Wanjiku & Wanjiku Associates v Manu Holdings Limited (Environment and Land Miscellaneous Application 243 of 2017) [2023] KEELC 489 (KLR)

Environment and Land Court (court not expressly named in the extract; judge sitting at Nairobi)

2 February 2023

LMLUCY N MBUGUA

925 words in judgment

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The bottom line

A Kenyan court allowed an advocate to summon company directors for questioning about the company's assets, but refused to hold them personally liable yet.

What this practically means

Executive summary

The applicant advocate moved the court by notice of motion dated July 29, 2022 seeking that Francis Saint Njuguna and Joyce Njoki Mwangi, the directors and shareholders of the respondent client company, attend court for oral examination on the respondent's assets and means of satisfying a taxed advocate/client costs decree of Kshs 878,235/= (certificate of taxation issued December 8, 2020 and affirmed on reference by a ruling of October 25, 2021), and that in default they be held personally liable and committed to civil jail. The applicant also sought production of the company's books of accounts, bank statements and audited accounts. The application was unopposed. The court framed two issues: whether the directors should be examined under Order 22 rule 35 of the Civil Procedure Rules, and whether the corporate veil should be lifted to fasten personal liability on them. Relying on Ultimate Laboratories v Tasha Bioservice (as cited in Tropical Wood Limited), the court held the Order 22 rule 35 power to summon officers for examination is limited to discovering debts owing to the judgment debtor and means of satisfying the decree, and since the application was unopposed and procedurally anchored in the rules, the examination and production orders were merited. On personal liability, applying Salomon v Salomon and Riccatti Business College, the court held that the mere fact that the respondent has no traceable assets does not constitute the special circumstances (improper conduct, fraud, sham, agency or tax evasion) required to lift the veil at that stage; such orders await the outcome of the examination or a default in attendance. The application was allowed in terms of prayers a), b), c) and e).

Key legal issues

Oral examination of directors under Order 22 rule 35

Holding

The request to summon the two directors for examination on assets and means of satisfying the decree is merited as it is anchored in Order 22 rule 34/35 Civil Procedure Rules and unopposed

Reasoning

Order 22 rule 35 permits a decree holder in a money decree to apply for oral examination of any officer of a corporation regarding assets, debts owing to the judgment debtor or other means of satisfying the decree, and for production of books and documents. The application was unopposed and the respondent had given no undertaking on satisfaction of the taxed advocate/client costs, so the examination orders issued.

p. 2

Lifting the corporate veil and personal liability of directors

Holding

Refused at this stage; mere lack of traceable assets is not a special circumstance

Reasoning

Applying Salomon v Salomon and Riccatti Business College, the court held the veil may be lifted only in special circumstances such as improper conduct, fraud, sham, agency or tax evasion. The applicant's deposition that the respondent has no traceable assets was uncontroverted but insufficient at the interlocutory stage; further orders depend on the outcome of the examination or a default in attendance.

p. 2

Legal principles established

The power to summon a person for examination under Order 22 rule 35 is confined to ascertaining debts owing to the judgment debtor and the property or means of satisfying the decree
A company is a separate legal person from its members; the corporate veil may be lifted only in special circumstances such as improper conduct, fraud, sham, agency or tax evasion
Lifting the veil cannot be ordered prematurely; it awaits examination of the company's officers or their default in attending

Court orders

1.The notice of motion dated July 29, 2022 is allowed in terms of prayer numbers a), b), c) and e), i.e. the directors Francis Saint Njuguna and Joyce Njoki Mwangi to attend court for oral examination on the respondent's assets and means of satisfying the decree and to produce the respondent's books of accounts, bank statements, audited accounts and other documents showing the affairs of the company

Authorities

Legislation

Civil Procedure RulesOrder 22 rule 35

Cases cited (4)

Ultimate Laboratories v Tasha Bioservice Limited
NBI HCCC No 1287 of 2000 (Unreported)
Tropical Wood Limited v Samilisinternatinal Investments
[2017] eKLR
Salomon Co Ltd v Salomon
[1897] AC 78
Riccatti Business College of East Africa Limited v Kyanzavi Farmers Company Limited
[2016] eKLR

Jurisdiction invoked: Order 22 rule 35 of the Civil Procedure Rules (execution jurisdiction over money decrees)

Key timeline

Practical implications

Frequently asked questions

Cite this brief

Caselaw, "Wanjiku & Wanjiku Associates v Manu Holdings Limited (Environment and Land Miscellaneous Application 243 of 2017) [2023] KEELC 489 (KLR)", Case Analysis (2023). Not stated in the judgment. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2023/489/eng@2023-02-02

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.