Ng’asura & 28 others v Karrymart Limited (Cause 903 of 2017) [2023] KEELRC 2319 (KLR)
The bottom line
#Kenya's Employment Court refused to let workers question a company's directors over unpaid judgment debt, because they showed no fraud or wrongdoing to justify lifting the corporate veil.
What this practically means
#Executive summary
#Key legal issues
#Whether the corporate veil could be lifted to allow examination of directors under Order 22 rule 35(c)
No - the applicants did not disclose facts bringing the respondent within the recognised instances justifying piercing the corporate veil, so the discretion under Order 22 rule 35 could not be invoked against the directors.
The court reviewed the depositions and case law, including Palmers Company Law's ten instances permitting lifting of the veil as adopted in Magenyi & Company Advocates v The Attorney General. It found the applicants' supporting affidavit disclosed no fraud, improper conduct or other recognised ground; the company's closure followed eviction by its landlord and auction of its goods, not concealment of assets by the directors. Execution cannot issue against directors absent justified piercing of the veil, so lifting it here would be a mere academic exercise.
Scope of the court's power under Order 22 rule 35 to summon persons for examination
The power is confined to the purposes of the rule - ascertaining debts owed to the judgment-debtor and any property or means of satisfying the decree - and the applicant must show the person summoned can provide such information.
Relying on Tropical Wood Limited v Samilis International Investments and Postbank Credit Limited (in liquidation) v Nyamanga Holdings Limited, the court noted that a person summoned under Order 22 rule 35(c) to provide information on the company's property may also be required to produce relevant documents, including books of account and financial statements. However, this power could not be exercised in favour of the applicants because they failed to discharge the onus on a balance of probability.
Legal principles established
#- The power to summon a person for examination under Order 22 rule 35 is circumscribed by the purpose of the rule, and an applicant must first show the person can provide information on the judgment-debtor's debts, property or means of satisfying the decree
- A company is a separate legal entity distinct from its shareholders and directors, and the corporate veil may be lifted only on established grounds such as fraud or improper conduct
Court orders
#- 1.The notice of motion dated 2/11/2022 is dismissed with costs to the respondent
- Jurisdiction invoked
- Order 22 rule 35 of the Civil Procedure Rules, 2010 (post-decree examination of persons as to means of satisfying the decree)
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Ng’asura & 28 others v Karrymart Limited (Cause 903 of 2017) [2023] KEELRC 2319 (KLR)", Case Analysis (2023). Not stated in the judgment (notice of motion dated 2/11/2022). Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2023/2319/eng@2023-09-28
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.