Ivan Smith (Administrator of Estate Kathleen Elfreda Chambers Smith) v CDF Scaffolding & Building Equipment Ltd and Others
| Jurisdiction | Jamaica |
| Judge | David Batts |
| Judgment Date | 19 September 2016 |
| Neutral Citation | [2016] JMCC Comm 23 |
| Docket Number | IN THE COMMERCIAL DIVISION CLAIM NO. CD00146/2014 |
| Court | Supreme Court (Jamaica) |
| Date | 19 September 2016 |
[2016] JMCC Comm 23
IN THE SUPREME COURT OF JUDICATURE OF JAMAICA
Batts J.
IN THE COMMERCIAL DIVISION CLAIM NO. CD00146/2014
Ms. Sandra Johnson for the Claimant
Ms. Carol Davis for the Defendant
Company Law — Majority shareholder deceased — minority shareholders vote to increase shares — locus standi of legal personal representative — Irregularities in accounts — whether notice of meeting called to increase shares and/or offer of new shares should be served on legal personal representative-Section 213A Companies Act-Section 212 Companies Act-Rectification of Register of Shares-Whether Damages applicable.
The Claimant is the legal personal representative for the estate of his deceased wife. He is entitled legally and beneficially to the shares his wife owned in the 1 st Defendant Company. His complaint is that since the death of his wife he has been excluded from and/or not allowed to exercise control of the 1 st Defendant Company. A company in which his wife during her lifetime had majority control. He blames the 2 nd and 3 rd Defendants for that and alleges further that they have committed fraud and/or negligence in the operation of the affairs of the 1 st Defendant company. He has, rather curiously, named the company as the 1 st Defendant in this action.
Save that it is admitted that the Claimant is beneficially entitled to the shares of his deceased wife (para 2(d)Defendants' submissions filed on the 2 nd June 2016},the Defendants deny the Claimant's allegations. The 2 nd and 3 rd Defendants say that they are in fact the majority shareholders. Further that they are lawfully appointed directors and were appointed by the Claimant's wife during her lifetime. They say the Claimant has never taken steps to be appointed a shareholder or a director. They also say they have acted in the best interest of the 1 st Defendant at all material times. In any event, they say, the claim is misconceived because the Claimant has no locus standi . The claim ought properly to have been brought by relator action on behalf of the Company and not by this Claimant. The Defendants counterclaimed and allege that the deceased fraudulently allotted shares to herself and, that in breach of her fiduciary duty, she used the 1 st Defendant's resources to purchase premises in her name and then leased those premises to the 1 st Defendant and used the 1 st Defendant's resources to improve her premises.
This trial has lasted many days. There has been much evidence, documentary and otherwise. Its conduct I must say has been characterised by confusion and intransigence. It is clear that Ms. Sandra Johnson in particular, did not at all times display that aloofness expected of Counsel. In the course of the trial, there were some surprising events. For example, Ms. Johnson objected to two letters written by her, and to which no privilege applied, being tendered in evidence [See Exhibits 34 and 35]. Ms. Johnson also admitted that her decision not to file and serve a particular witness statement was deliberate because,
‘If we open too much of our hands they are in control, can produce and backdate those documents to fit the circumstances. That is a real issue in this case.”
That intended witness be it noted was not allowed to give evidence. On the 2 nd June 2016, Ms. Johnson endeavoured to lead the evidence of an expert witness who had not prepared a report in the required format and without having obtained the permission of the court at case management to call the expert. In the interest of justice, I granted an adjournment to allow matters to be put right but Counsel was ordered to pay the costs personally. Although the parties managed to agree a Bundle of Documents, admitted as Exhibit 1, the exhibits eventually totalled 59 in all.
The Claimant gave oral evidence and called in support: Mr. Andrew Edwards Ms. Inger Hainsley Bennett, Ms. Rosemarie Salkey, Ms Rosemarie Gilbourne and Mr. Joshua Haye. The 2 nd and 3 rd Defendants both gave oral evidence and their witnesses were: Andrew Andrews and Davin Nairne.
I do not intend to repeat the evidence of each witness or the submissions of the parties. I will reference only so much of the evidence or submissions, as I consider necessary to explain the reasons for my decision.
Each party relied on the written report and oral evidence of an expert chartered accountant. The experts had contrasting views about aspects of the 1 st Defendant's (the Company's) accounts. Mr. Joshua Haye for the Claimant impressed me with his professionalism. Mr. Davin Nairne for the Defendant impressed me with his candour but appeared unfamiliar with detailed aspects of his own report. It became apparent that he had delegated much of the fact finding relative to the report to others. He at times found it difficult to explain aspects of the company's accounts, for example:
‘Q: what amount went to add to payable
A: cannot say how much
Q: tell us who were those creditors
A: This figure of $40 million was transferred from payable to long term loan account say is book entry
Q: Meaning
A: [Pause] it is an entry which is made for the records
Q: Does it mean nobody really is owed $40 million
A: I don't know, he (the accountant) says is a book entry and he does not recollect.’
The generally unsatisfactory nature of the company's accounting practices is not surprising given that this was a private family owned business venture. Furthermore, the person responsible for the accounts for a significant part of the time, and the one sent by the accounting firm to give evidence on its behalf, was Mr. Andrew Andrews. He was not a professionally qualified accountant.
The Claimant is not a particularly well read individual. He is a carpenter by profession. Until the death of his wife, he took no great interest in the affairs of the company. It is his evidence at paragraph 4 of his witness statement that,
‘Further, she alone was the sole signatory on all company accounts prior to her death and had full control of all administrative and financial affairs.’
In the course of cross-examination the following exchange occurred,
‘Q: You agree prior to marriage, you were not involved in Company
A: No, I was not involved in it
Q: While your wife was alive, you were not a director of the company
A: No
Q: Nor a shareholder
A: no
Q: Was [there] any reason why she did not make you a director or shareholder
A: Couldn't tell you I don't know of anything
Q: You agreed you were never on the payroll of the company
A: At the end of every month, my wife gave me a meagre salary and say, that's your pocket money. So I would not say that.’
After the death of his wife, the Claimant continued for a while to receive monthly cheques from the company. He formed the view that the 2 nd and 3 rd Defendants were unlawfully attempting to take control of the company after his wife's death. He also at some stage adopted the position that he would attend no meeting of the company without his lawyer's presence.
‘Q: there was a director's meeting in August 2008 recall that
A: not really
Q: remember at director's meeting you asked Mr Chambers if he invited Ms. Johnson to meeting
A: I told Mr. Chambers I would like Ms. Johnson to be at the meeting and he refused.
Q: you say you would have nothing to do with meeting except Ms. Johnson [[present].
A: I told them without my attorney at law I would not go to any meeting because my life was put on block. They tek me to half way tree court and sey I threaten the life of Mr. Chambers. I am afraid of people like these.’
The Claimant was therefore generally unaware of the operations of the company, of decisions taken, or of the keeping of records both before and after the death of his wife. He was however a generally truthful witness.
The 2 nd and 3 rd Defendants were the brother and nephew respectively, of the Claimant's deceased wife. While alive, it is clear she was the dominant party in the business. Her brother and nephew were minority shareholders but were not signatories on the company's account and played no great role in its day-to-day operation. They both worked on a part time or limited basis in the company. Her brother (the 2 nd defendant) is a trained scaffolder. I accept his evidence that he also, in the early days at least, injected some capital into the business. This was most probably by, way of investment not loan, and no supporting documentation was provided. Similarly, I accept that both the 2 nd and 3 rd Defendants sometimes worked without pay in order to assist the company. I accept the evidence that the 2nd and 3 rd Defendants were directors of the company prior to the death of Kathleen Chambers, the majority shareholder.
It is not surprising that upon his sister's death intestate, the 2 nd Defendant viewed with some alarm the prospect of the Claimant becoming majority shareholder by way of inheritance. Certainly, it may have seemed to him, that the informal manner in which the company's affairs had hitherto been conducted might no longer be possible. I find that the conduct of the 2 nd and 3 rd Defendants in, voting themselves additional shares and in forming a new company to provide services to the 1st Defendant Company, were motivated by a desire to protect themselves from the anticipated consequence of the Claimant becoming the majority shareholder. In this regard, there were two important bits of evidence during the cross-examination of the 2 nd Defendant:
‘Q: So what do you now say
A: I say when the increase shares was found out it was discussed with Mr. Smith...
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