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Celtrock Holdings Ltd v Freight Services (Fiji) Ltd [2001] FJHC 252; HBC228.2001 (22 November 2001)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

CIVIL ACTION NO. 228 OF 2001

Between:

CELTROCK HOLDINGS LIMITED
Plaintiff

And

FREIGHT SERVICES (FIJI) LIMITED
Defendant

Mr. D. Sharma for the Plaintiff
Mr. A. Tikaram for the Defendant

DECISION

By motion dated 24 May 2001 the plaintiff is applying to Court for ‘an order that the Defendant by itself or by or through its servants and/or agents howsoever be restrained from taking any action to present a petition for the Winding up of the Plaintiff and particularly Winding Up action threatened in its Notice to the Plaintiff dated 3 May 2001.’ The motion as supported by an affidavit sworn by Cherie Letia Chute, a Company Director, on 24 May 2001 together with a Supplementary Affidavit sworn by her on 4 July 2001.

The defendant Company filed an Affidavit in Reply through Harry Chand, its Finance Controller sworn 12 July 2001; a Supplementary Affidavit sworn by him on 20 August 2001 was also filed.

As ordered written submissions were filed by both counsel. Counsel for the plaintiff filed his on 24 October 2001.

The defendant has demanded $23,958.10 for shipping charges which the plaintiff says has already been paid. Counsel for the defendant threatened to wind up the plaintiff Company for the recovery of freight charges. The plaintiff has through its supplementary affidavit exhibited a letter confirming receipt of payment of the freight charges for the three containers involved in this action. The plaintiff is therefore seeking an interim injunction as prayed.

The defendant has replied to the plaintiff’s affidavits. It says that the payment relates to ‘destination charges paid’ i.e. ‘tax, duty and delivery charges from Port Le Harve to consignee, Taxxon on Maritime International Limited by their brokers/clearance house agents, Philippe Fauveder & CIE’. The defendant says that the ‘two bills and the payment of them have nothing to do with the balance freight charges still due and owing by the plaintiff to the defendant on Invoice No. 00019520 dated 17-12-2000.’ It further says that nowhere in the charge invoice of Philippe Fauveder & CIE does it say payment of Ocean Freight and/or charges from origin port, Suva, Fiji to destination Port, Le Harve. It says that the Plaintiff’s supplementary affidavit is misleading.

It is the plaintiff’s contention that there is a substantial dispute as to the alleged debt and hence the defendant ought to be restrained from presenting a petition to wind up the plaintiff Company.

The issue before the Court for its determination is whether there is a substantial dispute as to the alleged debt to enable the Court to make the order sought by the plaintiff.

There are certain principles governing the granting of a winding up order. There is a general principle that a petition for winding up with a view to enforcing payment of a disputed debt is an abuse of the process of the Court and should be dismissed with costs. (Palmer’s Company Law Vol 3, 15.214 and cases cited therein).

In Palmer’s (ibid) is set out the principles involved in considering disputes as to debt and I have borne these in mind in considering the matter before me. There it is stated:

"To fall within the general principle the dispute must be bona fide in both a subjective and an objective sense. Thus the reason for not paying the debt must be honestly believed to exist and must be based on substantial or reasonable grounds. "Substantial" means having substance and not frivolous, which disputes the court should ignore. There must be so much doubt and question about the liability to pay the debt that the court sees that there is a question to be decided. The onus is on the company "to bring forward a prima facie case which satisfied the court that there is something which ought to be tried either before the court itself or in an action, or by some other proceedings."

In Offshore Oil N.L. and Investment Corporation of Fiji Limited (Civ. App. 29/84 F.C.A. at p.15 of cyclostyed judgment) Barker J.A. said:

"The law is clear that there is a discretion in a Court seized of a winding-up petition, to decline to hear the petition where the debt is contested on substantial grounds".

Also in Bateman Television Limited (In Liquidation) and Another v Coleridge Finance Company Limited 1971 NZLR p.929 Judicial Committee, it was held:

"3. The general rule is that an order for winding up will not be made on disputed debt but a Judge has discretion to make a winding up order on disputed debts which is not reviewable unless exercised on a wrong principle or the Judge included or omitted consideration of a relevant fact or was wholly wrong."

Upon a careful consideration of the affidavit evidence before me and the submissions in writing of both counsel, I am satisfied that there is a substantial dispute. There is threat of a winding up Petition being filed. A real dispute turning on disputed questions of fact which require vice voce evidence cannot properly be decided on petition. It was held In re Company No. 00212 of 1995 The Times Law Reports (1995 P.186) that in such a situation "the correct course was to strike out the petition, whether the company was, or was not solvent at the time". It was also stated by Walker J that "where there was a complex rift of disputed facts and allegations on both sides which cried out for cross-examination, it was inappropriate for a claimant to resort to a petition to Wind up a company which was his adversary." (In re Amadeus Trading Ltd, The Times Law Reports 1 April 1997 p.36).

On the totality of the evidence there is here triable issues such as would entitle the company to resist a Petition if one was filed. I conclude with the following extract from Meggary J’s judgment in In re Lympne Investments Ltd (No. 00250 of 1971) 1972 1 WLR 523 at 527 which is apt:

"Nor is it right, or in accordance with the modern practice, to stand over the petition in order that the disputed issues may be resolved in other proceedings. That practice, I may say, seems to stem from In re London and Paris Banking Corporation (1874) [1874] UKLawRpEq 171; L.R. 19 Eq. 444. The Companies Court must not be used as a debt-collecting agency, nor as a means of bringing improper pressure to bear on a company. The effects on a company of the presentation of a winding up petition against it are such that it would be wrong to allow the machinery designed for such petitions to be used as a means of resolving disputes which ought to be settled in ordinary litigation, or to be kept in suspense over the company’s head while that litigation is fought out. Further, Mann v. Goldstein [1968] 1 W.L.R. 1091, cited with approval in the New Zealand Court of Appeal in Bateman Television Ltd. v. Coleridge Finance Co. Ltd. [1969] N.Z.L.R. 794, provides authority for saying that when a petition is based on a debt which is disputed on substantial grounds, the petitioner is not a "creditor" within section 224(1) of the Act of 1948 who has the locus standi requisite for the presentation of the petition, even if the company is in fact insolvent."

In the outcome, for the reasons stated hereabove and considering the principle involved, I grant the order sought by the plaintiff with costs in the cause. The Writ of Summons herein to take its normal course.

D. Pathik
Judge

At Suva
22 November 2001