https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/12277

 **REPUBLIC OF KENYA** **IN THE HIGH COURT OF KENYA AT MACHAKOS** **HCCC NO. 9 OF 2019** **JULIAH WAMBUI NGARUYIA** (Suing as the administrator of the Estate of the deceased **SAMUEL MBUGUA MUNGAI) ......................................... PLAINTIFF/DECREE HOLDER** **VERSUS** **KASSAM HAULIERS LIMITED .............................. DEFENDANT/JUDGMENT DEBTOR** **RULING** 1. What is before this court is a Notice of Motion dated 21st April 2026, by which the Plaintiff/Decree Holder seeks orders: 1. ***That the directors of the Defendant/Judgment Debtor attend court and be examined as to whether the judgement debtor has any other property or means of satisfying the decree herein and to produce the judgement debtor’s books of account and other documentary evidence showing the same before court.*** 2. ***That in default of compliance with the court orders above, this court does order the lifting of the corporate veil of the defendant/judgement debtor*** ***herein, and thereafter hold the directors to personally settle the entire decretal amount due to the decree holder.*** 3. ***That costs be provided***. 2. The Notice of Motion was responded to, not on its merits, but vide a Notice of Preliminary Objection dated 8th June 2026 filed on behalf of the Judgment Debtor by the firm of Elkana Mogaka & Associates Advocates, raising two grounds, namely; 1. ***That the Application offends Order 22 Rule 35 of the Civil Procedure Rules; and*** 2. ***That there is a need for examination of the directors/officials prior to the lifting of the corporate veil.*** 3. Both the Preliminary Objection and the Notice of Motion were canvassed orally before me on 9th June 2026, learned counsel Mr Makumi appearing for the Decree Holder and Mr Wanjiria holding brief for Mr Mogaka for the Judgment Debtor. I reserved my ruling, which I now render. 4. The grounds advanced by the Decree Holder in the Notice of Motion and the supporting affidavit are, in summary, as follows. Upon extraction of the decree, the Decree Holder proceeded to execute, and the first warrants of attachment issued were in the sum of KShs. 42,767,257. Following proclamation, the Judgment Debtor moved to court in separate proceedings and was granted conditional stay of execution, the conditions of which it is alleged were not complied with. Motor vehicles belonging to the Judgment Debtor, some fifty (50) in number, were attached, but it is the Decree Holder's case that the Judgment Debtor caused the attached vehicles to be handed over to and transferred to a third-party transporter, frustrating execution. 5. The Judgement Debtor’s counsel, further stated that of the fifty (50) vehicles attached, the Judgment nine (9) were sold by the auctioneers pursuant to duly advertised sales, notifications of which are on record, although no certificates of sale were filed to confirm the sums realised and applied towards the decretal sum. The remaining vehicles were, on the Judgment Debtor's account, transferred to the third party, said to be a subsidiary of the Judgment Debtor, before the judgment and in the ordinary course of the Judgment Debtor's business of selling vehicles, and not in an attempt to defeat execution. 6. By the time execution resumed in 2024, the decretal sum, with accruing interest, had risen to KShs. 47,156,290 (as at 25th July 2024). **Analysis and determination** 7. I have considered the pleadings, the rival submissions of counsel and the law. 8. I first address the P.O. The Judgment Debtor's first ground, that the Application offends Order 22 Rule 35 of the Civil Procedure Rules which states that; *“****Where a decree is for the payment of money, the decree- holder may apply to the court for an order that—*** ***(a)the judgment-debtor;*** ***(b)in the case of a corporation, any officer thereof; or*** ***(c)any other person,*** ***be orally examined as to whether any or what debts are owing to the judgment-debtor, and whether the judgment-debtor has any and what property or means of satisfying the decree, and the court may make an order for the attendance and examination of such judgment-debtor or officer, or other person, and for the production of any books or documents.*”** While the point raised is capable of determination as a pure point of law, since it turns on the proper construction of the rule and whether the Application as drawn falls within it, without the court having to resolve any disputed facts in accords with the celebrated case of ***Mukisa Biscuit Manufacturing Co. Ltd v West End Distributors Ltd [1969] EA 696***, where it was held that a preliminary objection consists of a point of law argued on the assumption that the facts pleaded by the other side are correct, and that it must not require the court to descend into the facts to resolve it. In view of the foregoing, the first limb of the Notice of Motion, seeking that the directors of the Judgment Debtor attend court and produce the company's books of account for examination as to the affairs and means of the company, falls within the four corners of the rule. The prayer seeking that in default of a satisfactory account the corporate veil be lifted and the directors held personally liable, rests on the court's inherent jurisdiction to do justice between the parties, see ***Riccatti Business College of East Africa Limited v Kyanzavi Farmers Company Limited [2016] eKLR,*** where it was stated that, “***The Court may lift the corporate veil in exercising its inherent jurisdiction to do justice and fairness for the ends of justice. This jurisdiction may be exercised only in special circumstances where the Court finds improper conduct, fraud or when a company is a sham, acting as an agent of the shareholders or evading tax revenues.”*** I address this matter further in the context of the merits below. I therefore find that the Notice of Motion, properly construed, does not offend Order 22 Rule 35. Its first limb is a proper invocation of the Rule, and its second limb does not purport to rely on the Rule at all. 9. The second ground of the P.O. stating that there is a need for examination of the directors prior to lifting the veil, is not a pure point of law. It presupposes, and in substance restates, the very relief sought in the Notice of Motion itself, namely, that examination should precede any lifting of the veil, going to the sequencing and merits of the orders sought, which is a matter for determination on the facts and evidence on record, including the circumstances surrounding the transfer of the attached vehicles and the conduct of the Judgment Debtor's directors. 10. A preliminary objection that touches on the merits cannot, on that account, dispose of the substantive Application. In the result, I find that the Preliminary Objection dated 8th June 2026 does not raise a pure point of law capable of disposing of the Application, and the same is accordingly overruled. Costs of the Preliminary Objection shall abide the outcome of the Application. 11. Turning to the substance of the Application, the starting point remains the doctrine of separate legal personality established in ***Salomon v Salomon & Co Ltd [1897] AC 22***, by which a company, once incorporated, exists as a person in law distinct from its shareholders and directors. That principle has been restated repeatedly by our own courts. In ***Victor Mabachi & another v Nurturn Bates Ltd, Civil Appeal No. 247 of 2005 [2013] eKLR***, the Court of Appeal held that, **“A company as a body corporate, is persona juridica, with a separate independent identity in law, distinct from its shareholders, directors and agents unless there are factors warranting a lifting of the veil.”** 11. The rationale for the doctrine, and the narrow circumstances in which it yields, was restated by the Supreme Court in ***Gatuma v Kenya Breweries Ltd & 3 others (Petition E023 of 2023) [2024] KESC 52 (KLR)***, where the court held that, **“*The corporate veil can only be pierced or lifted in exceptional circumstances, such as when the court is construing a statute, contract or other document which requires the veil to be lifted; when it can be shown that the company is being used as a mere façade or sham to perpetrate fraud, avoid legal obligations, or achieve some other improper purpose and, when it can be established that the company is an authorised agent of its controllers or its members, corporate or human.”*** 12. That statement of principle has in fact been applied to execution proceedings of the kind now before me. In ***Riccatti Business College of East Africa Limited v Kyanzavi Farmers Company Limited [2016] eKLR***, the Court of Appeal held that, ***“The Court may lift the corporate veil in exercising its inherent jurisdiction to do justice and fairness for the ends of justice. This jurisdiction may be exercised only in special circumstances where the Court finds improper conduct, fraud or when a company is a sham, acting as an agent of the shareholders or evading tax revenues.”*** That decision has been applied consistently by courts, most recently in ***Silver Construction Limited v Shady Acres Limited (Miscellaneous Application 1168 of 2020) [2025] KEHC 85 (KLR)***, where the veil was lifted only after the court was satisfied, on the material before it, that the circumstances demonstrated substantial grounds of illegality, breach and impropriety. 13. Equally settled, is the principle that mere insolvency or inability to pay a decree is not, without more, sufficient ground to lift the veil. As guided by the decision in ***Joel Ndemo Ong'au & another v Loyce Mukunya [2015] eKLR***, where it was stated that, **“The veil of incorporation is not to be lifted merely because the company has no assets or it is unable to pay its debts and is thus insolvent. In such a situation, the law provides for remedies other than the director of the company being saddled with the debts of the company.”** 14. As to procedure, Order 22 Rulle 35 sets that as first an order for the examination of a judgment debtor's directors and production of the company's records, reserving the question of lifting the corporate veil to be determined afterward, in light of what that examination discloses. This sequencing was followed in ***Dar Iman Limited v Clasico Builders (K) Limited (Commercial Miscellaneous Application E113 of 2021) [2024] KEHC 8562 (KLR)***, where the prayer to hold the judgment debtor's directors personally liable was reserved to be considered only after cross-examination of the directors and production of the company's books of account, audited financial statements, annual returns, bank statements and cheque books. This approach ensures that in the exceptional and consequential remedy of lifting the veil, is made on a proper evidential foundation as to the company's actual financial position and the conduct of its directors. 15. Applying the foregoing principles to the facts of this case, I am satisfied that the record, as it stands, does not permit a final determination on whether the corporate veil ought to be lifted. There is a live and unresolved factual dispute as to when and why the attached vehicles were transferred to the third party transporter, whether that transfer was a bona fide transaction predating the judgment as the Judgment Debtor contends, or a device to frustrate execution as the Decree Holder contends. There is similarly no clarity on the record as to the proceeds realised from the nine vehicles that were sold, and the extent to which the decretal sum has been reduced. These are not matters that require examination of the directors and production of the Judgment Debtor's financial and statutory records, as contemplated in ***Dar Iman Limited*** (supra). 16. Mindful that lifting the corporate veil is an exceptional remedy not to be granted on the strength of insolvency or non payment alone, as held in ***Joel Ndemo Ong'au*** (supra), and that the special circumstances warranting its exercise contemplated in ***Riccatti Business College*** (supra) have not yet been established on the evidence before me, I decline at this stage to make a final finding on the second limb of the Notice of Motion. I instead order that the directors of the Judgment Debtor be summoned for examination in the first instance, and I reserve the question of lifting the corporate veil to be determined thereafter. 17. In the result, I make the following orders: a) **The Preliminary Objection dated 8th June 2026 is overruled.** **b) The directors of the Defendant/Judgment Debtor, Kassam Hauliers Limited, be and are hereby summoned to attend court in person on a date to be fixed herein, for examination as to the affairs, assets and means of the Judgment Debtor, pursuant to Order 22 Rule 35 of the Civil Procedure Rules.** **d) The question whether the corporate veil of the Judgment Debtor should be lifted, and the directors held personally liable to satisfy the decretal sum, is hereby reserved and shall be determined after the examination of directors in order (b) above, upon further submissions by both parties. In any event it was a prayer in the alternative.** **e) Costs of the Notice of Motion shall be in the cause.** Orders accordingly, **Ruling Dated, Signed and delivered virtually this 30th day of July 2026.** **E.N.MAINA** **JUDGE** **In the presence of:** **Mr. Wanjihia for Mogaka for Defendant** **No appearance for the Plaintiff/Decree Holder** **Miriam – Court Assistant/Interpreter**