Maya Agrarian Holdings Ltd v Max Grains Ltd (Small Claims Appeal E072 of 2025) [2026] KEHC 8505 (KLR) (Civ) (22 May 2026) (Ruling)

Maya Agrarian Holdings Ltd v Max Grains Ltd (Small Claims Appeal E072 of 2025) [2026] KEHC 8505 (KLR) (Civ) (22 May 2026) (Ruling) Neutral citation: [2026] KEHC 8505 (KLR) Republic of Kenya In the High Court at Nairobi (Milimani Law Courts) Civil Small Claims Appeal E072 of 2025 AC Mrima, J May 22, 2026 Between Maya Agrarian Holdings Ltd Ltd Appellant and Max Grains Limited Respondent Ruling Background: 1.The dispute before this Court emanates from the decision of Nairobi [Milimani] Small Claims Court Commercial Case No. E2169 of 2023 (hereinafter referred to as ‘the suit’). The Respondent, Max Grains Limited, instituted a claim against the Appellant, Maya Agrarian Holdings Limited, seeking to recover Kshs. 909,500/- for goods allegedly sold and delivered on credit. 2.The Appellant failed to enter an appearance or file a response, prompting the trial Court to enter a default judgment in favour of the Respondent. 3.Subsequently, the Respondent commenced execution proceedings. On 19th April 2024, a Notice to Show Cause was issued against Pauline Wanjiru Macharia, a Director of the Appellant. On 30th May 2024, the trial Court allowed the application and issued warrants of arrest against the said Director, which were formally issued on 7th June 2024. She was arrested on 21st February 2025 and brought before the trial Court, where she was directed to pay Kshs. 20,000/- immediately and settle half of the decretal sum within 30 days to secure her release. 4.The Appellant subsequently filed an application dated 18th March 2025 in the trial Court seeking to set aside the default judgment and the warrants of arrest, citing a lack of service of summons and procedural irregularities in the execution process. In its ruling of 9th June 2025, the trial Court dismissed the application with costs. 5.Aggrieved, the Appellant lodged an appeal alongside the instant application seeking to stay the execution proceedings pending the determination of the appeal. 6.The application was opposed, and was heard by way of written submissions, hence, this ruling. The Application: 7.Through the Notice of Motion dated 11th June 2025 brought pursuant to Order 42 Rule 6 and Order 51 Rule 1 of the Civil Procedure Rules, and Sections 1A, 1B, 3A, and 63(e) of the Civil Procedure Act, the Applicant sought the following orders:1.Spent.2.Spent.3.That this Honourable Court be pleased to grant orders staying the execution of warrants of arrest issued on 7th June 2024 against Pauline Wanjiru Macharia, in her capacity as director of the Appellant/Applicant, pending the hearing and determination of the Appeal herein.4.That this Honourable Court be pleased to grant orders staying the execution of the ruling and all consequential orders delivered on 9th June 2025 by Hon. Philomena Makokha in SCCCOMM No. E2169 of 2023, pending the hearing and determination of the said appeal.5.That the costs of this application be provided for. 8.The application was grounded on the premise that the appeal raises substantial questions of law. The Applicant contended that the trial Court upheld the execution of a decree against a director without prior service and without any order lifting the corporate veil. It is averred that the application seeking to lift the veil was filed on 15th August 2024, months after the warrants were issued, and was never heard. 9.In her Supporting Affidavit, Pauline Wanjiru Macharia deposed that she was never served with the Statement of Claim, hearing notices, or the application seeking to impose personal liability. She asserted that her arrest on 21st February 2025 was her first knowledge of the proceedings. She contended that execution against a director without a judicial order lifting the veil of incorporation violated her right to a fair hearing under Article 50 of the Constitution and threatened her right to liberty, occasioning substantial loss. The Submissions: 10.It its written submissions dated 9th October 2025, the Applicant stated that the warrants of arrest were fundamentally defective as they were issued against a director without a pending or determined application to lift the corporate veil. The Applicant relied on the case of Peter O. Ngoge t/a O.P. Ngoge & Associates -vs- Ammu Investment Co. Ltd [2012] eKLR, to argue that lifting the corporate veil requires a deliberate judicial act supported by evidence justifying personal liability, and cannot be achieved merely through an application for examination under Order 22 Rule 35. 11. 11.On the conditions for granting a stay of execution, the Appellant cited Butt -vs- Rent Restriction Tribunal [1982] KLR 417 to advance the argument that the threat of unlawful arrest and deprivation of liberty constitutes irreparable prejudice and substantial loss that cannot be compensated by damages. The Appellant maintained that the application was filed without delay and expressed willingness to abide by any lawful directions of the Court regarding security. 12.The Applicant prayed that the application be allowed as prayed. The Respondent’s case: 13.The Respondent opposed the application through a Replying Affidavit of Peter Otieno deposed to on 4th July 2025. It was his case that the judgment of 13th June 2023 for Kshs. 909,500/= remains unpaid two years after its delivery. He averred that the Applicant had not demonstrated readiness to deposit the decretal sum and costs to satisfy the conditions for a stay. It was his case further that there was apprehension that Ms. Macharia had a history of changing company directors to frustrate creditors when her companies are sued. He referred to CR12 forms annexed as evidence. 14.The Respondent prayed that should the Court be inclined to grant the stay, the Applicant must be ordered to deposit the entire judgment sum into a joint interest-earning account in the names of both counsels. DIVISION - The Submissions 15.Through written submissions dated 13th October 2025, the Respondent submitted that the Applicant’s director breached the trial Court’s orders made upon her arrest, wherein she was directed to pay Kshs. 500,000/= within 30 days. The Respondent argued that the Applicant had not demonstrated that it will suffer substantial loss that cannot be compensated by costs. Further, the Respondent submitted that the application is defeated by unreasonable delay. To that end, it submitted that the delay is calculated from the date of the default judgment in 2023 rather than the date of the impugned ruling. 16.The Respondent maintained that the appeal is unarguable and merely an attempt to evade obligations. It reiterated its prayer that if stay is granted, the Applicant be directed to deposit the entire decretal sum of Kshs. 1,091,254.47/= together with interest to guarantee the performance of the decree. Analysis and Determination 17.Having considered the application, the affidavits on record, and the rival submissions, the singular issue for determination is whether the Application meets the threshold for the grant of an order for stay of execution. 18.The jurisdiction to grant a stay of execution pending appeal is discretionary but must be exercised upon the fulfilment of the three conditions stipulated under Order 42 Rule 6 (2) and (3) of the Civil Procedure Rules. It provides thus:2.No order for stay of execution shall be made under subrule (1) unless—a.the court is satisfied that substantial loss may result to the applicant unless the order is made and that the application has been made without unreasonable delay; andb.such security as the court orders for the due performance of such decree or order as may ultimately be binding on him has been given by the applicant.2.Notwithstanding anything contained in subrule (2), the court shall have power, without formal application made, to order upon such terms as it may deem fit a stay of execution pending the hearing of a formal application. 19.In the long-standing case of Butt -vs- Rent Restriction Tribunal [1982] KLR 417, it was observed that a Court’s discretion should be exercised to prevent an appeal, if successful, from being rendered nugatory, while balancing the rights of the decree-holder to enjoy the fruits of their judgment. The learned Judges of the Court of Appeal observed;… It is in the discretion of the court to grant or refuse a stay but what has to be judged in every case is whether there are or not particular circumstances in the case to make an order staying execution. It has been said that the court as a general rule ought to exercise its best discretion in a way so as not to prevent the appeal, if successful from being nugatory, per Brett, LJ in Wilson v Church (No 2) 12 Ch D (1879) 454 at p 459. In the same case, Cotton LJ said at p 458:”“I will state my opinion that when a party is appealing, exercising his undoubted right of appeal, this court ought to see that the appeal, if successful, is not nugatory.” 20.The Learned Judges then crystallized conditions as hereunder;a.The power of the court to grant or refuse an application for a stay of execution is discretionary; and the discretion should be exercised in such a way as not to prevent an appeal.b.Secondly, the general principle in granting or refusing a stay is, if there is no other overwhelming hindrance, a stay must be granted so that an appeal may not be rendered nugatory should the appeal court reverse the judge’s discretion.c.Thirdly, a judge should not refuse a stay if there are good grounds for granting it merely because, in his opinion, a better remedy may become available to the applicant at the end of the proceedings.d.Finally, the Court in exercising its discretion whether to grant or refuse an application for stay will consider the special circumstances and its unique requirements. The court in exercising its powers under Order XLI Rule 4(2) (b) of the Civil Procedure Rules, can order security upon application by either party or on its own motion. Failure to put security of costs as ordered will cause the order for stay of execution to lapse. 21.With the foregoing, this Court will consider the requirements in turn. Substantial Loss: 22.The Applicant’s core grievance is the execution of a decree against a Director of the judgment-debtor company through committal to civil jail. From the foregoing, it is apparent that the entirety of the Applicant’s case turns of the concept of a company being a distinct legal entity from its directors. [See Salomon -vs- Salomon [1897] AC 78]. 23.At the heart of the appeal will be a look at the manner the trial Court dealt with Order 22 Rule 35 of the Civil Procedure Rules which allows for the summoning of a corporate officer for examination regarding the company’s assets, and the manner the warrants of arrest were issued. Several averments have been made by the parties, but in essence they fall within the main appeal. 24.The deprivation of personal liberty of a company director in execution of a corporate debt, where the procedural prerequisite of lifting the corporate veil is robustly contested on appeal, undeniably constitutes substantial loss. Liberty, once lost, cannot be adequately compensated by damages. 25.In Alfred N. Mutua -vs- Ethics & Anti-Corruption Commission (EACC) & 4 others [2016] KECA 596 (KLR) the Court of Appeal discussed the irreversible harm that would visit a person when deprived of their personal liberty. The Learned Judges observed;…. In further consideration of public interest in relation to the conservatory orders sought, we have evaluated the instant application in light of the submission that there is a real threat of arrest and prosecution of the applicant and that this is a threatened violation of his dignity and fundamental rights under the Constitution. Arrest leads to many serious consequences not only for the arrested individual but for his family, close relations and friends particularly as most people do not make any distinction between arrest at a pre-conviction or post-conviction stage. In our view, arrest should be the last option and should be restricted to those exceptional cases where arresting an individual is imperative in the facts and circumstances of the case. Personal liberty is a very precious fundamental right and should be curtailed only when it becomes imperative according to the peculiar facts and circumstances of the case. The importance of personal liberty as a fundamental right cannot be gainsaid; all other fundamental rights and freedoms cannot be enjoyed without life and liberty. Life bereft of liberty is without honour and dignity and loses significance and meaning and life itself would not be worth living; that is why liberty is the very quintessence of a civilized existence. 26.Drawing from the above, this Court is satisfied that the Applicant has demonstrated that substantial loss will occur if stay is not granted. Delay: 27.The impugned ruling was delivered on 9th June 2025. The instant application was filed on 11th June 2025. A period of two days in between is remarkably prompt. The Respondent’s attempt to compute the delay from the date of the default judgment in 2023 is misplaced, as the present appeal specifically targets the ruling that declined to set aside the said judgment and the execution processes. 28.The Applicant has, therefore, satisfied the condition of filing without unreasonable delay. Security: 29.This requirement is designed to protect the decree-holder from a paper victory should the appeal fail. It guarantees the Respondent that it will not start all over the process of realizing the fruits of its judgment in the event the appeal fails. 30.The Court of Appeal in Civil Appeal (Application) 38 of 2013 Gatirau Peter Munya -vs- Dickson Mwenda Kithinji & 2 others [2014] eKLR laid down the basis ordering for security. It stated as follows: -…. The rationale for security for costs is to ensure firstly, that a party is not left without recompense for costs that might be awarded to him in the event that the unsuccessful party is unable to pay the same due to poverty; secondly, it ensures that a litigant who by reason of his financial ability is unable to pay costs of the litigation if he loses, is disabled from carrying on litigation indefinitely except on conditions that offer protection to the other party. In Noormohamed Abdulla -vs- Ranchhodbhal J. Patel & Another (1962) E.A. 448, it was held: -The order for security for costs in such a case is not directed towards enforcing payment of the costs as such, but is designed to ensure that a litigant who by reason of near insolvency is unable to pay the costs of the litigation when he loses, is disabled from carrying on the litigation indefinitely except upon terms and conditions which afford some measure of protection to the other parties. 31.In Gianfranco Manenthi & another vs. Africa Merchant Assurance Company Ltd [2019] eKLR the Court observed as follows;… the applicant must show and meet the condition of payment of security for due performance of the decree. Under this condition a party who seeks the right of appeal from money decree of the lower court for an order of stay must satisfy this condition on security. In this regard, the security for due performance of the decree under order 42 rule 6(1) of the Civil Procedure Rules, it is trite that the winner of litigation should not be denied the opportunity to execute the degree in order to enjoy the fruits of his judgment in case the appeal fails. 32.The apprehension expressed by the Respondent regarding the changing of directorships is valid and has been demonstrated. It, therefore, necessitates the protection of the decree. However, compelling the director to personally deposit the full sum upfront, before the appellate Court determines the propriety of the veil-lifting process, would amount to enforcing the very liability that is the subject of the appeal. 33.The Respondent requested the deposit of the entire decretal sum of Kshs. 1,091,254.47/-. The Applicant, while contesting the validity of the debt and the execution process, indicated a willingness to comply with the Court’s directives to preserve the balance of justice. To balance the competing interests, protecting the director’s liberty pending the appeal while securing the Respondent’s decree against the company, it is equitable to grant a conditional stay. Disposition: 34.Consequently, this Court finds merit in the Notice of Motion dated 11th June 2025 and issues the following orders: -(a)An order hereby issues staying the execution of the warrants of arrest issued on 7th June 2024 against Pauline Wanjiru Macharia pending the hearing and determination of the appeal.(b)An order hereby issues staying the execution of the ruling and consequential orders delivered on 9th June 2025 in SCCCOMM No. E2169 of 2023 pending the hearing and determination of the appeal.(c)The orders of stay in [a] and [b] above are conditional upon the Applicant and/or Pauline Wanjiru Macharia depositing the sum of Kshs. 500,000/= [Five Hundred Thousand Only] in Court within 14 days of this Order, failing which the orders of stay shall automatically lapse and execution shall forthwith proceed.(d)The costs of this application shall abide the outcome of the appeal.(e)Since the appeal is against a ruling, the following directions do hereby issue: -(i)The filing of a Record of Appeal is hereby dispensed with and the trial Court file shall be availed.(ii)The Appellant shall file and serve written submissions on the main appeal within 14 days of this order.(iii)Once served, the Respondent shall file and serve written submissions within 14 days of service.(f)The matter shall then be fixed for highlighting of submissions.Orders accordingly. DELIVERED, DATED AND SIGNED AT NAIROBI THIS 22ND DAY OF MAY,2026.A.C. MRIMAJUDGERuling virtually delivered in the presence of:Mr. Wanjohi, Learned Counsel for the Applicant.No appearance for, Learned Counsel for the Respondent.Michael/Amina – Court Assistants.