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In re Makare Investments Ltd [2011] FJHC 140; HBE78.2010 (3 March 2011)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

Civil Action No. HBE 78 of 2010

IN THE MATTER OF MAKARE INVESTMENTS LIMITED a limited liability company having its registered office at 1 Waimanu Road, Suva, Fiji
PETITIONER

AND

IN THE MATTER of the Companies Act

BEFORE: Master Deepthi Amaratunga

COUNSELS: Diven Prasad Lawyers for the Petitioner

Date of Hearing: 3rd February, 2011
Date of Ruling: 3rd March, 2011

RULING

1. INTRODUCTION
   

1. This is an application to wind up the Respondent Company for the non payment for the alleged services rendered to the Debtor Company. Petitioner's alleged sum is disputed and this was admitted in the affidavit in reply filed by the Petitioner in paragraph 11.
   

2. LAW AND ANALYSIS
   

2. It is trite law that a creditor should not use winding up proceedings in order to force a debtor to pay a disputed debt. It is well settled law that such an action would amount to an abuse of the court process. Offshore Oil N I v Investment Corporation of Fiji Ltd (Civil Appeal 29/84) it was held that "the law is very 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".
   
3. In the case of Mann & Anr v Goldstein &Anr (1968) 2 A [1861] EngR 510; 11 E.R. 769 at 774 it has held;
   

"Of cause the question whether this is a debt or not may be possibly be tried be a winding – up petition: but it has been said over and over again that the presentation of a winding up petition is not a convenient, and often not a proper method of trying a disputed debt. If there is any reasonable ground for disputing the existence of the debt- if the question is not a mere quantum, but whether there is in fact a debt or not - a petition ought not to be presented, and therefore the Court ought to restrain the presentation of the petition".

4. Viras Development limited & Ors v The Australian and New Zealand Banking Group Limited, (Civil Action No 290 of 2001) at page 7, where Pathik J upheld the following passage in Palmers Company Law Volume 13, at 15.214;
   

To fall within the general principle the dispute must be bona fide in both a subjective and objective sense. ............ "substantial" means having substance and not frivolous, which disputes the Courts should ignore. There must be so much doubt and question about 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 satisfies the court that there is something which ought to be tried either before the court itself or in an action or by some proceedings'........the court's discretion will be exercised in the light of all the circumstances existing ".

5. It is pertinent to note that the present winding up application is regarding a debt of FJ $ 39,375.00 and that is regarding the alleged services rendered by the Petitioning Creditor who undertook to carry out the preliminary design, developed design, constant documentation and construct supervision. The initial agreement is annexed as 'A' to the affidavit in opposition and according to that the amounts are stated in kina the official currency in PNG and the project budget was estimated as $ 7.5 Kina and the break down of the fees for the Plaintiff is given and the total fee was 6% of 7.5 = 450K. This was a letter sent by the Petitioning Creditor to Debtor Company on 7th October, 2009. On 8th December, 2009 a Performa Invoice no 219 for$ 22,500 was sent from the Petitioner to the Debtor Company for progress claim for concept design and again on 9th December, 2009 just after two months after another claim in Proforma Invoice No P 129-1 for $ 41, 343.75 being 15% progress claim for "Outline Planning approval stage" and again on 26th January, 2010 Performa Invoice no P 129-2 for sum of $29,250.00 was claimed for the "Outline Planning approval stage". It should be noted that the proforma invoice of 9th December, 2009 and the 26th January, 2010 are for the same work, but the amounts differ substantially. Again a proforma invoice was made on 5th February, 2010 for $39,375.00.
   
6. In the letter written on 5th February, 2010 (erroneously dated as February) the Debtor Company has written a letter to the Petitioner, terminating the services. In that letter it was stated that;
   

"Our primary reasons for the terminating of your service have been due to the continued variations from the proposed fee structure. It appears that your billing mechanism is clearly contrary to your submitted proposal. In our opinion, we believe that your claim that work has proceeded beyond the Concept Stage is not correct and that your progress claim entitlement is 5% or $8,750. Therefore, should you correct your claim to 5%, we will be happy to release your payment as full and final settlement, thereby relinquishing you full interest in the Davara Road project. Please acknowledge your agreement in writing directly to us to facilitate immediate settlement of your fees".

7. For this letter a reply was sent on the 5th February, 2010 and in that letter it was stated that they do not agree that 5% work stage completion and has stated "We welcome Fiji Association of Architects or any registered architect to review this independently" and further has stated that they will now submit final fee claim to this stage and the invoice for $39,375 was sent. It is clear that from the time January, 2010 the amount was in dispute and this is directly connected to the dispute as to the work completed by the Petitioner as the petitioner himself has suggested an independent review by a recognized institution. It is clear that not only the amount of money, but also the work completed by the Petitioner was at disputed long before this action was filed. In such an instance the winding up action is not the proper way to recover the debt owe as the debt is disputed on several grounds. The work completed is disputed as the Petitioner is alleging completion of work at 20% stage and the Debtor is alleging completion only at 5% stage. If there is a dispute as to the completion of the work the parties should reach an amicable settlement as to how to assess the work already carried out and if there is no agreement as to the method of assessing the work it should be an issue that has to be dealt in a proper court action and each party will have to assess the work independently and ultimately a court of law will decide on the evidence including expert evidence on construction and designing. This kind of dispute cannot be decided without an expert on the construction field and could be decided by a proper arbitration if the parties consent. The Debt is seriously disputed and this fact was admitted by the Petitioner in paragraph 11 of Affidavit in reply.
   
8. It is noteworthy that in the final Performa Invoice that had been dispatched on 5th February, 2010 the progress claim is 20% and the amount is $39,375.00 VIP. The amount stated in the final Performa Invoice is the amount claimed in the Section 221 notice. There is no prior Proforma Invoice for 20% work completion except the final claim which was made after the Petitioner's services were terminated on 5th February, 2010. The only other Proforma Invoice that indicate a progress work is the invoice dated 9th December, 2009 but the covering letter of that invoice state that the amount is for 'Outline Planning approval stage' but in terms of the agreed fee breakdown the 15% payment is at the stage of 'Developed Design' stage. So, clearly there is a need of further clarification on terms and the classification and the terminology, as Petitioner's invoices create confusion in the usage of terminology and this again adds to the dispute as to the work completed in the project by the Petitioner.
   

100. CONCLUSION
     

9. For the reasons given above, the Debt is disputed. The invoices and terminology used to describe work completed is not consistent and in the present proceedings it cannot be decided as to how much work is completed and what is the debt due to Petitioner.
   
10. The application for the winding up is struck off with cost of $750 assessed summarily and to be paid within 21 days.
    

Dated at Suva this 3rd day of March, 2011

Mr. Deepthi Amaratunga
Acting Master of the High Court

Suva