Merle Baldwin v Featherbed Farms Ltd

• Jurisdiction: Jamaica
• Judge: Brown Beckford J
• Judgment Date: 21 March 2024
• Docket Number: CLAIM NO: SU2020CD00408
• Court: Supreme Court (Jamaica)

Between

Merle Baldwin

Claimant

and

Featherbed Farms Limited

1 ^st Defendant

and

The Registrar of Companies

2 ^nd Defendant

and

Patricia Gordon

3 ^rd DEFENDANT Defendant

[2024] JMCC Comm 14

CLAIM NO: SU2020CD00408

IN THE SUPREME COURT OF JUDICATURE OF JAMAICA

COMMERCIAL DIVISION

Company Law — Allotment of Shares — Removal of Director — Oppressive and Unfairly Prejudicial Conduct — Rectification — Laches

IN OPEN COURT

Appearances:

Mr. Sean Kinghorn and Ms. Shanese Green instructed by Kinghorn & Kinghorn Attorneys-at-Law for the Claimant

Mrs. Janice Buchanan-McLean & Ms. Sashawah Newby for the 1 ^st and 3 ^rd Defendants

Brown Beckford J

INTRODUCTION

1 A dead man tells no tales. This is the story of a woman who claims to be betrayed by a man she befriended. Together, they formed a Company and establised a business of poultry rearing. She, being an agronomist, provided the technical expertise while he provided the capital. They owned the business equally, being equal shareholders in, and directors of, the Company. In the beginning, she managed the operation as the man resided overseas. He later joined her in managing the business. After some years, things soured. She, claiming to be undermined and threatened with physical harm by the man, withdrew from the operation, concentrating on other endeavours. In the meantime, the man became an expert in the industry winning many accolades. The business thrived. Then he died. His wife continued the operation. The woman discovered that she was no longer an equal shareholder in the Company or a director. The woman wanted half of the profits and to have the status of the company's affairs returned to its original position. The wife says no, you abandoned the business in its infancy, and this is my husband's doing, of which I am the beneficiary. Unable to settle the matter between themselves, a Court must now cut and distribute the cake. This is the story of Mrs. Merle Baldwin, Mr. Joseph Gordon and Featherbed Farms Limited.

BACKGROUND

2 Featherbed Farms Limited (“the Company”) is an agriculture and poultry farming business which was incorporated on 7 ^th December 1988 with an authorized share capital of One Thousand Dollars ($1,000.00) divided into 1000 ordinary shares with a par value of One Dollar ($1.00.00) per share. The only subscribers for shares were Mr. Joseph Gordon and Mrs. Merle Baldwin. Each was allotted 1 share, with the remaining 998 shares unissued. Mr. Gordon and Mrs. Baldwin were the first directors of the Company, and Mrs. Baldwin was also the Company secretary.

3 Mrs. Baldwin was an Agronomist with experience in Agriculture and Agronomy. She holds an Associate Degree in Agriculture (Hons) from the School of Agriculture and a Bachelor of Science Degree in Agronomy from the University (of the West Indies) St. Augustine. She managed the day-to-day operations of the Company in its initial stages. Mr. Gordon was the financier, providing all the initial capital for financing the Company. Their equal shareholding apparently reflected the value they placed on their respective contributions. Shortly after operations began, the Company sought and was granted a loan from the National Commercial Bank. Both Mr. Gordon and Mrs. Baldwin were guarantors of the loan.

4 In or around 1994, the relationship between the parties deteriorated beyond repair and Mrs. Baldwin no longer participated in the day-to-day management of the business. Mrs. Baldwin's evidence is that after the birth of her second child, having been on maternity leave, Mr. Gordon told her not to return to the farm. At the time Mr. Gordon was residing on the farm. Mrs. Baldwin's further evidence is that out of fear she did not return to the farm. This was in the year 1994. Mr. Gordon died on 22 ^nd May 2019. Mrs. Patricia Gordon, wife of the deceased, received the Grant of Administration in Mr. Gordon's estate.

5 Mrs. Baldwin claims to have discovered in December 2019, that all the unissued shares in the Company were allotted to Mr. Gordon, and that she had been removed as a director of the Company. In September 2020, Mrs. Baldwin commenced her claim to have the record of the shareholding of the Company rectified, and to be reinstated as a director. Mrs. Baldwin also asserts that Mr. Gordon behaved in a manner that was oppressive or unfairly prejudicial to her interest as a director and shareholder of the Company in breach of S.213A of the Companies Act of Jamaica.

6 In her claim, commmenced by way of Fixed Date Claim Form against Featherbed Farms Limited, The Registrar of Companies and Patricia Gordon, the 1 ^st, 2 ^nd and 3 ^rd Defendants, respectively, Mrs. Baldwin sought the following Orders:

The Registrar of Companies was removed as a party to the claim by the Order of Wint-Blair J. Reference to ‘the Defendants’ in this judgment is to the 1 ^st and 3 ^rd Defendants.

• i. A Declaration that the 998 shares allotted to Joseph Gordon were unlawfully and improperly allotted.

• ii. A Declaration that the shareholdings in Featherbed Farms Limited remain as 1000 ordinary shares with 1 ordinary share held by the Applicant, Merle Baldwin, and 1 ordinary share held by the estate of Joseph Gordon.

• iii. An order that the 2 ^nd Defendant amends the records of Register of Companies to reflect the Order of this Honourable Court in respect to the shareholding of the Company.

• iv. The Applicant, Merle Baldwin, be reinstated as a Director of the Company Featherbed Farms Limited.

7 Claimant's Counsel in his final submissions asked that the Court grant the following consequential Orders:

• 1. The register of members of Featherbed Farms Limited (1st Defendant), be rectified by striking out Nine Hundred and Ninety-Eight (998) shares of the share capital of the company purportedly held by the deceased.

• 2. The 3 ^rd Defendant shall file with the Registrar of Companies a return of allotment reflecting the rectified shareholdings in relation to the 1 ^st Defendant, within ninety (90) days of this order.

• 3. The 1 ^st and 3 ^rd Defendants shall file with the Registrar of Companies annual returns and all other documents as may be required reflecting the rectified shareholdings, in the aforementioned paragraph, within ninety (90) days of this order.

• 4. Notice of all such rectifications shall be given to the Registrar of Companies.

• 5. Notice of appointment/change of Directors filed with the Companies Office of Jamaica is cancelled and the Claimant is duly declared the lawfully appointed secretary and a Director of the 1 ^st Défendant.

• 6. The 3rd Defendant shall within thirty (30) days of this order take all steps as are necessary to rectify the Register of Directors and Company Secretary and file amended returns or notices as may be necessary to give effect to the order made in at paragraph 38.

• 7. The appointments of Anthony Francis as Director and/or secretary of the 1 ^st Defendant and any subsequent appointments in the absence of the Claimant were invalid having been effected contrary to the Articles of Association of the company.

SUBMISSIONS ON BEHALF OF THE CLAIMANT

8 Counsel on behalf of the Claimant, Mr. Sean Kinghorn, contended that the allotment of the 998 shares made by Mr. Gordon to himself was unlawful and therefore invalid, as it was contrary to the Company's Articles of Association. To this end he prayed that the Court revert the shareholding to the original legal position. He relied on Benkley Northover v Eric Northover[2014] JMCC Comm 14.

9 He asserted that the Pre-emptive Right Clause (Clause 42) of the Articles of Association was not complied with. Counsel argued that unissued shares in the Company's authorized share capital are new shares and as such attach pre-emptive rights. Therefore, Mrs. Baldwin ought to have been given the right to purchase the unissued shares in order to maintain her proportionate ownership in the Company. This argument he claimed was supported by the cases of Benkley Northover v Eric Northover, John Fitzgerald Peart v Sandra Palmer [2018] JMSC Civ 186 and Joni Kamille Young-Torres v Ervin Moo Young and others 2019 [JMCA] Civ 23.

10 Counsel also contended that Article 15 of the Articles of Incorporation, though seemingly giving a wide discretion to directors to issue shares, is fettered by the directors' obligation to act in the bona-fide interest of the Company. The directors also had a duty to exercise their powers for a proper purpose and not act for any collateral purposes. Consequently, in circumstances where Mr. Gordon had allotted the remaining 998 shares to himself, he had in effect breached his fiduciary duty by acting in his own best interests, and thereby, improperly exercising his power. He relied on Benkley Northover v Eric Northover. Furthermore, he pointed out, in accordance with Joni Kamille Young-Torres v Ervin Moo Young and others(supra) the burden of proof is on the directors to show that their actions were proper.

11 Counsel Mr. Kinghorn further averred that Mrs. Baldwin was not removed as a director of the Company pursuant to the Articles of Incorporation or The Companies Act. He maintains that no notice of a meeting was given to Mrs. Baldwin. Moreover, in view of her absence, no quorum could have been formed to constitute a valid meeting. Consequently, Mrs. Baldwin ough to be re-instated as a director. Counsel drew support from John Fitzgerald Peart v Sandra Palmer(supra).

12 In light of the evidence, it was Mr. Kinhgorn's contention that the conduct of the defendants were oppressive and unfairly prejucial to Mrs. Baldwin. Mr. Gordon's actions unlawfully diluted the Mrs. Baldwin's interest in the Company and prevented her from operating as a director.

13 It was further submitted that in the circumstances there was no delay on part of Mrs. Baldwin. In light of the threat upon her life by Mr. Gordon, Mrs. Baldwin acted with alacrity following her discovery of his death. In accordance...