How Chee Hong (Steven) (680728-10-6345) …Defendants GROUNDS OF JUDGMENT 2 Introduction [1] This is an application for an injunction filed by the Plaintiff to restrain the Defendants from presenting a winding up petition against the Plaintiff. [2] At the conclusion of the proceedings, this Court allowed the originating summon at enclosure 1. The following are the Grounds of Decision of this Court. Background facts The background of the matter are as follows: [3] The Plaintiff is incorporated in Malaysia and at all material times carried out the business of land development. The First Defendant is a legal firm while the Second Defendant is an advocate and solicitor and managing partner of the Second Defendant. [4] On 6.6.2014, the Plaintiff filed civil suit 22NCVC-279-06/2014 in the High Court of Kuala Lumpur (“Suit 279”) against eleven (11) defendants where the First and Second Defendant herein were the second and third defendants in Suit 279. [5] On 4.12.2015 during the final case management fixed to finalize the preparation for trial, the previous counsel for the Plaintiff in Suit 279 made an oral application to withdraw the suit with liberty to file afresh. 3 The application was objected by the Defendants and two other defendants. The learned High Court judge subsequently ordered that Suit 279 to be withdrawn and struck off without liberty to file afresh. He also ordered the Plaintiff to pay RM75,000.00 to first and fourth defendants and RM75,000.00 to second and third defendants. The Plaintiff paid RM75,000.00 to the first and fourth defendants in Suit 279 pursuant to Section 466 Notice issued by the latter. The sum of RM75,000.00 remain unpaid by the Plaintiff to the Defendants in this present Suit. [6] Dissatisfied, the Plaintiff appealed against the Order to the Court of Appeal. On 4.11.2016, the Court of Appeal allowed the appeal and set aside the High Court’s Order dated 4.12.2015. It was also ordered that Suit 279 to be remitted to the High Court for trial. [7] By way of letters dated 17.2.2016 and 23.5.2016 enclosing statutory winding up notices, the First and Second Defendants demanded for the sum of RM75,000.00 from the Plaintiff. The Defendants again on 14.11.2018 issued another winding up notice against the Plaintiff similarly founded on the Order dated 4.12.2015. [8] This led to the filing of the instant application by the Plaintiff for a Fortuna injunction against the Defendants. 4 Parties’ contention [9] The Plaintiff submitted that it has proved that there is a prima facie case of an abuse of process by the Defendants. [10] The Plaintiff further asserted that its present application fulfills both the first and second principles of Fortuna pre-conditions. Firstly, the Plaintiff argued that any winding up petition instituted by the Defendants would have no chance of success for the very reason that the Order of the High Court dated 4.12.2015 has been set aside by the Court of Appeal on 4.11.2016 making the demanded sum of RM75,000.00 as a disputed debt. It was further argued that the Defendants intended institution of a winding up petition would produce irreparable damage to the Plaintiff as a land developer as the Plaintiff would face difficulties in pursuing its on-going business and projects. Secondly, the Plaintiff highlighted to this Court that the Defendants wrongfully utilised the winding up procedures as a forum to demand for the disputed sum of RM75,000.00 when the more suitable alternative procedure would be to institute a civil suit to first determine if the Defendants were lawfully entitled to the said costs. [11] The Defendants, in their resistance to this application, contended that it is highly likely the winding up petition if presented would succeed as the debt is based on the High Court’s Order dated 4.12.2015 and the Plaintiff has failed to adhere to the Section 466 Notice within the 21 days statutory period. 5 [12] The Defendants further submitted that the Plaintiff before the Court of Appeal only addressed the issue of withdrawal without liberty to file afresh (“First Order”) and not the issue of costs (“Second Order”). It was highlighted that the same can be found in the Plaintiff’s Memorandum of Appeal. As an appeal begins from the grounds advanced in the Memorandum of Appeal, the Defendants asserted that the Plaintiff only appealed against the First Order. The Court of Appeal merely set aside the same and not the Second Order of which was never part of the Memorandum of Appeal. Therefore, the Second Order made by the High Court has not been set aside nor stayed. The amount demanded cannot be considered a disputed debt and thus, Section 466 Notice issued was not an abuse of court’s process. [13] On the issue of irreparable damage to the Plaintiff, the Defendants highlighted to this Court that the issue only comes into play if the Plaintiff establishes that the intended winding up petition is bound to fail, which is not the case in the present application. Further, it was submitted by the Defendants that the issue is irrelevant when the Plaintiff is lawfully indebted to the Defendant. [14] The arguments put forward by the parties will be dealt with in the rest of this judgment. 6 The law on Fortuna injunction [15] In a celebrated Australian case of Fortuna Holdings Pty Ltd v The Deputy Commissioner of Taxation of the Commonwealth of Australia [1978] VR 83, it was held that an injunction would only be granted in circumstances where to allow the petition would be an abuse of process as the petition has no chance of success. The Plaintiff in such a case would have to establish that, the petition if presented, would likely be dismissed. [16] In the Court of Appeal case of Mobikom Sdn Bhd v Inmiss Communications Sdn Bhd [2007] 3 CLJ 295, Gopal Sri Ram JCA (as he then was) held that the court would have to consider whether there is bona fide dispute of debt based on substantial grounds. It was held that: “The kind injunction by which an intended winding-up petition is sought to be restrained is known as “Fortuna injunction.” The phrase takes its name from Fortuna Holdings Pty Ltd v. The Deputy Commissioner of Taxation where the juridical basis for the relief was first explained. Fortuna Holdings made it clear that the courts have established a principle that the presentation of a winding-up petition may be restrained by injunction where its presentation would amount to an abuse of the process of the court. It was also clear that two distinct branches emanate from the principle - of which the first applies in case where the presentation of the petition may produce irreparable damage to the company and where the proposed petition has no chance of success, and the second is cases where a petitioner proposing to present a petition has chosen to assert a 7 disputed claim, by a procedure which might produce irreparable damage to the company, rather than by a suitable alternative procedure.” [17] The Court of Appeal again in Pacific & Orient Insurance Co. Bhd v. Muniammah Muniandy [2011] 1 CLJ 947 discussed the two principles that guide courts in granting Fortuna injunction: i. The intended petition has no chance of success, as a matter of law as well as a matter of fact and the present of such petition might produce irreparable damage to the company; or ii. An assertion of a disputed claim is made in the petition by way of a procedure that might produce irreparable damage, rather than by a suitable alternative procedure. (See also ISO Marketing & Services Sdn Bhd v. Low Ju Nai [2018] 1 LNS 944, Klass Corporation (M) Sdn Bhd v. MKRS Management Sdn Bhd [2018] 7 CLJ 303 and SME Majujaya Sdn Bhd v. Oon Brothers Electrical Trading Co. Sdn Bhd [2018] 1 LNS 945). Analysis and findings of the Court [18] The first principle as enunciated in Pacific & Orient (supra) is applicable to the present matter before this Court. Clearly, what is being disputed is the issue of whether the Defendants were entitled to the said costs. The entitlement to the RM75,000.00 cost was certainly 8 a disputed issue. It is the finding of this Court that the Defendants were not entitled to the said cost. The reasons for this Court coming to the said conclusion is discussed in the paragraphs below. [19] With such a finding by this Court, the Defendants would not be in a position to claim that they have an undisputed debt as it is the ruling of this Court that they were not entitled to the said amount to begin with. As such, the petition would not have any chance of success if filed in the Winding Up Court. It may result in irreparable damage to the company as the stigma of being served with a Section 466 notice will be difficult to remove. It will lead to the Plaintiff’s reputation being tarnished. [20] In Pacific & Orient (supra), it was explained that: “This principle applies only to disputed debt. It does not apply to cases where debt in question is undisputed. As long as the debt cannot be disputed, it is not consequence whether or not it will cause irreparable damage to the company, if presented. A valid and enforceable judgment of court as in the present case, (unless set aside or stayed) cannot be considered a disputed debt. The law is settled on this point. Therefore, an order for injunction as prayed for by the appellant in the present case, also cannot be granted under this principle.” 9 [21] Similarly in Bank Utama (Malaysia) Berhad v. GKM Amal Bhd [2000] 2 CLJ 525, it was held that: “A disputed debt, in the context of a winding up petition, is a debt in respect of which it is shown, with grounds supported by evidence, that there is a bona fide dispute. In this context, a debt is not a disputed debt simply because the debtor maintains that he disputes the debt. A judgment on the debt establishes in law that there is no bona fide dispute as to the debt. The summary judgment obtained by the petitioner is good and enforceable unless and until a stay is granted or it is set aside on appeal. The fact that the respondent had lodges an appeal against the summary judgment only meant that it still disputed the debt; it did not establish that the debt was bona fide disputed.” [22] Applying the above principles, this Court is of the view that there is a bona fide dispute of debt that has been shown which is supported by evidence. Memorandum of appeal [23] The Defendants in resisting the application for Fortuna injunction had also raised the issue that an appeal begins from the grounds advanced in the memorandum of appeal. In supporting the argument, the Defendants referred to two cases namely Malaysia Land Properties Sdn Bhd v. Waldorf & Windsor Joint Management Body [2014] 6 CLJ 821 and Bar Malaysia v. Neasarani T Singara Thevar & Anor [2015] 8 CLJ 634. 10 [24] This Court is of the view that this line of argument is unmeritorious and the cases provided by the Defendants are irrelevant to the facts of the present case before the Court. Nothing in those cases mentions that a memorandum of appeal operates as the starting point of an appeal. The cases above touches on the principle that an appellant cannot bring forward new grounds or submission that were not present during a trial or hearing to be used as a point to oppose the decision it is appealing against. The position is unlike the current case before this Court. [25] It is apposite to highlight that Rule 5 (4) of the Rules of Court of Appeal 1994 states that the scope of an appellant’s appeal is decided by way of the Notice of Appeal and not the memorandum of appeal. Rule 5 (4) reads: “Any appellant may appeal from the whole or part of a judgment or order and the Notice of Appeal shall state whether the whole or part only, and what part, of the judgment or order is complained of”. [26] In the present suit, the Plaintiff’s scope of appeal has been stated clearly in the Notice of Appeal and the memorandum of appeal. The wordings of the Notice of Appeal is reproduced below: “SILA AMBIL PERHATIAN bahawa Perayu di sini, NEWLAKE DEVELOPMENT SDN BHD, yang tidak berpuas hati dengan keputuan YANG ARIF HAKIM MAHKAMAH TINGGI TUAN NANTHA S. BALAN, yang telah diberi di Mahkamah Tinggi di Kuala Lumpur pada 4 haribulan Disember 2015 merayu kepada Mahkamah Rayuan terhadap 11 keseluruhan keputusan tersebut yang telah menolak permohonan lisan Perayu untuk mendapatkan kebenaran untuk menarik balik tuntutan terhadap Responden Pertama, Responden Kedua, Responden Ketiga dan Responden Keempat dengan kebebasan untuk memfailkan semula di bawah bidangkuasa sedia ada Mahkamah dan/atau menurut Aturan 21 Kaedah 3 Kaedah-Kaedah Mahkamah 2012 dengan kos sebanyak RM75,000.00 untuk Responden Pertama dan Responden Keempat dan kos sebanyak RM75,000.00 untuk Responden Kedua dan Responden Ketiga”. [27] In complying with Rule 5(4), the Plaintiff has stated in its Notice of Appeal that it is appealing against the entire Order of the High Court dated 4.12.2015, which includes the costs ordered. [28] It was highlighted to this Court that the Plaintiff in this case applied to the Court of Appeal vide a Notice of Motion for clarification of the order given on 4.11.2016. A perusal of the notes of proceedings during the said clarification dated 9.5.2017 showed that the Court of Appeal did not clarify its earlier ruling. This must mean that the earlier ruling was clear and required no clarification. It must be read to mean that once the appeal is allowed, the entire consequential orders such as costs must follow. [29] It would lead to a perverse outcome if the order for costs survives the appeal. It must be highlighted that the current case was remitted and re-instated at the High Court bearing the same suit number. It was not an order for the matter to be re-filed afresh as originally prayed by 12 the Defendants when they sought to apply for the matter to be withdrawn. [30] This Court is of the considered view that the costs awarded to the Defendants under the Order of the High Court dated 4.12.2015 is a consequence of the Defendants successfully opposing the Plaintiff’s application for a withdrawal with liberty to file afresh Suit 279. [31] After the Court of Appeal allowed the Plaintiff’s appeal on 4.11.2016, it must mean that the Order of the High Court dated 4.12.2015 is set aside entirely, consistent with the Notice of Appeal where the appeal is against the entire decision of the High Court. The order for costs of RM75,000.00 must also follow. As such, there is no longer a valid and binding order to pay such amounts to the Defendant. [32] The approach is consistent with Order 59 r.3(1) of the Rules of Court 2012 which states “Subject to the following provisions of this Order, no party shall be entitled to recover any costs of or incidental to any proceedings from any other party to the proceedings except under the order of a Court.” [33] Corollary to this is Order 59 Rule 3(2) which outlines the principle that “costs are to follow the event”. In the current case, the moment the Court of Appeal ruled in favour of the Plaintiff, the original order was no longer in favour of the Defendants. As such, in the absence of any express order as to costs by the Court of Appeal, what follows is the Defendants’ disentitlement to the earlier ordered costs. 13 [34] In Petroliam Nasional Bhd (PETRONAS) & Anor v Cheah Kam Chiew [1997] 1 MLJ 25 SC, Hashim Yeop Sani SCJ (as he then was), exhaustively laid out the definition of “costs are to follow the event”: “The general principle envisaged in the rule is simply that costs follow the event and that the successful party is entitled to be paid his costs except when it appears to the court that in the circumstances of the case some other order should be made. The same principle was enunciated in greater detail by Parker LJ in Ottway v Jones [1955] 2 All ER 585, at p 591: One starts with this, that, as general principle, costs follow the event, and the successful party is entitled to be paid his costs unless there are special grounds to order otherwise, and those grounds, it is well settled, must be grounds connected with the cause of action. No doubt, also, where a plaintiff has wholly failed to establish his title or his right, it is impossible judicially to order the successful defendant to pay the plaintiff’s costs. Indeed, as is shown by the cases to which my Lord has referred, it is there said that the occasion for the exercise of the discretion does not arise until the plaintiff has established his right.” Conclusion [35] Premised on the foregoing reasons, this Court is of the view that the Plaintiff had successfully satisfied all the requirements pertaining to 14 the granting of Fortuna injunction. The Originating Summons in enclosure 1 is therefore allowed with costs of RM5,000.00. (AHMAD FAIRUZ BIN ZAINOL ABIDIN) Judicial Commissioner High Court of Malaya Kuala Lumpur Dated: 14th August 2019 Counsels: Sachpreetaj Singh for the Plaintiff Messrs Raj & Sachs C-5-42, Tingkat 5, Blok Camilia 10, Beulevard Lebuhraya SPRINT, PJU 6A 47400 Petaling Jaya Selangor Nathan Narayanasamy for the Defendants Messrs Kumar Jaspal Quah & Aishah K-8-7, Solaris Mont Kiara No. 2, Jalan Solaris 50480 Kuala Lumpur