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ELRCPartially AllowedCause No E897 of 2022· [2023] KEELRC 3004 (KLR)

Abunda v Brandworld Communications Limited (Cause E897 of 2022) [2023] KEELRC 3004 (KLR)

Employment and Labour Relations Court
23 November 2023
LNLinnet Ndolo
1,522 words in judgment
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The bottom line

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A Kenyan court refused to hold company directors personally liable for a work dispute because the claimant offered no solid proof of fraud.

What this practically means

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Executive summary

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By a Notice of Motion dated 28th August 2023, a Claimant in a pending unfair termination suit sought five interlocutory remedies: security for a decree estimated at Ksh 4,211,522, lifting of the corporate veil to hold three directors (Kirimi Rintaugu, Susan Wamuyu Kanafunzi and Catherine Nthenya Kimeu) personally liable, attachment before judgment of two motor vehicles registered in the names of Brandworld Communications Limited and Prochem (EA) Limited, leave to amend the Statement of Claim, and restraints on the directors dealing with the Respondent's shares and assets. He alleged the directors had fraudulently transferred the Respondent's assets to a related company with common directors, rendering the Respondent incapable of satisfying any decree. The directors denied fraud; Rintaugu admitted the Respondent's indebtedness and financial crisis since 2018 but offered to pay from personal resources; Kimeu denied holding shares and claimed purely administrative roles as external company secretary. The court, per Linnet Ndolo J, held that attachment before judgment requires clear proof of mischief under Order 39 Rule 5(1); mere indebtedness or financial status is insufficient, and property of a non-party company could not be attached without a hearing. The lifting of the corporate veil failed for want of evidence of fraud, and the restraining orders failed for want of evidence. The prayer to amend the claim, trial not having commenced, was allowed. Costs were reserved to the cause. The application was partially allowed.

Key legal issues

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01

Attachment before judgment

Holding

Declined; no clear evidence of intent to defeat execution

Reasoning

Order 39 Rule 5(1) requires satisfaction that the defendant is about to dispose of or remove property with intent to obstruct or delay execution. Mere indebtedness or financial crisis, even admitted, does not meet the threshold. Further, part of the property targeted belongs to Prochem (EA) Limited, a non-party that has had no opportunity to be heard.

p. 3
02

Lifting of the corporate veil

Holding

Declined; threshold not met

Reasoning

The Claimant made general, unevidenced allegations of fraudulent transfer of assets between related companies. The law requires serious misconduct bordering on fraud, and the party seeking lifting of the veil bears the burden of demonstrating that threshold. Directors denied the transfers and no proof was offered.

p. 4
03

Leave to amend the Statement of Claim

Holding

Granted

Reasoning

Since trial has not commenced, amendment was allowed as prayed; amendment before trial is a matter properly within the court's discretion and was unopposed by any countervailing finding.

p. 4

Legal principles established

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  • Attachment before judgment requires clear proof of mischief, namely intent to dispose of or remove property to obstruct or delay execution
  • A party's mere financial inability does not justify attachment before judgment
  • The corporate veil will only be lifted on evidence of serious misconduct bordering on fraud, and the burden lies on the party seeking it

Court orders

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  1. 1.Prayer for attachment before judgment and security declined
  2. 2.Prayer for lifting of the corporate veil declined
  3. 3.Prayer for restraining orders against the directors disallowed
  4. 4.Claimant allowed to amend his claim as prayed
  5. 5.Costs of the application in the cause

Authorities

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Legislation

  • Civil Procedure RulesOrder 39 Rule 5(1)

Cases cited (3)

  • Kuria Kanyoko t/a Amigos Bar and Restaurant v Francis Kinuthia Nderu & others
    (1988) 2KAR 126
  • John Kipkemboi Sum v Lavington Security Guards Limited
    [1998] eKLR
  • Ukwala Supermarket v Jaideep Shah & another
    [2022] eKLR
Jurisdiction invoked
Order 39 Rule 5(1) of the Civil Procedure Rules (interlocutory application in pending employment claim)

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, "Abunda v Brandworld Communications Limited (Cause E897 of 2022) [2023] KEELRC 3004 (KLR)", Case Analysis (2023). Cause No E897 of 2022. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2023/3004/eng@2023-11-23

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