Butt v Nkole and Others (HPC 444 of 2015) [2017] ZMHC 26 (5 April 2017)

11 2015/HPC/0444 IN THE HIGH COURT FOR ZAMBIA AT THE COMMERCIAL REGISTRY AT LUSAKA (Civil Jurisdiction) BETWEEN: MUCKEY DEAN BUTT PLAINTIFF AND (cid:9) BO PATRICK GODFREY NKOLE FAUSTINA MWANGO CHIBOWA FRANCIS SUNG WE DOROTHY KABILA DAVIE NKANDU CHILAMBE CHRISTOPHER KAFUIA SUNGWE TAFIMONWAMONWA MINING COMPANY LIMITED 151 DEFENDANT 2ND DEFENDANT 3N0 DEFENDANT 4111 DEFENDANT DEFENDANT DEFENDANT 7111 DEFENDANT In Open Court before Mr. Justice Sunday B. Nkonde, Sc at Lusaka this 5th day of April, 2017. For the Plaintiff : Ms. Lydia Sameta of Messrs Mambwe Siwila Lisimba For the Defendants : Mr. Terence Chabu of Messrs Terence Chabu & Advocates. Cornpany JUDGMENT CASES REFERRED TO: 1) City Express Service Limited v Southern Cross Motors Limited (2006) Z. R. 263 LEGISLATION REFERRED TO: 1) Limitation of Actions Act, 1939 (cid:9) (cid:9) J2 OTHER WORKS REFERRED TO: 2) Halsbury's Laws of England, id Edition, Volume 24. By Writ of Summons and Statement of Claim filed on 19th October, 2015, the Plaintiff commenced this action against the Defendants claiming for: A declaration that he is still a shareholder in the tit Defendant Company. A consequential Order that his shareholding be restored on the Register of the 7 " Defendant Company. An Order that the 7th Defendant Company accounts for all dividends due to the Plaintiff since he became shareholder in 1991. Interest on any amounts found due. (S) (cid:9) (6) (cid:9) Further or other relief Costs. In the Statement of Claim, the Plaintiff avered that he was at the material time a shareholder in the 7th Defendant Company in which the rest of the Defendants were purported shareholders. (cid:9) It was further avered that the Plaintiff's shareholding of 15% arose from various monetary contributions made at the inception of the 7th Defendant's operations. The 15% shareholding was allotted in October, 1991 and registered at the Patents and Companies Registration Agency (PACRA) but unknown to the Plaintiff and without his consent, the Plaintiff alleged that the shareholding in the 7th Defendant was fraudulently changed to reflect the J3 1st, 2nd, 3rd, 4th, -th, and e, Defendants as the only shareholders. The Plaintiff outlined the particulars of fraud as: Withdrawing the shares without the Plaintiff's consent. Misrepresenting to PACRA that the Plaintiff no longer had shares in the t Defendant Company. Allotting the Plaintiffs shares to other persons without the Plaintiffs consent. The Plaintiff also asserted that he only became aware of the fraud on 29th October, 2012 when he conducted a search at PACRA. The Plaintiff further asserted that he had never been invited to any meeting of the 7th Defendant and has never received dividends on his shares resulting in loss. In the Defence filed into Court on 4th December, 2015, the Defendants denied the allegation that the Plaintiff was at any time a shareholder in the 7th Defendant Company and further that none of the original shareholders sold any shares to the Plaintiff as in fact the 7th Defendant had no shares to allot to the Plaintiff. The 7th Defendant also avered that there was no shareholder resolution passed to allot 15% shareholding in the 7th Defendant and as such no share certificate was issued to the Plaintiff. The Defendant also denied that the Plaintiff made various monetary contributions at the inception of the 7th Defendant's mining operations and further denied the allegation of fraud or misrepresentation to PACRA or withdrawal of shares from the Plaintiff. J4 On the other hand, the Defendants avered that the Plaintiff illegally gained access to the 7th Defendant's documents when one of the shareholders died and made unlawful alterations to pre-signed letterheads and also illegally caused the alteration of the 7th Defendant Companies Form 12 without the consent of other shareholders. Lastly, the Defendants' plea was that the Plaintiff's claim was statute barred as the Plaintiff failed and or neglected to commence the action once the purported allocation of shares in 1991. On the basis on the facts in the Defence, the Defendant also made a Counterclaim for, A declaration that the alteration to Company's Form 12 was illegal. A declaration that the Plaintiff's action is Statute barred. Any other relief the Court may deem fit. Costs. In the Defence to the Counterclaim, the Plaintiff denied having illegally gained access to the 7th Defendant's documents or having any pre-signed letterheads or filing any documents at PACRA as alleged by the Defendants. The Plaintiff also denied that the action was Statute barred and maintained that the fraud was discovered in 2012 when he made a search at PACRA and, J5 therefore, 6 years had not expired between the time the fraud was discovered and the time of commencement of the action on 19th October, 2015. The parties by respective Learned Counsel filed Skeleton Arguments whose portions I will refer to in the course of the Judgment. At the trial of this action, the Plaintiff (PW1) was the only witness. His evidence in-chief was in the following pattern. He stated that he first met the late Gabriel Kabila (the deceased) and the ft Defendant in 1989 when the deceased and the 1st Defendant both explained that they were looking for an Investor to help with the mining activities of the 7th Defendant. At that time, the deceased was a Shareholder and Managing Director and the rt Defendant a Shareholder and Company Secretary of the 7th Defendant. According to PW1, at the request of the deceased and the ft Defendant, he advanced the duo a loan with a repayment period of 2 to 3 months and after two months, again at the duo's request, an additional loan was given. The third time the two asked for a further loan, PW1 refused but after visiting the 7th Defendant's Mine in Kitwe to understand the problems that were being faced, a further loan was given. In return, as guarantee on the loans, the two offered PW1 shares in the 7th Defendant. 10% Shareholding was initially agreed upon but was later increased and agreed at 15% and letters to the effect were given to PW1 by the duo. He further stated that he verified the shareholding as dully registered at the Ministry of Commerce and Industry. However, unknown to him, and without his consent, he came to discover on 29th October, 2012 when he conducted a J6 search at PACRA and obtained a print-out that the 3.st to 6th Defendants had changed the shareholding in the 7 Defendant to reflect themselves as th Shareholders to his exclusion. In cross-examination by Learned Counsel for the Defendants Mr. Chabu, PW1 maintained that he gave the first loan of K75,000-00 to the deceased and the 1St Defendant representing the 7th Defendant in 1989 but admitted no loan agreement was signed. PW1 also stated that he did not make efforts to recover the loan because the deceased and the rt Defendant gave a reasonable explanation that the Mine had collapsed and a second loan was required. PW1 also admitted that there was no Contract signed on the shareholding to him as the deceased and the ft Defendant just gave letters to the effect and told him they were going to speak with the 7th Defendant's Board of Directors in Kitwe but made PW1 as a shareholder to guarantee the loans. PW1, however, admitted that he had been aware of the 7th Defendant's dispute on his shareholding from the time of the 22nd August, 1997 meeting at which he produced documents to prove the shareholding but these were rejected. To PW1, other persons that attended the meeting were biased against him. PW1 further admitted that he was not able to show any PACRA print-out on his shareholding in the 7th Defendant between 1991 and 2012 but explained that this was because his name had been removed as a shareholder at PACRA. Asked if he remembers the 7th Defendant writing the letter dated 26th August, 1997 which is at pages 44 to 45 of the Defendant's Bundle of Documents J7 disputing his shareholding in the 15t Defendant, PW1 admitted though he further stated that he never saw the letter until after the passing away of his late father on 14th February, 2008 when the letter was found among his late father's belongings. PW1 also denied having been a Director in the 7th Defendant. In re-examination by Learned Counsel Lydia Sameta, PW1 maintained that he did not receive the letter of 26th August, 2017, and insisted that he was still a shareholder in the 1st Defendant. The 15t Defendant (DW1) was the Defendant's only witness. His evidence in-chief was that there was no authentic PACRA print-out to show that PW1 was a shareholder on the 7th Defendant. DW1 further stated that there was no way PW1 could not have been participating in the 1st Defendant's meetings from 1991 to 2015 if he was a shareholder. According to DW1, PW1 could also not have had 15,000 shares as 15% shareholding in the 15t Defendant considering that the 1st Defendant had only 30,000 shares as at 30th October, 1991. In cross-examination by Learned Counsel Mr. Sameta, DW1 stated that it was common practice for the deceased as Managing Director and him (DW1) as Company Secretary respectively of the 7th Defendant to pre-sign blank letter- heads but he did not know whether the deceased used these letter-heads or not. He further stated that the letter-heads were pre-signed in 1996 but nonetheless conceded that there was no evidence to show that PW1 got any letter-heads J8 illegally. He further conceded that PW1 gave contributions to the 1st Defendant totaling K112,230-00 but added that the contributions were made on the basis of a verbal promise that as soon as the mine started production, the Plaintiff would be sold the products. In re-examination by Learned Counsel Mr. Chabu, DW1 disowned the authenticity of the signatures alleged to be his on the two letters; on the 10% and 15% allotment of shareholding from the 7th Defendant to the Plaintiff. Both parties also filed Skeleton Arguments which I intend to make reference to in the course of the Judgment. The first question I have to decide is whether this action is statute barred and then proceed to determine whether the Plaintiff is a shareholder in the 7th Defendant and if so, to what extent and any consequential Orders. On whether the action is statute barred, in the Defendant's Skeleton Arguments, it is contended that the action is statute barred as it was not brought within 6 years from October, 1991. The Defendants cited Section 2(1) and 2(2) of the Limitation of Actions Act which provide as follows: "2. (cid:9) Limitation of Actions of Contract and Tort and certain other Actions: (1) (cid:9) The following actions shall not be brought after the expiration of six years from the date on which the course of action accrued, J9 that is to say: (a) Actions founded on simple contract or on tort. (2) (2) An action for an account shall not be brought in respect of any other matter which arose more than six years before the commencement of the action." The Defendants also relied on, inter-alia, the case of City Express Service. Limited v Southern Cross Motors Limited,' on the settled principle that a litigant can plead the benefit of a statute at any stage of the proceedings. According to the Defendants, the contract of allotment of shares fell within the provisions of Section 2(1) (a) of the Limitation of Actions Act and, thus, ought to have been commenced within 6 years from October, 1991, when the Defendants refused to recognize the Plaintiff's shareholding in the 7th Defendant. Further, that the Plaintiffs claim for an account ought to similarly have been brought within the same 6 months and because this was not done, the action should be dismissed. The Defendants referred to the letter from the 7 th Defendant to the Plaintiff dated th August, 1997 to show when the course of action arose. The letter reproduced here below read as follows: Date. 25.08.1997 Mr. Mac Dean Butt Dean's Spray P. O. Box 35718 possible, given the long standing and commitment to the Company of the Shareholders who are alleged to have transacted this matter. According to the latest submission of Directors and shareholders to the Ministry of Trade and Commerce and Industry Registration of Companies Act. No. 26 of 1994 there, have not been any more submissions since the last one in 1990 made by our Lawyers. For these reasons your claim for associating yourself with this Company is not acceptable by us. The Directors/Shareholders have therefore resolved that claims by yourself have no basis and your entry to the Company's plot is banned forth with. You are required to surrender your Company's May, 1997, to the identification Card and Sticker No. 207 dated Company within 7 days from the date of this letter. 5th Yours faithfully For/TAFIMONWAMONWA MINING CO. LTD (Signed) M. C. CHIBOWA CHAIRMAN C. C. WS ELLIS & CO. LTD — KITWE C. C. THE SECRETARY ESMAZ KITWE On its part, the Plaintiff's by Learned Counsel contended in the Skeleton Arguments that the action was commenced within time. Learned Counsel cited the Learned Authors of Halsbury Laws of England, 3'd Edition Volume 24, paragraph 403 at page 220 where they state as follows: "An action of deceit is an action in tort for which the period of Limitation is six years, and in relation to equitable remedies, Equity acted in obedience to the statute and applied a like Limitation; but the running of time for any action based on fraud, is where the right of action as concealed by fraud, does not begin until the fraud has been discovered. Similarly, the Limitation period applied in equity by analogy will be postponed until the fraud is discovered...." Thus, it was argued that the Plaintiff had alleged fraud and, in paragraph 8 of the Statement of Claim, had pleaded that he became aware of the fraud upon conducting a search at PACRA on 29th October, 2012. Consequently, the action was in fact commenced 3 years later on 19th October, 2015 which according to the Learned Counsel was within the limitation period of 6 years. As can be noted, both parties are agreeable that the 6 year limitation period applies to this action. The difference is on when the course of action arose or accrued. I have given anxious consideration to the evidence adduced by the parties as well as the respective arguments put forward on when exactly the course of action arose herein. I right away reject the contention of the Plaintiff that the course of action arose on 29th October, 2012 when he purportedly discovered the fraud and instead make the finding that the course of action arose on 22nd August, 1997 at a meeting attended by the Plaintiff in person at which his shareholding was rejected. The rejection of the shareholding was further confirmed in the letter from the 7 Defendant to the Plaintiff dated 26 August, 1997 reproduced above th th and which the Plaintiff admitted to have seen but only on the passing of his late father on 14th February, 1998. In short, the Plaintiff could have competently sued on the shareholding claim immediately after the meeting of 22nd October, 1991. I must also here emphasize that from the evidence on record, there was nothing pointing to fraud attributable to the Defendants as alleged by the Plaintiff. Not a single document alleged to have been filed at the PACRA Registry on the Plaintiff's 15% shareholding had a PACRA stamp or was any print-out from PACRA shown at trial that the Plaintiff appeared at one time as a shareholder in the 7 Defendant th on any Companies Form lodged at PACRA. In my view, the Plaintiff ingenously used the PACRA search on 29th October, 2012 in an attempt to create a course of action founded on fraud when there was no evidence of fraud either in fact or in law. For the avoidance of any doubt, the allegation that the Plaintiffs name at PACRA as a shareholder was removed or the shareholding altered could only have been sustained if he first showed that his names had in fact been included on any Companies Form or Forms at PACRA in the first place. However, there is no such evidence of his claimed shareholding having at anytime been entered on any of the Forms lodged at PACRA or any proof that the Plaintiff was ever entered in the Register of Members of the 7th Defendant. What was only shown at trial were the two letters of allotment of shares from the 7th Defendant to the Plaintiff both dated 25th October, 1991. Therefore, the action having been brought after the 6 years limitation period, it is clearly statute barred and I accordingly dismiss the same. Having dismissed the action, I see no useful purpose that will be served in going further to determine the other claims made by the Plaintiff against the Defendants. As to the Defendants' counterclaim that the Plaintiff illegally altered the 7th Defendant's Companies Form 12, on the list of Directors, not only were particulars of illegality not pleaded but there was no evidence shown at trial that there was lodged at PACRA Companies Form 12 altered by the Plaintiff or that indeed there was such an altered Form 12 with a PACRA Stamp thereon. In any case, at trial, the Plaintiff denied having been a Director in the 7th Defendant. The counterclaim on the aspect, therefore, fails. Both parties having failed in their respective claims, each party will bear their own costs. Dated at Lusaka this S day of May, 2017. th HON. JUSTICE SUNDAY B. NKONDE, SC HIGH COURT JUDGE