https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/11410

REPUBLIC OF KENYA IN THE HIGH COURT OF KENYA AT NAIROBI COMMERCIAL AND TAX DIVISION CORAM: F. MUGAMBI, J MISC. APPLICATION NO. E790 OF 2024 BETWEEN FORTRESS ENGINEERING LIMITED ……….…….… APPLICANT JINSING ENTERPRISES COMPANY LTD ………..... RESPONDENT AND RULING Background and Introduction 1. The applicant filed the application dated 19th September 2024 seeking to have the respondent’s directors, being PATRICK ALUVI MUREFU and ZHANG JING together with its shareholders OUYANG GENYA and YAN YANGHUA ordered to attend court and be examined as to whether the Respondent has any property or means of satisfying the decree in Milimani High Court, Miscellaneous Application No. E1302 of 2020 MISC APP E790 OF 2024 RULING Page 1 consolidated with Milimani High Court Arbitration Cause No. E002 of 2021 and to produce the Respondent's books of accounts and other documentary evidence showing the status of the business before the court. 2. Upon such examination the applicant further wishes to have the veil of incorporation lifted and the said directors and shareholders be made personally liable to settle the decretal sum. Finally, the applicant seeks an order that the said directors and shareholders were knowingly a party to the carrying on of the business of JINSING ENTERPRISES COMPANY LIMITED with intent to defraud the creditor of the company and for fraudulent purposes. 3. The application is supported by the affidavit of MARTIN KIBE, a director of the applicant, sworn on 19th September 2024. It is opposed by a replying affidavit sworn by ZHANG JING on 2nd December 2024. Analysis and Determination MISC APP E790 OF 2024 RULING Page 2 4. The parties filed their respective submissions which I have equally considered. That the decree in question stems from the recognition and adoption of an arbitral award is uncontroverted. In determining the issues in question, I would begin by pointing out to the law and the extensive jurisprudence that is available on the question of examination of directors under Order 22 Rule 35 of the Civil Procedure Act, upon which this application is anchored. It provides as follows: “Where a decree is for the payment of money, the decree- holder may apply to the court for an order that— (a) the judgment-debtor; (b) in the case of a corporation, any officer thereof; or (c) any other person, be orally examined as to whether any or what debts are owing to the judgment-debtor, and whether the judgment-debtor has any and what property or means of satisfying the decree, and the MISC APP E790 OF 2024 RULING Page 3 court may make an order for the attendance and examination of such judgment-debtor or officer, or other person, and for the production of any books or documents.” 5. It is clear that the primary purpose of an order under Order 22 Rule 35 of the Civil Procedure Rules is to aid in discovery. This position was aptly stated by Ringera J, in Ultimate Laboratories V Tasha Bioservice Limited, HCCC No. 1287 of 2000 where the Learned Judge emphasized thus: “The objective of an examination of a company’s director or officer under Order XX1 Rule 36 is to obtain discovery, for the purpose of execution of a decree against the company, as to whether any or what debts are owing to the judgment debtor and whether the judgment-debtor has any and what property or means of satisfying the decree.” MISC APP E790 OF 2024 RULING Page 4 6. The Learned Judge further explained that: “The court’s duty under the Order and Rule in question is limited to ensuring that the person being examined answers all the questions which are fairly, pertinent and properly asked; it is thereafter up to the decree holder to use the said information to proceed with execution.” 7. It is only after the conduct of such examination that consequential orders may be made, including the lifting of the corporate veil, where sufficient cause is established. As articulated in Halsbury’s Laws of England, 4th Ed, paragraph 90, the general principle is that the court may pierce the corporate veil to achieve justice by treating the company as indistinguishable from the individuals who control it. This may be warranted not only in instances of fraud or misconduct but also where the nature of the company or its controllers is material to the issues before the court. MISC APP E790 OF 2024 RULING Page 5 8. The Court in the Ultimate Laboratories case (supra) emphasized that the threshold for summoning directors for examination is not unduly onerous: “... as long as the applicant has shown that the respondent is in a position to provide information in the nature of discovery, the Court should summon the person to attend and be examined. ... If the decree holder already has such definite information, there would be no need for examination.” 9. This position was reaffirmed as follows in Postbank Credit Limited (in Liquidation) V Nyamangu Holdings Limited, [2015] eKLR: “A person to be summoned under Order 22 Rule 35(c) of the Civil Procedure Rules ... will also be required to produce any relevant documents or copies thereof ... including but not limited to the judgment-debtor’s annual MISC APP E790 OF 2024 RULING Page 6 financial statements, documents of title, and other records.” 10. In the present case, the applicant has produced the Ruling (Majanja, J) dated 3rd November 2021, adopting the Award, a valid decree issued on 20th December 2021 as well as warrants of attachment to prove the existence of the default decree and difficulty in executing it. There is no evidence of satisfaction of that decree. A copy of the CR12 annexed to the application confirms the directorship and shareholding of the respondent company. The applicant has therefore proved that the persons sought to be examined are persons who would have information about the Company. 11. The main grounds raised in objection by the respondent is that the company is a separate legal entity from its directors and shareholders. Indeed, the same remains true now as it was when the locus classicus case of Salomon V Salomon & Co Ltd, (1897) A.C. 22 HL was determined. The overwhelming jurisprudence however confirms that the doctrine of separate legal personality is not without limit as captured in Halsbury’s Laws of MISC APP E790 OF 2024 RULING Page 7 England, 4th Ed at paragraph 90 where the circumstances calling for lifting the veil of incorporation are discussed 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 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 a 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, MISC APP E790 OF 2024 RULING Page 8 directing and controlling the activities of the company. … The corporate persona of a company will be dispensed with in cases where it is apparent that the company is being used as ‘a creature of [the controlling director], a device and a sham, a mask which he holds before his face in an attempt to avoid recognition by the eye of equity… 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.” 12. The long and short of this is that the application is to be considered in stages. The prayer seeking to lift the corporate veil and personal liability or any other consequence is a determination that must follow the examination of the respondent’s directors and a full assessment of their testimony and the documentary evidence regarding the MISC APP E790 OF 2024 RULING Page 9 affairs of the company. This approach aligns with the reasoning in Masefield Trading (K) Ltd V Rushmore Company Limited, [2008] eKLR, where Kimaru J held: “By examining such an officer, the court may or may not lift the veil of incorporation.” Disposition i. Accordingly, at this stage, prayer 1 of the application is allowed to the effect that: A Notice to Show Cause and/or Summons do hereby issue, compelling the Directors/Shareholders of the Respondent, JINSING ENTERPRISES COMPANY LIMITED, namely PATRICK ALUVI MUREFU and ZHANG JING, together with the Shareholders, OUYANG GENYA and YAN YANGHUA, to attend court and be examined as to whether the Respondent has any property or means of satisfying the decree in Milimani High Court Miscellaneous Application No. E1302 of MISC APP E790 OF 2024 RULING Page 10 2020, consolidated with Milimani High Court Arbitration Cause No. E002 of 2021, and to produce the Respondent's books of accounts and other documentary evidence showing the status of its business. ii. Prayers 2 through to 6 shall await the outcome of the examination. DATED, SIGNED AND DELIVERED AT NAIROBI THIS 24 TH DAY OF JULY 2026. F. MUGAMBI JUDGE Delivered in presence of: Ogendo for the applicant Ms Wetunga for the respondent Court Assistant: Lillian MISC APP E790 OF 2024 RULING Page 11