| Fiji Islands - In re Silimaibau Sunset Express (Fiji) Ltd - Pacific Law Materials |
IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION
WINDING UP ACTION NO. 40 OF 1996
IN THE MATTER of SILIMAIBAU SUNSET EXPRESS (FIJI) LIMITED
AND:
IN THE MATTER of the Companies Act Section 221
Mr. S. Maharaj for Petitioning Creditor
Mr. M. Raza for the Company
JUDGMENT
This is an opposed winding-up Petition.
By Petition dated 2 April 1996 F. & J. CO. LIMITED ("the Petitioner") has petitioned to wind-up SILIMAIBAU SUNSET EXPRESS (FIJI) LIMITED (the "company") for alleged indebtedness of the Company to the Petitioner in the sum of Y$7,339,979.00 (seven million three hundred thirty nine
thousand nine hundred seventy nine yen) or F$101,944.15 (one hundred and one thousand nine hundred forty four dollars and fifteen
cents). This debt is in respect of purchase of two buses whose registration numbers are CV608 and CV609.
The Company was served with a Notice under section 221 of the Companies Act Cap. 247 claiming the said sum but it has failed to pay same. The Petitioner says that the Company is insolvent and unable to pay
its debts. It says that in the circumstances it is just and equitable that the Company should be wound up.
On 5 July 1996 the Company through its director JALE PESI SILIMAIBAU filed an Affidavit in opposition to the Petition.
The Petitioner in reply filed an affidavit by TAKASHI UNI, a Company Director, formerly with the Company, sworn and filed on 19 July
1996.
These are the two affidavits on which I am required to decide the issue before me. The hearing took place on 9 December 1996 and both
counsel made oral submission followed by written submissions.
Company's submission
The Company denies that it is indebted to the Petitioner. It says that it was the Petitioner which is supposed to have paid the amount
"being part of their contribution for joining" the Company.
Mr. Raza submits that there are sufficient triable issues raised and in such a situation it is 'undesirable' for the Court to decide
on affidavit evidence alone. He says that the dispute is based on substantial grounds.
Petitioner's submission
The Petitioner submits that the Company had through the said SILIMAIBAU in the affidavit and annexures filed by him admitted that
the total paid up equity of the Company was $420,000.00 comprising of $300,000.00 local contribution and $120,000.00 foreign.
The local shareholder was the said JALE SILIMAIBAU and foreign shareholder was the said TAKASHI UNI. Mr. Maharaj asks how can the
Company claim that the foreign shareholder was to contribute $300,000.00 which is directly in contravention of the approval of Fiji
Trade and Investment Board.
Mr. Maharaj submits that it was a "$2.00 company" with each shareholder holding one dollar share each. Hence no question of payment of customs duty of $38,461.93 being payable by
the said UNI arises. He asks "how could a foreign shareholder holding (1) one dollar share in the company be expected to contribute $300,000" into the Company; and "this would be contrary to the approval granted by FTIB".
It is further argued by Mr. Maharaj that if the foreign shareholder had really contributed by two buses worth well over $100,000 would
be relinquish his shares in the Company on payment of $1.00. He says that the dispute between the two shareholders has nothing to
do with payment for both the buses.
Mr. Maharaj said that exhibit 'A' (to affidavit of Takashi Uni filed 19 July 1996) which is a letter written by the Secretary of the
Company is a sufficient admission of debt and then the Company is asking for time to pay for the two buses. In annexure "B"
(to the affidavit of UNI) the said SILIMAIBAU, the Managing Director of the Company, undertakes to pay seven million yen being the
balance outstanding for the two buses.
Mr. Maharaj submits that there are no triable issues and the purported triable issues claimed by the Company are issues "fabricated"
by the Company with no supporting documentary evidence.
Consideration of the issue
Now to the consideration of the issue.
Upon a careful consideration of the affidavit evidence before me and the submissions made by both counsel it is abundantly clear that
there is no dispute on substantial grounds on the claim made by the Petitioner against the Company.
It is clear that the debt which the said SILIMAIBAU as the Managing Director of the Company is denying has actually been admitted
by him as the debt owed by the Company and further he has asked for time to pay as evidenced by said annexures 'A' and 'B' referred
to hereabove.
There are other aspects of this matter which have been touched upon by both counsel and I have referred to some of them hereabove.
It will be sufficient for me to say that I accept the submissions of Mr. Maharaj in regard to debt and reject those put forward by
Mr. Raza in that connection. I find that there are no triable issues at all.
There is the general principle that a petition for winding up with a view to enforcing payment of a disputed debt is an abuse of the
process of the Court and should be dismissed with costs. (PALMER'S COMPANY LAW Vol 3,15.214 and cases cited therein).
In PALMER'S (ibid) is set out the principles involved in considering disputes as to debt and I have borne these in mind in considering the matter
before me. There it is stated:
"To fall within the general principle the dispute must be bona fide in both a subjective and an objective sense. Thus the reason for
not paying the debt must be honestly believed to exist and must be based on substantial or reasonable grounds. "Substantial"
means having substance and not frivolous, which disputes the court should ignore. There must be so much doubt and question about
the liability to pay the debt that the court sees that there is a question to be decided. The onus is on the company "to bring
forward a prima facie case which satisfies the court that there is something which ought to be tried either before the court itself
or in an action, or by some other proceedings."
Bearing in mind the above principles I hold that the alleged dispute is based on trivial and unsubstantial grounds. The Petitioner
has satisfied the Court that it is a creditor to which the amount claimed is owed. To be able to succeed in the opposition proceedings
the Company has to satisfy the Court, as HARMAN J put it in IN re a Company (No 001946 of 1991) ex.p. FIN SOFT HOLDING SA (1991) BCLC 737 at 740 when he said that there were not two tests but simply one which is: 'Is there a substantial dispute as to the debt upon which the petition is allegedly founded?' Hence, it was held that where there is such a dispute then the bona fides of the Company in disputing the debt is simply irrelevant.
Also if there is a dispute the Petitioner would clearly not satisfy the requirement of being a creditor for the purposes of the winding
up proceedings.
Where a dispute is on substantial grounds turning on disputed questions of fact which require viva voce evidence, but which I find
is not the situation here, the dispute cannot be decided on Petition and one would bear the following passage from the judgment of
MEGARRY J in IN re LYMPNE INVESTMENTS LTD (No. 00250 of 1971) 1972 1 WLR 532 at 527 in mind:
"Nor is it right, or in accordance with the modern practice, to stand over the petition in order that the disputed issues may
be resolved in other proceedings. That practice, I may say, seems to stem from In re London and Paris Banking Corporation (1874)
[1874] UKLawRpEq 171; L.R. 19 Eq. 444. The Companies Court must not be used as a debt- collecting agency, nor as a means of bringing improper pressure to bear on a company.
The effects on a company of the presentation of a winding up petition against it are such that it would be wrong to allow the machinery
designed for such petitions to be used as a means of resolving disputes which ought to be settled in ordinary litigation, or to be
kept in suspense over the company's head while that litigation is fought out. Further, Mann v. Goldstein [1968] 1 W.L.R. 1091, cited with approval in the New Zealand Court of Appeal in Bateman Television Ltd. v. Coleridge Finance Co. Ltd. [1969] N.Z.L.R. 794, provides authority for saying that when a petition is based on a debt which is disputed on substantial grounds, the petitioner is
not a "creditor" within section 224(1) of the Act of 1948 who has the locus standi requisite for the presentation of the
petition, even if the company is in fact insolvent."
In the outcome, for the above reasons the Company fails in its opposition to the Petition.
The Petitioner is therefore at liberty to proceed to wind up the company by proceeding with its Petition as required by the Companies Act.
The Company is ordered to pay the costs of the opposition proceedings which is to be taxed unless agreed.
D. Pathik
Judge
At Suva
6 March 1997
Hbe0040j.96s
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