In re Waya Development Company Ltd [2011] FJHC 201; HBE129.2008 (1 April 2011)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

Civil Action No. HBE 129 of 2008

IN THE MATTER OF WAYA DEVELOPMENT COMPANY LIMITED a limited liability company having its registered office at Suva.
PETITIONER

AND

IN THE MATTER of the Companies Act, CAP 247

BEFORE: Master Deepthi Amaratunga

COUNSELS: H.M Lawyers for the Petitioner
Muaror & Co. for Respondent
R. Patel Lawyers for Supporting Creditor

Date of Hearing: 16th March 2011
Date of Ruling: 1st April 2011

RULING

1. INTRODUCTION
   

1. The Petitioner has filed this petition to wind up the Respondent debtor Company for non payment of the professional services. The debt is not substantially disputed, but the debtor Company state that the debt was not owed by the Company, but to the Directors personally.
   

2. FACTS
   

2. Chronology of documents filed
   
   • (a) This matter commenced with the lodgment of the Winding Up Petition of the Petitioner on Thursday 13th November, 2008.
     
   • (b) On Tuesday 18th November 2008, the Petitioner filed the Affidavit Verifying Petition.
     

Under section 51 of the Interpretation Act, the period between the filing of the Petition on Thursday 13th November, 2008 and the filing of the Affidavit Verifying Petition on 18th November 2008 comprised four days m which is below 6 days as stipulated in the interpretation act, validating the lodgment of the Affidavit Verifying Petition, as the intervening Saturday and Sunday did not factor in reckoning of time as the time period was less than 6 days.

(c) The Affidavit of Service was filed on 27th January, 2009 and the Memorandum of due compliance was filed on 27th January 2009.

(d) On 25th February the Debtor Company filed an affidavit of Tikiko Tuwai Driu opposing the Winding Up.

(e) On 10th March 2009 the Petitioner filed an affidavit in response to the affidavit of Tikiko Tuwai Driu.

(f) On 9th April 2009, the Debtor Company filed a supplementary affidavit of Ronald Chan.

(g) The Court granted leave to the Petitioner to file a supplementary affidavit responding to the additional matters raised in the supplementary affidavit of Ronald Chan, and the Petitioner filed it on 24th April 2009.

3. The Debtor Company in their written submissions state that the debt if not owed by them, but owed by the two directors personally.
   

100. LAW AND ANALYSIS.
     

4. In Re-Comsol Fiji Limited 2009 FJHC 77 a dispute on substantial grounds was described thus:
   
5. Furthermore, if the company opts to dispute the debt it must do so on substantial grounds.
   
6. The test for a disputed debt was aptly stated in Palmers Company Law Vol. 13 as follows:
   

"To fall within the general principle the dispute must be bona filed 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 of reasonable grounds. Substantial means having substance and not frivolous, which disputes the court should ignore. There must be so much doubt and question about the liability pay the debt that the court sees that there is a question to be decided". (emphasis added)

[25] Certainly, grounds which are "frivolous or without substance" are inadequate; Mann v Goldstein [1968] 2 ALL ER 769 and 773.

7. In Avon Investments Limited HBE 0004 of 2003 Mr Justice Pathik was dealing with a situation where the Company having acknowledged the debt and made a settlement offer and part payment of the debt proceeded to then dispute the balance amount after the Petitioner issued Winding Up proceedings upon failure of the Company to pay off the balance debt. Pathik J said:
   

In this case there is no doubt that a specific sum or a liquidated amount was owned 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 owned was not a sufficient answer to the petition."

8. In these proceedings case, the Company acknowledged the debt by two letters dated 7th April 2008. In its second letter of 7th April 2008, it offered to settle the debt upon receiving financing. As much as the Debtor Company has acknowledged the debt by two letters written on 7th April, 2008, the Petitioner has also written two letters seeking identical amount of professional fees from the Petitioner as well as Messrs Rony Chan and Tikiko Tuwai Driu c/- Quality Development Consultants Limited on 2nd April 2008 . It should be noted from the two letters written by the Petitioner only the Petitioner has acknowledged the receipt of the letter seeking legal fees amounting $27,222.22 and Messrs Rony Chan and Tikiko Tuwai Driu c/- Quality Development Consultants Limited has neither acknowledged nor paid any amount.
   
9. The Debtor Company made a part payment of $10,000 (Ten thousand dollars) to the Petitioner on 11th July 2008 and made a further settlement offer, after initiation of these winding up proceedings, by letter dated 21st October, 2008.
   
10. It is to be noted this further settlement was suggested on the very same day on which the Petitioner issued a notice in terms of Section 221 of the Companies Act, before proceeding to windup the Company.
    
11. There is no doubt that the Debtor Company has acknowledged the debt and,the Debtor Company has made part payment for the debt, the Company has acknowledged the balance debt, after settling a sum of $ 10,000, and made an offer to settle it as late as on 21st Octobe, 2008. This action was filed on the 13th November, 2008.
    
12. It is pertinent to note that the dispute as to the debt was a creation after the institution of winding up action and cannot be considered a bona fide dispute. It is more of a creation, to confuse the minds on the available facts, rather than a genuine effort to dispute the debt.
    
13. In the matter of Silimaibau Sunset Express (Fiji) Limited the Director of the Debtor Company in that matter having acknowledged the debt and offered settlement terms later sought to dispute the debt when it came as a winding up action before Justice Pathik who said:
    

Upon a careful consideration of the affidavit evidence before me and the submissions made by both counsel it is abundantly clear that there is no dispute on substantial grounds on the claim made by the Petitioner against the Company.

It is clear that the debt which the said SILIMAIBAU as the Managing Director of the Company is denying has actually been admitted by him as the debt owned by the Company and further he has asked for time to pay as evidenced by said annexures 'A' and 'B' referred to here above.

There are other aspects of this matter which have been touched upon by both counsel and I have referred to some of them here above. It will be sufficient for me to say that I accept the submissions of Mr Maharaj in regard to debt and reject those put forward by Mr Raza in that connection. I find that there are no triable issues at all.

14. In re Savusavu Hire Plant Services Limited the Debtor Company having agreed on the amount owning and commenced partial payments towards settling its debt reneged on continuing those payments whereupon the matter went before Mr Justice Pathik who said:
    

From the affidavit evidence before me it abundantly clear, and there is no dispute about it, that the parties had reached an agreement in writing on 27 October 1997 as to the balance amount payable by the company. Subsequently the company made payments leaving the balance sum of $16,000.00 when the company stopped paying which gave rise to a statutory demand being made by the petitioner on 27 March 1998. Although on 15th April 1998, the company's solicitors replied to the demand they merely stated that there is substantial dispute in respect of the claim without details regarding the dispute and at the same time suggesting that the petitioner take the matter to court in the normal way and establish liability.

15. The Petitioner is claiming for the unpaid portion of $17,777 (Seventeen thousand seven hundred and seventy seven dollars) of an Invoice issued to the Company on the 2nd of April 2008 in the sum of $27,777 (Twenty seven thousand seven hundred and seventy seven dollars) and it was acknowledged by no less than two letters by the Debtor Company on 7th April, 2008,of which the Company had paid $10,000 (Ten thousand dollars) on 11th July 2008 leaving the balance amount of $17,777 (Seventeen thousand seven hundred and seventy seven dollars) as money due to the Petitioner from the Company for the legal services rendered, the details of which is included in the said letter written to the Debtor Company on 2nd April, 2008.
    

16. The Invoice dated 2nd April 2008 and issued by the Petitioner to the Company is annexed marked "C" to the affidavit of Jiaoji Savou sworn and filed on 10th March 2009.

17. The Company, under its letter head, acknowledged the Invoice by letters to the Petitioner dated 7th April 2008 annexed "D" and "E" to the affidavit of Jiaoji Savou sworn and filed on 10th March 2009. The acknowledgement of debt by the Company is unqualified.

18. It is to be noted that both the abovementioned annexed marked as 'D' and 'E' are dated on 7th April, 2008 and both letters are written on 'Waya Development Ltd' letter heads and states as follows

19. In the first letter marked annex "D" the Company states:

"We acknowledge bill of cost amounting to $27,222.22 (Twenty seven thousand two hundred and twenty two dollars and twenty two cents) for legal works rendered on the above matter".

20. In the second letter marked Annexure "E" the Company states:

"We acknowledge your bill of cost amounting to $27,222.22 (Twenty seven thousand two hundred and twenty two dollars and twenty two cents) rendered on the above matter.

The cost will be settled once the bank finances the project".

(emphasis is added)

21. It is to be noted both the abovementioned letters were addressed to the Petitioner, and both letters were signed by Ronald Chan. They were also written on the letter heads of the Debtor Company. The use of the Company letter heads would denote that the correspondence is not personal but on behalf of the Debtor Company. If not it was done deliberately to deceive the Petitioner, and that should not be held in favour of them.

22. The word 'We' has been used and there is only one signature which gives a clear indication that the reply is not done on any personal basis but on the basis that the acceptance was done on behalf of the company. That is the only interpretation given as there is only one signature. If not why has he used the company letter head and used the word 'we' without defining who exactly is denoted by the word 'we'.

23. It is clear that not only the amount but also, who owes the money is evident from the letters. The mere fact that there is no designation below the signature cannot taken to the advantage to argue that it was done on the personal basis.This is clearly a imagination and a creation to confuse the minds and cannot be considered as done in good faith. When a letter is written on the letter head of the company it is presumed that the transaction is done for and on behalf of the company. This was followed by another letter dated 21st October,2008 which again is written on a company letter head paying a part payment.

24. On 21st October, 2008 the Debtor Company, under its letterhead, wrote to the Petitioner acknowledging an email that gave notice of intended winding up and noted the outstanding monies owned by it and requested a three month term to settle the outstanding debt. It is also noted that it had paid a sum of $10,000 (Ten thousand dollars) in part settlement of the debt.

25. The letter is annexed marked "I" to the affidavit of Jiaoji Savou sworn and filed on 10th March 2009 and reads:

"We are in receipt of your email dated Saturday 18th October pertaining to the winding up action and wish to advise that we are currently developing the site and at the same time marketing the selling of Lots.

We note the outstanding monies owed and have paid you the sum of $10,000 towards the debt. We would request a three month term to settle this outstanding debt and bring matters to closure".

26. This letter is also written by Mr Ronald Chan, who accepted the earlier debt earlier on behalf of the Debtor Company and also used the Debtor Company's letter head as well as its funds to pay a part payment. If the contention of the Debtor Company is correct, all the above acts will amount to nothing but a fraud, to deceive the Petitioner, which should not be encouraged or presumed under normal circumstances. If such a fraud or deceptive acts were done, surely that party should not benefit from that fraud or deception.

27. The Debtor Company alleges that an initial invoice was issued to Messrs Rony Chan and Tikiko Tuwai Driu c/- Quality Development Consultants Limited on 2nd April 2008 and the letter written by the Petitioner to the Debtor Company on the same day, on the same amount creates a substantial dispute. The Petitioner has written two letters on 2nd April, 2008 . There is no dispute as to who has to pay the money as only the Debtor Company has acknowledged the debt, and also requested time to pay the amount stated in the Petitoner's letter dated 2nd April, 2008, and the Debtor Company followed it up with a payment of 10,000. The Debtor Company again, when in pursuant to Section 221 of Company Act, Debtor Company again wrote a letter seeking further time to settle the outstanding debt.If the Debt is owed by the said Messrs Rony Chan and Tikiko Tuwai Driu c/- Quality Development Consultants Limited why have they not replied to the letter of the Petitioner and even when the Section 221 notice was given no such indication was made.

28. If there was any doubt as to whom the legal services were rendered, that doubt is clearly eliminated by the Debtor Company acknowledging the invoice of the Petitioner and also admitting the amount and seeking time to pay the money. By the Debtor Company's own action, the letter written by the Petitioner for the same amount to Messrs Rony Chan and Tikiko Tuwai Driu c/- Quality Development Consultants becomes nugatory, and if there was any doubts it is fully cleared to all the parties including the Debtor that the legal services has to be paid by none other than the Debtor Company. The discrepancies in the description and of the professional work in two letters cannot create a substantial dispute, and in any event not only before, but also after Section 221 notice was given the Debtor Company has admitted the debt in no uncertain terms and has even shought further time to settle it.

4. CONCLUSION
   

29. There is no substantial doubt as to whom the legal services were rendered as it was acknowledged and a part payment was also paid by the Debtor Company. Taken the whole of correspondence in totality, from the acknowledgement of debt by the Debtor Company on 7th April, 2008 it is evident that Debtor Comapany owes money to the petitioner. This position is reinforced by a part payment by the Debtor Company, and at no point did the Debtor Company changed its position.

30. Even as late as 21st October, 2008 the position of the Debtor Company was that it would settle the remaining amount, and has sought 3 months. By disputing this debt on frivolous ground the Debtor has not only deprived the money due to the Petitioner for more than two years. This should not be delayed any further.

31. The request to wound up the debtor company is granted. The Debtor Company is to pay a cost of $750 assessed summarily to the Petitioner.

Dated at Suva this 1st day of April, 2011

Mr. Deepthi Amaratunga
Acting Master of the High Court

Suva