Date: 18 JULY 1991
JUDGMENT OF LAMPTEY J. A.
By an originating motion supported by an affidavit which ran into 26 paragraphs, the two applicants, namely Michael Kwaku Abrokwa and James Adona Mensah, in their capacities as shareholders in Ashanti Furniture Co. Ltd. pursuant to section 218 of the Companies Code, 1963 (Act 179) sought the following directions:
(i) “All proper accounts and inquiries be taken or made regarding the conduct of the affairs of the company by Francis Kwaku Pinamang, managing director of the company and that he be made to pay to the company all moneys found due from him to the company on such accounts.
(ii) That the current chairman of the company he removed from the board.
(iii) That Pinamang be prohibited from conducting the affairs of the company otherwise than in accordance with the valid decisions of the company and that he further be prohibited from regarding the company as if it were his personal property. And for such further or other orders this honourable court will seem fit.”
After a protracted hearing, the learned trial judge made the following orders:
(a). “That the company’s affairs be investigated from 1979 by a firm of chartered accountants and auditors to the date of commencement of the action and that the investigation should in no event take more than three months.
(b). That the acting managing director should continue in office subject to the supervision of the court and until the accountants have reported.
(c). That Abrokwa should pay for the services rendered by Ashanti Furniture Co. Ltd. inclusive of materials and labour at the prevailing rates for the house built in defiance of the board’s decision between 1980 and 1982.
(d). That Pinamang accounts for all moneys collected from the cashier for which he had produced no proper or genuine receipts including those that this court had found to be improperly taken by him; further he pays all moneys found due from him to the company.
(e). That the shares of the company be valued at current prices by a valuer agreed upon by the parties.
(f). That Abrokwa and Mensah are given the first opportunity of buying out Pinamang within three months of such valuation. If and only if Abrokwa and Mensah are unwilling or unable to do so then the respondent Pinamang should buy them out.”
Pinamang was aggrieved by the orders made against him and appealed to this court on a number of grounds of appeal. Though adverse orders were made against Abrokwa he did not appeal against those orders.
The application before the lower court was brought pursuant to section 218 of Act 179. Since Act 179 became law, the courts of the land had in a number of cases considered the ambit and application of section 218. There is a wealth of case law on this branch of our law. I must begin this judgment with a careful consideration and examination of the case law on that section, which reads as follows:
“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…”
The first case I wish to refer to is the case of West Coast Dyeing Industry Ltd, In re; Adams v. Tandoh, Court of Appeal, 7 March 1985; digested in [1984-86] G.L.R.D 131. In that case the ambit and application of section 218 was stated by Osei-Hwere J.A. (as he then was) as follows:
“The petitioner has to show that the affairs of the company are being conducted in a manner oppressive to some part of the members (including himself). This has been interpreted as meaning that there must have been a course of oppressive conduct and one isolated act, even if oppressive will not suffice … Further, a series of oppressive acts will not be sufficient unless they constitute a chain of events which continue right up to the presentation of the petition.”
It will be seen that to bring an application under section 218 of Act 179 the applicant must adduce evidence seeking to show a chain of events and occurrences of harsh and burdensome conduct which continued up to the date of the presentation of the petition. In this respect the courts have held that the rule in Foss v. Harbottle (1843) 67 E.R. 189 must be observed by the trial court and it must not inquire into matters of internal management or, at the instance of a shareholder, interfere with transactions which though prima facie irregular and detrimental to the company, are capable of being rectified by an ordinary resolution of the company in a general meeting. It will be shown in due course that the learned trial judge fell into the error of inquiring into matters of internal management such as, for instance, as the complaint by one of the applicants that he has been demoted and that his post had been downgraded.
There are two English cases which are relevant in considering the ambit and application of section 218 of Act 179. The first is Re Bellador Silk Ltd. [1965] 1 All E.R. 667. In that case, Plowman J. when dealing with an application under section 210 of the English Act stated the position at 672 as follows:
“A petition which is launched not with the genuine object of obtaining the relief claimed, but with the object of exerting pressure in order to achieve a collateral purpose is, in my judgment, an abuse of the process of the court, and it is primarily on that ground that I would dismiss the petition.”
The second case is Re Five Minute Car Wash Service Ltd. [1966] 1 All E.R. 242. In his judgment Buckley J. wrote at 246 in part as follows:
“First the matters complained of must affect the person or persons alleged to have been oppressed in his or their character as a member or members of the company. Harsh or unfair treatment of the petitioner in some other capacity, as for instance a director or a creditor of the company, or as a person doing business or having dealings with the company, or in relation to his personal affairs apart from the company, cannot entitle him to any relief under section 210.”
I must state in passing that section 218 of our Act 179 is nearly similar in content to section 210 of the English Act. Opinion has been expressed though that section 218 of our Act 179 is wider in its application than that of section 210 of the English Act. It is established by the decided cases that failure on the part of an applicant to bring his complaint as well as himself within any of the categories spelt out above is fatal to his application in the sense that the application is incompetent and misconceived. The interpretation of the law is illustrated by the case of Aboagye v. Tetevi [1976] 1 G.L.R. 217. In that case, the secretary of a company who was also a shareholder of the company brought an application pursuant to sections 217 and 218 of Act 179. A preliminary objection was raised as to the capacity of the applicant to bring the application. After hearing arguments and submissions the court held at 219 in part that:
“ . . . a member or shareholder who is also a director or secretary or employee can bring an application under section 218 of the Code to protect his interests in the company . . .”
It will be noticed that “an employee” who was also a member of the company was held competent to bring an application under section 218 of Act 179. The same issue was raised in the earlier Court of Appeal case of Okudjeto v. Irani Brothers Ltd. [1975] 1 G.L.R. 96, C.A. The Court of Appeal held that an application under section 218(1) of Act 179 could properly be brought by either a member or a debentureholder of the company but not by the company itself.
Having stated the law and demonstrated its application and ambit with the assistance of decided cases, both foreign and local, I now proceed to consider the appeal on the merits.
One of the reliefs sought by the applicants was formulated as relief (b) as follows:
“(b) an order that the current chairman of the board of directors of the company be removed from the board.” The first observation I wish to make is that Act 179 specifically provided for the procedure and the mode for the removal of a director of a limited liability company under section 185. Prima facie, to remove a director of a company from the office of a director, the procedure spelt out under section 185 of Act 179 must be followed by the company. It seems to me that the applicants must satisfy the court that resort to section 218 of Act 179 had become necessary as a final and last resort. In other words, the affidavits of the applicants must on the face of it show that the applicants resorted to section 185 without avail and without success. That as a last resort, the almighty power of the court must of necessity be called in aid of the applicants. There was no evidence to show that the applicants had unsuccessfully attempted to remove the named director chairman pursuant to section 185 of Act 179. It is only after this unsuccessful exercise pursuant to section 185 of Act 179 that resort to section 218 of Act 179 could be justified. The lower court, in my opinion, had no jurisdiction to hear and determine the relief sought under head (b) of the reliefs. The complaint made under head (b) is not one envisaged by section 218 of Act 179 and should have been refused and dismissed in limine by the learned trial judge.
There was, with respect, another error committed by the learned trial judge. It is this that the complaint was made against the chairman of the board of directors who was not made a party in the instant application. He was not served with any court process. The chairman was not given an opportunity of being heard on the complaint made against him in the application. The trial judge in spite of this irregularity considered the complaint made against the chairman and made the following observation on the chairman:
“I consider these minutes were typical of the methods employed by the chairman of the company. Of course, the members of the board respect his expertise and probity. I consider the manner he handled this particular matter was high handed and deserves severe criticism.”
When it is pointed out that the chairman was not given an opportunity of being heard in his defence during the hearing of the application the injustice done to him becomes apparent. It is unfortunate to record that the chairman was condemned without being heard in his defence. The saving grace, however, was that the learned trial judge ignored and disregarded the relief claimed against the chairman. The trial judge gave no reason nor explanation for his failure and or omission to make any pronouncement in respect of that relief. The last word on this issue is that the relief sought against the chairman has clearly and plainly misconceived. The trial judge should have refused it and proceeded to give reasons for so doing.
The gravamen of the complaint against Pinamang was that he personally benefited from the operations of the company, using his position as the majority shareholder. A catalogue of the activities of Pinamang which brought financial gain to himself personally were deposed to in the affidavit and further and better particulars were also given in evidence in court.
Apart from these financial irregularities, Abrokwa complained that he was removed from office and demoted by Pinamang. It seems clear to me that Abrokwa failed to prove that the conduct of Pinamang was harsh and burdensome. He did not disclose to the court his interest that was disregarded by Pinamang. He thus failed to discharge the burden he assumed. In In re West Coast Dyeing Industry Ltd. (supra), Osei-Hwere J.A. (as he then was) observed as follows:
“The term ‘officers’ in [section 218(1)(a)] if read in the context of the whole section makes it clear that the oppression complained of must be in disregard of the interests of the member or members as officers of the company to bring the section into play.”
In my opinion, Abrokwa failed to bring his complaints against Pinamang within the ambit of section 218 of Act 179. In the light of the nature of the complaints he made, his right was to resort to the remedies provided under section 216 of Act 179. In my opinion, the learned trial judge erred in law in the view he took of the complaints made against Pinamang by the applicants. The complaint made by Abrokwa that he Abrokwa was demoted by Pinamang acting without authority was not a mischief that could be remedied by resort to section 218 of Act 179. On this issue, the decision in Re Bellador’s case (supra) and also the decision in Re Five Minute Car Wash case (supra) provided an authoritative statement of the law. The complaints should have been rejected as misconceived by the learned trial judge.
The other dimension to the complaints made by the applicants related to the conduct of Pinamang in his business dealings with the company. In the view of the applicants, the conduct of Pinamang in this respect was evidence of oppressive conduct on the part of a shareholder director against the applicants. A careful examination of the long list of complaints shows that these pieces of evidence support a case of Pinamang obtaining and gaining collateral advantages from the company. The decided cases to which I have made reference held that complaints of this specie and nature are not complaints which support oppressive conduct and are therefore not remediable under section 218 of Act 179 or section 210 of the English Act. The learned trial judge indeed made an exhaustive analysis of the complaints and counter-complaints before him and found as follows:
‘‘The company operated a system by which the three shareholders directors and other senior officers just dipped their hands into its coffers upon the issue of what was known as I.O.U.s. The system worked for a long time until the company’s funds began depleting …”
He found further that:
“Another instance of ruining the company was that the three shareholders-directors agreed to divert the company’s funds into a private account which was operated in their joint names and drew upon it in liquidating any debt each might owe to the company in respect of the I.O.U.s …”
These findings of fact made by the learned trial judge, which in my humble view are not acts of oppression, strengthened his hand to conclude positively and convincingly as follows:
“I consider that up to about the end of 1978 Pinamang and Abrokwa were in pari delicto in their conduct towards the company. They regarded the company as their private and personal property. The concept of a company having an independent legal personality and identity was incomprehensible to them.”
I entirely agree with the learned trial judge in the conclusion he reached. I do not, however, with great respect to him, agree that the conduct of Pinamang and Abrokwa was evidence which proved “oppression” within the meaning and intendment of section 218 of Act 179. The conduct complained of which the learned trial judge found overwhelmingly proved by the evidence before him showed very clearly that Pinamang and Abrokwa each wilfully and recklessly breached section 213 of Act 179. In those circumstances the remedy open to the applicants was to resort to section 219 of Act 179, and not to apply to the High Court pursuant to section 218 of Act 179 for the reliefs claimed in the application. The learned trial judge in hearing and determining the application under section 218 of Act 179 misdirected himself on the relevant and applicable law.
The matters on which the applicants relied to move the court are not matters which can properly fall within the ambit of section 218 of Act 179. It is for this reason that I would allow the appeal. I would set aside the finding of the trial judge that a case of oppression of the applicants by Pinamang was made out. I find and hold that the applicants failed to make out a case of oppression within the meaning and intendment of section 218 of Act 179.
JUDGMENT OF AMPIAH J. A.
I agree.
JUDGMENT OF ESSIEM J. A.
I also agree.
