Causewell (Michael) and Richard Causewell v Dwight Clacken and Lynne Clacken

• Jurisdiction: Jamaica
• Judge: SMITH, J.A. , COOKE, J.A. , SMITH, 3.A. (Ag.)
• Judgment Date: 24 October 2008
• Neutral Citation: JM 2008 CA 82
• Judgment citation (vLex): [2008] 10 JJC 2405
• Court: Court of Appeal (Jamaica)
• Date: 24 October 2008

IN THE COURT OF APPEAL

BEFORE:

THE HON. MR. JUSTICE SMITH, J.A THE HON. MR. JUSTICE COOKE, J.A THE HON. MISS JUSTICE SMITH, J.A. (Ag.)

SUPREME COURT CIVIL APPEAL NO. 28 OF 2008

BETWEEN:

MICHAEL CAUSWELL

1 ^ST APPELLANT

^AND

RICHARD CAUSWELL

2 ^ND APPELLANT

^AND

DWIGHT CLACKEN

1 ^ST RESPONDENT

^AND

LYNNE CLACKEN

2 ^ND RESPONDENT

Mr. John Vassell, Q.C., Mrs. Julianne Mais-Cox and Miss Cindy Lightbourne instructed by DunnCox for the Appellants.

Mr. Michael Hylton, Q.C. and Miss Anna Grade, instructed by Rattray, Patterson, Rattray for the Respondents.

COMPANY LAW - Winding up - Petition to wind up company - Companies Act 1967 - Consent Order - Effect - Application to set aside

SMITH, J.A.

I have read in draft the judgment of Cooke, J.A. I agree with his reasoning and conclusion and there is nothing further I wish to add.

COOKE, J.A.

1 The background in this matter has been helpfully outlined in the skeleton argument which was submitted to the court. This I now reproduce.

" Background

It should be noted that apparently there has been no action, as yet as regards the direction of this court given on the 5 ^th March 2008 ((7) supra).

• 2. On the 5 ^th October 2001 the Petitioners, Dwight and Lynne Clacken, instituted proceedings in Suit No. E505 of 2001 by filing a Petition to Wind Up the Company, Equipment Maintenance Limited ("EML"), under the provisions of sections 196 and/or 203 of the Companies Act, 1967.

• 3. The Petition of the Respondents/Petitioners included a prayer that the shares of EML be valued by a competent valuer being a chartered accountant appointed by the Court and the Petitioners' shares be purchased by the Respondents (the Appellants herein).

• 4. On the 29 ^th May, 2002, the Supreme Court (Mr. Justice Anderson) by and with the consent of the parties made an Order upon the Winding Up Petition determining the dispute between the parties (hereinafter called "the Consent Order"). The Consent Order embodies the terms of an agreement between the parties for the resolution of their dispute. The Consent Order provides (inter alia) that: (a) the Appellants (Michael and Richard Causwell) purchase the Petitioners' shares in EML at a price to be fixed by the accounting firm of Peat Marwick and Partners (hereinafter called "the Valuer"); (b) the Valuer value the Petitioners' shares as at 31 ^st December 2001; (c) the Valuer is authorised to make enquiries and examine books, records and documentation including but not limited to the Affidavits and documentation filed in the proceedings in order to ascertain the value of any assets or amount of any funds or any amount which EML is entitled to demand repayment which not only have been diverted, but which have been utilized or paid by or to any shareholder (which includes the directors) and/or certain companies; (d) the Valuer is permitted to use the in house figures for the financial year ending the 31 ^st December 2001 in the absence of Audited financial statements for that year; (e) the decision of the Valuer in the event of any dispute relative to the valuation is final.

• 5. Upon the application of the Petitioners, by Order made on November 20, 2002, where the valuation is incomplete by January 31, 2003 the Valuer is authorized to use the audited accounts of EML for the financial year ending 31st December 2000. By the same Court Order, the Valuer is permitted to arrive at an approximate valuation 'for the purposes of the purchase of the shares of the Petitioners by the Respondents".

• 6. The Court of Appeal, in its Judgment in Michael Causwell et al v. Dwight Clacken et ux SCCA No 129/2002 on February 18, 2004, remitted this matter to the Supreme Court to fix the dates for the completion of the valuation of the Respondents'/ Petitioners' shares and for the payment of the 22% deposit thereof, as well as for the computation of the period within which the balance of the purchase price is to be paid. The application to set timelines was to be heard in the Supreme Court when on 25 ^th January 2007 the Honourable Mr. Justice Marsh in the court below ordered inter alia that the Application to Reschedule Time Lines be adjourned for a date to be set by the Registrar of the Supreme Court, and further stated that on the said Court of Appeal judgment, the setting of dates (timelines) is a matter contemplated was properly to go before the Honourable Mr. Justice Anderson and be determined by him, and that therefore the clarification of the Court of Appeal on this point was required.

• 7. On 5 ^th March 2008 the Court of Appeal, upon an application for such clarification, directed that its said Order of February 18, 2004 be effected forthwith by the Supreme Court, and that any Judge of the Supreme Court may preside over a hearing to bring into effect the said February 18, 2004 Order.

• 8. There is pending in the Supreme Court a Motion filed by the Respondents/Petitioners in October 2007 to set aside the Consent Order on the basis that the performance of its terms have been frustrated. It is in relation to that Motion that the Affidavits (paragraph I hereof) were filed."

2 In support of its motion to have the Consent Order of 29 ^th May 2002, set aside by reason of frustration the respondents placed reliance on an affidavit of Paul Saulter and two affidavits of Dwight Clacken one of the respondents. The appellants sought to strike out the Saulter affidavit in its entirety and certain paragraphs of the Clacken affidavits. On 13 ^th March 2008, Pusey J. refused the appellants' application for the following orders:

"The affidavit of Paul Saulter filed on February 11, 2008 be struck out on the ground that it is irrelevant and inadmissible.

Paragraphs 10 through 18 (inclusive) of the 24 ^th January 2007 Affidavit of Dwight Clacken and paragraphs 15 through 21 (inclusive) of the Affidavit of Dwight Clacken sworn on November 6, 2007 and filed herein be struck out on the basis that the evidence as to the proceedings before the Public Accountancy Board and the determination made by and before that body as to Basil Cunningham are irrelevant, inadmissible and only serve to hinder and thwart proceedings herein."

This appeal lies from this order.

3 The focus of the appeal centered on what the appellants regard as the offending paragraphs of the Clacken affidavits. These speak to the involvement of the Public Accountancy Board (PAB). In the Clacken affidavit dated 24th January 2007, Clacken states how from his perspective the PAB became involved.

• "6. That since the Consent Order was made in May 2002, the majority shareholders of the Company have failed and/or refused to deliver relevant documentation, particularly financial records to enable KPMG Peat Marwick and Partner Limited (hereinafter referred to as 'KPMG") to complete the valuation of the shares in the Company pursuant to the said Consent Order. Consequently, there has been no purchase of the shares of the minority shareholders by the majority shareholders (hereinafter referred to as "the Respondents") as contemplated by the said Consent Order.

• 7. That at all material times when we left the Company all documents concerning the monies received and expended by the Company, all sales and purchases by the Company and the assets and liabilities of the Company were in place and were up to date.

• 8. That notwithstanding the requirement that the majority shareholders of the Company deliver the audited financial statements of the Company for year 2001 to KPMG to enable KPMG to value the shares in the Company. KPMG was forced to rely on the audited financial statement for the Company for 2000 in the face of the majority shareholders' failure to deliver the audited financial statement for the Company for 2001.

• 9. That the Respondents have simply stated that the audited financial statements for 2001 is not available but to date have given no explanation or no satisfactory explanation for the absence of the said audited financial statements save and except to say that they have detailed the reasons for the absence of the audited financial statements for 2001 in several affidavits filed by Michael and Richard Causwell which are before the Court.

• 10. That after we exhausted all avenues that should cause the Respondents to provide KPMG with the requisite documents to complete the valuation pursuant to the Consent Order, we complained to the Public Accountancy Board in the Ministry of Finance by letters dated 12th of April 2005, 22nd of April 2005, 12th of July 2005 and 5th January 2006. Copies of these are attached together hereto respectively and marked "DC-1" for identification.

• 11. That the Public Accountancy Board wrote to Mr. Cunningham of J B Causwell & Co by letters dated 29th April 2005, 9th May 2005, 23rd January 2006, and 27th June 2006. Copies of these letters are attached together hereto respectively and marked "DC-2" for identification."

4 Following the Clacken complaint to the PAB a hearing was conducted into the professional conduct of Basil Cunningham. He was the accountant of J B Causwell & Co. whose responsibility it was to provide KPMG who was the agreed valuer with audited financial statements. J B Causwell & Co. was the auditors of Equipment Maintenance Limited (EML) the company which is the subject of this dispute. It is the adverse findings against Cunningham by the PAB which the appellants seek to exclude from consideration in the hearing as to whether or not there has been frustration in respect of the Consent Order. Before I address the issue of the admissibility of the findings of the PAB I will set out in outline the contention of the respondents. These are:

• "(a) Audited Financial Statements are a prerequisite to the valuation of any corporate entity;

• (b) Both parties agreed that KPMG should conduct the valuation and both parties...