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In the matter of Bligh Water Shipping Ltd [2012] FJHC 1194; HBE098.2011 (3 July 2012)

IN THE HIGH COURT OF FIJI
AT SUVA
COMPANIES JURISDICTION

Companies (Winding Up) No. HBE 98 of 2011

IN THE MATTER of BLIGH WATER SHIPPING LIMITED

AND

IN THE MATTER of THE COMPANIES ACT (CAP 247)

BEFORE: Master Deepthi Amaratunga

COUNSEL: Mr. Jon L. Apted for the Petitioner
Ms. Mary L.: Muir for the Respondent

Date of Hearing: 02^ND April, 2012
Date of Decision: 03^RD July, 2012

DECISION

A. INTRODUCTION

1. The Petitioner has filed this action for winding up of the Respondent company for the failure to honour its invoices for the services it rendered. The Respondent company has individually accepted invoices to the value NZD$68,672.96 out of the alleged debt of NZD$93,528. The Respondent's only dispute is regarding the balance of the debt and now it tries to expand that to the entire debt. The Respondent in the affidavit in opposition again admits that only a part of the alleged debt is disputed. The undisputed amount is evident from its own letter dated 14th November, 2011 where it has individually accepted invoices amounting NZD$68,672.96 out of all the unpaid invoices aggregating NZD$93,528. The Respondent should pay, the undisputed and admitted sum of NZD$68,672.96, in order to dispute the remaining debt in this action. The Respondent is estopped from denying this amount NZD$68,672.96 as it has not only admitted this amount but also paid $10,000 after the petition was filed presumably out of the undisputed sum, unconditionally. The dispute stated in the affidavit in opposition is without merit and a devise to delay the payment of already admitted debt to the Petitioner. The affidavit in opposition also indicated that the Respondent is in financial difficulties, substantiating the petitioner's contention for winding up. The opposition to winding up is 'sham' and even contain legally and or factually incorrect averments, and it can be considered as an abuse of process to delay the substantial debt that has already admitted and estopped from denying it. In the circumstances I grant the order for winding up of the Respondent and also grant the cost for the Petitioner on indemnity basis.

B. FACTS AND ANALYSIS

2. The Petitioner Company based in New Zealand provided to Bligh Water Shipping Limited engineering services for its vessels between August 2010 and August 2011. According to the invoices of the Petitioner the total value of those services provided was NZD$93,528.

3. A notice under section 221 of the Companies Act was served on the Company on 31 October 2011 for the said value, the notice expired Monday 21 November 2011, and on 20th December, 2011 the Respondent paid $10,000 and prior to this the Plaintiff has admitted the debt amounting to NZD$68,672.96 and also proposed a payment plan if that can be accepted.

4. By letter dated 14 November 2011 the Respondent acknowledged a debt owing to the Petitioner but disputed the part of the said amount and stated 'While we agree that there is an amount outstanding to NZ Turbo Charger, the amount is disputed. Please see attached spread sheet in regard to the summaries of the disputes.'

5. It acknowledged a debt of NZD$68,672.96 and indicated that a payment plan would be submitted.That payment plan was not forthcoming and when the notice for winding up was served the Respondent paid $10,000.

6. That same letter of 14 November 2011 gave notice that the Respondent was not paying the full account because the Respondent said that Petitioner had assembled the pats wrongly during service in particular parts known as a Roots blower (air blower) and Fludex couplings, and for this alleged wrong service the Respondent has refused to pay the full amount and rejected certain invoices and a sum of $68,672.96 is admitted and also proposed to submit a payment plan.

7. By letter dated 21 November 2011, the Company was advised the actions to wind up the Company would continue unless that amount of NZ$68,672.96 was paid without prejudice for the right to recover the disputed amount.

8. By letter dated 28 November 2011, the Respondent offered to settle the matter on receipt of an insurance pay out and stated

'Upon receipt of insurance payout $30,000 FJD upfront payment with $10,000 monthly installments until full settlement of the account. I realize this payment plan may add to NZ Turbo's frustrations however, it is all the company can afford during this very difficult period.' (emphasis added).

9. The Company never responded to that advice or raised any claim that Respondent had not carried out the repairs satisfactorily before the winding up notice was served. From the correspondence between the parties it is evident much water has gone under the bridge, before this action was filed as a last resort to recover the debt.

10. It is to be noted that the letter of 14 November 2011, the Respondent acknowledged the debt but disputed the amount as it had issues with four invoices. While disputing the said four invoices the Respondent did acknowledge a debt of NZ$68,672.96. The letter of 28th November, 2011 was sent and in that letter the Respondent accepted the payment of the full amount and submitted a payment plan. This is what can be deduced from the letter of 28th November, 2011 written by the Respondent to the Petitioner, where it had not disputed the amount stated in the winding up notice.

11. There is correspondence from Petitioner to the Respondent constantly from February 2011 until November 2011 seeking payment of the outstanding invoices and an email from Mr. George Niumataiwalu dated Tuesday, 12 April 2011 in which Mr. Niumataiwalu advised that he was completing a refinancing proposal for the Company and proposing payment schedule. Mr. Niumataiwalu acknowledged Petitioner had been very patient with the Respondent and has indicated future partnership with the 'refinanced Respondent', indicating that the quality of the services Petitioner had provided was never an issue and even to the disputed amount there was no refusal to pay and only letter that sought reduction of the amount to NZ$68,672.96 was the letter of 14th November, 2011.

12. By email dated 2 September 2011 Mr. Lepper advised Mr. Baerselman that he was doing everything possible, there was "one big mess", 'three years of poor management" and described Bligh Water Shipping as a "very sick Company". He even confirms Petitioner's patience and generosity extended to the Respondent in respect of payment of the outstanding invoices. The same email referred to the fact that the ships themselves were also in need of urgent repair due to neglect and lack of maintenance. There is no mention of any improper or wrong service till this was raised by letter of 14th November, 2011 after the winding up notice is served and in the same letter NZ$68,672.96 was admitted. If a service of the Petitioner was not done properly that has to be raised immediately after the service, but I need not go the issue of disputed sum as if the undisputed sum was paid this winding up action would not have been continued by the Petitioner as it had indicted this to the Respondent by its letter of 21st November, 2011. There is no bona fide dispute as to the debt of the Petitioner.

13. The test to determine whether or not a debt is disputed was stated in Palmers Company Law Vol. 13. It was quoted in In re Comsol Fiji Ltd [2009] FJHC 77; HBE 0048.2007L (25 March 2009) as follows:

"To fall within the general principle the dispute must be bona filed in both a subjective and an objective sense. Thus the reason for non paying the debt must be honestly believed to exist and must be based on substantial of 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 pay the debt that the court sees that there is a question to be decided". [emphasis added]

14. The letter dated 14th November, 2011 acknowledged that the Company was liable to pay $68,672.96. What is being dispute is not the existence of the debt but the amount and that is again not mentioned in its letter dated 28th November, 2011 where it submitted even a payment plan upon a receipt of some insurance claim to the Respondent.

15. In the matter of Shoeworld (Fiji) Limited – Winding Up Action No. HBE 47 of 2007, Master JJ Udit stated as regards to admission of part of the debt as follows:

"The issue for determination is a relatively short, and perhaps is answered by a decision of His Lordship Plowman in Tweeds Garages Limited, 1961 CHD 406. At page 414 His Lordship said: "In my judgment where there is no doubt (and there is none here) that the petitioner is a creditor of a sum which would otherwise entitle him to a winding –up order the precise sum which is owed to him is not of itself a sufficient to the petition".

[6] What is necessary is for the purpose of opposing a winding up petition is that the debt must be bone fide disputed. At page 413 His Lordship said; "...moreover it seems to me that it would in many cases be quite unjust to refuse a winding – up to a Petitioner who is admittedly owed monies which have not been paid merely because there is a dispute as to the precise amount owning". What this necessarily entails is that where a debt is owed by a Company and it admits only some of it, it ought to pay that portion and contest the balance. On the other hand, the Petitioner is entitled to wind –up the Company only on the admitted amount which remains unpaid. This was stated by Harman J. in Cornhill Insurance PLC – v – Improvement Services Limited & others 1986 1 WLR 114 at pg. 4 where his Lordship said that the following:-

"That appears to me to be sound reason and sound law. I re-enforce it by reference to a decision in Re a Company 1950 (94) SOL J 369 Visey J in the matter in which counsel of the utmost distinction in Chancery at that time both leading and junior counsel appeared said that where a Company was well known and wealthy it was the more likely the delay in settlement of its obligation would create suspicion of its financial embarrassment." "Rich man and rich companies which did not pay their debts had only themselves to blame if it were thought that they could not pay them."

16. Master H A Robinson in In the Matter of Gounder Investment Ltd [2010] FJHC 432; Winding Up Action No. 110 of 2009 (20 September 2010) [applying Re Tweeds Garages Limited [1962] 1 Ch 4073] stated:

"Proper functioning companies have a paper trail generated from within identifying ever sale or purchase and providing the particulars in a section 221 notice does more to proving that a company cannot pay its debt than a general statement like those referred to above. It is important to consider this point because even if the quantum is wrong but the particulars are right, the Court may still make an order. That is, a dispute as to the amount of indebtedness to a petitioning creditor but not the existence of the indebtedness is sufficient to entitle the petitioner to a winding up order." [Emphasis added]

C. CONCLUSION

17. The Respondent in their affidavit in opposition filed on 8th March, 2012 at paragraph 5 had admitted a portion of the Debt and stated

'5. The Respondent also disputes a portion of the debt claimed by the Petitioner in respect of the parts whose servicing was faulty'. (emphasis added).

The disputed invoices are clearly mentioned in its annexed to the letter dated 14th November, 2012 as a 'spread sheet' and stated

'Please see attached spread sheet in regards to the summarises of the dispute.'

The 'spread sheet' indicated the invoice numbers and details of the said invoices and whether the Respondent admit or reject the said invoices individually and indicated the total outstanding, as per Petitioner separately as NZD$93,528 and after the deductions of the disputed invoices the debt as per the Respondent is mentioned as $68,672.96 the present dispute beyond this is nothing but a sham. The Respondent in its affidavit in opposition is conflicting its position and averments from paragraph 25 to 48 are supporting the Petitioner's position and indicate the financial predicament of theirs indicting certain options for payment, which is not the scope of this court in a winding up action. The threatened action for damages against the Petitioner is again without any merits as there is no communication of such a course of action though in paragraph 15 to 17 for the first time in this winding up has even included alleged damage quantified and included the amounts in the affidavit in opposition. These allegations cannot attach any weight in support of a boa fide dispute of the amounts in the proper analysis of the evidence before me as the Respondent has accepted a debt of $68,672.96 after the notice of winding up dated 31st October, 2011 was served. It has also by a letter dated 28th November, 2011 has submitted a payment plan contingent of an insurance pay out and after the service of the winding up petition has paid $10,000 without a query indicating that the rest of the undisputed debt is not paid and outstanding. The Petitioner by its letter dated 21st November, 2011 requested to pay the undisputed amount immediately. Respondent has alleged certain things in the affidavit in opposition which are even legally incorrect and for an example I refer to paragraph 46 of the affidavit in opposition which is a legally wrong contention and I need not say more on that as I have concluded that there is no bona fide dispute. There is more than one communication that admitted the debt of the Petitioner and the Respondent is estopped from deviating from that position merely to delay the process of winding up. The Respondent has objected to the winding up without the payment of the amount it had admitted and even on the affidavit in opposition it had indicated that only a part of the alleged debt is disputed. The opposition to this winding up is without merit and I am inclined to grant indemnity cost for this action for the Petitioner considering the repeated admissions by the Respondent and it is a trite law that if only a part of debt is disputed the undisputed part has to be paid in order to prevent any winding up action. The Respondent has abused the process in order to delay a substantial payment and this is substantiated by their affidavit in opposition which supports their dire need for cash, which would to some extent be facilitated by any deferment of a substantial payment of this nature. In the circumstances I allow the winding up petition and order the winding up of the Respondent and also grant the cost to the Petitioner on indemnity basis.

D. FINAL ORDERS

1. Winding up of the Respondent Company is granted
2. The Respondent is ordered to pay the Petitioner cost on indemnity basis.
   

Dated at Suva this 03rd day of July, 2012.

.................................................
Master Deepthi Amaratunga
High Court, Suva