Sundarji v Sundarji [2002] FJHC 325; HBC1025.1986 (20 November 2002)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

CIVIL ACTION NO.: HBC 1025 OF 1986

BETWEEN:

NANDU BEN SUNDARJI d/o Sundarji
Plaintiff

AND:

NARBHAY RAM SUNDARJI f/n Sundarji
Defendant

Mr. B.C. Patel-Counsel for Judgment Creditors
Mr. D. Sharma -Counsel for Garnishee

DECISION

This is an application on behalf of Nirbhay Ram Sundarji (the Judgment Creditor) for issue of Garnishee Proceedings against the garnishee Dhiraj Lal Hemraj and Chirk Yam who are liquidators of Jethasons Limited. On 18th September this Court gave leave to the Judgment Creditor pursuant to Order 49 Rule 1 to issue summons against the garnishee to show cause why an order absolute ought not to be made. The action was adjourned to 11th October 2002.

On 4th October the Judgment debtor advised the garnishee to pay out the moneys to the Judgment Creditor and "not to incur any legal cost". He further asked that the "remaining funds" should be immediately distributed thereby suggesting that there would be surplus funds even after the judgment creditor was paid.

The garnishee in its filed affidavit raised three grounds to show cause:

(1) it does not know how the amount claimed by the creditor was arrived at. This ground was abandoned as obviously the amount included interest on the judgment sum.

(2) that the liquidators have been incorrectly joined as garnishee. That the proper garnishee is Jethasons Limited, the company itself.

(3) That there is no debt in existence because the amount due to the debtor cannot be calculated until "disputed items in the company’s books are sorted out, final tax returns are filed and tax clearance obtained and final distribution to shareholders is ready to be paid out".

The first issue in these proceedings is WHAT DEBTS ARE ATTACHABLE. Order 49 Rule 1 states that the court may "order the garnishee to pay the judgment creditor the amount of any debt due or accruing due to the judgment debtor". The underlining is mine for emphasis. So all debts due or accruing due from any person to the judgment debtor whether legal or equitable may be attached by an order.

Halsbury Volume 17 page 327 at paragraph 527 in considering this states as follows:

"To be capable of attachment there must be in existence, at the date the attachment becomes operative, something which the law recognizes as a debt, and not merely something which may or may not become a debt. Thus where the existence of a debt depends upon the performance of a condition, there is no attachable debt until the condition has been performed."

All that is needed for a debt to be attachable is its existence. It is not necessary that it should be immediately payable nor is it necessary that the exact amount should have been ascertained – O’Driscoll v. Manchester Insurance Committee [1913] UKLawRpKQB 114; (1913) 3 K.B. 499, where at page 516 to 517 Banks L.J. explained the position as follows:

"It is well established that ‘debts owing or accruing’ include debts debita in praesenti solvenda in futuro. The matter is well put in the Annual Practice 1915 p. 808. ‘But the distinction must be borne in mind between the case where there is an existing debt, payment whereof is deferred, and the case where both the debt and its payment rest in the future. In the former case there is an attachable debt, in the latter case there is not’. If, for instance, a sum of money is payable on the happening of a contingency, there is no debt owing or accruing. But the mere fact that the amount is not ascertained does not show that there is no debt."

Hence where there is an existing debt due and payable by future instalments, an application for garnishee summons may be made and a garnishee order may be made to become operative as and when such instalments become payable.

A debt due is one which is due and payable now. And debt accruing is a debt, which is due, but payment of it is in the future whether it is ascertained sum or unascertained is immaterial.

The second issue is who is the proper garnishee – the company or the liquidators of the company? The liquidators in the present case were appointed by the court on application by one of the shareholders. The company is still solvent. The purpose of appointment of liquidators was to enable them to sell assets of the company and to distribute proceeds after payment of liabilities which were rates to Nausori Town Council and tax to Inland Revenue Department. Both have been done and there is only about $8,400.00 left to be paid to the Inland Revenue due to some adjustments.

The affidavit in support of the motion paragraph 7 says that a sum of $70,411.89 was due to the judgment debtor from moneys held by the liquidators. The affidavit in reply says that the figure represents what the final outcome could be once all matters relating to the company are worked out. There is no denial but in fact a tacit admission that the liquidators are holding surplus funds due to the judgment debtor and adequate to meet the garnishee order. The liquidators are the ones who should have all the figures at hand and yet they failed to disclose by proper accounting how much they have. It appears from affidavits that it is the judgment creditor who is doing all the reconciliation of accounts for the liquidators. Nowhere do the liquidators depose that those reconciliation figures given by the judgment creditors are incorrect. The second affidavit sworn by Mr. Chen Bunn Young effectively buries any doubts about surplus funds. He attached a letter from solicitors of the liquidators dated 10th October 2000 which says:

"Since both living parties now agree that your client to be paid out of Natwar’s entitlements in Jethasons Limited and they have both dropped their respective claims for rental and management fees we would suggest that an order be moulded in court tomorrow for payout to Nirbhay Sundarji."

This letter of 10th October was copied to the liquidators and yet they did not act upon it on the pretext that it is the company which should be named as the garnishee. They are the liquidators. Normally a company acts through its directors. However, once liquidators are appointed, those duties are discharged by the liquidators. Section 242(2)(h) of the Companies Act gives the liquidators the necessary powers to distribute the assets. It reads:

"S.243 (2) The liquidator in a winding up by the court shall have power

(h) to do all such other things as may be necessary for winding up the affairs of the company and distributing its assets."

It is the liquidators who are in control of the finances of the company. They also have a duty to distribute the funds. The shareholders additionally are asking them to distribute the funds.

In Shaw Saville & Albion Company Ltd v. Inland Revenue Commissioner (1956) N.Z.L.R. 211 at 217 the position is explained as follows:

"The legal title was not in the liquidator, who was merely a person invested with statutory powers and charged with statutory duties which did not, up to the time when the demand or request was made, include a duty to transfer any property to appellant. The company, on the other hand, though the legal title was still vested in it, had no longer any powers exercisable otherwise than by the liquidator, and all its property was subject to his powers. I do not think it necessary to consider whether, during the normal course of the liquidation, it would have been correct to speak either of the liquidator or of the company, or of the two of them together, as holding this property in trust, whether for the appellant or otherwise. But I am clearly of opinion that, once the appellant made it clear, that, as it was in the circumstances entitled to do, it required the property to be transferred to it, the situation changed, and there immediately arose a trust for the appellant. No longer was it permissible for the liquidator or the company to do anything with the property but to transfer it to the appellant. The functions of the liquidator in relation to the property were then at an end, save only that there remained the duty to transfer. As for the company, it became a bare trustee of the legal title, its only power – exercisable at the moment by the liquidator – being to transfer it to the appellant."

Having looked at the Companies Act and the various authorities, it is quite clear that the liquidators were properly named as the garnishee.

It is for the garnishee to show cause why a garnishee order absolute ought not to be made. The onus is on the garnishee to bring to courts notice of any facts which militate against the court making the order absolute. They have not done so here.

The amount owing to the creditors as at 15th September was $23,820.04. Interest accrued at rate of $2.41 per day. See paragraph 8 of Chen Bunn Young’s first affidavit.

I therefore order that the garnishee forthwith pay the judgment creditor the sum of $23,820.04 plus all accrued interest to date and costs which I summarily fix costs at $600.00.

The garnishee therefore is to pay following sums:

(i) the sum of $23,820.04 which is judgment and accrued interest to 15/02/2002.

(ii) Interest at $2.41 per day from 15/02/01 to date of payment.

(iii) Costs $600.00.

As far as costs of garnishee are concerned I note that on 4th October 2002 the debtor had requested the liquidators to pay the sum to the creditors as he did not want to incur costs. The liquidators failed to heed the request of the debtor so it is only fair that they suffer their own costs.

Jiten Singh
JUDGE

At Suva
20th November 2002