HIGH COURT, ACCRA
Date: 30 MARCH 1973
HAYFRON-BENJAMIN J
CASES REFERRED TO
(1) Irvin & Johnson Ltd. v. Gelcer & Co., Ltd. [1958] 2 S.A.L.R. 59.
(2) Wagstaff v. Wilson (1832) 4 B. & Ad. 339; 110 E.R. 483.
(3) Ley v. Peter (1858) 3 H. & N. 101; 27 L.J. Ex. 239; 30 L.T. (o.s)367; 6 W.R. 437; 157 E.R. 403.
(4) Scottish Co-operative Wholesale Society Ltd. v. Meyer [1959] A.C. 324; [1958] 3 W.L.R. 404; [1958] 3 All E.R. 66; 102 S.J. 617; 1958 S.L.T. 241, H.L.
NATURE OF PROCEEDINGS
APPLICATION by both writ and originating notice of motion to have an investigator appointed under sections 218 and 220 of the Companies Code, 1963 (Act 179), to investigate the affairs of a company in which the applicants were shareholders. The facts are sufficiently stated in the ruling.
COUNSEL
C.C. Quist for the applicants.
J. Reindorf for the respondents.
JUDGMENT OF HAYFRON-BENJAMIN J.
This is an application under sections 218 and 220 of the Companies Code, 1963 (Act 179), that the court order:
(a) The Registrar of Companies to appoint one or more competent inspectors to investigate the affairs of the company and to report;
(b) That any moneys found to have been appropriated by the resident directors, namely, Anthony Rachid Irani, Edmond Rachid Irani and Adnan Midani be refunded to the company;
(c) That the directors and shareholders be restrained from removing Mr. Samuel Okudjeto as a director of the company;
(d) That the directors be compelled to comply with section 123 (4) of Act 179;
(e) The removal of Mr. Anthony Rachid Irani, Edmond Rachid Irani and A. Midani as directors of the company and managing director of the company;
(f) That the management do file an account with the court showing wheat bought, sales of flour and
bran pellets, sources of purchase of wheat and to whom bran pellets have been sold; and for such further order or orders as to the court shall seem fit.
The application is brought by Samuel Awuko Okudjeto, a legal practitioner of Accra who claims to be an attorney of Societe Industrielle du Levant S.A.L., a limited liability company incorporated under the laws of the Republic of Lebanon and also of Mohamed Ashkar who is resident in Lebanon. In this ruling I shall refer to this Lebanese company as “Sidul.” The applicants own 41 per cent of the total share capital of Irani Brothers and Others Limited, a company incorporated in Ghana and registered as No. 2115 ital 5. I shall in this ruling refer to this Ghanaian company as the company.
[p.377] of [1974] 1 GLR 374
The respondents to the application are the company, Anthony Rachid Irani, Edmond Rachid Irani, and A. Midani all of Seventh Lane, Osu, Accra. The last three respondents are all directors of the company, Anthony Rachid Irani being the managing director. The Registrar of Companies was served with notice of the proceedings but did not appear to take part in them. The company was incorporated in 1967 and received its certificate to commence business on 26 September 1967. It is engaged in the business of flour-milling at mills situated at Tema. The present membership of the company is as follows:
Name of shares No. and
class
Adnan Mohamed Nader El-Midani .. ..
Mohamed Ashkar …………….58,667
A
Mohamed Fouad Labadidi ……
Mohamed Soubhi Fakhoury ……
29,333 A
Societe Industrielle du Levant S.A.L,…..
Anthony Rachib Irani……..
53,737 C
Edmond Rachid Irani……..
35,825 C
Mrs. A. R. Irani …………….42,263
C
Alexander C. Kuma……..
1.000 C
Mrs. E. R. Irani………………..28,175
C
Irani Brothers (an incorporated partnership)
.. 1 x
Total issued shares
481,001
According to regulation 62 of the company’s regulations each class of shareholders “A,” “B” and “C” are entitled to appoint two directors, and the members in general meeting may also appoint one director. The managing director and the general manager are appointed by the board of directors. The present composition of the board is as follows:
1. A. M. N. El-Midani Appointed by class “A” shareholders.
2. M. F. Labadidi
3. Pakrat Sarkis Bakalian Appointed by class “B” shareholders.
4. Samuel Okudjeto
5. A. R. Irani Managing Director Appointed by class “C” shareholders.
6. E. R. Irani General Manager
7. A. C. Kuma who was appointed by all the members in general meeting.
The secretary of the company is one Mr. David H. Simpson, and the company’s auditors are Pannell Crewsden & Fitzpatrick of Accra.
Section 218 of the Companies Code provides, inter alia:
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“218. (1) Any member or debentureholder of a company or, in a case falling within section 225 of this Code, the Registrar may apply to the Court for an order under this section on the ground:
(a) that the affairs of the company are being conducted or the powers of the directors are being exercised in a manner oppressive to one or more of the members or debentureholders or in disregard of his or their proper interests as members, shareholders, officers, or debentureholders of the company; or
(b) that some act of the company has been done or is threatened or that some resolution of the members, debentureholders or any class of them has been passed or is proposed which unfairly discriminates against, or is otherwise unfairly prejudicial to, one or more of the members or debentureholders.”
Before considering these allegations and charges in detail, I shall deal with certain questions of practice and procedure which have been raised in these proceedings. The first is whether the form taken by these proceedings is proper. As I have said the applicants came both by writ and also by an originating motion on notice.
It seems to me that an application under section 220 of the Companies Code ought properly to be brought by originating notice of motion. Proceedings under this section are to be heard in chambers “to avoid undesirable publicity and to prevent applications being used for blackmailing purposes.” See Final Report of the Commission of Enquiry into the Working and Administration of the Present Company Law of Ghana, 1961, L. C. B. Gower, Commissioner, at p. 165. Under section 210 of the English Companies Act, 1948 (11 & 12 Geo. 6, c. 38) applications in respect of protection of minority rights are brought by petition. I do not think, however, that there is anything precluding an application under section 218 of our Code being made by originating notice of motion. In the circumstances I am formally striking out the writ issued in this case on the grounds: (1) that the claim for the appointment of an inspector is being pursued under this motion; (2) the claim for the value of the bags of flour alleged to have been converted is not maintainable by Sidul; and (3) the applicant in this case has testified that he is not claiming that any of the three respondents who have appeared personally has taken or has been responsible for the loss of any flour.
It became clear during the proceedings and from the affidavits filed that the application for an order under section 220 is based on the discovery of a notebook by two directors of the company when they visited the factory at Tema some time in March or April 1972. According to the applicants’ affidavit in support of the motion, some time in April 1972, the second applicant Mohamed Ashkar, then a director, came to Ghana together with Mr. Vasken Sarkis Bakalian also a director:
“(4) That while at the company’s flour mill at Tema the two of them caught sight of a notebook in which flour evacuations were recorded.
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(5) That the two directors took the said notebook as they suspected that the entries therein differed from the official records kept at the company’s office at Accra.
(6) That indeed a check later disclosed that the said entries differed considerably from the other records kept and sent to the directors.
(7) That later a complaint was made to the Ghana Police, Airport branch, for the arrest of the two directors for allegedly stealing the company’s record.
(8) That an undertaking had to be given by the solicitor for the second applicant before he was allowed by the police to leave.”
The applicants further exhibited a letter from the chief accountant of the company showing the flour evacuation for the months of September to December 1971 and January to February 1972, and also a letter from the company’s solicitor admitting that the record (or the notebook above referred to) is the official one kept in the company’s factory at Tema. The applicant wrote on 7 April 1972 to the managing director, i.e. the first respondent, demanding an explanation for the difference in the figures of flour evacuation contained in the notebook and those supplied by the chief accountant. The solicitor of the company replied denying that the figures in the notebook represent the real figures of flour evacuation from the factory. In his oral testimony, the applicant’s attorney stated that he was called by phone to the Continental Hotel on the morning of 6 March and there met one Mr. Okine, the assistant production manager at the mill. He was there with the second applicant. He was told by the second applicant the circumstances under which the notebook was discovered at the factory. He was also informed that a complaint had been made to the police about the notebook. All three of them went to the police and explained that the directors, i.e. the second applicant and Vasken Bakalian, suspected that the entries in the notebook differed from the official records and they needed the notebook to cross-check other information. Mr. Okine, according to the witness’s oral testimony, claimed that he needed the notebook for his work because of the entries contained therein. He needed it to give information to the customs and the Ministry of Trade and other agencies about their production. The applicant’s attorney also gave oral testimony of what he did when the notebook was released to him by the police. Adding up the figures in the notebook and those supplied by the chief accountant, he discovered that there was a vast discrepancy between them. He wrote for an explanation from the managing director, and he got a denial from the company’s solicitor.
Section 220 (2) provides that where an application is brought under the section by members of the company: “(a) the application shall be supported by such evidence as the Court may require for the purpose of showing that the applicants have good reason for requiring the investigation . . .” I am of the view that the evidence required is legal evidence and not mere rumour or suspicion, however strong. The courts always act on legal evidence and that alone. A policeman is authorised to arrest on reasonable suspicion that a crime has been committed. The Companies
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Code does not empower the court to order an investigation on reasonable suspicion that a company’s affairs are not being properly conducted. There must be some evidence to show that there is good reason.
A police officer is authorised to receive information; this may and usually includes hearsay and rumours.
The court, as I have said, deals only with admissible evidence. The Companies Code speaks of evidence and not information. If the framers of the Code had wanted the court to act on all types of information they would have used the word “information” and not “evidence.” It may be that since shareholders have a right of action against corporate management in cases where the facts are before them, this section can be read to contemplate a situation where the shareholders do not have the real facts, but have some information giving rise to a suspicion of some grave impropriety. However, the section does not spell this out. On the contrary it speaks unequivocally of evidence, and the term evidence is clearly understood in law.
Even if I am wrong in this view and that suspicion is enough, I am of the view that it must be very strong suspicion of wrongdoing by the directors as directors who are charged with the management of a company’s affairs. As Herbstein J. warned in the South African case of Irvin & Johnson Ltd. v. Gelcer & Co., Ltd. [1958] 2 S.A.L.R. 59 at pp. 62-63:
“If the court is entitled to act on ‘a suspicion of some grave impropriety’, it should be satisfied that the suspicion is well founded and that it has a solid and substantial basis. A mere feeling that something might be wrong should not be, and in my opinion is not enough.”
I do not know how a court of law can find that a suspicion is well-founded unless there is some legally admissible evidence before it lending support to that suspicion.
The question that arises, therefore, is whether there is evidence showing that the applicants have good reason for their application. The first point to note is that there is no affidavit from the directors who are said to have discovered the notebook. There is no evidence from the police or from Mr. Okine. It is said that the notebook is in the handwriting of one Adu Dako. He was not called to testify. An effort was made to call one of the production engineers at the factory, but he was sought to tender in evidence a paper purported to have been sent by him to the Lebanon and written in French, with a translation effected in the Lebanon. The engineer was not available. No other officer connected with the production of flour at the mill was called to testify. None of the books of the company was produced or requested.
In view of the fact that the two applicants are both out of the jurisdiction, and in view of the allegation made by counsel that the applicants do not want to come to Ghana for fear of their being arrested by the police, I decided to be very indulgent to them in the production of evidence. I do not think even with this indulgence they have succeeded in bringing before the court evidence sufficient to show any good reason for this application. Hearsay is hearsay even when embodied in an affidavit. The evidence that the notebook was found at the company’s mill is itself hearsay and is inadmissible.
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The applicants obviously placed great hope in the first letter written by the company’s solicitor admitting that the notebook is the company’s record book. The legal position is however clear that admissions made by a party’s solicitor before the commencement of litigation are not evidence against their clients: see Wagstaff v. Wilson (1832) 4 B.& Ad. 339 and Ley v. Peter (1858) 3 H. & W. 101 at p. 111. On normal principles the court is therefore left with no legally admissible evidence as to where the notebook came from or what it represents.
The conduct of a company’s business is the responsibility of the board of directors, and I am of the view that applications under section 220 (1) (c) must be supported by evidence giving rise to strong suspicion of some improper conduct by the directors qua directors. In these proceedings, the applicants’ attorney in his affidavit stated categorically that the three directors who are made respondents are responsible for the loss of flour by the company. He said further that “the applicants believe that the respondents are still continuing with the malpractices.” In the witness-box he resiled from this position when it was pointed out to him that even if the entries in the notebook referred to flour evacuation from the mill (which was categorically denied) the applicants themselves were solely in charge of the mill operations during certain lengthy periods covered by the said entries. The applicants’ attorney said that he was not claiming that the three directors were responsible for any loss or stealing of the flour but that a court of law cannot decide the matter one way or the other and that an inspector ought to be appointed to investigate and report. I am satisfied that the applicants’ attorney never really considered the notebook as any evidence of some unlawful practice. If he had thought so, then the way he went about seeking supporting evidence was singularly naive.
I am of the view that where it is alleged that an employee of a company is conducting himself in relation to any assets or property of the company in such a manner as to give rise to a reasonable suspicion of a crime having been or about to be committed the proper forum for the investigation of such conduct is the police and not the court. The courts would be flooded with applications if it were otherwise. An application would be made to the court where it is alleged that ticket sellers of a cinema company have been allowing customers to go into the theatre without obtaining the regular tickets. Applications would be made where it is alleged that drivers of a cement distribution company are diverting and stealing some cement which they have to deliver at certain of the company’s depots. There would be no end to such applications. The power to order an investigation into the affairs of a company vested in the court by virtue of section 220 of Act 179, must be exercised with caution by and in the knowledge that the persons primarily responsible for proper management of the company are the members of the boards of directors. I am of the view that it is where the directors themselves are being charged with impropriety that the court should act. It may very well be that where there is some evidence of conspiracy between the directors of some of them and some of the employees to embezzle or steal the company’s
[p.382] of [1974] 1 GLR 374
assets, the courts may be persuaded to intervene and appoint an inspector to find out the extent of the conspiracy and the extent of the embezzlement. Where, however, as in this case there is no such evidence of conspiracy by any director, and no evidence of embezzlement by any director nor any evidence of any loss by the company, the court would be embarking on a course which can only lead to a flood of similar applications, if it were to order an investigation merely on suspicion that there may be something wrong somewhere.
I am also of the view that the courts should adopt different attitudes when dealing with public and private limited liability companies. Private companies are more easily formed, and are usually family concerns and invariably the members are known to each other. The public as such is not interested or represented in that no invitation to purchase shares is made to it. In public companies, however, the court must be more concerned in protecting the interests of the members of the public who have been induced to purchase shares in the company.
In the South African case already mentioned, the learned judge referred to a passage in Gower’s Modern Company Law (1st ed.) at p. 515 dealing with similar provisions in the English Company Act. The learned author said that the Board of Trade which in England can appoint such investigators, “can be trusted not to appoint unless the circumstances warrant it but they will test the need on the basis of public and commercial morality and not on the basis of what is in the selfish interests of the complaining member—the two tests may not be the same.” The learned judge drew a distinction between public and private companies and suggested that the court would more readily appoint an inspector in the case of a public company than a private one. He said at p. 63:
“The comments of the learned author would appear to relate to companies in which the public are concerned; the contrast he draws between ‘public and commercial morality’ and ‘the selfish interests of the complaining member’ suggest that he did not intend to deal with a case like the present—where because the shares are held by only two shareholders the public qua public would not be interested in any domestic discussions and quarrels. While, where the public would be interested ‘a suspicion of some grave impropriety’ might suffice, it does not seem to me that the Legislature could have intended the provisions for an investigation to apply to a situation like the present.”
The learned judge however conceded that this view of the matter may not be well-founded. I am, however, of the view that the courts should be slower in appointing investigators into private companies than into public companies.
The allegations by the applicants that the respondent directors have tried to prevent representation on the board of directors of the applicants, by removing the second applicant and the person appointed director by the first applicant Sidul, and the attempt to conceal the books of the company from them may lend assistance to the applicants as some form of circumstantial evidence if well-founded.
[p.383] of [1974] 1 GLR 374
If it is true that the respondent directors have been deliberately concealing information about the management of the company from the applicants, and have been desperately trying to prevent representation by the applicants on the board, the court may, taking into account other circumstances, draw the inference that the respondent directors have something to hide, that they might be engaged in conduct which cannot stand the light of investigation and publicity. Conduct of the parties is a relevant consideration and is evidence where there is no other rational or reasonable explanation. However, circumstantial evidence is admissible only when the facts of the circumstances are themselves proved to be true. These allegations also form the basis of the application under section 218 of Act 179 and I shall at this stage deal with them to find whether they have been established. If they are found established they would enable the court to consider whether there is sufficient circumstantial evidence to support the application under section 220.
Before dealing with these allegations of concealment of information and prevention of the applicants’ participation in management, I must refer to the other allegations of malpractice and state straightaway that these have not been established. The applicants stated in their affidavit that the engineers and other employees of the company were taken by the managing director to Cotonou in the Republic of Dahomey to construct a flour mill there while they remained in the employment of the company. This allegation was not only admitted, but was treated almost with contempt by the respondents. They said in their affidavit that:
“As to paragraph (22) of the affidavit of Okudjeto I find it amazing that it is not accompanied by a further sentence to the effect that the company’s mills have come to a complete standstill—seeing that the engineers and other employees have been removed to Cotonou. I am advised and verily believe that the said paragraph requires no further answer until the deponent thereto has supplied further and better particulars of the engineers and other employees who have been removed as alleged by him.”
In this further affidavit the applicants’ attorney stated that he did not make an attempt, “at taking over control of the company as I only tried to exercise my rights as a director of the company to protect the company from misuse of power by the respondents in sending engineers and other agents of the company to construct a factory for the respondents in Dahomey.”
When the applicants’ attorney came to testify he made no mention of these rather serious allegations, and we are left with no evidence whatsoever to support them.
To succeed in an application under section 218 of Act 179 the applicant must establish some oppressive conduct or conduct on the part of the directors (who are responsible for the management) which disregards
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his interests or some resolution either passed or proposed or act done which is discriminatory or otherwise prejudicial to one or more of the members.
Allegations relied on in support of this application may be grouped under two main heads, namely: (a) allegations of discriminatory and oppressive acts in removing the second applicant as a director of the company and attempts to prevent the representation of Sidul on the board of directors; and (b) allegations of conduct generally aimed at preventing the minority shareholders from knowing how the company is being run, e.g. by concealing from them and denying them access to the books, accounts and other records and documents of the company.
It is clear from the evidence that at an extraordinary general meeting held on 6 April 1972, at the registered offices of the company at which the second applicant was represented by the applicants’ attorney holding a proxy, it was resolved that the second applicant was removed from office as a director with effect from 6 April 1972. No representations were received against this resolution. At a meeting of the class “A” shareholders held on 14 June 1972 in Lebanon, it was decided that one Labadidi be elected a director to represent the class “A” shareholders on the board of the company. It seems that notice of this meeting was sent under registered cover on 22 May 1972. I do not see anything wrong or improper in the removal of the second applicant as director.
All the other complaints centre around the presence of the applicants’ attorney in the affairs of the company. He became the solicitor to the second applicant, according to his own evidence in March 1972. It seems that the connection started with the telephone call to the Continental Hotel after the discovery of the notebook. At that time there was no love lost between the applicants on the one side and the respondents on the other side. The attorney donned the mantle of a partisan and in his position as solicitor decided to do battle on behalf of his client, and to harass as much as possible the other directors of the company. He acted as solicitor in what the respondents described as an unnecessary law suit in respect of the payment of dividends. Having failed to make progress in his capacity as a solicitor, he sought the stronger position of an alternate director. When he was baulked at this attempt, he was appointed a full director of the company. He was appointed a director of the company on 31 August 1972 and registered on 28 September 1972. The respondents stated in paragraph (24) of their affidavit in opposition that the applicants’ attorney:
“To judge from his conduct ‘since the beginning of September 1972, when the company was notified that the ‘B’ shareholders [first applicant herein] had appointed him a director of the company seems to believe that he is entitled to take over the running of the company by himself without reference to the board of directors or the managing director.”
Letters written by the attorney directly to the employees of the company seem to bear out this charge. I am satisfied that the evidence does not
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bear out the charges by the applicants that the respondents either acting alone or in company with others tried to conceal from them facts concerning the running of the company, or that the respondents tried to deny them representation on the board. The applicants were fully represented on the board throughout the period covered by the notebook, and since the discovery of the notebook another director appointed by the applicants has been accepted by the respondents. It seems there is both merit and substance in the respondents’ contention appearing in paragraph (22) of their affidavit that:
“There are reasons, personal to the attorney, why he is not wanted on the board, and the company is perfectly within its rights under section 185 of the Code to vote him off the board without assigning any reason therefor as the board was within its rights, under section 188, in refusing to accept him as an alternate director without assigning reasons therefor.”
Section 185 (1) of the Companies Code, 1963, provides that:
“Subject to the provisions of section 300 of this Code and to the following subsections, a company may by ordinary resolution at any general meeting remove from office all or any of the directors notwithstanding anything in its Regulations or in any agreement with any director.”
This section seems to vest in the general meeting of the shareholders the absolute right of determining who should manage the affairs of the company despite any agreement to the contrary. The remedy of a director who has been removed in breach of an agreement is found under section 185 (7). The power to remove directors is not exercised by directors, and therefore is not within the term “powers of the directors” in section 218 of the Companies Code, 1963. The removal of a director by the general meeting of the shareholders is however an act of the company as that term is defined in section 139 of the Companies Code, 1963, which provides inter alia that:
“Any act of the members in general meeting, the board of directors, or a managing director while carrying on in the usual way the business of the company shall be treated as the act of the company itself . . .”
It seems therefore that a resolution to remove a director can fall within the provisions of section 218 if it is found to be oppressive, or prejudicial, or discriminatory, or in disregard of the interests of a member. In this case, however, there is no evidence that the members at the general meeting do not want the class “B” shareholders to be represented. The members do not want a particular director appointed, and I think the provisions of section 185 that the general meeting can remove any director “notwithstanding anything in its Regulations” would be rendered meaningless if such a decision of the shareholders in circumstances such as appear in this case were held to be oppressive or discriminatory, etc. The class “B” shareholders are free to nominate another person as director. It is
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only when every person nominated by them is rejected that the court may legitimately draw the inference that the shareholders at general meeting are trying to deprive the class of representation on the board, and therefore stamp their conduct or acts as discriminatory or oppressive.
The refusal of the directors to accept the applicants’ attorney as an alternate director, cannot also be impugned. Section 188 (1) provides that:
“Unless prohibited by the Regulations a director may, in respect of any period not exceeding six months in which he is absent from Ghana or unable for any reason to act as a director, appoint another director or any other person approved by a resolution of the board of directors, as an alternate director.”
The attorney was not a director, and there was no resolution of the board approving him. Neither he nor the applicants can therefore complain. Having already come to the conclusion that there is no evidence that the respondents have tried to conceal the facts concerning the running of the company’s affairs from the applicants, I must reject the application under section 218. There is also therefore no circumstantial evidence of conduct on the part of the respondents which lends support to the allegation that they are guilty of any malpractice in respect of the evacuation of flour. They have only refused to accept the applicants’ attorney. There is nothing to show that they refused even those who themselves discovered the notebook. I must also therefore reject the application under section 220.
Having disposed of the complaints brought by the applicants, I must now examine those raised by the respondents. There is no doubt that there is considerable disharmony in the running of the affairs of the company. It is the duty of the court to make such orders and give such directives as would put an end to the constant bickering and acrimony between the parties. The respondents place the cause of the disharmony in another discovery by one of them. In paragraph (12) of their affidavit they state:
“In or about June 1971 another director of the company, namely, Adnan El-Midani who is a flour miller himself and possessed of great experience and knowledge in that field, came to Ghana on a visit from the Lebanon where he also is normally resident, and from an inspection of the company’s records, installations, etc., he arrived at the conclusion that, through their aforesaid control of the company’s business operations, the two Bakalian brothers had defrauded the company and the other shareholders on a massive scale, by among other things:
(a) fantastic over-invoicing of machinery, silos, equipment, etc., bought abroad (mostly from Henry Simpson Ltd., of Stockport, England) by them for the company;
(b) systematic under-declaration of the proceeds of the sale abroad by them (i.e. as directors and managers of Societe Industrielle du Levant S.A.L.) of bran pellets from the company’s Tema mills;
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(c) consistent over-pricing of wheat bought abroad by them for the company’s flour mills at Tema; and
(d) methodical diversion of flour from the company’s mills at Tema for sale on their own account.
As far as we have been able to calculate so far, the Bakalian brothers have under (a) above engaged in activities, i.e. over-invoicing of machinery etc., defrauding the company of at least £270,000 (two hundred and seventy thousand pounds), in hard currency while under (b) i.e. sale of bran, they have defrauded it of at least US $170,000 (one hundred and seventy thousand United States dollars) in hard currency apart from a further US $240,000 (two hundred and forty thousand United States dollars) which they have declared but refused to transfer to Ghana, and in respect of which a suit is now pending in Beirut between the company and the first applicant herein.”
The applicants by their attorney admit holding the U.S. $240,000 but say that they are withholding these funds pending an assurance by the respondents that the funds will not be used for purposes other than for the company’s business. This certainly relates to the affairs of the company and is in disregard of the interests of other members of the company, and therefore falls within the provisions of section 218. The directors resident in Ghana, i.e. the respondent directors could be held for contravening the provisions of the Exchange Control Act for failing to repatriate the proceeds of the exports by the company.
The court should find a way of putting an end to these complaints. The applicants themselves wrote to the respondents on 20 March 1972, 8 May 1972 and 24 August suggesting that they be bought out at a valuation. On 20 March 1972, P. S. Bakalian, one of the two directors of Sidul wrote to the company’s auditors and secretary a letter in which he said:
“We would be yours obliged if you could assess the said ‘fair selling price’ to enable us to have our real stake in this company, since given the latest development of divergence of opinions in the management and our being a minority shareholder, we would prefer at this stage to dispose of our shares if possible instead of going into court and legal procedure to enforce our points of view in the management of the flour with which is our speciality since many years.”
On 8 May 1972, the second applicant wrote a letter in which he stated that:
“As matters are standing now, I have no more the right to scrutinize the proper running of the company and I would therefore be your obliged if you could offer my shares of the company for sale according to the Regulations and laws of the country.”
On 24 August 1972, P. S. Bakalian repeated his offer to sell in a letter in which he wrote:
[p.388] of [1974] 1 GLR 374
“As we are all aware now that there has been a big divergence of opinion in the management of our company and as previously we had written you that you should evaluate the actual worth of the company and at the same time the fair selling price of the shares; and since now that we are considered a minority (this applies also to Mr. Mohamed Ashkar) and the managers at the board are not considering our point of view, might be it will be easier for us to sell our shares instead of complicating the existence of every one concerned by going to court.”
This court is given power under section 218 to order the purchase of shares of members. The object of the section in the words of Lord Denning in Scottish Co-operative Wholesale Society Ltd. v. Meyer [1959] A.C. 324 at p. 368, H.L. “is to bring ‘to an end the matters complained of.” In this case it is the acts of the applicants in disregard of the interests of the other shareholders. In the circumstances I make the order dismissing both applications under sections 218 and 220 brought by the applicants, and make an order at the request of the respondents and in accordance with the prior request of the applicants as evidenced by their own letters, directing the company to purchase the shares of the applicants at a valuation. The respondents have sued the applicants in respect of sums they claim to have been withheld by the applicants as a result of the purchase of machinery and the sale of bran, and other items. My order will therefore be: I dismiss the application for orders under both section 218 and section 220 of the Companies Code, 1963. 1 order further that in order to avoid the bickering and controversy between the shareholders the company engaged in this vital and essential industry, the company should purchase the shares of the applicants at a valuation. From any amount found due to the applicants should be deducted any amount which they might have withheld from the company from the sale of bran and the purchase of machinery and other items and commodities for the company. The company is free to go ahead and pass or otherwise consider and deal with the resolution complained of, i.e. the one which threatens to remove the applicants’ attorney from the company’s board of directors. The respondents will have their costs which I assess at 0750.00 and the company will also have its costs against the applicants which I assess at 0750.00. I formally dismiss suit No. 409/72. There will be no order as to costs in that suit.
DECISION
Applications dismissed.
Order accordingly.
T. G. K.
