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ALSPEC Holdings Ltd v Ministry of Works, Transport and Public Utilities [2017] FJHC 187; HBC341.2011 (3 March 2017)

In the High Court of Fiji at Suva
Civil Jurisdiction

HBC 341 of 2011

ALSPEC Holdings Limited

Plaintiff

vs

Ministry of Works, Transport and Public Utilities

First defendant

And

The Attorney General of Fiji

Second defendant

COUNSEL : Mr G. O’Driscoll with Mr R Harper for the plaintiff

Ms O. Solimailagi for the defendants

Date of hearing : 17^th November,2016

Date of Ruling : 3^rd March,2017

Ruling

1. By summons filed on 22^nd September,2016, the plaintiff company, a company in liquidation seeks leave to proceed with this action under section 531 of the Companies Act.
   
2. A synopsis of the pleadings

1. The plaintiff had entered into an Agreement with the first defendant to construct the Natadola Reservoir, Voua Pump Station and Voua to Natadola pipeline for a sum of $ 8,181,605.25. The plaintiff claims that the defendants unlawfully terminated the agreement, as a result of which it has suffered damages in a sum of $1,924,469.78, being the value of the works less the amount received from the defendants.
2. The statement of defence states that the first defendants issued a written notice of default to the plaintiff, as it did not carry out its work and obligations under the Contract. The plaintiff was given 10 working days to complete or remedy the breaches prior to terminating the Contract. The plaintiff was paid for works carried out in accordance with the Contract.

100. The plaintiff, in its reply to defence stated that it was forced to renege under the Agreement, as a result of reports manufactured by the Consultants and the withholding of payments. The plaintiff strongly denies that the defendants issued any written notice of default.
     

The determination

3. The defendants oppose the application for leave to proceed.
   
4. In order to proceed with an action, a company in liquidation must follow a two tier process. Firstly, it must be obtain the liquidator’s consent. That has been done in the present case.
   
5. The second requirement is contained in section 531 of the Companies Act, 2015. This section provides that where a winding up order has been made or an interim liquidator appointed, “no action or proceeding must be proceeded with or commenced against the Company, except by leave of the Court..”.
   
6. In Khan v Official Receiver, [1999] 45 FLR 220 as cited by the defendants in their written submissions, Pathik J interpreted section 229 of the Companies Act,(cap247),the predecessor of section 531, as follows:

Where leave is sought to commence or continue proceedings by a company in liquidation as in this case there are two determining factors: one is the nature of the plaintiff’s claim and the other is the balance of convenience and the demands of justice.(emphasis added)

7. Lindley on Companies, (6^th Ed,Vol. 2) at page 908 as cited by the defendant states :

The only material question to be considered is whether there are any circumstances which render it necessary that the action should be continued, or whether the claim of the plaintiff is not one which can be easily dealt with in the winding up as in any other way..(emphasis added)

8. PALMERS’S COMPANY LAW, Vol 1,(24^th Ed 1987) states :

The court has a discretion and where the claim is disputed may regard it as more convenient that the action should proceed to resolve the matter. (emphasis added)

9. Halsbury, Laws of England(4^th Ed,) Vol 7 at para 1502 states:

The court has a discretion, and will not stay the action where there is a dispute as to the liability, but if the liability is admitted and there is a mere dispute as to the amount the matter should be determined in the liquidation. (emphasis added)

10. In Cook v ‘X’ Chair Patents Co. Ltd, [1960] 1 WLR 60 it was held that since there was a substantial dispute as to the amount of damages, as to which evidence and cross-examination might be required, it was not a case in which any good would be done or expense saved by staying the action.
    
11. The authorities I have cited establish that the court will not exercise its discretion to stay an action, where liability is disputed. The rationale for that proposition, in my view, is that a disputed claim has to be determined by court
    
12. In the present case, the Agreement entered into between the parties is not disputed. The question whether the agreement was unlawfully terminated by the first defendant and the plaintiff did not carry out its work and obligations under the Contract have to be established among the several other issues raised at the PTC.
    
13. The defendants contend that the plaintiff has to establish a prima facie case.
    
14. In support of that proposition, the defendants rely on a decision of the New South Wales Supreme Court, In the matter of Ozrac Engineering New South Wales Pty Limited (in liquidation), [2013] NSWSC 740 where Black J said that a company in liquidation:

In order to obtain leave to commence the proceedings..must establish, first, that it has a prima facie case in the sense that there is a real dispute about the parties; and show that there is a good reason why it is appropriate that it be permitted to commence proceedings, albeit in this case in parallel to rather than instead of the proof of debt process. (emphasis added)

15. In my view, the decision of the New South Wales Supreme Court reinforces that the court would grant leave when it is evident that the proof of debt process is inappropriate to determine “a prima facie case in the sense that there is a real dispute”, ie a contested dispute.
    
16. Anare J in Meat Cuisine Fiji Ltd v Carpenters Fiji Ltd,(Civil Action No .141/2011) citing In the matter of Ozrac Engineering New South Wales Pty Limited (in liquidation) and a passage from a commentary in Austin and Black’s Annotations to the Corporations Act,(para 5.471B) thus concluded that the court should grant leave, where a claim could not be proved in the proof of debt process.
    
17. Orders
    1. I grant leave to the plaintiff to proceed with this action.
    2. I make no order as to costs
       

A.L.B.Brito-Mutunayagam

Judge
3^rd March, 2017