Petroleum Products Ltd et Al v Gulf Union Bank (Bahamas) Ltd et Al

• Jurisdiction: Bahamas
• Judge: Adderley, J.
• Judgment Date: 26 February 2009
• Court: Supreme Court (Bahamas)
• Docket Number: CLE/GEN 360 of 2007
• Date: 26 February 2009

Supreme Court

Adderley, J.

CLE/GEN 360 of 2007

Petroleum Products Limited et al

and

Gulf Union Bank (Bahamas) Limited et al

Appearances:

Alanzo Lopez for the second and fourth plaintiffs.

The third and fifth plaintiff prose.

No appearance for the fourth, sixth, seventh, eighth, ninth and eleventh defendants.

Company law - Shares and shareholders — Transfer of shares — Whether defendant shareholders ought to be replaced by the plaintiffs as shareholders.

Adderley, J.

1 This action has been extant for over 14 years. It commenced in Freeport as Action No. FP/155/94 in 1994 and was transferred to Nassau. Over the years various aspects of the matter or matters arising from it were the subject of decisions of various judges of this Court, of the Court of Appeal and of the Privy Council. This decision deals with the preliminary issue of who owns the 55,000 shares (“the Shares”) in Petroleum Products Limited (“Petroleum”), the first plaintiff herein.

2 The Statement of Claim asks the court to make the following order among others:

• “2. That the shares of the first plaintiff are still beneficially owned by the second, third, fourth and fifth plaintiffs”

There is no claim for rectification of the register of members by the second to fifth plaintiffs as they claim that they, and not the fourth defendant and it nominees, are the valid shareholders.

3 The Shares are claimed by the plaintiffs as follows:

(“Plaintiff Shareholders “)

but by the defendants as follows:

Felix N Stubbs – 1

Marvin Bethell – 1

Maurice O Clinton – 1

Fabian Investments Limited – 54,996

Pamela Seymour – 1

(“Defendant Shareholders “) The History

Shareholder	Number	Certificate	Office
Amos Russell	13,750	23	President
Oswald A Archer	13,749	24	Vice-Pres.
Rupert A Watkins	13,750	25	Secretary
Wallace R Allen (nominee)	1	26
Carlton S Wildgoose	13,750	27	Treasurer

4 The action was begun by a Writ of Summons filed 13 October 1994. Maynard, J., as he then was, in his case management order filed 30 January 2007 ordered that the statement of claim filed 23 January 1995 should stand. He also ordered that the issue of the ownership of the shares in Petroleum should be tried first as a preliminary issue.

5 In a decision in this action dated 7 April 1999 it was adjudged by Ganpatsingh, J., as he then was, that the action be struck out on the grounds that the statement of claim disclosed no reasonable cause of action. Ganpatsingh, J.'s Ruling was set aside by the Court of Appeal (Hall, C.J., Ibrahim and Osadebay, JJ.A.) in Petroleum Products Limited, et al v. The Grand Bahama Port Authority Limited, et al Appeal No. 41 of 1999 in a decision dated 17 November 2005.

6 On 25 February 1998, the second through fifth plaintiffs applied under section 57 of the Companies Act 1992 (“the Act”) to rectify the register of Petroleum reflected in the annual statement lodged with the Registrar General on 5 December 1990. It was an attempt to replace the defendant Shareholders with the plaintiff Shareholders. This application was heard on 10 March 2000 before Lyons, J. who dismissed the application. The reason for the dismissal was based on the principle that where there are complex facts in dispute the summary procedure under section 57 of the Act was inappropriate; such rectification should be sought in an action commenced by Writ. Lyons' judgment was appealed by the fifth plaintiff but his Notice was treated as irregular by the Court of Appeal and by the time the second through fifth plaintiffs together gave Notice of Appeal it was out of time, and the Court of Appeal did not grant them leave to appeal out of time.

7 Then on 9 January 2002 the third and fifth plaintiffs applied for leave to apply for an Order of Certiorari aimed at the Registrar General to rectify the register of Petroleum. That application was dismissed by Moore, J. on 7 May 2002. His decision was affirmed by the Court of Appeal (Churaman, Ganpatsingh and Osadebay, JJ.A.) on 7 November 2002. The Court of Appeal's decision was appealed to the Privy Council in Oswald Archer, et al v. The Registrar General, et al Privy Council Appeal No. 39 of 2003. That appeal was dismissed on 24 June 2004 because the Board found that the appellants were seeking review on a matter which was outside the Registrar General's functions. It was the Board's view that the matter could be dealt with only by a Court in proceedings to which those directly affected (in particular, Petroleum and Fabian Investments Limited (“Fabian”)) were parties.

8 In my Case Management Order made 15 January 2009, I gave hearing dates for the preliminary issue of share ownership ordered by Maynard, J. as follows: Friday, 6 February commencing at 10:00 a.m., Monday 9 February commencing at 2:30 pm and Tuesday 10 February commencing at 10:00 am. I also ordered that affidavits would stand as evidence-in-chief subject to cross examination and laid out time lines for filing of documents for hearing of the preliminary issue. I directed Mr. Paul Wallace-Whitfield (“Mr. Whitfield”), who appeared for the first plaintiff, to give notice of the hearing dates and the contents of the Case Management Order to Mr. Maurice Glinton (“Mr. Clinton”), the ninth defendant. Mr. Glinton, who was not present, had entered an appearance filed 27 October 1994 on behalf of the first plaintiff and the fourth, seventh, and eighth defendants. Mr. Whitfield kindly confirmed orally that he served a copy of the draft Orders on Mr. Glinton. On 6 February Mr. Maynard appeared pro se but Mr. Glinton did not appear. I directed Mr. Whitfield once again to notify Mr. Glinton in writing that the Court would proceed on Monday 9 February, 2009 and adjourned the matter. On 9 February Mr. Whitfield confirmed that he had carried out the Court's instructions and had affidavits filed to this effect which the Court read. In these circumstances, the Court proceeded with the hearing. Neither Mr. Glinton or Mr. Maynard appeared at the resumed hearing on 9 February nor did they submit anything for consideration.

THE FACTS

9 The first plaintiff is a company incorporated under the laws of the Bahamas in 1958. On or about 15 May 1984 the second third fourth and fifth plaintiffs purchased the Shares.

10 In order to make the purchase they obtained $300,000 financing from CIBC Bank which required as security the hypothecation of the Shares. Pursuant to the hypothecation the certificates for the Shares were signed in blank by the second through fifth plaintiffs and sent by their then attorneys Messrs Christie, Ingraham & Co. to CIBC.

11 CIBC later demanded payment and the plaintiffs found alternative financing with the first defendant, Gulf Union Bank (Bahamas) Limited (“Gulf”). They borrowed $537,000. Gulf obtained a mortgage and a debenture from Petroleum and a personal guarantee from the third and fifth plaintiffs (“the transaction documents”) as security. CIBC was repaid, and on 29 December 1986 the Shares were delivered by the attorneys for CIBC to the tenth defendant (“Mr. Maynard”) of Maynard & Co. apparently on the erroneous assumption that he was the attorney for Petroleum.

12 The payments due to Gulf fell into arrears. On 8 August 1988, Petroleum and the second through fifth plaintiffs entered into a rescheduling agreement with Gulf (“the Rescheduling Agreement”). In the agreement Petroleum covenanted to bring its payments up to date within six months from 24 July 1988 [by 23 January 1989]. In consideration of the Rescheduling Agreement the second through fifth plaintiffs issued a guarantee in favour of Gulf and agreed to the following:

“…in support of such guarantee shall assign to the Lender [Gulf] their certificates of shares in the Borrower [Petroleum] by way of deposit.”

The inference is that the share in the name of the nominee Wallace Allen was intended to be included as well.

13 After default in payment under the Rescheduling Agreement Gulf appointed Mr. Maynard receiver of Petroleum on 20 February 1989. The appointment was made under the terms contained in the debenture between them dated 12 December 1986.

14 Gulf later entered into an agreement dated 14 February 1990 with Fabian to sell inter alia the Shares to Fabian. Completion was to take place within 30 days [by 13 March, 1990]. The sale of the Shares...