Evergreen Environmental Services Ltd, In re [2016] FJHC 15; HBC19(B).2015 (22 January 2016)

IN THE HIGH COURT OF FIJI
WESTERN DIVISION
AT LAUTOKA

CIVIL JURISDICTION

Companies (Winding Up) No.
HBC 19 (B) of 2015

IN THE MATTER of EVERGREEN ENVIRONMENTAL SERVICES LIMITED

and

IN THE MATTER of the COMPANIES ACT CAP 247

(Ms) Natasha Feroz Khan for the Petitioner
Mr. Nilesh Prasad for the Respondent

Date of Hearing: - 30th October 2015
Date of Ruling : - 22nd January 2016

RULING

(A) INTRODUCTION

(1) On 15th of April, 2015, "Diamond Engineering (Fiji) Limited" [so, for ease of understanding, I will hereinafter refer to as Petitioner] filed a Petition to Wind up "Evergreen Environmental Services Limited" [so, for ease of understanding, I will hereinafter refer to as Respondent Company]. The Petition is presented pursuant to Section 220(e) of the Companies Act, 1983.

(2) The Petitioner alleges that the Respondent Company owes the Petitioner an undisputed debt of $29,396.30. The debt is alleged to be due and owing in respect of goods and services provided by the Petitioner.

(3) A statutory demand was served on the Company on 17th December 2014.

The Affidavit verifying Petition was filed on 24th April 2015.

(4) The Petition was advertised in the Fiji Times on 02nd May 2015 and in the Government of Fiji Gazette on 08th May 2015. The Memorandum of Due Compliance was filed on 03rd June 2015.

(5) The Winding-up Petition is vigorously resisted by the Respondent Company. The Respondent Company filed the Affidavit of Mr. "Peter Michael McGahan" sworn on 04th August 2015 in opposition with leave of the Court. Regrettably, the Petitioner filed no Affidavit in reply.

(6) The Petitioner and the Respondent were heard on the Winding-up Petition. They made Oral Submissions to Court. In addition to oral submissions, the Counsel for the Respondent Company filed a careful and comprehensive written submission for which I am most grateful.

(B) THE LAW

(1) With that short introduction, it is necessary to turn to the applicable law and judicial thinking in relation to the principles governing the exercise of the discretion to make the Order the Petitioner now seeks.

(2) Rather than refer in detail to the various authorities, I propose to set out with only important citations, what I take to be the principles of the play.

(3) Section 213 of the Companies Act,1983 reads,

213. – (1) the Winding-Up of a Company may be either-

(a) by the court; or

(b) voluntary; or

(c) subject to the supervision of the Court.

(2) The provisions of this Act with respect to winding-up apply, unless the contrary appears, to the winding-up of a company in any of those modes.

Section 219 of the Companies Act, 1983 reads,

219. The Supreme Court (now the High Court) shall have jurisdiction to wind up any company registered in Fiji.

Section 220 of the Companies Act, 1983 reads,

220. A Company may be wound up by the court, if-

(a) the company has, by special resolution, 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 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.

Section 235 of the Companies Act, 1983 reads,

235. For the purpose of conducting the proceedings in winding up a company and performing such duties in reference thereto as the court may impose, the court may appoint a liquidator or liquidators

(Emphasis added).

Section 221 of the Companies Act, 1983 reads,

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;

(Emphasis provided)

(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.

(4) 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 company's 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. 1948" 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.

Master Udit in In re Conmsol Fiji Ltd (2009 FJHC 77; HBE 0048, 2007L, (125 March 2009) held that section 221 of the Companies Act is the deeming provision and the presumption of inability to pay the debts can be rebutted. The learned Master 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 Palmers Company Law Vol. 13 as follows:-

"To fall within the general principle the dispute must be bona fide 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 or 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 to pay the debt that the court sees that there is a question to be decided"

(Emphasis added)

Peter Gibson L.J. in Raja 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 or process.".

(5) In the case of "In re Vimal Investments (Fiji) Ltd (2010) FJHC 371,Tuilevuka, J (sitting as Master then) held;

A debt alleged in a winding-up petition is prima facie proved when the Affidavit Verifying the Petition is filed. Upon filing of the Affidavit Verifying the Petition, it is then open to the respondent company (e.g. Vimal Investments Limited) to refute the debt alleged.

And if the respondent company does so dispute the debt, it must do so on substantial grounds (as opposed to a mere frivolous assertion) in order to dissuade the Courts from making an order to wind up the company (see Offshore Oil NL and Investment Corporation of Fiji Limited; Civil Appeal No. 29/84; rf. Avery v Worldwide Testing Services Pty Ltd. (1990) 2 ACSR 844, at 841).

Having said that, the Courts also are ever so watchful that the winding up proceedings are not used by petitioners to enforce a debt which is being disputed on substantial grounds. Proceedings instituted in such circumstances amount to an abuse of process and will be struck out with costs to the respondent company (see Re Lympne Investments [1972] 2 All ER 385).

If the debt is being disputed on substantial grounds, the onus then shifts back to the petitioner to proveis being disputed on substantial grounds, the onus then shifts back to the petitioner to prove its debt. As highlighted above, this may in some situations, involve viva voce evidence

In the case of Fiji Bandag v Vunimoli Sawmill Limited, Suva High Court Winding up Action No. HBE 003/2002, his Lordship Mr. Justice Pathikheld;

In Palmer's Company Law Vol. 3 15.214 is set out the principles involved in considering disputes as to debt and I have borne these in mind in considering disputes as to debt and I have borne these in mind in considering the matter before me. There it is stated:

To fall within the general principle the dispute must be bona fide 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 or 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 to pay the debt that the court sees that there is a question to be decided. The onus is on the company "to bring forward a prima facie case which satisfies the court that there is something which ought to be tried whether before the court itself or in an action, or by some other proceedings."

The Court has discretion when seized of a winding-up petition. In Bateman Television (In Liquidation) and Another v Coleridge Finance Company Limited [1971] UKPC 8; [1971] NZLR 929 the Judicial Committee stated:

The general rule is that an order for winding up will not be made on disputed debt but a Judge has discretion to make a winding up order on disputed debts which is not reviewable unless exercised on a wrong principle or the Judge included or omitted consideration of a relevant fact or was wholly wrong."

All that is required for a Petition to be struck out is that there is a dispute on 'substantial grounds'. The question therefore is "Is there a substantial dispute as to the debt upon which the petition is allegedly found?' [Herman J in Re a Company (No. 60 1946 of 1991) ex p Fin Soft Holdings S A (1991) BILL 737 at 740].

In Ramans Emporium Ltd, Suva High Court HBE No. 003/1994, Mr Justice Scott citing Re Great Britain Mutual Life Assurance Society (1880) 26 Ch D 246 at 253, said that the burden is on the company to bring forward a prima facie case which satisfies the Court that there is something to be tried.

(C) ANALYSIS

(1) Let me now proceed to analyse the evidence before me bearing aforementioned legal principles uppermost in my mind.

(2) The Petition is brought on the ground that the Respondent Company is unable to pay its debts.

(3) Alleged Debt:-

Paragraph 6 of the Affidavit verifying Petition provides a copy of the statutory demand notice under section 221 of the Companies Act which the Petitioner served on the Company which particularizes the sum due as follows:

"Take notice that Diamond Engineering (Fiji) Limited at Vunato Industrial sub-division, 3 Rose Place, Lautoka hereby demands the immediate payment for the sum of $29,396.30 (Twenty Thousand Three Hundred Ninety Six Dollars and Thirty Cents) (excluding interest) being the balance sum due and owing by you in respect of services rendered to you at your own request and the full particulars of which you are well aware of and/or which has been provided for you." Emphasis is ours.

(Emphasis added)

Paragraph 5 of the Affidavit verifying Petition also particularizes the debt as follows:

"The company is indebted to your Petitioner in the sum of $29,396.30 (Twenty thousand Three Hundred Ninety Six Dollars and Thirty Cents) being the amount due and owing by Evergreen Environmental Services Limited to Diamond Engineering (Fiji) Limited in respect of goods and services supplied to Evergreen Environmental Services Limited particulars of which has been rendered to it." Emphasis is ours.

(Emphasis added)

(4) Opposition:-

As contained in the Affidavit of Mr. Peter Michael MacGahan, the Company's grounds for opposition are as follows:-

1. The details stated in the statutory demand notice and/or the Petition does not provide sufficient particulars to establish a debt. In any event the Company is unaware of the alleged debt stated therein.
   
2. The Company is a limited liability company and for any services requested, Purchase Orders are issued to the suppliers. The description of the debt in the Petition does not make reference to any details and/or dates. The onus is on the Petitioner to produce the original Purchase Order(s) issued by the Company and other documents such as invoices and delivery dockets signed and acknowledged by the authorized staff member(s) of the Company to establish its debt stated in the Petition.
   
3. The Company issued Notices in the Fiji Sun and Fiji Times on 24 and 27 July 2013 advising the general public that the Company had ceased operations effective from 30 June 2013. All suppliers were requested to submit particulars of claims, accompanied by the supporting documents, within 21 days of the notice. However, it did not receive any claim from the Petitioner at that time. Refer to annexure PMM-2 in McGahan's 1st Affidavit which is copies of the said Notices.
   

(Emphasis added)

(5) Before I pass to consideration of the substance of the Petition, let me make this preliminary comment .

The Winding-up Petition is vigorously resisted by the Respondent Company. The Respondent Company filed the Affidavit of Mr. "Peter Michael McGahan" sworn on 04th August 2015, in opposition with leave of the Court. The Respondent Company denies the existence of a debt to the Petitioner. The Petitioner filed no Affidavit in reply. Despite the skillful advocacy of Counsel for the Petitioner, the conduct of the Petitioner in deliberately deciding not to file an Affidavit in reply is still not clear to me. It is difficult for me to speculate.

In the context of the present case, I would prefer to adopt the robust approach of the Court of Appeal in "Jay Prakash v Savita Chandra" (Civil Appeal No; ABU 0037/1985.) and allow my doubts to be submerged in what I think I may just call current of authority.

In the Court of Appeal judgment in "Jay Prakash v Savita Chandra" Civil Appeal No: ABU 0037/1985,Itwas held;

"Of course he did have to respond in our view the cause of events have taken and the consequences, if did not respond, rendered it as matter of prudence that he should reply if indeed he had a reply. And in the circumstances of the case in the absence of a reply, we hold the inference inescapable what the respondent had said to be true."

(Emphasis Added)

On the strength of the rule of law enunciated in the aforementioned judicial decision (As I understand those last words),it is enticing to accept the evidence of Mr. "Peter Michael McGahan" in toto

(6) Leave that aside for a moment and let me now turn to the substance of the Petition.

As I understand the evidence, the Respondent Company denies the existence of adebt to the Petitioner.

Reference is made to paragraph 4(1) of the Affidavit in Opposition.

"The details stated in the statutory demand notice and/or the Petition does not provide sufficient particulars to establish a

debt. In any event the Company is unaware of the alleged debt stated therein."

(Emphasis added)

The Petitioner filed no evidence in answer. In order to succeed on the Petition, the Petitioner has to prove the debt alleged in the Winding-up Petition to the satisfaction of the Court since it is the statutory foundation for the winding –up Petition which is presented pursuant to Section 220 (e) of the Companies Act, 1983. This, in my judgment the Petitioner failed to establish. I never heard of even an attempt to establish.

There is no iota of evidence before this Court to conclude that the debt alleged in the Petition existed. I remain with a predisposition to the view that it would be quiet wrong to seek to prove the debt alleged in the Petition by statements of information and belief of the Counsel for the Petitioner.

The Respondent through its Counsel raised the following seven issues;

1. The Petition does not specify what services as alleged were

rendered by the Petitioner including the date and time of these services.

2. The Petition does mention the details of any Purchase Orders

that the Company issued for such services.

3. There is no documents such as invoices and delivery dockets

signed and acknowledged by and on behalf of the Company.

4. This situation is further aggravated since the Company by

public notice in the local daily ceased operations in Fiji on or about 30 June 2013. All suppliers were requested to submit particulars of claims, accompanied by the supporting documents within 21 days of the notice.

5. The Petitioner did not react to the invitation by the Company to submit its claim then.
   
6. This begs the question that if the Company had ceased

operations in on 30 June 2013 then who whose order or authority did the Petitioner render the alleged services and whether that person was so authorized by to render any order or instructions to the Petitioner in the first place. Legally for the Company to be liable the order or instructions should have been from an authorized person.

7. If the Company ceased operations on 30 June 2013 then there

naturally was no one to sanction the alleged services and even if such instructions were given, which is strenuously denied, then the person had no legal nexus to bind the Company.

The Counsel for the Respondent has put before the Court all that he conceived could be urged on the Respondent Company's behalf.I have considered the aforementioned seven issues. I must confess that I find them very convincing. I remind myself that I have to deal with those seven issues on the evidence as it stands. As I mentioned earlier, the Petitioner did not adduce evidence in answer to those issues. I bear in mind the robust approach of the Court of Appeal in "Jay Prakash v Savita Chandra" (supra). I should add that the Counsel for the Petitioner did not argue on those seven issues. During the oral hearing, the Counsel for the Petitioner did not offer assistance on those issues. My clear conclusion is that the debt alleged in the Petition is not proved in Court by evidence. I should add that I am comforted in coming to this conclusion by the aforementioned seven issues. Given those circumstances, I see why it should not be just and equitable for me to make a Winding-up order.In the result, I uphold the objections.

Essentially that is all I have to say.

(D) CONCLUSION

After considering the evidence of this case and the submissions made to Court, I conclude that the Petitioner has not proved the debt alleged in the Petition and as a result the Respondent Company succeeds in its opposition to the Petition. I uphold the objections of the Respondent Company.

Accordingly, I have no alternate, but to dismiss the Petition. I cannot see any other just way to finish the matter than to follow the law.

(E) FINAL ORDERS

(1) The Winding-up Petition dated 22nd April 2015 is dismissed.

(2) The Petitioner is ordered to pay costs of $1000.00 (summarily assessed) to the Respondent Company which is to be paid within 14 days from the date hereof.

I do so order.

.......................................
Jude Nanayakkara
Master of the High Court

At Lautoka
22nd January 2016