CCJ restores High Court ruling on appointment of Nabi and Sons director

A court battle among the brothers of the S.A. Nabi and Sons Limited company ended in May when the Caribbean Court of Justice (CCJ) restored a Guyana High Court judgment ruling, which had confirmed the appointment of one of the brothers’ sons as a director on the board.

In 2004, Justice Rishi Persaud had ruled that the appointment of the son of Aslim Sheermohamed as a director of the board of the company was in order, throwing out the challenge that was mounted by two other Sheermohamed brothers, Amin and Azeez, through the company. However, the Court of Appeal later overturned that decision and ruled that the appointment of the son was unlawful.

The court battle continued, even though by now two of the brothers are deceased, and it was taken to the CCJ, which ruled on May 23.

Ashmidphraque David Sheermohamed and Aslim Sheermohamed, who is now deceased but was represented through Kathleen Sheermohamed the executrix of his estate, appealed to the CCJ, with S.A. Nabi and Sons Limited named as the respondent.

The case was heard by Justices Michael de la Bastide, R. Nelson, D. Bernard, D. Hayton and W. Anderson with Christopher Roy Parker, QC representing the appellants and Senior Counsel Fenton Ramsahoye and attorney-at-law Sanjeev Datadin representing the respondent.

According to the CCJ ruling, which was delivered by Justice de la Bastide, the appeal was taken to the CCJ by Asmid and his father Aslim and his two brothers Shir Amineed Nabi called ‘Amin’ and Azeez Sheermohammed, the latter also now deceased. The respondent is the S.A Nabi and Sons Ltd which is a family company engaged in the construction business. It was incorporated in 1965 and the three brothers, Aslim, Amin and Azeez, between them owned the great majority of shares in the company and for sometime comprised the Board of Directors of the company.

The proceedings out of which the appeal arose was launched by a notice of motion dated October 21, 2004, in which the company was named as the applicant and the action was brought against four respondents with Ashmid and Aslim being named the third and fourth respondents. The first two respondents were the Attorney-General and Registrar of Joint Stock Companies, but they took no part in the proceedings and were not parties to the appeal.

The purpose of the application was to challenge the appointment of Ashmid as a director of the company and a declaration that he was not “lawfully appointed” as a director and for an injunction to be issued restraining him from acting as a director. A declaration, that certain resolutions passed by Aslim and Ashmid as directors were null and void, was also sought. The resolutions that were targeted included those through which shares held by Amin and Azeez were subjected to a lien and then forfeited and subsequently sold to Aslim.

According to the CCJ’s ruling, the basis of the challenge of Ashmid’s appointment was that it was made by two directors, Aslim and Amin, at a meeting held on the September 10th, 2004 to which a third director, namely Azeez was not invited. It was contended that the two directors who attended that meeting did not constitute a quorum and did not have the power to appoint what was alleged to be a fourth director. The controversial meeting was convened by Aslim for the express purpose of increasing the number of directors from two to three and thus satisfying the requirement contained in article 80 of the Company’s articles of association that there be a minimum of three directors – all of this on the premise that Azeez was not a director at the material time. That was a premise which in September 2004, appears to have been accepted by all three brothers.

At the meeting, Amin proposed Azeez (presumably with Azeez’s consent) to be the third director while Aslim proposed Ashmid. Aslim by means of a casting vote which he claimed as chairman resolved the deadlock in Ashmid’s favour.

“It was crucial to the case for the applicant that Azeez was a director at the time of the meeting on the 10th September, 2004. If he was a director, then the admitted failure to invite him to the meeting alone would have nullified any business transacted at it. It was alleged that in any event there was no quorum at that meeting,” the CCJ ruling said.

It pointed out that those were the applicant’s principal arguments although Aslim’s right to a casting vote was also challenged. As a result, the central factual issue in this case was whether Azeez, who both sides agreed had been a director up to 1994, was still a director on the 10th September, 2004.

High court

In the High Court, Justice Persaud, according to the CCJ, had to decide the issue largely on the basis of the documents which were introduced into evidence as annexures to the affidavits sworn respectively by Amin in support of the application and by Aslim in opposition to it.

“One of the unsatisfactory aspects of this case is that it was starved of evidence. In their affidavits both deponents simply made contradictory averments that Azeez was or was not still a director in September 2004,” the CCJ pointed out.

It said that Aslim produced no evidence of how Azeez’s directorship was terminated. On the other hand, Amin offered no explanation of why he (and apparently Azeez as well) had accepted that Azeez was no longer a director or why he changed his mind about that.

“Moreover, for some reason, which it is difficult to fathom, the attorneys on both sides agreed that there should be no cross-examination. This had the effect, whether intended or not, of depriving the judge of any chance of discovering the answers to these crucial questions,” the ruling said.

In making his decision, Justice Persaud considered the documentary evidence in the case. He paid particular attention to those documents which were signed by Amin, who was the Secretary of the Company as well as a director. These included annual returns to the Registrar of Companies for the years 1995, 1996 and 1997, which reported that the Company had only two directors, Aslim and Amin. The Judge also referred to evidence that Amin had brought to Aslim‘s attention that the Company was in non-compliance with its articles, since there were only two directors in place and the minimum number of directors required by the articles was three. This position was maintained by Amin, in a letter written to Aslim, dated September 30th, 2004. The judge also took into account annual returns for the years 2002 and 2003, in which Azeez was shown as a director, but he found that there were aspects of these returns which rendered them unreliable.

In the end, he held that on the evidence it had been established that Azeez was not a director in September, 2004. He also found that Aslim and Amin were entitled to fill the gap by appointing a third director and that Aslim was chairman and entitled to a casting vote. Accordingly, he gave judgment in favour of the appellants (respondents to the notice of motion) but made no order as to costs.

Court of Appeal

An appeal was then made in the Court of Appeal and according to the CCJ the case then took a different turn.

For the Court of Appeal, it was crucial that the applicant was not Amin but the Company and therefore the Court of Appeal held that the “out-of-court assertions” of Amin to the effect that Azeez had ceased to be, and was not at the material time, a director of the Company, could not be used as evidence of the truth of that which was asserted but only as prior inconsistent statements that could be used to undermine Amin’s credibility.

All the evidence therefore that Amin had up to the end of September, 2004, demonstrated both in writing and by his conduct that he firmly believed that Azeez was no longer a director of the Company, was held to have no positive probative value whatever.

The Court of Appeal stressed that the appellants (respondents in the Court of Appeal) had provided no evidence that anything had occurred which would have resulted in the termination of Azeez‘s directorship pursuant either to article 95 of the Company’s articles or to section 69 of the Act.

The Court held that in those circumstances the appellants had failed to discharge the evidential burden that lay on them to rebut the presumption that Azeez who had admittedly been a director from the inception of the Company until 1994, had continued in that office up to 2004. Accordingly, the Court of Appeal allowed the appeal, set aside the declaration made by Justice Persaud affirming the lawfulness of Ashmid’s appointment and granted the applicant most of the relief which was sought, including an order for costs against the appellants though limited to the sum of $100,000.

CCJ ruling

After a lengthy deliberation, Justice de la Bastide said that the judges sitting at the CCJ concluded that the Court of Appeal was not entitled to take the point that the out-of-court assertions of Amin, being the assertions of a non-party, could not be used as positive evidence of the truth of what was asserted.

Further, it held that in any case, no such limitation could properly be imposed on (i) assertions made by Amin on behalf of and with the authority of the Company to third persons, or (ii) assertions evidence of which was introduced by the applicant.

It said there was evidence to support Justice Persaud’s finding that Azeez was not a director of the Company in September, 2004; that Amin and Aslim were competent under the Company’s articles to appoint a third director; that Aslim as chairman of the meeting of the 10th September, 2004 was entitled to a second or casting vote in favour of appointing Ashmid a director; and as a result, it said Ashmid’s appointment as a director was lawful and valid.

“The result of these findings is that we must allow this appeal even though no order is made for the substitution of Amin for the Company as applicant.

The only difference that such an order would make has to do with the matter of costs,” the judge said.

He said should an order in the matter of costs be made it would render Amin liable to be ordered to pay the costs, not only of the CCJ appeal, but also of the proceedings in the courts below.

“This would undoubtedly be of advantage to the appellants, but it would not affect the substantial outcome of the appeal. Furthermore, the appellants must accept a large share of the responsibility (if not the whole of it) for the fact that no order for substitution was made,” the judge noted. He said if, therefore, they are as a result unable to recover costs against Amin they have only themselves to blame for this.

“I have stated earlier in this judgment that we would only make an order for substitution if that was necessary to avoid serious injustice. It appears in the light of the findings that I have summarised above, that this is not the case and, accordingly, no order for substitution of parties will be made,” Justice de la Bastide stated.

He said the judges who heard the matter at CCJ did not find it necessary to deal with the attempt by the appellants to invoke the doctrine of estoppel. Suffice it to say that if Amin, and not the Company, had been the applicant, the appellants might well have been able to claim that all the elements necessary to establish an estoppel by convention were present in this case. The effect of the estoppel would be to prevent Amin from alleging that Azeez was a director on September 10, 2004 or possibly even from challenging the lawfulness of the meeting held on that day.

With the Company as applicant, however, the plea of estoppel becomes more problematical, the judge said.

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