In re Footwear International (Fiji) Ltd [1999] FJHC 158; HBE0003J.1999S (31 August 1999)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

CIVIL ACTION NO. HBE 0003 OF 1999

BETWEEN:

IN THE MATTER OF FOOTWEAR
INTERNATIONAL (FIJI) LTD.
Plaintiff

AND:

IN THE MATTER OF THE COMPANIES ACT
Defendant

Counsel: Mr A. Tikaram for the Plaintiff
Mr R. Prasad for the Defendant

Hearing: 20th August 1999
Decision: 31st August 1999

JUDGMENT

On 20th January 1999 a winding-up petition was filed by Hoon Gye Lee, trading as Ja Yu Trading Company, against Footwear International (Fiji) Ltd, on the ground that Footwear International (Fiji) Ltd. (“the company”) was indebted to the petitioner in the sum of US$34,800.00 for the supply of leather and on the ground that the company is unable to pay its debts.

On 3rd March 1999, the company obtained an ex parte injunction from the High Court to restrain the petitioner from further advertising the winding-up petition.

Memorandum of Due Compliance was filed on 17th March 1999, in accordance with the Companies (Winding-Up) Rules 1983.

The affidavit of Sang Hong, company director of Footwear International (Fiji) Limited was filed in opposition to the winding-up petition, on 27th April 1999. The affidavit of Hoon Gye Lee, businessman was filed on behalf of the Petitioner on 7th June.

The petition was set for hearing before this court on 20th August 1999.

Counsel for the Petitioner, Mr A. Tikaram made both oral and written submissions. He submitted that the interim ex parte injunction granted by Pathik J should be dissolved and the winding-up petition be allowed to take its normal course. He submitted that the affidavit of Hong Gye Lee showed that the Company was indebted to the Petitioning Creditor in the sum of US$34,800.00 as per invoice number JY980928 for the sale and supply of leather, that the Company failed to pay the sum claimed, and that the Company had therefore shown its inability to pay its debts. He submitted that if the leather was defective, the Company should have returned it and said that the creditor denied that the debt had been settled because the leather was defective.

In opposition, Mr R. Prasad submitted that the leather had been supplied, but that on arrival in Fiji, it had been found to be defective. He relied on the affidavit of Sang Hong who deposed that Mr Hoon Gye Lee had come to Fiji to personally inspect the leather, had agreed that it was defective and had agreed to settle in the sum of approximately US$7,692.00. He argued that although this agreement and settlement was disputed by Mr Hoon Gye Lee in his affidavit, the dispute meant that there were triable issues that ought to be the subject of ordinary litigation rather than winding-up proceedings. He submitted that substantial grounds had been raised to justify dismissal of the petition.

It appears from a perusal of the affidavits filed by Sang Hong and Hoon Gye Lee that there is a dispute as to the existence and nature of the debt itself. Whilst the company alleges that the leather was defective, that Hoon Gye Lee had agreed that the leather was defective, and that full and final settlement of the debt had been made on 4th November 1998, the Petitioning Creditor denies that the leather was defective, states that the visit to Fiji of Hoon Gye Lee was for the purpose of collecting payment of US$34,800.00 and not for inspecting the leather, and denies that the debt was settled in the sum of $7,692.00. Hoon Gye Lee deposes in his affidavit that this payment was in accordance with an arbitration award in Korea (annexed to Hoon Gye Lee’s affidavit).

In Offshore Oil N L -v- Investment Corporation of Fiji (Civil App 29/84, 84/415) Barker JA said that it was a matter for the discretion of the court in winding-up proceedings “to decline to hear the petition where the debt is contested on substantial grounds”.

The question is whether there is a substantial dispute as to the debt. MrTikaram referred to paragraph 15. 214 of Palmer’s Company Law Vol. 3 in his submissions as laying down the relevant principles. That paragraph states;

“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 satisfied the court that there is something to be tried either before the court itself or in an action or in some other proceedings” (Re Great Britain Mutual Life Assurance Society [1880] UKLawRpCh 276; (1880) 16 Ch D 246, 253 per Jessel M.R”

Having considered the dispute in this case, I am satisfied that the company has shown prima facie that there is a dispute that ought to be tried. Whilst it is not denied that the leather was never returned to the supplier, Mr Prasad points out that it is unusual for Mr Hoon Gye Lee to personally come to Fiji to collect payment of US$34,800.00 when the two companies had a history of payment by telegraphic transfer. Furthermore, immediately after the winding-up petition was filed, the company wrote to the petitioning creditor on 4th February 1999 confirming the existence of a “gentlemen’s agreement” of US$7,692.00 being full and final settlement of the debt.

Whilst the petitioning creditor has other explanations for the visit to Fiji and the payment, these are clearly matters that ought to be determined on a proper trial in ordinary litigation.

For these reasons I dismiss the petition. The petitioner is to pay the company’s costs to be taxed if not agreed.

[Nazhat Shameem] Ms
JUDGE

At Suva
24th August 1999