Joni Kamille Young-Torres v Ervin Moo-Young

• Jurisdiction: Jamaica
• Judge: McDonald-Bishop JA,Sinclair-Haynes JA,Edwards JA (AG)
• Judgment Date: 31 July 2019
• Neutral Citation: JM 2019 CA 71
• Date: 31 July 2019
• Court: Court of Appeal (Jamaica)

[2019] JMCA Civ 23

SUPREME COURT CIVIL APPEAL NO 23/2016

Before:

The Hon Mrs Justice McDonald-Bishop JA

The Hon Mrs Justice Sinclair-Haynes JA

The Hon Miss Justice Edwards JA (AG)

Between

Joni Kamille Young-Torres (as Administrator of the estate of Karl Augustus Young)

Appellant

and

Ervin Moo-Young

1 ^st Respondent

Debbian Dewar (as an executor of the estate of Chad Adrian Young)

2 ^nd Respondent

ZIP (103) Limited

3 ^rd Respondent

Mrs Sandra Minott-Phillips QC and Mrs Simone Bowie Jones instructed by Myers, Fletcher & Gordon for the appellant

Mrs Symone Mayhew and Ms Kimberly Morris instructed by Symone M Mayhew for the 1 ^st respondent

Allan Wood QC, Mrs Tana'ania Small Davis and Miss Kerri-Ann Allen Morgan instructed by Livingston Alexander & Levy for the 2 ^nd respondent

Ms Carlene Larmond instructed by Rattray Patterson Rattray for the 3 ^rd respondent

Company Law - Shares and shareholders — Pre-emption rights — Whether allotment of shares in the 3rd respondent was in breach of pre-emption rights attached to the estate of the deceased — Whether directors were obliged to give notice offering those shares to the beneficiaries of the estate — Fair market value of shares.

McDonald-Bishop JA

1 I have had the privilege of reading, in draft, the judgment of my sister, Edwards JA (Ag). I agree with her reasoning and conclusion as well as the orders she has proposed and there is nothing I could usefully add. I would, however, take the opportunity to apologise for the delay in the delivery of the judgment, which is not at all attributable to her.

Sinclair-Haynes JA

2 I too have read in draft the judgment of Edwards JA (Ag) and agree with her reasoning and conclusion as well as the orders proposed.

Edwards JA (AG)

Introduction

3 The appellant, Joni Kamille Young-Torres (“Joni Torres”), commenced a claim in the Supreme Court of Jamaica (in her capacity as the administrator of the estate of Karl Augustus Young (“Karl Young”), seeking, among other things, a declaration that the allotment of the 490,000 shares in the 3 ^rd respondent, Zip (103) Limited (“the company”), to Chad Young, was a breach of the pre-emption rights which attached to the share entitlement of Karl Young's estate and that, as such, the allotment was unlawful and a nullity. The claim was brought against Ervin Moo-Young, Debbian Dewar (as executor of the estate of Chad Young) and the company. The company brought an ancillary claim against Debbian Dewar in her personal capacity as well as in her capacity as executor of the estate of Chad Young.

4 The claim and ancillary claim were heard by Sykes J (“the judge”), (as he then was), and on 5 February 2016, for reasons contained in a written judgment, he refused the orders sought by Joni Torres and gave judgment for Debbian Dewar. Ervin MooYoung, who was the 1 ^st defendant in the court below, did not contest the claim and supported the submissions made on behalf of Joni Torres, for the orders sought in the court below. The judge made no orders with respect to Ervin Moo-Young. He also gave judgment for Debbian Dewar in the ancillary claim brought by the company.

The facts

5 Karl Young and Ervin Moo-Young are brothers. Karl Young died on 10 June 2010. At the time of his death the brothers were the only shareholders of the company, being registered shareholders of one share each. Ervin Moo-Young acquired his one share from the original subscriber to the memorandum of association, Brian Schmidt. The company was incorporated 17 September 2001 with an authorised share capital of $500,000.00 divided into 500,000 ordinary shares of $1.00 per share. At the time of incorporation, the company adopted a form of articles of association in Table A of the Companies Act (“the Act”). The brothers having only issued two shares from the authorised shares, it meant that at the time of the death of Karl Young, the company had 498,000 unissued shares.

6 Chad Young and Joni Torres are brother and sister, being the offspring of Karl Young. That would also make Ervin Moo-Young their uncle. Whilst Karl Young was still alive, Chad Young was made a director of the company in August of 2004 but he was not a shareholder. Joni Torres and four other siblings lived overseas and took no part in the operation of the company. The relationship between Debbian Dewar and Chad Young is unclear but she was appointed a director of the company in 2011 and joint managing director in 2013. Ervin Moo-Young denies being in attendance at the meeting at which it is alleged that she was appointed Managing Director. However, during the lifetime of Chad Young, she acquired no shares in the company.

7 At the time of the death of Karl Young, the issued shares in the company remained one share to Ervin Moo-Young and one share to Karl Young. However, on 8 July 2010, within a month after Karl Young's death intestate, and before any legal administrator of his estate could be appointed, the surviving shareholder and director of the company Ervin Moo-Young, along with the other director Chad Young, purported to call a general meeting of the directors and members of the company. At that meeting, which was chaired by Chad Young, it was agreed that 490,000 of the unissued shares in the company, were to be allotted to Chad Young. An amended “return of allotment” was subsequently signed by Ervin Moo-Young and filed at the Companies Office of Jamaica, on 9 September 2010. This immediately made Chad Young the majority shareholder in the company.

8 Chad Young subsequently died on 27 February 2014, leaving a will, by which he bequeathed, among other things, 50% of his interest in the company, to Debbian Dewar absolutely. On 18 June 2015, Debbian Dewar, as one of two executors, (the other being Ervin Moo-Young) was granted probate in Chad Young's estate, with power reserved to Ervin Moo-Young. Joni Torres obtained letters of administration in the estate of Karl Young in August of 2015.

The proceedings in the court below and the judges reason for decision

9 In her fixed date claim form filed 30 October 2015, Joni Torres sought declarations, among other things that:

• (i) only two of the 500,000 shares in the company had been lawfully issued;

• (ii) she (as administrator of the estate of Karl Young) and Ervin Moo-Young were the holders of the two lawfully issued shares in the company; and

• (iii) the purported allotment of 490,000 shares in the company to Chad Young was unlawful and a nullity.

10 In support of her claim, Joni Torres averred that the fact that Chad Young was never issued with any shares in the company, notwithstanding having been appointed a director during the lifetime of Karl Young, was of major significance. This, she contended, meant that control of the company remained vested in Karl Young and Ervin Moo-Young, up until the purported allotment of 490,000 shares to Chad Young, in July 2010. She further noted that this allotment of shares was dubious as the company's articles of association required all unissued shares to be first offered to members, unless the company by special resolution directed otherwise. The relevant sections in the articles of association relied on by her are articles 34, 35 and 36.

11 She also averred in the court below that at no point after the death of Karl Young did his legal representative or his beneficiaries receive an offer to take up any of the unissued shares in the company, and that no special resolution had been passed to circumvent this requirement.

12 In the ancillary claim brought by the company against Debbian Dewar it sought several declaratory reliefs. The relevant portion of the claim was as follows:

“(i) That the allotment of the 490,000 shares to Chad Young be cancelled.

(ii) A declaration that the share register and the records of the Companies Office of Jamaica be rectified.

(iii) A declaration that [Debbian Dewar] was appointed a director of [the company].

(iv) A declaration that the director's register and the records of the Companies Office of Jamaica be rectified…”

13 The judge refused both the orders sought by Joni Torres on the claim and those sought in the ancillary claim, brought by the company, against Debbian Dewar.

14 In assessing Joni Torres' claim as to whether there had in fact been a breach of the company's articles of association, the judge conducted a thorough and detailed review of its provisions relating to the allotment of shares upon the death of a shareholder. Referencing the decision in Thompson and another v Goblin Hill Hotels Ltd [2011] UKPC 8, the judge reasoned that in interpreting a commercial document, inclusive of a company's articles of association, “the plain and ordinary meaning of the words used … can only be displaced if it produces a commercial absurdity”.

15 The judge accepted that section 61 of the Act, along with article 47(a) of the company's articles of association, did provide a right of pre-emption to existing members, with respect to unissued shares. He, however, concluded that for this provision to be applicable to the case of a deceased shareholder who had died intestate, someone would have to be appointed a legal personal representative to their estate. The judge found that the requirement for notice to, or the recognition of, a legal personal representative, as provided for by the company's articles of association, did not refer to beneficiaries, and as such, there was no foundation for the proposition that the company was under a legal obligation to give notice to or recognise the beneficiaries, in the absence of a legal personal representative.

16 The judge noted also, that the failure of the company's articles of association to make provision for any potential time lapse between a shareholder's death and the issuing of shares before a legal personal representative is appointed, was perhaps a fault of its author. Notwithstanding, he found that the court was not at liberty...