https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/9578

Kinlix Ltd v Intertropical Timber Trading Ltd & another (Civil Case E140 of 2021) [2026] KEHC 9578 (KLR) (Civ) (25 June 2026) (Ruling) Neutral citation: [2026] KEHC 9578 (KLR) Republic of Kenya In the High Court at Nairobi (Milimani Law Courts) Civil Civil Case E140 of 2021 SN Mutuku, J June 25, 2026 Between Kinlix Limited Plaintiff and Intertropical Timber Trading Ltd Respondent and Peter Kariuki Njiiri t/a Njiiri Kariuki & Njau Company Advocates Defendant Ruling The Application 1.Kinlix Limited (the Applicant) took out the Notice of Motion dated 14.03.2024 (the Motion) under Sections 1A, 1B and 3A of the Civil Procedure Act (CPA); and Order 36, Rules 1 and 8 and Order 51, Rules 1 and 3 of the Civil Procedure Rules (CPR), supported by the grounds set out on the face of the Motion and in the Supporting Affidavit sworn by the Applicant’s Director, Gerald Okune Laria 2.The Motion seeks orders lifting the corporate veil of the 1st Defendant and issuing of summons to Geoffrey Nganga Kariuki, a Director of the 1st Defendant, to show cause as to why he should not be committed to civil jail for failure to pay Kshs. 25,892,000/= being the decretal sum plus accrued interest and costs of the suit. The Applicant also seeks costs of the Motion. 3.It is deposed in the Supporting Affidavit that an interlocutory judgment was entered in favour of the Applicant herein and against Intertropical Timber Trading Company Limited (the Respondent) and Peter Kariuki Njiiri T/A Njiiri Kariuki & Njau Company Advocates (the 2nd Defendant) on 27.08.2021 jointly and severally, upon their failure to file its defence within the statutory timelines. That consequently, the Respondent owes the Applicant a principal decretal sum of Kshs. 3,300,000/- together with interest totaling a sum of Kshs. 22,592,000/- and costs of suit, founded on a claim for breach of contract. 4.The deponent has stated that upon extracting a decree on 1.10.2021 the Applicant’s advocate instructed Makuri Auctioneers (the Auctioneers) to undertake investigations to establish the operations and assets of the Respondent. That the said investigations did not yield any fruitful results as the Auctioneers were unable to trace any assets and/or properties belonging to the Respondent. 5.It is suspected that the Respondent’s directors have concealed and/or disposed of its assets and properties with a view to evading execution of the decree against it and that the Respondent’s sole known Director, Geoffrey Nganga Kariuki, established the Respondent with the aim of defrauding innocent persons, hence the necessity to grant the prayers sought in the instant Motion. 6.I have noted that the Respondent has not filed submissions. It is evident from the record that when the matter was placed before this court on 19.06.2025, Mr. Kuria advocate acting for the Respondent, sought and was granted leave of seven (7) days within which to file a response to the Motion. This order was subsequently extended on 27.10.2025, 13.04.2026, and 6.05.2026. However, no response to the Application or submissions have been filed by the Respondent as at the time of writing this ruling on 19.06.2026 as could be ascertained from the CTS. Applicant’s submissions 7.The application was canvassed through written submissions. The Applicant’s submissions are dated 15.07.2025. They are anchored on the case of Ultimate Laboratories v Tasha Bio-service Ltd HCCC No. 1287 of 2000; Jepkemoi v Zaburi Enterprises Company Ltd & 2 others [2024] KEHC 2343 (KLR) and Mugenyi & Company Advocates v The Attorney General [1999] 2 EA 199, which authorities address the instances in which the corporate veil of a company may be lifted. In Mugenyi & Company Advocates v The Attorney General case particularly, the court set out the various instances when the corporate veil may be lifted as follows:a.Where companies are in the relationship of holding and subsidiary companies;b.Where a shareholder has lost the privilege of limited liability and has become directly liable to certain creditors on the ground that business continued after the membership had dropped below the legal minimum, to the knowledge of the shareholder;c.In certain matters relating to taxation;d.In the law relating to exchange control;e.In the law relating to trading with the enemy;f.In the law of merger control in the United Kingdom;g.In competition of the European Economic Community;h.In abuse of law in certain circumstances;i.Where the device of incorporation is used for some illegal or improper purpose; andj.Where the private company is founded on personal relationship between the members. 8.The Applicant has submitted that the corporate veil of the Respondent herein ought to be lifted for the reasons that its assets and properties have been concealed thereby hindering the execution process in this matter; that it is apparent from the Respondent’s conduct prior to the suit, that it is a company incorporated to defraud innocent persons including the Applicant while shielding its directors from personal liability; that the directors of the Respondent are utilizing it to commit acts of fraud, as seen through the actions of the sole known director, namely Geoffrey Nganga Kariuki. 9.It is the Applicant’s argument that unless the prayers presently sought are granted, grave prejudice and injustice will be visited upon the Applicant, given that the Respondent has no known assets capable of being attached in execution of the decree issued herein. 10.Regarding costs, it is the Applicant’s arguments that it is entitled to costs of the Motion, pursuant to Section 27 of the CPA which stipulates that costs shall follow the event, which legal position is echoed, inter alia, in the case of DGM v EWG [2021] KEHC 2940 (KLR). 11.On the totality of those grounds, the Applicant has thus urged the court to grant the prayer seeking to lift the Respondent’s corporate veil in order to hold its director(s) personally liable. Determination 12.I have considered the Motion and the grounds in support. I have also considered the Applicant’s written submissions and the authorities relied on. The Respondent herein has neither put in a response to the Motion nor filed written submissions. The Motion therefore stands unopposed. 13.The substantive order sought in the instant Motion seeks to lift the corporate veil of the Respondent and issue summons to the Respondent’s Director, Geoffrey Nganga Kariuki, to show cause why he should not be committed to civil jail for failure to pay the decretal sum and costs of the suit. 14.My careful perusal of the record shows that it is not disputed that an interlocutory judgment was entered in the suit on 27.08.2021 in favour of the Applicant and against the 1st Respondent and the 2nd Defendant, jointly and severally, in the sum of Kshs. 3,300,000/- together with interest totaling a sum of Kshs. 22,592,000/- plus costs of suit. There is no evidence that the decretal sum has been settled to date. 15.To my mind, there is a singular issue to determine in this matter: whether the Applicant has established that the circumstances herein are suitable for lifting the corporate veil of the Respondent. The circumstances under which a corporate veil of a company can be lifted have been addressed in various authorities within our jurisdiction. In Ahmed Shakeel Shabbir v Samuel Musaa Ndolo [2016] eKLR, it was held that:“In Masefield Trading (K) Ltd v Rushmore Company Ltd & Another [2005] eKLR, it was stated that the corporate veil of a corporate body may be lifted if it is found that the oral examination uncovers wrongdoing by an officer of the corporate body. During the oral examination, the witness clearly pointed out that the Defendant Company was wound up due to failure by the Company to pay its rent. This amounts to wrongdoing and improper conduct on the part of the Defendant. The Court therefore used its power to lift the corporate veil donated to it under Order 22 rule 35 Civil Procedure Rules as read with Section 323 of the Companies Act, Cap 486.” 16.A similar position was taken by the Court of Appeal in Githunguri Dairy Farmers Co-operative Society v Ernie Campbell & Co. Ltd & another [2018] eKLR when it rendered itself thus:“In our view, the learned Judge was right to lift or pierce the veil of incorporation to ensure justice and equity to all parties prevails. Further, the law is that courts will disregard the veil of incorporation where it is apparent that the device of incorporation is used for some illegal, fraudulent or improper purpose. See Mugenyi & Company Advocate v The Attorney General (1999) 2 EA 199. In the present instance, Mr. Baiya claimed that the liabilities accrued by the 2nd respondent including the decretal sum and the costs of suit, were to be paid from the 2nd respondent’s account. Why would Mr. Baiya, a director in the 2nd respondent and who definitely had full knowledge of its affairs (that it had no attachable assets or financial means to satisfy the decree) insist that the decree be settled by it? We draw the same inference as the 1st respondent that the same was meant to defeat the satisfaction of the decree, an improper purpose warranting the court to go behind the veil of incorporation....In the absence of any reasonable excuse or justification from the appellant for its conduct, then we find it safe to draw an improper and fraudulent purpose necessitating lifting the 2nd respondent’s veil of incorporation for purposes of ensuring justice to both parties.” 17.In the present instance, the Applicant has in sum, averred and argued that the corporate veil of the Respondent ought to be lifted since it is suspected that the Respondent has concealed its assets and properties and that the Respondent is similarly operating in a manner intended to defraud members of the public whilst simultaneously protecting its directors from personal responsibility. 18.The legal principle therefore is that the corporate veil of a company will be pierced and lifted where it has been demonstrated that the said company is being used as a disguise by its directors and shareholders, in actuating fraudulent or illegal or improper activities. That the corporate veil will also be lifted where the interest of justice dictates so and where it is apparent that the directors are acting in bad faith or committing a wrongdoing through the said company. 19.That said, the proper procedure to be applied by the court in determining whether to lift the corporate veil of a company is to summon the respective directors for purposes of being cross-examined on the assets, books, accounts and operations of the company in question. It is only upon such cross-examination and production of relevant accounts and books that the court can ascertain whether there is evidence of concealment, fraud or impropriety on the part of the directors, and whether it would serve the interest of justice to lift the corporate veil. 20.In the present matter, upon my review of the record, I noted that none of the directors of the Respondent herein have so far been summoned for purposes of cross-examination and production of the relevant books and accounts, to enable me ascertain whether there is evidence or suspicion of fraud and illegality. Likewise, I noted that the Applicant did not tender any material to support its averments and arguments that the Respondent has either concealed its assets and properties, or that it’s directors have been engaging in fraudulent activities through the guise of the said Respondent. 21.It is noteworthy that this court cannot rely purely on speculation in determining whether to lift the corporate veil of the Respondent. The proper procedure set out above ought to be followed. 22.In my view, the issue whether to lift the corporate veil of the Respondent can only be adequately considered upon examination of the directors of the Respondent. Consequently, I find that the prayers in this instance are prematurely and preemptively sought and I am hesitant to grant them at this stage. The Applicant is at liberty to appropriately move this court in respect of this matter. In the meantime, this Notice of Motion is held in abeyance. 23.Orders shall issue accordingly. DATED, SIGNED AND DELIVERED THIS 25TH DAY OF JUNE 2026.S. N. MUTUKUJUDGE