Fresha Exports Ltd v Tonga Co-operative Federation Ltd [2010] TOLawRp 31; [2010] Tonga LR 200 (15 November 2010)

IN THE SUPREME COURT OF TONGA
Supreme Court, Nuku'alofa

CV 220/2009

Fresha Exports Limited

v

Tonga Co-operative Federation Limited

Scott CJ
9 November 2010; 15 November 2010

Company law – court appointed receiver – but not incorporated company; was cooperative society – appointment set aside
Practice and procedure – applications which affected other parties should not be ex parte

On 7 December, 2009 judgment in the amount of NZ$297,140.31 and US$177,721.85 was entered against Tonga Cooperative Federation Limited (TCF) in default. On 2 March 2010, upon application being made ex parte by the judgment creditor, the Court appointed a receiver to enforce the judgment against TCF. The Court acted pursuant to RSC. 0.33. The applicant, Crosby Exports Limited, applied to set aside the 2 March 2010 order on the ground that it was made in error and without jurisdiction. The judgment creditor argued that it was entitled to the priority which it had acquired by obtaining judgment in its favour. Secondly, since her appointment, the receiver had done an excellent job and she should be allowed to complete the task for which she had been appointed. The applicant advanced two basic propositions: the first, was that a receiver may not be appointed where the judgment debtor was a cooperative society and secondly, that RSC 0.33 did not give the Supreme Court a blanket power to appoint a receiver.

Held:

1. The provisions of the Companies Act did not apply to a cooperative society whether or not it was deregistered under section 43 of the Act. The provisions of Parts VI and VII of the Act were inconsistent with the appointment of a receiver under the Companies Act. RSC 0.33 only gave the Supreme Court the power to appoint a receiver where such an appointment was provided for by statute. The Act provided no such powers of appointment by the court.

2. The order made on 2 March 2010 was made without jurisdiction and was set aside. The court acted on the impression that TCF was an incorporated company but it was actually a cooperative society.

3. The court pointed out that applications which did not only affect the party applying should, except in cases of exceptional urgency, always be served on all parties. If TCF had been served with the 2 March 2010 application then the error lying at the heart of the order would almost certainly have been revealed.

Statutes considered:

Civil Law Act (Cap 25)

Companies Act 1995

Cooperative Societies Act (Cap 118)

Supreme Court Act 1981 (UK)

Rules considered:

Supreme Court Rules 2007

Counsel for the applicant : Mr Niu
Counsel for the judgment creditor : Mr Afeaki

Decision

[1] On 7 December, 2009 judgment in the amount of NZ$297,140.31 and US$177,721.85 was entered against Tonga Cooperative Federation Limited (TCF) in default of Defence.

[2] On 2 March, 2010, upon application being made ex parte by the Judgment Creditor, the Court appointed a receiver to enforce the judgment against TCF. The Court acted pursuant to RSC. 0.33.

[3] This is an application made under RSC 0.13 r 7, by a person, Crosby Exports Limited, to set aside the 2 March, 2010 order on the ground that it was made in error and without jurisdiction.

[4] Both Counsel filed comprehensive and helpful written submissions which need not now be repeated in detail.

[5] In brief, Mr. Afeaki submitted that the Judgment Creditor was entitled to the priority which it had acquired by obtaining judgment in its favour. Secondly, since her appointment, the receiver had done an excellent job and she should be allowed to complete the task for which she had been appointed. Details of the progress made by the receiver are set out in a report dated 1 April, 2010.

[6] Mr. Niu advanced two basic propositions. The first, was that a receiver may not be appointed where the judgment debtor is a cooperative society and secondly, that RSC 0.33 does not give the Supreme Court a blanket power to appoint a receiver.

[7] Judging by its name, one would think that TCF was a limited liability company but in fact it is, as was agreed by counsel, a cooperative society. The fact that the word "limited" is included in its name derives from the requirement of section 6(3) of the Cooperative Societies Act (Cap 118 – the Act).

[8] The relevant parts of the Act dealing with a society's failure to meet its financial commitments are parts VI and VII. Section 41 (1) provides that the Registrar of Cooperative Societies, upon application by a creditor, may authorize an investigation. If the Registrar is of the view that the committee of the society is not performing its duties properly he may appoint a person to act in effect as a receiver (section 42 (b)). The appointee has the power to "recover the assets and discharge the liabilities of the society" (section 42 (2) (b)). If the Registrar is of the opinion that the society should be dissolved the society's registration can be cancelled (section 44). Following cancellation a liquidator can be appointed section 46). Among the liquidator's powers is the right to decide "any question of priority which arises between creditors" (section 47 (c)).

[9] It was common ground that following the repeal of the Civil Law Act (Cap 25) in 2003 there is now no bankruptcy law in Tonga. It was also agreed that the only specific statutory provision for the appointment of a receiver is to be found in the Companies Act (14 of 1995) e.g sections 242 and 270 (2)(f). Section 62 of the Act, however, specifies that the provisions of the Companies Act do not apply to a "registered" cooperative society.

[10] In my view the provisions of the Companies Act do not apply to a cooperative society whether or not it has been deregistered under section 43 of the Act. In my view, the provisions of Parts VI and VII of the Act, outlined above are inconsistent with the appointment of a receiver under the Companies Act.

[11] In England and Wales, section 37 (1) of the Supreme Court Act 1981 gave the High Court the power to appoint a receiver "in all cases in which it appears to the court to be just and convenient to do so". This provision has no application in Tonga. In my opinion RSC 0.33 only gives the Supreme Court the power to appoint a receiver where such an appointment is provided for by statute. The Act provides no such powers of appointment by the court.

[12] I am satisfied that the order made on 2 March, 2010 was made without jurisdiction and must be set aside. It is plain that the court acted on the impression, now conceded to have been wrongly given by paragraph (3) of the Statement of Claim, that TCF was an incorporated company. The application succeeds; the order of 2 March, 2010 is set aside.

[13] The question now is how the liquidation of TCF's assets should be carried forward to the benefit of all its creditors. Counsel may wish to consider approaching the Registrar. The appointment of a receiver under section 42 (b) of the Act would avoid her excellent work to date being wasted.

[14] Before leaving the matter I wish again to point out that applications which do not only affect the party applying should, except in cases of exceptional urgency, always be served on all parties. If TCF had been served with the 2 March, 2010 application then the error lying at the heart of the order would almost certainly have been revealed.

[15] I will hear counsel as to costs.