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Saunaka Land Purchase Cooperative Ltd v Mohammed [2012] FJHC 837; HBC157.2010 (3 February 2012)

IN THE HIGH COURT OF FIJI
AT LAUTOKA
CIVIL JURISDICTION

CIVIL ACTION No. HBC 157 OF 2010

BETWEEN:

SAUNAKA LAND PURCHASE COOPERATIVE LIMITED a duly incorporated entity governed under the Cooperative Societies Act (Cap 250)
Plaintiff

AND:

AFIZ MOHAMMED (father's name not known to the Plaintiff) of P.O Box 311, Nadi Accountant.
First Defendant

AND:

RAKESH KUMAR, VIDYA WATI, KRISHNA MURTHI, AVINESH VERMA, BERNADETE SHANKARAN, MOREEEN all of Saunaka, Nadi.
Second Defendant

AND:

THE DIRECTOR/REGISTRAR of Cooperatives and Small Business, P.O Box 2356, Government Buildings, Suva.
Third Defendant

AND:

THE ATTORNEY-GENERAL OF FIJI
Fourth Defendant

Before: Master Anare Tuilevuka.
Appearances: No appearance for the Plaintiff.
Mr. Vipul Mishra for the 1st and 2nd Defendants.
No appearance for the 3rd and 4th Defendants.

Date of Ruling: Friday 03 February 2012.

DIRECTIONS

INTRODUCTION

[1]. The plaintiff is a co-operative society incorporated under the Cooperative Societies Act (Cap 250). On 10 August 2010, a writ of summons and statement of claim was filed through Babu Singh & Associates – purportedly on behalf of the plaintiff. The 1st and 2nd defendants now seek to strike out the claim on the ground that it is scandalous, frivolous or vexatious and that it may prejudice, embarrass or delay the fair trial or is otherwise an abuse of process. The application is made pursuant to Order 18 Rule 18 of the High Court Rules 1988. And the key argument is that the name of the plaintiff [Saunaka Land Purchase Society Limited ("society")] is being used in this case as the façade for the cause of its ousted board members.

SAUNAKA LAND PURCHASE COOPERATIVE LIMITED

[2]. The society was formed to acquire some 56 acres of freehold land from a Mrs. Ferrier Watson. Following that acquisition, the land was subdivided into holdings and then distributed amongst the members for their use and benefit upon such terms and conditions as were determined by the general meeting – which is the central decision making organ of the society– according to its constitution. The general meeting is convened by the Board set up under the constitution.

OLD & NEW BOARD

[3]. Anil Nandan is actually behind the filing of the writ of summons and the statement of claim. He was the Board Secretary for sometime. It is an issue between the parties as to whether or not he is still the secretary. Nandan was also behind the interim injunction application in the name of the society. That interim injunction was granted by Mr. Justice Fernando on 12 August 2010.

[4]. According to the statement of claim, the society is aggrieved about the Registrar of Cooperatives' action in appointing the second defendants as its Board members[1] in a meeting on 05 August 2010. The 05 August meeting also effectively dissolved the old Board. It is alleged that these changes have hindered the society's development plans - causing it to suffer losses and damages. General damages as well as various declaratory and injunctive orders are being sought to invalidate the new appointments and to restore the status quo.

[5]. From the pleadings and affidavits filed, I gather that the composition of the Board was changed amidst allegations of fraud within the old Board. In his submissions, Mr. Mishra goes to great lengths in emphasizing that the society cannot sue its own board members[2]. There is merit in this submission.

ANIL NANDAN'S AFFIDAVITS

[6]. In his affidavits, Nandan is adamant that the ousting of the old Board and the appointment of the new – was improper as the proceedings were not carried out in accordance with the society's constitution. He also argues that the new appointees (2nd defendants) were not registered members of the plaintiff co-operative society and that the Registrar of Cooperatives breached and abused his statutory powers in making the appointments.

[7]. It appears to me that Nandan's views represent the views of a faction of the society's membership. They are entitled to that view and to bring their case to court. But – until the court declares who the lawful board members are, it is rather presumptive for Nandan and others to use the society's name as the vehicle for airing their grievances in court.

DEFENCE

[8]. The statement of defence of the 1st and 2nd defendants includes an allegation that Nandan himself was behind the irregular disposition of certain parcels of land owned by the society to some non members.

[9]. As for the Registrar of Cooperatives, interestingly – there are some concessions in paragraphs 5, 6(h) and 7 of his statement of defence filed by the Office of the Attorney-General.

5. ....the 3rd and 4th Defendant had taken an unprecedented course of action ..................

6. h) that the Ministry is mindful that given the current situation, strict compliance with the legal process would not produce a long term and sustainable amicable solution for SLPCL...............

7. ....the approach taken by the 3rd Department (sic) was an innovative and necessary ....................

ARGUMENTS FOR STRIKING OUT

[10]. The defendants argue firstly that Nandan has instituted these proceedings in the name of the society purportedly in his capacity as secretary of the board. But Nandan had resigned as Secretary on 04 September 2008. A copy of his letter of resignation dated 04 September 2008 is annexed to the affidavit of Rakesh Kumar Raj and Vidyawati Mani Lal.

[11]. However, according to Nandan[3], he withdrew his resignation later on the same day - which withdrawal was accepted by the Chairman of the Board[4].

[12]. The defendants also submit that Nandan does not have the authority of the board members to institute these proceedings. In response, Nandan asserts in his affidavit that he acted lawfully and "with authority given to me by the majority of the Board members and as Secretary of the Cooperative"[5].

[13]. Again, the question as to which of the two boards has the authority to institute proceedings in the name of the society - still very much hangs in the balance. Nandan's assertion that he has the support of the (ousted) Board members to institute the proceedings in the name of the society presupposes that the ousted members are still vested with that authority. Similarly, the submission that he does not have that authority presumes that the new board is validly appointed. These questions turn ultimately on how the court interprets the constitution of the society as well as the powers of the Registrar of Cooperatives under the Cooperative Societies Act (Cap 250). I am not being asked to do that here.

INTERIM INJUNCTION

[14]. The defendants submit that Nandan misled and did not disclose material facts to Mr. Justice Fernando which led to the granting of an interim injunction on 10 August 2010 to prevent any dealing on the cooperative society's property.

[15]. The submission is that Nandan swore the affidavit in support of the interim injunction application purporting to be the secretary of the society. And, in that facade, he committed the society in the following undertaking as to damages.

The plaintiff gives its usual undertaking as to damages. It has 14 registered members and about 50 acres of freehold land valued at $2.5 million. It has funds in the bank. The members built their houses on to the property owned by the Plaintiff.

[16]. Mr. Mishra cites various cases re - that an injunction is usually not granted without a proper undertaking as to damages[6]; that if the court was to hold that the plaintiff is not entitled to an injunction, then the defendants are entitled an inquiry as to damages; that an injunction without proper disclosure should be dissolved immediately[7] and that Nandan has no locus to bring this action and has no authority to act in the interest of the cooperative society[8].

[17]. Nandan deposes as follows in paragraph 20 of his affidavit[9]:

As to my legal standing in instituting this action and depositing the affidavit on behalf of the Plaintiff, the registered elected Board members and the registered members collectively agreed to institute this proceeding. I reiterate paragraph 4 above.

[18]. Paragraph 4 which he refers is the following deposition:

That the registered executive members of the Saunaka Land Purchase Cooperative Limited (the Cooperative) agreed and consented to take action against the minority members and other non registered members who were illegally appointed by Mr. Are Wakowako in an un-constituted meeting held on 5th August 2010 (I refer to annexure marked C in Rakesh's affidavit). I annexed herein signed consent by the elected registered executive members marked as Annexure AN 2.

[19]. I see from Fernando J's minutes of 12 August 2010 when the interim injunction application was argued before him that he was aware of all the related issues before he exercised his discretion in favour of the granting of the interim injunction.

ALTERNATIVE

[20]. It is also submitted on behalf of the defendants that if Mr. Nandan (or for that matter, the old board) was unhappy about how things were evolving within the cooperative society – then the proper course for him was to apply to the Registrar of Cooperatives under section 18(2).

[21]. The same argument was raised by Mr. Mishra before Fernando J as a ground for objecting to the jurisdiction of the court to issue injunctive relief[10].

[22]. Fernando J did go ahead and grant the interim relief.

MEETING OF 05 AUGUST 2010

[23]. Mr. Mishra also went to great lengths to draw attention to the minutes of the cooperative meeting of 05 August 2010. The minutes recorded that Nandan in fact did participate in the meeting and was actively involved in the appointment of the new board[11]. Furthermore, the minutes recorded Nandan as having said that he was not interested in any of the positions in the Board.

[24]. In my view, the validity or otherwise of the meeting (and resolutions) of 05 August 2010 are not in the least affected by anything that Nandan might have said. Rather, this all depends on how the court will construe the relevant provisions of the society's constitution as well as the Registrar's powers under the Cooperative Societies Act (Cap 250).

ANALYSIS

[25]. The society is registered under the Cooperative Societies Act (Cap 250). Under section 14 of the Act, the society is a body corporate endowed with all the usual attributes of a registered corporation.

14. The registration of a co-operative shall render it a body corporate by the name under which it is registered, with perpetual succession and a common seal, and with power to hold moveable and immovable property, to enter into contracts, to institute and defend suits and other legal proceedings and to do all things necessary for the purposes of its by-laws.

[26]. As a corporate personality, the society is a legal entity distinct from its members. And because it is a distinct legal entity, its name cannot be used as a façade to institute any legal proceedings by any of its members without proper authorization.
[27]. In this case, the proceedings have been instituted in the name of the society by Nandan who still regards himself as its lawful secretary and who has produced evidence that he is duly authorised by the board which was purportedly ousted in the 05 August 2010 meeting[12].

[28]. Nandan may or may not be the lawful secretary of the Board. That all depends whether or not the withdrawal of his resignation and the acceptance of withdrawal are both held to be valid[13]. It also depends ultimately on whether or not the meeting of 05 August 2010 which purportedly appointed the new Board, including the new Secretary, were to be declared invalid. These issues are best reserved before Fernando J.

[29]. What seems to be happening in this case, essentially, is a struggle between two boards (and their respective members) within the society for the right to wield power in controlling the affairs of the society. In that light, it is rather presumptive and utterly improper for one faction (i.e. Nandan and the members of the ousted board) to use the society's name as the vehicle to fight his (and the ousted members') cause in this case.

[30]. The question that arises is: what is to be the legal consequence of this anomaly? On this question - I reserve my ruling because:

• (i) I am conscious that the Orders that Mr. Mishra seeks would, if granted, have to entail the dissolution of the interim injunction granted by Fernando J (perhaps then, the defendants should have been seeking an order to dissolve the injunction on the same grounds raised in these proceedings).
  
• (ii) I am also conscious that, if I were to refuse the orders sought, I would be perpetuating the glaring anomaly in the way the society's name is being used in instituting all proceedings.
  

As such, it would only be appropriate for me to reserve my ruling on the issues raised and to refer the matter to Fernando J for directions. Case adjourned to Thursday 09 February 2012 for mention before Mr. Justice Fernando.

Anare Tuilevuka
Master

At Lautoka.
03 February 2012.

^[1] (as treasurer, secretary, and board members).
^[2] He draws analogy to the well known case of Salomon v A Salomon & Co Ltd [1897] AC 22.
^[3] See paragraph 3 of his Affidavit sworn on 02 September 2010.
^[4] Nandan annexes to his affidavit a copy of his letter of withdrawal dated 04 September 2008 and a letter of ACCEPTANCE OF WITHDRAWAL also dated 04 September 2008 signed by Uday Narayan as Chairman.
^[5] See paragraph 10 of his affidavit.
^[6] Tropic Forest Joint Venture Co. Ltd & Anor v Ratu Sairusi (Civil Action No. 080 of 2001; Milton Ross Dube & Ors v Kristamma Gounder & Ors (Civil Action HBC No. 61 of 2005).
^[7] Thomas A. Edison Ltd v Bullock [1912] HCA 72; [1912-1913] 15 CLR 679; Rauzia Mohammed v ANZ Banking Group – FCA Civil Appeal No. 066 of 1984.
^[8] Sun Insurance Co. Ltd v Bank of Baroda FCA Civil Appeal No. ABU 0071 of 2006;
^[9] Sworn on 02 September 2010.
^[10] As recorded in Fernando J’s typed minutes dated 02 September 2010.
^[11] E.g. Nandan had requested at the outset of the meeting proper that a Secretary be appointed. Thereafter, it was agree that Raja Kumaran be the Secretary. Nandan also moved that the previous minutes be passed. The appointment of Vidyawati Lal to Vice Chairman was actually moved by Nandan. Also – the appointment of Bernadette Shankaran was moved by Nandan.
^[12] See paragraph 5 above.
^[13] See paragraph 11 and footnote 3 above.