CONTE v.

KPEGLO AND ANOTHER

[1964] GLR 311

Division: IN THE MATTER OF A PETITION FOR THE WINDING

UP BY THE COURT OF J. CONTE LTD. IN THE
SUPREME COURT
Date: 11 MAY 1964
Before: SARKODEE-ADOO C.J., OLLENNU AND ACOLATSE
JJ.S.C.

Company law—Winding up—Contributories—Insufficient evidence of—Letter indicating shares were

“allotted”—Meaning of “allotment”—Either offer by company of shares or acceptance by company of
application for shares—Whether evidence of acceptance of offer—Whether evidence of completion of
conditions for court to declare ownership in shares—Companies Ordinance, Cap. 193 (1951 Rev.), ss.
103 and 107.

HEADNOTES
The liquidator appointed by the court for winding up J. Conte Ltd. called upon the High Court to settle
the list of contributories as provided by section 103 of the Companies Ordinance. The difficulty arose
since the only admissible evidence as to the contributories was the minutes book, all other documents
having been lost or cancelled. The first respondent claimed that the majority of the shareholders and
directors of J. Conte Ltd. had voted him 10,000 shares valued at £G1 each, free of charge for services he
had rendered to the company. Basing its decision on the oral evidence of the first respondent and a letter
he had received from the appellant, the High Court declared that the first respondent had been allotted
these 10,000 shares, thus giving him 10,001 shares in the final disposition of the contributories of the
company. On appeal it was submitted inter alia that the trial judge erred in holding that the letter
supported a finding that the 10,000 shares had been allotted. This letter could only be evidence of an offer
of shares and there was no evidence of an acceptance. In the alternative, if the letter operated as an issue
of shares then the first respondent should have been called upon to make payment for them in accordance
with section 107 of the Companies Ordinance. In reply it was submitted that since the letter was written
by a layman then the word “allotted” should be interpreted in its ordinary meaning as signifying a
complete and performed contract.
Held, allowing the appeal:
(1) an allotment of shares is an appropriation by the directors or the managing body of a company to a
particular person. This may take the form of an offer of shares to the allottee or an acceptance of an
application for shares by the allottee; but an allotment by itself does not necessarily create the
status of membership. The allotment may be subject to conditions. Nicol’s Case (1885) 29 Ch.D.
421 and Spitzel v. Chinese Corporation Ltd. (1899) 80 L.T. 347 applied.
(2) The wording of the letter could amount to either an offer of shares by the company to the first
respondent or an acceptance by them of an application for shares. With respect to the first
alternative there was no evidence of an acceptance by the first respondent; and with respect to the
second alternative there was no evidence of a payment or completion of conditions by the first
 respondent.

[p.312] of [1964] GLR 311

CASES REFERRED TO
(1) Nicol’s Case (1885) 29 Ch.D. 421; 52 L.T. 933; 1 T.L.R. 221, C.A.
(2) Spitzel v. Chinese Corporation Ltd. (1899) 80 L.T. 347; 15 T.L.R. 281; 43 S.J. 350; 6 Mans. 355

NATURE OF PROCEEDINGS
APPEAL against a judgment of the High Court in an action to settle the contributories of J. Conte Ltd.

COUNSEL
Narayan for the appellant.
Olaga for the first respondent.
Second respondent in person.

JUDGMENT OF OLLENNU J.S.C.

Ollennu J.S.C. delivered the judgment of the court. These proceedings commenced with a petition under
sections 91, 89 (4) and (5) and 90 (2) and (3) of the Companies Ordinance,1 brought for and on behalf of
Messrs. African Timber and Plywood (Ghana) Ltd., judgment creditors of J. Conte Ltd., for the
winding-up by the High Court of the said J. Conte Ltd., and a prayer under section 99 (1), (3) and (6) of
the said Ordinance, for the appointment by the court of Mr. Harry Verney Alfred Franklin, as official
liquidator.
At a stage in the winding-up proceedings, the official liquidator, the second respondent (hereinafter called
the second defendant) called upon the High Court to settle the list of contributories as provided by section
103 of the Ordinance.
All the relevant books and other documents of the company from which the High Court would normally
settle the list of contributories, namely, the register of members and annual returns, were either lost, or
had been cancelled in previous proceedings. The only documents available are the minutes book and the
annual return showing a list of members as at 1 January 1960; but the said list of members is not
supported by any allotment in the minutes book, and therefore had to be ruled out of court.
The only undisputed evidence of shares held by members of the company is contained in the minutes of a
meeting of directors of the company dated 12 February 1959, in which shares were allotted as follows:

“J. Conte 5,018 shares

Mrs. Conte 1 share
N. Y. Asare 1 share
Dr. A. Y. Kpeglo 1 share
R. J. Amanoo 1 share
W. E. Arthur 1 share
R. Ashie 1 share
 5,024 shares.”

But Dr. A. Y. Kpeglo (hereinafter called the first defendant) claimed that some time after the successful
conclusion, in favour of the company,

[p.313] of [1964] GLR 311

of an action against Frisicaro Angelo, a meeting of the directors of the company was held. At this
meeting, the majority of the shareholders and directors (including Joseph Conte) voted Kpeglo 10,000
shares, i.e. twenty per cent. of the company’s total shares of 50,000, at £G1 each, free of charge for
services he had rendered to the company. The first defendant gave oral evidence of the said allotment, and
in confirmation, produced a letter dated 20 May 1961, written to him by the said Joseph Conte
(hereinafter called the plaintiff).
Notice of the first defendant’s claim was given to Mr. T. Annan-Forson, as alternate director appointed by
the plaintiff; although he attended court on the first day that the matter came before the court, and was
represented by counsel on the last date when the court made its ruling, there was no appearance by or for
him on the material date when evidence was taken.
The only evidence before the High Court was the oral evidence of the first defendant and the letter he
produced signed by the plaintiff. The learned judge of the High Court accepted that evidence in the
following terms: “I believe Dr. Kpeglo’s evidence that 10,000 shares were allotted to him free for services
rendered to the company as this evidence is supported by the letter dated 20 May 1961, from J. Conte,
exhibit D.”
In consequence of his findings the learned judge settled the list of contributories as follows:

“J. Conte 5,025 shares

Mrs. Conte 1 share
N. Y. Asare 1 share
Dr. A. Y. Kpeglo 10,001 shares
R. J. Quarcoo 1 share
W. E. Arthur 1 share
Raphael Ashie 1 share
5,031 shares.”

The plaintiff appealed against the settlement on the following grounds: (1) that there was not sufficient
evidence that Dr. A. Y. Kpeglo was the owner of more than one share; (2) that the learned trial judge
erred in law in holding that Dr. Kpeglo was the owner of 10,001 shares; and (3) that the learned trial
judge misdirected himself in holding that exhibit D supports the fact that the shares were allotted free for
services rendered.
Arguing grounds (1) and (3) together, counsel for the plaintiff submitted: (i) that the letter, exhibit D,
does not support the oral evidence of the first defendant that 10,000 shares were allotted to him free of
charge for his services to the company; (ii) that even if the letter, exhibit D, operates as making an
allotment, there is no evidence that the first defendant accepted it and had shares issued to him according
to law; and (iii) that if exhibit D is interpreted as operating as an issue of shares, so as to make the first
defendant a contributory under the law, then in the absence of

[p.314] of [1964] GLR 311

lawful exemption in his favour, the High Court, settling the list as it did, should have called upon the first
defendant by virtue of section 107 of the Companies Ordinance, to make payment for them to the extent
of his liability, i.e. to pay cash for the same. On the second and third points counsel referred the court to
Palmer’s Company Precedents (17th ed.), Part 1, pp. 142-144 where the author deals with the law relating
to an application for allotment, and the issue of shares, and also to section 107 of the Companies
Ordinance, which authorises the court to make an order upon contributories to make payment for shares
they hold.
Counsel for the first defendant, in reply, contended that the letter, exhibit D was, written by a layman, not
conversant with the law, and therefore the word “allotted” used by him therein should be interpreted in its
ordinary meaning as signifying a completed and performed contract of allotment; that so interpreted, the
letter, exhibit D, would be found to corroborate the oral evidence of the first defendant in all its material
aspects, and would be a complete answer to all of the points raised against the ruling of the High Court.
We do not share the views of counsel for the first defendant. The letter, exhibit D, purports to have been
written in compliance with the requirements of company law with respect to allotment of shares in the
company; therefore technical words used in it must be given their ordinary technical meaning; and it is
with that construction that we have to consider the evidential value of the letter, exhibit D.
It is evident from the ruling that the ground upon which the learned judge of the High Court accepted the
evidence of the first defendant is, according to him, that that evidence is supported by the letter exhibit D,
that he is “allotted” twenty per cent. of the whole shares of J. Conte Ltd.
What then is meant by the use of the term “allotment” when used in company law with respect to shares?
We find guidance on this in Gower’s Modern Company Law (2nd ed.) at p. 348. There the learned author,
discussing the subject of how a person becomes a shareholder in a company, points out that the process
involves two distinct legal operations: (a) an agreement and (b) entry of the name on the register. He says
that “both must be present before the person concerned becomes a member and shareholder.”
The agreement involves one of the following: (i) an original allotment of shares, i.e. appropriation of
shares accompanied by a form of application, which is filled in and submitted to the company by an
applicant for shares, (ii) allotment at any other time upon application for shares, or (iii) allotment made by
the company upon its own resolution, and not in response to any preceding application: See Palmer’s
Company Precedents, (17th ed.), Part 1, pp. 142-143.
As to original allotment, Gower (supra) points out at p. 348 that the publication of a prospectus “is not an
offer” by the company, “but a mere invitation to submit offers by completing and returning the
application form . . .” He states further at p. 349:

[p.315] of [1964] GLR 311

“The board of directors then consider the various applications and decide whether or not to accept them or
some of them, and whether for the full amount or only part—in the case of a public issue the prospectus will
normally have stated the policy to be adopted in the event of over-subscription. Their decision to accept is
known as allotment, but it has no legal effect until notified to the applicant. This notification will be by
dispatch of allotment letters which will often be renounceable for a limited time. Once the allotment letter
has been dispatched the agreement is complete.
But the allottee is still not a shareholder. He has not yet been entered on the register—indeed particular
shares identified by number have probably not been appropriated to him. This will not occur until he is duly
 placed on the register, and if the allotment letter is renounceable he himself may never become a
shareholder.”

Of the second class of allotment, i.e. allotment made upon application, again the application is an offer by
the applicant, the acceptance by the company in such a case is, as Palmer says (supra) at p. 143, ordinarily
evidenced by what is termed “allotment.” He then cites the definition of allotment given by Chitty J., in
Nicol’s Case2:
“What is termed ‘allotment’ is generally neither more nor less than the acceptance by the company of the
offer to take shares. To take the common case, the offer is to take a certain number of shares, or such a less
number of shares as may be allotted. That offer is accepted by the allotment either of the total number
mentioned in the offer or a less number, to be taken by the person who made the offer. This constitutes a
binding contract to take that number according to the offer and acceptance. To my mind there is no magic
whatever in the term ‘allotment’ as used in these circumstances . . . It is an appropriation, not of specific
shares, but of a certain number of shares. It does not, however, make the person who has thus agreed to take
the shares a member from that moment; all that it does is simply this—it constitutes a binding contract under
which the company is bound to make a complete allotment of the specified number of shares, and under
which the person who has made the offer and is now bound by the acceptance is bound to take that particular
number of shares. In most cases the act of placing the person who has agreed to become a member on the
register is a mere matter of form, and may be described as a mere ministerial act; but it appears to me that in
point of law all that is done by the process I have just indicated, and all that was done in this case, was to
make a complete and binding contract.”

Again in Spitzel v. Chinese Corporation Ltd.,3 Stirling J., also defined and distinguished two things:
“allotment” and “issue” of shares. He said:
“In the first place, I have to consider what meaning is to be attached to these two words [allotment and
issue]. First of all, What is an allotment of shares? Broadly speaking, it is an appropriation by the directors or
the managing body of the company of shares to a particular person. The legal effect of the appropriation
depends on circumstances. Thus it may

[p.316] of [1964] GLR 311

be an offer of shares to the allottee, or it may be an acceptance of an application for shares by the allottee;
but of itself an allotment does not necessarily create the status of membership. The allotment may be, and
probably generally is [where it is an offer], such as to give a title to the shares the moment the allottee
communicates his acceptance of it to the company whose directors make the allotment; but it seems to me
that the allotment may be subject to a condition—as, for example, that the allottee should not only indicate
acceptance, but perform some other act, such as payment of a sum of money. In other words, I think that a
company may offer specified shares to A. B. on the terms that the title of A. B. should not arise until he had
paid a sum of money to the company, and this being so, a contract may provide, as I think, that allotment
shall be subject to conditions.”

Applying the principles laid down in these two authoritative definitions, we would say that at its very
best, the interpretation of the letter, exhibit D, most favourable to the first defendant is, that it is either an
offer by the company of shares to the first defendant, or an acceptance by them of an application for
shares by the first defendant made in his letter referred to in the exhibit. In either case, it has to be
accepted by the first defendant to create a binding contract between him and the company to issue shares
to him, but until he pays for them, or fulfils any other conditions attached to it, no particular shares
identified by number can be appropriated to him, consequently he would not be entitled to be recognised
as owning more than the one share he is proved by the minutes of the company as holding, and his name
cannot be entered on the register.
Thus the natural inference to be drawn from the statement in exhibit D that, “you are allotted 20 % of the
whole shares,” is that the company were prepared to issue such shares to him if he had accepted and paid
for them. There is nothing in exhibit D from which it can be inferred that the offer to the first defendant in
this case could not have attached to it the conditions usually attached to such offer, e.g. payment of cash
for the same.
The learned judge of the High Court therefore erred in holding that exhibit D supported the oral evidence
of the first defendant and concluding that 10,000 shares at £G1 each had been allotted to the first
defendant on the condition that they should be free of charge for services rendered to the company.
Now there is no evidence that this offer, if made in the normal course of business, as it should be, was
accepted by the first defendant to create a binding contract. That being the case the question of an order
by the court under section 107 of the Companies Ordinance, requiring the first defendant to pay cash for
those shares does not arise. For that reason also, it is unnecessary to deal with the other points raised by
counsel for the plaintiff.
It follows that the appeal of the plaintiff must succeed. The appeal is accordingly allowed, the ruling of
the High Court that in addition to his one share, the first defendant is entitled to 10,000 shares, is set
aside. It is ordered that the list of contributories should be as contained in the

[p.317] of [1964] GLR 311

minutes book reporting the minutes of a meeting of the directors dated 12 February 1959:

“J. Conte 5,018 shares

Mrs. Conte 1 share
N. Y. Asare 1 share
Dr. A. Y. Kpeglo 1 share
R. J. Amanoo 1 share
W. E. Arthur 1 share
R. Ashie 1 share
5,024 shares.”

DECISION
Appeal allowed.
T.G.K.