Cityvilla Construction Sdn. Bhd. v Emerald Unity Sdn. Bhd. (JA-24NCC-25-05/2025)

This is the Plaintiff’s application by way of Originating Summons seeking for –

a declaration that the Statutory Notice of Demand dated 19 April 2025 issued by the Defendant pursuant to Sections 465 and 466 of the Companies Act 2016 [Act 777] is invalid and amounts to an abuse of process;

a Fortuna Injunction to restrain the Defendant from presenting or proceeding with any winding-up petition based on the said Statutory Notice until the disposal of the Originating Summons; and

such further and consequential orders as this Court deems fit.

On 21 September 2025, this Court allowed an ad interim injunction until the disposal of this Originating Summons.

Parties filed their written submissions and also made oral submissions before this Court on 29 September 2025. The Court adjourned its decision to 14 October 2025. These are this Court’s grounds of decision.

The Plaintiff is a property development company in Malaysia, responsible for the “Sun City” project in Johor Bahru. In 2012, it entered into a Joint Venture Agreement with Dinding Development Sdn Bhd to develop Block A of the project. At the same time, a Novation Agreement was executed with Malaysia Building Society Berhad (MBSB), under which the Plaintiff’s debt to MBSB was transferred to Dinding Development. As security, a third-party charge was created over the Plaintiff’s land in favour of MBSB.

In February 2019, MBSB sued the Plaintiff for RM20.3 million. The Plaintiff resisted liability, arguing that the debt had been novated to Dinding Development. Despite this, the matter was settled by a Consent Judgment recorded on 3 December 2024, where the Plaintiff agreed to pay RM16 million (the “Settlement Sum”) to MBSB.

After the Consent Judgment, MBSB requested that payment be made not to itself, but to the Defendant (Emerald Unity Sdn Bhd). This was on the basis of a Vesting Order dated 6 January 2023 granted by the Shah Alam High Court, which purported to transfer all of MBSB’s rights and obligations under the loan to the Defendant. Notably, the Vesting Order predates the Consent Judgment. Given that the Vesting Order was made in December 2023, MBSB arguably no longer retained the legal capacity to enter into the Consent Judgment of 3 December 2024. This temporal inconsistency forms part of the bona fide dispute.

Relying on that Vesting Order, the Defendant issued a Statutory Demand dated 19 April 2025 under sections 465–466 of Act 777, claiming RM16.19 million allegedly due under the Consent Judgment.

The Plaintiff disputes this claim, arguing that Emerald Unity was never a party to the Consent Judgment and therefore lacks locus standi to enforce it. To prevent the Defendant from pursuing winding- up proceedings based on the disputed debt, the Plaintiff filed Enclosure 1 (the Originating Summons) on 29 May 2025, seeking a Fortuna injunction to restrain the Defendant from presenting, serving, or advertising a winding-up petition.

The remedy commonly referred to as a Fortuna injunction traces its origin to the Australian case of Fortuna Holdings Pty Ltd v Deputy Federal Commissioner of Taxation [1978] VR 83, where the Court held that it would be an abuse of process to present a winding-up petition founded on a debt that is bona fide disputed on substantial grounds.

This principle has been consistently adopted in Malaysia. In the most recent case of V Medical Services M Sdn Bhd v. Swissray Asia Healthcare Co Ltd [2025] 4 CLJ 282 the Federal Court affirmed that a Fortuna injunction may be granted only where the debt is bona fide disputed on substantial grounds.

The Court of Appeal in Pacific & Orient Insurance Co Bhd v. Muniammah Muniandy [2011] 1 CLJ 947 reaffirmed the principles from Fortuna Holdings Pty Ltd. The Court explained that a Fortuna Injunction may be granted where –

the proposed winding-up petition has no chance of success; and

it would cause irreparable damage to the company; or

where a petitioner seeks to enforce a genuinely disputed debt through the winding-up jurisdiction. (see also: Mobikom Sdn Bhd v. Inmiss Communications Sdn Bhd [2007] 3 CLJ 295).

However, the Court stressed that this doctrine is confined to cases involving disputed debts. A debt established by a judgment remains enforceable and cannot be recast as a “disputed debt” merely because an appeal has been filed, unless a stay of execution is granted.

These authorities collectively establish that a Fortuna Injunction may be granted where the underlying debt is genuinely and substantially disputed, rendering any winding-up petition oppressive or an abuse of the Court’s process.

Declaratory Relief

Applying the above principles, the first issue is whether the Statutory Notice of Demand dated 19 April 2025 is valid. This, in turn, depends on whether the debt of RM16,189,369.90, said to arise from the Consent Judgment recorded on 3 December 2024, is bona fide disputed on substantial grounds.

The Plaintiff contends that the Defendant has no locus standi to enforce the Consent Judgment because it was never a party to that judgment. The Defendant, Emerald Unity, relies on a Vesting Order dated 6 January 2023 to argue that all MBSB’s rights were transferred to it, including the right to enforce the Consent Judgment.

The Plaintiff maintains that this position is untenable. The Vesting Order predates the Consent Judgment, and Emerald Unity was not substituted as plaintiff in the civil suit where the Consent Judgment was entered. As such, the Plaintiff argues that Emerald Unity cannot enforce or rely upon the Consent Judgment as a judgment creditor.

The Defendant in turn submits that the Vesting Order is broad and effective to vest all rights, title and interest of MBSB and therefore it steps into the shoes of MBSB for purposes of enforcement. The Defendant further contends that the Plaintiff has admitted liability under the Consent Judgment and cannot re-open the matter by disputing who the judgment creditor is.

The Defendant’s own application dated 23 April 2025 in Civil Suit JA- 22NCC-34-07/2019 to substitute itself as plaintiff (Exhibit TGC-7 Enc.2) underscores that it was fully aware it was not a party to the Consent Judgment. This self-evident acknowledgment fortifies the Plaintiff’s contention that the Defendant presently lacks standing to enforce that judgment.

Having considered both positions, this Court is satisfied that there exists a serious and substantial dispute as to whether the Defendant has the legal right to enforce the Consent Judgment against the Plaintiff. This dispute is not frivolous or technical. It goes to the very root of whether the alleged debt is in fact due and payable to the Defendant. Accordingly, the Statutory Demand is founded on a debt that is bona fide disputed and is therefore invalid. This finding does not determine the ultimate enforceability of the Consent Judgment but merely recognises that, on the present record, the Defendant’s entitlement is seriously and bona fide disputed.

Fortuna Injunction

Even if the Statutory Demand were not declared invalid, the Fortuna principles would still apply. Where there is a bona fide dispute on the debt, winding-up proceedings must not be used as a means of resolving that dispute.

Moreover, the prejudice to the Plaintiff if a winding-up petition were presented or advertised would be grave and irreparable. The Plaintiff is a going concern with ongoing development projects and employees dependent on its continued operations. The reputational and commercial damage caused by a winding-up advertisement cannot be compensated by damages. This is supported by paragraphs 31–33 of the Plaintiff’s Affidavit in Support (Enclosure 2), where the Plaintiff deposes that the publication of any petition would cripple ongoing projects, trigger banking restrictions and cause reputational damage.

In this Court’s view, this satisfies the second limb of the Pacific & Orient Insurance test.

Accordingly, this Court holds that the Statutory Demand issued by the Defendant is based on a debt that is genuinely and substantially disputed. To permit winding-up proceedings in such circumstances would be oppressive and an abuse of the process of this Court.

For the reasons stated above, this Court is satisfied that the Statutory Notice of Demand dated 19 April 2025 is founded upon a debt that is bona fide disputed on substantial grounds. The Defendant’s standing to enforce the Consent Judgment is seriously contested, and this goes to the root of whether the alleged debt is due and payable.

Further, even if the Statutory Notice were not set aside, the presentation or advertisement of a winding-up petition based on such a disputed debt would be oppressive and cause irreparable harm to the Plaintiff. This is in line with the Fortuna injunction principles as affirmed by the Federal Court in V Medical Services M Sdn Bhd and by the Court of Appeal in Pacific & Orient Insurance Co Bhd.

Accordingly, this Court allows the Plaintiff’s application in Enclosure 1 in the following terms –

It is declared that the Statutory Notice of Demand dated 19 April 2025 issued by the Defendant is invalid and amounts to an abuse of process;

the Defendant, whether by itself, its servants or agents, is restrained from filing, presenting, serving or advertising any winding-up petition founded on the said Statutory Notice of Demand until the full and final disposal of this Originating

Costs of RM 8,000.00.

Based to the submissions by both parties, before the Court deliver judgment today, it’s further order that Pl to filed in setting aside application against the Consent judgement within 14 days from today’s order. Dated : 14 October 2025 Dr. Noradura Binti Hamzah Judicial Commissioner High Court Civil 2 Johor Bahru Applicant’s Solicitor : Tetuan C. K. Yap & Partners Respondant’s Solicitor : Tetuan Zeffree Azmi