All Freight Logistics Pte Ltd v Touchwood Sawmiller Pte Ltd [2021] FJHC 379; HBE20.2020 (14 December 2021)

IN THE HIGH COURT OF FIJI AT SUVA

COMPANIES JURISDICTION

Companies (Winding Up) Action No. HBE 20 of 2020

IN THE MATTER of TOUCHWOOD SAWMILLER PTE LTD a limited

liability company having its registered office at 2 Kings Road, Navua.

AND

IN THE MATTER of the COMPANIES ACT 2015

BETWEEN

ALL FREIGHT LOGISTICS PTE LIMITED a limited liability company

having its business place at Lot 6 Jai Hanuman Road,

Vatuwaqa, Suva in the Central Division.

RESPONDENT-APPLICANT

AND

TOUCHWOOD SAWMILLER PTE LTD a limited liability company

having its registered office at 2 Kings Road, Navua, in the

Central Division.

APPLICANT-RESPONDENT

Counsel : Ms. Jackson L. for the Applicant

Mr. Fa S. for the Respondent

Date of Hearing : 01^st December 2021

Date of Judgment : 14^th December 2021

RULING

(On the Application for Stay pending Appeal)

[1] On 18^th January 2021 this court ordered that the applicant-respondent (applicant) company be wound up.

[2] The applicant company being dissatisfied with the above order of the court appealed to the Court of Appeal on the following grounds of appeal:

1. That the Learned Judge erred in law and acted ultra vires his jurisdiction in his decision delivered on the 18^th of January 2021 when he ordered that the Appellant Company be wound up under the grounds of Insolvency as per Section 513(c) of the Companies Act 2015, despite the fact that Section 528 of the Companies Act 2015 mandates that for a company wound up in Insolvency the application must be determined within 6 months from when the application is made, and in this case the Winding Up application was made by the Respondent on the 20^th April 2020, a period of over 7 months between the commencement of the application and the determination of the same:
2. That the Learned Judge erred in fact and in law in his decision delivered on the 18^th of January 2021 when he held at paragraph 3 of his Judgment that as the Appellant did not make an application to set-aside the Statutory Demand, the only ground that the Honourable Court was entitled to consider was whether the Appellant was solvent, without taking into account the following factors:
   
   • (a) That on the 13^th of July 2020, the Appellant via a Notice of Motion and Affidavit in Support sought leave from the Honourable Court to permit the Appellant to file its opposition to the application filled by the Respondent;
   • (b) That on the 23^rd of October 2020, the Honourable Court granted leave to the Appellant;
   • (c) That the granting of leave by the Honourable Court on the 23^rd of October 2020 allowed for Section 529 of the Companies Act 2015 to take effect thus permitting the Appellant to introduce alternative grounds other than grounds covering Insolvency;
   • (d) That the Affidavit in Opposition deposed by Mohammed Imran Qamer on the 28^th of May 2020 and filed on the 1^st of June 2020 provided prima facie evidence that the debt alleged by the Respondent was a disputed debt which required its substance and merits to be determined by a full Hearing, and in the event that the Honourable Court was to unilaterally accept such debt as owing, this would cause injustice and prejudice to the Appellant and it would leave the Appellant without a remedy;
   • (e) That at the Hearing of the Winding Up matter, the Solicitor for the Appellant highlighted to the Court via Affidavit evidence that the debt alleged by the Respondent was exorbitant, excessively high, and that no reasonable person involved in such a trade would agree to the same therefore it was clearly disputed by the Appellant;
   • (f) That despite leave being granted as required under Section 529 of the Companies Act to permit the Appellant to introduce alternative grounds other than those of Insolvency, and despite the evidence provided in the Affidavit of Mohammed Imran Qamer which was later highlighted by Counsel for the Appellant at the Hearing of the Winding Up matter, the Honorable Court proceeded to Wind Up the Appellant company.
3. That the Learned Judge erred in fact and in law in his decision delivered on the 18^th of January 2021 when he held at paragraphs 13 and 14 of his Judgment that as the Appellant did not make an application to set-aside the Statutory Demand, the only ground that the Honourable Court was entitled to consider was whether the Appellant was solvent and then held that the Appellant was insolvent, without taking into account the following factors:
   • (a) That the information provided by Qavio Consulting came from a registered Charted Accountant;
   • (b) That the Chartered Accountant provided a list of information showing that the value of the Appellant’s owned assets were in access of the Respondent’s alleged debt;
   • (c) That the Appellant’s Company’s cash flow for the last financial year was approximately under FJ$1 million (One Million Fijian Dollars);
   • (d) That the above evidences was shown to the Honourable Court at the Hearing of the Winding Up action;
   • (e) That the information above, the Honourable Court granted a Winding Up Order against the Appellant Company.
4. That the Appellant reserves the right to amend this Notice of Appeal and/or to add further grounds.

[3] The Applicant on 01^st February 2021 filed summons seeking an order to stay the execution of the judgment delivered on 18^th January 2021pending the apeal.

[4] The law governing the stay of execution pending appeal has been discussed in the following decisions:

In Natural Waters of Viti Ltd v Crystal Clear Mineral Water (Fiji) Ltd (Supra) the Court of Appeal held that in an application of stay pending appeal the court should consider the following;

1. Whether, if no stay is granted, the applicant’s right of appeal will be rendered nugatory (this is not determinative). See Philip Morris (NZ) Ltd v Liggett & Myers Tobacco Co (NZ) Ltd [1977] 2 NZLR 41 (CA).
2. Whether the successful party will be injuriously affected by the stay.

100. The bona fides of the applicants as to the prosecution of the appeal.

In Federal Commissioner of Taxation v Myer Emporium Ltd (No. 1)(1986) [1986] HCA 13; 160 CLR 220; 4 April 1986 it was observed:

It is well established by authority that the discretion which it confers to order a stay of proceedings is only to be exercised where special circumstances exist which justify departure from the ordinary rule that a successful litigant is entitled to the fruits of his litigation pending the determination of any appeal.

Generally that will occur when, because of the respondent’s financial state, there is no reasonable prospect of recovering moneys paid pursuant to the judgment at first instance. However, special circumstances are not limited to that situation and will, I think, exist where for whatever reason, there is a real risk that it will not be possible for a successful appellant to be restored substantially to his former position if the judgment against him is executed.

Per Dawson J. - Whilst I was initially inclined to accept the taxpayer’s submission, upon reflection I think that there is sufficient force in the argument advanced by the commissioner to cast doubt upon the power of this court to grant relief upon appeal as the taxpayer contends. I do not think that in these proceedings I have to go further than that; I do not have to conclude the issue. It is sufficient to say that in my view there is a real risk that if the judgment made by the Supreme Court is not stayed, the Commissioner may be prejudiced by the payment pursuant to a statutory obligation, of a substantial amount of money which will prove to be irrevocable notwithstanding the conclusion of the appeal in his favour.

In the case of Linotype – Hell Finance Ltd v Baker (1992) 4 All ER 887 it was held:

Where an unsuccessful defendant seeks a stay of execution pending an appeal to the Court of Appeal, it is a legitimate ground for granting the application that the defendant is able to satisfy the court that without a stay of execution he will be ruined and that he has an appeal which has some prospect of success.

[5] The learned counsel for the respondent raised a preliminary objection to the maintainability of this application on the ground that the application stay pending appeal has been filed under the wrong provisions of the law in that this application has been made pursuant to section 553 of the Companies Act 2015 (the Companies Act) and Order 45 rule 10 of the High Court Rules 1988.

[6] Section 553(1) of the Companies Act provides:

The Court may, at any time after an order for winding up, on the application either of the liquidator or the Official Receiver or any creditor or contributory, and on proof to the satisfaction of the Court that all proceedings in relation to the winding up ought to be stayed, make an order staying the proceedings, either altogether or for a limited time, on such terms and conditions as the Court thinks fit.

[7] Under the above provision an application for stay can be made only by the liquidator or official receiver or any creditor or contributory. It is therefore absolutely clear that an application for stay pending appeal cannot be made under section 553 of the Companies Act. However, the applicant, in its summons for stay of execution, has also mentioned Order 45 rule 10 of the High court Rules which provides:

Without prejudice to Order 47, rule 1, a party against whom a judgment has been given or an order made may apply to the Court for a stay of execution of the judgment or order or other relief on the ground of matters which have occurred since the date of the judgment or order, and the Court may by order grant such relief, and on such terms, as it thinks just.

[8] The applicant in its summons has mentioned two different statutory provisions one of which is incorrect. In my opinion since the applicant has stated the correct provision of the law the court should determine the application under the correct provision of the law.

[9] The learned counsel for the applicant submitted that the court has taken more than six month which is the period within which an application winding up should be determined.

[10] Section 528 of the Companies Act provides:

(1) An application for a Company to be wound up in Insolvency is to be determined within 6 months after it is made.
(2) The Court may by order (on such conditions as it considers fit) extend the period within which an application must be determined, but only if—

• (a) the Court is satisfied that special circumstances justify the extension; and
• (b) the order is made within that period as prescribed by subsection (1), or as last extended under this subsection, as the case requires.

(3) An application is, because of this subsection, dismissed if it is not determined as required by this section.

[11] The respondent instituted winding up proceedings on 20^th April 2020 and the court on 19^th October 2020 extended the time for another three months and the judgment was delivered within that period on 18^th January 2021. Therefore, the submission of the learned counsel that the matter was not determined within the period prescribed by law has no merit.

[12] The statutory demand was served on the applicant on 26^th February 2020. The applicant did not make an application to set aside the statutory demand. One of the grounds of appeal is that However, the order for winding up was not based on the fact that the applicant did not make an application to set aside the statutory demand.

[13] The applicant at the winding up hearing totally relied on the undated report of Qavio Consulting. In my judgment I have stated why this court could not rely on the said statement. The documents referred to the said statement had not been provided by the applicant to the accountants. It could have at least tendered those documents to court at the hearing but for reasons best known to the applicant it did not tender any of the document to court at the hearing of the winding up application.

[14] The applicant on 03^rd July 2020 filed a notice of motion pursuant to Rule 15(1) of the Companies (Winding Up) Rules seeking leave to file an affidavit in opposition which was granted by the court. However, there was no application by the applicant pursuant to section 529 of the Companies Act which provides as follows:

(1) In so far as an application for a Company to be wound up in Insolvency relies on a failure by the Company to comply with a Statutory Demand, the Company may not, without the leave of the Court, oppose the application on a ground—

• (a) that the Company relied on for the purposes of an application by it for the demand to be set aside; or
• (b) that the Company could have so relied on, but did not so rely on (whether it made such an application or not).

(2) The Court is not to grant leave under subsection (1) unless it is satisfied that the ground is material to proving that the Company is Solvent.

[15] The applicant was therefore, not entitled to rely on the grounds it could have relied on to set aside the statutory demand.

[16] From the above I see no merit in the grounds of appeal and therefore, the application for stay pending appeal must fail.

ORDERS

1. The summons filed by the applicant on 01^st February 2021 is struck out and the orders sought are refused.
2. There will be no order for costs of this application.
   

Lyone Seneviratne

JUDGE

14^th December 2021