Wakilii

Eastern Builders & engineers ltd v Malva Construction u ltd (Hct-00-cc-ma-0563 - 2008)

High Court · [2010] UGHC 25 · 2010 Application Dismissed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application to lift the corporate veil following judgment in civil suit, heard exparte after substituted service
Decision
Application to lift corporate veil refused for want of evidence

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

Application to lift the corporate veil dismissed. The Court held that no sufficient evidence was presented to show that the respondent company's corporate personality was being used fraudulently as a cloak, sham, or mask to avoid execution. The directors were not named, shareholding was not disclosed, and no company assets were shown to be held by directors personally. Mere closure of business offices does not constitute evidence of fraud warranting piercing of the corporate veil.

Outcome

Application to lift corporate veil refused for want of evidence

Facts

Eastern Builders & Engineers Ltd obtained judgment against Malva Construction (U) Ltd in Civil Suit No. 44 of 2002 for US$93,581.80 plus interest on 31 July 2002. When execution was to commence, the applicant claimed the respondent company held no assets in its own name, all being held in the directors' names. The applicant alleged the directors deliberately left the country with intent to defraud and closed the business office. The directors and their whereabouts were said to be unknown. The applicant sought to lift the corporate veil to execute against the directors personally. Service was by substituted service through newspaper advertisement. The respondent did not appear and the matter proceeded exparte.

Issues

  1. Whether the Court should lift the corporate veil of the respondent company to allow execution against its directors personally.

Orders

  • Application dismissed.
  • No order as to costs, proceedings having been exparte.

Rules and key headnotes

Company Law — Lifting the Corporate Veil — Grounds
Before the corporate veil can be lifted, there must be evidence from which the court can conclude that the company and a particular individual are one and the same thing, and that the corporate personality is being used as a cloak, sham, or mask for fraud.
Company Law — Lifting the Corporate Veil — Burden of Proof
The judgment creditor seeking to lift the corporate veil must prove that the defendant company is the creature of its directors, a device and sham held before their faces in an attempt to avoid recognition by the eye of equity, in order to justify piercing the corporate veil to protect the creditor against fraudulent directors.
Company Law — Lifting the Corporate Veil — Insufficiency of Evidence
The mere fact that a judgment debtor company has closed its business offices, without more, does not constitute evidence of fraud on the part of the directors sufficient to warrant lifting the corporate veil. The applicant must identify the specific directors, disclose shareholding, and demonstrate that company assets are held by directors personally.

Legislation cited (2)

Cases cited (5)

  • Nile Bank Ltd v Gomba Machinery and General Equipment Ltd (1992) IKLR 67
  • Jones v Lipman [1962] 1 WLR 832
  • Jones v Lipman [1962] 1 All ER 442
  • W.E. Kiwalabye v Uganda Commercial Bank & Another (1994) IV KALR 8
  • Salim Jamal & 2 Others v Uganda Oxygen Ltd & 2 Others (1997) II KALR 38

Full judgment

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The original judgment as reported. Read the original PDF before relying on any passage.

Eastern Builders & engineers ltd v Malva Construction u ltd (Hct-00-cc-ma-0563 - 2008) [2010] UGHC 25 (3 March 2010)
Source: this page presents Wakilii’s issue analysis and metadata for a publicly reported Ugandan judgment. Any AI-generated summary is marked as such. Judgment text is sourced from the Uganda Legal Information Institute (ulii.org). Wakilii is not affiliated with ULII.