In the application dated 31.10.2022,the parties aggrieved; David Muriuki Mambo and Rose Mambo (''the Directors"), are directors of Shady Acres Limited seek to review and set aside the orders issued by this court on 25th March 2021 and 24th June 2022. I have considered the written submissions filed on behalf of the directors and the oral submissions by counsel for the Applicant and I take the following view of the matter.
In the consent of 25th March 2021, the parties recorded a consent, that is the Applicant and Respondent agreed to liquidate the decretal amount by a date certain. This was after the parties had recorded a consent judgment on 14th December 2020. The Directors contend that the consent was entered without jurisdiction as the matter before the court was an application seeking interim measures of protection under section 7 of the Arbitration Act pending arbitration. I reject this argument as the suit belongs to the parties and they have right to compromise it in the manner they wish. In William Karani and 47 Others v Wamalwa Kijana and 2 Others [1987] eKLR, Gachuhi JA., expressed the following review regarding settlement by the parties, "There is no limit or fore under which a consent can take so as to finalise the whole dispute. The doors of negotiations are very wide. One can bring in matters which were not in this pleading or leave out any matter or claim pleaded so long as the intention of the parties is to bring the whole dispute into finality."'
In any case, the consent constitutes a contract which can only be set aside on valid grounds of fraud, misrepresentation and the like which have not been established. Further, even if I set aside the order of 25th March 2021, the consent judgment would still remain in force.
As regards the order of 24th June 2022, the Directors complain that the court pierced the veil of incorporation by ordering judgment against the directors contrary to the principle in Salomon v Salomon [1897] AC 22 which posits that a company is a corporate person separate from its directors and shareholders. The context of the application must be understood. In the orders made by the court, it directed that the, “directors of Shady Acres Limited; David Muriuki Mambo and Rose Mambo are to be summoned to court for examination on the means of the company to satisfy the debt and in that regard they shall furnish the Court, the annual reports, books of accounts and other document as may be requested by the Applicant.” And it is only if they failed to attend court and provide the books of account that, “the applicant may proceed with execution against the said directors personally.”
I hold that examination of directors is a normal incident of the execution process and is provided for under Order 22 rule 35 of the Civil Procedure Rules. It is at the stage of examination that the court may proceed to pierce the corporate veil if there is sufficient evidence. In this case, the examination of directors has not taken place. The directors will have ample opportunity to present themselves to court to show cause why the decree should not be executed against them and the court will make a decision whether they are liable for the debt.
I therefore dismiss the application dated 22nd May 2023 with costs to the Applicant in the matter. The examination of the directors of the Judgment Debtor shall take place on 28.06.2023. Summons to issue to the Directors accordingly.
DATED and DELIVERED at NAIROBI this 24th day of MAY 2023
D. S. MAJANJA
JUDGE