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In re Apparels (Fiji) Ltd [1994] FJHC 19; Hbe0067d.1993s (18 February 1994)

IN THE HIGH COURT OF FIJI
At Suva
Civil Jurisdiction

WINDING UP CAUSE NO. HBE0067 OF 1993

IN THE MATTER of APPARELS (FIJI) LIMITED

and

IN THE MATTER of the Companies Act, (Cap. 247)

Mr. J. Howard for Pacific Embroidery (Fiji) Limited
Mr. M. Narsey for Apparels (Fiji) Limited

RULING

On the 25th of August '93 this Court granted an injunction restraining the advertisement of a winding-up petition issued by Pacific Embroidery (Fiji) Limited (hereafter abbreviated to "PEF") against Apparels (Fiji) Limited (hereafter abbreviated to "AFL").

The affidavit filed in support of the injunction application by the solicitors of AFL indicates that this was the second 'attempt' by PEF to wind-up AFL, a previous notice under Section 221 of the Companies Act 1983 not having being pursued by PEF's former solicitors despite a threat to do so. The affidavit also specifically avers that:

"(c) the alleged debt on which the petition is based is disputed by the applicant Apparels (Fiji) Ltd. and there has been correspondence in that regard between solicitors for the applicant and the petitioner."

In this latter regard the affidavit annexed a lengthy letter from the New Zealand solicitors of Praego South Pacific Limited (hereafter referred to as 'Praego'), the holding company of AFL which was then in receivership and in liquidation, setting out in some detail the 'historical perspective' and 'contractual relationships' behind the 5 invoices on which PEF's notice and winding-up petition are based.

There was also annexed a letter from a director of AFL responding to PEF's first 'demand notice' in which he states:

"I am surprised that you have issued this notice to Apparels (Fiji) Ltd. You ought to have known that the work you were undertaking was for Praego S.P. Ltd. All instructions for the embroidery program emanated from Praego S.P. Ltd. and, indeed, your Auckland Office invoiced Praego for the program charges (see their invoice No. 1078).

You are recorded in Praego's books as an unsecured creditor of Praego S.P. Ltd. (In Receivership)." (my underlining)

On the 5th of October '93 however PEF by its General Manager filed an affidavit seeking the dissolution of the injunction. In brief PEF rejected the letter of the New Zealand solicitors of 'Praego' (op. cit) and the claim that the debt was with 'Praego' the New Zealand holding company of AFL.

Conversely PEF asserts that its claim reflects work done by it at the request of AFL on garments and fabrics supplied by AFL to PEF and subsequently delivered back to AFL after completion of the works.

It was also deposed that (PEF) "... knowing at all relevant times the financial status of the respondents New Zealand holding company, (namely 'Praego') has never and would never have done work for the said New Zealand company in lieu of funds paid in advance on placement of the order."

From the above it is clear that the existence of the debt is not disputed, nor is it denied that the debt is presently due. What is denied and vigorously contested however, is the claim by PEF that AFL is liable for the debt.

In considering this application I am guided by the dictum of the Privy Council in Bateman T.V. Limited v. Coleridge Finance Co. Ltd. [1971] UKPC 8; [1971] N.Z.L.R. 929 where it said at p.932:

"It was argued that as the debts in question were disputed debts no winding-up order should have been made, and for this purpose their Lordships are prepared to assume that the debts were genuinely disputed debts.

In such cases the general rule is, no doubt, that no order will be made on a petition founded on such debts. But each case must depend upon its own circumstances and it is a question for the discretion of the judge; ..."

(my underlining)

It is necessary therefore to carefully consider the ground or basis upon which the company, in this case AFL, disputes liability for the debt and, in this regard, AFL claims that throughout its dealings with PEF it acted solely as agent for Praego to the knowledge of PEF. (See: para. 2 of counsel's memorandum; para. 7.1 of the affidavit of Suresh Suppiah and para. 5 p.3 of the letter of the solicitor acting for the receivers of 'Praego'.)

I note however that no affidavit has been filed by any authorised or responsible officer of AFL which one might have expected given the circumstances deposed by the General Manager of PEF, in particular, his denial that the work was done for any other person other than AFL and his assertion that there is no foundation in fact for AFL's claims to the contrary.

In this regard I am reminded of the observation of Clausen L.J. in In re James Millward & Co. Ltd. [1940] Ch 333 when he said at p.335:

"Where the onus is on those who are opposing the winding-up petition, I would very much hesitate to regard the onus as discharged in a case where those who must necessarily be conversant with the whole matter do not put in any affidavit and are, therefore, not subject to cross-examination."

Be that as it may as I see it the position of PEF may be conveniently summarised in the alternative as follows: Firstly, AFL contracted as a principal and not as agent for Praego; alternatively, if AFL contracted as agent for Praego it nevertheless did so in such a way as to make itself liable for the debt as well as Praego.

The position of AFL however is that it contracted solely as agent for Praego to the knowledge of PEF and therefore was under no liability for the debt.

I begin my analysis of these relative "positions" by citing from Bowstead on Agency (13th edtn) wherein Art 123 at p.390 provides:

"Where an agent makes a contract which is not reduced to writing the question whether he contracted personally or solely in his capacity as an agent is a question of fact."

Further Art 121 at p.385 reads:

"The question whether the agent is to be deemed to have contracted personally, in the case of a contract in writing ... depends upon the intention of the parties, as appearing from the terms of the written agreement as a whole, the construction of which is a matter of law for the court."

In this latter regard on the question of 'intention' Brandon J. in The "Swan" (1968) 1 Lloyds Law Rep. 5 said at p.12:

"The intention for which the court looks is not the subjective intention of (the parties). Their subjective intentions may differ. The intention for which the court looks is an objective intention of both parties based on what two reasonable businessmen making a contract of that nature, in those terms and in those surrounding circumstances, must be taken to have intended."

On the basis of the affidavits and annexures presently before the court I can deal fairly briefly with the diametrically opposed positions of the parties.

On the question whether AFL contracted solely as a principal, I can say that on the present materials I am not satisfied that the entire contract between PEF and AFL has been reduced into writing or is to be derived only from the invoices, credit note, delivery dockets and payments receipts furnished by PEF.

Needless to say the documents do not include any written 'order form' or 'job request' signed by AFL and all may be said to post-date the actual formation of the contract for the work. Indeed they may or may not include all of the terms of the contract between PEF and AFL.

As was said as long ago as 1860 by Pollock C.B. in Holding v. Elliot 120 RR 504 at p.507:

"No doubt there are cases where an invoice is very strong evidence to show what was the contract between the parties; but here it appears to me that the contract was made long before any invoice was contemplated and this form of invoice was adopted, not for the purpose of showing the relation in which the parties stood, but with a different object."

In similar vein Martin B. in the same case said:

"I agree that if at the time of the sale an invoice is made out, or anything passes to show the parties meant the invoice to be the contract, it would be; but I am also of opinion that if there be nothing of that kind, the mere circumstance of an invoice being afterwards made out will not make it the written contract or clothe it with the incidents of one."

and finally Channell B. said at p.508:

"I agree that an invoice is only evidence of a contract, and not a contract per se."

AFL's position is equally untenable. None of the documents records in any unequivocal manner the fact of its agency nor do they clearly disclose the identity of its alleged principal Praego. Indeed it could be said that on the face of the documents no such agency could be inferred or detected.

Furthermore no protest or objection has been taken to the invoices, credit note or delivery dockets as framed and the mere existence of a business relationship between Praego and Pacific Embroidery Ltd. (N.Z.) and the latter company and PEF (which is presently unclear) may or may not explain the knowledge and intention of PEF and AFL or the terms of the contract between them. In any event that would not be conclusive.

I turn then to the alternative position of PEF and for that purpose assume that AFL did contract as agent for Praego. That is not however the end of the matter. I need only refer to the decision of Basma v. Weekes (1950) A.C. 441 (P.C.) where Lord Reid in delivering the opinion of the Privy Council said at p.454:

"An agent who contracts in his own name does not cease to be contractually bound because it is proved that the other party knew when the contract was made that he was acting as agent."

Similarly Pearce J. in Rusholme & Bolton & Roberts Hadfield Ltd. v. S.C. Read & Co. (London) Ltd. (1955) 1 W.L.R. 146 referred to the relevant legal principle when he said at p.150:

"The fact that a person is agent and is known so to be does not of itself prevent his incurring personal liability. Whether he does so is to be determined by the terms of the contract and the surrounding circumstances. Where he contracts on behalf of a foreign principal there is a presumption that he is incurring a personal liability unless a contrary intention appears; and similarly where he signs in his own name without qualification."

What then are "... the terms of the contract and the surrounding circumstances"? The petitioner PEF says they have been reduced into writing and are to be inferred from the documentary annexures; AFL on the other hand (albeit through other parties) suggests that the contract was only partly reduced into writing and for its full terms regard must be had to the "surrounding circumstances" which includes the historical or chronological "perspective" and presumably the inter-company relationships.

In other words PEF says the contract is very simple: AFL supplied the raw materials and were later invoiced and took delivery of the finished garments. AFL however says that the contract was finalised between Praego and PEF through Pacific Embroidery Ltd. (N.Z.) and it had merely supplied the raw materials to PEF and received the finished products on Praego's behalf.

It is sufficiently clear from the foregoing that the "terms of the contract" in this case are far from certain and clearly cannot be determined on the basis of the affidavits and/or annexures presently before the court. Equally clearly the "surrounding circumstances" in the case which includes the inter-company relationships as it affects the contract is far from clear albeit that they are all separate legal entities.

There are undoubtedly serious questions to be tried in this case not the least of which is the ascertainment of the 'terms of the contract', and the nature and extent of AFL's agency.

Such questions in my view raise a genuine dispute as to the very indebtedness and liability of AFL to PEF and accordingly I am driven reluctantly to agree with counsel for AFL that the present procedure adopted by PEF is wholly inappropriate for the determination of the matters at issue between the parties.

Accordingly in the exercise of the court's discretion in the matter and with the apparent concurrence of counsel for AFL the most 'just' order that this court can make in the circumstances and without in anyway finally determining the issues in this case, is to continue the injunction indefinitely on terms.

Subject therefore to AFL paying into court within 28 days the sum of $12,826.61 (Twelve thousand eight hundred and twenty six dollars and sixty one cents) the injunction granted by this court on the 25th of August, 1993 is hereby extended.

Needless to say in the event of the said sum not being paid into court the injunction shall be dissolved.

(D.V. Fatiaki)
JUDGE

At Suva,
18th February, 1994.

HBE0067D.93S