https://new.kenyalaw.org/akn/ke/judgment/kecopt/2026/313

**REPUBLIC OF KENYA** **IN THE CO-OPERATIVE TRIBUNAL AT ELDORET** **TRIBUNAL CASE NO. E381 OF 2024** **(Coram: Hon. J. Mwatsama- Chairperson, Hon. B. Sawe- Member, Hon. F. Lotuiya- Member, Hon. M. Chesikaw- Member and Hon. P. Aol- Member.)** **LAINISHA SACCO SOCIETY LIMITED…..…. ……….…………CLAIMANT** **VERSUS** **JOSEPH MURIUKI NJUKI……………………………..……1ST RESPONDENT** **SAMUEL KIBURU NJUKI……………………………..……2ND RESPONDENT** **TANA GROUP LIMITED……………………………………3RD RESPONDENT** **RULING OF THE TRIBUNAL** 1. The matter before the Tribunal for determination is a Notice of Preliminary Objection by the 1st and 2nd Respondents, dated 14**th** August, 2025. **NOTICE OF PRELIMINARY OBJECTION** 1. The 1st and 2nd Respondents herein object to the validity of Claimant’s claim against them and pray that the same is struck out for misjoinder with costs on the grounds: 2. That the 2nd Respondent is a limited liability company as defined under Section 9 of the Companies Act 2015 and being a body corporate entity as provided under Section 19 of the Companies Act, 2015 is a distinct separate legal entity from its Directors, being the 1st and 2nd Respondents and as such, the 1st and 2nd Respondents should be expunged from this suit for misjoinder. 3. The parties were directed to canvass the Preliminary Objection by way of written submissions. The Respondents’ written submissions are dated 21st April, 2026 while the Claimant’s written submissions are dated 25th March, 2026. **1st and 2nd Respondents’ Submissions** 1. The 1st and 2nd Respondents submit that: 2. the 3rd Respondent is a company; 3. the 1st and 2nd Respondents are directors of the 3rd Respondent; 4. the 1st and 2nd Respondents signed corporate loan documentation “on behalf of” the 3rd Respondent (including a “Directors’ Declaration”); 1. It is the Respondents' case that the suit as framed against the 1st and 2nd Respondents is a misjoinder, because the 1st and 2nd Respondents are mere directors of the 3rd Respondent, which is a company and is a separate legal person and that liability (if any) lies against the 3rd Respondent company, not against the 1st and 2nd Respondents directors in their personal capacity. 1. The 1st and 2nd Respondents submit that they ought to be struck out from these proceedings for misjoinder. **Issues for Determination raised by the 1st and 2nd Respondents.** 1. The 1st and 2nd Respondents have raised the following are the issues for determination before the Tribunal: 2. Whether the suit against the 1st and 2nd Respondents is a misjoinder and should be struck out? 3. Whether, in these circumstances, the corporate veil can be lifted and whether this Tribunal has jurisdiction to do so? 4. Whether the Preliminary Objection raised by the Respondents meets the tenets of the Mukisa Biscuit test? ***On whether the suit against the 1st and 2nd Respondents is a misjoinder and should be struck out:*** 1. The 1st and 2nd Respondent submit that the Claimant does not dispute, the foundational doctrine of corporate personality. It is well established that once incorporated, a company is a legal person separate from its shareholders and directors and the company has the capacity to own assets, bear its debts, sue, and be sued in its own name. 2. It is the 1st and 2nd Respondents’ submissions that if the borrower is the company, the debtor is the company and its directors do not become debtors merely because they signed documents as agents of the company (for and behalf of) or managed the company's affairs; that this principle is consistently applied in Kenyan courts**; that in Amos Tum Kiptoo, Lawrence K. Kaptoge & Francesca Chemutai V P.M. Wandabwa & 9 Others; Kenya Seed Co. Ltd\_ [2007]**; that in **KEHC 831 (KLR),** the High Court sustained a preliminary objection and struck out individual board members, holding in substance that: i. acts complained of were collective/agency acts of the company, not personal acts; and ii. the proper party was the company, not the directors sued personally. The Court, in holding the aforesaid, stated as follows: “With regard to the 7th Defendant, he was appointed by virtue of being the Managing Director of the Agricultural Development Corporation. The Agricultural Development Corporation itself is a State Corporation and the appointment of any sitting Managing Directors to the Board of the Company is by virtue of that position. Mr. W.K. Kirwa has no personal interest in the Company and is not representing any private interest. He is there on the basis of his office. To be laden with a legal suit or litigation, it must be shown that you have an interest or are a necessary party. Mr. Kirwa is not a necessary party. The Plaintiffs ought to have possibly sued the office of the Managing Director or the Agricultural Development Corporation itself. If his term expires and he is not re-appointed, what will happen? Mr. Kirwa in such circumstances, will continue having the responsibility of defending the suit as it could have possible personal implications in terms of compliance with Court orders and costs. I see no basis to retain his name as a party. With regard to the 1st, 2nd, 3rd and 8th Defendants, and the same will apply to all other Board Members, in that the Annual General Meeting was being convened by the Board of the Defendant Company. The Board is an organ of the Company. The meeting could not be called by an individual Board Member. It is a collective act and decision, and it is not personal. It was an act of the company. I see no personal liability that can arise from this. Any consequences will be faced by the Company. The Board members are agents of the Company and the principal is known. To sue the Board Members in their personal capacities is totally unnecessary and will only vex them and expose them to a waste of precious time and legal costs.” 1. The 1st and 2nd Respondents submit that from the aforesaid decision, the Claimant's case is that the 1st and 2nd Respondents executed the loan documentation as directors and “on behalf of” the 3rd Respondent, a fact admitted by the Claimant in its submissions; that the 1st and 2nd Respondents’ actions fall within the definition of corporate agency, not personal contracting; that failure to affix the company seal is a factual question requiring evidence and not, by itself, a doctrine that transmutes corporate obligations into directors' personal debts; that the 3rd Respondent is the contracting borrower and the 1st and 2nd Respondents acted as directors/agents; ***Whether, in these circumstances, the corporate veil can be lifted and whether this Tribunal has jurisdiction to do so?*** 1. The 1st and 2nd Respondents submit that the Claimant's continued joinder of the 1st and 2nd Respondents purely because they are directors/shareholders of the 3rd Respondent is, in substance, an invitation to this Honourable Tribunal to disregard the 3rd Respondent's separate legal personality and to treat directors as the true debtors; that retaining the 1st and 2nd Respondents in the suit would be tantamount to lifting/piercing the corporate veil. 1. According to the 1st and 2nd Respondent, it is well established that Jurisdiction is everything. A tribunal can only do what its enabling statute permits; that the Co-operative Tribunal's jurisdiction is anchored in statute, principally Section 76 of the Co-operative Societies Act (Cap. 490), which defines the scope of disputes referable to it; that critically, nothing in Section 76 or the general powers on proceedings and awards, expressly confers on the Tribunal the High Court's inherent jurisdiction associated with equitable and corporate law remedies such as veil-lifting the corporate veil to impose personal liability on directors or shareholders of a limited liability company, especially where the persons sued are not parties by contract and are being pursued solely by reason of their corporate position; that ***In*** ***Kenya Planters Co-Operative Union Ltd (In Receivership) & 12 Others V Minister For Co-Operative Development & Marketing & 4 Others [2012] KEHC 248 (KLR) the High Court*** reaffirmed the centrality of statutory allocation of jurisdiction the court stated as follows: “where Parliament has created a tribunal and delineated jurisdiction, courts and parties must respect those bounds.” The 1st and 2nd Respondents’ aver that the Tribunal has no power to pierce the corporate veil and impose personal liability and should strike out the claim against the 1st and 2nd Respondent for misjoinder. ***On whether the Preliminary Objection meets the tenets of the Mukisa Biscuit test?*** 1. It is submitted by the 1st and 2nd Respondents that the Mukisa Biscuit Test on Preliminary objections is that: a valid preliminary objection must raise a pure point of law capable of disposing the suit or a distinct limb of it on the assumption that the pleaded facts are correct; that Kenyan courts continue to police that threshold strictly; that in William Kiprono Towett & 1597 Others v Farmland Aviation Ltd, Marco Dunn & Toby Dunn [2016] KECA 301 (KLR), the Court of Appeal reiterated that a preliminary objection must be a pure point of law and not one that requires factual ascertainment or discretion; that the objection herein is not about contested facts, it assumes the Claimant's own facts that the 1st and 2nd Respondents are directors and signed on behalf of the 3rd Respondent and asks the legal question: does that make them personally liable; that is a classic preliminary point: whether pleadings disclose a sustainable cause of action against named parties' given admitted/assumed corporate agency facts. 2. It is the 1st and 2nd Respondents’ submission that the Tribunal does not need to receive evidence to determine the legal proposition that directors are not personally liable for corporate debts absent pleaded exceptions; that the relief sought in the Preliminary Objection is targeted and severable as striking out the 1st and 2nd Respondents does not terminate the claim against the 3rd Respondent company; it simply aligns parties to the correct debtor; however, it does not follow that wrongly-sued parties must be retained; that Kenyan courts routinely strike out improperly joined parties where no reasonable cause of action is disclosed against them in their personal capacity; that the preliminary objection satisfies the Mukisa Biscuit test as it raises a pure point of law and is capable of disposing of the suit against the 1st and 2nd Respondents. **Claimant’s Written Submissions** 1. The Claimant submits that it moved the Tribunal vide a Statement of Claim dated 20.5.2024 seeking for Judgment against the Respondents jointly and severally for payment of Kshs. 10,980,519/= (Ten Million Nine Hundred and Eighty Thousand Five Hundred and Nineteen) with accrued interest at the rate of 16% per annum from the month of April 2024 until payment in full; plus, costs of suit and interest thereon at court rates. 2. The Claimant submits that on 14.12.2022 the Respondents at their own request and instigation did apply for and were duly granted a loan facility of Kshs. 9,507,912/= (Nine Million Five Hundred and Seven Thousand Nine Hundred and Twelve) payable within a maximum turnover period of 60(sixty) days from the date of disbursement with an accrued interest of 13.5% per annum. This fact is acknowledged in their Response at paragraph 2; that the 1st and 2nd Respondents executed the Directors’ Declaration form contained in the Corporate Loan Application and Agreement Form, item number 1 in the claimant's list of documents; that there is no doubt that the 1st and 2nd Respondents are directors of the 3rd Respondent and further there is no doubt that the 1st and 2nd Respondent executed the loan agreement dated 14.12. 2022 on behalf of the 3rd Respondent; that at no place was the 3rd Respondent Seal used hence they cannot run away from the proceedings as doing so will place the Claim at a precarious situation and expose the Claimant to losses; that the Claimant has sued all the parties JOINTLY and SEVERALLY meaning that they are collectively and individually responsible for the payments. **ANALYSIS AND DETERMINATION** 1. We have considered the Notice of Preliminary Objection and the documents filed by both parties in this suit and the issues that arise for determination are as follows: 2. Whether the Respondent’s Notice of Preliminary Objection meets the threshold for preliminary objections. 3. Whether or not the Preliminary Objection is merited. **Whether the threshold for a preliminary objection has been met.** 1. What constitutes a preliminary objection was set out in Mukisa Biscuit Manufacturing Co. Ltd Vs. West End Distributors Ltd (1969) EA 696 and later emphasized by the Supreme Court in the Hassan Ali Joho & another v Suleiman Said Shahbal & 2 others (2014) eKLR as follows: “(31)To restate the relevant principle from the precedent-setting case, Mukisa Biscuit Manufacturing Co Ltd –vs. - West End Distributors (1969) EA 696: “a preliminary objection consists of a point of law which has been pleaded or which arises by clear implication out of pleadings and which if argued as a preliminary point may dispose of the suit. Examples are an objection to the jurisdiction of the court or a plea of limitation or a submission that the parties are bound by the contract giving rise to the suit to refer the dispute to arbitration….a preliminary objection is in the nature of what used to be a demurrer. It raises a pure point of law which is argued on the assumption that all the facts pleaded by the other side are correct. It cannot be raised if any fact has to be ascertained or if what is sought is the exercise of judicial discretion”. 2. In Dismas Wambola v Cabinet Secretary, Treasury & 5 others (2017) eKLR, stated as follows: “A preliminary objection must first, raise a point of law based on ascertained facts and not on evidence. Secondly, if the objection is sustained, that should dispose of the matter. A preliminary objection is in the nature of a legal objection not based on the merits or facts of the case, but must be on pure points of law. It may be noted that preliminary objections are narrow in scope and cannot raise substantive issues raised in the pleadings that may have to be determined by the court after perusal of evidence….” 3. The case of Oraro vs. Mbaja [2005] 1 KLR offers significant insight where the Court observed that: “A preliminary objection consists of a point of law which has been pleaded or which arises by clear implication out of pleadings, and which if argued as a preliminary point may dispose of the suit …Anything that purports to be a preliminary objection must not deal with disputed facts, and it must not itself derive its foundation from factual information which stands to be tested by normal rules of evidence…….” 4. We find that the 1st and 2nd Respondents’ preliminary objection raises two points: 5. In terms of the 3rd Respondent being a separate legal entity from its Directors by virtue of Section 19 of the Companies Act, concerning the claim of misjoinder of the 1st and 2nd Respondent in the claim herein.; 6. In terms of the Jurisdiction of the Tribunal derived from Section 76 of the Cooperative Societies Act. 7. The aforesaid points raise legal issues of who are the proper parties before the Tribunal and the legality of suing Directors of a Limited liability company jointly with the company. It is not possible to consider issues of legality of suing the individual directors of the 3rd Respondent without considering the Jurisdiction of the Cooperative Tribunal. 8. The points raised are therefore pure points of law touching on the Jurisdiction of the Tribunal to hear and determine the claim against the 1st and 2nd Respondent and is therefore within the threshold of what is a preliminary objection. **Whether or not the Preliminary Objection is merited.** 1. It is not disputed in the pleadings that the 3rd Respondent is a limited liability company incorporated under the Companies Act, 2015 and a member of the Claimant; neither is it disputed that the 1st and 2nd Respondent are Directors thereof. 2. The question we need to answer herein is, whether the 1st and 2nd Respondent are proper parties to the suit, or they have been unlawfully mis-joined to it. 3. It goes without saying that by virtue of the provisions of the Companies Act, a limited liability company is a separate legal entity from its Directors and is capable of owning property, transacting and of suing and being sued. 4. The jurisdiction of the Tribunal is established under Section 76 of the Cooperative Societies Act, Cap 490 of the Laws of Kenya. **Section 76(1)** determines the disputes that are referred to the Tribunal and the parties to the disputes and provides that if any dispute concerning the business of a Cooperative Society arises; 1. Among Members, past Members and persons claiming through Members, past Members and deceased Members; or 2. Between members, past members; or deceased members and the Society, its committee or any officer of the society; or 3. Between the society and any other Cooperative Society, it shall be referred to the Tribunal. 4. The pleadings herein reveal a loan dispute between the Claimant and its member-borrower, the 3rd Respondent. The claim should therefore be between the Claimant and its member, the 3rd Respondent. 5. Merely because the 1st and 2nd Respondent executed the loan documentation as Directors of the 3rd Respondent does not make them borrowers, neither does it place them in the position of a member. The 1st and 2nd Respondents herein are therefore not proper parties before the Cooperative Tribunal in terms of Section 76 the Cooperative Societies 6. For the reasons aforesaid, we find firstly, that the claim against 1st and Respondents for being Directors of a limited liability company is unsustainable for want of jurisdiction as they are not members of the Claimant individually and secondly, the 3rd Respondent, being a limited liability company and member of the Claimant is a legal entity capable of suing and being sued in its own name, hence it was neither necessary nor proper to enjoin its Directors to the claim. 7. Consequently, we find that the Notice of preliminary Objection dated 14th August, 2025 has merit and is hereby allowed. 8. The claim against the 1st and 2nd Respondents is hereby expunged from the record with no order as to costs. Mention for Pretrial Directions on 8.10.2026. Notice to issue. Ruling signed, dated and delivered *virtually* at **Nairobi** this **30th** day of **July, 2026.** **Hon. J. Mwatsama Chairperson Signed 30.7.2026** **Hon. Beatrice Sawe Member Signed 30.7.2026** **Hon. Fridah Lotuiya Member Signed 30.7.2026** **Hon. Paul Aol Member Signed 30.7.2026** **Hon. Michael Chesikaw Member Signed 30.7.2026** **Tribunal Clerk Jemimah** Kahigah advocate for the Claimant – No appearance. Kanyori advocate for the Respondent. **Hon. J. Mwatsama Chairperson Signed 30.7.2026**