Shareholder

Civil procedure – Judgment – Characteristics of a judgment – Court to reveal its reasoning
Civil procedure – Judgment – 7 essential elements
Civil procedure – Party seeking main relief and alternative reliefs – Whether court is bound to
consider granting alternative reliefs

There was animosity between the shareholders of the 1st Appellant. The 2nd Appellant was the
majority shareholder and the Respondents, who are mother and son, were minority shareholders.
The Respondents came to Court accusing the 2nd Appellant as majority shareholder, of
conducting the affairs of the company in a manner which was oppressive to the Respondents.
They filed a petition to wind up the Company pursuant to sections 271(1) (c), 272(1) (f) and 239
(2)(3) of the Companies Act, Chapter 388 of the Laws of Zambia. The ground on which the petition
was made, was that it was just and equitable that the Company should be wound up, because
the relationship between the 2nd Appellant and the Respondents had broken down irretrievably
and this had resulted in a deadlock. The Respondents cited numerous acts of oppression that
they had allegedly suffered at the hands of the 2nd Appellant. The main relief which the
Respondents were seeking in their petition was that the Company should be wound up. In the
alternative, the Respondents were seeking such other orders under section 239 (3) of the
Companies Act, such as for purchase of the Respondent’s shares, or regulating the affairs of the
Company.

The trial Judge was satisfied that the respondents proved their case on a balance of probabilities and that it was just and equitable to wind up the Company. Accordingly, he granted the order to wind up the Company. The Appellants were not happy with the decision of the Court below hence the appeal. They argued firstly that the judgment did not meet the benchmarks of a judgment, and secondly, that since the Company was still a going concern, the Court below should have granted the alternative reliefs sought, as opposed to winding up.

Held
1. Every judgment must reveal a review of the evidence, where applicable, a summary of the arguments and submissions, if made, findings of fact, the reasoning of the court on the facts and the application of the law and authorities, if any, to the facts. Finally, a judgment must show the conclusion. A judgment which only contains verbatim reproduction and recitals is no judgment. In addition, a court should not feel compelled or obliged and moved by any decided cases without giving reasons for accepting those authorities. In other words, a court must reveal its mind to the evidence before it and not just simply accept any decided case. The learned trial Judge revealed his reasoning when he found from the evidence that was before him, that the relationship between the parties had broken irretrievably because they had lost trust and confidence in each other and could not work together. It was from this evidence that the trial Judge deduced that it was just and equitable to wind up the Company. Minister of Home Affairs, Attorney General v Lee Habasonda (2007) ZR 207 followed
2. A judgment should be thorough, exhaustive, and clear on issues. There are seven essential elements of a judgment, namely: an introductory structure, setting forth the nature of the case and identifying the parties; the facts; the law relevant to the issues; the application of the law to the facts; the remedy; and the order. Zambia Telecommunications Company Limited v Aaron Mulwanda and Paul Ngandwe (2012) 1 ZR 405 followed.
3. In cases where parties are seeking a main relief and some alternative reliefs, the Court is not bound to consider alternative reliefs. This is especially in cases where the Court has granted the main relief. In such cases, it ought to look no further. The rationale behind alternative reliefs is that if the main relief fails, the Court can consider granting the alternative reliefs. This does not however mean that if the main relief fails, then the alternative reliefs should automatically succeed. There is still need for a party seeking an alternative relief to prove that he is entitled to it. In this case, the Court below held that the Respondents proved their case on a balance of probability that it was just and equitable to wind up the Company. It was, therefore, not bound to consider alternative reliefs. It is trite law that a Company may be wound up on the ground that winding up is just and equitable, where it is impossible to carry on its business, owing to internal disputes which have produced a state of deadlock; or where improprieties in management have led to the loss of mutual confidence between shareholders and directors.

Lusaka Stock Exchange Listing Rules of 2003 – Powers to ensure orderly and fair trading on the Stock Exchange – Whether Lusaka Stock Exchange has power to suspend trades in shares after sale has taken place but before trade is settled. Extent of Lusaka Stock Exchange discretion to suspend trades and regulate the market Securities (Conduct of Business) Rules – Instructions of Licencee’s client to sell shares conflicting with directive of Licencee’s regulator to suspend trading in subject shares – Licensee’s duty to observe high standards of integrity and fair dealing
Civil procedure – Costs awarded at the discretion of the court – Costs to follow the event

The Appellant was a shareholder in the Third Party of 3 000 000 shares. Following a directive from the Bank of Zambia that banks should increase their capital reserves to US$100 million, the Third Party's shareholders, at an annual general meeting (AGM) held on 28 March 2012, resolved that the Third Party was to retain all profits earned in the year so that its capital reserves would increase in accordance with the directive by Bank of Zambia. It was also resolved that the Third Party would issue bonus shares to all its shareholders appearing in the register of members, as at the record date of 18 April 2012, at the ratio of 26 to 1, that is, 26 additional shares would be issued to each shareholder for every share owned by the record date. The effect of the bonus shares issue was that it devalued the Third Party's shares from K80 to K2.96. There was, however, a delay in the issuance of the bonus shares by the Third Party and a delay in publication of the bonus issue. The publication in two daily newspapers happened on 27 April 2012. Meanwhile, the Appellant as property owner of shares in the Third Party, between 18 and 20 April 2012, engaged the 2nd Respondent to trade his shares on the 1st Respondent stock exchange without taking into account the dilutive effect of the then pending bonus issue. However, before the settlement date and prompted by the Third Party's failure to issue the bonus shares by the record date as aforesaid, the 1st Respondent on 25 April 2012 issued a notice suspending trading in the Third Party's shares on the stock exchange with effect from 24 April 2012. This included the trade in the Appellant's shares. The suspension of trade was also at the instigation of the Third Party after its shareholders, who included the Appellant, refused to change the record date to another date to accommodate the delay in the issue of the bonus shares. The 1st Respondent’s intervention was partly because the Third Party's shares were being traded at an artificial price which did not take into consideration the dilution of their value as a consequence of the bonus issue. It was therefore sought to protect members of the public who bought or were in the process of buying the Third Party's shares at the artificial price of K80.00 per share instead of K2.96 per share. The 2nd Respondent contended that it could not conclude the trade in the Appellant's shares because of the suspension. As a consequence of this, all its efforts to have the trade settled were frustrated by the suspension.
The Appellant being aggrieved by the suspension prevailed upon the 1st Respondent to settle the trade but the latter refused to do so. This prompted him to seek intervention by the Securities and Exchange Commission as regulator of the 1st Respondent but his efforts were fruitless. The Appellant was undeterred so he sought redress through the High Court by commencing an action against the Respondents claiming amongst other things that his sale of shares on the stock exchange was valid and that the Respondents breached the rules by preventing the trades from settling; and for an order for the payment of K174 605 885. 41 being the net value of the trade in question.

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The High Court held that the 1st Respondent's decision to cancel the trade appeared to be logical and justified. The Learned High Court Judge justified his findings by referring to the Securities (Conduct of Business) Rules which he held places an obligation upon the 1st Respondent to ensure that high standards of integrity and fair dealing are maintained on the stock exchange and provides discretion to cancel a trade which contravenes these principles, in accordance with rule 4.27 of the Listing Rules of 2003ª. He found further that the power under rule 4.27 is reinforced by rule 2.03(10)ᵇ, which he held empowers the 1st Respondent to suspend all or part of trading activities on the stock exchange in the event of an emergency. The Appellant appealed.
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Held:
1. The 1st Respondent has power to ensure orderly and efficient trading on the stock exchange and to suspend trading in any issue of securities, pursuant to rule 2.24(1) of the Listing Rules ͨ . The 1st Respondent acted within its mandate when it suspended the trade in the Third Party's shares and consequently, annulled trade in the Appellant's shares. The rule is couched in such a manner that it does not restrict the powers to suspend to a certain period of a trade. The power to suspend trading in shares can be invoked at any stage of a trade. By maintaining the record date at 18 April 2012, the Third Party's shares diluted in value from K80 per share to K2.96 per share on that date. The Appellant nonetheless went ahead to trade them at K78 per share on a subsequent date prompting the 1st Respondent to intervene because the shares in effect were not trading at their true value and the public was not aware of this fact because the bonus issue and its effect had not yet been published. Given the foregoing facts, it is understandable why the 1st Respondent suspended trading in view of its duty to protect the unsuspecting public from a trade that was clearly improper.
2. In view of the wide discretion vested in the 1st Respondent to suspend trade in shares and its other regulatory functions, it would be an injustice to the said discretion if it were to be curtailed by finding that it only emanates from rule 4.27 of the Listing Rules. This
is the case with rule 2.02(10) of the Listing Rules as well. Suffice to say that, the rules only represent, two of the various instances in which the 1st Respondent can exercise its power to cancel a trade by way of suspending trade in shares of a certain entity.
3. The 2nd Respondent as agent for the Appellant was obliged to respect the consequences of the regulator's decision to suspend trading in the Third Party's shares. The 2nd Respondent as licensee on the stock exchange was obliged to immediately discontinue the trade in the Appellant's shares. Any act to the contrary would have amounted to aiding and abetting the Appellant in his improper conduct in relation to trade on the stock exchange. This would have been contrary to the 2nd Respondent's obligation to “…observe high standards of integrity and fair dealing ..." prescribed by rule 4(a) of the Securities (Conduct of Business) Rules.
4. The award of costs is in the entire discretion of the court and in the exercise of the said discretion, the court must apply the principle that costs follow the event. Put differently, the losing party must bear the costs of the other party. Having found that the Appellant's case was unmeritorious, there was no basis whatsoever for the Learned High Court Judge to award costs to the Appellant.

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ªRule 4.27 of the Listing Rules of 2003 states that "The exchange shall not give assistance to a member to annul a bargain, except where there is an allegation of fraud wilful misrepresentation, or where there is a mistake which in the judgment of the Exchange's staff would warrant its intervention".
ᵇRule 2.03(10) of the Listing Rules 2003 so far as is relevant provides that
"Without prejudice to rule 2.02 and any other provisions in the articles or these Rules, the following powers shall in addition be vested in the Board, to be exercised in such manner, on such terms and at such times as it shall see fit:
(10) to suspend all or part of the trading activities on the exchange in the event of an emergency and to take such remedial actions as it thinks fit;"

ͨ Rule 2.24(1) states in part that "... the General manager, shall have such powers as the Board or any committee may confer upon him including, in particular the following powers:-
(1) To supervise the trading activities in the Exchange and trading systems, the clearing and settlement of trades executed on the Exchange, and to take all necessary steps to maintain orderly and efficient trading in accordance with these rules, and to suspend trading in any issue of securities or by any member as provided for in these rules or as directed or authorised by the Board, any committee or the commission".
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On 22 May 2015, the Appellant filed a petition to wind up Zambezi Portland Cement (the “Company”) pursuant to section 272 of the Companies Act. It was supported by an affidavit verifying facts. After the petition was filed, the Appellant applied ex parte for the appointment of a provisional liquidator pursuant to section 280 of the Companies Act, as read with rule 8 of the Companies (Winding-Up) Rules, 2004. The Respondent opposed the application. In doing so, it denied the contentions by the Appellant and refuted the claim that the Appellant is a shareholder in the Company. The High Court Judge found that the evidence in the petition revealed that there was a dispute by the parties in relation to the shareholding in the Company, which dispute was pending before another court. The High Court Judge concluded that the Appellant had established a prima facie case that the winding-up petition is likely to succeed.
The High Court Judge also found that notwithstanding her finding of a prima facie case, she was still required to consider whether the Appellant had established that it had the necessary standing to bring the application for winding-up of the Company. In considering this issue, she began by stating that a contributory may apply to court for a winding-up order. She took judicial notice of the dispute between the Appellant and Respondents in respect of the shareholding in the Company under cause number 2008/HPC/0366. She then found that where a contributory has filed a petition and there is a dispute in terms of ownership of shares in the Company, such contributory does not have the necessary standing to present the petition and any other attendant application. The Judge concluded that that there was need for the parties to initially have their dispute under cause number 2008/HPC/0366 determined. According to her, if it were found that the Appellant is a shareholder in the Company, then the Appellant would have the necessary standing to apply to wind up the Company. The Judge reiterated that her findings did not mean that the application lacked merit nor that the Appellant is not a shareholder. She accordingly dismissed the application. The Appellant appealed

Held
1. Whilst it is true that section 271 of the Companies Act which sets out the category of persons and entities who can petition the winding-up of the company does not mention a contributory, the Companies (Winding-up) Rules under rule 8 (1) do refer to the word “contributory” and indeed lists a contributory as one of the persons eligible to petition for the dissolution of a company. Further, there is reference to the word “contribution” in sections 262, 265 (2), 266 (1) and (2) and 268 (1) in the Companies Act which introduces the concept of a contributory in the Companies Act. The forgoing provision and other provisions that make reference to the word contribute, clearly indicate that the concept of a contributory is not alien to the Companies Act.
2. The learned High Court Judge’s decision was a cautionary measure on her part that it is not safe at this point to grant the order for appointment of a provisional liquidator in view of the challenge raised against the Appellant’s status as a shareholder. This was the correct decision to make in view of the evidence presented before her and the judicial notice she took of the dispute under cause number 2008/HPC/0366 because the fate of the substantive matter before her, being the petition for winding-up, was heavily dependent upon the outcome of the matter under cause number 2008/HPC/0366. That is to say, if under that cause, it is found that the Appellant is not a shareholder, the petition as a whole will collapse on account of want of locus standi by the Appellant. The sound decision by the High Court Judge, which was pursuant to the discretionary powers vested in her, is enhanced by the fact that it eliminated the real possibility of conflicting decisions from her court and that of Chashi J; and the peril that would have befallen the company, if she allowed the application and later Chashi J, found that the Appellant is not a shareholder. These are primary concerns that courts guard against. Her decision is enhanced by the fact that the Supreme Court in appeal number 141 of 2015,
confirmed the order of injunction granted against the Appellant and others from, among other things, purporting to act as shareholders in the company. The wording of the order ends by restraining the Appellant and others from “taking any course of action of any nature whatsoever as shareholder of ZPC until final determination of the matter…” This decision essentially puts an end to the Appellant and others asserting their rights as shareholders in the Company until disposal of the matter in the High Court. These rights include the Appellant’s right to bring a petition for winding-up of the Company in its capacity as a shareholder.
Appeal dismissed