Buckeye Holdings Ltd v RWI Management Ltd and Anor. (CL 91 of 2021) [2022] TCASC 23 (12 August 2022)

Flynote

Finance and Insurance Law

Case summary

Buckeye’s action was dismissed and they were directed to pay the Defendants costs. Section 155 of the Insolvency Ordinance provides that a creditor may serve a demand on a debtor for a debt that is due at the time of the demand, and section 156 provides that the alleged debtor can apply to set it aside. Sections 5 and 161 indicate the importance and consequence of such a demand. Section 5 provides that “a company is presumed to be insolvent if it fails to comply with the requirements of a statutory demand that has not been set aside under section 157”, and section 161 provides that the court may appoint a liquidator of a company which is insolvent. [5] In the circumstances, the statutory demand procedure should not be used as a means of collecting disputed debts. That is why section 157(1) provides that “the Court shall set aside a statutory demand if it is satisfied that (a) there is a substantial dispute as to whether (i) the debt; or (ii) a part of the debt sufficient to reduce the debt to less than the prescribed minimum, is owing or due”. [6] The requirement that the Court find a “substantial dispute” means that a debtor cannot simply say it is disputing the debt. Vendort Traders Inc. v. Evrostroy Grupp LLC [2016] UKPC 15 (BVI); Sparkasse Bregenz Bank AG v In The Matter of Associated Capital Corporation BVI Civil Appeal No. 10 of 2002, considered. [8] -[9] If the hurdle of establishing a “substantial dispute” is crossed, the Court will not go on to attempt to resolve the dispute. It must set aside the statutory demand. The parties may then seek a resolution by filing an ordinary action or pursuing some other procedure. [10] The Court found no evidence of a substantial dispute in relation to the debt claimed by the Strata Corporation. Buckeye’s contentions based on the arbitration and the force majeure clauses in the Agreement were not relevant to this debt, because it arises pursuant to Buckeye’s statutory obligations as a strata title owner, and not pursuant to the Agreement with RWI. [11] Similarly, the issues in relation to RWI’s repair expenditure, or its statements and accounting did not raise any or in any event, any substantial dispute in relation to the debt claimed by the Strata Corporation. The debt to the Strata Corporation ($12,413.70) far exceeds the prescribed minimum, which is $750.00. Salford Estates (No 2) v Altomart Limited [2014] ECWA Civ 1575, considered, [12] - [13] Further, the fact that there is an arbitration clause does not mean that there was a dispute. [14] Also, even if the force majeure clause applied to the debt due to the Strata Corporation, it would not assist Buckeye. [15] Buckeye submitted that the Covid 19 pandemic and its resulting impacts constitute force majeure and as a consequence, any non-performance on its part is excused under that clause. [16] Even assuming that the pandemic constituted a force majeure event for the purposes of the clause, it would not relieve Buckeye of its payment obligations, and would not constitute a substantial dispute that would require the court to set aside the Statutory Demand. [20] Tandrin Aviation Holdings v Aero Toy Store [2010] EWHC 40, considered. [17].

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