Fiji Development Bank v Hauset Development Co Ltd [2022] FJHC 55; HBE30.2020 (16 February 2022)

IN THE HIGH COURT OF FIJI
AT SUVA
COMPANIES JURISDICTION

Winding Up Cause No. HBE 30 of 2020

IN THE MATTER of HAUSET DEVELOPMENT COMPANY LIMITED a limited liability company having its registered office situated at Level 1, Multispares Building, 26 Sonoma Street, Suva.

AND

IN THE MATTER of the Companies Act 2015.

BETWEEN:

FIJI DEVELOPMENT BANK a body corporate duly constituted under the Fiji Development Bank Act (Cap 214) and having its principal office at 360 Victoria Parade, Suva, Fiji.

PETITIONER

AND:

HAUSET DEVELOPMENT COMPANY LIMITED a limited liability company having its registered office situated at Level 1, Multispares Building, 26 Sonoma Street, Suva, Fiji.

RESPONDENT

BEFORE:
Hon. Mr. Justice Vishwa Datt Sharma

COUNSELS:
Ms Raitivi A. for the Plaintiff
Mr Singh S. for the Defendants

Date of Decision:
Wednesday, 16^th February, 2022

JUDGMENT

[Winding Up in terms of the provisions of the Companies Act 2015]

Introduction

1. This is a Winding Up Application brought by the Applicant, Fiji Development Bank, who is seeking for a Winding Up Order against the Respondent Hauset Development Co. Ltd, as they allege that the Respondent company failed to pay the Applicant the outstanding sum of $FJD 908,739.94 (Nine Hundred Eight Thousand Seven Hundred Thirty-Nine Dollars and Nine-Four Cents).
2. The Respondent admits the outstanding amount being $FJD 908,739.94 (Nine Hundred Eight Thousand Seven Hundred Thirty-Nine Dollars and Nine-Four Cents).
3. The Applicant seeks the following Orders from the Court:-
   • (i) That Hauset Development Company Limited by Wound Up by the Court under the provisions of the Companies Act.
   • (ii) That the Official Receiver be appointed Provisional Liquidator for the affairs of the said Company.
   • (iii) The costs of this Application be taxed and paid out of the assets of the Company.
   • (iv) Such other Order as this Honourable Court may deem just, fit and expedient.
     

Background Facts

4. The secured loan of $804,365.00 was approved to Hauset Development Company Limited on 5 may 2017, for the purchase of two (2) brand new buses from Higer Bus Company Limited in China for $755,480.00 to service charter for Momi Resort staff.
5. The Respondent provided the following securities:-
   • (i) Bus No. HM323
   • (ii) Joint & Several Guarantees by Directors/Shareholders of the Company for total liability.
   • (iii) Adequate insurance cover over the 2 Dream Liner Busses Registration JJ990 and JJ993 with Bank’s interest noted therein.
   • (iv) Bill of Sale over two buses JJ990 and JJ993.
6. That the failure of the Respondent to meet the payments resulted in Demand by the Applicant for the sum due and owing in the total sum of $908,739.94.
7. Thus the Winding Up application before Court.
   

Applicant’s Case

8. The Applicant’s counsel made submissions on the procedural aspect of the Winding Up application. The procedures of Winding Up applications are well established in the Companies Act 2015 and the Winding Up Rules 2015 respectively.
9. The Applicant failed to realise that the procedures for Winding Up applications and all the documents filed necessary for the defence of the Winding Up application by the Applicant is not an issue.
10. The substantive matter that the Respondent ought to have realised is the Respondent’s inability to pay its debt and whether Applicants application satisfies the requirements of Section 515 of the Companies Act.
11. They submitted that although the Applicant has established the debt amount, the Respondent does not oppose the debt but the question of whether they are capable of paying the debt is the substantive issue for this Court to determine.
    

Respondent’s Case

12. The Respondent’s counsel submits that the Applicant has not proven to the satisfaction of the Court that the Respondent is unable to pay its debt (insolvency).
13. Submissions were made to that effect by the Respondent’s counsel that the Respondent had taken a secured loan and provided a bus as security. The Applicant failed to realize this security and/or made any consideration of the security before filing the Winding Up application.
14. The Respondent further submits that the availability of the security shows that the Respondent was and is in a position to pay its debts. The Applicant therefore failed to prove to the satisfaction of the Court that the Respondent was unable to pay its debts as per the provision under Section 515 (Supra).
15. The Respondent submits to this honourable court to consider the submissions of the Respondent and of the fact that they do have the ability to pay the debt (solvent), if given time by the Applicant.
16. The Respondent submits to the Court to consider that the Respondent company was formed by a joint venture with Sunset Express Limited and that Sunset Express has been a long-standing transportation business providing service to the general public of Fiji and if the Court winds up the Company, this will hinder the business of the Respondent and affect the employment of many people.
17. The Respondent humbly seeks that the application for Winding Up be dismissed with costs.
    

Analysis and Determination

18. The substantive issue within the current Winding Up action before the Court is seeking that Hauset Development Company Limited be wound up by this Court under the provisions of the Companies Act 2015.
19. The Respondent Company, Hauset Development Company Limited was formed by a joint venture with Sunset Express Limited which has been a long-standing transportation business providing service to the general public of Fiji.
20. The Applicant, Fiji Development Bank (FDB) granted a loan of $573,500 to the Respondent, Hauset Development Company Limited for the purpose of purchasing two (2) dream buses.
21. This loan granted was a secured loan and the Respondent provided the following securities:-
    • (i) Bus No. HM323;
    • (ii) Joint & Several Guarantees by Directors/Shareholders of the Company for total liability;
    • (iii) Adequate insurance cover over the 2 dream liner busses with FDB Bank’s interest noted thereon; and
    • (iv) Third party Bill of Sale over 2 x buses JJ990 and JJ993.
22. The Respondent failed to meet the required repayments which resulted in the demand by the Applicant for the total sum due and owing amounting to a sum of $908,739.94.
23. Section 515 of the Companies Act 2015 provides as follows-

Definition of inability to pay debts

515. Unless the contrary can be proven to the satisfaction of the Court, a Company must be deemed to be unable to pay its debts—

(a) if a creditor, by nment or t or otherwise, to whom the Company is indebted in a sum exceeding $10,000 or such other Prescribed Amount then due, haved on the Company, by leaving it at the Registered Office of the Company, a demand requiriquiring the Company to pay the sum so due ("Statutory Demand") and the Company has, not paid the sum or secured or compounded for it to the reasonable satisfaction of the creditor within 3 weeks of the date of the notice; or

(b) if during or afterriod of 3 of 3 months ending on the day on which the winding up application is made—

(i) execution or other process issued on a judgment, deor order of any Court in favour of a creditor of the Companompany is returned unsatisfied in whole or in part;

(ii) a Receiver or Manager has been appointed, of Property of the Company was appointed under a power contained in an instrument relating to a Floating Charge on such Property; or

(iii) 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 must take into account the contingent and prospective liabilities of the Company.

24. Section 513(a) provides the Circumstances in which Company may be wound up. The application is made in particular, pursuant to Section 513(c) “whether a Company may be wound up if the Company is insolvent?”
25. The Applicant submitted that the Respondent Company has the inability to pay the debt and there being no dispute as to the debt, the Respondent Company should be wound up.
26. The Respondent admits to the total outstanding amount being $FJD 908,739.94.
27. No doubt, the Applicant has established the debt amount on the admission of the Respondent and the Respondent Company does not oppose the debt in question raised herein.
28. However, the substantive question then arises “whether the Applicant has satisfied the requirements of Section 515 of the Companies Act as enumerated and paraphrased at paragraph 23 of my Judgment hereinabove.”
29. Further, whether the Respondent Company is capable of paying off the debt amounting to $908,739.94.
30. The Respondent took a secured loan and in turn provided a bus as security. The question arises “whether the Applicant should have realised this security and/or made any consideration of the security first before filing the Winding Up Application?”
31. The Respondent Company was formed by a joint venture with Sunset Express Limited and that Sunset Express has been a long standing transportation business providing service to the general public of Fiji.
32. According to the Applicant’s submissions, the security documents with the Applicant does not have any value as the bus under security has not been running and is parked at the Respondent’s Company. The Applicant had released the bus back to the Respondent Company, Hauset Development Company Limited in Good Faith Agreement that they will pay the debt amount. However, the Applicant says that this was not honoured by the Respondent Company.
33. No doubt that the loan granted to the Respondent Company was a secured loan whereby the Respondent Company provided a bus as security.
34. The purpose of providing security against the grant of loan from the Applicant over an asset (bus) means that the Applicant (FDB Bank) can, on the insolvency of the borrower (Hauset Development Company Limited), take possession of that asset (bus), sell it and use the proceeds to repay the outstanding loan.

If in case there was any balance remaining outstanding after the realisation of the security at hand, then the Applicant can file Civil Proceedings in a Court of Law to recover the balance sum in order to settle the entire loan.

35. The appropriate step for the Applicant to take herein was since the Applicant was a Security Holder, firstly to cease the bus under security, and realise this security (bus) before proceeding to file an application for Winding Up the Respondent Company Hauset Development Company Limited.
36. I find that the availability of the Security with the Applicant Bank shows that the Respondent was and is in a position to pay its debts (solvent).
37. The Applicant has failed to prove to the satisfaction of this Court that the Respondent Company Hauset Development Company Limited was unable to pay its debt pursuant to the provisions of Section 515 of the Companies Act 2015.
38. Accordingly, for the aforesaid rationale, I have no alternative but to dismiss the Applicant’s Winding Up Application.
    

Costs

39. The Application proceeded to full Hearing with parties filing Response Affidavits, Oral and Written Submissions.

It is only appropriate that I grant a sum of $500 as summarily assessed costs at the discretion of this Court against the Applicant Fiji Development Bank.

40. Following are the Orders of the Court.
    

ORDERS

1. The Applicant’s Winding Up Application is hereby accordingly dismissed.
   
2. There will be an Order for costs summarily assessed at $500 to be paid by the Applicant to the Respondent Hauset Development Co. Limited.
   

DATED at SUVA this 16^th day of February, 2022.

VISHWA DATT SHARMA
JUDGE

cc: Fiji Development Bank, Suva.
Shelvin Singh Lawyers, Suva.