[2022] KEHC 15837 (KLR)

Maina t/a Bill Consultants v Bobmill Properties Ltd & another (Civil Case 1861 of 2012) [2022] KEHC 15837 (KLR) (Civ) (2 December 2022) (Ruling)

Neutral citation: [2022] KEHC 15837 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Law Courts)

Civil

Civil Case 1861 of 2012

JK Sergon, J

December 2, 2022

Between

Davidson Kariuki Maina t/a Bill Consultants

Plaintiff

and

Bobmill Properties Limited

Defendant

and

Bobmill Industries Limited

Objector

Ruling

1. The application dated August 26, 2021 seeks the following orders:-i.That pending the hearing and determination of this application inter partes there be a stay of execution of the decree and warrants herein against the objector/applicant.ii.That the decree holder through his agents including Principal Auctioneers or any other auctioneer, whether by themselves or their representatives, servants, agents, and/or assigns or howsoever acting be precluded from proclaiming or having proclaimed, from attaching or selling the objector's property in its premises or the ones proclaimed in the said notice of proclamation dated August 23, 2021, in answer of the decree of this honourable court.iii.That this honourable court be pleased to lift and set aside the proclamation and attachment against the objector's movable goods dated August 23, 2021. iv.That the costs of this application be provided for.

2. The application is supported by the affidavit of Jaimin Vipinkumar Nathalal Shahsworn on the August 26, 2021 and a supplementary affidavit of the same deponent sworn on October 28, 2021. The plaintiff filed a replying affidavit sworn by Davidson Kariuki Maina on September 20, 2021.

3. The parties agreed to determine the application by way of written submissions but only the objector’s counsel complied. The applicant contends that it has never participated in the dispute between the plaintiff and the defendants. However, the objector/applicant was served with a proclamation dated August 23, 2021 whereby its properties including 40,000 pieces of assorted mattresses, forklift KHMA 309R, 100 assorted desktop computers, motor vehicle registration number KCN 327B, KCN 966S, KCP 471U and KBK 708J, 500 assorted office chairs and 500 assorted office desks belongs to the objector herein and not the judgment debtor.

4. Counsel for the application contends that the objector and the judgment debtor are two separate legal entities. Counsel relies on the case of Kenyariri & Associates Advocate/ Applicant vs Hans Jurgen Langer(2016) eKLR where the court held:-“Even when the shareholders of 2 companies are the same, that does not make such companies the same. The reason for that legal position stems from the fact that duly incorporated companies are distinct from both its members or shareholders, and also from its directors.The principle that a company is a legal person separate from those who compose it, is the greatest legal innovation that we have seen in company law. The company sues or is sued on its name; it owns its own properties and bears its liability. The company is not even an agent of its members. And as a general rule, the directors are not liable for omissions and actions of the company”.

5. Further reliance was placed on the case of Trading Co Ltd v Muli Mwanzia & 2 others(2019) eKLR where it was held:-“Separate legal personality of a company can never be departed from except in instances where the statute or the law provides for the lifting or piercing of the corporate veil, say when the directors or members of the company are using the company as a vehicle to commit fraud or other criminal activities.”

6. On his part, the plaintiff contends that the objector’s application is not genuine and is not brought in good faith. The objector is a sister company to the defendant company. They belong to a group of companies which include the objector, the defendant, Bobmill Investments Limited, Silver Trading Company Limited, Try-Stan Limited among others and they are all owned by the Nathalal Shah family. The plaintiff maintains that he was contracted by the defendant to prepare bills of quantifies for a construction that was to be undertaken in Uganda. All the companies are housed in the same offices along Mombasa Road.

7. The objection is raised on the basis that the objector is distinct from the defendant and has never participated in the dispute and that the proclaimed properties belong to the objector and not the defendant.

8. The application is brought under order 22 rule 51 which states as follows:-“Any person claiming to be entitled to or to have a legal or equitable interest in the whole of or part of any property attached in execution of a decree may at any time prior to payment out of the proceeds of sale of such property give notice in writing to the court and to all the parties and to the decree-holder of such objection to the attachment of such property.”

9. The objector annexed copies of logbooks of the proclaimed motor vehicles. Al the log books are in the names of the objector. There is no evidence from the plaintiff to the effect that the proclaimed properties belong to the defendant. It is also not contended that the objector is being used by the defendant to hide its properties with the sole intention of defeating the decree in favour of the plaintiff.

10. I am entirely in agreement with the holding in the cases of Kenyariri & Associated and Chai Trading Company(supra) that separate legal personality should be upheld unless it can be shown that it is being used to perpetuate fraud or defeat justice. It does not matter whether the directors of the Objector company are the same as those of the defendant. A decree holder is required to carefully pursue properties owned by the defendant. Companies are formed for different purposes and each company normally keeps its own separate records. Properties are bought by a specific company out of its own needs and from its own resources. A sister company could be thriving while another related company could be heading towards receivership. I am guided by the decision in Hannah Maina t/a Taa Flower vs Rift Valley Bottlers Limited (2011) eKLR where the Court of Appeal held:-“In the circumstances, the respondent could not be held liable for the debts of its subsidiary company, the two being distinct and separate legal entities. We are in agreement with the holding of the learned judge. The authority that she cited, Re: Southard Limited [1979] 3 All ER 565 is quite apt:“… a parent company may spawn a number of subsidiary companies, all directly or indirectly controlled by the shareholders of the parent company. If one of the subsidiary companies turns out to be the runt of the litter and declines into insolvency to the dismay of the creditors, the parent company and the subsidiary companies may prosper to the joy of the shareholders without any liability for the debts of the insolvent subsidiary.”

11. The objector has established that the goods do not belong to the defendant. The proclamation and intended auction cannot be allowed to proceed. I do find that the application dated August 26, 2021 is merited and the same is granted as prayed. Parties shall meet their own costs of the application.

DATED, SIGNED AND DELIVERED ONLINE VIA MICROSOFT TEAMS AT NAIROBI THIS 2ND DAY OF DECEMBER, 2022……………………………J. K. SERGONJUDGEIn the presence of:………………………………. for the Plaintiff/Respondent………………………………. for the Defendant………………………………. for the Objector/Applicant