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High Court of Fiji |
IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION
Civil Action No: HBE 97 of 2008
IN THE MATTER of PACIFICCONNEX INVESTMMENT LIMITED formally known as SASHA LIMITED
IN THE MATTER OF THE COMPANIES ACT
BETWEEN:
VODAFONE FIJI LIMITED
Petitioner
AND:
PACIFICCONNEX INVESTMENT LIMITED
Respondent
FINAL JUDGMENT
Judgment Of: Ms Dias Wickramasinghe J.
Counsels Appearing: Neel Shivam Lawyers - for the Plaintiff
R. Patel Lawyers - for the Defendant
Solicitors: Mr M.Saneem – for the Petitioning Creditor
Mr R. Nand - for the Respondent
Mr S. Valenitabua – for Party Intention to support
Winding Up hearing: – Digicel Fiji Ltd
Date of Hearing: 12 August 2010
Date of Judgment: 30 August 2010
Legislation:
Cases referred to:
INTRODUCTION
[1] The Petitioning Creditor, Vodafone Fiji Limited, filed this action moving court to wind up Pacificconnex Investment Limited (Debtor Company) on the basis of its inability to pay debts owed to the Petitioning Creditor.
[2] This matter comes before me as part of the jurisdiction of this court under section 213 of the Companies Act read with section 2 of the Companies Act and section 6 of Administration of Justice Decree 2009 (Decree 9).
Factual Matrix
[3] The Petitioning Creditor had between the period of 12th December 2005 and 27th June 2006, provided various network services agreements and 3 blackberry and 4 mobile devices listed on post paid plans to the Debtor Company. The Petitioning Creditor claims that since the Debtor Company defaulted payment it was compelled to prematurely terminate these agreements. The Petitioning Creditor estimates the total debt at $7,665.41.
[4] On 3rd March 2008, the Petitioning Creditor filed Notice of Demand and intention to wind up.
[5] Following companies filed Notice of Intention to appear and support the Petition.
| Name | Debt |
| $15,160.06 |
| $38,775.42 |
| $ 5,000.00 |
[6] In response, the Debtor Company filed an Affidavit in Opposition on the basis that;
[7] Both parties filed comprehensive written submissions. At the hearing while the counsel for the Petitioning Creditor made oral submissions, counsel for the Debtor Company informed court that he would only rely on the Affidavit in Opposition filed by the Debtor Company and the written submission, as he had no further instructions from his clients.
[8] Both Petitioning Creditor and the Debtor Company, agreed and admitted to the procedural correctness of filing and serving of all documents in terms of the Companies Act (Act) and Companies (Winding Up) Rules at [Cap. 247 Rev 1985 (Subsidiary Legislation) (Winding Up Rules)]. A Memorandum of due Compliance was filed on 7th November 2008 which forms part and parcel of the record.
[9] The following submissions were advanced at the hearing on behalf of the Petitioning Creditor.
LEGAL MATRIX
[10] It is trite law that a creditor should not use winding up proceedings in order to force a debtor to pay a disputed debt.
[11] It is therefore incumbent upon the court to first determine whether the application for winding up is an abuse of the due process of the court. This general principle has been accepted in several judicial decisions.
"Of cause the question whether this is a debt or not may be possibly be tried be a winding – up petition: but it has been said over and over again that the presentation of a winding up petition is not a convenient, and often not a proper method of trying a disputed debt. If there is any reasonable ground for disputing the existence of the debt- if the question is not a mere quantum, but whether there is in fact a debt or not - a petition ought not to be presented, and therefore the Court ought to restrain the presentation of the petition".
To fall within the general principle the dispute must be bona fide in both a subjective and objective sense. ............ "substantial" means having substance and not frivolous, which disputes the Courts should ignore. There must be so much doubt and question about liability to pay the debt that the Court sees that there is a question to be decided. The onus is on the company 'to 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 proceedings'........the court's discretion will be exercised in the light of all the circumstances existing ".
[12] This action for winding up has been filed on the basis of the Debtor's inability to pay its debts in terms of section 221 of the Act. The Petitioning Creditor alleges that it served the statutory demand, but the Debtor Company failed to pay it, therefore by operation of law, viz the deeming provision stipulated in section 221(a) of the Act, the creditor is entitled to an order ex debito justitae.
[13] If the Petitioning Creditor has a prima facie right to an order for wind up due to the deeming provision stated above, a question then arises as to whether this court can further look into the dispute or even determine whether there is an abuse of the court process in such an instance.
I find that section 223(1) of the Act shed light on this matter;
"On hearing a winding-up petition, the court may dismiss it, or adjourn the hearing conditionally or unconditionally, or make any interim order, or any other order that it thinks fit, but the court shall not refuse to make a winding-up order on the ground only that the assets of the company have been mortgaged to an amount equal to or in excess of those assets or that the company has no assets".
[14] It is evident from a reading of this section that, even when the Winding Up application falls within the deeming provision of section 221(a), the court has a duty to look into the merits of the winding up action without acting merely as a rubber stamp. If such an interpretation is not founded, it would pave ways for creditors to induce pressure on solvent companies to pay monies, without resorting to civil action, which could otherwise be bona fide disputed. I do not think the legislature at any point intended such a situation.
[15] In this regard, I also consider in support, the following passage of Palmers Company Law Volume 13, at 15.212;
"powers exercisable by court on hearing a petition for winding up, are so drawn as to indicate that the court does indeed enjoy a discretion that is extremely wide ranging. Certain themes have evolved, however, to suggest that there are prevalent judicial attitudes as to the manner in which such discretionary power should be exercised. In the interest of consistency and in furtherance of overall purposes of insolvency legislation".
[16] Inoke J in the case of In Re Khan Buses Limited [2009] FJHC 213; HBF015, 2009L discussed at length the law relating to abuse of court process and especially at page 6 he quoted with approval Williams –v- Spautz [1992] HCA 34; (1992) 174 CLR 509 and stated as follows:
"Williams –v- Spautz is authority that the Court has an inherent jurisdiction to prevent an abuse of process. The circumstances in which he found abuse of process clearly indicate that he was applying the long standing principles that govern the court's exercise of discretion when dealing with a winding-up application".
[17] This court is thus of the view that despite the deeming provision, the court is bound to look into the merits of the case, especially the objections of the debtor, before making a final determination to wind up.
[18] Let me therefore first determine whether there is in fact a bona fide dispute established both substantive and objective sense and this application is not an abuse of the court process.
[19] The main objection advanced by the Debtor Company is that the Vodafone bills do not relate or reflect the Debtor Company. The Debtor Company further states that, since December 2006, the business of the company is basically closed down and therefore they are unable to verify the alleged debt, especially as its Directors are currently imprisoned facing criminal charges. The debtor also states that until such time it could verify that the debt is just lawful and not disputed; it is unable to pay its debts.
NAME CHANGE OF THE COMPANY
[20] Let me now examine the main objection of the Debtor Company where it alleges that the Vodafone bills does not relate to its company but to a company named "Pacificconnex Limited" . It alleges that the company sought to be wound up is a different company, viz "Pacificconnex Investment Limited".
[21] I have considered the certificate issued by Registrar of Companies attached to the Affidavit in Response, filed by Arvind Dutt, where the Registrar has certified that SASHA LIMITED which was incorporated on the 29th day of February, 2000 changed its name by Special Resolution and with the approval of the Registrar on the 14th day of January, 2004 to Pacificconnex Limited and again by Special Resolution and with the approval of the Registrar on the 31st day of August, 2005 changed its name to "Pacificconnex Investment Limited".
[22] The certificate of the Registrar clearly indicates that the Debtor Company had undergone 3 name changes since its incorporation and was formally known as Pacificconnex Limited and SASHA LIMITED. I am unable to accept that the Debtor Company was unaware of this name change when the Affidavit in Opposition was filed. Further, the Debtor Company should have been fully aware or ought to have been aware of its own name change. The court therefore rejects the objection that the relevant bills have been sent to a company unknown to the Debtor.
[23] This Court also agrees with the submission of the Petitioner's Counsel that the changing of names of a company has no bearing to the rights of the parties as stipulated in Section 22(4) of the Companies Act, which reads:
"change of name by a company under this section shall not affect any rights or obligations of the company or render defective any legal proceedings by or against the company, and any legal proceedings that might have been continued or commenced against it by its former name may be continued or commenced against it by its new name"
[24] I therefore conclude that the objection of the Debtor Company that the debt relates to a company unknown to the Debtor Company, or the assertions that the Debtor Company was unaware of the debt is baseless, frivolous and none other than a mischievous attempt to delay the speedy conclusion of this winding up proceedings.
[25] Let me now examine the arguments advanced by the Petitioning Creditor.
VALIDITY OF THE AFFIDAVIT IN OPPOSITION.
[26] The Counsel for the Petitioning Creditor moved this court to disregard the Affidavit in Opposition on the basis that it is defective and submits;
[27] The deponent, Sereana Kalesita, in her affidavit deposes that she is the legal clerk of Messrs R Patel & Co, who acts as Solicitors of the Debtor Company. In paragraph 1, she avers that she was authorized to depose to the affidavit by Ballu Khan, the Director, as he was out of the country when the affidavit was sworn. She however does not produce any document in support.
[28] The Counsel of the Petitioner strongly argued that the Affidavit in Opposition can only be signed by persons stated in section 40 of the Act.
[29] Section 40 of the Companies Act reads as follows.
"A document or proceeding requiring authentication by a company may be signed by a director, secretary or other authorized officer of the company, and need not be under its common seal"
[30] I am of the view that this section applies when attesting company documents for the purpose of authentication only and does not necessarily apply when deposing affidavits. Affidavits are a source of providing evidence and anyone privy to knowledge and information has a right to depose to an affidavit.
[31] I however find that the affidavit filed on behalf of the defendant by Sereana Kalesita, has been filed in breach of HC Rules 41 Order 5.
[32] High Court Rules 41 Rule 5(1) requires a deponent to depose to facts contained in an affidavit, which are within the deponent's own knowledge. The only exception to this rule is if the affidavit is used for interlocutory proceedings where the deponent is permitted under Order 41 Rule 5(2) to depose to facts or statement of information or belief with the sources and grounds thereof.
[33] The instant matter relates to a winding up application, which is not an interlocutory proceeding. In the circumstances, the affidavit of Sereana Kalesita, must satisfy this court that the facts deposed to by her are within her personal knowledge. Although her affidavit states that she was authorized to depose to the affidavit as a legal clerk, the affidavit does not contain an averment to demonstrate her personal knowledge of the information that she has deposed to in the affidavit. As observed by Phillps J in the case of Manan v Khan [2008] FJHC 275 HBC 338.2007, I am of the view that the solicitor's clerk cannot swear to an affidavit in a Winding Up action unless proven that he/she has personal knowledge of the facts. In this regard, I quote the following paragraph form the above case of Pillips J.
"At the outset, it must be stated that the affidavit in support is defective. It contravenes Order 41 rule 5(2) in that the deponent has not disclosed the sources or grounds of her belief as to the matters deposed to. Moreover it is sworn by a solicitors clerk, a practice which unfortunately continues despite numerous pronouncements cautioning counsel about the inappropriateness of the practice."
[34] For the foregoing reasons I conclude that the affidavit of Sereana Kalesita, is defective.
[35] I have also considered the provisions enumerated in Rule 202 (1) of the Companies (Winding Up) Rules which states;
"No proceedings under the Act or these Rules shall be invalid by reason of any formal defect or any irregularity, unless the court before which any objection is made to the proceedings is of opinion that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by any order of that court."
[36] Considering that the deponent is only a legal clerk as opposed to an employee of the Debtor Company, I also hold that it was imperative for the deponent to have attached a copy of the authorization to the affidavit in terms of High Court Rules Order 41 Rule 11. The court also concludes that the omission and the non- disclosure of the sources of the information of which she deposed to, does cause a substantial injustice to the Petitioning Creditor. Affidavit is an accepted form of placing evidence before judicial proceedings. When the deponent is deposing as a legal clerk in a winding up proceeding, a simple assertion by the deponent stating she received authorization would in my mind not be sufficient to satisfy the provisions of High Court Rule 41 Order 5,
[37] Although I have determined that the affidavit in opposition is defective and have rejected the objections of the Debtor Company this court is still required to determine whether the plaintiff has proved his application for winding up.
Let me now analyze the Petitioning Creditors application for wind up.
[38] The petition for winding up in this action is made on the basis that the Debtor Company is unable to pay its debts.
[39] The Court can make a winding up order on any of the grounds contained in section 220 of the Companies Act and inability to pay its debts is one such ground upon which a company could be wound up, in terms of section 220 (e) of the Act.
[40] Section 221(a) of the Act defines the instances where a company could be deemed unable to pay its debts. For convenience, I reproduce the relevant part of section 221(a) of the Act, which reads thus:
(a) if a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding $100 then due has served on the company, by leaving it at the registered office of the company, a demand under his hand requiring the company to pay the sum so due and the company has, for 3 weeks thereafter; neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor.
[41] The aforesaid deeming provision creates a rebuttable presumption that a company is deemed unable to pay its debts if proven that;
[42] The Petitioning Creditor had on the 3rd of March 2008, served notice of demand and notice of intention to wind up. The parties admit the procedural correctness of serving the notice and other documents under the Act and the Companies Winding Up Rules. The parties agree that the debt demanded by the Petitioning Creditor from the Debtor Company, Pacificconnex Investment Limited remains unsettled up to date.
[43] The failure of the Debtor Company to comply with the statutory notice served under section 221(a) of the Act requires this court to deem that the Debtor Company is unable to pay its debts. In such an instance, it is not germane to determine whether a Debtor Company is solvent or not. Neither it is relevant for this court to determine whether the Debtor Company has assets to cover its debts. By operation of law, viz section 221(a), the company must be necessary deemed insolvent if the court is satisfied that the application is not an abuse of the due process of court.
[44] This Court therefore concludes that the Petitioning Creditor has satisfied the court that it duly served the statutory demand, pursuant to section 221(a) of the Companies Act, but the Debtor Company has failed to pay the debt within the statutory period. I also conclude that the dispute before this Court is bona fide and not an abuse of the court process. In the circumstances this court concludes that Pacificconnex Investment Limited is unable to pay its debts therefore should be wound up.
Cost
[45] The court assesses cost in the sum of $750 to be paid within 21 days hereof.
Orders
Ms D.Dias Wickramasinghe
JUDGE
At Suva
30 August 2010
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