Over 40-years following the death of one of Grenada’s pioneers in the television broadcast industry, the children of Joe Pitt have been squabbling over his property.
High Court judge Raulston Glasgow has been called upon to give a ruling in a civil matter brought before the high court by two of Pitt’s children, Richard and Selwyn Pitt against their elder brother, Brian Pitt on the ownership of a property on Scott Street in St George.
Richard and Selwyn Pitt approached the court to block a bid made by Brian Pitt to get Possessory title of ownership on the grounds that he had occupied the property in keeping with the 12-year requirement of the law.
Justice Glasgow ruled against Brian Pitt and issued the following orders in the case:-
- Mr. Brian Pitt is (to) hand over all keys and materials belonging to the property to a representative appointed by the company to receive same;
- Mr. Brian Pitt is to hand over all keys and other materials belonging to the company within 30 days of the date of this order;
- The defendant (Brian Pitt) is to provide a detailed statement of his dealings with the company from 1st May 2021 to the date of the delivery of the keys and other materials belonging to the company;
As a public service, THE NEW TODAY reproduce the Justice Raulston Glasgow judgment in the case:-
Claimants’ submissions on Brian Pitt’s and others directors’ fiduciary duties to the company
[24] On this score the claimants posit that pursuant to section 483(5) of the Companies Act, any liability of the directors, officers and members of the company during the period that it has been dissolved continue as if the company had not been dissolved. Consequently, Edlyn Pitt and every director of the company, including the defendant, Brian Pitt, continued to owe fiduciary duties to the company and in particular, fiduciary duties in respect of the preservation of its assets. The claimants rely on Re Systems Building Services Group Limited and Davies v Ford.
[25] The essence of the claimants’ complaint therefore is that Brian Pitt could not hold the property as its owner whenever it was returned by the Government. They submit that he could not so hold the property because he was a director of the company when it was dissolved and remained a director up until it was restored to the register. Therefore, Brian Pitt owed a fiduciary duty to the company which duty precluded an ability to assert a personal interest in the assets of the company for himself against the interest of the company. He possessed the asset on trust for the company.
[26] Brian Pitt relies on section 2 of the Act recited above. He also relies on sections 4 and 27 of the Limitation of Actions Act4. Those sections read –
Section 4
“No land or rent to be recovered but within twelve years, etc. No person shall make an entry or distress, or bring an action to recover any land, but within twelve years next after the time at which the right to make the entry or distress, or to bring the action, has first accrued to some person through whom he or she claims, or, if the right has not accrued to any person through whom he or she claims, then within twelve years next after the time at which the right to make the entry or distress, or to bring the action, has first accrued to the person making or bringing it.”
Section 27
“At the end of the period of limitation, the right of party out of possession to be extinguished At the determination of the period limited by this Act to any person for making an entry or distress or bringing an action, the right and title of that person to the land for the recovery whereof the entry, distress, or action, might have been made or brought within that period shall be extinguished.”
[27] Brian Pitt submits that the conjoint reading of both sections suggest that the company’s rights to the property were extinguished because –
(1) The company was the proper party to oppose his application for possessory title and not the claimants;
(2) The company’s right to bring a claim for its property arose in 1981 when the PRG took possession of the property and that right was extinguished 12 years later in or about 1993;
(3) The evidence shows that the company took no action after being struck off the register to assert its paper title. Equally it took no action against the applicant when he took possession in 1995;
(4) The company has taken no steps to be joined as a party to this claim, even though it is aware of the same;
(5) The pleadings show that the litigation in this claim has been pursued by the claimants in their personal capacity and not on behalf of the company;
(6) There is no evidence of a directors’ resolution since the company has been restored in 2017;
(7) Despite the declarations sought by the claimants and notwithstanding the fact that they were shareholders of the company at the time of filing their claim, there is no written resolution from the company authorising the claimants to act on its behalf. It was some 17 months after filing the claim that the claimants purport to have a resolution from the company to participate in the proceedings. Notwithstanding this resolution, section 17 (1) of the Companies Act suggest that after its restoration to the register, the company should have been joined as party to the proceedings. The claimants did not therefore have any locus to act on behalf of the company in this claim.
Brian Pitt’s submissions on the company’s right to possession by virtue of holding the property’s paper title
[28] On this score, Brian Pitt recites his side of the story as to how the company was struck off the register, the property was appropriated by the PRG, the keys to the property were thereafter handed to him in 1995 and how he treated with the same as his own to the exclusion of the “rest of the world”. He points out that the claimants in their evidence acknowledge that he is in de facto control of the property and collects rent therefrom.
[29] He insists that he has remained in exclusive and undisturbed possession and carried out all acts as owner, including the maintenance and repair of the property. He points out that throughout his period of undisturbed, exclusive possession no person, including representatives of the company, challenged his possession and occupation of the property.
[30] Brian Pitt says that Mrs. Marrast-Victor agreed with him that once a company was struck off the register, the company was no longer in existence. Brian Pitt further asks the court to find that Mrs. Marrast-Victor’s evidence demonstrates that he engaged the Government to settle the title deed of the property since the Government took possession in 1980. He says that Mrs. Marrast-Victor’s evidence does not show that the Government was engaged because it was a shareholder of the company.
[31] Brian Pitt also addresses an earlier argument made by the claimants in their pleadings that Edlyn Pitt could not divest the property in her will. I need not repeat these arguments since the claimants, rightly, in my view, accept that Edlyn Pitt could not hold the property in her personal capacity.
Discussion and Analysis
[32] There are 2 bases on which I disagree with Brian Pitt. I shall refer to them as (1) the Companies Act basis; and (2) the Possessory Titles Act basis.
The Company Act basis
What happens to the assets of a company when it is struck off the register and becomes dissolved?
[33] The evidence discloses that the company’s assets included the property situate at Scott’s Street, St. George’s. The evidence further discloses that after its incorporation, the Government was listed as one of the shareholders of the company. Additionally, even though the PRG did not formally acquire the property during its time in office, the PRG physically appropriated and occupied the property. After the end of the PRG, successive governments continued to occupy the property.
[34] The company was struck off the register sometime in 1980. Section 484(1) of the Companies Act cited above states that after a company has been struck off and dissolved, the outstanding property, real or personal, which were vested in the company become vested in the Official Receiver. Section 388 of the Companies Act provides that for the purposes of the Act, the Official Receiver means the Official Receiver attached to the court for bankruptcy purposes. By virtue of the section, the Official Receiver is an officer of the court. There is no evidence that any other receiver was appointed during the period when the company was dissolved. Further, there is no evidence that the company’s property was disposed of or sold during the period of its dissolution. Therefore, by operation of law the property was vested and remained in the hands of the Official Receiver during the period of its dissolution.
What was the position of the directors once the company was dissolved?
[35] Brian Pitt takes the position that once the company was struck off, it was dissolved. Accordingly, the company became defunct and as such he, Brian Pitt could hold the property in his personal capacity. In fact, his case is more assertive than I have stated. His case is that he was put into possession when the keys were handed to him by the Government and he has acted as owner exclusively from the year 1995 without disturbance. On this score, Brian Pitt is, regrettably, mistaken. Section 483 (5) of the Companies Act states:
“(5) At the expiration of the time mentioned in the notice the Registrar may, unless cause to the contrary is previously shown by the company, strike its name off the register, and shall publish notice thereof in the Gazette, and on the publication in the Gazette of this notice the company shall be dissolved, but—
(a) the liability, if any, of every director, managing officer, and member of the company continues and may be enforced as if the company had not been dissolved; and
(b) nothing in this subsection affects the power of the court to wind-up a company the name of which has been struck-off the register.” (Bold emphasis mine)
And section 512 of the Companies Act provides:
- Liability continues
“Where a body corporate is struck-off the register, the liability of the body corporate and of every director, officer or shareholder of the body corporate continues and may be enforced as if it had not been struck-off the register.” (Bold emphasis mine)
[36] The conjoint reading of sections 483(5) and 512 of the Companies Act suggest to me that during the period when a company is struck off the register, the liabilities of its directors to the company continue. These duties include their continued fiduciary obligation to act in good faith with a view of the best interests of the company. In Re Systems Building Services Group Limited, Hunt and Anor v Michie and Anor6 Barber J observed instructively –
“…the general duties of a director of a company to the company set out in ss 171–177 CA 2006 do survive the company’s entry into administration and creditors’ voluntary liquidation. Whilst in office, a director continues to owe the company the duties laid down in ss 171–177 CA 2006, as applied and interpreted in accordance with the underlying common law rules and equitable principles on which such duties were based: ss 170(3) and (4).”
[37] The statutory duties cited in Re Systems are similar to the general duties of a director under the Companies Act. Section 97 of the Companies Act prescribes:
“(1) Every director and officer of a company in exercising his or her powers and discharging his or her duties shall— (a) act honestly and in good faith with a view to the best interests of the company; and
(b) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.
(2) In determining what are the best interests of a company, a director may have regard to the interests of the company’s employees in general as well as to the interests of its shareholders.
(3) The duty imposed by subsection (2) on the directors of a company is owed by them to the company alone; and the duty is enforceable in the same way as any other fiduciary duty owed to a company by its directors.”
[38] Brian Pitt was a director of the company as at the date of its dissolution. Section 97 of the Companies Act placed a fiduciary duty on him as a director to act honestly and in good faith with a view to the best interests of the company. Sections 483(5) and 512 of the Companies Act suggest that the directors’ fiduciary obligation to the company to act in a manner that is in its best interest subsists, even though it was struck off and deemed to be dissolved.
Breach of duty
[39] Section 484 of the Company’s Act makes it plain that the company’s right to the property was not extinguished by the striking off from the register. Indeed, the company’s right to the property was preserved by section 484 and was vested in the Official Receiver. I cannot see how Brian Pitt could successfully assert that he is acting in the best interests of the company by asserting that he received the company’s property as his own. See the discussion above on sections 97, 483(5) and 512 of the Companies Act.
[40] Brian Pitt had a continuing obligation to act in the best interests of the company even though it had been struck off the register. In that regard, he was duty bound to avoid all potential conflicts with his duties to the company. His assertion that he received the property as his personal property is a clear admission of an act that was patently in conflict with the best interests of the company. Brian Pitt ought not to have placed himself in such a position.
[41] In Davies v Ford & Ors, although speaking of the property of an insolvent company, the learned judge Johnson QC opined appositely that–
“268. …Although a company director may certainly breach his duties to the company by misappropriating its existing assets, that is not a pre-requisite. He may also breach his duties in other ways, not at all dependent on the misapplication of pre-existing corporate assets, for example by putting himself in a position of conflict and thereby making an unauthorised profit.
269. A good example is Re Bhullar Bros. Ltd [2003] EWCA Civ. 424, [2003] BCC 711. In that case, a company owned an investment property which was used as a bowling hall. Two directors of the company came to know that a plot of land next to the investment property was for sale, and they acquired it using another company which they owned and controlled called Silvercrest. They said that there was no breach of fiduciary duty in doing so because the company itself has shown no interest in acquiring the plot of land at the relevant time, and accordingly had not been deprived of any maturing business opportunity. This argument was rejected and the Court of Appeal affirmed the declaration made by the judge at first instance that Silvercrest held the plot of land on trust for the company. It was not necessary, in determining that there had been a breach of duty, to show that the company had some pre-existing interest in the opportunity in question. Jonathan Parker LJ said as follows:
(TO BE CONTINUED)