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ELRCDismissedNot stated in the judgment· [2024] KEELRC 737 (KLR)
Mungai & 4 others v Bon Motors Limited & 2 others (Employment and Labour Relations Cause 548 of 2016) [2024] KEELRC 737 (KLR)
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·~9 min to read original · ~4 min briefThe bottom line
#What this practically means
#Executive summary
#The Claimants, former employees of Bon Motors Limited (the 1st Respondent), sued for outstanding terminal dues following their declared redundancy vide a letter dated 25th August 2011, which stated that dues of Kshs 9,000,000 would be paid in quarterly instalments of Kshs 1,000,000, with directors personally liable should company resources be insufficient. Payments of Kshs 3,792,781 were made up to 30th April 2014, leaving Kshs 5,207,219 outstanding. The 3rd Respondent denied being a director of Bon Motors Limited and denied the authenticity of the letter, alleging her late husband's signature was forged, though she never reported the forgery to police. The sole issue was whether the 3rd Respondent was personally liable under the letter. The court applied Section 107 of the Evidence Act, placing the burden of proof on the Claimants, and applied Salomon v Salomon as adopted in Joseph Kobia Nguthari v Kiegoi Tea Factory Company Ltd, affirming corporate separateness. The court found no CR12 from the registry proving the 3rd Respondent's directorship, no warranted basis to lift the corporate veil, and improper service of summons per its ruling of 22nd September 2023. The 2nd Respondent was deceased and the company defunct. The suit was dismissed with each party bearing their own costs.
Key legal issues
#01
Whether the 3rd Respondent was personally liable for the Claimants' terminal dues under the letter of 25.08.2011
Holding
The claim was dismissed; the Claimants failed to prove the 3rd Respondent was a director of Bon Motors Limited or that any basis existed to lift the corporate veil
Reasoning
The court applied Section 107 of the Evidence Act and Salomon v Salomon. There was no CR12 from the registry establishing that the 3rd Respondent was a director. The corporate veil could only be lifted on warranting factors, none of which were established. Service of summons was also found improper per the court's ruling of 22nd September 2023. The 2nd Respondent was deceased and the company had ceased operations.
p. 5
Legal principles established
#- A company is a separate legal entity distinct from its subscribers and directors, who are not personally liable except as provided by law (Salomon v Salomon)
- He who alleges must prove; the burden of proof lies on the party asserting a fact (Section 107, Evidence Act)
- To hold a director personally liable for a company's debts, the corporate veil must be lifted on the basis of warranting factors
Court orders
#- 1.The claimants' suit is dismissed
- 2.Each party will meet the costs of their suit
- Jurisdiction invoked
- Original employment and labour relations jurisdiction of the Employment and Labour Relations Court
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Mungai & 4 others v Bon Motors Limited & 2 others (Employment and Labour Relations Cause 548 of 2016) [2024] KEELRC 737 (KLR)", Case Analysis (2024). Not stated in the judgment. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2024/737/eng@2024-04-05
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.