Petri v Dragon Seafood Company (Fiji) Ltd [1996] FJHC 102; Hbc0533j.94s (22 February 1996)

IN THE HIGH COURT OF FIJI
At Suva
Civil Jurisdiction

CIVIL ACTION NO. 0533 OF 1994

Between:

JOHANNES GEORG PETRI
Plaintiff

and

DRAGON SEAFOOD COMPANY (FIJI) LTD.
Defendant

Mr. A.H.C.H. Gates for Plaintiff
Mr. S. Matawalu for Defendant

JUDGMENT

On the 8th November 1994 the plaintiff issued a Writ of Summons seeking various declarations and orders against the defendant company including an injunction which was granted ex parte by Byrne J. on 10th November 1994.

On 21st November the defendant company returned an Acknowledgement of Service declaring its intention to contest the proceedings. Thereafter on 13th February 1995 the plaintiff filed a comprehensive Statement of Claim seeking all the remedies earlier sought in its endorsed Writ of Summons together with a liquidated claim for:

"(f) The sum of $155,590.00 being the amounts now due and owing to the Plaintiff by the Defendant Company as set forth in paras. (7), (15), (19), (23), (25); (27) and (28) hereof."

A copy of the Statement of Claim was served by way of a registered mail envelope sent on the 14th of February 1995.

On the 31st of March 1995 in the absence of a Statement of Defence the plaintiff obtained 'default judgment' for the above-mentioned liquidated sum and on the 3rd May 1995 a 'Writ of Fifa' was issued out of the High Court against the Defendant company.

On the 22nd September 1995 the Defendant Company sought to set aside the 'default judgment' on the ground that it had a good and valid defence on the merit of the case. On 7th November the plaintiff issued a motion pursuant to Section 224 of the Companies Act 1983 seeking to restrain the defendant company from proceeding further in its application to set aside 'default judgment' pending the final determination of a petition to wind up the defendant company presented on 20th December 1994. Both applications were argued before me on 19th January 1996.

However subsequent events have somewhat over-taken the plaintiff's application insofar as an order winding-up the defendant company was made by this Court on the 9th February 1996. (See: Companies Action No. 143 of 1994.) That is not to say that the plaintiff's application is thereby rendered nugatory but rather that the Court has an additional factor to consider in the exercise of its discretion.

In this regard, there can be no doubting from the clear wording of Section 224 of the Companies Act 1983 that the Court is given an unfettered discretion to stay or restrain 'any suit or proceeding pending against the company' at any time after the presentation of a winding-up petition, and before a winding-up order has been made. In somewhat similar vein Section 229 requires the leave of the Court before any action may be "commenced or proceeded with against the company" where a winding-up order has been made.

The clear 'mischief' sought to be overcome by both provisions is that which is likely to arise from a multiplicity of proceedings being commenced or prosecuted (possibly before different courts and by different parties) against a company whose continued existence and commercial viability is the subject matter of a winding-up petition or order by the Court.

In both instances however the statutory discretion is only exercisable where the pending suit or action is one "... against the company". In the present case the application is that of the company seeking to set aside a 'default judgment' entered against it by the plaintiff. In my view such an application is not a suit or action "... pending against the company" or necessarily against its interests, and accordingly I rule that the plaintiff's application is misconceived.

If I should be wrong in so ruling that the application is misconceived nevertheless the general principle upon which proceedings are stayed in an action brought against a company in liquidation is clearly set out in Lindley on Companies (6th edn) as follows:

"When the Court is asked to stay an action the only material question to be considered is whether there are circumstances which render it necessary that the action should be continued, or whether the claim of the plaintiff is not one which can be as easily dealt with in the winding-up as in any other way."

In this latter regard bearing in mind the ordinary form of procedure in a winding up where a claimant lodges a verified proof of debt with the liquidator who admits or rejects it and from whom an appeal lies to a judge (See: Rule 97 Companies (Winding Up) Rules 1983) and also, bearing in mind that the plaintiff's judgment debt is a default order of the Court which the defendant company seeks to contest on its merits, I am firmly of the opinion that the ordinary form of procedure provided under the Companies Act and Rules for proving debts is plainly unsuited to deal with an application invoking the Court's power to set aside default judgment.

Accordingly, the plaintiff's application must be and is hereby dismissed.

Turning then to consider the application of the defendant company to set aside the default judgment. At the outset I would observe that the defendant company in permitting five (5) months to elapse before moving to set aside the default judgment demonstrates a degree of dilatoriness on its part.

Be that as it may the relevant Order of the High Court Rules which empowers the Court to set aside a judgment entered in default of defence is in its terms unfettered and as was stated by Lord Atkin in the leading case of Evans v. Bartlam (1937) A.C. 473 at 480:

"The principle obviously is that unless and until the Court has pronounced a judgment upon the merits or by consent, it is to have the power to revoke the exercise of its coercive power where that has only been obtained by a failure to follow any of the rules of procedure ..."

His lordship also recognised that where default judgment is regularly entered then "... there must be an affidavit of merits, meaning that the applicant must produce to the Court evidence that he has a prima facie defence."

In this latter regard the defendant company deposes through its managing director "... that it has a good and valid defence on the merits of the case". There is also annexed to the affidavit a proposed Statement of Defence which counsel for the company submits indicates that the plaintiff's claim is not only 'grossly exaggerated' but also tinged with fraud. Furthermore the defendant company also has a Counterclaim based upon an alleged conspiracy by the plaintiff and others to defraud the defendant company in acquiring control over it in order to strip it off its assets.

Having considered the numerous annexures and affidavits of the managing director of the defendant company I am satisfied that the circumstances under which the plaintiff claims he purchased items and made cash advances to the defendant company and his 'status' as a shareholder and officer of the defendant company ought to be fully investigated at a trial.

However both in its managing directors affidavit (p.15 para. 9 of 19th December 1995 affidavit) and in its proposed Statement of Defence (paras. 18 and 22) the defendant company "... admits owing ... $25,015.03 to the Plaintiff ..."

In the circumstances the defendant company is given leave to defend the action for the difference between the default judgment and the amount admitted as properly owing by the defendant company to the plaintiff (i.e. $155,590.00 - $25,015.03) = $130,574.97.

To that extent the default judgment is set aside conditional upon the payment into Court within 14 days of the sum of $25,015.03 for payment out to the plaintiff. The defendant company is also ordered to file and serve on the plaintiff or his solicitors a Statement of Defence within 14 days of the date hereof.

(D.V. Fatiaki)
JUDGE

At Suva,
22nd February 1996.

HBC0533J.94S