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In re Amunuca Resort Management Ltd [2012] FJHC 1337; HBE9.2012 (19 September 2012)

IN THE HIGH COURT OF FIJI AT SUVA
COMPANIES JURISDICTION
Companies (Winding Up) No. HBE 09 of 2012


IN THE MATTER of
AMUNUCA RESORT MANAGEMENT LIMITED


AND


IN THE MATTER of THE COMPANIES ACT (CAP 247)


BEFORE : Master Deepthi Amaratunga
COUNSEL : Mr. Krishna R for the Petitioner
Ms. Natasha Khan for the Respondent Company


Date of Hearing : 16th July, 2012
Date of Judgment : 19th September, 2012


JUDGEMENT


  1. INTRODUCTION
  1. The Plaintiff filed this petition seeking winding up of the Respondent Company, upon the non payment of its debt for the supply of the fuel. The Respondent Company does not deny that it obtained fuel from the Petitioner, but it state that it is unable to ascertain the veracity of the claim. The Respondent Company managed a resort and the fuel was purchased for the said resort by the Respondent and it was allegedly taken over by the receivers. The Respondent alleges since the resort was taken over by receivers, they cannot ascertain the fuel stock at the time of the change of the possession. This is a lame excuse in order to create a doubt in mind and does not create a bona fide dispute between the Petitioner and Respondent as to the supply of the fuel on credit. The Petitioner has supplied fuel to the Respondent on credit as evidenced from the delivery dockets and taking over of the resort by a third party cannot create a dispute for the payments for the fuel already supplied to the Respondent. The Respondent is utilizing, the unforeseen taking over of the resort to its advantage by delaying the payments to the Petitioner and any dispute as to the stocks at the hand at the time of taking over of the resort is a matter between the Respondent and the third party and Petitioner is not a privy to such an issue merely because the Respondent was facilitated through credit payment. Petitioner has supplied details of the delivered stocks to the Respondent including the delivery dockets which were signed at the time of delivery by the party who accepted the consignment of fuel and the evidential proof of supply and acceptance of fuel was submitted to the Respondent and they were not disputed and the payment should be made to that effect. No dispute as to the debt between the Petitioner and Respondent. Since the Petitioner has invoked the deeming provision in the Companies Act, for the winding up of the Respondent, the consideration of the financial status of the Respondent is irrelevant and non-issue in this matter.
  1. FACTS
  1. The petition of Pacific Energy (South West Pacific) Limited (the Petitioner) dated 21 February 2012 sought that:

A total of 11 creditors of Respondent support the Petition.


  1. Analysis of Law and Evidence
  1. The following affidavits have been filed in these proceedings:
  2. The Respondent state that:

Respondent also claims that it is not insolvent which is irrelevant to this matter as the Petitioner has invoked the deeming provision in the companies act.


  1. On or about 12 January 2012, Petitioner served on Respondent a notice under section 221 of the Companies Act at its registered office at Parshotam & Co., Level 2, Mid City, Corner of Cumming Street and Waimanu Road, Suva . The Notice demanded payment of $120,575.02.
  2. On or about 16 January 2012, Respondent's lawyers wrote to Pacific Energy's lawyers stating that '[t]here is no way for ARML (Respondent) to verify the claims as all business records was stolen by the Receivers ...'
  3. On or about 19 January 2012, Petitioner's lawyers replied to the 16 January 2012 letter delivering to Respondent with copies of the invoices and delivery dockets relating to the demand in the Notice, but no further communication was sought by the Respondent indicating that the debt was admitted. The notice expired on or about 31 January 2012. Respondent failed to pay the sum demanded by the Petitioner and only reason given was that they were unable to verify the amounts stated in the invoices, but I do not have any material to show that such request was made from the present manages of the resort for any accounts and for other details of the supply of fuel. This shows the attitude of the Respondent who seek to refuge under the unforeseen taking over and trying to convert in to a windfall in order to delay the payments to suppliers including the Petitioner.
  4. The Petitioner has responded to the issues raised by Respondent as follows:
  5. In October and November 2011, Pacific Energy supplied a total of $189,886.07 (VIP) worth of fuel products to Respondent at Amunuca Island Resort and Spa, on Tokoriki Island in the Mamanucas as follows


Reference
Delivery date
Amount ($)
Invoice No.
Deliver Docket No.
2 October 2011
40,466.65
101000011718 & 101000011715
90577 & 90576
17 October 2011
45,741.11
101000011888
90595
1 November 2011
27,196.12
101000012281 & 101000012282
90617 & 90618
9 November 2011
49,556.50
101000012461 & 101000012462
90759 & 90760
25 November 2011
27,480.69
101000012721 & 101000012722
90788 & 90790
Total
190,441.07
Less Credit Note (1 Nov 11)
575.00
Sum Payable
$189,886.07

  1. On 2 December 2011, the Petitioner has ascertained the existing stocks of fuel at the Resort. Stocks wroth $69,291.05 were held at the Resort on 2 December 2012, when the alleged taking over took place. The Respondent dispute this fact and state there could not have been such verification, but how the deponant can state for certain that such a verification was not done is not clear. The deponent of the affidavit in opposition has not verified this fact from the person who was in charge of the fuel tank at that time. So, it is a mere allegation and if the facts stated in the affidavit in opposition is correct it can safely assume that such verification was done before the actual taking over as the party who took over the resort had come prepared for the taking over of that and I can see no reason why they did not verify the fuel stocks as soon as they arrived to the resort.
  2. The Petitioner obtained payments of $69,291.05 from the receivers of the owners of Resort (the third party). The Receivers accepted that it represented the value of the existing fuel stocks when they took control of the resort's operations. This leaves $120,575.02 worth of fuel products were used at the resort, and not paid by the Respondent. It is clear that the said receivers of the resort were mindful of the claim for fuel and other stocks and promptly verified the stocks at the resort as soon as they arrive. In any event since the supply of the fuel was to the Respondent and not to the receivers, the payment should be made by the Respondent.
  3. In any event since the supply of the fuel was to the Respondent, prior to taking over by the third party, the full payment should be made by the Respondent, irrespective of whether it fully utilized it or not. The payments are being made for goods supplied, and not for goods utilized or used since the storage of fuel was not a managed by the Petitioner. Usage of fuel is different as oppose to a supply to a storage devise as in this case. In a resort, there is a need to have adequate storage, but the payments are to be made at the time of the delivery to the storage and not at the point of using them as the storage is not a property under the management of the Petitioner. In a situation where the fuel is supplied through credit, the payments need to be based on the delivery as opposed to any usage. The payments through credit does not absolve the party who purchased the goods from paying for what was purchased, even if there was a change of possession of the said storage later.
  4. The change of possession is strictly a matter between the Respondent and the third party and payments due prior to the taking over has to be met by the Respondents irrespective of the said items, goods were used or not. If not any party who obtains goods on credit, which is a common practice in commercial dealings, may later dispute payments stating that they never used the goods or items, prior to the full payment, stating someone stole or took possession of them! If such excuses are accepted by courts the commercial dealing on credit is at a serious disadvantage and in order to make provision for such unforeseen situation the cost of credit would increase. The payments on credit is only a method of payment that allow credit for a specific period, as agreed between the parties, and after the delivery any dispute as regards to usage of the goods delivered will not absolve the payments to the supplier. So, there cannot be a dispute as to the fuel supplied by the Petitioner as the delivery dockets were signed at the time of the delivery. There is no attempt made by the Respondent to verify the dockets or invoices and that indicate the lack of bona fide on the part of the Respondent. The dispute should be a genuine one.
  5. Section 220 of the Companies Act ( Cap. 247) states:

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

.............

(e) the company is unable o pay its debts;


Section 221 of the Companies Act states:


221. A Company shall be deemed to be unable to pay its debts –


(a) if a creditor ....... 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 he 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; or

................. [ emphasis added]


Halsbury's Law 4th Edition, 1988 Reissue, Volume 7(2) Companies at paragraph 1451 (pages 1101 and 1102) provides an accurate summary of the case law regarding disputed debts in a winding up petition:


A winding up order will not be made on a debt which is disputed in good faith by the company; the court must see that the dispute is based on a substantial ground. A dispute as to the precise amount due is not a sufficient answer to the petition. If there is a genuine dispute, the petition may be dismissed or stayed, and an injunction may be granted restraining the advertisement or publicizing of the petition...


The debt must be disputed in good faith and on 'substantial grounds'. 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].


A dispute about the quantum of the debt does not amount to a disputed debt. Plowman J said in Re Tweets Garages, Ltd [1962] 1 All E.R. 121(at page 124);


Moreover, it seems to me that it would in many cases be quite unjust to refuse a winding –up order to a petitioner who is admittedly owed moneys which have not been paid merely because there is a dispute as to the precise amount owing. ...is the company entitled to say: "it is not disputed that you are a creditor but the amount of your debt is disputed and you are not, therefore, entitled to an order?" I think not. In my judgment, where there is no doubt (and there is none here) that the petitioner is a creditor for the sum which would otherwise entitle him to a winding –up order, a dispute as to the precise sum which is owed to him is not itself a sufficient answer to his petition. [emphasis added]


The dispute as to the calibration of the dipstick, which the Respondent never bothered to do while it was using the measurements taken from that dipstick would at maximum lead to variation of the precise amount. One should be mindful that this cannot be considered as a bona fide dispute. If the Respondent was not happy with the dipstick they could have immediately stop using it and request for a new calibrated one at their own expense, which they failed to do, but now try to use their own inaction to purchase a new calibrated dipstick for their advantage. This is not a bona fide dispute and the bad faith is evident.


  1. In the case of In re Douglas Griggs Engineering Limited [1962] 1 All ER 498.

Pennycuick J said (at page 500):


It seems to me that this prima facie right of the petitioning creditor to a winding – up order is not displaced merely by showing that the company had a disputed claim against the petitioning creditor which is the subject of litigation in other proceedings. [emphasis added].


Any intending or pending litigation between the Respondent and the third party is not a reason for the refusal of the winding up, from the ratio of the above case. It is clear that the Respondent needed to pay for the fuel it purchased, irrespective of the dispute between the Respondent and the third party as to the possession of the resort.


  1. In Seawind Tankers Corporation v Bayoil SA [1998] EWCA Civ 1364; [1999] 1 All ER 374, the Court of Appeal (England) at p 379 cited Buckley on the Companies Act (11th Edi) as follows

'A winding up petitionis not a legitimate means of seeking to enforce payment of a debt which is bona fide disputed by the company. A petition presented ostensibly for a winding up order but really to exercise pressure will be dismissed, and under circumstances may be stigmatized as a scandalous abuse of the process of the Court. Some years ago petitions founded on disputed debt were directed to send over till the debt was established by action. If, however, there was no reason to believe that the debt, if established, would not be paid, the petition was dismissed. The modern practice has been to dismiss such petitions. But, of course, if the debt is not disputed on some substantial grounds, the court may decide it on the petition and make the order'.


The guiding principle in the determination of the issue of 'disputed debt' is whether there is bona fide dispute, and not a created or frivolous dispute for the sake of disputing it. The bona fide can be determined from the previous conduct prior to the winding up as well as from the affidavit evidence. The conduct of the Respondent is far from that of a dispute based on good faith. The Respondents even dispute the dipstick which they utilized for the measurement of the fuel, till the taking over of the resort. If it gave wrong measurements why Respondent did not purchase a new calibrated dipstick? When the delivery dockets were produced what else was needed? Is there a genuine effort to obtain any relevant information from the third party? The answer to all the questions above, will show that the alleged dispute is not a bona fide dispute.


  1. CONCLUSION
  1. The debt arose from the supply of fuel and fuel products by Petitioner to the Respondent at the resort. Respondent admits managing the Resort from 1 April 2010 and admits that Petitioner supplied fuel and fuel products to them. It does not deny owing moneys to Petitioner. All it says is that it does not have records to verify the claim, but at the same time failed to show any communication or effort on their part to ascertain the truth of the claim from any person who is in possession of the relevant documents and the Respondent has failed to name any such document and or any such person from whom the verification was needed. All the invoices and the delivery dockets relating to the claim have been sent to Respondent. The invoices and delivery dockets indicate that Pacific Energy supplied $189,886.07 worth of fuel and fuel products to Respondent at the resort. Of this sum, $69,291.05 has been satisfied leaving the balance of $120,575.02 for which a demand was served on Respondent. This amount remains due and outstanding. The dispute between the Respondent and the third party should not be used to delay payments. If the goods were supplied and payments were received at the time of delivery any subsequent events would not result the payments already paid being reimbursed. The only difference being the fuel being supplied on credit, and the Respondent conveniently use the taking over of resort as an excuse. The issue regarding dipstick was never rectified by the Respondent, obviously because it was not a major issue when the Respondent was using it for measurements. Now it uses its inaction to purchase a new calibrated dipstick to dispute the measurements. This clearly indicate the lack of bona fides on the part of the Respondents.
  1. FINAL ORDER
  1. Order in terms of the winding up petition.
  2. The Petitioner is granted a cost of $1,500 assessed summarily to be paid by the Respondent as the cost of this application.

Dated at Suva this 19th day of September, 2012.


.................................................
Master Deepthi Amaratunga
High Court, Suva

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