IN THE HIGH COURT OF FIJI
IN THE WESTERN DIVISION
AT LAUTOKA

CIVIL JURISDICTION

COMPANIES ACTION NO. : HBM 26 OF 2018

IN THE MATTER of a Statutory Demand dated 7th August 2018 taken out by SSS INVESTMENT CO (“the Respondent” against CHINA OVERSEAS CONSTRUCTION PTE LIMITED (“the Applicant”) and served on the Applicant on 7th August, 2018).

AND

IN THE MATTER setting an application by the Applicant for an Order aside the Statutory Demand pursuant to Section 516 of the Companies Act.

BETWEEN

CHINA OVERSEAS CONSTRUCTION PTE LTD a duly registered limited having its registered office at Ratu Mara Road, Samabula.

APPLICANT

A N D

SSS INVESTMENT CO a duly registered limited liability company having its registered office at Mulomulo, Nadi.

RESPONDENT

Appearances	:	Mr Nemani Vakacakau for the applicant
			Mr Isoa Tikoca for the respondent

Hearing	:	Wednesday, 30th October, 2019

Decision	:	Wednesday, 22nd April, 2020

D E CI S I O N

[A]	INTRODUCTION

(01)	On the 07th August, 2018 the  respondent served on the applicant a statutory demand 
under Section 515 of the Companies’ Act, 2015, requiring it to pay an alleged debt in the sum of of $142,081.11 for services provided to the applicant by the  respondent from 01-09-2017 to 29-10-2017.

(02)	On the 28th August, 2018 and within the 21 day limit under Section 516(2) of the Act, the 
applicant filed an application together with an affidavit in support seeking the setting aside of the statutory demand served on it.

[B]	THE LAW

(1)	Under Section 515(a) of the Companies’ Act, 2015, a Company mustbe deemed unable to 
pay its debts

(a)	If a creditor, by assignment or otherwise, to whom the Company is 
indebted in a sum exceeding $10,000.00 or such other prescribed amount then due, has served on the company, by leaving it at the registered office of the Company, a demand requiring the Company to pay the sum so due (Statutory Demand) and the Company has, not paid the sum or secured or compounded for it to the reasonable satisfaction of the Creditor within 3 weeks of the date of the Notice.

(b)	……………………………………………………………………………..

(i)

(ii)

(2)	An application under Section 516 to set aside a statutory demand must be made on one or 
more of the following grounds;

(i)	That there is a genuine dispute between the Company and the respondent about the existence or amount of a debt to which the demand relates; [Section 517 (a)].

(ii)	That the Company has an offsetting claim. [Section 517(b)].

(iii)	That because of a defect in the demand, substantial injustice will be caused unless the demand is set aside. [Section 517(5)(a)]

or

(iv)	There is some other reason why the demand should be set aside. [Section 517(5)(b)].

(3)	An order setting aside the demand will render the demand of no effect. [Section 518].

[C]	CONSIDERATION AND THE DETERMINATION

(01)	The applicant is a duly registered limited liability construction company having its 
registered office at Ratu Mara Road, Samabula, Suva.

(02)	The respondent carries out a hire of machinery and general excavation business at 
Mulomulo, Nadi.

(03)	In June, 2017 the applicant began construction work of a hotel at ‘Wailoaloa Beach, 
Nadi’on DP 7066, Lot 2, on an area of wetland.

(04)	The applicant says that in order to  construct foundation on the wetland, the mud and the 
waste had to be removed and to be replaced with proper soil.  Therefore, the applicant has contracted the respondent to carry out general excavation works at the pool site.

(05)	That being the case, the applicant had entered into two separate agreements with the 
respondent.

(06)	On the 07th August, 2018 the applicant had entered into a ‘soil transportation agreement’ 
with the respondent.  (Annexure AA-02, referred to in the affidavit of Xu Yang, sworn on 28-08-2018).

(07)	In accordance with the contract for soil transportation, the respondent commenced work 
at the SGV Hotel site on 18-08-2017 and completed work around 25-11-2017.

(08)	On 13th August, 2017 the applicant entered into an agreement for ‘lease of machinery’ 
with the respondent.  (Annexure AA-03, referred to in the affidavit of Xu Yang sworn on 28-08-2018).

(09)	Under the agreement for lease of machinery, the respondent (the lessor – Party B) agreed 	
to lease machinery to the applicant lessee – Party A (one digger) from 10-08-2017 till further notice from the rate of FJ$ 545 per day.

(10)	It is critical to note clause (4) of the agreement for lease of machinery which provides;

4.	Payment

	4.1	“Account settlement shall be done on monthly basis.  Party B shall 
release the invoice (VIP and VAT amount to be settled) with a value equal to the amount stated in the advice of settlement which has been confirmed with signature from both parties.  Party A shall pay Party B within two weeks after receiving the invoice.  At the same time when payment has been made party B shall release corresponding receipt to party A.

			4.2	If Party A is required by law to make any deduction or withholding 
for tax from any sum payable by it pursuant to this agreement then the amount of the payment due from Party A shall be reduced by the amount required by law.”

(11)	It is also critical to note clause 6 of the agreement which provides;

6.		Dispute	

Any dispute arising from the performance of this contract shall be settled through consultation by both parties.  If it cannot be solved by negotiation, the dispute shall be brought to Nadi Arbitration Court for final settlement.

(12)	It is also important to note the payment clause in the Contract for soil transportation 
which is in these terms;

•		No advance payment shall be given by the Party A for work.
•		Progress payment; Party B shall make payment application to Party A 
every month.  After Party A’s approval of the application, Party B shall release corresponding Tax Invoice (The invoice shall include VAT amount and VIP amount and other essential elements) based on appraise value to Party A.  85% of the approved value shall be paid by the Party A to Party B.  Party B shall provide receipts to Party A immediately after receipt of the payment from Party A.  Party A shall pay the approved amount to Party B within two weeks after receiving the invoice, no extra charge or interest shall apply during foresaid two weeks period.	
•	Settlement payment. After the work has been finished and related settlement procedures have been gone through, Party A shall pay remaining balance of the total approved value to Party B.  Party B shall release corresponding Tax Invoice (The invoice shall include VAT amount and VIP amount and other essential elements) based on the remaining balance of the settlement to Party A.  Party B shall also provide receipts to Party A immediately after receipt of the payment from Party A.  Party A shall pay the remaining balance of the settlement to Party B within two weeks after receiving the invoice, no extra charge or interest shall apply during foresaid two weeks period.  
•	If Party A is required by law to make any deduction, or withholding for tax from any sum payable by it pursuant to this Contract, then the amount of the payment due from Party A shall be reduced by the amount required by law.

(13)	The applicant says that the total amount to be paid to the respondent under the two 
contracts was $605,809.12.  The applicant further says that it had paid the respondent a total of $502,760.42 before the dispute arose and the amount remaining to be paid to the respondent is $103,048.70.

(14)	The dispute arose when the respondent served the registered office of the applicant a 
statutory demand for the amount of $142,081.11.  The applicant says that the amount remaining to be paid was $103,048.70.

(15)	On 24-08-2018, the applicant has paid the respondent $103,048.70 less the 5% 
withholding tax (Total of $98,521.70).  The applicant says that no other monies is owed to the respondent.

(16)	The issue lies at the total invoiced sum under the two contracts.  The applicant says that 
the total invoiced sum issued under the two contracts for the period 25-09-2017 to 24-08-2018 was $605,809.12 [inclusive provisional tax to FRCS].  The respondent disputes and says it was $621,746.12.

(17)	The primary argument for the applicant in seeking to set aside the statutory demand is 
that there is a genuine dispute to the debt.

(18)	The applicant disputes the total amount of invoices listed in the respondent’s annexure 
SB-4.

As I understand the argument of the applicant, it says that some invoices listed in the respondent’s annexure SB-4 is not in accordance with clause 5 of the soil transportation agreement and clause 4 of the agreement for lease of machinery. The applicant says that both parties have to approve the payment invoice.  The invoices only become due once both parties agree on the value of the invoices – approved progress payment.

(19)	The applicant argues that under both agreements an advice of settlement form is prepared 
monthly for the work carried out.  Both parties check the settlement statement for each of the works carried out and once satisfied, a Director and a Manager each from each party signs off on the statement and an invoice is issued out against the applicant for payment. (See paragraph 12 of the affidavit of Xu Yang sworn on 28-08-2018).

(20)	The respondent disputes this and says; (Reference is made to paragraph 9 of the affidavit 
of Safwan Begg sworn on 09-10-2018.)

(*)	Under the soil transportation agreement, payments are to be made via 
approved progress payment.

		(*)	Under the agreement for lease of machinery, payments are to be made on 
presentation of an invoice co-signed by both parties.

(21)	Furthermore, the applicant says that there are genuine inconsistence in computation of 
accounts because the following invoices do not show on the respondents records;

	Invoice Numbers -	0257
				0261
				0213
				0284
				0094
				0230
				0234

[See paragraph 9 of the supplementary affidavit of Xu Lei sworn on 02-08-2019].

(22)	The respondent denies and says as follows in paragraph 08 of the affidavit in reply of
Safwan Begg sworn on 18-09-2019.

	8.	That as to paragraph 9, I deny its contents thereof and say that there are no 
inconsistencies in the invoices which the respondent had provided to the applicant.  I further say that invoice No. 0213 was replaced by Invoice No. 0147 and Invoice No. 0094 was replaced by Invoice No. 0284 due to errors in the description of the each invoice respectively………………..

(23)	The applicant argues that some invoices contained in annexure SB-4 referred to in the 
affidavit in reply of Safwan Begg sworn on 09-10-2018 do not contain the approved signature of both parties under the two agreements.

(24)	Apart from the errors in the invoices and in the calculations, what is critical to note is that 
the respondent is not certain as to how much the applicant owes it.

In paragraph 17 of the affidavit in reply of Safwan Begg sworn on 09-10-2018 the respondent says that the applicant owes $43,726.41.

In paragraph (9) of the affidavit in reply of Safwan Begg sworn on 18-09-2019 the respondent says; “I am advised and verily believe that the applicant still owes the respondent a substantial debt in the sum of approximately $11,979.00…………”	

(25)	Therefore, I am satisfied that there is a genuine dispute to the debt which requires 
investigation.

I do not think that the Applicant’s disputations are “hypothetical, illusory or misconceived”.

(26)	I remind myself that I ought not to engage in any form of balancing exercise between the 
strength of competing contention or even to determine the merits of the dispute.  It is sufficient if I find there to exist a genuine dispute.

In MNWA Pty Ltd v Deputy Commissioner of Taxation 

The Commissioner has rights and duties in relation to the recovery of taxation liabilities of taxpayers, including those available under Pt 5.4 of the Corporations Act.  But, that does not mean that he is free to resort to those despite having promised, or made representations to, or entered into an arrangement with, a taxpayer that he would proceed differently, as a result of which the taxpayer altered his, her or its position.  The question of whether a contract or an 

arrangement was made and, if so, on what terms or whether the Commissioner, in fact, acted “in good faith” in accordance with cl 5.3 in the three deeds or for an improper purpose or unconscientiously, in my opinion, was one that, in the circumstances, could only be resolved in other substantive proceedings and not in the applications under s459G. 

[Emphasis mine]

(27)	It is important to remember that the threshold criteria for establishing the existence of a 
genuine dispute to the debt is a low one.

In Fitness First Australia Pty Ltd v Dubow, the Court dealt with an application under section 459G of the Corporations Act 2001 (Cth) which is identical in terms to section 516 of our Companies Act 2015.  Ward J stated at [6]:

…..the court does not determine the merits of any dispute that may be found to exist, but simply whether these [sic is such a dispute and the threshold for that is not high.  In Edge Technology Pty Ltd v Lite-on Technology Corporation [2000] NSWSC 471; (2000) 34 ACSR 301, Barrett J said at [45]):

The threshold presented by the test to set aside a statutory demand does not however require of the plaintiff a rigorous and in-depth examination of the evidence relating to the plaintiff’s claim, dispute or offsetting claim…..Hayne J in Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] Vic Rp 61; [1994] 2 VR 290.

In Eyota Pty Ltd v Hanave Pty Ltd, McLelland CJ explained that “genuine dispute” means:

….a  plausible contention requiring investigation, and raises much of the same sort of considerations as the “serious question to be tried” criterion which arises on an application for an introductory injunction or for the extension or removal of a caveat.  This does not mean that the court must accept uncritically as giving rise to genuine dispute, every statement in an affidavit “however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be not having “sufficient prima facie plausibility to merit further investigation as to its [truth]” (cfEng Me Young v Letchumanan [1980] AC 331 at 341], or “a patently feeble legal argument or an assertion of fact unsupported by evidence”: cfSouth Australia v Wall(1980) 24 SASR 189 at 194.

But it does mean that, except in such an extreme case[i.e. where evidence is so lacking in plausibility], a court required to determine whether there is a genuine dispute should not embark upon an enquiry as to the credit of a witness or a deponent whose evidence is relied on as giving rise to the dispute. There is a clear difference between, on the one hand, determining whether there is a genuine dispute and, on the other hand, determining the merits of, or resolving, such a dispute…..  In Re Morris Catering Australia it was said the essential task is relatively simple – to identify the genuine level of a claim….

In Fitness First (supra) at 127, Ward J cited Panel Tech Industries (Australia) Pty Ltd v Australian Skyreach Equipment Pty Ltd (N.2) saying:

Barret J noted that the task faced by a company challenging a statutory demand on genuine dispute grounds is by no means a difficult or demanding one – a company will fail in its task only if the contentions upon which (sic) seeks to rely in mounting the challenge are so devoid of substance that no further investigation is warranted.  The court does not engage in any form of balancing exercise between the strengths of competing contention.  If there is any factor that on reasonable grounds indicates an arguable case it must find a genuine dispute exists even where the case available to be argued against the company seems stronger.

								[Emphasis mine]

	And later, at 132:

A genuine dispute is therefore one which is bona fide and truly exists in fact and that is not spurious, hypothetical, illusory or misconceived.  It exists where there is a plausible contention which places the debt in dispute and which requires further investigation.  The debt in dispute must be in existence at the time at which the statutory demand is served on the debtor (Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd [1997] FCA 681; (1997) 76 FCR 452; Eyota).

[D]	ORDERS

(01)	The respondent’s statutory demand dated 07th August, 2018 is set aside.

(02)	The respondent to pay the costs of the application to the applicant which is summarily 
assessed in the sum of $1500.00.

(03)	The costs to be paid within 07 days from the date of the decision.

………………………
Jude Nanayakkara
[Judge]

At Lautoka
Friday, 22nd April,  2020