Tss Investments Limited v Blackstone Trading Company Ltd

warehousing in 2018. That the last business was in 2016 which was importation of cooking oil, as evidenced at page 58 of their documents. That the address given to KRA was Canon Towers, Mombasa, according to page 71 while their registered office in Nairobi is shown on page 61 and 80. 6. Mr. Ally Mwangi stated that there was an attempt to proclaim goods at the office in Nairobi but there was an objection, and that they used the same advocates representing them herein. At page 62, the principal activity was indicated as supply of construction material while at page 72, the principal activity was indicated as letting and renting business. That on page 62, Githere Associates & Co. expressed their willingness to intervene as their auditors but he could not recall whether they retained the auditors. 7. It was further stated at page 70 indicated an audit report for the year 2019 where the auditors were MC Joel & Associates and on page 72, the report was signed in 2020. At page 76, the income was for 2018 – 2019 and the title said it was a financial statement for the year ended 31/12/2021 but the report was not signed at page 75. 8. On page 83, he paid rent of Kshs. 9,261,008 in 2016 and 2019, which rent was for the Mombasa office but he could not recall the rent per month. At page 66 and 67, there is no mention of rent for the year 2017. He stated that at page 83 note 12, he could not recall the name of the company the goods were sold to and at note 13 of page 83 was not reflected in the audit report. He stated that they were renting the warehouse to 3rd parties who were their clients but were not receiving rent, and that from page 1-32, there was a lot of cash withdrawals by himself. 9. On re-examination, Mr. Mwangi stated that the principal business was warehousing based on receiving and storing goods for their clients but they were not letting the space. That Blackstone was incorporated in the year 2012 and that prior to 2016, the company was dormant. That the company did not trade in 2017 and that they ended warehousing in May 2019 and handed over the keys to the agent. That they have their office in Canon Towers and never had a business at J. F. Center. That they closed the office after 1st May 2018 and that it was towards the end of August 2018. 10. That the objection proceedings were by J. F. Center and that it has nothing to do with Blackstone. That on page 76, it is indicated that the statement is for the year ending 2021 but the contents are for the year 2019. That there was no ending for the year 2021. That since 31st August 2019 they have never had anything. 11. Mr. Ally Mwangi was cross examined by court and he stated that they used the address of J. F. Center because some of the directors of the company were shared with Blackstone. 12. The parties were directed to file further submissions. The Plaintiff filed submissions dated 01/09/2025 and stated that prayer 1 and 2 of the Plaintiff’s Notice of Motion dated 03/08/2023 were complied with when the Defendant filed a list of documents dated 10/02/2025 and Mr. Ally Ismail Mwangi attended court on 24th July 2025. 13. The court is now left with prayers 3 and 4 which seek to lift the corporate veil to hold the Defendant’s directors personally liable, and to award costs of the application to the Plaintiff. That the issue for determination therefore is whether the veil of incorporation ought to be lifted. 14. The Plaintiff stated that circumstances in which the veil of incorporation ought to be lifted were set out in the case of Jiang Nan Xiang v Cok Fas-St Company Limited [2018] KEHC 10230 (KLR) to include; i. where there is no real formal legal separation between the company and its shareholders’ personal financial affairs https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/19595/eng@2025-11-13 2

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ii. the company is just a sham iii. the company’s actions were wrongful or fraudulent iv. the shareholders and/or directors act recklessly in the management of the business of the company and/or design a scheme to perpetrate financial fraud v. if the company’s creditors suffer unjust cost, that is, they did business with the company and they are left with unpaid bills or unpaid court judgment. 15. That the question therefore is whether after cross examination of Mr. Mwangi, there is evidence that would lead the court to conclude that any of the limited circumstances aforesaid have been shown to exist. 16. The Plaintiff submitted that first, the Defendants received income from third parties for letting the same premises that it was leasing from the Plaintiff but it did not remit the amount or any part thereof to the Plaintiff. That second, once third parties paid the Defendant, the directors withdrew the sums in cash which demonstrates a scheme to perpetrate fraud or a case of the directors acting recklessly in the management of business, both of which are a basis for lifting of the veil of incorporation. The Plaintiff cited the case of Robert Kinaga Waweru v Northcorr Enterprises Ltd [2021] KEHC 6093 (KLR) in support of the position. 17. The Plaintiff submitted further that there are inconsistencies in the testimony of Mr. Mwangi, where he said that the Defendant did not engage in any trade in the year 2017, but supplied audited accounts which show the Defendant’s principal business in 2017 was supply of construction material which generated Kshs. 13,697,000.00. 18. That while Mr. Mwangi insisted that the Defendant’s offices were in Canon Towers in Mombasa, the audited statements for the year 2017 and 2019 by different auditors confirmed that the offices were at J.F. Center in Nairobi. That Mr. Mwangi was unable to reconcile the fact that the audit report for the year 2019 showed that the directors were owed Kshs. 4,653,710 as explained in note 18 but the entire report did not contain a note 18 as alleged. 19. That the audit report showed that the Defendant paid rent of Kshs. 9,261,008.00 in the year 2018 and a similar amount as rent in the year 2019 which amounts as confirmed by Mr. Mwangi related to the Mombasa office. That however, in re-examination he said the office in Mombasa was closed in August 2018 and the warehouse was handed over in August 2019. 20. That if the office in Mombasa was closed, why would they pay rent for the year 2018 and 2019? That the audited accounts do not include rent owed to the Plaintiff despite the litigation around the outstanding rent having commenced in March 2019, before the audited accounts were prepared. 21. The Plaintiff further submitted that, Mr. Mwangi in cross examination by court stated that they used details of J.F. Centre since some of the directors of Blackstone were also directors of J.F. Centre. That in re-examination, he insisted that J.F. Center Limited is a separate legal entity that deals in letting property. The Plaintiff cited the cases of Zingo Investment Limited v Miema Enterprises Limited [2015] KECA 246 (KLR) and Githunguri Dairy Farmers Co-operative Society v Ernie Campbell & Co. Ltd & another [2018] KECA 721 (KLR) which dealt with similar circumstances. 22. The Defendant filed submissions dated 25/08/2025 and argued that cross examination of Mr. Ally Mwangi showed that the Defendant was incorporated in 2012 but it was dormant until 2016 when it operated the business of importing cooking oil. That in 2017, the company commenced the business of warehousing which entailed receiving and storing goods for their clients. https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/19595/eng@2025-11-13 3

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23. That the principal office of the company was in Canon Towers in Mombasa and once the company ceased trading, it closed its office. That the Defendant traded from 2017 to 31st August 2019 when vacant possession of the leased premises that the Defendant used as a warehouse was handed over to the Plaintiff. 24. The Defendant cited the case of NBI HCCC No. 1287 of 2000, Ultimate Laboratories v Tasha B. Loservice Ltd (Unreported), Salmon & Co. Ltd v Salmon (1897) A. C 22 and Jiang Nan Xiang v Cok Fas-St Company Ltd (2018) eKLR and submitted that there is no basis upon which this court can order that the corporate veil be lifted to hold the directors personally liable for settlement of the partial decree dated 17/02/2022. 25. The Defendant further submitted that Mr. Ally Mwangi answered all the questions asked and that the corporate personality of the Defendant has not been used as a mask for fraudulent schemes or improper conduct. That it is apparent from the documents filed on behalf of the Defendant that it is no longer trading hence its inability to settle the partial decretal sum. The Defendant relied on the holding in Post Credit Limited (in liquidation) v Nyamangu Holdings Limited [2015] KEHC 5964 (KLR) which set out instances where the veil of corporate personality may be lifted. The Defendant prayed for this court to dismiss prayer number 3 of the application with costs to them. Analysis 26. Upon considering the evidence of the Defendant’s director, Mr. Ally Mwangi, and submissions by the parties, the issues for determination are; a. Whether the corporate veil ought to be lifted b. Who bears the costs 27. It is a fact that the Defendant/ Judgment Debtor is yet to satisfy the partial decree after partial judgment on admission was entered in favor of the Plaintiff/ Decree Holder for Kshs. 15,503,488.36 vide the ruling of the court delivered on 17/02/2022. In execution of the said Decree, the Plaintiff sought to have the Directors of the company summoned for examination for purposes of producing the documents necessary to ascertain the assets and liabilities, and in default, the corporate veil be lifted and the directors be held personally liable for the satisfaction of the said debt. 28. It is well settled in law that a company is a separate legal entity from its directors and shareholders (See Salomon v Salomon case). This makes the directors and shareholders of a company not liable for the debts incurred by the company. However, there are exceptions where the directors are held liable for the debts of the company where the corporate veil or the legal personality of a company is lifted. 29. In the case of Aster Holdings Limited v. City Council of Nairobi & 4 others [2019] eKLR the court stated that: “ There is no doubt that a company is at law a separate legal entity which is different from its shareholders and subscribers. However, in some instances, the corporate veil of a company can be pierced. The circumstances under which the corporate veil of a company may be pierced were well set out in paragraph 90 of Halsbury’s Laws of England 4th Edition Vol 7 (1) which states as follows; "Notwithstanding the effect of a company's incorporation, in some cases the Court will 'pierce the corporate veil' in order to enable it to do justice by treating a particular company, for the purpose of the litigation before it, as identical with the person or persons who control https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/19595/eng@2025-11-13 4

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that company. This will be done not only where there is fraud or improper conduct but in all cases where the character of the company, or the nature of the persons who control it, is a relevant feature. In such case the Court will go behind the mere status of the company as a separate legal entity distinct from its shareholders, and will consider who are the persons, as shareholders or even as agents, directing and controlling the activities of the company. " 30. The Plaintiff has since 2019 made attempts to distress for rent. The Defendant challenged the distress in Msa HCCC No. 20 of 2029 on grounds that the proclaimed goods belonged to a 3rd party. Even in this matter, the Defendant states that the proclaimed goods belong to J.F Centre, situated in Nairobi. From the examination of the director of the Defendant company, it is a fact that the Defendant company share the same address with the said J.F Centre. Further, the said J.F Centre share the same advocates. It has also been established that the Defendant company share some of the directors with J.F Centre. 31. It has also been established that as much as the director of the Defendant company states that the company was not trading, the audit report gives different position as it shows the Defendant continued to generate income and posted expenditures which included payment of rent, which rent was not paid to the Plaintiff. The efforts by the Plaintiff to execute the judgment against the Defendant are being frustrated as the proclaimed assets belongs to J.F Centre which is a separate legal entity. 32. It has been admitted that the Defendant and J.F Centre share some directors and that is why the address are similar. I find that the J.F Centre is being used to evade the legal obligations by the Defendant to satisfy the decree against it. The Defendant while still operational and generating income failed to meet its contractual obligations towards the Plaintiff. 33. By virtue of the Defendant directors failing to meet their obligations of paying the Defendants debts despite the audit report showing flow of income and cash withdrawals by the director Mr. Mwangi, the said conduct is meant to evade the legal obligations by the Defendant. The court in ensuring justice and accountability has got no option but to pierce the corporate veil and find the Defendants directors personally liable for the debts of the Defendant company. 34. On costs, it follows that the successful party gets awarded the costs of the suit. However, the award of costs being discretionary. I find no reason to deny the Plaintiff costs of the application. Determination 35. Following the foregone discourse, the upshot is that the following orders do hereby issue: a. Further to the ruling of this court dated 31/10/2024 in respect to the Notice of Motion dated 03/08/2023, I find merits in prayers 3 and 4. b. The corporate veil is hereby lifted and the Plaintiff is at liberty to execute against the Defendant’s directors in their personal capacity. c. Costs to the Plaintiff. Orders accordingly. DATED, SIGNED AND DELIVERED AT MOMBASA THIS 13TH DAY OF NOVEMBER, 2025. ………………….. HON. F. WANGARI JUDGE In the presence of; https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/19595/eng@2025-11-13 5

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Mr. Kongere Advocate for the Plaintiff. Mr. Kobole Advocate for the Defendant Ms. Salwa, Court Assistant https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/19595/eng@2025-11-13 6

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