Court Orders Mombasa Car Dealer to Refund KSh 670,000 After Buyer Rejects ‘Zero Mileage’ Toyota

A Mombasa-based second-hand car dealer has lost a lengthy legal battle after the Court of Appeal ruled that it must refund a buyer’s KSh670,000 deposit, declaring that a seller cannot retain both a returned vehicle and the purchaser’s money simply by hiding behind an “as is where is” clause.

In a judgement likely to resonate across Kenya’s booming used-car market, a three-judge bench held that N.S. Car Dealers Ltd was unjustly enriched after accepting back a Toyota Voxy from two buyers, later selling it to another customer while refusing to refund the original purchasers’ deposit.

The decision closes a legal dispute that began in 2018, yet its reasoning stretches well beyond one vehicle.

It speaks directly to the balance between contractual freedom and commercial fairness, particularly where second-hand motor vehicles are concerned.

The dispute centred on a Toyota Voxy, registration KCN 940G, purchased under a hire-purchase agreement for KSh1.45 million. Jerry Russels Shivachi and Evans Muhadia Busaka paid KSh670,000 upfront, expecting to settle the balance through monthly instalments.

Zero Mileage

The buyers later claimed the dealer represented the vehicle as having zero mileage. Their confidence quickly evaporated.

After driving the vehicle to Nairobi, they obtained a Kenya Bureau of Standards roadworthiness certificate.

It showed the vehicle had previously recorded more than 91,600 kilometres, sharply contradicting what they believed they had purchased. Convinced something fundamental had been concealed, they returned the vehicle before their first instalment even fell due.

The dealer denied any deception.

It insisted the vehicle had been sold strictly on an “as is where is” basis after inspection. It also denied tampering with the odometer, arguing instead that the buyers simply walked away from a valid contract after changing their minds.

Yet what followed would become the case’s defining feature.

Instead of rejecting the returned vehicle, the company accepted it. It even proposed sourcing another vehicle at a higher purchase price before eventually selling the returned Toyota to someone else.

At the same time, it retained the buyers’ deposit.

Those actions steadily weakened the dealer’s legal position.

The trial court found there was insufficient evidence proving odometer tampering or fraud, since such allegations require strict proof.

Nevertheless, it concluded that the dealer’s own conduct demonstrated the original transaction had effectively collapsed, ordering a refund of both the deposit and tracker charges.

High Court

The High Court later refined that reasoning.

Justice Kizito Magare held that the magistrate had wrongly relied on the doctrine of frustration because neither party had pleaded it. However, he reached the same ultimate destination through a different legal route.

The judge found the buyers had lawfully repudiated the contract by returning the vehicle, while the dealer accepted that repudiation by taking possession and later disposing of the vehicle. Once that happened, the contract ceased to exist.

The dealer therefore had no legal basis for retaining the buyers’ money. The court, however, struck out the additional KSh20,000 tracker claim after finding it had not been proved.

Court of Appeal

Still dissatisfied, N.S. Car Dealers turned to the Court of Appeal.

The company argued that the High Court had effectively invented a new legal case based on repudiation, despite neither side pleading it.

It further maintained that courts cannot rewrite contracts and insisted the “as is where is” clause shielded it from liability.

The appellate judges disagreed almost entirely.

Writing for the unanimous bench, the court drew an important distinction between facts pleaded by litigants and legal conclusions drawn by judges.

“The facts and evidence distinctly pointed to the contract as having been repudiated and subsequently terminated by the parties,” the judges observed, adding that pleadings ordinarily contain facts while courts determine the applicable legal principles.

The judges rejected claims that the High Court had improperly introduced a new case. Instead, they found the evidence consistently showed the buyers returned the vehicle, the dealer accepted it, and later sold it. Those facts, they ruled, naturally amounted to repudiation of the agreement.

Equally significant was the court’s treatment of the contract itself.

The judges accepted that the agreement expressly stated the vehicle was sold on an “as is where is” basis.

Even so, they ruled that clause lost its force once the dealer voluntarily accepted the vehicle back and effectively terminated the agreement.

“Once the Appellant accepted the return of the motor vehicle… the ‘as is where is’ term of the agreement became moot,” the court held.

The judgement also turned on a broader equitable principle.

Allowing the dealer to keep both the vehicle and the buyers’ deposit, the judges reasoned, would amount to unjust enrichment. The proper remedy was therefore restitutio in integrum, restoring both parties to the positions they occupied before the failed transaction.

Ultimately, the Court of Appeal dismissed the dealer’s appeal in its entirety.

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N.S. Car Dealers must now refund the KSh670,000 deposit, together with interest and costs, bringing to a close an eight-year dispute whose legacy may outlive the Toyota Voxy that started it.

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