Kim Industries Ltd, In Re (No 1) [2000] FJLawRp 41; [2000] 1 FLR 141 (7 July 2000)

2000 1 FLR 141

HIGH COURT OF FIJI

KIM INDUSTRIES LIMITED, In Re (No. 1)

High Court Civil Jurisdiction
Gates, J
HBF0036/99L
7 July 2000

Winding Up - whether defective affidavit admissible-meaning of agent, officer, who should sign demand notice - Companies Act s2, 40, 220, 221, 391; Companies (Winding Up) Rules 21, 24(2), 25; High Court Rules O.41 r.9

The company objected variously to the petition and forms used in the winding up process and several issues were framed for a court ruling.

Held - (1) Endorsement note ought to be appended to backsheet of affidavit - petitioner's signature, although not required, desirable and will be the practice adopted by the court. Leave must be sought if affidavit bears an irregularity.

(2) Signature on petition is mere surplusage on the completed form.

(3) Although there was no authority for a solicitor to sign a demand notice, there was no procedural advantage attached to such a narrow legalistic approach. A document signed by a barrister and solicitor will suffice, although solicitors should ensure they hold authority to so sign.

(4) In the interests of modern day efficacy, the court will recognize a divisional manager as an appropriate witness to depose to an affidavit verifying compliance with rule 25 of the Companies (Winding Up) Rules.

(5) An affidavit of service must be complete and must state measures taken to locate registered address of company and that service was properly effected.

Preliminary objections to the Petition rejected and hearing of Petition to continue.

Cases referred to in judgment
ref Ba Town Council v Fiji Broadcasting Commission & Ors (1976) 22 FLR 91
ref Gleeson v J Whippell & Co Limited (1977) 1 WLR 510
Appl In Re New Zealand Gum Machines Co Limited [1921] NZGazLawRp 194; [1922] NZLR 93
Cons Re Whitley partners Limited [1886] UKLawRpCh 94; [1886] 32 Ch.D 337
Cons In Re Diptford Parish Lands [1934] 1 Ch 151
Cons Bateman Television Limited. & Anor. v Coleridge Finance Co. Limited [1969] NZLR 794
Foll In Re Vic Groves & Co. Ltd [1964] 2 All E.R. 839
Foll Re African Farmers Limited [1906] UKLawRpCh 124; [1906] 2 Ch. 640

[note: appl in Chandrika Prasad v Republic of Fiji & Attorney-General [2000] HBC0217/00L (No. 3) Ruling 15 November, 2000, (No. 5) 20 December 2000, ABU0078/00 1 March, 2001, State v President of The Fiji Islands, Judicial Services Commission, Chief Justice of Fiji, Attorney-General, Jayant Prakash; ex-parte Iftakhar Iqbal Ahmad Khan [2000] HBJ007/2000L 12 October 2000, Jokapeci Koroi & Ors v Commissioner of Inland Revenue & Attorney-General [2001] HBC 179/2001L judgment of 24 August 2001;
foll in Sigatoka Builders Limited v Pushpa Ram & Sanjay Prakash Ram [2002] HBC 182/01L judgment of 22^nd April 2002]

Adish K. Narayan for the Petitioning Creditor
Samuel Ram for the respondent Company

7 July, 2000

RULING

Gates, J

The Petitioning Creditor has brought Winding Up proceedings against the Respondent Debtor Company under the Companies Act Cap. 247. Preliminary issues were raised by Counsel for the Respondent Debtor Company. I was asked to rule on these submissions prior to proceeding further with the petition.

1. Affidavit Defective: Non-compliant with Rules

The Petitioning Creditor, namely Dominion Insurance Limited, is a limited liability company which had been incorporated and registered in Fiji. In compliance with Rule 25 of the Companies (Winding Up) Rules, and in support of its Petition of 16th December 1999, the Creditor filed an affidavit verifying the Petition. This was sworn by one Satish Shankar on 17th December 1999.

The affidavit read as follows:

"I SATISH SHANKAR father's name Gauri Shankar of Nadi, Manager, make oath and say as follows:-

1. THAT I am the Manager Western of DOMINION INSURANCE LIMITED and am duly authorised by the said Petitioner to make this affidavit on its behalf.

2. THAT such of the statements in the Petition now produced and shown to me, marked "A" as relate to acts and deeds of the said Petitioner are true, and such of the statements as relate to the acts and deeds of any other person or persons I believe to be true."

The affidavit appears to have been engrossed with the Petition itself so as to form a continuous single document, that is, the affidavit was not prepared as a separate document with its own backsheet. Counsel for the Respondent Company complains the affidavit is not endorsed as it should have been in accordance with Order 41 r.9 of the High Court Rules.

Ord. 41 r. 9(2) reads:

"9. (1) ......

(2) Every affidavit must be indorsed with a note showing on whose behalf it is filed and the dates of swearing and filing, and an affidavit which is not so indorsed may not be filed or used without the leave of the Court."

This information is often conveniently noted on the backsheet as follows:

AFFIDAVIT OF MOHAMMED
ALEEM
Verifying Petition for Winding Up

[Note Indorsed
pursuant to Order 41
r. 9(2)] of the High
Court Rules 1988
(Fiji) as amended.

Sworn by: Mohammed Aleem
Date sworn: 17 December 1999
Date filed: 17 December 1999
On behalf of: Petitioning Creditor

Such endorsement and format is particularly helpful in interlocutory proceedings where there may be as many as 3 or 4 summonses to be considered and several affidavits in the action filed for each of the summonses. The indorsement assists in picking out the relevant Affidavit for the particular Summons to be heard. Sometimes the indorsement note is placed on the final page of the affidavit and such placing is also correct, although not as helpful for the reasons I have mentioned.

If an affidavit bears an irregularity in its form, such as the omission of the endorsement note, leave must be obtained from the court for it to be filed or used [Ord. 41 r.4 and Ord. 41 r. 9(2)]. In this case I am prepared to grant such leave to the petitioner. However these Rules have good purpose behind them. The failure of counsel to come with adequately prepared affidavits will not always result in a court allowing indulgence under Ord. 41 or Ord. 2 r. 1 see Ba Town Council v. Fiji Broadcasting Commission and Others [1976] 22 FLR 91 at 94B; Gleeson v. J. Whippell & Co. Ltd. [1977] 1 WLR 510.

It takes some time to set up documents such as affidavits correctly, once and for all. But once done Solicitors are then assisted by modern computers to maintain the format correctly ever after.

2. Petition not in prescribed form

Rule 21 of the Companies (Winding Up) Rules states:

"Every petition shall be in Form No. 3, 4 or 5 with such variations as circumstances may require."

The complaint here is that the Petitioner's signature (in reality, that of its solicitor) has been added at the conclusion of the Petition at P. 4 and in this regard it is said it fails to comply with the forms because there is no requirement for a signature. It is correct that none of the forms specified in Rule 21 appear to require the petitioner's signature. It is not clear why the petition should not be signed. Petitions and Notices of Appeal provide for the Petitioner's or Appellant's signature [see CPC Form 31, and Sections 310 and 311 of the Criminal Procedure Code Cap 21]. I can see nothing remiss in such signing. If the insertion of a signature is irrelevant, then I take it as mere surplusage on the completed form and it can be disregarded In Re New Zealand Gum Machines Co Ltd [1921] NZGazLawRp 194; [1922] NZLR 93 at 95. Logic would seem to suggest that a Petitioner petitioning a court would naturally sign his Petition at its conclusion acknowledging it as his and signifying assent to its contents.

I favour the signing of the petition by the petitioner or by his Barrister and Solicitor, and this will be the practice of this court [see Rule 203]. In instances where the petitioner himself signs I suggest the petition should conclude:

"Presented this day of 2000.

Signed. ....... By the Petitioner"

3. S.221 Notice not under the hand of the creditor

By virtue of Section 220 of the Companies Act a company can be wound up by the court where inter alia the company is unable to pay its debt [section 220 (e)].

Section 221 provides:

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)

(c) ....

Counsel for the Respondent company says that the demand of the 16th October 1999 issued in compliance with Section 221 and left at the Registered office of the Respondent was not given "under the hand of the Creditor" (the petitioner). He argues the petitioning company should have signed through its company's secretary, a director, or other principal officer of the company.

The notice was in fact signed by the petitioner's solicitor, and it read as follows:

Dominion Insurance Limited by its solicitors

Messrs A K Narayan & Company

per: A K Narayan Signed.

In every other respect the Section 221 Notice was unremarkable.

There is no prescribed form under the Rules for framing the Section 221 Notice. The issuance of the notice is a preparatory step taken prior to the filing of a petition. The Notice is not a Court form.

The Creditor, or someone with his authority, would appear to be the persons contemplated as being able to sign and to issue such a notice. The common law rule was "qui per alium facit, per seipsum facere videtur" [He who does anything by another is deemed to have done it himself]. Quain J in Re Whitley Partners Ltd [1886] UKLawRpCh 94; [1886] 32 Ch.D 337 at 340 said: "We ought not to restrict the Common Law Rule,......., unless the statute makes a personal signature indispensable". Here Section 221 does not insist on a personal signature. Luxmoore J in In re Diptford Parish Lands [1934] 1 Ch 151 at 161 had this to say of a solicitor signing an Appellant's Petition of Appeal:

It is convenient that I should deal with the second point, as it has been raised. It was also said that the petition was not properly presented, because the notice, which is a condition precedent to the presentation of the petition, was not under the hands of the appellants. I do not think that it would be correct to read s. 11 of the Act of 1869 as requiring actual physical signature by an appellant. I think it is quite sufficient if an appellant signs the notice by his duly authorised agent. There might be reasons which made it impossible for a person to sign, or even to make his mark. The appellant in the present case is a Parochial Church Council. How can such a body sign under its own hand? I think there is no substance in the second objection.

In England the creditor has to serve on the company "a written demand in the prescribed form", [Insolvency Rules 1986 S1 1986/1925 r.4, 4(2)]. This demand must be signed by the Creditor himself or by a person stating himself to be authorised to make the demand on the Creditor's behalf [r.4.4(3)]. In Australia previously, under the Companies Act 1961 it had to be "a demand under his hand or under the hand of his agent thereunto lawfully authorised".

In Fiji Section 2 of the Companies Act an "agent" is defined as not to include a person's Barrister and Solicitor acting as such.

Section 40 of the Act states:-

A document or proceeding requiring authentication by a company may be signed by a director, secretary or other authorized officer of the company, and need not be under its common seal.

Document is defined:

"document" includes summons, notice, order and other legal process, and registers. [Section 2]

In these proceedings, the Petitioner filed an authority dated 2nd December 1999. This authorised Satish Shankar inter alia to sign and present a winding up petition, to swear affidavits and sign all documents necessary etc. No papers were filed authorising the solicitors for the petitioner to issue a demand notice. However, this was not necessary. Indeed a solicitor's authority cannot be disputed at trial. In re New Zealand Gum Machines (supra) at 95 where the proper course for such challenge was indicated to be a motion for stay.

In Re Whitley Partners Limited (supra) at 339 in interpreting the meaning of "shall be signed by each subscriber in the presence of and attested by one witness at least." Cotton LJ had this to say:

"The appellant contends that as nothing is said in the statute about signature by an agent, these expressions must mean that the signature is to be affixed by the subscriber himself...I think it would be wrong to hold that an enactment simply referring to signature is not satisfied by signature by means of an agent".

In Bateman Television Ltd & Anor. v. Coleridge Finance Co. Limited [1969] NZLR 794 at 819 Macarthy J said:

"If I had any doubt, which I have not, I would lean strongly in favour of the efficacy of an agent's signature.

The practical advantages of that view of the situation are obvious and in a procedural matter such as this are entitled to weight."

I conclude therefore that no procedural advantage attaches to a narrow legalistic approach to the signing of the Demand Notice. Common sense also dictates that it should be open for the notice to be signed either by the Creditor himself or by his authorised agent, and a creditor could make his Barrister and Solicitor his authorised agent for such purposes. After all a company has to appear at court by a barrister and a solicitor. If a barrister and a solicitor can properly sign a Notice of Appeal for a company it follows that there could be nothing improper in a barrister and solicitor signing a Section 221 Notice, if so authorised. Solicitors should ensure that they hold such authority.

4. Affidavit Verifying Petition not sworn by Director, Secretary, or other Principal officer of Company.

The Respondent company's counsel submits that the affidavit verifying the petition is defective since it has not been sworn by one of the creditor's principal officers in accordance with Rule 25 of the Companies (Winding Up) Rules.

Rule 25 provides:

Every petition shall be verified by an affidavit, which shall be sworn by the petitioner, or by 1 of the petitioners if more that 1, or, where the petition is presented by a corporation, by a director, secretary or other principal officer thereof, and shall be sworn and filed within 4 days after the petition is presented and such affidavit shall be prima facie evidence of the contents of the petition.

The affidavit was sworn by Satish Shankar, described as The Manager Western for the petitioning company.

Further Section 2 of the Companies Act defines officer as:

"officer", in relation to an association or a body corporate, includes a director, manager or secretary.

However that definition is one giving an extended meaning to the ordinary meaning of the word defined. The Shorter Oxford Dictionary gives various definitions of "officer" including "one to whom a charge is committed, or who performs a function; one who holds an office, post or place". "Principal" is defined as "belonging to the first or highest group in rank or importance; prominent or leading".

The deponent was Divisional Manager, Western of the petitioner. All Western Division branches came under him. I am told there were only 2 Divisional Managers of the petitioner, (an Insurance company), and one Chief Executive officer based in Suva. In Re Vic Groves & Co. Ltd [1964] 2 All E.R. 839 there were 32 Divisional Managers of the petitioner, Shell-Mex and BP Ltd, a very substantial company. Pennycuick J accepted that a general manager would qualify as an "other principal officer," but not a Divisional Manager where there were 32 of them. His lordship relied on a Practice Note of Simonds J (made in 1937) that an Assistant Secretary of a company was not of sufficient rank, though possibly he might be in a large company.

The basis for this objection was for the administrative reason that it would be too difficult for the Companies (Winding Up) Department to manage. Presumably the clerks in the department had a duty to reject petitions which were not in the correct form, including affidavits which had been verified by officers who could not be classified as "other principal officers". These must now be considered, considering advances in business management techniques, quite old cases. We are in a swifter age where it is unrealistic to expect modern managers of the rank of Chief Executive Officer to be handling Winding Up decisions and affidavits. These are matters more appropriately and more knowledgeably to be handled by Financial Controllers, or Divisional or Branch Heads. It will be a question of degree as to whether the officer who deposes on behalf of the petitioning company is or is not an "other principal officer," bearing in mind the size of the company and the responsibilities likely to be carried by the officer in question.

Modern business efficacy expects courts to recognise how businesses are managed today and not to waste the time of a corporation's most senior officers with matters now reliably and safely delegated. It is noteworthy that Pennycuick J considered the strict application of the rule, which was directory only, inconvenient and likely to be amended.

His lordship accepted there would be proper cases [petitioner absent overseas as in Re African Farmers Ltd [1906] UKLawRpCh 43; [1906] 1 Ch. 640, or where material facts were more within the knowledge of the deponent than of the petitioner himself. Nowadays this will often arise. I consider a Divisional Manager to be an appropriate witness to depose to the affidavit verifying in compliance with Rule 25.

5. Affidavit of Service of Notice and Petition

Complaint was made by Counsel for the respondent that an affidavit of Service of the Section 221 Notice was not served on his client, the debtor. It does not have to be. An affidavit as to service of the petition only is required [Rule 24 (2) Companies (Winding Up) Rules]. As it happens the affidavit of the petitioner's Divisional Manager verified the petition. Paragraph 6 of the petition referred to the demand and its service on the 16th October 1999. It did not state who had actually served the demand. This should be included in the petition or set out specifically in the affidavit.

Service of the Petition is dealt with by Rule 24 which states:

(1) Every petition shall, unless presented by the company, be served upon the company at its registered office, if any, and, if there is no registered office, at the principal or last known principal place of business thereof, by leaving a copy of the petition with any member, officer or servant of the company, or, if no such member, officer or servant can be found, by leaving a copy at such registered office or principal place of business, or by serving it on such member, officer or servant of the company as the court may direct; and, where the company is being wound up voluntarily, the petition shall also be served upon the liquidator, if any, appointed for the purpose of winding up the affairs of the company.

(2) An affidavit of service of such petition shall be sworn and filed by the officer executing service thereof.

It is desirable in producing full and adequate evidence of Service on a company that the correctness of the place of service be established. This means that the bailiff or clerk serving needs to refer in his affidavit to what he was told (naming his source, unless he did the search himself, in which case he can give direct evidence on the matter) of the results of a company search revealing the registered office and the registered postal address of the company. He should go on to state that he then served the company at the address discovered in the search. Ideally the affidavit should exhibit a copy of the certificate of incorporation and either an extract from the Registrar of Companies records showing the addresses, or a Solicitor's search form bearing the searching clerk's name and signatures. This evidence will then satisfy a Court that a: (i) Service was properly effected in accordance with Rule 24 (or Section 391 of the Act) on the relevant company, (ii) at its correct address. Too many cases come to Court in which the company's registered address is later found to be incorrect.

When making orders in default of appearance, a Court needs to have full and satisfactory evidence of service to the extent I have indicated. Without such evidence, a Court may not be satisfied that service was indeed effected.

The preliminary objections to the Petition are therefore rejected and the Hearing will now continue.

Preliminary objections dismissed.

Marie Chan