Mukule & 3 others v Rural Assets Credit Litd (Civil Appeal E967 of 2023) [2026] KEHC 8859 (KLR) (Civ) (10 June 2026) (Judgment)

**REPUBLIC OF KENYA** **IN THE HIGH COURT OF KENYA AT NAIROBI** **CIVIL APPELLATE DIVISION** **CIVIL APPEAL NO. E967 OF 2023** **MASIKA MUKULE……………………………………….1ST APPELLANT** **RICHARD GATHECHA NJORA…………………..….2ND APPELLANT** **THEMIS INVESTMENT LTD……………………..…..3RD APPELLANT** **SUSAN WAIRIMU NJORA…………….……………….4TH APPELLANT** (*Being an appeal from the Ruling of Hon. Hosea Nga’nga (PM) in Milimani CMCC NO. E3564 of 2017 delivered on 24/8/2023)* **JUDGMENT** 1. The Plaintiff/Decree Holder obtained a decree against the Defendant/Judgment Debtor (Rural Assets Credit Limited) on 22nd November 2019 for Kshs. 2,220,221.91 plus accrued interest of Kshs. 524,533.29. 2. The Plaintiff/Decree Holder applied for the directors of the Defendant/Judgment Debtor to be held personally liable to satisfy the decretal amount. 3. On 30th May 2022, one co-director, Richard Gatheca, attended court for examination, stated the company went under receivership but provided no proof, and failed to attach any statement of account, taxation, or minutes on the company’s current status. 4. The trial court cited Order 22 Rule 35 of the Civil Procedure Rules, which allows a decree holder to apply for oral examination of a corporation's officer regarding debts and property to satisfy the decree. 5. The trial court found that the Defendant/Judgment Debtor's officers/directors failed to disclose any assets or means of satisfying the decretal amount. 6. Citing the case of **Ramaban Ramnika/Patani & 2 others Vs Garden Chambers Limited [2019] eKLR**, the court affirmed its power to summon any officer of a company for examination. 7. Citing **Ultimate Laboratories Vs Tasha Bioservice (Ringera J.),** the court stated it has the power to lift the corporate veil and order a director to personally discharge the company's debts. 8. The trial court ruled that this was a proper case to lift the corporate veil because the co-directors failed to provide evidence or information on the Defendant's status and ability to satisfy the decretal amount. 9. The trial court found there was no evidence that the Defendant was placed under receivership or statutory management. 10. The trial court held that the directors should be personally liable for satisfying the amount due to the Plaintiff/Decree Holder. 11. The application was allowed in terms of prayers 3, 4, and 5, ordering the directors to be personally liable, granting the Plaintiff/Decree Holder liberty to execute the decree against the directors jointly and severally, and ordering the directors to pay the costs of the application. 12. The appellant has appealed to this court on the following grounds; 13. *THAT the learned Principal Magistrate erred in law and fact in lifting the veil of incorporation while there was absolutely no evidence of fraud, or improper conduct on the part of the Appellants.* 14. *THAT the learned Principal Magistrate erred in law and fact in directing that the decree be executed against the Appellants while the Appellants were not a party to the suit.* 15. *THAT the learned Principal Magistrate erred in law and fact in directing that the decree be executed against the Appellants without offering the Appellants a chance to defend themselves.* 16. *THAT the learned Principal Magistrate erred in law and fact in failing to appreciate that the Decree holder application was not an enquiry per-se but was a trial against the Appellant and therefore the Decree holder was obliged to provide evidence to prove their allegation.* 17. *THAT the learned Principal Magistrate erred in law and fact in granting leave for examination of the Directors on an application grounded on fraud whereas no fraud was pleaded in the Plaint.* 18. *THAT the Court erred in law and fact in ordering the production of the book of account for the period when the Judgement Debtor Company was not operating.* 19. *THAT the entire proceedings/ ruling were nullity as it was conducted in breach of the Appellants right to fair hearing as enriched under Article 50 of the Constitution.* 20. *THAT the court has no Jurisdiction to lift the veil under order 22 rule 35 of the Civil Procedure rules.* 1. The parties filed written submissions in the appeal as follows; The appellant submitted that the appeal is competent without requiring prior leave of the court, contrary to the Respondent’s preliminary objection. 2. The Respondent’s application before the magistrate was partly brought under Order 22 Rule 35 of the Civil Procedure Rules, but it also invoked Sections 1A, 1B, 3A, 38, and 63(e) of the Civil Procedure Act, which confer general powers on the court. 3. The application relied on these general statutory provisions and therefore no leave to appeal is required, particularly where jurisdiction is challenged, as jurisdiction goes to the root of the proceedings. 4. On the merits, Order 22 Rule 35 only empowers a court to order a judgment debtor or corporate officer to attend for oral examination and to produce documents; it does not grant power to lift the corporate veil or hold directors personally liable. 5. The magistrate exceeded jurisdiction by using Order 22 Rule 35 to hold the directors personally liable for the decretal sum. 6. The court was not justified in lifting the corporate veil because there was no evidence of fraud or improper conduct by the directors. 7. The company had no assets and had ceased operations, and one director had appeared and given a detailed explanation, negating any inference of bad faith. 8. Insolvency or inability to pay debts alone does not justify piercing the corporate veil, as held in Kenyan cases including **Corporate Insurance Company Ltd v Savemay Insurance Brokers Ltd and China Wu Yi Ltd v Edermann Properties Ltd.** 9. Allegations of fraudulent transfer of assets were not proved to the required standard. 10. Although there was a delay in filing submissions, no prejudice has been caused to the Respondent. 11. The Appellants pray that the appeal be allowed with costs. 12. The Respondent submitted that the High Court lacks jurisdiction to entertain the instant appeal because the appeal is fundamentally incompetent. 13. Under Section 75 of the Civil Procedure Act and Order 43 of the Civil Procedure Rules, a ruling made under Order 22 Rule 35 does not enjoy an automatic right of appeal. 14. A party wishing to appeal such an order must first obtain explicit leave from the court. 15. The Appellants failed to seek or obtain statutory leave either orally or in writing within the mandatory fourteen-day timeline, or at any point to date. 16. Consequently, the appeal is a non-starter and a legal nullity that cannot be cured by constitutional provisions regarding procedural technicalities. 17. The Respondent further highlights that the Appellants failed to comply with multiple timelines set by the court to file and serve their submissions. 18. Even after being granted an extension of time by the Deputy Registrar, the Appellants remained non-compliant. 19. Citing relevant case law, court orders are serious directives meant for strict compliance rather than cosmetic purposes. 20. A court cannot wait endlessly for non-compliant parties. 21. The Respondent therefore requests the court to issue a Notice to Show Cause for dismissal due to this non-compliance. 22. Ultimately, the Respondent urges the High Court to “down its tools” for want of jurisdiction. 23. The court should refuse to engage in an academic exercise on the merits of the case. 24. The issues for determination in this appeal are as follows; 25. **Whether the appeal is competent given the Respondent’s preliminary objection that it was filed without first obtaining the requisite leave of the court** 26. **Whether the trial magistrate erred in law and fact by lifting the corporate veil and holding the Appellants personally liable for the company’s debt.** 27. The Respondent’s preliminary objection is based on Order 43 Rule 1 of the Civil Procedure Rules which provides an exhaustive list of orders from which an appeal lies as of right. 28. A ruling made under Order 22 Rule 35 is not among those listed in Rule 1(1)(a) to (z). 29. Consequently, Rule 1(2) applies, which unequivocally states, “*An appeal shall lie with the leave of the court from any other order made under these Rules*.” 30. The law is settled that failure to obtain leave where it is required renders an appeal incurably incompetent and a legal nullity, as leave is a prerequisite to the court’s jurisdiction to entertain the appeal. 31. This court is guided by the holding that a ruling made under Order 22, Rule 35 does not have an automatic right of appeal, and a party seeking to appeal must first obtain leave of the court, either orally at the time the order is made or within fourteen days from the date of such order. 32. The Appellants did not seek or obtain such leave, and the inclusion of other statutory provisions like Sections 1A, 1B, 3A, and 63(e) of the Civil Procedure Act in the original application does not cure this fatal procedural defect, as the core of the application and the ruling appealed from was squarely founded on Order 22 Rule 35. 33. The appeal is therefore incompetent and must be struck out. 34. Having found the appeal incompetent for want of leave, the court need not delve into the merits of whether the corporate veil was properly lifted. 35. Ultimately, the appeal is hereby struck out for being incompetent as the Appellants failed to obtain leave to appeal as required under Order 43 Rule 1(2) of the Civil Procedure Rules. 36. Each party shall bear their own costs of the appeal. **Judgment Dated, Signed and Delivered Virtually at Nairobi this 10th day of June, 2026.** **ASENATH ONGERI** **JUDGE** ***Delivered in the presence of:-*** Mr. Kisala holding brief for Mr. Kimathi for the Respondent Miss Wangui for the Appellants Crispin – Court Assistant.