Stephen Hofmeyr QC and Anna Gotts appeared for the successful Appellants in this appeal to the Privy Council. This decision brings welcome clarity to the scope of the oppression remedy, confirming inter alia that its application is limited to cases in which a company is still functioning. It also clarifies the meaning of the word “liability” as it appears in section 272 of the Bahamian Companies Act 1992 (“the Act”) – a provision continuing the “liability” of directors following a company’s removal from the register of companies (“the Register”). Its significance extends beyond Bahamian law given the presence of similarly worded provisions in company law statutes throughout the world, including the United Kingdom.
In 2005, Mr. Galantis obtained judgment against ACDL. That judgment had not been satisfied when, in 2008, ACDL was removed from the Register. Thereafter, Mr. Galantis issued proceedings against the Appellants in their capacity as former directors of ACDL, by which he sought relief from oppression pursuant to section 280 of the Act.
The Supreme Court rejected the claim. Proceedings under section 280 were subject to a requirement of timeliness. Had the claim been brought before ACDL was removed from the Register, Mr. Galantis would have had an arguable case of oppression. By the time the action was brought, however, the actions complained of were not susceptible to being corrected as there was no longer an existing wrong.
The Court of Appeal allowed Mr. Galantis’ appeal. It approached the issue on the basis that oppression must be ongoing when the action is filed. It then held that (by virtue of section 272 of the Act) the Appellants’ liability for oppressive behaviour was not extinguished by ACDL’s removal from the Register.
The Appellants appealed to the Privy Council. Drawing in particular on decisions of the Supreme Court of Canada, the Board was unanimous in its conclusion that neither section 280 nor section 272 had any application to the present case.
Properly construed, section 280 did not require a complainant to establish that conduct giving rise to oppression was continuing at the time proceedings were commenced. Rather, it was necessary that oppression should exist at that date as a state of affairs requiring restraint or remedy. Section 280 was accordingly directed at cases in which the company still existed with functioning directors. In the present case, there was no ongoing oppression capable of being remedied by the intercession of the court in the affairs of ACDL at the time proceedings were commenced. It was unrealistic to suggest that the oppression continued in perpetuity until such time as the judgment debt was paid. Furthermore, when proceedings were commenced, ACDL no longer existed and the Appellants no longer held office. Accordingly, section 280 did not apply.
The Court of Appeal was also wrong to conclude that, at the time ACDL was removed from the Register, the Appellants were under a “liability” capable of being continued by section 272. Section 280 conferred a wide remedial discretion, the exercise of which was inextricably linked to the facts of each case. The exercise of that discretion was a pre-condition to the imposition of any liability pursuant to section 280. No “liability” capable of being continued had been imposed by the date on which ACDL was removed from the Register. Mere exposure to the possibility of being subjected to a discretionary remedial order under section 280 was not a “liability” for the purposes of section 272.
To view the advice of the Board, please click here.
Stephen Hofmeyr QC and Anna Gotts were instructed by Clyde & Co.