Duff's Valley Corporation Ltd v 1. Michael Antonio Smith; 2. Bryon Smith
| Jurisdiction | British Virgin Islands |
| Judge | MATTHEW J. Ag. |
| Judgment Date | 14 June 2002 |
| Neutral Citation | VG 2002 HC 23 |
| Docket Number | CIVIL SUIT 35 OF 2002 (NO. 2),CIVIL SUIT NO. 35 OF 2002 |
| Court | High Court (British Virgin Islands) |
| Date | 14 June 2002 |
IN THE HIGH COURT OF JUSTICE
CIVIL SUIT NO. 35 OF 2002
Mr. T. Neale for the Claimant
Mrs. J. George-Creque for the Defendants
This is one of several disputes between Members of a Company. Ishmael Brathwaite claims to be the Managing Director and Chief Executive Officer of the Claimant and has purportedly dismissed the three other Directors of the Company, Michael A. Smith, Bryon Smith and Iris Penn.
Brathwaite claims to have that authority by virtue of his over fifty percent of the shares and in accordance with the Articles of Association of the Company.
On February 28, 2002 the Claimant filed an action against the Defendants asking, inter alia, for certain declarations and accounts as well as an injunction restraining the Defendants from entering on and or using the Claimant's premises.
The first hearing was fixed for March 7, 2002. The Parties were in attendance and so was learned Counsel for the Claimant. The matter was adjourned to March 23, 2002 for the Defendants to retain Counsel.
At the resumed hearing the Defendants indicated that they had filed a summons to strike out the action on March 19, 2002. As the Claimant was not properly served the matter was adjourned to April 30, 2002.
In the meantime several affidavits were filed by the Parties—two by Ishmael Brathwaite; two by Michael Smith; two by Iris Penn and one by Bryon Smith.
The grounds of the application is that the Claimant, purporting to act through Ishmael Brathwaite as its Managing Director and Chief Executive Officer, is not so authorized to commence these proceedings, neither by resolution of the Board of Directors of the Claimant nor by resolution of the Members of the Claimant.
Before learned Counsel for the Defendants could begin learned Counsel for the Claimant took a preliminary point that the rectification by a principal of the acts of the agent cures any defect in the action of the agent. DANISH MERCANTILE CO. V BEAUMONT 1951 1 All E.R. 923at page 930 E.
Counsel referred to the second affidavit of Ishmael Brathwaite filed on April 19, 2002 where the deponent stated that he held at least 55 percent of the Company's shares and to an exhibit, BS1, which indicated he had 293,334 out of the total of 457,692 shares.
Counsel also referred to Exhibits IB4 and IB5 which are the ‘Notice of Extraordinary General Meeting’ and the ‘Notice of Entraordinary General Meeting convened by Requisitionists’ respectively. Both notices give the date of the Meeting to be April 15, 2002 and list the proposed resolutions as including the removal of the Defendants as Directors and approval for instituting suit 35 of 2002.
Counsel referred to sections 48, 49, 60 and 106 of the Companies Act, Cap. 285 as well as Articles 46, 47, 48, 49, 52 and 77.
Counsel referred to the case RE OXTED MOTOR CO. LTD. 1921 3 KB 33 to show how the Court deals with irregularities that prejudice no one.
The Court held in that case that it was competent for the shareholders of the Company acting together to waive the formalities required by Section 69 of the Companies Act, 1908, as to notice of intention to propose a resolution as an extraordinary resolution and that as all the shareholders of the Company had met and passed the resolution to wind up the Company, the resolution was valid.
Learned Counsel for the Defendants looked at the structure of the Company from its incorporation on March 17, 1986 and submitted that the structure as amended only allowed for 30,930 shares and the Company was not authorized to issue the amount of shares in the exhibit BS1.
Counsel was referred to the Memorandum of Association and the Articles which clearly showed that the share capital of the Company is US$300,000 divided into shares of $3.00 each. That in my calculation would be 100,000 shares.
Counsel submitted that the Company had no share register as provided for in Section 48 of the Companies Act and the Annual Returns could not take the place of the share register. Counsel was challenging the share holding of Brathwaite.
Counsel referred to a paragraph in the first affidavit of Michael Smith where he stated that his family land was worth in excess of $1 million and his father who is now deceased was never allotted the shares in the Company representative of that value.
I am not sure if I am being asked now to allocate shares to Michael Smith's deceased father, but I agree with learned Counsel for the Claimant that this is, at the moment, quite irrelevant.
Counsel referred to the same articles that Counsel on the other side mentioned and some of those call for a pronouncement, for their interpretations submitted by the Parties are different. Counsel in addition referred to Article 60.
Counsel cited the case AIRWAYS LTD. V BOWEN 1985 BCLC 355at page 356 to indicate that there could be differences between Parties as to their shareholding. The head note of this case is instructive as to when an objection such as the one Counsel is taking should be properly taken.
It states that an objection that an action in the name of a company is not properly constituted because it is not authorized by the company cannot be raised by way of a defence, but must be raised at the outset by an application to have the name of the company struck out as Plaintiff. This Counsel for the Defendants has done well.
Learned Counsel has also referred to Palmer's Company Law by Clive Schmitthoff at pages 719 and 731. The latter reference is interesting as it states that on principle a meeting comprises more than one person. This is very relevant here as when one looks at the several resolutions purportedly passed by the Company the number of persons voting in favour is ‘1’, those voting against is ‘0’.
This would at first glance appear to boggle the mind but it seems to me the ordinary thinking would have to give way to what the Parties contracted among themselves when they set up the Company.
I set out below in full the relevant Articles of Association:
‘46. The directors may, whenever they think fit, and they shall, upon a requisition made in writing by holders of not less than one-tenth in value of the paid-up capital of the Company, convene an extraordinary general meeting.
For the purpose of all general meetings of the members of the Company if a quorum as required by these Articles shall be present then the meeting shall be deemed to have been held notwithstanding the presence thereat of only one person.
47. Any requisition made by the members shall specify the resolution or resolutions to be proposed or matters to be discussed at the meeting so requisitioned and shall be left at the registered office of the Company.
48. Upon receipt of such requisition the directors shall forthwith proceed to convene an extraordinary general meeting. If they do not convene the same within twenty-one days from the date of delivery of the requisition at the registered office of the Company, the requisitionists or any other members amounting to the required number, may themselves convene an extraordinary general meeting.
NOTICE OF GENERAL MEETINGS
49. Seven days' notice at the least specifying the place, the day and the hour of meeting and, in the case of special business, the general nature of that business, shall be given in manner hereinafter mentioned, or in such other manner, if any, as may be prescribed by the Company in general meeting, to such persons as are, under the regulations of the Company, entitled to receive such notices from the Company; but the non-receipt of such notice by any member shall not invalidate the proceedings at any general meeting.
52. No business shall be transacted at any general meeting unless a quorum of members is present at the time when the meeting proceeds to business. A quorum shall consist of the holder or holders present in person or by proxy of not less than 50 percent of the shares carrying the right to vote in accordance with the regulations contained herein under the heading ‘Votes of Members’.
VOTES OF MEMBERS
60. At any general meeting of the Company on a show of hands every holder of a voting share present in person or by proxy shall have one vote and on a poll every member shall have one vote for every voting share of which he is the holder.
77. The Company in general meeting may with or without cause by ordinary resolution remove any director and may appoint another person in his stead.’
It seems to me that on a reading of Article 46 Ishmael Brathwaite could alone convene a meeting since he held not less than one-tenth in value of the paid-up capital. The last phrase in the Article ‘notwithstanding the presence thereat of only one person’ is indicative of that.
It also appears to me that Articles 47, 48 and 49 were complied with. The case of RE OXTED MOTOR CO. LTD. lends support to the validity of the meeting held on April 15, 2002. In respect of the meeting the evidence suggests, and learned Counsel for the Claimants submitted, without response, that the Defendants were not saying they did not receive notice of the meeting but what they are saying is they did not attend.
Article 52 is clear on the quorum for the meeting and in my interpretation of that article because Brathwaite held over 50 percent of the shares carrying the right to vote his attendance alone would be sufficient for a quorum.
Article 60 deals with the method of voting and cannot detract from the interpretation as to what constitutes a quorum.
Article 70 is a powerful provision. It seems to me that based on the article Brathwaite in a general meeting could remove the other three directors with...
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