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Dee Cee's Bus Services Ltd v Drive Train Engineering Ltd [2002] FJHC 256; HBC0262d.2002s (17 September 2002)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

CIVIL ACTION NO. 262 OF 2002

Between:

DEE CEE=S BUS SERVICES LIMITED
Plaintiff

and

DRIVE TRAIN ENGINEERING LIMITED
Defendant

Mr. D. Sharma for the Plaintiff
Mr. G.P. Shankar for the Defendant

DECISION

This is the plaintiff=s application by way of motion dated 21 June 2002 seeking an order restraining the defendant >from proceeding with and advertising in any way a threatened winding up petition against the applicant until further order=.

An affidavit of Reginald Chand in support has been filed.

Plaintiff=s contention

The grounds of opposition mainly is that there is a substantial dispute between the parties relating to any amounts alleged to be owed by the plaintiff. The plaintiff has simultaneously with this motion issued a Writ of Summons in this regard.

The plaintiff says that it is a solvent company. It would be inequitable and unjust for the defendant to advertise the winding-up Petition as it would cause irreparable damage to the plaintiff=s reputation.

The plaintiff says that the defendant=s bailiff and agent Eparama Turaga came to collect $32,553.78 in August 2000. It is alleged by the plaintiff that it was agreed with Turaga that a credit note for $14,653.00 would be issued to the plaintiff and the sum of $17,920.78 would be paid. Post-dated cheques were issued for the latter sum and the cheques were duly honoured.

Despite this agreement a winding-up Notice was issued on 21 March 2002 and on 14 June 2002 the defendant=s solicitors threatened to proceed to wind-up the plaintiff company stating that the said agreement was unenforceable.

Defendant=s contention

The defendant in reply states that Turaga had no authority whatsoever to make any compromise with the plaintiff. It says that the said cheques were deposited as part- payment. The plaintiff owes $22,201.42 and that is why a statutory demand notice was sent.

Consideration of the issue

I have read the affidavits filed herein and the written submissions made by both counsel.

There is no doubt that there is a substantial dispute between the parties as to the alleged debt.

The plaintiff maintains that it has paid the debt in full and relies heavily on the agreement signed by the defendant=s bailiff and agent. There a credit note is stated to have been given for $14,653.00.

Whether the said Turaga had any authority to enter into such an agreement cannot be decided on affidavit evidence alone. It could be a matter entirely between the defendant and Turaga.

On the facts as they stand, the solution to the dispute lies in an action commenced by the Writ of Summons and that the plaintiff has already done. Winding-up Petition is not the answer to a vigorously opposed debt based on substantial grounds.

In determining the issue before me I have borne in mind the principles as stated below from Palmer=s Company Law Vol.3 15.214:

ATo 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. ASubstantial@ 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 Ato 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 cyclostyled judgment) Barker J.A. said:

AThe 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:

A3. 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 requires 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 Athe 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 Awhere 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 Megarry J=s judgment in In re Lympne Investments Ltd (No.00250 of 1971) 1972 1 WLR 523 at 527 which is apt:

ANor 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] UKLawRpEq 171; (1874) 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 Acreditor@ 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 principles involved, I grant the Order sought, namely, restraining the defendant from proceeding with filing a petition and advertising in any way to wind-up the plaintiff company until further order of this Court. The costs are to be costs in the cause.

D. Pathik
Judge

At Suva
17 September 2002