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Pacific Harbour International Hotel v Buttula [1995] FJHC 85; Hbc0399d.93s (3 May 1995)

IN THE HIGH COURT OF FIJI
At Suva
Civil Jurisdiction

CIVIL ACTION NO. 0399 OF 1993

Between:

PACIFIC HARBOUR INTERNATIONAL HOTEL
Plaintiff

- and -

OTTO BUTTULA
Defendant

- and -

ENDEAVOUR FISHING ENTERPRISES (FIJI) LTD.
Claimant Company

Mr. V. Kapadia for Plaintiff
No appearance for Defendant
Mr. N.S. Arjun for Claimant Company

RULING

On the 10th of February 1995 this Court after a short trial to determine an issue as to the legal ownership of various items seized under a Writ of Fifa, ordered that:

"The items enumerated in the claimant company's interpleader summons namely, items 1 to 8, being legally the property of the claimant company, must therefore be returned forthwith to the claimant company or its lawful representative." (hereafter 'the disputed items')

On 23rd February 1995 the unsuccessful plaintiff hotel sought an order:

"... for stay of all further proceedings in this action including the judgment of the High Court of Fiji dated 10th February 1995 be stayed pending the hearing and determination of the Appeal ... filed on the 22nd day of February 1995."

The affidavit filed in support of the application and deposed by the Accountant of the plaintiff hotel did not annex a copy of the Notice of Appeal as is the normal practice, instead the affidavit makes reference to:

(i) a sale and transfer of real estate property by the defendant on or about the 20th of December 1994;

(ii) a bankruptcy petition against the defendant advertised on 18th February 1995;

(iii) a High Court Writ issued in January 1995 by the plaintiff hotel's solicitor's on behalf of an unrelated party, claiming a sum in excess of $105,000 from the defendant;

and

(iv) an order dated 23rd April 1993 winding up the claimant company and appointing the Official Receiver the provisional liquidator.

The affidavit then deposes to the absence of the consent of the Official Receiver to the institution of the interpleader proceedings by the claimant company; to a yet-to-be-made application to adduce further evidence at the hearing of the appeal; and finally, to the "... very real risk that the priority to the chattels accorded to the plaintiff hotel pursuant to the execution of the Writ of Fi fa may be lost if the defendant is eventually made bankrupt" and presumably, the plaintiff hotel's appeal succeeds.

The Deputy Official Receiver in opposing the application for a stay and in pursuance of his duty to protect and take possession of all assets belonging to the claimant company "... has given his necessary consent to continue with the interpleader proceedings" and has asserted his claim to the various items the subject matter of the Court's order of 10th February 1995.

I confess that despite the submissions of counsel for the plaintiff hotel, I remain unconvinced that any of the matters referred to in the affidavit and enumerated as (i), (ii) and (iii) above, has any relevance or bearing on the application presently before the Court. Suffice it to say they all refer to the defendant personally and not to the claimant company.

Item (iv) however is somewhat different in so far as it refers to the 'legal status' of the claimant company at the time that it issued the interpleader summons. This is a new matter which was neither disclosed or raised as an issue at the above-mentioned trial, but in any event, given the beneficial outcome of the proceedings for the claimant company and bearing in mind the clear consent granted by the Official Receiver to the continuation of the present action, I am satisfied that there is no merit in this belated technical demurrer.

It is trite that unlike in a bankruptcy where the bankrupt is divested of his entire estate in favour of his trustee, the liquidator of a limited company is not automatically vested with the estate to the exclusion of the company upon an order winding-up the company. The estate remains vested in the company itself, and the liquidators are mere administrators of it for the purpose prescribed by the Companies Act, and that is for equal distribution among creditors of the company. (per Lord Kinnear in Bank of Scotland v. Macleod (1914) A.C. 311 at 321)

The submission is completely answered in my view, by the decision of the English Court of Appeal in Danish Mercantile Co. Ltd. and Others v. Beaumont and Another 1 Ch. 680 to which it is only necessary to refer to the headnote which reads:

"Where proceedings are started in the name of a plaintiff without proper authority, so long as the matter rests there, the action is not properly constituted. In that sense it is a nullity and can be stayed at any time, provided that the aggrieved defendant does not unduly delay his application. It is, however, open at any time to the purported plaintiff to ratify the act of the solicitor who started the action, and to adopt the proceedings. When that has been done, then, in accordance with the ordinary law of principal and agent, and in accordance with the ordinary doctrine of ratification, the defect in the proceedings as originally constituted is cured, and it is no longer open to the defendant to object that the proceedings then ratified and adopted were in the first instance brought without proper authority."

Counsel also referred to the various 'grounds of appeal' and submitted that they disclosed an arguable appeal. I note however that the judgment being appealed from comprises two essential matters firstly, a finding of fact viz the ownership of 'the disputed items' and secondly, a refusal to exercise a discretion viz to lift the veil of incorporation.

In this latter regard counsel for the claimant company submitted that there is no 'common law right' to lift the veil of incorporation and much less where the company concerned is in the process of being compulsorily wound up by the Court and given the adverse consequences of such a course upon bona fide secured creditors of the company.

Having considered the various 'grounds of appeal' which refers 'inter alia' to the Court not properly considering documentary exhibits and the evidence generally, and the absence of a proper basis for a finding of fact, I am satisfied that such 'grounds' do not amount to 'special circumstances' sufficient to support a stay.

As was said by Lord Esher M.R. in Monk v. Bartram [1891] UKLawRpKQB 15; (1891) 1 Q.B. 346 in refusing a stay of execution pending appeal in that case:

"It is impossible to enumerate all the matters that might be considered to constitute special circumstances; but it may certainly be said that the allegations that there has been a misdirection, that the verdict was against the weight of evidence, or that there was no evidence to support it, are not special circumstances on which the Court will grant a stay of execution."

Counsel then referred to the 'risk of prejudice' to the plaintiff hotel if a stay was not granted and 'the disputed items' were released into the custody of the Official Receiver (as the claimant company's lawful representative), and if he were to liquidate them, then the items would be irrecoverably lost and the plaintiff hotel's appeal which seeks a further determination as to the ownership and title to 'the disputed items', if successful, would be rendered nugatory in the sense that "... the priority accorded to the plaintiff hotel pursuant to the execution of the Writ of Fifa may be lost if the defendant is eventually made bankrupt".

In this latter regard counsel for the claimant company submits that if the defendant is made bankrupt as deposed, then, even if a stay is granted and the plaintiff hotel is completely successful in its appeal, nevertheless, the plaintiff hotel would not achieve its declared objective given the clear effect of Section 42 of the Bankruptcy Act (Cap. 48), which provides:

"Where a creditor has issued execution against the goods of a debtor ... he shall not be entitled to retain the benefit of the execution against the trustee in bankruptcy of the debtor, unless he has completed the execution (by seizure and sale) before the date of the receiving order, and before notice of the presentation of any bankruptcy petition against the debtor."

In my view the principle to be applied in the exercise of the Court's discretion to grant a stay is one of balancing all the factor's involved so as to best meet the overall justice of the case and bearing in mind that a successful litigant ought not to be denied the fruits of his success and an unsuccessful party, the opportunity of a meaningful appeal.

In this case the claimant company has successfully obtained a judgment in its favour and although there is a possibility that 'the disputed items' may be irrecoverably lost to the plaintiff hotel if they are released to the official receiver, I note that there is no suggestion that the plaintiff hotel has any desire to retain 'the disputed items' in their present form.

In the circumstances in the exercise of the Court's discretion, the application for a stay is refused with costs to the Official Receiver on condition that the Official Receiver undertake to retain the sum of $18,138.56 from the proceeds of sale of 'the disputed items' if that should occur prior to the final determination of the plaintiff hotel's appeal.

(D.V. Fatiaki)
JUDGE

At Suva,
3rd May, 1995.

HBC0399D.93S