In re Personal Computer Lab Ltd [1998] FJHC 135; Hbe0002j.98s (18 September 1998)

Fiji Islands - In re Personal Computer Lab Ltd - Pacific Law Materials

IN THE HIGH COURT OF FIJI

AT SUVA

CIVIL JURISDICTION

WINDING UP ACTION NO. 2 OF 1998

IN THE MTHE MATTER of PERSONAL COMPUTER LAB LIMITED

AND:

IN THE MAT/b>of the Companies Act (Cap. 247)

Mr. Eroni Veretni foni for the Petitietitioner
Ms. V. Lotu for the Debtor Company

JUDGMENT

This is an opposed winding-up Petition.

The Petition was filed on 14 Janu998. On 27 February Summonsmmons for stay of proceedings and an Affidavit in Opposition was filed. Affidavit in Reply was filed on 29 April. Both counsel had on 15 July agreed on stay and to file written submissions on opposition hearing for the Court to consider.

The Petitioner FUJITSU (NZ) LIMITED (FIJI BRANCH) (the "petitioner") has petitioned the Court to wind-up PERSONAL COMPUTER LAB LIMITED (the "company") on the ground that the company is indebted to it in the sum of $78,639.00 in respect of supply and installation of personal computers, laser printers, software, scanner, Cd-ROM, Network, cabling, correctors, network cards UPs at its request full particulars whereof are well known to the Directors.

A Notice under section 221 of the Companies Act Cap. 247 (the "Act") claiming the said sum was served on the company but it has failed to pay same. The petitioner says that the company is insolvent and is unable to pay its debts. Therefore, in the circumstances it is just and equitable that it should be wound-up.

Company's submission

It is the company's contention that the petitioner is in breach of the contract entered into between them. The petitioner failed to complete the 'project'. The alleged sum of $78,639.00 is disputed because of this and also for the reason that most of the goods supplied and delivered to the company have been seized by the petitioner.

The company further alleges that it was not properly served with the petition as required under s221 of the Act.

It also submits that there are triable issues and a counterclaim against the petitioner. The Petitioner it says, should pursue its claim by way of writ of summons instead of Petition.

Petitioner's submission

The petitioner submits that the company has not denied that goods have been supplied and that certain amount is still due.

It says that the nature of the counterclaim, the facts which are intended to support the existence of a counterclaim and the "breach of contract" alleged by the company are unsubstantiated. They are not supported by any documents or facts and figures.

The petitioner submits that there was a proper service of the Petition, in that it was served at the registered office of the company.

Consideration of the issue

Now to the consideration of the issue.

The issue for Court's determination is whether there is a substantial dispute as to the alleged debt after considering the submissions made by both counsel.

I reject the company's submission that it was not served with a Notice as required under section 221 of the Act. I find that it was properly served.

It is not disputed that the goods were supplied and services rendered except that there is a dispute as to the balance amount and that there is a counterclaim.

As for the law there is a general principle that a petition for winding up with a view to enforcing payment of a disputed debt is an abuse of the process of the Court and should be dismissed with costs. (PALMER'S COMPANY LAW Vol 3, 15.214 and cases cited therein).

In PALMER'S (ibid) is set out the principles involved in considering disputes as to debt and I have borne these in mind in considering the matter before me. There it is stated:

To fall within the general principle the dispute must be bona fide in both a subjective and an objective sense. Thus the reason for not paying the debt must be honestly believed to exist and must be based on substantial or reasonable grounds. "Substantial" means having substance and not frivolous, which disputes the court should ignore. There must be so much doubt and question about the liability to pay the debt that the court sees that there is a question to be decided. The onus is on the company "to bring forward a prima facie case which satisfies the court that there is something which ought to be tried either before the court itself or in an action, or by some other proceedings."

In OFFSHORE OIL N.L. and INVESTMENT CORPORATION OF FIJI LIMITED (Civ App. 29/84 F.C.A. at p.15 of cyclostyled judgment) BARKER J.A. said:

"The law is clear that there is a discretion in a Court seized of a winding-up petition, to decline to hear the petition where the debt is contested on substantial grounds."

Also in BATMAN TELEVISION LIMITED (IN LIQUIDATION) AND ANOTHER v COLERIDGE FINANCE COMPANY LIMITED 1971 NZLR p.929 Judicial Committee, it was held:

"3. The general rule is that an order for winding up will not be made on disputed debt but a Judge has discretion to make a winding up order on disputed debts which is not reviewable unless exercised on a wrong principle or the Judge included or omitted consideration of a relevant fact or was wholly wrong".

On the affidavit evidence before me it is clear that there was a contract between the parties and that there was a breach of that (as alleged by the company) because the project under it was not completed or not completed in time. The company is also concerned that some of the items have been seized by the petitioner and not accounted for by it. Then also there is the substantial dispute as to the actual amount that is being claimed as not being the correct amount.

In the circumstances I find that the dispute is based on substantial grounds although details are scanty.

The law on the issue before me is that winding up is not to be used as a system of debt collecting and therefore the court will not grant a winding up order where there is a dispute as to whether or not a debt is actually owed. That is exactly the position here. Also, if there is such a dispute, the petitioner will not satisfy the requirements of being a creditor. All that is required for a petition to be struck out is that there is a dispute on 'substantial grounds'. In some of the cases, the courts have required that the debt be disputed 'in good faith and on substantial grounds' (STONEGATE SECURITIES LTD v GREGORY (1980) 1 All E.R. 241 at 243-244) whereas in others the requirement of 'good faith' has been omitted. In Re a company (No.001946 of 1991) ex. p. FIN SOFT HOLDING SA (1991) BCLC 737 at 740, HARMAN J considered that there were not two tests but simply one which is: 'Is there a substantial dispute as to the debt upon which the petition is allegedly founded?' As a consequence, it has been held that where there is such a dispute then the bona fide of the company is simply irrelevant.

On the facts and on the law applicable this petition must fail. A real dispute turning on disputed questions of fact which require viva voce evidence cannot properly be decided on petition. It was held In re Company No.00212 of 1995 The Times Law Reports (1995 P.186) that in such a situation "the correct course was to strike out the petition, whether the company was, or was not solvent at the time". It was also stated by WALKER J that "where there was a complex rift of disputed facts and allegations on both sides which cried out for cross-examination, it was inappropriate for a claimant to resort to a petition to Wind up a company which was his adversary." (IN re AMADEUS TRADING LTD, The Times Law Reports 1 April 1997 p.36). On the totality of the evidence there were here triable issues such as would entitle the company to resist a Petition. I conclude with the following extract from MEGARRY J's

judgment in In re LYMPNE INVESTMENTS LTD (No. 00250 of 1971) 1972 1 WLR 523 at 527 which is apt:

"Nor is it right, or in accordance with the modern practice, to stand over the petition in order that the disputed issues may be resolved in other proceedings. That practice, I may say, seems to stem from In re London and Paris Banking Corporation [1874] UKLawRpEq 171; (1874) L.R. 19 Eq. 444. The Companies Court must not be used as a debt-collecting agency, nor as a means of bringing improper pressure to bear on a company. The effects on a company of the presentation of a winding up petition against it are such that it would be wrong to allow the machinery designed for such petitions to be used as a means of resolving disputes which ought to be settled in ordinary litigation, or to be kept in suspense over the company's head while that litigation is fought out. Further, Mann v. Goldstein [1968] 1 W.L.R. 1091, cited with approval in the New Zealand Court of Appeal in Bateman Television Ltd. v. Coleridge Finance Co. Ltd. [1969] N.Z.L.R. 794, provides authority for saying that when a petition is based on a debt which is disputed on substantial grounds, the petitioner is not a "creditor" within section 224(1) of the Act of 1948 who has the locus standi requisite for the presentation of the petition, even if the company is in fact insolvent."

In the outcome, for these reasons and bearing in mind the law on the subject the Company succeeds in opposing the Petition. The Petition is therefore dismissed with costs in the sum of $200.00 to be paid to the Company.

D. Pathik
Judge

At Suva
18 September 1998

Hbe0002j.98s