In re Snax & Drinks (Fiji) Ltd [2011] FJHC 273; HBE124.2009 (13 May 2011)

IN THE HIGH COURT OF FIJI ISLANDS
AT SUVA
CIVIL JURISDICTION

Civil Action No: HBE 124 of 2009

BETWEEN:

IN THE MATTER OF SNAX & DRINKS (FIJI) LIMITED
Plaintiff

AND:

IN THE MATTER OF COMPANIES ACT
Defendant

Counsel: Mr. Lateef for the Plaintiff.
Mr. Vakaloloma for the Defendant.

Date of Judgment: 13th May, 2011.

INTERLOCUTORY JUDGMENT

1. The petitioner, Fosters Pacific Ltd, has filed a winding up petition against Snax and Drinks Ltd (hereinafter referred to as the company) on 09.11.2009. An affidavit verifying the petition was filed on 17.11.2009.
   
2. Thereafter, the company sought to be wound-up, filed an inter- parte Notice of Motion seeking following orders:
   
   1. That the petitioner's winding up petition be struck out and/or stayed on the ground of irregularities and non-compliance with the Companies Act Cap.247 in particular Rule 25 of the Companies(Winding up) Rules.
      
   2. That the winding up petition be stayed on the ground that the affidavit verifying petition was not endorsed in terms of Order 41 Rule 9(2) of the High Court Rules.
      
   100. That the company be given an enlargement of time to file an affidavit in opposition.
        
3. In support of the motion, an affidavit was filed by one Sam Narayan, the Managing Director of the company.
   
4. In that affidavit the deponent states that the winding up petition suffers from substantial defects. It is further stated that the company did not file an affidavit in opposition since the company was still negotiating with the petitioner's solicitors in relation to the claim. The deponent further states that even after the petition was filed, the petitioner was still continuing to do business with the company and also the petitioner has filed the petition for an improper purpose as a means of debt recovery rather than being pursued as a genuine winding up application.
   
5. However, it is noteworthy that the company has not filed an affidavit in opposition nor has denied the debt, but raised some procedural issues.
   
6. Opposing the company's motion, one Alfred Chan, a Finance Controller of the petitioner's company has filed an affidavit. In that affidavit, he states that the winding up petition presented to the court on 16th day of December 2009, has complied with all the procedural formalities under the Companies (Winding up) rules and it, therefore, does not suffer from any substantial defects.
   
7. Both parties have filed their respective written submissions.
   
8. I shall consider the first argument raised by the company, i.e. the petitioner has failed to comply with Rule 25 of the Companies (Winding up) Rules.
   

Section 25 of the Companies (Winding up) Rules reads:

Every petition shall be verified by an affidavit, which shall be sworn by the petitioner, or by one of the petitioners if more than1, or, where the petition is presented by a corporation, by a director, secretary or other principal officer thereof, and shall be sworn and filed within 4 days after the petition is presented and such affidavit shall be prima facie evidence of the contents of the petition.

9. In the present case, the petition was filed on 09.11.2009, but the affidavit verifying the petition was filed on 17.11.2009, i.e. 08 days after the filing of the petition.
   
10. However, it could be noted that although the petition was filed on 09.11.2009, it was presented to and indorsed by the Chief Registrar on 16.11.2009. The petitioner submits that the computation of the four days starts after the petition is presented and, therefore, the affidavit verifying the petition was filed within the time limit stipulated in section 25.
    
11. According to section 25 of the Companies (Winding up) Rules, the affidavit verifying the petition shall be sworn and filed within 4 days after the petition is presented but not within 4 days after the petition is filed. In the present case, it is clear that the affidavit verifying the petition has been sworn and tendered on 17.11.2009, i.e. on the day after the petition was presented.
    
12. Therefore, I conclude that the petitioner has complied with Section 25 of the Companies (Winding up) Rules.
    
13. Further, the purpose of filing the affidavit is to verify the contents of the petition. In other words, by filing the affidavit, the information contained in the petition is presented to court in the form of evidence. Therefore, even if the petitioner fails to file the affidavit verifying the petition within 4 days after the petition is presented, but still has filed it within a reasonable time, it should not be considered as fatal to the winding up petition unless it is shown that a substantial injustice has been caused to the other party.
    
14. Especially, in light of section 202(1) of the Companies (Winding up) Rules, no proceedings shall be made invalid by reason of any formal defect or any irregularity unless it appears that an irremediable substantial injustice has been caused to the other party. Therefore, the defendant's first objection fails.
    
15. The company further argues that the Winding up petition must be stayed since the petitioner has not complied with the Rule 41 of the High Court Rules because the affidavit verifying the petition was not endorsed in terms of Order 41 Rule 9(2) of the High Court Rules.
    

Order 41 rule 9 (2) reads:

Every affidavit must be endorsed with a note showing on whose behalf it is filed and the date of swearing and filling, and an affidavit which is not so indorsed may not be filed or used without the leave of the court.

16. The petitioner submits that Order 2 rule 1 of the High Court Rules 1988 makes provisions for non compliance with rules and hence, failure to endorse the affidavit does not render the winding up proceedings null and void.
    
17. However, Order 41 rule 10(1) reads:
    

Subject to paragraph (2) an original affidavit may be used in proceedings notwithstanding that it has not been filed in accordance with Rule 9.

18. The above provision clearly enables the court to use its discretion while allowing the use of defective affidavits.
    
19. In Board of Directors of Ba Provincial Holding Co Ltd v. Ba Provincial Council & Others [2006] HBC 237 of 06 leave granted to use defective affidavit despite failure to comply with the mandatory rules where defendants have not been unduly prejudiced.
    
20. In Kim Industries Ltd {2000] (1) FLR 143 the issue of non compliance with Order 41 rule 9(2) was argued. In that case Gates J (as he was then) expressed his view regarding the requirement of an endorsement as follows;
    

'Such endorsement and format is particularly helpful in interlocutory proceedings where there may be as many as 3 or 4 summonses to be considered and several affidavits in the action filed for each of the summonses. The endorsement assists in picking up the relevant affidavit for the particular summonses to be heard. Sometimes the endorsement note is placed on the final page of the affidavit and such placing is also correct, although not as helpful for the reasons I have mentioned.'

21. However, it must be noted that, in none of the above cases, the failure to have the endorsement on the affidavit has been considered as fatal to the winding up proceedings.
    
22. Therefore, I conclude that the winding up petition shall not be stayed or struck out due to the non compliance of Order 41 rule 9 (2).
    
23. The company also seeks an enlargement of time to file affidavit in opposition. The company's position is that since the solicitors were negotiating with the petitioners claim, the company did not file an affidavit in opposition.
    
24. Once a petition and an affidavit verifying the petition are filed by the petitioner under section 25 of the Companies Act, it is considered as a prima facie evidence of the contents of the petition.
    
25. Therefore, if the company has a genuine dispute, it is obliged to file its affidavit in opposition. In other words, the company is required to tender their evidence by way of an affidavit in order to oppose the winding up petition. Therefore, if the company has failed to file an affidavit in opposition, it means that the company has not tendered any evidence in opposition to the petitioner's evidence.
    
26. In considering the company's application for extension of time I would like to highlight the following passage from the Privy Council judgment in Ratnam v. Coomaraswamy and Another [1964] 3 All.E.R.933 at 935.
    

"the rules of court must, prima facie, to be obeyed, and, in order to justify a court in extending the time during which some step in procedure requires to be taken, there must be some material on which the court can exercise its discretion. If the law were otherwise, a party in breach would have an unqualified right to an extension of time which would defeat the purpose of the rules which is to provide a time table for the conduct of litigation".

27. In the present case it is evident that the conduct of the company, as far as the action is concerned would amount to delaying the winding up proceedings unnecessarily. Has the company had a genuine commitment towards the settlement of the debt, indeed the court could have considered the application for enlargement of time but if it appears to the court that the conduct of the company would cause a substantial delay to the winding up proceedings and such an application for an enlargement of time shall not be granted.
    
28. In the present case, the petition was filed on 09.11.2009. Therefore, the company had ample opportunity to file its affidavit in opposition or settle the debt but instead of doing so the company has raised some trivial procedural issues in order to delay the proceedings.
    
29. If I were to consider the application for an enlargement of time, substantial reasons would need to be advanced by the company before such an enlargement is granted. However, in the instant case, there were no substantial grounds for granting the application for enlargement of time. Merely because the company's solicitors were engaged in negotiating with the petitioner, the company cannot ignore the rules and later use it as an excuse to escape from its liabilities. Apart from that, the counsel for the company has not advanced any valid reason to convince the court to enable it to decide in favour of the company.
    
30. Therefore the reasons advanced by the company in order to justify its application for enlargement of time to file affidavit in opposition are far from satisfactory and hence cannot be accepted.
    
31. On the above premise, I make following orders:
    
    1. The company's motion is dismissed.
       
    2. The winding up petition shall be heard.
       
    3. Cost will be in the cause.
       

Pradeep Hettiarachchi
JUDGE

13.5.2011