[1995] UGHC 67

## THE REPUBLIC CP UGARDA : IN THE HIGH COURT OF UGLIDA AT KAMPALA CIVIL SUIT IC:32 OF, 1994

| | Makerer: Properties. LTD | | |---------|-----------------------------|------------------------------------------------------------------------------------------| | | versus | | | | MANSUKHI'L RANJI. KARIA | | | | | | | Before: | Hen. Mr. Justice J. P. Berko | For and on behalf of:-<br>Institution in States A. Handele<br>$\bigcap \text{ADVOCATES}$ | | | Judgement: | |

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This action concerns a disjute in a family Company, called Makerere Properties Ltd. The Company was incorporated on 31st January, 1959 under the Gorganics Ordinance of 1935. It was formed by Abdulaziz Allibhai Firani and Tadrudin Ab^dulaziz Pirani. The two were the first directors of the Company. The other members of the family were sharehoders. The family consisted the father, mother, six brothers and three sisters.

The Company had a share capital of 300,000 shillings divided into 301 shares of 1000/- each. The Company had power to increase its capital by the issue of additional shares.

The Company had several objects, but the main object was to acquire a certain piece or parcel of land and building at Makerere in the Town of Kampala and to develop it. The land and premises is compresed in a Lauschold $\sqrt{$ olume 85 $\sqrt{ }$ olio 10 and known as Plot 13 Market Street. The Company acquired that piece or parcel of land and became the registered proprietor of it.

The shareholders and directors with Asians. They were ferced to leave Uganda on or about 91st December, 1972 following the then Government's order expelling from Uganda members of the Asian Community. They did not all go to one Country. Some went to Canada, speep went to Germany, others went to United Kingdom and Pakistan. Z Tohoded Abdulaziz Pirani

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Montreal. (F71) was one of those who settled Canada,

On one of his visits to the U-iitod Kingdom,. His .excellency. President Yoweri He according!?/ 3.\*oturned • to Uganda sometime His transfered tn themselves the sh-.j'os in hakerere Properties Ltd and. that the defendant had become director and had dropped all the original directors. On. the 27/11/82, The Company executed a transfer of the premises situate on Plot No. 1\$ in 1991 with the view to re-claiming the family property, investigation revealed that in or ojouM 1982, Manuskh^al aguta Museveni, said at a press conference that all Asians who left properties in Uganda during their expulsion, could come to'Uganda ' caiC rc-claici those properties. Amin Mohamed Abdulaziz Pirani read what, the President said in ^a London Newspaper. Market Street in favour of the defendant thereby making the defendant the registered proprietor of;the property. Ramai'Karia, the defendant herein, toother with others, had

institute the instant proceedings against the defendant. of Companies was directed to re-instatu the original Shareholders. Following the Court'^s said ruling in his ^favour Amin Mohamed Abdulaziz Pirani (P.;1) instructed :./s .• ul'iira f. Co Advocates to Amin Mohamed Abudal^ziz i-'ira>i uwza pioceedla,-.^ in the Amin Mohamed Abdulaziz Pirani v companies cause No.2 of 1992. Mansukahalal'Ranji Karia, to rectify the Company'^s register. In a ruling delivered in that Companies cause, it was held that the transactions removing the original directors and shareholders were fraudulent, null void and the Registrar Among the reliefs claimed are:

- registered as a proprietor of the suit premises. i (a) a declaration that thr dafcunailt was fraudulently - (b) cancel the names of tha deieiiGant as the registered proprietor and to reinstate the plaintiff. an order directing the Registrar of titles to

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Issues were joined and I heard evidence from both sides. A massive amount of documents were but in evidence. During the final submissions, Learned Counsel for the defendant, Mr. Lule, has submitted 'that on Jakin Rohamed Abdulaziz Pirani's (FW1) own admission that he has mover been a director of the ( Campany, he had no capacity to instruct I'/s Mulira & Co Advocates to institute the action and has invited me to strike. it out. Learned Counsel for the Contains has argued to the contrary.

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I I propose-to-deal with the submission at this stage, for. in my view, if the action is not wall tainable, then there would be no need to consider the promise of the case. The Company has Memorandum and Acticles of Association. $\delta$ $\delta$ . The articles adopted some of the wovesions of Table 4, others vere expressly excluded. I will r i r briefly to one or two of the articles. Article 3 provides that the company is a "Private Company" within the meaning of the Companies Ordiance. Article 19 provides that General is times shall be held once at least in every year at such time and at such a place as may be determined by the directors. Article 25 provides that the first directors of the company shall be appointed by the subscribers or the majority of them by instrument in writing Article 26 provides that the divergence shall not be more than seven and not less than two. Article 55 adopts Articles 81-88 of Table A, subject to the following modification

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> a director who is at anytime out of Uganda Protectorate $(ii)$ shall not during such time be entitled to Notice of any meeting of directors and

> a resolution determined on without any meeting of $(ii)$ directors and evidenced by writing under the hands 'sic) of all the directors, shall be valid and effected/as

> a resolution duly passed at a mosting of the directors. The regulation relating to the manufactor of the company is of importance. That is article 3611 article 36 provides that the management of the business of the company shall be

vested in the directors; and that the directors may exercise i all such powers and do all such acts and thihgs as the company is by its Memorandum of Association or otherwise authorised to exercise ^r do, and as are not hereby or. by statute directed • r required to be exercised or done by the Company in general meeting.

management of the company is in the hands of the directors. It will be seen at once that by article 36, the day to day

This . General. of the company is the board of directors, . \_ . .1 \_ \_ or to between the company on one*L* no ¹ and it makes/difference is delegated as an incident of man3<,in». the comapany. included the ri^ht to instruct couiljo! to institute actions ¹ m behalf of the comapany: Unit'd yiSuurancd Cp Ltd ^v Attorney Civil Appeal No ¹ of 1906 (unrnported). Shas and - Sons (Salford) Ltd v Saw (1955) 2 1J3 Tl> C. A •j»here a wrong has been done to the company and action is brought to restrain its continuance, orto recover the comapny\*s proper or damages or compensation dee to it, the company is the tfrue plaintiff Gray v Lewis (1673). 6 ch App 1035; Burland v Earle (19,07) AC iJijch adispute is not an internal "ne between those intevoutc.d in the company but one hend ano. third parties on the other, in principle that the third parties i happened to be, the director or roauroLiang snarenoider 01 uae . . ⁱ company. The appropriate agency to start an\* action on bc-half to,whom the power

Action he was not a director and has never -been a director of the company. cause directors" In the instant case at the tii?.? when .-.min K.ohamed Abdulaziz i Pirani instructed M/s Mulira ft Co A"h-ocateg to institute the pleaded in paragraph 6 that he afr rioved with the ruling in the Companies Cause and had' a.peeled against that decision Companies He brought the action after the Court had ordered She the Register \* of/Company *'* to bo ratified following the Action of 1992,■in which the court directed the Registrar >f Companies t» reinstates the origin \*.l shcii e holders and In the written statement of defence, the defendant

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to the S wreme Court. In the Reply to the written statement of defence, on the instructions of Asim iohamaed Absulaziz Pirani. was pheaded that the company was not relying on the its case said ruling, but that/was based on allegations of fraud. That stand was taken apparently to pro-empt any possible step the defendant might take to stay proceedings until the appeal in the Companies Cause was disposed off.

$\mathcal{L} = \mathcal{L}$

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Without the rectification of the Register of the Company the position at the time the action was commenced, as I see it, was that neither Amin Mohamed Abdulaviz Firani (FW1) nor any of the original shareholders and directors were shareholders and directors of the company. This is clear from paragraph 6 •f the plaint. What authority then did $\lambda$ min Nohamed Abdulaziz Pirani had to instruct the advocates to institute the action. He says he had powers of attorney from all his brothers to institute the action. He said the powers were natorised and certified at the Registry of Companies. The said powers of attorney were neither annexed to the plaint nor put in evidence at the trial to enable the court to know what powers were given to him. Then he says that after he had given evidence on the 15/7/94 he went to Cananda and got his mother and Sadradin to sign resolutions authorising him to institute the action.

The position of the law in such a situation has been discussed by in Buckley on the Companies Act. 13th Ed. at page 171. This is what the Learned authors said:

"If the case be one in which the company ought to be plaintiff thefact that the soul is in the possession of the<br>adverse party will not necdsparily preclude the intending<br>plaintiffs from using the company's name. Neither will<br>it is necessary to obtain the resolution of a gen meeting in favour of the action before the writ is issued. In many cases the delay might a wunt to a denial of justice. In a case of urgency the intending plaintiffs may use the In a case of urgency the intenden, plaintiffs may use the<br>company's name, but at their peakl, and subject to their<br>being able to show that they have the support of the<br>majority. For, although proceedings started in the nam

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Acc.rdingly, in an action so instituted, the court may give interlocutory relief, taking care that a meeting<br>be alled at the earliest possible date to determine whether<br>the action really has the support of the majority or<br>not. If it appears that the company's name has been use solicitor, will be ordered to pay the company's costs as<br>between solicitor and client and the defendant's costs as between party and party. This passage has been approved in a number of cases. For our present purpose I will only mention one which is relevant to the issue before me. That is the case of Danish Recognitie Co Ltd v Beanmont and Anor (1957) Ch 680 at page 606. It

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It is plain that at the time the action was t

instituted, Amin Nobesand Abdulaziz Pironi did not have authority to institute the proceedings as he was neither a director nor a shareholder. He commission to have given instructions to the solicitors to institute the action. In the case of Danish Mercantile Co Dod v Reanmont and Anor (1951) Ch C. A. 680 Jenkins L. J. at a a 607 stated the position as follows:

"I think that the true position is simply that a solicitor<br>who starts proceedings in the name of a company without who states proceedings in the name of a company wrotate<br>verifying whether he has proved authority so to do, or<br>under an erroneous assumption of authority does so at his<br>own peril, and that, so long as the matter rests ther that the aggrieved party does not unduly delay his a application; but it is open at any time to the purported<br>plaintiff to ratify the act of the solicitor who started the action to adopt the processions, to approve all that has been done in the past and to instruct the solicitor to continue the action. then that has been done, then, in accordance with the ordinary law of principal and agent and in accordance with the ordinary doctrine of ratification, in my view, the defect in the proceedings as originally constituted is cuded; and it is no longer open to the defendant to object on the ground that the proceedings thus ratified and webpied were, in the first instance, brought without authority".

Amin Mohamed Abdulaziz Firani Unied to ratify the position by •btaining a signed resolution from his mother and brother Sadrudin after the institution of the suit. There is no evidance that a meeting was held at which the orid resolution was They were said to have been signed separately and passed. that they did not meet together howover, unformally, for the purpose of signing the said resolution. If I had been satisfied on that, then the alleged resolution would have been

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perfectly in order. As was said by Michael Wheeler CC in Cane v Joned (1981) 4 All E. R. 533 at 554, the resolution would have represented "a meeting of minds which is, after all, the essence of a resolution". But in this case I never saw the said resolution. Dut if it did exist, which I doubt, that authority scems to me not worth the paper it is written upon. If authority is wanted to use the name of the company it must be authority got ffom the proper quarter - either from the directors or from the shareholders. As there has been no wotification of the register of the company, the mother and Sadrudin were not directors or shareholders of the company. They could therefore not have ratified and adopted the suit that was improperly instituted.

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What order should the court make in the circumstances. In the instant case like Buike Estate Coffee Ltd which I said I shall refer to later on want of authority to institute the suit is not pleaded in the written statement of defence and the plaintiff's advocate has had no motive of the objection. More over, the objection is one that should have been raised before the hearing by an interlocutory, $a_{\mathbb{R}^n}$ lication to strike out the suit. The quote from the judgement of Noche L. J. in John Saw & Sons Ltd v Saw (1935) 2 5 113 at 147,

"As to the preliminary question whether the plainiff company was properly before the court, that is to say, whether the action was instituted and carried on with authority, I have arrived at the same result as Greer L. J. but for different reasons, which I propose to briefly to state:

> 'I agree with both Lord Justices as to the result of the decided cases and particularily of<br>the <u>Daimler case</u> and of the Russian Commercial<br>Bank case. The principles to be derived from them are that such an objection to a right to sue as is<br>here taken should be valued not at the trial but by an interlocutory mother or summons.; that if<br>such procedure is not adopted the court need not,<br>and ordinarily should not, entertain such an<br>objection at the trial on is it were a defence. <pre>If</pre> it were otherwise, then for reasons pointed out by warrington J. in Michaend v Branson, the<br>position of the court would be well high into Perable Nevertheless, as appears from the decision in Daimler case, if want of capacity or authority to sue plainly appears are used in stage the court may then strike out the action!".

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The above statement was retied upon by Bennett J. in a local case of Buike Estate Coffee Lid and Two Others v Lutabi and Anor. (1962) EA 328. He concluded at page 329 as follows:

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"In the instant case the question as to whether or not the plaintiff's advocate has been duly authorised to sue will depend upon the courts finding as to who are the lawful directors. That is a matter which can only be determined after evidence has been heard. In my judgement,<br>want of authority to sue does not plainly appear at the<br>present stage of the suit, and the suit ought not to be. struck out at this juncture."

The position in this case is plainly quite different. Amin Mohamed Abdulaziz Firani has wever been a director, of the campany. The court did not embark on a trial to determine who were the lawful directors as was the case in United Assurance Co Ltd v Attorney General. Civil In ed. No.1 of 1986. Therefore the management of the company had never Been in his hands. He could not therefore instruct counsel to file proceedings in the name of the company.

In my judgement, and acting on the authority of Jaimler Co v Continental Type and Rubber Go (1916) AG 307. to the effect that/of facts which prove conclusively that the solicitors had no authority to bring the action, the action should be struck out" I so do.

It is ordered that Amin Molyar & Ab plaziz Firani should pay the company's costs as between solicitor and client and that of the defendant as between party.

> $X \cap \mathcal{W}^+$ $\mathbf{J} = \mathbf{U}^\top$

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