Robert L. Sprague v Bonus Parts, Accessories & Auto Imports Ltd
| Jurisdiction | Jamaica |
| Judge | Palmer Hamilton, J. |
| Judgment Date | 28 July 2022 |
| Year | 2022 |
| Court | Supreme Court (Jamaica) |
| Docket Number | CLAIM NO. SU2021CD00393 |
In the Matter of sections 212 and 213 of the Companies Act, 2004
and
In the Matter of an application for leave to bring derivative action on behalf and in the name of Bonus Parts, Accessories & Auto Imports Limited
[2022] JMCC COMM 21
CLAIM NO. SU2021CD00393
IN THE SUPREME COURT OF JUDICATURE OF JAMAICA
IN THE COMMERCIAL DIVISION
Company Law — Civil Practice and Procedure — Civil Procedure Rule 27.2 (8) — Fixed Date Claims (First Hearings) — Section 212 of the Companies Act — Application for Leave to bring Derivative Action in the name and on behalf of the company — Statutory requirements to be met (reasonable notice, good faith & appears to be in the interest of the company) — Section 213 of the Companies Act — Court's Powers
Nigel Jones & Kimberly Morris instructed by Nigel Jones & Co. for and on behalf of the Claimant
The Defendant is unrepresented
Ronald Paris & Neco Pagon instructed by Paris & Co. for and on behalf of Mr. Ian Dunn, Director and Shareholder of the Defendant
On the 9 th day of September, 2021 the Claimant filed a Fixed Date Claim Form and Affidavit of Robert L. Sprague in support. The Fixed Date Claim Form sought the following Orders:
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(a) An Order that the first hearing be treated as the trial of the claim and/or that the matter be determined summarily at the first hearing, pursuant to Rule 27.2 (8) of the Civil Procedure Rules, 2002;
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(b) An Order granting leave to the Claimant to bring a derivative action in the name of Bonus Parts, Accessories & Auto Imports Limited against Mr. Ian Dunn and Mrs. Shawna Allen-Dunn, pursuant to section 212 (1) of the Companies Act, 2004;
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(c) An Order authorizing the Claimant to control the conduct of the action, pursuant to section 213 (1) (a) of the Companies Act, 2004; and
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(d) Such further or other relief as this Honourable Court deems just.
Bonus Parts, Accessories & Auto Imports Limited, hereinafter referred to as ‘the Company’, was incorporated under the Companies Act as a Limited Company on the 22 nd day of May, 2019 and issued one million (1,000,000) shares on incorporation. The Articles of Incorporation indicated that the activities of the business are ‘import and retail of auto parts, accessories, cars, buses and trucks.’ In or about November 2020, the Company expanded their activities to the buying and selling of motor vehicle oil. Mr. Ian Dunn and Mr. Robert Sprague were named as Directors and Shareholders, each issued with five hundred thousand (500,000) shares. Mrs. Shawna Allen-Dunn, the wife of Mr. Dunn, was named as the Company Secretary.
Mr. Sprague averred in his Affidavit in Support that he spearheaded the incorporation of the Company and appointed Mr. Dunn as Managing Director of same, and issued to Mr. Dunn the five hundred thousand (500,000) shares as equity. According to Mr. Sprague, Mr. and Mrs. Allen-Dunn without authorization withdrew and/or took monies amounting to ONE MILLION FOUR HUNDRED AND FIFTY-ONE THOUSAND AND SEVENTY-THREE JAMAICAN DOLLARS (JMD$1,451,073.00) and TWO THOUSAND THREE HUNDRED AND EIGHTY-FIVE UNITED STATES DOLLARS (USD$2,385.00) from the Company between July 2020 and December 2020. In addition, Mr. Dunn refused to provide to Mr. Sprague a customer list for the motor vehicle oil business that the Company was engaged in, pocketing revenue generated by the GPS Tracker business that the Company was engaged in, and causing the Company's sales to drop by 50% as a result of a competing business started by Mr. Dunn. Mr. Sprague alleges that Mrs. Allen-Dunn in December, 2020 changed the password to the Company's Sales and Inventory System resulting in the Company spending NINETY-EIGHT THOUSAND FIVE HUNDRED AND FIFTY JAMAICAN DOLLARS (JMD$98,550.00) to recover access to same.
Mr. Sprague, in his Affidavit, contends that the Company has a valid claim to recover all of its property and funds from Mr. Dunn and Mrs. Allen-Dunn. His objective, he further contends, is to recover for the benefit of the Company, all keys, documents, intellectual property, funds and other property from which it has been deprived.
On the 30 th day of November, 2021, Mr. Dunn filed an Affidavit in Opposition of the Fixed Date Claim Form. Mr. Dunn averred that at all material times, both himself and Mr. Sprague operated the Company as equal partners and it was his idea to form the Company. Mr. Sprague provided the capital and he, Mr. Dunn, provided “everything else to make them succeed.” He further averred that he was never appointed as Managing Director nor was he allotted shares on account of services rendered. Mr. Dunn denied that he withdrew the sums alleged by Mr. Sprague without authorization and contended that no authorization was needed as he was a signatory in his own right. Mr. Dunn admitted that he refused to provide the customer list because Mr. Sprague intended to force him out of the Company without any compensation. He further denied that his wife, Mrs. Allen-Dunn, committed any of the acts alleged as she did not possess the relevant information to access the Sales and Inventory System. On the other hand, Mr. Dunn admitted that he refused to turn over keys, documents, intellectual property, funds and other property because Mr. Sprague had decided to terminate their business relationship and forced him out of the Company.
Mr. Sprague filed a Second Affidavit in Support of Fixed Date Claim Form as a response to Mr. Dunn's Affidavit in Opposition. He denied the allegations as set out by Mr. Dunn and reiterated that Mr. Dunn and Mrs. Allen-Dunn committed wrongs against the Company
Mr. Jones, Counsel for the Claimant, submitted that Rule 27.2 of the Civil Procedure Rules, 2002, as amended, hereinafter referred to as the CPR, specifically empowers the Court to deal with matters summarily. Due to the nature of the orders being sought, Counsel Mr. Jones submitted that they verily believe that the matter seeking an order from the Court granting leave to bring a derivative action is one that should be dealt with summarily.
Counsel, in his submissions, stated that a derivative action is “an action brought by a shareholder or other complainant in respect of a wrong done to the company where the wrongdoers are in control of the company and refuse to bring an action in the name of the company.” He relied on the cases of John Glenmore and Brian Plummer v Phenee Anthony Plummer, Sean Fraser and Denbigh Farms Limited [2020] JMCA App 16 and Cable & Wireless Jamaica Limited v Eric Jason Abrahams [2020] JMCA Civ 45 (paragraphs 10 & 11).
Counsel contends that his client, by virtue of being a Director of the Company has met the statutory requirements to be empowered as a Complainant under section 212 (3) of the Companies Act and can therefore bring a derivative action. Mr. Jones submitted that section 212 of the Companies Act also states how derivative actions should be handled. He outlined the 3 requirements as being:
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(a) reasonable notice;
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(b) the Complainant is acting in good faith; and
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(c) in the best interest of the company.
In dealing with the first requirement, Counsel noted that Mr. Dunn was served by way of a letter dated July 1, 2022 titled “Notice of Intention to Pursue Derivative Action pursuant to Sections 212 and 213 of the Companies Act, 2004. Counsel contended that the Companies Act does not specifically state what is reasonable and therefore case law must be used to ascertain what the Courts have considered as reasonable. He relied on the case of Sally Ann Fulton v Chas E Ramson Limited [2016] JMSC COMM 14 and submitted that Mr. Sprague has given reasonable notice in the circumstances with the necessary information as evidenced in his Affidavit.
Counsel relied on numerous cases in dealing with the second requirement. He submitted that the ‘non-elevated standard’ is to be used to determine good faith as was outlined in the case of Sally Ann Fulton v Chas E Ramson Limited (supra). In using that standard Mr. Jones submitted that based on the evidence in Mr. Sprague's Affidavit this threshold has been met. He further submitted that if the claim does not go through it can affect the very core of the business structure and cause an end to the life of the Company as what was sustaining it has been diminished.
Mr. Jones also submitted that there is not a high threshold in meeting the third requirement. He contended that the use of the word ‘appears’ implies that it does not have to be proved by a high threshold but that on the fact of it, that it is in the company's interest. He further contended that the essence of the business has been greatly affected due to the actions of Mr. Dunn.
As Mr. Sprague is the only other director, Learned Counsel urged this Court to authorize him to control the matter in accordance with the powers vested to it under section 213 of the Companies Act.
Counsel also relied on the following cases: Earle Lewis and Carol Lewis v Valley Slurry Seal Company, Jeffery Reed and Valley Slurry Seal Caribbean Limited [2013] JMSC COMM 21, Leon Forte v Twin Acres Development Ltd [2015] CD 00004, re Bellman v Western Approaches Ltd. (1981) 130 D.L.R. (3d) 193, and Ang Thiam Swee v Low Hian Chor [2013] SGCA 11.
Counsel for Mr. Dunn, noted at the outset of their submissions that Mr. Sprague has not offered any proof, whether by supporting affidavits or contemporaneous documentary evidence, of the allegations raised by him in this claim. This is the basis for opposing Mr. Sprague's claim.
Learned Counsel submitted that Mr. Sprague's claim is not in good faith and that derivative action is not in the best interest of the Company. Counsel relied on the requirements...
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