J. Kevi Refrigeration & Air Conditioning Services Ltd (trading as J. Kevi (Fiji)), In re [2022] FJHC 415; HBM07.2022 (11 July 2022)

IN THE HIGH COURT OF FIJI
WESTERN DIVISION AT LAUTOKA
COMPANY JURISDICTION

HBM 07 of 2022

IN THE MATTTER of a Statutory Demand dated 14 January 2022 taken out by J. KEVI REFRIGERATION & AIR CONDITIONING SERVICES LIMITED T/A JKEVI (FIJI) a limited liability company having its principal place of business at Sri Murgan Building, Nadi Back Road, Nadi Town, in the Republic of Fiji against CIF CONSTRUCTION PTE LIMITED a company having its registered office at Lot 11, Namaka Industrial Sub Division, Nadi in the Republic of Fiji and served on 17 January 2022.

A N D

IN THE MATTER of an application by CIF CONSTRUCTION PTE LIMITED a company having its registered office at Lot 11, Namaka Industrial Sub Division, Nadi in the Republic of Fiji for an Order setting aside the Statutory Demand pursuant to Section 516 of the COMPANIES ACT 2015.

Appearances: Ms. Takali. for the Applicant
Ms. Kumar for the Respondent
Date of Hearing: 09 May 2022
Date of Ruling: 11 July 2022

R U L I N G

INTRODUCTION

1. Before me is a Notice of Originating Motion to Set Aside Statutory Demand filed on 07 February 2022 by Siddiq Koya Lawyers for and on behalf of CIF Construction Pte Limited (“CCPL”).
   
2. The said Notice is filed pursuant to section 516 and section 517(1)(a) and section 517(5)(b) of the Companies Act 2015 and under the inherent jurisdiction of this Court.
   
3. The application is supported by an affidavit sworn by Mr. Kirit Kumar (“Kumar”) on 04 February 2022.
   
4. J. Kevi Refrigeration & Air Conditioning Services Limited T/
   A J.Kevi (Fiji) (“J. KRACSL”) is the defendant. It has filed an affidavit of Kevi N. Reddy (“Reddy”) sworn on 02 March 2022 to oppose the application.
   

BACKGROUND

5. J. KRACSL is a limited liability company duly registered and incorporated under the Companies Act. The company trades under the business name of J. Kevi (Fiji). J. KRACSL was issued with a Certificate of Registration of A Business Name on 21 June 2018 which confirms that the said business name is registered in J. KRACSL’s favour.
   
6. The founding affidavit of Kumar sets out how CCPL was served with two statutory demands.
   

First Demand Notice

7. The first one was dated 18 November 2021 demanding payment of the sum of $78,000. This one was served by J. KRACSL.
   
8. The above demand was disputed by CCPL. A letter dated 08 December 2021 by Siddiq Koya Lawyers to J. KRACSL’s lawyers (Lal Patel Bale Lawyers) states the following (my summary):
   
   • (a) J. KRACSL initially sought $58,000 by email dated 24 July 2020
     
   • (b) CCPL then responded with a payment proposal for the said sum
     
   • (c) the payment proposal was rejected by J. KRACSL.
     
   • (d) J. KRACSL instead insisted on full settlement of that amount
     
   • (e) thereafter – meetings were held between the J. KRACSL and CCFL. From these, it appears that CCFL did require from J. KRACSL a breakdown of the amount of $58,000.
     
   • (f) J. KRACSL delayed in providing a breakdown but finally did send another demand to the sum of $62,452.47.
     
   • (g) on 15 March 2021, CCFL sent an email to J. KRACSL seeking a breakdown as to how the sum of $62,000 was arrived at
     
9. Further to the above, Siddiq Koya Lawyers also said as follows in the same letter:
   
   • (a) J. KRACSL is responsible for the delay in the settlement of the debt as it has not provided a detailed account
     
   • (b) the works carried out by J. KRACSL to which the statutory demand relates – was defective.
     
   • (c) J. KRACSL has failed to rectify the defects and CCFL has had to pay Vinod Patel the sum of $46,519.36 “for items which were damaged due to your client’s defective works”
     
   • (d) CCFL will be taking legal action against J. KRACSL to recover losses for the defective works
     
10. In a letter dated 14 December 2021, Lal Patel Bale Lawyers responded as follows:
    
    • (a) CCFL’s claim that J. KRACSL’s demand for the payment of the full sum of $58,000 was unreasonable to the COVID-19 situation – is redundant. The invoices to the debt were raised well before Covid-19 was declared a pandemic.
      
    • (b) J. KRACSL is not required to provide a breakdown of the outstanding debt sum as each invoice was given for each completion stage of the works and sets out the particulars of the services rendered.
      
    • (c) J. KRACSL refutes the allegation that the works it carried out was defective.
      
11. Siddiq Koya Lawyers wrote a reply on 16 December 2021 joining issues with the above.
    

Second Demand Notice

12. The Second Demand Notice was issued on 14 January 2022. In this second Demand Notice, the sum claimed is $58,000. Notably, his sum has decreased considerably from the sum of $78,000 which was claimed in the first Demand.
    

ACKNOWLEDGEMENT OF DEBT OF $58,000

13. There is an email dated 03 August 2020 sent by a Richard S Prakash (Office Manager at Siddiq Koya Lawyers) to Mr. Kevi which states as follows:
    

CIF is willing to settle the entire outstanding in the sum of $58,000-00 with the monthly payment of $2,000.00 per month.

In respect of the $19,000-00 which our CIF wanted to contra, they have sent a Statutory Demand (Winding Up Notice) to Padarath Aluminum and once this received they will make lump sum payment.

INVOICES

14. Annexed also to Reddy’s affidavit marked KR6 seventeen (17) statements/ invoice in total as follows:
    

Date of Statement/ Invoice	Issued By	Issued To	Amount	Description
13/12/21	J. Kevi Group Fiji	Classic Interior Furniture & Construction Limited (“CIFCL”)	$78,000
31/12/19	J. Kevi	CIFCL	$8,668.47	16 particulars set out on the Invoice with separate amounts adding up to the invoiced amount.
28/12/19	J. Kevi	CIFCL	$1,950.00	To Supply Chequer Plate for Stairs at Harrisons Site @ $1,950 VIP
20/12/19	J. Kevi	CIFCL	$2,152.03	To Carry Out Variation Works on Roofing at The Prasad & Prasad Site
20/11/19	J. Kevi	CIFCL	$3,161.00	To Fabricate & Install Fire Stair Case
20/11/19	J. Kevi	CIFCL	$9,810.00	To Carry Out Rectification Works On Gutter & Gutter Outlet Piping System
20/11/19	J. Kevi	CIFCL	$2,725.00	To Carry Out Purline Building Works @ Consumer Site
14/11/19	J. Kevi	CIFCL	$7,521.00	To Fabricate & Install Structural Fixtures for Consumer Complex @$6,900 VEP
04/11/19	J.Kevi	CIFCL	$1,008.00	To Carry Out Welding Works On Harrisons Site For 56 Hours @ $18.00 Per Hour
14/10/19	J. Kevi	CIFCL	$1,008.00	To Carry Out Welding Works On Harrisons Site For 56 Hours @ $18.00 Per Hour
08/10/19	J. Kevi	CIFCL	$1,728.00	To Carry Out Welding Works On Harrisons Site For 96 Hours @ $18.00 Per Hour
27/09/19	J. Kevi	CIFCL	$1,728.00	To Carry Out Welding Works On Harrisons Site For 96 Hours @ $18.00 Per Hour
25/09/29	J. Kevi	CIFCL	$5,395.50	To carry out Welding Works On Gutter & to Seal-Off Gutter
23/09/19	J. Kevi	CIFCL	$ 324.00	To Carry Out Welding Works On Harrisons Site For 74 Hours @ $18.00 Per Hour
08/06/19	J. Kevi	CIFCL	$2,071.00	To Fabricate & Install Plate for Trench on Consumer Site (FEA)
22/05/19	J. Kevi	CIFCL	$28,750.00	To Fabricate and install Stainless Steel Railing – Final Claim # 4

THE LAW

15. Section 516 of the Companies Act provides:
    

516.—(1) A Company may apply to the Court for an order setting aside a Statutory Demand served on the Company.

(2) An application may only be made within 21 days after the demand is so served.

(3) An application is made in accordance with this section only if, within those 21 days—

(a) an affidavit supporting the application is filed with the Court; and

(b) a copy of the application, and a copy of the supporting affidavit, are served on the person who served the demand on the Company.

16. The normal grounds employed to support an application to set aside a statutory demand are set out in sections 517 which are:
    
    • (a) that there is a genuine dispute between the Company and the respondent about the existence or amount of a debt to which the demand relates (section 517(1)(a)).
    • (b) that the Company has an offsetting claim (section 517(1(b)).
    • (c) that there is a defect in the demand, substantial injustice will be caused unless the demand is set aside (section 517(5)(a)).
    • (d) there is some other reason why the demand should be set aside (section 517(5)(b)).
      

IS THERE A GENUINE DISPUTE ABOUT THE DEBT?

17. Mr. Justice Jude Nanayakarra ruling in Searoad Shipping Pte Ltd v On Call Cranes (Fiji) Ltd [2020] FJHC 1025; HBM 36.2020 (11 December 2020) provides an excellent discussion of the various tests applied. The key points which I extract from the above to determine whether a genuine dispute is established for the purposes of section 517(1)((a) of the Companies Act, 2015 are as follows:
    

(a) the threshold criteria for establishing the existence of a genuine dispute is a low one.

(b) the court does not determine the merits of any dispute. Rather, the Court is only concerned with the question - whether there is such a dispute? (In Edge Technology Pty Ltd v Lite-on Technology Corporation [2000] NSWSC 471; (2000) 34 ACSR 301, Barrett J at [45]); Fitness First Australia Pty Ltd v Dubow; Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] Vic Rp 61; [1994] 2 VR 290

(c) the threshold for that is not high (see In Edge Technology). The Court need not engage in a rigorous and in-depth examination of the evidence relating to the plaintiff’s claim, dispute or off-setting claim (Mibor Investments Pty Ltd v Commonwealth Bank of Australia).

(d) the threshold rather is similar to the “serious question to be tried” criterion which arises on an application for an introductory injunction or for the extension or removal of a caveat (Eyota Pty Ltd v Hanave Pty Ltd), or that there are reasonable grounds indicating an arguable case (see In Fitness First (supra) at 127, Ward J cited Panel Tech Industries (Australia) Pty Ltd v Australian Skyreach Equipment Pty Ltd (N.2))

(e) as McLelland CJ said in Eyota:

This does not mean that the court must accept uncritically ...every statement in an affidavit “however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be not having “sufficient prima facie plausibility to merit further investigation as to its [truth]” (cf Eng Me Young v Letchumanan [1980] AC 331 at 341], or “a patently feeble legal argument or an assertion of fact unsupported by evidence”: cf South Australia v Wall (1980) 24 SASR 189 at 194.

(f) the task is simply to identify the genuine level of a claim (In Re Morris Catering Australia). As McLelland CJ said in Eyota:

... except in such an extreme case [i.e. where evidence is so lacking in plausibility], a court ... should not embark upon an enquiry as to the credit of a witness or a deponent whose evidence is relied on as giving rise to the dispute. There is a clear difference between, on the one hand, determining whether there is a genuine dispute and, on the other hand, determining the merits of, or resolving, such a dispute.....

(g) hence, if a company’s claim is so “devoid of substance that no further investigation is warranted” (see In Fitness First (supra) Panel Tech Industries (Australia) Pty Ltd v Australian Skyreach Equipment Pty Ltd (N.2)), or is “plainly vexatious or frivolous”, it will fail in establishing that there is genuine dispute.

(h) the court does not engage in any form of balancing exercise between the strengths of competing contentions. Hence, where the company has advanced an arguable case, and even where the case against the company seems stronger, the court must find that there is a genuine dispute ((see In Fitness First (supra); CGI Information Systems & Management Consultants Pty Ltd v APRA Consulting Pty Ltd); Roadships Logistics Ltd v Tree

(i) A genuine dispute is therefore one which is bona fide and truly exists in fact and that is not spurious, hypothetical, illusory or misconceived. It exists where there is a plausible contention which places the debt in dispute and which requires further investigation. The debt in dispute must be in existence at the time at which the statutory demand is served on the debtor (Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd [1997] FCA 681; (1997) 76 FCR 452; Eyota).

COMMENTS

18. CCPL’s allegations about J. KRACSL’s defective workmanship and it having to engage Vinod Patel & Company to carry out remedial work, raises a potential off-setting counterclaim.
    
19. I do note though that there is no clear evidence given. A report from Vinod Patel & Company setting out in detail the work that it carried out and specifically, that it was all work performed to remedy the defects and complete the work earlier done by J. KRACSL - would have satisfied the burden of proving the allegations. No such evidence was in the affidavits filed.
    
20. As I have said, under section 517 of the Companies Act, a statutory demand may be set aside if there is a genuine dispute about (i) the basis of – of – (ii) the amount of debt or (iii) if the Company has an offsetting claim.
    
21. While I am mindful that the threshold is not high (see In Edge Technology) and that I need not engage in a rigorous and in-depth examination of the evidence relating to CCPL’s claim or off-setting claim (Mibor Investments Pty Ltd v Commonwealth Bank of Australia) – this does not absolve CCPL from the onus of having to adduce evidence that there is a serious issue to be tried or that there is an arguable case.
    
22. The authorities are clear. A statutory demand should be set aside where there appears to be factual evidence that may require further inquiry to establish the truth of the matter. A mere disagreement with a statutory demand without particulars, or a mere assertion of a legal argument unsupported by evidence, cannot be counted as a genuine dispute.
    
23. In this case, I have taken into account the correspondence between the parties prior to the service of the first statutory demand and also prior to the service of the second statutory demand. I have also taken into account the invoices rendered by J. KRACSL which I have set out above.
    
24. It is clear to me from these that there was a contract entered into between CCPL and J. KRACSL for the supply of materials and the construction and installation of some “structures” as itemized on the invoices.
    
25. The scope of the service to be rendered by J. KRACSL – one may glean from the invoices.
    
26. I note that the invoices were not questioned by CCPL immediately after they were rendered in 2019.
    
27. However, I also note that the second Demand Notice is based on the admitted amount of $58,000.
    
28. In my view, there is no genuine dispute about the amount of debt. The applicant had admitted to the sum of $58,000 and had even arranged to settle it by installments. There is also no evidence in the affidavits filed by the applicant as to what defects in workmanship are alleged, nor is there any evidence that any work carried out by Vinod Patel & Company was to remedy any defective work.
    

CONCLUSION

29. The application to set aside statutory demand is dismissed with costs to the respondent which I summarily assess at $800-00 (eight hundred dollars only).
    

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

Anare Tuilevuka

JUDGE

Lautoka

11 July 2022