Impero Land Sdn Bhd v Aneka Jaringan Sdn Bhd (WA-24NCC-516-09/2023)

The plaintiff filed an originating summons, seeking a Fortuna Injunction to restrain the defendant from presenting a winding-up petition or continuing with winding-up proceedings against it.

The court dismissed the originating summons, after finding that the debt owed by the plaintiff to the defendant is an undisputed debt. S/N PThWYrzl60ut6HHbFeDkxg **Note : Serial number will be used to verify the originality of this document via eFILING portal 3! ! B. Background Facts

By a letter of award dated 19 October 2020 (“Letter of Award”), the defendant was appointed by the plaintiff as a contractor for works involving the construction of a residential apartment in Pantai Dalam, Kuala Lumpur (“Project”).

The defendant claimed it ceased works due to non-payment by the plaintiff. The defendant initiated adjudication proceedings against the plaintiff, and an adjudication decision dated 30 June 2022 was issued in favour of the defendant.

On 22 July 2022, the plaintiff and the defendant entered into a settlement agreement (“Settlement Agreement”). The Settlement Agreement provides, amongst others, that: a. The Letter of Award shall be mutually terminated; and b. Any retention sums that have been paid under the Letter of Award shall be returned.

The defendant issued letters of demand to the plaintiff seeking a return of the retention sum amounting to RM462,545.10 (“Retention Sum”) that had been paid by the defendant to the plaintiff. The plaintiff did not respond, and as such, the defendant issued a statutory notice of demand dated 6 September 2023 for the Retention Sum, pursuant to section 466 of the Companies Act 2016 (“Winding-Up Notice”). S/N PThWYrzl60ut6HHbFeDkxg **Note : Serial number will be used to verify the originality of this document via eFILING portal 4! ! [7] In response to the Winding-Up Notice, the plaintiff filed an originating summons, seeking to restrain the defendant from filing and presenting a winding-up petition against it. C. Considerations And Findings

The court's power to restrain the presentation of a winding-up petition can be traced back to the Australian case of Fortuna Holdings

Pty Ltd v Deputy Federal Commissioner of Taxation [1976] 2 ACLR The Supreme Court of Victoria held that an injunction may be granted: a. Where the presentation of the petition might produce irreparable damage to the company and where the proposed petition has no chance of success; and b. Where a petitioner has chosen to assert a disputed claim by a procedure which might produce irreparable damage to the company rather than by a suitable alternative procedure. [9] The principles set out in Fortuna Holdings (supra) have been recognised by the Malaysian courts (see Mobikom Sdn Bhd v lnmiss Communications Sdn Bhd [2007] 3 MLJ 316 and Pacific & Orient Insurance Co Bhd v Muniammah Muniandy [2011] 1 CLJ 947). [10] The approach of the courts in considering the grant of a Fortuna Injunction has been clear, in that the injunction will only be granted when there is a debt that is bona fide disputed on substantial grounds. S/N PThWYrzl60ut6HHbFeDkxg 5! ! [11] In the present case, the plaintiff argued that the intended winding-up petition against it has no likelihood of success and will produce irreparable damage to it, as the debt alleged to be owing by the plaintiff to the defendant, namely the Retention Sum, is disputed on substantial grounds. [12] After considering documentary evidence before the court, the court finds that the Retention Sum does not qualify as a debt that is disputed on substantial grounds. [13] The Retention Sum is due under the Settlement Agreement. The relevant terms of the Settlement Agreement are as follows: a. Clause 1.1: “In consideration of the mutual promises contained in this Agreement, Impero Land shall pay Aneka Jaringan the sum of Ringgit Malaysia Five Million and Two Hundred Thousand Only (RM5,200,000-00) in accordance with the manner hereinafter provided and subject to the terms and conditions herein contained.” b. Clause 1.3: “Payment of the full Settlement Sum by Impero Land to Aneka Jaringan shall constitute a full and final settlement of the sums awarded under the Adjudication Decision and the parties shall thereafter have no further and/or other claims against each other in respect of the Sub-Contract Works save and except for any breach or default of the terms of this Agreement and for the due return of the Retention Sums that have been paid, if any, under/pursuant to the Letter of S/N PThWYrzl60ut6HHbFeDkxg 6! ! Award dated 19.10.2020 and all related contractual documents.” c. Clause 1.4: “Impero Land hereby agrees that upon execution of this Agreement, the Letter of Award dated 19.10.2020 is accepted by parties as having been mutually terminated.” d. Clause 1.5: “Impero Land hereby agrees that, Aneka Jaringan bears no further obligations, responsibilities and/or liabilities in respect of the Letter of Award dated 19.10.2020. For the avoidance of doubt, it is agreed that Aneka Jaringan shall be under no obligation to carry out and/or complete any further works under/pursuant to the Letter of Award dated 19.10.2020 and all related contractual documents.” (emphasis added) [14] The obligation to return the Retention Sum is set out in clause 1.3 of the Settlement Agreement, which states that once the full settlement sum is paid by the plaintiff, the parties shall have no further claims against each other, except for claims arising from: a. any breach or default of the terms of the Settlement Agreement; and b. the due return of retention sums that have been paid pursuant to the Letter of Award. S/N PThWYrzl60ut6HHbFeDkxg 7! ! [15] It is not in dispute that the Retention Sum had been paid by the defendant to the plaintiff pursuant to the Letter of Award. [16] However, the plaintiff argued that the Retention Sum is disputed on substantial grounds. The plaintiff relied on the Letter of Award, and argued that the return of the Retention Sum must comply with the requirements in clause 9 of the Letter of Award. Clause 9 provides that: “Pursuant to the requirement in Conditions of Contract, the Employer shall retain Ten (10) % of total value of work, material, and goods certified up to maximum of Five (5) % of the Contract Sum as a Retention Sum. First moiety (2.5%) shall be released upon issuance of Certificate of Practical Completion and remaining sum shall be released upon expiring of Defects Liability Period or upon issuance of Certificate of Making Good Defects, whichever is later.” (emphasis added) [17] The plaintiff argued that the Retention Sum is not due to be released to the defendant, as the certificate of practical completion has not been issued and the Project has not been completed. The entitlement to and quantum of the Retention Sum must be determined first, before a demand can be made on the sum. [18] The court finds the plaintiff’s argument to be erroneous, for the reasons explained below. S/N PThWYrzl60ut6HHbFeDkxg 8! ! [19] First, the Letter of Award had been terminated pursuant to clause 1.4 of the Settlement Agreement. Clause 1.5 of the Settlement Agreement also states that the defendant does not have any further obligations, responsibilities or liabilities under the Letter of Award, including any obligation to carry out and/or complete works under the Letter of Award. With the termination of the Letter of Award, the parties have no further obligations towards each other, and the mechanism for the release of the Retention Sum pursuant to clause 9 of the Letter of Award cannot be relied on. [20] In ABB Transmission and Distributions Sdn Bhd v Sri Antan Sdn Bhd & Anor [2009] 7 MLJ 644, the court addressed the status of retention sums after the termination of a contract: “[124] The first defendant is supposed to pay the plaintiff the retention money when the taking over certificate and the final certificate is issued. But since the first defendant has repudiated the subcontract, I am of the view the plaintiff is entitled to be paid all retention money withheld. The serious action of the first defendant’s act of diverting a very substantial amount of the plaintiff’s money, cancellation of the substations in Mainheads D and F, refusing to pay the plaintiff for equipment delivered, the late payments, taking over the substations without good reason through their notice of taking over and expecting the plaintiff to continue with the reduced scope of the contract at the original contract rates, all point to the conclusion that the first defendant does not intend to honour its obligations in the subcontract. With these actions, the first defendant has destroyed all trust and confidence that the plaintiff had in it. These actions S/N PThWYrzl60ut6HHbFeDkxg 9! ! also made it very difficult for the plaintiff to continue with the subcontract. By these acts, the first defendant has repudiated the contract, which repudiation the plaintiff has accepted by the plaintiff’s letter of 7 September 2000. With the termination of the contract, there is no longer any subsisting contractual relationship and therefore there is no basis for the first defendant to hold on to the retention monies. [125] Retention money is usually a sum of money set aside and held by the employer until all defects have been satisfactorily rectified, (see Chow Kok Fong, Law and Practice of Construction Contracts, (3rd Ed), at p 3441. But retention money is the contractor’s money. It is held on trust by the employer usually until defects liability period had ended. According to Peh Swee Chin J (as he then was) in Lee Kam Chun v Syarikat Kukuh Maju Sdn Bhd (Syarikat Perumahan Pegawai Kerajaan Sdn Bhd Garnishee) [1988] 1 MLJ 444, retention sum is an existing debt and one cannot lose sight of the fact also that the retention sum was deducted from value of work already and actually done and materials already and actually supplied. [126] Retention money is held on the basis that the contract is on foot. If the contract in question has been repudiated, both parties are discharge from further performance of the contract and the retention money held which is trust money has to be paid back to its rightful owner. In this regard, that would be the plaintiff.” (emphasis added) S/N PThWYrzl60ut6HHbFeDkxg 10! ! [21] With the termination of the Letter of Award, and the obligations of the parties towards each other no longer subsisting, there cannot be any dispute that the Retention Sum must be returned to the defendant. [22] Secondly, as the Letter of Award no longer has any legal effect and the relationship between the parties is now governed by the Settlement Agreement, the defendant’s entitlement to the Retention Sum must be assessed by taking into account the terms of the Settlement Agreement. Clause 1.3 of the Settlement Agreement expressly provides for the due return of the Retention Sum. There are no conditions imposed under clause 1.3 on the return of the Retention Sum. It therefore follows that the Retention Sum is an undisputed debt owing by the plaintiff to the defendant. [23] With the court’s finding that the Retention Sum is an undisputed debt, a winding-up petition if presented against the plaintiff, has a reasonable chance of success. In this regard, the balance of convenience lies against the grant of an injunction that would restrain the filing of a winding-up petition, premised on the Winding-Up Notice.

[24] With the above considerations and findings, the court dismissed the originating summons, with costs. S/N PThWYrzl60ut6HHbFeDkxg Dated 2 May 2025 ADLIN ABDUL MAJID Judge High Court of Malaya Kuala Lumpur Counsel: Plaintiff : Muhammad Iman Johar (together with Oliver Lee Phui Sian) of Messrs. Selva Mookiah & Associates Defendant : Sachpreetraj Singh Sohanpal (together with Nur Izyan Azimi) of Messrs. Raj & Sach S/N PThWYrzl60ut6HHbFeDkxg