Wanjiku v Mwita (Commercial Case E1247 of 2025) [2026] SCC 41 (KLR)

5. Primordially, this court will determine whether the Respondent sued is sued correctly. It is trite law that a company is a separate and distinct legal entity from its director/shareholders. It is however also true that out of necessity and to prevent abuse of this principle, over time, the law has developed principles allowing for lifting or “piercing” of the corporate veil. This “lifting of the veil” principle therefore opens the way for persons who control companies, in appropriate cases, to be held personally liable to pay the company’s debts. I rely on the decision in Jepkemoi v Zaburi Enterprises Company Ltd & 2 others (Miscellaneous Civil Application 43 of 2023) [2024] KEHC 2343 (KLR) (8 March 2024) (Ruling) where the court held as such. 6. In the instant case, the Respondent has produced a CR12 of Java Orient Kenya Limited which lists the Respondent as the sole director/shareholder. The Respondent has also produced a certificate of registration of Java Self Drive which states THAT Java Orient Kenya Limited carries on business under the business name of Java Self Drive. A business name is not a legal entity. 7. The Respondent has additionally produced an investment policy which indicates the parties as Java Self Drive, a subsidiary of Java Orient Kenya Limited, which is a limited company registered under the laws of the Republic of Kenya on one part and (hereinafter referred to as the “Partner”, which expression shall where the context so admits include his/her successors-in-title and assigns) of the other part. The partner here being the Claimant. 8. Have the circumstances in this case warranted a lifting of the corporate veil? A look at the investor policy indicates the parties as Java Self Drive, a subsidiary of Java Orient Kenya Limited, which is a limited company. Further, that Java Self Drive is engaged in the business of automated car hire, where Java Orient Kenya Limited owns several cars and sells half shares or full shares of particular cars trading in the system. It therefore means that Java Self Drive is a conduit through which Java Orient Kenya Limited acts. This is so as it has admitted it is not independent but derives authority from Java Orient Kenya Limited. 9. All the documents produced are of Java Orient Kenya Limited (trading as Java Self Drive). This shows that there is no operational distinction between the two, the public facing brand is Java Self Drive. Another exhibition of control is the sole directorship/shareholding of Java Orient Kenya Limited. It is the Respondent who makes all the decisions and passes all the resolutions as confirmed in his cross examination. There is no evidence on record of a separate governance structure of 10. Java Self Drive. More telling however is the level of control Java Orient Kenya Limited has over Java Self Drive. This can be seen at clause 9 of the investment policy which states that Java Orient Kenya Limited, as the hoster and holder of the full 100% share of each vehicle unit, is the default custodian. This means the company is responsible for the care, availability, and operational readiness of all units unless custodianship is transferred to a qualifying investor. Without the cars there can be no Java Self Drive. 11. Instances where the court will pierce the corporate veil were discussed in Stephen Njoroge Gikera & another v Econite Mining Company Limited & 7 others [2018] KECA 25 (KLR). Therein, the court held that; notwithstanding the efiect 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 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 or even as agents, directing and controlling the activities of the company. However, where this is not the https://new.kenyalaw.org/akn/ke/judgment/scc/2026/41/eng@2026-04-27 2

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position, even though an individual’s connection with a company may cause a transaction with that company to be subjected to strict scrutiny, the corporate veil will not be lifted” 12. From the foregoing, this court finds that the two entities Java Self Drive and Java Orient Kenya Limited are infact a single economic unit. Thus this court can in the circumstances having found as such, lift the corporate veil. The Respondent is thus correctly sued. I rely on the Supreme Court decision in Symon Wairobi vs Kenya Breweries Limited & 3 others SC Petition No. E023 of 2023, where the court held that the corporate veil can only be pierced or lifted in exceptional circumstances, such as when the court is construing a statute, contract or other document which requires the veil to be lifted; as in this case. Further that It is the duty of a claimant to show that the parent and the subsidiary operate in a single economic unit; the actions of the parent control the subsidiary and further that, the parent and subsidiary are engaged in fraud or improper conduct, or the subsidiary is being used as a mere façade which duty has been discharged as the Claimant in her examination in chief and cross examination maintained that she dealt at all times with the Respondent and that the Respondent even showed her the CR12 which lists him as the sole director. There was no one else but him. 13. I associate myself with the finding of the court in Robert Kinaga Waweru v Northcorr Enterprises Ltd [2021] KEHC 6093 (KLR) where the court held that it 14. will be a travesty of justice for a court of equity to close its eyes where it is clear that a person incorporates a company, enters into agreements through it, derives benefits therefrom and leaves the parties to such agreements licking financial wounds while he continues to enjoy the benefits therefrom. 15. Having found that the Claimant rightly sued the Respondent, I proceed to determined whether the Claimant is entitled to the refund of Kshs. 350,000/= claimed. It is the Claimant’s case that she did not receive the monthly returns as agreed on the asset she invested in and therefore sought to opt out. The Respondent argues that the investment policy only allows Investors to exit by advertising and selling their ownership share to a third party and the company does not ofier refunds, buybacks, or forced exits. Until a buyer is found and the share is successfully transferred, the investor remains fully bound by the investment terms. 16. The Respondent claims that the motor vehicle which the Claimant invested in was hired out by a foreign national who later on went missing. Days later two ladies came and returned the car and to date the trip has never been closed hence why the Claimant has never received any money. He goes on to add that the trip is however still earing money that will be remitted to the Claimant once the trip is closed. Equally, the Respondent submits that the Claimant has not advertised her share to third parties in order to be bought out as per the terms of the investment policy. 17. This court finds the position taken by the Respondent troubling. The investment policy relied on at clauses 4.3 and 9 vest all responsibility for full time monitoring, check in and check out as well as ensuring the asset vehicle is not handed over to third parties by the customer on the Respondent. These safeguards were clearly not carried out as the asset motor vehicle was abandoned and handed over to third parties under unclear circumstances. Additionally, as part of security and accountability, the Respondent was to ensure that all operational data and usage history is captured correctly. The Respondent has not produced any operational data or usage history to corroborate the fact that the trip is still active as alleged. There is also no information to confirm the status of motor vehicle KDH 438A which information is in the custody of the Respondent. Even a mere OB extract to corroborate the allegations of the abandoned vehicle and the missing foreigner were not produced. 18. The Respondent’s claim that the subject motor vehicle to date is still on an ongoing trip and therefore no earnings can be remitted to the Claimant is a technical/system issue which cannot excuse responsibility on their part. The core purpose of the contract was income generation from successful https://new.kenyalaw.org/akn/ke/judgment/scc/2026/41/eng@2026-04-27 3

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sales of hiring out of the car. That purpose has completely failed as the whereabouts of the motor vehicle are unknown. The Respondent’s operational failure and mismanagement of the asset destroyed the 19. subject matter of the contract, and they cannot rely on their own failure to deny exit. 20. Moreover, the Respondent accepted liability and even proposed to ofier the Claimant another car for personal use in line with clause 6 of the investment policy as director of Java Orient Kenya Limited which we have seen is one and the same as Java Self Drive. Another exhibition of the entities being one and the same. 21. Regarding the exit clause, while it is true that courts will not rewrite contracts entered into by parties, courts will step in where the contract is unconscionable. 22. The Court of Appeal decision in Margaret Njeri Muiruri Vs Bank of Baroda (Kenya) Limited (2014) e KLR cited with approval the case Commercial Bank of Australia Ltd Vs Amadio [1983] 51 CLR 447 the Court in Australia stated that: “ Unconscionable dealing looks to the conduct of the stronger party in attempting to enforce, or retain the benefit of, a dealing with a person under a special disability in circumstances where it is not consistent with equity or good conscience that he should do so. The adverse circumstances which may constitute a special disability for the purposes of the principles relating to relief against unconscionable dealing may take a wide variety of forms and are not susceptible to being comprehensively catalogues. [Such disability includes] …"poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary". … the common characteristic of such adverse circumstances "seems to be that they have the efiect of placing one party at a serious disadvantage vis-a-vis the other.” 23. In the same decision, the Court of Appeal cited with approval the UK decision in Strydom Vs Vendside Ltd [2009] EWHC 2130 (QB) which set out the necessary ingredients for finding a clause to be unconscionable: “ In summary, therefore, before the court will consider setting a contract aside as an unconscionable bargain, one party has to have been disadvantaged in some relevant way as regards the other party, that other party must have exploited that disadvantage in some morally culpable manner, and the resulting transaction must be overreaching and oppressive. No single one of these factors is suficient – all three elements must be proved, otherwise the enforceability of contracts is undermined…. Where all these requirements are met, the burden then passes to the other party to satisfy the court that the transaction was fair, just and reasonable.” 24. In the instant case, the Claimant testified that they formalized the agreement over dinner and that the Respondent took her through the app, created an account for her 25. but did not take her through any documentation whether physical copies or softcopies. Additionally, it was her evidence that whenever she would face a challenge regarding the app she would call the Respondent who would fix it. The Respondent controlled the system from the back end. This was what raised the alarm for her. https://new.kenyalaw.org/akn/ke/judgment/scc/2026/41/eng@2026-04-27 4

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26. On his part, the Respondent in cross examination stated that the only assistance he provided was directing the claimant to the app for her to download it. This court finds that the Respondent agrees that he did not take the Claimant through the said policy documents for her to understand what she was getting herself into. 27. I have scrutinized the investment policy documents produced and find that based on the testimonies of the witnesses, there was clearly no procedural fairness in how the agreement was reached. This is so as the investment policy by design is a standard online business contract with no room for negotiation. The digital space enhanced the imbalance as you must click “I agree” there is no room for negotiation. The Claimant was left to her own devices and based on trust she clicked away. 28. Secondly, several clauses are substantively unfair. Per the policy, the company bears 0% risk as there is a no refund policy and they can lock you in indefinitely, as is the case presently, if one does not find a buyer. Additionally, the company can change rules mid-contract as there is a unilateral modification of terms clause leaving an investor unprotected. Finally, the company despite controlling customers, bookings and tracking accepts no responsibility for failure. These terms are clearly oppressive, one sided and should have been brought to the attention of the Claimant for her to give full and informed consent. The efiect is that the said investment policy creates a major imbalance in bargaining power that should have been explained to the Claimant and this lack of explanation placed the Claimant at a special disadvantage. 29. It has not been disputed that the Claimant invested Kshs. 350,000/-. Indeed, the Respondent testified that the Claimant ought to be refunded but that she should wait till a third party buys her out. It is now 2 years later and there has been no investor to buy her out. During the hearing of the Respondent’s case, the Respondent repeatedly said that the Claimant was being nagging. This court wonders how else was the Claimant to be if ever since late 2024 the venture she had engaged in was non performing with no way forward. The court finds that the actions of the Respondent to unilaterally deny the Claimant exit, amounts to improper conduct. 30. Therefore, guided by the principle in National Bank of Kenya Ltd v Pipeplastic Samkolit (K) Ltd C.A. Nairobi Civil Appeal No 95 OF 1999, that courts will not rewrite contracts but may decline to enforce terms that operate unjustly, this Court holds that the essential purpose of the agreement has been defeated. Accordingly, the Claimant is entitled to terminate the agreement and recover her investment. 31. In the end I find that the Claimant has proved its case on a balance of probabilities and enter judgment for the Claimant against the Respondent as follows; a. Kshs. 350,000/= being the amount claimed. b. Interest from date of filling at court rates. c. There shall be no orders as to costs. DATED SIGNED AND READ VIRTUALLY AT MOMBASA THE 27TH DAY OF APRI 2026 In the presence of; HON. THERESA N. MWANGEKA RESIDENT MAGISTRATE/ADJUDICATOR ……Ms. Mubassu… for Claimant; ………N/A… for Respondent C/A Sabina SIGNED BY/FOR: https://new.kenyalaw.org/akn/ke/judgment/scc/2026/41/eng@2026-04-27 5

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