had fully settled a KSh 300,000 loan.
In a ruling delivered in a civil appeal, the court overturned an earlier magistrate’s decision that had dismissed Paul Mungatia’s claim against the lender.
The matter dates back to April 2016 when Mungatia secured a KSh 300,000 facility from the bank, offering the original logbook of his Mercedes Benz as collateral. Although he cleared the loan by July 2017, the logbook was never returned, leaving him unable to transfer ownership or insure the vehicle.
The situation escalated when he attempted to sell the car for KSh 700,000, only to discover that it had been registered under the name of Kenyanjui Mbugua Dennis.
Equity Bank acknowledged receiving the logbook and signed transfer documents but blamed the National Transport and Safety Authority, maintaining that it had forwarded the paperwork for joint registration and that any improper transfer lay with the Authority. The bank presented a 2017 letter addressed to NTSA requesting rectification.
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The High Court was unconvinced. It held that under the terms of the loan agreement, the bank bore responsibility for ensuring joint registration was properly effected before releasing the funds. The judge noted that had the security been registered prior to disbursement, the vehicle could not have been transferred to a third party.
The court concluded that the bank owed its customer a duty of care and breached that obligation by failing to secure the joint registration, thereby exposing the asset to irregular transfer. Institutions, the judge observed, must take reasonable steps to prevent foreseeable harm to those directly affected by their actions.
While the lower court had acknowledged the borrower’s considerable hardship, it had cleared the bank of liability, suggesting instead that NTSA should have been sued.
Mungatia had sought KSh 1 million in damages. However, the High Court found that he had not fully mitigated his losses. Evidence showed that NTSA corrected the dual registration in 2018 and advised him to log into the Transport Information Management System to reclaim ownership, a step he did not take.
The court ultimately awarded him KSh 100,000 in general damages.
