Avoi v Office of the Official Receiver [2012] FJHC 1408; Civil Action 80.2012 (28 September 2012)

IN THE HIGH COURT OF FIJI AT SUVA
CIVIL JURISDICTION

Civil Action No. 80 of 2012

BETWEEN:

Moses Avoi of Namadi Heights,
Suva Businessman
Plaintiff

AND:

The Office of the Official Receiver
Defendant

Appearances: Mr K. Pillay for the plaintiff
Ms K. Vuibau for the defendant

Date of hearing: 7th May,2012

JUDGMENT

1. The plaintiff has filed ex parte notice of motion and seeks the following orders against the Office of the Official Receiver:
   
   1. An interlocutory injunction restraining the defendant by themselves and/or through their servants and/or agents from hindering, or interfering in any way with the Plaintiff's rights of mortgagee sale of the vessel "Cagi Mai Ba" that is subject to Mortgage dated 2nd December 2010.
      
   2. An Order that the Defendant be restrained by its servants and/or agents or any one of them or otherwise from removing, disposing of, selling, assigning, charging, mortgaging or otherwise dealing with the vessel "Cagi Mai Ba" until the further Order of the Court.
      
   100. An Order that the Defendant by itself, or by a responsible officer or person appearing to be in control of the vessel "Cagi Mai Ba", do permit the Plaintiff to have regular access to the vessel upon two days prior notice for the purposes of inspection whilst the vessel is in the custody and care of the Defendant.
        
   4. An Order that the Defendant by itself or its servants and/or agents to keep the vessel "Cagi Mai Ba" in safe and secure custody or any way whatsoever diminishing the value of the vessel "Cagi Mai Ba" which is the subject of the Mortgage dated 2nd December 2010.
      

I directed that this matter be heard inter partes. The defendant filed its affidavit in response. The matter was then taken up for hearing on 7th May,2012.

2. These proceedings stem from a loan, the plaintiff states he had granted in November, 2010, to a company, Western Shipping Ltd, in the sum of $ 110,248. In his affidavit in support, the plaintiff states that Western Shipping Ltd required these monies to pay the High Court of Fiji, in order to secure the release of a vessel "Cagi Mai Ba", which had been arrested, consequent to an application by Fiji Ports Corporation Ltd. The loan was secured by a loan agreement, leasing agreement and a mortgage over the vessel, all of which were executed on 2nd February,2012.
   

The plaintiff's affidavit in support recites that Western Shipping Ltd had been wound up by an order of the High Court on 14th September, 2010, upon a petition presented by petitioning creditor, Marine Industrial & Structural Engineering Limited made on 29th July,2009. An Official Receiver was appointed as liquidator. Meanwhile Marine Industrial & Structural Engineering Limited was wound up by an order of the High Court on 7th May,2010.

It is alleged that Ms Salate Taka, the Deputy Official Receiver consented to the loan agreement, the mortgage agreement and the leasing agreement between the plaintiff and Western Shipping Ltd. The plaintiff had taken control of the vessel, after execution of the loan agreement, the mortgage and the leasing agreement .It is further alleged that the Deputy Official Receiver gave express approval to the plaintiff's solicitor to proceed with the mortgage sale of the vessel and agreed that Neel Shivam lawyers would conduct the mortgagee sale.

Since there was no repayment of the loan, the plaintiff had exercised his right of mortgagee sale of the vessel "Cagi Mai Ba", and advertised and obtained tenders for the purchase of the vessel. On 2nd February,2012, solicitors for Western Shipping Ltd had then, written to the plaintiff to refrain from exercising his rights as mortgagee, on the ground that the mortgage was invalid as Western Shipping Ltd was in liquidation, at the time the mortgage was executed. The Official Receiver had also written to the plaintiff instructing him to a stop the mortgagee sale, for the same reason. The Official Receiver had taken custody of the vessel "Cagi Mai Ba".

The Acting Official Receiver, in his affidavit in response, states that the former Official Receiver was shown unexecuted copies of the lease, not a loan or mortgage document. The Official Receiver did not agree to the mortgage of the vessel nor was the mortgage agreement executed by the Official Receiver. The vessel was in the possession and custody of the plaintiff, in terms of the lease agreement. It is stated further that the plaintiff's solicitors were advised to stop the mortgagee sale, as it was realised that the transaction required the sanction of the creditors and/or the court.

3. The hearing
   

Mr Pillay, counsel for the plaintiff, in his written submissions, has submitted that the issue to be decided by this court is twofold, namely,

1. whether the winding up order issued for Western Shipping Limited is valid, and
2. Western Shipping Limited had the capacity to enter into a mortgage with the plaintiff.
   

It was contended that Marine Industrial & Structural Engineering Limited, the petitioning company had no legal existence and was dissolved, when the hearing and winding up order in respect of Western Shipping Ltd was made.

The alternate contention of the plaintiff was that Western Shipping Limited had the capacity to enter into a loan, leasing and mortgage agreements with the plaintiff, as the express consent of the Official Receiver was obtained. It is further contended that the Official Receiver was a part of the mortgagee sale, as the final determination to sell was forwarded to him, and the Official Receiver had, by an email of the same date, confirmed the sale.

Ms Vuibau, counsel for the defendant, in reply submitted that the winding up order made against was valid in law. She stated further that no appeal had been filed against that order.

4. The determination
   

The plaintiff's case is that the winding up order dated 14th September, 2010, in respect of Western Shipping Limited, was invalid, due to the intervening act of the winding up of the petitioning creditor, after the petition for the winding up of Western Shipping Limited was presented.

Section 227(2) of the Companies Act provides that:

".... the winding up of a company by the court shall be deemed to commence at the time the presentation of the petition for the winding up."

Mr Pillay conceded that in terms of this provision, the winding up order pre-dates to the date, the petition for the winding up was presented, but strove to persuade the court that the final order of the court is invalid, due to the intervening act. The petition, he said, lapsed upon the winding up of the petitioning company.

The answer to this submission is as follows. The object of section 227(2) is part of the statutory scheme designed to prevent, when liquidation is imminent, (ie, during the period which elapses before a petition can be heard), the alienation and dissipation of the property of the company .This retrospective invalidation of the disposition of property is designed to preserve the assets for the benefit of the general body of creditors and is expressly given effect to in section 225. Accordingly, the argument propounded, is in my view,untenable.

In any event, as Ms Vuibau submitted, the validity of the winding up order in respect of Western Shipping Limited cannot be questioned in these proceedings.

In my judgment, the directors of Western Shipping Limited were precluded from executing a mortgage of the property of the company, after the company was wound up. The mortgage is therefore, null and void.

The plaintiff's alternate submission has even less merit. It is evident the mortgage agreement was not executed by the Official Receiver. The Official Receiver denies the plaintiff's allegation that Western Shipping Limited and the plaintiff had obtained their express consent of the Official Receiver, to execute the mortgage agreement. The other matter relied on by the plaintiff is an email from the Official Receiver, as regards the sale. In his affidavit in response, the Official Receiver has adequately explained that they realised subsequently, that this sale could not be effected, without the sanction of the creditors and/ or court.

I am not satisfied that there is a serious question to be tried. The plaintiff has not met the threshold requirement for the grant of interim relief. I refuse the plaintiff's application for interlocutory injunction .

In my judgment, the Official Receiver has lawfully taken custody of the vessel "Cagi Mai Ba". Accordingly, the plaintiff is not entitled to the other reliefs sought in his motion. The plaintiff's motion is refused with costs summarily assessed in a sum of $ 1200 payable by the plaintiff to the defendant.

28th September, 2012

A.L.B. Brito-Mutunayagam
Judge