ERNEST ANDREW CHITALIKA v FRANCIS PHILIP TEMBA 1996 TLR 287 (HC)

 

ERNEST ANDREW CHITALIKA v FRANCIS PHILIP TEMBA 1996 TLR 287 (HC)

Court High Court of Tanzania - Dar es Salaam

Judge Bubeshi J

B

CIVIL CASE NO 68 OF 1995

21 November 1995

Flynote

Company law - Winding up - When just and equitable that company be wound up -

Directors not C on speaking terms - Sections 163, 167, 172 and 173 of Cap 212

-Headnote

The applicant sought the winding up of a company of which he had been a director.

He D alleged that there were only two directors and that the relationship between

himself and his fellow director had broken down to the point where they were

unable to function.

Held:

(i) The Court was empowered to wind up a company where the Court was

of the opinion that it was just and equitable to do so. In the present case where the E

former directors were not on speaking terms and each accused the other of fraud, it

was just and equitable that it be wound up.

Case Information

Ordered that the company in question be wound up.

No case referred to. F

Mr Lyimo for the Petitioner.

Respondent in person.

[zJDz]Judgment

Bubeshi J: G

The petitioner Ernest Andrew Chitalika has filed this chamber summons for winding

up of a company pursuant to s 163 as read together with ss 167(d), 172 and 173 of Cap

212. The grounds for this application are stated in the petition filed. I shall reproduce

the salient features of the petition as follows: H

-- that the petitioner is one of the only two directors and shareholders

who appear in this petition, of a company known as Safe Business and Construction

Company Ltd which is to be wound up by this Court. I

-- that the respondent in this petition made impossible as to the

1996 TLR p288

BUBESHI J

A existence of the said company by `disqualifying' the petitioner no

longer to be one of the directors by his letter dated 22 June 1994 herein attached as

Annexure A. In fact his utterance that the other director was disqualified led the

respondent to hold privately the property of the said company, namely M/V Land B

Rover 109-with registration No UJ 2203, concrete vibrator, vacuum pump and an

electric drilling machine. These properties are valued at Shs 12,495,000/= in total.

-- that a demand note was sent to the respondent which so far has not

been successful as expected, showing that the respondent is not ready to settle this C

dispute out of Court. The said demand note was sent to the respondent by post under

the power of attorney of one Joseph Mihayo, which were conferred to him, by the

petition in this suit. A certificate of posting a registered mail is annexed hereto as

Annexure B.

D -- that the petitioner avers that Safe Business and Construction Company

Ltd, under the directorship of the petitioner and respondent in this petition, and the

same persons are the only subscribers to the Memorandum and Articles of Association

as verified by a letter by one Mahingile, a Senior Assistant Registrar of Companies-his

letter is Annexure C. E

-- that the respondent unlawfully and contrary to the company's

regulations, after he had written the aforementioned letter of disqualification,

swindled company's fund to the amount of Shs 1,350,000/= without the consent of the

petitioner as F shown by bank statements-Annexure D. The petitioner in this case

cautioned the bank with a letter dated 1 December 1994-Annexure E.

-- that the company incurred some costs for the maintenance of the said

M/V Land Rover UJ 2203 amounting to Shs 718,950/= as per Annexure F. G

-- that the cause of action has arisen in Dar es Salaam within the

jurisdiction of this court; given the fact that the petitioner demands the respondent to

surrender property of the said company valued at Shs 13,845,000/=. H

The petitioner is praying for

(a) an order of the court declaring the winding up of the aforementioned

company;

I (b) an order that the said property as per paras 4 to 7 of the petition be

surrendered by the respondent.

1996 TLR p289

BUBESHI J

A (c) an order that the respondent pays to the petitioner costs of this

application.

-- an order that the respondent pays to the petitioner interest at the

court's rate of interest on the decretal amount from date of filing of this petition to

the date of full settlement. B

-- any other relief as this court may deem fit to grant.

Mr Lyimo, who appeared for the petitioner, argued with some force that the existence

of the company is not untenable. It was Mr Lyimo's argument that this company had

initially C two directors-the petitioner and the respondent; that these two

subscribers are also the shareholders to the company. It was Mr Lyimo's contention

that since the disqualification of the petitioner by the respondent these two partners

cannot work together. That the respondent has locked the office and moved out some

of the D company's properties to an unknown place. It was therefore impossible for

the company to operate under prevailing circumstances. Mr Lyimo was of the view

that under the prevailing circumstances of disharmony between the two directors, the

operation of the E company is in serious doubt and therefore it should be wound up

by order of this court. In the alternative, added Mr Lyimo, the Court should find that

due to the disagreement between the two directors, the operation of the company has

been rendered impossible, this court, in exercise of its discretion to wind up the

company and appoint an official receiver or liquidator so that the same may perform

his legal duties to creditors and/or F shareholders.

The respondent who preferred to argue his own case before the Court put up some

forceful arguments to challenge the petition.

He stated before the Court that since the inception of this company there were four

G original shareholders: Steven, Ainea, Francis and Ernest. The subscribers were to

be two-the petitioner Ernest and himself. The respondent told the Court that the

petitioner is the cause of all the problems now facing their company. That the

petitioner had withdrawn some Shs 872,000/= which he has not accounted for and

referred the court H to Annexure D. The respondent disputed the contents in

statement Annexure F produced by the petitioner. The respondent informed the

Court that contrary to what has been stated by the petitioner, it is the same petitioner

who has dissociated from the company and formed his own company by the name of

Eric Business and Construction I Company. He added further that the petitioner has

banked a forged

1996 TLR p290

BUBESHI J

cheque in their account and a criminal case No 57 of 1994 is pending in Court. That

the A petitioner is the one who has locked the office forcing the respondent to look

for another venue from which to conduct their company business. As to the Land

Rover the respondent said it was his own personal vehicle that he had left with the

petitioner who took the registration card and added his (petitioner's) name. This

matter also is still B pending in court with the registration card under police custody.

The respondent also added that they have tried to summon the petitioner to come and

attend to company's business but all in vain hence they sent him a message to hand

over the office and C company's properties. To this request the petitioner has not

responded. It was the respondent's submission that since theirs was a private company

no winding up procedures can be applied--the respondent is relying on s 140 of Cap

212. He also argued that s 167(d) is confined to members of the company and not

directors. The D respondent prayed for the dismissal of the petition as it does not

apply in their case at hand.

In reply Mr Lyimo on behalf of the petitioner said that as far as this company is

concerned it has only two directors and therefore any resolution that was passed to E

disqualify the petitioner was therefore null and void.

Having heard the parties, it is evident that the two directors cannot work together

any longer. The atmosphere within which they are supposed to transact business is

tainted with accusations of fraud. Not only that but there are criminal charges filed in

court against one of the directors and one wonders whether under such conditions,

this F company can really survive.

The petitioner has asked this Court to wind up the company under ss 163, 167(d), 172

and 173 of Cap 212. Section 163 of Cap 212 reads: G

`163 The High Court shall have jurisdiction to wind up any company

registered in the Territory.'

And again s 167 lays down circumstances in which a company may be wound up by

H court. The petitioner has relied on s 167(d) of Cap 212 which reads:

`A company may be wound up by the Court if--

(a) . . . .

I (b) . . . .

(c) . . . .

1996 TLR p291

BUBESHI J

A (d) the number of members is reduced, in the case of a private company

below two or in the case of any other company below seven.'

Mr Lyimo arguing for the petitioner has submitted that as of 12 September 1994 their

company had two directors: the respondent and the petitioner. Also these two

persons B are also the subscribers to the memorandum and articles of association and

therefore the shareholders and no change has been effected in the company since it

was incorporated. This information was transmitted to the petitioner by the office of

the Registrar of Companies. C

However this information is challenged by the respondent. According to him a

certified board resolution was filed with the Registrar of Companies on 12 July 1994.

The contents of the resolution were twofold-the disqualification of the petitioner as a

director and the appointment of one Steven P Mgaya as a new Director. Pursuant to

this D resolution, a demand note of 14 March 1995 was communicated to one Joseph

Mihayo (purportedly holding a power of attorney on behalf of the petitioner) to

inform him of the current situation. We have therefore two contradictory

informations emanating from the office of the Registrar of Companies. While the

petitioner is informed on 12 September E 1994 that he is still one of the directors to

the company; the same office on 12 July 1994 acknowledged the change in

directorship as presented by the respondent. It is therefore rather a confused state of

affairs. And in that vein the respondent was correct to contend that their company

has at the moment two directors-one Steven P Mgaya F having replaced the

petitioner.

In terms of s 163 and 167(f) this court has the power to wind up any company

registered in this country. Section 167(f) of Cap 212 reads: G

`167 A company may be wound up by the court if:

(a) . . . .

(b) . . . .

(c) . . . . H

(d) . . . .

(e) . . . .

(f) the court is of opinion that it is just and equitable that the company

should be wound up.'

In my considered view I think it would be just if this company is wound up because

as I remarked earlier on in my ruling the former

1996 TLR p292

directors are not in talking terms so to speak; each director is accusing the other A

director of one of the other; accusations of fraud are abounding. The petitioner is

contending that he is still one of the directors while the respondent has submitted

evidence that the petitioner's name was deleted and a replacement appointed. The

office B of the Registrar of Company is also not very helpful in this regard by giving

contradictory statements of affairs.

In the final event, this Court in exercise of its discretion under s 167(f) has deemed it

fit to wind up this company and appoints the Registrar of Companies to act as the

official receiver in terms of s 179 of Cap 212. C

I make no order as to costs.

1996 TLR p292

D