12 Dec Tatiana Boya v. Mario D Cataldo & Cottage Italia Industries Civil Appeal No. J4/41/2015, Delivered on 13th March 2024 (Supreme Court)
“A court in civil matters is not required to demand of a Plaintiff proof beyond reasonable doubt. Therefore, the question that ought to be asked is whether the Plaintiff adduced enough cogent, credible and reliable evidence which, prima facie, proves her claim of directorship? In accordance with the required standard of proof, we answer the above in the affirmative. This is especially the case because the 1st Defendant who put the Plaintiff’s directorship in issue has on record co-signed various documents with the Plaintiff as a director.
The Plaintiff claimed to be the Managing Director, majority shareholder, and registered secretary of the 2nd Defendant Company (“the Company”). She stated that the 1st Defendant transferred a total of 3,288,336.39 shares to her in 2006 and 2010, making her the majority shareholder of the Company. She sought a declaration from the court confirming her beneficial ownership of these shares. The 1st Defendant on the other hand, vehemently denied knowledge of Plaintiff’s directorship, and claimed he was the beneficial owner of all the shares in the Company.
The 1st Defendant admitted transferring a portion of his shares to the Plaintiff but argued that the transfer was merely superficial, and only intended to make the Plaintiff appear to be the majority shareholder. This, he claimed, was done to protect the Company from government interference. He counterclaimed, seeking among other reliefs a declaration that the Plaintiff’s conduct in seeking to lay claim to the shares was tainted by fraud and also sought an order reversing the share transfer deed which had transferred a number of his shares to the Plaintiff. It is important to note however, that during the trial, the 1st Defendant declined to adduce evidence in proof of these allegations.
The Issue of the Plaintiff’s Directorship
The Supreme Court emphasized that the burden of proof in a civil action, lies with the party making an allegation to prove their case on a balance of probabilities. Therefore, it was the Plaintiff’s responsibility to provide sufficient evidence to support her claims of being a director of the company and the voluntary transfer of shares by 1st Defendant to her.
The Supreme Court acknowledged the requirements of the Companies Act that a person may only be appointed as a director of a company if they have given their written consent to the appointment beforehand. It however took the view that although the Plaintiff had failed to adduce such written consent, the absence of the written consent was not fatal on the Plaintiff’s since she had adduced sufficient cogent evidence to prove her claim of being a director on a balance of probabilities.
The Plaintiff presented various documents, including audit reports of the Company from 2008, 2009, and 2010, which she co-signed with the 1st Defendant as directors. Additionally, the 1st Defendant had previously signed other documents referring to the Plaintiff as a director without any objections. The Supreme Court observed that per section 25 of the Evidence Act, 1975 (Act 323), facts recited in a written document are conclusively presumed to be true between the parties involved, unless proven otherwise. This is also known as estoppel by deed.
The Court further applied section 26 of the Evidence Act[1], which states that when a party deliberately causes another party to believe a set of facts to be true, and that party proceeds to act on that belief, the facts would be presumed to be true during proceedings between the parties. This principle is referred to as estoppel by conduct or statement. In the present case, the 1st Defendant had allowed the Plaintiff to believe she was a co-director for years, and the Court ruled that he was estopped from denying her directorship.
The Issue of the Plaintiff’s Membership
The Supreme Court highlighted on the importance of the pleadings filed by the parties to an action – especially, how they may delimit the factual controversies that may require proof at trial. In this case, both the Plaintiff and 1st Defendant had admitted per their pleadings that, the Plaintiff was a shareholder of the Company and that the 1st Defendant had transferred some shares to her in 2006 and 2010. Accordingly, since the parties by their pleadings had made such unambiguous admissions, the court as well as the parties were bound by these pleadings.
The Supreme Court relied on the principles established in the case of Adehyeman Gardens Ltd And Another v. Assibey[2] to hold that the Plaintiff’s membership was not invalidated due to the absence of paid consideration. The Court further held that the Deeds of Transfer were valid evidence of share transfers and that the non-registration of these transfers did not invalidate the Plaintiff’s membership.
It is important to note that the 1st Defendant argued that the share transfers were invalid because of certain alleged fraudulent motives of the Plaintiff. However, since he failed to lead evidence of the said motives during trial, the allegations were disregarded by the Court.
In conclusion, the Supreme Court reversed the decision of the Court of Appeal and by inference the High Court, and concluded that Plaintiff had provided sufficient evidence to prove her claim of directorship and membership of the 2nd Defendant Company. The Court made further orders regarding rendering of accounts by the 1st Defendant, and injuncted the 1st Defendant from unilaterally dealing with the assets of the Company so long as the Plaintiff was a valid member.
Insight: To succeed in an action regarding directorship of a company, the party claiming directorship must show evidence of appointment as director and evidence showing that the other party directly or indirectly held them out as a director of the company.
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AUTHOR:
Tracy Akua Ansaah Ofosu (Legal Associate)
[1] 1975 (Act 323)
[2] 2003-2005] 1 GLR 391