United Assurance Company Limited v Attorney General (Civil Appeal 1 of 1986) [1986] UGSC 18 (6 October 1986)

Full Case Text

IN Tllr, COURT Of APPEAL AT MENGO • m. Wambuzij P.j Lubogo, Ag. J. A. •& Odoki J. A• CIVIL APPEAL NO. 1 OF 1986 • BETWEEN LTD APPELLANT AND RESPONDENT .(Appeal from of the High Court of Uganda at Kampala, Hr. Justice Oder) dated 31st October, 1885) ATTORNEY GENERAL a judgment, decree, and order gJUTED ASSURANCE CO.

## CIVIL SUIT CASE NO. 221 OF 1981

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## JUDGMENT OF LUBOG0 AG. J. A,

action in the High Court a gainst the Attorney General for wao null and void (2) the Statuary Instrument No. 69 of 1>78 in among other things that there was and lawful in all aspects including the aspect of providing for prenpt payment of adequate compensation and that the illegal acquisition of Plot 1 in Kimathi Avenue, Kampalad and sought for do duration\*\* at (1) the purported acquisition us far as it purported to compulsorily acquire.the said land was null and void and (3) that the plaintiff's ownership legally, and effectively acquired for a public purpose. He pleaded fur thcr '.tha t the acquisition was constitutional no purporting to compulsorily acquire the proprty in question but that it was actually in contravention of th-- '.institution and therefore was of the said land was not affected by. Statutory Instrument No. .69 of 1978. In the utndended'ft .8 ,D. the respondent averred in the particular it was done not in contravention of, but in The appellants, the United Assurance Co. Ltd\* filed an accordance with, Article 13 of the constitution.

On hearing the suit nine issues were framed:-

- 1. Whether S. I No. 69/78 contravenes the constitution 2- Whether that 5.1 waa capable in law of ul'fectiug \* . the plaintiff's rights to the property. - **'3.** Whether this property was acquired under the assets of Departed Asian Decree No. 27 of 1973\* - Whether the plaintiff acquired or consented to the property being taken over. - **3.** Whether the- Government gave prompt and adequate compensation. - **6.** Whether the action is maintainable in .view of the provisions of the Expropriated Properties act 1982. - 7. time when the'S. I 69 of 1978 was passed.\* Whether tnv action is tiine barred in so fur as the . suit was not'commenced within 12 months from tue

**8.** Whether*'*the plaintiff company gave instructions to

- the counsel to bring this suit. - **5.** Whether a firm of advocates styling itself Hunter . view of the provisions in tne Evidence Act Section 5'i-Greiff.', cun hhvc audince .before . this court in

The last Q issues were considered by consent as preliminary pants by both counsel and i\$re argued before the substantial issues were dealt with.

The learned judge'.g finding on issues 6 & 7 was that the ouit wao unmaintainable in view of the provisions of company hud given In hie earlier ruling the learned judge had stated;- Expropriated Properties Act 1982 and that the plaintiff's no instructions to counsel to bring the a action and fur that finding he dismissed the suit.

"Consequently my view 5.5 that the question whether the ucquistiun complained of by' the plaintiff contravenes the constitutionals a substantive matter I do not consider that this

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io yet the proper stage to refer the matter to a constitutional court. In my view the above mentioned preliminax'y points do not involve the interpretation of the Constitution".

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2,' & 7 together as they are related-In his memorandum of appeal the appellant had seven grounds of appeal. The first ground was that the learned trial judge was wrong in law. in holding that by its nature the action did not involve the interpretation of the constitution. I will deal with grounds 1,

In his submission Mr. ICateeru for appellant said that in was purpose of donating it to the Uganda Airlines for the within framework of the constitution. Ho submitted that if the constitution was not involved there was the question of constitutionality i.e. was.the property acquired in accordance with the provisions of thu constitution when Statutory Instrument No. 69/78 order' to determine whether the property was taken in accor •dance with thu constitution ono should look at Article 13 of the constitution and-establish whe ther •'the • property acquired for public purpose. The acquisition was for the powers derived from the Land acquisition- Act 19&5\* accommodation of staff and generate revenue for the Airline.. • \* • He went on to say that the Expropriated Properties Act 1982 l . was contrary to the Constitution and should bo interpreted was made by thu minister under

Company in 1972, and that Uganda was a landlocked country. The trial judge had looked at the Statutory Instrument No. acquisition was proper. 69/?8 and the reasons given'in it and was satisfied that the In his reply on this ground the State Attorney said that the trial judge took judicial -notice of the collapse of the

In his ruling the trial judgo"saidj,

"It follows that the operation of section (l)(a.)^ of AC t 9/32 the shares, tho plaintiff company and the suit property to that oxtent vested in the Government. Secondly, Section (1) (l)(c) of the act 9/82 ; retains as vested\*in the Government 'airy property appropriated or taken over in any other way by Military Regime".

I would suppose that 'the provisions of the Expropriated properties act 1982 intended to deal with tho properties of the Asians and not with the africun snares, company or tho. property in which the Africans had a share and interest. The Act dia not,I would suppose, intend to appropriate the ufrican interest in any property. Since the.property in Kimuthi avenue, and tho company are indivieable between the ufrican and the Asians it would stand /reason to/that the provisions of the act need interpretation in relation with the provisions of Article 13 (1) (c) (5) and (ii) of the constitution to ascertain the propriety of the acquisition by the Minister of the ufrican Intercast, or the usiun interest fur that matter. The trial judge dismissed the suit on two overriding considerations one of which was that the Act had provided to that effect. It seems the Custodian Board hud little or no concern in protecting the interests of the'asuian shareholders of the company. The whole issue of acquisition in my view would depend upon the interpretation of tho constitution in relation to the Decree Nc. 27/73 and the Lund Acquisitia n net 1965 under which Statutory Instrument Mo. 69/78 • emanated tu sue whether the property, shares and the company were acquired legally for public benefit under Article 13(l)(u) of tho constitution.

> that the learned trial resolution of the shareholders of the company or of the Board of Directors 5/ The third ground of appeal is judge was wrong in law in deciding that a

accessory. In particular he errod in law in deciding charmanaging Director of this company was incathe digiving instructions to commonce logal action. Mr. Kateera for the appullants submitted that the Uni $\pm$ ssurance Co. Ltd was a private company whose affairs. recoverned by Table A of the Companies .ct and specifically the bowers and duties of the directors are governed by regulation 80 of Table ... Ho submitted further that a private company under Section 177 of the Companies Act can at least nave one director, and that being the case, the director of the company Mr. Kyeyune instructed his firm of lawyers to institute the present action. He referred to us a number of authorities to substantiato his urgument. In reply to this submission the learned state attorney stated $\cdot$ . that regulation 80 of Table A speaks of directors and therefore Mr. Kyeyune as a single director could not have authorised the institution of the action. He said that the appointment of the new directors was improper is it contravened Decrea No. 27/73. Now Section 177 of the Companies Act reads;,

> "Every company (other than a private company) registered actor the commence ment of this act shall have at least two directors, and every company registered before such commencement (other than a. private company) and every private company khall have at least one director".

There is no dispute as to the private status of the company and if that is the case, it can only have at least one-dire ctor. It is Mr. Kyeyune who remained as director after his asian co-director had left in 1972. The custodian Board never challenged his powers as a director of the company he remained as a directer in the file Rept by the Registrar of Companies. Miss Wakabi the Assistant Registrar of

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companies gave evidence and stated, among other things, the the only subject matter that was discussed in their correspondence was the re-allocation of shares. With regard to the Custodian Board Kibwika Bagonda tostified that the Company claimed the snares of the departed asiuns. Ho continued that the dispute should have gone to the Tribunal set up for that purpose but the Tribunal never took off. The only complaint by the Custodian Board was that since the majority of shares was vested in the Board, the Board should have had a director of the Board of Directors of Company. We were not referred to any authority for that proposition. Mr. Kyeyune us undisputed director of the company invoked regulation 80 of Table A which reads:,

$\cdot$ $\cdot$

"The business of the company shall be managed by the directors, who may pay all expenses incurred in promoting and registering the company, and may exercise all such powers of the company as are not, by the Act or by these regulations, required to be exercised by the company in general meeting---------

I do not read anything in this regulation or the Companios Act that curtails the powers of the director to instruct a lawyer to institute an vaction for and on behalf. $\cdots \cdots \cdots \cdots \cdots$ of the company without the mooting of the shuroholders $\cdots\cdots\cdots\cdots$ or that the shareholders should pass a resolution in that. $\cdots \quad \cdots \quad \cdots \quad \cdots$ behalf or that the shareholders should ratify the actions $\mathcal{L} = \mathcal{L}$ of the directors in the general meeting..

I am of the opinion that what is meant by the expression "the business of the company" includes instruction of solicitors to file action on behalf of the company. In Quin & Extens Ltd and other V Salmon (1909) AC, 442 the directors passed a resolution with the object of acquiring and letting premises, from which B dully.

$\alpha$ $\alpha$

. . . . . . . . . . . . . . . . *. . . . . . . . . . . . . . . . . . . .*

coording resolutions to the same offect were passed at comparinary general meeting of the company by a simple. compared the shareholders. It was hold that upon the true uniffaction of the articles the resolutions of themany were inconsistent with the provisions of the rticles and the company must be restrained from acting upon them. In the same cuse above Lord Loroburn LC said:, $\mathcal{L} \times \mathcal{L}$ "The bargain made between the shareno lders is contained.in articles 75 and (). 80 of the articles of association, . and it amounts for the purpose in hand to this, that the directors. should manage the business, and the company, therefore, are not to manage the business unless there is. provision to that effect $\mu$ .

In the present case the bargain was between the share holders and the remaining director since the regulation 80 of Table A had not been amended: in any case a director of the company could act alone as provided by Section 177 of the Companies Act; regulation. 98 of Table A provides that it is not necessary to give a notice of the meeting to any directror for time-being absent from Uganda. Therefore, Mr. Kyeyune as the only remaining director was entitled under the article to instruct a firm of advocates to institute an action on behalf of the Company.

Insanother English case which approved Quin & Extens Itd and others V Solmon (supra) came to the same decision und facts similar to the present case before us. It was the case of John Shaw & Sons (Sulford) Ltd V Shaw (1935) All E R 456. Without going into all the details of that case it would suffice to montion the relevant facts of the case. Three parmanent directors held a moeting, to which none of the ordinary directors were summonad. The permanent directors

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- A.

carried a resolution by two to one to instruct the Company solicitors to issue the write in that action. accordingly. the policitors gaused two specially indorsed write to be issued, the ensuing action was defended on the ground of want of authority to institute it. Gree LJ had this

to day:

$\sim$

"I am of the opinion that the action was commenced and carried on by the authority of agents clothed with authority by the company's articles, and that the meeting of the shareholders on April 30, 1934 had no power to urder the chairman to instruct solicitors to discontinue thu actions".

Once Mr. Kyeyune was clothed with authority that was all that $\cdots \cdots$

was necessary. In the same case Gree LJ went on to say:, $\cdot$ $\overline{a} \cdot \overline{a} \cdot \overline{a} \cdot \overline{a} = \overline{a} \cdot \overline{a} = \overline{a} \cdot \overline{a} = \overline{a} \cdot \overline{a} = \overline{a} \cdot \overline{a} = \overline{a} \cdot \overline{a} = \overline{a} \cdot \overline{a} = \overline{a} \cdot \overline{a} = \overline{a} \cdot \overline{a} = \overline{a} \cdot \overline{a} = \overline{a} \cdot \overline{a} = \overline{a} \cdot \overline{a} = \overline{a} \cdot \overline{a} = \overline{a} \cdot \$ "The power was not in the board of directors, but in the permanent directors".

Therefore, in this case under his exclusive powers as the sole director Mr. Kyeyune actod. In the same case Slasser LJ supported Greer LJ in his opinion. He said inis:,

> "As to the third ground of want of authority, that the shareholders instructed the directors to discontinue that action. on April 30, 1934; if the permanent directors had power under the urticles to bring the action, I do not see how the ohareholders could interfere with that power, otherwise than by altoring the articles, which they have not proposed to do".

To the result I find that a resolution of the shareholders or that of the board of directors of the company was not necessary to clothe the sole director with authority to give instructions to lawyer to institute the action.

Tith regard to ground five of the memorandum of appeal which deals with subsequent ratification of the acts of the director, it is trite law that a resolution by the directurs to carry on the business of the company may be rati fied by the shareholders in a general meeting if it is legally necessary by the provisions of the Act or articles of association to do so. However in Danish Mercantile Co. Ltd V Beanmont and another (1951) 1 All E R 925

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mot the shareholders who subsequently adopted the musuings commenced by a solicitor without instructions who liquidator when the company went into liquidation. go that that case could be distinguished from the present me. But however, it establishes a principle that the action of the directors could be the subject of atification subsequently.

In the present case it seems to me that there was no need for ratification because neither the provisions of the Company's Act nor the articles of association day so. Thore are very few isolated provisions in the Act that require ratification, want of authority is not one of them.

In his judgment the trial judge stated that because t the Custodian Board and a majority of shares and did not participate in the appointment of new directors, therefore, the subsequent ratification was improper. as I have indicated above there was no need for ratification for want of authority, the instruction of the single director was enough and was done according to regulation 80 of the Company's articles of association. Therefore, the question of improper appointment of new directors does not arise in connection with that ratification.

Now with regard to ground six I have already found that the firm of lawyers had proper instructions. The award of costs against the advocates personally was mainly due to the fact that they had no instructions and not founded on a well established principle that costs follow the event. The order awarding costs against the advocates personally would therefore be set aside. How I would like to refor to the provisions of Article $87(1)$ of the Constitution which provide as follows:,

Where any question as to the interpretation of this Constitution arises in any proced court-rnattiol, and the court is of the opinion that the quuution involves u substantial question of law' tho court may, and shall if any party to the proceedings so requests, refer the question to the High Court consisting of a bench of not less than three judg of the High Court. ;

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Provided taut no such question bo rcfui'red if the court is of the opinion that it is not sufficiently important to the proceedings to require a reference to the High Court".

During the submissions of the learned State Attorney he impressed upon us the importance of these proceedings as the outcome would have serious repocursions to so many to require interpretation and No. 29/73 and the Expropriated Properties Act Ho. 9\*82 full within the ambit of the provisions of Article 13 • of the Constitution. people\* I have found during the hearing. of this appeal thi, the submissions of butn counsel involved questions so sub otantial in our law as especially whether the Lanu Acquisition Act 19^5, Decree

Accordingly I would•allow the appeal. The costs of this appeal and in the court below would go to tho memorandum of appeal, orders:, . appellant. Finally the appellant had proposed in the that this court make the.following

- (a) declarin' that the acquisition of the property was wrong null and void; - (b) that the said property did not vest in the Government; - (c) that the advocates fur the appellant were pruperly instructed; - (d) that even if they' were not properly instructed initially the act of tho Managing Director xas ratified;

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und in the court below. to ConstitutionaljCourt; (f) 'the respondent shoulu pay costs of appeal

With regard to (a) & (b) I decline to wake any v' ins true tea, whether a reference should be made to the Constitutional Court. Finally (f) has\* been grunted. did nut make any finding us to (c) since thisissue will depend upon the submissions of counsel during tne hearing. < js? « finning as both issues require'adducing of evidence.'As regards (c) my .finding is that the advocates were properly and that being the case (d) does not arise. I

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hearing in the high Court on issues framed ana-undealt with by this court, as stated above, and if, during tne hearing a party submits that the issues involve u substantial quosticn Court under tne provisions of Article 87(1) of the Const!tution. \ I would, therefore, set aside the dismissal of the suit and would direct that the suit be reinstated for of law which needs interprutution by the Constitutional Court the presidin' judge shall refer the mutter to the

Signed:

D. L. K. LUBOGO AG. JUSTICE OF APPEAL IN THE COURT OF APPEAL

## AT MENGO

(Corom: Wombuzi, C. J.; Lubogo, Ag. J. A.; Odoki, J. A.)

CIVIL APPEAL NO.1 OF 1986

**BETWEEN**

UNITED ASSURANCE CO. LTD. . APPELLANT

$A \times D$

ATTORNEY GENERAL .. ..... RESPONDENT (Appeal from a judgment, decree and order of the Nigh Court of Uganda at Rampala, (Oder, J.) dated 31st October, 1985

## CIVIL SUIT NO. 221 OF

## JUDGMENT OF WANBUZI, C. J.

I agree with the judgment of my learned brother Lubogo, Ag. J. A. that this oppeal must succeed. The facts are sot out in the ${\tt judgment}$ of the learned justice of Appeal and I will only make a few observations.

The last four of the nine issues which were framed were by consent taken as preliminary points to be argued and bo disposed of first. As regards issue number six, that is to say, whether the action is maintuinable, it appears the learned trial judge was requested to refer that inque to a constitutional court as the issue involved interpretation of the Constitution. In his ruling delivered on 9th September, 1983 the learned trial judge declined to refer the innue to a constitutional court as in his view the issue did pot involve interpretation of the Constitution. Leave was given to appeal against this ruling but it was agreed to argue

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*£qut* issues ond a final ruling was given, oi\ Jlot October,

T^e i-6SUC6 relevant to thi.7 appeal arc ie uo number 6 already . 3^ out in Judgment and isr.ue number ,8 which is,

suit." . •

fy' *'* "Whether the plaintiff's company gave . *qk* instructions to counsel to bring this

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trial ed to pay coats personally. It is this finding and order that this appeal has been brought. The first.ground of appeal is that. ry^Both issues were answered in the negative by the learnedjudge and counsel for the plaintiff in tho lower court were order-

> "The learned, trial judge, was wrong in law in holding that by its .nature the action did not involve interpretation of the Constitution."

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The second ground is, in effect,.a .variation of the first ground. **?** It is tha t,

> "Tho learned judge's judgment was perverse in so far ns it decided that the acquisition of the property in question os well as the Expropriated Properties Act in so far ns they related to the• suit premises did not contravene tho Constitution. . \* ......*.*

The decision on'this point involve.! interpretation of the Constitution and ought to have been referred'to a • • constitutional court."

Hr. Knteera for the appellant argued before the trial judge and indeed before in the Government properties which v/cro vested in the Government by decree 27 of 1975 and those' taken1 over- by Amin's government which is tho subject matter of this appeal falls under tho property taken over the Land Acquisition Act, 1965 and that the teking over of the appellant's property under the Act offended article 13 of the Constitution and was therefore null and void. Counsel argued that as the taking over.was null nnd void the, appellant **' s** not vested-in the Government for purposes of ", because it was takon over under "in any other manner.". Learned counsel argued that tho property property was us that tho Expropriated Properties Act, 1982, vests "in any other manner

Section $1(1)(c)$ of the Expropriated Properties Act, 1982.

On this point the learned trial judge said in his ruling of 9th September, 1983,

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"In my view, Mr. Kateera's argument touches on the main substantial issue on the case, which is plended in the plaint and is termed as issue number one above and is not a preliminary point. The question. whether or not the suit property should be considered as having not been taken over by the military regime is a question of interpretation of Section $l(1)(c)$ of Act 9 of 1982 and no need of interpretation of the Constitution. Further the issue of whether this action is maintainable in view of Act 9 of 1982 is a question of interpretation of the Act. Consequently my view is that as the question whether the acquisition complained of by the plaintiff contravenes the Constitution is a substantive matter. I do not consider that this is yet the proper stage to refer the matter to a constitutional court. In my view, the above mentioned preliminary points, do not involve interpretation of the Constitution. They should therefore be disposed of. $n$

With respect I find the learned trial judge's fintings a little ambiguous. I entirely agree with the learned judge when he says that Mr. Kateern's argument touches on the main substantial issue in the case, which is pleaded in the plaint, is termed issue number l and is not a preliminary point. The lanrned judge went on to say, again quite rightly in my view, that consequently in his viow the question whether the acquisition complained on by the appellant contravence the Constitution is a substantive matter. le did not consider that that was yet the proper stage to refor the matter to a constitutional court. In these circumstances it is difficult to reconcile the learned judge's holding that the question whether or not the suit property should be considered as having been taken over by the military regime is a question of interpretation of Section $1(1)(c)$ of $\Lambda c t$ 9 of 1982 and there was no need of interpretation of the Constitution. In so far as is relevant to this appeal Section $l(1)(c)$ of the Aci provides,

$\mathcal{L}$ $\overline{I}$

1) Any property or business which was .. $\cdots\cdots\cdots\cdots\cdots$ (c) In any other way appropriated or taken over by the military regime ...... shall from the commencement of this Act, remain vested in thu Government and be managed by the Ministry of Finance."

Hows in my view that whether or not the suit property falls wathese provisions depends on whether or not they were taken Sunder the Land Acquisition Act and to decide whether or not wore taken over the court will have to decide whether or not r taking over was constitutional. It looks to me as if issue nber 6 could not have been token as a preliminary point because $\widehat{\mathbf{e}}$ no the basis or part of the basis of the action as the loarned $\cdot$ $\cdots, \cdots, \cdots, \cdots$ dge himself pointed out. $\alpha \in \mathbb{R}^{n}(\mathcal{A}) \times \mathbb{R}^{n\times n}, \text{ and }$ $\cdots.$

In his ruling delivered on 31st October, 1985 the learned rial judge said that his ruling on 9th September, 1983 was limited o the specific point of whether consideration of issue number 6 nvolved interpretation of the Constitution and I at he did not liapose of the wider issue of whether in view of the provisions of Act 9 of 1982 the suit was maintainable. The learned trial judge then said,

> $"On the evidence available I nm satisfied$ the original majority shares in the plaintiff company, and ipso facto the plaintiff company, its suit property vested, to the extent of the Asians' majority shares, in the Government and the Custodian Board under decree 27 or 1973. It follows that by operation of Section $l(1)(a)$ of Act 9/82 the shares, the plaintiff company and the suit property to that extent vested in. the Government. Secondly, Section $1(1)(c)$ of Act $9/82$ .

rething he vested in the Government any property appropriated or taken over in any other way by the military regime. ...... in the result, I consider that the suit propert; is subject to Section $1(1)(a)$ of Act 9/82 ns having first vested in the Departed Asian Property Custodian Board under ducrue 27 of 1973. In case that view is wrong I consider that the suit property is subject to Section $l(1)(c)$ of the Act in that it

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was appropriated or taken over "in any other way by the military regime. I n either case, it would mean that the guit Property is now vested in the Government. and not in the Uganda Airlines Corporation."

with respect to the learned trial judge I think he middirected himself on the law. The learned judge quite correctly held that the shares in the appellant company belonging to the departed Acions were vested in the government or the Custodian Board. But the suit property belonged to the appellant company and not to the individual shareholders of the company. It is trite law that o company is a legal entity separate from the shareholders. The learned trial judge should have found that the suit property remained vested in the company under decree 27 of 1923. It was nloo a misdirection in law on the part of the learned trial judge to hold that the suit property is subject to section $l(1)(c)$ of Act 9 of 1982 because it was appropriated or taken over "in any other way by the military regime." As I have al $\varphi$ ady pointed out in this judgment before the learned judge can conclude whether or not the suit property was taken over in any other way he must first find that the taking over of the suit property was not unconstitutional as claimed by the appellant which is the subject of issue number one. The learned trial judge went on to find that os the suit property is vested in the government under Act 9 of 1982 the correct procedure of repossession should be by complying with section 3 of that Act and not by suit. The learned judge concluded that the suit was not mainthinable. With respect this conclusion cannot be correct for the reasons already given. In my view, the first and second grounds of appeal must succeed and for the reasons already given in this judgment I must also find for the appellant on ground of appeal number 7 which asserts in effect that the assets of the company remained vested in the company and what vested in the government were the stares of the departed Asians and not the assets of the company.

$\ldots \ldots /6$

Ehird ground of appool was that the labrhad trial judge who Frong in law in deciding that a resolution of the shareholders of e company or of the Board of Directors was necessary. In parti- $\ldots \ldots$ ular, he erred in law in deciding that the managing director of this company was incapable of giving instructions to commence $\cdots \cdots$ legal proceedings.

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$\scriptstyle l_i$

$\cdots \cdots \cdots$ On these points after concidering a number of authorities the that framation is learned trial judge come to the following conclusion,

Sections . "It is indeed correct that according to section 177 of the Companies Act, the plaintiff company needed to have at least only one director. Article 80 of table A, however, stipulates that the business of the company shall be managed by the 'directors.' By article 107, a mannging director cnn only be appointed by the directors. In view of the decided cases referred to and the provisions in the articles of acsociation of the plaintiff company, I have no doubt that the proper authority to bring this suit could only have come from a board of its directors or a general mouting. On the evidence before me I find that no such board of directors of the plaintiff company existed when this suit was filed, and none could have given proper instructions. I also find that the authority to file this suit was not given by any general meeting of the company."

Mr. Kateera submitted that the question of filing a suit by a company is a matter of management of the company under the articles of association, Exhibit P.2, Table A of the Companies Act was incorporated and under regulation $80$ of Table A of the Act the $\overbrace{\hspace{1cm}}$ directors monage the business of the company and not the general $\cdots$ meeting of the company. Lonrned counsel went on to orgue that the appellant being a privatu company can have and indeed had only one director at the time instructions were given to file the proceedings the subject matter of this appeal. Learned counsel relied on a number of authorities submitting that some of the authoritics relied on by the learned trial judge were wrongly Automobile contractor to the second property of the second property of the second property of the second property. decided. Leorned counsel further submitted that there is no law

$\cdots \cdots 17$

requiring a resolution to file a sult in the namf of the company. I have looked at two of the English cases relied on by the loormed judge namely, Danish Mercantile Co. Ltd. & Othera v. Beaumont & Another 1951 Ch. 680 and Marshall's Valve Gear Co. Ltd. v. Manning Wardle & Co. Ltd. (1909)1 Ch. 267 which as far as I could gather were to the effect that to bring an action in the name of a company there must be outhority a matter which is not in question in this appeal. However, in the Uganda case of Dugerere Coffee Growers Ltd. v. Sebaduko & Another (1970) E. A. 147 Youds J, said,

> "When companies authorise the commencement of legal proceedings, a resolution or resolutions have to be passed either at a company or board of directors meeting and recorded in minutes, whoreas in the present case I find no company or board meeting hald-on or about 18th November, 1968 npart from the extra-ordinary general meeting which certainly did not nuthorise M/S Parckhji & Co. to start those or any proceedings on behalf of the company."

The action foiled and was dismissed. The learned judge did not refer to any authority in support of his conclusion on the matter. There can be no doubt on the authorities that where proceedings are brought in the name of a company there must be authority for bringing the action. Whether the authority is by the board of directors or the company at a general meeting must depend on the constitution of the company. In the House of Lords case of Quin & Axten Ltd. and Others v. Salmon (1909) i. C. 442 Lord Loriburn L. C. said at page 443.

> "The borgain made by the shureholders is contained in articles 75 and 80 of the articles of association, and it amounts for the purpose in hand to this, that the directors should manage the business; and the company o therefore, are not to man ge the business unless there is provision to that effect."

Also in the later case in the Court of Appeal of John Shew & Sons (Salford) Ltd. v. Show 1935 ABR 456 Greer, L. . had this to say on the matter at page 464, I am, therefore, of opinion that "he filearned judge was right in refus: in to dismiss the action on the plan that it was commenced without the authority of the plaintiff company. I think the judge was also right in refusing to give effect to the resolution of the meeting of the shareholders requiring the chairman to instruct the company's solicitors not to proceed further with the action. A company is an entity distinct alike from its shareholders and directors. Some of its powers may, according to its articles, be exercised by its directors; certain other powers may policy according the shareholders in general signing a more $\mathcal{L}(\mathcal{C})$ powers of management are vested in the is directors, they and they and one ican exer cise these powers. The only/way in which the general body of the shareholders con control the exercise of the powers vested by the articlus in the directors is by alterating their articles, or if opportunity arises under the articles, by refusing to elect the directors whose actions they disapprove. II .

I am not aware of any Uganda or, for that matter, East African case on the subject. I consider these two English cases very sound law on provisions similar to those in our Commanies "ct and I am permoded that they represent the correct interpretation of our law. There can be no doubt on the nuthorities that in the case before $\sim$ $\cdots \cdots \cdots \cdots$ $\ldots$ us the management of the businese of the appellant was, by its articles, vested in the board of directors and not in the company or shall I any the shareholders.

I would like to refer here to the case of Buike Estate Coffee Ltd. & Two Others v. S. Lutabi & Another (1962) E. A. 328 in respect of principles of procedure referred to which in my view should be followed in these matters. At page 329 Bonnet, J. said,

> When the case was called on for hearing Mr. Dholpkin, for the defendants, took two preliminary objections in point of law. The first was that the plaintiff's advocates had acted without authority in instituting proceedings in the name of the company. It was said that he had not been nuthorised to institute the suit by the two defendants and t'eir. co-directors, when it was contended. are the lawful directors. Want of

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authority to institute the suit is not plended in the written statement $N$ dufence and the plaintiff's advocate has had no notice of the objection. Moreever, the objection is one that should' have been raised before the hearing by an interlocutory application to strike out the suit. To quote from the judgment of Roche, L. J., in John Shaw & Sons Ltd. v. Shaw (1935)2 K. B. 113 at page 147,

'As to the preliminary question whether the plaintiff company was properly before the court, that is to any, whether the action was instituted and curried on with its authority it have arrived at the same result as Greer, L. J. but for different reasons which I propose briefly to state. I agree with hoth the Lords Justices as to the result of the decided cases and particularly of the Daimler case and of the Russian Commercial Bank case. The principles to be derived from them are that such an objection to a right to suc as is huro taken should be taken not at the trial but by an interlocutory motion or summons; that if such procedure is not adopted the court need not, and ordinarily should not, entertain such an object on at the trial as if it were a defunce. If it were otherwise, then for reasons pointed out by Warrington, J. in Richmond v. Brnnson, the position of the court would be well nigh intolerable. Nevertheluss, as appears from the decision in the Daimler case, if want of capacity or authority to sue plainly appears at any stage the court may then strike out the action.

In the instant case the question as to whether or not the plaintiff s.advocate... has been-duly authorised to summill depend upon the court's finding as to ... who are the lawful directors. That is a matter which can only be determined nfter evidence has been heard. "In my judgment, want of authority to sup does not plainly appear at the present stage of the suit, and the suit ought not to be struck out at this juncture."

The position in the case before us does not appear to be any different. Hr. Hdwulu for the respondent submitted that after the departure of the Asians who were the majority share holders new shares were created giving the African's majority shareholding and that the Registrar of Companies apparently

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d to register the changes unless the Custo Can Board took The Custodian Board was not involved in any meeting of the . oppany. In the learned counsel's view the Custodian Board was antitled to the directorships onjoyed by the Asians. Counsel further submitted that the proceedings were vehemently opposed by the majority shareholders. Two witnesses were called. I believe that 法的复数行动的基本状况 at this stage the matter was becoming slightly complicated; if not confused. The count apparently humbarked confused in the count apparently humbarked confused in the count apparently humbarked confused in the count apparent is the count of the count of the count of the count of the count

lawful directors. Be that as it may the least it will be the consi- dered the evidence before him and said.

"It follows therefore that after the departure of the three Asian directors their replacement could not have been made without involving the Departed Asian Property Custodian Board as the majority shareholders and possibly as a director who has replaced the three Asian directors. Without the involvement of the Custodian Board, the appointment of Dr. Kityn and Dr. Kosoer in Mr. Mobule's view was null, and void. accept that view and hold that after the departure of the Asians only Mr. J. W. Kyeyung validly remained and continued to be director of the plaintiff company."

On the learned judge's own finding the only director of the appellant company is Mr. J. W. Kyeyuno. If the learned judge is right it would follow that the management of the appellant company was in the board of directors consisting of one director who under section 177 of the Companies Act can monugo the affairs of the company under regulation 80 of Table A of the Act. This would include in my view instructing counsel to file proceedings in the name of the company. With respect it was a misdirection on the part of the learned judge to hold that there was no board of directors when the suit was filed to give proper instructions. I have already considered authorities indicating that where management is in the board of directors the shareholders, in this case the Custodian Board, cannot interfere unless there is provision

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in the company's articles of association to that affect. As the learned trial judge quite rightly remarked.

> "The Custodian Board obviously could have been more active in pursuing its interest in the plaintiff company than it appears to have done."

The Asians departed in 1972. To date in 1986 over 14 years ago. the Custodian Board has apparently taken no steps to be represented on the board of directors although it had majority shares as found by the learned trial judge.

The only question for decision is whether the single director of a private company is obliged to pass a resolution before he can give instructions to counsel to bring an action in the name of the company. I repart the proposition as ridiculous to say the least. In the first place there is no legal provision requiring a rosolution to be passed in that regard. I must hasten to add, however, that where a decision of the board of directors is required one way of encuring that such a decision has been taken is if a resolution. $\cdots$ $\cdots \quad \cdots \quad \cdots$ has been passed in that regard. The important thing is whether authority is given for doing an act not whether a resolution has been passed. If authority is given in my view it is irrelevant as to how it was given. I derive some support in the only East African case I have been able to lay my hands on, Emco Plastica International Limited v. Freeberne (1971)E. K. 432. In that case the appellant company by resolution of the board appointed the respondent as Secretary. The terms of his employment were contained in a letter signed on behalf of the company by its manning director which provided that the contract was for a minimum period of 5 years. The monaging director dualt with the day offairs of the company. The cospany purported to dismiss the respondent by 5 days' notice. The respondent sued for benefits under the contract. The company contended that the managing director had $\overline{a}_{\alpha\beta} = \overline{a}_{\alpha\beta} + \overline{a}_{\alpha\beta} + \overline{a}_{\alpha\beta} + \overline{a}_{\alpha\beta} + \overline{a}_{\alpha\beta} + \overline{a}_{\alpha\beta} + \overline{a}_{\alpha\beta} + \overline{a}_{\alpha\beta} + \overline{a}_{\alpha\beta} + \overline{a}_{\alpha\beta} + \overline{a}_{\alpha\beta} + \overline{a}_{\alpha\beta} + \overline{a}_{\alpha\beta} + \overline{a}_{\alpha\beta} + \overline{a}_{\alpha\beta} + \overline{a}_{\alpha\beta} + \overline{a}_{\alpha\beta} + \overline{$

$\sim$

ordive from the company to make the contract, there being, wedon of the board to support it and noth . Ig in the company's of association conferring any powers on the managing Lutta; J. A. in his judgment delt with the provisions. Kenyo Company law relating to powers of directors which $\n\cdot\n$ $\n\cdot\n$ $\n\cdot\n$ $\n\cdot\n$ milar to ours and said at page 435,

> "The judge held in effect that Mr. Dhanani had implied or ostensible authority to enter into the contract on behalf of the appellant company. The basis of this would appear to be that the appellant company held out Mr. Dhonani as the person who was managing its day to day business and therefore, thad authority to enter, on its behalf, into contract with the respondent. In my view, the judge's decision, on the facts of this case, was correct." the state of the state.

The learned Justice of Appoal wont on to say later in his judgmont,

"The management and conduct of the business of the appellant company throughout the material period was in the hands of Mr. Dhannni. The board of directors,-by their conduct, helped to create this impression or belief in the mind of the respondent, and, indeed in the minds of other persons who dealt with the appellant company. The respondent thus reasonably believed that Mr. Dhanani had authority to onter into the contract, ao this matter, that is, entering into contracts was a matter which was within the orticles of association and powers of the board of director5.1

In the same cas Law, J. A. at page 437 said,

"It is clearly within the ostensible" authority of a managing directors to negotiate a contract of service with on employee of the company."

The third member of the court Mustafa, J. A. said at page 437,

"As the trial judge has rightly found, Hr. Dhanani in effect had ostensible authority to act for the appellant company in offering the contract of service to the respondent." 🔅 👀

Every case must be decided on its own facts. Looking at the $\mathcal{L} = \mathcal{L} \times \mathcal{L} \times \mathcal{L}$ III means a maint $\cdots$ outhorities and thelaw I would say that one way of proving a decision of a board of directors is by a resolution of the Board. in that behalf. Nut I would not go so far as to say that this is

$\sim$

*i*

1 the only'~TTfeans of proof atructions woe Hy the learned trinl I judge had found. on\_ the ' eyi\_de\_ri£c acting as managi.ng—dXrojtor . was the only director of n private company as ns is suggested in Bugerc *:* Coffee Growers Ltd, v. Sebadduka, unless of course, the law specifically requires a resolution tig appears to be the case in instances^ specifically\* provided for in the Companies Act and authority to bring an action in the name of the company is not one of those instances where a resolution is required .'•^I n my view having regu'rd to all the\_\_evidence on the jrecord.there was authority for this suit to be brought in the name of the company. J. W. Kyeyune who originally gave in-

1.3

thia appeal set aside the order dismissing the suit and the order for coats against the advocate personally. I would direct the High Court to proceed with the hearing of the case was of the Exproprinted Properties Act, 1982, before deciding the legality of the acquisition of the suit property. I would further direct that the Court shall refer such questions as may arise requiring interpretation of the Constitution, to the constitutional court, for example whether or not the acquisition of the suit property was In this connection I would draw the attention of the trinl court to the provisions of Article 87(1) of the Constitution to the effect thnt where ony question Constitution arises in ony proceedings and the court is of opinion that the question involves a substantial question of law the court may and.shall if any party to the proceedings so a court is of opinion that the question is not sufficientiv requests refer the question to the High Court consisting of bench of not less than 3 Judges cf the High Court unless the within the moaning of nrtiqle 1) of the Constitution. I would allow authority for bringing this action in on the basis thnt there **t** the names of the company, thnt the trial court caunot dispose of issue, no.6, that is, whether this action is maintainable in view ns to the interpretation of the

As Odoki, J. A. agrees with the judgment of Lubogo, ^give the appellant-the costs of the appeal and in the .°rcicrod 06 proposed by the learned Ag. J./\. *^'S?^J^^^proceedings* to require a reference to -he **High Court..**

DATED at Mongo this 6th day of October, 1986.

Signed:

vjorobuzi, CHIEF JUSTICE.

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