IN THE MATTER of
South Pacific Agriculture Development Limited
AND:
IN THE MATTER of the Companies Act, 1983
Mr. M. Raza for the Petitioner
Mr. G. O'Driscoll for the Company
JUDGMENT
This is a Petition to wind up SOUTH PACIFIC AGRICULTURE DEVELOPMENT LIMITED (the 'Company') by YOUNG TAE KIM (the 'petitioner') in respect of debt alleged to be due to the petitioner in the sum of F$96,687.00 which is equivalent to 50,000.00 Korean Won.
Background facts
The Petition was filed on 8 May 1997. Upon motion ex parte made on 14 May 1997 an interim order was made restraining the petitioner
from advertising the winding up until the hearing and determination of this action or until further order of this Court. On 17 September
by motion the petitioner applied for the dissolution of the interlocutory injunction.
A number of orders were made for filing of affidavits and replies thereto both in respect of the dissolution and in respect of opposition
to the winding up.
The matter therefore ended up as an opposed winding up and was heard in open Court. As ordered, both counsel filed written submissions
for my consideration.
The issues
The issues for Court's determination as agreed before the hearing are:
1. Is the agreement between the parties enforceable?
2. If enforceable is Petitioner compelled to purchase the land or is he entitled to a refund?
3. If not enforceable is Petitioner entitled to refund?
Petitioner's contention
All of petitioner's arguments are contained in the written submissions of Mr Raza. However, I will briefly outline them.
Sometime in January 1996 the company and the petitioner entered into an oral agreement for the petitioner to purchase certain land
in Fiji (the 'property') belonging to the Company for an agreed price 60,000.00 Korean Won. The petitioner came to Fiji in June 1996 and decided not to proceed with the purchase of the property as no subdivision was done
to enable the petitioner to obtain his title. Also he alleges that there were no basic amenities such as water and electricity 'to enable the petitioner to start a new life in the promised land'. On 20 February by a letter in writing the company agreed to refund the said sum of 50,000.00 Won but no such refund has been made
despite numerous attempts by the petitioner to do so.
The petitioner avers that any dealings between the parties is void by virtue of s.6(1) of Land Sales Act Cap. 137 which provides, inter alia, as follows:
No non-resident or any person acting as his agent shall without the prior consent in writing of the Minister responsible for land matters make any contract to purchase or take on lease any land: Provided that nothing contained
in this subsection shall operate to require such consent or prevent a non-resident from making any such contract if the land together
with any other land in Fiji of such non-resident does not exceed in the aggregate an area of one acre. (emphasis mine)
In support of the argument based on the said s.6, Mr Raza has referred the Court to the case of Thomas D Hunter & Pearleen Hunter v Francis Joseph Apgar and Dorothy Olita Apgar (High Court of Suva, Civ. Action No. 923 of 1986, judgment 15.9.89) (a judgment of Palmer J) which Mr Raza says 'resembles the present matter in most material particulars'. He also referred the Court to Isaac J's judgment in George v Greater Adelaide Land Development Company Limited. [1929] HCA 40; (43 C.L.R. 91 at 101).
Mr Raza submits that the entire agreement is unlawful, null and void ab initio and therefore a winding up order should be made immediately.
Company's submissions
Like the petitioner I have before me the company's counsel's written submissions.
The company contends that the title in respect of the property was in the process of being issued. But goes on to say that as required
by law the petitioner refused to sign the application form for consent to transfer. Hence it says that the petitioner should be precluded
from taking advantage of any "illegality" when he himself refused to sign the application. The company disputes the illegality
and states that the 'petitioner has prevented the ministerial consent from being granted by refusing to sign the necessary application form'.
Counsel says that on the above facts it is clear that the 'claim for moneys is disputed in good faith by the company'. He says that in such a situation 'the Court usually adjourns the Petition to enable the question to be decided in an action' (Hals. 4th Ed. para 1004).
On the question of refund the company states that:
However the letter in which the company agreed to refund the money states quite clearly that the company was willing to refund the
money, without admission of liability and in order not to have any dealings with the Petitioner and on the condition that he apologised
in writing and in person for his defamation of the Managing Director of the company. A satisfactory apology was not made by the Petitioner.
Determination of the issues
It is agreed that (a) the said sum of 55,000.00 won (about F$96,687.00) was paid by the petitioner to the company for the purchase
of 3.24 acres which equals 1.3069 hectares of land in Vanua Levu pursuant to an oral agreement with the company in April, 1996, (b)
the petitioner was a Korean citizen at the time of payment for which a receipt as acknowledgment, was given by the company and (c)
that no consent was obtained from the Minister for the petitioner to purchase the said land.
It is a 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." (Re Great Britain Mutual Life Assurance Society [1880] UKLawRpCh 276; (1880) 16 Ch.D 246, 253, per Jessel M.R.).
As Harman J said in IN re a Company (No. 001946 of 1991) ex p. Fin Soft Holding SA (1991) BCLC 737 at 740 that there are not two tests but simply one which is: 'Is there a substantial dispute as to the debt upon which the petition is allegedly founded?'
It is in the discretion of Court 'to decline to hear the petition where the debt is contested on substantial grounds' (Offshore Oil N.L. v Investment Corporation of Fiji Limited (Civ. App. 29/84, 84/415 F.C.A. - Barker J.A at 15).
On the evidence before me I find that the company had in actual fact agreed to refund the said sum but had not done so because it
says that the petitioner had not apologised to the company's Managing Director. That does not constitute a dispute in the context
of a winding up petition. For the company to succeed in these opposition proceedings there has to be a dispute on substantial grounds
as stated in the principles pertaining to it (Re Lympne Investments Ltd. 1972 2 All E.R. 385).
There is no evidence that steps had been taken by the company to obtain Title to the property apart from merely stating that it was
in the process of doing so. In any case I fail to understand how it could even proceed to the issuing of title when the oral agreement
is illegal under the Land Sales Act in the absence of application for consent. Mr Raza had referred the Court to the case of Hunter (supra). There Palmer J dealt with the application of s6 of the Act at some length and I accept his treatment of this section and apply it to the case before
me. A very similar situation as here arose in Hunter.
Palmer J at p8 said:
The Land Sales Act, as already noticed, aims directly at the non-resident. It provides a mechanism to ensure that a non-resident cannot obtain any enforceable
right in relation to land until, right at the outset, the Minister has had the opportunity of prohibiting any such transaction or imposing terms and conditions
for his consent to the same.
He goes on to say (at p12):
It must be steadily borne in mind that Section 6 in the present case prohibits the making of the contract not the transaction, as is the case of Section 12 of the Native Land Trust Board Act. (emphasis mine).
He says that in relation to section 12 of NLTB Act "it is a prohibition of the performance of a contract not against the making of the contract as in section 6."
A similar situation arose in the case of George v Greater Adelaide Land Development Company Ltd. [1929] HCA 40; (1929 43 CLR 91). The following passage from the judgment of Starke J at 103 is apt:
"The question therefore is whether a sale subject to the terms of the Act being complied with is in contravention of the Act.
Murray C.J. in the Court below held that it was not, but consideration has led me to the conclusion that this decision cannot be
supported. The principle is undoubted that a transaction expressly or impliedly forbidden by statute is unlawful. The Town and Planning and Development Act 1920 renders unlawful not only conveyances
and transfers of allotments, but also the acts of offering for sale or selling of such allotments. Selling, in the case of land includes
the making of agreements for its conveyance in consideration of the price in money; and this is so whether the agreement be absolute
or conditional, for a conditional agreement for the sale of land is none the less a sale of land, and therefore a selling of it.
Once this point is reached, the case becomes clear, for the Act prohibits the mere making of the agreement, and making the agreement
'subject to the provisions' of the Act 'being complied with' cannot save it."
In this case although there was a verbal agreement, the fact that section 6 prohibits the making of the contract and not the transfer
which is prohibited does not save the day for the company. The consent has to be obtained prior to the making of the contract. Here
there was no such consent for whatever reason. Even if any consent is given after the agreement, it will I consider be ultra vires
and of no effect.
A very interesting passing comment and observation has been made by Palmer J at p18 on Application for Consent form under the Act. Bearing in mind the issues for my determination I ought to set it out here which is as follows:
This might on the face of it be taken as suggesting that some agreement is indeed appropriate and valid before application for consent
is made to the Minister. However, I am of the view that the making of the agreement being absolutely prohibited without the prior
consent of the Minister by the Act itself, that absolute prohibition cannot be set aside by the side wind of something contained
in a form approved by the Minister. The minister is as much bound by the statute as is anyone else. The statute must prevail. In
my view that form in its present state is a nullity and of no effect as being contrary to the Act, at least in paras 12 and 13. The
Minister may wish to reconsider the design of such an application form in the light of this judgment.
On the interpretation and effect of s6, Palmer J (at p19) concluded by saying as follows with which I agree because it is pertinent for the purposes of this case:
The whole purpose of the legislation is to ensure that no contract is made without first giving the Minister the opportunity of permitting
or prohibiting it and in the former case of imposing conditions upon it.
For these reasons the answer to the issues before me is that the purported oral agreement to purchase the property is unlawful and
of no effect and unenforceable. The petitioner is therefore entitled to the refund of the amount claimed.
In any case the company had agreed to refund but it had failed to do so. The condition attached to agreeing to refund will hold no
water for by analogy in IN re Tweeds Garages Ltd 1962 1 Ch. 40 at 408 where the company admitted the existence of a debt to the petitioner but disputed the amount of the debt alleged in the petition,
it was held that:
"the only qualification required of the Petitioner was that it was a creditor; and that, where there was no doubt that the petitioner
was a creditor for a sum which would otherwise entitle it to a winding-up Order, a dispute as to the precise sum owed was not a sufficient
answer to the petition".
Similarly, here I hold that there is no dispute on substantial grounds and that the petitioner is a creditor which entitles him to
present the petition.
The correct test in approaching these matters is as Harman J said in Cornhill Insurance Plc v Improvement Services Ltd & ors (1986) 1 W.L.R. 114 quoting from Ungoed - Thomas J in Mann v Goldstein (1968) 1 WLR 1091 at 1096 where he said:-
"When the creditor's debt is clearly established it seems to me to follow that this court would not, in general at any rate,
interfere even though the company would appear to be solvent, for the creditor would as such be entitled to present a petition and
the debtor would have his own remedy in paying the undisputed debt which he should pay. So, to persist in non-payment of the debt
in such circumstances would itself either suggest inability to pay or that the application was an application that the court should
give the debtor relief which it itself could provide, but would not provide, by paying the debt."
In this case I find that although the company says it is solvent it has chosen not to pay the debt, and the following words of Harman J in Cornhill (supra) apply to this case also:
"In my view in such circumstances the creditor was entitled to (a) threaten to and (b) in fact if it chose to present a winding
up petition, ....."
In conclusion, for these reasons, the Court cannot restrain the petitioner from presenting his petition. Therefore the company's opposition
to the petition to wind up fails and the petitioner is at liberty to proceed with the petition. The company is ordered to pay the
costs of the hearing which I fix at $150.
D Pathik
JUDGE
At Suva
9 July 1999
Hbe0084j.97s
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