Ideal Betting ownership battle: Sadler, Lewis sue each other in Supreme Court
A Kingston businessman has filed a claim in the Supreme Court against the principal shareholder and chairman of Ideal Betting Company Limited, Donovan Lewis, contending that shares were created and allotted in breach of the company's articles of association.
As such, Canute Sadler is seeking an order to amend the shares register and an injunction restraining Ideal Betting and Lewis from making changes to the record.
Sadler also wants the court to order Ideal Betting or Lewis to purchase shares held by Delores Scott-Carlington and him on terms determined by the tribunal. Scott-Carlington is also a claimant in the lawsuit.
The connection between Sadler and Lewis extends back more than three decades.
In the case filed in the Supreme Court, Sadler contended that in 1969, he and Lewis agreed to establish the betting company, which was incorporated the next year, in 1970. Sadler would hold 20 per cent of the shares and Lewis 35 per cent, while other persons would take up shares in the company, he claims.
Lewis has countered, however, that the two never had such an agreement, and he has counter-sued, seeking damages for breach of contract over a $3 million transaction he claims Sadler has refused to execute.
Sadler claimed that at the company's founding, he put up $8,000, but no shares were allotted to him because, at the time, he was involved in a dispute with the operator of another betting enterprise.
To prevent any delay in incorporating the company, the businessman said it was agreed that the shares to which he was beneficially entitled would be issued to Scott-Carlington, to whom he was engaged to be married at the time, and who would hold the shares on his behalf.
Between them, Sadler and Scott-Carlington initially held 1,400 shares, which eventually increased to 14,000 shares.
He claims that over the life of the company, Ideal Betting's authorised share capital was increased four times - moving from 20,000 to 1.5 million shares of $1 each - and that the annual returns show that shares allotted to Lewis increased from 10,600, or 53 per cent of the company at the time of incorporation, to 982,800, or more than 90 per cent in 2011. The holdings include shares he said Lewis acquired from existing shareholders.
Weren't invited to meetings
Sadler charged that the increases in the authorised share capital and allocation of shares were made at meetings for which Scott-Carlington and he were not invited, nor were they given notice of such meetings.
As a result, he is arguing that the increases were carried out in breach of the Companies Act and Ideal Betting's articles of association, and that Ideal Betting failed or neglected to offer them shares pro-rated to their holdings.
The businessman also cited a transaction in 2011 under which, based on an agreement with Lewis, Scott-Carlington executed the transfer of the 14,000 shares to Sadler and he, in turn, transferred them to Lewis. Sadler said in his court filings that no purchase price was agreed for the 14,000 shares and that he is yet to be paid by Lewis.
He has asked the court to rectify the share register of Ideal Betting by striking out the number of shares held by the company and substituting a number to be determined by the court; and he wants Scott-Carlington's name and 127,936 shares to be inserted in the register.
Alternatively, Sadler is asking the court to order Lewis and Ideal Betting to provide an account, including dividends and payments made to each shareholder and or directors of the company from incorporation to present.
In his defence and counter-claim, Lewis said Sadler was never a party to the agreement to incorporate Ideal Betting and there was no discussion with him regarding shareholding in the company.
Lewis said formation of the company was solely his decision and that it was he who solicited the interest of four other investors. His contention is that when discussions started regarding the incorporation of the company, it was one of the potential investors who suggested he consider including Sadler as a shareholder.
That was discussed at a meeting in November 1970, but a decision was taken not to include or allot shares to Sadler based on information that came to his attention, Lewis said, noting that he was relying on the minutes of the Jamaica Bookmakers Association.
He also denied that Sadler made any financial contribution to the company and that there was no agreement that shares held by Scott-Carlington were to be held in trust for Sadler.
Lewis said in his court filing that Ideal Betting's authorised share capital was increased to comply with regulatory changes. In1988 or early 1989, the Betting Gaming and Lotteries Commission imposed a requirement that in order to maintain a betting licence, all betting companies were required to have a 2:1 current asset ratio.
In order to comply, Ideal Betting required capital injection of $400,000.
Lewis said that at an extra-ordinary general meeting in 1989, resolutions were passed increasing the company's authorised share capital by 400,000 shares of $1 each. Those shares were offered to shareholders, but only Lewis was able to take up the offer.
Lewis is expected to testify, as laid out in his court filings, that he purchased the shares of two of Ideal's shareholders in accordance with the company's articles of association and bonus shares were offered to shareholders for every ordinary share held under a resolution passed at a duly convened extraordinary general meeting in December 1997.
He also purchased 12,800 shares in 2003, which increased his holdings to 982,000 shares.
Lewis said notices of the general meetings were sent to shareholders in the company, including Scott-Carlington, but Sadler was not a member of the company and hence there was no requirement to notify him. He said the only agreement with Sadler was for him to transfer the 14,000 shares he claimed he had acquired from Scott-Carlington.
The transaction and sale price of $3.63 million was agreed in January 2012, according to Lewis, who said Sadler was to be paid $3 million, net of transfer tax and stamp duties that he agreed to advance.
However, Sadler has refused to accept that payment that Lewis said he tendered repeatedly.
In his counter-suit, Lewis is seeking an injunction to restrain Sadler from disposing of the shares other than transferring them to him.
The case is set for trial in November.
Sadler and Scott-Carlington are being represented by Ransford Braham, QC, and Ideal Betting and Lewis by Michael Hylton, QC.
Business Reporter Neville Graham and Assistant Business Editor McPherse Thompson contributed to this story.