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MUSTAFA, J.A.
[1] The appellants applied by way of originating notice of motion for the
rectification of the register of members of the respondent company. They
alleged that their names had been properly entered on the register of
members as the holders of one share each in the respondent company and that
subsequently their names had been deleted from the said register without
their knowledge or consent.
[2] They applied to the High Court for an order to the respondent company to
rectify the register of members by re-instating their names as holders of
one share each. These facts were deposed to by one Cyril Herbert Mayers in
affidavit filed with the notice of motion.
[3] The appellants had obtained their respective shares from Cyril Herbert
Mayers who had executed the duly stamped transfers of one share each to the
appellants in or about June 1970. Before that in or about October, 1969 the
respondent company and A.C.L.I. Company Limited had filed a case in the High
Court being Civil Case No. 1353 of 1969 against Cyril Herbert Mayers and one
of the appellants herein namely Hazel Margaret Mayers claiming that certain
arrangements and provisions in a consent judgment entered in their favor
against the respondent company and A.C.L.I. Company Limited should be set
aside as being void and unenforceable.
[4] These provisions relate to the delivery of title deeds to Githingini
Estate, and the execution of a second mortgage and chattel mortgage over
land and cattle respectively and the payment of a sum of shs. 70, 000/-.
There was an allegation by the plaintiffs in Civil Case No. 1353 of 1969
that Cyril Herbert Mayers was the owner of shares of the respondent company
and had agreed to sell to A.C.L.I. Company Limited already all the shares in
the respondent company which were not already held by A.C.L.I. Company
Limited.
[5] There was an implied allegation that Cyril Herbert Mayers was no longer
entitled to the shares he held in the respondent company that is to say the
right of Cyril Herbert Mayers to his shares in the respondent company was in
dispute. I understand that Civil Case No. 1353 of 1969 is still pending.
[6] In reply to the notice of motion for rectification the respondent
company filed a notice of preliminary objection supported by an affidavit of
one of its directors one David Lloyd-Jones asking for the motion to be
struck out. The notice of preliminary objection referred to Civil Case No.
1353 of 1969 and to the allegation that the ownership of shares registered
in the name of Cyril Herbert Mayers was directly in issue, as it was alleged
that A.C.L.I. Company Limited was the true owner of the shares held in the
name of Cyril Herbert Mayers.
[7] There was no reference to or denial of the various allegations contained
in the motion for rectification. The learned judge heard the application and
ruled¬-
"There may well be circumstances where the removal of a name entered in
error is justifiable”,
[8] That is without the order of the court or the consent of the
shareholder. The judge went on¬-
“whether or not the names were wrongly removed the applicants derive their
titles from Cyril Herbert Mayers and I am unable to regard the question of
the re-instatement of their names as entirely distinct from the right of
Cyril Herbert Mayers to his shares which is in dispute in H.C.C.C.
1353/69.............I think it will be in the interest of justice to grant
the adjournment requested. I accordingly stand over the motion until the
hearing of H.C.C.C. 1353 of 1969."
[9] It is against this order of adjourning the hearing of the motion until
after the decision of High Court Civil Case No. 1353 of 1969 that the
appellants have appealed. Incidentally the name of A.C.L.I. Company Limited
as one of the plaintiffs in High Court Civil Case No. 1353 of 1969 had been
struck out of the action. Mr. Khanna for the appellants has submitted that
the sole issue in the notice of motion was whether the respondent company
had any right or authority to remove the names of the appellants from the
register of shares once their names had been properly entered on it without
a court order or the knowledge and consent of the appellants. He submitted
that the issues and reliefs prayed for in the High Court Civil Case No. 1353
have no connection with the issue raised in the motion for rectification of
the register of members.
[10] In any event the name of A.C.L.I. Company Limited had already been
struck out as plaintiff in High Court Civil Case No. 1353 of 1969 and the
respondent company had not and indeed could not have sued Cyril Herbert
Mayers for specific performance of the transfer of his shares to A.C.L.I.
Company Limited as the respondent company was a stranger to any such alleged
agreement to transfer.
[11] The fact that Cyril Herbert Mayers was registered as owner of the
shares was prima facie evidence that he was such owner, section 120 of the
Companies Act. No evidence to displace that was adduced. There was no
allegation or evidence that any transfer of shares had been executed by
Cyril Herbert Mayers in favor of L.C.L.I. Company Limited or that any
certificate of shares was issued to A.C.L.I. Company Limited.
[12] The motion for rectification was made under section 118 of the
Companies Act (Cap.486) and A.C.L.I. Company Limited being a stranger to the
application and action the court could not take account of or be concerned
with its alleged interests as it was not a party before it. I think there is
merit in these submissions. I do not think that the learned judge was
justified in staying the hearing of the motion to rectify until the decision
in High Court Civil Case No. 1353 of 1969. The issues in that case bear
little direct relevance to the matter of rectification of the register of
members.
[13] It is true that the learned judge had exercised his discretion in
making the order for adjournment and I would not lightly interfere with such
an exercise of discretion. I am however of the view that the learned judge
had seriously misdirected himself in doing so. He should have confined
himself to the application for rectification before him which concerned a
narrow and distinct issue, instead of taking into account matters in another
case which did not arise directly out of the application to rectify.
[14] The learned judge should have proceeded to hear the application on its
merits instead of adjourning it. I think the learned judge had exercised his
discretion wrongly: see Mbogo and another v. Shah [1968] E.A. 93. The
learned judge had ruled that there may well be circumstances where the
removal of a name entered in error is justifiable". He relied on the case of
Derham and Allen Limited (1946) Ch. 31 at 36 for that proposition. Apart
from the fact that I do not think that the decision in the Derham case
supports such a proposition, it is somewhat difficult to understand how the
learned judge could have said so as there was no evidence of any kind before
him that the name was removed because it was first entered in the register
in error.
[15] Mr. Khanna has submitted that should he be successful in his appeal
this Court should order the respondent company to rectify the register of
members by re-instating the names of the appellants as holders of one share
each. He submitted that there was a hearing of the motion on merits. I am
not prepared to go that far. As I have pointed out earlier, in answer to the
motion to rectify, the respondent company merely filed a notice of
preliminary objection, without answering or traversing the allegations
contained in the said notice of motion. I appreciate that facts alleged in
an affidavit and not traversed are normally accepted as admitted.
[16] However I believe that the respondent company was in effect taking a
preliminary objection on a point of law and was not at that stage concerned
with facts as such. I also appreciate that the learned judge has stated that
"the facts very briefly are as follows” and went on to enumerate them in
terms of the allegations in the notice of motion to rectify.
[17] However reading the record as a whole I am satisfied that the
respondent company had not entered on the stage of challenging the
allegations as it was only taking a preliminary legal objection to the
notice of motion. I do not think there was in fact any hearing on the
merits, and the respondent company should be given an opportunity, should it
wish to do so, to traverse or admit the facts alleged.
[18] I would therefore allow the appeal, set aside the order for adjournment
made by the High Court and remit the matter to the High Court for hearing in
the usual course. I would allow costs of this appeal to the appellants. I
would leave the costs so far incurred in the High Court to the discretion of
that court. I would not certify for two advocates.
LAW, AG. V-P.
[19] I have read the judgment prepared by Mustafa, J.A. and I agree with it.
I do not like interfering with an exercise of judicial discretion but, like
Mustafa J.A., I consider with respect that the order adjourning the hearing
of the notice of motion until after the hearing of Civil Suit No. 1353 of
1969 represents an erroneous exercise of discretion. That suit was filed
nearly two years ago; one of the plaintiffs has been struck out; and counsel
were unable to give any indication as to when that suit would come on for
hearing. It may not be heard for some considerable time.
[20] The question of the appellants' right to be on the register of share¬
holders of Akira Ranch Ltd. is not directly in issue in that suit. In the
meantime the appellants are entitled to a decision on their application for
rectification of the register of the respondent company. It is not disputed
that their names at one time appeared on the register but have been removed.
So far as I am aware, a name cannot be removed from the register without the
order of a court, except where the shareholder concerned consents to such a
rectification of the register, see First National Reinsurance Company
v.Greenfield (1921) 2 K.B. 260 at page 279.
[21] I agree that this matter must be remitted to the High Court for a
decision. I would allow this appeal. I concur in the order proposed by
Mustafa J.A.
DUFFUS, P.
[22] I have read the draft judgments of Mustafa, J.A. and Law, Ag. V-P I
agree that the learned judge was correct in adjourning the application for
further evidence to be taken as the hearing appears to have been only on a
preliminary objection and not on the merits, but I do not think that this
adjourned hearing should have been stayed until after the hearing of Civil
Suit No.1353 of 1969.
[23] I, also, am reluctant to interfere with the discretion of the learned
judge but I am satisfied that this was a wrong exercise of his discretion,
especially as the hearing date of the civil case still appears to be
indefinite. The hearing of this case has already been delayed over a period
of nearly two years.
[24] One of the main issues which will have to be decided is the title to
the shares now in the name of C.H. Mayers and it does appear that this issue
could be settled either on this application, having regard to section 118,
subsection 3, of the Companies Act (Cap.486) r else as one of the issue in
civil suit No.l353 of 1969.
[25] I agree, therefore, with Mr. Mustafa J.A. that that part of the order
of the High Court staying the hearing of this motion pending the decision in
civil suit No.1353 of 1969 should be struck out and that this matter should
be remitted to the High Court for hearing in due course. This does not mean
that the hearing of civil suit No.1353 of 1969 is stayed pending the hearing
of the motion and it could be that the hearing of the civil suit may yet in
the ordinary course of events be completed before the hearing of this
motion, and of course, it may also mean that the first one of these cases to
be settled might well affect the decision in the other case but this is not
a matter which now arises.
[26] I also agree with Mustafa, J.A’s order as to costs and as the Ag. V-P
also agrees the appeal will be allowed on the terms set out by Mustafa, J.A.
LUTTA, J.A.
[27] I have read in draft the judgments prepared by Law J.A. and Mustafa J.A.
I agree with them and with the order proposed. |
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