Transport and Allied Workers Union v Kenya Bus Services Limited (Cause 68 of 2006) [2023] KEELRC 2902 (KLR)
The bottom line
#Kenya's Employment Court confirmed directors can't be personally liable for company debts through Order 22 rule 35, but gave them another chance to defend a veil-lifting order.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether the applicants were served with, and heard on, the application dated March 13, 2014 seeking lifting of the corporate veil
- 2.Whether sufficient reason exists to review and set aside the order of September 17, 2019 lifting the corporate veil
- 3.Whether Order 22 rule 35 of the Civil Procedure Rules can be used to lift the corporate veil and attach personal liability to directors
- 4.Whether the judgment of September 6, 2007 is statute-barred under section 4(4) of the Limitation of Actions Act
Key legal issues
#Whether the order of September 17, 2019 lifting the corporate veil should be reviewed on grounds of lack of service and natural justice
Yes - sufficient reason was demonstrated; the order was reviewed to enable the applicants to respond to the Motion dated March 13, 2014
The applicants deponed that neither they nor their advocates were served with the application dated March 13, 2014 or the hearing notices, learning of the orders only on January 17, 2023. The court held this amounted to sufficient reason under rule 33 to review the order, allowing the applicants to respond to the Motion rather than being condemned unheard.
Whether Order 22 rule 35 can be used to lift the corporate veil and impose personal liability on directors
No - the provision permits examination only, and assumption of liability is a different process not contemplated by it
The court read Order 22 rule 35 plainly: it allows the decree holder to have the judgment debtor, an officer of a corporation, or another person examined to assist enforcement. It does not attach personal liability. Adopting Odunga J's reasoning in Michael Kyambati, the court distinguished examination of an officer as the company's agent from lifting the veil, which attaches liability to shareholders personally.
Whether the judgment is statute-barred under section 4(4) of the Limitation of Actions Act
Not determined at this stage - the applicants were given an opportunity to file responses to the underlying Motion
Counsel for the applicants submitted that the 2007 judgment, being more than twelve years old, could not be enforced under section 4(4) of the Limitation of Actions Act. The claimant countered that execution attempts had been thwarted by the respondent's directors. The court did not rule on this point, instead directing the applicants to file responses to the Motion dated March 13, 2014.
Legal principles established
#- Order 22 rule 35 of the Civil Procedure Rules provides for examination of a judgment debtor or officer to aid execution and does not attach personal liability nor provide a vehicle for lifting the corporate veil
- A company is a legal person separate from its members, who are not liable for its debts except as provided by statute (Salomon v Salomon)
- The corporate veil may be pierced only in special cases, including fraud or improper conduct, to do justice between the company and those who control it
Court orders
#- 1.Review of the Court's order made with regard to the Motion dated March 13, 2014, to enable the applicants respond to the same as contemplated under Order 22 rule 35
- 2.The applicants directed to file their responses to the Motion dated March 13, 2014 within 14 days from the date of the ruling
- 3.The respondent/decree holder at liberty to file a further affidavit, if necessary, within a similar period after service
- 4.Matter set for mention on January 29, 2024 for directions on hearing and disposal of the Motion dated March 13, 2014
The bench
#One judgment of the whole court — no separate or dissenting opinions.
Wrote the judgment
- Jurisdiction invoked
- Inherent review jurisdiction under rule 33 of the Court rules (ELRC Rules) and Order 51 rule 15 of the Civil Procedure Rules
Relief refused
#Setting aside (outright) the order of September 17, 2019 lifting the corporate veil
The court instead ordered a review to permit the applicants to file responses to the Motion dated March 13, 2014, rather than setting the order aside outright
Costs
No costs order made in the judgment
Quotable passages
#Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.
The applicant's are hereby directed to file their responses to the Motion dated March 13, 2014 within 14 days from the date of this ruling. The respondent/decree holder shall be at liberty to file a further affidavit, if necessary, within a similar period after service. The matter set for mention on January 29, 2024 for directions on hearing and disposal of the Motion dated March 13, 2014.
Sufficient reason has been demonstrated by the applicant for the Court to review its order made with the regard to the Motion dated March 13, 2014 to enable the applicants respond to the same as contemplated under order 22 rule 35.
The assumption of liability is therefore a different process not within the contemplation of order 22 rule 35.
In the latter an officer is examined as an agent of the company while lifting the corporate veil, the mask of incorporation is lifted with the result that the shareholders are no longer agents of the company but are treated in their own rights
Issues in the judgment
#The application seeks to set aside 'the order issued on September 17, 2019' but the grounds and affidavit repeatedly refer to an order 'issued on July 17, 2019'; the judgment itself elsewhere records that the application dated March 13, 2014 was 'granted by Wasilwa J on 13th March, 2014'
Inconsistent decretal figures: the affidavit depones a liability of Ksh 526,326,840 while paragraph 17 records judgment for Kshs. 562,326,840/-
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Transport and Allied Workers Union v Kenya Bus Services Limited (Cause 68 of 2006) [2023] KEELRC 2902 (KLR)", Case Analysis (2023). Not stated in the judgment (main suit claim against the Respondent; application dated February 7, 2023). Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2023/2902/eng@2023-11-10
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.