| Fiji Islands - In re SB Holdings Limited - Pacific Law Materials |
IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION
WINDING UP ACTION NO. 2 OF 1999
AND
IN THE MATTER OF COMPANIES ACT, 1983p>
Mr N. Arjun for the Petitioner
Mr V Kapadia for the Company
JUDGMENT
This is a Petition by Credit Corporation (Fiji) Limited (the "petitioner") to wind up S.B. Holdings Limited (the "Company") pursuant to the provisions of section 220 of the Companies Act Cap. 247 (the "Act").
This is an opposed petition. I heard the petition on 14 June 1999. Both parties filed written submissions.
The petitioner alleges that the Company owes it the sum of $225,630.13 being the instalment due and owing under Asset Purchase Agreement dated 18 October 1995. A statutory demand dated 14 October 1998
was served on the Company; memorandum of Due Compliance was filed 22 February 1999.
On 10 March 1999 the Company stated that it opposes the petition and sought leave to file affidavit in opposition which was granted.
An affidavit opposing was filed on 17 March and a reply thereto was filed on 13 April.
The Company's Contention
The Company says that it disputes the claim and its solicitors sought "full accounts" from the date of agreement by letter
dated 6 November 1998. It says that the petitioner 'failed to follow the normal course of obtaining a judgment'. It says that "the debt owing according to its records is the sum of $157,310.00" but it says it has a counterclaim of $385,000.00.
The Petitioner's Contention
The petitioner says that the Company was on 10 November 1998 at its request given time to repay the outstanding debts 'on certain'
terms and conditions as contained in its letter of 10 November. On 16 February 1999 the petitioner's solicitors wrote to Sherani
& Co stating inter alia, that the Company is in arrears for a substantial amount of money and have not paid any instalment for
quite some time. It suggested that the company pay $100,000.00 at least to enable it to seriously consider consenting to an adjournment.
The petitioner deposes that the Company is unable to pay its debts; that there is no dispute over the accounts and that the company
is merely "seeking" to stall for time and avoid paying its just and overdue debts.
It is submitted by Mr Arjun that in the Company's financial statements for year ending 31 December 1997 the indebtedness of $566,715
is acknowledged. As at 16 October 1998 when the winding up notice was served the arrears stood at $255,630.13.
The Petitioner denies that it is indebted to the Company in the sum of $385,000 by way of counterclaim or any sum at all. It denies
dismantling the crusher plant as alleged. It denies having received letter dated 25 June 1998 from the Company, the Company failed
to comply with the conditions on which it was allowed to remove the crusher from Labasa to Taveuni. It denies that it waived the
winding up Notice at any time.
Mr Arjun submits that the Company has no intention of paying its just and due debts but instead is advancing money to other companies
in which the same managing director Mr Bashir Khan holds and controls a substantial shareholding which is reflected in the Company's
financial statements for year ending 31 December 1997.
Determination of the issue
The issue for Court's determination is whether there is a 'substantial' dispute as to the alleged debt after considering the matters
raised in opposition by Mr Kapadia to prevent the making of a winding up order against the Company.
The petition is presented under s220 of the Act which provides, inter alia, that "a company may be wound up by the court, if ... (e) the Company is unable to pay its debts; (f) the Court is of opinion that it is
just and equitable that the company should be wound up; ......"
The term "inability to pay debts" is defined by s221 of the Act inter alia as follows:
"221. A company shall be deemed to be unable to pay its debts -
(a) if a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding $100 then due has served on the
company, by leaving it at the registered office of the company, a demand under his hand requiring the company to pay the sum so due
and the company has, for 3 weeks thereafter, neglected to pay the sum or to secure or compound for it to the reasonable satisfaction
of the creditor; or
(b) ..........
(c) .........."
It is Mr Arjun's assertion that the said debt has not been paid despite the statutory demand and despite time having been given to
pay under certain terms and conditions. That this is so is clear from the affidavit evidence before me. The Company however admits
owing $157,310.00 but then it says it has a counterclaim of $385,000. The allegation of counterclaim will be of no avail to the company
and in support of that proposition I rely and adopt what was held in In re Tweeds Garage Ltd. 1962 1 Ch 407 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 (and there
was none here) 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". (emphasis added).
The Company says that the debt alleged is disputed but not in the full amount but in a substantial sum. To be able to succeed in a
case of this nature, the Company has to prove that the dispute is on 'substantial grounds' (Re Lympne Investments Ltd 1972 2 All ER 385). In Offshore Oil N.L. v Investment Corporation of Fiji Limited (Civ App. 29/84 F.C.A. Reported 84/415 Barker J.A. said:
"The law is clear that there is a discretion in a Court seized of a winding-up petition, to decline to hear the petition where
the debt is contested on substantial grounds."
On the evidence before me I find that there is no bona fide dispute on substantial grounds bearing in mind what I have already stated
hereabove.
In Bateman Television Limited (In Liquidation) and Another v Coleridge Finance Company Limited 1971 NZLR p.929 Judicial Committee, it was held:
"3. The general rule is that an order for winding-up will not be made on disputed debt but a Judge has discretion to make a winding
up order on disputed debts which is not reviewable unless exercised on a wrong principle or the Judge included or omitted consideration
of a relevant fact or was wholly wrong".
This petition is brought on the ground that the company is "unable to pay its debt". I find that that is the situation here.
Even after admitting owing the bulk of the amount claimed it has not made payment of that sum. It is the creditor who has to prove
the negative, that negative being that the company cannot pay its debt. By analogy the following passage from the headnote to the
case of In re Globe New Patent Iron and Steel Company [1875] UKLawRpEq 129; (1875) LR 20 Eq 337 is apt to cover the situation in this case:
"A company bought goods, giving in part payment its acceptance, which was dishonoured on presentation, and continued unpaid:
and the vendor presented a petition for winding up the company:-
Held, that the dishonour of the bill was proof to the satisfaction of the Court under sect. 80, sub-sect. 4 of the Companies Act,
1862, that the company was unable to pay its debts, although the Petitioner had not served a demand requiring payment under sub-sect.
1."
Similarly, in Cornhill Insurance Plc v Imprisonment Services Ltd. and Others (1986 1 W.L.R. 114) it was held as follows allowing the petitioner to present a petition:
"Held, refusing the application, that where a company was under an undisputed obligation to pay a specific sum and failed to
do so, it could be inferred that it was unable to do so; that, accordingly, defendants could properly swear to their belief in the
plaintiff company's insolvency and present a petition for its winding up."
The company in this case has admitted a substantial portion of the claim and although it says it is solvent it has chosen not to pay the debt and hence in the words of Harman J in Cornhill (supra):
"in such circumstances the creditor was entitled to (a) threaten to and (b) in fact if it chose to present a winding up petition, ...."
To conclude, for the aforesaid reasons, this petition must succeed. There is no bona fide dispute on substantial grounds permitting
the court to restrain the petitioner from proceeding with the petition.
I therefore make an order that the petitioner be at liberty to proceed to wind up the company with costs which is to be taxed unless
agreed.
D Pathik
JUDGE
At Suva
9 July 1999
Hbe0002j.99s
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