Brilliant Star Construction (M) Sdn Bhd v Exyte Malaysia Sdn Bhd (WA-28NCC-225-02/2025)

(M) SDN BHD PETITIONER AND EXYTE MALAYSIA SDN BHD RESPONDENT GROUNDS OF JUDGMENT (STRIKING OUT PETITION) A.

The Petitioner has filed a Petition to wind up the Respondent for an alleged debt that it says is owed by the Respondent.

The Respondent, disputing the said debt and the validity of the Petition, has filed an application to strike out the said pleading under Order 18 Rule 19(b) and/or (d) of the Rules of Court 2012. Essentially, the Respondent contends that the debt is disputed, that the Petition is an abuse of process, and that the dispute between the parties should have been resolved by way of arbitration rather than by a Petition to wind up the company.

Having considered the submissions, the affidavits filed and after hearing counsels on this issue, I find that the Respondent has successfully shown that: -

That the Winding-Up is not based on a judgment of the Court or an award by an arbitrator.

(ii) That the Respondent has a bona fide defence and is disputing the validity of the sums claimed by the Petitioner.

(iii) That the Petitioner should not have filed the Petition and should have filed either a claim in arbitration against the Respondent for the sums or at the very least filed a writ to have the issue resolved.

(iv) That the dispute between parties cannot be resolved solely by affidavit evidence and must be determined through viva voce evidence.

That the Respondent has shown a bona fide defence to the claim and has not admitted that the sums are due as alleged by the Petitioner.

Therefore, I find that the Petition should be struck out as it is an abuse of the process of Court to utilize the winding-up mechanism as a means to force the Respondent to pay the sums that are claimed. The alleged debt is disputed and should be resolved through the appropriate process as agreed between parties. B. Background Facts 5.

Thereafter, during the lifetime of the Contract, the Respondent issued Purchase Order No. 5336274 dated 2.9.2024 (“PO dated 2.9.2024”) to the Petitioner for the sum of RM3,316,525.94. The Purchase Order Standard Terms and Conditions were also attached to the PO dated 2.9.2024.

This Court notes that the Petitioner disputes that the Standard Terms and Conditions were attached to either the Letter of Award (LOA) or the Purchase Order (PO).

The Respondent relies on the following terms of the Contract as they appear in the Standard Terms and Conditions: -

All invoices and delivery orders must indicate PO Nos. and Project No. and include all supporting documents required by the Respondent. The payment terms shall start from the date of receipt of the Petitioner’s invoices and all supporting documents required by the Respondent. The Respondent may withhold payments to the Petitioner to the extent required to cater for any breach or imminent breach of the Petitioner’s obligation under the POs; and

In the event of any dispute arising out of or in connection with the orders, the parties shall attempt to resolve such dispute in good faith through negotiations between their respective management teams. If such dispute cannot be so resolved within 30 days of notice from either party, the dispute shall be finally resolved by arbitration seated in Malaysia, in accordance with Rules of the Asian International Arbitration Centre.

The Respondent accepts that the Petitioner performed the Labour Supply under the Contract from 19.8.2024 to 29.11.2024.

The Respondent also does not dispute that: -

The Petitioner has submitted 5 Progress Claims (“PCs”) amounting to the total sum of RM6,078,117.46 This figure was then adjusted to RM5,711.466.76.

By way of 4 Certificates of Payment (“COPs”), the Respondent certified a total Contract sum of RM5,020,477.05; and

(3)

The Respondent has fully paid the sum of RM5,020,477.05 to the Petitioner pursuant to the aforesaid Tax Invoices.

This Court notes that the Respondent issued a Notice of Demobilization of Workforce dated 28.11.2024 to notify the Petitioner that the labour supplied by the Petitioner would be reallocated to other sites of the Project. This caused various disputes between the parties in respect of their claims and liabilities under the Contract and eventually led to the purported termination of the Contract by the Petitioner.

An example of the issues that have arisen between parties can be seen from the Respondent’s assessment of the Petitioner’s claim leading to the presentation of the Petition, which are summarized as follows:

On 16.12.2024, the Respondent in its email provided a copy of the COP No. 4 and stated there is a variance of RM426,883.56 between the Respondent’s assessment and the Petitioner’s claim and requested for a meeting to resolve this issue.

Subsequently, on 24.12.2024, the Respondent vide its email, provided the Petitioner the details of reconciliation of account and the assessment of the Petitioner’s claim, showing a variance or difference of RM690,969.72 between the Respondent’s assessment and the Petitioner’s claim.

By way of a letter dated 27.12.2024, the Respondent put on record that it had received payment applications from 19.8.2024 to 19.11.2024 amounting to the sum of RM5,711,446.76. Upon conducting a detailed review and reconciliation of account as part of the payment certification process, the total sum due under the Contract is RM5,020,477.05, and not RM5,711,446.76 as claimed by the Petitioner, which resulted in a variance of RM690,969.72.

The Respondent suggests that there were errors in the calculation prepared by the Respondent. The Respondent disputed that the sum of RM690,969.72 is correct and decided not to certify the same.

The Respondent also claims that there are issues concerning the discrepancies between the timesheets submitted and the turnstile data, erroneous transportation and accommodation claims involving a double claim for September 2024 and the applicable claim for the engineer claimed by the Petition.

This can be seen in the letter dated 2.1.2025 issued by the Petitioner to the Respondent. The contents show that the Respondent disputed inter alia, the payment variance and reconciliation details and assessment of the Respondent.

The Petitioner by way of a letter dated 6.1.2025 replied to the Respondent earlier letter dated 27.2.2024 denying the above dispute and reiterated that the sums are due.

The Respondent replied via letter 9-1-2025 reiterating its position and denied that the said sums claimed are due.

Based on the said sum of RM 690, 969.72, the Petitioner decided to issue a letter to demand payment of the said sums on 22-1-2025 and eventually filed the Petition on 26-2-2025. The notice to wind-up the company is based on the sum of RM 690, 969.72 claimed by the Petitioner and as seen in the letters referred to earlier were disputed by the Respondent. C. Applicable Law 15. The applicable law on this area is trite. I summarize the applicable law as follows: -

The Court must consider whether an applicant could show that it is a plain and obvious case that recourse should be had to the said process under the above-referred rule and that the claim on the face of the document is “obviously unsustainable”;

(ii) A striking out is not a trial on affidavits and the Court should not conduct a minute examination of the documents through the affidavit. As long as there is a valid claim on the face of the pleadings or raises some questions fit to be tried it should not be struck out.

(iii) A striking out order should not be entered if there is an issue of law that requires lengthy argument and mature consideration especially when the issue requires deliberation after taking evidence at trial.

I am guided by the decisions of our Superior Courts in Bandar Builder Sdn Bhd & Ors v. United Malayan Banking Corporation Bhd [1993] 4 CLJ 7, Sivarasa Rasiah & Ors v. Che Hamzah Che Ismail & Ors [2012] 1 CLJ 75 and Om Cahaya Mineral Asia Bhd v. Damansara Realty (Pahang) Sdn Bhd [2018] 5 CLJ 587.

I make specific reference to the often-quoted judgment of the Court of Appeal in Sivarasa Rasiah v. Che Hamzah Che Ismail (supra) and Bandar Builder Sdn Bhd v. United Malayan Banking Corporation Bhd (supra). If the pleadings disclose a reasonable cause of action and if it could be shown that there are “issues of law that need to be elaborated and argued in great detail and for mature consideration”, then this Court should not strike out the suit.

If there are relevant factual issues that require deliberation of the facts through witnesses, the power under Order 18 rule 19 of Rules of Court 2012 should not be utilised.

However, I am mindful of my duty to consider the claim and the affidavit evidence in their entirety, in order to determine whether a reasonable cause of action exists that ought to be referred to trial.

I also refer to the judgment of Mohd Azmi SCJ in Bank Negara Malaysia v. Mohd Ismail Ali Johor [1992] 1 CLJ 627 (supra), where his Lordship quoted the judgment of the Privy Council in Eng Mee Yong v Letchumanan [1979] 1 LNS 18: “Although in the normal way it is not appropriate for a Judge to attempt to resolve conflicts of evidence on affidavit, this does not mean that he is bound to accept uncritically, as raising a dispute of fact which calls for further investigation, every statement on an affidavit however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself it may be.”

I find that the same principles of law are applicable to an application to strike out a Petition to Wind-Up a company. I refer to the following cases: -

Liew Yin Yin Construction Sdn Bhd v. Yata Enterprise Sdn Bhd [1989] 3 MLJ 249

(ii) Bank of East Asia Ltd Singapore Branch v. Axis Incorporation Bhd (No 2) [2009] 6 MLJ 564

(iii) Siti Esah bt Talib v. Mentiga Corp Bhd [2010] 8 MLJ 589

(iv) Ho Num Chon & Anor v. Tech-Lab Manufacturing Sdn Bhd [2017] 9 MLJ 32

Natural Transforms Sdn Bhd v. GTM Land & Property Sdn Bhd & Ors and other cases [2021] MLJU 2360 D. Preliminary Objection by the Petitioner 22. I will first deal with the Preliminary Objection raised by the Petitioner.

The Petitioner points out that the application filed by the Respondent did not comply with Rule 7 (2) Company Winding-Up Rules 1972 where it says that any application in Chambers must be made by summons as in

The Petitioner also relies on Pansar Engineering Services Sdn Bhd v. Chieng Construction Sdn Bhd [2020] 1 SSLR 482 and the Court of Appeal decision in Murthaveeran Muruvan @ Murugan & Ors v. Pukazendiran Maruthamuthu [2024] 6 MLRA 492.

The complaint put forth by the Petitioner is that the Notice of Application filed by the Respondent to strike out the Petition did not follow the Form as required under Rule 7(2) of the Company Winding-Up Rules 1972.

After considering the case law referred to and relied upon by the Petitioner, I find that the complaint of non-compliance is not fatal to the Respondent’s application. The applicable rules require that the application filed by the Respondent be filed in Court and that notice of the same be served on every person against whom such an order is sought. This requirement was complied with by the Respondent. Although the form used by the Respondent was not in the format of Form 1, I find that the Petitioner did not suffer any prejudice in this instance. What is important is that the Respondent notified the Petitioner of its intention to strike out the Petition and provided the reasons for the said application.

I refer to Sections 582(1) and (2) of the Companies Act 2016, that provides: -

No proceeding under this Act shall be invalidated by any defect, irregularity or deficiency of notice or time unless the Court is of the opinion that substantial injustice has been or may be caused which cannot be remedied by any order of the Court.

The Court may, if it thinks fit, make an order declaring that the proceeding is valid notwithstanding any such defect, irregularity or deficiency.”

Reference is also made to Rule 194(1) of the Companies (Winding-U) Rules 1972 that states: - “(1) No proceedings under the Act or the Rules shall be invalidated by any formal defect or any irregularity, unless the Court is of the opinion that substantial injustice has been caused by the defect or irregularity, and that the injustice cannot be remedied by any order of the Court.”

I further refer to the decision of the Court of Appeal in Jagdis Singh Banta Singh v. Outlet Rank (M) Sdn Bhd [2013] 3 CLJ 47 and the Federal Court in Khairy Jamaluddin v. Dato’ Seri Anwar Ibrahim & Another appeal [2022] 6 CLJ 163 where the Courts have held that the purpose of such procedures are to facilitate a proper decision on the merits and where it is shown that such discrepancies do not affect the hearing of the application on its merits, it will not be fatal.

For the above reasons, I dismiss the Petitioner’s preliminary objection. E. Decision on the merits of the Respondent’s application 30. I find that this Petition to Wind-Up the company is an abuse of process of this Court.

It is clear to this Court that the debt claimed by the Petitioner is disputed. The letters disclosed to this Court and referred to earlier show that the Respondent maintains the sum of RM690,969.72 is not due and payable to the Petitioner.

This debt therefore should have been referred to arbitration or at the very least resolved by way of a proper suit before the Courts to enable the merits of the claim heard by an arbiter of fact and law. This dispute could not be resolved by way of a Petition to Wind-Up and such an attempt tantamount to an abuse of process of this Court.

It is trite law that disputed debts like those arising in this case cannot and should not have been resolved by way of a Petition to Wind-Up a company. I refer to the following cases: -

V Medical Services M Sdn Bhd v. Swissray Asia Healthcare Co Ltd [2025] 2 MLJ 744.

(ii) Carimin Engineering Services Sdn Bhd v. Dynamic Navigation Sdn Bhd [2025] CLJU 77.

(iii) Conweld Engineering Sdn Bhd & Ors v Goh Swee Boh @ Goh Cheng Kin & Anor [2022] 6 MLJ 810.

Nallini Pathmanathan FCJ in V Medical Services (supra), inter alia, held as follows: - “(l) a primary reason put forward for applying the lower threshold is that a creditor who seeks to use winding-up to enforce his debt rather than going through arbitration as he contracted to, is abusing the insolvency process. Where there is abuse arising in the form of the filing of a winding-up petition even where a debt is genuinely disputed and the matter requires adjudication in the courts or by way of arbitration, the remedy is to strike out the petition and to penalise the wrongful use of the winding-up process by way of indemnity costs, as has been stated in Sian and Dayang. In most cases, it is usually evident that the creditor initiating the winding-up process is simply seeking to circumvent his contractual obligation to arbitrate the dispute, as was the case in this appeal;”

I find after considering the affidavits filed before me, the Respondent has shown that the debt is bona fide disputed on substantial grounds. As indicated in the affidavits and the submissions filed, the Respondent suggests and have shown that the claim alleged is not due on the grounds that (i) that the Petition had overbilled the Respondent, (ii) that the claim contains claims for work that was not done or incorrectly calculated (iii) that the discrepancies between the timesheets submitted and the turnstile data, (iv) erroneous transportation and accommodation claims involving a double claim for September 2024 and (v) the applicable claim for the engineer claimed by the Petition.

These issues cannot be resolved through affidavit evidence alone and more so through a Petition to Wind-Up. The Petitioner should have the dispute resolved by an arbiter of fact, either by way of arbitration as claimed by the Respondent or by a Judge in the Courts. This dispute is clearly, to me, bona fide disputed and as such the Petition is an abuse of process by the Petition. This dispute is shown not only in the letters referred to earlier but can be seen in the documents produced before this Court by the Respondent in Exhibit EMSB-4. The Respondent has successfully shown that the manpower claimed by the Petitioner is bona fide disputed by it.

I note that the sole argument put forth by the Petitioner is that the letter of demand and the notice to wind up was not replied by the Respondent. Counsel suggests that this tantamount to an admission that the debt is admitted. He then relies on the decision of the Court of Appeal decision Heller Factoring (M) Sdn Bhd v. Metalco Industries (M) Sdn Bhd [1995] 1 MLRA 645.

I agree that I am bound by the decision of the Court of Appeal. However, the said case concerned an appeal over a claim of debt that was decided after a trial. I therefore do not believe that the said decision of the Court of Appeal is applicable to the facts of this case. The facts of this case show that the Respondent may have been slow in its response to the Petitioner, but they have consistently denied any liability for the sums claimed by the Petitioner. This case is not merely a bare denial by the Respondent but is based on substantiated defences that must be determined at trial.

The Petitioner also suggests that the dispute raised by the Respondent is not genuine. Counsel for the Petitioner suggests that the amount of dispute kept changing and that there was silence by the Respondent when the said invoices were issued. The Petitioner also suggests that since the notice to wind up the company was not replied to, this suggests that the debt is admitted and is evidence that the debt is due and payable. Therefore, the Petitioner suggests that the Petition should be heard and should not be wound-up.

Again, I reiterate that these issues cannot and should not be resolved solely by way of affidavits. This must be resolved at a trial either before an arbitrator or by a Judge before our Courts. As seen in Heller itself, the dispute was not resolved by way of a winding-up petition but through a trial before a Sessions Court Judge. This clearly shows that the process adopted and chosen by the Petitioner is wrong and that there exists a bona fide dispute. To state the obvious, a party could only claim that the sums invoiced and claimed are wrong after receiving the invoice. One cannot raise such a dispute before the invoice is issued.

It is important that I reproduce the decision of the Court of Appeal in Kumpulan Liziz Sdn Bhd (in liquidation) v. Pembinaan Azam Jaya Sdn Bhd [2022] 1 MLJ 570: "[42] The definition of "inability to pay debts" is found in s. 466(1)(a) CA 2016 and it is a sine quo non that the debt must in a sum that is due and the sum cannot be said to be due if it is bona fide being disputed. The procedure of a petition where matters are decided on affidavit evidence is eminently unsuitable to resolve the issue of a disputed debt. ……. [54] Whether or not there is a sum due and owing to the Petitioner would have to be proved based on facts not seriously in dispute and if there are serious disputes on the sum due gleaned from the affidavits filed, then clearly the procedure of a petition to wind up on a disputed debt, in the face of conflicting affidavits then clearly procedure of a petition to wind up on a disputed debt, in the face of conflicting affidavits would not be a suitable procedure to solve the matter and the petition would have to be dismissed as being an abuse of the court’s process. …….. [125] It is not for the winding-up court to descend into details of the set-off that the respondent had raised via its affidavit to oppose the petition and to weigh and consider the probabilities of success lest the petition be converted into a writ action which would not be amenable to resolution by way of conflict in affidavit evidence."

I further refer to the decision of VC George J in NKM Development Sdn Bhd v. Irex Sdn Bhd [1988] 2 CLJ Rep 56: - “It therefore seems to me that this petition must fail. A real dispute, turning to a substantial extent on disputed questions of fact which require viva voce evidence, and involving charges of fraud or near fraud, cannot properly be decided on petition. Nor is it right, or in accordance with the modern practice, to stand over the petition in order that the disputed issues may be resolved in other proceedings. That practice, I may say, seems to stem from Re London & Paris Banking Corpn. The Companies Court must not be used as a debt-collecting agency, nor as a means of bringing improper pressure to bear on a company. The effects on a company of the presentation of a winding-up petition against it are such that it would be wrong to allow the machinery designed for such petitions to be used as a means of resolving disputes which ought to be settled in ordinary litigation, or to be kept in suspense over the company’s head while that litigation is fought out. Further, Mann v. Goldstein, cited with approval in the New Zealand Court of Appeal in Bateman Television Ltd. v. Coleridge Finance Co. Ltd., provides authority for saying that when a petition is based on a debt which is disputed on substantial grounds, the petitioner is not a ‘creditor’ within s. 224(1) of the Companies Act 1948 who has the locus standi requisite for the presentation of the petition, even if the company is in fact insolvent.”

The same reasoning can be seen in the judgment of Lee Swee Seng J in Christopher Michael Chow v. ANS Builders Sdn Bhd [2012] 10 MLJ 359: - “[13] It is a fundamental principle enunciated by the courts that a winding up petition on ground of inability of the respondent to pay its debts is totally unsuitable and indeed is an abuse of the court’s process where the debt is bona fide being disputed. Where the debt is being disputed and on substantial grounds then the petitioner is not a creditor within the meaning of s 218(2)(a) of the Companies Act 1965 (‘the Act’) and thus has no capacity to present a winding up petition. ……. [25] If the petitioner is so confident that there is no bona fide dispute on the debt, he is always free to pursue a summary judgment application in a writ action and then obtain judgment after which he would stand solidly as a creditor with the locus to present a winding up petition. ….. [32] Having reviewed the position of the law on the meaning of a ‘bona fide dispute’ as to the debt sought to be claimed under s 218(2)(a) of the Companies Act in a petition grounded on s 218(1)(e) and whether the presumption of an inability to pay its debt had been rebutted by the respondent, I find that this is a case where there is a bona fide dispute on the debt which the petitioner for its non-payment by the respondent sought to wind it up. The respondent has rebutted the statutory presumption of its inability to pay the debt as the debt to begin with is being disputed and on substantial grounds. The petitioner does not therefore stand in the position of a ‘creditor’ that has the locus to present a winding up petition against the respondent.”

I do note that the Respondent did not issue a response to the winding-up notice issued by the Petitioner. However, I find that the Respondent has demonstrated the existence of a substantial dispute regarding the debt claimed by the Petitioner. The mere fact that the Petitioner issued a notice, and that the Respondent did not reply to it, does not in itself mean that the debt is undisputed. The statutory presumption arising from non-response is a rebuttable one, and in this case, it has been effectively rebutted by the Respondent. The evidence before the Court shows that the debt is indeed disputed, and such a dispute ought to be resolved through appropriate proceedings either before the Courts or, as suggested by the Respondent, by way of arbitration or affidavit evidence. This necessarily means that the debt cannot be determined in a winding-up proceeding. To adopt the words of VC George J, it is “wrong to allow the machinery designed for such petitions to be used as a means of resolving disputes which ought to be settled in ordinary litigation, or to be kept in suspense over the company’s head while that litigation is fought out.” Proceedings that are used as a means to compel payment of a disputed debt amount to an abuse of process and should accordingly be struck out by this Court.

Therefore, I find that the Respondent has shown that it has a bona fide defence to the claim and that the debt claimed is bona fide disputed on substantial grounds. This Petition should be struck out as it is an abuse of the process of this Court.

I also find that the Petitioner filed two proceedings before the High Court of Malaya in Penang concerning the same Contract. These suits can be seen in PA-22NCC-26-03/2025 and PA-22NCC-32-03/2025. The subject matter of the claims in these two suits also arises from the same Contract referred to above. Therefore, I see no reason why this claim cannot be included in the same suits. This shows that the Petitioner is misusing this Petition as a means to collect a debt that is bona fide disputed by the Respondent and to force the Respondent to agree to the same.

On the issue of whether the dispute falls within the scope of the agreement to arbitrate, I find that the clause referred to by the Respondent does encompass the dispute between the Petitioner and the Respondent. On the face of it, the agreement to arbitrate clearly covers the subject matter of the present dispute. Accordingly, I find that both the Petitioner and the Respondent are bound by the terms of the arbitration agreement to which they have consented.

Nevertheless, the Petitioner is entitled to argue before the appropriate jurisdiction, whether in a suit commenced before the Courts to claim for the said sums or in arbitral proceedings, that the Standard Terms and Conditions, including the arbitration clause, are not binding upon the parties. I refer to Gise Kam Kwan International Trade Ltd v. Antara Steel Mills Sdn Bhd [2024] 10 CLJ 370 and Section 18 of the Arbitration Act 2005. Whether the dispute ultimately falls within the scope of the arbitration agreement remains an open question, notwithstanding my preliminary finding. I will not bind the hands of my learned brother or sister Judge or any arbitrator appointed. What is important in our proceedings is the existence of a substantial dispute that must be resolved either in Court or by way of arbitration. Such a dispute is not appropriately addressed by way of a winding-up petition, as sought by the Petitioner. Accordingly, this Petition is therefore an abuse of process.

To summarize, I find that the Respondent has shown: -

That the Petition is an abuse of process of this Court.

(ii) That the Debt claimed is bona fide disputed and the defence to the claim is substantiated by the Respondent. The totality of the evidence before me shows that this claim cannot and should not be resolved by way of a Winding-Up Petition. The Respondent has shown a bona fide defence and that the debt is genuinely disputed.

(iii) That the Debt is not admitted by the Respondent.

For the above reasons, I exercise my powers to strike out the Petition with costs of RM 15,000.00 subject to allocator. I have considered the severity of the Petition on the Respondent, its importance to the Respondents, the seniority of Counsel involved, and the fact that the Petition amounts to an abuse of the process of the Court. Dated 16 May 2025 Dato’ Indera Mohd Arief Emran bin Arifin Judge High Court of Malaya at Kuala Lumpur NCC5 Counsel: Ahmad Shiimir Sufian, Mohd Shahrysham & Fatin Adriana for the Petitioner Amar, Syiimir, Izat & Sham Advocates & Solicitors T Kuhendran, Susan Tan Shu Shuen, Koh Shien Lin & Clement Ling for the Respondent