The First Hall of the Civil Court, presided over by Mr Justice Joseph Zammit McKeon, on September 15, 2015, in the case ‘Alexandra Balzan Ruggier v Amadeo Balzan’ held, among other things, that the fact that Amadeo Balzan had been removed as director meant that he could not be answerable for Alexandra Balzan Ruggier’s claims to provide her with documents and details relating to the company.

Alexandra Balzan Ruggier was one of three shareholders of Central Holdings (Travel & Tourism) Ltd, holding 49.9 per cent of the shares, as well as a director of the company. The other director was Amadeo Balzan, her husband.

The parties were in the process of an acrimonious separation and Balzan Ruggier claimed that her husband mismanaged the company in a way prejudicial to her rights. No board meetings were held and, as a result, the board did not sanction the activities of the company.

Allegedly she was denied access to the company documents, information and books including accounts and relative correspondence. When she requested information on the company, she did not receive anything and in this respect she claimed that she was denied the right to exercise her rights as director.

Faced with this situation, Balzan Ruggier proceeded to file legal proceedings against her estranged husband asking the court:

• To declare that the management by her husband was abusive and prejudicial to her rights as director;

• To order her husband to give her full account of the company operations and detailed information on the company’s finances as from May 1, 2007, within a short period to be fixed by the courts.

In reply, Balzan pleaded that his wife had no personal right of action, as any action had to be taken by the company and that his wife’s claims should be dismissed.

He stated in defence that, as a managing director, he was vested with authority to manage the company under the Companies Act. Nor was it true that he denied his wife information regarding the company, nor should he be prohibited from taking decisions.

It resulted further that his wife took documents from the office of the company.

The court noted that the parties were in the process of separation proceedings. During the court proceedings on September 18, 2008, Balzan was removed as director but remained a minority shareholder.

The evidence in civil proceedings had to be morally convincing and not simply based upon a supposition though it need not be proved ‘beyond reasonable doubt’ as in criminal proceedings.

While the parties were happily married, there were no problems in the company

The fact that evidence was conflicting meant that the court had to decide which version was more credible. An applicant always had to bring proof even if the other party remained inactive. It was the duty of the court to consider different versions.

The fact that there were two very plausible contrasting versions meant that an applicant did not succeed to prove his case.

In ‘Xuereb et v Gauci et’ dated March 24, 2004, the Court of Appeal held that the court had to consider which version was more credible in view of its veracity and consistency. re. ‘Fogg Insurance Agencies Ltd noe v Maryanne Theuma’ (App. Inf dated November 22, 2001).

The court had to consider which version was more probable on the basis of a balance of probabilities. Not every conflict brought the court to a situation when it was unable to decide (‘Bugeja v Mejlak’ dated October 30, 2003), (‘Ciantar v Curmi noe’ dated April 28, 2003; ‘Camilleri v Borg (CA)’ dated March 17, 2003.

The court considered that the duties of a director were listed in article 136A of chapter 386.

In the court’s opinion, the purpose of this section was to safeguard the interest of the company. This meant that the personal interests of a director/shareholder were irrelevant. If a shareholder felt that he was not treated properly, he had other remedies.

In Brazilian Rubber Plantations & Estate Ltd (1911, ch. 425), it was held: “A director’s duty had been laid down as requiring him to act as reasonably to be expected from him, having regard to his knowledge and experience. He is, I think, not bound to bring any special qualifications to his office. He may undertake the management of a rubber company in complete ignorance of everything connected with rubber, without incurring responsibility for the mistakes which may result from such ignorance.

“Such reasonable care must, I think, be measured by the care an ordinary man might be expected to take in the same circumstances on his own behalf.

“He is clearly, I think, not responsible for damages occasioned by errors of judgment.”

While the parties were happily married, there were no problems in the company. Balzan managed the company properly, noted the court.

He felt that Balzan Ruggier was more concerned with her personal interests in the company.

In Pennington’s Company (p. 778 “Director’s powers are given to them to be used for the benefit of the company, that is for the benefit of the shareholders of the company as a whole and not for the benefit of the directors themselves, not for the benefit exclusively of a section of the shareholders or employees of the company... or of outsiders.”

The court felt that Balzan acted in the interest of the company, even though he was a minority shareholder.

In ‘Norman v Theodore Goddard (1991, BCLC 1,028) “The degree of care which the director of a company owes a duty to take when carrying the functions of the company is the care that would be taken by a reasonable diligent person having both: (a) the general knowledge, skill and experience that may reasonably be expected to a person carrying out the same functions as are carried out by the director in relation to the company [the objective test], and (b) the general knowledge, skill and experience that that director has [the subjective test].”

The court insisted that the auditor gave a clear bill of health to the company and to the way Balzan managed the company.

The court did not find that Balzan failed in his duty to act in the interest of the company, and in this respect rejected the claims of his wife.

The court made reference to the case ‘Joseph Mary Farrell v Commissioner of VAT’ dated June 24, 2011.

After September 18, 2008, Balzan was removed as director and he was no longer obliged to give his wife anything, save what was in his possession.

For these reasons, on September 15, 2015, the court dismissed all Balzan Ruggier’s claims, and accepted all defence pleas of Balzan.

Karl Grech Orr is a partner at Ganado Advocates.