In re Furniture World Ltd [2002] FJHC 96; HBE0026J.2000S (8 February 2002)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

WINDING UP ACTION NO. 26 OF 2000

IN THE MATTER OF FURNITURE WORLD LIMITED

IN THE MATTER OF COMPANIES ACT 1983

Mr. T. W. Seeto for Petitioner
Mr. K. Muaror for Company

JUDGMENT

This is a disputed winding up Petition.

The NBF Asset Management Bank (the >petitioner=) has filed a Petition to wind up a limited liability company known as Furniture World Limited (the >company=) pursuant to s.221 of the Companies Act 1983 (the >Act=) for a debt of $257,926.72 (as at 27 February 2000).

The Company=s Manager Narendra Kumar has filed an undated affidavit in Opposition disputing the amount claimed saying, inter alia, that the Petitioner ought to proceed by way of Writ of Summons. The Petitioner has filed an Affidavit in Reply dated 4 May 2001 clarifying its position.

Background facts

The petitioner filed >memorandum of due compliance= on 16 June 2001 pursuant to Rule 28 of the Companies (Winding Up) Rules, 1983. As ordered, an Affidavit in Opposition sworn by Narendra Kumar, a Director of the Company, was filed on 24 August 2000.

Company=s contention

Through its Director in the said affidavit of Narendra Kumar the Company sets out in detail denying its indebtedness to the Petitioner in the sum of $257,926.72 and hence it did not make any payment on the alleged debt. It says that the Petitioner has failed to identify or articulate the composition of the alleged debt amount despite various requests by the Company.

In the said affidavit in item 4 is set out in detail explanation of the basis for the Company=s dispute of the alleged debt by the Petitioner and I do not propose to reiterate these details here suffice it to say that after the approved banking facility in the sum of $150,000.00 the Company says that it made payments amounting to $146.116.00. The company also said that Company security (the property) which formed part of the security for the loan was sold by the Bank for the sum of $123,000.00 but the petitioner had not notified the Company of such sale. It says, that means that taken together with cash payment of $146,116.00 the Company had already paid the petitioner the total sum of $269,116.00.

The Company says that notwithstanding such payments by it, it is now alleged by the petitioner that the Company still owes the sum of $257,926.72.

Not only that, the Company says that in or about March 1993 the petitioner appointed a Receiver who closed the business operations of the Company. The effects of such unjustified appointment was disastrous to the Company in that it not only stopped the business operations for the total period of the receivership but also involved very high costs for the period of the receivership. The Company says that their total revenue from the receivership has not been accounted to the Company.

The Company says that this attempt to wind up the Company is a clear abuse of the winding up provisions of the Act. It says that if the petitioner wishes to pursue this claim it should initiate it by way of a High Court writ of summons as it is >seriously and evidentially contentious=.

Petitioner=s contention

The petitioner submits in its Affidavit in Reply by Laisenia Takala, Senior Manager Rehabilitation, that the Company is indebted in the sum claimed and refutes the arguments put forward by the Company. She says that the petitioner is justified in winding up the company and that it is not an abuse of the process to do so. She says that the Company is unable to pay its debts.

The issue

The issue for the Court=s determination is whether the debtor company has a bona fide dispute on substantial grounds to enable the Court to prevent the winding up petition against it to proceed.

Petitioner=s counsel=s submission

To show whether the Company has a bona fide dispute, the learned counsel (Mr. Seeto) for the petitioner sets out in great detail in his written submission how the debt is made up and how over a period the company had in fact agreed on the amount of the debt and made payment and promised to make further payments. In this regard I refer to pages 1 to 5 of the submission.

Consideration of the issue

As agreed, both counsel filed written submissions for Court=s consideration and I found them to be very helpful.

There are certain principles governing the granting of a winding up order. 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 dispute as to debt and I have borne these in mind in considering the matter before me. There it is stated:

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@.

In Offshore Oil N.L. and Investment Corporation of Fiji Limited (Civil App. 29/84 F.C.A. at p.15 of cyclostyled judgment) 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@.

Also in Bateman Television Limited (In Liquidation) and Another v Coleridge Finance Company Limited 1971 NZLR p.929 Judicial Committee, 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)

In the written submissions of the petitioner are set out in considerable detail the dealings between the parties showing, inter alia, the state of accounts between them. It is noted that in Clause I of letter of 17 October 1997 the status of the account was accepted by the Company and there was no protest as to the state of the said accounts.

The petitioner says that it has >articulated= the composition of the said debt as is evidenced by the Bank Statement attached to the petitioner=s affidavit and shows the total amount outstanding as at 30 November 2000 as $287,558.39.

It is quite evident on the affidavit evidence before me, that at no stage the Company took any steps after service of s221 Notice by way of an action to dispute the debt on the alleged negligent manner in which the Company sold its Crown Lease property and also in respect of other alleged negligent conduct. I agree with Mr. Seeto that what the Company now appears to be applying for by its affidavit in opposition is in fact a Aside wind@ application for injunction which is not permitted by the courts. In this regard Fatiaki J=s statement in National Bank of Fiji v Abdul Kadeer Kuddus Hussein (Civil Action No. 0331 of 1998) is pertinent when he said at p.7 is >it either just or proper to allow by a >side-wind= an injunction which the Defendant has not seen fit to apply for in a properly constituted application@.

The Company raised a number of other points such as >receivership= which took place some seven years ago but there was a Deed of Release subsequently; it also raised the application of Fair Trading Decree 1992 but I see no merit in the Company=s submission on these matters for not having raised them at the appropriate time and in good time, it has missed the boat and cannot be raised in the present proceedings.

Conclusion

To conclude, for the above reasons on the facts and circumstances of this case and on the authorities on the subject of whether the alleged dispute is based on substantial grounds I hold that the plaintiff ought not to be prevented from proceeding with its petition to wind up the defendant Company. There is a substantial amount of money owing to the Petitioner and serious attempt has not been made to reduce the debt. There is no offer to deposit the alleged sum due into court so that the dispute can be adjudicated upon in a properly constituted action. In the outcome I find that since the dispute is not on >substantial= grounds within the meaning attributed to that word and on the authorities referred to hereabove by me, it is ordered that the petitioner be at liberty to proceed to wind up the Company. It is therefore directed that the Chief Registrar list the Petition for hearing before a Judge. I award costs to Petitioner in the sum of $250.00 payable by the defendant.

D. Pathik
Judge

At Suva
8 February 2002