Background and introduction
1. The Defendants in the counterclaim filed a Preliminary Objection dated 18th November 2024, seeking to strike out the suit against the 2nd and 3rd Defendants on grounds that they are directors and shareholders of the 1st Defendant, a limited liability company, and thus shielded by the principle of corporate personality. The Plaintiff opposed the objection, contending that it has distinct claims against the 2nd and 3rd Defendants based on credit facilities extended to them in their personal capacities though related to the 3rd Defendant’s facilities.
Analysis and Determination
2. I have carefully considered the preliminary objection, the opposition thereto and the oral submissions by Counsels. It is well-established that a preliminary objection must raise a pure point of law. In Mukisa Biscuit Manufacturing Co Ltd v West End Distributors Ltd [1969] EA 696, the Court of Appeal held that a preliminary objection “consists of a point of law which has been pleaded, or which arises by clear implication out of pleadings, and which if argued as a preliminary point may dispose of the suit.” Equally, a preliminary point “raises a pure point of law … on the assumption that all the facts pleaded by the other side are correct” and cannot be sustained “if any fact has to be ascertained”
3. In El-Busaidy v Commissioner of Lands & 2 Others [2002] 1 KLR 508, the Court held that a preliminary objection cannot contest pleaded facts and reinforced the test that a [defendant’s] preliminary objection cannot stand if the defendant refuses to accept the [plaintiff’s] pleaded facts as true. This would mean that the preliminary point is not based on a commonly accepted set of facts.
4. Applying the above tests to this matter, the Defendants’ objection turns on the contention that by suing the 2nd and 3rd Defendants personally, the Plaintiff has violated the principle established on corporate personality. At first blush, corporate personality is a legal concept well established in the case of Salomon v Salomon & Co Ltd [1897] AC 22. However, the Plaintiff’s response invokes specific factual allegations, namely, that credit facilities were extended to the directors individually. Determining whether these allegations are true or whether the directors made personal commitments necessarily involves factual inquiry. The objection thus cannot be resolved as a pure legal question without regard to facts. That conflict cannot be untangled without examining evidence. In short, the Defendants’ objection does not rest on an agreed fact pattern. Instead, it challenges the truth of the Plaintiff’s case. Under the established principles in Mukisa Biscuit such an objection is not maintainable at the preliminary stage.
5. That said, it is also trite law that while a company is a distinct legal entity, directors may be personally liable where they have independently undertaken obligations. The Plaintiff’s pleadings allege such personal commitments by the 2nd and 3rd Defendants. Thus, the claim against them is not prima facie defective but subject to evidentiary proof at trial.
Disposition
6. Accordingly, the preliminary objection is disallowed. The counterclaim will proceed for hearing on the merits, including the claims against the 2nd and 3rd Defendants in their personal capacity. The 2nd and 3rd Defendants shall pay the costs of this preliminary objection.
Orders accordingly.
DATED, SIGNED AND DELIVERED IN NAIROBI
THIS 13th DAY OF MAY 2025.
F. MUGAMBI
JUDGE
1. The Defendants in the counterclaim filed a Preliminary Objection dated 18th November 2024, seeking to strike out the suit against the 2nd and 3rd Defendants on grounds that they are directors and shareholders of the 1st Defendant, a limited liability company, and thus shielded by the principle of corporate personality. The Plaintiff opposed the objection, contending that it has distinct claims against the 2nd and 3rd Defendants based on credit facilities extended to them in their personal capacities though related to the 3rd Defendant’s facilities.
Analysis and Determination
2. I have carefully considered the preliminary objection, the opposition thereto and the oral submissions by Counsels. It is well-established that a preliminary objection must raise a pure point of law. In Mukisa Biscuit Manufacturing Co Ltd v West End Distributors Ltd [1969] EA 696, the Court of Appeal held that a preliminary objection “consists of a point of law which has been pleaded, or which arises by clear implication out of pleadings, and which if argued as a preliminary point may dispose of the suit.” Equally, a preliminary point “raises a pure point of law … on the assumption that all the facts pleaded by the other side are correct” and cannot be sustained “if any fact has to be ascertained”
3. In El-Busaidy v Commissioner of Lands & 2 Others [2002] 1 KLR 508, the Court held that a preliminary objection cannot contest pleaded facts and reinforced the test that a [defendant’s] preliminary objection cannot stand if the defendant refuses to accept the [plaintiff’s] pleaded facts as true. This would mean that the preliminary point is not based on a commonly accepted set of facts.
4. Applying the above tests to this matter, the Defendants’ objection turns on the contention that by suing the 2nd and 3rd Defendants personally, the Plaintiff has violated the principle established on corporate personality. At first blush, corporate personality is a legal concept well established in the case of Salomon v Salomon & Co Ltd [1897] AC 22. However, the Plaintiff’s response invokes specific factual allegations, namely, that credit facilities were extended to the directors individually. Determining whether these allegations are true or whether the directors made personal commitments necessarily involves factual inquiry. The objection thus cannot be resolved as a pure legal question without regard to facts. That conflict cannot be untangled without examining evidence. In short, the Defendants’ objection does not rest on an agreed fact pattern. Instead, it challenges the truth of the Plaintiff’s case. Under the established principles in Mukisa Biscuit such an objection is not maintainable at the preliminary stage.
5. That said, it is also trite law that while a company is a distinct legal entity, directors may be personally liable where they have independently undertaken obligations. The Plaintiff’s pleadings allege such personal commitments by the 2nd and 3rd Defendants. Thus, the claim against them is not prima facie defective but subject to evidentiary proof at trial.
Disposition
6. Accordingly, the preliminary objection is disallowed. The counterclaim will proceed for hearing on the merits, including the claims against the 2nd and 3rd Defendants in their personal capacity. The 2nd and 3rd Defendants shall pay the costs of this preliminary objection.
Orders accordingly.
DATED, SIGNED AND DELIVERED IN NAIROBI
THIS 13th DAY OF MAY 2025.
F. MUGAMBI
JUDGE