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ELRCPartially AllowedCause No 1390 of 2014· [2023] KEELRC 1178 (KLR)

Wainaina v Adrian Company Limited (Cause 1390 of 2014) [2023] KEELRC 1178 (KLR)

Employment and Labour Relations Court
18 May 2023
3,176 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~13 min to read original · ~4 min brief

The bottom line

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Kenya's Employment Court allowed a judgment creditor to summon a company's directors for questioning about unpaid debts, but refused to make them personally liable yet.

What this practically means

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Executive summary

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The Claimant, a decree-holder in whose favour judgment was delivered on 15th March 2019 with a decretal sum plus taxed costs of Kshs.3,220,013.70, moved the court by Notice of Motion dated 14th December 2021 under sections 1A, 1B and 3A of the Civil Procedure Act and Order 22 Rules 35 and 51 of the Civil Procedure Rules. He sought orders summoning three named directors/shareholders of the Respondent company, the judgment-debtor, and any past or present directors, for examination on the company's assets, bank accounts and books of account, and in default, that they be held personally liable for the decretal sum. The Respondent opposed through a preliminary objection dated 23rd March 2022, contending that the applicant had shown no attempts to execute, that no fraud by the directors was shown to justify lifting the corporate veil, and that the application was a fishing expedition. The court framed three issues: the merit of the preliminary objection, whether the directors should be summoned, and costs. Applying Mukisa Biscuit and Oraro v Mbaja, the court found the preliminary objection was anchored on contested facts rather than pure law and failed. On the merits, the court applied Order 22 Rule 35, adopting the Oni Properties principle that examination of directors and lifting of the corporate veil cannot be sought in the same application, and held that the application sought only examination, so the veil-lifting objection was misplaced. The application was allowed in terms of prayers (b) and (c) only, with costs to the Respondent; personal liability under prayer (d) was not granted.

Key legal issues

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01

Whether the Preliminary Objection met the Mukisa Biscuit threshold

Holding

It did not; its grounds were anchored on facts rather than pure points of law.

Reasoning

Applying Mukisa Biscuit and Oraro v Mbaja, the court held that a preliminary objection must raise a pure point of law on undisputed facts. The Respondent's grounds rested on contested factual matters requiring evidence, so the objection dated 23rd March 2022 failed.

p. 6
02

Whether the Respondent's Directors should be summoned for examination under Order 22 Rule 35

Holding

Yes; the decree was unsatisfied and the examination orders do not lift the corporate veil.

Reasoning

Judgment had been entered and a warrant of attachment issued but the decretal sum remained unsatisfied. Order 22 Rule 35 permits examination of a corporation's officers. The court found the application sought only examination, not lifting of the veil, so the Respondent's objection that it amounted to veil-lifting was not well founded.

p. 7

Legal principles established

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  • A party invoking Order 22 Rule 35 should not invoke lifting of the corporate veil in the same application; one must choose, and lifting of the veil can only be sought after examination under Order 22 Rule 35 fails.
  • A preliminary objection must be anchored on pure points of law and cannot rest on contested facts requiring evidence to establish.
  • Where a decree is for payment of money and is unsatisfied, the decree-holder may obtain an order for oral examination of a corporation's officers on the judgment-debtor's property and means of satisfying the decree.

Court orders

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  1. 1.The Respondent's Directors be summoned to attend court for examination on the Judgment Debtor's assets, bank accounts and production of books of account (prayers b and c of the Notice of Motion dated 14th December 2021).
  2. 2.Costs of the Application to be borne by the Respondent.

Authorities

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Legislation

  • Civil Procedure ActSections 1A, 1B, 3A
  • Civil Procedure Rules 2010Order 22 Rule 35
  • Civil Procedure Rules 2010Order 51 Rule 1
  • Civil Procedure Rules 2010Order 21 Rule 1
  • Constitution of Kenya 2010Article 159(2)(d)
  • Constitution of Kenya 2010Article 48

Cases cited (10)

  • Samuel Ojwang Juma vs Saphire Collections Limited
    (2021) eKLR
  • Macdonald Charo & 36 others vs Bofa Maweni Limited
    (2021) eKLR
  • Ultimate Laboratories v Tasha B Loservice Limited
    NBI HCCC No 1287 of 2000
  • Koninklijke Luchtvaart Maatshappji N.V vs Africair Management & Logistics Limited
    (2021) eKLR
  • Oni Properties Limited vs Signal Investments Limited
    (2021) eKLR
  • Electrowatts Limited vs Countryside Supplier Limited & Another
    (2014) eKLR
  • Jitendra Liladhar Nagda & 3 others vs Willis Ouma Ondiek & Another
    (2021) eKLR
  • Mukisa Biscuit Manufacturing Co. Ltd -vs- West End Distributors Ltd
    (1969) EA 696
  • Oraro v Mbaja
    2005 KLR 141
  • Independent Electoral & Boundaries Commission v Jane Cheperenger & 2 Others
    [2015] eKLR
Jurisdiction invoked
Sections 1A, 1B and 3A of the Civil Procedure Act 2010; Order 22 Rule 35 and Order 51 Rule 1 of the Civil Procedure Rules 2010

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, "Wainaina v Adrian Company Limited (Cause 1390 of 2014) [2023] KEELRC 1178 (KLR)", Case Analysis (2023). Cause No 1390 of 2014. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2023/1178/eng@2023-05-18

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