Karen Stewart v Bobby Seepersaud
| Jurisdiction | Jamaica |
| Judge | Brooks P,Simmons JA,Laing JA |
| Judgment Date | 25 November 2022 |
| Neutral Citation | [2022] JMCA Civ 40 |
| Docket Number | SUPREME COURT CIVIL APPEAL NO COA2022CV00035 |
| Court | Court of Appeal (Jamaica) |
| Year | 2022 |
and
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JM 2022 CA 117
[2022] JMCA Civ 40
THE HON Mr Justice Brooks P
THE HON Miss Justice Simmons JA
THE HON Mr Justice Laing JA (AG)
SUPREME COURT CIVIL APPEAL NO COA2022CV00035
IN THE COURT OF APPEAL
Written submissions filed by Frater, Ennis & Gordon for the appellant
Written submissions filed by Zavia Mayne & Co for the respondent
(Considered on paper pursuant to 2.4(3) of the Court of Appeal Rules 2002)
I have read in draft the judgment of Laing JA (Ag). I agree with his reasoning and conclusion and have nothing further to add.
I too have read the draft judgment of Laing JA (Ag) and agree with his reasoning and conclusion.
Laing JA (AG)
Mr Seepersaud (‘the first respondent’) and Mr Mattis (‘the second respondent’) (together referred to herein as ‘the respondents’) were the original shareholders and directors of the third respondent Seematt Construction Company Limited, a company duly incorporated on 20 September 1997 under the Companies Act of Jamaica (‘the company’). The first and second respondents each held one of the two issued shares in the company.
The annual returns of the company filed for the year 2020 showed that the respondents were no longer directors, and that the second respondent held one share in the company. The issued shares in the company had been increased to 1000 and there were six shareholders with Miss Karen Stewart (‘the appellant’) being the majority shareholder, with a shareholding of 548 shares.
The first and second respondents, having concluded that the adjustment of the shareholding and corporate governance structure of the company had been procured by fraud, filed a claim in the Supreme Court on 1 February 2021 against the appellant, Debbilee Stewart and the Registrar of the Companies Office, seeking numerous declarations in respect of their exclusion from the ownership and management of the company. The company was named as a claimant in the claim.
In the claim they allege that they were removed as shareholders and directors by fraud, as they had not resigned or transferred their shares to anyone. The respondents successfully applied for an injunction in the Supreme Court to restrain the appellant and Debbilee Stewart from any further dealings with the company, and to restrain all three defendants from registering any transfer of shares and/or appointing officers to the company.
At the hearing of the application for the injunction Palmer J (‘the learned judge’) also heard and considered a notice of application filed by the appellant seeking the following orders:
“1. An order that the 3 rd Claimant Seematt Construction Company Limited be removed as a party to the proceedings herein;
2. An order that the 1 st and 2 nd Claimants Bobby Seepersaud and Gary Mattis pay into court by way of Security for Costs the sum of One Million Five Hundred Thousand dollars ($1,500,000.00) within thirty (30) days of the date of this order.
3. That the 1 st and 2 nd Claimants shall deposit the said sum of One Million Five Hundred Thousand dollars ($1,500,000.00) as security for costs into an interest-bearing account in the name of Frater, Ennis & Gordon Attorneys-at-law, at a financial institution to be agreed on by the parties.
4. That the proceedings herein be stayed pending the payment of Security for Costs in accordance with the terms of this order.
5. That if the security is not provided in accordance with the terms of this order, the 1 st and 2 nd Claimants' Claim shall be struck out.
6. Costs of this application to be costs in the Claim.
7. Such further and/or other relief as this Honourable Court deems fit.”
The appellant made the application pursuant to rules 19.2(4) and 24.3 of the Civil Procedure Rules (‘CPR’) on the bases that the respondents are ordinarily resident outside of the jurisdiction, the company is not a proper party to the claim and that the appellant is not aware of any assets within the jurisdiction belonging to respondents.
After hearing the applications by both parties, on 14 March 2022 the learned judge granted the injunction and made the following orders:
“…
(i) Application to have the 3 rd Claimant Company removed as a party to these proceedings is refused;
(ii) Separate Counsel to appear to protect the interests of the 3 rd Claimant company;
(iii) A Receiver Manager to be appointed to manage the 3 rd Claimant company as follows:
(a) The Receiver Manager shall be agreed upon by the parties within 14 days of the order herein;
(b) If not agreed, the Receiver Manager is to be appointed by the Registrar of the Supreme Court from a list of prospects to be agreed by the parties within 28 days of the date hereof;
(c) If no agreed list is supplied as stated above, the Registrar shall select a suitable Receiver Manager after the expiration of the 28-day period in (iii) (b) above;
(d) The Receiver Manager to be paid by the 3rd Claimant company.
(iv) Application for Security for Costs is refused;
(v) Costs of the 1 st Defendant's application awarded to the Claimants to be taxed if not agreed.
…”
Being dissatisfied with the orders made in relation to her application, the appellant has filed the following grounds of appeal challenging the orders made by the learned judge:
1. “The Learned Trial Judge erred in facts [sic] and/or law in refusing the Appellant's application to have the [company] removed as a party to the proceedings, thereby permitting the 1 st and 2 nd Respondents to continue a derivative action without adhering to the clear provisions outlined in section 212 of the Companies Act.
2. The Learned Trial Judge failed to properly address how section 212 of the Companies Act applies to the claim filed, and if it does not apply, failed to explain why.
3. The Learned Trial Judge erred in facts [sic] and/or law by permitting the 1 st and 2 nd Respondents to bring an action in the name of the [company] notwithstanding the fact that neither party purports to act with the authority or sanction of the [company] and/or its Board of Directors.
4. The Learned Trial Judge erred in facts [sic] and/or law by ordering the appointment of a Receiver Manager to manage the [company] notwithstanding the fact that there was no evidence or indication that the [company] was insolvent, bankrupt or a debtor in any proceedings.
5. The Learned Trial Judge erred in facts [sic] and/or law by ordering the appointment of a Receiver Manager to manage the [company] notwithstanding the fact that there was no application made by the 1 st and 2 nd Respondents, or any other party, for a Receiver Manager to be appointed.
6. The Learned Trial Judge erred in facts [sic] and/or law by refusing the Appellant's Application for Security for Costs notwithstanding the fact that both the 1 st and 2 nd Respondents gave foreign addresses.
7. The Learned Trial Judge erred in facts [sic] and/or law by refusing the Appellant's Application for Security for Costs notwithstanding the fact neither the 1 st nor 2 nd Respondents gave sufficient particulars about any property that they owned within the jurisdiction.”
After outlining the factual background, the appellant argued that, since the respondents were “former directors” and they included the company as a claimant, the only reasonable conclusion to be drawn is that they were pursuing a derivative claim and section 212 of the Companies Act was therefore applicable.
The appellant relied on Sykes J's (as he then was) judgment in Fulton v Chas E Ramson [2016] JMSC COMM 14 where he distinguished a derivative action from an oppression remedy. The appellant submitted that this distinction is important because the derivative action is brought when the company would have a cause of action for wrongs done to it. This is distinct from the oppression remedy, which is filed on behalf of individuals for wrongs done to them and is not filed in the company's name. The appellant also submitted that the respondents would have to show that the wrongs being complained of were wrongs done to the company and sought support in this court's decision in John Plummer and another v Phenee Plummer et al [2020] JMCA App 16.
The appellant contended that the requirements of the Companies Act have not been complied with and that the learned trial judge did not properly apply the relevant legislation. In addition, it was submitted that the learned judge has not provided any explanation as to how he arrived at his decision.
The appellant referred to rule 24.3(a) of the CPR and submitted that had the learned judge removed the company as a party to the claim he would have had sufficient reasons to grant the order for security for costs as there would have been no claimant who was ordinarily resident within the jurisdiction.
The appellant submitted that the requirements for an order for security for costs had been satisfied based on the affidavit in support in that, both respondents gave addresses outside the jurisdiction. Furthermore, the only evidence of assets in the jurisdiction belonging to them was made in reply and is property jointly owned by the second respondent and several other persons.
The appellant submitted that, having satisfied the conditions under rule 24.3 of the CPR and the respondents' inadequate response, the learned judge wrongly exercised his discretion in refusing the order for security for costs.
The appellant submitted that, based on the requirements of sections 2 and 58 of the Insolvency Act, section 213A of the Companies Act (‘the Act’) and Part 51 of the CPR, the learned judge...
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