Guangzhou Dongsong Energy group company Limited and 4 Others v Fang min (Civil Appeal No. 170 of 2020)

Observed later treatment

Citator coverage is limited to judgments in the Wakilii corpus and source-matched treatment records. Absence of a signal is not an assertion that the case remains good law.

Holding

The Court of Appeal partly allowed the appeal. It upheld the finding that the respondent's suit was a valid derivative action under the fraud-on-the-minority exception to the rule in Foss v Harbottle, and that she owned 35 shares. However, it held that although the expert valuation report was admissible, several valid objections—overstated mineral area, failure to consider mining-lease duration and business risk—rendered its USD 25,000,000 valuation of low probative value. The court set aside that award and substituted compensation of USD 5,000,000 payable directly to the respondent, with interest at 8% per annum. Orders on the frozen USD 8,000,000, lifting the corporate veil, and audit of the company's books were upheld.

Outcome

Appeal partly allowed; USD 25,000,000 award set aside and substituted with USD 5,000,000 payable directly to the respondent; cross-appeal disposed of accordingly.

Facts

Uganda Hui Neng Mining Ltd (UHNML) was incorporated to mine at Sukulu, Tororo. The 2nd appellant subscribed for 80 shares and the respondent for 20, but the respondent paid up the entire USD 5,000,000 share capital because the 2nd appellant could not remit funds from China. The company obtained an exploration licence. The respondent claimed the 2nd appellant later transferred 15 shares to her (bringing her to 35 shares) partly to offset his debt. Relations deteriorated over accountability for expenditure. The 3rd and 4th appellants, who had not subscribed for shares, participated in a decision transferring UHNML's exploration licence to the 1st appellant. The respondent sued alleging fraudulent expropriation and claimed unpaid contributions and appreciation fees; she also had USD 8,000,000 frozen in China at the 2nd appellant's request. The 1st appellant counterclaimed for a refund of monies allegedly misappropriated. The High Court found for the respondent, valued her 35 shares at USD 25,000,000 based on an expert report, and dismissed the counterclaim.

Issues

1. Whether the respondent's action was a derivative action properly brought on behalf of the company or an impermissible personal action.
2. Whether the respondent held 35 shares in Uganda Hui Neng Mining Ltd.
3. Whether the trial Judge properly relied on the expert valuation report tendered by a single expert to assess the value of the respondent's shares.
4. Whether the respondent was obliged to give accountability for monies remitted to her, and whether the 1st appellant's counterclaim was proved.
5. Whether the respondent could be awarded a refund and appreciation fees while retaining her shareholding.
6. Whether the freezing of USD 8,000,000 in the respondent's China accounts was conceded and unlawful.
7. Whether the compensation for value of shares should be paid directly to the respondent rather than the company.

Orders

• The sum of USD 25,000,000 awarded to the respondent for loss following the unlawful transfer of the exploration licence is set aside.
• The respondent shall instead be paid USD 5,000,000 as compensation.
• Interest is awarded on the USD 5,000,000 at 8% per annum from the date of filing the suit in the lower court until payment in full.
• Each party to bear their own costs of the appeal; the trial court's order on costs is upheld.
• The respondent is entitled to the frozen USD 8,000,000 conceded to by the 2nd appellant.
• The frozen USD 8,000,000 shall attract interest at 8% per annum from date of filing the suit until payment in full.
• The corporate veil of the 1st and 5th appellants shall be lifted to enable execution against their shareholders and directors.
• The books of account of UHNML be subjected to an audit to establish the financial status of the company.
• The costs in the High Court shall be borne by the appellants.

Rules and key headnotes

Legislation cited (10)

• Companies Act 2012 s.154
• Companies Act 2012 s.248
• Evidence Act Cap. 6 s.92(a)
• Evidence Act Cap. 6 s.101
• Evidence Act Cap. 6 s.102
• Evidence Act Cap. 6 s.133
• Mining Act 2003
• Surveyors Registration Act Cap. 275
• Accountants Act 2013
• Judicature (Court of Appeal Rules) Directions S.I 13-10 Rule 30(1)(a)

Cases cited (20)

• Ogiale vs. Shell Pet. Dev. Co (Nig) Ltd (1997) 1 NWLR 148
• Okeny v Okot (Civil Suit No. 63 of 2012)
• R v Silverlock [1894] 2 QB 766
• Atkins v R [2009] EWCA Crim 1876
• Commissioner for South African Revenue Service v Stepney Investments (Pty) Ltd [2015] ZASCA 138
• Kennedy v Cordia (Services) LLP [2016] UKSC 6
• Attorney General v DMW (U) Ltd (Civil Application No. 314 of 2020)
• Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 204
• Day v Cook [2001] Lloyd's Rep PN 551
• Muzeyi v Uganda [1971] EA 225
• Foss v Harbottle (1843) 2 Hare 461, 67 ER 189
• Jamal v Uganda Oxygen (Civil Appeal No. 64 of 1995)
• Giles v Rhind [2003] Ch 618
• Sevilleja v Marex Financial Ltd [2020] UKSC 3
• Simba Properties Investment Co Ltd v Kirunda (Civil Application No. 538 of 2022)
• Uganda v Ssimbwa (Criminal Appeal No. 37 of 1995)
• Kimani v Republic [2000] 2 EA 417
• Dhalay v Republic [1997] TLR 514
• Edwards v Halliwell [1950] 2 All ER 1064
• Griffiths v TUI (UK) Ltd [2021] EWCA Civ 1442

Cases citing this judgment (1)

How later Ugandan judgments in the Wakilii corpus have cited this case. Treatment labels come from Sequitur — Uganda’s citator — each backed by a verbatim span from the citing judgment, and are not an assertion that this case is, or is not, good law.

• Byenkya Kihika and Company Advocates v Fang min (Misc Cause 52 of 2022)

The original judgment as reported. Read the original PDF before relying on any passage.