1. This is a Ruling in respect of the 2nd and 3rd Defendants Notice of Motion dated 13th January 2025.
Background Facts
2. The Plaintiff filed the Plaint dated 28th September 2020 seeking judgment against the 1st Defendant as well as the two directors who are the 2nd and 3rd Defendants respectively. The suit against the Defendants arises out of a claim for breach of Contract and the outstanding debt of Kshs. 60,287,235/= among other prayers as sought in the Plaint.
3. In opposition, the 2nd and 3rd Defendants filed the Notice of Motion dated 13th January 2025 seeking the following orders;
a) The names of the 2nd and 3rd Defendants PATRICK N. MVUNGU and JOYCE WANGUI WACHIRA be struck off from the suit; and,
b) Costs of this application be in the cause.
4. The Application was supported by the grounds of the face of it and the Affidavit of Patrick N. Mvungu . He stated that the dispute herein concerns an alleged contractual claim between the Plaintiff/Respondent and the 1st Defendant. At all material times, the 2nd and 3rd Defendants acted solely in their official capacities as Directors of the 1st Defendant, Paddy Distributors Ltd, and not in their personal capacities. Accordingly, the cause of action properly lies as between the Plaintiff/Respondent and the 1st Defendant only. The inclusion of the 2nd and 3rd Defendants, therefore, amounts to a misjoinder of parties, rendering the Plaintiff’s claim legally untenable, an abuse of the Court process, and liable to be struck out with costs.
5. In opposition to the Application, the Respondent filed the Replying Affidavit sworn on 14th March 2025. It was contended that the argument that the 2nd and 3rd Defendants/Applicants are improperly joined to this suit is unfounded and misconceived. The Plaintiff’s documents, particularly at pages 35, 38, and 39 of the trial bundles, are correspondence executed by the 2nd Defendant, demonstrating their direct involvement in the transactions in issue.
6. Further, the Applicants issued over 23 cheques amounting to Kshs. 60,287,235/=, all of which remain unpaid, despite being issued with full knowledge that the 1st Defendant lacked the capacity to settle the Plaintiff’s dues. Under Section 143(1)(c) of the Companies Act, directors are obligated to act in good faith, especially in their dealings with suppliers and other stakeholders. In light of this duty, the 2nd and 3rd Defendants, as directors of the 1st Defendant, owed the Plaintiff—being a supplier—a responsibility to act honestly and transparently, which duty they breached by issuing cheques they knew would not be honoured.
7. In the circumstances, and given the allegation which remain unproven of the repeated misrepresentations made to the Plaintiff through the issuance of the dishonoured cheques, it is necessary that the 2nd and 3rd Defendants remain parties to these proceedings. It is settled law that where the character of a company or the conduct of those controlling it is in issue; the Court may look beyond the corporate veil to ascertain the individuals directing and controlling the company’s actions. The acts leading to the alleged breach of contract were allegedly undertaken by the 2nd and 3rd Defendants, and their presence is essential for a full and effective determination of the dispute.
8. The 2nd and 3rd Defendants will suffer no prejudice by remaining in the suit, as they will be afforded an opportunity to defend the claims against them. Notably, the suit against them was instituted and served five years ago, and the present application has only been brought at a late stage after the matter had already been certified ready for hearing.
Issues for determination
9. After a careful consideration of the Application, the Response and the written submissions by the parties the Court drafts only one issue for determination;
a) Whether the 2nd and 3rd Defendants ought to be struck off from the suit.
Analysis
10. The Applicant’s case is that the 2nd and 3rd Defendants are merely directors of the 1st Defendant, a company duly incorporated under the Companies Act, That it exists as a separate and distinct legal entity capable of suing and being sued in its own name. Directors acting on behalf of a company do not incur personal liability for corporate obligations. The dispute before the Court concerns an alleged debt of Kshs. 60,287,235/= arising from diesel fuel supplied to the 1st Defendant. The cheques issued in payment were drawn by the company itself. Accordingly, the 2nd and 3rd Defendants have been improperly joined to these proceedings, and their inclusion amounts to a misjoinder of parties; their names should therefore be struck out from the suit.
11. On the other hand, it was the Respondent’s contention that the 2nd and 3rd Defendants are proper parties before the Court for purposes of ascertaining the Plaintiff’s Claim. That, for justice to be done to the parties, the 2nd and 3rd Defendant must remain parties to this suit, as they are the actual propagators of the cause of action, being the signatories to the documents and dishonoured cheques herein.
12. The Applicants brought their Application under Order 1 Rule 9, which provides;
No suit shall be defeated by reason of the misjoinder or non-joinder of parties, and the court may in every suit deal with the matter in controversy so far as regards the rights and interests of the parties actually before it.
13. Order 1 Rule 10 (2) of the Civil Procedure Rules grants this Court that power as it states that-
"The court may at any stage of the proceedings, either upon or without the application of either party, and on such terms as may appear to the court to be just, order that the name of any party improperly joined, whether as plaintiff or defendant, be struck out, and that the name of any person who ought to have been joined, whether as plaintiff or defendant, or whose presence before the court may be necessary in order to enable the court effectually and completely to adjudicate upon and settle all questions involved in the suit, be added."
14. It is imperative to note that the discretion conferred by Order 1 Rule 10(2) to remove a party from proceedings must be applied cautiously. This should only be in instances where it is evident that the party was wrongly joined and no conceivable remedy can be pursued against them. That stringent test has not been satisfied in the present case. It is alleged at this point that the cheques issued in settlement the subject matter of this suit were issued by the 2nd and 3rd Defendants. This is a matter that ought to proceed for a trial so that parties can prosecute their rival arguments and bring forth evidence to persuade the Court. The Court will be in a better position to make a final determination of the dispute, upon hearing the parties and their witnesses.
15. Having considered the issues raised in the Plaint, it is the Court’s considered view that there are arguable issues, including allegations of fraud, misconduct, and potential abuse of the corporate veil, which warrant determination after a full trial where the evidence may be properly interrogated through cross-examination.
16. The Applicants based their argument on the principle in Salomon v Salomon & Co. Ltd [1897] AC 22, which established that a company is a separate and distinct legal entity from its shareholders and directors. While it is true that a company is a separate legal entity, this principle is not absolute. The Court of Appeal in H. Ajay Shah & Another v Deposit Protection Fund Board & Another [2016] eKLR , held:
“Directors and shareholders can be held personally liable if the corporate entity is used as a vehicle for fraud.”
17. In light of the above, the Court finds that striking out the 2nd and 3rd Defendants at this juncture would prematurely deny the Plaintiff the opportunity to fully present and pursue its claim.
18. As to costs, the same ordinarily follow the event unless the Court holds otherwise. The Court is not persuaded to deny the Plaintiff/Respondent the costs of this application.
Determination
19. The 2nd and 3rd Defendants’ application by way of a Notice of Motion dated 13th January 2025 is HEREBY dismissed for lack of merits.
20. The costs thereof are awarded to the Plaintiff/Respondent.
21. It is so ordered.
DATED, SIGNED AND DELIVERED AT MILIMANI THIS 26TH DAY OF FEBRUARY, 2026.
NJOROGE BENJAMIN K.
JUDGE
In the presence of:
N/A for the Plaintiff/Respondent.
N/A for the 1st Defendant/Respondent.
Mr. Muli for the 2nd & 3rd Defendants/Applicants.
Peter Wabwire - Court Assistant.
Background Facts
2. The Plaintiff filed the Plaint dated 28th September 2020 seeking judgment against the 1st Defendant as well as the two directors who are the 2nd and 3rd Defendants respectively. The suit against the Defendants arises out of a claim for breach of Contract and the outstanding debt of Kshs. 60,287,235/= among other prayers as sought in the Plaint.
3. In opposition, the 2nd and 3rd Defendants filed the Notice of Motion dated 13th January 2025 seeking the following orders;
a) The names of the 2nd and 3rd Defendants PATRICK N. MVUNGU and JOYCE WANGUI WACHIRA be struck off from the suit; and,
b) Costs of this application be in the cause.
4. The Application was supported by the grounds of the face of it and the Affidavit of Patrick N. Mvungu . He stated that the dispute herein concerns an alleged contractual claim between the Plaintiff/Respondent and the 1st Defendant. At all material times, the 2nd and 3rd Defendants acted solely in their official capacities as Directors of the 1st Defendant, Paddy Distributors Ltd, and not in their personal capacities. Accordingly, the cause of action properly lies as between the Plaintiff/Respondent and the 1st Defendant only. The inclusion of the 2nd and 3rd Defendants, therefore, amounts to a misjoinder of parties, rendering the Plaintiff’s claim legally untenable, an abuse of the Court process, and liable to be struck out with costs.
5. In opposition to the Application, the Respondent filed the Replying Affidavit sworn on 14th March 2025. It was contended that the argument that the 2nd and 3rd Defendants/Applicants are improperly joined to this suit is unfounded and misconceived. The Plaintiff’s documents, particularly at pages 35, 38, and 39 of the trial bundles, are correspondence executed by the 2nd Defendant, demonstrating their direct involvement in the transactions in issue.
6. Further, the Applicants issued over 23 cheques amounting to Kshs. 60,287,235/=, all of which remain unpaid, despite being issued with full knowledge that the 1st Defendant lacked the capacity to settle the Plaintiff’s dues. Under Section 143(1)(c) of the Companies Act, directors are obligated to act in good faith, especially in their dealings with suppliers and other stakeholders. In light of this duty, the 2nd and 3rd Defendants, as directors of the 1st Defendant, owed the Plaintiff—being a supplier—a responsibility to act honestly and transparently, which duty they breached by issuing cheques they knew would not be honoured.
7. In the circumstances, and given the allegation which remain unproven of the repeated misrepresentations made to the Plaintiff through the issuance of the dishonoured cheques, it is necessary that the 2nd and 3rd Defendants remain parties to these proceedings. It is settled law that where the character of a company or the conduct of those controlling it is in issue; the Court may look beyond the corporate veil to ascertain the individuals directing and controlling the company’s actions. The acts leading to the alleged breach of contract were allegedly undertaken by the 2nd and 3rd Defendants, and their presence is essential for a full and effective determination of the dispute.
8. The 2nd and 3rd Defendants will suffer no prejudice by remaining in the suit, as they will be afforded an opportunity to defend the claims against them. Notably, the suit against them was instituted and served five years ago, and the present application has only been brought at a late stage after the matter had already been certified ready for hearing.
Issues for determination
9. After a careful consideration of the Application, the Response and the written submissions by the parties the Court drafts only one issue for determination;
a) Whether the 2nd and 3rd Defendants ought to be struck off from the suit.
Analysis
10. The Applicant’s case is that the 2nd and 3rd Defendants are merely directors of the 1st Defendant, a company duly incorporated under the Companies Act, That it exists as a separate and distinct legal entity capable of suing and being sued in its own name. Directors acting on behalf of a company do not incur personal liability for corporate obligations. The dispute before the Court concerns an alleged debt of Kshs. 60,287,235/= arising from diesel fuel supplied to the 1st Defendant. The cheques issued in payment were drawn by the company itself. Accordingly, the 2nd and 3rd Defendants have been improperly joined to these proceedings, and their inclusion amounts to a misjoinder of parties; their names should therefore be struck out from the suit.
11. On the other hand, it was the Respondent’s contention that the 2nd and 3rd Defendants are proper parties before the Court for purposes of ascertaining the Plaintiff’s Claim. That, for justice to be done to the parties, the 2nd and 3rd Defendant must remain parties to this suit, as they are the actual propagators of the cause of action, being the signatories to the documents and dishonoured cheques herein.
12. The Applicants brought their Application under Order 1 Rule 9, which provides;
No suit shall be defeated by reason of the misjoinder or non-joinder of parties, and the court may in every suit deal with the matter in controversy so far as regards the rights and interests of the parties actually before it.
13. Order 1 Rule 10 (2) of the Civil Procedure Rules grants this Court that power as it states that-
"The court may at any stage of the proceedings, either upon or without the application of either party, and on such terms as may appear to the court to be just, order that the name of any party improperly joined, whether as plaintiff or defendant, be struck out, and that the name of any person who ought to have been joined, whether as plaintiff or defendant, or whose presence before the court may be necessary in order to enable the court effectually and completely to adjudicate upon and settle all questions involved in the suit, be added."
14. It is imperative to note that the discretion conferred by Order 1 Rule 10(2) to remove a party from proceedings must be applied cautiously. This should only be in instances where it is evident that the party was wrongly joined and no conceivable remedy can be pursued against them. That stringent test has not been satisfied in the present case. It is alleged at this point that the cheques issued in settlement the subject matter of this suit were issued by the 2nd and 3rd Defendants. This is a matter that ought to proceed for a trial so that parties can prosecute their rival arguments and bring forth evidence to persuade the Court. The Court will be in a better position to make a final determination of the dispute, upon hearing the parties and their witnesses.
15. Having considered the issues raised in the Plaint, it is the Court’s considered view that there are arguable issues, including allegations of fraud, misconduct, and potential abuse of the corporate veil, which warrant determination after a full trial where the evidence may be properly interrogated through cross-examination.
16. The Applicants based their argument on the principle in Salomon v Salomon & Co. Ltd [1897] AC 22, which established that a company is a separate and distinct legal entity from its shareholders and directors. While it is true that a company is a separate legal entity, this principle is not absolute. The Court of Appeal in H. Ajay Shah & Another v Deposit Protection Fund Board & Another [2016] eKLR , held:
“Directors and shareholders can be held personally liable if the corporate entity is used as a vehicle for fraud.”
17. In light of the above, the Court finds that striking out the 2nd and 3rd Defendants at this juncture would prematurely deny the Plaintiff the opportunity to fully present and pursue its claim.
18. As to costs, the same ordinarily follow the event unless the Court holds otherwise. The Court is not persuaded to deny the Plaintiff/Respondent the costs of this application.
Determination
19. The 2nd and 3rd Defendants’ application by way of a Notice of Motion dated 13th January 2025 is HEREBY dismissed for lack of merits.
20. The costs thereof are awarded to the Plaintiff/Respondent.
21. It is so ordered.
DATED, SIGNED AND DELIVERED AT MILIMANI THIS 26TH DAY OF FEBRUARY, 2026.
NJOROGE BENJAMIN K.
JUDGE
In the presence of:
N/A for the Plaintiff/Respondent.
N/A for the 1st Defendant/Respondent.
Mr. Muli for the 2nd & 3rd Defendants/Applicants.
Peter Wabwire - Court Assistant.