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ELRCOtherNot stated in judgment· [2013] KEELRC 685 (KLR)

Kenya Petroleum Oil Workers Union v Delta Petroleum Trading Company (Cause 145 of 2010) [2013] KEELRC 685 (KLR)

Industrial Court of Kenya
19 July 2013
MMM. Mbaru
1,090 words in judgment
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The bottom line

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A Kenyan court ruled that a union cannot pursue directors personally over a company's debt until it first proves it tried to execute the judgment against the company itself.

What this practically means

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Executive summary

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The claimant union, Kenya Petroleum Workers Union, moved the Industrial Court by Notice of Motion dated 11th March 2013 seeking orders that four named directors of the respondent company attend court for oral examination and produce the company's financial records for nine years, and that upon failure to give satisfactory reasons for non-satisfaction of the decree, the corporate veil be lifted and the directors be held personally liable for the decree of Kshs.4,625,823 plus costs and interest. The application was supported by the affidavit of Gerishon Mmbadi, a former employee and union member. The 1st respondent, Bagwanji Bachu Parmar, opposed it through a replying affidavit, stating that the claim against him had been dismissed by the award of June 2011, that the decree had been amended to run against the 2nd respondent only, that a review application was pending, that he and his wife Savitri Bagwanji Parmar had been acquitted in criminal case No. 3275 of 2007, and that neither was a director of the 2nd respondent, as confirmed by the search attached to the claimant's own affidavit. The court noted that the award had been confirmed only against the 2nd respondent per the decree of 9th September 2011, and held that before a veil-lifting application in aid of execution can be entertained, the claimant must demonstrate efforts to execute the decree, which had not been done. The court also found that no orders could issue against the two non-directors. Striking a balance with the objectives of section 3 of the Industrial Court Act, the court struck out the application without sanctioning the union, allowing it to file an appropriate application, with each party bearing their own costs.

Key legal issues

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01

Preconditions to lifting the corporate veil in aid of execution

Holding

The court must first be satisfied that there have been efforts to execute the decree; that precondition was not met, so the application could not be entertained.

Reasoning

The court examined the file and found the award of 15th June 2011 was confirmed against the 2nd respondent only, per the decree of 9th September 2011. An application to lift the veil for execution requires proof of efforts to execute that decree. The claimant had not extracted the decree for execution, so the application was premature and fundamentally flawed. The court nonetheless declined to penalise the union, giving it an opportunity to file a proper application in light of the Industrial Court Act's objective of meeting the ends of justice.

p. 3
02

Orders against non-directors

Holding

Orders for examination and personal liability cannot issue against Bagwanji Bachu Parmar and Savitri Bagwanji Parmar, who are not directors of the 2nd respondent and whose position was already determined.

Reasoning

The 1st respondent deponed that the award dismissed the claim against him personally and that he and his wife were only a manager and manager's wife, not directors of the 2nd respondent, a fact apparent from the search attached to the claimant's own affidavit. The criminal case against them had ended in acquittal. The court found the claim against the 1st respondent had already been decided and the claimant could not ask the court to lift the veil over an individual already confirmed not to be a director.

p. 2

Legal principles established

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  • Before a court entertains an application to lift a corporate veil for purposes of executing a decree, it must be satisfied that there have been genuine efforts to execute the decree as issued.

Court orders

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  1. 1.The application is struck out
  2. 2.Each party to bear their own costs
  3. 3.The claimant is allowed time to file an appropriate application or move the court as appropriate

Authorities

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Legislation

  • Civil Procedure ActSections 1, 2 and 3
  • Civil Procedure RulesRules 22 and 35
  • Companies Act
  • Labour Institutions Act
  • Industrial Court ActSection 3
Jurisdiction invoked
Labour Institutions Act and the Industrial Court Act, in execution of a decree of the court

Key timeline

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Practical implications

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Frequently asked questions

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Cite this brief

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Cite this brief

Caselaw, "Kenya Petroleum Oil Workers Union v Delta Petroleum Trading Company (Cause 145 of 2010) [2013] KEELRC 685 (KLR)", Case Analysis (2013). Not stated in judgment. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2013/685/eng@2013-07-19

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