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ELRCDismissedNot stated in the judgment (decree arising from judgment delivered 10th August 2018)· [2020] KEELRC 173 (KLR)

Nicholas Kinyili v Mocca Lounge & Bistro [2020] KEELRC 173 (KLR)

Employment and Labour Relations Court
1 December 2020
MOMAUREEN ONYANGO
972 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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A Kenyan court refused to hold a company director personally liable for a company debt because the creditor had no evidence and never properly served him.

What this practically means

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Executive summary

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Judgment had been entered for the Claimant against the Respondent on 10th August 2018 after an ex parte hearing, awarding Kshs.589,685/=. The Claimant taxed his costs and instructed Upstate Kenya Auctioneers to execute the decree, but the Auctioneer returned the warrants unexecuted on 10th June 2019, having been unable to locate any attachable assets of the judgment debtor. By a notice of motion dated 5th February 2020 and filed on 17th February 2020, brought under Order 22 Rule 35 of the Civil Procedure Rules, the Claimant/Decree Holder sought orders to lift the corporate veil of the Respondent Company, to summon Mohamed Mealen Abakare, said to be the Managing Director, for oral examination on the judgment debtor's assets and production of its books of account, and to have the decree executed against him personally. The Respondent filed no response and did not attend; only the Claimant filed submissions. Maureen Onyango J found that although the decree was for money, there was no evidence that Mr Abakare was a Director or Officer of the judgment debtor, the application had not been served on him personally, and the allegation that he had concealed, appropriated or wasted the company's assets was uncorroborated third-party information. The court therefore dismissed the application, with no costs order recorded. The judgment was delivered via video conferencing under the COVID-19 court-operation directions.

Key legal issues

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01

Whether the corporate veil of the Respondent should be lifted and the decree executed against a director personally

Holding

The application fails; the Applicant did not give sufficient reason for the grant of the orders sought

Reasoning

The decree was for payment of money, engaging Order 22 Rule 35 which permits examination of a corporation's officer. However, the Applicant produced no evidence that Mohamed Mealen Abakare was a Director or Officer of the judgment debtor, and the application was not served upon him personally so he could confirm or deny the allegation. The claim that he concealed or wasted the company's assets rested on uncorroborated third-party information. On this state of the evidence, lifting the veil and holding him personally liable could not be justified.

p. 2

Legal principles established

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  • A decree-holder seeking examination of a corporate officer under Order 22 Rule 35 must establish that the person is an officer of the judgment debtor and serve the application on that person
  • Averments of concealment or wastage of a company's assets to defeat execution must be supported by evidence, not uncorroborated third-party information

Court orders

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  1. 1.The application dated 5th February 2020 and filed on 17th February 2020 is dismissed

Authorities

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Legislation

  • Civil Procedure RulesOrder 22 Rule 35
  • Civil Procedure RulesOrder 21 Rule 1
  • Constitution of KenyaArticle 159(2)(d)
  • Constitution of KenyaArticle 48
  • Civil Procedure Act (Chapter 21 of the Laws of Kenya)Section 1B
Jurisdiction invoked
Order 22 Rule 35 of the Civil Procedure Rules (examination of judgment-debtor as to property); Article 159(2)(d) and Article 48 of the Constitution; Section 1B of the Civil Procedure Act

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, "Nicholas Kinyili v Mocca Lounge & Bistro [2020] KEELRC 173 (KLR)", Case Analysis (2020). Not stated in the judgment (decree arising from judgment delivered 10th August 2018). Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2020/173/eng@2020-12-01

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