Company LAw (complainant's rights), Lecture notes of Law

Download Company LAw (complainant's rights) and more Lecture notes Law in PDF only on Docsity! ‘Complainants’ -separate legal personality and litigation Lesley A. Walcott 2019 FOSS V HARBOTTLE • Two shareholders brought this action alleging that land has been sold to the company at an exorbitant price. They brought this action on behalf of themselves an all other shareholders except the defendants. It was held that the conduct complained of was a wrong done to the company and that only the company could sue. FRAUD ON THE MINORITY FRAUD WRONG DOERS IN CONTROL Reform • Barbados; • Bahamas; • Trinidad & Tobago • St Kitts & Nevis • Jamaica Worksheet 6 * 1. Complainant Rights * Derivative action * Restraining oppression Oppression remedy Part IX of the Bahamas Companies Act • The language of the oppression remedy is contained in Part IX of the Bahamas Companies Act which outlines the grounds for relief as • “oppressive; or • unfairly oppressive; • or that unfairly disregards.” Section 278 – complainant • (a) shareholder or debenture holder or a former holder of a share or debenture of the company; • (b) a director or an officer or former director or officer of the company or its affiliates; • (c) “any other person can qualify who in the opinion of the court is a proper person to institute an action…” (a) and (b) as is the case in Barbados qualify as of right. With respect to (c) however , standing is predicated on judicial recognition. JAMAICA COMPANIES ACT SECTION 212 JAMAICA Section 213 (a) A shareholder or former shareholder of a company or an affiliated company (b) A debenture holder or former debenture holder of a company or an affiliated company (c) A director or officer or former director or officer of a company or an affiliated company. Barbados Companies Act Cap 308 [1982] Section 225 Trinidad & Tobago [1995] Section 239 (i) The registrar; or (ii) Any other person who, in the discretion of the court is a proper person to make and application under this Part. Complainant Bds/ T&T - • (i) a shareholder or debenture holder, or a former holder of a share or debenture of a company or any of its affiliates; (ii) a director or an officer or former director or officer of a company or any of its affiliates; (iii) the Registrar; or (iv) any other person who, in the discretion of the Court, is a proper person to make an application under that part of the Act." OPPRESSION Burdensome, harsh or wrongful – Scottish Co-operative Wholesale v. Meyer [1959] A.C. 324 (HL) UNFAIRLY PREJUDICIAL Acts that are unjustly or inequitably detrimental. Diligenti v. RWMD Operations Kelowna (1976) 1 BCLR. 36 BARBADOS & TRINIDAD & TOBAGO “Unfairly disregards the interests …” unjustly or without cause, pay no attention to, ignore or treat as Of no importance Stech v. Davies(1987) 53 Alta L.R. (2nd) 373 Devaux - Suit No.393 of 2003( H.C. St Lucia ). • 1] In this case, Mrs. Devaux instituted the oppression remedy as provided by section 241 of the Companies Act 1996, alleging that the business or affairs of the Company are or have been carried on or conducted in a manner that is oppressive or unfairly prejudicial to and which unfairly disregards her interest as shareholder and Managing Director. The High Court held that Mrs. Devaux failed to establish any element of lack of probity on the part of the ‘majority’ is no basis on which to apply the oppression remedy. COMPLAINANTS Lalla v. TCL & TCL Holders H.C.A. No. C.V.S. 852/98 • “Oppressive -burdensome, harsh and wrongful per Viscount Simmonds in Scottish Co-Operative Wholesale Society Ltd v. Meyer Safarik v Ocean Fisheries Ltd .1993 10 B.L.R. Harvey notes that , “the unfairly prejudicial remedy is intended to protect a wider range of rights than those under the oppression remedy and the words unfairly prejudicial are to be given a wider interpretation than the word oppression.” Unfairly prejudicial has been interpreted to mean “acts which are unjustly or inequitably detrimental.” Dillgenti v RWMD (1973) 1 B.C.L.R. 36 In this case Dillgenti’s removal as director was not oppressive under section 221(a) of the British Columbia Companies Act but that it was “unfairly prejudicial.” Stech v Davies Unfairly disregards has been interpreted to mean “unjustly or without cause pay no attention to, ignore or treat as of no importance.” Cox v Roberts • In this case the plaintiff, Mr. Cox, a shareholder and managing director of a company, commenced proceedings after the defendants sought to remove him from the board of directors. Alleging that the attempt to remove him as a director amounted to oppression, unfair prejudice and or that his interests were being disregarded, the plaintiff sought, inter alia, an order directing the defendants to purchase his shares. Mr Justice Blackman -no evidence of oppression within the meaning of section 228(2) • Viewing the situation as a whole, I am not persuaded that the conduct of the defendants has been oppressive, unfairly prejudicial or carried on in a manner that unfairly disregards the plaintiff’s interest as a shareholder. In light of the conclusions I have reached, the relief sought by the plaintiff does not fall to be considered. Accordingly, the application is dismissed.” Ruling • -the alleged objects of oppression were not within the 'specified category' of persons in section 242. (i.e. any shareholder, debenture holder, creditor, director or officer of the impugned company). Since the oppression remedy as contained in the statute does not embrace all the complainants its obvious and deliberate intent was that only those complainants as identified were the complainants who were entitled to relief on establishing that the defendant’s actions were oppressive, unfairly prejudicial or unfairly disregarding his interests. • Whereas in PCL Industrial Constructors Inc v. CLR Construction Labour Relations Association of Saskatchewan Inc.,[1] the court treated the silence of the legislation to recognise ‘any other person’ as an obvious legislative oversight and that any other interpretation would be absurd so that the “obvious legislative gap was filled, the High Court in Lopez took a narrower approach. [1] (1995) QBG No 1651; 2000 SKCA 15(C.A.) Jamadar in Lopez • “There is no obscurity, ambiguity or absurdity in the sections under consideration. On the contrary, an ordinary reading clearly demonstrates the intention and purpose stated above.” St Georges • " Justice Adderly in drawing a distinction between the conduct of the company which raises a cause of action and the conduct of a director or officer in his private capacity which does not, ruled : • “no case of oppression under section 280 can be proved and the remedies of the section invoked unless the victim of the oppressive acts is one of the above ("title victim class") of the company it is his interest in his capacity as such member of the victim class of the company that the Act seeks to protect. Differences between Barbados and the Bahamas • The definition of complainant in the Bahamas is different from that in Barbados not only in its failure to recognize the registrar as a complainant but more importantly, certainly on the facts of St George itself, that “shareholders or debenture holders” of affiliated companies are not recognized by section 278(a); Continued … • Another area of departure can be found in section 279 which speaks to derivative actions. It provides “subject to subsection (2), a complainant may….. apply to the court for leave to bring an action in the name and on behalf of the company or any of its subsidiaries or intervene in any action to which any such company or any of its subsidiaries is a party.” - These differences notwithstanding collectively St Georges and Lopez adhere to the plain and obvious intent of the legislature and instruct and inform as to how to treat the question of complainant rights. Comment on Canwest • why the reforming spirit of the legislation was not applied, on the facts, to section 225(b)(i) a shareholder or former shareholder... of the entity or any of its affiliated entities?” One cannot easily dismiss the argument since a complainant under 225(b)(iv) arguably does not, on a strict literal construction of 228(2) have redress under 228 (2). Simply, any other person is not a member of the special category of complainants identified. Summary Caribbean Case Law • Lalla v. Trinidad Cement Limited and TCL Holdings, Unreported decision from Trinidad and Tobago H,C,A. No Cv S- 852/ 98. • Five Star Medical And Ambulance Services Limited v. Telecommunications Services of Trinidad and Tobago Limited and Samuel Martin, H.C.A. No 1593 of 2001; • Lopez v Telecommunications Services of Trinidad and Tobago, High Court of Trinidad and Tobago No 84 of 2004. Comment • “Broadly it is observed that the conplainant section signifies that the challenge to the doctrine of separate legal personality is not confined to four established exceptions to the rule in Foss v Harbottle but to an amorphous category of aggrieved persons called complainants. This section represents a clear transition from the shareholder - centered approach towards a broader stakeholder model…. whereas formerly judges adopted a hands-of- approach reluctant to review internal business decisions, under the new regime Caribbean judges are robustly exercising their discretion. .. …. • that is oppressive or unfairly prejudicial to, or that unfairly disregards the interests of, any shareholder or debenture holder, creditor, director or officer of the company, the Court may make an order to rectify the matters complained of." • • [1 restricted class ? • shareholder • debenture holder, • creditor, • director or officer of the company, Lopez v. TSTT & RBTT Trust Ltd H.C.A. No 1997 of 2003 • Restricted literal interpretation • Rejection of the purposive approach