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ELRCPartially AllowedKericho ELRC Cause No. 36 of 2017 (and Causes 37, 38, 39, 40, 41, 42 of 2017)· [2021] KEELRC 535 (KLR)

Daniel Ogare v Herne Limited; Gopal Dhanji Patel (Applicant) [2021] KEELRC 535 (KLR)

Employment and Labour Relations Court
9 November 2021
HWHellen Wasilwa
2,024 words in judgment
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The bottom line

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A Kenyan court ruled that a company director cannot face arrest over a company's employment judgment debt unless the court first pierces the corporate veil.

What this practically means

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Executive summary

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This ruling of the Employment and Labour Relations Court at Kericho, delivered virtually on 9 November 2021 by Lady Justice Hellen Wasilwa, determined a Notice of Motion dated 8 August 2019 by Gopal Dhanji Patel, a director of the respondent company Herne Limited, in a series of employment causes (Kericho ELRC Causes 36-42 of 2017) filed by former employees of Mara River Lodge. The applicant sought stay of execution and lifting of warrants of arrest issued on 29 May 2019, contending that the warrants were irregularly procured because execution was levied against him personally without the corporate veil first being lifted, and that neither the Notice to Show Cause nor the warrants were served on him or the company. The claimants opposed, arguing that the doctrine of corporate separateness is not inviolable in labour law, that service was effected through the company's offices, and that the application was an abuse of process given the delay and indefinite interim orders. The court agreed in principle that employer and director may be closely intertwined in employment matters, but held that their separation can only be conclusively discerned upon lifting of the corporate veil, which the claimants never sought. Execution against the applicant personally without first demonstrating his status and dealings with the employer was irregular. The application was allowed: stay of execution was granted and the warrant of arrest issued on 29 May 2019 was lifted, pending further directions of the court, with costs in the cause.

Key legal issues

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01

Whether warrants of arrest could issue against a director personally without prior lifting of the corporate veil

Holding

The court held that although employer and director may be closely linked in employment matters, the separation can only be discerned upon lifting the corporate veil, which was never done; execution against the applicant personally was therefore irregular

Reasoning

The court acknowledged that in employment matters there is sometimes a thin line between employer and director, but held that this separation can only be conclusively discerned upon lifting of the corporate veil. The claimants proceeded directly to execution against the applicant without seeking the court's direction on lifting the veil, and without first demonstrating his status vis-à-vis the respondent and his dealings with the employer. This rendered the Notice to Show Cause and subsequent warrants irregular.

p. 3

Legal principles established

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  • A director of a judgment-debtor company cannot have execution levied against him personally unless the court first determines, upon lifting of the corporate veil, his status and relationship with the employer company
  • Execution against a director personally is irregular where no application to lift the corporate veil was made and his dealings with the employer have not first been demonstrated before court

Court orders

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  1. 1.Stay of execution of the warrant of arrest issued on 29.05.2019 against the Applicant Gopal Dhanji Patel
  2. 2.The warrant of arrest issued against the Applicant on 29/5/2019 lifted, pending further directions of the court
  3. 3.Costs in the cause

Authorities

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Legislation

  • Employment Actdefinition of 'employer'
  • Civil Procedure Rules 2010Order 40 (interim injunctions timelines)
  • Civil Procedure Rules 2010Order 22 Rule 35
  • Civil Procedure Rules 2010Order 22 Rule 31(1)
  • Civil Procedure ActSection 38
  • International Convention on Civil and Political Rights (ICCPR)Article 11

Cases cited (7)

  • Justine Nyambu v Jaspa Logistics
    [2017] eKLR
  • Daniel Mutisya Masesi v Romy Madan & Another
    [2013] eKLR
  • Philip Ateng Oguk & 28 others v East Africa Power Management Limited
    [2014] eKLR
  • Ochola Kamili Holdings Limited v Guardian Bank Limited
    [2018] eKLR
  • Kolaba Enterprises Limited v Shamshudin Hussein Varvani & Another
    [2014] eKLR
  • Jayne Wangui Gachoka v Kenya Commercial Bank Limited
    [2013] eKLR
  • Solomon Muriithi Gitandu & Another v Jared Maingi Mburu
    [2017] eKLR
Jurisdiction invoked
Employment and Labour Relations Court jurisdiction over the employment causes and execution proceedings therein

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (2)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Daniel Ogare v Herne Limited; Gopal Dhanji Patel (Applicant) [2021] KEELRC 535 (KLR)", Case Analysis (2021). Kericho ELRC Cause No. 36 of 2017 (and Causes 37, 38, 39, 40, 41, 42 of 2017). Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2021/535/eng@2021-11-09

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