Cundall v Holderbaun [2022] FJHC 106; HBC148.2020 (4 March 2022)

IN THE HIGH COURT OF FIJI AT SUVA

CIVIL JURISDICTION

Civil Action No. HBC 148 of 2020

In the matter of DUA NA CEGU FREE DIVER PTE (FIJI) LIMITED

AND

IN THE MATTER of the Section 176 of Companies Act 2015

BETWEEN:

WILLIAM KAINOA CUNDALL of Waisalima, Nakasaleka, Kadavu, Shareholder
and Director of DUA NA CEGU FREE DIVER PTE (FIJI) LTD.

APPLICANT

AND:

RACHEL WAILANA WHALEN HOLDERBAUN of Waisalima, Nakasaleka, Kadavu,
Shareholder and Director of DUA NA CEGU FREE DIVER PTE (FIJI) LTD.

RESPONDENT

BEFORE:
Hon. Mr. Justice Vishwa Datt Sharma

COUNSELS:
Mr. O’ Driscoll with Ms. Qioniwasa for the Applicant
Ms. Chaudhary M. for the Respondent

DATE OF DECISION:
Friday, 04^th March 2022 @ 9.30 am.

DECISION
[Oppressive conduct of Affairs – Members Rights and Remedial pursuant to

Section 176 and 177 of the Companies Act 2015]

Application

1. The Applicant’s Originating Summons filed on 02^nd May 2020 seeks the following Declarations and Orders against the Respondent:
   
   • (a) A declaration that the Respondent being Co-Director, Shareholder and Official Administrator of the Company Dua Na Cegu Free Dive Fish (Fiji) Pte Ltd. Ltd (“the company”) has failed in her civil obligations as Director of the company to promote the success of the company by not acting in good faith for the benefit of the members and company as a whole by abandoning her roles for almost 5 months now without any proper handing over of documentations which has affected the company. The Respondent has failed to contribute her attention to the company for almost 5 months and has never fully paid up her shares.
   • (b) A declaration that the Respondent being the Co-Director, Shareholder and Official Administrator of the company has failed in her civil obligations as Director of the company to exercise reasonable care, skill and diligence towards the management of the company. The Defendant failed to achieve company’s government compliances which put the company at great risk for three years.
   • (c) A declaration that the Respondent being the Co-Director, Shareholder and Official Administrator of the company has failed in her civil obligations as Director to avoid conflict of interest of the company as she also works on her private pool work for Hawaii an carries out other extra-curriculum activities and is now illegally working for Tom Bashaw which has affected her interest in carrying out work for the company with reasonable care and diligence.
   • (d) A declaration that the Respondent being the Co-Director, Shareholder and Official Administrator of the company has failed in her civil obligations as Director of the company as she acted recklessly with intentional dishonesty and failed to exercise her powers and discharge her duties in good faith in the best interest of the company or for proper purposes.
   • (e) An Order or directions to regulate the conduct of the Company’s Affairs in the future.
   • (f) An order that the Respondent be restrained from taking, selling or disposing off any company assets to third parties.
   • (g) An order that the Respondent return to the Applicant all company documentation and all accounting documentation and any other company documentation that the Respondent has in her possession.
   • (h) An Order that the Respondent be removed as Director of the company due to her breach of her civil obligation under the Companies Act.
   • (i) An Order for the expenses of conducting the above to be borne by the Respondent.
     
2. The Applicant relies on the Affidavit in Support deposed by William Kainoa Cundall.
   

The Law

3. Sections 176 and 177 of the Companies Act 2015 provides as follows:-

“176-(1) The court may make an order under section 177 if:-

(a) The conduct of a company’s affairs;
(b) An actual or proposed act or omission by or on behalf of a company; or
(c) A resolution, or a proposed resolution, of members or a class of members of a company, is either:

(i) contrary to the interests of the members as a whole; or

(ii) oppressive to, unfairly prejudicial to, or unfairly discriminatory against a member or members whether in that capacity or in any other capacity.

(2) For the purposes of this Part, a person to whom a share in the company has been transmitted by will or by operation of law is taken to be a member of the company.”

“177-(1) The court can make any order under this section that it considers appropriate in relation to the company, including an order:-

(a) that the company be wound up;
(b) that the company’s existing articles of association be amended or repealed;
(c) to regulate the conduct of the company’s affairs in the future;
(d) for the purchase of any shares by any member or person to whom a share in the company has been transmitted by will or by operation of law;
(e) for the purchase of shares with an appropriate reduction of the company’s share capital;
(f) for the company to institute, prosecute, defend or discontinue specified proceedings;
(g) authorising a member, or a person to whom a share in the company has been transmitted by will or by operation of law, to institute, prosecute, defend or discontinue specified proceedings in the name and on behalf of the company;
(h) appointing a receiver or manager of any or all of the company’s property;
(i) restraining a person from engaging in specified conduct or from doing a specified act; or
(j) requiring a person to do a specified act.

(2) If an order that a company be wound up is made under this section, the provisions of this Act relating to the winding up of companies apply:-

(a) as if the order were made under Part 39; and

(b) with such changes as are necessary.

(3) If an order made under this section repeals or modifies a company’s articles of association, or requires the company to adopt articles of association, the company does not have the power under section 46(7) to change or repeal the articles of association if that change or repeal would be inconsistent with the provisions of the order, unless:-

(a) the order states that the company does have the power to make such a change or repeal;

or

(b) the company first obtains the leave of the court.”

4. In terms of Section 176(1)(i) and (ii), in order for the Applicant to successfully seek the Declarations and Orders as per the Originating Summons, it is for the Applicant to establish the requirements therein accordingly.
   

Analysis and Determination

5. There are two issues that this Court needs to determine:-
   • (i) Whether the Respondent is conducting the affairs of the Company in a manner oppressive to the Applicant?
   • (ii) Whether the Respondent has breached he civil obligations as company Director and should be removed as the Director of the Company?
6. The Applicant alleges the following oppressive acts and conducts on the part of the Respondent:-
   • (i) failed in her capacity as a Director of the Company
   • (ii) promote the success of the Company by not acting in good faith
   • (iii) to contribute her attention to the Company and never fully paid up her shares
   • (iv) to exercise reasonable care, skill and diligence towards the management of the Company
   • (v) to achieve Company’s government compliances which put the Company at great risk for three years
   • (vi) to avoid conflict of interest of the Company and work for the Company with reasonable care and diligence
   • (vii) acted recklessly with intentional dishonesty and failed to exercise her powers and discharge her duties in good faith and best interest
7. However, the Respondent opposed the Declaration sought by the Plaintiff in the substantive Originating Summons and the Affidavit in Support as follows:-
   • (i) She opposed the declaration sought at paragraph 2(a) of the Applicant’s Affidavit stating that the Application has continuously acted maliciously against her and partner; she denied acting in bad faith for the members and the Company; provided a different email address to various authorities in Fiji advising them not to communicate and correspond to her.
   • (ii) Opposed the declaration sought at 2(b) and denied stating that it was not her responsibility alone to achieve governmental compliances rather Plaintiff should be equally responsible for delays and failures.
   • (iii) Opposed the declaration sought at 2(c) stating that the Applicant was aware how no issues and agreed to her contribution to this Hawaii based business since 2011.
   • (iv) Opposed the declaration sought at paragraph 2(d) and if the order is good, it would allow the Plaintiff greater control of Company’s decision making which should rightfully be shared between the shareholders.
   • (v) She had no objection to orders sought at paragraphs (f) and (g) of the Affidavit in Support.
   • (vi) Opposed the declaration sought at paragraph 2(h) and denied the allegation that she was in breach of her civil obligation under the Company Act.
   • (vii) Opposed the order sought at paragraph 2(i) and did not agree that should have been the expenses in court order.
8. The Respondent’s remaining responses at paragraphs 3 to 27 inclusive can be ascertained from her Affidavit in Response and have been taken into consideration accordingly.
9. The Respondent however sought for the following orders:-
   • (i) An Order restraining the Applicant from using company assets for personal use; and
   • (ii) That the Applicant not be granted the Orders sought in terms of the Originating Summons and the application be struck off with costs.
10. The Applicant is the Director of and 50% shareholder in the Company Dua Na Cegu Free Diver Pte (Fiji) Ltd.
11. The Respondent is the Co-Director of 50% shareholder in the Company and owns 50% shares in the Company.
12. The Applicant is seeking for relief against oppressive conduct of the affairs of the Company on the part of the Respondent. Apart from the Declaration, the Applicant is also seeking for the following Orders for the Company:-
    • (a) An order or directions to regulate the conduct of the Company’s affairs in the future;
    • (b) An order that the Respondent be restrained from taking, selling or disposing off any Company assets to third parties;
    • (c) An order that the Respondent return to the Applicant all Company documentation and all accounting documentation and any other Company documentation that the Respondent has in her possession.
    • (d) An order that the Respondent be removed as Director of the Company due to her breach of her civil obligation under the Company’s Act; and
    • (e) An order for the expenses of conducting the above to borne by the Respondent.
13. The provisions of sections 176 and 177 of the Companies Act 2015 are relevant to the current application. Both Sections deal with members’ rights and remedies for oppressive conduct of affairs of the Company. In particular, Section 176 provides for the grounds for Court Order and Section 177 provides for the “orders the court can make”.
14. The Applicant commenced this Application seeking for Declaration and Orders in his capacity as a Co-Director and 50% shareholder in the Company Dua Na Cegu Free Dive Fish (Fiji) Ltd.
15. The Respondent is the Director and 50% shareholder in the Company.
16. The Applicant and the Respondent were engaged to be married but it did not work out due to the Respondent’s indiscretion, and she stated her intention to sell her 50% shareholding and depart, to which the Applicant agreed. The situation was aggravated with the Respondent bringing her current boyfriend, namely Joseph Pauriasi, to the resort operated by the company to live and reside.
17. The Applicant took out interim Domestic Violence Restraining Order [“DVRO”] against the Respondent and her boyfriend on 06^th November 2019.
18. The Respondent retaliated against the Applicant after being served with the interim DVRO by attempting to damage him and destabilize the company by indulging in provocative and intimidating actions and behavior which could prove detrimental to the on-going operation of the company.
19. The Respondent illegally locked Applicant out of the company emails after been served with the interim DVRO which is a breach of the said order, as the email is property of the company which is protected under the order.
20. The Applicant believed that the Respondent fully intended to leave Waisalima in November 2019 without informing him. He accidently found out from one Tom Bashaw of the Respondent’s intention to leave Waisalima for 4 weeks. The Respondent being solely in charge of the finance and administration for the company had knowledge that leaving the company without proper handover would leave the company’s position untenable and at great risk. He requested the Respondent to reduce her leave for two weeks as the government compliance issues were pressing, in particular issue of the Rural Business License without which any other compliance requirements cannot proceed. The Respondent left Waisalima without heeding the request made by him thus failing to promote the success of the company and failing to act in good faith.
21. That a prospective purchaser indicated interest in buying the Respondent’s shares and all negotiations and discussions are evidence by emails. However, on 20^th November 2019, the prospective purchaser received an email from the Respondent stating that she was suspending her interest in the sale of her shares of Dua Na Cegu.
22. That the prospective purchaser had been carrying out due diligence in regard to purchasing the Respondent’s 50% shares of the company and found out that the Respondent had failed to obtain the following government requirement compliance after 3 years:-
    • (a) Building completion certificate
    • (b) Town and Country rezoning of the company lot
    • (c) Rural business licence
    • (d) National Fire Authority and employee fire fighting training
    • (e) Health Department final inspection and
    • (f) Fiji National Provident Fund registration.
23. That the Respondent completely ignored and failed to act on or bring to Applicant’s attention a letter from Town & Country Planning dated May 2017 which outline 10 items to be complied with to achieve rezoning of the company’s lot. This requirement was only discovered recently showing the Respondent’s failure to promote the success of the company and failing to exercise reasonable care, skill and diligence.
24. That on Thursday 21^st November 2019, the Respondent forwarded an email to him that Investment Fiji were considering our request to extend business activities to include Fish sales as commercial fishing. No such request has ever been made or lodged with Investment Fiji and the Respondent was fully aware that the company does not have the resources to fund this with neither partner willing to transfer 30 percent of their shares to a local. These actions are being pursued by the Respondent solely to create problems for Applicant, his father and the company.
25. That the Respondent acted dishonestly by filing false reports to the Police.
26. That the Respondent acted dishonestly by falsifying a report to the Police.
27. The Respondent dishonestly used her position to obtain her boyfriend’s boat master license. The Respondent used company funds to pay for her boyfriend’s boat master license without Applicant’s approval.
28. That the Respondent had removed 31 boxes from the company property when moving to Bashaw’s property and refused to provide an inventory when requested.
29. The Respondent was not diligent in serving the company as she was always busy with her private pool work in Hawaii and other extracurricular activities and is illegally working for Tom’s company.
30. The Respondent as the Official Administrator of the company failed to maintain proper administrative documentation, financial documentation, made inaccurate statements and observations. However, she is always claiming that documents were misplaced.
31. The Respondent has clearly failed in her civil obligation and breached her duty as a Director of the company to promote the success of the company and failed to exercise reasonable care, skill and diligence and should be removed as the Director of the company.
32. The Originating Summons proceeded to Hearing with parties to the proceedings making oral submissions. The Applicant furnished Court with Written Submissions and the Respondent chose not to file any Written Submissions but relied on the Affidavit in Response filed herein.
    

Conclusion

33. In terms of the Affidavit evidence and on the balance of probabilities, I am satisfied that the Applicant has established the Respondent’s acts and omissions in the management of the company to be of oppressive manner.
34. Further, it can be ascertained from the affidavit evidence that the Respondent:-
    • (i) Abandoned her role as the official administrator of the Company without proper handing over of the documentation which in turn affected the Company, and failed to hold board meetings;
    • (ii) Blocked and locked the Applicant from accessing into the Company’s email account, the Applicant then had to resort to furnishing an alternative email address to organisations and organise to ensure ongoing communications;
    • (iii) Allowed the Company’s website to go down since the Company cannot afford to make monthly payments and was a blatant attempt to sabotage the Company’s effort to continue to operate successfully;
    • (iv) Failed to make decisions in the best interest of the Company in allowing the Company website to go down unnecessarily; and
    • (v) Failed and refused to give the Account name and password to the Applicant since the information was only accessible by the Respondent.
35. Shareholder oppression is a conduct which is prejudicial to the investors of a shareholder. However, it must be noted that an oppressed shareholder has protections under the Law and the oppressions remedies operate to provide valuable safeguards to shareholders aggrieved by unfair and/or prejudicial conduct on the part of a Company’s management.
36. Bearing above in mind, I have no alternative but to grant the Declarations and Orders as sought for by the Applicant enumerated at paragraph 1(a) to (h) of my Judgment hereinabove accordingly.
37. The Respondent filed her Affidavit in Response but failed to be present and/or represented by a Counsel.
38. Apart from the Declarations and Orders granted hereinabove, it is only fair that the Respondent pays the Applicant a sum of $650 as summarily assessed costs.
39. Further, the Counter-Orders sought by the Respondent in her Response Affidavit:-
    • (i) An Order restraining the Applicant from using company assets for personal use; and
    • (ii) That the Applicant not be granted the Orders sought in terms of the Originating Summons and the application be struck off with costs;

are hereby refused and accordingly dismissed.

40. Following are the Orders of the Court:-
    

Orders

(a) A declaration is granted that the Respondent being Co-Director, Shareholder and Official Administrator of the Company Dua Na Cegu Free Dive Fish (Fiji) Pte Ltd has failed in her civil obligations as Director of the company to promote the success of the company by not acting in good faith for the benefit of the members and company as a whole by abandoning her roles for almost 5 months now without any proper handing over of documentations which has affected the company.
(b) A declaration is granted that the Respondent being the Co-Director, Shareholder and Official Administrator of the company has failed in her civil obligations as Director of the company to exercise reasonable care, skill and diligence towards the management of the company and failed to achieve company’s government compliances which put the company at great risk for three years.
(c) A declaration is granted that the Respondent being the Co-Director, Shareholder and Official Administrator of the company has failed in her civil obligations as Director to avoid conflict of interest of the company as she also works on her private pool work for Hawaii and carries out other extra-curriculum activities and is now illegally working for Tom Bashaw which has affected her interest in carrying out work for the company with reasonable care and diligence.
(d) A declaration is granted that the Respondent being the Co-Director, Shareholder and Official Administrator of the company has failed in her civil obligations as Director of the company as she acted recklessly with intentional dishonesty and failed to exercise her powers and discharge her duties in good faith in the best interest of the company or for proper purposes.
(e) An Order or directions to regulate the conduct of the Company’s Affairs in the future is granted.
(f) An Order is granted that the Respondent is restrained from taking, selling or disposing off any company asset to third parties.
(g) An Order is granted that the Respondent return to the Applicant all company documentation and all accounting documentation and any other company documentation that the Respondent has in her possession.
(h) An Order is granted that the Respondent is removed as Director of the company due to her breach of her civil obligation under the Company’s Act.
(i) There is an Order for summarily assessed costs of $650 granted against the Respondent.
(j) The Respondent’s Counter Orders sought in her Response Affidavit that:-

1. An Order restraining the Applicant from using company assets for personal use; and
2. That the Applicant not be granted the Orders sought in terms of the Originating Summons and the application be struck off with costs;

are hereby refused and accordingly dismissed.

DATED at SUVA this 04^th day of March, 2022.

VISHWA DATT SHARMA
JUDGE

cc. O’ Driscoll & Company, Suva.

Vama Law, Suva.