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JudgmentRace Auto Garage VS Lydia A. Juma10 min read

Race Auto Garage VS Lydia A. Juma

High Court at Milimani High Court · · Andayi W.F.

  1. The appellant herein Race Auto Garage (the garage) undertook repairs to the 1st respondent’s motor vehicle registration number KCU 554L at the instructions of the 2nd respondent (the insurer) who was the insurer. When the 1st respondent (the insured) went to collect the vehicle from the appellant’s garage, she was asked to settle the costs of the repair in full and that the vehicle would be retained at the appellant’s garage until payment was made. The 2nd respondent failed to settle the repair charges and the 1st respondent brought a claim at the SCC dated 12/4/2022 against the 2nd respondent and the appellant. As against the 2nd respondent she prayed for a declaration that it was liable to settle the repair charges in full and special damages of KShs 2,500/= per day from 21/3/2022 being loss of user, until the vehicle was available to the 1st respondent. She also prayed for general damages. I do not see any prayers made against the appellant in the claim. 
  2. The appellant on being served with the summons appeared and filed a response and counter claimed the cost of repairs KShs 35,960/= and storage charges of KShs 21,000/= making a total of KShs 56,960/=.
  3. The learned trial Adjudicator having heard the claim dismissed both the claim and the counterclaim and ordered each party to bear its own costs.
  4. Arising out of that decision, the appellant filed the present appeal through a memorandum of appeal dated 15/8/2022 contains some 7 grounds of appeal. Five out of those grounds start with the standard phrase of “…the learned magistrate erred in law and in fact…” To begin with, claims before the SCC are not heard by a magistrate but by an Adjudicator as per section 5(a) of the SCCA (Cap. 10A) Laws of Kenya, the fact that an Adjudicator is a magistrate notwithstanding. Therefore, the jurisdiction to preside over a SCC is conferred by statute upon an Adjudicator and not a magistrate.
  5. Secondly, appeals from the SCC to this court are only on points of law and not on issues of fact. Therefore, use of the standard byline of “… erred on matters of law and fact…” can only mean that either the learned counsel for the appellant has not fully acquainted herself with the workings of the SCCA or did not take time to go through the memorandum of appeal once prepared by her juniors. I believe she is now well advised.
  6. The appeal was canvassed by way of written submissions filed by the appellant only. The respondents did not file any submissions in spite of being granted time and notified to do so.
  7. I have considered the grounds of appeal raised in the memorandum of appeal, the record of appeal and the submissions by learned counsel for the appellant.
  8. An appeal to this court from the SCC is on points of law only as provided for under section 38 of the SCC Act.
  9. The Court of Appeal in M’Riungu v. Republic [1983] KLR 455, has given guidance on how to proceed to determine an appeal on points of law only, thus:

“where a right of appeal is confined to question of law, an appellate court has loyalty to accept the findings of fact of the lower court(s) and resist the temptation to treat findings of fact as holdings of fact and law and it should not interfere with the decision of the trial court or the first appellate court unless it is apparent that on evidence, no reasonable tribunal could have reached that conclusion, which would be the same as holding that the decision is bad in law”.

  1. The appellate court may however interfere with the findings of the trial court where it is demonstrated that there was no evidence at all upon which such findings were based or that the evidence relied upon was of such a nature that no reasonable tribunal, properly addressing its mind on it, could have made such findings as has been held in numerous decisions. (see for instance Bashir Haji Abdullahi v Adan Mohammed Nooru & 3 others [2014] eKLR.
  2. So, the first issue for this court to consider is whether the grounds of appeal raised by the appellant are on points of law only.
  3. The issues of law which I can discern from the seven grounds in the memorandum of appeal are that the learned trial Adjudicator erred in law by misapplying the principles of the law of contract and thereby arrived at a wrong decision in holding that the 1st respondent was not under obligation to pay the appellant for the repairs to his vehicle for reasons that the 1st respondent was not a party to the contract between the appellant and the 2nd respondent for the repair of the 1st respondent’s vehicle.
  4. Learned counsel for the appellant made extensive submissions on the issue of the agency relationship between the appellant and the 1st respondent. She even framed one of the issues for determination to be whether there existed a principal-agent relationship between the 1st respondent/insured and the 2nd respondent/insurer.
  5. According to the appellant, the insurer was simply an agent of the insured who was the principal and therefore liable to pay for the repairs and subsequent costs incurred for the vehicle.
  6. The learned trial Adjudicator found, and I believe correctly so that there was no principal/agent relationship between the insured (1st respondent herein) and the insurer (2nd respondent herein) as was alleged by the garage (appellant herein). The reason is that a contract of indemnity entered into between the insurer and insured is a special form of contract different from an agency relationship or contract created between a principal and agent.
  7. Although it is true that the 1st respondent/insured delivered her vehicle to the appellant for repairs and the 2nd respondent/insurer gave authority to the appellant/garage to proceed with the repairs which the garage did, this did not create an agency relationship as is known in law amongst the insurer the insured and the garage. By delivering the vehicle to the garage for repairs, the insured entered into a contract with the garage. She was bound to pay for the repairs. The insurer stepped in simply to fulfil the terms of the contract of indemnity it had with the insured. It did not step in as an agent of the insured but on a different contract to indemnify the insured for the damage caused to the third party’s vehicle.
  8. The issue of what happens where an insurance company for one reason or another, for instance in the case of insolvency, becomes incapable of meeting its obligations to its insured has been considered in various cases. In the case of Mercy Waithira v United Insurance Company Limited Statutory Manager & 3 others [2019] eKLR the High Court held that:

“The contact of Insurance is between the insurer and the Insured.  If like it happened to United Insurance Company that it became insolvent and was unable to settle the claims by 3rd parties against the insured, it is the insured who has the responsibility to settle those claims by 3rd parties…

It is the insured who has the responsibility to settle the claims by the 3rd parties who have obtained Judgment against her and cannot shift the responsibility to parties who were not parties to the contract. The liability is on the insure and cannot be transferred to another party.”

  1. The court arrived at this decision upon considering other cases that had dealt with the issues thus: In Kenny Jaden Kwanyi –v- Minister for Finance and 3 others (2005) eKLR the High Court held that.

“The contract of insurance is between him (the insured) and the insurer (the Insurance Company).  If the Insurance Company has collapsed he must carry that risk in a free enterprise system such as ours, the insurer was a company of this choice.  If he had Insured with a better managed Insurance Company, the risk he took could have been absorbed.  He probably insured in good faith, believing that since the Insurer was licensed by the state, it was a good bet to insure with.  He lost.  His only right is to prove the loss or debt (represented by the decree against him) with the statutory manager, receiver or liquidator.”

  1. Similarly, Justice Mumbi Ngugi (as she then was) in Duncan Mogaka Muchira –v- Minister for Finance & 4 Others stated:-

“It is a balancing act.  The primary liability in my view is that of the insured.  There is a valid decree of court against him or it, and so long as the decree subsists he is liable to satisfy it…

This, is in my view, is for good reason.  The balancing act involves weighing the competing claim of the insured, who made the unfortunate choice of an Insurance Company that was, for whatever reason, rendered insolvent, and a third party who is not party to the contract of insurance but has a Judgment against the insured.  The scales, surely must tilt in favour of the third party.  Which leads me to the second main issue raised in this application.”

  1. In another case Andrew Linge Mutua v Geminia Insurance Company Limited; Zipporah Mwende Mutua (Interested Party) [2021] eKLR where the court was considering an application for stay of execution where an insured was seeking to have the insurer settle a decretal sum obtained by a third party against the insured where judgment had been entered against the insured G. V. Odunga, J (as he then was) observed orbiter as follows: 

“I must however state that the primary obligation of settling the decree falls squarely on the Applicant and in the event the Defendant as his insurer fails to satisfy the decree, the Applicant will still be called upon to satisfy the same. The mere fact that the Defendant is bound both contractually and statutorily to satisfy the decree does not absolve the Applicant from meeting his obligations under the tort of negligence. It must be noted that nothing prevents the Applicant from settling the decretal sum and then suing the Defendant for compensation or reimbursement.”

  1. From the foregoing authorities, it is apparent that whereas the insured has a contract of indemnity with the insurer to settle claims arising out of the insurance contract, where the insurer fails to do so, the third party has a right to go for the insured directly to settle the claim.
  2. I am persuaded by these authorities to find that the learned trial Adjudicator was at fault in her finding that the contract for repair was between the insurer and the garage and therefore the garage could not seek to have the same enforced against the insured and thus dismiss the appellant’s counter claim against the 1st respondent. In fact, there was no contract at all between the insurer/the 2nd respondent herein and the garage, the appellant. As stated above the insurer only came to provide an assurance that the insured would settle the claim through it. Theoretically, the insurance company should pay over the money to the insured to remit to the garage but for purposes of convenience, such winded procedure is cut out with the insurance company then dealing directly with the third party in settling the repair bill. Unfortunately, in this case, the insurance company, the 2nd respondent was unable to settle the bill even after giving the garage the assurance that it would do so. In that case, the insured/1st respondent herein has to settle the claim and pursue the insurer for reimbursement through the other legal channels available to it.
  3. In a case very similar to the present one of Marshall’s East Africa Limited v Wilson Osoro [1993] eKLR the Court of Appeal had occasion to consider a similar issue and held that:

“The primary responsibility for payment of repair charges for the vehicle was the respondent’s. Because he was insured for the accident damage to his vehicle however, he looked to the insurers to meet the repair charges. The fact that for reasons we need not go into the insurers did not meet the charges does not alter the fact that the respondent obtained value from the appellant in the repair of his vehicle. In these circumstances the appellant’s counterclaim against the respondent ought to have been allowed and we hereby allow it with costs.”

  1. I agree with the submissions by learned counsel for the appellant that, the appellant has a lien over the 1st respondent’s vehicle until payment of the repair charges is made. If a chattel is in repair, the repairer acquires a lien on the chattel for the cost of repairs against the owner. (see the case of Wilson Osoro above). The storage charges arose as a result of the delay in payment of the repair charges and so are equally payable by the 1st respondent.
  2. In the result the appeal is allowed and the judgment of the SCC is set aside and substituted as hereinabove determined and judgment entered for the appellant on its counter claim.
  3. In view of the fact that the situation the appellant and the 1st respondent find themselves was not occasioned by any fault on the part of either of them I make no order as to the costs of this appeal.
  4. Dated, signed and delivered, at Milimani on the Virtual Platform, Teams this 17th day of September 2024.


    Race Auto Garage VS Lydia A. Juma Race Auto Garage VS Lydia A. Juma