SJ Patel (Zambia) Ltd v DV CInamon (Male) (1970/H.P./516) [1970] ZMHC 9 (23 July 1970)

SJ PATEL (ZAMBIA) LTD v DV CINAMON (MALE) (1970) ZR 68 (HC) HIGH COURT HUGHES J I 23rd JULY 1970 5 (1970/H. P./516) Flynote Company - Liability of director for documents issued on behalf of company - Cheque issued to plaintiff with stamp bearing name of company but without word "Limited" - Director held personally liable - Companies Ordinance, Cap. I 216, s. 81. 10 Company - Name of company - Necessity to engrave and mention full name of company ending with word "Limited" on company seal and documents to be signed by or on behalf of company - Penalty for failure to comply - Effect of omitting word "Limited" - Companies Ordinance, Cap.216, ss. 8 (1) (a), 80 and 81. 15 ■ Headnote This was an appeal by the plaintiff against the decision of the Registrar in which he granted unconditional leave to defend the plaintiff's claim brought in respect of three dishonoured cheques. The plaintiffs supplied goods to Longacres Stores Limited and three cheques were drawn in their favour signed by the defendant in his capacity 20 as managing director of the company over a rubber - stamp bearing the inscription "Longacres Store", without the word "Limited" appearing on the cheques. Subsequent to the issue of these cheques the company went into voluntary liquidation and on presentation of the cheques they were dishonoured. The issue as to whether the defendant had a statutory 25 liability for the amount claimed by the plaintiff was considered. Held: ■ ■ (i) The Companies Ordinance requires that the company's name in full be engraved on its seal and mentioned in documents to be signed by or on behalf of the company and that the last word of 30 the name should end with the word "Limited". Failure to comply with the provisions makes the person who signs the documents personally liable if the company fails to pay. (Companies Ordinance, Cap. 216, ss. 8 (1) (a), 80 and 81.) ■ (ii) By failing to comply with the statutory provisions the defendant 35 rendered himself liable to the plaintiffs for the amount payable in respect of the three cheques. ■ Cases cited: (1) Atkins and Co. v Wardle (1889) LJQB 377. (2) Durham Fancy Goods Ltd v Michael Jackson (Fancy Goods) Ltd. [1968] 40 3 WLR 225, ■ [1968] 2 All ER 987. Legislation referred to: Companies Ordinance, (Cap. 216), ss. 8 (1) (a), 80 and 81. Companies Act, 1862 (England) s. 42. Companies Act, 1948 (England) s.108 (4). 1970 ZR p69 HUGHES J Judgment Hughes J: This is an appeal by the plaintiffs against a decision of the learned Deputy Registrar given on the 11th June, 1970, in which he granted the defendant unconditional leave to defend the plaintiff's claim of K6,383.73 brought in respect of three dishonoured cheques. The facts of the case are not in dispute. The plaintiffs supplied goods 5 to, and at the request of, Longacres Store Limited (hereinafter called "the company") to the value of K6,383.73. These goods were paid for by three cheques drawn in favour of the plaintiffs on Barclays Bank DCO, Longacres, Lusaka as follows: I Cheque No. 567089 - 31 - 3 - 70 - K5,635.99. 10 I Cheque No. 491037 - 24 - 4 - 70 - K483.80. Cheque No. 491057 - 28 - 4 - 70 - K263.94. The cheques were signed by the defendant, apparently in his capacity as managing director of the company, over a rubber stamp bearing the inscription "Longacres Store". It is conceded by the plaintiffs that the 15 cheques were issued for and on behalf of the ■ company and there is no suggestion that the plaintiffs were in any doubt that the goods, in respect of which the cheques were tendered in payment, had been supplied to the company and would be paid for by the company. Subsequent to the issue of the cheques the company went into voluntary liquidation and following 20 presentation, on their due dates, the cheques were dishonoured and returned unpaid to the plaintiffs endorsed "payment stopped", "refer to drawer - company in liquidation" and "company in voluntary liquidation" respectively. In addition to the action now brought against the defendant the plaintiffs have filed a proof of debt for the amount claimed 25 on these cheques in the liquidation. The parties are agreed that no triable issue of fact arises in this matter. It remains to be determined whether the learned Deputy Registrar was right in deciding that a question of law arises as to the defendants statutory liability for the amount claimed by the plaintiffs. Section 8 (1) 30 (a) of the Companies Ordinance, Cap. 216 (hereinafter referred to as "the Ordinance") requires that the memorandum of association of every company must state the name of the company with "Limited" as the last word of the name. Section 80 of the Ordinance provides: ■ ■ ■ ■ "80. Every company shall paint or affix and shall keep painted or 35 affixed its name on the outside of every office or place in which the business of the company is carried on, in a conspicuous place and in letters easily legible, and shall have its name engraved in legible characters on its seal and shall have its name mentioned in legible characters in all notices, advertisements, and other official 40 publications of the company, and in all bills of exchange, promissory notes, endorsements, cheques and orders for money or goods purporting to be signed by or on behalf of the company, and in all bills of parcels, invoices, receipts and letters of credit of the company." 45 ■ Section 81 of the Ordinance prescribes the penalties and sanctions for non-compliance with the requirement to publish a company's name and further provides: ■ HUGHES J "81. If penalty; and if any director, manager or officer of the company or any person on its behalf, uses, or 1970 ZR p70 I ■ authorises the use of any seal purporting to be a seal of the company whereon its name is not so engraved as aforesaid, or issues or authorises the issue 5 of any notice, advertisement, or other official publication of the company, or signs or authorises to be signed on behalf of the company, any bill of exchange, promissory note, endorsement, cheque, order for money and goods, or issues or authorises to be issued any bill of parcels, invoice, receipt, or letter of credit of 10 the company, wherein its name is not mentioned in manner aforesaid, he shall be liable to a penalty of fifty pounds sterling, and shall further be personally liable to the holder of any such bill of exchange, promissory note, cheque or order for money or goods for the amount thereof, unless the same is duly paid by the company.'r 15 ■ That section is expressed in precisely the same terms as the provisions of s. 42 of the English Companies Act of 1862 and substantially the same terms as the provisions of s. 108 (4) of the English Companies Act 1948. In Atkins and Co. v Wardle (1) the court considered the personal liability of directors under s. 42 of the 1862 Act. The facts of that case were that a 20 company was registered by the title of "The South Shields Salt Water Baths Company (Limited)". The plaintiffs drew the following bill of exchange, "Six months after date pay to our order the sum of £125 for value received. - Salt Water Baths Company (Limited), South Shields", which was accepted as follows: "Accepted payable Messrs. Hodgkin, 25 Barnett & Co.'s Bank, So. Shields. - John P. Wardle Chairman, Thomas S. Blues and Joseph Pollard Directors, South Shields Salt Water Baths Co." The company later fell into difficulties and the bill was dishonoured, an action having been brought upon the bill by the plaintiffs against the chairman and directors. It was held that the two variations from the 30 proper designation of the company were ■ sufficient to bring the defendants within the provisions of s. 42 of the 1862 Act, the intention of which was to insure extreme strictness in regard to the use of the registered name of the company, not only enforcing the use of the word "Limited", but in all other I respects. The plaintiffs were entitled to judgment. 35 In Durham Fancy Goods Ltd v Michael Jackson (Fancy (goods) Ltd (2), the court considered the provisions of s. 108 (4) of the 1948 Act. In that case the plaintiffs drew a ■ ■ ■ bill of exchange on a company called Micheal Jackson (Fancy Goods) Ltd. but addressed it to "M. Jackson (Fancy Goods) Ltd." and inscribed the words of acceptance: "Accepted payable 40 ... For and on behalf of M. Jackson (Fancy Goods) Ltd., Manchester." On receiving the bill the second defendant, who was a director and secretary of the company, merely signed his name and returned the bill. The bill was dishonoured upon maturity and the company went into liquidation. On a claim by the plaintiffs against the second defendant on the 45 grounds that he had become personally liable on the bill by ■ signing it on behalf of the company contrary to s. 108 of the 1948 Act, as the bill did not mention the proper name of the company. It was held: 1970 ZR p71 HUGHES J "(i) that 'M' was not an acceptable abbreviation for 'Michael' and that accordingly, the second defendant had committed an offence under section 108, which had not been sufficiently complied with, and was liable to the plaintiffs who were holders of the bill of 5 exchange. I ■ ■ (ii) but that the plaintiffs' action would be dismissed because that could not enforce that liability, for they had inscribed the words of acceptance and had chosen the wrong words, thereby implying that acceptance of the bill in that form would be, or would be 10 accepted by them as, a regular acceptance off the bill: in seeking to rely on their own error, coupled with the second defendant's failure to detect and remedy it, as entitling them to relief, they were bound by the equitable principle of promissory estoppel." I find myself unable to distinguish the facts in this case from those 15 in the two cases cited above in so far as the question of law of this defendant's personal liability to the plaintiffs is concerned. In my view the point of law is clear and unarguable, that the defendant had rendered himself liable to the plaintiffs for the amount payable in respect of the three cheques by virtue of his non-compliance with the provisions of s. 8l aforesaid. It is, however, possible to distinguish this case from the Jackson 20 case where ■ the mis - description and non-compliance with the statutory provision resulted primarily from an error made by the plaintiffs. In the case before me the mis - description arises from the defendant's failure to comply with the relevant statutory provision. In the circumstances it would seem clear that the defendant cannot seek equitable relief to 25 prevent the plaintiff from enforcing the statutory liability. It has been submitted on behalf of the defendant that the company has not refused to discharge its liability on foot of the cheques in question and that, consequently the defendant's personal liability does not therefore arise. I cannot accept this submission. The cheques have been presented 30 for payment and have been dishonoured. Although the plaintiffs have filed a proof of debt in the company liquidation they are nevertheless entitled to seek recovery from the defendant by virtue of his statutory liability. I therefore allow this appeal with costs to the plaintiffs, such costs 35 to be taxed in default of agreement. The plaintiffs are given liberty to sign final judgment against defendant for K6,383.73 with costs on the appropriate scale. Appeal allowed ■ ■ ■