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In re Pacific Fishing Company Ltd [2013] FJHC 336; HBE25.2013 (10 July 2013)

IN THE HIGH COURT OF FIJI
AT SUVA
COMPANIES JURISDICTION

Companies (Winding Up) No. HBE 25 of 2013

IN THE MATTER of PACIFIC FISHING COMPANY LIMITED a limited liability company having its registered office at Messers. Cromptons, Prouds Buildings, The Triangle, Suva.

AND

IN THE MATTER of THE COMPANIES ACT (CAP 247).

BEFORE: Justice Deepthi Amaratunga

COUNSEL: Mr. Naco A for the Petitioner
Mr. Nagin H for the Respondent.

Date of Hearing: 1st July, 2013
Date of Ruling: 10th July, 2013

RULING

1. INTRODUCTION
   

1. The purported petitioner of this winding up action is a trade union by the name of PAFCO Employee Union, but on the day of hearing neither the counsel nor any person on behalf of the Petitioner appeared in court and the petition was struck off. The Respondent's counsel sought indemnity costs stating that the PAFCO Employee Union was wrongly made a petitioner in the action and this was done by an ousted ex-secretary of the PAFCO Employee Union, against the wishes of the said Union. An affidavit in opposition for winding up was filed and upon the perusal of documents I was convinced that the winding up process was abused in order to meet the private ends. Since there was evident abuse of process and waste of time and money for the Respondent, I ordered indemnity costs and also assessed it to be FJD 3,000. The issue was whether it could be ordered against the Barrister and Solicitor who knowingly instigated the winding up action when there was already dispute as to the status of the person who had instructed him to file a winding up against the Respondent. In terms of the Order 62 rule 11 when the costs was unreasonably or improperly incurred, costs can be ordered against the lawyer personally.
   

2. FACTS AND ANALYSIS
   

2. The winding up petition was purportedly filed by PAFCO Employee Union, (the Union) but in fact it was filed by ex-secretary of the Union while there was a dispute as to his status in the Union (as to the post of secretary). The counsel as well as the client who was the ex-secretary was fully aware of the dispute and the settlement was reached by the Respondent with the Union. This was readily available to the counsel.
   
3. The solicitors for the Respondent had in its letter dated 22nd May, 2013 had stated as follows
   

'We refer to our (Nagin /Naco) telephone conversation of this afternoon and write to confirm that your will not advertise the winding up petition to allow us time to resolve this matter.

The issue relating to filing of the Petition on instructions of Mr. Tomasi Tokalauvure also raises a serious dispute as our instructions are that no moneys are outstanding by PAFCO to the Union and that Mr. Tokalauvere is no longer the General Secretary of the Union.'

4. Even prior to this on 5th March, 2013 immediately after the purported notice of Winding Up in terms of Section 221 of Companies Act was served the Respondent had indicated to the solicitor of the Petitioner, in no uncertain term that the alleged debt had already been settled between the Union and the Respondent and Mr. Tokalauvere was no longer the secretary of the Union and stated as follows
   

'Notice Under Section 221

Further to your letter dated 5.3.13 please be advised that the Memorandum of Agreement signed between the Union and the Company on 14th December, 2012 is in the custody of the Union executives as they had taken it upon themselves to have the MOA registered with the Ministry of Labour.

Note also that the Company has been duly advised by Union that during their Annual General Meeting held in Levuka on Friday 19th October, 2012, the members under the provisions of the Union Constitution decided by secret ballot to terminate the services of Mr. Tokalauvere with immediate effect and that"...Mr. Tokalauvere is not to act on behalf of the Union in any capacity whatsoever."

5. The said letter to the solicitor is annexed ET6 to the affidavit in opposition. No affidavit in reply was filed and thout, I have granted the solicitor to file and serve an affidavit for the determination on the issue of liability of the costs the solicitor had not done so, but tried to introduce some evidence through his submission in contravention of accepted norms of the Court. No evidential material can be annexed to submission and it will confine only to the evidence already available to the court at the hearing with supporting materials such as case law or statutes. The lawyer who appeared for the Petitioner had ample opportunity to submit any evidence if he needed. First, he could have filed an affidavit in reply to the affidavit in opposition filed by the Respondent. He not only refrained from doing so but also failed to appear at the hearing of the winding up! Secondly, I granted another opportunity to do so, but he failed to comply.
   
6. Considering the materials before me I was more than convinced that the petition was an abuse of the process by a frustrated ex-secretary who instituted this action being fully aware of the MOA between the Union and the Respondent, hence he was fully aware of his status as well as the settlement between the Union and Respondent. This fact would have come to the notice of the lawyer when he was instructed, but if not at least by 5th March 2013 he was fully informed of the status of his client as well as the settlement between the Union and Respondent, which was the basis of the alleged debt. So, as a prudent practitioner he would not have proceeded with the winding up, when the status of his client was fully informed as well as the MOA between the Union and the Respondent.
   
7. This is a clear abuse of process to meet private ends to a dispute by the Union and the ex-secretary who tried to stole a march on the present administration of the union and the lawyer had ample notice of this and also became a party of this dispute by filing this winding up proceeding in order to abuse the process on behalf of his client. The Winding Up petition was filed on 6th May, 2013 and at least by 5th March, 2013 the lawyer for the Petitioner was fully appraised of the status of his client as well as to the alleged debt.
   
8. Order 62 rule 11 of the High Court Rules of 1988 state as follows
   

'Personal liability of legal representative for costs (O.62.r11)

'11.(1) Subject to the following provisions of this rule, where it appears to the court that costs have been incurred unreasonably or improperly in any proceedings or have been wasted by failure to conduct proceedings with reasonable competence and expedition, the Court may-

(a) Order

1. The legal representative whom it considers to be responsible (whether personally or through a servant or agent) to repay to his client costs which the client has been ordered to pay to any other party to the proceedings; or
   
2. The legal representative personally to indemnify such other parties against costs payable by them; and
   
3. the costs as between the legal representative and his client be disallowed or
   

(b) direct a taxing officer to inquire into the matter and report to the Court, and upon receiving such a report the Court may make such order under sub-paragraph(a) as it thinks fit.

(2) .............

(3) ....

(4) ....

(5) The Court shall not be obliged to give the legal representative a reasonable opportunity to appear and show cause where proceedings fail, cannot conveniently proceed or are adjourned without useful progress being made because the legal representative-

(a) fails to attend in person or by a proper representative;

(b) fails to deliver any document for the use of court, which out to have been delivered or to be prepared with any proper evidence or account, or

(c) otherwise fails to proceed.

9. At the hearing of the Winding Up the lawyer for the Petitioner did not turn up, and the counsel for the Respondent had already filed and served an affidavit in opposition and he sought the matter to be struck off, subject to indemnity costs. I have perused the affidavit in opposition and the uncontroverted evidence before me that the winding up action was filed frivolously and or vexatiously and also an abuse of process and struck off the winding up and also granted costs on indemnity basis at $3,000 and notified the lawyer to appear to show cause as to why it should not be ordered against him. The counsel for the Respondent relied on the Order 62 rule 10 and requested the costs be ordered against Mr. Tokalauvere and not against the Petitioner, as the Union was not a part of this action for winding up.
   
10. When a client seeks legal advice from a practitioner it is his duty to instruct the client properly and not to be a rubber stamp of what the client seeks. The lawyer was given sufficient notice of the status of his client as well as to the alleged status of the debt and more specifically the MOA between the Union and the Respondent. In such a situation it is totally unreasonable to file a winding up petition on 6th May, 2013 when the Respondent had indicated its position as early as 5th March, 2013.
    
11. I have notified the lawyer and granted time to file a reply through an affidavit before I make an order, but the lawyer had again failed to file any affidavit. So, I granted him an opportunity to make oral submissions on 1st July, 2013 and when he could not do so I allowed him to file a written submission. In the written submissions the lawyer is trying to introduce new evidence which he failed to produce when the opportunity was given. Again he is trying to abuse the process, by annexing evidence to the written submission. I disregard such evidence produced through written submission.
    
12. The lawyer was not reasonable in filing the winding up petition against the Respondent knowing the status of his client. If the petitioner is a limited liability company the directors usually authorize another Director or Managing Director to instruct a solicitor to enter appearance. If not the articles and the necessary documents should be perused before the lawyer is satisfied that the person who gives instruction is exclusively given authority to do so on behalf of the entity (see De Reuter v The Morris Process Company (1895) 39 SJ 399; Laskey v Runtz (1908) 24 TLR 496. This responsibly is more when it is an unincorporated body where there was a dispute as to the status of the client, as in this case. Even if there was no dispute the lawyer should have been satisfied that his client, alone was empowered by the Union to institute legal action on behalf of the Union. This responsibility is more when the action is a winding up as it can have serious consequences on the Respondent if it was instituted frivolously as in this case. Even when the actual situation was informed by the Respondent as early as 5th March, 2013 the lawyer did not stall the winding up proceeding and proceeded further to file the winding up petition and also served it to the Respondent and they were compelled to obtain legal assistance and file an affidavit in opposition to the winding up, unreasonably. When the affidavit in opposition was filed by the Respondent no affidavit in reply was filed and the evidence produced by the Respondent is not controverted. The petitioner's lawyer did not appear at the hearing of the winding up. I have granted another opportunity for the lawyer to show cause by filing an affidavit and this was also neglected. In the circumstances the lawyer had ignored the vital issues. In my judgment the costs incurred to the Respondent had 'incurred unreasonably or improperly' the cost of $3,000 granted on the indemnity basis should be against the lawyer of the Petitioner to pay personally, in terms of Order 62 rule 11(1)(a)(ii).
    

Dated at Suva this 10th day of July, 2013.

Justice Deepthi Amaratunga
High Court, Suva