Vinod Patel & Company (Lautoka) Ltd v Vimal Contructions & Joinery Works Ltd [2011] FJHC 194; HBF 36.2004L (29 March 2011)

IN THE HIGH COURT OF FIJI
AT LAUTOKA
CIVIL JURISDICTION

Winding Up Action No: HBF 36 of 2004L

BETWEEN:

VINOD PATEL & COMPANY (LAUTOKA) LIMITED
Petitioner

AND:

VIMAL CONSTRUCTIONS & JOINERY WORKS LIMITED
1st Respondent

AND:

BIMAL PRAKASH
2nd Respondent

INTERLOCUTORY JUDGMENT

Judgment of: Inoke J.

Counsel Appearing: Ms N Khan for the Petitioner.
Dr M S Sahu Khan for the Respondents.

Solicitors: Natasha Khan Assocs for the Petitioner.
Sahu Khan & Sahu Khan for the Respondents.

Date of Hearing: 16 December 2010
Date of Judgment: 29 March 2011

INTRODUCTION

[1] This case started off as a winding up proceeding in 2004. The Court file is made up of three large bundles of documents. They contain applications for committal, orders for sale of the Second Respondent's properties in addition to the usual winding up papers. The case has been taken on appeal unsuccessfully by the Respondents from this Court to the Court of Appeal in 2008. The judgment of Court of Appeal[1] is reported in Vimal Construction and Joinery Works Ltd v Vinod Patel and Company Ltd [2008] FJCA 98; ABU0093.2006S (15 April 2008) which concluded:

[58] In the earlier application before this Court Scott JA prefaced his decision with the words:

"this essentially straightforward litigation has become almost hopelessly confused as result of a multiplicity of applications, affidavits and rulings, several changes of solicitors, failure to follow the proper procedures and what appears to be an unnecessarily confrontational approach by the parties."

[59] This Court considers those words apt.

[60] It may be that the appellants were badly served by a series of lawyers, and if so the appellants may have remedies elsewhere.

[61] It is equally possible that the appellants failed to properly instruct those lawyers and changed lawyers for the purposes of frustrating the first appellant's creditors and the legal process.

[62] The true position is not something that this Court can determine but in either case the appellants must bear prime responsibility for the failures identified by Scott JA.

[63] The proceedings between these parties need to be brought to an end. The appeal or appeals are dismissed with costs for the reasons set out above.

[2] The attitude of the Second Respondent has not changed, unfortunately.

THE BACKGROUND

[3] The Respondent Company was placed in liquidation on 14 January 2005 by order of this Court. On 13 December 2005, the Petitioner filed an application for declaration pursuant to s 324 of the Companies Act that the directors of the Respondent Company, Birmal Prakash, the Second Respondent, Anjuman Lata and Jitendra Sen, were knowingly parties to the carrying on of the business of the company with intention to defraud the company's creditors and for an order that the company pay the Petitioner $54,420.50 with interest at 12% pa from 12 August 2003 to the date of payment. Connors J delivered his judgment on the application on 22 March 2006 in which His Lordship found that only the directors Bimal Prakash and Jitendra Sen had acted in breach of s 324 of the Act and made orders for preservation of certain real estate owned by the Company and/or Bimal Prakash.

[4] The Respondent Company then applied to have both the winding up order of 14 January 2005 and the declaratory orders of 22 March 2006 set aside. On 22 May 2006, Connors J refused to set aside those orders. Also on the same day, His Lordship, on the Petitioner's application granted leave for three parcels of land belonging to the Respondent Bimal Prakash to be sold to satisfy the Petitioner's debt.

[5] On 24 May 2006, the Respondents filed an application for stay and Connors J, on 25 May 2006, granted a stay of execution of his orders of 22 May 2006 on three conditions: (1) that $65,000 is paid into Court, (2) the mortgage payments with respect to 3 parcels of land be kept up to date, and (3) the "appellant shall comply with all orders, directions, rules and requirements of the Fiji Court of Appeal". The Court Order was subsequently registered against the three titles to the parcels of land in question.

[6] By Notice of Motion filed on 3 July 2009, Bimal Prakash applied to have the Court Order removed from the titles so that he could sell them. The application was filed ex-parte. On 9 July 2009, Mr S Maharaj appeared as counsel for him and informed me that the money paid into court has been paid out to the respondent's solicitors and only the question of costs remained. He said "technically all debts have been paid". The respondent had not contacted his client for some time and counsel convinced me to order cancellation of the registration of the orders on the titles. I gave the parties liberty to apply in respect of costs.

[7] That provoked a response from the respondent/petitioning company because on 18 October 2010, its solicitor filed and ex-parte application to have my order of 9 July 2010 be wholly discharged on the grounds that I had been misled by counsel for the appellant. On 22 October 2010 I heard Ms Khan ex-parte and ordered a stay of my 9 July 2010. The matter was to come back before me in November 2010 for mention. In the mean time, the respondents, true to form, once again changed solicitors to his current solicitors. On 12 November 2010, counsel agreed on a timetable for the filing of further affidavits and to continue the stay until determination of the application inter-partes. The inter-partes hearing took place on 16 December 2010 before me. This is my judgment.

THE APPLICATION

The current application is effectively to restore the various Orders of Connors J which had been unsuccessfully challenged on appeal. It is supported by the affidavit of the credit controller of the petitioning company filed on 18 October 2010. He says that apart from the $65,000 which was paid into Court and which has since been paid out to the Petitioner's solicitors, no further payments have been made to satisfy the Petitioner's debt. The interest and costs remain unpaid. A series of letters have passed between the solicitors as to how much is actually owed and negotiations have come to nought. There are three properties involved, CT13912, 13913 and 13914. Despite the Orders of 22 March and 22 May 2006 being registered on these titles, the Second Respondent has tried to have them cancelled to enable him to sell the properties and avoid payment of the Petitioner's debt.

[8] Mr Bimal Prakash filed an affidavit in reply on 13 December 2010. He objects to the Petitioner's affidavit on the grounds that it is invalid and irregular. He admits "owing some monies" to the Petitioner but only to the extent that as at 19 September 2008, the total amount owing was $31,985.27.

CONSIDERATION OF THE APPLICATION

[9] It is trite law that a party who seeks orders ex-parte must make full and frank disclosure. In South Pacific Aquatic Inc v Information Technology Services (Fiji) Ltd [2001] FJHC 97; Hbc0411j.2001s (5 December 2001), Fatiaki J as he then was cited the following authority:

The principle requiring full and frank disclosure in ex-parte applications has recently been enunciated and reaffirmed in Bank of Mellat v. Nikpour (1985) F.S.R. 87 where Donaldson, L.J. said:

"This principle that no injunction obtained ex parte shall stand if it has been obtained in circumstances in which there was a breach of the duty to make the fullest and frankest disclosure is of great antiquity. Indeed, it is so well enshrined in the law that it is difficult to find authority for the proposition; we all know it; it is trite law. But happily we have been referred to a dictum of Lord Justice Warrington in the case of R. v. Kensington Income Tax Commissioners, ex p. Princess Edmond de Polignac (1917) 1 K.B. 486 at p.509. He said: 'It is perfectly well settled that a person who makes an ex parte application to the court - that is to say, in the absence of the person who will be affected by that which the court is asked to do - is under an obligation to the court to make the fullest possible disclosure of all material facts within his knowledge, and if he does not make that fullest possible disclosure, then he cannot obtain any advantage from the proceedings, and he will be deprived of any advantage he may have already obtained by means of the order which has thus wrongly been obtained by him'."

Furthermore, Lord Cozens-Hardy M.R. in dealing with the consequences of non-disclosure in ex-parte applications aptly summed it up when he said in R. v. Kensington Income Tax Commissioners (op.cit) at p.505:

"...... the court ought not to go into the merits of the case, but simply say, 'we will not listen to your application because of what you have done'."

[10] The Second Respondent has admitted that the debt owed by his company and for which he is now liable has not been paid. That admission alone is sufficient for me to vacate the orders that I made ex-parte on 9 July 2009. On that occasion, his counsel informed me that all moneys have been paid. Bimal Prakash, in his affidavit in support filed on 3 July 2009, swore that the judgment sum and interest have been paid except for costs which the Petitioner has not filed an application for taxation of costs nor have its solicitors written about it.

[11] He has not made the fullest possible disclosure required of him. Indeed, he has misled the Court on the very foundation of his ex-parte application filed on 3 July 2009 in reliance on which I granted the ex-parte orders of 9 July 2009.

[12] With respect to the view expressed by Fatiaki J in South Pacific Aquatic Inc (supra), I am of the view that once it is shown that there has not been the fullest possible disclosure of the material facts, I am not permitted to go any further and re-consider the application inter-partes. To do otherwise would leave the non-disclosure unpunished.

[13] I therefore vacate the orders that I made ex-parte on 9 July 2009. For the avoidance of any doubt, the effect of this judgment is that all orders made by Connors J remain unvaried or undischarged except to the extent, if any, varied or discharged by the Court of Appeal in its judgment of 15 April 2008. Further, all actions taken pursuant to those ex-parte orders are null and void and of no effect.

COSTS

[14] The Petitioner asks for indemnity costs. I think this is one of those cases falling within the principles summarised in Lok v Singh [2010] FJHC 7; HBC321.2000L (20 January 2010) – material non disclosure bordering on contempt which has put the Petitioner to unnecessary expense. I assess costs at $3,000.

ORDERS

[15] I therefore order as follows:

1. The Ex-Parte Orders granted on 9 July 2009 and sealed on 15 July 2009 are wholly discharged and dissolved forthwith and all actions taken pursuant thereto are null and void and of no effect.
   
2. The Second Respondent is to pay the Petitioner's costs of $3,000 within 21 days.
   

Sosefo Inoke
Judge

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^[1] Byrne AP, Scutt and Powell JJA