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Laidlaw Holdings Ltd v Maxam Gold Bank Ltd [2000] TOLawRp 17; [2000] Tonga LR 125 (1 May 2000)

IN THE SUPREME COURT OF TONGA

Laidlaw Holdings Ltd

v

Maxam Gold Bank Ltd

Supreme Court, Nuku'alofa
Ward CJ
C 276/2000

11, 13 April 2000; 1 May 2000

Company law — company failed to follow Act — ordered for company to rectify the share register

Maxam Gold Bank was registered and a certificate of incorporation issued by the Registrar of Companies on the 8 July 1999. The application for registration was made by Mrs Fuiva Kavaliku. In the application form she was named as sole shareholder and her shareholding was written as "100%". Laidlaw Holdings Ltd was registered and incorporated on 23 March 2000. On that day, Fuiva Kavaliku signed a share transfer form transferring 100 shares in Maxam Gold Bank to Hemaloto 'Alatini for one dollar and, on 29 March 2000, he signed a share transfer form transferring the shares to Laidlaw Holdings Ltd for ten dollars. On 29 March the forms were delivered to the company office with a covering letter asking that they be entered on the company share register. The company secretary replied on 30 March "refuting your claim to shares" in the company and threatening various actions if the claim was pursued. The company claimed that on 13 July 1999 Fuiva Kavaliku authorised the transfer of her shares to Christopher Pedras. The Companies Act required the company to enter the name of the transferee on the share register "forthwith". Laidlaw Holdings contended that the transfer from 'Alatini to Laidlaw dated 29 March 1999 had not been entered on the share register forthwith and as a result it sought a determination of its entitlement to have the transfer entered on the register.

Held:

1. The Court was satisfied that the statement on Form 1 that the number of shares held by Fuiva Kavaliku as the sole shareholder was 100% meant that there were 100 shares, all held by her. The Court was equally satisfied that she was entitled to transfer those shares to Hemaloto 'Alatini and he was subsequently entitled to transfer the shares to Laidlaw. Therefore, in accordance with section 91, the Court ordered that the Company rectify its share register by entering the transfers of 100 shares from Fuiva Kavaliku to Hemaloto 'Alatini on 23 March 2000 and from Hemaloto 'Alatini to Laidlaw Holdings Ltd on 29 March 2000.

2. The Court was not satisfied that it had the power to make the third order requested by Laidlaw and the application for that order was refused.

3. This application was necessary because of the failure of the company to follow the requirements of the Act and it was ordered to pay the applicant's costs.

Statute considered:

Companies Act 1995

Counsel for applicant: Mr Garrett
Counsel for respondent: Mr Foliaki

Note: The third order requested by Laidlaw, which does not appear from the judgment, was in the following terms:

"That Mr Christopher Pedras, his servants, agents and/or employees, are restrained from claiming any entitlement or interest in the Company and, shall refrain from making any public statement or advertisement in respect of the said Company and further, those persons are prohibited from entering into any contractual arrangement and/or dealings on behalf of the Company."

Judgment

Maxam Gold Bank was registered and a certificate of incorporation issued by the Registrar of Companies on the 8 July 1999.

Although, on the limited evidence before the court, it would appear that there has not been proper compliance with the requirements of the Act, section 18 provides that the certificate of incorporation is conclusive proof of the incorporation and that the requirements of the Act as to registration have been complied with.

The application for registration was made by Fuiva Kavaliku as sole applicant. The application on Form 1 names herself and Giovanni Kavaliku as the directors and herself as the sole shareholder. Following that, in the column for the number of shares, the entry is written as "100%". That is not a correct entry but, as the company was registered on the basis of the information on this form, I can only assume that it has been taken by the Registrar as meaning 100 shares.

Laidlaw Holdings Ltd was registered and incorporated on 23 March 2000.

On that day, Fuiva Kavaliku signed a share transfer form transferring 100 shares to Hemaloto 'Alatini for One dollar and, on 29 March 2000, he signed a share transfer form transferring the shares to Laidlaw Holdings Ltd for ten dollars.

On 29 March, in accordance with section 85 (2), the forms were delivered to the company office with a covering letter asking that they be entered on the company share register. The company secretary replied on 30 March "refuting your claim to shares" in the company and threatening various actions if the claim was pursued.

The Act requires the company to enter the name of the transferee on the share register "forthwith" and that has not been done.

As a result Laidlaw Holdings has come to the court seeking a determination of its entitlement to have the transfer entered on the register.

The company has produced evidence claiming that the shares were transferred by Fuiva Kavaliku to Christopher Pedras. It has produced a copy of a resolution passed on 9 July 1999, that, as of 13 July 1999, she authorised the "transfer of all corporate stock and all other rights of ownership and management to Mr Christopher A. T. Pedras".

Christopher Pedras has filed an affidavit exhibiting a number of resolutions of the directors at a meeting apparently held on 9 July 1999 and the minutes of a meeting of the Board of Directors on 23 July 1999.

It would be reasonable to describe those documents as remarkable. They are frequently incomprehensible and, in a number of critical aspects, appear to be mutually contradictory. They also reveal an ignorance of the Act and even of its correct name and failure to comply with many of its provisions. However, I do not consider I have sufficient evidence upon which to reach any final conclusion about their contents at this stage and neither do I need to do so.

Mr Foliaki for Maxam does not deny that the company has failed to comply with many mandatory requirements of the Act. The method of suggested transfer of the shares disclosed in the resolutions of the company is not, in itself, in accordance with the Act. In particular, he admits there has never been any attempt to register the suggested transfer of the shares from Fuiva Kavaliku to Christopher Pedras.

The requirements of the Act should have been complied with and, in the absence of any such registration following a suggested transfer nine months previously, the court can only conclude that the shares were not transferred in the manner claimed by Christopher Pedras. The evidence on Form 1 is that the shares at the time of registration and incorporation of the company were all held by Fuiva Kavaliku and there is no proper evidence of that having changed.

In accordance with section 91(3), I consider it necessary to decide the meaning of the statement on Form 1 that Fuiva Kavaliku holds 100% of the shares in Maxam and the entitlement of Laidlaw to have its name entered in the register.

I am satisfied that the statement on Form 1 that the number of shares held by Fuiva Kavaliku as the sole shareholder is 100% means that there are 100 shares, all held by her. I am equally satisfied that she was entitled to transfer those shares to Hemaloto 'Alatini and he was subsequently entitled to transfer the shares to Laidlaw.

In those circumstances, in accordance with section 91, I order that the Company rectify its share register by entering the transfers of 100 shares from Fuiva Kavaliku to Hemaloto 'Alatini on 23 March 2000 and from Hemaloto 'Alatini to Laidlaw Holdings Ltd on 29 March 2000.

I am not satisfied that I have the power to make the third order requested by Laidlaw and the application for that order is refused.

This application has been necessary because of the failure of the company to follow the requirements of the Act and it must pay the applicant's costs.