In re Viti Mini Buses Cooperative Ltd [2014] FJHC 657; HBE69.2013 (5 September 2014)

IN THE HIGH COURT OF FIJI
AT SUVA
COMPANIES JURISDICTION

Winding Up Action No.HBE 69 of 2013

IN THE MATTER of VITI MINI BUSES CO-OPERATIVE LIMITED

AND

IN THE MATTER of the Companies Act 1983, Section 221

IN THE HIGH COURT OF FIJI AT SUVA COMPANIES ACT

BEFORE: Master Thushara Rajasinghe

COUNSEL: Mr. Nanise M. for the Plaintiff
The Defendant is represented by Mr. Semesi Davai, A director of the Defendant,

Date of Hearing: 4th June, 2014
Date of Judgment: 5th September, 2014

JUDGMENT

1. INTRODUCTION
   

1. The Petitioner, Digicel (Fiji) Limited instituted this winding up proceedings against the debtor company Viti Mini Busses Co –Operative limited seeking following orders inter alia;
   
   1. That Viti Mini Buses Co-operative Limited may be wound up by the court under the provisions of the Companies Act,
      
   2. That the official receiver be constituted provisional liquidator for the affairs of the said company,
      
   3. That the costs of the petitioner be taxed and be paid out of the assets of the Company; and
      
   4. That such other order may be made in the premises as shall be just.
      
2. Having instituted this proceedings, the Petitioner then filed its' affidavit verifying petition, which was followed by the affidavit in opposition filed by the debtor company. The Petitioner then filed its affidavit in reply and the memorandum of due compliance pursuant to the winding up rules 28 (1). Subsequently, this petition was set down for hearing on 4th of June 2014. The counsel for the petitioner and the director of the debtor company agreed to conduct the hearing by way of written submissions, which was allowed. Both parties then filed their respective written submissions accordingly. Having considered the petition, respective affidavits and written submissions, I now proceed to pronounce my judgment as follows.
   

2. BACKGROUND,
   

3. This winding up petition is founded on the ground that the debtor company is unable to pay its debts pursuant to section 220 (c) of the Company Act. The Petitioner has served the debtor company a winding up notice demanding the company to pay sum of $ 60, 698.46, for accrued phone charges pursuant to mobile service agreement dated 24th of February 2009. The Petitioner stated that the debtor company failed to pay that amount as demanded in the winding up notice within the 21 days of the said notice. Hence the debtor company is now deemed to be insolvent or unable to pay its debts pursuant to section 221 (a) of the company Act.
   
4. Meanwhile, the debtor company contended that those alleged mobile phone connections were actually given to individual members of the company and the company is not responsible for this accrued phone charges. The Company denied that they entered into any mobile service agreement with the Petitioner on 24th of February 2009.
   
5. In response to the debtor company's refusal, the Petitioner deposed in their affidavit in reply that one of the directors the company has admitted their responsibility in a written letter, which was tendered as an annexure to its affidavit for my perusal and consideration. Moreover, the Petitioner reiterated that the company entered into this agreement with the petitioner, though the mobile connections have actually been used by the individuals who work for the company.
   

100. THE LAW,
     

6. Section 220 of the Company Act has stipulated the grounds upon which a company could be wound by the court. The inability to pay its debts is one of those grounds stipulated under section 220. This petition for winding up is founded on the ground of the debtor company's inability to pay its debts.
   
7. The Definition of inability to pay debts has been provided in section 221 of the Company Act, where it states that;
   

"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; or

(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".

8. Ungoed – Thomas J in Mann and Another v Goldstein and Another ( 1968) 2 ALL ER 769 has discussed the requirements for winding up proceedings and the insolvency, where his lordship observed that
   

"To enable the companies court to make the winding-up order itself, not only must the petitioner have been shown to be entitled to present the petition, but also one of the grounds specified in s 222 of the Companies Act, 1948a must be established: and the only such ground relied on in the petition and before me was that the company is unable to pay its debts. This requirement is additional to the pre-condition of presenting the petition, that the petitioner must be a creditor, and is not alternative to it. The insolvency requirement, however, unlike the creditor requirement, is only a pre-requisite of the order and not a pre-requisite of the presentation of the petition. So if a person is entitled to present a petition, then the company's inability to pay its debts is the very matter which it is appropriate for the companies court to enquire into and decide in the exercise of its jurisdiction to make a winding-up order.

9. Master Udit in In re Comsol Fiji Ltd (2009) FJHC77;HBE0048.2007L (25 March 2009) held that section 221 of the Company Act is a deeming provision and the presumption of inability to pay the debts can be rebutted. He further held that
   

"when a demand is made the company must act swiftly to dispute the debt or pay the same in order to negate the imposition of the said presumption. Furthermore, if the company opts to dispute the debt it must do so on substantial grounds. The test for a disputed debt was aptly stated in as follows:-

dispute must be bode in e in both a subjectnd an oive s&Thus thus the reason for not paying the debt must be honestly believed to exist aist and mund must be based on substantial or reasonaround60;Substantialntial means having substance and not&#/b> There me so much doubt aestion about the the liability to pay the debt thatcourt sb>&#1>that that there is a is a question to be decided." (emphasis added)

10. Peter Gibson LJ in Raja>Raja v Ru v Rubin and Another (1999) 3 All ER 73 held that
    

"a person seeking to wind up a company on a disputed debt, as in such case, it is well established that the petition is on abuse of process".

11. In view of the above judicial precedents, it has been held that the Petitioner is entitled to obtain an order to wind up the respondent company only on the ground of undisputed debt.
    
12. Turing to this instance case, as stated in the petition this winding up proceedings is founded on the accrued phone charges pursuant to Mobile Service Agreement made between the Petitioner and the Debtor Company on 24th of February 2009. However, the copies of the mobile service agreements tendered by the Petitioner in its affidavit in reply have made on some other dates other than on 24th of February 2009 as indicated in the Petition. In view of this inconsistency of the Petitioner's position of this alleged agreement, the court is not in a position to comprehensively determine that this debt alleged by the petitioner has actually accrued pursuant to an agreement made on 24th of February 2009 or not. Specially, Having considered the Debtor company's contention that they have not entered into any agreement with the Petitioner and only accommodated individuals who work for the company to obtain these mobile phone connections, I find the lack of evidence and the contradictory nature of Petitioner's evidence compel me to hold that the Petitioner has failed to establish that this alleged debt has actually accrued pursuant to the mobile service agreement dated 24th of February 2009 and it is undisputed. I accordingly make following orders that;
    
    1. The Petition of the Petitioner dated 28th of August 2013 is refused and dismissed,
    2. The Debtor Company is awarded cost of $ 1,000 assessed summarily,
       

Dated at Suva this 5thday of September, 2014.

R.D.R. Thushara Rajasinghe
Master of High Court, Suva