Automated Summary
Key Facts
The plaintiff, Lilian Wambui Ndege, paid Kshs.650,000 to Diamond Property Merchants Ltd (1st Defendant) in 2018 for a land plot that was never delivered. She alleges misrepresentation and fraud by the company and its directors (2nd-6th Defendants). The court ruled in favor of the plaintiff, ordering the 1st and 6th Defendants to refund the money with 10% annual interest from 27 February 2018 and awarding costs. The court declined to lift the corporate veil at this stage but allowed the plaintiff to pursue such relief in a separate proceeding.
Transaction Type
Sale of land plot
Issues
- The court examined whether the corporate veil of Diamond Property Merchants Ltd should be lifted to hold its directors (2nd to 6th Defendants) personally liable for misrepresentation and fraud in a land sale. The plaintiff argued that directors acted in their individual capacities and that the company was a sham to perpetrate fraud, citing precedents like Halsbury's Laws and Essential Drugs Ltd v. Oss Chemie (K) Ltd. The court noted that lifting the veil requires evidence of fraud or improper conduct and a hearing for cross-examination, but declined to lift it at this stage, allowing the plaintiff to pursue further application.
- The court determined that Diamond Property Merchants Ltd (1st Defendant) and Josephat Gichunge Mwirabua (6th Defendant) are jointly and severally liable for breaching the sale agreement by failing to deliver the land. The plaintiff proved payment of Kshs.650,000 with a receipt, and the defendants did not defend the claim. Judgment was entered for refund of the full amount plus 10% annual interest from 27th February 2018 until full payment, with costs awarded.
Holdings
- The court determined that the corporate veil would not be lifted in this case, as the plaintiff did not provide sufficient evidence to warrant such an action. However, the court allowed the plaintiff to apply for an order to lift the veil in a separate proceeding.
- The court ordered the 1st and 6th Defendants to refund the plaintiff Kshs.650,000 plus interest at 10% per annum from 27th February 2018 until full payment, and awarded costs of the suit.
- The court held the 1st Defendant (Diamond Property Merchants Ltd) and the 6th Defendant (Josephat Gichunge Mwirabua) jointly and severally liable for the breach of contract, as they were the only parties against whom a judgment could be entered at this stage.
Remedies
- Costs of the suit were awarded to the plaintiff as part of the court's judgment against the 1st and 6th Defendants.
- Judgment entered against the 1st and 6th Defendants for refund of Kenya Shillings Six Hundred and Fifty Thousand (Kshs.650,000) with interest at 10% per annum from 27th February 2018 until full payment is received.
Contract Value
650000.00
Monetary Damages
650000.00
Legal Principles
The court applied the principle that the corporate veil can be lifted when there is fraud or improper conduct, holding directors personally liable. This was based on precedents such as Halsbury's Laws, Essential Drugs Ltd v Oss Chemie (2022), and Salomon v Salomon & Co Ltd (1897), which outline circumstances under which the court may pierce the corporate veil to ensure justice.
Precedent Name
- Mugenyi & Co. Advocates vs. The Attorney General
- Multi Choice Kenya Ltd vs. Mainkan Ltd & another
- Salomon Vs Salomon & Company Ltd
- Essential Drugs Ltd Vs. Oss Chemie (K) Ltd
- Jiang Nan Xiang v Cok Fas-St. Company Limited
Key Disputed Contract Clauses
- Clause 9.2 of the sale agreement outlined the defendant's obligation to refund the plaintiff all monies paid (Kshs.650,000) plus 10% interest if the transaction failed. The plaintiff claimed this refund was due, while the defendant argued the clause was not binding due to lack of execution. The court ruled in favor of the plaintiff for the refund and interest.
- Clause 4 of the sale agreement stipulated that the date of completion would be six (6) months from the signing date. The plaintiff alleged the defendant failed to meet this deadline, leading to a breach of contract. The court acknowledged this clause but determined the agreement was not executed, leaving the offer letter as the only binding contract.
Judge Name
A. Omollo
Passage Text
- 28. On the basis that proof of payment of Kshs.650,000 was made, I enter judgment against the 1st and 6th Defendants jointly and severally for refund of the said money with interest at 10% per annum from the 27th February, 2018 until payment is received in full. Costs of the suit is also awarded.
- 27. Since the impugned transaction was done with the 1st Defendant, it is the 1st defendant who has the legal personality in law (Salomon vs Salmon and Co. Ltd) that is liable for the breach of contract. The upshot of the foregoing is that as of now, this court can only give judgment for refund of the monies expended by the plaintiff as against the 1st Defendant and 6th Defendant who did not defend the claim.
- 26. It is trite law that courts lift the veil to hold directors of companies personally liable for actions undertaken using the company to defraud. In this instance, for the lifting of the veil to take place, a hearing must take place where directors of the company are summoned for cross-examination. It is my understanding that such process would be independent of the instant claim. For now, I will not lift the veil but the Plaintiff is at liberty to apply in the proper forum for such an order.
Damages / Relief Type
- Costs of the suit awarded to the plaintiff.
- Refund of Kshs.650,000 with 10% annual interest from 27th February 2018 until full payment.