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ELRCPartially AllowedNotice of Motion dated 13th May, 2014

Transport and Allied Workers Union v Kenya Bus Service Limited & another (Cause 68 of 2006) [2024] KEELRC 2481 (KLR)

Employment and Labour Relations Court
11 October 2024
AJABUODHA NELSON JORUM
2,463 words in judgment
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The bottom line

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What this practically means

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Executive summary

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The applicant, a union representing some 750 members, obtained judgment against the respondent on 6th September 2007 for Kshs. 526,326,840/- and had been unable to execute it for years, alleging that the respondent and an objector frustrated every attempt at attachment. By Notice of Motion dated 13th May 2014, it sought lifting of the respondent's corporate veil and oral examination of its named directors on the company's assets. The respondent, through its Managing Director, opposed the application, contending that attachment efforts targeted third-party assets, that a withdrawn winding-up petition had formerly stayed execution, that a director is not personally liable for a company's debts save in limited circumstances, and that its financial distress stemmed from lawful compliance with the Michuki rules. The applicant relied on Order 22 rule 35 and authorities including Masifield and Mombasa Bricks & Tiles; the respondent relied on Salomon and Oni Properties. The Court held that there was no serious contest over its power under Order 22 rule 35 to order oral examination of a corporation's officers, and that the rule contemplates physical attendance and cross-examination rather than affidavit evidence. It ordered the surviving directors named by the applicant to appear for examination on a date to be fixed, but declined the prayer to lift the corporate veil as premature, to be considered only after the examination. The matter was set for mention on 25th November 2024, with the Court encouraging negotiated settlement.

Questions the Court framed

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The issues the Court set itself to decide, in its own words.

  1. 1.Whether the officers/directors of the respondent corporation should be ordered to appear in court for oral examination under Order 22 rule 35 on the assets and means of satisfying the decree
  2. 2.Whether the corporate veil of the respondent should be lifted so as to hold the directors personally liable for the decretal sum

Key legal issues

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01

Whether the Court may order oral examination of a corporation's officers under Order 22 rule 35 notwithstanding financial information already supplied by affidavit

Holding

Yes - the rule contemplates physical attendance and oral examination; supplying affidavit evidence does not render attendance unnecessary

Reasoning

A plain reading of Order 22 rule 35 shows the judgment debtor or its officers must physically appear and be orally examined by the decree-holder. The rule did not contemplate presentation of facts and documents by affidavit. The decree-holder requires to cross-examine the judgment debtor, so the respondent's prior disclosure of financial information does not excuse attendance.

p. 5
02

Whether the corporate veil should be lifted at this stage

Holding

No - the prayer is premature; the veil may or may not be lifted only after conclusion of the oral examination

Reasoning

Relying on the Masifield authority, examination of an officer is the proper first step, and at its conclusion the Court may or may not lift the veil. The applicant had not yet had the opportunity to examine the directors, so a finding of personal liability could not be made summarily.

p. 5

Legal principles established

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  • Order 22 rule 35 confers jurisdiction on the Court to summon any officer of a company to attend court to be examined on the assets and means of the company to settle the decreed sum; at the conclusion of that examination the Court may or may not lift the veil of incorporation
  • Examination under Order 22 rule 35 must be by physical attendance and oral examination, not by presentation of facts and documents by way of affidavit

Court orders

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  1. 1.The directors of the respondent as listed in paragraph 8 of the applicant's affidavit and as still alive do appear before the Court on a date to be set with concurrence of the parties for examination pursuant to Order 22 rule 35
  2. 2.Prayer for lifting the corporate veil declined as premature until the oral examination is dispensed with
  3. 3.Matter to be mentioned on 25th November, 2024 for taking a date for oral examination of the named directors
  4. 4.Parties encouraged to embrace innovative negotiations to settle the decretal sum

The bench

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One judgment of the whole court — no separate or dissenting opinions.

AJ
majority

Wrote the judgment

Jurisdiction invoked
Order 22 rule 35 of the Civil Procedure Rules, 2010

Relief refused

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Lifting of the corporate veil and holding the directors personally liable for the decretal sum

The prayer was premature and could only be considered after the oral examination of the directors under Order 22 rule 35

p. 5

Costs

No costs order recorded in the judgment

Quotable passages

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Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.

From the foregoing the Court will order that the directors of the respondent as listed in paragraph 8 of the applicants afidavit and as still alive do appear before the honourable Court on a date to be set by the Court with concurrence of the parties herein for purposes of examination pursuant to the provisions of Order 22 rule 35.
p. 5final orders - oral examination of directors
Prayer for lifting the corporate veil is premature and cannot be granted until the oral examination is dispensed with.
p. 5prematurity of veil-lifting prayer
Matter will be mentioned on 25th November, 2024 for purposes of taking a date for oral examination of the named directors.
p. 5mention date
the Court has jurisdiction to summon any oficer of a Company to attend Court so that they can be examined on the assets and means of the company to settle the sum decreed.
p. 5jurisdiction under Order 22 rule 35

Issues in the judgment

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minor

Judgment alternates the year of the Michuki rules between 2003 and 2023

minor

Judgment states judgment was obtained on 6th September 2007 while the respondent's replying affidavit refers to September 2006

minor

Judgment states the matter is 17 years old although the decree dates from 2007

Key timeline

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Practical implications

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Frequently asked questions

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Cite this brief

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Cite this brief

Caselaw, "Transport and Allied Workers Union v Kenya Bus Service Limited & another (Cause 68 of 2006) [2024] KEELRC 2481 (KLR)", Case Analysis (2024). Notice of Motion dated 13th May, 2014. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2024/2481/eng@2024-10-11

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.