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THE REPUBLIC OF UGANDA
IN THE SUPREME COURT OF UGANDA AT MENGO
(CORAM: ODOKI, C.J., ODER, TSEKOOKO, KAROKORA, KANYEIHAMBA, JJ.S.C.)
CIVIL APPEAL NO. 13 OF
2002
BETWEEN
JASPAL SINGH SANDHU
:::::::::::::::::::::::::::::::::::: APPELLANT
AND
NOBLE BUILDERS (U) LTD. ]
RAGHBIR SINGH SANDHU ] :::::::::::::::::::::::::: RESPONDENTS
[Appeal from the judgment of the Court of Appeal (Kato, Engwau and Kitumba, JJ.A.) in Civil Appeal No. 41 of 2001, dated 20th day of May, 2002]
JUDGMENT OF KANYEIHAMBA. J.S.C.
This is a second appeal from the judgment of the Court of Appeal allowing an
appeal from the judgment and orders of the High Court
(Okumu Wengi, J.) in which
the appellant had been the successful plaintiff.
The facts of this case may be summarised as follows:
The appellant Jaspal Singh Sandhu and the second respondent, Raghbir Singh
Sandhu formed the first respondent, Noble Builders (U)
Ltd (Hereinafter called
respondent Company), on 5/01/1984 and had it registered. On 12/01/1984, the
appellant notified the Registrar
of Companies that he had ceased to be a
Director and member in the respondent company and that he had appointed his wife
Balwinder
Kaur Sandhu to replace him as both director and member. The day before
this notification, the appellant had filled in and completed
Company Form A8
which he personally signed showing that he had ceased to be a director/member of
the respondent company and his wife
was appointed a new director/member of the
company. Shortly after these transactions, the appellant left for Canada where
he became
a resident. Later on, his wife followed him. In the meantime, the
second respondent stayed in Uganda running and administering the
business
affairs of the respondent company. It would appear that the respondent company
registered some business successes because
when eventually the appellant
returned to Uganda, he discovered that the respondent company had made profits
for which he asked that
company to account.
The second respondent
refused to account for the profits of the respondent company on the ground that
since the appellant had ceased
to be a shareholder before departing for Canada,
he had no locus standi in the company and could therefore not claim
accountability from it. Faced with this resistance from the second respondent,
the appellant
decided to petition the High Court to order the winding up of the
respondent company and to declare the second respondent a delinquent
director
with an order to account for all the monies and assets of the respondent
company. The trial judge entered judgment for
the appellant and made the
orders prayed for in the petition. In addition, the learned trial judge ordered
the appellant's name to
be restored in the company register.
Dissatisfied with the judgment and orders of the High Court, the respondents
appealed to the Court of Appeal which allowed the appeal
- hence this
appeal.
Mr. Mubiru Kalenge and Mr. Bwanika, counsel for the appellant
had filed nine grounds of appeal before us, but after objections from
Mr.
Byenkya, counsel for the respondents that some of the grounds framed for the
appeal offended against rule 81 of the rules of
this Court, Messrs Mubiru
Kalenge and Bwanika, abandoned grounds 6,7 and 9. They argued grounds 1 and 8
separately and grounds 2
and 3 together and 4 & 5 together,
respectively. The grounds argued were framed as follows:
1. The learned Justices of Appeal erred in fact and law in finding that the words contained in Company Form N0.A8 were unambiguous.
2. The learned Justices of Appeal contradicted themselves and thereby arrived at the wrong decision after correctly finding that shares can only be transferred in accordance with Section 75 of the Companies Act and then finding that the appellant validly transferred his shares to his wife.
3. The learned Justices of the Court of Appeal erred in finding that the appellant relinquished his membership in the 1st respondent
by signing Company Form No. A8.
4. The learned Justices of the Court of Appeal misdirected themselves and erred in law in finding that evidence given in High Court Civil Suit No. 174 of 1990 Noble Builders v. Sietco Ltd was inadmissible. 5. The learned Justices of the Court of Appeal erred in holding that had the trial judge not relied on evidence in H.C.C.S. No. 174 of 1990 Noble Builders v. Sietco Ltd, he would have come to different conclusions.
8. The learned Justices of the Court of Appeal grossly erred and
misdirected themselves in holding that the whole appeal case resolved
on one
issue only and thereby ignored other grounds of appeal which raised important
questions for the jurisprudence of this country.
Counsel for the appellant proceeded to present numerous and prolonged
arguments and submissions which were not always designed to
advance their
client's cause. Counsel advanced arguments which had been made in both the Court
of Appeal and the High Court. Much
of the same had been covered in lengthy
written submissions which contained much more than what was pertinently relevant
to this
appeal. Indeed, the Court of Appeal aptly described all these
submissions and arguments as copious. I note that ground 8 of the appeal
complains that the Justices of Appeal grossly erred and misdirected themselves
when they held that the whole appeal case revolved
on one issue only and thereby
ignored other grounds of appeal which raised important questions for the
jurisprudence of this country.
Important as the jurisprudence of this country
may be, the basis of the court's consideration in any case is the application of
law
and principles of justice founded on the actual facts and circumstances of
the case. The primary function of the court in determining
a case involving
disputes amongst citizens and organizations is to resolve those disputes
judicially and not to seek and declare
jurisprudential wisdom. Such wisdom
evolves incidentally and not by design in any one given case.
In my
opinion, the notion that because in its deliberations, a given court did not
enhance the knowledge of jurisprudence in Uganda,
should constitute a ground of
appeal is very far fetched in any legal system. For these reasons I would
dismiss ground 8 of the appeal.
Having perused the voluminous record of proceedings and heard counsel, I am
of the same view as Kato, J.A. who wrote the lead judgment
in the Court of
Appeal that this whole case resolves on one vital issue. That issue is whether
or not it was the appellant who completed
Form A8 of the Companies Act and if so
what effect the registration of that same form had on the status, rights and
obligations of
directors and shareholders of the company. It is pleaded on
behalf of the appellant that he is still a member of the respondent company
with
all his rights as a member subsisting and enforceable. The second respondent
claims that the appellant ceased to be a member
the day he surrendered his
shares and membership of the company to his wife and that from then onwards, he
ceased to have locus standi and could not claim any rights either as a
member or as a contributory. If the evidence was to show that he is still a
member of the
company and it is so declared by court, the court would proceed to
consider the other grounds of appeal including a declaration of
rights and
compensation, if any. If the pleadings and submissions prove that the appellant
ceased to be both a member and a contributory
of the company, the case ends
there because all the other listed grounds would only be considered on the
presumption that the appellant
is still a member and contributory of the
company.
In my view, the grounds which are pertinently relevant to
matters in this appeal are grounds 1,2,3 and 8 of the appeal. I have already
disposed of ground 8.
On ground 1, Mr. Mubiru Kalenge, counsel for
the appellant, submitted that the Court of Appeal erred in fact and in law in
holding
that the words which the appellant used in completing Form A8 of the
Companies Act were vague, ambiguous and confusing. Counsel again
contended that
in light of the nature of the words used, it could not be deduced from the
completed Form A8, that the appellant had
surrendered or transferred his shares
to his wife. Counsel contended that the appellant had duly signed the Memorandum
and Articles
of Association of the first respondent. They were subsequently
registered and by virtue of this procedure, the appellant had become
a member of
and a contributory to the respondent company. Mr. Mubiru Kalenge further
contended that the appellant has had those shares
registered in his name since
1984, and he is still their owner. Counsel pointed out that the appellant never
relinquished or transferred
his shares to anyone, at all. This is evidenced
further by the fact that the formalities demanded under the Companies Act for
the
transfer of shares were not followed. Consequently, the appellants' wife was
never registered as the transferee of the shares.
Counsel for the
appellant further contended that the alleged act of transfer to his wife was
never effective. In the first instance,
Form A8 which he completed was headed
"Notification Of Change of Directors or Secretary Or In The Particular" and was
not designed
for the surrender or transfer of shares, per se. Mr. Mubiru
Kalenge further submitted that for a transfer of shares to be effective, the
transfer has to comply with the provisions
of the Companies Act and the Articles
of Association of the company in question. He cited the relevant provisions for
his submissions.
In relation to the doctrine of estoppel which had
been advanced on behalf of the respondents in the Court of Appeal, counsel for
the
appellant contended that it was not applicable in this case since the
attempted transfer of the appellant's shares had not succeeded.
Counsel
submitted further that the fact that no stamp duty had been paid on the transfer
is further evidence that the appellant was
still the true owner of his shares in
the first respondent and any purported transfer of his shares did not
materialise.
Mr. Bwanika, second counsel for the appellant, made
submissions on grounds 4, 5 and 8. On grounds 4 and 5, he contended that the
learned
Justices of Appeal had not properly evaluated the evidence. In his view,
they had failed to consider the appellant's Counsel's submissions
and arguments.
Mr. Bwanika contended that the second respondent had been delinquent and came to
court with soiled hands and in counsel's
view, he should not have been granted a
relief.
Mr. Bwanika further argued that the fact that the appellant
had signed Form A8 indicating the transfer of his directorship and membership
to
his wife was a mere technicality and the appellant should not be deprived of his
remedies on a mere technicality.
Counsel for the appellant cited Charlesworth & Morse: Company Law,
7th Edition, Re - National Savings Bank Association (1866) L.R.1. Ch.
App. 594, Re - London and Provincial Consolidated Cost Company (1877) Ch.
Vol. V. 52, Colonial Bank v. Hapworth, 1887, Vol. 36 Ch. 37. L. Hall's
Company
Secretarial Practice, 6th Edition and provisions on the Companies
Act, as authorities in support of their submissions and
arguments.
For the respondents, Mr. Byenkya made submissions on the
grounds as presented and argued by counsel for the appellant. The thrust
of Mr.
Byenkya's submissions was that the appellant ceased to be a member on the day he
signed Form A8 and revealed to all and sundry
that he had transferred his shares
to his wife. Counsel contended that the words used by the appellant in that
transfer were clear
and unambiguous and should be given their natural and
technical meaning in company law matters. Counsel contended that the appellant
ceased to be a member of the company with effect from 12th January,
1984, when he signified that he had transferred his shares to his wife. Mr.
Byenkya contended further that in company law,
the term member only refers to
shareholders and in signing Form A8, the appellant had said that he had ceased
to be director/member
of the company and on the same day his wife Mrs. Balwinder
Kaur Sandhu had been appointed a new director/Member of the company.
Respondents' counsel contended further that in informing the officials of the
respondent company and those at the Companies' Registry,
he intended that those
officials and any other stakeholder should act upon the information he provided.
He further submitted that
in consequence, both respondents acted and managed the
company in the belief that the appellant had quit the respondent company and
was
replaced by his wife who had stepped in his shoes and became both a director and
member.
It was also a contention for the respondents, that the signed
acknowledgement by the appellant of surrender of his shares to his wife
estopped
him from denying that he had ceased to be a member.
Mr. Byenkya contended that on the basis of the appellant ceasing to be a
member, the respondent company had gone ahead and created
a new issue of shares
and allotted the same to other people. Following the appellant's departure as
director/member, the respondent
company started dealing with his wife as the new
director/member and there is evidence that she was warned of the consequences if
she persistently continued to be absent from the respondent company's Board
meetings.
Finally, it was counsel's contention that the appellant had
no locus standi to petition for the winding up of a company of which he
was neither a member nor a contributory. Respondents' counsel cited Henry
Kawalya v. Dan Semakadde, Comp. Cause No. 8 of 1990, Nurdin Bankali v.
Lombarak Tanganyika Ltd., [1963] EA. 304, Mugenyi & Co.
Advocates v. Attorney General, S.C.C. No. 43 of 1955
and Re Tal y Drws State Company (Mackley's Case) 1875 1
C.H. 247 as authorities for his submissions.
As noted earlier, on the 30th April, 1984, the appellant who together with the 2nd respondent had previously formed the respondent company executed a document hereinafter called Form A8 with the words,
"With effect from 12th January, 1984, Mr. Jaspal Singh Sandhu ceased to be a Director/Member of the company. On the same day/date Mrs. Balvinder Kaur is appointed a new Director/Member of the company."
In the lead judgment of the Court of Appeal, Kato, J.A. as he then was, said of the contents of that document:
"The appellants are adamant that those words meant that the respondent did not only cease to be a director but also a member of the first appellant. The respondent's interpretation is that he only resigned from the directorship of the company. I accept the interpretation given by the appellants' counsel as the correct one. It is trite law that words which are not ambiguous must be given their ordinary and natural meaning. In this case the respondent was clear that he ceased being a director and member of the company. If he wanted to remain a member then why should the word member have been included in the document? The respondent does not say anywhere in his affidavit that he never wrote that word. On the contrary, both the respondent and his wife in their affidavits dated 16/10/2000 and 2/03/2001 respectively, show clearly that the appellant actually signed the document."
Then, after citing extracts from the affidavits of both the appellant and his wife and reevaluating other evidence, the learned Justice of Appeal concluded,
"it is my considered opinion that as from 12/1/84, the respondent ceased to be a member of the first appellant and all his rights in that company were vested in his wife. I find that the respondent had no locus standi in the affairs of the first appellant and as such he could not petition for its winding up nor could he call upon the second appellant to account to him how he had been managing the business of the company. The respondent does not fall under any of the categories which may institute proceedings to wind up a company under Section 224 of the Companies Act" The other two Justices of Appeal agreed with Kato, J.A.
In my opinion, the learned Justices of Appeal cannot be faulted. In support
of their decision, I find further evidence that the wife
of the appellant
acquired the shares of her husband who was the original subscriber at the
initial stage of the company's incorporation.
The record shows that her husband
who is the appellant in this appeal owned 49% of the shares and the first
respondent owned the
remaining 51% of the shares. Thereafter, the appellant
transferred both his directorship and membership of the company to his wife,
Mrs. Balwinder Kaur Sandhu. There is no evidence that the appellant was ever
contacted again by the company after he transferred
his shares. On the other
hand, his wife was apparently contacted from time to time as a director by the
company.
The evidence shows that the wife remains the second director and
owner of the 49% of the shares in the first respondent, namely Noble
Builders
(U) Ltd. There was an attempt to reorganise the management and shareholding of
the company. The attempt never succeeded
because it could not comply with either
the provisions of the Companies Act or the regulations of Noble Builders (U)
Ltd. Indeed,
the company itself recognised this dilemma when corresponding with
the appellant's wife. Having realised that a single director could
not effect
changes they desired in the company, they wrote to the appellant's wife whom
they recognised as the new director on 25.08.1988
and observed,
"I write to inform you that since you were appointed as director you have never attended any Board meeting of the company. Board meetings are held once every month You are only two directors.
A Board meeting cannot take place without yourself; that you are rendering the company's business ineffective."
It follows therefore that the attempted allotment of new shares by the single remaining director or his attempted reorganisation of Noble Builders (U) Ltd.'s management failed. The inability of the company to effect changes after the appellant had departed from its management is itself an acknowledgment of their difficulties by the respondents when they pleaded with Mrs. Balwinder Kaur Sandhu, the new director and shareholder on the basis that without her attendance and participation in the running of the company, they would be unable to transact business.
In consequence, I would dismiss grounds 1, 2 and 3 of this appeal and as I have already dismissed ground 8 for lack of merit and held that the other ground, namely ground 5 is irrelevant, I would dismiss this appeal with costs to the respondents in this court and in the courts below.
Before leaving this appeal, I am constrained to observe that it was inadvisable for the appellant's wife, Balwinder Kaur Singh not to be joined as a party to the proceedings in this case. The fact that she may have not attended board meetings or fulfilled her responsibilities as a director, does not adversely affect her rights and obligations as a shareholder and owner of the 49% of the equities of Noble Builders (U) Ltd. I agree with Kato, J.A., the learned Justice who wrote the lead judgment in the Court of Appeal, that it is remarkable that the appellant's wife has not chosen to pursue her rights. Of course, this judgment and all previous proceedings in this case do not in any way affect her rights as a shareholder in Noble Builders (U).
JUDGEMENT OF TSEKOOKO, J.S.C.
1 have had the benefit of reading in draft the judgment prepared by my
learned brother, Kanyeihamba, J.S.C, and I agree with him that
this appeal should be dismissed with costs to both respondents here and in the
two courts below.
It is common ground that the appellant and the
second respondent, were the initial subscribers to the first respondent (the
Company).
Both the Memorandum of Association and the Articles of Association
show that the two were the only subscribers by the time the company
was
incorporated on 5th January 1984. The appellant stated clearly in
paragraph 6 of his petition that he relinquished his directorship and membership
on
12/1/1984. According to paragraph 7 of the affidavit of 2nd
Respondent, appellant endorsed on a formal company form entitled
"Notification of Change of Directors or Secretary or in Their Particulars"
the following words written manually in ink,
"With effect from 12th January, 1984 Mr. Jaspal Singh Sandhu ceased to be a director/member of the company. On the same day/date Mrs. Balwinder Kaur is appointed a NEW DIRECTOR/MEMBER of the company".
The said Mrs. Balwinder Kaur is in fact the wife of the appellant. The form
is dated 30/4/1984 and it was signed by the two subscribers.
The second
respondent signed the form apparently as the Managing Director of the Company
while the appellant appears to have signed
it as Director of the company. The
form was filed in the Registry of Companies.
In these circumstances
and contrary to the findings of the trial judge there is not the slightest doubt
in my mind that the appellant
ceased to be Director and Member of the Company on
12/1/1984. Or at latest upon lodging the form in the Registry of Companies, the
appellant ceased to be a director as well as a member of the company. Counsel
for the appellant attempted to minimise the effect
of the endorsement arguing
that Mrs. Balwinder Kaur was not active in the company and so the appellant
remained a shareholder in
the company, and therefore he can present to court a
member's winding up petition.
In my opinion, the appellant publically
relinquished his directorship and shareholding on 12/1/1984 or latest by
8/5/1984. Therefore
for him to come to court nearly twenty years later to seek
as a member of the company to have the company wound up is nothing short
of a
deliberate attempt to abuse court process. I am satisfied that the learned trial
judge erred to hold that the appellant was
a shareholder and I agree that the
Court of Appeal acted properly when it rejected the evil efforts of the
appellant to have the
company wound up since he had ceased to be both a member
and a director early in 1984.
I would dismiss this appeal with costs here and in the courts below.
JUDGMENT OF KAROKORA, JSC.
I have had the advantage of reading in draft the judgment prepared by
Kanyeihamha. JSC. and 1 agree with him that the appellant voluntarily
transferred all his shares to his wife with effect from 12th January
1984, and ceased to be a director and a member of the 1st respondent
company.
Therefore, the appeal has no merit and must be dismissed. I
also agree with the orders as proposed by Kanyeihamba, JSC.
JUDGMENT OF ODOKI, C.J.
I have had the advantage of reading in draft the judgment prepared by my
learned brother, Kanyeihamba, JSC, and I agree with him that
the appeal should
be dismissed with costs to the respondents, in this court and the courts
below.
As the other members of the court also agree, this appeal is
dismissed with costs in this court and the courts below.
JUDGMENT OF ODER, JSC.
I have had the benefit of reading in draft the judgment of
Kanyeihamba, JSC and I agree with him that the appeal should be
dismissed with costs to the respondents.
Dated at Mengo this 22nd day of February 2005.
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