Wanga v Guadalcanal Travel Service [1998] SBCA 10; CA-CAC 4 of 1998 (10 December 1998)

IN THE SOLOMON ISLANDS COURT OF APPEAL

NATURE OF JURISDICTION:	Appeal from a judgment of The High Court of Solomon Islands (Muria CJ.)
COURT FILE No.	Civil Appeal Case No.4 of 1998(an appeal from Cases 107 of 1995)
DATE OF HEARING:	23rd July 1998 at Honiara
DATE OF DELIVERY JUDGMENT:	10th December 1998
THE COURT:	KAPI, (Ag) P., Casey JA, Kabui JA.
PARTIES:	PHILIP WANGA
	V
	GUADALCANAL TRAVEL SERVICE
ADVOCATES:
Appellant:	C. Ashley
Respondent:	A. Radclyffe
KEYWORDS:	Alteration of articles of association, compliance with ss12 and 135 of the Companies Act (Cap.66) - Meeting to pass special resolution by shareholders at short notice - Date of determination of value of shares - Determination of dividends by counter-claim
EX TEMPORE/RESERVED:	Reserved
ALLOWEDIDISMISSED:	Appeal allowed
	Cross Appeal dismissed
PAGES:	1 - 9

JUDGMENT

In a civil case between Guadalcanal Travel Service Limited (the Plaintiff) and Mr. Philip Wanga (the Defendant) (HC-CC107 of 1995), the learned Chief Justice (the trial Judge) had found in favour of the Plaintiff and thereby ordered specific performance against the Defendant as prayed for in the Plaintiff’s Statement of Claim, and that the value of the shares to be transferred be determined at the date of the Judgment, that is to say, 27th February, 1998. It is against this judgment that both the Plaintiff and the Defendant appealed to this Court. The Plaintiff (“the Appellant”) filed its Notice of Appeal on 16th April, 1998 but only against part of the trial Judge’s Judgment. The appeal is in the following terms-

The Appellant appeals against part of the judgment as follows:-

That in exchange for a signed share transfer form the Defendant be paid the price of his shares calculated to 27th February 1998.

The grounds of the appeal are:

1. The Defendant should only be paid the value of his shares as at the date of his dismissal (29/5/92) less his outstanding account with the Plaintiff.

2. The effect of the judgment is that the Defendant will profit from his wrongful refusal to sell his shares on his dismissal from the Plaintiff.

3. The Defendant ceased to have the beneficial rights attached to ownership of the shares after his dismissal by the Plaintiff.

The Appellant seeks the following judgment in lieu of that appealed from:- that the Defendant deliver to the Plaintiff a signed share transfer form in exchange for payment for his shares valued at the date of the Defendant’s dismissal by the Plaintiff less his outstanding account with the Plaintiff.

The Defendant (cross-Appellant) cross-appealed by filing his Notice of Appeal on 23rd April, 1998. The cross-appeal is in the following terms:-

The Appellant appeals against the whole Judgment Order. The Grounds of Appeal are:

1 The Honourable Chief Justice erred in exercising the Court’s discretion against the applicant in that he failed to question the validity of the notice of resolution and minutes registered and filed on the record with the Registrar of Companies on 19th February 1987 as proof of the alleged alterations to the respondent’s Articles which are suspect and raise serious questions as to the truthfulness of the matters stated therein.

2. The Honourable Chief Justice erred in exercising the Court’s discretion against the applicant in that he failed to question the validity of respondent’s Statement of Claim for specific performance considering the material evidence that the notice of resolution and minutes relied on as proof of the alleged alterations to the respondents’ Articles were contrived.

3. The Honourable Chief Justice erred in exercising the Court’s discretion against the applicant in that he failed to consider the merits of the applicant’s defence and counterclaim together with the matters raised by the applicant’s several affidavits and the material evidence thereto.

4. The Honourable Chief Justice erred by failing to properly address the applicant’s right and beneficial entitlements as a lawful shareholder in the respondent company, in particular dividends as stated in the respondent’s annual reports from 1992 up until the present day;

5. The Honourable Chief Justice erred in exercising the Court’s discretion against the applicant by failing to address the unlawful transfer of the applicant’s shares to other shareholders in the company, evidence of which was before him in particular Annie Evans who left the respondent in 1994 and yet still retained 1/3rd of the applicants shares after leaving the company.

The appellant seeks the following judgment in lieu of that appealed from:

(a) The alleged amendments to the Articles of Association be declared invalid.

(b) The appellant to remain the lawful owner of his shares in the respondent.

(c) The respondent to pay the appellant his share of the declared dividends from 1992 up to the date hereof together with accrued interest at the rate of 12% within 14 days.

(d) The respondent pay damages in negligence, deprivation and hardship in the amount of $250,000.

(e) The respondent pay the appellant’s costs of and incidental to the whole action.

(f) That the case file be delivered to the Public Prosecutor for further investigation.

The Appellant is a Company duly incorporated in Solomon Islands and operates a travel business in Honiara. It was incorporated in February, 1984. Its authorised capital is $50,000 divided into $1.00 shares. Soon after its incorporation, the cross Appellant became its employee as a travel consultant. He also became a shareholder holding in the Appellant some 2,000 shares. Sometime in 1987, the Articles of Association were amended by deleting Articles 4 and 6 and replacing them with new Articles 4 and 6 at a meeting attended by the shareholders. This was done by way of special resolution agreed by all the shareholders. One of the effects of the amendment of the Articles of Association is that any employee of the Appellant holding shares at the time of termination of employment must offer the shares so held in his or her name for sale to another incoming Solomon Islands citizen employee if any, or to any existing Solomon Islands citizen employee. In the event that such shares are not taken up by any Solomon Islands citizen employee, such shares must be offered to the Bank Line Limited or to the expatriate Managing Director if he or she is not already a shareholder.

The cross-Appellant was dismissed from employment on 29th May, 1992 but refused to transfer his shares in accordance with the amended Articles of Association. By agreement of both Counsel, the cross-appeal was heard first. Grounds 1 - 5 of the cross-Appeal were argued before the Court by Mr. Ashley, Counsel for the cross-Appellant. The main thrust of Mr. Ashley’s argument was that the requirement of 21 days notice under section 135(2) of the Companies Act (Cap.66) had not been complied with by the Appellant and so the meeting during which the Articles of Association were amended was invalid. Alternatively, no such meeting took place on the evidence before the trial judge. We do not agree. The proviso to section 135 above makes it very clear that a shorter notice can be given by agreement of the majority of members representing 95% of the nominal value of shares.

Similar provisions to section 135 of the Companies Act (Cap. 66) have been considered by the Courts elsewhere many times. In re Express Engineering Works [920] 1Ch. 466, all the five shareholders met in their capacities as directors and then as shareholders met and passed a resolution to issue debentures without notice having been given under second 67 of the Companies (Consolidation) Act, 1908 of the United Kingdom. The Court held that the meeting at which the resolution was passed was valid. This case was approved by LUSH J. In In re Oxted Company, Limited [1921] 3 KB 32. In this case, there were only two shareholders. They meet on the same day a judgment was obtained against their Company and passed a resolution to wind up the Company on the ground that it was unable to meet its liabilities. There was no notice of intention to propose that resolution. The Court held that the meeting was valid. At page 37, LUSH J. said, “The Court of Appeal held, affirming Asbury J., that the requirements of the statute were intended for the protection of the shareholders, and if the resolution was in a matter intra vires the members of the company, and there was no fraud, the shareholders were able to waive all formalities as regards notice and that the resolution that had been passed was just as valid as if there had been the requisite notice”.

Previous other cases including the Oxted Motor Company case above were further discussed in Cane v Jones and Others [1980] 1WL.R 1451. There, the articles of association amongst, other things, said that the chairman should be elected by the directors and should have a casting vote at board meetings. In March, 1967, the shareholders by a written agreement agreed that the chairman should not have a casting vote. The Court held that the written agreement altering the articles of association regarding the position of a chairman without a casting vote was valid. At pages 1459 - 1460, Michael Wheeler Q.C. said, “For my part I venture to differ from Mr. Potts on the first limb of his argument, namely that articles can only be altered by special resolution. In my judgment, section 10 of the Act is merely laying down a procedure whereby some only of the shareholders can validly alter the articles: and if, as I believe to be the case, it is a basic principle of company law that all the corporators, acting together, can do anything which is intra vires the company, then I see nothing in section 10 to undermine this principle. I accept that the principle requires all the corporators to “act together”: but with regard to this I respectfully adopt what Astbury J. Said in Parker and Cooper Ltd. -v- Reading [1926] Ch. 975, 984:

“Now the view I take of both these decisions” - those were In re Express Engineering Works Ltd. [1920] Ch. 466 and In re George Newman & co. [1895] UKLawRpCh 38; [1895] 1 Ch. 674 - “is that where the transaction is intra vires and honest, and especially if it is for the benefit of the company, it cannot be upset if the assent of all the corporators is given to it. I do not think it matters in the least whether that assent is given at different times or simultaneously.”

“I should add that the evidence in the case before me is that the 1967 agreement was signed by “the two sides,” if I may call them that, separately, and that they did not meet together, however informally, for the purpose of signing the document. But it is clear beyond doubt that the agreement did represent a meeting of minds which is, after all, the essence of a meeting and the passing of a resolution”. (Section 10 referred to in the above quotation is the equivalent of section 12 of the Companies Act (Cap. 66)).

We are satisfied on the evidence before the trial judge that a meeting of all the shareholders did take place at short notice and that the cross-Appellant was aware of it and was at that meeting as well. Any doubt as to the exact date and time of that meeting would not be considered as fatal to the validity of that meeting and the resolution passed during that meeting as verified by Minutes dated 18th February, 1987.

The Appellant was then heard on its grounds of appeal and in response to the cross- appeal. The main argument by Mr. Radclyffe on behalf of the Appellant was that the trial judge was wrong in ordering that the shares to be transferred be valued at the date of the judgment. This argument was based upon the premise that it would be against public policy and inequitable for the cross-Appellant to be allowed to benefit from his failure to obey the requirements of the amended Articles of Association as a shareholder. We were referred to In re A Company (No. 002567 of 1982) [1983] 1 W.L.R. 927 and In re London School of Electronics [1985] 3 W.L.R. 474 by Mr. Radclyffe as authority for the proposition that the cross-Appellant’s shares be valued at the time of his dismissal or at the time he refused to execute the transfer of his shares in accordance with the Appellant’s amended Articles of Association. These two cases cited by Mr. Radclyffe have not laid down any hard and fast rule on the matter of the relevant date for valuation of shares but rather the matter would largely depend upon the facts of each case. In this appeal, we are of the view that the relevant date for the purposes of determining the value of the respondent’s shares was 11th November 1994, the date the cross-Appellant refused to execute the transfer of his shares in accordance with the amended Articles of Association.

We also noted that the cross-Appellant’s counter-claim pleaded in the High Court was omitted from the judgment delivered by the trial judge. The counter-claim is that the Appellant had failed to pay dividends on the cross-Appellant’s shares after his dismissal from employment. And thus the Appellant was in breach of its contractual obligation towards the cross-Appellant under its Articles of Association. This matter is contained in paragraph 3 of the cross-Appellant’s grounds of cross-appeal. This claim remains outstanding on record.

The formal order of the Court is that

(1) the cross-appeal be dismissed;

(2) The appeal be allowed to the extent that the relevant date for the determination of the value of shares be 11th November, 1994;

(3) The counter-claim by the cross-Appellant be remitted to the High Court for determination according to law;

(4) Costs be the Appellant’s costs.

Sir Mari Kapi
Justice of Appeal

Sir Maurice Casey
Justice of Appeal

Mr. Justice Frank Kabui
Justice of Appeal