Seamech Ltd v Dragon Seafood Company (Fiji) Ltd [1996] FJHC 100; Hbe0143j.1994s (9 February 1996)

IN THE HIGH COURT OF FIJI
At Suva
Civil Jurisdiction

COMPANIES ACTION NO. 0143 OF 1994

IN THE MATTER of the COMPANIES ACT SECTION 221

Between:

SEAMECH LIMITED
Petitioner

- and -

DRAGON SEAFOOD COMPANY (FIJI) LTD.
Respondent

Mr. G. Prasad for Petitioner
Mr. A. Kato for Qing Li, a contributor in opposition
Mr. A.H.C.T. Gates for Johannes Georg Petri, a supporting creditor

JUDGMENT

This is an opposed petition to wind up Dragon Sea Food Company (Fiji) Ltd. ('Dragon') lodged in December 1994 by Seamech Limited ('Seamech') claiming $3,169.45 being the balance sum plus interest due and owing by Dragon in respect of the manufacture and supply by Seamech of certain fishing equipment for use on a commercial fishing vessel the "M.V. Vatunawa" owned by Dragon.

It is convenient to digress briefly and examine the relevant law applicable to an application such as the present.

In this regard Lord Upjohn in delivering the opinion of the Privy Council in Bateman Television Ltd. v. Coleridge Finance Co. Ltd. [1971] UKPC 8; (1971) N.Z.L.R. 929 said at p.932:

"... the general rule is, no doubt, that no order (to wind up a company) will be made on a petition founded on (genuinely disputed debts) ..."

That 'rule' is also referred to in Buckley on the Companies Acts (13th edn) where the learned author writes at p.451:

"A winding-up petition is not a legitimate means of seeking to enforce payment of a debt which is bona fide disputed by the company ... But of course, if the debt is not disputed on some substantial ground, the court may decide the petition and make the order ..."

Accordingly the question which the Court is required to consider is: Whether the debt upon which the petition is founded is 'bona fide' disputed on substantial grounds? To answer the question it is necessary to consider the evidence as disclosed in the affidavits filed in the case of which there are - four (4) from Qing Li on behalf of Dragon; one (1) from Ross Brodie on behalf Seamech and two (2) from Johannes Georg Petri a supporting judgment creditor.

Seamech's claim as deposed in the affidavit of Ross Brodie a director, is to the effect that it had only agreed to manufacture and supply certain fishing equipment to Dragon pursuant to its quotation dated 23.9.93. That it initially required a 30% deposit before it commenced manufacture but instead was paid a substantially larger sum ($6,500) by Dragon on 24.9.93. Under cover of a note dated 18.3.94 a representative of Dragon took delivery of most of the fishing equipment from its workshop and although all remaining items were supplied in or about August 1994, and despite several demands on Dragon, the outstanding balance remains unpaid.

Dragon for its part deposed through Qing Li a director, that the oral contractual arrangement reached with Seamech involved "... the (manufacture) supply, delivery and installation of material and equipment on (the) vessel Vatunawa at Navutu in Lautoka by Seamech ...". Furthermore Seamech agreed "to complete all installation works within a period of nine weeks from 24.9.93".

Then it is deposed that: "In breach of the agreement Seamech failed to supply, deliver and complete the installation of the agreed items within the agreed nine weeks period ..." and finally, the failure is said to have "... resulted in considerable loss to (Dragon) to the extent of $30,000."

Quite plainly there appears to be some disagreement in the affidavits as to the precise nature of the obligations undertaken by Seamech in terms of its agreement with Dragon, with the former saying it was "only for the manufacture of the equipment" and the price quoted "did not include any cost for delivery or installation of the same", whereas, the latter claims that it did. Further more there is some suggestion by Dragon that Petri a supporting creditor "should be responsible for the payment to Seamech".

In this latter regard and here I must confess to an incomplete understanding of the function and role within Dragon of Johannes Georg Petri, but it does appear that he might have been and may still be associated with Dragon as some sort of financier and intermediary during the relevant time. What is clear however is that relations have seriously 'soured' between him and Qing Li, a director and contributor of Dragon.

Be that as it may, in my view whatever might be the internal differences between the persons involved in the running of Dragon, I fail to see what relevance or bearing it can or should have on the fairly straight-forward claim of Seamech for payment for work done and equipment supplied by it to Dragon or on Dragon's primary liability to pay.

At best Dragon's dispute is one based on breach of contract for late, incomplete and unsatisfactory work which if proved, would sound in an award of unliquidated damages. True an unsubstantiated figure of $30,000 is mentioned but that can only be a matter of pure conjecture bearing in mind that the fishing vessel was still being reconstructed and had never been operated commercially.

In In re Tweeds Garage Ltd. (1962) 2 W.L.R. 38 Plowman J. in rejecting the company's assertion that it had a number of deductions to be made from the sum claimed by the petitioners and that the amount of the debt was therefore, bona fide disputed, said at p.43:

"In my judgment, where there is no doubt (and there is none here) that the petitioner is a creditor for a sum which would otherwise entitle him to a winding-up order, a dispute as to the precise sum which is owed to him is not of itself a sufficient answer to his petition."

In similar vein Pennycuick J. said in In re Douglas Griggs Engineering Ltd. (1962) 2 W.L.R. 893 at p.896:

"It seems to me that this prima facie right of a petitioning creditor to a winding-up order is not displaced merely by showing that the company has a disputed claim against the petitioning creditor which is the subject of litigation in other proceedings."

In this latter case the order compulsorily winding-up the company was made upon a default judgment debt in the sum of £380 notwithstanding that the pending claim of the company against the petitioner was for the substantially larger sum of £2,559.

More relevantly in Anglian Sales Ltd. v. South Pacific Manufacturing Co. Ltd. (1984) 2 N.Z.L.R. 249 the New Zealand Court of Appeal in revoking a stay of a winding-up petition and in allowing the petitioner to proceed said (per Greig J.) at p.255:

"Of course a dispute as to a part of a debt is not sufficient ... so long as there is a debt due qualifying the creditor as a petitioner and providing a basis for the ground of a petition.

Other considerations apply when the debt is not disputed in whole, as in this case, but there is a cross-claim or counter-claim which is alleged to be equal or exceed the amount of the creditor's debt. In that case the creditor is still a creditor. On the hearing of the petition it remains a matter of discretion as to whether the petition will be granted or not."

(my underlining)

In the present case Seamech's claim is for $2,998.30 plus interest which far exceeds the minimum statutory amount of $100 (See: Section 221(a) Companies Act 1983), and, unlike in the Douglas Griggs Engineering Ltd. case (ibid), Dragon's claim for 'late, incomplete and unsatisfactory workmanship' remains unsubstantiated two (2) years after the event.

Learned counsel for Seamech in support of the petition drew the Court's attention to various matters which counsel submits is wholly 'inconsistent' with Dragon's position. These included:

(a) The absence of any complaint or mention in the pre-petition correspondence exchanged between the parties alleging a failure on the part of Seamech 'to install' the various fishing equipment supplied by it. Indeed to the contrary effect is Qing Li's letter of 11.11.93;

(b) The fact that Seamech's quotation has written on it: '... delivery ex w/s' which suggests that the supplier or vendor's (i.e. Seamech) responsibility for the goods ends at its workshop door;

(c) The undeniable fact that the equipment was actually 'taken delivery of' on several occasions from Seamech's workshop by Dragon's representative even outside the alleged completion date; and

(d) The written acknowledgements (albeit implied) of Seamech's outstanding debt by representatives of Dragon in seeking further time to pay including a letter written by Qing Li dated 5.9.94.

I accept in this latter instance that Qing Li has attempted to provide some 'background' to the various letters but not being the author of the letters, such explanations are inadmissible parole evidence and/or hearsay. Whatsmore in relation to Petri's letter of 13th May 1994, the explanation is directly contradicted by the author's own affidavit of 18th July 1995 in very material respects including the solvency of Dragon.

In conclusion having considered Counsel's submissions and the grounds upon which Dragon disputes Seamech's debt and the various matters deposed in the affidavits, I am not satisfied that there is a bona fide dispute of the debt both as to its existence and amount, based on substantial grounds or that Dragon is both solvent and able to pay its debts. Indeed, if anything, the evidence convinces me otherwise.

Accordingly I make an order winding-up Dragon Seafood Company (Fiji) Limited with costs to be taxed if not agreed.

(D.V. Fatiaki)
JUDGE

At Suva,
9th February, 1996.

HBE0143J.94S