High Court of Ireland Decisions

 
THE HIGH COURT

2002 No. 103 Cos.

IN THE MATTER OF I.C.T. INTERNATIONAL COTTON AND TEXTILE TRADING COMPANY LIMITED AND IN THE MATTER OF THE COMPANIES ACTS 1963 TO 2001

Judgment of Miss Justice Laffoy delivered on 31^st March, 2004.

The Petition

The petition in this matter was presented on 28^th March, 2002 and it sought an order that I.C.T. International Cotton and Textile Trading Company Limited (the Company), which was incorporated in the State on 7^th December, 1992, be wound up. The Petitioner was named in the petition as "XL Winterthur International Limited", a company incorporated in England and Wales. The name of the Petitioner was stated incorrectly in the petition. Its correct name is "XL Winterthur International Insurance Company Limited". There will be an order that the petition be amended to show the correct name of the Petitioner.

The petition is founded on a demand pursuant to s. 214(a) of the Companies Act, 1963, as amended, dated 14^th February, 2002, wherein the Petitioner sought payment of the sum of US$332,376 alleged to be due by the Company to it in respect of unpaid insurance premiums, and non-compliance with that demand.

The reason the petition had been before this Court for over two years when it was heard is that it was adjourned from time to time pending the determination of proceedings in an Italian court, which the Company contended had a bearing on the issue which was before this Court, that is whether the Company should be wound up. The Company contends that it is not indebted to the Petitioner and that it is not insolvent.

The Law

The parties agree that the test to be applied by the Court is that set out in a judgment of Buckley L.J. in Stonegate Ltd. v. Gregory [1980] 1 All E.R. 241 (at p. 243), which has been approved by the Supreme Court in Re Pageboy Couriers [1983] I.L.R.M. 510 and more recently in Re W.M.G. (Toughening) Ltd., unreported, in which judgment was delivered by McCracken J. on 29^th January, 2003. The test was stated as follows by Buckley L.J.:

"If the company in good faith and on substantial grounds disputes any liability in respect of the alleged debt, the petition will be dismissed, or if the matter is brought before a court before the petition is issued, its presentation will in normal circumstances be restrained. That is because a winding up petition is not a legitimate means of seeking to enforce payment of a debt which is bona fide disputed."

The issue, accordingly, for determination in this case is whether the Company's contention that it is not indebted to the Petitioner as alleged is made in good faith and on substantial grounds. Unfortunately, because of the manner in which the factual basis of the claim has unfolded on affidavit, it is necessary to attempt to put some coherent structure on it.

The Insurance

It is common case that in 1996 the Company entered into a contract with La Neuchateloise SA, which I understand to be a Swiss company, for insurance of baled cotton during transportation and storage. In 1997 an Italian company, Winterthur Assicurazioni SpA (the Italian Company) acquired the assets of the Italian branch of La Neuchateloise SA, including the contract with the Company. The change of insurer was noted on the relevant policy at the time and the policy was assigned a new policy number.

In early January, 1999, fire destroyed goods of the Company stored in a warehouse in Greece and the Company claimed on the policy. A dispute arose between the Italian Company and the Company as to whether the goods in question were on cover. That dispute led to proceedings in a court in Milan, Italy, which were commenced on 20^th December, 1999. On 3^rd July, 2003 judgment was given in the Italian court. The Italian Company was ordered to pay the Company US$1,187,599 plus continuing interest and costs. In a letter dated 23^rd February, 2004 from the lawyer practising in Genoa, who acted for the Italian Company in those proceedings, Rossello, which is exhibited in these proceedings, it is stated that on foot of the order the sum of US$1,484,423.12 has been transferred to a nominated Swiss bank account, but he is not aware if the account is controlled by the Company or by a company incorporated in England and Wales, I.C.T. International Cotton Trading Ltd. (the English Company), which he believes "is controlled by the same individuals that control" the Company. The Italian Company has appealed against the judgment entered against it and that appeal is proceeding in Milan. The Company is also appealing the quantum of the award.

It is common case that the Company was on cover with the Italian Company up to 12^th February, 1999. There is a dispute as to what happened thereafter. The Petitioner's case is that the Petitioner, which was then incorporated under the name Winterthur International Insurance Company Limited and was an "affiliated company" of the Italian Company, took over as insurer. The Company denies that it ever had a contractual relationship with the Petitioner.

In July, 2001 XL Capital Ltd., a company registered in Bermuda, acquired the Petitioner and the name of the Petitioner was changed to its current name. At that time "the affiliated nature of the relationship" between the Italian Company and the Petitioner changed.

It is the Petitioner's case that it was the insurer from 13^th February, 1999 to 1^st November, 2000, when the cancellation of the policy, on foot of a notice of 28^th September, 2000, took effect.

During the relevant period the Company dealt with an insurance broker in Milan, Penta Insurance sas (Penta). Penta would appear to have been associated in some way with the Italian Company and with the Winterthur group of companies. It seems to be accepted by the Company that Penta was the agent of the Company.

Two European legal firms have acted for the Company in connection with the matters which arise in these proceedings: Valaperta in Milan and Pizzoli in Lugano, Switzerland.

Verification of the Petition

The affidavit verifying the petition was sworn by Malcolm Newman, the Chief Financial Officer of the Petitioner. It contained no details in relation to the alleged debt other than that it was in respect of unpaid insurance premiums.

The debt was first disputed in these proceedings in an affidavit sworn by Leonardo Gaggini, who is apparently located in Lugano, on 5^th June, 2002. Apart from denying any contractual relationship with, and any indebtedness to, the Petitioner, Mr. Gaggini raised a jurisdiction point in his affidavit, contending that this Court is not the proper forum for litigating any dispute on foot of the contract of insurance which the Company acknowledged it entered into with the Italian Company. He also asserted that the Company was solvent. These matters are peripheral to the central issue and I do not find it necessary to comment further on them other than to state that -

(a) this Court unquestionably has jurisdiction to wind up a company incorporated in the State, and

(b) apart from the deemed insolvency by virtue of the non-compliance with the demand under section 214(a), there is no evidence before the Court of the insolvency of the Company.

An affidavit sworn by the Petitioner's solicitor in this jurisdiction, Declan Black, on 24^th June, 2002, set out in detail the Petitioner's version of the factual background to the Petitioner's claim for the first time.

In relation to the factual dispute, that is to say, the situation which prevailed between 13^th February, 1999 and 1^st November, 2000 in relation to the insurance contract, I propose outlining what is asserted by the Petitioner in the four affidavits filed on its behalf first and then what is asserted by the Company in the four affidavits filed on its behalf.

The Petitioner's Assertions

Mr. Black, in his first affidavit, averred that it was agreed between the Italian Company and Penta that the cover provided by the Italian Company would cease as of 12^th February, 1999 but that replacement cover would be arranged with the Petitioner. He further averred that the parties intended that the Petitioner would operate the existing policy as the new contracting party and that the parties would negotiate with a view to agreeing terms of a new policy. However, such negotiations did not bear fruit and, accordingly, the Petitioner operated the previously existing policy but as the new insurer. With effect from 27^th September, 1999, the policy number was changed. Mr. Black also explained that the manner in which the policy operated was that the Company would notify the Petitioner in respect of transport under the policy. Copies of such notifications, and of invoices which were issued in respect of premiums, which fill two lever arch binders, were exhibited by Mr. Black, in addition to copies of various faxes and other documents, and translations of them. Mr. Black asserted that the documents in question establish that the Company –

(a) acknowledged the change of insurer from the Italian Company to the Petitioner by agreeing to it through the actions of its agent, Penta, and

(b) operated the policy with the Petitioner by notifying transport to the Petitioner and thereby incurring liability to pay premiums.

A cursory examination of the notifications and invoices exhibited discloses that all the invoices were issued by the Italian Company. The notifications of transports were mainly by telex. They were variously notified by the Company (of Dublin) and the English Company (of London) and were variously directed to "Winterthur", "Winterthur Int." and "Winterthur International".

In his affidavit Mr. Black also exhibited a copy and translation of a letter of 28^th March, 2000 from the Petitioner to the Company asking for "partial payment" of the premiums due to "Winterthur International" for the fiscal year 1999. The letter also contained a confirmation that the Petitioner was "keeping all accidents reported . . . under guarantee, based on the conditions indicated in the temporary coverage, regardless of their amount", but payment would be suspended "until such time as I.C.T. have paid the premium due".

The following correspondence from the Company's lawyers was also exhibited by Mr. Black in his affidavit:

(i) A letter dated 7^th March, 2002 from Valaperta to the Petitioner's solicitors, written in English, which contained the following statement as to what happened after the fire in January, 1999, upon which counsel for the Petitioner laid particular emphasis:

"The original policy was simultaneously cancelled and replaced with a new policy by Winterthur International Ltd. . . . It was agreed by them that, pending the refund (settlement) of the above fire damage, the new amounts due by ICT (premiums) would have been noted in a separate account. The total amount would have been deducted from the gross figure of the refund for the fire damage claim due by [the Italian Company] and Co-Insurers".

(ii) A letter dated 21^st March, 2002 from Pizzoli to the Petitioner's solicitors which expressed the following opinion:

"ICT was authorised to compensate its claim of damage with the premiums outstanding, because it continued to pay the premium to [the Italian Company] Milan, Italy (and not to [the Petitioner] UK) until the end of the contractual period, October, 2000."

A further affidavit was sworn by Mr. Newman on 5^th November, 2002, primarily to answer points which had been made by Mr. Gaggini in an affidavit sworn by him on 11^th September, 2002, to which I will refer later. To a large extent this affidavit is argumentative rather than factual.

In relation to the factual position, Mr. Newman referred to the averment in Mr. Black's affidavit that the parties (the Petitioner and the Company) did negotiate with a view to agreeing the terms of the new policy but the negotiations did not bear fruit. He went on to aver that Valaperta, the Company's lawyer in Italy, carried out these negotiations knowing that he was negotiating with the Petitioner about a policy which was in place between the Company and the Petitioner "with a view to amending that policy and commencing a new policy between the Petitioner and the Company". He exhibited a letter of 12^th July, 2000, to which I will refer later, and a translation of it, from Valaperta, commenting on "new I.C.T. policy". Mr. Newman also outlined the role of Penta in the affidavit: it operated as an insurance broker and intermediary in respect of the policy operated both by the Italian Company and the Petitioner. While it was authorised by the Italian Company and the Petitioner to communicate on their behalf and to issue invoices in the name of the insurer, its customer was the Company and it acted on behalf of the Company. Mr. Newman commented that Penta was on occasion careless in relation to the notepaper it used and the indication of the insurer involved. He also commented that erroneously Penta issued invoices with the name of the Italian Company on the invoices rather than the Petitioner's name.

Company's Assertions

In his affidavit sworn on 11^th September, 2002 Mr. Gaggini averred that the proceedings in Italy are central to the petition. If any monies are due and owing by the Company they are due to the Italian Company. He averred as follows:

"The proceedings initiated in Italy by ICT will resolve the issue as to whether payment is due to ICT from [the Italian Company] as a result of the fire in Greece and this ultimately will also resolve whether monies are owed by ICT to [the Italian Company] or whether they can be set off against an award that would be made in ICT's favour against [the Italian company]."

As counsel for the Petitioner submitted, the foregoing is not consistent with the statement in the Valaperta letter of 7^th March, 2002 that the deduction of the premiums from what is payable on foot of the fire damage claim was a matter of agreement. It is also inconsistent with the following statement in a letter of 21^st February, 2003 from Pizzoli to the Company's Irish solicitors which was exhibited in an affidavit of Brian Winters sworn on 21^st February, 2003:

"First of all it is important to underline that at the time the proceedings started in Milan, Winterthur fully agreed with ICT that the latter would not pay the premia outstanding until the question of the damage to ICT property which is the subject of the Italian proceedings was resolved. Evidence of this is the fact that Winterthur never sent any invoice or reminder to ICT."

Moreover, Rossello, in the letter dated 23^rd February, 2004 stated that the proceedings in the Milan court "have nothing to do with insurance premiums payable".

Much of what was deposed to by Mr. Gaggini in his second affidavit is argumentative rather than factual. There is a suggestion that there was something improper in what happened in February, 1999, in that Mr. Gaggini states that "the Winterthur organisation should not be able to switch around its insurance obligation from one corporate entity to another whilst at the same time giving the impression that at all stages the client . . . [the Company], was dealing with the Italian Company". This suggestion was elaborated on later, when referring to an averment contained in Mr. Black's affidavit to the effect that the Petitioner is an entirely separate entity to the Italian Company and has now no relationship with it and is not interested in any linkage of the lawful debt due to it in any putative claim which the Company may have against the Italian Company, Mr. Gaggini averred as follows:

"I say that this adds further weight to my concern that the purported corporate manoeuvring by the Winterthur Group has been orchestrated in order to prevent 'any linkage' of the premia payments due to [the Italian Company] with monies due to [the Company] as a result of the fire in Greece."

The third and final affidavit was sworn by Mr. Gaggini on 25^th March, 2004. Mr. Gaggini exhibited in that affidavit a letter dated 30^th April, 2000, enclosing a proposed contract, a policy document, to be entered into between the Petitioner and the Company for the calendar year 2000. He then averred that the contract and its terms were deemed unacceptable by the Company and it was rejected. He further averred that it was "agreed to revert to the original contract and agreement we had with the Italian Company". In the final paragraph of this affidavit Mr. Gaggini drew the Court's attention to the fact that, even if the Italian Company wished to assert its claim to the premiums owing, the quantum of which was denied, it would "be time barred in Italian law from doing so".

Conclusions

The basis on which the Company disputes liability to the Petitioner, as summarised by counsel for the Company, is that it does not owe the debt as insurance premiums to the Petitioner. The issue for the Court is whether the Company is acting bona fide in advancing that defence and whether it is supported on substantial grounds. In my view, the onus of proof in relation to these matters is on the Company.

It was submitted on behalf of the Company that the dispute as to the liability of the Company raises questions as to the credibility of witnesses, what are the correct inferences to be drawn from facts and such like. Further, it was submitted that these questions cannot be resolved without a plenary hearing.

In my view, the Company's denial of liability to the Petitioner, considered in the light of its assertion that the issue of liability can only be resolved if a plenary hearing, is supported by substantial grounds for the following reasons:

(1) The central issue is what, if anything, was agreed between the Company and the Petitioner after 12^th February, 1999, and, in particular, whether it was agreed that the Petitioner would replace the Italian Company as insurer. The Company relies on the fact that the invoices were issued by the Italian Company to support its contention that it is not liable to the Petitioner. The key player in the dealings and negotiations between the Company, on the one hand, and the Winterthur group, on the other hand, was Penta. Notwithstanding that, there is no affidavit from any member or employee of Penta who can give first-hand evidence of the factual situation. Mr. Newman, who is apparently located in London, is constrained to explain why invoices, which issued from Milan two to three years previously, were issued in the name of the Italian Company, rather than in the name of the Petitioner, by ascribing error to Penta. This is not a satisfactory way of dealing with the fundamental issue of the identity of the insurer.

(2) Such documentation as is before the Court was produced by both parties on a piecemeal basis. It obviously represents part only of the contemporaneous documentation which affected the dealings between the parties. Moreover, in the case of some of the documents which emanated from an Italian source and were written in English, it is obvious that English was not the author's first language, so that difficulties of interpretation arise. Translations of documents written in Italian also give rise to difficulties of interpretation.

(3) The affidavits and the documents are replete with conflicts of evidence and inconsistencies, which call into question the assertions of both parties. I have mentioned some of the inconsistencies earlier. I will mention a further inconsistency by way of illustration. Mr. Newman, in his second affidavit sworn on 5^th November, 2002, as I have already stated, exhibited a letter from Valaperta dated 12^th July, 2000, commenting on a proposed policy document. There is with the exhibit a document, which apparently issued from Milan on 1^st December, 1999 and which appears to be a proposed policy document intended to relate to the calendar year 2000. At the hearing, I raised a question in relation to an apparent inconsistency between Valaperta's comments on Article 16 and the Article 16 in that proposed policy document. It seems to me fairly obvious that Valaperta was not commenting on that proposed policy document. This is borne out by Mr. Gaggini's final affidavit, sworn on 25^th March, 2004, in which he exhibited a letter from Penta on the letter heading of the Italian Company which enclosed "the new insurance contract" issued by "Winterthur International" for the calendar year 2000, which issued at Milan on 3^rd April, 2000. This document differs from the proposed policy exhibited by Mr. Newman, but in relation to Article 16 is consistent with Valaperta's comments. Apart from the internal inconsistency in the evidence put before the Court by the Petitioner, this illustrates the incomplete nature of the documentary evidence before the Court.

If the evidence before the Court was grounding an application for summary judgment on foot of a claim for the sum alleged to be owed by the Company to the Petitioner in summary proceedings, in my view, judgment could not be granted and the matter would have to go to plenary hearing. It follows that the evidence is not sufficient to establish that the Company is unable to pay its debts so as to empower the Court to wind it up.

That leaves the issue of whether the Company is acting in good faith. The fact that Mr. Gaggini, in his second affidavit sworn on 11^th September, 2002, in a passage which I have quoted earlier, stated that the proceedings in the Italian court would resolve whether monies are owed by the Company to the Italian Company and whether they can be set off against an award in favour of the Company against the Italian Company, but following determination of the proceedings at first instance, in his most recent affidavit sworn on 25^th March, 2004, is now suggesting that the Italian Company's claim is statute barred in Italian law, must give rise to a concern as to the bona fides of the Company in relation to its dealings with the Italian Company, which may or may not be justified. Having said that, however, the Company, on affidavit has consistently denied any indebtedness to the Petitioner. In the circumstances as regards the claim of the Petitioner, on the evidence, I find that the Company is not lacking good faith in defending that claim.

Decision

In the circumstances, I consider that it would not be appropriate to make an order for the winding up of the Company. I will hear submissions from counsel as to what is the appropriate order to make on the basis of the conclusions I have set out earlier.