On New Year’s eve in 2015, a fatal crash happened on the Litein-Kericho road in the South Rift Valley region involving a vehicle that had been rented by the National Treasury from car leasing firm, Tsusho Capital Kenya Limited on behalf of the National Police Service.
A police constable James Ngechu was among those killed in the accident on December 31, 2015 while on board the vehicle and on official duty escorting remandees to the Sotik Law Court—triggering a lawsuit by his widow Esther Wanjiru Ngechu who demanded compensation for the lost family bread-winner.
At the time of the accident, Tsusho was the registered owner of the vehicle although they had rented it out to the National Treasury on behalf of the National Police Service under a master operating lease dated November 4, 2013.
Ngechu’s widow filed a case in a Magistrate Court seeking compensation to cater for their three sons and herself.
In her suit, she argued that 45-year-old Ngechu’s career had been cut short by 15 years and demanded reparation based on his regular monthly salary of Sh44,800 at the time of his death.
It was her case that she had spent Sh22,500 on funeral expenses and Sh25,000 on letters of administration. She, therefore, prayed for compensation from the Tsusho Capital.
And in a verdict that is likely to shape future deals between State and vehicle leasing firms, both the Magistrate court and the High Court held Tsusho Capital accountable for Mrs Ngechu’s compensation even though the vehicle was in the hands of the lessee.
The magistrate court on April 25, 2019, delivered a judgment in favour of the widow and ordered Tsusho Capital to pay her Sh4,675,580 being the combined award for special and general damages.
Dissatisfied by the decision of the trial court, the Tsusho filed an appeal in the High Court on May 22, 2019, on grounds that the magistrate erred in law by allegedly basing his decision on a wrong legal principle and declining its request to enjoin the Attorney-General in the dispute as the official custodian of government operations.
Tsusho argued that although it was the registered owner of the motor vehicle registration number GKB 371 E, that did not bestow on it the responsibility of risk or liability during the term of the agreement.
The firm further maintained that it could not be held liable for the accident yet the motor vehicle at the time of the crash was not being driven at its request or instruction.
Tsusho also argued that it neither had any interest, concern, or control over the vehicle which was firmly in the possession and use of the National Police Service.
It made a final submission that if the insurance company failed to honour the claim then the National Treasury would indemnify them.
High Court Judge Roseline Lagat-Korir however upheld the decision of the lower court, placing Mrs. Ngechu’s compensation claims in the in-tray of Tsusho Capital and putting the spotlight on the lease deals signed with the State.
The Judge upheld that Tsusho was the bonafide owner of the vehicle and was liable according to the Traffic Act.
“In terms of ownership of a motor vehicle, Section 8 of the Traffic Act states 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” she ruled on November 18, 2022, citing a 2018 verdict by the Court of Appeal in a case involving a Mr Jared Magwaro Bundi versus Primarosa Flowers Limited.
“The question then becomes who was liable for the accident that occurred on December 31, 2015. The agreement produced was between the appellant as the lessor and the National Treasury as the lessee and the same was dated November 4, 2013. The lease period was for four years which meant the earliest the agreement could terminate was sometime in November 2017 though DW1(defense witness1) testified that the lease was to expire in February 2018. This means that the accident occurred when the agreement was still in force,” Justice Lagat-Korir said.
The judge also faulted Tsusho for failing to push for the enjoinment of the Attorney-General in the matter even after making an application for the same on May 22, 2018.
“From the record, the appellant filed a chamber summons application dated May 22, 2018, where she sought leave to issue a third-party notice against the Attorney General. The Application was dismissed on October 24, 2018, for want of prosecution. The record shows no attempt by the respondent to reinstate the application and pursue it to its logical conclusion” the Judge said.
“Clause 8 (h) of the lease agreement stated: - As an obligation surviving termination of this agreement, the lessee would indemnify the lessor in respect of any claims made against the lessor and all damages, costs, and expenses suffered or incurred by the lessor as a result of any third party claim arising out of the state, condition or use of the vehicles or in any way arising out of the vehicles being let under this agreement,” she added.
Clause 18 (d) of the lease agreement also stated that the “ lessor shall not be liable (in contract, tort or otherwise) for any claim, damage, liability, loss (including consequential loss) or expense of any kind arising directly or indirectly in connection with the vehicles nor from any delay in delivery of, or failure to deliver, the vehicles, any defect or deficiency in, or inadequacy or unsuitability of, the vehicles or their installation, use, performance, servicing or repair of from any action or omission of the lessor, its servants or agents.”
Analysts said the court verdicts are likely to trigger reviews of the lease deals to have the National Treasury and renting ministries and agencies expressly bear a bigger responsibility for the vehicles.
“The Tsusho experience is an eye opener for leasing firms to review their liability terms with renters. Although they own cars and take comprehensive insurance cover for them, they must now take steps to make the renters shoulder a bigger responsibility and extend to areas such as driver discipline and training,” an official of a vehicle leasing firm told Smart Business.
For example, in the case of Tsusho, the deal with the National Treasury vaguely stated that the leasing firm would foot claims and “may seek indemnity from the Government”.
The vehicle leasing programme was officially launched in 2013 and has taken root across the country, serving departments, especially in the security sector.
Under the scheme, the government has hired cars dealerships including CMC Motors Group Limited, Toyota Kenya Ltd, DT Dobie &Co. Ltd, Simba Corporation Ltd, Isuzu EA Limited, Ecta Kenya (Subaru) Ltd, Crown Motors Group Ltd (Nissan) and Urysia Ltd (Peugeot) for three years before trading them in.
Under a trade-in deal, an owner surrenders a used car to a dealer and selects another, and after the two units are assessed, a barter price is agreed on.
The cars would then be resold as second-hand vehicles in the local market to help reduce the demand for imports saving on forex and boosting the local industry.