Keith Mitchel v Steve Fassihi

EASTERN CARIBBEAN SUPREME COURT GRENADA IN THE HIGH COURT OF JUSTICE (CIVIL) CLAIM NO. GDAHCV2015/0407 BETWEEN: KEITH MITCHELL Claimant and [1] STEVE FASSIHI [2] GEORGE WORME [3] GRENADA TODAY LTD (By its Liquidator Garvey Louison) [4] EXPRESS NEWSPAPER LTD Defendants Before: Ms. Agnes Actie Master Appearances: Mrs.Michelle Emmanuel-Steele,Ms. Amy Bullock-Jawahir and Ms.Desriee Douglas for the Claimant Ms. Jennilyn Ettienne for 3 rd Named Defendant Ms. Ollabisi Clouden with Mr. Henry Paryag for 2 nd Named Defendant ________________________________________ 2016: April 13; June 9; August 12 _______________________________________ JUDGMENT

[1]ACTIE, M .: Before this court are two applications for determination. The first application filed by the Liquidator of the third named defendant company is for summary judgment and striking out of the claimant’s claim on the ground that the claimant failed to first obtain leave to commence an action against the company in liquidation. The second application filed by the claimant seeks leave retrospectively to commence the action against the third named defendant company.

Background facts

[2]It is imperative to give a summary of the facts to appreciate the nature of the applications before this court. In a claim for defamation, Cottle M., on 25 th September 2003 made an order confirmed by the Court of Appeal on 30 th June 2004 awarding the claimant judgment with damages against the four named defendants/judgment debtors. The defendants/judgment debtors failed to satisfy the judgment debt. On 19 th October 2005, the claimant/judgment creditor petitioned the court for a winding up order of the third named company/judgment debtor alleging its inability to pay the judgment debt. The claimant/judgment creditor nominated Garvey Louison as the Liquidator. The court by order dated 27 th October 2009 wound up the company appointing Garvey Louison as Liquidator to exercise all his powers pursuant to the Companies Act .

[3]On 16 th January 2014, the claimant applied to the court for the removal and replacement of Garvey Louison as Liquidator of the company. The application was refused with costs in the sum of $2000.00 to the Liquidator.

[4]On 24 th September 2015, the claimant instituted a new claim against the four defendants/judgment debtors for the sum of $330,645.00, comprising the awards made by Cottle M. and confirmed by the Court of Appeal together with interests and costs. The statement of claim avers that the defendants have to date failed or neglected and/or refused to make payments towards the judgment debt.

[5]Garvey Louison, Liquidator for the third named defendant in a defence and counterclaim alleges that the claimant is estopped from proceeding with the action having failed to seek leave of the court to institute the action pursuant to the Companies Act . The Liquidator avers that the claim is res judicata and an abuse of process as it is an attempt to extend the life of the judgment as liability had already been determined by the court. The application for summary judgment

[6]On 19 th November 2015, Mr. Garvey Louison applied for summary judgment against the claimant or alternatively to strike out the claim as (being an abuse of process, barred by the operation of the Limitation of Actions Act , (or ) unless the claimant complies with the costs orders of the High Court and of the Court of Appeal respectively and (iii) the claimant applies for the requisite leave to proceed with the claim that the claim be struck out or stayed. The Liquidator avers that the claimant has to date failed to pay the costs awarded and in his counterclaim claims for the said costs.

[7]Mr. Louison contends that the claimant is in the position of an unsecured creditor without any prior or superior right in relation to any debts due. He alleges that the claim is an unlawful attempt by the claimant to improve his rank in priority to other creditors and an attempt to circumvent the winding up proceedings.

[8]The clamant in reply states that the claim is not by way of execution but is a fresh action to enforce the judgment debt. The Claimant’s application for leave to file the claim

[9]On 26 th January 2016, the claimant filed an application seeking leave to commence or to continue the action against the third named defendant. The Clamant states that the omission to apply for leave was unintentional.

Law and Analysis

[10]The Companies Act requires the leave of the court to commence or continue proceedings against a company in liquidation. Section 386 of The Companies Act [1] provides as follows “When a winding up order has been made, or a provisional liquidator has been appointed, no action or proceeding shall be proceeded with or commenced against the company except by the leave of the court, subject to such terms as the court may impose.”

[11]The purpose and function for this requirement for leave is to prevent a company in liquidation from being exposed to a multiplicity of actions which could be expensive and time consuming.at the expense of the creditors of the company. The provisions seeks to avoid taking away available funds from the orderly winding up of the company and also to have regard to matters capable of being determined expeditiously by the winding up court itself. This is done with a view to ensure equitable distribution of the assets among those entitled. The Text, Palmer in Company Precedents [2] , states: “When a winding up order is made, the court, acting by its officer–the official receiver–lays its hand upon the assets and says, no creditor or claimant must touch these assets or take proceedings, by way of action, execution or attachment pending the distribution by the court in due course of administration. This protection is indispensable equally in winding up and in bankruptcy to prevent a scramble for the assets, but it is not always enough. An even handed justice requires that the court should have power to intervene at an early stage for the protection of the assets, and this power is given by this section. ”

[12]Any claim against the company in liquidation cannot proceed with until the leave of the court is obtained, and such proceedings shall remain pending till such leave is granted. There exists jurisprudence that allows an application for leave to be made retrospectively. The court in Re Saunders (A Bankrupt) Bristol and West Building Society v Saunders [3] held that: “…proceedings can be issued and they are valid and the claimant must then make an application for retrospective permission which will ordinarily be granted on terms similar to those imposed when a company is restored to the register”.

[13]The granting of leave is a judicial discretion which requires the court to consider several factors when deciding whether or not to grant leave to commence or continue proceedings against a company in liquidation. One of the main factors to be taken into consideration in an application for leave is the time the applicant became aware of the liquidation. The court will also take into account other relevant factors such as the amount and seriousness of the claims; the degree and complexity of the legal and factual issues involved; the stage to which the proceedings, if commenced, have progressed; the risk that the same issues would be re-litigated if the claims were to be the subject of a proof of debt; whether the claim has arguable merit; whether proceedings are already in motion at the time of liquidation; whether the proceedings will result in prejudice to creditors; whether the grant of leave will unleash an avalanche of litigation; whether the cost of the hearing will be disproportionate to the company’s resources; delay and whether pre-trial procedures such as discovery and interrogatories are likely to be required or beneficial.

[14]In Stanley Defreitas (Trading as Defreitas and Associates) v Transglobal Inc (in Liquidation ) [4] , a case for leave to file a claim against a company in liquidation Thom J said: “[44] The Court has a discretion whether or not to grant leave to an applicant to institute proceedings against a company in liquidation. The Learned Authors of Corporate insolvency Law and Practice at paragraph 20.5 outlines how this discretion should be exercised as follows: “In exercising its discretion to grant leave to continue or commence proceedings against the company the Court will be concerned to ensure that no creditor gains an advantage over other creditors in the same class. The essential object of a winding up is to ensure an equal distribution of the company’s assets to the ordinary creditors after payment of any preferential claims … where the proceedings are in existence, particularly where they are well advanced, the Court will generally give leave for the action to continue on the ground that it is more convenient to determine the issue between the Claimant and the Company in the existing proceedings than by invoking the procedure for determining disputed proofs, that is by application to the Court in the winding up proceedings. lt is usual for leave to be granted on terms that no judgment obtained may be enforced without leave of the Court. Where no proceedings are in existence the creditor will usually not be given leave to commence proceedings, but will be expected to submit a proof of debt and follow the procedure on disputed proof before the winding up Court. After a creditor has submitted a proof he will be required to follow the procedure in disputed proof; he will not be permitted to start proceedings in another Court.” [45] Leave to institute proceedings against a company in liquidation will only be granted where there is some issue which cannot properly be determined in the winding up proceedings. Where there is some issue which can be resolved in the winding up proceedings then leave to institute proceedings should not be granted. This principle is well illustrated in Re Exchange Securities and Commodities Ltd and Others. The Applicants had invested sums in companies which were later put into liquidation, and some applicants had also invested with a Mr. Hunt who was the principal shareholder of the companies. The applicants contended that they were not mere creditors but investors and the companies held their money on trust. Therefore they should be permitted to bring an independent action against both the company and Mr. Hunt. The Court refused the applications on the basis that the issue whether any trust interest subsist could be determined in the winding up proceedings. There were no special circumstances which necessitated a departure from the general approach.

[15]Mr. Louison objects to the granting of leave to the claimant. He states that the claimant is not a stranger to the liquidation proceedings as it was the claimant’s application made in 2009 that resulted in the winding up of the third named company.

[16]Mr. Louison seeks summary judgment on its counter claim against the claimant. CPR 15.2 provides that the court may give summary judgment on a claim or on a particular issue if it considers that the claimant has no real prospect of succeeding on the claim or the issue. The Court of Appeal In Saint Lucia Motor & General Insurance Co. Ltd. v Peterson Modeste [5] states that summary judgment should only be granted by a court in cases where it is clear that a claim or ( defence ) on its face obviously cannot be sustained or is in some other way an abuse of the process of the court Pereira C.J then George-Creque JA, at paragraph 21 stated: “[21] The principle distilled from these authorities by which a court must be guided may be stated thus: Summary Judgement should only be granted in cases where it is clear that a claim on its face obviously cannot be sustained, or in some other way is an abuse of the process of the court. What must be shown in the words of Lord Woolf in Swain v Hillman is that the claim or the defence has no “real” (i.e. realistic as opposed to a fanciful) prospect of success. It is not required that a substantial prospect of success be shown. Nor does it mean that the claim or defence is bound to fail at trial. From this it is to be seen that the court is not tasked with adopting a sterile approach but rather to consider the matter in the context of the pleadings and such evidence as there is before it and on that basis to determine whether, the claim or the defence has a real prospect of success. If at the end of the exercise the court arrives at the view that it would be difficult to see how the claimant or the defendant could establish its case then it is open to the court to enter summary judgment.”

[17]A creditor with a claim against an insolvent company has the option of either lodging a proof of debt or seeking relief through litigation. In determining whether leave should be granted the court must consider whether the balance of convenience lies in allowing the applicant to proceed by way of action to judgment, or whether the applicant should be left to pursue the claim by lodging a proof of debt with the liquidator. The onus is on the applicant to establish the reason for proceeding by way of action rather than by the ordinary and preferred course of filing a proof of debt with the liquidator. I take judicial notice that the company was wound up at the instance of the claimant in 2009. The claimant filed the claim in clear breach of the provisions of the Companies Act and only made an application for leave after the Liquidator applied to strike out the claim. The claimant has not proffered any plausible reason for not pursuing the debt through the liquidation process which was in 2009. I am of the view that the claimant has not met the evidential burden necessary to convince the court. I am of the view there is no serious issue to be tried as the amount due and owing had already been established and the non-fulfillment of the debt led to the declaration of insolvency against the third defendant. Mr Garvey Louison was appointed Liquidator at the instance of the claimant. The absence of any convincing reason to justify the granting leave to proceed with the claim will therefor result in the dismissal of the application for leave to commence the claim. The claim is accordingly struck out against the third named defendant and summary judgment is granted in favor of the third named defendant on the counter claim with costs in the sum of $1500. 00. The refusal to grant leave to proceed against the third named defendant will not stop the proceedings against the other defendants. Accordingly the claim shall be listed for further case management conference.

Order

[18]For reasons given above I order as follows:- The application to grant leave to commence the claim against the third named defendant is refused. The claim form against the third named defendant is struck out. Summary judgment is granted in favor of the third named defendant on the counterclaim. The refusal of leave to proceed against the third named defendant will not stop the proceedings against the other defendants. Accordingly the claim shall be listed for further case management directions. Costs to the Liquidator of third named defendant in the sum of $1500.00. Agnes Actie Master [1] 2010 revised laws of Grenada [2] Part II, 17 th Edition, at page 302. [3] (1997) CH 60. [4] Saint Vincent and The Grenadines High Court Civil Claim No. 101 of 2011. [5] HCVAP2009/008 delivered on 11 th January 2011.