CASE Brief - John & Brian Plummer v. Phenee Plummer, Sean Fraser and Denbigh Farms Limited Court PDF

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John & Brian Plummer v. Phenee Plummer, Sean Fraser and Denbigh Farms Limited
Court of Appeal, Jamaica, (2020) JMCA App 16
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University of Technology, Jamaica Faculty of Education and Liberal Studies Business & Computer Studies

Company Law (3001) Case Brief

By Shirlet Burger

Lecturer: Miss D. McNeil Date of submission: October 12, 2020

ID#:0603136

John & Brian Plummer v. Phenee Plummer, Sean Fraser and Denbigh Farms Limited Court of Appeal, Jamaica (2020) JMCA App 16

John Plummer Brian Plummer Phenee Anthony Plummer Sean Fraser Denbigh Farm Ltd

1st applicant 2nd applicant 1st respondent 2nd respondent 3rd respondent

Facts: Denbigh Farms Limited is a family owned private limited company involved in cattle rearing and sugar cane farming and is managed by the 1st applicant who is the Managing Director. On June 21, 2017 a claim form was filed by the 1 st and 2nd respondents a shareholder and director respectively, on behalf of the 3rd respondent against the 1st applicant for failing to account for income and expenditure relating to the farm for transactions that he carried out, and for the leasing of lands owned by the company, one of which he leased to his son the 2 nd applicant. All these transactions were conducted without knowledge and approval of the company’s Board of Directors. On February 13, 2020 the 1st applicant applied to the Court of Appeal for permission to appeal against the order of Batts J which he supported with an affidavit, the court, however, refused his application.

Procedural history: On December 17, 2019 the respondents filed a claim to the Honourable Batts J against the 1st applicant seeking an order declaring the respondents and the applicant for these orders are complainants within the meaning of section 212 of the companies Act and if required, leave be granted retroactively to bring this claim in the name of and on behalf of Denbigh Farms Limited for wrongs done to the company, its directors and shareholders. The 1 st applicant also filed a

claim on January 14, 2020 counteracting the respondents, he sought for the claim filed by the respondents to be struck out for non-compliance with section 212 and 213 of the Companies Act 2004 and that cost to the applicants to be agreed and taxed. At the pre- trial review on January 31, 2020, the Honourable Justice Batts denied the application for leave of appeal and for the claim to be struck out. He also ruled cost to the respondents to be taxed or agreed and the respondents’ attorney to prepare, file and serve formal order which lead to the 1 st applicant filing to the Court of Appeal, for permission to appeal against the order of Justice Batts. Issues: 1. Whether the respondents (present board) can continue a derivative action that was filed in 2017 without the leave of the court. 2. Can majority shareholders continue a claim against a minority shareholder who is not a director of the company? 3. Whether the notice submitted to the court by the respondents was a proper notice and reference was made to the directors of the company. Holding/Decision: 1. Yes, in the absent of a written resolution where it is shown that all members knew of and agreed in a decision, they and the company will be bound. 2. Yes, the majority directors or shareholders do not need the court’s permission to bring action. 3. Yes, the notice was sufficient for the purposes of section 212 of the Companies Act. Rule of law enunciated: 1. To determine the substantive rights of both parties the court made reference to the case of Parker & Cooper Ltd v Reading (1926) Ch 975 where Astbury J stated the principle ‘where

the transaction is intra vires and honest and especially it is for the benefit of the company, it cannot be upset if the assent of all the corporators is given to it. He also stated that it doesn’t matters in the least whether that assent is given at different times or simultaneously. 2. The relevant rule of law that was adopted was from section 212 and 213 of the Companies Act. It claims that directors in the majority, who see it in the company’s interest to commence a claim, do not need permission of the court to do so. 3. As a relevant rule of law, the court used the case of Winfield v Daniel where Gallant J found that failure to provide notice was not fatal, the history of both parties made it unlikely that the dispute could have been resolved out of court. In this case it is obvious that strict compliance with statutory requirement of giving notice would be futile. Reasoning: The Honourable Miss Justice Simmons in her decision concluded first that the present directors have clearly elected to adopt and continue the claim and the fact they decided to do so appears to be a sufficient basis on which such a finding could be made. Based on the case of Parker & Cooper Ltd v Holding, the agreement of the directors, even if not in writing is sufficient to bind the company. Therefore the amendment of the present board signifies their decision to adopt and continue the claim in the company’s name against the 1 st applicant, the former director and majority shareholder and the 2nd applicant, a third party, as opposed to a derivative action. In such circumstance the requirement for leave to file the claim would therefore be negative. The court also concluded that the law as it now stands according to section 212 and 213 of the Companies Act of Jamaica, directors in the majority, who see it in the company’s interest to commence a claim, do not need permission of the court to do so. In this case, even though

counsel labeled the 1st applicants as a minority shareholder, the court identified him as a majority shareholder and even though he is no longer a director, the company can take actions against him for his purported breach of duty while he was the managing director of the company because once the wrong complained of is ratifiable, the majority have the option to do so. The court noted that the learned judge finding the notice to be sufficient for the purposes of section 121 of the Companies Act, cannot be faulted as the respondents presented the court with evidence of the shareholders’ grievances being laid before the board including the 1 st applicant in numerous emails. The premise of the court’s decision was based on the fact that the emails sent to the 1st applicant was evidence that an effort was made to resolve the dispute, however the court questioned the purpose of informing him of the proposed action, when all indications showed that he was not interested in discussing the matter. Concurring and Dissenting opinion: There was no concurring or dissenting opinion as the Honourable Mr. Justice F Williams JA and the Honourable Mrs. Justice Foster-Pusey JA agreed with the reasoning and conclusion of the Honourable Miss Justice Simmons JA (AG) affirming the trial court’s decision....