https://new.kenyalaw.org/akn/ke/judgment/keelrc/2026/1529

Mugah v G. North & Son Limited (Cause E716 of 2023) [2026] KEELRC 1529 (KLR) (4 June 2026) (Ruling) Neutral citation: [2026] KEELRC 1529 (KLR) Republic of Kenya In the Employment and Labour Relations Court at Nairobi Cause E716 of 2023 ON Makau, J June 4, 2026 Between Elijah Jacktone Odhiambo Mugah Claimant and G. North & Son Limited Respondent Ruling 1.This Ruling relates to the Claimant’s Notice of Motion dated 8th August 2025 brought under Rule 47 &73 of the ELRC Procedure Rules, Order 22 Rule 35 and Order 51 Rule 1 of the Civil Procedure Rules. It seeks the following orders:-a.That Paul Wanderi Ndungu, Patrick Kithinji Mugambi being directors and Kennedy Morara Ontiti being the company secretary of G. North & Son Limited, the Respondent/judgment debtor do attend court and be examined on the assets/business of the judgment debtor with a view to recover the decretal sum herein.b.That Paul Wanderi Ndungu and Patrick Kithinji Mugambi being directors and Kennedy Morara Ontiti being the company secretary be and are hereby ordered to produce and file in court for inspection audited books of account of the judgment debtor for the period between June 2018 to date, and provide and file in court a schedule of all the judgment debtors' assets including such proof of ownership from June 2018 to date and to account for the whereabouts of these assets.c.That in default of compliance with prayer/order 1 and 2 above, this honourable Court be pleased to lift the corporate veil of the Respondent/judgment debtor and the said Paul Wanderi Ndungu, Patrick Kithinji Mugambi and Kennedy Morara Ontiti being directors and company secretary of the judgment debtor be made personally liable to satisfy the decretal sum herein.d.That costs of this application be provided for. 2.The Motion is supported by Claimant’s Affidavit sworn by the on 8th August 2025 and is premised on the grounds set out on the face of the motion. The motion is not opposed and the record shows that the Respondent never entered appearance in the suit. The application was disposed of by submissions. Facts 3.Judgment in this matter was delivered on 13th March 2025, and costs of the suit were taxed on 22nd April 2024. Attempts to execute the decree and certificate of costs through attachment failed as the Respondent closed its premises in 2020 and the whereabouts of the Respondent’s assets is unknown. 4.The Warrants of attachment issued to Keysian Auctioneers have since been returned unexecuted vide the auctioneer's letter dated 16th July 2025. Therefore, the decretal sum remains unpaid to date. 5.The Claimant filed the Respondent’s CR12 showing the shareholding and directorship of the Respondent as at 21st March 2025 as Sarastro Holdings Limited which holds 84,384 ordinary shares, and Paul Wanderi Ndungu one ordinary share. 6.The Claimant further produced the CR12 for the Sarastro Holdings Limited as at 21st March 2025 showing that shareholding and directorship as Paul Wanderi Ndungu who holds 60 ordinary shares, and Patrick Kithinji Mugambi who holds 40 ordinary shares. The Claimant further deposed that the CR12 for the two companies indicate Kennedy Morara Ontiti as the company secretary. 7.The Respondent and its share-holders/directors have been served through Newspaper advertisement with the leave of the Court but they never filed any response and showed how the respondent intents to pay the decreed sum. Therefore, prayer 1 and 2 in the motion are now spent. 8.Having considered the instant Motion, the Supporting Affidavit, and the Claimant's submissions, the main issue for determination is whether the Respondent’s corporate veil should be lifted and the persons named as its directors and company secretary be held personally liable to satisfy the decretal sum. Analysis 9The Claimant’s case this court passed a decree on 13th March 2025 directing the Respondent to pay the Claimant Kshs. 3,741,300 together with costs and interest, but the respondent has defaulted. He further avers that the efforts to execute the decree against the Respondent by attachment and sale of its property have not been successful as it closed its premises in 2020 and the whereabouts of its assets is unknown. 10The directors and corporation secretary of the Respondent have not attended Court despite being served with the Application and Court orders directing them to attend Court and produce audited books of accounts. The court is now invited to lift the Respondent’s corporate veil and hold the Directors and company secretary liable to personally pay the decreed sum. 11.To back his application for lifting of the corporate veil, the Claimant cited the case of Masefield Trading (K) Ltd v. Rushmore Company Limited & 2 others (2008) KEHC 798 (KLR) where the High Court stated that:-“However, that fundamental principle of incorporation may be disregarded, lifted or pierced in exceptional circumstances both under express statutory provisions (of section 323 of the Companies Act is but one example only) and under judicial interpretation or intervention. As regards the latter, English authorities establish the broad principle that the corporate veil will be lifted by the Court if, among other situations, corporate personality is being used as a mask for fraud or improper conduct.” 12.The Claimant also relied on Justine Nyambu v.Jaspa Logistics[2017] eKLR case where this Court stated that:-“13.For the Court to make an appropriate decision on the request to lift the corporate veil, one has to consider it in the context of employment law in Kenya. It appears that officers or agents of an employer are not shielded from legal obligation by the corporate veil. Section 2 of the Employment Act defines employer as follows:"Employer means any person, public body firm, corporation or company who or which has entered into a contract of service to employ any individual and includes the agent, foreman, manager or factor of such person, public body, firm, corporation or company.” 13.The Claimant submitted that quite apart from lifting the veil of incorporation, this Court is empowered under Section 2 of the Employment Act to declare and order a principal officer of a corporation or company personally liable to settle employment dues to an employee. 14.However, I must a draw a parallel between an actively operating company and a genuinely inoperative company. In my view, where a company is operative but its officers’ conduct is called into question, the court should consider an invitation to lift the corporate veil and see what is going on behind it. However, where a company’s business has collapsed and becomes genuinely unable to meet its financial obligations to creditors, like in this case, the court should tread carefully lest it crosses its jurisdictional lane and veer off onto the insolvency world. 15.The Claimant has admitted that the respondent closed shop in 2020, even before he filed the suit. He has not accused its officers of fraud or for using the company for criminal activities or evading legal obligations. Since no allegation of misconduct has been made against the said officers, but rather closure of business, I decline the invitation to pierce the respondent’s corporate veil. 16.This means that the Claimant must do his assignment further to ascertain whether the respondent is operating elsewhere, and further demonstrate that its officers are using the corporate veil in a dishonesty and fraudulent manner so as to evade legal obligation including settling the decree of this court. 17.In conclusion, the Notice of Motion fails to the extent that it seeks lifting of the respondent’s corporate veil and to hold its officers liable to settle the decree of the Court. For avoidance of doubt the claimant is at liberty to apply should he succeed in tracing the Respondent/ Judgment debtor. DATED, SIGNED AND DELIVERED VIRTUALLY IN OPEN COURT AT NAIROBI THIS 4TH DAY OF JUNE, 2026.ONESMUS MAKAUJUDGEAppearance:Mungla for ClaimantNo appearance for Respondent