Home | Databases | WorldLII | Search | Feedback High Court of Fiji

Sun Insurance Company Ltd v Tower Insurance (Fiji) Ltd [2005] FJHC 397; HBE0451D.2004S (28 October 2005)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

CIVIL ACTION NO. HBE0451D OF 2004S

BETWEEN:

SUN INSURANCE COMPANY LIMITED
a limited liability company duly incorporated in Fiji and
having its registered office at 1st Floor, Burns Philip
Building, Rodwell Road, Suva.
PLAINTIFF

AND:

TOWER INSURANCE (FIJI) LIMITED
a duly Incorporated company having its registered office
At Thompson Street, Suva.
DEFENDANT

Counsel for the Plaintiff: Ms S.S. Devan: G.P. Lala & Assoc.
Counsel for the Defendant: V. Maharaj: A.K. Lawyers

Date of Decision: 28 October, 2005
Time of Decision: 9.30 a.m.

DECISION

On 20 October, 2004 I granted an Order restraining the Defendant from proceeding to Wind-up the Plaintiff Company for an alleged debt of $15,066.63, which sum was clearly disputed by the latter. The Order was obtained by way of an ex-parte application. The Court ordered that the documents be served on the Defendants within 7 days and the matter adjourned to 28 October, 2004.

The Defendant is represented by A.K. Lawyers, operating out of Ba, and its Suva City agents is the firm of O’Driscoll & Seruvatu. On 28 October, 2004, the city agents appearing on instructions of the Defendant’s Counsel, and in opposing the continuation of the Order, argued that the Plaintiff did not have a genuine dispute and was liable to pay for the amount owed. Leave was given to the Defendant to file affidavit in reply and the Plaintiff had 7 days thence to respond if necessary. The matter was adjourned to 11 November, 2004 for arguments. However, the Court was advised by a letter dated 2 November, 2004 from the Solicitors for the Defendant, that Counsel would not be available on the 11 November for arguments and a new date was fixed for the hearing, namely 24 November, 2004.

At the hearing on 24 November, the Defendant was again not represented by its Counsel nor by the city agents, but by Mr Vijay Maharaj of Maharaj and Chandra. Both Counsel merely referred to and relied on, their submissions after which the Court adjourned for decision on Notice.

The Law on Injunction in Winding-Up Proceedings

It is trite that the Court has jurisdiction to restrain by injunction a person claiming to be a creditor of a company from presenting a petition to Wind-up the Company, where the debt is bona fide disputed, and the Company is solvent (see: Cercle Restaurant Castiglione Company v. Lavery (1881) 18 Ch. 555). Further, in In re A Company [1894] UKLawRpCh 61; [1894] 2 Ch 349, Vaughan Williams J said, at p. 351:

“In my judgment, if I am satisfied that a petition is not presented in good faith and for the legitimate purpose of obtaining a winding-up order, but for other purposes, such as putting pressure on the Company, I ought to stop it if its continuance is likely to cause damage to the Company.”

Moreover, the Court in In re A Company, also recognised the inherent jurisdiction of the Court in the situation described by Vaughan Williams J above, to prevent such an abuse of process,

“ ... and will do so, without requiring an action to be commenced, by restraining the advertisement of the petition, and staying all proceedings upon it.”

On the other hand the Court recognises the right to petition the Court for a winding-up order in appropriate circumstances is a right conferred by statute. The jurisdiction of the Court to stay or restrain the commencement of such proceedings should therefore be exercised with great care. As Buckley L J noted in Brynston Finance v. de Vries (No. 2) [1976] 1 Ch, 63, at p. 78.

“It has long been recognised that the jurisdiction of the Court to stay an action in limine as an abuse of process is a jurisdiction to be exercised with great circumspection and exactly the same consideration must apply to a quia timet injunction to restrain commencement of proceedings. These principles are, in my opinion, just as applicable to winding-up petition as to an action. The right to petition the Court for a winding-up order in appropriate circumstances is a right conferred by statute. A would-be petitioner should not be restrained from exercising it except on clear and persuasive grounds.”

In this case, the evidence produced before me by the Plaintiff in support of its application to restrain the advertisement of the petition show that there is a bona fide dispute as to the amount of debt owed to the Defendant. The Defendant had issued its demand notice pursuant to section 221 of the Companies Act threatening possible winding-up action if the Plaintiff failed to pay the sum of $15,066.63 within 21 days. According to the Plaintiff the Defendant had gone ahead with the statutory demand notice to be followed automatically with petition for winding-up, without any further “discussions” with them. The Plaintiff is a big and reputable insurance company with operations throughout the country, and has the financial capability to pay its debts. The possible issue and advertisement of an application to Wind-up the Company would have caused irreparable damage to its reputation. It is upon these considerations that the Court granted the Plaintiff’s application for injunction. In the Court’s view, these factors constituted persuasive grounds for restraining the Defendant from exercising its right to petition.

The Court equally recognises the right of the Plaintiff to make an application of injunction before the issuance of the writ or originating summons. This, including the terms under which the Court may act as provided under Order 29 rule 3 of the High Court Rules. There is however some variance in the winding-up petition, where the petitioner remains the prime mover of the action. The Court in In re A Company (supra) recognised this saying that it may, in certain circumstances, where it is clear that the petition is presented for other purposes such as putting pressure on the Company, prevent it “without requiring an action to be commenced.”

Defendant’s Arguments

The affidavit in reply by one Paul Absell, General Manager of the Defendant Company, sets out in greater details the financial arrangement and agreement between the parties.

There was, according to Mr Absell, a very clear understanding that the Plaintiff will meet half of the fees and costs of the forensic investigation into a fire that totally destroyed the factory (Kanvan Papers). This is confirmed by the Plaintiff’s letter dated 3 August 2004 annexed to his affidavit.

Differences between the parties arose following the delivery of the invoices of the two Companies that had carried out the investigation work. The total costs of F$30,133.26, according to the Plaintiff, was way beyond the sum of F$13,000 mentioned by the Defendants. Mr Absell for the Defendant, said that he mentioned the sum of NZ$13,000.00 in his discussion with the Plaintiff, but had qualified it by adding that the amount was what the Defendant had paid for a fire of a much smaller scale than the Kanvan Papers factory.

The Defendants further argued that in any case, the Plaintiff has acknowledged that it owes a debt of at least $7,000.00 which sum it has not paid, and under the circumstances, its section 221 Notice was in order. The fact that the Plaintiff disputes the balance of the debt, the Defendant submits, should not prevent the petitioning creditor from winding-up action. The Defendant referred to Re: Julins Harper Ltd ex p Winkler & Co. (Hong Kong) Ltd. [1983] NZLR 215 and Re: Tweeds Garage Ltd. [1962] 1 All ER 121 to support this proposition.

The Defendant also submitted that the Plaintiff had failed to fully disclose all the material facts before the Court in its ex-parte application. It specifically referred to the failure of the Plaintiff to show the Court of the existence of the agreement to share half of the costs of the forensic investigation with the Defendant. Also, the Plaintiff through Mr Thomas Naua’s affidavit in support of its ex parte application, had informed the Court that the Defendant had proceeded to section 221 Notice, “without any further discussions on the cost issue”, when clearly there had been several exchanges of correspondence on the issue between the parties. In both instances, the Defendant contends, the Plaintiff’s affidavit in support of the application was, in the words of Viscount Reading C J in R v. Kensington Income Tax Commissioners, Princess Edmond de Polignac. Ex parte [1917] 1 KB 486, at 496:

“ ... not candid and did not fairly state the facts, but stated them in such a way as to mislead the Court as to the true facts ...”

Under such circumstances, the Court ought,

“ ... for its own protection and to prevent and abuse of its process to refuse to proceed any further with the examination of the merits.”

Evaluation

In an injunction application, especially where it is made ex parte, it is the duty of the applicant to disclose all materials relevant to the matter before the Court. Lord Cozens-Hardy M.R. in R v. Kensington Income Tax Commissioners (Supra) quoting from Daglish v. Jarvie [1850] EngR 688; 2 Mac. & G. 231, at p. 504 said:

“It is the duty of a party asking for an injunction to bring under notice of the Court all facts material to the determination of his right to the injunction; and it is no excuse for him to say that he was not aware of the importance of any facts which he had omitted to bring forward.”

The fact that a material fact is not in favour of the applicant’s cause, is irrelevant. The applicant has to show good faith and frankness, uberrima fides. The requirements from a party applying for ex parte Order from the Court is summarised by Isaacs J in Thomas Edison Limited v. Bullock [1912] HCA 72; (1912) 15 CLR 679 at p. 682:

“Uberrima fides is required and the party inducing the Court to act in the absence of the other party, fails in his obligation unless he supplies the place of the absent party to the extent of bringing forward all the material facts which the parties would presumably have brought forward in his defence to the application. Unless that is done, the implied condition upon which the Court acts in forming its judgment is unfulfilled and the order so obtained must almost invariably fall.”

Lord Cottenham L.C. in Brown v. Newell [1837] EngR 791; 2 My. & C. 558, at p. 571 stated that:

“The Court can have no ground upon which it can proceed, in granting an ex parte injunction, but a faithful statement of the case.”

The Court in Newell also pointed out the distinction between mis-statement, or suppression of facts likely to influence the Court in acceding to the applications, and that which is not material to the matter before it.

In the present instance, the Plaintiff’s letter of 3 August 2004 and the exchanges of correspondence between the parties on the fees and costs of the forensic investigation are most material. In the case of the former, it is a categorical undertaking, without conditions, on the part of the Plaintiff to meet “50% cost sharing of the Final Bill of the Forensic Investigation Report.” In the case of the latter, the exchange of correspondence showed that the Plaintiff had on various occasions offered its views and a compromise on the shared costs.

The Court is satisfied that these facts were not only material, but also that the Plaintiff failed to disclose them in its affidavit supporting its ex parte application before the Court on 21 November 2004. It could very well be that the omission of the material facts was due to inadvertency or even forgetfulness on the part of the Plaintiff. This however is not sufficient an excuse from the obligation to disclose.

I now turn to the debt in question. The principles governing disputes as to debt is set out by Pathik J in In the Matter of Silimaibau Sunset Express (Fiji) Ltd, Winding-Up Action No. 0040.1996. At page 4, quoting from Palmers Company Law Vol. 3, he said:

“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 dispute the Court should ignore. There must be so much doubt and the question of 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.”

There is no denying that the Plaintiff in this case is indebted to the Defendant. This much the Plaintiff has acknowledged. There is however dispute as to quantum. In In re Tweeds Garages Ltd. [1962] 1 Ch. 406, the Court held that,

“ . . . the only qualification required of the petitioner was that it was a creditor; and that, 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.”

I might however add that in that case, the company was clearly insolvent. It is not so in this instance. However the question of what precisely is the sum owed by the Plaintiff is not, the Court believes, an issue. The Plaintiff owes the Defendant half or 50% of the fees and costs of the forensic reports undertaken by the experts. The undertaking by the Plaintiff to pay half of the fees and costs, as conveyed in its letter of 3^rd August 2004 was, as the Court had observed above, without any qualification. The letter simply stated that:

“ ... we confirm our agreement for 50% costs sharing on the Final Bill of the Forensic Investigation Report.

We look forward to receipt of the completed report with interest.”

There is no reference to the estimated total costs of the exercise. No sum or figure is mentioned. For the Plaintiff to now claim that there had been an estimated costs agreed to by the parties orally on a previous occasion, is simply inadmissible. As far as this Court is concerned, the Plaintiff’s letter agreeing to paying 50% of the Report on the fine was an open-ended undertaking to meet its share of the costs whatever it may be. If the intention was to set a ceiling to the costs, then it would have been necessary for the Plaintiff to specify the details in its letter. As it is, the Court can only interpret the terms and the intention of the parties from the plain and unambiguous meaning of letter confirming the agreement of 3 August, 2004. The Plaintiff has failed to discharge the onus of proving to the Court that there exists a prima facie case which ought to be tried.

Finally, the Defendant submitted that the injunction should be dissolved as the principles governing interim relief as set out in American Cyanamid & Co. v. Ethicon Ltd. [1975] UKHL 1; [1975] AC 396 could not be met. Given the Court’s views above, it agrees that the first requirement namely, that a serious issue arises, does not exist. There is no serious issue to be tried which would require the Court to maintain the status quo.

Findings

For reasons explained above, the Court finds as follows:

(1) That there was non-disclosure by the Plaintiff of material facts in its ex parte application.

(2) There is proof of debt in the sum claimed by the Defendant and owing by the Plaintiff, and the Plaintiff has failed to establish a prima facie case of a dispute as to the debt.

(3) The Plaintiff has failed to establish that a serious issue arises to convince it the Court to continue with the injunction.

Result

It is ordered that the injunction obtained from this Court on 20 October, 2004 be and is hereby dissolved.

I award costs of $350.00 to the Defendants.

F. Jitoko
JUDGE

At Suva
28 October 2005