John Joseph Baker v The Raine Engineering Co Ltd (1970/HN/387) [1971] ZMHC 12 (30 November 1971)

JOHN JOSEPH BAKER v THE RAINE ENGINEERING CO LTD (1971) ZR 23 (HC) HIGH COURT CHOMBA J 30TH NOVEMBER 1971 (1970/HN/387) Flynote Company 20- Resolution by shareholders - No provision in the articles of association of a private company for passing of a resolution by share holders by merely signing resolution without convening a meeting - Validity of such resolution. Company - Directors' meeting - Validity of proceedings of a meeting of which 25 notice not given to one of the directors. Headnote The plaintiff was an employee of the defendant company under a written agreement. He was also nominated to the board of directors of the company. The shareholders of the company purported to pass a resolution by signing it, under which the plaintiff was removed from the 30 position of a director. The board of directors passed a resolution at a meeting of which notice was not given to the plaintiff, dismissing him forthwith from the employment of the company. The plaintiff challenged his dismissal and claimed damages for breach of contract and wrongful dismissal. He claimed, in the alternative, judgment, declaring: (1) that 35 the directors' meeting at which it was resolved that he be dismissed from service was irregular and therefore its proceedings were null and void; (2) that his purported dismissal by the defendant company was also null and void. Granting the application for the declaration: 40 Held: (i) In the absence of a specific provision in the articles of association of a private company authorising the passing of a resolution by the signing of it by the shareholders without any meeting having been convened, any such resolution was null and void. 45 CHOMBA J (ii) The proceedings of directors' meeting of which notice was not given to any of the directors were null and void. 1971 ZR p24 Case referred to: (1) Young v Ladies Imperial Club [1920] KB 523. H Reilly , Jaques & Partners, for the plaintiff. 5 I Zulu, Ellis & Co., for the defendant. Judgment Chomba J : The plaintiff's claim in this case is multifold - he is claiming damages for breach of contract of service; he also claims in tort damages for wrongful dismissal; and in the alternative he prays that 10 this court grant him a judgment declaring (1) that the directors' meeting at which it was resolved that he be dismissed from service was irregular and therefore null and void and (2) that his purported dismissal by the defendant company on the 13th April, 1970, was also null and void. It is common ground that the defendant company, Raine Engineering 15 Co., Ltd. which according to its articles of association is a private company, carries on business as construction engineers in Ndola; that by written agreement dated 4th November, 1969, the plaintiff, John Joseph Balker, was employed by the defendant company as a manager engineer on terms contained in the said written agreement to which further reference 20 is to be made in the course of this judgment; and that on the 13th April, 1970, by letter of the defendant company's administrative director, Mr William Herbert Harden, the plaintiff was informed that at a directors' meeting held on the 8th April, 1970, it was resolved that the plaintiff be given instant dismissal. The 25 parties have joined issue on the question whether or not such dismissal was wrongful. In justification of the dismissal the defendant company in its defence to the statement of claim averred that the plaintiff misconducted himself in that he planned transactions aimed at his taking over the defendant company with a person or persons unknown. The 30 defence further stated that by cl. 14 of the contract of service the defendant company had a right to dismiss instantly a misconducting officer of the company. The plaintiff denied indulging in such transactions alleged against him. It is further and in the alternative stated in the statement of claim, 35 that on the 8th April, 1970, the plaintiff was a director of the defendant company; that as such he was entitled to be given notice of any directors' meeting; that he was in fact not given notice of the directors' meeting of the 8th April, 1970, at which the resolution to dismiss him was passed. The defendant company's response to this averment was 40 disclosed in the course of the cross - examination of the plaintiff when it was suggested by Mr Zulu, counsel for the defendant company, to the plaintiff that under Art. 41 of the defendant company's articles of association non-receipt by any member of a notice of a meeting did not invalidate proceedings at such meeting. 1971 ZR p25 CHOMBA J The defendant company filed a counter - claim in which it claimed unliquidated damages in respect of the continued occupation by the plaintiff of a company house, namely No. 6 Rutland Avenue, Ndola from 13th April, 1970, to the 31st August, 1970. It will be observed that this period occurs after the purported dismissal of the plaintiff as earlier 5 indicated. The implication is that if the plaintiff was dismissed and ceased to be in the employment of the defendant company as from the 14th April 1970, then during that period he occupied the said company house unlawfully. The counter - claim also particularises various sums of money alleged to have been expenses incurred by the plaintiff and which 10 expenses were caused to be paid by the defendant company although they had been incurred by the plaintiff personally. These various sums are being claimed by the defendant company against the plaintiff. In his defence to the counter - claim the plaintiff joined issue on the question of damages for his occupation of the company house during the period 15 stated and in respect of the various moneys claimed he stated that some of the moneys had been deducted by the defendant company from the plaintiff's terminal salary and in respect of others he has disclaimed liability. I propose first to dispose of the counter - claim by the defendant 20 company. In the course of his evidence for the defence the said Mr Harden, the defendant company's administrative director, stated that the amount claimed against the plaintiff in respect of the plaintiff's expenses which were wrongly debited to the defendant company had been recovered by the defendant company. He in fact said that he was not certain that the 25 plaintiff owed any money to the defendant company and added that if any money was owing one way or the other such money was very little. The evidence of the plaintiff was that the moneys claimed in this regard had been deducted from his terminal salary. He was dismissed with effect from the 14th April, 1970, and I assume therefore that the terminal 30 salary was paid to him in April, 1970. The writ in this action was not issued until 12th May, 1970. The defence to the statement of claim was delivered on the 30th July, 1970. I am certain that by that date the defendant company and therefore the counter - claim need not have been made in respect of those moneys. Consequently I regard the 35 counterclaim, in so far as these moneys are concerned, to be vexatious and frivolous. For reasons to be stated in due course I cannot also uphold the counter - claim with regard to the unliquidated damages claimed in respect of the occupation by the plaintiff of the defendant company's house during the period 13th April, 1970 - 31st August, 1970. In the event I 40 dismiss the counter - claim with costs which are to be taxed in default of agreement. Adverting to the vexed question of the plaintiff's dismissal, I notice that there were three letters written by the said Mr Harden to the plaintiff in this connection. By letter dated 21st February, 1970, the plaintiff was 45 informed that at a directors' meeting held on the 18th February, 1970 it was resolved that he be requested to tender his resignation forthwith. The plaintiff failed to tender such resignation and on the 23rd February another letter was written notifying him that as from that date the defendant company had terminated his employment. Apparently the 50 1971 ZR p26 CHOMBA J plaintiff ignored this letter too because on the 13th April the third letter written to him stated that at a board meeting of the directors held on the 8th April, 1970, it was resolved that he be given instant dismissal as at 14th April, 1970. Since the means by which the plaintiff's appointment as manager 5 was effectually terminated was the stated directors' resolution of the 8th April, 1970, which was communicated to him by the letter dated 13th April, I find it unnecessary to make further reference to letters of the 21st and 23rd February, 1970. It is stated in para. 6 of the statement of claim that the plaintiff was 10 on the 8th April, 1970, a director of the defendant company. This statement was conceded by Mr Harden who, in his evidence, testified that the plaintiff had been a nominated and not a shareholding director. Prima facie therefore he was entitled to receive notice of all directors' meetings and in particular of the meeting of the 8th April when the resolution to 15 dismiss him as manager was passed. However, in the course of these proceedings a written consent resolution of the shareholders (see Exh. D3) was produced. This resolution which is dated 25th March, 1970, was signed by Messrs Johnson and Sanderson respectively on behalf of Rhodesian Engineering and Steel Construction Co., Ltd and Scar - Tow 20 Foundries Ltd. the two holding companies, purported to terminate the plaintiff's appointment as director. This resolution reads: "Resolution by Consent of all Shareholders, Raine Engineering Company Limited. Resolved that in terms of Article 68 of the Company's Articles of 25 Association, the appointment of Mr J J Baker as a Director of the Company be and is hereby terminated. Confirmed, for and on behalf of Rhodesian Engineering & Steel Construction Company Limited. (Signed) G. R A Johnson 30 Chairman Witness 1: ? ? ?." Confirmed, for and on behalf of Scaw - Tow Foundries Limited: (Signed) Sanderson 35 Witness 1: W. H. Harden." If this resolution effectually revoked his appointment then on the 8th April, 1970, the plaintiff was not a director and was therefore not entitled to receive notice of the meeting of that date. The question therefore is 40 whether that resolution was valid and effective. It was disclosed in the course of the evidence of Mr Harden that no actual meeting of the holding companies' representatives took place for the purpose of passing the resolution by which the plaintiff was purportedly relieved of his appointment as a director. What happened was that 45 the resolution was drawn up, Mr Johnson who is said to be resident in Rhodesia signed it thereby signifying the consent of Rhodesian Engineering and Steel Construction Co., Ltd. then it was sent to Mr Sanderson at Kitwe and the last named signed it on behalf of Scaw - Tow Foundries also consenting to the resolution. 1971 ZR p27 CHOMBA J In Article 84 of the defendant company's articles of association, it is expressly provided that a resolution in writing signed by all directors shall be as valid and effectual as if it had been passed at a meeting of directors duly called and constituted. Having carefully perused the Articles I can find no corresponding article authorising the passing by 5 shareholders of resolutions merely by signing written resolutions without holding a meeting. In my view if the defendant company had intended to pass resolution in that manner an article similar to Article 84 should have been included in the articles of association creating power to pass such resolutions. Gower in his authoritive book Modern Company Law 10 2nd Ed. p. 203 states that it has now become common practice to insert in articles of a private company an express provision that [a written resolution signed by all the members entitled] to vote shall be as valid and effective as if it had been passed at a general meeting. The defendant company would have done better had it made a similar provision in its articles. 15 As it has made no such provision to my mind it cannot pass a written resolution by consent without holding a meeting because doing so is ultra vires its constitution. I hold that in order to pass a valid and effective resolution the shareholders of the defendant company had to convene a meeting at which to pass such a resolution. By Article 68 it is provided 20 that the defendant company may by ordinary resolution remove any director and may by ordinary resolution appoint another person in his stead. In the absence of any provision to the contrary I hold that such a resolution can be passed only at a meeting of the company. By Article 49 of the defendant company's articles of association at such a meeting 25 decisions are required to be made by members present and the proxies of those absent by show of hands or by poll. This further suggests, in my opinion, that no written consent resolutions were envisaged by the draftsman of the defendant company's articles of association. Therefore as no actual meeting of the defendant company took place for the purpose 30 of passing a resolution to remove the plaintiff as a director, the consent written resolution on which Messrs Johnson and Sanderson are signatories is in my opinion invalid. It follows that the purported removal of the plaintiff from the directorship was null and void. It follows further that on the 8th April, 1970, the plaintiff was a director of the defendant 35 company and as such was entitled to receive a notice of the directors' meeting held on that date. The only director to whom notice need not have been given was a director who might have been outside Zambia (see Article 81). The plaintiff was in Zambia on 8th April. Gower in his book (ante) at p. 128 states that where powers are conferred on directors 40 under a company's articles they are conferred upon directors collectively as a board. I adopt that pronouncement. Therefore it was imperative that all directors, except those covered by the provisions of Article 81, supra, should have been involved in decisions made at their board meetings. Consequently it was necessary to give to the plaintiff notice of the 45 meeting of 8th April. The failure to give him such notice invalidated the transactions conducted thereafter. I am reinforced in this view by the decision in Young v Ladies Imperial Club (1) in which it was held that the failure to give notice to a committee member of the club who was entitled to such notice was fatal to a decision passed at the committee 50 1971 ZR p28 CHOMBA J meeting in her absence. That decision was made in a case concerning a proprietary club but in my opinion its principle can be applied, and I hereby apply it, to the instant case which concerns a limited liability private company. It may be said to be absurd to suggest, as I have done 5 that the plaintiff should have been summoned to a meeting at which he was to be dismissed as a manager. In my view such a situation, incongruous as it appears, had inevitably to follow as the company although possessed of powers to determine the plaintiff's appointment as a director had failed validly to exercise those powers before the crucial directors' meeting 10 of the 8th April. It was contended on the defendant company's behalf that Article 41 applied to the convening of directors' meetings. That article first provides that a notice of meetings shall be given to persons therein specified and concludes by stating that non-receipt of the notice by any 15 member shall not invalidate the proceedings at general meetings. The contention was that although the plaintiff did not receive a notice of the directors' meeting of 8th April, the non-receipt of the notice by the plaintiff was not fatal to the deliberations conducted at the meeting. Article 41 comes immediately after the heading, "Notice of General Meeting". 20 It should further be observed that it talks about notices to members, that is members of the company, with reference to the holding of general meetings. It does not apply to directors' meetings. The relevant meeting, the notice to attend which the plaintiff claims he should have been given, is a directors' meeting. The argument by the defendant company's 25 counsel on this issue therefore falls away. As I have already decided, the resolution aimed at revoking the plaintiff's appointment as director was abortive. I have not been appraised of any other step taken by the defendant company validly and effectively to revoke the plaintiff 's appointment as such. In consequence I hold 30 and hereby declare that he is to this day a director of the defendant company. Having found that on the 8th April, 1970, the plaintiff was a director of the defendant company and as he was not given notice of the director's meeting held that day, I declare also that that meeting was irregular. Therefore his purported dismissal by resolution passed at that 35 meeting was abortive and ineffectual. In the event I find that the plaintiff was not validly dismissed. Having made the declarations prayed for by the plaintiff as an alternative to the claims in contract and tort, I deem it superfluous to determine the claims for damages. However I may state in brief that the 40 dismissal was wrongful in that the plaintiff was not given an opportunity to exculpate himself of the allegation that he had planned to take over the defendant company with persons unknown. Such an arbitrary action by the defendant company offends against the rules of natural justice. It is further significant that no evidence has been adduced in support of the 45 allegation of misconduct by the plaintiff. The only reference made to that was in connection with the statement said to have been made by two named persons. These statements have not been produced and therefore I 1971 ZR p29 CHOMBA J cannot profess to know their contents. As I have said it is unnecessary now to delve into the issue of wrongful dismissal or breach of contract. The plaintiff is declared to be still both a manager and director of the defendant company until he is properly dismissed. Therefore all the rights, emoluments and privileges accruing to him by virtue of his appointment 5 as director and manager are due and payable to him. Judgment is accordingly entered for the plaintiff and he is to have his costs of the entire action. Such costs are to be taxed in default of agreement. Judgment for the plaintiff 1