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PRINCIPAL REGISTRY CIVIL CAUSE NO. 680 OF 2000
BETWEEN: CANDLEX LIMITED............................................PLAINTIFF -and- MARK KATSONGA PHIRI................................DEFENDANT
CORAM: THE HON. MR JUSTICE F.E. KAPANDA
RULING Introduction In the two actions before this court, which were both commenced on 10th March 2000, by way of writ of summonses, being Civil Causes Nos. 680 and 713 of 2000, the Defendant has been represented by the firm of Racane and Associates since the commencement of the said actions. The same is true with the Plaintiff Company which all along has been represented by Messrs Savjani and Company. The actions were consolidated and they are being tried as one action. The trial of the consolidated actions commenced on 30th April 2001 after bundle of pleadings were filed on 21st August 2000 in respect of Civil Cause No. 680 of 2000 and on 28th August 2000 in connection with Civil Cause No. 713 of 2000. The Plaintiff closed its case on 3rd October 2001 and it then remained for the Defendant to start, on the following day, his defence to the action. It never happened for the Defendant wanted to have the first witness, who was called by the Plaintiff, recalled. A protracted argument then ensued as to whether the said witness should be recalled or not. At the close of submissions, in respect of the application to have the first witness recalled, the court reserved its ruling on the application. The ruling was to be delivered on the day the court was to resume sitting and continue with the trial of the consolidated action. On 28th January 2002, when the case was called and before the court
could deliver its reserved ruling, there was yet another application, by
the Defendant by way of a motion, which is now the subject matter of this
ruling. The court managed to deliver the reserved ruling and it then
proceeded to hear the motion filed by the Defendant on 28th January 2002.
The Defendant, through Counsel, is moving this court to dismiss the action herein. The motion, it is the contention of Mr Mhone, is made pursuant to the provisions of the Rules of the Supreme Court Volume 2, part G of the 1999 edition which confers on this court summary jurisdiction over lawyers who appear before it. The specific provision under which the motion is taken out has not been indicated on the face of the Notice of Motion. Mr Savjani S.C. took an issue with the fact that the Notice of Motion did not indicate under what provision it was taken out. This was a pertinent observation. It is trite knowledge that the relevant law or rule under which a motion is brought must be indicated on the face of the Notice of Motion. In the interest of justice the court proceeded to hear the motion notwithstanding this procedural error committed by Mr Mhone. It is hoped that learned Counsel will not fall into this error again. The grounds upon which the Defendant’s application is based have been indicated as follows:- 1. Savjani and Company were not given instructions to commence an action against the Defendant by the Plaintiff’s Board of Directors. 2. The intructions were given by a Shareholder/Director without the authority of the Board of Directors. 3. In the alternative, the instructions to Savjani and Company by the Shareholder/Director have not been ratified.
Facts of the case The detailed facts of this matter are to be discerned from the affidavits,
and supplementary affidavits, filed with the court in support, and in opposition,
to the Notice of Motion. These are the affidavits, and supplementary
affidavits, in support of the motion sworn by Messrs Raphael Joseph Mhone
and Mark Katsonga Phiri. On the other hand there are the affidavits,
and supplementary affidavits, in opposition to the motion deponed to by
Messrs Rosemary Kanyuka, Michael Hubbe Felix Sakyi and Benard Mkweche Winston
Ndau. The record will show that there are so many of these affidavits
and for this reason I do not propose to set out in full the contents of
the said affidavits. Further, the affidavits are not only numerous
(there are eight
Inspite of the foregoing observations this court will endeavour to set out the salient parts of the matters of fact deponed in the affidavits. I will now move on to set out the said facts. It is common cause that the actions that the Defendant wants dismissed
were commenced on 10th March 2000. Further, it is common ground that
the parties, by consent, caused consent orders for directions to be issued,
by the court, sometime between 4th and 8th August 2000. Furthermore,
it is obvious that before the trial of this action commenced, on 5th May
2001, either party, in view of the said consent order for directions, had
an opportunity to carry out discovery and inspection of documents that
were in the possession, custody or power of the other party.
“Candlex Limited Minutes of an Extraordinary Board Meeting of the Directors of the Company Held on 1st March 2000 at Lilley, Wills and Company Blantyre at 3. PM Present : Mrs R. Kanyuka Chairperson
Apologies : Hon. J.J.J. Sonke 1. Constitution of Meeting The Chairperson called the meeting to order and a qourum being present, declared the meeting duly constituted. 2. The Group Chairmanship The Acting General Manager informed members of Mr Phiri’s behaviour in calling himself Group Chairman of the company and being in charge of management. The Acting General Manager tabled the memos that were exchanged between himself and Mr Phiri and also between the Chairperson and Mr Phiri. It was RESOLVED that though the board had earlier resolved to settle the issues of Mr Phiri’s behaviour which was bringing a lot of confusion amongst the staff at Candlex: 1. Mr Phiri should be asked to vacate the premises. 2. Legal action should be taken against him to evict him from the premises. 3. The Acting General Manager and Mr Abbey should go and see Messrs
Savjani and Company and instruct them to commence legal proceedings against
Mr Phiri on eviction and legal proceedings to stop Mr Phiri from passing
himself off as Group Chairman of the Company.
There being no other business the meeting was declared closed.
(Signed)
It was also deponed by Mr Felix Sakyi, on behalf of the Plaintiff, that the statement of fact contained in one of the Defendant’s affidavits, to the effect that the Plaintiff Company’s auditors denied knowledge of the court proceedings, is not true because actually what happened was that at a meeting, where the Defendant queried why the issues of Group Chairman/Managing Director and possession of premises (the questions that are before this court) were not mentioned in the audited accounts of the Plaintiff Company. Mr Felix Sakyi further stated in his affidavit that he replied and stated that these issues did not require to be mentioned in the accounts since they did not have any financial impact on the company. It was further deponed by the said Mr Felix Sakyi that the Plaintiff Company’s auditors are fully aware of the present action against the Defendant. It will also be noted that the Plaintiff further deponed, through the affidavit of Mrs Rosemary Kanyuka, that the directors of the Plaintiff have since signed a written resolution to confirm, and ratify, the instructions given to Savjani and Company to commence the action against the Defendant. The above are the main facts obtaining in the affidavits that were filed
in support of, and against the, motion. Further facts will appear
later in this ruling when I am dealing with the issues for determination.
As will have been seen from the foregoing sketch of the facts of this application
there is a conflict of the said facts. I must resolve these incompatible
statements of fact and make findings of fact on what the true position
is. This will be done at the time this court will be considering
the questions that must be adjudicated upon.
At this point in time it is necessary that the said questions for determination should be set out in this ruling. The issues are those that have been raised by the Notice of Motion and the affidavit evidence that was offered in support of, and against the, motion. As I see it, the matters that are in dispute in this application, and which must be determined by this court, may be summarised as follows:- (a) Whether the firm of Messrs Savjani and Company was given instructions to commence this action, against the Defendant, by the Plaintiff’s Board of Directors. (b) Whether, if it be found that there were no such instructions, this action should be dismissed. I wish to point out that the isolation of these issues should not be taken to mean that these are the only issues. There are of course other ancillary questions, which do not require to be highlighted, that will also be dealt with when the court is considering the two main issues mentioned above. Before embarking upon the exercise of considering the issues set out
above, and all the other related issues that will arise, let me express
my gatitude to both Counsel for their careful and thorough viva voce submissions
made in support of their respective points of view regarding the motion
herein. Any clarity in this ruling is largely due to the efforts
of Counsel. It will not, however, be possible to refer to each and
every argument, put forward by Counsel, in this ruling. If an attempt
was made to incorporate all the arguments in this ruling that would make
this ruling unnecessarily long in view of the fact that the submissions
were very lengthy. Further, I take the
Were there instructions from the Plaintiff’s Board of Directors? It is the Defendant’s case, argued by Mr Mhone of Counsel, that the Board of Directors of the Plaintiff Company never authorised the commencement of this action against the Defendant, as was required in terms of Article 72 of the Articles of Association of the Plaintiff Company, thus this action must be struck out for it is a nullity. The case of John Shaw and Sons (Salford) -vs- Shaw [1935]All. E.R. 456 was cited in support of this argument. Mr Mhone has further put it to this court that Mr Michael Hubbe’s averment, in paragraph 6 of his affidavit filed on 30th January 2002, that as a majority shareholder he was entitled to give instructions to Savjani and Company to commence action against the Defendant is of no legal consequence in view of the principle of law in the case of John Shaw and Sons (Salford) Ltd (supra). It is Mr Mhone’s further submission that an interim board of directors, which the shareholders agreed each was going to nominate a person(s) to sit on the board, never authorised the commencement of this action. The arguments of Mr Mhone, as shall soon be demonstrated, are weak. Turning to the arguments made on behalf of the Plaintiff Company, it
is the contention of Mr Savjani S.C., that the Defendant’s application
is frivolous as demonstrated by the fact that it was made late and as shown
by the number of affidavits that were filed at different stages since the
application was instituted. It is also the contention of Counsel
for the Plaintiff Company that the fact that Counsel for the Defendant
never raised any question regarding want of instructions or ratification,
at the time the Plaintiff’s witnesses were before this court to testify
on behalf of the Plaintiff Company, shows that the Defendant’s application
is indeed frivolous.
Interim Board of Directors Learned Senior Counsel further submits that there was no subsisting agreement about appointments to the Board as was being suggested by Mr Mhone, when the latter relied on exhibit MPK 25 - the minutes of an Extraordinary Shareholders Meeting of the Plaintiff Company of 9th June 1998 - and contended that the Plaintiff Company still has an Interim Board of Directors and that this Interim Board of Directors did not pass a resolution to commence this action, but that actually at the Shareholders meeting of 4th December 1998 the Shareholders appointed Directors and a new Board was put in place to replace the said Interim Board of Directors. I have had the ocassion to read the Minutes of the Shareholder’s Meeting of the said 4th of December 1998, which the Defendant attended. They are annexed to the affidavit of Mr Ndau filed on 7th February 2002 and are marked as BMWN1. In minute 2, inter alia, it is recorded as follows:- “--2 APPOINTMENT OF DIRECTORS 2.1 Mr Phiri (the Defendant) suggested that since MDC has
RESOLVED That the Interim Board be and is dissolved and a new Board be appointed---” (emphasis and underlining supplied by me) Pausing here, let me observe that I entirely agree with Mr Savjani S.C. when he submits that, pursuant to Section 125(2) of the Companies Act, 1984, the above quoted minutes, whose existence have not been disputed by the Defendant, clearly show that there is prima facie evidence of the fact that the interim board was dissolved and a new board was appointed to replace the interim one. This, therefore, means that there can be no question of a resolution of an interim board not having been made to authorise the giving of instructions to M/s Savjani and Company to institute the action against the Defendant. There was no Interim Board of Directors of the Plaintiff Company, in existence then, to pass the resolution being referred to by learned Counsel for the Defendant. Appointment of Directors: Alteration of Articles Turning again to the arguments of Counsel, it is the further contention
of learned Senior Counsel that the purported agreement, with respect to
appointment of directors by a particular shareholder, which essentially
had the effect of altering the Company’s Articles of Association, is in
any event contrary to the Articles of Association of the Plaintiff Company
which have not been amended by a special resolution as is required by the
provisions of Section 13(1), as read with section 122, of the Companies
Act, 1984. In point of fact, it has been submitted, on behalf of
the Plaintiff Company, that the Company’s Articles of Association do not
provide for the appointment of Director(s) by a particular shareholder.
The
Mr Mhone, in reply, has contended that on the authority of the cases of In Re Express Engineering Works Ltd [1926]1 Ch. D. 466 and In Re Duomatic Ltd [1969]2 Ch. D. 365 this Court should find that the Articles of Association of the Plaintiff Company were altered on the authority of the common law and that the matter of the appointment of directors was then placed in the hands of a particular shareholder. The cases cited by Mr Mhone do not support his sweeping proposition that, at common law, Articles of Association can be altered in the manner the shareholders purported to do. The following dictum of Younger L.J. In Re Express Works Ltd (supra) at page 471 is very instructive:- “---In my opinion the true view is that if you have all the shareholders present, then all the requirements in connection with a meeting of the company are observed, and every competent resolution passed for which no further formality is required by Statute becomes binding on the company---” (emphasis supplied by me) The above quoted statement, of Younger L.J., was cited with approval In Re Duomatic Ltd (supra) by Buckley, J. at page 371 F-G.
Decision to take action against Defendant
The Defendant, instead of proving what he was alleging, wanted the Plaintiff to disprove what the Defendant has been contending. The Plaintiff, although not obliged to do so, has proven that the commencement of the action against the Defendant was authorised. Realising that his allegation can not stand the Defendant made another baseless application. This is made apparent in the Defendant’s prayer for production of a Minute Book. In lieu of praying for discovery of this particular document at an earlier stage, he made an application for production of the Minute Book at the end of his arguments in support of this motion. I believe this was intended to fish out for some evidence to support the allegation that there is of want of authority. If this was not a fishing expedition, on the part of the Defendant, I wonder what it could be called. For the foregoing reason the Defendant’s application would be dismissed. Ratification
“Candlex Limited That the undersigned directors having received notice of a proposed resolution of the board of directors of Candlex Limited (“the Company”) signify their assent to the confirmations set out below and the passing of the resolutions set out below:- 1. The directors hereby confirm that:- 1.1 they decided to instruct Messrs Savjani & Co., Legal Practitioners, to take action on behalf of the Company to restrain Mr Mark Latsonga Phiri from holding himself out as Group Chairman and/or Managing Director of the Company and to stop him from interfering in the administration of the Company and asked Messrs Michael Hubbe and R. Abbey, directors and shareholders of the Company (and in the case of Mr Michael Hubbe also then Acting General Manager of the Comapny) to meet Savjani & Co. for purpose, which they did. 1.2 they decided to instruct Messrs Savjani & Co. to recover immediate possession of the offices of the Company occupied by Mr Mark Katsonga Phiri and did so instruct Messrs Michael Hubbe and R. Abbey. 1.3 they have been informed from time to time about the progress of
the Company’s actions against Mr Mark Katsonga Phiri regarding the issues
of Grough Chairman/Managing Director and regarding the preminses and the
directors confirm that such information of the directors has been given
by the Board Chairperson Mrs Kanyuka and Mr Michael Hubbe. Such information
also included the information that the initial injunction granted by the
High Court in Cause No. 713 of 2000 had not been granted and a decision
was made by the board of directors not to proceed with an appeal and to
proceed to trial of the action instead.
(a) ratify (if ratification is necessary) the actions of Mr Michael Hubbe and/or Mr R. Abbey in giving instructions to Savjani & Co. as mentioned in 1.1 and 1.2 above, (b) ratify (if ratification is necessary) all actions taken by Savjani & Co. on behalf and in the name of the Company against Mr Mark Katsonga Phiri, including High Court Civil Cause Numbers 680 and 713 of 2000 in which the Company is suing Mark Katsonga Phiri in relation to the issues of Group Chairman/Managing Director and director and occupation by Mr Mark Katsonga Phiri of two rooms in the Company’s premises respectively. (c) adopts those High Court actions, and
(d) instructs Savjani & Co. To continue those actions on behalf of the Company. Dated the......... day of January 2002.”
Promptness in bringing up application Finally, let me aboseve, and conclude, that this motion would have been
refused in any event on the ground that, as rightly pointed by Mr Savjani
S.C., it was not made promptly. If this court had found that there
was want of authority to commence the proceedings herein, on behalf of
the Plaintiff Company, it could still have proceeded to dismiss the motion
on the authority of the cases of Russian Commercial and Industrial Bank,
Danish Mercantile Co Ltd (supra) and Banco De Bilbao -vs- Sancha [1938]2
K.B. 176 which are for the proposition that if a Defendant wishes to question
the authority to sue in a Plaintiff Company’s name then same must be done
at an early stage and not at trial. In the matter before this court
the Defendant only raised the issue of want of authority at trial.
It is abundantly clear that this action was commenced more than a year
ago i.e. on 10th March 2000. Indeed, the record of this case will clearly
demonstrate that the Defendant started questioning the authority of the
Plaintiff Company to sue after the Plaintiff had closed its case on 3rd
October 2001. The court was awaiting to hear the Defendant in his
defence to the action after the Plaintiff closed its case. It is
clear that what the Defendant did is not to bring an application, raising
want of authority to sue in the name of the Plaintiff Company, promptly.
There was an inordinate delaly in taking up this motion.
The Motion is refused and the Defendant is condemned to pay the costs
of, and ocassioned by this, motion. The court
Pronounced in open Court this 2nd day of April 2002 at the Principal
Registry, Blantyre.
F.E. Kapanda |