The Sanitary Laundry Company Ltd et Al v Heal

• Jurisdiction: Barbados
• Court: High Court (Barbados)
• Judge: Williams, J.
• Judgment Date: 17 June 1982
• Neutral Citation: BB 1982 HC 42
• Docket Number: No. 277 of 1982
• Date: 17 June 1982

High Court

Williams, J.

No. 277 of 1982

The Sanitary Laundry Co. Ltd. et al

and

Heal

Mr. J.S.B. Dear, Q.C., and Mrs. D. Williams for the first plaintiff.

Mr. D.A. Simmons and Mr. R. Maraj for the second plaintiff.

Mr. F.G. Smith, Q.C., Mr. A. Clarke and Mr. A. Husbands for the defendant.

Company law — Meeting — Validity

Company — Foreign corporation — Laws of incorporation to determine the officers authorised to act on its behalf — Foreign corporation shareholder in Barbadian company — Requisition of extraordinary general meeting by foreign shareholder valid.

Williams, J.

1 This notice of motion is by the plaintiff, John Owens and seeks a declaration that:–

• (1) the extraordinary general meeting of the Sanitary Laundry Company Limited (hereinafter called “Sanitary”) held at the Holiday Inn, St. Michael, on March 31, 1982 was improperly conducted and the proceedings thereat are null and void; and

• (2) the following persons are still the directors of Sanitary, namely, John H, Owens, Philmore Davis, Patrick Kearns, Julian Outram and Arden Sealy.

2 I deal first with an issue of fact which arises for decision on the affidavits of Mr. Owens on the one hand and Mr. Heal and Mr. Joyner on the other. Minutes were produced of a meeting of the Board of Directors of Sanitary held on August 15, 1975. These minutes show that at that meeting Heal, Chairman of the Board, advised that he and one Mr. Yells had sold their interest in Martigua International S.A. (hereinafter called Martigua) and were resigning as directors of Sanitary; that Heal handed in letters of resignation from himself and Yelle dated August 15, 1975; and that Owens was appointed a director, and Chairman of the Board of Directors, of Sanitary at the same meeting. The minutes also record that Joyner was present and took an active part in the meeting. Owens accepts the record as representing the true record of a meeting actually held. On the other hand both Heal and Joyner deny that any such meeting ever took place. On the evidence I find that the meeting did take place and I accept the record in the minutes as setting out what transpired.

3 I turn next to another matter that arises for decision on the affidavits. It relates to Heals status in Martigua on February 12, 1982. The relevant portions of the affidavit of Owens are as fallows:–

• “8. That the defendant is not a share holder of Martigua………………..………

• 15. That, contrary to the fact, the defendant has represented that he still owns shares in Martigua … …..

• 23. That in so far as the defendant is not the President of Martigua and holds no shares therein, the notice convening the said extraordinary general meeting is invalid as well as all acts flowing there from.”

4 Heal in paragraph 4 of his affidavit of May 28, 1982 takes issue with these statements.

5 Prior to June 15, 1975 Heal and Yelle through his company Raybar Investments S.A. (hereinafter called Raybar) owned the capital stock of Martigua, Heal owning 734 shares and Raybar 266. By a redemption agreement dated June 15, 1975 between Martigua, Heal and Raybar, Martigua agreed to redeem 914 of these 1 000 outstanding shares, of which 671 shares were owned by Heal and 243 by Raybar. Two promissory notes made by Martigua in favour of Heal and Raybar provided for the payment of the redemption price. The redemption agreement provided that pending full payment of the notes the shares redeemed pursuant to the agreement were to be deposited, together with stock powers duly executed in blank with signatures guaranteed, in the custody of Mr. Jack Petch, a Toronto barrister and solicitor. The shares were to be delivered by Petch to the Secretary of Martigua for cancellation in the books of Martigua in accordance with Escrow Agreements of the same date.

6 As security for the payment of the principal and interest on the promissory notes Martigua, Heal, Yelle and Petch entered into escrow agreements of June 15 which provided that if Martigua should default in the, payment of principal or interest on the promissory notes, then Heal and Yelle were to notify Petch and the Secretary of Martigua of the default so as to permit an opportunity for a defence to be put forward for non-payment of principal or interest. If within 60 days Petch did not receive notice in writing of such a defence or of a claim for a set-off against the note, he was to return the escrowed shares in the manner provided in the agreement.

7 The escrow agreement contained an arbitration clause and provided that the agreement was to be subject to and be construed in accordance with the laws of the Province of Ontario in Canada and in the courts of that province.

8 Pursuant to a purchase agreement dated June 16, 1975 Heal and Yelle sold their remaining 86 shares in Martigua to Keller and Owens.

9 The rights and obligations of the parties under the above instruments were modified by later instruments. Contention arose between the parties and in 1980 Heal and Yelle claimed that Martigua had defaulted in payment of installments due under the instruments. They claimed return of the shares from escrow.

10 Martigua, Owens and Keller commenced proceedings in the Supreme Court of Ontario against Heal, Yelle, Raybar and Petch seeking, among other things, an interlocutory injunction restraining Petch from transferring or delivering to Heal, Yelle or Raybar or their appointees any of the shares held by him as escrow agreement. On Petch's application the following order was made by Master Sischy of the Supreme Court of Ontario on November 10, 1981:–

• “1. It is ordered that the action against John F, Petch be stayed pending further order of the court.

• 2. And it is further ordered that the 914 common shares of Martigua International S.A. held by John F. Petch pursuant to an Escrow Agreement and Escrow Agreement — Amendment No. 1, both dated June 15, 1975 between John F, Petch and Robert E. Heal and Raymond R. Yelle, of which 243 are registered in the names of Raybar Investments S.A. and 671 are registered in the name of Robert E. Heal, copies of which are attached hereto, be delivered into Court and held by the Accountant of the Supreme Court of Ontario, such shares to remain in Court pending further order of this court.”

11 This is a summary of the transactions between the parties commencing with the Redemption Agreement of June 15, 1975. The contention of Owens is that Heal and Yelle disposed of 100 of their shareholding in Martigua 914 shares being redeemed and the other 86 shares being sold to Owens and Keller on June 16. Owens is saying that Heal is no longer a shareholder of Martigua.

12 But, as is seen clearly from the order of the Supreme Court of Ontario cited above, 671 shares in Martigua are still registered in Heal's name. Though the share certificates are held by the Accountant of the court pursuant to the order of November 10, the records of Martigua show Heal as the holder of 671 shares. And in January 1982 the Third Circuit Court, Civil Section in the City of Panama, on Heals applications called a special meeting of Martigua's shareholders for the purposes inter alia, of electing new officers and directors. This meeting was held on February 12, 1982. Owens and the other directors were removed and heal, Mrs. Heal and Yelle were elected directors in their place. At a directors' meeting held later the same day Owens was removed from the office of President and the Vice President, Secretary and Treasurer were also removed. Heal was elected President, Mrs. Heal secretary and Yelle treasurer. The new President was authorised “to appoint and deal with such counsel, accountants, auditors, bankers and such other firms and/or corporations as he may deem necessary or desirable in connection with the business and affairs of Martigua”.

13 Subsequently other legal manoeuvres tools place in Panama but according to the affidavits of the Panamanian lawyers which, have been tendered, they have not altered the position under Panamanian Law. On April 22nd, 1982 Owens commenced proceedings by summary action against Martigua in which he claimed orders declaring null and void the removal on February 12th of himself and the other directors and the cancellation of the records returned to the Public Registry in respect of the meeting of February 12th. And on May 14th, 1982, the Second Judge of the Circuit Court ordered that the decisions of the meeting of February 12 be suspended and not recorded in the Public Registry.

14 However on May 27th, 1982, pursuant to a writ filed by Martigua, Heal and others requesting the court to protect their constitutional rights which they considered were violated by the order of May 14, the Second Court of the Circuit of Panama issued a note which suspended the effects of the order of May 14. The relevant legal position in Panama is now as stated in paragraphs 11 to 15 of the affidavit of Jaime Mora Solis, Professor of Civil Law at the University of Panama and Professor of Commercial Law at the University of Santa Maria which I accept. His opinion based on his knowledge of the Laws of Panama is

• (1) the note of May 27th effectively suspended the effects of the order of May 14th until the writ for the protection of Constitutional rights is resolved and the order of May 14th, 1982 is of no effect until such time;

• (2) by reason of the note of May 27th the order of May 14th would not be effective for any purposes whatsoever in any legal proceedings until after the writ for the protection of constitutional rights has been determined by the courts of Panama;

• (3) under Panamanian Law Heal, Mrs. Heal and Yelle were lawfully elected directors of Martiqua from February 12th, 1982 until the, present time, and

• (4) under Panamanian Law Heal, Mrs. Heal and Yelle were lawfully appointed President, Secretary and treasurer respectively of Martigua from February 12th,...