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Patel v Anand [2022] FJHC 231; HBE 2 of 2017 (13 May 2022)

In the High Court of Fiji

At Labasa

Civil Action No: HBE 2 of 2017

In the matter of Nadi Motor Parts Limited

Seruwaia Tagi Patel and Rajeshna Dusara

Petitioners

And

Deo Anand

Respondent

Counsel: Mr A Kohli with Ms S Nair for the petitioners

Ms Vreetika for the respondent

Date of hearing: 12^th May, 2022

Date of Ruling: 13^th May, 2022

Ruling

1. In these proceedings, the petitioners filed an application for winding up of Nadi Motor Parts Limited, (the company). On 20^th April, 2018, the Order for winding up was granted. On 13th March, 2019, the Order was stayed by consent. The Consent Orders entered on that day provided that the company property, Crown Lease No 11185, Lot 4, DP 263 was to be sold and the sale proceeds distributed between the parties on the terms stipulated therein.
   
2. In this inter partes summons filed on 4^th May,2021, the respondent seeks that:
   1. leave be granted to the solicitors for the Respondent to release and distribute to the parties the sale proceeds of the property ...
   2. the sale proceeds to be distributed between the parties as follows:
      1. The sum of $464,753.66 ... to the Petitioners.
      2. The sum of $428,775.47... to the Respondent.
   3. the sum of $115,596.33 (One Hundred Fifteen Thousand Five Hundred Ninety Six Dollars and thirty Three Cents) being the Value Added Tax as assessed by Fiji Revenue and Customs Services be retained in the Trust Account of the Respondent’s solicitors until determination of this application.
   4. there be an order that the sum of $115,596.33 (One Hundred Fifteen Thousand Five Hundred Ninety Six Dollar and Thirty Three Cents) being the Value Added Tax as assessed by the Fiji Revenue and Customs Services be paid equally from the sale proceeds by both the parties.
   5. there be costs in favour of the Respondent on client/solicitor indemnity basis.

The application is made in terms of section 10 (a) of the Trust Accounts Act 1996.

3. On 12^th May, 2021, consent orders were entered with respect to the distribution of the sale proceeds.
   
4. The matter in dispute is the payment of the Value Added Tax,(VAT) assessed by Fiji Revenue and Customs Services in a sum of $115,596.33, as stated in paragraphs iii and iv of the summons.
   
5. The respondent states that both parties are required to pay the VAT. The Consent Orders do not exempt the petitioners from payment of VAT.
   
6. The petitioners state that the payment of VAT is the respondent’s responsibility. The VAT amount cannot be deducted from their share. The Consent Orders provide that they are entitled to half the proceeds of the sale price after deduction of the Capital Gains Tax and the sum of $250,000.00 owed to Westpac.
   
7. Ms Vreetika, counsel for the respondent contended that VAT is charged on the assets of the company. The sale price is reached after VAT is deducted. She relied on her written submissions and the authorities cited therein.
   
8. In my view, the authorities cited have no application to the present matter. The parties agreed expressly to the manner of distribution of the sale proceeds and the deductions to be made.
   
9. The relevant Consent Orders read as follows:
   
   7. Upon sale of the property the Petitioners shall be entitled to half of sale price after deduction of any Capital Gains Tax and moneys owing to Westpac Banking Corporation Limited not exceeding $250,000.00.
   8. ..
   9. Any debt of the company other than the debt owed to Westpac Bank be paid from the shares of the Respondent. ...
   10. The Respondent shall be liable for all taxes due to Fiji Revenue Customs Services and shall pay the same from his shares of the proceeds of sale.(emphasis added)
       
10. In my view, paragraph j) is clear and unambiguous. It explicitly provides that the respondent is liable for all taxes and “shall” pay the same from his share of the proceeds of sale. As Mr Kohli, counsel for the petitioners submitted the words are couched in mandatory terms.
    
11. Paragraph g) sets out the two deductions to be made, viz, capital gains tax and moneys owed to Westpac, not exceeding $250,000.00. Any debt of the company other than that owed to Westpac is to be paid from the respondent’s share in terms of paragraph i).
    
12. I conclude that the respondent is liable to pay the VAT.
    
13. Orders
    • (a) I decline the relief sought in prayers 3), 4) and 5) of the respondent’s inter partes summons filed on 4^th May, 2021.
    • (b) The respondent shall pay the petitioners costs summarily assessed in a sum of $ 1000 within 15 days of this Ruling.
      

A.L.B.Brito-Mutunayagam
Judge
13^th May, 2022