AUSTRALIAN TELEPHONE DISTRIBUTORS PTY LTD. (IN LIQUIDATION) v. GOLDEN ALWAYS LTD AND ANOTHER

IN THE COURT OF APPEAL

1996, No. 88
(Civil)

----------------------

----------------------

J U D G M E N T

----------------------

Godfrey, J.A. :

Introduction

1. This is the judgment of the court.

2. This appeal, by Australian Telephone Distributors Pty. Limited ("the petitioning creditor"), is an appeal against the dismissal, with costs, by Mrs. Justice Le Pichon on 25 March 1996, of its petitions presented on 21 December 1995 for the compulsory winding-up of two associated companies, Golden Always Limited ("Golden") and Paradigm Connections Limited ("Paradigm"), to which we will refer together as "the companies". The appeal was called on for hearing on 27 June 1996. Mr. Nigel Kat (to whose forceful but fair argument we are indebted) appeared for the petitioning creditor. On being told by Mr. Kat that he did not object, we allowed one Malcolm Basil Maydwell, a director of the companies, to represent their interests, as he had been allowed to do before Mrs. Justice Le Pichon. We indicated then, and we repeat now, that while it might sometimes be appropriate for a body corporate to be represented in proceedings in the Supreme Court by one of its directors (as indeed the local rules of the Supreme Court expressly contemplate : see O.5 r.6(2)(b)) it does not follow that a similar indulgence will be granted by this court as was granted at first instance. However, since (1) Mr. Kat, as we have said, did not object; and (2) we considered that considerations of delay and expense pointed strongly in favour of disposing of the appeal before close of business on 27 June 1996, we did not insist on the companies being represented by counsel. And indeed we are indebted to Mr. Maydwell, too, whose careful and courteous argument was of great assistance to us.

The facts

3. The petitioning creditor agreed some years ago (1) to purchase some tooling equipment from Golden but to allow Golden to use that equipment to produce telephone accessories for sale by Golden to the petitioning creditor; and (2) to purchase cellular telephones from Paradigm. These arrangements broke down and the companies ceased trading. The petitioning creditor demanded delivery up by Golden of the equipment to which we have referred, and compensation from Golden and Paradigm for their failure to deliver goods which, according to the petitioning creditor, they ought to have delivered. Unsatisfied, the petitioning creditor brought an action for the recovery of the equipment and for compensation accordingly. On 17 November 1994, it obtained an order for summary judgment, under O.14 of the Rules of the Supreme Court, against Golden and Paradigm for that part of its claim which related to delivery up of the equipment (even though Paradigm was not alleged to have had any such equipment to deliver up). The O.14 order included an order for costs against not only Golden but also against Paradigm. The costs were taxed, and on 31 October 1995 were certified in the sum of HK$197,064.04. They were not paid. On 25 November 1995 the petitioning creditor, as each of its petitions alleged, "served on Malcolm Maydwell, a director of the company, by leaving it at 5th Floor, 108 Macdonnell Road, Hong Kong being the business address of the company a demand under its hand requiring the company to pay the said sum, which demand was in the prescribed form". The demands referred to the "allocatur" dated 31 October 1995 by which the costs had been certified in the sum of HK$197,064.04. On 13 December 1995, Mr. Maydwell, for the companies, wrote to the petitioning creditor's solicitors a letter in the following terms:

"I write to you on behalf of Golden Always Limited and Paradigm Connections Limited.

We are in receipt of a copy of your letter dated 24th November 1995, reference AHL/RGB/42-067599-1. We note that the original letter has not been received. Our address for service is 5th Floor, 108 Macdonnell Road, not Mody Road, Kowloon.

Your purported demands of the same date makes reference to Allocatur dated 31 October 1995. As there is only one matter before the courts out of which these may have arisen, we presume this is in relation to costs taxed in proceedings A6220 of 1993. Nevertheless, we have received no Allocatur from you.

Notice was serviced upon you on August 8, 1995 that our address was 5th Floor, 108 Macdonnell Road, Hong Kong. A copy of the notice, receipted by your office, is available for your inspection if you should so require. The notice was filed on the same day in the Supreme Court.

In view of the fact that no Allocatur has been served on us, we are unable to attend to your claim.

Furthermore, we wish to draw your attention to the substantial counterclaim against your clients in the aforesaid proceedings. We are entitled to a set-off exceeding the amount of your Allocatur and no Winding Up Petition has any chance of success in these circumstances. We reserve our right to produce this letter in court should you be minded to proceed with such a petition.

Finally, we note that your client has taken no steps to pursue the balance of its claim against us in proceedings A6220 of 1993 for more than one year. We hereby give you notice that it is our intention, within seven days of the date hereof, to apply to the court for your client's statement of claim to be struck out for want of prosecution."

4. It was the fact that no "allocatur" had been served on the companies. It was the fact that Golden had a substantial counterclaim, for a sum exceeding HK$3 million, against the petitioning creditor, raised in its defence filed in the petitioning creditor's proceedings against Golden; the counterclaim had been signed by solicitors for Golden who, presumably, had before them material which justified their putting their name to Golden's defence and counterclaim. The petitioning creditor ignored the point taken by Mr. Maydwell's letter of 13 December 1995 in relation to the "allocatur"; at least, it did not bother to "serve" a copy of the "allocatur" on the companies, as it perfectly well could and indeed should have done. And it ignored the point taken as to Golden's counterclaim, too. Instead, it simply forged ahead with the petitions which, in due course, were dismissed by Mrs. Justice Le Pichon on 25 March 1996.

The issues

5. The petitioning creditor sought an immediate order for the compulsory winding-up of each of the companies. It relied on the fact (and it was the fact) that its demands for payment of HK$197,064.04, being the costs taxed under the order of 17 November 1994 and certified in that sum on 31 October 1995, remained unsatisfied. The petitioning creditor asserted at the hearing (although not in its petitions) that the companies were, therefore, to be deemed insolvent and unable to pay their debts, and that it would, therefore, be just and equitable immediately to wind up the companies.

6. The companies resisted this. They relied on the fact (and it was the fact) that at the date of the demands, 25 November 1995, they had not been served with the copy of the "allocatur" certifying at HK$197,064.04 the amount of the costs taxed under the order of 17 November 1994. They contended that they came under no obligation to pay that sum to the petitioning creditor before they were presented by the petitioning creditor with a copy of the "allocatur". Therefore, they claimed, the demands were invalid and they were entitled to have the petitions dismissed. Even if they were wrong about that, they said, the court should nevertheless, in all the circumstances, exercise its (undoubted) discretion to dismiss the petitions, since, in the case of Golden, the amount of its counterclaim against the petitioning creditor substantially exceeded the amount of the petitioning creditor's debt; and, in the case of Paradigm, because no order for costs ought to have been made against it at all, since the order under which the order for costs was made did not relate to any claim made in the action by the petitioning creditor against Paradigm, and that Paradigm wanted to appeal against that order accordingly.

The judgment below

7. The judge upheld the companies' contention that the demands were invalid. She held that the obligation of a party directed to pay costs "does not arise until such time as he is presented with a copy of the allocatur". Accordingly, she was of the opinion that at the time the demands were served there was not a debt then due from the companies to the petitioning creditor. She therefore decided to dismiss the petitions and she did not, in the circumstances, express any final view on the other contentions raised by the companies.

The appeal

8. The issues before us were the same as those before the judge. But we were of the opinion, differing from the judge, that the sum of HK$197,064.04 became immediately due and payable by the companies to the petitioning creditor as soon as that sum was certified. Thereafter, the amount of the debt was no longer unascertained (compare In re Laceward Ltd [1981] 1 WLR 133 and In re A Company No. 001573 of 1993 (1983) 1 BCC 98, 937, in each of which the amount of the debt was unascertained). The failure of the petitioning creditor's solicitors to answer the letter of 13 December 1995 by supplying forthwith copies of the "allocatur" was irrelevant, although unfortunate; for while production of the "allocatur" (or the order endorsed with it) might have been necessary in order to prove the debt, it was not necessary in order to create it.

9. We therefore had to go on to consider the other contentions raised by Golden and Paradigm respectively and decide whether, on the basis of those other contentions, to affirm the decision of the judge to dismiss the petitions or to take some other, and if so what, course.

10. So far as Golden was concerned, it seemed to us that, as (1) the companies had ceased trading; (2) there were no supporting or opposing creditors; (3) there were no funds which the liquidator of Golden could call upon to fund the prosecution of Golden's substantial counterclaim against the petitioning creditor; and (4) Mr. Maydwell was prepared to take on the burden of representing Golden in its proceedings on the counterclaim, the right course was for the court to refuse to make an immediate winding-up order. It would then be open to the court, instead, to dismiss the petition or stay all further proceedings on it (compare In re LHF Wools Limited [1970] Ch 27; and In re A Company No. 006273 of 1992 [1993] BCLC 131). We decided to take the latter course.

11. So far as Paradigm was concerned, we were unable to see how the order for costs made against Paradigm could be justified, since that order related to no claim against Paradigm. Since, on 30 January 1996, Paradigm had applied for leave to appeal out of time against that order, and since Mr. Maydwell was prepared to represent Paradigm on that application and (if granted) to represent Paradigm on the appeal, we decided that it would be right to stay all further proceedings on the petition against Paradigm, too.

The result

12. At the end of the hearing of the appeal we announced our conclusions as set out above. We stated that we would reduce our reasons into writing (which we have now done) and would hand down our judgment in due course (which we now do). We allow the appeal and we set aside the order of the judge dismissing the two petitions, substituting, for that order, on Mr. Maydwell's undertaking personally to prosecute with due diligence (1) Golden's counterclaim in the petitioning creditor's action against Golden; (2) Paradigm's application for leave to appeal against the costs order made against Paradigm and (if granted) the appeal itself, an order that all further proceedings in the two petitions be stayed until further order, with liberty to the petitioning creditor (if so advised) to apply at any time for the lifting of the stay (the object being, of course, to afford the petitioning creditor a sanction in the event of any breach by Mr. Maydwell of the undertakings given by him to this court).

Costs

13. After hearing argument, we decided that it would not be right, taking an overall view of the proceedings, to make any order for the costs of any party. We therefore set aside the order for costs made by the judge and made no order as to the costs of the appeal.