Benkley Northover v Eric Northover and Others

 
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[2014] JMCC Comm 14

IN THE SUPREME COURT OF JUDICATURE

COMMERCIAL DIVISION

CLAIM NO. 2013CD00072

In the Matter of W.G. Northover Associates Limited

In the Matter of Section 213A of the Companies Act 2004

Between
Benkley Northover
Claimant
and
Eric Northover
1st Defendant

and

Rohan Northover
2nd Defendant

and

Godfrey Dixon
3rd Defendant

and

Winston G. Northover Associates Limited
4th Defendant

COMPANY LAW — PRIVATE COMPANY — DIRECTORS POWER TO ALLOT SHARES — WHETHER SHARE ALLOTMENT BY ONE OF TWO EXISTING DIRECTORS VALID-SHARES ALLOTTED FOR IMPROPER PURPOSE — WHETHER BREACH OF PRE-EMPTION RIGHTS — EFFECT OF IMPROPER ALLOTMENT.

COMPANY LAW-REMEDIES-OPPRESSION REMEDY-MAJORITY SHAREHOLDER CLAIMING UNFAIR PREJUDICE AND OPPRESSION-WHETHER MAJORITY SHAREHOLDER CAN BRING ACTION-WHETHER ACTS COMPLAINED OF AMOUNTED TO OPPRESSION OR UNDUE PREJUDICE-POWERS OF THE COURT TO REMEDY-COMPANIES ACT S 213A.

Edwards J.
INTRODUCTION
1

‘Mother may have, father may have, but God bless the child who has his own’. This is a very popular refrain from a popular gospel song. I think it very apt in this particular case. It is a case involving a lucrative private company, the deceased owner and the surviving relatives fighting over not so scarce benefits and spoils. One witness referred to them in documentary evidence as ‘the feuding Northovers’, and unfortunately I cannot say I disagree with that description. This case presents a most unfortunate situation and is a prime example of what can occur when the laws and the rules and regulations governing them are not followed.

2

The claim was commenced by way of Fixed Date Claim Form filed on May 14, 2013, seeking a declaration that the Claimant, Benkley Northover (Benkley) holds 400 ordinary shares in the 4 th Defendant (the company) in addition to the 300 ordinary shares in the company, which it is common ground that he holds on trust pursuant to the will of Winston G Northover (WN), deceased. The Claimant further sought an injunction to restrain the 1 st to 3 rd Defendants from disrupting the company's operations, which disruption he claimed had oppressed and unfairly prejudiced his interests as a director and shareholder. The Claimant also asked the Court to appoint a board of directors that would properly administer the company's affairs in order to put it in a position to properly conduct its affairs.

3

The Claimant averred that the 1 st , 2 nd and 3 rd Defendants had acted dishonestly and in a manner that oppressed his interest as a director and shareholder of the company, both in his beneficial capacity and as executor and trustee of the will of WN. He sought an injunction against the three Defendants not only to restrain them from dealing with the company but also to restrain the transfer of shares and the reduction of shares and for the appointment of directors and officers to the board of the company. The first two Defendants are the children of WN; the Claimant Benkley is his brother. The 3 rd Defendant was the Company Secretary and the 4th Defendant is the company founded by WN.

BACKGROUND FACTS
4

The deceased, WN, was a self-made man. He was a skilled contractor and blaster who built up his company Winston G. Northover and Associates Ltd. from scratch into a multi-million dollar company. The company was formed in 1995 with an authorized share capital of 1000 shares of $1.00 each. It was registered as a Limited Liability Company with 300 shares allotted to WN and 100 originally allotted to a Mr. Errol Elliot, one of his business associates. Those 100 shares held by Mr. Elliot were later transferred to the second son of WN, Rohan Northover (Rohan). However, for the most part, WN ran the company as a one man company.

5

WN had 14 known children who benefited from the success of the company and a much loved brother. He also could not live forever and so after a short illness he died but not before realizing that the company he founded would flounder for lack of a successor. So what did he do? He called his brother Benkley to his hospital bedside and he made a will. In his will he gave Benkley his 300 shares to hold on trust for his children to share equally. As already noted 100 of the original 400 allotted shares had already been transferred to his son Rohan. If that was all then there would be no problem. Rohan, with his 21 shares out of the 300, would become the majority shareholder in his father's company with the remaining 13 siblings being minority share holders.

6

However, and this is the crux of the matter, Benkley claimed that WN also invoked 500 of the remaining 600 unalloted and unissued shares out of the authorized share capital of 1000 and gave 400 of them to him. He also gave 100 shares to Benkley's son Norman Northover (Norman) and made him Managing Director. All thishe did from his hospital bed. According to Benkley, WN did not wish for his son Rohan to have controlling interest of his company to the detriment of the remaining children. WN wanted Benkley, and this is Benkley's account, to have control of the company as WN was confident he would run the Company in its best interest and that of his children.

7

Upon the death of WN several documents were filed with the Registrar of Companies. The 400 shares Benkley claimed he got were registered. He was also registered as a Director. The 300 shares he held as personal representative of the assets of WN in trust was also registered. Eric Northover (Eric), the eldest son of WN was also registered as Director. Then the feud began. The protagonists were many. There were claims and counterclaims against Rohan, Eric, Norman and Benkley. Rohan, although he held 100 shares had previously been fired from the company as Director by his father. After his father's death he nominated his brother Eric to the Board as Director. In the midst of what was fast becoming a family squabble there was the accountant and Company Secretary, the 3 rd defendant Godfrey Dixon (Godfrey). Alliances were now being formed. Godfrey appeared to have chosen the side of the two brothers. Benkley sought the support of his sons and outside associates.

8

When it became clear that the brothers and their uncle could not run the Company in harmony and in its best interest there was an agreement between the brothers and Benkley, that a Mr. Clarke Lowe was to act as an independent Director and Chairman of the Company. The brothers later reneged on this arrangement citing several reasons, the main one being that Mr. Lowe and Benkley were acting against their interest. There were claims and counter claims on both sides. Mr. Lowe and Benkley claimed the company could not move forward with any decision with which the two brothers did not agree and they did not seem to agree with any decision made by Benkley or the independent director.

9

Benkley claimed the brothers were taking money from the company, entering into contracts in its name without his knowledge and approval and that, with the aid of Godfrey, they were making loans from the company to themselves. He also claimedthat they froze bank accounts to which he had access and opened accounts with company funds to which only they had access. At a meeting of the Directors which was not attended by Eric, the directors voted to make Benkley the Managing Director and his son Kaon Northover as Company Secretary, citing the fact that Godfrey had voluntarily removed himself from that post. They also voted in a Mr. Phillip Duncan as technical director and voted to move the company's offices to his premises, a location vehemently objected to by Rohan and Eric.

10

The brothers and Godfrey then claimed Benkley was misappropriating funds from the Company and using it for personal gain. Norman had also previously stolen from the company and had been removed by Benkley. Eric and Rohan subsequently caused documents to be filed at the Companies Office purporting to remove Benkley as Director and cancelling his 400 shares. All this led Benkley to the courts to seek redress under section 213A of the Companies Act 2004 and so we come to it.

THE ISSUES
11

It is my considered opinion that any disposition of this case must involve deliberation on the following issues:

  • 1. Whether the shares to Benkley Northover and Norman Northover were validly allotted;

  • 2. Whether the Claimant as the majority shareholder was oppressed or treated in a manner unfairly prejudicial to him; and if so, what, if any, remedy is available;

  • 3. Whether the Defendants were oppressed or treated in a manner unfairly prejudicial to them; and if so what remedy is available.

Chronology of Events
12

Based on the manner in which the Company was operated, I think it might be useful to list a chronology of relevant events as they unfolded in the company.

  • 1. December 1995 the company was formed. Winston G. Northover, first Director with authorized share capital of 1000 shares. Issued shares were 300 to Winston G. Northover and 100 to Errol Elliot.

  • 2. Godfrey Dixon appointed Company Secretary, March 10, 1997.

  • 3. December 1, 2001, Rohan Northover appointed Director, by Notice of Change of Directors filed July 1, 2002.

  • 4. December 2010 share registry showed Winston Northover 300 shares, Rohan Northover 100 shares, issued share capital 400 shares.

  • 5. As at December 31, 2011 shareholders and directors were Winston G. Northover...

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