George J

On April 27, 1984 I dismissed the petition by Securicor (M) Sdn. Bhd. to wind up Universal Cars Sdn. Bhd.

By section 218(1)(e) of the Companies Act the Court may order the winding up of a company if it is unable to pay its debts. By section 218(2)(a) the company shall be deemed unable to pay its debts if a creditor to whom the company is indebted in a sum exceeding $500.00 then due has made a demand for the same and the company has for 3 weeks thereafter neglected to pay the same. It is to be noted that it is not the neglect to meet the demand of the creditor that gives the jurisdiction to the Court to order that the company be wound up but the inability of the company to pay its debts. It is the presumption arising from the neglect to meet the demand that gives the Court the jurisdiction. This presumption is rebuttable.

In the instant case it seemed to me that the position was on all fours with the position that obtained In Re London and Paris Banking Corporation (1874) LR 19 Eq Cases 444. In that case Sir G. Jessel M.R. said at 446

"… It is very obvious, on reading that enactment, that the word "neglected" is not necessarily equivalent to the word "omitted". Negligence is a term which is well known to the law. Negligence in paying a debt on demand, as I understand it, is omitting to pay without reasonable excuse. Mere omission by itself does not amount to negligence. Therefore I should hold, upon the words of the statute, that where a debt is bona fide disputed by the debtor, and the debtor alleges, for example, that the demand for goods sold and delivered is excessive, and says that he, the debtor, is willing to pay such sum as he is either advised by competent valuers to pay, or as he himself considers a fair sum for the goods, then in that case he has not neglected to pay, and is not within the wording of the statute."

In the instant case the company did not neglect the statutory demand of June 5, 1982. By its letter dated June 22, 1982 in reply to the demand it challenged the penalty charges imposed. Although by the contract between the parties the petitioner had reserved itself the right to impose the penalty for late payment, the imposition of it, in the face of the challenge which on the facts of the instant case it seemed to me was made bona fide, is an issue to be tried.

In the event, the section 218(2)(a) presumption that arose was rebutted whereupon the section 218(1)(e) position ceased to be available to the petitioner.

Apart from the section 218(2)(a) presumption there is nothing else to suggest that the company is anything but solvent.

The petition should not have been presented — at any rate was prematurely presented and should have been and was dismissed with costs.