Busoga Millers and Industries Ltd v Patel (Civil Appeal No. 11 of 1955) [1955] EACA 316 (1 January 1955) | Company Shares | Esheria

Busoga Millers and Industries Ltd v Patel (Civil Appeal No. 11 of 1955) [1955] EACA 316 (1 January 1955)

Full Case Text

## COURT OF APPEAL FOR EASTERN AFRICA

Before SIR BARCLAY NIHILL (President), SIR NEWNHAM WORLEY (Vice-President) and Hooper, J. (Kenya)

## THE BUSOGA MILLERS & INDUSTRIES LTD., Appellant (Original Defendant)

ν.

## PURSHOTTAM CHANDUBHAI PATEL, Respondent (Original Plaintiff) Civil Appeal No. 11 of 1955

(Appeal from the decision of H. M. High Court of Uganda, Lewis, J.)

for delivery-up of Shares—Detinue—Conversion—Whether demand Claim required where claim though in definite is based on a conversion—Posting of letter—Presumption as to dispatch and delivery of letter—Letter not properly addressed-Position of infant transferee of property-Shares bought in name of person other than purchaser-Equity-Presumption of resulting trust-Whether order for rectification of company's register and for delivery-up of share certificate may be made where registered owner is not party to the proceedings in which order purported to be made.

The respondent, then aged 19 years, claiming to be the legal and beneficial owner of certain shares in the appellant company, which shares were bought by $X$ in his name, sued the company in definue alleging that it was in possession of the certificate for the shares notwithstanding his demand for its delivery-up, and claimed its delivery-up costs "and any further and other relief". The company denied (a) that the respondent owned any shares so that it could not be in possession of any certificate of the respondent for them and $(b)$ that it had received any letter of demand for delivery-up.

At the time the suit was instituted the shares alleged by the respondent to be his were registered in the name of Y who was not made a party to the proceedings.

The trial Judge ordered delivery-up of the certificate of shares, rectification of the company's register by registering the respondent's name as holder of the shares and the giving of notice of the said registration to the Registrar of Companies.

There was no evidence that the letter of demand was correctly addressed, no post box number being indicated.

It was (inter alia) argued: (a) that as no ground for rectification had been made in the plaint and as any order for rectification would affect or prejudice the rights of the registered owner of the shares concerned who was not a party to the proceeding, the trial Judge should not have ordered rectification and delivery-up, and, $(b)$ that the respondent having been a minor at the time the shares were registered in his name, no valid contract was made between him and the company so that he did not, in law, become a member of the company or the registered owner of the shares, reference being made to the Contract Ordinance.

$Held$ (3-9-55).—(1) Whilst there may be a presumption that a letter correctly addressed and dispatched by the usual course of post will be received by the addressee, where a letter<br>is not correctly addressed, proof of posting is not enough to justify the presumption of delivery.

(2) $Qu\acute{a}re$ —Whether, notwithstanding that the complaint was confined to detinue, as a conversion of the shares was alleged, it was necessary for the respondent/plaintiff to prove a demand.

(3) A court cannot order the name of a bona fide purchaser of shares to be removed from the company's register without his being made a party to the proceedings.

(4) No ground for rectification having been disclosed in the plaint an order for rectification should not have been made.

(5) In the circumstances of the existing proceedings upon the trial Judge being satisfied that there was a deprivation of a beneficial interest in the shares, an inquiry into damages should have been ordered.

(6) A presumption of a resulting trust arises where on a purchase of property it is $\frac{1}{2}$ conveyed into the name of someone other than the purchaser, but this can be rebutted by evidence of the actual intention of the purchaser. In the instant case there was no such evidence.

(7) In Uganda, the position of an infant transferee of property is the same as at common law, so that he may be the transferee of property whether by purchase or gift, subject, as to the transfer of shares to any special provisions of the Companies Ordinance '(Cap. $212$ ).

Appeal allowed.

Appear anowed. Cases referred to: New Chile Gold Mining Co. (In re) (1890) 45 L. R. Ch. D. 598; Mohori Bibee v. Dhurmodas Ghosi (1902) 30 I. A. 114; Raghava v. Srinivasa (1917) I. L. R. 40 M

Nazareth (S. C. Gautama with him) for appellant company.

Wilkinson for respondent.

SIR NEWNHAM WORLEY (Vice-President).—The subject matter of these proceedings is the certificate for 30 fully paid-up shares numbered 82 to 111 inclusive in the appellant company. The respondent claims to be the owner, both legal and beneficial, of these shares and in the High Court he sued the appellant company in detinue alleging that it was in possession of the certificate (although the numbers of the 30 shares were not specified in the plaint) and further alleging that although by letter dated 27th October, 1951, he had, through his advocate, demanded delivery-up of the certificate, the company was detaining the same. The relief claimed was the delivery-up of the certificate, costs, and "any further or other relief". In its written statement of defence the appellant company denied that the respondent was the owner of any shares in the company, that it was in possession of any certificate to any shares of the respondent or was detaining the same, and further it denied receiving any letter from the respondent or his advocate demanding delivery of any certificate. The learned trial Judge decreed the suit for the plaintiff-respondent and ordered "that the defendants do deliver to the plaintiff a certificate for 30 fully paid-up shares of Sh. 1,000 each and rectify its register by registering the name of the plaintiff as holder of 30 fully paid-up shares of Sh. 1,000 each numbered 82 to 111 inclusive and that notice of the said rectification be given to the Registrar of Companies". The appellant company appealed against the whole of this decree.

A number of points of law are raised in the memorandum of appeal and were argued before us and a great number of authorities were cited, but in the time at my disposal I propose to deal only with three or four of the most important points.

The first point is whether the respondent proved a demand for the certificate before action brought. At the trial, Rambilas Sirdaw, a director of the company, swore that he never received any communication from the respondent or his father and the only evidence called for the respondent was that of a correspondence clerk in Mr. Wilkinson's office who produced, without objection, a copy of a letter dated 27th October, 1951 (exhibit A) which reads: $-$

"The Busoga Millers & Industries Ltd.,

Jinia.

Dear Sirs,

I am instructed by Mr. Purshottam Chandubhai Patel, a shareholder in your company that you are in possession of the certificate relating to his shares and to demand that you forward this certificate by return post.

> Yours faithfully, (Signed) P. J. Wilkinson."

He also produced a postage book (exhibit B) which he said showed that a letter was posted to the company on that date. He added that if any letter was returned by the Post Office it would be filed. The learned trial Judge was satisfied from this evidence that the letter of which exhibit A was a copy "was in fact dispatched to the company". He does not say, but presumably intended to imply, that he was satisfied it was received by the company. There may of course be a presumption that a letter correctly addressed and dispatched by the usual course of post will be received by the addressee but there is in fact in the instant case no evidence that the letter was correctly addressed. The postage book, exhibit B, has unfortunately disappeared and we do not know whether it showed how the envelope was addressed, but I would not be prepared to hold that the address as shown on exhibit A was sufficient. It is common knowledge that the Postal Administration in the East African Territories does not deliver correspondence except to Post Office boxes or private bags and although Jinja is not a very large place I do not think that we ought to presume that the address was sufficient and that the letter was delivered. The company had its registered office at the Lake Shore plot of the company at Jinja and its postal address was P. O. Box 207, Jinja. This appears in the minutes of the first meeting but that address, if not already known to the respondent's solicitors, could have been ascertained by inquiry from the Registrar of Companies, and it is rather surprising that a letter of this nature was not sent by registered post. For my part, therefore, I am of opinion that the proof of posting was not sufficient to justify the presumption of delivery, but I do not propose to decide the appeal on this point for the following reason. I do not think it is altogether clear that in a case of this nature it was necessary for the respondent to prove a demand. In *Halsbury's Laws of England*, 2nd Ed. Vol. 1, para. 38, at p. 36, it is said:

"A demand would appear to be necessary before commencing an action of detinue, although, of course, if the plaintiff, without proving an actual demand and a refusal, show that the defendant has, by his mode of originally obtaining the goods or by his conduct in respect of them, so dealt with them as to have 'converted' them to his own use, then the plaintiff may sue him for the conversion without proof of any demand."

The instant case, as would appear, is one where the respondent alleges a conversion of the shares and, although the complaint was confined to detinue and no amendment has been asked for, I think it would be unsatisfactory to attempt to decide this appeal on a point of pleading and to leave untouched the real issue between the parties.

The second point with which I wish to deal is covered by paragraphs $(b)$ and (c) of the first ground of the memorandum of appeal, namely that as no ground for rectification had been made in the plaint, and as any order for rectification would affect or prejudice the rights of one P. N. Sirdaw (the present registered owner of shares Nos. 82-111) who was not a party to the proceedings, the High Court was wrong in ordering rectification and delivery-up of the certificate for these shares, which was and presumably still is, in the possession of P. N. Sirdaw; if the respondent has been deprived of any beneficial interest in the shares by any action of the appellant company, the proper course it is said was for the court to order an inquiry into damages. In my opinion this argument must succeed. Mr. P. N. Sirdaw is a son of Rambilas Sirdaw referred to above and is also a director of the company but these facts are no ground for assuming that he was not a bona fide purchaser for value of the shares in suit which were transferred to him in the circumstances which I shall consider later in this judgment, and I take the law to be correctly stated in Palmer's Company Precedents 16th Ed. Part 1, p. 1063, as follows: -

"Where the rights of third parties will be affected by rectification the register cannot be rectified in their absence on a motion."

Mr. Wilkinson referred us to Gore-Browne's Handbook of Joint Stock Companies, 41st Ed., p. 221, where it is said: -

"If it can be shown that the holder obtained the shares from some person who could not give him a title to them, the name of the true owner will be retained upon or restored to the register, and the holder will lose the shares. But if the holder acquired the shares in good faith, having given value for them, relying upon an untrue certificate issued by the company, the company would be estopped from denying his title to the shares which he was induced to buy or pay for by being shown the certificate. This, however, gives the holder only a right to damages against the company and not to the shares as against the true owner."

I have no doubt that this passage correctly states the law as laid down in the three cases which are cited as authority for it, but I do not see how those cases can be put forward as authority for the proposition that a court can order the name of a bona fide purchaser of shares to be removed from the register without his being made a party to the proceedings. Moreover, I think that Mr. Nazareth is correct when he says that the relief of rectification could not, in this case, be given by the court without amendment of the plaint: under Order 7, rule 7, Mulla's Code of Civil Procedure, 10th Ed. at p. 560, has the following comment: —

"In order, however, to entitle a plaintiff to a relief under the claim for general relief it is necessary that the ground for such relief should be disclosed by the allegations in the plaint. A plaintiff cannot be entitled to relief upon facts or documents not stated or referred to by him in 'his pleadings.'"

In the instant case the plaintiff-respondent was asking for the delivery-up of the original issued certificate which showed him as the registered owner of the shares in suit and there was nothing on the pleadings nor was any amendment asked for averring that his name had been wrongfully removed from the register.

I pass now to the third point and the substantial issue in the case, i.e., who was the beneficial owner of the shares in question, the respondent or one Manjubhai Ambalal Patel otherwise known as M. A. Patel? The learned Judge's findings that M. A. Patel was not the beneficial owner of these shares is vitiated by his failure to examine sufficiently the history of the matter, and his misdirection of himself on the evidence. In referring to the evidence of Rambilas Sirdaw the learned Judge quotes him as saying: $-$

"The 30 shares registered in the name of the plaintiff were given tothe company on lien by M. A. Patel purporting to act for the plaintiff. The plaintiff owed the company money."

The learned trial Judge then says that this evidence can only mean that the company at that date, whenever it was, recognized the plaintiff as the owner of the shares. With respect, I think this is a false inference. If Rambilas Sirdaw did say in the witness-box that the plaintiff owed the company money it was an obvious slip, for this has never been alleged by anybody and the record shows that Sirdaw went on to say "he lodged the 30 shares as security"; this can only refer to M. A. Patel. The learned Judge also considered that the evidence of Rambilas Sirdaw was "clearly biased" because the shares are now registered in the name of his son and Mr. Wilkinson has conceded that this discounting of the evidence led for the defence was not justified. For these reasons, therefore, I think that this Court is free and indeed is bound to examine the evidence and the circumstances for itself and to reach its own conclusion on the question of where the beneficial interest lay.

The Memorandum of Association shows that the company was established on 1st July, 1948, to carry into effect an agreement dated 27th March, 1948, made between M. A. Patel and one Raichura for the acquisition of the latter's business. The share capital of the company was Sh. 300,000 divided into 300 shares of Sh. 1,000 each. It is conceded that the company's books show that prior to incorporation M. A. Patel was credited with Sh. 30,000 cash which appears to have been paid out to Raichura, and that he also paid on behalf of the company further sums of Sh. 45,000 and Sh. 30,000 to Raichura; he thus acquired credit of Sh. 105,000 and in August is debited with the sum of Sh. 100,000, this being used in payment for 100 shares of which 40 were registered in his name, 30 in the name of one C. A. Patel (who, it seems, is a brother of M. A. Patel and father of the respondent). The remaining 30 were registered in the respondent's name.

When the company started M. A. Patel was the managing director, but he appears to have seriously mismanaged the business and on 13th June, 1949, heacknowledged in writing (exhibit 5) that a net sum of Sh. 83,500 was due from him to the company and agreed that pending payment of this sum the company should have "a first and paramount lien on all my fully paid shares in the company". He had previously, on 20th April, 1949, written to the company as. $\overline{\text{follows}}$ : —

"You are aware of the fact that before the above company was floated I had in my credit the sum of Sh. 100,000. It was with my own this amount [sic] that I bought 40 shares in my personal name, 30 shares in the name<br>of my nephew, Purshottam C. Patel, and 30 shares in the name of my brother, Chandubhai A. Patel. This was done for my own convenience. I further confirm that I have full power and authority to deal with the said 60 shares of my said relatives in any manner whatsoever."

In fact, the 30 shares allocated to C. A. Patel were transferred into the name of M.<sub>a</sub>A. Patel on 5th May, 1949. The remaining 30 shares registered in the name of the respondent were not affected, but on 1st June, M. A. Patel gave to the appellant company the curious letter admitted as exhibit 3. I should remark, in parenthesis, that these two letters were admitted not as truth of their contents but as evidence of representations made by M. A. Patel to the company leading upto the company's sale of the 30 shares in suit. Exhibit 3 reads: -

"I hereby confirm that 30 fully paid-up shares bought in my name in the Bugosa Millers & Industries Ltd. by Mr. Manjubhai A. Patel should for all intent and purpose [sic] and in all respects be treated as personal property of Mr. Manjubhai A. Patel.

## Yours faithfully,

For and on behalf of Purshottam Chandubhai Patel, (Sd.) M. A. Patel."

It is not suggested that M. A. Patel was authorized by the respondent to write this letter.

M. A. Patel did not pay the debt due to the company and we were informed from the Bar that there have been court proceedings between them. On 5th February, 1951, the company gave M. A. Patel notice of their intention to sell his shares and in due course they did so, including the 30 shares registered in the respondent's name. All members of the company were circularized asking if they wished to buy shares, but, in fact, all the shares were sold to directors, the 30 shares in suit being sold as has already been said, to P. N. Sirdaw, a son of Rambilas Sirdaw, the transfer being registered on 7th September, 1951. In the return to the Registrar of Companies for 1952 these shares were shown as having been transferred to one, Havili Ram, but this appears to have been a clerical mistake; the Minutes of 7th September, 1951, and the Memorandum of Transfer of Shares show that it was the 30 shares originally registered in the name of C. A. Patel which were transferred to Havili Ram.

There is no dispute that the shares in suit were originally paid for by M. A. Patel though registered in the respondent's name. I accept Mr. Nazareth's argument that in these circumstances a resulting trust will be presumed in favour of the person who is shown to have paid the purchase money in the character of purchaser, and I also accept his argument that there is no evidence that M. A. Patel intended to benefit his nephew so as to raise any presumption of advancement. The only evidence to rebut the presumption of a resulting trust was given by the respondent and was, to say the least, vague and contradictory. He was at the time of the purchase of the shares a schoolboy aged 15 years. He was in India where he normally lives, and indeed he only came to Uganda for the purpose of this litigation. He admitted that he had never received the share certificate which, according to the evidence of Rambilas Sirdaw, had been retained by M. A. Patel. The respondent first of all claimed that he applied for the shares in 1948 and paid the Sh. 30,000, but admitted in cross-examination that this was untrue and that his father had told him that he (the father) had bought the shares for the respondent. But he also admitted that in 1948 he knew nothing about the shares and that he knew that it was M. A. Patel who applied for the shares. He claimed that his father "had cash in Sova Industries and transferred it to the defendant company for shares" but he never explained his means of knowledge nor did he claim to know how much cash was transferred or for what shares. Lastly, he admitted that M. A. Patel "did say I had no claim to shares as my money not received". I think there can be no doubt that the respondent had no first-hand knowledge of this transaction at all and that anything he did know about the purchase of these shares was only hearsay acquired from his father. The father, who also lives in India, was not called. One might have expected that if the story of the father transferring money from Soya Industries to the company had any grain of truth in it, it could have been proved and would have been proved by documentary evidence. M. A. Patel was not called by either party although it appears that he was available. I would not be prepared myself to draw an adverse inference against either party for not calling him. It seems that he is at arm's length with the company, and the respondent's case

was that M. A. Patel had defrauded him of his shares; in these circumstances it is quite understandable that neither side was prepared to treat him as a credible witness. In my view, therefore, looking at the case as a whole, the respondent's evidence did not rebut the presumption of a resulting trust. I entertain no doubt that M. A. Patel was the beneficial owner of the shares in suit and that the company was justified in treating him as such and in dealing with the shares as they did.

This finding is sufficient to dispose of this appeal, but I should perhaps add a word on Mr. Nazareth's argument that since, under the Contract Ordinance of Uganda (Cap. 207) (which is the Indian Contract Act applied with modifications by order of the Secretary of State) an infant is incapable of contracting, the whole transaction between the respondent and the company, if there were in truth any such transaction, was void. Mr. Nazareth relied upon the Privy Council case of Mohori Bibee v. Dhurmodas Ghose (1902) 30 I. A. 114, but that decision does not say that an infant cannot be the transferee of property whether by purchase or gift. That appears to be the case even in India under the Transfer of Property Act: see Mulla's Transfer of Property Act, 3rd Ed. p. 76, and Raghava v. Srinivasa (1917) I. L. R. 40, Mad. 308. The Indian Transfer of Property Act has not been applied to Uganda and I apprehend that the position of an infant transferee is the same as at common law in England subject, as regards transfers of shares, to any special provisions of the Companies Ordinance (Cap. 212). Section 64 of that Ordinance is substantially the same as section 73 of the Companies Act, 1948, and provides that the shares or other interest of any member of a company shall be moveable property. In *Buckley on the Companies* Acts, 12 Ed. at p. 178, it is said that a transfer to an infant is not void but voidable. However, I think it unnecessary, as I have said, to go further into this question.

I would therefore allow this appeal, set aside the decree appealed from and substitute for it a decree dismissing the suit. The appellant company should have costs of the proceedings in the High Court and the costs of this appeal.

SIR BARCLAY NIHILL (President).—I concur in the judgment prepared by the learned Vice-President and have nothing to add. An order will be made in the terms he has proposed.

HOOPER, J.—This is an appeal by the defendants, the Busoga Millers and Industries Ltd., against the judgment of the Honourable Mr. Justice Lewis delivered on 24th November, 1954, at Kampala, Uganda, in which he gave<br>judgment for the plaintiff, Mr. Purshottam Chandubhai Patel, for the delivery-up by the defendant company to him of a certificate for 30 fully paid-up shares of Sh. 1,000 each in the defendant company and ordered the company to rectify its register by registering the name of the plaintiff as the holder of the said shares, which were numbered 82 to 111 (both inclusive), notice of the rectification to be given to the registrar of companies.

Before dealing with the points raised in the appeal by the appellant company it seems desirable to set out the facts of the case, so far as they can be ascertained from the evidence led in the courts below.

By a plaint dated 24th April, 1952, the plaintiff, Mr. Purshottam Chandubhai Patel, a merchant of Nadiad, in India, then about 19 years of age, claimed the delivery-up to him by the defendant company of a share certificate in respect to 30 shares in the defendant company of which he claimed to be the owner, and which was in the possession of the company, on the grounds that the company had detained and refused to deliver-up the said shares to him in spite of a demand addressed on his behalf to the defendant company by his advocate, dated 27th October, 1951. The plaintiff also asked for costs and any further or other crelief. $\frac{1}{2} \cdot \frac{1}{2}$

By their defence dated 19th June, 1952, the defendant company denied that the plaintiff owned any shares in the company and consequently denied that they had in their possession any certificate of the plaintiff for any shares in the company or had detained or was detaining any such shares. Further, the defendant company denied that they had ever received any letter either from the plaintiff or his advocate asking for the delivery-up of the certificate.

At the hearing of the case on 18th November, 1954, the plaintiff gave evidence in support of his claim. His evidence-in-chief was extremely brief; and the principal information by him was extracted in cross-examination. In chief the plaintiff stated that he was born on 18th May, 1933, and came to Uganda specially to fight the action. He was then 21 years of age. It may well be true that he did come to Uganda from India shortly before the hearing of the case, since it appears from the record that on 8th October, 1952, the case was adjourned .sine die as the plaintiff was then in India. The plaintiff stated in chief that he was the owner of 30 fully paid shares in the defendant company for which he had paid the sum of Sh. 30,000. He had never received any share certificate in respect to these shares nor had he transferred the shares or authorized any other person to do so.

In cross-examination the plaintiff stated that he bought the shares in 1948 but at once contradicted himself by saying that it was his father (whose name and occupation and whereabouts appear never to have been disclosed with any degree of certainty) but who may be Chandubhai Ambalal Patel, second on the Return of Allotments (exhibit 1), had bought the shares for him who had paid for them. He added that his father was still in India and had been when he bought the shares in 1948. The plaintiff then stated that his father had paid for the shares in the defendant company by transferring to it cash he had in Soya Industries, though the nature and whereabouts of this company are not disclosed. The plaintiff stated that he had never asked for a share certificate himself, though his father had done so in 1948. The plaintiff added that he was then a schoolboy in school and at that time knew nothing about the shares. The plaintiff added that he had never seen the Memorandum and Articles of Association of the defendant -company (both of which were put in evidence by consent).

The plaintiff also stated that a person named Manjubhai Ambalal Patel (who was the managing director of the company and whose activities play an important part in this case, and who has been referred to throughout as M. A. Patel) was his uncle and this incidentally points to the fact that Chandubhai Ambalal Patel, second on the return of allotments (exhibit 1), is the father of the plaintiff. His place of residence is given as Nadiad, Kaira District, India, being the same address as that of the plaintiff himself, who figures as No. 3 on the return of allotments $\cdot$ (exhibit 1). Finally, the plaintiff stated that he had knowledge of the dispute between M. A. Patel, his uncle, and the defendant company about the shares, though he had heard nothing about any lien on the shares of the company and - did not know that his name had been removed from the share register in 1951.

It is quite clear that the plaintiff knows nothing or next to nothing about $\mathbf{I}$ $\cdot$ any rights he may have to the 30 shares in question and indeed in re-examination The has stated that it was his father who had instructed him in October, 1951, to claim the shares, when he was about 18 years of age.

Such was the case for the plaintiff.

Only one person was called for the defence and that was a person called Rambilas Sirdaw, a director of the defendant company. He produced in evidence the register of the company (exhibit 1) stating that the plaintiff was not a member of the company in April, 1952 (that is the date when the plaint was drawn). Mr. Sirdaw then goes on to explain how it came about that the plaintiff was not a member of the company on that date. Mr. R. Sirdaw admitted that the plaintiff was a member of the company on 18th July, 1948, holding 30 shares in the company, numbered 82 to 111 inclusive, these shares being registered in the plaintiff's name at the request of his uncle, M. A. Patel. Mr. R. Sirdaw added that M. A. Patel held 40 shares in the company in his own name and there were also 30 shares in the name of Chandubhai Patel (who may be the father of the plaintiff). Mr. Sirdaw, however, states that it was M. A. Patel himself who paid for these shares; and if this is true neither the plaintiff nor Chandubhai paid for or owned the shares, which, for some reason which has never been disclosed, were registered in their respective names. Mr. Sirdaw produced in evidence the Memorandum and Articles of Association of the company (exhibit 2) but as they had already been put in by consent during the cross-examination of the plaintiff, this appears to have been unnecessary as they were already in evidence.

Mr. Sirdaw then goes on to explain how it was that the plaintiff lost any interest he may have had in the 30 shares registered in his name in the books of the company. According to him, M. A. Patel got into difficulties and owed the company money. To cover his liabilities to the company he lodged the 30 shares registered in the name of the plaintiff as part of a security for his liabilities; in other words gave the company a lien amongst other things over the shares registered in the name of the plaintiff, which shares, Mr. Sirdaw stated, were purchased with M. A. Patel's money and in fact belonged to him, though registered in the name of the plaintiff.

At this point it seems desirable, in order to ascertain with at least some degree of accuracy what the facts of this case are, to turn to exhibit 5, which is a letter dated 13th June, 1949, addressed by M. A. Patel to the defendant company. In this letter M. A. Patel admits that he is owing the company the sum of Sh. 112,000, which was "due to the company by me on account of my misdeed, errors, and omissions of my part during the management of the affairs of the company by me as its managing director and person-in-charge of the affairs of the company", though he gives no details of his "misdeed, errors and omissions". The letter then goes on to say, in paragraph 2, that the company agreed to take from M. A. Patel the sum of Sh. 78,000 as being due from him to the company, in addition to a sum of Sh. 5,500 referred to in paragraph 3 of the letter, bringing the total sum due by him to the company to Sh. 83,500. Then comes an important statement in paragraph 4 of the letter: "pending payment of the said sum to the company, I agree that the company shall have a first and paramount lien on all my fully paid shares in the company". In this connexion reference may be made<br>to article 26 of the Memorandum and Articles of Association, which states: "The company shall have a first and paramount lien upon all the shares registered in the name of each member (whether solely or jointly with others) and upon the proceeds of the sale thereof for his debts, liabilities and engagements solely or jointly with any other person to or with the company". It therefore appears, on the assumption that what Rambilas Sirdaw says is true, namely, that M. A. Patel had paid for all the shares registered in the name of the plaintiff and also in the name of Chandubhai Patel and consequently were in fact his, though not registered in his name, that the company would have had a lien on the shares of the plaintiff amongst others—subject to determination of the legal position created. by registration in the plaintiff's name.

Article 27 of the Memorandum and Articles of Association provides that "for the purposes of enforcing such lien the directors may sell the shares subject: thereto in such manner they think fit". Section 29 of the memorandum provides. that: "Upon any sale ... for enforcing a lien the directors may cause the purchaser's name to be entered in the register in respect of the shares sold, and the purchaser shall not be bound to see to the regularity of the proceedings or to the application of the purchase money, and after his name has been entered in the register in respect of such shares the validity of the sale shall not be impeached by any person, and the remedy of any person aggrieved by the sale shall be in damages only and against the company exclusively."

It may be desirable at this point to consider the terms of paragraph 10 of the memorandum. It provides as follows: "Save as herein otherwise provided, the company shall be entitled to treat the registered holder of any share as the absolute owner thereof, and accordingly shall not, except as ordered by a court of competent jurisdiction, or as by statute required, be bound to recognize any equitable or other claim to or interest in such share on the part of any other person."

This may also be a convenient point in which to examine two other letters written by M. A. Patel. The first is dated 20th April, 1949 (exhibit 4) and in it M. A. Patel states that before the flotation of the defendant company he had to his credit the sum of Sh. 100,000 and with this sum he purchased the following shares: -

- $(1)$ 40 shares in his own name. - (2) 30 shares in the name of the plaintiff, his nephew. - (3) 30 shares in the name of Chanubhai A. Patel, his brother.

This is borne out by the entries on page 5 of the ledger of the company. M. A. Patel does not say why he did not have the whole of the 100 shares registered in his own name. His only explanation is that "This was done for my own convenience". M. A. Patel then adds "I further confirm that I have full power and authority to deal with the said 60 shares of my said relatives in any manner whatsoever". There is nothing on the record to show that he had any such full power and authority, and indeed the mere fact that the plaintiff has brought this action itself casts at least some doubt upon it. As the learned trial Judge has pointed out M. A. Patel, who could have explained so much and have have been of such great assistance to the court in ascertaining the facts of this case, did not give evidence.

The other letter (exhibit 3) is a curious one. It is dated 1st June, 1949, and is addressed to the defendant company. It is signed by M. A. Patel "for and on behalf of Purshottam Chandubhai Patel". This letter is written in the first person singular and as it is a short one is reproduced verbatim:

"I hereby confirm that 30 fully paid-up shares bought in my name in the Busoga Millers and Industries Ltd. by Mr. Manjubhai A. Patel should for all intent and purpose and in all respects be treated as personal property of Mr. Manjubhai A. Patel."

There is no evidence to show why these two letters had been written, but it may not be unreasonable to assume that they were written preparatorily to the writing by M. A. Patel of the letter of 13th June, 1949 (exhibit 5). These two letters were admitted by the learned Judge not as truth of their contents but to explain ceratin facts relating to the sale of the plaintiff's shares by the company.

Since the plaintiff stated in evidence that in 1948 he knew nothing about his shares and was in fact a schoolboy at the time, it seems not unreasonable to conclude that he was not consulted by his uncle, M. A. Patel, when the latter wrote exhibit 3.

To return to the evidence of Mr. R. Sirdaw. After stating that the 30 shares registered in the name of the plaintiff were given to the defendant company as a lien "purporting to act for plaintiff" Mr. Sirdaw stated: "We gave him (i.e. M. A. Patel) 14 days to pay Sh. 78,000 (i.e. not including the Sh. 5,500 referred to in paragraph 3 of exhibit 5) and as he failed to pay sold them (i.e. the 30 shares of plaintiff) to my son P. N. Sirdaw." The registered owner of the plaintiff's 30 shares is consequently now P. N. Sirdaw, Rambilas Sirdaw's son, the transfer having been registered on 7th September, 1951. There is no evidence to show whether the shares registered in the name of Chandubhai Patel have similarly been sold. The only evidence on this point is a statement by Rambilas Sirdaw that he had never received any communication either from the plaintiff or his father. In the Annual Return of Shares for 1952, the 30 shares said to be bought by P. N. Sirdaw were shown as having been bought by one Havilal Ram, though this is said to have been a mistake.

It appears that all the other shares in the company registered in the name of M. A. Patel or owned by him were sold to the other directors of the company. These are the facts of the case so far as we have been able to ascertain them from the meagre and confused evidence given at the trial.

From this evidence it appears that the case for the defendant company is as follows: -

- (1) The 30 shares purporting to belong to the plaintiff were in fact not his, although registered in his name, but really belonged to M. A. Patel who bought them with his own money and retained all rights to them as his personal property. Exhibit 3 was obviously written in an attempt to prove this assertion. - (2) Shortly after the company had been floated M. A. Patel, the managing director of the company, became indebted to the company, by what appear to be fraudulent activities in the sum of Sh. 83,000 and the company called upon him to repay this sum, and in fact gave him nine months in which to do so. As he failed to do so the company exercised its lien over M. A. Patel's shares which it claimed to have in virtue of the provisions of Article 26 of the Memorandum and Articles of Association of the defendant company; and the directors of the company bought up the whole of M. A. Patel's shares in virtue of this lien. The shares registered in the name of the plaintiff were deemed by the company to be M. A. Patel's personal property and not that of the plaintiff, though registered in his name, and consequently the company deemed the lien created by Article 26 of the Memorandum to cover these shares. They were purchased by Rambilas Sirdaw, a director of the company and registered in the name of his son P. N. Sirdaw, who was the registered owner of the plaintiff's shares at the time the plaint was filed.

These appear to me to be the issues which were before the trial Judge, the plaintiff's case, of course, being that his father purchased the shares for him with cash from the "Soya Industries". The plaintiff's father gave no evidence and there is nothing to show whether such a concern as "Soya Industries" exists and there is no entry in the books produced to show that any shares were in fact purchased by the plaintiff's father for the plaintiff.

The principal grounds of appeal against the judgment of the learned trial Judge are as follows: $-$

- (1) The trial Judge erred in law and in fact in ordering the appellant company to deliver to the respondent a certificate for 30 fully paid-up shares in the appellant company. - (2) The Judge further erred in ordering the appellant company to rectify its register by registering the name of the respondent as holder of 30 fully paid-up shares of Sh. 1,000 each numbered 82 to 111 both inclusive since no claim for rectification had been made in the respondent's claim. - (3) Any such order as in (2) above would affect or prejudice the rights and position of P. N. Sirdaw who had not been made a party to the proceedings. - (4) The learned Judge erred in failing to consider that at the time of the allotment of the 30 shares to the respondent he was in fact a minor and accordingly no valid contract was made or could be made between the respondent and the appellant company; and consequently the respondent did not in law become a member of the appellant company nor the registered owner of the said shares. - (5) The learned Judge erred in law and in fact when he declined to find on the evidence that in fact M. A. Patel was the beneficial owner of the shares registered in the name of the plaintiff. - (6) The learned Judge erred in failing to hold that the respondent was estopped from denying that M. A. Patel had authority and right to create a lien on the shares of the respondent and otherwise deal with them and in failing to hold that the respondent was bound in law by the lien created by M. A. Patel. - (7) The learned Judge did not find as a fact that the respondent's letter dated 27th October, 1951, had been received by the appellant company, there being no evidence that the letter was properly or sufficiently addressed to the appellant company and as a result no cause of action in definue had been proved against the appellant company.

I now proceed to consider these grounds of appeal in the light of the arguments of learned counsel and of the law involved.

The plaint of 24th April, 1952, makes no claim to any rectification of the register of companies by registering the name of the respondent therein as holder of 30 fully paid-up shares. I am of the opinion that before any such order could have been made, even had it been asked for, it was essential for B. N. Sirdaw, the present registered holder of the shares claimed by the respondent, to have been made a party to the action. (See in re New Chile Gold Mining Co. L. R. Ch. D. 1890 p. 598). What, it may be asked, in this connexion, would be the position of **B.** N. Sirdaw, on the assumption that he is a holder in good faith and for value of the shares—or indeed of any other person similarly placed—when he finds that an order has been made without his knowledge the immediate effect of which is to deprive him of his title to the shares as the registered owner thereof for their transfer to a stranger? He has surely lost the money he paid for them. Indeed, apart from this aspect of the matter, the provisions of Article 29 of the Memorandum and Articles of Association, which it is agreed constitutes the contract between the company and its members, seems to me to put the matter beyond any doubt. As I have already recited its terms they need not be repeated here. Suffice it to say it is expressly stated that "the validity of the sale shall not be impeached by any person, and the remedy of any person aggrieved by the sale shall be in damages only ...".

Learned counsel for the appellant company has submitted that as the respondent was a minor at the time the shares were registered in his name no valid contract was made between him and the appellant company, with the result that he did not in law become either a member of the appellant company or the registered owner of the shares. The position here is not the same as in English law. The question of minority is governed by the provisions of section 11 of the Indian Contract Act which is in force in Uganda. It discloses the age of minority to be up to 18 years and not 21 years as in English law. The following comment is made on the section of the Indian Contract Act by Canning, 10th Edition, pp. $48-49:$

"According to the construction put by the Judicial Committee upon this and the connected sections, there can be no contract between persons one of whom is incompetent to contract; and agreement made with such a person is void, and not merely voidable, and cannot, when he ceases to be incompetent, be made valid by mere confirmation or ratification."

And further on the learned commentator states: —

"Whatever may be the nature of the agreement and although the incompetent person may have derived benefit under it, he cannot be made liable on it nor can he enforce it."

I am therefore of the opinion, that as learned counsel for the appellant company has submitted, the fact that the respondent was a minor at the time the shares were registered in his name in purported execution of a contract between him and the appellant company, proves that there never was a valid contract between him and the company. In point of fact, the respondent never entered into any contract with the appellant company at all and says so in his evidence. It was his father, he says, who bought and paid for the shares. He says that in 1948 he knew nothing about the matter; and that in October, 1951, it was his father who instructed him to bring the action claiming the certificate for the shares. I therefore would hold that there was no contract of any sort between the respondent and the appellant company whether on grounds of minority or otherwise: and I shall now deal with the question as to whether it was M. A. Patel who bought and paid for the 30 shares registered in the name of the respondent. and was consequently the beneficial owner of the shares.

As I have said, no evidence has been given by the father of the respondent to the effect that he bought the shares for his son; we only have the word of the respondent for this—on the other hand, exhibits 3, 4 and 5 are to the effect that it was M. A. Patel, the respondent's uncle, who purchased the 30 shares for the respondent with his own money and caused them to be registered in the respondent's name, though, as I have already remarked, he does not say why this procedure was adopted. Confirmation of the contents of the letters in this respect appears from the entries on page 5 of the ledger of the appellant company put in by consent during the hearing of the appeal. An entry on page 5 in August, 1948, shows a debit entry in respect to M. A. Patel in the sum of Sh. 100,000 accounted for by the purchase of 40 shares in the name of M. A. Patel himself; 30 shares purchased by him in the name of C. A. Patel (who may be the respondent's father); and 30 shares in the name of P. C. Patel, the present respondent. The position is somewhat obscure, but on the whole, and in the absence of any clearer evidence, I feel I must agree that in 1948 it was M. A. Patel who purchased the 30 shares on behalf of P. C. Patel and had them registered in his name; and -consequently I must also agree that he was the beneficial owner of these shares.

I have given due consideration to the claim by the appellants that there is no evidence to show that the letter sent by the respondent's advocate to the appellant company was ever received. I do not doubt that the letter was in fact dispatched, but it is possible that it did not reach its destination. The appellant company denies ever having received the letter of 27th October, 1951, and if this is true it is quite clear that as no claim had been made to the company for the return of the share certificate no action in law will lie against the appellant company in definue. The position might have been different had the appellant company received the letter of 27th October, 1951, and had refused to return the share certificate, or had merely contented themselvs with giving some explanation as to its transfer to the present holder. The copy of this letter, which is on the record, shows that it is addressed to "The Bugosa Millers & Industries Ltd., Jinja", without a P. O. Box No. being added. I feel in this connexion that we may take judicial notice of the fact that in Uganda (as in other East African territories) there is no uniform system of street numbers and consequently the P. O. Box No. system has been adopted. It is, of course, possible that the P. O. Box No. was placed on the envelope though not on the letter; and I bear in mind the submission of learned counsel for the respondent that, even had the P. O. Box No. not been placed upon the enevlope, the Post Office authorities would nevertheless have known where the registered office of the appellant company was situated and so have delivered the letter. On the other hand, I have difficulty in believing, in the absence of any evidence to that effect that the appellant company, when faced by a legal demand for the return of a share certificate which must have foreshadowed an action in law had the certificate not been delivered-up or otherwise satisfactorily accounted for, would intentionally have destroyed or otherwise suppressed the letter. After due consideration I accept the contention of the respondent that while there can be no doubt that the letter was written and dispatched it was never received by the appellant company.

For the reasons set out above I would allow this appeal. It may be that the respondent has a cause of action against the appellant company, but Article 29 of the Memorandum and Articles of Association makes it clear that the remedy of any person aggrieved by a sale of shares shall be in damages only; and this was clearly the correct remedy for respondent to pursue. But as the plaint is framed, I find great difficulty in acceding to the request of learned counsel for the respondent that this Court should order an inquiry as to damages. There should therefore be judgment for the appellant company with costs and the order of the court below that the company deliver to the plaintiff a certificate for the shares claimed with the consequent rectification of its register by registering the name of the plaintiff in the place of B. N. Sirdaw should be set aside and the notice of rectification given to the Registrar revoked. I agree that the company should have costs of the proceedings in the High Court and the costs of this $:$ appeal.