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FMF Foods Ltd v Dayal [2024] FJHC 779; HBC293.2020 (18 September 2024)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION
CIVIL ACTION NO.: HBC 293 of 2020

BETWEEN : FMF FOODS LIMITED formerly known as FLOUR

MILLS OF FIJI LIMITED
PLAINTIFF

AND : JAY DAYAL, PRAKASH DAYAL and MANJULA

DAYAL
FIRST DEFENDANTS

: DAYAL (FIJI) ARTESIAN WATERS LIMITED

SECOND DEFENDANT (IN LIQUIDATION)

: THE OFFICIAL RECEIVER

THIRD DEFENDANT (NOMINAL)

APPEARANCES/REPRESENTATION
PLAINTIFFS : Mr. S. Fatiaki [Sherani & Co]
FIRST DEFENDANTS : Mr N. Kumar [Krishna & Co]
SECOND DEFENDANT : Wound Up by Court Order dated 12 June 2018
THIRD DEFENDANT : Ms G Nagilevu [Attorney-General’s Chamber]
RULING BY : Master Ms Vandhana Lal
DELIVERED ON : 18 September 2024

INTERLOCUTORY RULING

Application for determination

1. The First Defendants seeks that the Plaintiff’s reply to defence be struck out, as it raises new allegations and/or evidence contrary to the rules of the High Court, is an abuse of process of Court and causes prejudice to the First Defendant.
2. According to the First Defendants there will not be a fair trial as they are unable to reply to the “new allegations and/or facts evidences raise(d)”, as pleadings have closed.
   

A summary of the statement of claim

3. The First Defendants were shareholders and Directors of the Second Defendant Company. The First Defendants were the controlling mind of the Second Defendant Company.
   
4. On 11 June,2009, the Plaintiff filed a writ and statement of claim (HBC 157 of 2009) against the Second Defendant Company. The Master (on 28 July 2011) struck out the Second Defendant’s defence and entered judgment in favour of the Plaintiff.
   
5. On 16 August, 2013, the Second Defendant entered into a Sale and Purchase Agreement with W.R. Carpenters Ltd for the sale of all its assets for $4,850000.00.
   
6. On 14 October,2013, the Plaintiff obtained ex parte mareva injunction against the Second Defendant restraining the Second Defendant from disposing of its assets. The injunction was dissolved and proceeded to settlement with Carpenters.
   
7. On 15 May, 2014, the proceeds from the sale of the Second Defendant’s assets were fraudulently siphoned off to one of the First Defendants as shareholders under the guise of investing same as term deposits.
   
8. In May 2016 the First Defendant fraudulently attempted to voluntarily wind up the Second Defendant.
   
9. On 1^st November,2017, the Second Defendant entered into a consent judgment with the Plaintiff for $200,000, but failed to pay that sum.
   
10. On 12 June,2018, the Second Defendant Company was wound up on the application of a creditor.
    
11. It is alleged that the First Defendants been the controlling mind of the Second Defendant defrauded the Plaintiff and as a result the Plaintiff is not able to recover its judgment sum of $200,000.
    

The statement of defence

12. The statement of defence states that the Third Defendant cannot be a nominal party to the proceedings, as he is the liquidator of the Second Defendant, who is not a nominal party. The Third Defendant, by operation of law is requited to appear and enter an appearance and defend the claim against the Second Defendant. The assets of the Company were sold during the proceedings in HBC 157 of 2009.
    
13. The Plaintiff was never a creditor of the Second Defendant and no debt was crystallised. The Second Defendant determined the distribution of funds in its account. There was no liquidated debt payable. The Sale & Purchase Agreement took place prior to the consent judgment.
    

The Determination
Preliminary objection by the Official Receiver

14. The preliminary question that arises is whether this action can proceed against the Second Defendant as the Second Defendant Company was wound up prior to the commencement of the claim.
    
15. Section 531 of the Companies Act provides as follows:

When a winding up order has been made or an interim liquidator has been appointed under section 537, no action or proceeding must be proceeded with or commenced against the company, except by leave of the Court and subject to such terms as the Court may impose.

16. The Second Defendant was wound up on 12 June 2017. This action commenced on 08 October 2020. The leave of Court has not been obtained to commence this action.
    
17. As such, this action cannot proceed against the Second Defendant. The action against the Second and Third Defendants ought to be struck out as an abuse of court process.
    

Should the reply to defence filed on 22 December 2022 be struck out?

18. A reply to the defence is an answer to the defence. Practice is for the Plaintiff not to put forward in the reply a new cause of action which is not raised in the writ or statement of claim. But the may add a fact in his reply. This is not a departure (Breslauer v. Barwick (1877) 36 L.T. 52, 53 see also Collett v Dickinson [1878] W.N. 52 – The Supreme Court Practice, 1991 Edition at page 276 paragraph 18/3/2.
    
19. Though the reply to defence may not set up a new claim, it may explain and define the original claim. A reply is served to allege facts in answer to the defence which are not included in the claim.
    

Reply is served to clarify the issues in the case; it must not contradict or be inconsistent with the claim and it should not introduce new claims or causes of action within the reply.

20. Paragraph 7 of the reply by the Plaintiff is a reply to paragraph 18 of the defence which in turn is a reply to paragraph 18 of the claim. Hence whilst making a finding all three pleadings must be compared holistically.
    

1. Paragraph 7 (i) - the proceeds of sale (cash) from the Second Defendant’s assets in 2014 formed part of the Second Defendant’s assets;

21. The mention of proceed of sale does not raise any new claim and is not in contradiction with the claim. I agree with the Plaintiff that cash sale is an asset of a company. The objection is refused.
    

2. Paragraph 7(ii) and (iii) - the said proceeds of sale that were transferred one of the First Defendant under the guise of a loan invested in life insurance policies of one of the First Defendants on behalf of the Second Defendant and upon maturity of the purported investment in the life insurance policies, the said sum ought to have been returned to the Second Defendant of which the Plaintiff’s debt (which crystallised at time of maturity) should have been paid from;

22. The Plaintiff in paragraph 18 of the claim has alleged that proceed from the sale of the Second Defendant’s assets was siphoned to one of the First Defendants under guise of an investment.
    
23. The allegation regarding investing in life insurance and maturing of the same clarifies (according to the Plaintiff) what was done to the monies in an attempt to defraud the Plaintiff.
    
24. I do not find the two paragraphs to be contradicting the original claim or introducing any new claims. Hence the objections raised by the First Defendant is refused.
    

100. Paragraph 7 (v) - the monies received from the investment that were assigned to another creditor by the First and Second Defendants were so to defraud and escape payment of the said consent judgment sum to the Plaintiff’s. the said creditor to which monies were assigned to is a related company of the Second Defendant whose directors and shareholders are the First Defendants. The said creditor is Dayals Sawmillers PTE Limited:

25. On paragraph 18.18 of the defence, the First Defendants have mentioned that monies in investment were assigned to a creditor which was subsequently paid out to the creditors of the Second Defendant.
    
26. The Plaintiff by naming the creditor has not raised any new claim or is in

contradiction with the original claim. Hence the objection by the Frist Defendant is dismissed.

4. Paragraph 7(vi) - although being a separate entity from the Second Defendant, Westland Loggers initially share the same registered office and place of business with the Second Defendant at 1 Kings Road, Yalalevu, Ba;

27. On paragraph 18.5 of the defence, the First Defendants stated that Westland Logger is a separate entity from the Second Defendant and does not share: directors; shareholding; registered office and place of business.
    
28. On paragraph 18 of its statement claim, the Plaintiff has mentioned that the First Defendants used their kinship ties to the directors of Westland Loggers to fraudulently obtain a winding up order.
    
29. The statement in paragraph 7(vi) clarifies the Plaintiff’s allegation regarding the operation of Westland Loggers.
    
30. This is not a new claim or cause of action. Hence the objection raised by the First Defendant is refused.
    

5. Paragraph 8 - at all material times the Plaintiff has been diligent in the recovery of its debt from the Defendants and it is the Forst Defendant that have used the Second Defendant and its other related entities to commit fraud against the Plaintiff:

31. This is not a new claim or a statement that is inconsistent with the original claim, as the Plaintiff’s allegation is that the First Defendants being the controlling mind of the Second Defendant have defrauded the Plaintiff from recovering the consent judgment sum.
    

Orders

32. Since no leave was obtained from Court to initiate proceeding against the Second Defendant, the Second and Third Defendants are removed as parties to this action.
    

References in the statement of claim; defence and reply to defence to the Second Defendant are replaced with “Dayal (Fiji) Artesian Waters Limited” and references to the Third Defendant are replaced with “The Official Receiver”.

33. The First Defendants application filed on 10 February 2021 is dismissed with costs summarily assessed at $3,000. This cost is to be paid by the First Defendants to the Plaintiff by 12 noon on 25 September 2024.

.........................
Vandhana Lal [Ms]
Master of the High Court
At Suva.
18 September 2024

TO:

1. Suva High Court Civil File No. HBC 293 of 2020;
2. Sherani & Co., Solicitors for the Plaintiff;
3. Krishna & Co, Solicitors for the First Defendants;
4. The Official Receiver, the Attorney-General’s Chambers.