Lodhias Ltd v Financial Import Services Pty Ltd [2005] FJHC 679; HBC0220.2004L (11 January 2005)

IN THE HIGH COURT OF FIJI
AT LAUTOKA
CIVIL JURISDICTION

CIVIL ACTION NO. HBC0220 OF 2004L

BETWEEN:

LODHIAS LIMITED
Plaintiff

AND:

FINANCIAL IMPORT SERVICES PTY LIMITED
Defendant

Counsel for the Plaintiff: Dr. Sahu Khan with Ms. S. Sahu Khan
Counsel for the Defendant: Mr. I. Fa

Date of Hearing & Judgment: 11 January 2005

EXTEMPORE JUDGMENT

This matter comes before the court by way of Notice of Motion filed on behalf of the plaintiff seeking that the defendant be restrained from commencing and or taking any steps for winding up proceedings against the plaintiff until the final determination of the action. The plaintiff in support of the motion relies upon the affidavits of Chandu Lodhia sworn on 22^nd July 2004, 16^th September 2004 and 7^th January 2005.

The motion is opposed and the defendant relies upon the affidavits of Debbie Nicholson filed on 30^th August 2004 and 6^th December 2004.

Written submissions have been filed on behalf of the plaintiff and supported by further oral submissions by Dr. Sahu Khan and oral submissions have been made by Mr. Fa on behalf of the defendant.

The Law

As the relief sought by the plaintiff is injunctive relief and as it is sought on an interlocutory basis, the matter requires a consideration of the fundamental principles as detailed by Lord Diplock in American Cyanamid v Ethicon Ltd [1975] UKHL 1; [1975] A.C. 396. At page 406 His Lordship said:

“My Lords, when an application for an interlocutory injunction to restrain a defendant from doing acts alleged to be in violation of the plaintiff’s legal right is made upon contested facts, the decision whether or not to grant an interlocutory injunction has to be taken at a time when ex hypothesi the existence of the right or the violation of it, or both, is uncertain and will remain uncertain until final judgment is given in the action...The object of the interlocutory is to protect the plaintiff against injury by violation of his right for which he could not be adequately compensated in damages recoverable in the action if the uncertainty were resolved in his favour at the trial; but the plaintiff’s need for such protection must be weighed against the corresponding need of the defendant to be protected against injury resulting from his having been prevented from exercising his own legal rights for which he could not be adequately compensated under the plaintiff’s undertaking in damages if the uncertainty were resolved in the defendant’s favour at the trial. The court must weigh one need against another and determine where “the balance of convenience” lies.”

His Lordship further said at page 407:

“It is no part of the court’s function at this stage of the litigation to try to resolve conflicts of evidence on affidavit as to facts on which the claims of either party may ultimately depend nor to decide difficult questions of law which call for detailed argument and mature considerations. These are matters to be dealt with at the trial.”

As the matter is also one involving winding up proceedings, it is necessary to consider the issues applicable in granting of an injunction restraining the presentation or prosecution of a winding up petition.

In Bryanston Finance v De Vires (No.2) [1976] 2 WLR 41, Buckley J. discussed the abuse of process in some length on page 52 where he said:

“If it could now be said that, on the available evidence, the presentation by the defendant of such a petition as is described in the injunction would prima facie be an abuse of process, the plaintiff company might claim to have established a right to seek interlocutory relief. Otherwise I do not think it can. If it were demonstrated that such a petition would be bound to fail, it could be said that to present it, or after presentation to seek the prosecute it, would constitute an abuse.”

At page 53 he said:

“The right to petition the court for a winding up order in appropriate circumstances is a right conferred by statute. A would be petitioner should not be restrained from exercising it except on clear and persuasive grounds even though advertisement of petition may cause much harm to the company’s business and reputation.”

Facts

It is necessary to look at the facts in the light of the earlier references to the words of Lord Diplock in American Cyanamid.

It is contended on behalf of the plaintiff that the transaction between the plaintiff and the defendant was one whereby the defendant provided letters of credit for the plaintiff to facilitate delivery of powdered milk from the supplier Murray Goulburn Co-operative Limited (MGCL). It is further contended on behalf of the plaintiff that as the transaction involved the issue of the letters of credit by the defendant on behalf of the plaintiff, it was a transaction in breach of the Exchange Control Act (Cap. 211) and therefore illegal and therefore unenforceable.

This submission is made notwithstanding that numerous admissions have been made on behalf of the plaintiff that the monies are in fact owing to the defendant.

On behalf of the defendant, it is submitted that the transaction is one where the defendant issued a letter of credit to the supplier (MGCL) to facilitate the purchase of powdered milk, which was then on sold to the plaintiff. The plaintiff then endorsed a bill of exchange through the Bank of Baroda in favour of the Commonwealth Bank of Australia for payment to the defendant of the purchase price of the powdered milk and the disbursements associated with that purchase. Such disbursement including the costs associated with the letter of credit.

The annexures to the affidavit of Debbie Nicholson filed on the 30^th August 2004 include invoices issued by the defendant company to the plaintiff and these invoices are in some instances described as being “invoice for sale of goods as follows” and in one instance an invoice for interest with respect to the late payment of the Bill of Exchange and in another an invoice for the costs of bank bills relating to various enumerated orders.

I am satisfied that the evidence before me in the affidavits supports the defendant’s submission that is, that the letters of credit issued by the defendant to the supplier, MGCL, for the purchase of powdered milk to be on sold to the plaintiff and that the plaintiff subsequently paid by way of Bill of Exchange endorsed in favour of the defendant the purchase price of the powdered milk and the disbursement associated with the acquisition of it.

It follows that I find that the transaction is not in breach of the Exchange Control Act and is therefore not illegal. I note in passing that it would appear that a similar argument was run on behalf of the plaintiff before Mr. Justice Singh in Lodhias Limited v Geoffrey Hughes (Export) Pty Limited – HBC0140 of 2004L.

I note that His Lordships similarly found the transaction not to be as submitted on behalf of the plaintiff.

It is disappointing that the authority was not brought to my attention by the plaintiff in these proceedings and only came to light as a result of the defendant’s submission very late in the proceedings.

Conclusion

I cannot be satisfied that the petition “would be bound to fail” and accordingly I cannot be satisfied that to proceed with a petition would be an abuse of the courts process in accordance with the words of Buckley J. in Bryanston Finance v De Vires.

Whilst it may well be that there are issues that cause the debt to be disputed these are matters for the consideration of the court when dealing with the winding up proceedings and are not matters to dominate in these proceedings which are proceedings seeking an injunction to restrain winding up proceedings.

When taking account the 3 tests as described in American Cyanamid whist there may be a triable issue, I cannot be satisfied that damages would not be an adequate remedy and I am satisfied that the balance of convenience lies in favour of the defendant in the circumstances as this case.

Orders

1. Plaintiff’s motion filed on the 22^nd July 2004 is dismissed.

2. Plaintiff is to pay the defendant’s costs.

JOHN CONNORS
JUDGE

At Lautoka
11 January 2005