Re Interasian Traders Finance Ltd

HCCW000056/1980

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Coram: Garcia, J. in Court.

Date of Judgment: 7th July, 1980.

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JUDGMENT

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1. This is a petition brought by the Bank Negara Indonesia 1946 under Section 177(e) of the Companies Ordinance, Cap. 32, to wind up Interasian Traders Finance, Limited, on the ground that the Company is unable to pay its debts.

2. The debt upon which the petition is founded arose in this way: The Company, which was formerly known as the Gubni Asian Finance, Limited, is alleged to have sold a large quantity of United States Dollars to the Petitioner, US$10,000,000 in all, and the proceeds of such sale in Hong Kong, Dollars were credited to the Company's account with the Petitioner in Hong Kong, while the United States Dollars so sold were to be remitted by telegraphic transfer to the Petitioner's account with the Crocker International Bank in New York, with the exception that on one occasion US$2,000,000 were to be sent to the Petitioner's account with the Irving Trust Company, also of New York. All these transactions occurred in August and September, 1978. There appears to have been a current account between the Company and the Petitioner in respect of such dealings because by the 19th day of December, 1978, the Company had failed to deliver the sum of US$8,000,000 to the Petitioner as a result of the said transactions, and with interest calculated up to that date on the latter sum, the total amount of indebtedness due to the Petitioner was $8,343,013.87.

3. On the same day, that is, 19th December, 1978, an agreement was concluded between the Petitioner and the Company regarding this indebtedness and among the terms was one that the Petitioner would not commence proceedings for the recovery of the debt upon the Company agreeing to pay such debt by instalments on certain repayment dates by means of personal cheques issued by a Mr. Taufiq Natawiria, an ex-Director of the Company. Mr. Natawiria resigned from the Company in August, 1978. Moreover, parallel to the signing of the agreement by the parties, Mr. Natawiria also signed a personal guarantee to the Petitioner guaranteeing the payment of the said debt.

4. The first clause of the Letter of Agreement reads as follows:

"1. We hereby acknowledge our indebtness to you, Bank Negara Indonesia 1946 ("BNI") in the sum of US$8,343,013.87 ("the Debt"), such debt being computed as follows:

The preamble to the guarantee signed by Mr. Natawiria in respect of the above debt reads as follows:

"WHEREAS

5. Both parties were then represented by their respective legal advisers and these two statements show unequivocally the indebtedness of the Company to the Petitioner on 19th December, 1978. By 30th April 1980, the debt was reduced to US$6,800,215.73, and as the amount remained unpaid on that date, the Petitioner through its solicitors, made a demand in writing to the Company on 2nd May, 1980 in accordance with Section 178(a) of the Companies Ordinance, Cap. 32. The section reads as follows:

"178. A Company shall be deemed to be unable to pay its debts -

The demand was duly served on the company, and on 16th May, 1980, its solicitors wrote to the Petitioning Creditor's solicitors in effect denying that the Company owed any money to the Petitioner because they acted as brokers for the P.T. Bank Dagang Nasional Indonesia with the knowledge of the Petitioner and in the penultimate paragraph of the letter they say:

"Finally, we are instructed to say that our client is most surprised that your clients should see fit to demand payment of the abovementioned sum from them since your clients had on or about early December 1978 expressly agreed with our client that they (your clients) would only look to P.T. Bank Dagang Nasional Indonesia and/or Mr. Taufiq Natawiria for payment of any sum due under the above-mentioned transaction. Indeed it was on the strength of this undertaking by your clients that our client agreed to sign the letter addressed to your clients dated 19th December 1978 and which was in fact drafted by your goodselves."

6. Predictably the Company did not comply with the demand of the Petitioner and despite the abovementioned letter from the Company's solicitors, the Bank on 28th May, 1980 presented this petition to wind up the Company, and a copy thereof was served on the Company at its registered office the following day. The Company was unable to file an affidavit or affidavits to oppose the petition within the time limited by Rule 32 of the Companies Winding-Up Rules, and instead of seeking an injunction to restrain the Bank from proceeding further with the petition, as they had every right to do, took out a summons for leave to extend the time to file the said affidavit, and in so doing, annexed an affidavit in support of the said summons, sworn by Mr. Kuo Chang Shu, who was acting on behalf of the Forward Navigation Co., S.A., which latter company is a Director of the Interasian Traders Finance, Limited. Mr. Kuo's affidavit states that the said sum of US$6,800,215.73 is owed by P.T. Bank Dagang Nasional Indonesia and/or Mr. Taufiq Natawiria and

"The transactions giving rise to the claim for the said sum of US$6,800,215.73 referred to in the said Petition were all handled or directed by Taufiq personally. Interasian merely acted as a broker in the said transactions and received all the instructions from Taufiq personally. Taufiq is therefore the person who has full knowledge of the said transactions and is the person in the best position to depose to an affidavit on behalf of Interasian to oppose the said petition for winding-up."

7. Leave was granted and Mr. Taufiq Natawiria filed his affirmation on 20th June, 1980, stating, inter alia, that the sum of US$6,800,215.73 alleged to be due by Interasian Traders Finance, Limited, in the said Petition is in fact owed by the P.T. Bank Dagang Nasional Indonesia to the Petitioner

"because all the T.T. were sold by BDNI to BNI through Interasian who merely acted as a broker on commission of 0.0625%. BDNI instructed Interasian to report all the transactions with BNI by telex to me personally/Jaya"

and that in view of these facts

"the matter should be resolved firectly (sic) between BNI and BDNI."

8. In no part of his affirmation did Mr. Natawiria mention that he had guaranteed the liabilities of the Company to the Petitioner nor the acknowledgment by the Company on 19th December, 1978, of their indebtedness to the Petitioner. There was no doubt that he had personal knowledge of the Letter of Agreement dated 19th December, 1978, Since he himself was on the same date the signatory of a guarantee given in favour of the Petitioner as security for the liabilities of the Company, and he had, according to Mr. Kuo, "full knowledge of the said transactions."

9. On the basis of these assertions in the affirmations of both Mr. Kuo and Mr. Natawiria, counsel for the Company submits that there are substantial grounds upon which the debt is disputed and invites the Court to dismiss the petition because although there might be a debt owing to the Petitioner, that debt was not owed by the Company and therefore there was no reason to say that the Company is unable to pay its debts under sections 177(e) and 178(a) of the Ordinance. There is clear authority that the modern practice is to dismiss such a petition where a debt upon which the petition is grounded is disputed : Mann v. Goldstein (1968) 1W.L.R. at 1094 per Ungoed-Thomas J.

"As stated in Buckley on the Companies Act, 13th Ed. (1957) p.451, in a passage quoted with approval by Lord Greene M.R., in In re Welsh Brick Industries:

And then it goes on:

What the Companies Court will not do is to proceed any further at all on a petition founded on a debt which is not thus shown in limine to exist, for in such a case there is not, of course, the necessary creditor required by section 224 to apply for a winding-up order."

Further on at page 1095, he says:

"To enable the Companies Court to make the winding-up order itself, not only must the petitioner have been shown to be entitled to present the petition, but one of the grounds specified in section 222 of the Companies Act must be established and the only such ground relied on in the petition and before me was that the company is unable to pay its debts. This requirement is additional to the pre-condition of presenting the petition, that the petitioner must be a creditor, and is not alternative to it But the insolvency requirement, unlike the creditor requirement, is only a prerequisite of the order and not a prerequisite of the presentation of the petition. So if a person is entitled to present a petition, then the company's inability to pay its debts is the very matter which it is appropriate for the Companies Court to enquire into and decide in the exercise of its jurisdiction to make a winding-up order."

10. So also in Re Lympne Investments Ltd. (1972) 2 All E.R. 385 where Megarry J. (as he then was) states at page 388:

"A real dispute turning to a substantial extent on disputed questions of fact which require viva voce evidence, and involving charges of fraud or near fraud, cannot properly be decided on petition. 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 Re London & Paris Banking Corporation. 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."

11. The substantial grounds for the disputed debt relied upon by the Company are: (1) the Company acted only as a broker in the transactions between the Bank Dagang Nasional Indonesia and the Petitioner; and (2) there was a collateral agreement between the Petitioner and the Company that the former would look to the Bank Dagang Nasional Indonesia and/or Taufiq Natawiria for payment of the sum due under the said transactions. So far as the first ground is concerned, if that were the only ground upon which the Company seeks to dispute the debt, I would have no hesitation in rejecting it and making the order asked for any the Petition. There is absolutely no indication whatsoever in any of the documents before the Court that the Company acted otherwise than as a principal in the transactions between the Petitioner and itself and such of the documents as are before the Court show clearly and unequivocally that the Company was carrying out the transactions on its own account. A typical letter of confirmation of sale of the United States Dollars referred to reads as follows:

Please confirm above by returning copy hereof duly signed.

Moreover, the Company had on 19th December, 1978, acknowledged its indebtedness in the amount stated in the Letter of Agreement to the Petitioner as principal and not on behalf of nor on account of nor as agent for the Bank Dagang Nasional Indonesia.

12. So far as these documents and affidavits are concerned, I think I am entitled to refer to them at least for the purpose of ascertaining whether any substantial grounds exist for the debt to be disputed by the Company and so dismiss the petition if such grounds are evident.

13. As to the second ground, even if there existed a collateral agreement as indicated in the letter from the Company's solicitors to the Petitioner's solicitors on 16th May, 1980, such an agreement does not, in my judgment curtail or extinguish the rights of the Petitioner to proceed against the Company in respect of its indebtedness once default has been made in the repayment of the sums set out in the Letter of Agreement, acknowledged by the Company to be due by it to the Petitioner, since neither the Letter of Agreement, itself nor the Guarantee signed by Mr. Natawiria contain any such provision.

14. There are in my judgment no substantial grounds shown by the Company in the documents before the Court upon which the debt due to the Petitioner may be disputed. The Company not having complied with the statutory demand, I make the order to wind up the Company as sought in the Petition with costs to be taxed and to be paid out of the Company's assets.

Representation:

Mr. Charles Ching. Q.C. and or. William-Stone (J.S.M.) for petitioning creditor.

Mr. Martin Lee, Q.C. and Mr. Herman Poon (Vincent Lo & Co.) for the company.

Mr. Barry-Walsh for Official Receiver.