Mar'S Paragon Resources Sdn Bhd v Lms Technology Distributions Sdn Bhd (WA-28NCC-480-05/2025)

Enclosure 1 is the winding up petition dated 5.5.2025 (“Winding Up Petition”) by the petitioner, Mar’s Paragon Resources Sdn Bhd (“Petitioner”) for the respondent, LMS Technology Distributions Sdn Bhd (“Respondent”) to be wound up pursuant to Section 465(1) (e) and 466(1) (a) of the Companies Act 2016.

The Petitioner’s premises is located on the 18th Floor. The Respondent’s premises is located on the 19th Floor. The Respondent carried out renovation works on its premises on the 19th Floor, which caused inter-floor leakage to the Petitioner’s premises on the 18th Floor.

The Petitioner commenced legal action against the Respondent at the Kuala Lumpur Sessions Court Suit No: WA-A52NCvC-396- 04/2019. However, the parties settled the matter amicably and entered into a consent judgment dated 6.3.2020 (“Consent Judgment”), whereby it was agreed that: -

The Respondent will commence repair works on the Petitioner’s premises within 21 days;

In the event the Respondent fails to conduct the repair works, the Petitioner shall elect Messrs. HR Design & Build to obtain access into the Respondent’s premises in order to conduct the repair works;

The Respondent shall then pay the sum of RM 108,110.00 to the Petitioner upon the Petitioner’s completion of the repair works. [4] The Respondent failed to abide with the terms of the Consent Judgment. Pursuant to the Respondent’s failure, the Petitioner obtained a summary judgment order dated 21.5.2021 (“Summary Judgment Order”) against the Respondent to pay damages in the sum of RM 72,989.12 (with interest and costs). [5] The Petitioner’s solicitors have served the statutory demand dated 9.12.2024 and 4.3.2025 (“the Statutory Demand”) on the Respondent, calling upon the Respondent to make the payment sum of RM 192,577.51 together with interest and costs, being the amount due and owing by the Respondent to the Petitioner pursuant to the Summary Judgment Order. [6] However, despite the Statutory Demand being made, the Respondent failed to pay the demanded sum or any part thereof. [7] Accordingly, the Petitioner is praying for the Respondent to be wound up pursuant to the provisions of the Companies Act 2016. Summary of the Respondent’s case (in opposing the Winding Up Petition) [8] The Respondent is relying on the following grounds to oppose the

The Respondent is currently solvent and is able to pay its debts;

The Winding Up Petition will cause prejudice to the Respondent and its employees;

The Respondent is ready to reach a resolution to settle its debts;

The Respondent has taken steps to adhere to the Consent Judgment. [9] The Respondent relies on the authority of Malaysia Marine & Heavy Engineering Sdn Bhd v Teras Tegap Sdn Bhd [2018] MLRHU 1474, to argue that a ground for winding up is made out only if the Court, after taking into account the company’s contingent and prospective liabilities, is satisfied that the company is unable to pay its debts. The Respondent argues that an examination of the company’s entire financial position is required. Evidence suggesting a temporary lack of liquidity is not sufficient to prove that a company is unable to pay its debts. [10] The Respondent also relies on the case of Perusahaan Peridi Sdn Bhd v Pressure Casting Technology Sdn Bhd [1997] 8 MLRH, to argue that the discretion as to whether to wind up a company rests solely in the Court, even though the grounds for winding up might be established. Where there is an offer made, the company should be given an opportunity of carrying out the offer. [11] The Respondent also submits that the Winding Up Petition is premised on the fact that the Respondent is unable to settle the debt within 21 days pursuant to the Statutory Notice, and not on the basis that the Respondent is insolvent. The Respondent states that the debt does not automatically crystalize into a winding up order. [12] The Respondent also relies on the case of Malaysia Air Charter Company Sdn Bhd v Petronas Dagangan Sdn Bhd [2000] 4 CLJ 437, to argue that a company will not be wound up, even if it fails to heed a valid notice, if it can establish by independent evidence that it is solvent. [13] Finally, the Respondent replies on the authority of KNM Process Systems Sdn Bhd v Mission Biofuels Sdn Bhd [2014] 8 MLJ 434, to argue that the mere failure to pay debt does not empower the Petitioner to file the Winding Up Petition. The duty is still on the Petitioner to proof that the Respondent is unable to pay its debts. Summary of the Petitioner’s case (in supporting the Winding Up Petition) [14] The Petitioner states that the Respondent is not disputing the debt. [15] The Petitioner submits that the Respondent is unable to pay its debt when they failed to pay the amount owing within 21 days after the Statutory Notice was served on the Respondent. Relying on the authority of WWTAI Finance Ltd v IES Energy Holdings Sdn Bhd [2016] 1 LNS 1801, the Petitioner submits that the failure to pay within 21 days will give rise to a presumption that the Respondent is unable to pay its debts. It is irrelevant whether the Respondent is currently solvent and able to pay its debts. [16] Relying on the case of Lafarge Concrete (Malaysia) Sdn Bhd v Gold Trend Builders Sdn Bhd [2011] 1 LNS 1763, the Petitioner argues that the solvency of a company counts for nothing if it is not ready, willing and able to meet the demands of a creditor. The Petitioner also points out that the Respondent has not shown any steps taken on how the Respondent intends to settle its debts. Findings by the Court [17] The claim by the Petitioner is straightforward. The Petitioner and the Respondent had entered into the Consent Judgment. Due to the Respondent’s failure to abide with the terms of the Consent Judgment, the Petitioner obtained the Summary Judgment Order against the Respondent. The Petitioner then served the Statutory Demand, requiring the Respondent to make payment of the sum of RM 192,577.51. The Respondent failed to comply. The Petitioner then presented the Winding Up Petition, seeking an order for the winding up of the Respondent, by reason that it is unable to pay its debts under Section 465(1) (e) of the Companies Act 2016. [18] There is no dispute on the debt. The Consent Judgment and the Summary Judgment Order remain valid and binding. The Respondent never applied to set aside the Summary Judgment Order nor was there any stay of execution. Once the Respondent fails to comply with the Statutory Demand, the law will presume that the Respondent is insolvent and unable to pay its debts. [19] In Pontian United Theatre Sdn Bhd v Southern Finance Bhd (formerly known as United Merchant Finance Bhd) [2006] 2 MLJ 602, it was held that a judgment sum establishes the debt, which then becomes due to the person to whom it is owed. Should the company fail to settle the demand, they were to be deemed to be unable to settle their debts, a circumstance which constituted one of the grounds on which the company could be wound up. [20] Similarly, in Klass Corp (M) Sdn Bhd v MKRS Management Sdn Bhd [2018] 9 MLJ 305, it was held that a judgment debt is not considered as capable of having the status of being disputed. The status of a judgment debt is one that is presently valid, binding and enforceable. [21] The averments made by the Respondent (that the Respondent is currently solvent; the Winding Up Petition will cause prejudice; the Respondent is ready to reach a resolution to settle its debts; and the Respondent has taken steps to adhere to the Consent Judgment) are all bare statements and unsupported by any evidence. [22] The test of insolvency is laid down succinctly in the following legal authorities: -

In Lafarge Concrete (Malaysia) Sdn Bhd v Gold Trend Builders Sdn Bhd [2012] 6 MLJ 817, being that of “commercial insolvency”, i.e. the company’s inability to meet current demand as they fall due;

In SSM Management Sdn Bhd v Aeon Big (M) Sdn Bhd (formerly known as Magnificent Diagraph Sdn Bhd) [2019] 4 MLJ 826, the court held that the company must be willing and able to meet the current demand of the creditor;

Similarly, in WWTAI Finance Ltd v IES Energy Holdings Sdn Bhd [2016] MLJU 1591, the test of commercial insolvency simply means that company is not able to meet current debts when they fall due. [23] Thus, failure of the Respondent to pay as demanded would trigger the presumption that it is unable to pay its debt. The onus to rebut is on the Respondent to show that it is able to pay its debt: Visage Continental Sdn Bhd v Smooth Track Sdn Bhd [2008] 1 MLJ 101. In this case, the Respondent had not shown any grounds or evidence to rebut such presumption. Conclusion [24] Once the Respondent has failed to comply with the Statutory Demand, there is a presumption of insolvency against it. The onus then shifts to the Respondent to show that it is able to pay the debt. In SSM Management Sdn Bhd v Aeon Big (M) Sdn Bhd (formerly known as Magnificient Diagraph Sdn Bhd) [2019] 4 MLJ 826, Harminder Singh JCA held: - “[20] In this regard, it is settled law that once a company has failed to comply with the statutory demand, there is a presumption of insolvency against it. The onus then shifts to the company to show that it is able to pay all its debts at the material time. The test of insolvency, as the learned judge correctly noted, is the test of commercial insolvency or cash flow insolvency in that the company must be able to pay its debts when they fall due and not at some future date. In other words, the company must be willing and able to meet the current demand of the creditor. In this way, a company cannot be said to be solvent when it asserts that it is able to pay the debt but persists in not doing so.” [25] Accordingly, for the reasons above, Enclosure 1 is allowed with cost fixed at RM 6,000.00 subject to payment of allocator. Dated the 26th day of December 2025 …………………………………….. DR. SEOW HOCK PENG Judicial Commissioner High Court (Commercial Division NCC2 & Admiralty) High Court of Kuala Lumpur In the Federal Territory, Malaysia Counsel for Petitioner: Ms. Tee Xue Ying (Messrs. Chih – Jen & Associates) Counsel for Respondent: Mr. Vigneswaran Raju (Messrs. The Chambers of Waran)

Malaysia Marine & Heavy Engineering Sdn Bhd v Teras Tegap Sdn Bhd [2018] MLRHU 1474 2. Perusahaan Peridi Sdn Bhd v Pressure Casting Technology Sdn

Malaysia Air Charter Company Sdn Bhd v Petronas Dagangan Sdn Bhd [2000] 4 CLJ 437 4. KNM Process Systems Sdn Bhd v Mission Biofuels Sdn Bhd [2014] 8 MLJ 434 5. WWTAI Finance Ltd v IES Energy Holdings Sdn Bhd [2016] 1 LNS 1801 6. Lafarge Concrete (Malaysia) Sdn Bhd v Gold Trend Builders Sdn Bhd [2011] 1 LNS 1763 7. Gordagen Pharmaceuticals Pty Ltd v Felda Wellness Corporation Sdn Bhd [2016] 1 LNS 270 8. Pontian United Theatre Sdn Bhd v Southern Finance Bhd (Formerly Known as United Merchant Finance Bhd) [2006] 2 MLJ 602 9. Klass Corp (M) Sdn Bhd v MKRS Management Sdn Bhd [2018] 9 MLJ 305 10. Lafarge Concrete (Malaysia) Sdn Bhd v Gold Trend Builders Sdn Bhd [2012] 6 MLJ 817 11. SSM Management Sdn Bhd v Aeon Big (M) Sdn Bhd (Formerly

WWTAI Finance Ltd v IES Energy Holdings Sdn Bhd [2016] MLJU

Visage Continental Sdn Bhd v Smooth Track Sdn Bhd [2008] 1 MLJ 101

Section 465(1) (e) and 466(1) (a) of the Companies Act 2016