Peter Mucha Gachoka v Protocol Solutions Limited [2019] KEELRC 1241 (KLR)
The bottom line
#A Kenyan court held two company directors personally liable for their company's debt because one tried to dodge responsibility after judgment.
What this practically means
#Executive summary
#Key legal issues
#Whether a director against whom judgment was entered while in office can evade liability for the company's decree
A director in office at the time judgment was entered cannot escape liability; the veil was pierced on the basis of improper motive in attempting to change directorship after judgment
The court found from the Registrar of Societies records that Job Ndege was a director as at 2/7/2017 and as late as 2018 attempted to change the directorship of the Respondent after judgment was entered on 30/1/2017. He also gave evidence as RW1 describing himself as an employee while omitting his directorship. The court held these facts imputed improper motive to evade liability, justifying lifting the veil and holding him and Tonny Ketter liable jointly for the decretal sum.
Whether mere insolvency of a company justifies lifting the veil of incorporation
No - the veil is not to be lifted merely because the company is insolvent or has no assets
Relying on Ringera J in Corporate Insurance Co. Ltd v Savemax Insurance Brokers Ltd, the court acknowledged that insolvency alone does not warrant saddling directors with the company's debts. However, the court distinguished the present case by finding fraud/improper design imputed from the director's conduct, bringing it within the recognized exceptions to the Salomon principle.
Legal principles established
#- Directors are generally not personally liable on contracts of their company, but the corporate veil may be pierced where fraud or improper design by directors or shareholders is imputed
Court orders
#- 1.The corporate veil of the Respondent was pierced and Job Maxwell Ochieng Ndege and the current Director Tonny Ketter were treated as identical to the Respondent
- 2.Job Maxwell Ochieng Ndege and Tonny Ketter were ordered to pay the Claimant the decretal sum jointly
- Jurisdiction invoked
- Order 5 Rule 17 of the Civil Procedure Rules (execution/post-judgment examination proceedings)
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Peter Mucha Gachoka v Protocol Solutions Limited [2019] KEELRC 1241 (KLR)", Case Analysis (2019). Not stated in judgment (Notice of Motion dated 05/11/2018). Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2019/1241/eng@2019-06-19
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.