Guadalcanal Travel Service Ltd v Wanga [2000] SBHC 71; HCSI-CC 107 of 1995 (18 October 2000)

CC, 107, 2000.HC

IN THE HIGH COURT OF SOLOMON ISLANDS

Civil Case No.107 of 1995

GUADALCANAL TRAVEL SERVICE LTD-

-v-

PHILIP WANGA

High Court of Solomon Islands
(Muria, CJ)
Civil Case No. 107 of 1995

Hearing: 11th October 2000
Ruling: 18th October 2000

A. Radclyffe for the Plaintiff
C. Ashley for the Defendant

MURIA CJ: The defendant was one of the shareholders in the plaintiff company and upon termination from his employment in the company on 29 May 1992; he was obliged to offer his shares to the existing shareholders pursuant to the company's Articles of Association: (Articles 4 and 6). The defendant refused to do so. It would appear from the evidence that had he done so then, he would be entitled to be paid the value of his shares in the sum of $79,210.62 less deductions made therefrom.

In his counter-claim, the defendant also claimed dividends on his shares. I do not think the plaintiff denies that the defendant had not yet been paid his dividends on his shares for 1992, 1993 and 1994. The evidence is that the dividends payable on the defendant's shares are as follows:

For 1992 $63, 000.00

For 1993 $18,500.00

For 1994 $12,000.00

The plaintiff, however, submits that the defendant is only entitled to the value of his shares up to 11 November 1994 and his dividends for 1992 and 1993. The plaintiff contends that as for the dividend for 1994, the defendant is now not entitled to claim that since he was no longer a shareholder when the dividends were declared on 31 December 1994. The answers to these questions will resolve the disputes between the parties to this case once and for all on the defendant's entitlements in this matter.

With regard to the date 11 November 1994, this Court is bound by the bound by the order of the Court of Appeal which ordered that the relevant date for the determination of the value of the defendant's shares to be 11 November 1994. To do so otherwise would be in breach of the Order of that Court. That being the case, the evidence clearly shows, and there is nothing to point to the contrary, that the value of the defendant's shares as at 11 November 1994 was $29,585.03. I am therefore bound to accept that determination as “the fair value” of the defendant's shares in this case.

As to the defendant’s contention that he was still a shareholder when the dividends were declared on 31 December 1994, the short answer to that is that his name was still on the share register because he refused execute the share transfer which he was obliged by law to do so and not because he had the right to allow his name to remain on the share register. It was for that reason that the Court fixed the cut off date at which the defendant was entitled to be paid the value of his shares. A shareholder has no right to claim the dividend in a company until that dividend is declared: Black and Others-v-Homersham [1878] UKLawRpExch 44; (1878) 4 Ex. D 24; In re Severn and Wye and Severn Bridge Rly Company [1896] 1Ch.559; Sim Lim Investments Ltd-v-Attorney General, Singapore [1970]2 WLR 336. Up to 11 November 1994, the defendant was a shareholder but no dividend was declared yet for that year then. The dividend declared on 31 December 1994 was no longer an entitlement of the defendant but rather of those to whom he ought to have executed the share transfers on 11 November 1994. By law, the right to those shares vested in the purchasers as from 11 November 1994 and the dividends declared on 31 December 1994 belonged to those purchasers.

In the light of what I have said above, the defendant is not entitled to the 1994 dividend. He is, however, entitled to the dividends for 1992 and 1993 together with the value of his shares as at 11 November 1994, a total of $111,085.03 which is made up as follows:

Value of shares as at 11 November 1994	$ 29,585.03
Dividend for 1993	$ 63,000.00
Dividend for 1993	$ 18,500.00
	$111,085.03

In its defence to the defendant's amended counter-claim, the plaintiff seeks to set off against the amount due to the defendant the following sums which are said to have been due from the defendant to the plaintiff, namely, $53,275.21 for debts owed by the defendant to the plaintiff, $52,000.00 for costs incurred by the plaintiff in the High Court and Court of Appeal, and interest on debts payable to the plaintiff. It is the law that where a shareholder is indebted to the company for a sum which becomes payable immediately, the company is entitled to set-off the debt against any dividends which are payable to the shareholder in respect of his shares: Re Cannock and Rygely Colliery Co., ex parte Harrison [1885] UKLawRpCh 47; (1885) 28 Ch. D. 363. There is evidence to support the plaintiff’s claim in this case that the defendant has owed it $53, 275. 21. The plaintiff is entitled to set off this sum from the $111,085.03 due to the defendant. I therefore order that the said amount of $53,275.21 be set-off against the sum of $111,085.03.

Then there is also the claim by the plaintiff for costs to be set-off against the amount due to the defendant in this case. The amount claimed by the plaintiff as costs is $52,000.00. Now, if the Court were to allow the plaintiff's costs to be set-off against the defendant's entitlement in this case in addition to the $53,275.00 debt owing by the defendant, the result would be that the defendant would only be left with $5,809.82. But not only that, the plaintiff also seeks to have interest on the debt owing assessed and set-off against the defendant's entitlement. If that is also to happen, the result would be that the defendant would find himself left “with nothing in hand at all but rather out of pocket” to use Lord Denning's words in Nicholson -v- Little [1956] 2 All ER 699, 701.

The question of costs is always in the discretion of the Court to be exercised in each individual case. As such the circumstances of each case must always be taken into account as each case differs from the other. No hard and fast rule as to costs need to be laid down, otherwise the discretion of the judge would be fettered as pointed by Baliol Brett, MR in The Friedeberg [1885] UKLawRpPro 25; (1885) 10 P.D. 112 and referred to also in Nicholson -v- Little (above).

In the present case, we have the plaintiff who brought the action really for specific performance. The defendant on the other hand brought counter-claim seeking to be paid his entitlement for shares he had in the plaintiff company. The plaintiff, by its defence to·the defendant's counter-claim sought to set-off amounts owing by the defendant to it. The result is that the plaintiff has succeeded in its claim for specific performance and off-setting the debt owing by the defendant. The defendant has, in the main, also succeeded in its counter-claim. In such circumstances, would it be just and fair for the defendant, having brought the action counter-claiming for money due to him and succeeded, find himself left with an empty hand because he has to shoulder the costs now placed upon him by the plaintiff? If, as claimed in the present case, the plaintiff were to be granted its costs and set-off against the defendant's entitlement, the plaintiff would be happy but the defendant who also succeeded in establishing his claim would not be entitled to any costs. That I do not think is just and fair both in practice and in law.

The proper course to take would be that which was stated by Singleton, L.J in Chell Engineering Lid -v- Unit Tool and Engineering Co, Ltd [1950]. 1 All ER 378 at 380 where he said:

“I have always thought that where there is a claim and a counterclaim and the plaintiff succeeds on the claim and the defendant on the counterclaim the more convenient course is to enter judgment for the plaintiff for the amount for which he succeeds on the claim and to enter judgment for the defendant for the amount for which he succeeds on the counterclaim, and in the ordinary course, if there are costs both on the claim and on the counterclaim, each party is entitled to the costs which he has had to incur to recover the sum recovered on the claim and on the counterclaim respectively.”

That, I feel, is the proper thing to do also in the present case with regard to the question of costs. Since the plaintiff succeeds in its claim, it is entitled to its costs incurred to established its case and the defendant is, likewise, entitled to his costs which he has to incur to recover his entitlement on his counterclaim.

In the judgment of the Court, the plaintiff, having succeeded in its action for specific performance, has also succeeded in establishing that the value of the defendant's share ought to be determined as at 11 November 1994, the date at which the defendant ceased to be a shareholder in the company. It has succeeded also in establishing its claim of $53,275.21, a debt owing by the defendant to it, to be set-off against the sum of $111, 085.03 which is due to the defendant. The defendant on the other hand has succeeded in establishing his counterclaim for dividends due to him, although less than what he would have liked to have achieved.

Order of the Court.

In the light of what I have said above and in the circumstances of this case, the appropriate order of the Court is as follows:

1. Since the date of the determination of the value of the defendant’s shares in the company to be 11 November 1994, the fair value of the defendant's shares as at that was $29,585.03.

2. The defendant is not entitled to the 1994 dividends declared on 31 December 1994.

3. The defendant is entitled to and should be paid the value of his shares assessed as at 11 November 1994 together with dividends for the years 1992 and 1993 totalling $111,085.03 less $53,275.000 being a debt owing by him to the plaintiff. The sum payable to the defendant is therefore $57,810.00 which sum shall be paid to defendant in exchange for him executing the share transfer documents in compliance with the order for specific performance already ordered by the Court.

4. As both parties partly succeeded, they are each entitled to their costs incurred in establishing their claim and counterclaim respectively in this action. The plaintiff’s costs, of course, to include that which the Court of Appeal had already granted.

(Sir John Muria)
CHIEF JUSTICE