Company law –
Shareholder - Transfer of shares
– Capacity - Breached of
fiduciary duties - breach of
Companies regulations - Whether
there has been a valid offer of
sale or transfer of shares to
the plaintiffs - Whether or not
the sale of the shares of the
Central Regional Development
Corporation in Twifo Oil Palm
Plantations Limited amounts to a
variation of the plaintiff’s
rights without its consent -
Whether or not the said sale is
contrary to law and inconsistent
with the regulations of the TOPP
- Whether or not the Divestiture
Implementation Committee had no
capacity to sell or transfer the
shares of CEREDEC - Whether the
plaintiffs as shareholders can
be deemed to have waived their
pre-emptive rights under the
Regulation 32 (a) of TOPP and
were thus stopped from claiming
under those rights - Whether or
not the 2nd
Defendant’s (Unilever) are
shareholders and members of TOPP
HEADNOTES
At the 100th
Board meeting of TOPP held on
April 2nd 1998
(exhibit B) the Board purported
to have approved “the sale of
40% of capital in TOPP out of
the 80.46% shares held by the
Government to Unilever” and
authorised the transfer of
shares to Unilever all with
retrospective effect from 4th
March 1998. The protest of the
plaintiff’s nominees on the
Board was ignored because as
advised by the Chairman of the
meeting, the members
representing the Government’s
interest on the board would not
go against the position of the
Government. The Chairman then
advised “that P.S. Investments
Limited had the right to seek
any legal redress if found
necessary under the laws of the
Republic of Ghana in Court”. The
plaintiff therefore caused the
present action to be instituted
in accordance with the
provisions of the Companies Act,
1963 Act 179 for and on behalf
of itself and on behalf of all
shareholders of TOPP except
CEREDEC. The action is against
CEREDEC, Unilever, DIC, The
Attorney General and all the
directors of TOPP except Mr.
John Amakye, the plaintiff’s
nominee at the time. The learned
trial Judge, in his judgment
dated 21st June 2007
dismissed all the reliefs of the
plaintiffs An appeal against the
said judgment of the High Court
was also dismissed
HELD
In
conclusion, there will be
judgment for plaintiffs as
follows:-
In the
result, the plaintiffs succeed
with their appeal, and the
judgment of the Court of Appeal,
dated 23rd March 2010
is hereby set aside, and by
necessary implication, that of
the trial High Court, dated 21st
June 2007 is also set aside.
Instead,
there will be judgment for the
plaintiffs in respect of their
amended writ of summons as
follows:
1.
The plaintiffs are entitled to
the grant of relief I of the
endorsement as the sale of the
shares of the 1st
defendants in TOPP amounted to a
variation of the rights of the
plaintiffs without their
consent.
2.
There is a further declaration
that the sale of the 1st
defendant’s shares in TOPP is
contrary to the Companies Act,
1963 Act 179 and Regulation 32
(a) of the 14th
Defendants, TOPP.
3. A
further declaration that the
Board resolutions of TOPP
purported to have been passed on
April 22nd 1998 (100th
emergency board meeting)
approving the 50% sale of the
shares of the 14th
Defendant company is void and of
no effect, as that Board
resolution is incapable of
amending Regulation 32 (a) of
TOPP’s Regulation and the
protection afforded minority
rights under the Companies Act,
1963 Act 179.
4.
From the analysis made in the
judgment, it follows that the
purported sale of the shares of
1st Defendant’s to 2nd
Defendant’s must be set aside
and they are indeed hereby set
aside.
5.
Relief five (5) of the amended
writ is granted in its entirety.
6. In
view of the conduct of the 5th,
6th 7th, 8th,
9th, 10th,
11th, 12th
and 13th defendants,
who are were at all material
times directors of TOPP, which
conduct has been held to have
been in bad faith, in the
transfer and sale of the shares
of the 1st Defendants
to the 2nd
Defendants, the said Directors
must be deemed to have acted in
breach of their duties as
directors.
7. In
view of our comments in the
judgment, relief (7) seven of
the amended writ of summons is
dismissed as inapplicable as it
is inappropriate.
8.
Reliefs (8) eight and (9) nine
of the amended writ of summons
are accordingly granted.
9. In
granting relief (10) ten of the
amended writ of summons, we are
of the opinion that, the relief
should be granted in respect of
the first part of Regulation 32
(a) which is that the said
shares shall not be transferred
unless the existing
shareholders, which includes the
plaintiffs shall first have been
offered their right, failing
which the second leg of the
Regulation which is a transfer
of the class or classes in the
proportion of their existing
shareholding structures shall be
considered.
Whilst this
judgment, might be deemed to
have been a logical sequence to
the advice proffered by the
Board Chairman of TOPP at all
material times to the plaintiff
in the following words:-
“that P.S
Investments Limited has the
right to seek any legal redress
if found necessary under the
Laws of the Republic of Ghana in
Court”,
which was an
apparent response to the protest
of the plaintiff’s nominee on
the TOPP Board to the indecent
and hasty sale of the 14th
Defendants shares to the 2nd
Defendant, we still believe that
all is not lost for the purposes
of having a settlement in this
matter.
We will on
our part advice the parties to
resort to ADR.
STATUTES
REFERRED TO IN JUDGMENT
Companies
Code 1963, Act 179
Divestiture
Implementation Committee Act,
1993 (PNDCL 326),
CASES
REFERRED TO IN JUDGMENT
Mellish L.J.
in McDoughall v Gardiner (1875)
I CHD 13
McDougal v
Gardiner (1875-76) L.R. I ch. D.
13
Luguterah v
Northern Engineering Co. Ltd. &
Others [1978] GLR 477 H.C
MacDougall v.
Gardiner (1875) 1 Ch. D 13
Mozeley v.
Alston (1847) 41 ER 833
Salomon v.
Salomon [1897] A.C. 22
Edwards v.
Halliwell (1950) 2 All ER 1064
Prudential
Assurance v. Newman (1982) Ch.
204
Estamanco v.
Greater London Council (1982) 1
All ER 437
Menier v.
Hooper’s Telegraph (1874) 9 Ch
App 350
Heron
International v. Lord Grade
(1983) B.C.L.C. 244
Kwan v.
Nyieni (1959) GLR 67 CA
Appenteng v.
Bank of West Africa (1972) 1 GLR
153, CA
Pinamang v.
Abrokwa (1992) 2 GLR 384, CA
Foss v.
Harbottle (1843) 67 E.R. 189
Foss v.
Harbottle (1843) 2 Hare 461
Kludjeson International v.
Celltell Ltd, HC Suit No FT(IV)
12/2001, 27th April,
2005
Boohene v. Ghana Union Assurance
Suit No. ACC 7/2005, 18th
January, 2006.
Harmer Ltd. [1959] 1 W.L.R. 62
Edwards v Halliwell [1950] 2 ALL
E.R 1064
Barrett v
Duckett [1995] 1 BCLC 243 at 249
-250
Ampratwum
Manufacturing Co. Ltd v.
Divestiture Implementation
Committee (2009) SCGLR 692
Gregory v
Tandoh IV and Hanson [2010]
SCGLR 971
Achoro v
Akanfela [1996-97] SCGLR 209
Fosua & Adu
Poku v Dufie (Deceased) and Adu
Poku Mensah [2009] SCGLR 310 at
313
BOOKS
REFERRED TO IN JUDGMENT
DELIVERING
THE LEADING JUDGMENT
DOTSE JSC:
COUNSEL
FELIX NTRAKWA
WITH HIM KWADWO GYASI NTRAKWA
FOR THE PLAINTIFF/
APPELLANT/APPELLANT.
NII ODOI
ODOTEI WITH HIM MARTIN KPEBU FOR
THE 2ND DEFENDANT/
RESPONDENT/RESPONDENT.
CECIL
ADADEVOR (SENIOR STATE ATTORNEY)
FOR THE 3RD
DEFENDANT/
RESPONDENT/RESPONDENT.
_____________________________________________________________________
J U D G M E N
T
_____________________________________________________________________
DOTSE JSC:
In view of
the peculiar facts and
circumstances of this appeal, we
deem it expedient to state in
some detail, the facts of the
case as we deem it relevant and
applicable to the issues germane
to the resolution of the appeal
herein.
The
Plaintiff/Appellant/Appellant,
hereafter referred to as
Plaintiff is a shareholder in
Twifo Oil Palm Plantation
Limited (TOPP) a company
incorporated under the laws of
Ghana and engaged in the
cultivation of oil palm at the
TOPP who are themselves the 14th
Defendants/Respondents/Respondents
and together with the other
Defendants are hereafter
referred to simply as 1st
– 14th Defendants as
appearing above.
In order to
understand the dynamics of the
shareholding structure of the 14th
Defendant, it is proper to set
out in detail the said
shareholding structure as
provided in the record:
i.
Central Regional Development
Corporation
- 80.46%
(CEREDEC) – (1st
Defendant)
ii.
State Insurance Company
(SIC)
- 2.21%
iii.
Paterson Zochonis
PLC
- 1.47%
iv.
National Investment
Bank
- 0.33%
v. PS
Investments
Limited
- 15.53%
vi.
Mobil Oil Ghana
Limited
- 0.33%
The fifth,
seventh, eighth, ninth, tenth,
eleventh and twelfth defendants
were at all material times
directors of TOPP. The
thirteenth defendant reputedly
held himself out as a director.
It is to be
noted that the shareholders of
TOPP are required by the
Regulations of TOPP to appoint
directors to represent their
interest on the board.
At various
times, Unilever Ghana Limited
(Unilever), the second
defendants herein showed
interest in the acquisition of
shares in TOPP. Unilever
discussed the possibility of
acquiring the shares of Paterson
Simons & Co (African) Ltd. the
predecessor of the plaintiff but
no deal was concluded. Unilever
also attempted to acquire the
shares of SIC without success.
When Unilever again failed to
acquire the shares of Mobil Oil
Ghana Limited (Mobil), through
its subsidiary GBO Invesments
Ghana Limited (GBO) because the
Board considered Mobil’s offer
contrary to Regulation 32 (a) of
the Regulations of TOPP, an
action was brought by GBO in the
High Court, Accra against TOPP
and Mobil.
Whilst GBO’s
action against TOPP and Mobil
was still pending, the Chairman
of the Board of Directors
(Board) of TOPP instructed the
Company Secretary of TOPP to
write to the shareholders of
TOPP about the “Government of
Ghana shares” in TOPP. The Board
Secretary wrote exhibit ‘7’
dated 29/10/1997 to individual
directors of TOPP representing
the interest of shareholders of
TOPP except CEREDEC.
For ease of
reference the relevant part of
exhibit ‘7’ is reproduced below:
“Mr. E.R.M. LYNE
- PS Investment Ltd.
Mr. S. A Dua
- State Insurance
Corporation
Mr. P.M.
Boyce
- Paterson Zochonis
(PZ) Ltd.
Dear Sir,
RE: SALE OF
GOVERNMENT SHARES IN TOPP
As directed
by the Board Chairman (reference
Hon. Ibrahim Adam’s letter
TOPP/BC/97/01 dated 23/10/97,
copy attached) interested
Shareholders are advised to
submit their offer for
Government shares of 643,652,204
in TOPP or proportion thereof in
accordance with Clause 32(a) of
the Company’s Regulations.
The offer
should be addressed to the Board
Chairman, Twifo Oil Palm
Plantations Ltd. for the
Attention of the Company
Secretary and received by
November 30, 1997.
Thank you:
Yours
faithfully
Twifo Oil
Palm Plantations Ltd
Signed by:
(Dr. B. OMANE-ANTWI)
COMPANY
SECRETARY
Cc: All
Directors, TOPP Ltd.
The Executive Secretary
Divestiture Implementation
Committee
Accra
The Hon. Minister
Ministry of Finance
Accra
Upon receipt
of Exhibit ‘7’ the plaintiff
wrote Exhibit ‘E’ in response
and we quote the relevant part
below:
Monday,
December 15, 1997
The Executive
Secretary
Divestiture
Implementation Committee
F35/5 Ring
Road East (North Labone)
P. O. Box C
102
Cantonments
Accra
Dear Sir,
RE: SALE OF
GOVERNMENT SHARES IN TOPP
I refer to
your letter with reference
DIC/053/010 of November the 27th
1997, which was went to me by
the Company Secretary of TOPP
Ltd. Under cover of TOPP letter
dated the 28th
Novemeber 1997 and referenced
TOPP/CS/97/02, in respect of the
above.
I wish to
inform you that in accordance
with the provisions of the
Regulations of TOPP Ltd.
regarding “Transfer and
Transmission of Shares” my
company PS Investment Ltd. may
exercise its rights as and when
required.
Thank you,
Yours
faithfully
Signed by
Edward Lyne
SIC also
wrote Exhibit “D” dated
17/11/1997 in response and its
reads as follows:-
The Board
Chairman
Twifo Oil
Palm Plantation Ltd.
P. O. Box 138
Cape Coast
Attention:
Company Secretary
Dear Sir,
RE: SALE OF
GOVERNMENT SHARES IN TOPP
We
acknowledged, with thanks,
receipt of your letter
referenced TOPP/CS/97/1 dated 29th
October 1997 in the above
regard.
The
Management of SIC hereby
indicates its interest in
acquiring a proportionate part
of the Government’s shares of
643,652,204 in TOPP.
It will
therefore be appreciated if you
can kindly communicate to us the
offer price as soon as same has
been fixed.
We look
forward to hearing from you at
your earliest convenience.
Thank you.
Yours
faithfully,
For: SIC
Signed by
W.A.K. FIADZIGBEY
Director,
Legal Services
Cc:
Mr. E.R.M.
Lyne
- PS Investments Ltd.
Mr. S. A.
Duah
- State Insurance
Corporation
Mr. P.M.
Boyce
- Paterson Zochonis
(PZ) Ltd.
Mr. Nelson
Kyei
- National Investment
Bank
The Executive
Secretary
Divestiture
Implementation Committee
Accra
The Hon.
Minster
Ministry of
Finance
Accra”
It is also
recorded in the minutes of the
97th TOPP Board
meeting held on March 4th,
1998 (Exhibit 1) as follows:
iii.
That Company Secretary was
initially asked to invite
existing shareholders to bid
with a closing date of November
30, 1997. The said closing date
was further extended by DIC to
December 15, 1997.
iv.
That bids were opened on
December 30, 1997 with the
Company Secretary in attendance.
v.
That offers received were
a.
Unilever Ghana Limited offered
US$7.2 million (Seven Million
Two Thousand US Dollars) for 40%
equity share holding in TOPP.
b.
Siat offered US$3 million (Three
million US Dollars) for 40%
equity share holding in TOPP.
c.
P.S Investment Ltd. advised in a
letter that they would make an
offer at the appropriate time.
iv.
That after evaluation of the
Bids, Unilever was ranked first
and its offer recommended to the
President of the Republic for
approval.
v.
That the President duly approved
the offer of Unilever as advised
in a letter before members.
vi.
That in accordance with the
regulations of the Company,
there was the need to ratify the
approval of the partial sale of
GOG Shares to Unilever Ghana
Limited.
The nominee
of the plaintiff on the Board of
TOPP protested that the
procedure used by DIC was
contrary to Regulations 32 (a)
of the Regulations of TOPP.
By a letter
dated March 20th 1998
addressed to the Board Chairman
of TOPP and referred to in the
minutes of the 99th
Emergency Board meeting of TOPP
(exhibit 4) Divestiture
Implementation Committee (DIC)
requested TOPP to issue a share
certificate to “Unilever as a
matter of urgency”. At page 5 of
exhibit 4 it is recorded that:
2.03.3 Members indicated
strongly:
i. That it
would not be in the interest of
the Board to issue the share
certificate now in the face of
mounting reservations and legal
issues
At the 100th
Board meeting of TOPP held on
April 2nd 1998
(exhibit B) the Board purported
to have approved “the sale of
40% of capital in TOPP out of
the 80.46% shares held by the
Government to Unilever” and
authorised the transfer of
shares to Unilever all with
retrospective effect from 4th
March 1998. The protest of
the plaintiff’s nominees on the
Board was ignored because as
advised by the Chairman of the
meeting, the members
representing the Government’s
interest on the board would not
go against the position of the
Government.
The Chairman
then advised “that P.S.
Investments Limited had the
right to seek any legal redress
if found necessary under the
laws of the Republic of Ghana in
Court”.
The plaintiff
therefore caused the present
action to be instituted in
accordance with the provisions
of the Companies Act, 1963 Act
179 for and on behalf of itself
and on behalf of all
shareholders of TOPP except
CEREDEC. The action is against
CEREDEC, Unilever, DIC, The
Attorney General and all the
directors of TOPP except Mr.
John Amakye, the plaintiff’s
nominee at the time.
The above
constitute the board room
wranglings that led the
plaintiffs to institute this
action in the High Court
claiming as per their amended
writ of summons the following
reliefs:-
1.
A declaration that the purported
sale of
the shares of the Central
Regional Development Corporation
(CEREDEC) in Twifo Oil Palm
Plantations Limited (TOPP)
amounts to a variation of the
plaintiff’s rights without its
consent.
2.
A declaration that the purported
sale of the shares of Central
Regional Development Corporation
(CEREDEC) in Twifo Oil Palm
Plantations Limited (TOPP)
is
contrary to law and inconsistent
with the regulations of the TOPP.
3.
A declaration that the board
resolutions of TOPP purported to
have been passed on April 22,
1998 (100th emergency
board meeting) approving the
sale of 50% of the shares of
Central Regional Development
Corporation (CEREDEC) in TOPP
are void and inconsequential.
4.
An order setting aside the
purported sale of the shares of
CEREDEC in TOPP to Unilever
Ghana Limited.
5.
An order cancelling the share
certificate issued by TOPP to
Unilever Ghana Limited.
6.
A declaration that the fifth,
sixth, seventh, eighth, ninth,
tenth, eleventh, twelfth and
thirteenth defendants who are
members of the board of
directors of TOPP acted in bad
faith by approving of the sale
and transfer of the shares in
CEREDEC and are also in breach
of their duties as directors.
7.
A declaration that
the
Divestiture Implementation
Committee had no capacity to
sell or transfer the shares of
CEREDEC.
8.
Perpetual injunction restraining
Unilever Ghana Limited from
holding itself out as
shareholder of the Twifo Oil
Palm Plantations Limited (TOPP).
9.
A declaration that Unilever
Ghana Limited is not a
member/shareholder of Twifo Oil
Palm Plantation Limited and that
the shareholders existing at the
time of the purported sale of
the shares of CEREDEC in TOPP to
Unilever Ghana Limited have
equitable interest in the said
shares of CEREDEC in TOPP
purportedly sold to Unilever
Ghana Limited and in priority to
the interest of Unilever Ghana
Ltd.
10.
An order directing CEREDEC to
offer in accordance with the
Regulations of TOPP, 40% of the
shares held in TOPP prior to the
purported sale by DIC to
Unilever Ghana Limited, to the
shareholders of TOPP existing at
the time of the purported sale
in the proportion in which such
shareholders held shares and at
the same price at which the said
shares were purportedly sold to
Unilever Ghana Limited.”
At the trial,
the Plaintiff’s representative
gave evidence and thereafter the
plaintiff’s called two witnesses
and tendered several documents
which we will be referring to in
this judgment.
The 2nd
Defendant testified through its
then Chairman, Mr. Ishmael
Yamson. The 5th to
the 13th Defendants
who were at all times Directors
of TOPP never attended court and
thus did not give any evidence
during the trial.
The 4th
Defendants, Divestiture
Implementation Committee was
also represented by Mrs. Yaa
Jakobo.
The learned
trial Judge, in his judgment
dated 21st June 2007
dismissed all the reliefs of the
plaintiffs
and
summarised his reasons for so
holding in the following terms:
“From the
nature of plaintiff’s claim as
could be gathered from the
reliefs sought, plaintiff is
calling for the setting aside of
the sale and transfer of the 40%
CEREDEC shares to Unilever
because there were
irregularities in the sale which
made it impossible for it to
exercise its pre-emptive rights.
Since it is an action to seek
redress on the abuse of its
alleged rights, it could be said
that the action falls within the
exception to the FOSS V
HARBOTTLE rule and for that
matter plaintiff did not falter
in coming to Court.
The question
however is; can plaintiff
succeed in this action?
Plaintiff
mentioned two main
irregularities. One of the
alleged irregularities was that
it was not CEREDEC that offered
the shares for sale but an agent
of the Government (i.e. DIC)
when the shares did not belong
to Government. That was the
reason why plaintiff said it
refused to partake in the sale,
which it considered irregular.
The second
was that the purported sale
offended the Code and the
Regulations of TOPP because the
shares were not offered to the
existing shareholders as was
provided in the Regulations.
The leaned
trial Judge after recounting the
reliefs which plaintiff’s
claimed before the court
continued as follows:-
“In the view
of this court, plaintiff cannot
succeed in any of the reliefs
sought. By plaintiff’s own
admission, the sale to Unilever
of the shares of CEREDEC did not
amount to a variation of his
rights. Again, the evidence
before the court does not
suggest in any way that
plaintiff was prevented from
exercising its pre-emptive
rights. Plaintiff was giving
(sic) every opportunity to
either acquire any or all the
shares CEREDEC was selling
through a procedure plaintiff
and other minority shareholders
suggested but it failed to
exercise that right when given
the option.”
The learned
trial Judge then proceeded to
analyse why in his view the
plaintiffs, as minority
shareholders should be deemed
as having endorsed the bidding
process for the transfer of the
1st Defendant’s
shares, continued the judgment
in the following terms:-
“Quite apart
from the fact that plaintiff is
stopped from complaining about a
procedure it contributed in
introducing in the divestiture
of the shares in question to
Unilever, and plaintiff himself
having admitted during cross
examination that the irregular
procedure he was complaining of
is capable of being ratified by
a Special resolution of TOPP in
a general meeting and that the
vote of CEREDEC alone could pass
that Special resolution, there
is no need for this court to
interfere in what the Company
has done as after all, it could
do it afterwards.”
To use the
words of
Mellish L.J. in McDoughall v
Gardiner (1875) I CHD 13 @ P. 25
(quoted by counsel for the 2nd
defendant in his written
address):
“If something
has been done irregularly which
the majority are entitled to do
regularly, or if something has
been done illegally which the
majority of the company are
entitled to do legally, there
can be no use having litigation
about it, the ultimate end of
which is that a meeting is
called and the majority gets its
wishes.”
Plaintiff’s
action therefore failed from the
onset and I do not hesitate in
dismissing it. It is accordingly
dismissed.
Plaintiff to
pay costs of ¢5 million to each
of the defendants.”
An appeal
against the said judgment of the
High Court was also dismissed
by
the Court of Appeal per its
judgment dated 23rd
March, 2010. The instant appeal
is therefore one against this
Court of Appeal judgment in
which the plaintiff has filed
the following as the grounds of
appeal.
1. By
various erroneous
pronouncements, the learned
Justices of Appeal misdirected
themselves in several respects
on the relevant and applicable
laws including those regarding
the institution of
representative action with the
result that the appellant’s
appeal was erroneously and
unjustly dismissed.
2.
Like the trial judge, the
learned Justices of Appeal
allowed themselves to be misled
by a misquoted statement
attributed to Mellish L.J. in
the case of
McDougal
v Gardiner (1875-76) L.R. I ch.
D. 13 to erroneously and
unjustly dismiss the appellant’s
appeal.
3.
The learned Justices of Appeal
erred in law not only in holding
that the controversy between the
parties had been captured by
grounds (1) and (2) of the
original grounds of appeal but
also in failing to judicially
and adequately consider ground
(1) and completely ignoring
ground (2) of the original
grounds of appeal.
4.
The holding that the
plaintiff/appellant was a
signatory to exhibit 5, was
factually and legally in error
and resulted in substantial
miscarriage of justice.
5.
The learned Justices of Appeal
erred in law and on the facts in
holding that the learned trial
judge went through the issues
set down for trial with a fine
tooth-comb and based upon the
admissions of the appellant the
learned trial judge came to the
conclusion that he did.
6.
The pronouncement that “we shall
not bother with the additional
grounds of appeal which were
adequately analysed by the
learned trial judge and
pronounced upon”, was in error
both in law and on the facts and
resulted in a substantial
miscarriage of justice.
7. It
was an error of law and a
miscarriage of justice for the
learned Justices of Appeal to
have endorsed the conclusions of
the trial judge which were
largely wrong and sometimes
contradictory.
8.
The learned Justices of Appeal
also erred in law and on the
facts in grounding the dismissal
of the appellant’s appeal on the
conclusions of the trial judge
which has been challenged
separately and sufficiently
debunked by the additional
grounds of appeal which they did
not bother to consider.
9.
Additional grounds to be filed
on receipt of the record of
proceedings.
ADDITIONAL
GROUND
On the 14th
of March 2011 the appellant
filed the additional ground of
“The Judgment is against the
weight of evidence and was
granted leave to argue same on
24th May 2011.
We have
perused and analysed the entire
appeal record in this case. We
have also equally digested the
statements of case filed for and
on behalf of the plaintiffs, the
2nd and 3rd
Defendants.
We have also
critically analysed the
judgments of the learned trial
Judge and of our learned
brethren and sister of the Court
of Appeal.
In our
opinion, the following issues
standout from the grounds of
appeal and from the statements
of case filed by the parties as
the issues raised in this
appeal.
1.(a) To
what extent is Regulation 32 (a)
of TOPP relevant and crucial to
the determination of this appeal
(b)
Flowing from this issue is
whether exhibit 7 constitutes a
valid offer for purchase of
shares that was made to the
plaintiff’s as shareholders.
2. To
what extent does the Companies
Act, 1963, Act 179 retain the
rule in Foss V Harbottle.
3.
Whether
the plaintiffs as shareholders
can be deemed to have waived
their pre-emptive rights under
the Regulation 32 (a) of TOPP
and were thus stopped from
claiming under those rights.
4.
Whether
or not the 2nd
Defendant’s (Unilever) are
shareholders and members of TOPP.
5.
Whether the defendants Directors
on TOPP Board
breached
their fiduciary duties to
the company.
What appears
to be fundamental to an
understanding of the rule in the
celebrated case of Foss v
Harbottle (1843) 2 Hare, 461
which has been referred to by
all the learned Counsel in this
case is first and foremost the
Regulation 32 (a) of the 14th
Defendant, Company TOPP.
This
Regulation 32 (a) of TOPP states
as follows:
“No member
shall have the right to transfer
all or any of his shares in the
company, unless same shall first
have been offered to all the
existing shareholders of the
shares of the class or classes
being transferred in proportion
as nearly as may be to their
existing holdings.”
What this
means is that, before any
shareholder of TOPP can have
the right to transfer any of his
shares to a third party, by
which we mean a non-share holder
of TOPP, that shareholder must
first offer the said shares to
his co-shareholders, or to the
class or classes of the shares
that are being offered.
Is there any
evidence of any such offer to
the other shareholder? There is
no clear evidence of this on
record. It does therefore mean
that, in purporting to unravel
the legality of the transfer of
the 1st Defendant’s
50% shares in TOPP to the 2nd
Defendant, the commencement
point should be this Regulation
32 (a) of TOPP.
The plaintiff
averred in paragraphs 11, 15, 16
and 17 of the Statement of Claim
as follows:-
11. “On
or about October 29 1997 the
Secretary to the Board of
Directors of TOPP without
authority and in contravention
of the Companies Code 1963, Act
179 and the regulations of TOPP
requested shareholders to TOPP
to submit bids for the
Government of Ghana shares in
TOPP.
15. The
Shareholders of TOPP have
pre-emptive rights under the
Regulations of TOPP with respect
to the transfer of shares and
new issue of shares.
16. The
Plaintiff says that not only
were the bids and invitations
contrary to the Companies Code
1963, Act 179 and the
regulations of the company, but
also they were irregular.
17. The
plaintiff says further that
contrary to the Regulations of
TOPP and the
Companies
Code 1963, Act 179 CEREDEC
never offered its shares to the
existing shareholder in the
proportions in which the shares
were then held or at all”
Besides, Part
B, of the Companies Act, 1963
Act 179 which comprises sections
16 – 23 deals with what
constitutes the contents of
Regulations of a Company, the
Form of the Regulations, how to
subscribe to these Regulations,
Regulations of existing
companies, Effect of these
Regulations etc.
No wonder,
Taylor J, as he then was, held
in his characteristic strong and
convincing fashion in the case
of
Luguterah v Northern Engineering
Co. Ltd. & Others [1978] GLR 477
H.C (more of this case
later) that a
breach of
regulations can hardly be
categorized under mere
irregularities. Section 21 (1)
of Act 179 states that the
Regulations
“shall have
the effect of a contract under
seal between the company and its
members and officers and between
the members and officers
themselves whereby they agree to
observe and perform the
provisions of the Regulations,
as altered from time to time, in
so far as they relate to the
company, members, or officers as
such.”
It therefore
appears clear to us that
Regulation 32(a) of TOPP must be
thoroughly scrutinized alongside
the rule in Foss v Harbottle in
order to gain a real
understanding of whether the
plaintiff can succeed on the
reliefs he claims from the
court.
It is
interesting to observe that, the
learned trial Judge after
referring to Regulation 32 (a)
of TOPP in his judgment, made
the following logical
deductions:-
This section
has two imports. The first
import is that before any member
could transfer any of his shares
in the company TOPP, he should
first have offered the said
shares to all the existing
shareholders.
The second
import is that if the shares to
be divested are of special class
or class shares then the member
selling them should first have
offered them to all the holders
of the shares of the class or
classes being transferred in
proportion as nearly as may be
to their existing holdings.
After stating correctly what
regulation 32 (a) constitutes
concluded the matter thus:-
“what this
section contemplates is what is
known in law as a contract of
first refusal or pre-emption.”
The above
observations by the learned
trial Judge were approved by the
Court of Appeal when they also
stated as follows:
“From the
foregoing, the inference drawn
is the alleged breach of TOPP’s
Regulations and the fact that
the proper plaintiff in this
action should have been TOPP.
Also the shares, the subject
matter of this suit, if at all
they were to be offered for
sale, should have been offered
in the proportions in which the
existing shareholders held their
shares.”
The learned
Judges of the Court of Appeal
however like their brother in
the trial court were of the view
that, being a “derivative
action” the right of
commencement which belongs only
to the company in that the
beneficiary of the action is
TOPP, citing the rule in Foss
v Harbottle.
What then is
the rule, with its exceptions in
Foss v Harbottle
vis-à-vis our Companies Act,
1963 Act 179?
The rule in Foss v. Harbotle
or majority rule is one of the
common law company law
principles which have partly
been incorporated into our
Companies Code, 1963 (Act 179).
By section 7 of the Companies
Code, this rule as a common law
principles is as co continued in
operation in Ghana, except where
it is inconsistent with the
provisions of Act 179.
In Foss v. Harbotle,
supra, two shareholders of an
English company sued the
directors of the company. They
claimed these directors had
fraudulently profited and
colluded with others to profit
at the company’s expense. They
also alleged that the directors
had raised money in an
unauthorised manner, contrary to
the company’s regulations. It
was argued by the directors that
the plaintiffs lacked capacity
to institute the action because
the injury complained of was an
injury to the company at large
and not an injury to the
plaintiffs. Sir James Wingram
famously held at 490 as
follows:-
“It could not successfully be
argued that it was a matter of
course for any individual member
of a corporation to assume to
themselves the right of suing in
the name of the corporation. In
law, the corporation and the
aggregate of the members of the
corporation are not the same
thing for a purpose like this.”
(e.s.)
This ruling paved the way for
other decisions which sought to
limit minority protection in
company law. Thus in
MacDougall v. Gardiner (1875) 1
Ch. D 13 – which
both the plaintiff and the
defendant have discussed in
their submissions – Mellish LJ,
relying on Foss v. Harbotle,
supra held:
“In our opinion, if the thing
complained of is a thing which
in substance the majority of the
company are entitled to do, if
something has been done
irregularly which the majority
of the company are entitled to
do regularly, or if something
has been done illegally which
the majority of a company are
entitled to do legally, there
can be no use in having a
litigation about it, the
ultimate end of which is only
that a meeting has to be called,
and then ultimately the majority
gets its wishes. Is it not
better that the rule should be
adhered to that if it is a thing
which the majority are the
masters of, the minority in
substance shall be entitled to
have their will followed? If it
is matter of that nature, it
only comes to this, that the
majority are the only persons
who can complain that a thing
which they are entitled to do
has been done irregularly; and
that, as I understand it, is
what has been decided by the
cases of
Mozeley v. Alston (1847) 41 ER
833 and Foss v. Harbotle.”
(e.s.)
Consequently, the rule has come
to be applied on two grounds:
1.
Flowing from the separate
personality doctrine in
Salomon v. Salomon [1897]
A.C. 22, supra, if a
wrong is done to a company, it
is only the company and not its
members who can bring an action
to remedy the alleged wrong.
This has also been called the
proper plaintiff rule.
2.
If the wrong complained of is
one that the majority can easily
remedy by merely passing an
ordinary resolution, the court
would not interfere to force
them to do something against
their wishes.
This has also been called the
majority rule
Hardly any rule is established
without exceptions. Thus with
time, the courts laid down
exceptions to the application of
the rule. The courts will not
apply the rule where there is an
irregularity in the passing of a
resolution which requires a
specified majority, see
Edwards v. Halliwell (1950) 2
All ER 1064,
or where the wrong complained of
is an act ultra vires the
company, see
Prudential Assurance v. Newman
(1982) Ch. 204 or where
a fraud has been committed on
the minority, see
Estamanco v. Greater London
Council (1982) 1 All ER 437 and
Menier v. Hooper’s Telegraph
(1874) 9 Ch App 350. The
rule will not be applied where
the wrong complained of
infringes the personal rights of
members, see
Heron
International v. Lord Grade
(1983) B.C.L.C. 244
In Ghana, the rule in Foss v.
Harbotle has been applied in a
number of cases. In
Kwan
v. Nyieni (1959) GLR 67 CA,
even though the matter was
not related to company the court
held that in a suit for recovery
of family land as a general rule
the head of a family, as
representative of the family, is
the proper person to institute a
suit for recovery of family
land. In
Appenteng v. Bank of West
Africa (1972) 1 GLR 153, CA,
the court upheld the proper
plaintiff rule. Holding (1) of
the headnote to the decision
reads:
“(1) as a general rule, a
shareholder cannot sue for a
wrong done to a company or to
recover money as damages to it,
unless the action is taken by
the company itself. The second
respondent could therefore not
bring an action of negligence
against the appellants for the
alleged negligent advice given
to the company. In any case she
was estopped from bringing this
action as a similar unsuccessful
suit had been brought against
the appellants by other
shareholders of the same company
in respect of the same
subject-matter of which the
second respondent was aware but
did nothing. That action had not
been appealed against. Foss v.
Harbottle (1843) 2 Hare 461 and
Appenteng v. Bank of West Africa
Ltd. [1961] G.L.R. 196 applied.”
(e.s.)
In
Pinamang v. Abrokwa (1992) 2 GLR
384, CA, at 388, the
court upheld the majority rule
in the following words:
“ … the courts have held that
the rule in
Foss v.
Harbottle (1843) 67 E.R. 189
must be observed by the trial
court and it must not inquire
into matters of internal
management or, at the instance
of a shareholder, interfere with
transactions which though prima
facie irregular and detrimental
to the company, are capable of
being rectified by an ordinary
resolution of the company in a
general meeting. It will be
shown in due course that the
learned trial judge fell into
the error of inquiring into
matters of internal management
such as, for instance, as the
complaint by one of the
applicants that he has been
demoted and that his post had
been downgraded.” (e.s.).
See also
Kludjeson International v.
Celltell Ltd, HC
(unreported) Suit No FT(IV)
12/2001, delivered on 27th
April, 2005 and Boohene v. Ghana
Union Assurance (unreported)
Suit No. ACC 7/2005, delivered
on 18th January,
2006.
The Companies’ Code, Act 179
contains several relevant
provisions, as far as the rule
in Foss v. Harbotle is
concerned. Section 24 of the Act
states, inter alia, that a
company shall have all the
powers of a natural person of
full capacity, in furtherance of
its objects and powers. Section
137(3) provides that the
institution of proceedings in
the name of the company can only
be done by the Board of
Directors of the company.
Section 137(5) also permits
members to bring an action in
the name of the company only if
the Board of Directors have
neglected or refused to do, but
as members acting together in a
general meeting.
It would appear from the
provisions above (alone) that
Act 179 has given statutory
blessing to the Foss v. Harbotle
rule. But when read with
other provisions, it could be
said that Act 179 has
significantly chipped away the
relevance of the rule in Foss v.
Harbotle in Ghanaian corporate
governance. Section 21 (3)
provides that:
“(3) In any action by any member
or officer to enforce any
obligation owed under the
Regulations to him and any other
member or officer, such member
or officer shall, if any other
member or officer is affected by
the alleged breach of such
obligation, sue in a
representative capacity on
behalf of himself and all other
members or officers who may be
affected other than any who are
defendants and the provisions of
section 324 of this Code shall
apply.”
Section 25(4) further provides
that, on application by a member
the Court may prohibit, by
injunction, the doing of an act
or the conveyance or transfer of
any property which is ultra
vires the company. In relation
to directors’ see section
sections 210(1) and 210 (5),
when read together, have the
effect of clothing a shareholder
with capacity to institute
actions for breach of directors’
duties, even if that breach
resulted in damage to the
company alone.
Section 217 (1) provides thus:
“(1) The Court on the
application of any member may by
injunction restrain the company
from doing any act or entering
into any transaction which is
illegal or beyond the power or
capacity of the company or
which infringes any provision of
its Regulations, or from
acting on any resolution not
properly passed in accordance
with this Code and the company's
Regulations, and may declare any
such act, transaction or
resolution already done, entered
into, or passed to be void and
of no effect …” emphasis
supplied.
Section 218 provides a remedy
for the minority, where
oppressive conduct is alleged.
This remedy extends even to
debenture holders. It provides,
inter alia, that a member may
apply to the Court for an order
on the ground that “the affairs
of the company are being
conducted or the powers of the
directors are being conducted or
the powers of the directors are
being exercised in a manner
oppressive to one or more of the
members or debenture holders or
in disregard of his or their
proper interests as members,
shareholders, officers, or
debenture holders of the
company”.
The overall effect of these
statutory provisions is that the
proper plaintiff leg of the rule
has been whittled away
significantly. A member is
allowed to bring an action where
it is alleged that the member’s
right has been violated. The
Act even allows members to bring
representative actions. Section
324 of Act 179 provides the
procedure with which members
must comply.
Be that as it may, on the basis
of decisions like Appenteng
v. Bank of West Africa and
Pinamang v. Abrokwa,
supra, the courts will still
uphold the majority rule, upon a
finding that the irregularity or
act complained of is one that
can be remedied or regularized
by an ordinary resolution.
In the circumstances of this
case, the question to ask is
whether the plaintiff’s case is
one that can be saved by the
modifications of Act 179 or
whether on the basis of the
cases cited supra, this court
should choose not to interfere
with the internal mechanisms of
TOPP. On page 33 of the
plaintiffs submissions, the
plaintiffs argued that there are
three facets to the plaintiff’s
claim; a personal right under
section 21, regarding breach of
the regulations by members and
officers, a personal claim for
declarations, injunctions under
217 and a claim for enforcement
of director’s duties under
section 210. Therefore it was
incorrect to say that all these
facets derive from the right of
the company as the Court of
Appeal suggested. The plaintiff
further argued that the Court of
Appeal erred when it held as
follows:
“According to the Appellant as
per paragraph 15 of its
statement of claim, the
shareholders of TOPP have
pre-emptive rights pursuant to
TOPP’s regulations with regard
to transfer of shares. The
appellant avers further in
paragraph 17 of the said
statement of claim that contrary
to TOPP’s Regulations, CEREDEC
never offered its shares to the
existing shareholders of TOPP in
the proportion in which the
shares were held at all. We
agree with counsel for the 2nd
Defendant/Respondent’s
submission that based upon this
pleading, the Appellant admitted
that all it is entitled to by
this suit is a percentage of the
shares of CEREDEC equal to the
proportion of shares it held in
TOPP.”
It is our considered view that
the plaintiff does not in any
way lack capacity to bring this
action and is entitled, if
successful, to its reliefs. The
case of Luguterah v. Northern
Engineering Co Ltd & Others
already referred to is
instructive. The facts, as
stated in the headnote reads
thus:
“The Northern Engineering Co.,
Ltd., hereafter called the
company, was incorporated under
the Companies Code, 1963 (Act
179), in 1972 with 10,000
subscribed shares, all of which
were allotted to its four
subscribers—each holding 25 per
centum of the shares. On 15
June 1977, the applicant, a
director and one of the four
shareholders, received by post,
a letter dated 7 June and signed
by the secretary of the company
summoning him to attend an
extraordinary general meeting of
the company scheduled to take
place at the company's premises
on 11 June. The only member of
the four members of the company
who attended the meeting was the
sixth respondent, the acting
managing director of the
company, a holder of only 25 per
centum of the shares. The
meeting was also attended by all
the eight other respondents
except the seventh respondent.
However all the eight
respondents had, before that
meeting, paid to the company,
various sums of money totalling
¢6,000 as consideration for
shares in the company but none
of them had his name entered as
a member in the company's
register of members. The
meeting, inter alia, passed a
resolution replacing the old
board of directors with a new
seven member board of directors.
The applicant therefore filed
the instant originating motion
on notice, challenging the
validity of the notice summoning
him to attend the extraordinary
general meeting and the
proceedings of that meeting and
also for a declaration, inter
alia, that the eight respondents
were not members of the
company. In his defence, the
sixth respondent, the acting
managing director, said that the
company had in 1975, increased
(by special resolution of the
board of directors) the shares
of the company from 10,000 to
100,000 shares. He however
admitted that no prior notice of
the alleged increase was served
on the applicant.”
On the issue of the validity of
the membership of the eight
respondents, Taylor J (as he
then was) held at 502 as
follows:
“In any case as I have already
pointed out, the eight
respondents do not have their
names on the register.
Furthermore assuming that the
N.E.C. had some new or unissued
shares, it is, nevertheless,
by its regulations, as I have
already noted herein, prohibited
from issuing new or unissued
shares to them without first
offering the said shares to the
existing shareholders in
proportion to their
shareholding. The eight
respondents, from a study of the
affidavits, are probably
innocent victims of the
incompetence of the N.E.C.
management. If the manner of
their alleged acquisition of
shares in N.E.C. can be said to
be a procedural or mere
irregularity I think the rule in
Foss
v. Harbottle (1843) 2 Hare 461,
would have prevented the
applicant from maintaining his
action. But as Jenkins L.J.
impliedly conceded in In re
Harmer
Ltd. [1959] 1 W.L.R. 62 at
p. 84, C.A. and Romer L.J.
expressly held at p. 87 of the
same case, shareholders have
a right as members of the
company to have the affairs of a
company conducted in accordance
with the regulations of the
company. On the facts of
this case what was done was
ultra vires the regulations and
contrary to the Companies Code.”
(e.s.)
The facts and holding in
Luguterah v. Northern
Engineering, supra, should apply
mutatis mutandis, to this case.
In this case, the plaintiff has
alleged a breach of a personal
right under TOPP’s regulations.
As held by Taylor J (as he then
was) a breach of regulations can
hardly be categorized under mere
irregularities. A breach of a
contract cannot be bunched up
with mere irregularities, and in
which the court therefore should
not intervene. In effect, the
holding in Pinamang v. Abrokwa,
supra, would be inapplicable in
the circumstances of this case.
That case was about the demotion
of a member. The facts of this
case revolve around a violation
of the plaintiff’s pre-emptive
rights under the Regulations and
an alleged waiver of those
rights.
To sum up, the rule in Foss v
Harbottle can therefore be said
to comprise two elements, which
are discernible in the classic
statement of Jenkins J in the
case of
Edwards v Halliwell [1950] 2
ALL E.R 1064 as follows:
1. The proper plaintiff
in an action in respect of a
wrong alleged to be done by a
company is prima facie the
company itself.
2. Where the alleged
wrong is a transaction which
might be made binding on the
company and all its members by a
simple majority of the members,
no individual member of the
company is allowed to maintain
an action against the company
for the simple reason that, if
the majority members of the
company are in favour of what
has been done, then as was said
in the Edward v Halliwell case,
“Cadit Quaestio” – end of
matter.
The rule therefore as a common
law rule, appears basically
simple. As was stated also in
the case of
Barrett v
Duckett [1995] 1 BCLC 243 at 249
-250
“The proper plaintiff is prima
facie the company. Where the
wrong or irregularity can be
made binding on the company by a
simple majority, no individual
shareholder is allowed to
maintain an action in respect of
that matter.”
Even though,
there appear to be some
advantages to the rule, there
certainly are a lot of
drawbacks. For example, if the
wrong complained of is by the
majority of the members of the
company, who may not wish to
sue, then the net outcome of
their refusal to sue is that the
wrong doing would go unpunished
and the minority shareholders
would be at risk and the
majority can therefore loot the
company with impunity. The
exceptions to the rule have
therefore been developed in
order to give a remedy for
wrongs or infringements which
would otherwise go without
redress. By the statutory
interventions contained in our
Companies Act, 1963 Act 179, the
following may be said to be the
statutory provisions, which as
we have noted already, has
whittled away the scope of the
proper plaintiff rule in Foss v
Harbottle rule.
1.
Personal rights – if the
personal rights of an individual
has been invaded the rule will
not apply.
2.
Fraud on the minority – by this
the minority can bring what is
known as a derivative action to
control the activities of
wrongdoers
3.
Special Procedure – If as is
stated in regulation 32 (a) of
TOPP, the transfer of shares can
only be done in a certain way,
then failure to comply will
entitle the affected members to
take action as has happened in
this case. There are many
provisions in Act 179 which
provide for this, and have been
referred to already.
4.
Ultra Vires Acts – If an act is
ultra vires the Companies Act or
Regulations, a member can sue.
It is
therefore clear that, both the
learned trial Judge and those of
the Court of Appeal erred in
failing to appreciate the
statutory interventions made by
the companies Act, 1963 Act 179
on the applicability of the rule
in Foss v Harbottle in
Ghana.
WAS THERE A
VALID OFFER MADE TO PLAINTIFFS
Another issue
which is closely related to the
validly and effect of Regulation
32 (a) of TOPP which we have
discussed is the issue of
whether
there has been a valid offer of
sale or transfer of shares to
the plaintiffs?
As has been
stated elsewhere in this
judgment, both the learned trial
judge and the Court of Appeal
found as a fact that Exhibit 7
was not an offer letter, and for
that matter does not qualify to
be accepted as a valid offer in
contact law.
It must be
noted that, it is a basic
principle of contract that there
must be an offer before there
can be an acceptance. Once there
has been no valid offer, then
quite clearly the plaintiffs
could not have been expected to
accept the offers.
Nevertheless,
the plaintiff’s by their
exhibits ‘D’ and ‘E’ expressed
interest in the said shares and
relied on their rights in
Regulation 32 (a). This
regulation is not an ordinary
contract which can be wished
away.
On the
authority of Luguterah v
N.E.C already referred to
supra, we are of the considered
view that, there being no valid
offer, no contract for sale and
or purchase of shares had been
made to the plaintiffs.
WAIVER OF
PLAINTIFF’S PRE-EMPTIVE RIGHTS
AND ESTOPPEL
At this
stage, it is perhaps important
to consider the contention of
the 2nd Defendant
that the plaintiff and the other
shareholders waived their
pre-emptive rights under
Regulation 32 (a) of TOPP’s
regulations.
The basis of
this contention is Exhibit 5, a
letter written by the minority
shareholders of TOPP in 1995,
allegedly requesting for a
tendering process in contrast to
the position as is stated in
Regulation 32 (a) of the
Regulations of TOPP, already
referred to supra.
The issue before this court is
not whether the plaintiff’s
pre-emptive rights were
side-lined per se. The trial
judge held that the bidding
process used by the respondents
did not amount to an offer of
shares to the existing
shareholders. The learned trial
judge held on this matter as
follows:
“From the wording of Exhibit 7
no offer, properly so- called or
understood under Contract Law
was made to the existing
shareholders to purchase
Government or CEREDEC shares in
TOPP. Rather the existing
shareholders were invited to
make offers for the shares that
they could purchase. It
therefore amounted to an
invitation to treat as counsel
for the plaintiff rightly
dilated in his written address.
The question however, is;
was that procedure contrary to
section 32(a) of TOPP’s
Regulations and if yes, is it
fatal to render the transaction
pertaining to the sale and
transfer of the shares to
Unilever void?
To the first question, the
answer is ‘yes’, because the
procedure adopted in divesting
the shares to Unilever is
contrary to the provision of
section 32(a) but to the second
as to whether or not it is fatal
to render the transaction void,
I would say No. I say No
because, records before the
Court indicate overwhelmingly
that it was the minority
shareholders themselves,
including the Appellant who were
to benefit under the sale of the
said shares, who in a letter
addressed to the Executive
Secretary of DIC over the
divestiture of CEREDEC shares in
TOPP, suggested that the
procedure under section 32(a)
should be waived since the best
approach in divesting the said
shares in TOPP was to follow
normal tendering procedures.
This letter was tendered in
evidence by the defendants as
Exhibit ‘5’. It was signed by
the Appellant and other minority
shareholders and it is dated 5th
May, 1995.”
The learned trial Judge
continued thus:
“ … It does not therefore lie in
the mouth of either the
plaintiff or any of the minority
shareholders to turn round to
say that the very procedure they
themselves had suggested should
be used in the divestiture
procedure is wrong and for that
matter the whole sale and
transfer should be declared null
and void.” (e.s.)
Since the holding of the trial
judge that there had been no
offer of shares to the existing
shareholders as envisioned by
TOPP’s regulations has not been
challenged, it follows that the
only issue left to determine is
whether Exhibit ‘5’ amounts to a
waiver of its pre-emptive
rights, in the circumstances of
this case.
The 2nd and 3rd
defendants have argued that
Exhibit ‘5’ had the effect of a
shareholders agreement and
therefore the plaintiff, whose
predecessor was a party to the
contract, was bound by their own
agreement. Exhibit 5 is clear in
meaning. At a meeting in 1995,
the minority shareholders at the
time requested for a discussion
of the possibility of resorting
to the normal tendering process.
The concern was that, the normal
process of offering shares was
dragging on and so in order to
speed things up and in the
interest of TOPP, their decision
was to discuss tendering as an
option to the offer of shares.
The defendants contend that
Exhibit 5 was not a mere opinion
but a binding agreement of the
minority shareholders. Assuming,
arguendo, that that proposition
was right, the subsequent
conduct of the plaintiff, prior
to the actual sale of CEREDEC’s
shares would also lend credence
to the position that the
plaintiff had changed their
position on tendering. First
Exhibit E: a letter written by
the representative of the
plaintiff, already referred to
supra.
This letter dated 15th
December 1997 suggests that the
plaintiff was considering
exercising its rights in
accordance with the regulations,
a deviation from the perceived
agreement to use the tender
process. Since no offer was
made, the plaintiff was not able
to exercise his right. Again,
the comments by the plaintiff’s
representative at Board meetings
also suggests that the plaintiff
strongly protested the sale of
CEREDEC shares to Unilever in
the manner that it was carried
out. Evidence on record shows
that at the 99th and
100th Board meetings
(Exhibit 4), Mr. Lyne, the
plaintiff’s nominee on the board
strongly contested the sale. It
is hard to find, in the face of
all these objections which
occurred immediately prior to
the sale, that Exhibit 5 was
still operative. Another
convincing piece of evidence is
Exhibit F, the 88th
Board Meeting of TOPP. It shows
that in the sale of shares to
Mobil, the Board of Directors
gave effect to clause 32(a) of
TOPP’s regulations. In this
regard, the plaintiff argued on
page 110 of his submissions
thus:
“Exhibit ‘5’ was written in
1995. Between 1995 and 1997
October when Exhibit ‘7’ was
written certain developments in
TOPP about the sale of shares in
that company made it impossible
for anybody to believe in
Exhibit ‘5’ or even act on it.
The truth which was known to all
the alleged representees and
even the purchaser, Unilever,
was that shares in TOPP would
not be sold in breach of
Regulation 32(a). The directors
of TOPP including the persons
who signed Exhibit ‘5’ refused
to register a transfer of shares
from Mobil Oil Ghana Ltd to GBO
Investment Limited (GBO)
resulting in GBO bringing a suit
against TOPP and Mobil. It is
submitted that even if Exhibit
‘5’ was a representation of
fact, there would be no estoppel
because by being parties to the
board decision against the
registration of the transfer of
shares from Mobil Oil to GBO a
subsidiary company to Unilever,
the authors of Exhibit ‘5’ had
by their conduct withdrawn the
representation before Exhibit
‘7’ was written. The action
instituted by GBO against TOPP
and Mobil Oil was still pending
during the hearing of this
suit.” (e.s.)
The above constitute the exact
chronology of events and
necessary deductions that had to
be made in a common sense
approach. We agree with it.
It is submitted that on the
basis of the evidence on record,
exhibit 5 could not be said to
operate as a waiver at the time
of the sale of CEREDEC’s shares
to Unilever.
It appears to us that, the
conduct of the 2nd
Defendants, Unilever in the
entire transfer of shares in
TOPP was in very bad faith.
Having been made aware of
Regulation 32 (a) of TOPP on the
clear procedure for transfer of
TOPP shares, the 2nd
Defendants acted not only in
clear breach of the Regulation
32 (a) but were in indecent
haste to acquire TOPP shares no
matter the consequences. As
matters stand now, they must be
made to face the music by losing
all that they had acquired
unlawfully.
Under the
circumstances, this court has no
option other than to declare
that the sale of the 40% CEREDEC
shares in TOPP to the 2nd
Defendants is void. Membership
of TOPP cannot therefore be
bestowed on the 22nd
Defendant.
CAPACITY OF DIC TO DEAL WITH
CEREDEC SHARES
Now, we have to consider the
capacity
of the DIC to deal with CEREDEC
shares with TOPP.
The plaintiffs contention is
that the Divestiture
Implementation Committee
(hereinafter “DIC”) lacked the
capacity to sell CEREDEC’s
shares in TOPP to Unilever Ghana
Limited. It relied on this
court’s ruling in
Ampratwum Manufacturing Co. Ltd
v. Divestiture Implementation
Committee (2009) SCGLR 692
where it was held that “ As
a matter of law (founded on the
Divestiture Implementation
Committee Act, 1993 (PNDCL 326),
ss 3(1) and 4(1) and on of
fact and practice, the DIC was a
mere advisory executive agent of
the Government of Ghana without
authority to take decisions of
finite nature; and it had no
capacity to sue or to be sued in
its own right. As such agent of
the state, civil proceedings
against it must be instituted
against the Attorney-General.”
The plaintiff canvassed this
point in his submissions
extensively by arguing that the
DIC has no capacity to contract
and also that the Government of
Ghana had no shares in TOPP. The
plaintiff argued that the trial
judge erred in finding that the
Government of Ghana had shares
in TOPP, by virtue of the fact
that it wholly-owned CEREDEC.
It is clear, on the basis of
this court’s decision in
Ampratwum Manufacturing Co. Ltd
v. Divestiture Implementation
Committee, supra, that the
DIC does not have legal
personality to enter into
contracts etc. However, the
evidence on record is clear that
the DIC did not purport to sell
the shares in CEREDEC on its own
volition. The DIC, per section 2
of PNDCL 326, is an agent of the
Government. Acting in such
agency capacity is clearly
distinguishable from cases where
the DIC sought to clothe itself
with legal personality. Exhibit
G is the Share Sale and Purchase
Agreement dated the 30th day of
March, 1998. It states clearly
that the Agreement is between:
1.
DIVESTITURE IMPLEMENTATION
COMMITTEE, a statutory body
with headquarters at F35/5
(check) Ring Road East North
Labone, Accra, Ghana (“DIC”) in
its capacity as the agent of the
THE GOVERNMENT OF THE REPUBLIC
OF GHANA (“GoG”);
and
2.
CENTRAL REGIONAL DEVELOPMENT
CORPORATION, a statutory
corporation, formed by GoG whose
place of business is at Cape
Coast, Central Region, Ghana
(CEREDEC);
and
3.
UNILEVER GHANA LIMITED, a
company registered in Ghana
incorporated as a company
limited by shares under the
Companies Code 1963 (Act 179)
whose registered office is at
Swanhill, Kwame Nkrumah Avenue,
P.O. Box 64, Accra, Ghana (“the
Buyer”) …”
This document was signed by and
authorised on behalf of all the
parties.
We are therefore of the
considered view that, the
ordinary rules of the
principal-agent relationship
would therefore apply in these
circumstances. It is a well
established principle of agency
law that contracts entered into
by an agent are binding on the
principal, as long as the agent
acted intra vires. Legal
personality, per se is not a
sine qua non for the capacity of
an agent to act for a principal.
As regards the Government of
Ghana’s status, vis-à-vis the
shareholding structure in TOPP,
one need not belabour the point.
CEREDEC is a statutory
corporation with separate legal
personality, whose shares are
wholly owned by the Government
of Ghana, another legal entity.
If CEREDEC owned 80.64% of
shares in TOPP, another legal
entity, the correct deduction to
make is that the Government of
Ghana controls the shares in
TOPP, through CEREDEC. It is our
opinion that this deduction does
not detract from the legal
status of all the actors
involved in the sale. Our
decision therefore is that, the
DIC had the capacity to deal
with the shares of the 1st
defendant.
BREACH OF
DIRECTORS’ DUTIES
The last
issue to consider is the breach
of Directors duties to the
company. The learned trial Judge
stated in the judgment as
follows:
“As a Court,
I do not see anything untoward
on the part of either the
company TOPP or its Board of
Directors collectively or
individually with regard to the
sale of the 40% CEREDEC shares
of Unilever. The company or the
Board neither misconducted
itself nor did act ultra vires
the powers granted it by the
Regulations to the detriment of
the company in the course of the
transaction.” (e.s)
The plaintiff
claims that the board of
directors (with the exception of
its own nominee) breached their
fiduciary duty to the company.
In its submissions, it argued
that by passing a resolution
which they knew to be against
the Regulations of the company,
they had not acted in good
faith. The defendants claim
otherwise.
It must be
noted that the fiduciary duties
of directors are owed to the
company. Section 201(1) of Act
179 makes it clear. Section
201(2) further provides that:
2) “A
director shall act at all times
in what he believes to be the
best interests of the company as
a whole so as to preserve its
assets, further its business,
and promote the purposes for
which it was formed, and in such
manner as a faithful, diligent,
careful and ordinarily skilful
director would act in the
circumstances.” It is only when
the director is determining what
is in the best of interest of
the company that he may consider
the interests of members and
employees and other actors in
the company, section 201(3).”
In the
circumstances of this case, the
board of directors claimed to
have laboured under the belief
that the plaintiff and the other
minority shareholders had waived
their pre-emptive rights under
the Regulations. However, it is
difficult to subscribe to this
belief, in the face of all the
protests and reservations with
regard to the application of
32(a) of the Regulations. In
those circumstances, diligent,
skilful directors would, in the
interest of the company and in
loyalty to its regulations, stay
any attempts to sell shares
before the resolution of the
protests. Instead, the sale was
hurried and presented to the
board for approval. It would be
our opinion therefore that the
directors breached their
fiduciary duty to the company.
This is more so when it is
considered against the
background that due to similar
disagreements about the transfer
of GBO shares to the same
Unilever, the matter was sent to
court for the interpretation of
Regulation 32 (a) of TOPP’s
Regulations. That suit was still
pending when this instant one
was instituted.
Having
therefore been apprized about
the non-observance to this
Regulations 32 (a), it was a
clear breach of the fiduciary
duties of the said Directors to
the company to have acted
recklessly in the transfer and
or sale of the 1st
Defendants shares to the 2nd
Defendants.
The appeal
herein therefore succeeds in its
entirety.
INTERFERENCE
WITH CONCURRENT FINDINGS OF FACT
It should be
noted that we are not unaware
that both the trial and
appellant courts have all made
findings of fact in favour of
the Defendants.
We are also
aware of the principles of law
involved in justifying
interference by the Supreme
Court in the findings of fact by
both the trial and appellate
courts.
The
conditions under which this
court finds itself in the
determination of this appeal, in
that we had to depart from the
concurrent findings by both the
trial and appellate courts have
been settled in the case of
Gregory v Tandoh IV and Hanson
[2010] SCGLR 971 where
the Supreme Court spoke with one
voice through Dotse JSC and laid
down the guidelines, relying on
celebrated cases like
Achoro v
Akanfela [1996-97] SCGLR 209
and Fosua & Adu Poku v Dufie
(Deceased) and Adu Poku Mensah
[2009] SCGLR 310 at 313
among other cases.
Based on the
authority of the above cases and
several others, we are of the
firm view that some of the
findings of fact by the learned
trial Judge and concurred in by
the Court of Appeal are not only
perverse but also inconsistent
with the totality of evidence on
record.
For example,
when the learned trial Judge
stated in the judgment that the
plaintiff’s action “falls within
the exception to the Foss v
Harbottle rule and for that
matter plaintiff did not falter
in coming to court”, he was
perfectly right.
Then, the
learned trial Judge in his
concluding remarks stated that,
“Plaintiff’s action therefore
failed from the onset and I do
not hesitate in dismissing it.”
How can the learned trial Judge
be so inconsistent? And these
are the finding of facts the
Court of Appeal said were
arrived at by a fine comb.
Secondly, the
learned trial judge and the
Court of Appeal all found that
exhibit 7 did not amount to an
offer of sale or transfer of
shares to the plaintiffs.
However, the learned trial judge
made a somersault and concluded
“that plaintiff was giving (SIC)
every opportunity to either
acquire any or all the shares
CEREDEC was selling through a
procedure plaintiff and other
minority shareholders suggested
but it failed to exercise that
right when given the option.”
There could
not have been any contradiction
and inconsistency other than the
two scenarios just referred to.
We could have given many more
examples, but the above suffice
to establish the fact that this
court indeed had good and solid
grounds to interfere with the
findings of fact made by the
trial and appellate courts and
depart from them because they
were perverse and inconsistent.
In
conclusion, there will be
judgment for plaintiffs as
follows:-
In the
result, the plaintiffs succeed
with their appeal, and the
judgment of the Court of Appeal,
dated 23rd March 2010
is hereby set aside, and by
necessary implication, that of
the trial High Court, dated 21st
June 2007 is also set aside.
Instead,
there will be judgment for the
plaintiffs in respect of their
amended writ of summons as
follows:
1.
The plaintiffs are entitled to
the grant of relief I of the
endorsement as the sale of the
shares of the 1st
defendants in TOPP amounted to a
variation of the rights of the
plaintiffs without their
consent.
2.
There is a further declaration
that the sale of the 1st
defendant’s shares in TOPP is
contrary to the Companies Act,
1963 Act 179 and Regulation 32
(a) of the 14th
Defendants, TOPP.
3. A
further declaration that the
Board resolutions of TOPP
purported to have been passed on
April 22nd 1998 (100th
emergency board meeting)
approving the 50% sale of the
shares of the 14th
Defendant company is void and of
no effect, as that Board
resolution is incapable of
amending Regulation 32 (a) of
TOPP’s Regulation and the
protection afforded minority
rights under the Companies Act,
1963 Act 179.
4.
From the analysis made in the
judgment, it follows that the
purported sale of the shares of
1st Defendant’s to 2nd
Defendant’s must be set aside
and they are indeed hereby set
aside.
5.
Relief five (5) of the amended
writ is granted in its entirety.
6. In
view of the conduct of the 5th,
6th 7th, 8th,
9th, 10th,
11th, 12th
and 13th defendants,
who are were at all material
times directors of TOPP, which
conduct has been held to have
been in bad faith, in the
transfer and sale of the shares
of the 1st Defendants
to the 2nd
Defendants, the said Directors
must be deemed to have acted in
breach of their duties as
directors.
7. In
view of our comments in the
judgment, relief (7) seven of
the amended writ of summons is
dismissed as inapplicable as it
is inappropriate.
8.
Reliefs (8) eight and (9) nine
of the amended writ of summons
are accordingly granted.
9. In
granting relief (10) ten of the
amended writ of summons, we are
of the opinion that, the relief
should be granted in respect of
the first part of Regulation 32
(a) which is that the said
shares shall not be transferred
unless the existing
shareholders, which includes the
plaintiffs shall first have been
offered their right, failing
which the second leg of the
Regulation which is a transfer
of the class or classes in the
proportion of their existing
shareholding structures shall be
considered.
Whilst this
judgment, might be deemed to
have been a logical sequence to
the advice proffered by the
Board Chairman of TOPP at all
material times to the plaintiff
in the following words:-
“that P.S
Investments Limited has the
right to seek any legal redress
if found necessary under the
Laws of the Republic of Ghana in
Court”,
which was an
apparent response to the protest
of the plaintiff’s nominee on
the TOPP Board to the indecent
and hasty sale of the 14th
Defendants shares to the 2nd
Defendant, we still believe that
all is not lost for the purposes
of having a settlement in this
matter.
We will on
our part advice the parties to
resort to ADR.
(SGD) J. V. M.
DOTSE
JUSTICE OF
THE SUPREME COURT
(SGD) S. O. A. ADINYIRA
(MRS)
JUSTICE OF
THE SUPREME COURT
(SGD)
R. C. OWUSU (MS)
JUSTICE OF
THE SUPREME COURT
(SGD)
ANIN YEBOAH
JUSTICE OF
THE SUPREME COURT
(SGD)
P. BAFFOE BONNIE
JUSTICE OF
THE SUPREME COURT
COUNSEL:
FELIX NTRAKWA
WITH HIM KWADWO GYASI NTRAKWA
FOR THE
PLAINTIFF/APPELLANT/APPELLANT.
NII ODOI
ODOTEI WITH HIM MARTIN KPEBU FOR
THE 2ND
DEFENDANT/RESPONDENT/RESPONDENT.
CECIL
ADADEVOR (SENIOR STATE ATTORNEY)
FOR THE 3RD
DEFENDANT/RESPONDENT/RESPONDENT.
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