Wakilii

Sarick Construction Limited v Children of Africa Limited & Another (Miscellaneous Application 4 of 2023)

High Court · [2024] UGHC 721 · 2024 Application Dismissed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application to lift corporate veil arising from Civil Suit No. 027 of 2016 following summary judgment
Decision
Application to lift the corporate veil dismissed with costs to the Respondents

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The court dismissed the application to lift the corporate veil. The applicant failed to prove that the 1st Respondent lacked a registered office or property for execution. The 2nd Respondent changed her name for political reasons in 2020, before the 2023 decree, not to evade enforcement. No law restricts a company from entering contracts exceeding its members' guaranteed liability. The applicant did not establish fraud, deliberate evasion, or flagrant injustice warranting piercing of the corporate veil under Section 20 of the Companies Act 2012.

Outcome

Application to lift the corporate veil dismissed with costs to the Respondents

Facts

On 15 October 2015, the 1st Respondent contracted the Applicant to construct buildings for a rehabilitation centre at UGX 28,880,336,335. The 1st Respondent was to pay 30% upon substructure completion within 28 days. The Applicant completed the substructure in April 2016 but the 1st Respondent paid only UGX 70,000,000, leaving UGX 7,727,690,810 unpaid. The Applicant sued in Civil Suit 027 of 2016. In May 2019, the court granted the 1st Respondent conditional leave to defend, requiring it to deposit half the claim within 30 days, failing which summary judgment would enter. The 1st Respondent failed to comply. Summary judgment was entered in May 2023. The Applicant then applied to lift the corporate veil, alleging the 2nd Respondent changed her name from Alweny Dorothy to Queen Dorothy Amolo and left Uganda to evade execution, and that the 1st Respondent had no traceable property or registered office.

Issues

  1. Whether the corporate veil of the 1st Respondent should be lifted to make the 2nd Respondent personally liable for the company's debt.
  2. Whether the 2nd Respondent's change of name and departure from Uganda constituted deliberate evasion of enforcement of the decree.
  3. Whether the 1st Respondent's registration as a company limited by guarantee with liability capped at UGX 1,000,000 while entering into a contract exceeding UGX 28 billion constituted fraud.

Orders

  • Application dismissed.
  • Costs awarded to the Respondents.

Rules and key headnotes

Company Law — Lifting the Corporate Veil — Statutory Grounds under Companies Act 2012 s.20
Under Section 20 of the Companies Act 2012, the High Court may lift the corporate veil where a company or its directors are involved in acts including tax evasion, fraud, or where membership falls below the statutory minimum. The provision does not restrict grounds to fraud alone but includes other acts warranting the remedy, such as flagrant injustice and improper conduct.
Company Law — Lifting the Corporate Veil — Conditions for Piercing the Veil
The power to lift the corporate veil must be exercised sparingly. It is justified only where a person is under an existing legal obligation or liability which he deliberately evades or whose enforcement he deliberately frustrates by interposing a company under his control, or where the corporate structure is used to evade legal limitations and rights of relief which third parties already possess.
Company Law — Limited Liability Companies — Capacity to Contract
No law limits or restricts a company from entering into contracts or transactions the value of which exceeds the liability of its members as stated in the company memorandum. The registration of a company limited by guarantee with low guaranteed liability does not constitute fraud merely because the company subsequently enters into high-value contracts.
Company Law — Lifting the Corporate Veil — Burden of Proof
The burden is on the applicant seeking to lift the corporate veil to prove the grounds justifying that remedy, including proving fraud, deliberate evasion of obligations, or that the company has no property or registered office for execution purposes.
Civil Procedure — Execution — Duty to Exhaust Remedies Against the Judgment Debtor Company
Before seeking to pierce the corporate veil to pursue a director personally, a judgment creditor must make reasonable attempts to enforce the decree against the company itself, including attempting to attach available company property. Failing to pursue execution against identified company assets undermines an application to lift the corporate veil.

Legislation cited (8)

Cases cited (10)

  • Salomon v Salomon & Co [1897] AC 22
  • Madison Investment, Property and Advisory Company Limited v Peter Kanyinji (Civil Appeal No. 010 of 2016)
  • Ben Hashem v Ali Shayif [2009] EWHC 864 (Fam)
  • Littlewoods Mail Order Stores Ltd v Inland Revenue Commissioners [1969] 1 WLR 1241
  • Salim Jamal and Others v Uganda Oxygen Ltd and Others (SCCA No. 64 of 1995)
  • Beatrice Odongo and another v Tamp Engineering Consultants Limited (Civil Appeal No. 8 of 2020)
  • Etoma Thomas v Zziwa Peter & 3 Others (High Court Miscellaneous Application No. 338 of 2021)
  • Samuel Abbo v Cimeel Engineering Ltd (High Court Miscellaneous Application No. 29 of 2013)
  • Stirling Civil Engineering Ltd v Plinth Technical Works Ltd (High Court Miscellaneous Application No. 231 of 2019)
  • Prest v Petrodel Resources Ltd [2013] UKSC 34

Full judgment

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

Sarick Construction Limited v Children of Africa Limited & Another (Miscellaneous Application 4 of 2023) [2024] UGHC 721 (2 August 2024)
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.