Introduction
1. The Application before the Court is the Notice of Motion dated 5th June, 2024. The Applicant seeks, inter alia, summons for examination of the Directors of the Judgment Debtor under Order 22 rule 35 of the Civil Procedure Rules, production of books of account, and in default, orders lifting the corporate veil and holding the Directors personally liable for the decretal sum arising from Small Claims Court Case No. E154 of 2021.
2. The Application is supported by the affidavit of Hannington Kirombo sworn on 5th June 2024. The Respondents oppose the Application through the replying affidavit of Sanjay Shah sworn on 25th February 2025.
3. I have considered the Application, the affidavits on record, the annexures thereto including the decree of the Small Claims Court dated 19th January 2022, the ruling of the Small Claims Court dated 22nd September 2023 dismissing a similar application, and the applicable law.
Background
4. It is not disputed that judgment was entered in favour of the Applicant in SCCCOMM Case No. E154 of 2021 and a decree issued on 19th January 2022 for the sum now stated to stand at KES 1,062,158.00 inclusive of interest and costs.
5. Warrants of attachment and sale were issued and partial execution undertaken. The auctioneer’s letter dated 4th July 2022 confirms recovery of KES 154,682/= net of charges. The balance remains unsatisfied.
6. The Applicant contends that the Judgment Debtor has no attachable assets and that its Directors have failed to produce books of account despite previous examination. It therefore seeks renewed examination and eventual lifting of the corporate veil.
7. The Respondents contend that a similar application was previously heard and determined by the Small Claims Court and dismissed on 22nd September 2023. They assert that the company’s assets are encumbered, that they acted in good faith, and that no fraud or improper conduct has been demonstrated to justify piercing the corporate veil.
Analysis and Determination:
8. The applicable law is found in the decision of the High Court in Masefield Trading (K) Ltd v Rushmore Company Limited & Another Civil Suit No. 1794 of 2000; [2008] eKLR, which sets out the jurisdiction of this court pursuant to Order 22 Rule 35 in the following terms:
“I, therefore, take the view that, as long as the Applicant has shown that the Respondent is in a position to provide information in the nature of discovery ...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, the court should summon the person to attend and be examined in relation to the purpose stated in the rule.”
8. Guided by the above, this court has on several occasions stated that the Court applies a two-stage test under Order 22 rule 35:
a. First stage: Whether the Applicant has satisfied the threshold for examination and production of books of account for purposes of discovery in execution.
b. Second stage: Whether, at this stage, grounds exist to lift the corporate veil and impose personal liability upon the Directors.
9. Order 22 rule 35 empowers the Court, where a decree remains unsatisfied, to summon officers of a corporation for oral examination and for production of books and documents relating to the judgment debtor’s means.
10. The decree herein remains unsatisfied. Execution has yielded only partial recovery. The CR12 annexed to the supporting affidavit confirms the Directors and shareholding structure.
11. The present Application is anchored squarely on Order 22 rule 35 and seeks structured discovery in execution. The existence of prior proceedings does not bar examination for purposes of execution where the decree remains unsatisfied. The respondent submitted that some documentation was provided in the past. Counsel could not say, when that was. I do not think this is a bar to providing updated and fresh information concerning the assets of the respondents.
12. I am satisfied that the decretal sum remains due, and that the Directors, as officers of the company, are persons likely to possess relevant information regarding the company’s assets and means. The Applicant has therefore satisfied the first stage of the test.
13. The second stage, the respondent submitted that the small claims court had already dealt with this matter in full and that the same is res judicata. However, I note that the small claims court has no jurisdiction to lift the corporate veil in any event. That determination by that court therefore cannot be res judicata.
14. As to whether the Court should, at this juncture, pierce the corporate veil and impose personal liability, the principle in Salomon v Salomon remains foundational. A company is a separate legal entity. Lifting the veil requires proof of fraud, improper conduct, or use of the corporate form as a mere façade.
15. The material presently before the Court shows non-payment of a debt and alleged failure to produce documents. That, without more, does not amount to proof of fraud or improper purpose. Lifting of the veil is a consequential order that may only arise after proper examination and discovery, not before. It is therefore premature at this stage to lift the corporate veil.
Disposition
20. The Application is allowed in part and orders issue as follows:
a. The Directors of the Judgment Debtor, namely Kavit Hashmukh Shah, Sanjay Shah and Hasmukh Raichand M. Shah, shall attend Court on a date to be fixed by the Deputy Registrar for examination under oath pursuant to Order 22 rule 35.
b. The Judgment Debtor shall, within twenty-one (21) days from the date hereof, produce its books of account, audited financial statements, bank statements for the last three years, and any documents relating to its assets and encumbrances.
c. The prayer seeking lifting of the corporate veil and imposition of personal liability is declined at this stage, without prejudice to the Applicant’s liberty to renew the same upon completion of examination.
d. Costs of this Application shall abide the outcome of the execution proceedings.
1. The Application before the Court is the Notice of Motion dated 5th June, 2024. The Applicant seeks, inter alia, summons for examination of the Directors of the Judgment Debtor under Order 22 rule 35 of the Civil Procedure Rules, production of books of account, and in default, orders lifting the corporate veil and holding the Directors personally liable for the decretal sum arising from Small Claims Court Case No. E154 of 2021.
2. The Application is supported by the affidavit of Hannington Kirombo sworn on 5th June 2024. The Respondents oppose the Application through the replying affidavit of Sanjay Shah sworn on 25th February 2025.
3. I have considered the Application, the affidavits on record, the annexures thereto including the decree of the Small Claims Court dated 19th January 2022, the ruling of the Small Claims Court dated 22nd September 2023 dismissing a similar application, and the applicable law.
Background
4. It is not disputed that judgment was entered in favour of the Applicant in SCCCOMM Case No. E154 of 2021 and a decree issued on 19th January 2022 for the sum now stated to stand at KES 1,062,158.00 inclusive of interest and costs.
5. Warrants of attachment and sale were issued and partial execution undertaken. The auctioneer’s letter dated 4th July 2022 confirms recovery of KES 154,682/= net of charges. The balance remains unsatisfied.
6. The Applicant contends that the Judgment Debtor has no attachable assets and that its Directors have failed to produce books of account despite previous examination. It therefore seeks renewed examination and eventual lifting of the corporate veil.
7. The Respondents contend that a similar application was previously heard and determined by the Small Claims Court and dismissed on 22nd September 2023. They assert that the company’s assets are encumbered, that they acted in good faith, and that no fraud or improper conduct has been demonstrated to justify piercing the corporate veil.
Analysis and Determination:
8. The applicable law is found in the decision of the High Court in Masefield Trading (K) Ltd v Rushmore Company Limited & Another Civil Suit No. 1794 of 2000; [2008] eKLR, which sets out the jurisdiction of this court pursuant to Order 22 Rule 35 in the following terms:
“I, therefore, take the view that, as long as the Applicant has shown that the Respondent is in a position to provide information in the nature of discovery ...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, the court should summon the person to attend and be examined in relation to the purpose stated in the rule.”
8. Guided by the above, this court has on several occasions stated that the Court applies a two-stage test under Order 22 rule 35:
a. First stage: Whether the Applicant has satisfied the threshold for examination and production of books of account for purposes of discovery in execution.
b. Second stage: Whether, at this stage, grounds exist to lift the corporate veil and impose personal liability upon the Directors.
9. Order 22 rule 35 empowers the Court, where a decree remains unsatisfied, to summon officers of a corporation for oral examination and for production of books and documents relating to the judgment debtor’s means.
10. The decree herein remains unsatisfied. Execution has yielded only partial recovery. The CR12 annexed to the supporting affidavit confirms the Directors and shareholding structure.
11. The present Application is anchored squarely on Order 22 rule 35 and seeks structured discovery in execution. The existence of prior proceedings does not bar examination for purposes of execution where the decree remains unsatisfied. The respondent submitted that some documentation was provided in the past. Counsel could not say, when that was. I do not think this is a bar to providing updated and fresh information concerning the assets of the respondents.
12. I am satisfied that the decretal sum remains due, and that the Directors, as officers of the company, are persons likely to possess relevant information regarding the company’s assets and means. The Applicant has therefore satisfied the first stage of the test.
13. The second stage, the respondent submitted that the small claims court had already dealt with this matter in full and that the same is res judicata. However, I note that the small claims court has no jurisdiction to lift the corporate veil in any event. That determination by that court therefore cannot be res judicata.
14. As to whether the Court should, at this juncture, pierce the corporate veil and impose personal liability, the principle in Salomon v Salomon remains foundational. A company is a separate legal entity. Lifting the veil requires proof of fraud, improper conduct, or use of the corporate form as a mere façade.
15. The material presently before the Court shows non-payment of a debt and alleged failure to produce documents. That, without more, does not amount to proof of fraud or improper purpose. Lifting of the veil is a consequential order that may only arise after proper examination and discovery, not before. It is therefore premature at this stage to lift the corporate veil.
Disposition
20. The Application is allowed in part and orders issue as follows:
a. The Directors of the Judgment Debtor, namely Kavit Hashmukh Shah, Sanjay Shah and Hasmukh Raichand M. Shah, shall attend Court on a date to be fixed by the Deputy Registrar for examination under oath pursuant to Order 22 rule 35.
b. The Judgment Debtor shall, within twenty-one (21) days from the date hereof, produce its books of account, audited financial statements, bank statements for the last three years, and any documents relating to its assets and encumbrances.
c. The prayer seeking lifting of the corporate veil and imposition of personal liability is declined at this stage, without prejudice to the Applicant’s liberty to renew the same upon completion of examination.
d. Costs of this Application shall abide the outcome of the execution proceedings.