Metalloyd Ltd v Burwill Resources Ltd

• Jurisdiction: British Virgin Islands
• Judge: HARIPRASHAD-CHARLES J
• Judgment Date: 17 July 2006
• Docket Number: Claim No. BVIHCV 2006/0083
• Court: High Court (British Virgin Islands)
• Date: 17 July 2006

THE EASTERN CARIBBEAN SUPREME COURT

IN THE HIGH COURT OF JUSTICE (CIVIL)

Before: The Honourable Justice Indra Hariprashad—Charles

Claim No. BVIHCV 2006/0083

IN THE MATTER OF THE INSOLVENCY ACT 2003

AND IN THE MATTER OF BURWILL RESOURCES LIMITED

Between

Metalloyd Ltd

Applicant

and

Burwill Resources Limited

Respondent

Appearances

Mr. Richard Evans with him Ms. Dawn Smith for the Applicant

Mr. Christopher Young with him Ms. Keisha Durham for the Respondent

Cases judicially considered or referred to in the judgment

1. Safe Solutions Accounting Ltd [In Administration] (2) Asciom Solutions Limited [In Administration] v French Connections Limited (BVIHCV2005/0242) (unreported)—per Hariprashad—Charles J.

2. Sparkasse Bregenz Bank AG v In the Matter of Associated Capital Corporation Civil Appeal No. 10 of 2002 (unreported), Court of Appeal of the Eastern Caribbean Supreme Court BVI, Judgment on 18 June 2003.

3. Commissioners of Inland Revenue v Lee Phipps [2003] BPIR 803, paras 16–21 of judgment.

4. Adams v Mason Bullock [2005] BPIR 241, paras 20–32 of judgment.

5. Brillouet v Hachette Magazines Ltd, Re a Debtor (No. 27 of 1990) [1996] BPIR 518, ChD.

6. David Grant & Co. Pty. Ltd. V Westpac Banking Corp. (1995) 184 CLR 265 referred to in the case of Chadmar Enterprises Pty Ltd v IGA Distribution Pty Ltd [2005] ACTSC 39 (10 May 2005) at page 17.

7. Braams Group Pty Limited v Miric [2002] NSWCA 417.

8. Re a Company (No. 001946 of 1991) ex parte Fin Soft Holding SA 1991 BCLC 737.

9. Re Bayoil SA [1999] 1 BCLC 62.

10. Montgomery v Wanda Modes Ltd [2002] 1 BCLC 289.

11. Popely v Popely [2004] EWCA Civ 463.

12. Haldanes v China North Industries Investment Management Limited and Haldanes v TL Management Ltd BVIHCV 2006/0022 and 0023 (unreported) per Joseph-Olivetti J.—judgment delivered on 10 April 2006. Decision declared per incuriam in this judgment.

CATCHWORDS

Corporate Insolvency — test for insolvency — Applicant relied upon company's failure to satisfy or apply to set aside the statutory demand — whether company is insolvent under Insolvency Act — company disputes the debt and has a genuine and serious cross — claim — whether failure to challenge statutory demand precludes challenge to debt and/or argument that company is solvent at hearing of application to appoint liquidator — whether UK Insolvency Act is a guide to interpretation.

HEADNOTES

The Applicant, Metalloyd Limited (‘Metalloyd’) is a company incorporated in England and Wales. Burwill Resources Limited (‘Burwill’) is a company incorporated in the British Virgin Islands.

During 2003 and 2004, Metalloyd and Burwill entered into various contracts for the supply of minerals and steel. Disputes arose and the parties decided to settle the disputes by entering into a settlement agreement which placed three obligations on Burwill for the benefit of Metalloyd. It is agreed by the parties that Burwill performed two of those obligations. Metalloyd is of the view that the third, which is an obligation to pay the sum of US$94,578.39 was not satisfied. According to Burwill, the third, was no more than a gesture of goodwill pursuant to which the sum would be written off by way of it providing new business of an unspecified value to Metalloyd.

As a consequence of Metalloyd's interpretation of the agreement, it served a statutory demand dated 10 June 2005 on Burwill. Burwill did not satisfy the demand or applied to have it set aside. On 20 March 2006 Metalloyd filed an originating application seeking the appointment of a liquidator over Burwill.

At the hearing of the application Burwill sought to oppose the appointment of the liquidator on the grounds that the debt is disputed and that it has a genuine and serious cross-claim which exceeds the alleged debt. The cross-claim is presently being pursued in arbitration proceedings. Burwill also asserted that it continues to trade and has no overdue trading debts or liabilities. There was however no documentary evidence to substantiate the assertion.

Metalloyd relied on Section 8 of the Insolvency Act, 2003 which states that ‘a company is insolvent if (a) it fails to comply with the requirements of a statutory demand that has not been set aside under section 157’ and submitted that Burwill is insolvent. It was further submitted that Burwill is precluded from raising matters or defences which should have been raised on an application to set aside the statutory demand. Burwill had fourteen days within which to apply to set aside the statutory demand and failed to do so. It is therefore too late in the day for Burwill to seek to dispute the debt or to raise the cross-claim.

Burwill argued that if the debt is disputed then Metalloyd is not a creditor and therefore has no standing to make the application. It was also submitted that if the Legislature intended that such matters or defences could not be heard at the hearing of the petition then clear provisions would have been included in the Act.

HELD:

• 1. The Insolvency Act, 2003 is revolutionary and innovatory. It adds certainty to the law of insolvency and is different from the UK Act. The U K Act is not a guide to the interpretation of these sections of our Act. Our Act empowers the Court to deal with insolvency in timely and expeditious manner.

• 2. Section 8 (1) is explicit. A company is insolvent if it fails to comply with a statutory demand that has not been set aside under section 157 of the Act.

• 3. The matters raised by Burwill that the debt was disputed and that it has a serious and genuine cross-claim which exceeds the debt simply cannot be raised at this juncture as a defence to the application. If it wanted to rely upon such matters, it ought to have applied to set aside the statutory demand.

• 4. There is no disputed debt on any ground, be it substantial or frivolous. Burwill owes US$94,578.39 to Metalloyd.

• 5. The cross-claim which is not disputed, is genuine and serious and exceeds the debt.

• 6. Burwill has failed to demonstrate that it is in fact solvent.

• 7. Unless Burwill shall pay the debt by 4:00 pm on 31 July 2006 a licensed insolvency practitioner is to be appointed as liquidator over Burwill.

HARIPRASHAD-CHARLES J

1 The primary issue in this application is whether a liquidator should be appointed over Burwill Resources Limited on the ground that the Company is insolvent pursuant to section 162 of the Insolvency Act 2003 (‘the Act’).

The parties

2 The Applicant, Metalloyd Limited (‘Metalloyd’) is a company incorporated in accordance with the laws of England and Wales and carries on business as a trader of steel products and raw materials in the Asia Region.

3 The Respondent, Burwill Resources Limited (‘Burwill’) was incorporated under the provisions of the International Business Companies Act, Cap. 291 on 2 February 1999 and has its registered office at P.O. Box 957, Office Incorporation Centre, Road Town, Tortola, British Virgin Islands. The authorized share capital of Burwill is $50,000 made up of one class and one series of shares divided into 50,000 shares of US$1.00 par value each. Burwill is also a trader of steel products and raw materials in the Asia region.

4 During 2003 and 2004, Metalloyd and Burwill entered into various contracts for the supply of minerals and steel. Disputes arose between the parties over certain of the contracts in 2003 and they agreed to settle these disputes by entering into a settlement agreement dated 30 May 2003 (‘the Settlement Agreement’). 1

5 The relevant terms of the Settlement Agreement are as follows:

‘Whereas the buyer [the Company] agrees to settle the following amount through the contract no. BW/RJG 029CM (MS0402) covering 1,153,359 MT MV “OB” by means of:

• —Letter of Credit: USD 370/MT to be opened on/before 15 June 2003

• —Commission: USD50/MT to be offered on/before 15 June 2003

• —Balance: USD82/MT to be settled by new business on/before 31 May 2004.

6 The parties are at loggerheads with respect to the third limb of this Agreement.

7 It is Metalloyd's case that Burwill performed only two of its three obligations under the Settlement Agreement. The third, an obligation to pay a balance of $94,578.39 remains outstanding. As a consequence, it served a statutory demand in the prescribed form dated 10 June 2005 on Burwill. Burwill has not applied to set aside the statutory demand. Metalloyd's case is that the law is strict: Burwill had fourteen days within which to apply to set aside the statutory demand and failed to do so. It is therefore too late in the day for Burwill to seek to dispute the alleged debt.

8 Metalloyd next submitted that in the event that the Court does not dispose of the case on that issue, there is no genuine disputed debt and Burwill's case stands or falls upon a question of construction in respect of the one obligation of the Settlement Agreement. Metalloyd also asserted that the alleged cross-claim is the subject of (confidential) arbitration proceedings and reference to it in Mr. Chiu's affidavit is improper.

9 Conversely, Burwill is of the view that it is not in breach of the Settlement Agreement as it did in fact fulfil the third limb of the Settlement Agreement. Burwill alleges that its perception of the parties' understanding at the time they entered into the Settlement Agreement was that the third limb of the agreement was no more than a gesture of goodwill pursuant to which the balance of USD82/MT would be written off by way of it providing new business of an unspecified value to Metalloyd. Therefore, there is no judgment debt and even if there is (which is denied), the debt is disputed on substantial grounds and there is a genuine and serious cross claim which exceeds the amount of the alleged debt.

10 It is a fact that Burwill has not applied to set aside the statutory demand. As a result, on 20 March 2006, Metalloyd filed...