Court orders company's liquidation

In two judgments delivered yesterday Mr Justice Noel Cuschieri, sitting in the First Hall of the Civil Court, ordered that J.B. Limited be liquidated after it resulted that one of its directors had fraudulently transferred company property to himself.

The judgments were handed down in the two cases filed by Mary Grech and her husband Edmund Grech against Joseph Chetcuti in his personal capacity and as director of J.B. Limited.

Mary Grech claimed in the writs that she and Chetcuti were the only two shareholders in the company and each held 50 per cent of its shares. Both parties were directors of the company. She claimed that Chetcuti had taken certain decisions in respect of the company that were seriously prejudicing her rights as a shareholder.

According to Grech, J.B. Ltd had, in 1983, acquired a field in Qormi from another company, ABCD Ltd, in which Chetcuti was a majority shareholder. In May, 1989 Chetcuti had, as a director of J.B. Ltd, called a board meeting for authorisation to transfer the property onto his own name.

Grech had opposed this request, and had requested the court to issue a warrant of prohibitory injunction preventing the meeting from taking place and stopping the transfer. However, the court had turned down Grech's application.

In June, 1989 Chetcuti again called for a board meeting to be held on June 22. In the meantime, Grech filed a writ of summons requesting that the company be put into liquidation. She then successfully obtained a warrant of prohibitory injunction against Chetcuti whereby he was prohibited from holding the board meeting.

However, Chetcuti, in his personal capacity and on behalf of J.B. Ltd, filed an application requesting the revocation of the warrant. The court immediately upheld Chetcuti's request and, without serving the application on Grech, revoked the warrant that same day. Chetcuti then proceeded to hold the board meeting with only himself present, as Grech was not aware that the warrant of prohibitory injunction she had obtained previously had been revoked. After the meeting J.B. Ltd transferred the land at Qormi to Chetcuti, in his personal capacity, for the sum of Lm3,000.

Grech requested the court to rescind and annul the contract of sale and to condemn Chetcuti to make good the damages she had sustained. The court was also requested to place J.B. Ltd in liquidation.

In yesterday's judgments the court noted that the revocation of Grech's warrant of prohibitory injunction had not taken place according to law. Chetcuti had challenged the warrant by filing an application, however the law stipulated that the challenge had to take place by writ of summons. As a result, Grech's warrant of prohibitory injunction had not been legally revoked and the acquisition of the land by Chetcuti was null and void and had to be rescinded.

Mr Justice Cuschieri added that Grech had not been notified of the board meeting and this was in violation of the statute of J.B. Ltd. Chetcuti's failure to inform Grech of the meeting and the speed at which the meeting was held were all factors that showed an element of bad faith on Chetcuti's part. Grech's claim that Chetcuti had acted fraudulently was therefore proven. The court also upheld Grech's claim that Chetcuti had damaged J.B. Ltd, for the property had been sold to Chetcuti for the same price at which the company had purchased it six years before.

Mr Justice Cuschieri added that Chetcuti had also acted incorrectly when he had voted on the sale of the property to himself as this was a personal interest that should have prohibited him from voting in terms of law.

The court therefore upheld Grech's claim and ordered that the contract of the sale of the land to Chetcuti be rescinded as it was null and void. The court also ordered that J.B. Ltd be put into liquidation. However, the court declined to award damages to Grech.