In re Avon Investments Ltd [2003] FJHC 117; HBE0004J.2003S (27 June 2003)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

WINDING-UP ACTION NO. HBE0004 OF 2003

IN THE MATTER of AVON INVESTMENTS LIMITED

AND

IN THE MATTER of the Companies Act (Cap. 247)

Mr. A. Tikaram for the Petitioner
Ms. P. Madanavosa for the company

JUDGMENT

This is a Petition by Starest Furniture and Joinery Limited (the ‘petitioner’) to wind up Avon Investments Limited (the ‘company’).

The petition is opposed by the company.

After service of Petition the company had on 6 February 2003 by Summons applied to Court to restrain the Petitioner from further proceeding with the winding up Petition supported by an affidavit.

The amount claimed in the Petition is $13,400.00. The company admits owing the sum of $9900.00 but disputes the rest, namely $3500.00. The said sum of $9900.00 was on 20 March 2003 paid into Court as ordered.

Consideration of the issue

I have before me for my consideration written submissions from both counsel.

It is the balance sum of $3500.00 which is disputed by the company. The main ground for the dispute is as stated by the company’s counsel when she said as follows in the written submission:

In the present case reference is made to both paragraph 4 and paragraph 5 of the Affidavit in Support of Jung Mook Jun dated 6 February 2003. Paragraph 4 stated that despite the fact that the creditor had invoiced the debtor on the 3rd December 2001 of the sum of $4,400.00, according to the debtor the job was not completed but the job done was only worth $2,000.00. Furthermore, in paragraph 5 it states that the sum of $1,500.00 is also disputed as per the invoice dated 19th December 2001 in that of the 50 chairs that were hired at $50.00 each 30 were not in good condition as they were damaged. Therefore, the debtor submits that it would be unfair they have to pay for goods rented but not in a good condition. This eventually gives rise to an issue of law which needs to be determined in a Court of law.

The petitioner on the other hand through its counsel Mr. Tikaram has set out in great deal showing how the company after the first winding-up Notice dated 14 June 2002 for $18,400.00 gave a written agreement to pay off the outstanding account of $18,400.00 and at that time no dispute was raised by the company on this account. Thereafter certain payments are made but the company fell into arrears and so the Petitioner wrote to the company to clear its debt by 31 October 2002 as promised. However despite the Managing Director of the company Mr. Jung Mook Jun promising to settle the account and giving a guarantee that money would be transferred from Korea nothing was done.

Then a second and the present winding-up Notice dated 10 December 2002 for the balance sum of $13,400.00 is served. Whereupon the company offered to pay by weekly instalment of $500.00. But no dispute as to the said balance amount is raised in the winding-up Notice. The company makes a counter offer to pay but nothing was paid and no dispute was raised either. The company wrote seeking time until 8 January 2003 to pay but instead on that date Messrs. G.P. Lala & Associates for the first time raised dispute in the sum of $3900.00.

The question for the Court’s determination is whether there is a substantial dispute as to the balance debt alleged after considering the submissions made by counsel for the company to prevent the making of a winding up order against it.

The company says that the debt alleged is disputed. To be able to succeed in a case of this nature, the company has to prove that the dispute is on ‘substantial grounds’ (Re Lympne Investments Ltd 1972 2 All ER 385). 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.”

On the affidavit evidence before me and in the circumstances as outlined hereabove I find that there is no bona fide dispute in regard to the alleged debt. I agree with Mr. Tikaram that this is clearly a last attempt to raise the issue of ‘dispute’ when the second winding-up Petition is issued against the company. The goods for which the debt is due were supplied in December 2001 when the company took possession of the ‘furniture’ and has been in total control of it until and after 8 January 2003. None of the goods have been returned to the Petitioner at any time.

What was held in Batman Television Limited (in liquidation) and Another v Coleridge Finance Company Limited 1971 NZLR p.929 Judicial Committee, is worth noting. 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”.

In this case there is no doubt that a specific sum or a liquidated amount was owed by the Company, but I find that only to avoid payment the company says that it disputes the balance amount owing. In this kind of situation In re Tweeds Garages Ltd 1962 1 Ch 407 at 408 where the company admitted the existence of a debt to the petitioner but disputed the amount of the debt alleged in the petition, it was held:

“that the only qualification required of the Petitioner was that it was a creditor; and that, where there was no doubt (and there was none here) that the petitioner was a creditor for a sum which would otherwise entitle it to a winding-up Order, a dispute as to the precise sum owed was not a sufficient answer to the petition.”

In this case having found that the creditor’s debt is clearly established in that there is no dispute on substantial grounds, the correct test in approaching these matters is as Harman J said in Cornhill Insurance PSC v Improvement Services Ltd & Others 1986 1WLR 114 quoting from Ungoed - Thomas J in Mann v Goldstein (1968) 1WLR 1091 at 1096 where he said:-

“When the creditor’s debt is clearly established it seems to me to follow that this court would not, in general at any rate, interfere even though the company would appear to be solvent, for the creditors would as such be entitled to present a petition and the debtor would have his own remedy in paying the undisputed debt which he should pay. So, to persist in non-payment of the debt in such circumstances would itself either suggest inability to pay or that the application was an application that the court should give the debtor relief which it itself could provide, but would not provide, by paying the debt”.

In this case it appears to me that although the company says it is solvent it has chosen not to pay the debt, and the following words of Harman J in Cornhill (supra) apply to this case also:

“In my view in such circumstances the creditor was entitled to (a) threaten to and (b) in fact if it chose to present a winding up petition,....”

To conclude, for the aforesaid reasons, this petition must succeed. There is no bona fide dispute on substantial grounds permitting the court to restrain the Petitioner from proceeding with the petition. Here I find that the dispute alleged has been based on very trivial and insubstantial and flimsy grounds.

Therefore, in all the circumstances of this case unless the company deposits the said balance sum of money into Court within 7 days from the date of this judgment it is ordered that the company be wound up. Upon payment of the said sum the amount previously deposited in Court and this present sum is Ordered to be paid out to the Solicitor for the Petitioner. The Company is ordered to pay the costs of this action in the sum of $400.00 to the Petitioner’s solicitor within 7 days from the date hereof.

D. Pathik
Judge

At Suva
27 June 2003