PacLII Home | Databases | WorldLII | Search | Feedback

High Court of Fiji
You are here:  PacLII >> Databases >> High Court of Fiji >> 2009 >> [2009] FJHC 270

Database Search | Name Search | Recent Decisions | Noteup | LawCite | Download | Help

In re Kaybee Investments Ltd [2009] FJHC 270; HBF016.2009 (3 December 2009)

IN THE HIGH COURT OF FIJI
AT LAUTOKA
CIVIL JURISDICTION


Civil Case No. HBF. 16 of 2009


IN THE MATTER OF THE COMPANIES ACT 1983


AND


IN THE MATTER OF KAYBEE INVESTMENTS LIMITED
a limited liability company having its registered office at Baravi Road, Wailoaloa, Nadi


AND


IN THE MATTER OF MEMBERS STATUTORY REMEDY


Before: Master Anare Tuilevuka


Counsels: Messrs Rams Law for the Plaintiff
Shri Ragni Karan – In person


Date of Hearing: 13th November 2009
Date of Decision: 03rd December 2009


RULING


BACKGROUND


[1] KAYBEE INVESTMENTS LIMITED (hereinafter called "the Company") was incorporated under the Companies Act on the 3rd day of March 2004. The Company’s registered office is situated at its Beach Escape Resort, along Baravi Road in Wailoaloa, Nadi. The Resort sits on CT 28598[1] ("land") which is under mortgage to Colonial National Bank. There is no evidence before me of any other asset of the company. The unencumbered market value of that piece of land was recently (in October 2009) assessed at $1,140,000-00 by Pacific Valuations Limited.

[2] The land, as far I can tell from the memorials on the Certificate of Title, once belonged to one George Jai Karan (now deceased – "Jai") and one Mahalatchmi, the parents of one Shri Ragani Karan also known as Bunty ("Bunty") who is one of two directors and a 50% shareholder of the Company.

[3] The other director and owner of the remaining 50% shares of the Company is, Stephen Craig Barritt ("Barritt"), the Petitioner.

[4] Jai apparently died of paraquat poisoning in April 2002. Upon his death, the land was then transmitted to Mahalatchmi in February 2004 as executrix trustee of Jai’s estate. In December 2005, Mahalatchmi transferred the land to Barritt’s and Bunty’s Company (the Company had been in existence for some 22 months or so at the time of the transfer).

[5] Barritt and Bunty were in a de facto relationship for some ten years or so. They separated about a year or so ago when their relationship started to turn sour. And since separation, their relationship has only regressed from bad to worse. That, in turn, is taking its toll on the Company according to Barritt’s petition.

[6] The reason why their relationship turned sour is not set out in either of their affidavits. Barritt has more or less just glossed over that issue. However, in an affidavit filed in Nadi Magistrates Court, a copy of which Bunty was produced in this Court, Bunty alleges that Barritt "is having extra marital relationship with a married woman who happens to be my child’s kindergarten teacher".

[7] Initially in Court, Bunty appeared to be hanging on to the last vestige of hope that the Company could survive their differences. It gradually emerged that Barritt did not share the same hope. In fact, they have a pending case in the Magistrates Court family division in Nadi concerning the custody of their children. Bunty, it appears, is adamant still that the prayers sought in the Petition should only be granted as a "last resort".

[8] For the record, I did adjourn this case twice to give Barritt and Bunty a chance to talk and settle their affairs out of court. In fact, the adjournments were allowed after Bunty made an offer to Barritt in court. Bunty’s offer was to trade off her 50% interest in a certain New Zealand asset which she holds jointly with Barritt in return for his 50% interest in the Fiji Company. However, nothing eventuated from the adjournments. I was to learn that Bunty had first broached the idea before Barritt presented the petition. When nothing happened, Mr. Ram presented this petition now before me.

Barritt’s Petition


[9] Barritt’s petition was filed on 09th July 2009 seeking the following orders:-

[10] The petition does not say which section(s) of the Companies Act (Cap 247) he relies on. Mr. Ram however refers to sections 212 and 223 in his written submissions.

[11] The petition was advertised in the Fiji Times on the 14th day of August 2009 and in the Government Gazette on the 21st day of August 2009.

[12] The Petition states that before they separated, Barritt was in charge of the day to day management of the affairs of the Company. Major management decisions were made jointly with Bunty. But when their relationship turned sour, it has become extremely difficult for them to see things the same way. Bunty allegedly interferes constantly with Barritt’s day to day management of the Company and stands in the way to every decision Barritt makes. In an incident in February 2009, Bunty, in a bout of anger, is alleged to have smashed open the lock and wood panelling of the Company’s Office door just to access the filing cabinets ("smashing incident"). According to Barritt, Bunty has always had free access to the office, the filing cabinets and even the Company’s books and accounts and the extent to which went on that occasion only reveals how spiteful she has become.

[13] Barritt also reveals that, on various occasions over the past several months, Bunty would hurl bad and abusive language at him and also at staff members in the presence of guests ("bad language incident"). No specific date or time is mentioned in the Affidavit. Bunty is also alleged to have threatened to sack staff members occasionally without any grounds. Again, the allegations lack any specificity such as which staff members were involved. Barritt alleges that Bunty has often engaged the Company’s resort staff in activities which are not in the Company’s interest. He does not state though what sorts of "activities" are involved.

[14] The closest that Barritt has come to being specific with his allegations is when he cites in his affidavit an incident on 31st day of December 2008 when Bunty allegedly altered the credit conditions with respect of two of the Company’s suppliers without his knowledge. She then ordered liquor above the Company’s usual credit limits and also "continued" to sell liquor outside approved licensed hours. Around the same period, Bunty on a separate occasion, took for her own personal use certain assets of the Company at the expense of business. Barritt does not clarify this in any detail.

[15] These incidents, says Barritt, have caused undue stress on him and staff members alike. Barritt says his personal problems with Bunty has created a deadlock in the way they run the Company. The two of them can no longer make joint decisions on important Company matters like they used to. Barritt says his relationship with Bunty is not likely to improve and will only stand in the way of the Company’s affairs.

[16] Barritt says he has made several verbal and written offers to Bunty giving her the first right to purchase his shares in the Company. She has not accepted his offers. Barritt says that if the Company is wound up, there would still be a monetary surplus for distribution between he and Bunty though he does not attach any evidence to support that assertion.

BUNTY’S AFFIDAVIT IN OPPOSITION


[17] In her Affidavit filed on 29th July 2009, Bunty denies every allegation in Barritt’s petition. The allegations, she says, are scandalous, frivolous and vexatious and an embarrassment to her and her family. She says it would be unfair to wind up the Company because Barritt is a foreigner and she, a citizen of Fiji. In his answer to Bunty’s Affidavit, Barritt annexes an email dated 17th March 2009 from Bunty’s former solicitors which he says confirms Bunty’s status as a New Zealand citizen on a work permit in Fiji.

[18] Bunty also highlights that ‘the company" formerly known as Nadi Bay Beach Villa was in fact founded by her parents.

[19] She states at paragraph 7 that Barritt has failed to produce evidence to support his allegation that he had offered to sell her his shares in the Company. She says that she should be given a fair chance to "preserve the company in maintaining its former status quo" (my emphasis) and that it would not be in the best interest of the company to wind it up now.

[20] She appears to state at paragraph 7 of her Affidavit that Barritt has painted a picture which is not entirely correct and that this Court should not hasten to make orders which would prejudice the company. She highlights that Barritt only came to acquire shares in the Company through her.

[21] Bunty reveals that there are assets in New Zealand which she owns jointly with Barritt. She is willing to trade off to Barritt, under certain conditions, her interest in the New Zealand assets as long as the company is preserved. Furthermore, according to Bunty, Barritt is motivated purely by his personal financial interests and ego and the orders he seeks would not be fair to her.

[22] Bunty further reveals that there is a pending proceeding before the Family Division of the Magistrates Court in Nadi. She believes that most of the issues between her and Barritt will be resolved in this other pending matter. She has produced in Court copies of a pending application in the Nadi Magistrates Court (Family Division) seeking an order to direct the parties to attend mediation conference regarding settlement of distribution of their Fiji and New Zealand assets.

BARRITT’S AFFIDAVIT IN ANSWER


[23] Barritt insists that Bunty had refused his verbal offers to purchase his interest in the Company. His solicitors even wrote an offer dated 5th of March 2009 to Bunty’s former lawyers to buy him out of the Company. Thereafter, their respective solicitors tried to settle but to no avail. A copy of the offer letter from his solicitors dated the 5th day of March 2009 and the email from Bunty’s solicitors dated 18th day of March are annexed to Barritt’s Affidavit

THE LAW


[24] Section 212 of the Companies Act (Cap 247) says as follows:

Division 14-Minorities


Alternative remedy to winding-up in cases of oppression


212.-(1) Any member of a company who complains that the affairs of the company are being conducted in a manner oppressive to some part of the members (including himself......may make an application to the court, by petition, for an order under this section.


(2) If, on any such petition, the court is of opinion-


(a) that the company's affairs are being conducted as aforesaid; and


(b) that to wind up the company would unfairly prejudice that part of the members, but otherwise the facts would justify the making of a winding-up order on the ground that it was just and equitable that the company should be wound up;


the court may, with a view to bringing to an end the matters complained of, make such order as it thinks fit, whether for regulating the conduct of the company's affairs in future, or for the purchase of the shares of any members of the company by other members of the company or by the company and, in the case of a purchase by the company, for the reduction accordingly of the company's capital, or otherwise.


(3)..........................


(4)..........................


(5) In relation to a petition under this section, section 345 shall apply as it applies in relation to a winding-up petition.


[25] If the Court is satisfied that the affairs of the Company are being conducted in a manner oppressive to some part of the members, and the facts would justify the making of a winding-up order on the ground that it was just and equitable that the company should be wound up, but to wind up would unfairly prejudice that part of the members, then under section 212 (2), the Court "may", with a view to bringing to an end the matters complained of and as it thinks fit, make any of the following orders:-

ISSUES


[26] The issues in this case (which I list below in the order in which I deal with them) become more translucent when Barritt’s and Bunty’s situation is juxtaposed with the ingredients of section 212:

DISCUSSION ON ISSUES


WHETHER BARRITT HAS STANDING?


[27] The whole purpose of section 212 is to put in place a legislative scheme where a minority shareholder alleging oppression could seek a range of remedies provided under section 212(2) other than winding up the company.

[28] So, given that Barritt is a 50% shareholder of a small company where his de facto, Bunty, is the other 50% shareholder, does he have locus to seek remedies under section 212?

[29] In England, generally, the Courts will not grant a majority shareholder a remedy under their equivalent to our section 212 if the subject matter of his complaint is one from which he can readily rid himself by the use of his majority shareholding (see Re Baltic Real Estate (No.2) [1983] B.C.L.C 503; Morris v Hately, The Times, March 10, 1999, C.A.; see also paragraph 8.904/2 Palmer’s Company Law, Volume 2, March 1999 edition).

[30] However, there is also authority that situations of equality of shareholdings can be brought within the section if the company involved is of a small quasi-type (Re Stewarts Brixton) Ltd [1985] B.C.L.C 4. In my view, there is every reason not to exclude Barritt on this point given that his and Bunty’s company is of a small quasi type formed on the mutual trust and confidence arising out of their de facto relationship (see Ebrahimi –v- Westbourne Galleries Ltd [1972] 2 All ER 492 at 500). See further discussion below.

WHETHER THE AFFAIRS OF THE COMPANY ARE BEING CONDUCTED IN A MANNER OPPRESSIVE TO BARRITT?


[31] To reiterate, Barritt alleges that since his falling out with Bunty, it has become difficult for them to agree on any major management decision concerning their company. Bunty allegedly interferes constantly with Barritt’s day to day management of the Company. The "smashing incident" in February 2009 and the "bad language incident" must be considered at this point.

[32] The general tone in which these allegations are "chronicled" in Barritt’s affidavit was rather unconvincing at first. But after carefully assessing the evidence in its totality, and from the parties own demeanor in Court, it is clear that their de facto relationship is no more.

[33] Furthermore, it is clear that the breakdown of their relationship has caused, is causing, and will continue to cause such strife that would mean difficulties in running their company. But is this enough to qualify as "oppressive conduct" within the purview of section 212?

[34] Again, it is hard to ignore the strife that exists between Barritt and Bunty. It is also hard to attribute the source of it solely to Bunty. But in the context of their case, it would be pointless for this Court to even attempt a witch-hunt to get to the bottom of the issue. I say that because, in my view, a deadlock situation in a small quasi type company such as theirs is, at the end of the day, all that needs to be considered.

[35] The English Court of Appeal case of Re Bovey Hotel Ventures Ltd (Unreported) (1981)[2] perhaps can be compared and contrasted with Barritt’s and Bunty’s situation.

[36] In Re Bovey, a husband and wife had found a hotel/ a restaurant business called Bovey Hotel Ventures Limited. They appointed themselves the directors and equal shareholders of the company. In 1971, they separated. There was such strife between them following separation which meant there were difficulties in running their company. The husband allegedly excluded the wife from the business. She suspected him of taking funds out of the business for his own purpose. At some point, the Inland Revenue investigated him. Their findings confirmed her suspicions. The Commissioner of Customs and Excise also investigated the Company on VAT irregularities on the sale of wines and spirits and found that the Company owed $3100 in trade duty for VAT purposes. Furthermore, wines and spirits worth $26,600 was discovered to have disappeared from the Company cellar. The wife believed she was being treated unfairly. She presented a petition under section 75 of the Companies Act 1980[3]. It was held that the actions of the husband were unfairly prejudicial to the wife as a shareholder of the company and she was granted the relief she sought.

[37] Company Law Textbooks are abound with references to Re Bovey as one of the earlier cases on the "unfair prejudice" test that now applies in England.

[38] Suffice it to say here that England has done away with the "oppression" test" through legislative reforms[4] and replaced it with the "unfair prejudice test" which proffers a flexible objective-test[5] approach (of whether the reasonable bystander would think that the conduct in question was unfair (as per Lord Hoffman in re Saul D Harrison & Sons Plc [1995] 1 BCLC 14.).

[39] In England, as Palmer’s on Company Law observes, this test received a somewhat restrictive interpretation in the courts before legislative reforms.

[40] In Fiji, under section 212, the words "oppression" and "unfairly prejudice" are both used.

[41] I am of the view that deadlock between Barritt and Bunty, even when considered subjectively, does go towards establishing both an "oppressive" situation and which will "unfairly prejudice" Barritt[6].

WHETHER THE FACTS WOULD JUSTIFY THE MAKING OF A WINDING-UP ORDER ON THE GROUND THAT IT WAS JUST AND EQUITABLE THAT THE COMPANY SHOULD BE WOUND UP?


[42] The Courts jurisdiction to wind up a company on the ground that it is just and equitable is provided for in section 220 (f).

220. A company may be wound up by the court, if-


(f) the court is of opinion that it is just and equitable that the company should be wound up.


[43] Bearing that in mind, my reading of section 227 is that it requires a petitioner to establish also that the facts (of which he complains) are such that, had he instead presented a petition under section 220(f), the Court would have been justified in granting his application.

[44] The wording of section 220(f) is plainly that the jurisdiction created thereon is an equitable jurisdiction. Again, Barritt’s account of the deadlock in the company caused by his strained personal relationship with Bunty must be considered. Is this sufficient to justify an order to wind up the company under section 220(f)?

[45] Palmers on Company Law January 1996 at paragraph 8.1007 states as follows:

"In the early cases concerning small quasi –partnership companies it was said to be a distinct head of the winding up jurisdiction that "deadlock" had been arrived at in the conduct of the companies affairs. "Deadlock" in this context seemed to mean not a factual inability to arrive at decisions about the company’s business policy, but the complete breakdown of the partnership type relationship upon which the company had been based.....where there has been a complete and irrevocable breakdown of the original partnership concept, the court may regard that as grounds for granting a winding-up order under the just and equitable jurisdiction...."(my emphasis)


[46] While the above may now be outdated in England, it may still be authority in Fiji (see discussion of Finnigan J Pautogo v Goldenwest Enterprises Ltd [2005] FJHC 710; HBF 013.2003 (5 April 2005).

[47] Having said all of the above, it is relevant to consider at this juncture that the land which the company owns is of great sentimental value to Bunty. She did say at the outset that she does not want the company to be wound up. According to her, Barritt did not bring much to the Company as most of what they acquired was through her inheritance from her parents. Now he wants out after having made his money.

[48] There has been no suggestion by either parties that the company is not doing well. Perhaps equity would have dictated against the making of a winding up order under section 220(f) if it would destroy a perfectly viable business undertaking with sentimental value to Bunty?

WHETHER, NOTWITHSTANDING (II) ABOVE, TO WIND UP THE COMPANY WOULD UNFAIRLY PREJUDICE BARRITT?


[49] Barritt has deposed in his affidavit that if the Company is wound up, there would still be a monetary surplus for distribution between he and Bunty. I have noted above that there is no evidence before me to support that assertion.

[50] While that deposition of Barritt may suggest that he is in favour of winding up, he seeks a remedy alternative to winding up through his section 212 application.

[51] It seems though that, if the company is to be wound up, Bunty stands to loose, in addition, the sentimental value she attaches to the company and its assets.

WHETHER, WITH A VIEW TO BRINGING TO AN END THE MATTERS COMPLAINED OF BY BARRITT, WHICH OF THE ORDERS ABOVE IN PARAGRAPH 24 (I) TO (III) SHOULD THIS COURT MAKE? ARE THERE ANY OTHER ORDERS THAT CAN BE MADE?


[52] If I may say so yet again, Barritt’s and Bunty’s situation is akin to a 50-50 deadlock situation. That deadlock situation is, essentially, the matter that Barritt has complained about in his petition.

[53] In considering what order(s) to make, I am guided by the object of section 212 which is to bring the deadlock situation to an end. I am also guided by what must be the underlying principle(s) of section 212(2) (see below) which is to, provide an alternative to winding up as to avoid the destruction of what may be a perfectly viable business undertaking.

[54] Either of the following orders are open to me under section 212 (2). An order:-

(ii) for the purchase of the shares of any members of the company by other members of the company or


(iii) for the purchase of the shares of any members of the company by the company and, in the case of a purchase by the company, for the reduction accordingly of the company's capital, or otherwise".


[55] Again, the company has been paralyzed by Barritt’s and Bunty’s falling out. When their relationship is looked at subjectively, there is yet no vestige of confidence left between them. They are embroiled in a custody battle over their children in the Family Court division at Nadi Magistrates Court.

[56] In England, commentators have observed that the most important and widely used Order in such a situation is an order to make the respondent purchase the shares of the petitioner. The problem in this case is that Bunty is not yet in a position to buy Barritt out, though Barritt is obliged (I gather from the articles of association) to give her a right of first refusal. Bunty highlights that the company has a bank debt and she has been advised against buying Barritt out for the time being as "it is not a seller’s market right now". She urges the Court to consider the prevailing economic situation in the country and in how it affects the tourism industry in Fiji. That is not an unreasonable request to make, except that there is no concrete evidence before me on this situation- or on how it is affecting the business.

[57] The immediate question to ask is: how to assess the value of the shares. One lacuna in the Fiji Companies Act (Cap 247) is that no provision is made for the principles of valuation of shares. And neither of the parties has made submissions on whether or not the company’s articles provide for a machinery for determining a fair price for shares.

[58] Bunty has said in Court that as director, she is only paid $90-00 (ninety dollars) per week yet she works 7 days a week doing mostly manual jobs. She does not know how much per week he takes home in pay.

[59] Barritt seeks an Order to allow him to have the Company shares valued by a professional valuer and/or that he be allowed to sell the Company and/or its assets in the open market at a price no less than the value of the Company as assessed by a Valuer or such other order as may be just in the circumstances.

[60] Mr. Ram has submitted in Court that his client prefers is to be appointed as "a sort of interim liquidator" for the Company given the deadlock that exists in order that he may supervise the sale of the assets of the company in due course. I observe that the prayers in the petition do not include such a prayer.

FURTHER COMPLIANCE

[61] I will reserve making any orders for now until I have considered the following compliance by the parties:-

This case is adjourned to 20th January 2010 when I will make the appropriate Orders after having viewed the above documentation. Meanwhile, I record here the following interim orders, by consent, to regulate the conduct of the company between now and 20th January 2010:-


(i) Barritt and Bunty are to meet daily at 10.00 a.m. in the Company Office at Beach Estate Resort in Wailoaloa.

(ii) at these meetings, Barritt will disclose all information required by Bunty pertaining to the following:

(iii) Barritt is to answer all queries raised by Bunty regarding the affairs of the company, and vice versa.

Case adjourned to 20th January 2010.


A. Tuilevuka
Master


03rd December 2009

[1] a piece of land known as “Cawa” containing two roods one perch and two tenths of a perch.

[2] (see reference to this case in paragraph 8.908 – Palmer’s Company Law, June 1999)

[3] See footnote 4 below.

[4] Section 210 of the Companies Act 1948 talked in terms on “oppression”. This was found to be unduly restrictive and so section 75 of the 1980 Act came into force on December 22 1980 which repealed section 210 and enacted a new provision based on “unfair prejudice”.

[5] For a detailed discussion on this, see Palmers Company Law, March 1999 at paragraph 8.901.

[6] Perhaps, a fuller discussion of the tests will have to be reserved for another case.

PacLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback
URL: http://www.paclii.org/fj/cases/FJHC/2009/270.html