Equity Bank has been penalised Sh1 million by the court for misplacing a customer’s vehicle logbook, which had been used as collateral for a Sh500,000 loan, and for failing to promptly replace it after the loan had been repaid in full.
Justice Florence Muchemi ordered the bank to pay the damages to businesswoman Pauline Wanjiku for the loss of use of the vehicle.
The judge found that the bank had breached the loan agreement by failing to release the collateral to the borrower upon full repayment of the loan, as set out in the contract documents.
Although the bank admitted to misplacing the logbook and reporting it missing at Thika Police Station, they accused Ms Wanjiku of frustrating the replacement process.
“It is clear that the logbook was placed in the safe custody of the bank and as such, the bank owed a duty of care to the respondent to keep it in safe custody. The bank ought to have communicated to the respondent of the loss of the logbook even before they applied for replacement. The failure to do that was a breach of duty of contract by the bank,” said Justice Muchemi in the verdict delivered on May 26, 2025.
The motor vehicle had been used as security for a Sh500,000 loan advanced to Ms Wanjiku in March 2015. However, the logbook was still in the name of the vehicle’s initial owner, Anne Wangari, as it had not been transferred to Ms Wanjiku.
Ms Wanjiku finalised her loan repayments in 2016. But, the bank failed to release the logbook, claiming that it had been lost and that they could not replace it as Ms Wanjiku did not provide the details of the registered owner of the vehicle.
She sought court redress, arguing that detaining the logbook was unlawful.
She filed the court action in 2022, contending that she was incurring daily expenses for hiring transport because she could not use her vehicle due to the missing logbook.
“The bank did not take the necessary steps to inform the respondent once they discovered that they had misplaced it and proceeding to take the steps in replacing it with a duplicate. Instead the bank blamed the respondent for being indolent and frustrating the process of obtaining a duplicate by not availing the registered owner. It is, therefore, my considered view that the bank breached the terms of the loan agreement,” said Justice Muchemi.
The dispute escalated to the High Court following an appeal by the bank after the magistrate’s court ordered the lender to pay the businesswoman Sh4.6 million in damages.
Ms Wanjiku claimed that she had been unable to use the motor vehicle since 2017 and was therefore entitled to compensation for loss of use.
However, while reducing the award to Sh1 million, Justice Muchemi said Ms Wanjiku had failed to mitigate her losses by waiting several years to claim compensation or transport expenses. The damages were calculated at Sh5,000 per day, six days a week, for 36 weeks, totalling Sh1,080,000.
“This indolent act of the respondent ought to have been taken into consideration by the magistrate in awarding damages,” said the judge.
The judge also dismissed the bank’s argument that Ms Wanjiku lacked standing to file the suit without joining the registered owner of the motor vehicle.
“It is clear that, the bank when entering into a loan agreement with the respondent, was fully aware that the suit motor vehicle was not registered in the respondent’s name. The log book she deposited with the bank bore the name Anne Wangari, but the bank did not ask for the said owner to be brought before them and neither did they decline to use the log book as security or hold the loan for the reason that the logbook was in the name of Anne Wangari,” observed the judge.
She added that the bank accepted the sale agreement Ms Wanjiku provided to them and held the logbook as collateral for the loan that was advanced to her.
“From the conduct of the bank, it is not in dispute that the bank conceded to the respondent’s beneficial ownership of the suit motor vehicle before accepting it as collateral,” said Justice Muchemi.
