Green Gro International Ltd & 2 others v Bhudia & another (Civil Appeal E197 of 2023) [2026] KEHC 8693 (KLR) (19 June 2026) (Judgment)

Green Gro International Ltd & 2 others v Bhudia & another (Civil Appeal E197 of 2023) [2026] KEHC 8693 (KLR) (19 June 2026) (Judgment) Neutral citation: [2026] KEHC 8693 (KLR) Republic of Kenya In the High Court at Machakos Civil Appeal E197 of 2023 BM Musyoki, J June 19, 2026 Between Green Gro International Limited 1st Appellant Victor Kobia 2nd Appellant Dennis Mbaabu 3rd Appellant and Mukesh Ramji Bhudia 1st Respondent Rashmita Mukeshkumar Bhudia 2nd Respondent (Being an appeal from judgement and decree of Honourable Hon. M. Thibaru RM/Adjudicator dated 24-07-2023 in Machakos Small Claims Comm claim no. E146 of 2022) Judgment 1.On 8-07-2022, the respondents filed a claim in the trial court against the respondents and one Denko Properties praying for;a.Judgment in the sum of Kshs 918,200.00 being the net returns due on 11th March 2020 and 20th March 2020.b.Costs and interest.c.Any other or further relief as this Honourable Court may deem fit and just to grant. 2.The respondents pleaded that vide a contract dated 19th April 2018, it was agreed that the 1st appellant would manage greenhouses constructed on the respondents’ land parcels numbers Athi River/Athi River Block 19 (Denko Limited)/ 58 & 59 for purpose of agricultural farming for a renewable period of one year that consisted of two seasons of six months each. It was agreed that Kshs 459,100.00 for each parcel would be paid for each season. The respondents averred further that in January 2019, the 1st appellant paid returns of Kshs 918,200.00 for the first season. 3.It was claimed further that the returns were guaranteed and that the appellants charged the respondents for the insurance. They added that for the 2nd season, the appellants cultivated capsicum and barsil with expected season end of March 2020 but failed to remit the returns which were due on 11th March 2020 and 20th March 2020. The 2nd and 3rd appellants were sued as directors of the 1st appellant who undertook to personally guarantee the returns. 4.In response to the claim, the appellants averred that as per the contract, the 1st appellant was to farm, harvest and sell the produce outlined in Schedule 1 of the agreement in order to pay the respondents but denied that the season was to end on 11th and 20th March 2020 as alleged. They added that the respondents evicted the 1st appellant from the properties in May 2020 during an ongoing season when the 2nd respondent had planted barsil crops which were almost mature thus frustrating and breaching the contract. The crop remained in the possession of the respondents. 5.The matter proceeded by way of documents in terms of Section 30 of the Small Claims Courts Act. Parties filed their submissions and by judgement delivered on 24-07-2023, the trial court found that the appellants owed the respondents Kshs 918,200.00 being returns for one season. It also held that the 2nd and 3rd appellants being directors of the 1st appellant could not escape liability for their own misdoings and therefore were liable to settle the decretal sum. 6.The judgement aforesaid prompted this appeal which is based on the following grounds;1.That the learned Magistrate erred in law by lifting the 1st appellant’s veil of incorporation in absence of the requisite legal conditions for the same.2.That the learned Magistrate erred in aw by finding that the appellants had breached the contractual provisions in the agreement between the parties herein in absence of the requisite legal conditions for the same.3.That the learned Magistrate erred in law by misinterpreting the contractual provisions in the agreement between the parties herein.4.That the learned Magistrate erred in law by delivering her judgment without jurisdiction to do so, more than three (3) days after the hearing of this case on 19th June 2023.5.That the learned Magistrate erred in law by entertaining and hearing this case without jurisdiction to do so, more than sixty (60) days after the setting aside of the ex-parte judgment on 20th February 2023. 6.This appeal was heard by way of written submissions. I have read the submissions of the parties dated 30th May 2025 and 14th August 2025 respectively together with the memorandum of appeal and the documents filed therein. I discern from the reading that the issues for determination in this appeal are;a.Whether the court lacked jurisdiction on account of delivering judgment after the statutory period.b.Whether the trial court erred in lifting the veil and finding the 2nd and 3rd appellants liable to pay.c.Whether the court erred in ignoring the evidence on eviction and therefore arrived at the wrong conclusion.d.Whether the trial court erred in failing to find that the contract was frustrated. 7.As rightly submitted by the appellants, the above issues are matters of law and therefore this court possesses jurisdiction under Section 38(1) of the Small Claims Courts Act. Although the issues of eviction and frustration of the contract may appear to be matters of fact, they stride across both facts and law since the allegations around it are that the trial court ignored the pertinent evidence on them. Where an appeal is limited to matters of law, the appellate court would be within its jurisdiction if it handles a complaint that the trial court’s judgement is perversive or failed to consider crucial evidence as a court is bound by the law to consider the evidence produced before it before coming into a conclusion. Honourable Justice Kizito Magare held in Ogwari v Hersi [2023] KEHC 20111 (KLR) that;‘Point of law include exercise of discretion and decision based on no evidence.’ 8.I will start with the issue of jurisdiction. The appellants have argued that the court lacked jurisdiction because the matter was completed more than sixty days after an earlier interlocutory judgment had been set aside and more than three days after the close of the hearing. According to the appellant, Section 34(1) and (2) of the Small Claims Courts Act ties and binds the court to the period of sixty days and since the matter went beyond the statutory period, the court acted without jurisdiction. The Subsections provide as follows;1.All proceedings before the Court on any particular day so far as is practicable shall be heard and determined on the same day or on a day to day basis until final determination of the matter which shall be within sixty days from the date of filing the claim.2.Judgment given in determination of any claim shall be delivered on the same day and in any event, not later than three (3) days from the date of the hearing. 9.The appellants have buttressed their argument with the holding of the court in Kartar Singh Dhupar & Company Limited v ARM Cement PLC (In liquidation) [2023] KEHC (KLR). They have reproduced the holding they rely on as follows;‘Guided by these authorities, this court is satisfied that the judgment delivered by Hon CA Okumu (Ms)/Adjudicator on August 23, 2022 was done outside the statutory timelines set under Section 34 of the Small Claims Courts and hence made without jurisdiction. It is therefore a nullity, bereft of any force or effect in law. 10.In the upshot, the appeal is upheld. The judgment delivered on August 123, 2022 is hereby quashed.’As I observed in Royal Mabati Factory Limited v Opiyo [2026] KEHC 8278 (KLR), this position has attracted different opinions from Judges of the Hugh Court and my position remains that Section 34 of the Act is facilitative and directional rather than jurisdictional. Its main purpose is to promote expeditious disposal of matters before the Small Claims Courts in order to achieve the objective for which they were created. The subtitle of the Section is ‘Expeditious disposal of cases’ and not ‘jurisdiction’. In the aforesaid Mabati Rolling Mills case, I associated myself with holding of my brother Honourable Justice Kizito Magare in Biosystems Consultants v Nyali Links Arcade [2023] KEHC 21068 (KLR), which has also been cited by the respondents thus;‘The purpose of the Small Claims Court Act is to facilitate expeditious disposal of the disputes while at the same time respecting the right to be heard. The net result is that balancing the two may result at times to overshooting the 60 days. The 60 days do not have penal consequences for good reason. They are aspirational. This is part of having access to justice over amounts that need not be in the normal system. Allowing the application will open floodgates that will eventually defeat the purpose of the Act.’ 11.I also agree with the position taken by Honourable Justice Francis Rayola Olel in Mash Engineering Ltd v Simbanet Com Ltd & another [2026] KEHC 6608 (KLR) that;‘Be that as it may, this court is however of the view that the purpose of timelines set under Section 34 of the Small Claims Court Act was to ensure timely disposal of suits and not to cause injustice to the parties. 12.I now move to the issue of lifting the 1st appellant’s corporate veil. It is trite and not indisputable that a limited liability company is a separate entity and different legal person from its directors and shareholders. There are however instances where the corporate veil may be lifted such that the directors of the company are held personally liable for the acts or omissions that would ordinarily be of the company. For the veil to be lifted, there must be proof that the directors were involved in deliberate misrepresentations or fraud which resulted to the harm being litigated. It must be shown that the directors had the intention of committing fraud against the public or third parties and take advantage of the shield of corporate veil in order to escape personal liability. In Peter O. Ngoge T/A O P Ngoge & Associates v Ammu Investment Company Limited [2012] KEHC 1133 (KLR) Honourable Justice G.V. Odunga (as he then was) held that;‘It follows that the mere fact that one is a director or shareholder of a corporation does not, ipso facto, make the director or shareholder liable for the actions or omissions of the Company unless the circumstances are such that the corporate veil of the Company can be lifted.’ 13.And in Stephen Njoroge Gikera & another v Econite Mining Company Limited & 7 others [2018] KECA 25 (KLR), the Court of Appeal stated as follows;‘However, there are instances when the veil of incorporation may be lifted. In such instances, the law goes behind the corporate personality to attach responsibility to the individual shareholders or directors; thereby ignoring the separate personality of the company in favour of the economic reality prevailing in the circumstance. The Halsbury’s Laws of England, 4thEdn para. 90; addresses the issue of piercing the veil of incorporation and states that;“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 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 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” 14.In this matter, the respondents did not in their pleadings plead any fraud or misrepresentation against the 2nd and 3rd appellants. The only mention of the two in the statement of claim was in paragraph 4(h) where it was pleaded that; ‘the 3rd and 4th respondents being directors of the 1st and 2nd respondents undertook to personally guarantee the returns to the claimants.’ This cannot be termed to be an averment of fraud or misrepresentation. It is clear that the said appellants were being joined for having guaranteed returns. Giving a guarantee and misrepresentation or fraud are different things. None of the documents produced by the respondents had a claim of fraud or deliberate misrepresentation leave alone proof. The fact that a business venture fails to perform as expected does not amount to misrepresentation or fraud. 15.I am alive to the position in law that a director can be held liable for the company’s failure to meet its obligations without necessarily lifting the corporate veil if they had given personal guarantee for performance of the company’s obligation. The guarantee must however be in respect of specific obligations and in such cases, their liability does not flow from fraud or misrepresentation but from the guarantee which is an independent contract between the directors and the person to whom the guarantee is given. A personal guarantee in my view cannot be made or inferred casually as the trial court did. It must be outright and unequivocal. Executing a contract or undertaking acts which are lawfully within their mandate does make the directors guarantors of the company’s obligations or bind them in their personal capacities. 16.It was held in Post Bank Credit Limited (In Liquidation) v Nyamangu Holdings Limited [2015] KEHC 5964 (KLR), that;‘Thus, the Directors, Members or shareholders of a limited liability company are not liable for the debts or liabilities of the company; the company is. Once the shareholders have contributed and paid up the nominal value of their shares, they are no longer liable to contribute anything further. However, it is quite different for companies which are formed with unlimited liability of members, or with members’ guarantee to a particular amount.’ 17.I have gone through the agreement which was produced as the respondents’ document number 6 and I cannot see any personal commitments by the 2nd and 3rd appellants that can be interpreted to mean a personal guarantee. Actually, the agreement does not seem to bear signatures or the seal of the appellants. In view of what I have stated above, I find and hold that the trial court erred in law by finding the 2nd and 3rd appellants personally liable for the 1st appellant’s commercial debts. 18.The third issue is whether the court ignored the evidence of eviction or frustration of the contract. I have gone through the judgment of the trial court and in my view, it did not ignore that aspect. In its judgment at paragraph 15, the court addressed the issue of eviction by stating that;‘As per the first document by the respondent, the second season was to end on 13th January 2020 and 20th April 2020 for the two greenhouses respectively. Even if the allegations by the respondent that the claimant evicted them from the land in May 2020 is true, it means that they had already harvested the crops from the second season as shown by the dates of harvest being 15th July 2019 and 18th January 2020 respectively. This in essence means that by the time they left the land in May 2020, the season had already ended. The allegations by the respondents that they left barsil crops which were almost mature is therefore not true.’ 19.I understand the Honourable court as saying that the issue of eviction was not relevant to the case because the same came after the season in dispute had ended. I can’t fault her for this because I will be going outside my jurisdiction under Section 38(1) of the Act. That was a factual finding based on the evidence produced before the trial court. 20.The above would be the same for the allegations that the trial court failed to considered the evidence on frustration of the contract by break-out of the covid pandemic. The trial court found as matter of fact that the 1st appellant had harvested the crop as per the report in the second season. It went on to address the alleged frustration in paragraphs 16 to 19 of its judgment. I therefore decline to go into that issue. 21.The inevitable conclusion from the above is that, this appeal partially succeeds and I proceed to issue the following orders;1.The judgment in Machakos Small Claims Court commercial claim number E146 of 2022 against the 2nd and 3rd appellants is set aside and substituted for an order dismissing the claim with costs.2.The 1st appellant’s appeal is dismissed and judgment against it in Machakos Small Claims Court commercial claim number E146 of 2022 upheld.3.The 1st appellant shall pay the respondents’ costs of the appeal.4.The respondents shall pay the 2nd and 3rd appellant’s costs of this appeal. DATED SIGNED AND DELIVERED AT NAIROBI THIS 19TH DAY OF JUNE 2026.B.M. MUSYOKIJUDGE OF THE HIGH COURT Judgment delivered in presence of Mr. Ng’ang’a for the appellant and Miss Essava for the respondents.