Len Zon Marketing Sdn Bhd Petitioner v Sun Blinds (M) Sdn Bhd (WA-28NCC-193-04/2017)

The petitioner presented a winding-up petition premised on s. 465 Companies Act 2016. It was claimed that the respondent owed the petitioner a sum of RM40,000.00.

I had in dismissing the petition, held that there is a bona fide dispute as to the amount claimed.

The facts of this case are uncomplicated. The alleged debt claimed by the petitioner was not a direct debt by the respondent. The amount sought was based on an alleged 2 undertaking given by the respondent, to settle the amount owing to the petitioner by another company called Twin Technic Sdn Bhd („Twin Technic‟). No facts were put forward pertaining to this debt owing by Twin Technic.

The alleged undertaking by the respondent was made through 2 cheques issued by the respondent to the petitioner for RM35,000.00 and RM5,000.00 respectively. These cheques were for the settlement of the debt claimed against Twin Technic. These cheques were subsequently dishonoured, leading the petitioner to then issue a notice of demand under the previous provisions of s. 218 Companies Act 1965.

The petitioner had prior to commencing this suit against the respondent, filed a winding-up petition against Twin Technic in the Kuala Lumpur High Court. The petition was successful, in that Twin Technic was wound-up with costs of RM5,000.00 on the 28 July 2016. It was only after the winding-up order was made, that the respondent issued the 2 cheques for the debt and costs of the winding-up order against Twin Technic.

The respondent admitted to issuing the 2 cheques. However, it denied being indebted to the petitioner, or having given an undertaking to settle the debt. The respondent maintained that it was merely helping out Twin Technic to pay its debt. The respondent claimed that the cheques were dishonoured, 3 as it did not get payment for some projects undertaken, which led to it having insufficient funds.

The petitioner took the position that the respondent had in issuing the 2 cheques, had firstly, unequivocally and unconditionally assumed and undertook to settle the debt of Twin Technic, and secondly, admitted the debt due by the respondent to the petitioner.

The relevant issue is whether there is a bona fide dispute as to the debt claimed by the petitioner. To answer this question, it is crucial to determine whether the respondent, had by issuing the 2 cheques, assumed the debt of Twin Technic and had undertook to settle it.

A bona fide dispute to a debt claimed, will negate the presumption that a respondent‟s neglect to pay within the statutory time limit, connotes that it is unable to pay its debt. The judgment of Mohd Nazlan JC (as he then was) in WWTAI Finance Ltd v IES Energy Holdings Sdn Bhd [2016] MLJU 1591 (HC) on this issue is illuminating. I set out the relevant portion of his lordship‟s judgment:- “However, a neglect and hence a failure to pay the debt as demanded in the valid winding up notice could be justified if 4 the refusal is due to the debt being bona fide disputed. This is a well-established basis to deny a petition because it represents a direct challenge on the existence of the debt itself. In other words, the key requirement in Section 218(2)(a) concerning the debt is being attacked. If the challenge is successful, the presumption does not arise, since it cannot be said that the respondent has neglected to pay. After all, the demand must relate to a specified debt. As such, a company has not neglected or refused to pay the debt if the debt is disputed on substantial grounds (see Securicor (M) Sdn Bhd v Universal Cars Sdn Bhd [1985] 1 MLJ 84.” [p 14-15]

For a dispute to be bona fide however, there must be cogent reasons, or evidence proffered for the court to consider. This dispute must give rise to a legitimate challenge to the debt claimed. Similar to an application for summary judgment, the dispute must entitle the respondent to assert that there are issues that have to be tried, and that these issue could not possibly be determined through affidavit evidence alone.

Where a bona fide dispute has been raised, it would be most prudent for the petitioner to adjudicate its case by filing a writ action, and have it adjudicated in the usual manner; see Re Nima Travel Sdn Bhd Sun Soon Heng Coach Works Sdn Bhd v Nima Travel Sdn Bhd [1986] 2 MLJ 374. A winding-up court is not the proper forum to adjudicate a claim that is legitimately disputed. 5 [12] Plowman J. in Re Tweed Garages Ltd [1962] 1 All ER 121, cited with approval the following passage from Buckley on the Companies Acts (13th Edn), p 451, where it was stated:- “A winding-up petition is not a legitimate means of seeking to enforce payment of a debt which is bona fide disputed by the company … But, of course, if the debt is not disputed on some substantial ground, the court may decide it on the petition and make the order …”.

There were no explanations given pertaining to the debt owing by Twin Technic, and the relationship between Twin Technic and the respondent. The respondent claimed that it had merely forwarded the 2 cheques with the intention of helping Twin Technic with its debt.

Now the petitioner claimed that the respondent had in its own words, “unequivocally and unconditionally” assumed the debt of Twin Tech. What is glaringly missing is the evidence to support this claim. There was no evidence to substantiate the respondent‟s alleged undertaking or agreement to have Twin Technic‟s debt assigned to it. All that the respondent had merely done was to offer its help to Twin Tech.

For the respondent to be liable, there must be some express condition agreed for the respondent to assume, or undertake to settle Twin Technic‟s debt. The mere act of forwarding cheques with the intention of helping Twin Technic to settle 6 its debt, could not be equated to an undertaking or assumption of debt.

Furthermore, the petitioner did not provide any evidence to show that they had in allowing the respondent to assume the debt, had provided some sort of consideration, such as foregoing its claim against Twin Technic. Although Twin Technic has been wound-up, the petitioner‟s claim against it is still alive, until and unless relinquished.

I therefore find that there is a bona fide as to the debt claimed. The winding-up court is not the proper forum for a dispute that requires a comprehensive finding of fact to be made.

I had for these reasons find that the respondent has raised a bona fide dispute as to the debt claimed. The petition is dismissed with costs of RM5,000.00 subject to allocatur. Dated: 7 November 2017 -sgd- (Mohamed Zaini Mazlan) Judge Kuala Lumpur High Court (Commercial Division) 7 Counsel for the plaintiff R. Yogananthan [Messrs R.Y Nanthan & Partners] Counsel for the respondent Prema Arunasalam [Messrs V. Samy & Co]