The High Court has dismissed an appeal by asset financing firm Mogo Auto Ltd and upheld a decision requiring the company to refund a Mombasa tuk-tuk operator after unlawfully repossessing and selling his vehicle.

In a judgment delivered on June 4, Justice Gregory Mutai ruled that the agreement between Mogo and the customer was, in substance, a hire-purchase agreement, making it subject to the provisions of the Hire Purchase Act.

The dispute arose from a 2023 financing arrangement under which Mogo provided Sh446,250 towards the purchase of a tuk-tuk, while the customer contributed Sh50,000. The vehicle was to be transferred to the customer upon full repayment of the loan.

Court documents show the customer made payments of between Sh479,609 and Sh549,246 before falling into arrears. Mogo later repossessed the tuk-tuk and sold it to a third party for Sh413,400, arguing that it was exercising its rights under an asset finance agreement.

However, the Small Claims Court ruled that the repossession was unlawful because the customer had already paid more than two-thirds of the purchase price. Under Section 15 of the Hire Purchase Act, an owner can only recover such goods through a court process.

Mogo appealed the decision, arguing that the transaction was governed by the Movable Property Security Rights Act rather than the Hire Purchase Act and that the repossession was therefore lawful.

Justice Mutai rejected the argument, finding that the company retained ownership of the vehicle until the loan was fully repaid, a key characteristic of a hire-purchase arrangement.

“The contract looked like a hire purchase agreement, walked like a hire purchase agreement, and quacked like one,” the judge stated.

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The court held that Mogo should have sought a court order before repossessing and selling the vehicle.

“Accordingly, it was improper and unlawful for the appellant to repossess and sell the motor vehicle without leave of the court,” Justice Mutai ruled.

The judge noted that the Hire Purchase Act provides that where goods are repossessed unlawfully after a customer has paid more than two-thirds of the purchase price, the customer is entitled to recover sums already paid.

The High Court upheld the Small Claims Court’s order requiring Mogo to refund Sh413,400 to the customer and dismissed the company’s counterclaim seeking additional payments.

Justice Mutai further ordered that the decretal amount deposited by Mogo during the appeal be released to the respondent immediately and awarded costs of the appeal to the tuk-tuk owner.