In the Matter of Dayals (Fiji) Artesian Waters Ltd [2012] FJHC 1269; HBE126.2008 (8 August 2012)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

Civil Action No. HBE 126 of 2008

IN THE MATTER of DAYALS (FIJI) ARTESIAN WATERS LIMITED a limited liability company having its registered office at 1 Kings Road, Yalalevu, Ba, Fiji.

AND

IN THE MATTER of the COMPANIES ACT 1983, SECTION 221

BEFORE: Master Deepthi Amaratunga

COUNSELS: Mr. A. Prasad of Munro Leys for the Plaintiff
Ms. Natasha Khan for the Defendant

Date of Hearing: 1st April, 2011
Date of Judgment: 8th August, 2012

Judgment

A. INTRODUCTION

1. The Petitioner filed this petition for winding up of the Respondent Company for failure to honour the debt of $293,435.68. The notice of the debt in terms of the Section 221 of the Companies Act was served to the Respondent on 1st September, 2008. The Respondent paid $20,000 to the Petitioner on 2nd December, 2008 but did not settle the remaining debt and filed an affidavit in opposition, claiming that the materials supplied by the Petitioner was sub standard. There is no communication between the parties till this action was filed regarding a dispute as to the quality of the materials supplied. Even after the filing of this action a part payment was made by the Respondent without raising any issue as to the alleged quality of the materials supplied, and the alleged poor quality of the taste of the water cannot be linked to the Petitioner's materials that were supplied and used in the moulding of the plastic bottles manufactured by the Respondent at its factory. If the water quality was poor in some five individual cases that can be due to various factors and there is no evidence to suggest poor quality of materials as the cause for the alleged poor quality in water.
   

B. FACT AND ANALYSIS

2. The Petitioner and Respondent were in a contractual relationship whereby the Petitioner supplied PET resin to Respondent for the manufacture of water bottles. The supply of the resins began in November 2007 and the last invoice for these supplies was issued on 30 April 2008. The Respondent is the manufacturer of bottled water under the brand name Island Chill.
   
3. The debt owed to the Petitioner increased to a significant amount of $293,435.68. The Petitioner made requests for payment however, no payment was made. The Petitioner instructed Messrs Patel Sharma Lawyers to issue a notice in terms of Section 221 of Companies Act and after the filing of this action a part payment of $20,000 was made through Respondent's then solicitors. Though the Respondent state that the said settlement to pay the debt was on 'without prejudice' basis the email of the Respondent's then solicitor confirming the payment annexed as 'E' to the affidavit in reply does not state so, and state 'I received your fax re-payment. We are organizing some payments today to Patel Sharma.' (The Patel Sharma being the previous solicitor for the Petitioner). It is clear that even as late as 19th February, 2009 some payments were promised by the then solicitors for the Respondent.
   
4. Section 220 of the Companies Act Cap 247 states when a company may be wound up
   

"220. A company may be wound up by the court, if –

(a) The company has, by special resolutions, resolved that the company be wound up by the court;

(b) Default is made in delivering the statutory report to the registrar or in holding the statutory meeting;

(c) The company does not commence its business within a year from its incorporation or suspends its business for a whole year;

(d) The number of members is reduced, in the case of a private company, below 2, or, in the case of any other company, below 7;

(e) The company is unable to pay its debts;

(f) The court is of opinion that it is just and equitable that the company should be wound up;

(g) In the case of a company incorporated outside Fiji and carrying on business in Fiji, winding-up proceedings have been commenced in respect of it in the country or territory of its incorporation or in any other country or territory in which it has established a place of business."

The definition of inability of the company to pay its debt is described by section 221 of the Act "221. A company shall be deemed to be unable to pay its debts–

(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;

(b) If execution or other process issued on a judgment, decree or order of any court in favour of a creditor of the company is returned unsatisfied in whole or in part; or

(c) If it is proved to the satisfaction of the court that the company is unable to pay its debts, and, in determining whether a company is unable to pay its debts, the court shall take into account the contingent and prospective liabilities of the company."

The Respondent after service of the notice of debt in terms of the Section 221 of the Companies Act made part payment in the sum of $20,000 on 2 December 2008 without any serious dispute being raised as to the quality of the materials supplied. The Petitioner has accepted the payment without prejudice basis and this will not preclude the Petitioner from divulging the acceptance of the said sum as it is a clear indication of the acceptance of the Debt by the Respondent, though I do not need this facts to arrive at a decision that the debt is not disputed, as laid down in this judgment.

5. The law is that there has to be a substantial dispute that the debt is not actually owed. There is no evidence before the court to suggest that there is a substantial dispute on whether the debt is actually owed. The only evidence that the Respondent is relying on is an emails annexed to the affidavit in opposition annexed as JD 1 and JD2. These emails are dated 1st March, 2008 and 22nd April, 2008 respectively and the email date 1st March, 2008 stated 'We are now taking the water back and sending it for immediate analysis. So far it is 'five difference cases.' No analysis was produced and there is no evidence more than the alleged five different cases mention in the email and even those had not been inspected and lab results were not available.
   
6. If the matter was a serious dispute as to the quality of resins involving a payment of $293,435.68 there should be more evidence on the alleged incident connecting the Petitioner. No lad analysis was done and no evidence of such evidence directing the causation of the poor quality of alleges 'five cases' to the Respondent's supplied materials were forthcoming even after three years when this was heard in 2011.
   
7. All that the Petitioner is required to prove is that it is a creditor. In re Casual Shoes (Fiji) Ltd [1998] FJHC 133:
   

"In re TWEEDS GARADES LTD 1962 1 Ch p. 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. The grounds of dispute in the affidavit are that the materials supplied by the Petitioner was defective. There is no real evidence before the court to suggest that the materials supplied were defective. Affidavit in opposition states that there was a plastic taste in water, which they allege is a result of defective resins supplied by the Petitioner, but there is no independent evidence to support that contention. The smell of the water can be due to various factors and though the smell is referred as 'plastic smell' it need not be necessarily connected with resins supplied by the Petitioner to make the plastic as the failure of proper composition of the said materials at the time of moulding by the Respondent and or other factors can affect the poor quality of the contents in the bottles. There is no evidence linking the poor quality of water to the bottles and even if the bad taste is linked with the bottle it cannot be attributed to the Petitioner unless the materials supplied are tested separately as the making of the bottles were not done by the Petitioner.
   
9. In any event, the plastic taste could have been caused by a variety of reason. There is no lab analysis of plastic bottles to explain the reason for the alleged poor quality of the water to bottles made out of the resins supplied by the Petitioner. There is no lab analysis indicating whether plastic taste in the bottled water was a direct result of defective product supplied by the Petitioner. If the poor quality of the water is proved to be a direct result of poor quality of the bottle, since it was not made by the Petitioner further proof of poor quality resins supplied by the Petitioner is needed as poor processing or quality control on the part of Respondents or even the storage and delivery methods resulted such incident. So, even if the causation of the poor quality of the water is the plastic bottle further proof of low quality resin needs to be proved.
   
10. In re Casual Shoes (Fiji) Ltd [1998] FJHC 133 the Petitioner was the supplier of leather products to the Company. The Petitioner issued a winding up proceedings against Company for non-payment of leather supplied to the Company. The Company claimed that the debt is disputed as the leather supplied by the Petitioner was defective or not of good quality. The court said:
    

"The company says that the debt alleged is disputed. To be able to succeed in a case of this nature, the company has to prove that the dispute is on 'substantial grounds' (Re LYMPNE INVESTMENTS LTD 1972 All E.R. 385). In OFFSHORE OIL N.L. and INVESTMENT CORPORATION OF FIJI LIMITED (Civ. App. 29/84 F.C.A. at p.15 of cyclostyled judgment) BARKER J.A. said:

"The law is clear that there is a discretion in a Court seized of a winding-up petition, to decline t hear the petition where the debt is contested on substantial grounds."

On the evidence before me I find that there is no substantial dispute. The lateness of the allegations and the evidence of the company's insolvency indicated that it was looking for any defence to avoid payment of the amount due [COMPANY, A (No. 001964 OF 1991), Re, ex p. FIN SOFI HOLDINGS SA (1991) BCLC 737m HARMAN J.]."

11. In the case In re Casual Shoes (Fiji) Ltd [1998] FJHC 133, the court said that the alleged dispute of defective product was based on trivial and unsubstantiated and flimsy grounds. In this matter the alleged bad taste was confined to 'five cases' and there is no evidence of how many bottles were involved in the said five cases and in the manufacture of that number of bottles what quantity of the resin was involved, is not clear. The 'said five cases' had not been properly investigated to link the causation of the poor quality to the materials supplied by the Petitioner.
    
12. In re Khan's Shipping Company Ltd Civil Action No. 39 of 2004 the action was filed for debt arose in relation to a supply of fuel to the Company. The Company used the fuel in one of its sea going vessels. The vessel suffered engine damage and was towed back. The company alleged that the fuel was contaminated resulting in the damage to the vessel. The company suffered loss as a result. The court held that:
    
    • (a) There is no dispute that the product was supplied; and
      
    • (b) Therefore, there is no dispute of the amount claimed.
      

These factors were weighed against the Company's mere assertions and the court came to a conclusion that the company should be wound up as"-

(a) There is no evidence before the court proving the contamination; and

(b) There were no engineers report stating that there was damage done to the vessels owned by the company as a result of using contaminated fuel.

13. That there is no evidence before the court proving that the allegations of bad tasting water is a direct result of the resins supplied by Petitioner. There is no evidence at all that the poor quality is due to the bottles that were made out of the materials supplied by the Petitioner. In the moulding of the materials which was done by the Respondent some other materials and machinery would be utilized and unless the material that were supplied were tested and proven defective the poor quality of the goods cannot be linked to the materials supplied by the Petitioner.
    
14. There is no lab analysis of bottles that the bad tasting of water is a direct result of the resins supplied by Petitioner. The testing of the materials supplied to the Respondent has to be done at the time of delivery or soon after that and not after the bottles were made and filled with water and shipped to another country as the poor quality of water in such an instance could be due to various factors, apart from the quality of raw material, resin.
    
15. The Respondent do not disputed that the products were supplied nor have they disputed its value. Confirmation of contamination of products supplied by the Petitioner could be determined by lab test results. The Respondent also says that it has suffered loss as a result of the alleged defective products supplied; However, there is no evidence to support this allegation and why it did not take any action for that proves that these are only allegations unsubstantiated and in the analysis of the evidence I cannot attach any weight to such allegations.
    
16. The Petitioner also points out that the memorandum of due compliance was not filed before the first hearing date assigned by the Deputy Registrar at the time of the filing of the petition. This memorandum was filed subsequently and I will only quote companies winding up rules below in reply to the said contention and reject the same. Rule 202(1) states as follows:
    

'202(1) 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 in of opinion that substantial injustice has been causes by the defect or irregularity and that the injustice cannot be remedied by any order of that court.'

17. There is no injustice to the Respondent by filing the memorandum of due compliance after date fixed by the Deputy Registrar for hearing of the winding up application, since the hearing was only in 2011.
    

C. CONCLUSION

18. The Petitioner's debt is not disputed and the alleged poor quality of 'five cases' cannot be a reason for any dispute of the said debt due to following one or more reasons
    
    1. The alleged 'five cases' does not refer to any number of bottles.
       
    2. If there is a specific number of bottles then the question is how much resin or material were used in the manufacture of the said number of bottles, not revealed.
       
    100. There is no evidence that the poor taste of water was due to poor quality of the plastic bottles made out of materials supplied by the Petitioner.
         
    4. If the poor quality of the water is linked to the poor quality of the bottles, since the bottles were not made by the Petitioner there should be evidence to indicate that the poor quality of the resin supplied by the Petitioner was the direct result.
       

The Respondent failed to prove that the poor 'Plastic Taste' of the water is due to poor quality of the resin supplied to the Respondent by the Petitioner. In short the Respondent cannot rely on mere conjecture to dispute the debt. There is no evidence to support any substantial dispute as to the debt. I need not consider the part payment of the Respondent arrive at the conclusion that I arrived in the analysis of the evidence before me. In the circumstances I make an order to wind up the company and assess the cost of this action summarily at $1,250.

D. FINAL ORDERS

1. The Respondent company be wound up
   
2. The Petitioner is granted a cost of $1250 as the cost of this application assessed summarily.
   

Dated at Suva this 8th day of August, 2012.

Master Deepthi Amaratunga
High Court, Suva