Supreme Court
Action No. 100 of 1980
11th September, 1980
Moe, CJ

Mr. Horace W. Young, Q.C. for the Applicants
Mr. Derek B Courtenay for the Respondent

Practice - Originating Summons - Injunction - Leave to appeal - Whether granting of injunction affected rights of shareholders of Company - Whether order unreasonable, unjust or oppressive - Leave refused.

J U D G M E N T

By an ex parte originating summons dated 9th April 1980, the respondent applied for relief as follows: - (1) that an Extraordinary general meeting of Belize Airways Limited (hereinafter referred to as "the Company") may be convened by the Court for the purpose of considering and if thought fit passing as an extraordinary resolution, the resolution set forth in the Schedule to the summons; (2) that the Court may give directions as to the manner in which the said meeting is to be called, held and conducted and all such ancillary and consequential directions as it may think expedient; (3) that an injunction be granted restraining the persons appointed as directors at the shareholders meeting of the Company held on the 26th day of March 1980 from acting as directors aforesaid or in any manner acting for or in the name of the Company until directors are duly appointed at the meeting aforesaid.

On the 12th April 1980 the Chief Justice in chambers made an order which inter alia: - (1) granted an injunction restraining forthwith the applicants amongst other persons (whether by themselves or any of them or by their servants or agents or otherwise howsoever) from acting as directors of or in any manner acting for or in the name of the said Company until directors of the said Company are appointed in pursuance of the Order or until further Order; (ii) ordered that an extraordinary general meeting of the members of the Company be convened for the purpose of considering and if thought fit passing as an extraordinary resolution the resolution as set out and for appointing directors of the said Company. The Order then set out six directions with regard to the convening and conduct of the meeting which for the purposes of this decision it is unnecessary to recount.

This application seeks leave to appeal from that Order. The Applicants proceeded on the basis that the Order was not covered by the provisions of section 15(3)(a)(ii) of the Court of Appeal Ordinance 1967. They relied on two of the circumstances under which leave may be granted in a matter of this nature and contend that (1) there is a prima facie case that an error was made, and (2) the question involved is one of general principle decided for the first time.

The applicants submit that an error will be found to have been committed because: - (i) the originating summons was not served nor brought to the notice of any person as respondent thereto or otherwise but yet the matter was dealt with and the Order made; and (ii) there is no authority under which the Court could have properly entertained the application. Alternatively (a) the order was made upon a wrong principle since there is provision whereby the Respondent could have caused a meeting to be called or himself called a meeting; (b) the terms of the order and the directions thereunder were unreasonable, unjust and oppressive; and (c) the directions for convening the meeting were not precisely carried out. They further submit that the question of general principle decided for the first time is whether there is any authority under which the application could have been entertained.

I proceed first to consider the question whether there is authority under which the Court could have entertained the application. Now the summons sought three things: - (1) to have an Extraordinary general meeting of the Company convened by the Court; (2) to have the Court issue directions with regard to the calling and conducting of that meeting; (3) to have an injunction restraining the applicants from acting as directors of the Company until directors were appointed at the meeting convened by the Court. Both counsel agreed that there is no specific statutory authority under which the Court may summon an extraordinary general meeting of a company in Belize. Counsel for the applicants pointed to section 66 of the Company Ordinance CAP 206 as provision under which the respondent himself could have convened such a meeting. At this point I set out section 66 in full which is as follows: -

"Section 66 - (1) Notwithstanding anything in the articles of a company the directors of a company shall, on the requisition of the holders of not less than one-tenth of the issued share capital of the company upon which all calls or other sums then due have been paid, forthwith proceed to convene an extraordinary general meeting of the company.

(2) The requisition must state the objects of the meeting, and must be signed by the requisitionists and deposited at the registered office of the company, and may consist of several documents in like form, each signed by one or more requisitionists.

(3) If the directors do not proceed duly to convene a meeting to be held within twenty-one days from the date of the requisition being so deposited; the requisitionists, or a majority of them in value, may themselves convene the meeting, but any meeting so convened shall not be held after three months from the date of the deposit.

(4) If at any such meeting a resolution requiring confirmation at another meeting is passed, the directors shall forthwith convene a further extraordinary general meeting for the purpose of considering the resolution and, if thought fit, of confirming it as a special resolution and, if the directors do not convene the meeting within seven days from the date of the passing of the first resolution, the requisitionists, or a majority of them in value, may themselves convene the meeting.

(5) Any meeting convened under this section by the requisitionists shall be convened in the same manner, as nearly as possible, as that in which meetings are to be convened by directors."

On the evidence, the respondent was and is the holder of more than one-tenth of the issued share capital. On his requisition therefore the directors would be obligated to convene an extraordinary general meeting. At the meeting so convened, the resolution he wished considered may be then considered.

Counsel for the respondent however referred to the delaying procedures involved in following the said provisions. The delay involved in the convening of an extraordinary general meeting on requisition may therefore be noted. Counsel submitted that the Court may in exceptional circumstances circumvent the delaying procedures which are to be faced in calling a meeting, by itself calling a meeting and to facilitate calling the meeting may grant an injunction.

Here it should first be observed that section 66 of the Ordinance is identical to the provisions of section 66 of the Companies Act 1908 U.K. and it has been held that in an urgent case a mandatory injunction may be granted directing directors to call a meeting forthwith under that section. Vide Palmers Company Law 21st Edition page 470. Further in Harben v. Phillips 23 Ch. D. while it was made clear that a court ought not to interfere in the conduct of a company's business further than is absolutely necessary, it was accepted that there was jurisdiction in the Court to interfere if there are manifest irregularities in the conduct of a company's affairs and immediate serious harm is likely to result from the irregularities.

The Chief Justice had before him the Affidavit of Yasin Shoman which disclosed: - (1) that the applicant and two other persons purported to hold an annual general meeting of the Company (a) without the notice required by the Articles of Association of the Company having been given and (b) while there was no quorum in accordance with the said Articles of Association; (2) at such a meeting certain persons including the applicants were appointed as directors of the company; (3) the directors so appointed purported to appoint officers of the company; (4) the directors so appointed authorised persons to enter into agreements for and on behalf of the company; (5) the directors so appointed authorised court proceedings in respect of the company's premises, assets and income; (6) the directors so appointed, themselves made an appointment in breach of the company's obligations which made the company liable to be mulcted in damages in the sum of $1,000,000 (U.S.).

Although there was clear cause for complaint about the six matters set out above, it appears that they were all matters which could either have been regularised, ratified or confirmed by a proper majority of the company. In Foss v. Harbottle (1843) 2 HARE 461, Melllish L.J. had this to say "if the thing complained of is a thing which in substance the majority of the company are entitled to do, or if something has been done irregularly which the majority of the company are entitled to do regularly, or if something has been done illegally which the majority of the company are entitled to do legally, there can be no use in having litigation about it, the ultimate end of which is only that a meeting has to be called and then ultimately the majority gets its wishes." But as it turned out the majority shareholder is the respondent. He received no notice of the purported meeting above mentioned, did not waive the requirement for the notice and by virtue of his application for relief herein was evidently not in favour of regularizing, ratifying or confirming anything done at that meeting. Further there was evidence that the irregularities were likely to cause serious harm to the Company.

Following the principles just adumbrated above I hold that there were ample grounds for the court to entertain the application.

I turn now to the question whether the application should have been heard, the summons not having been served nor brought to the notice of any other person. It may first be stated that an ex parte originating summons by definition is not served on anyone. However I am of opinion that it is still incumbent on the court before whom the summons comes to decide whether the proceedings ought to be brought to the notice of some other person. It may have to be determined whether the matter under consideration is such that some other person ought to be given the opportunity of being heard. For the general rule of law is that the Courts will not m8ke orders in legal proceedings affecting a party's rights without giving that party an opportunity of being heard. See Salmon L.J. in Cozens v. North Devon Hospital Management Committee [1966] 2 A.E.R. 799. If it is determined that another person ought to have notice, in the normal course of event, that person having got notice would be aware of the relief sought and have the opportunity to come to the Court and have his say. But I also hold that in exceptional and emergency cases the Court can dispense with notice and make such order as would give the relief which in view of the particular circumstances would otherwise be not obtained. I am guided to this conclusion by the reasoning and decision of Templeman J. in Emi Ltd. v. Pandit [1975] 1 A.E.R. 418 which dealt with an application ex parte by plaintiffs in an action for alleged infringement of copyright and passing off. The Plaintiffs sought an order that such persons as may be duly authorised by the plaintiffs be at liberty to enter forthwith premises occupied or used by the defendant at any hour being 8 o'clock in the forenoon and 9 o'clock in the evening for certain purposes which included inspection and photographing infringing material and correspondence which were relevant to the action and for removal of the infringing articles. Having pointed out that there was provision which required that an application for such an order must be made by summons or by notice under the relevant Order, Templeman J. had this to say:

"In the normal course of events, a defendant will have notice of the relief which is sought against him in the exercise of the powers given by this rule and will be able to come along to the court and to give reasons why the order should not be made or why, if it is made, particular safeguards should be included. Nevertheless, in my judgment, if it appears that the object of the plaintiffs' litigation will be unfairly and improperly frustrated by the very giving of the notice which is normally required to protect the defendant, there must be exceptional and emergency cases in which the court can dispense with the notice end, either under power in the rules to dispense with notice or by the exercise of its inherent jurisdiction, make such a limited order albeit ex parte, as will give the plaintiffs the relief which they would otherwise be unable to obtain."

This principle is recognized in our rules. In Order 56 R. 3, it is first stipulated that no motion shall be made without previous notice to the parties thee as follows "Except where, according to the practice existing in England at the time of the passing of the Supreme Court of Judicature Act, 1873 (Imperial), any order or rule might be made absolute ex parte in the first instance, and except where, notwithstanding R. 2 of this Order, a motion or application may be made for an order to show cause only, no motion shall be made without previous notice." Then it goes on "But the Court, if satisfied that the delay caused by proceeding in the ordinary way would or might entail irreparable or serious mischief, may make any order ex parte upon such terms as to costs or otherwise, and party affected by such order may move to set it aside."

Although the rule is set out with reference to applications by motion, I hold that the principle therein is applicable to other applications.

Now following Cozens case the answer to the question whether the summons herein ought to have been served or brought to the notice of some other person appears to depend on whether the rights of some other person were to be affected. In considering that issue in a matter of this nature it would have to be borne in mind as laid down in Foss v. Harbottle (1843) 2 HARE 461 that with respect to membership rights in a company the principle of the supremacy of the majority applies.

I have already set out above what the summons herein sought. That summons was taken out on behalf of the majority shareholder of the company, i.e.58% of the paid-up shares of the company; the applicants together hold 14% of the paid-up shares.

For the applicants it was contended that the injunction granted which is merely corollary to the convening of the extraordinary general meeting should not go so far as to preclude shareholders from exercising their rights. The convening of an extraordinary general meeting would not have affected the rights of shareholders and in any event it was sought by the majority shareholder. Again the granting of an injunction would not have affected the rights of the applicants as shareholders. The respondent asked that they be restrained from acting as directors or in the name of the company until directors are duly appointed.

But apart from the question whether the rights of same person were to be affected the respondent the majority shareholder had put before the Chief Justice circumstances as outlined above which included irregularities committed by a minority of shareholders, which irregularities were not going to be regularised by the majority of shareholders end likely to cause serious harm to the Company if prompt action was not taken. I take the view that the respondent had put before the Court an emergency situation which in accordance with the principles outlined above entitled the Court to dispense with notice.

In the circumstances I do not find that the decision to proceed without bringing the proceedings to the notice of the applicants or any other person was contrary to the principles of natural justice. The application accordingly fails on its first ground that a prima facie case of error in the proceedings is shown.

The reasoning outlined above shows also that I cannot hold for the applicants that the question involved is one which is being decided for the first time.

I turn now to the alternative submission that the terms of the order or the direction given thereunder were unreasonable, unjust or oppressive.

The applicants dealt specifically with two directions contained in paragraph 4 of the Order which I now set out:

2. The said notice shall be served personally on all members of Belize Airways Limited entitled to receive the same and to vote at the said meeting no later than Saturday the 12th day of April 1980 save and except that the notice for Raul Martin shall be sent to his address in the State of Florida one of the United States of America by telegraphic message and the notice for Henry T.A. Bowman may be served personally on his proxy.

4. The quorum at the same Extra ordinary General Meeting shall be one member entitled to vote thereat personally present.

With respect to the first mentioned direction they contended that the order was made on the 11th April and entered on the 12th April and it was therefore unreasonable to direct that the Extraordinary general meeting be held on the 14th April. They say further that in that direction no person was named as the proxy for Henry Bowman. The evidence does not support this contention. The record of the proceedings show that the applicants and Mr. Bowman's proxy attended the meeting so summoned and participated. It was also submitted that it was oppressive to direct that one person could form a quorum at the extraordinary general meeting summoned. I do not accept this submission. It has been held that in extraordinary circumstances a meeting may consist of one person only; See East v. Bennett Brothers Ltd. [1911] 1 Ch. 163. In the circumstances of this case it was evidently anticipated that the person would be the majority shareholder.

The ground that the direction for convening the meeting were not precisely carried out does not appear to be one of the circumstances under which leave to appeal against the Order itself may be granted.

Leave to appeal is accordingly refused.

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