Muloil Limited & 4 others v Coolxtreme Limited (Commercial Appeal E205 of 2023) [2026] KEHC 8079 (KLR) (Commercial and Tax) (9 June 2026) (Judgment)

**REPUBLIC OF KENYA** **IN THE HIGH COURT OF KENYA AT NAIROBІ** **COMMERCIAL AND TAX DIVISION** **COMMERCIAL APPEAL NO. E205 OF 2023** **MULOIL LIMITED………………………………………………...1ST APPELLANT** **MULTIPLE ICD LIMITED………………………………………...2ND APPELLANT** **RAJINDER SINGH BARYAN…………………………………….3RD APPELLANT** **TARLOCHAN SINGH CHАЈЈА………………………………….4TH APPELLANT** **MANVIR SINGH BARYAN………………………………….…..5TH APPELLANT** **-VERSUS-** **COOLXTREME LIMITED........................................................RESPONDENT** **JUDGMENT** 1. This Judgment arises out of the decision delivered on 7th August, 2023. It arose out of a construction dispute entered through a Joint Building Council (JBC) contract. It challenges the periodic works certificates allegedly issued pursuant to the contract. The claim arose out of unpaid invoices arising out of the periodic works certificates. Liability for payment is denied by the Appellants. The Trial Court determined that they were validly issued and the invoices payable. This has triggered this Appeal. **Background Facts** 1. The Appellants filed the Memorandum of Appeal dated 30th August, 2023 on the following grounds, namely; 2. *The learned magistrate erred in fact and in law in finding that payment certificate number 5 was issued to the respondent by the authorized party as per the contract, when there was no evidence to support such a finding.* 3. *The learned magistrate erred in fact and in law in finding that the respondent had fulfilled its contractual obligations, and that the payment certificate number 5 was valid for payment, when no such payment certificate as required under the contract was presented in evidence.* 4. *The learned trial magistrate erred in fact and in law in finding that the respondent was entitled to Kshs 16,858,454.38 as the amount owed, when no payment certificate as per the contract was produced in evidence to prove this amount.* 5. *The learned trial magistrate erred in fact and in law in piercing the 1st appellant's corporate veil and finding that the 2nd to the 5th appellants were liable to settle the amounts awarded to the respondent.* 6. *The learned trial magistrate erred in fact and in law in piercing the 1st appellant's corporate veil by relying on allusions of the 1st appellant's alleged insolvency and alleged depletion of its assets, when no evidence was placed before the court to support such a finding.* 7. *The learned trial magistrate erred in fact and in law in piercing the 1st appellant's corporate veil by making a finding that the 1st appellant had no assets to settle its liabilities to its creditors, when no evidence was placed before the court to support such a finding.* 8. *The learned trial magistrate erred in fact and in law in piercing the 1st appellant's corporate veil by making a finding that there was a demonstration of an intent to unjustly disenfranchise or defraud the respondent of the fruits of judgment, when no evidence was placed before the court that the respondent to support such a finding.* 9. The Appellants prayed for the following orders: 10. *This appeal be allowed.* 11. *The judgment and decree of the Hon Wendy K Micheni delivered on 7th August 2023 be set aside.* 12. *The suit against the appellants (defendants in the magistrates' court) be dismissed with costs.* 13. *The costs of this appeal be borne by the Respondent.* **Issues for determination** 1. The Court has carefully considered the Appeal, Record of Appeal, the written submissions as well as the oral highlights by Counsel for the parties. The Court frames the following issues for determination; 2. *Whether the Respondent proved that* *payment certificate No. 5 was issued by the authorized party under the contract and hence payable.* 3. *Whether the Respondent was entitled to Kshs. 16,858,454 in the absence of a valid payment certificate.* 4. *Whether the lifting of the 1st Appellant's corporate veil was justified and whether the 2nd to 5th Appellants were liable to pay Kshs. 16,858,454.* **Analysis** 1. The Appeal raises issues of both facts and law. The only way to determine it is by re-examining the evidence adduced before the Trial Court. This is in order to reach an independent finding. This is the role of the first appellate Court as discussed in the case of ***Selle & Another v Associated Motor Boat Co. Ltd & Others [1968] EA 123***, thus: ***“...this court is not bound necessarily to accept the findings of fact by the court below. An appeal to this court .. is by way of retrial and the principles upon which this court acts in such an appeal are well settled. Briefly put they are that this court must reconsider the evidence, evaluate it itself and draw its own conclusions though it should always bear in mind that it has neither seen nor heard the witnesses and should make due allowance in this respect...”*** 1. It is undisputed that the Respondent and the 2nd Appellant, pursuant to a letter of award dated 15th November, 2011, entered into an agreement. It was for the supply, installation, and commissioning of an air-conditioning plant and equipment for an office block at Makupa Causeway in Mombasa. Following the execution of the relevant contractual documents, two separate contracts were drawn: The Main Contract between the 2nd Appellant and the 1st Appellant, and the Sub-Contract between the Respondent and the 1st Appellant. Under the Sub-Contract, the 1st Appellant engaged the Respondent to undertake and perform the works relating to the supply, installation, and commissioning of the air-conditioning system. 2. It is also undeniable that the Respondent undertook to perform the subject works. **a)** ***Whether the Respondent proved that payment certificate No. 5 was issued by the authorized party under the contract and hence payable.*** 1. The main issue in contention revolves around the payment certificates and, particularly, payment certificate No. 5 presented by the Respondent. Indeed, to this Court, the entire suit before the Trial Court and this Appeal turns on the issue of the certificate. Was it issued? According to the Appellants, the payment certificate relied on by the Respondent does not indicate the person who prepared it. That no evidence was produced to show that it was prepared and approved by the relevant persons. Consequently, the payment certificate was not issued in accordance with the contract, and no reliance should be placed on it. 2. The Appellants argued that under Clause 23.4 of the contract, the issuance of a payment certificate was contingent upon the Respondent first obtaining and issuing a Certificate of Practical Completion for the works undertaken. The absence of such a certificate demonstrated that the Respondent had not fulfilled its contractual obligations and was therefore in breach of the agreement. This position was further reinforced by the fact that the payment certificate relied upon by the Respondent was neither signed nor approved by the relevant authorized persons. That the Respondent gave inconsistent accounts regarding its issuance. It alleged in its Amended Plaint that it had issued the certificate while later submitting that the project engineer had issued it. It would make no business sense for the certificate to be issued by the Respondent who was to execute the same work. A certificate is a document that verifies the work done, as certified by another party, not the doer of the work. It is a confirmation to the Employer that says, *“look I have done the work as promised. Look even your Quantity Surveyor or Architect or Project Manager as the case might be, has confirmed and approve the work done.”* It is therefore a crucial document in building contracts as it can originate the process of payments, disputes as to none payments, arbitration or lawsuits. It is used to account for works done that need to be paid for. 3. In response, the Respondent acknowledged that on the face of it, arguably, one can say that it cannot be said who drew the payment Certificate Number 5. However, the Respondent went on to state that, under the subject subcontract or the Letter of 21st May, 2012, the format for a Payment Certificate or the mode of confirmation and certification by the Project Engineer is not set out. All that the Letter of 21st May, 2012 requires is that the Confirmation and Certificate shall come from the Project Engineers. 4. This Court notes that the parties to the contract had set out the four corners within which they were to transact. Clause 23 of the contract sets out in details how the valuation or payment certificates were to be originated or processed. They were to be signed by the Quantity Surveyor or the Architect. On this aspect the Appellants throughout the trial denied the validity of the Certificate No. 5. It was therefore incumbent upon the Respondent to prove its validity. This is by placing evidence before the Court that it was validly executed or approved by the authorizing person. 5. The Court notes that in the testimony of DW1, contrary to the Respondent’s assertions that *“DW-1 Rajinder Singh Baryan confirmed that the Payment Certificate appearing at Pg. 81 of the Record of Appeal is indeed the one that was issued to him”* the same is incorrect, as this was not a confirmation made by DW1, who actually stated; *“So in this case, the Plaintiff would get the two contracts from the* *main contractor.* *(Witness shown the two certificates)* *I have said the two are not signed.* *I said l am unhappy with that as it encompass incomplete works.* *They were issued to the main contractor. The sub-contractor is expected to have them. We did not file any documents.-There are no signed certificates in our possession that we withheld. (witness shown page 29 prepared by.....).* *I do not know who prepared them.”* 1. A perusal of Certificate No. 5 does not show who issued or approved it. There is no evidence that it was approved or issued by the Quantity Surveyor or the Architect pursuant to clause 23.4 of the contract. 2. Having perused the Record of Appeal and the evidence before the Court, it is the Court’s considered view that it is common ground that, the issuance of a payment certificate was contingent upon the Respondent first obtaining and issuing a Certificate of Practical Completion for the works undertaken. It was also to be issued and signed in accordance with clause 23.4 of the contract. The absence of such a certificate demonstrated that the Respondent had not fulfilled its contractual obligations and was therefore in breach of the agreement. Further, the payment certificate relied upon by the Respondent was neither signed nor approved by the relevant authorized persons. That this is a position acknowledged by the Respondent as well. The 1st Appellant was entitled to challenge a certificate issued other than in the manner contemplated in the contract. The Court cannot rewrite the terms of a contract between the parties. In **National Bank of Kenya Ltd v Pipeplastic Samkolit (K) Ltd & another [2001] KECA 362 (KLR)** the Court of Appeal held as follows; *“A Court of law cannot re-write a contract between the parties. The parties are bound by the terms of their contract, unless coercion, fraud or undue influence are pleaded and proved. There was not the remotest suggestion of coercion, fraud or undue influence in regard to the terms of the charge.”* 1. **Section 107 (1) of the Evidence Act** provides that: ***Whoever desires any court to give judgment as to any legal right or liability dependant on the existence of facts which he asserts must prove that those facts exist.*** 1. In addition, the evidential burden of proof is captured in **Sections 109** and **112 of the Evidence Act** as follows: ***109. The burden of proof as to any particular fact lies on the person who wishes the court to believe in its existence, unless it is provided by any law that the proof of the fact shall lie on any particular person.*** ***112. In civil proceedings, when any fact is especially within the knowledge of any party to those proceedings, the burden of proving or disproving the fact is upon him.*** 1. Further, the case of ***Anne Wambui Ndiritu –vs- Joseph Kiprono Ropkoi & Another [2005] 1 EA 334***, the Court held as follows: ***“As a general proposition under Section 107 (1) of the Evidence Act, Cap 80, the legal burden of proof lies upon the party who invokes the aid of the law and substantially asserts the affirmative of the issue. There is however the evidential burden that is case upon any party the burden of proving any particular fact which he desires the court to believe in its existence which is captured in Sections 109 and 112 of the Act.”*** **b)** **Whether the Respondent was entitled to Kshs. 16,858,454 in the absence of a valid payment certificate.** 1. The claim for payments arising out of this contract could only arise out of works which had already been valued and certified as ready for payment. That is what the parties had agreed to. That is what is expected in this kind of contracts which have evolved over time and involve huge amounts of money. This is what would distinguish this kind of contracts from the *kawaida contract with your local fundi upgrading your esimba back at home in Funyula*. 2. In light of the above, the Court finds that the Respondent failed to prove its case on a balance of probabilities. **c) *Whether the lifting of the 1st Appellant's corporate veil was justified and whether the 2nd to 5th Appellants were liable to pay Kshs. 16,858,454.*** 1. It is trite that a Company is a judicial person. The law expressly permits the incorporation of a business to enable its shareholders and directors to escape personal liability, as held in ***Salomon v Salomon & Co (1897) AC.*** However, there are instances when the veil of incorporation may be lifted. In such instances, the law goes behind the corporate personality to attach responsibility to the individual shareholders or directors, thereby ignoring the separate personality of the company in favour of the economic reality prevailing in the circumstance. 2. A Court will only lift the corporate veil if there has been serious misconduct or if the Company, shareholders, or directors have acted reasonably egregiously. Courts understand the benefits of limited liability as expressed in the statute. 3. As held in ***Jocelan Consultants Ltd v County Developers Limited [2019] KEHC 1250 (KLR)***, the Court is not prohibited from lifting the corporate veil under **Order 22 Rule 35 of the Civil Procedure Rules** if grounds for piercing the corporate veil exist. 4. In this case, there were no proven grounds for lifting the corporate veil as the Trial court relied on *“the conduct of the directors by dint of the testimony of DW1…..”* 5. Nonetheless, the Court finds that the Appeal is merited and the decision of the Trial Court is hereby set aside. 6. As to costs the same lie at the discretion of this Court. Costs ordinarily follow the event. The Appellants are awarded the costs of this Appeal and the suit below. **Determination** 1. The Appellants appeal herein succeeds and Judgement is entered in favour of the Appellants as against the Respondent in the following terms; 2. *This appeal is HEREBY allowed.* 3. *The judgment and decree of the Hon Wendy K Micheni CM (as she then was) delivered on 7th August, 2023 is HEREBY quashed and set aside. It is instead replaced with a judgement and decree of this Honourable Court dismissing the Respondent’s case as against the Appellants (the Plaintiff’s case against the Defendants before the Trial Court) with costs.* 4. *The Costs of this Appeal are awarded to the Appellants.* 5. It is so ordered. **DATED, SIGNED AND DELIVERED AT MILIMANI THIS 09TH DAY OF JUNE, 2026.** **NJOROGE BENJAMIN K.** **JUDGE** **In the presence of:** Mr. Mwihuri the Appellants. Miss Gitau holding brief for Mr. Wandabwa for the Respondents. Mr. John Paul - Court Assistant.