Kennedy Hotels Ltd, In re [2001] FJLawRp 12; [2001] 1 FLR 56 (6 February 2001)

IN RE KENNEDY HOTELS LIMITED

High Court Civil Jurisdiction

6 February 2001

HBF 0065D/97L

Companies Law - dissolution of injunction – petition to wind up – whether material non disclosure of correspondence in injunctive application fatal – whether petitioning creditor's winding up petition on undisputed debt an abuse of process - Companies Act (Cap. 249) s221

The Debtor obtained an ex parte injunction against the Petitioning Creditor to prevent the Petitioning Creditor from winding up the company. The Petitioning Creditor sought to have the injunction dissolved. The Company admitted receiving chlorine and the debt but counterclaimed for damages caused by the chlorine subsequent to supply. It alleged that in face of a negligent supply of chlorine, the Petitioning Creditor's petition was an abuse of process. The Court considered that the consequences after supply and the debt were two different transactions. The debt being undisputed, it was proper for the Petitioning Creditor to pressure the company to pay its debts as due.

Held–(1) The duty cast on party seeking injunctive relief is total. Failure to disclose vital correspondence by Petitioning Creditor on a without prejudice basis, making offer of repayment of amounts owing by instalment, when making an ex parte application has restrictive consequences for the party affected and injunction is dissolved forthwith.

(2) It is not an abuse of process for a Petitioning Creditor to pursue its remedies against a Company which admits a debt, but fails to pay after 21 days of a service of demand and wrongly sets up a counterclaim for 2 different transactions.

Injunction to restrain petitioner from proceeding with winding up action dissolved.

Cases referred to in Decision

appl Anglian Sales Ltd v South Pacific Manufacturing Co. Ltd [1984] 2 NZLR 249
appl Re a company (No. 006273 of 1992)

6 February, 2001

DECISION

Madraiwiwi, J.

The Petitioning Creditor Gremm Chemicals (Fiji) Limited has by motion dated 21 August 1998 sought an order that the ex parte injunction made on 9 January 1998 be dissolved and the Respondent Kennedy Hotels Limited pay the costs of this application. The application is supported by an affidavit sworn by Rishi Ram Sharma on 2 March 1998.

The parties rely on the following documents in this application:

1. Notice of motion dated 21 August 1998;

2. Affidavit in support of Rishi Ram Sharma sworn 3 March 1998;

3. Affidavit of Mohammed Aleem Khan sworn 9 January 1998;

4. Notice of Petition dated 19 December 1997;

5. Affidavit verifying petition sworn 8 December 1997;

6. Ex parte summons dated 9 January 1998;

On 23 April 1997 the petitioning creditor by its solicitors issued a notice of demand and notice of intention to wind up claiming from the Respondent the sum of $9424.08 for liquid chlorine supplied to it. Various correspondence then passed between the parties and in December 1997 the petitioning creditor filed a winding up petition against the Respondent. The ex parte injunction was obtained by the latter on 9 January 1998 and continues to date hence this application.

The petitioning creditor in its affidavit in support refers to a letter dated 7 May 1997 that was addressed to the Respondent's solicitors on a "without prejudice" basis. The latter combines an offer to repay the amounts owing in instalments. This correspondence was omitted when the Respondent made its application for an ex parte injunction. In the court's respectful opinion, this correspondence ought to have been disclosed when the ex parte injunction was made. The duty cast upon the party seeking such relief is total. That is because the nature of the relief has restrictive consequences for the party affected. Because of that omission, the injunction is dissolved forthwith.

Even were the court mistaken in this regard, there is the basis on which the ex parte injunction was granted. The conflicting principles in this area of law were settled by the New Zealand Court of Appeal in Anglian Sales Ltd v South Pacific Manufacturing Co. Ltd [1984] 2 NZLR 249. Greig J.A. explained it in these terms at 255:

"Reference has been made in this and other previous High Court decisions in New Zealand to a number of Australian decisions which display a conflict between the view that a substantial counterclaim raises a question of locus standi resulting in preference for an exercise of the inherent discretion against the petitioner and the view that, on the other hand, the existence of a counterclaim does not affect locus standi. I think that those who prefer the former view have failed to make the distinction between the inherent jurisdiction to prevent in special cases on abuse of the court's process and the exercise of jurisdiction on the hearing of the petition.

This is not a case in which the petitioner's case debt is disputed or in which it can be said the petition must fail. The Respondent is a creditor in what is conceded to be a substantial amount. The Appellant has a cross-claim sounding in unliquidated damages. That may leave it in doubt as to whether the Respondent on the hearing of the petition is bound to fail. The petitioner, the Respondent in this case, ought to be entitled to present its petition."

A careful consideration of the affidavit relied upon by the Respondent reveals that Mohammed Aleem Khan has essentially admitted the supply of chlorine and the debt by paragraph 12 of the same. He then sets up his counterclaim in relation to the alleged damage caused by the chlorine subsequent to the incurring of the debt as the basis for his contention, the petitioning creditor's application is an abuse of process. But what may one ask has the alleged negligent supply of chlorine and its consequences to do with the earlier supply of chemicals for which the petitioning creditor demanded payment? They are two different transactions and in seeking recompense the petitioning creditor was only pursuing its remedies. How is that an abuse of process? As their Lordships of the New Zealand Court of Appeal stated in Anglian Sales Ltd supra at 252:

"In bringing his petition, the creditor is doing no more than asserting the right to which the statute entities him to do. In our opinion a creditor's right in this respect ought not to rest simply on the balance of convenience considerations which may be relevant to an interim injunction. Something more than that is required.

All that the Respondent says is that it has substantial assets and that it will be unnecessarily embarrassed by presentation of the creditor's petition. In the interim the twenty-one days has passed from service of demand in which the Respondent is deemed to be unable to pay its debts under section 221 of the Companies Act Cap. 247. It was held in Re a company (No.006273 of 1992) that presentation of a petition to wind up a company based on an undisputed debt was not an abuse of process. It was proper to present such a petition to pressure the Respondent to pay debts that was not disputed. The court respectfully adopts that reasoning.

The application to dissolve the injunction forthwith is accordingly granted and costs summarily assessed for the petitioning creditor at $500.00.

Application granted.

Marie Chan