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ELRCPartially AllowedNot stated in the judgment· [2021] KEELRC 543 (KLR)

Abdulkarim Ali Mohamed v Coast Mail Company Limited & another [2021] KEELRC 543 (KLR)

Employment and Labour Relations Court
5 November 2021
MOMaureen Onyango
2,128 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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Kenya's Employment Court ruled that shared directors don't make two companies the same, but an objector must prove ownership of each attached item with documents like logbooks.

What this practically means

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Executive summary

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Judgment was entered for the Claimant against Coast Mail Company Limited on 12th July 2019, and a decree issued on 6th October 2020. Warrants of sale were issued to Okuku Agencies Auctioneers for Kshs.366,900/- and goods, including motor vehicles, were proclaimed on 22nd October 2020. Coast Bus (Mombasa) Limited filed a Notice of Motion dated 28th October 2020 as Objector seeking stay of execution, an order precluding the Decree Holder from attaching its property, and the raising of the warrants, contending that it is a stranger to the suit and the proclaimed property is its own, not the Judgment Debtor's. The Decree Holder opposed, asserting the proclamation was intended for the Judgment Debtor and that the two companies, sharing a majority shareholder and the same offices, were colluding to evade the decree. The court framed two issues: whether the Objector proved the proclaimed goods belonged to it, and whether the application was merited. Applying the principle of separate legal personality, the court held that shared directorship and offices do not justify attaching one company's property for another's debts. The Objector's logbook proved ownership of KBK 062J, but KBE 888P was shown to belong to Coast Air Safaris Mombasa Limited, a stranger to the application, and no proprietary or equitable interest was demonstrated in the remaining items. The court lifted the proclamation on KBK 062J only, sustained the rest, and ordered the Judgment Debtor to bear the costs. Delivered virtually at Nairobi on 5th November 2021 by Maureen Onyango J.

Key legal issues

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01

Whether separate legal personality shields the Objector's property from execution against the Judgment Debtor

Holding

Yes - the Judgment Debtor and the Objector are distinct legal entities despite shared directorship and offices, so the Objector's property cannot be attached for the Judgment Debtor's debts

Reasoning

The court accepted the Objector's submission, supported by Salomon v Salomon and Victor Mabachi & Another v Nurturn Bates Ltd, that a company is a separate juridical person. Common directorship or shared offices does not permit execution against one company for another's debts absent factors warranting lifting of the veil, and the Decree Holder had not sought such lifting.

p. 3
02

Whether the Objector discharged its burden of proving ownership of the proclaimed goods

Holding

Partially - logbooks proved ownership of KBK 062J only; KBE 888P belongs to Coast Air Safaris Mombasa Limited, a stranger to the application, and no interest was shown in the other items

Reasoning

The Objector attached two logbooks. That of KBK 062J was in the Objector's name and proved ownership, justifying lifting of the proclamation. The logbook for KBE 888P was in the name of Coast Air Safaris Mombasa Limited, which filed no objection, and no evidence of proprietary or equitable interest in the remaining proclaimed items was adduced.

p. 3

Legal principles established

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  • A company, once incorporated, is a separate legal entity distinct from its shareholders and directors, and from other companies sharing the same directors or offices
  • An objector in execution proceedings bears the burden of demonstrating a proprietary or equitable interest in the attached property

Court orders

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  1. 1.Lifting of the proclamation on motor vehicle KBK 062J only
  2. 2.Sustaining of the proclamation on KBE 888P and all other items in the proclamation
  3. 3.Costs of the proceedings to be borne by the Judgment Debtor

Authorities

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Legislation

  • Companies ActSection 19(a)
  • Civil Procedure RulesOrder 22 Rule 53
  • Civil Procedure RulesOrder 22 Rule 51
  • Civil Procedure RulesOrder 21 Rule 1
  • Civil Procedure ActSection 1B
  • Constitution of KenyaArticle 159(2)(d)
  • Constitution of KenyaArticle 48

Cases cited (7)

  • Salomon v Salomon
    (1897) AC 78
  • Victor Mabachi & Another v Nurturn Bates Ltd
    NRB [2013] eKLR
  • Mugenyi & Company Advocates v The Attorney General
    [1999] 2 EA 199
  • Thomas De La Rue (K) Ltd v David Opondo Omutelema
    [2013] eKLR
  • Chart Engineering Enterprises Ltd v Attracting Supplies Ltd
    [2009] eKLR
  • Miema Enterprises Ltd v Njoka Tanners Ltd
    [2007] eKLR
  • Precast Portal Structures v Kenya Pencil Company Ltd & 2 Others
    [1993] eKLR
Jurisdiction invoked
Order 22 Rules 51 and 53 of the Civil Procedure Rules (objection proceedings in execution)

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, "Abdulkarim Ali Mohamed v Coast Mail Company Limited & another [2021] KEELRC 543 (KLR)", Case Analysis (2021). Not stated in the judgment. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2021/543/eng@2021-11-05

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