Court name
Commercial Court of Uganda
Judgment date
5 June 2014

Per Egede Nielsen v Preben Rosenkilde & 2 Ors (Miscellaneous Application-2014/241) [2014] UGCommC 213 (05 June 2014);

Cite this case
[2014] UGCommC 213

THE REPUBLIC OF UGANDA

IN THE HIGH COURT OF UGANDA AT KAMPALA

                             MISCELLANEOUS APPLICATION 241/2014

                             (Arising from Civil Suit 228/2014)

 

PER EGEDE NIELSEN:::::::::::::::::::::::::::::::::::::::::::::::::::::::::APPLICANT

 

                                                VERSUS

 

PREBEN ROSENKILDE AND 2 OTHERS::::::::::::::::::::::::::RESPONDENTS

 

 

BEFORE THE HON. JUSTICE HENRY PETER ADONYO

 

RULING

Facts and Background

The Applicant holds one (1) share in the third Respondent company (a Ugandan Incorporated company) representing 1% shareholding in the said company. The second Respondent, a Danish incorporated Company, owns the majority 99% shareholding.

The Applicant filed a head suit as a derivative action against the Respondents/Defendants, “on his behalf and on behalf of the Third defendant in a derivative action, seeking to protect and safeguard his interests and those of the Third Respondent/Defendant company, to protect its business interests and assets, prevent the oppression and diminution of the shareholding and role of the Plaintiff, maintain the directorship and day-to-day management mandate of the Plaintiff, a permanent injunction against the Respondents/Defendants, their agents and servants or those claiming under them from altering the shareholding, directorship and/or management of the third Respondent/Defendant contrary to the law or unless the Plaintiff consents…” This is as seen in Paragraph 3 of the Plaint in the mains suit.

During the pendency of the main suit, the Applicant filed the instant Application under the provisions of Order 41 Rules 2 and 9 of the Civil Procedure Rules, SI 71-1 and Section 98 of the civil procedure Act, CAP 71 and all enabling laws as stated in the Chamber Summons.

The Application is supported by two affidavits both sworn on the 5th day of May, 2014 respectively. The application seeks the following orders;

  1. A Temporary Injunctive Order doth issue against the Respondents, their agents and/or servants and any other person (s) acting under their authority or instructions restraining them from altering the shareholding, directorship and/or management of the third respondent company until determination and disposal of the main suit.
  2. Costs of this application be provided for.

The Respondents, on the other hand, rebut the contention of the Applicant on the basis that the Applicant has not satisfied the grounds for the grant of a temporary Injunctive order and any other reliefs sought.

This Application is basically for a grant of a temporary injunction. The law on the grant of temporary Injunction has been set out in a number of cases. The principles are that;

  1. The grant of a temporary Injunction is an exercise of judicial discretionary power to maintain the status quo.
  2. The Applicant must show that there is a Prima Facie case with the probability of success.
  3. The Applicant will suffer irreparable injury which would not be adequately be compensated by an award of damages if the order is not granted.
  4. Court will weigh the balance of convenience in favor of granting or declining the injunction.

See: Giella versus Cassman Brown & Co [1973] EA 358, Robert Kavuma versus M/s Hotel International SCCA 8/1990.

The Applicant submits that prima facie there are questions to be decided including wrongdoing and fraud being committed on the third party affecting its fortunes and operations with the resultant actions fact that the Applicant cannot prevent it through the company’s organs as he will be overpowered or out voted by the majority shareholder acting through its agents and or servants as the first Respondent.

The Respondents on the other hand submits that the status quo of the Applicant sought to maintain when he filled the application has since changed and as such a grant of an Injunctive order would be in vain. This is a position which is admitted by the Applicant in his submission in rejoinder that indeed the status quo has since changed though with impunity.

I have perused and considered the submissions in this matter and the arguments for and against the grant of the orders sought. I have taken them into account in resolving this matter.

I note that the Applicant had earlier on sought to injuct his dismissal as a general manager in Miscellaneous Application No. 242 of 2014 arising out of this very application but that application was denied.

From the outset I must state that the issues surrounding this matter reflect a series of misunderstandings by shareholders and their roles regarding the Respondent/defendants companies. The instant Application is one such area.

From the holding in American Cynamide  versus Ethicon [1975] 1 ALL ER 504 and numerous other authorities, it is clear that where the court is in doubt in regard to all the other tests for the grant or disallowing an application for an injunctive order, it would seek to find whether the balance of convenience lies in favor of declining or granting of such an order.

At this stage it is not part of the court’s function to try to resolve conflicts of evidence on affidavit as to the facts on which the claims of either party may ultimately depend which call for detailed argument and considerations as these matters shall be dealt with at the full trial.

My observation is that in this matter and from the pleadings that there is no longer a status quo to maintain as the applicant has since been replaced as General Manager of the third Respondent and he is no longer the sole director thereof.

It is also of importance to note that the 2nd Respondent owns the majority of 99% shares in the 3rd Respondent giving it a controlling factor. In my opinion, it would be unfair to injuct the transfer of such huge number of shares if needed to given that shares of a company are movable property which can be traded for value.

On the other hand, I note that the Applicant’s rights as a shareholder of 1% shareholding is not threatened and that he is still a director in the 3rd Respondent Company. This still gives him powers to direct the affairs of the company even if at minority levels.

In the premises therefore, I would find that given the situation there has been no reasons given for this court to exercise its authority to grant the orders sought above.

Inevitably I would find that this Application fall short of the conditions for grant of the orders sought and hence lacks merits.

Having concluded so, therefore, I would dismiss this Application but order costs to be in the cause.

Order

This Application is dismissed with costs to be in the cause.

 

 

 

HENRY PETER ADONYO

JUDGE

5TH JUNE 2014