Country Heights Holdings Berhad v Tetuan Chellam Wong (BA-24NCvC-765-04/2024)

A petition to the court to wind up a company can be made on various grounds, with a company’s inability to pay its debts being one of the valid grounds under the Companies Act 2016. However, the success of such a petition is never guaranteed. What is certain, though, is that the mere filing of a winding-up petition can have an adverse effect on the company, often leading to irreparable damage or harm. Given the potentially severe consequences of a winding-up petition, the court may grant a Fortuna Injunction to prevent a prospective petitioner from proceeding with the filing. However, granting such an injunction can also infringe upon the rights of the petitioner as recognized under the law. In this context, courts are mindful of balancing the rights and interests of both parties and will approach any such application based on established principles.

In the present case, the Plaintiff has been served with a notice pursuant to sections 465(1)(e) and 466(1)(a) of the Companies Act 2016. In its applications in Enclosure 3, the Plaintiff sought a Fortuna Injunction to restrain the Defendant from filing a petition to wind it up.

On 15 July, 2024, this Court dismissed Enclosure 3 and in tandem with that, Enclosure 1 with costs of RM10,000.

The principal issue in this case was whether this was proper case for the granting of a Fortuna Injunction. As the Plaintiff was relying on the 3 first branch of the principle governing the granting of a Fortuna Injunction, two subsidiary questions arose for consideration. First, if a Fortuna Injunction were not granted, would the Plaintiff suffer irreparable damage? Second, was there evidence that there was no chance of success if the Defendant were to present a petition to wind up the Plaintiff company. In order for the Plaintiff to succeed, the answers to both of the above questions will have to be in the affirmative. The contentious issue in this application was whether the Plaintiff was able to demonstrate to the satisfaction of this Court on the existence of the “no chance of success” element. In the context of the present application, the issue was whether there was a disputed debt.

The Plaintiff is a public company incorporated under the laws of Malaysia and its shares are listed on the main board of Bursa Malaysia.

The Defendant is a firm of solicitors.

According to the Defendant’s version of events, it was appointed by the Plaintiff for the provision of legal services for the “Sale & Purchase of assets and due diligence exercise for Country Heights Holdings Berhad in respect of Mines Resort Sdn Bhd (Dream City), Mines Wonderland Sdn Bhd, Mines Waterfront Business Park Sdn Bhd, Mines Excellence Golf Resort Bhd, Country Heights Venture Sdn Bhd and Castlepark Sdn Bhd” (“the Corporate Exercise”).

The Defendant claimed that its appointment was recorded by a Letter of Appointment dated 8 April, 2021 (“LOA”) whereby in the same LOA, the Plaintiff has expressly agreed to the fee of RM400,000.00. The LOA was executed by one Jared Lim, being a director and the chief executive officer of the Plaintiff at that material time. The Defendant pointed out that at all material times, all correspondences between the Plaintiff and itself were copied to all officers of the Plaintiff and consultants involved in the Corporate Exercise.

On 5 May, 2021, the Defendant issued its first invoice for the sum of RM53,512.00 to the Plaintiff. The same invoice was received by the Plaintiff on 18 May, 2021. The Defendant underscored the fact that the Plaintiff did not reply or dispute the invoice. This was followed by a second invoice dated 21 February, 2022 for the sum of RM212,530.00. This second invoice was received by the Plaintiff on 22 February, 2022 and once again the Defendant highlighted the fact that the Plaintiff did not reply nor dispute the second invoice.

A third and final invoice for the sum of RM425,060.005 was issued by the Defendant on 21 September, 2023 and received by the Plaintiff on 22 September, 2023 where this invoice “supersedes and encompasses” the first and second invoices. Once again, the Defendant emphasized that there was also no reply or dispute to the third invoice.

More importantly, the Defendant stressed that all three invoices bear the acknowledgment of receipt of the Plaintiff and prior to the filing of the Originating Summons, the Plaintiff has never disputed, protested nor disagreed in any manner the fees agreed upon and the work done by the Defendant.

A Statutory Demand pursuant to section 466 of the Companies Act 2016 dated 12 March, 2024 was served on the Plaintiff on 20 March, 2024. The 21 days for the Notice expired on 10 April, 2024. Again, the Plaintiff did not respond to, nor protest against, the Notice in any manner. It was thus the Defendant’s contention that a presumption of insolvency against the Plaintiff has arisen.

The crux of the Defendant’s case is that the Plaintiff has failed to meet the threshold necessary for a Fortuna Injunction in that there is no disputed debt. The Defendant relied on Pacific & Orient Insurance Co Bhd v Muniammah Muniandy [2011] 1 AMR 685; [2011] 1 CLJ 947; [2010] MLJU 2217; [2010] 3 MLRA 263 and Mobikom Sdn Bhd v Inmiss Communications Sdn Bhd [2007]3 AMR 195; [2007] 3 CLJ 295; [2007] 3 MLJ 316; [2006] 2 MLRA 700.

The Plaintiff argued that there exists bona fide substantial dispute of the Defendant’s claims that warrants an injunction restraining the presentation of the petition for the winding up of the Plaintiff. The Plaintiff’s case is couched on two main contentions, namely that Jared Lim was not properly mandated to appoint the Defendant and/or there was no board approval for doing so, and the invoices issued by the Defendant have not been taxed.

This Court granted the Plaintiff an Order for a Fortuna Injunction against the Defendant on an ex-parte basis on 22 April, 2024. The inter-partes date was fixed on for hearing on 6 May, 2024.

On 6 May, 2024, this Court extended the Order to 29 May, 2024 pending the disposal of the Notice of Application on an inter-partes basis.

On 29, May, 2024, the parties agreed to an adjournment in a bid to settle and the matter and a new hearing was fixed on 15 July, 2024 with an undertaking by the Defendant not to proceed with the filing of a petition until the new hearing date.

As noted, this Court’s on 15 July, 2024 dismissed Enclosure 3 and in tandem with that, Enclosure 1 with costs of RM10,000. The reasons were as follows.

First, the validity or authenticity of the LOA was not an issue. There was also no dispute that Jared Lim was the CEO of the Plaintiff at the material time. The only relevant issue on the LOA was whether Jared Lim, as director and the CEO at that material time, was properly mandated. This Court agreed with the Defendant’s submission that the law does not impose a duty on the Defendant to enquire as to the authority or mandate of the director and CEO at the material time, for its appointment. It was established that Jared Lim had appointed the Defendant to undertake the restructuring of Golden Horses Sdn Bhd under section 366 of the Companies Act 2016 and there was no protest nor dispute from by the Plaintiff.

As an “outsider” of the company, this Court agreed with the submission by the Defendant that it should be able to rely on the “indoor management rule” or the “Turquand’s rule”. This Court also took notice of 7 the decision in Tong Guan Co (Pte) Ltd v Lam Kong Co Ltd (No. 2) [1998] 3 CLJ 964; [1998] 7 MLJ 720; [1997] 4 MLRH 518 and the provision in section 64(1) of the Companies Act 2016 which provides that: Company contracts

A contract may be made –

By a company, in writing under its common seal;

On behalf of a company, by a person acting under its authority, express or implied; or

On behalf of a company, orally, by any person acting under its authority, express or implied. [21] On the argument that the invoices issued by the Defendant have not been taxed, this Court had referred to sections 114, 124(2), 126 and 128 of the Legal profession Act 1976. These provisions read as follows. Advocate and solicitor may make agreement for remuneration from client

(1) Whether or not any order is in force under section 113, an advocate and solicitor and his client may, either before or after or in the course of the transaction of any non-contentious business, make an agreement as to the remuneration of the advocate and solicitor in respect thereof: Provided that such agreement shall not provide for costs at a scale lower than that provided by any order made under section 113. No advocate and solicitor to sue for costs until delivery of bill of cost

(1) …

Where a bill is proved to have been delivered in compliance with subsection (1) it shall not be necessary in the first instance for the advocate and solicitor to prove the contents of the bill and it shall be presumed until the contrary is shown to be a bill bona fide complying with this Act. An order for taxation of costs to be made within 6 months of delivery of bill of costs

(1) An order for the taxation of a bill of costs delivered by any advocate and solicitor may be obtained by a petition as a matter of course by the party chargeable therewith, or by any person liable to pay the cost either to the party chargeable or to the advocate and solicitor, at any time within six months from the delivery of the bill, or, by the advocate and solicitor after the expiration of one calendar month, and within a year from, the delivery. … Order for taxation of advocate and solicitor’s bill on notice given

(1) After the expiration of six months from the delivery of a bill of costs, or after payment of the bill of costs, no order shall be made for taxation of a solicitor’s bill of costs, except upon notice to the advocates and solicitors and under special circumstances to be proved to the satisfaction of the Court.

No such order for taxation shall in any event be made after the expiry of one year from the delivery of the bill of costs. [22] The Defendant’s latest invoice to the Plaintiff was delivered on 22 September, 2023 and duly acknowledged by the Plaintiff, more than eight months have passed since then. In addition, the Plaintiff was estopped from raising any disputes in relation to the invoices as in an e-mail dated 9 November, 2023 from the deponent of the Plaintiff’s affidavit, the deponent has stated that the invoice has been passed on to the its finance department for processing. The deponent, being the head of legal of the Plaintiff had not questioned the work of the Defendant nor disputed the validity of the Defendant’s appointment or charges at any time. [23] This Court further took cognizant of the following authorities, namely, Tetuan Azim, Tunku Farik & Wong v Tetuan Ong Partnership [2021] 8 AMR 21; [2021] 10 CLJ 258; [2021] 6 MLJ 464; [2021] 6 MLRA 569, Lim Goay Hooi v Tetuan Choy & Associates [2024] CLJU 804; [2024] MLJU 905 and Tetuan Kang & Kang v Kirana Studio Sdn Bhd [2014] 5 AMR 821; [2015] 1 CLJ 431; [2014] MLJU 1937; [2014] MLRHU 1432. [24] Based on the totality of evidence before it, this Court was satisfied that the debt was not disputable. [25] It was on the above findings that the decision to dismiss Enclosures 3 and 1 was made. Dated: 6 September, 2024 sgd [CHOONG YEOW CHOY] Judicial Commissioner High Court of Malaya Shah Alam Counsel: James Au for the Applicant (Messrs. Ramli Yusuff & Co.) Eldarius Yong for the Respondent (Messrs. Ting & Yong)