In re Feeders Rabi Fishing Company Ltd [2002] FJHC 104; HBE0045j.2000S (12 April 2002)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

WINDING-UP ACTION NO. 45 OF 2000

IN THE MATTER OF FEEDERS RABI FISHING COMPANY LIMITED

And

IN THE MATTER OF THE COMPANIES ACT

Mr. T. Seeto for Petitioner
Mr. A. Tikaram for Company

JUDGMENT

This is an opposed winding up petition.

The Petitioner NBF Asset Management Bank alleges that the sum of $198,532.76 is owed to it by the Company, Feeders Rabi Fishing Company Limited as at 15 February 2000 with interest accruing at 15.5% per annum for various loan facilities advanced to the Company which remains unpaid. A Statutory Notice dated 17 February 2000 was served on the Company under Section 221 of the Companies Act Cap. 247.

The Company opposed the Petition and despite an order to file an affidavit it was not filed until 28 November 2000. An affidavit in Reply was not filed by the Petitioner until 9 May 2001. The Company=s Affidavit in Reply was not filed until 31 July 2001. The Acting Deputy Registrar had been making these Orders for affidavits it be filed. He allowed further affidavit in Reply by the Petitioner to be filed on 10 September 2001. The last of the submissions as ordered was not filed until 25 February 2002.

Issue

I have before me for my consideration the abovementioned affidavits from both parties and also comprehensive written submissions from counsel.

The issue for the Court=s determination is whether the debtor has a bona fide dispute to entitle the petitioner to obtain a winding up order.

Company=s contention

The grounds on which the petition is opposed are set out in considerable detail in the Company=s affidavit in opposition sworn by John Teawea as the Manager by Feeders-Rabi Fishing Company Limited and I do not wish to reiterate them here.

However, on the issue, the deponent says that the records kept by the Company does not show an outstanding amount such as the one claimed by the Petition. The records show he says that the then Managing Director of the Company had unilaterally and without proper resolutions from the shareholding Council, obtained further long term loan with the help of his friend, Mr. Makarava who was then the General Manager of the Petitioning creditor. With some difficulty the Company managed to obtain some statements of accounts from the Petitioner. There have been large withdrawals in 1994 from the Company when there was very little income. From 31 January 1995 onwards, all debits are for interest. The Company is still waiting for full particulars of account and copies of securities which it appears the Petitioner does not have.

The company says that because of the unavailability of the securities and because the debt is disputed the Petitioner ought to proceed by way of Writ of Summons instead of winding-up.

Petitioner=s contention

By his affidavit in Reply to the Company=s claim, Mr. Laisenia Takala, Senior Manager said that the Company is responsible for the regulation of its internal management and cannot hold the Petitioner responsible for the same . He admits that the Petitioner does not have the security sought and the Company has been informed accordingly. It appears that the security was not executed but the Company proceeded to utilise funds from the Petitioner and is thus liable for the amount advanced. He says that >there is no purpose in proceeding by way of Writ because there is nothing to Discover=.

The Petitioner says that there is no genuine dispute as such because the grounds advanced by the Company lack merit. It states that the company is attempting to lay the blame for the huge debt it has incurred at the door of the bank simply because of mismanagement by its own officers which it freely admits.

Consideration of the issue

I have given careful consideration to the useful written submissions filed by counsel.

The amount claimed is substantial and it appears that most of it is for interest on the principal sum. On the affidavit evidence before me, I consider that the Company has reason to be dissatisfied with the manner in which its account has been administered by the Petitioner for one thing, particulars of accounts have not been furnished despite requests for same and for some unknown reason copies of security documents have not been made available to show the circumstances and the manner in which the alleged advancements were made to it. It is also a matter of comment as to why the accounts were left open for so long if the Company was showing signs of going downhill and no appropriate action was taken in good time rather than the alleged debt being allowed to escalate.

The state of affairs pertaining to accounts are far from clear and this can only be resolved through an action commenced by a writ of summons and not through a winding-up petition particularly when the alleged debt is vigorously opposed on substantial grounds.

I therefore find that the alleged debt is disputed by the Company on substantial grounds. In considering the issue before me I had borne in mind the principles as stated below in Palmer=s Company Law Vol. 3 15.214.

ATo 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. ASubstantial@ 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 Ato 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@.

The grant or refusal of a winding up order is discretionary as stated in Bateman Television Limited (In Liquidation) and Another v Coleridge Finance Company Limited 1971 NZLR p.929 Judicial Committee, where it was held:

A3. 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@. (emphasis added)

Similar statement was made in Offshore Oil N.L. and Investment Corporation of Fiji Limited (Civil App. 29/84 F.C.A. at p.15 where Barker J.A. said:

AThe 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@.

For these reasons, on the facts and circumstances of this case and on the authorities this is not a case in which petition to wind up the company ought to be granted. The Petitioner will have to decide on some other mode of pursuing its claim.

The Petition is therefore dismissed with costs in favour of the Company in the sum of $250.00.

D. Pathik
Judge

At Suva
12 April 2002