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Bluebird Lumber & Hardware Ltd v Westora Marketing Ltd [2008] WSSC 87 (2 October 2008)

IN THE SUPREME COURT OF SAMOA
HELD AT APIA

BETWEEN:

BLUEBIRD LUMBER & HARDWARE LIMITED
a duly incorporated company having its registered office at Saleufi, Apia.
Judgement Creditor

AND:

WESTORA MARKETTING LIMITED (IN RECEIVERSHIP)
a duly incorporated company carrying on business in Samoa.
Judgement Debtor

AND:

ANDREW AH LIKI
of Palisi, Businessman
Sub-Debtor

Counsel: Mr Faaiuaso for judgement creditor and sub-debtor
Mr Enari for judgement debtor

Submissions: 25 September 2008
Judgement: 2 October 2008

JUDGEMENT OF THE COURT

1. On the 1st February 2008 Westora Marketing Limited (In Receivership), the judgement debtor, obtained judgement by default against the sub-debtor Andrew Ah Liki in the sum of US$39,986.95 plus costs of $3,000. On the 17th March 2008 the judgement creditor, Bluebird Lumber & Hardware Ltd and Ah Liki Construction Limited obtained judgement by default against the judgement debtor in the sum of $287,643.36 inclusive of costs.
   
2. Both Bluebird Lumber and Hardware and Ah Liki Construction Limited are locally registered family companies. Andrew Ah Liki, the sub-debtor, is the Managing Director and principal shareholder of both Ah Liki Construction Ltd and Bluebird Lumber and Hardware. Westora Marketing Ltd (In Receivership) was incorporated in New Zealand with registered office in Auckland, New Zealand.
   
3. On the 1st April 2008 the judgement debtor issued judgement summons against the sub-debtor to enforce payment of US$39,986.95. By garnishee summons dated the 25th April 2008 the judgement creditor sought a garnishee order to receive the US$39,986.95 owing by the sub-debtor to the judgement debtor to offset the judgement debt of $287,643.36 owing by the judgement debtor to the judgement creditor.
   
4. The judgement debtor was placed into receivership on the 23rd February 2005 when the Hong Kong and Shanghai Banking Corporation Limited (HSBC) as debenture holder under a deed of Debenture dated 26th October 2001 appointed Mr Graham and Mr Gibson both Chartered Accountants of Auckland New Zealand to be receivers and managers of all of the judgement debtor’s property:
   

"being the property charged by the Deed with all the powers conferred by, and subject to the terms and conditions of the Deed."

5. For the receivers who opposed the granting of the garnishee order it was contended by Mr Enari that HSBC as debenture holder has had since the 26th October 2001 when the Deed of Debenture was executed, a secured charge over all the assets of the judgement debtor which follows that the sum of US$39,986.95 should be paid to the receivers of the judgement debtor for the benefit of the HSBC who as a secured creditor has priority over the judgement creditor, an unsecured creditor.
   
6. Mr Faaiuaso in support of the garnishee order cited a number of factors which the court should consider in exercising its discretion. These factors included:
   
   • (a) The judgement debtor, Westora, is not registered in Samoa and does not have a place of business in Samoa.
     
   • (b) The Hong Kong Shanghai Bank, likewise is not registered in Samoa, does not have a place of business in Samoa, were not a party in these proceedings, and its debenture is not registered in Samoa.
     
   • (c) It would be unjust and inequitable to allow the judgement debtor to claim payment of their judgement debt which is e nforceable in Samoa but deny access by the judgement creditor to that judgement debt, the sole asset of the judgement debtor in Samoa.
     
   • (d) It would be highly prejudicial to the judgement creditor if the judgement debtor was allowed to enforce its judgement but deny the judgement creditor the sole asset in Samoa which is still much less than the judgement debt the judgement creditor has obtained against the judgement debtor.
     
   • (e) To pursue the judgement debt, the judgement creditor would have to file proceedings in New Zealand which would not only be costly but also futile because the judgement debtor is in receivership.
     
   • (f) To deny garnishee proceedings means that the judgement debtor can enforce its judgement debt for US$39,985.95 in Samoa but can walk away from the jurisdiction of this Court and from Samoa with a debt of $287,643.36.
     
   • (g) The court should give priority to the judgement creditor which is registered in Samoa, unlike the judgement debtor which is registered overseas.
     
   • (h) The Debenture is not entitled to recognition in Samoa just as the warrant of the United States District Court was not recognised by the courts of New South Wales, Australia in European Bank Ltd v Citibank Ltd (2004) NSWCA 76.
     
   • (i) The court has a discretion to make such order as may be just.
     
7. The main thrust of the repetitive and overlapping grounds advanced by Mr Faaiuaso is that the Deed of Debenture given by the judgement debtor to the Hong Kong Shanghai Banking Corporation (HSBC) cannot be recognised as a legal binding document in this jurisdiction. The court should accordingly ignore the Deed of Debenture executed in New Zealand by two legal entities not incorporated in Samoa.
   
8. Neither counsel addressed the commercial significance of a Deed of Debenture for very obvious reasons; suffice to say that the debenture holder HSBC in accordance with the powers conferred by the Deed of Debentures appointed receivers in February 2005 to be receivers and managers of the judgment debtor’s property, being properly charged by the Deed of Debenture.

Charged Asset is defined in the deed as:

"all the present and future assets of the Company whether situated in New Zealand or elsewhere."

Book debt is defined as:

" all indebtedness owed at any time to the Company, including;

(i) the proceeds of any book debt
(ii) moneys held in any bank account; or
(iii) the benefit of all or any rights

9. To grant the garnishee order would tantamount to a violation of the legal rights and remedies conferred by the Deed of Debenture on HSBC as the debenture holder. It would be contrary to the interests of justice for the court in the exercise of its discretion to deny to the debenture holder as a secured creditor what he is legally entitled to pursuant to the terms and conditions of the deed and at the same time granting an advantage to an unsecured creditor who seeks a garnishee order some three years after the debenture holder moved to exercise its power under the deed of debenture.
   
10. Of the authorities cited in support of the granting none of them support the granting of the order. For instance in MI Ubase Holdings Co. Ltd v Trigem Computer Inc (2007) NSWSC 859 (8/8/07). Counsel quotes from the judgment of Brereton J at paragraph 76:
    

"It is far more just and convenient that the claims of all creditors be resolved according to the law of the place of incorporation where there can if necessary be a general pro-rata distribution, than in New South Wales, which can deal only with the claim of one creditor against one asset and that to the prejudice of the other creditors. ...."

To apply that quotation to the present application, counsel is conceding that the judgment creditor like all other creditors of the judgement debtor should have his claim as a creditor resolved in New Zealand.

11. It could not be seriously suggested by the judgement creditor that HSBC could not enforce its Deed of Debenture is Samoa. The Shorter Oxford English Dictionary defines comity of nation as:
    

"The courteous and friendly understanding by which each nation respects the law and usages of every other, so far as may be without prejudice to its own rights and interests."

The commercial significance of, and the legal status of a deed of debenture is identical in both the New Zealand and Samoan jurisdictions. Most of the Samoa legislations, enactments and regulations adopted the ipsissma verba of their New Zealand counter-parts. In Bumper Development Corporation v. Commission of Police of the Metropolis & Others (1991) 1 WLR 1362 the Privy Council went even further to hold that a foreign litigant not recognised in the English court as a legal personality was nonetheless allowed to sue in the English court on the basis that the law of its country recognised the litigant as a juristic entity. That is, although the litigant was not recognised in the laws of England as a legal entity, he was nonetheless entitled, in accordance with the principle of comity of nations, to sue in England.

And as Cardozo J said in Loucks v Standard Oil Co. of New York (1918) 224 NY 99 at 111:

"The courts are not free to refuse to enforce a foreign right at the pleasure of the judges, to suit individual notion of expediency or fairness. They do not close their doors unless help would violate some fundamental principle of justice, some prevalent conception of good morals, some deep-rooted tradition of the common weal."

12. Counsel for the judgement creditor contended that the debenture is not entitled to recognition in Samoa just as the warrant of the United States District Court was not recognised by the courts of New South Wales Australia in European Bank Ltd v Citibank (supra). I beg to differ with counsel as the court there held inter alia that the discharge of a debt is governed by the proper law of the contract, the situs of the debt. After consideration of the established principles of banking law and private international law the court held that the debt incurred in New South Wales Australia could not be discharged by an attachment in New York, America.
    

Order

(1) The application by the judgement creditor for a garnishee order is refused.
(2) Judgement creditor to pay costs of $800.

JUSTICE VAAI