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J U D G M E
N T
DR. DATE-BAH,
J.S.C.:
Two business partners related by
blood fell out. In the wake of
this falling out, the courts
have had the responsibility
thrust upon them to determine
the partners’ respective rights
and obligations under the
Companies Code 1963 (Act 179).
In August
1978, Dr. Kwame Dufour and Mr.
Nicholas Bernard Asare
subscribed the Regulations of
the first
defendant/respondent/appellant,
which will subsequently be
referred to as the first
appellant or the appellant
company, and incorporated it by
registration at the companies’
registry. By that act, they
both became shareholders and
members of the appellant
company. (See Adehyeman
Gardens Ltd. v Assibey
[2003-2004] SCGLR 1016). This
much is in effect admitted by
the appellants’ decision to
abandon Ground One in their
Notice of Appeal, which had read
as follows:
“The Court of
Appeal erred by its holding that
the Respondent was a member of
the Company when at the same
time, it accepted the fact that
all that the Respondent did
amounted to pre incorporation
actions which did not bind the
Appellants or the Company.”
What remains
in issue with regard to the
shareholding in the appellant
company is the extent of
shareholding by the
plaintiff/appellant/respondent,
who is hereafter referred to in
this judgment as the
respondent. Did the respondent
remain the 50% shareholder he
was as a subscriber or did
subsequent acts of the company
and/or its members dilute his
shareholding? This was an issue
that had to be determined in
order to decide whether to grant
the first of the declarations
sought by respondent in this
case which he had initiated with
an originating motion under the
Companies Act 1963 for the
following declarations:
1.
“That
the Applicant is a shareholder
and member of the first
Respondent Company and holds 50%
of its issued share capital.
2.
That
the systematic reduction by the
Second Respondent in the number
of shares held by the Applicant
was an unjustified expropriation
of the Applicant’s shareholding
and a fraud on him.
3.
That
the purported removal of the
Applicant as a director of the
First Respondent Company by the
Second Respondent was unlawful
and so void as the same was
contrary to Section 185(2) of
the Companies Code 1963 (Act
179).
4.
That
the affairs of the First
Respondent Company are being
conducted and the powers of the
directors are being exercised in
a manner oppressive to the
Applicant or in disregard of his
legitimate interests as a
Shareholder of the Company.”
The learned
trial judge, Ansah J., as he
then was, decided that the
respondent’s original
shareholding had been lawfully
diluted through the action of
the members of the company. On
this issue, he said (at p. 194
of the Record):
“The
complaint that the applicant’s
shares in the company have been
reduced is borne out by the
evidence. From the original 50%
as per exhibit NBA 1, he now has
10% as per KD3. But one thing
which must be noted is that
until recently the respondent
had never protested against
that. In fact as per exhibit
KD3, the allocation of 10% “A”
shares to him was done as far
back as on 1 May 1980 and he
subscribed to it and he never
protested. The fact of the
matter is that in an undated
letter ( I do not know how else
to describe it), Exhibit KD 32,
the applicant wrote to say that:
“Due to
circumstances beyond my control,
and because of family ties, I
reluctantly accepted the current
10% share that I hold.”
From the tone
of that letter, the applicant
complains that whereas the
Second Respondent kept on
increasing the numbers of shares
he held, his were reduced
will(sic) he got the 10% he was
allotted. In the last paragraph
of the letter, Exhibit KD 32, he
applied for another shares
review to avert crisis in their
relationship. Note is to be
taken of the threats in that
paragraph.
The point I
am driving at is that ever since
the special resolution was
passed on 1 May 1980, the
applicant has known and accepted
the situation that he was
allotted 10% shares in the
company and he never protested
at that.”
Predictably,
the learned trial judge went on
to deny the respondent the first
declaration he sought, namely,
that he was a shareholder and
member of the appellant company
and held 50% of its shares.
In the Court
of Appeal, Twumasi JA, who
delivered the judgment of the
Court, reversed the learned
trial judge and held that on the
evidence before the trial court
it was clear that the respondent
was a shareholder and member of
the appellant company in terms
of section 30(1) of the
Companies Code and that he was
therefore entitled to have his
name entered in the register of
the company. He held that the
learned trial judge was in error
in refusing to make an order for
such entry. He therefore upheld
grounds (ii) and (iii) of the
respondent’s grounds of appeal
before the Court of Appeal which
were in the following terms:
“(ii)
The Learned Trial Judge erred in
law when he held that the
Appellant was an allottee of
shares, when in fact he was a
subscriber to the Regulations.
(iii)
The
Learned Trial Judge further
erred in law by failing to order
that the Appellant’s name be
entered in the Register of
members under Section 30 of the
Companies Code even though he
himself had found that the
Appellant had subscribed to the
Company’s Regulations.”
Before this
Court, the appellants, whilst no
longer disputing the
respondent’s membership of the
appellant company on account of
his failure to pay for his
shares, still contended that the
shareholding structure was as
contained in the new regulations
adopted by a special resolution
dated 1st May 1980.
It was, of course, wise that the
appellants abandoned their
argument that because the
respondent had not paid for his
shares he should not be regarded
as a member of the company. It
is well settled law that
non-payment for shares does not
affect the status of a
shareholder as a member. As
Sophia Akuffo, .J.S.C. said in
Adehyeman Gardens Ltd. v
Assibey [[2003-2004] SCGLR
1016 at p. 1027:
“By the terms
of the Code, until all of his
shares are forfeited for
non-payment of a validly made
call (or until the occurrence of
any of the other said
eventualities), a subscriber
remains a fully-fledged member
and shareholder of the company,
even if he has not paid a pesewa
for his shares.”
The
appellants’ Ground (ii) in the
their Grounds of Appeal
contained in their Notice of
Appeal was in the following
terms:
“The Court of
Appeal grossly erred in
substituting Exhibit “NBA 1” (at
p. 12) for Exhibit “KD3” (at
page 40) and “KD4” (at page 41)
which accurately reflected the
share holding position of the
Company.”
Exhibit NBA 1
is a copy of the page of the
appellant company’s original
Regulations on which the
respondent and the second
appellant had signed their names
as subscribers for 50,000 shares
each in the company. Exhibit
KD3 is a copy of a special
resolution signed by the second
appellant and the respondent to
the effect that new Regulations
which had for the purpose of
identification been signed by
them be adopted as the
Regulations of the company in
substitution for and to the
exclusion of all the existing
Regulations of the Company to
take effect from 1st
May 1980. Exhibit KD4 is a copy
of the new Regulations purported
to have been adopted by the
special resolution of 1st
May 1980.
The complaint
in the appellants’ ground (ii)
is that the Court of Appeal
seemed to have relied on the
original shareholding structure
rather than the structure set
out in the new Regulations.
This complaint is probably based
on the following passage (at p.
262 of the Record) in which
Twumasi JA sets out why the
Court of Appeal had reached its
conclusion that the Respondent
was the victim of oppression,
within the meaning of section
218 of the Companies Code 1963:
“In the
instant case the appellant
originally held 50% shares for a
long time he headed the accounts
department of the company and he
did a lot of service right from
the establishment of the company
but somewhere along the line his
fifty percent structure was
reduced to 10% in a manner that
was harsh, burdensome and
wrongful. His sad sentiments
were expressed in a letter which
was tendered in evidence. He
was removed from office while on
a course in the United States.
All these acts in my view
amounted to oppression within
the meaning of Section 218. It
was clear that he was thrown out
of the management of the affairs
of the company when that should
not have been the case because
he was originally a shareholder
director. What happened?
Curious isn’t it? I need not
waste much breadth to make a
clear and positive finding that
there was more than sufficient
evidence to support a case of
oppression under Section 218 the
most glaring of it being that
for several years dividends of
the company were not declared
for no apparent reason, and the
fact that the wife of the 2nd
respondent played roles which
conflicted with the judiciary
(sic) interest of the second
respondent.
Such conduct
in my view constitutes
oppression under s. 218 as it
affects the best interests of
the members of the company.”
It is
important to review the acts
cited by the learned Appeal
Judge as constituting instances
of oppression in order determine
whether his view was justified
or not and this will be done
later in this judgment. But
before dealing with that issue,
it is necessary to consider the
respondent’s argument that the
new Regulations should be
ignored since they were never
legally valid.
If the
respondent’s argument that the
new Regulations are void
succeeds, then the issue
relating to oppression will
assume lesser significance since
much of the sting of the alleged
oppression relates to the
implementation of the new
Regulations.
In the
Respondent’s Statement of Case,
he sets out his argument
relating to ground (ii) above
with ground (v), which is in the
following terms:
“The Court of
Appeal erred when it failed to
recognize and uphold the copious
evidence on record that the
Respondent acquiesced in the
shareholding of 60%, 30% and 10%
as spelt out in Exhibit “KD3”
and “KD4”.”
His argument
is as follows: the Companies
Code 1963 does not permit to be
done what the Second Appellant
procured to be done through
Exhibits, KD 3, KD4 and KD5,
namely the special resolution,
the new Regulations and the new
subscription page of the new
Regulations. More specifically,
he states that:
“Exhibit KD3,
the special written Resolution
of the Company passed to
effectuate the scheme may be
found at p. 4. It said that the
new Regulations of the company
which have for the purpose of
identification been signed
by the undersigned be and the
same are hereby approved and
adopted as the Regulations of
the Company in substitution for
and to the exclusion of all the
existing Regulations of the
Company to take effect from the
1st day of May 1980.
KD4, page 41, which was supposed
to be the new Regulations was
not signed by “the undersigned”
i.e. Dr. Kwame Duffour and
Nicholas Bernard Asare. See
page 40. KD3 is a written
resolution of the shareholders
of the company pursuant to
section 174. In the
circumstances, the internal
evidence which is in KD3 to
authenticate KD4 was absent.
The proper inference to be drawn
from that is that KD4 was not
the document envisaged by KD3.
KD5 (page 44) which is supposed
to be part of KD4 was
differently typed. What is
worse, there was nothing on the
face of KD3, or KD5 that any of
them had been registered at the
Companies Registry.”
In response
to the allegation in this
passage that KD3 was not signed
by “the undersigned”, I called
for and inspected the High Court
docket in this case and the
Exhibit KD3 in that docket
appears to have been signed.
The other
allegation in the Respondent’s
Statement of Case that there was
no evidence on the face of the
Regulations that they had been
registered is a significant one,
but not determinative, because
there could be credible
extrinsic evidence on record
showing that the Regulations
were in fact registered.
Paragraph 4
of the new Regulations provide
that the “first directors of the
Company” are to be six specified
persons of whom four including
the respondent and second
appellant are appointed by the
holders of the “A” shares under
Regulation 56(a)(i) of the new
Regulations and two of the
specified persons were appointed
by the holders of the “B” shares
under Regulation 56(a)(ii) of
the new Regulations.
The
Respondent’s Statement of Case
correctly points out that
Regulations have effect only
when registered. “Consequently
until KD4 was registered there
could be no classes A or B
shareholders, for under the
original Regulations there were
no classes of shares. In these
circumstances the supposed
appointment of the second “new
directors” by the holders of
either the “A” or “B”
shareholders was a nullity. The
proper thing would have been for
the existing Regulations to be
altered by inserting the
division of the shares into
classes and then later
increasing the directors by the
expedient of each class
appointing the requisite
number. In any even (sic)
Exhibit KD4 had no
regulation/56(a)(1) under which
such appointments could be
made.”
These points
made in the Respondent’s
Statement of Case are valid
ones. KD4 has only 9 paragraphs
and therefore had no regulation
56 under which the new
appointments of “first
directors” was purported to have
been made. If the new
regulations had a regulation 56,
it was not part of what was put
in evidence Exhibit KD4.
Furthermore, the document could
not have legal effect until
registered at the Companies’
Registry and therefore there is
need to establish whether there
was evidence that it was so
registered.
Even if the
new regulations are proved to
have been duly registered at the
companies’ registry, the issue
of sequencing raised in the
Respondent’s Statement of Case
remains relevant. The
regulations had to be made
legally effective first before
powers conferred by them could
be exercised to make new
appointments of directors.
The alleged
lack of registration of the new
Regulations would also have a
fatal effect on Regulation 7 of
these Regulations according to
which the company was now to be
registered with five million
shares of no par value,
3,500,000 of which were to be
“A” shares subscribed by the
second appellant and persons
approved by him and their
transferees or nominees, while
1,500,000 were to be “B” shares
to be subscribed by the Ghana
Timber Marketing Board and/or
any of its subsidiaries.
On this new
Regulation 7, the Respondent’s
Statement of Case makes the
following argument:“ by the
Code.”
To these
points made by the Respondent,
the appellants responded as
follows, in their Reply to the
Respondent’s Statement of Case:
“The new
regulations of the 1st
Respondent/Appellant Company was
adopted pursuant to Section 22
of the Companies Code which
provides thus
“A Company
may by special resolution,
alter or add to its
regulations or adopt new
regulations”
Submit:
In the instant case the Company
adopted new regulations, as an
existing Company registered
under the Code. Therefore
all references to Section 14(c)
and (d), 16(2), 18(1) and 19 are
irrelevant and inapplicable.
Furthermore
Section 19 of the Code is/was a
transitional provision intended
to cater for existing Companies
prior to the
promulgation of the Companies
Code 1963 (Act 179).”
Furthermore,
regarding the alleged
non-registration of the new
Regulations, the appellants
responded as follows in their
Reply to the Respondent’s
Statement of Case:
“At Page 4 of
the Applicant/Respondent’s
Statement of Case, he states in
reference to Exhibits “KD3” &
“KD5” thus:
“…What is
worse, there is nothing on the
face of KD3, or KD5 that any of
them had been registered at the
Companies Registry.”
Submit:
This contention is far from the
truth, since the
Applicant/Respondent himself
admitted under cross-examination
that Exhibit KD3, KD4 & KD5 have
been filed at the Registrar
General of Companies. See Page
92 Lines 25-34 of the record.
Submit:
That once the
Applicant/Respondent admits that
those Exhibits have been
registered at the Registrar
General’s Department since 1981
he cannot reprobate and contend
that there is nothing on the
face to say that it has been
registered.
Submit
further:
that the omnia praesumuntur rule
is applicable to those
Exhibits.”
I proceed
next to examine these contending
views of the parties. To begin
with, were the new Regulations
ever registered at the companies
registry? The evidence relied
on by the appellants in support
of the registration is the
following from the
cross-examination of the
respondent (at p. 92 of the
Record):
“Q. You
signed Exhibit KD3?
A.
Yes.
Q.
KD3, 4
and 5 have been filed at the
Registrar General’s Department?
A.
Yes
they were filed in 1981.”
The issue of
whether the new regulations were
ever registered was not one that
the learned trial judge adverted
to. His findings in connection
with the new regulations were in
the following terms (at p. 182
of the Record):
“…on 1 May
1980, a special resolution was
passed by the company to alter
the regulations on the
shareholding structure and
substitute same with a new one.
All these were shown in Exhibits
KD3, KD4 and KD5. Following
upon this, the second respondent
fully paid for his shares and
was issued a share certificate
on 26 May 1981. As shown in
KD5, the second respondent held
60,000 A Shares, the applicant,
10,000 A Shares and G.T.M.B
30,000 B shares. The applicant
signed same.”
These
findings leave unresolved one of
the central issues raised in
this appeal, namely, that the
new regulations were never
registered and therefore were
legally ineffective. The
learned trial judge assumed that
the regulations had been
registered and therefore his
analysis is based on their being
in force.
The onus of
proof was firmly on the
appellants to prove the due
registration of the new
regulations. The mere
attachment of KD4 to the
affidavit of the second
appellant is insufficient proof
of its due registration. In the
affidavit of the second
appellant in opposition to the
respondent’s application, he
significantly omits to depose to
whether the regulations were
registered at the Registrar
General’s or not. In
paragraphs 20 and 21 of that
affidavit, this is what he
states:
“20. That
I deny the averments in
paragraphs 19 to 21 of the
affidavit and aver that
consequent upon the averments
stated in paragraph 17 supra, a
special resolution was passed by
the 1st respondent
company on 1st May,
1980 approving new regulations
embodying a new shareholding
structure which was substituted
for and to the exclusion of the
existing regulations of the
company. A copy of the special
resolution duly signed by the
applicant and I, regulations 1
to 6 of the new regulations and
the page showing the names of
the subscribers and the
shareholding structure of the
company are herewith attached
and marked “KD3”, “KD4 “ and
“KD5” respectively.
21.
That thereafter I paid my shares
in full and was issued with a
share certificate dated 26th
May, 1981 which was signed by
the Company Secretary and the
applicant and I as directors. A
copy of the share certificate is
herewith attached and marked
“KD.6”.”
I do not
consider that, on the evidence
on record, the appellants have
discharged their burden of proof
on the issue of whether the new
regulations were ever registered
with the Registrar General’s
Department. The respondent’s
statement in cross-examination
that the regulations had been
registered is, on its own, to my
mind, insufficient proof. The
appellants themselves made no
attempt to adduce evidence that
the new regulations had been
registered. This default is, to
my mind, not cured by reliance
on the maxim omnia
praesumuntur rite esse acta,
as the appellants sought to do
in their Reply to the
Respondent’s Statement of Case.
That maxim is ordinarily
understood to refer to a
rebuttable presumption of law
establishing due appointment and
capacity to act. In Ghana’s
Evidence Decree 1975 (NRCD 323),
I believe that this common law
presumption is reproduced as
follows:
“37(1)
It is presumed that official
duty has been regularly
performed.
(2)
This
presumption does not apply to an
issue as to the lawfulness of an
arrest if it is found or
otherwise established that the
arrest was made without a
warrant.”
I fail to see
how this presumption is of any
assistance to the appellants on
the facts of this case.
This appeal
being by way of re-hearing, this
Court, of course, has the power
to make the finding that the new
regulations were never
registered and were therefore
bereft of legal effect. I do so
hold. This implies that the
respondent and the second
appellant remain the only
shareholders of the appellant
company and each have a fifty
per cent interest in the shares
of the company. This position
is not affected by any
acquiescence by the respondent.
Given the voidness of the new
regulations, the acquiescence of
the respondent in the new
arrangement, which was alleged
by the appellants, even if
established, would be legally
ineffective. The alleged
acquiescence cannot cure a
non-compliance with a statutory
obligation.
Even if the
new regulations had been duly
registered, it is doubtful
whether they could lawfully have
re-written history by
substituting a new set of
original subscribers to the
company’s regulations, as they
sought to do. This point is
emphatically made in the
Respondent’s Statement of Case,
as follows:
“Learned
Counsel for the Appellant has
submitted at page 3 of his
Statement of Case for the
Appellant (last line of the last
paragraph) that the alterations
of the Regulations were done
pursuant to section 22 of the
Code.
The truth of
the matter is that the
Regulations were not altered
as alleged. Exhibit KD3 said
new regulations were to be
approved and adopted as the
Regulations of the Company, in
substitution for and to the
exclusion of all the existing
Regulations of the company to
take effect from 1st
May 1980. There is no authority
in section 22 for the company
to do what Exhibit KD3 was
intended to achieve. It is the
Respondent’s submission that
Exhibits KD4 and KD5 were not
authorized by sections 19(1) (3)
and 22 of the Code. Section 22
provides the cases, the mode and
the extent for which express
provision has been made in the
Code for the alteration of the
Regulations. It does not
sanction the near-sacrilege of
manipulating the Regulations for
the collateral purpose of
depriving a member of his stake
in the company with the result
that there are two sets of
first directors and two sets
of subscribers for the company
known as Dupaul Wood Treatment
(Ghana) Co. Ltd. Section 22
cannot be used to rewrite the
history of the company. In
particular, it does not allow
for the alteration of the
Regulations so as to produce a
complete obliteration of those
who were truly the first
directors and the subscribers
(ie the corporators) of the
company.”
In view of my
earlier finding that the new
regulations were never
registered, it is unnecessary to
come to a firm view on the
interesting issue raised by
Respondent in the above passage.
Finally, let
me address the issue of
oppression. This is raised in
Ground (xi) of the Appellants’
grounds of appeal which states:
“The Court of
Appeal misconstrued the meaning
of oppression under Section 218
of the Companies Code 1963 (Act
179)”
Section 218
is in the following terms:
“(1) Any
member or debentureholder of a
company or, in a case falling
within section 225 of this Code,
the Registrar may apply to the
Court for an order under this
section on the ground –
(a)
that
the affairs of the company are
being conducted or the powers of
the directors are being
exercised in a manner oppressive
to one or more of the members or
debentureholders or in disregard
of his or their proper interests
as members, shareholders,
officers, or debentureholders of
the company; or
(b)
that
some act of the company has been
done or is threatened or that
some resolution of the members,
debentureholders or any class of
them has been passed or is
proposed which unfairly
discriminates against, or is
otherwise unfairly prejudicial
to, one or more of the members
or debentureholders.
(2) If
on such application the Court is
of opinion that either of such
grounds is established, the
Court may, with a view to
bringing to an end or remedying
the matters complained of, make
such order as it thinks fit:
and, without prejudice to the
generality of the foregoing may
by order -
(a)
direct
or prohibit any act or cancel or
vary any transaction or
resolution; or
(b)
regulate the conduct of the
company’s affairs in future; or
(c)
provide for the purchase of the
shares or debentures of any
member or debentureholders of
the company by other members or
debentureholders, of the company
or by the company itself and in
the case of purchase of shares
by the company without regard to
the limitations imposed by
sections 59 to 63 (other than
subsections (4) and (5) of
section 59) of this Code.”
This is the
basic statutory framework,
supplemented by the relevant
case law, within which the
respondent’s claim of oppression
by the second appellant is to be
assessed. I have already set
out above Twumasi JA’s views on
the conduct which he considered
sufficient to constitute
oppression. This Court has to
come to a view on whether
Twumasi JA either misconstrued
the meaning of oppression under
section 218 in this connection
or misapplied the concept.
In Mahama
v Soli [1977] 1 GLR 215,
Apaloo JA, as he then was,
delivering
the judgment
of the Court of Appeal, said (at
pl. 233):
“The word
"oppressive" in section 218 (1)
of Act 179 is not a term of
art. In Re H. R. Harmer Ltd.
[1958] 3 All E.R. 689 at p. 690,
C.A. it was said the word must
be construed in its ordinary
sense and means, burdensome,
harsh and wrongful.”
On the facts
of this case, what needs to be
determined is whether, if the
invalid change of the appellant
company’ regulations is ignored,
there is any conduct of the
second appellant which can be
characterised as being
“burdensome, harsh and
wrongful.” On the analysis set
out above, whatever “oppression”
may have been intended through
the purported change in the
regulations did not succeed and
therefore there is no need for
relief against it. The new
regulations are declared void
and the respondent remains a 50%
shareholder of the first
appellant. In the Court of
Appeal, the main factors
identified by Twumasi JA as
persuading him that there had
been oppression by the second
appellant were: the reduction of
the respondent’s shareholding
from 50% to 10%; his removal
from office as a director whilst
he was on a course in the United
States; his removal from the
management of the affairs of the
company; the failure to declare
dividends for no apparent reason
and the role played by the
second appellant’s wife.
The reduction
in shareholding, being void, can
be ignored. Regarding the
respondent’s removal as a
director, this was reversed by
the learned trial judge, who
declared him to be still a
director and ordered that all
his fees in arrears as a
director were to be computed and
paid to him. The learned trial
judge did not, however, reverse
the respondent’s removal from
office as an Executive
Director. His removal from the
management of the affairs of the
company therefore remains.
On the factor
of non-payment of dividends, the
views expressed by both their
Lordships Twumasi JA and Ansah
J., as he then was, are of some
concern to me. Except in
extraordinary circumstances, I
would not consider the
non-payment of dividends to be
an act of oppression. Different
companies have different
policies on the declaration of
dividends. It is a matter of
business policy. If a company
chooses to accumulate its
surpluses and to plough them
back into the business, I do not
see how this becomes an act of
oppression. There is nothing
wrongful, harsh, nor burdensome
about this. There is no legal
obligation to declare
dividends. The board of
directors of a company is
entitled to exercise its
discretion freely as to whether
to declare dividends or to
accumulate profits within the
business for re-investment.
This is a business decision. I
was therefore surprised by the
view expressed by Ansah J, as he
then was, in his judgement in
the trial court that:
“On the issue
of dividends there is no denial
by the respondents that these
have never been paid. I do not
know for sure why dividends have
not been paid. I think
necessary steps must be taken at
once so that within a reasonable
time, dividends are declared and
paid to those entitled to them,
ie those who have paid for the
shares allotted to them.”
This view was
not expressed as an order and
thus can be ignored. It does
however contain the erroneous
assertion that only those who
have paid for their shares are
entitled to dividends, when
declared. This is incorrect in
the light of the exposition of
the law in Adehyeman Gardens
v Assibey (supra).
It will be
recalled also that Twumasi JA,
in the passage from his judgment
that has already been quoted,
relied on non-payment of
dividends as glaring evidence of
oppression. With respect, I do
not share this view, at least
not on the facts of this case.
The funds which have not been
distributed as dividends are
accumulating in the company as
part of the stated capital of
the company to which the
respondent has his entitlement,
for instance with regard to
future dividends or in relation
to receiving his proportionate
part of the proceeds of a
winding up. I do not see the
oppression in this.
Regarding the
conduct of the second
appellant’s wife, the following
findings were made by learned
trial judge (at p. 190 of the
Record) and no considered effort
was made by the Court of Appeal
to challenge these findings on
the basis that there was no
evidence to support them:
“It was
alleged … that the second
Respondent’s wife attended
meetings of managers of the
company even though she was not
a manager; she sold the
Company’s allocation of cement
as her sole business and used
the Company’s vehicle to cart
the cement without paying the
Company for that, and that she
supplied the companies spare
parts and that in 1993 alone,
the spare parts purchase for the
Company was c150m, clearly an
inflated price which reduced the
company’s profits. I considered
these allegations serious enough
and desired a strict proof of
them by the applicant. On the
wife’s alleged presence at
management meetings, I did not
feel convinced that proof of an
isolated instance which the said
wife was at a meeting was enough
to lead to the conclusion that
she attended meetings of the
management. That envisaged a
continuous, repetitive
conduct. I reject that
allegation as being
unsubstantiated. So do I treat
the allegation of the Company’s
cement allegedly taken by the
wife of the second Respondent.
Not even a modicum of evidence
was led in support thereof and I
am not prepared to accept and
therefore label as truth that
deposition by the applicant.
It was also
said that it is “clear” that in
1993 prices of spare parts to
the company were inflated by the
same woman. That would also
have been serious enough for the
second respondent to let his
wife treat the company that way.
But that also called for a
proof. No evidence was led on
the type of spare parts bought
and their quantity or their fair
or market price for the Court to
compare same with the price sold
by the woman so as to see
whether or not she inflated the
prices and therefore cheated the
company in any way. That
allegation therefore is not
proved and is therefore
rejected.”
From these
findings of the learned trial
judge, it is clear that it would
be unsafe to make any
determination of oppression
based on the conduct of the wife
of the second appellant.
Accordingly, from all the
factors relied on by Twumasi JA
to make his determination of
oppression, the only one which
survives scrutiny is that
relating to the removal of the
respondent from the management
of the appellant company (i.e.
his removal as an Executive
Director). In Okudjeto v
Irani Brothers [1874] 1 GLR
374 at p. 385, Robert
Hayfron-Benjamin J., as he then
was, said:
“It seems
therefore that a resolution to
remove a director can fall
within the provisions of section
218 if it is found to be
oppressive, or prejudicial, or
discriminatory, or in disregard
of the interests of a member.”
However, on
the facts of this case, I do not
consider that the removal of the
respondent from his position as
Executive Director (and thus
from the management of the
appellant company) was
oppressive. I am in agreement
with the learned trial judge on
this issue and quote below with
approval (except for a
particular passage which I will
discuss later) his considered
view on this matter (see p. 195
et seq. of the Record):
“I now come
to consider the purported
retirement of the applicant from
the company. This point has not
been denied by the respondent.
The reason offered was that he
had attained the age of 60 and
it was therefore compulsory for
him to retire. It was clear
that the applicant was a member
of the company’s senior staff. I
cannot but agree with this for
the applicant was an Executive
Director of the company and his
position was governed by section
192 of the Code. He could hold
an office for profit in the
company other than the office of
an auditor, even as he hold
(sic) the office of a director.
It is usual that he works under
some terms or conditions of
service. According to exhibit
NBA 10, the terms of the
applicant’s employment were
contained in the “Conditions of
Service for Management,
Personnel and Senior Staff of
Dupaul”./ Article 19B(1)(b)
thereof provided that:
“A
Manager/Officer shall be deemed
to retire from the service of
the company on compulsory
retirement based on statutory
provision:
-
55
years for women
-
60
years for men.
The
applicant’s complains (sic)
against his retirement and his
assertion that it constituted
oppression must be seen as being
a virtual claim that he has been
wrongfully dismissed as an
employee of the company. In the
first place, as seen already,
such claims do not fall under
section 218. In other words it
did not affect the applicant as
a member of the company but
rather as an employee. I will
therefore not say that his
retirement, even if wrongful
amounted to oppression. That
aside, I am of the view that an
employee or an office holder in
a company who complains that his
retirement from office is
wrongful, must prove the terms
of his employment and then also
that his retirement was in
breach of the said terms or that
it contravened some statutory
provision for the time being
regulating employment: see
Morgan and ors v Parkinson
Howard Ltd. [1961] GLR 68. He
may also show that the
retirement is against a common
law principle. Section 216 of
the Companies Code also said
that:
“The rights
and duties and liabilities of
officers and agents of companies
shall continue to be governed by
the rules of the common law and
equity relating to principal and
agent and master and servant
save in so far as such rules are
inconsistent with the express
provisions of this code.”
It is not for
the respondent to justify the
retirement. It is rather for
the applicant to show its
wrongfulness. The applicant did
not produce any evidence on his
terms of contract and why he
claimed his retirement was
wrongful. …
I must make
it plain however that under the
terms or conditions of service,
the applicant could be retired
as a worker, or Executive
Director but not as a Director.
Directors are removed from
office under section 185 of the
Code. There is no evidence that
the applicant was removed in
accordance with these provisions
and I therefore hold that if he
was removed as a Director that
was wrongful. In this case, I
think he is deemed as still
being a director of the first
respondent company. All his
directors fees not paid to him
from date of hi s
removal as a
director to date are to be paid
to him.”
The only part
of this passage from the
judgment of the learned trial
judge with which I disagree is
that in which he states that
because the compulsory
retirement did not affect the
respondent as a member of the
company but rather as an
employee, that retirement, even
if wrongful, could not amount to
oppression. That is an
incorrect statement of the law
because under section 218, if
the directors exercise their
powers in relation to a member
in a manner that is oppressive
to such member as an officer of
the company, this can amount to
oppression. Although the
section 218 procedure may only
be initiated by a member or
debentureholder or, in a
particular defined instance by
the Registrar, once the action
has been initiated, section
218(1)(a) makes it clear that
the ground for a court’s
intervention includes the
exercise of the powers of the
directors in a manner that is
oppressive “to one or more of
the members or debentureholders
or in disregard of his or their
proper interests as members,
shareholders, officers,
or debentureholders of the
company”. (Emphasis supplied).
“Officer” is defined in the
First Schedule of the Companies
Code 1963 as meaning: “…any
director, secretary or employee
of that body corporate appointed
under a power contained in any
instrument,…” From this
definition, it is clear that a
member can be oppressed in his
or her capacity as a director,
whether executive or not. I
would thus overrule the contrary
views of Anin JA on this issue,
expressed when delivering the
lead judgment of the Court of
Appeal in Okudjeto v Irani
Brothers [1975] 1 GLR 96 at
pp 115-116. With respect, Anin
JA made an error in importing
Elder v Elder 1952 S.C. 49
into Ghanaian law, when as he
himself acknowledged, it was
based on the old section 210 of
the English Companies Act 1948.
Professor Gower in his Comment
on section 218 of the Companies
Code 1963 in the Final Report
of the Commission of Enquiry
into the Working and
Administration of the Present
Company Law of Ghana
indicates that the Ghanaian
provision was intended to
reverse the effect of Elder v
Elder. The relevant part of
the Comment is as follows:
“In this
Code, following the
recommendation of the N. Irish
Committee, “oppression” is
supplemented by further words
designed to make the ambit of
the section wider and clearer.
Subsection (1)(a) also covers
the situation where there has
been a disregard of the proper
interests of members or
debentureholders whether in
their capacity of members,
debentureholders or officers.
In a private company it may well
be oppressive to remove a member
from his managerial position,
yet Elder v Elder 1952
S.C. 49 held that the English
section 210 did not cover this.”
Thus, a
member may suffer s. 218
oppression qua director.
However, as
shown by the learned trial judge
in the passage above, there is
no oppression in an Executive
Director being required to
proceed on compulsory retirement
in accordance with the general
terms and conditions of
employment of the company.
Accordingly, I do not find that
the removal of the respondent
from his position as an
Executive Director is a basis
for finding that the appellants
were guilty of oppression.
Given my
views on the law and the
evidence expressed above, it is
clear that, without any need to
invoke section 218 of the
Companies Code 1963, the
respondent has received the
benefit of de facto
relief from the alleged
oppressive conduct of second
appellant. In these
circumstances, can it be said
that the second appellant’s
behaviour was nevertheless
oppressive within the meaning of
secition 218?
The
respondent argues, in effect,
that it can and that the second
appellant’s behaviour was
rightly held by the Court of
Appeal to be oppressive. For,
having made the arguments about
the voidness of the new
regulations, which have been
upheld above, he continues to
press for an upholding of the
Court of Appeal’s finding of
oppression, asserting in his
Statement of Case that:
“The
Respondent’s case is that the
second Appellant embarked on a
systematic conduct of the
affairs of the company in total
disregard of the proper
interests of the Appellant both
as a member and also a
director. As has been stated
earlier the parties formed this
company in 1978 as the first
shareholders and directors. The
Second Appellant had persuaded
the applicant that it was
“their project” (page 117
lines 19-26). Each subscribed
for 50,000 shares for a
consideration of c50,000.00).
The evidence is that the second
Appellant was the Managing
Director and the Applicant was
Executive Director. See page 4
paragraph 7 and page 95 lines
27-29. Indeed between 1981 and
1991, the Respondent was one of
the signatories to the
companny’a account. (page 96
lines 19-23).
Again at page
124 lines 1-9 and page 126 lines
1-15, the second Appellant
admitted that the Respondent had
a vested interest in the
business. But at page 123
lines 2-9, the second Appellant
was now saying that the
Respondent was not even a
director but an employee. At
page 120 the second Appellant
claimed that he formed the
company and made himself the
Managing Director and that it
was he who made “Asare Executive
Director”. Page 121, lines
17-20 when the second Appellant
was asked which shareholders
passed the resolution to remove
the Applicant as a director, he
replied: “I did it, the sole
shareholder of the
company”. Pages 121 lines 35-
page 122 (entire page) shows
that by October 1992, the second
Appellant was regarding the
company as his sole property and
that the Respondent was an
ordinary employee “who was
principally running my errands”.
Page 123 lines 2 – 8. What else
is needed to establish
oppression?
Every aspect
of the Second Appellant’s
behaviour towards the Respondent
smacked of oppression. The
Respondent was removed as a
director when he was on a course
in the USA. Reading through
pages 121 – 124 leaves one with
the saga of a man consumed by
the sad miasma of personal
aggrandizement determined to
oppress the Respondent. And he
was not even bold to own up to
his misdeeds. Every wrongful
act had to be elicited from him
by sustained cross-examination
after he had lied about it.”
The Statement
of Case then proceeds to dilate
on the other alleged acts of
oppression relied on by Twumasi
JA, namely, non-payment of
dividends; Mrs. Duffour’s
alleged conduct; the removal of
the respondent from any
influence over the conduct of
the affairs of the company and
the adoption of new regulations
seeking to reduce the
shareholding of the respondent.
There is nothing new here and
the merits of these claims of
oppression have already been
evaluated above.
The
Appellants, of course, had
counter-arguments in their
Statement of Case as to why the
Court of Appeal got it wrong in
deciding that the respondent was
the victim of oppression.
Regarding the respondent’s
removal as an Executive
Director, the Appellants’
argument stated in their
Statement of Case was:
“Submit:
Section 218 of the Code is aimed
at providing protection against
illegal or oppressive action
against a member or members of
the Company or Directors, not
Executive Directors with service
contracts as in the instant
case.”
Also, in the
Appellants’ Reply to the
Respondent’s Statement of Case,
they make the following
argument:
“It is
pertinent to note that the
relief sought by the Respondent
in respect to oppression can be
found at Page 2 Lines 1 – 7 of
the record which states thus
“That the
affairs of the 1st
Respondent Company are being
conducted and the powers of the
Directors are being exercised in
a manner oppressive to the
Applicant in disregard of his
legitimate interest as a
Shareholder of the Company.”
It is
significant to note that the
Respondent went to Court to
complain about oppression
as a member of the 1st
Appellant Company and therefore
all arguments about oppression
as a Director is an afterthought
and must not be countenanced.
In any event the trial Court
rightly concluded that
Applicant/Respondent has not
been removed as a Director.”
The point
made by the appellants that
section 218 is not intended to
provide protection against
oppressive action aimed at a
director is erroneous, as
already pointed out (supra).
Also, even though the relief
sought by the respondent was
against oppression in his
capacity as a member, if in fact
the evidence discloses
oppression meted out to him in
his capacity as a director,
there is no reason why this
Court cannot give him relief.
Nevertheless,
I am persuaded that there has
been no oppression of the
respondent. I am inclined to
the view that although the
totality of the conduct of the
second appellant could be
interpreted as attempted
oppression, objectively that
endeavour to oppress never
actually succeeded, in the light
of the conclusions I have
reached above. Accordingly, I
would reverse the Court of
Appeal’s finding of oppression
and substitute for it:
1.
a
declaration that the respondent
is a shareholder and a member of
the first appellant and holds
50% of its issued share capital;
a declaration
that the new regulations adopted
on 1st May 1980 were
never registered with the
Registrar General’s Department
and are therefore void and of no
effect;
2.
a
declaration that the purported
removal of the respondent as a
director was unlawful and so
void.
I would grant
the orders applied for by the
Respondent, except the
following:
“That the
First or Second Respondent [ie
Appellants before this Court] be
ordered to purchase the
Applicant’s shares and future
prospects at a fair valuation.”
Thus the
other two orders which were
granted by the learned trial
judge are confirmed, namely:
1.
“That
the Applicant’s name be entered
in the Register of Members of
the First Respondent Company
[ie. The Appellant Company
before this Court] pursuant to
section 35 of the Companies Code
1963 (Act179).
2.
That
the Applicant be paid all the
directors’ fees and allowances
which were discontinued as a
result of his purported removal
as a director of the company.”
Since the
effect of this judgement is to
restore the parties to the
status quo ante 1st
May 1980, except for the
respondent’s loss of his
Executive Director position,
there is an opportunity for a
fresh start. It would not make
sense for the Appellants to be
compelled to buy the
Respondent’s interest in the
company. Moreover, that remedy
is one that arises out of a
finding of oppression under
section 218, which this judgment
has not made. (See Okudjeto
v Irani Brothers [1975] 1
GLR 96 at p. 116 where the Court
of Appeal held that an order for
a remedy under section 218(2),
including for the compulsory
purchase of the shares of a
member, may only be made when
the court is satisfied that an
application under section 218(1)
has been made out.) If the
original partners are unable to
make their fresh start work,
then they may want to reach an
arrangement between themselves
as willing buyer and seller.
In the
result, I would allow the appeal
against the judgment of the
Court of Appeal in part. The
sums adjudged payable are to
bear interest in accordance with
the Court (Award of Interest and
Post Judgment Interest) Rules,
2005 (CI 52).
DR. S. K. DATE-BAH
JUSTICE OF THE SUPREME COURT
S.A.B.
AKUFFO(MISS)
JUSTICE
OF THE SUPREME COURT
G. T.
WOOD(MRS.)
JUSTICE OF
THE SUPREME COURT
R. T.
ANINAKWAH
JUSTICE OF
THE SUPREME COURT
S. K. ASIAMAH
JUSTICE OF
THE SUPREME
COURT
COUNSEL:
Mr. Ebow
Quarshie for Appellant
Mr. Kwame
Gyan for Respondent.
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