[2013] KEHC 1747 (KLR)
The court found that the directors of the judgment debtor company, having failed to provide proper accounts and with the company not appearing to be in operation, should be examined on oath regarding the company’s assets. The directors had acknowledged the debt and attempted to settle it, but the cheque issued was...
Source-derived case information.
- Citation
- [2013] KEHC 1747 (KLR)
- Parties
- Applicant: Petrol Oil (K) Ltd; Respondent: Hosborne Arunga; Respondent: Jacqueline Arunga; Defendant: Millenium Freight Logistics Limited
- Court
- High Court
- Court Station
- High Court at Mombasa
- Jurisdiction
- Kenya
- Case Number
- Miscellaneous Civil Application 35 of 2013
- Procedural Posture
- Miscellaneous Application / Ruling on Notice of Motion for Examination of Directors and Lifting of Corporate Veil
- Outcome
- application allowed
- Judges
- GO Shikwe
- Legal Topics
- Lifting Corporate Veil, Enforcement of Judgment, Director Liability, Debt Recovery
- Source Language
- en
Source-derived case record
Summary, issues, holding and outcome
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Parties
Petrol Oil (K) Ltd
Applicant
Hosborne Arunga
Respondent
Jacqueline Arunga
Respondent
Millenium Freight Logistics Limited
Defendant
Procedural Posture
Miscellaneous Application / Ruling on Notice of Motion for Examination of Directors and Lifting of Corporate Veil
Legal Issues
- 1 Whether the directors of the judgment debtor company can be examined on oath regarding the company’s assets and required to produce books of account.
- 2 Whether the corporate veil should be lifted to hold the directors personally liable for the company’s debt.
Ratio Decidendi
The court found that the directors of the judgment debtor company, having failed to provide proper accounts and with the company not appearing to be in operation, should be examined on oath regarding the company’s assets. The directors had acknowledged the debt and attempted to settle it, but the cheque issued was dishonoured. There being no evidence to the contrary and in the interests of justice, the court lifted the veil of incorporation and held the directors personally liable for the company’s debt to the applicant.
Court Disposition
application allowed
Orders
- The veil of incorporation of Millenium Freight Logistics Limited is lifted.
- Hosborne Arunga and Jacqueline Arunga are held personally liable for the company’s debt to the applicant.
Full Case Text
Judgment text and source record
34 paragraphs
REPUBLIC OF KENYA
IN THE HIGH COURT OF KENYA
AT MOMBASA
MISC. CIVIL APPLICATION NO. 35 OF 2013
PETROL OIL (K) LTD ….........................…..APPLICANT/DECREE HOLDER
VERSUS
HOSBORNE ARUNGA ………..........…...…1ST DEFENDANT/RESPONDENT
JACQUELINE ARUNGA….........................2ND DEFENDANT/RESPONDENT
MILLENIUM FREIGHT LOGISTICS
LIMITED …............................... 3RD DEFENDANT/JUDGMENT DEBTOR
RULING
This Notice of Motion application is brought pursuant to order 22 rule 35, order 51 rule 1 of the Civil Procedure Rules section 323 of the Companies Act section 1A 2B and 3A of the Civil Procedure Rules.
It seeks orders for the examination on oath of the Directors of the Respondent Hesborne Arunga and Jacqueline Arunga as to 3rd Defendants assets status and whereabouts and to produce its books of accounts and other documentary evidence.
That the Directors upon failing to provide proper accounts in respect of the Judgment Debtors assets and books of account to lift the veil of incorporation and hold them personally liable to the claim.
The grounds are that Judgment was entered for the applicant against the 3rd Respondent on 22nd August, 2011.
That the said Respondent appears not to be in operation whereas it is the said Hosborne Arunga and Jacqueline Arunga who are the Directors and the 3rd Respondents guarantor prior to the accumulation of the cause of action.
The application is supported by the affidavit of one Daniel Ndungu an accounting officer of Petrol Oil (K) Ltd, the plaintiff in this suit.
This application dated 20th March, 2013 was served on the 1st and 2nd Respondents and there is an affidavit of service to that effect.
A perusal of the affidavit of Daniel Ndungu shows that the Applicant supplied goods on account to the 3rd Respondent as exhibited by annextures marked “MAA 1A” and “1B”.
Subsequently a debt of Ksh. 2,716,600/= did accrue and a letter of demand was issued “MAA 2”.
The debt was acknowledged vide letters “MAA 3A” “B” “C”and“D” by the 1st and 2nd Respondents.
The Respondents attempted to settle the debt by issuing a cheque for Ksh. 1,800,000/= which cheque was returned unpaid “MAA 4”.
Subsequently a suit was instituted and Judgment was entered and decree issued.
A search at the Companies registry annexure “MAA 7” shows the Directors of the 3rd Respondent as the 1st and 2nd Respondents.
There being no evidence to the contrary I am satisfied that this application has merit. Having failed to provide proper accounts in respect of the Judgment/debtors assets I accordingly lift the veil of Incorporation and hold the Directors personally liable to the claim.
Costs to the applicants.
Ruling dated and delivered this 28th day of October, 2013 .
…................
M. MUYA
JUDGE
28TH OCTOBER, 2013
In the presence of:-
Learned Counsel for the applicants Mr. Ojode.
Court clerk Musundi