Anilabata v Premium Balsa Products Ltd [2001] SBHC 133; HC-CC 077 of 2001 (13 August 2001)

HIGH COURT OF SOLOMON ISLANDS

CIVIL CASE NO. 77 OF 2001

ROSE ANILABATA

-V-

PREMIUM BALSA PRODUCTS LIMITED
AND VERNON SMITH AND JOSEPH HAROLD

HIGH COURT OF SOLOMON ISLANDS
(PALMER J.)

HEARING: 7TH AUGUST 2001
JUDGMENT: 13TH AUGUST 2001

A & A Legal Services for the Respondent/Plaintiff
V. Smith in person and as an Officer representing First Defendant as the Applicant/First and Second Defendants

PALMER ACJ.: This is an application by Mr. Smith as the Second Defendant in person and also appearing on behalf of the First Defendant as Director, for orders inter alia, to have the claim of the Plaintiff struck out on grounds that it is frivolous and vexatious and that it discloses no reasonable cause of action. The application obviously was made under Order 27 Rule 4 of the High Court (Civil Procedure) Rules, 1964 (hereinafter referred to as “the Rules”). Mr. Smith relies on two crucial grounds in his submissions, first that the Plaintiff is not a shareholder in the First Defendant company (hereinafter referred to as “PBP”) and secondly, that she had been dismissed from being a director in PBP as of 15th October 1997. The way the orders had been worded is unusual but that can be accommodated for the purposes of this application, as the Applicant is a layman and not a legal practitioner. He has filed two affidavits, one on 12th June and the other on 6th August 2001.

Submissions of Parties on Ground 1.

Mr. Smith’s application for striking out is based on his submissions that although the Plaintiff had been allotted 50% shareholding in PBP on incorporation, she had failed to pay for those shares and that accordingly her shares had been forfeited by the company and withdrawn. He relies on Exhibits “VSO1” to “VSO10” annexed to his affidavit filed 12th June 2001. Exhibit “VSO1” is a copy of a letter dated 14th December 1996 in which the Plaintiff was reminded to pay up on the shares offered to her in PBP. Exhibit “VSO2” is a copy of a letter addressed to the Plaintiff dated 16th February 1997 in which the offer of shares was purportedly withdrawn. Exhibit “VSO6” is the copy of the minutes of a Directors Meeting held on 10th December 1997, which made reference to the fact that, she had not paid for the shares offered to her (paragraph 3 of the Minutes). Exhibit “VSO10” is the copy of the letter dated 18th February 1998 which repeated the withdrawal of the shares and appears to have been the final decision on the issue.

Mr Ashley submits on the other hand that the all the Plaintiff needed to establish was that she has a prima facie case before this Court for determination. He submits that the matters raised by Mr. Smith are matters which should rightly be determined at trial.

What does Applicant have to establish?

In order for the Applicant’s summons to succeed under ground (1) he needs to show that the claim is devoid of merit or cannot possibly succeed (Willis v. Earl Beauchamp [1886] UKLawRpPro 6; (1886) 11 P.D. 59). In Norman v. Mathews (1916) 85 L.J.K.B 857, 859 Lush J. propounded the test as follows:

“In order to bring a case within the description it is not sufficient merely to say that the plaintiff has no cause of action. It must appear that his alleged cause of action is one which on the face of it is clearly one which no reasonable person could properly treat as bona fide, and contend that he had a grievance which he was entitled to bring before the Court.”

Is the Plaintiff’s claim devoid of merit or cannot possibly succeed? Is it one which no reasonable person could properly treat as bona fide and contend that she had a grievance which she was entitled to bring before the Court?

Plaintiff’s Claim

Plaintiff claims she owns 50% of the issued 100 shares in PBP on incorporation on 12th June 1996. She also claims she was appointed as one of the Directors of the company. At paragraph 11 of her Statement of Claim she contends the 2nd and 3rd Defendants had fraudulently obtained and transferred her shares to the 3rd Defendant without any consideration. She also claims she had been fraudulently terminated as director. She therefore seeks by way of relief inter alia, an account of the assets and liabilities of PBP, a declaration that the purported change of directorship and transfer of shares from the Plaintiff to the 3rd Defendants was null and void and consequential orders that she is still a director and shareholder of 50% of the issued shares of PBP.

The Issues for determination

Are there any issues for determination between the parties or triable issues? Mr. Smith does not dispute that on incorporation an allotment of 50% of the shares was made to the Plaintiff and that she was appointed one of the directors. Mr. Smith however contends the allotment had been validly withdrawn and forfeited, due to non-payment of the shares. Plaintiff contends on the other hand, that there had been fraud as to how her shareholding had been terminated in that there was no meeting of the Directors where this was done. Mr. Smith has filed affidavit evidence in support of his submissions. These consist of correspondences exchanged between PBP and the Plaintiff regarding payment of the allotted shares. There doesn’t appear however to be any records in the minutes of the Directors Meetings of 15th October 1997 and 12th December 1997 (Exhibits “VSO4” and “VSO6”) as to any resolutions to forfeit and withdraw those shares. This issue accordingly is a live issue which should properly be determined at trial. As to question of termination of directorship, Plaintiff contends there had been no such meeting. In contrast Mr. Smith submits evidence that this had been done. That is not the end of the matter however because the issue of validity of those meetings is yet to be determined. This will depend on the evidence before this Court which is yet to be tested by cross-examination and whether the Court accepts the affidavit evidence submitted by Mr. Smith; a matter properly left for trial. It is important to bear in mind that the Plaintiff alleges fraud in the termination of her directorship. This inevitably will entail assessments of evidence which can only de done on trial. Further where fraud is alleged, sufficient particulars must be provided in the pleadings. It seems this is a matter parties will have to address whether there is sufficient particulars pleaded or not. I am not satisfied it can be said the Plaintiff’s claim at this point of time is frivolous or vexatious. With respect the matters raised by Mr. Smith challenging the Plaintiff’s claim at this point of time is premature. All Plaintiff needs to establish at this point of time is that her claim is not devoid of merit. She has done that. The evidence shows there had been an allotment of shares as well as having been appointed as director of PBP on incorporation. What transpired thereafter resulting in the forfeiture and termination of her directorship are matters in dispute and will depend a lot on evidence to be tested and agitated at trial. That will come about after pleadings had closed. Application of the First and Second Defendant accordingly must be dismissed with costs. Defendants should now consider filing any Statements of Defence to this action. They have 14 days to do this. This case should proceed in the normal course thereafter.

Security for costs

A defendant would normally seek orders for security for costs under Order 65 Rule 4 of the Rules where a plaintiff is ordinarily resident abroad and has no substantial property, real or personal in the jurisdiction (Kevorkian v. Burney (No. 2) [1937] 4 All E.R. 468). It can also be sought where there is a nominal and impecunious plaintiff suing for the benefit of some other person; or is an insolvent company. In other instances it can be ordered where the plaintiff has deliberately omitted or misstated his address in the writ or where he has changed his address with the view to evading the consequences of litigation. In such instances the Court is required to have regard to all the circumstances of the case and will make the order only where it thinks it just so to do. This is a discretionary matter. Even if the above conditions have been fulfilled, the Court may still not grant orders for security for costs. I have considered the circumstances in which this application has been made but with respect I am not satisfied that such an order can be made.

ORDERS OF THE COURT:

1. Refuse orders 1-6 sought in the Summons of the 1st and 2nd Defendants.
   
2. The Defendants to file Statement of Defence within 14 days. Proceedings to continue in the normal way thereafter.
   
3. First and Second Defendants to pay costs of the Plaintiff in this application.
   

THE COURT.