Perusahaan Otomobil Nasional Sdn Bhd v U.C.M. Automotive Systems Sdn Bhd (BA-24NCC-87-07/2024)

Unpaid Outstanding Invoices – RM1,742,996.89

Interest on the unpaid outstanding invoices – RM164,482.81 (Interest)

Freight and Forex Claims – RM970,153.22

Exora End of Production Parts Claim – RM1,432,567.44. [7] After hearing both parties read the affidavit and submissions filed, I have decided that:

Given the circumstances of the case, I find that Proton's prospects of success in defending the winding up proceedings, if instituted, are unfavourable to them both in law and in fact.

Having reviewed the details of the amount due as submitted, I find that Proton's contention disputing it and/or submitted to the contrary against the issuance of the Statutory Notice does not amount to a bona fide dispute.

I am not persuaded that there is a genuine dispute that should be adjudicated upon, as no substantial grounds have been advanced that would necessitate a full trial of the same.

Nor do I see any valid controversy over any contestable matter raised by Proton, as there are merely inconsistencies in the issuance of the invoices, most of which are undisputed.

As to the issue of interest charged, I agree with UCM's submission that it is immaterial and irrelevant for Proton to dispute the charges. [8] Accordingly, Proton's application for a Fortuna Injunction is dismissed with cost of RM8000, subject to the allocator. [9] Dissatisfied with the above decision, Proton appealed to the Court of Appeal. My reasons are below. Analysis and Findings [10] The law on Fortuna Injunction is trite and established as decided in the case of Mobikom Sdn Bhd v Inmiss Communications Sdn Bhd [2007] 3 MLJ 316. There were two circumstances which Proton must establish when a company may restrain the presentation of a winding-up petition, that is (refer to the case of Fortuna Holdings Pty Ltd v The Deputy Commissioner of Taxation of the Commonwealth of Australia [1978] VR 83):

Where the presentation of the petition might produce irreparable damage to the company and where the winding-up petition has no chance of success.

The petitioner has chosen to assert a disputed claim by a procedure that may produce irreparable damage to the company. [11] In support of this Originating Summon, Proton submitted as follows:

Filing a winding-up petition against Proton would inevitably cause irreparable harm and damage to Proton as they were one of the largest and most reputable national car manufacturers in Malaysia. It will also affect various entities and stakeholders, including its employees, investors, customers, vendors and suppliers who rely on Proton for their operational and business activities.

Proton may suffer irreparable damage merely through public knowledge of the presentation of a winding-up petition.

Winding-up proceedings can have damaging consequences and financial implications and may be financially paralysing.

Winding-up is not a suitable procedure for a disputed claim. The alleged debt is genuinely disputed on substantial grounds.

The presentation of a winding-up petition would amount to an abuse of the Court's process as there was a clear dispute about whether a proper suit should have been commenced to obtain a proper judgment.

The winding-up petition is bound to fail and has no chance of success.

On the outstanding invoices claimed (RM1,742,996.89), RM852,978.30 was paid, and the balance/remaining sum of RM890,018.59 is disputed.

The reason for the dispute was as follows:

They are paid by Proton by way of an Offset / Contra Exercise, which UCM acknowledges;

One of the invoices (INV 5151) is not payable because the goods in which the invoice was issued are defective; and

4 of the invoices (IN5157, IN5220, IN5226 and IN5558) are not payable because the supporting documents to enable Proton to process payment for the same were not provided by UCM.

On the interest of RM164,482.81, Proton disputed any imposition of interest. UCM unilateral imposition and computation of interest are disputed, and from historical practice by both parties, no imposition of interest or payment of the same existed.

With regard to freight and forex claims, it was submitted that Proton had fully settled the amount by way of offset exercise by Proton to Yinlun on 10.1.2023 and 20.1.2023. This was allegedly admitted by UCM.

On the Exora End of Production Part Claim, an amount of RM1,165,441.05 was admittedly made to UCM on 29.7.2024. The remaining balance of RM267,126.39 as inventory holding cost is disputed and should be adjudicated in Court.

On the other claim (debit notes), which are not under the Statutory Notice and substantially disputed, it should be disregarded as it was out of the scope of the said notice. [12] The Defendant objected to this application on the following grounds:

The 21 days had lapsed, and Proton still failed, refused and/or neglected to pay UCM the outstanding sum but filed this application to stop UCM from presenting a winding-up petition.

After the filing of this application, Proton had made two-part payments to UCM, a sum of RM2,024,488.00 and RM65,226.34, on 29.7.2024 and 29.8.2024.

UCM admitted to the payment arrangements made and shall deduct the amount claimed from the invoices except for the non-agreed and/or consented payment arrangement.

In light of the development, the revised claims for the outstanding invoices and claims are as tabulated in paragraph 19 of the UCM submission. According to the table, a sum of RM548,141.94 remains due and owing by Proton.

UCM have the right to charge interest at 10% per annum on late payments, and this is clearly stipulated in every invoice claimed in the Statutory Notice. Proton had never objected or protested to this term previously.

Proton had failed to satisfy the thresholds to warrant the granting of the Fortuna Injunction. [13] In order to succeed in getting an injunction, Proton must satisfy both limbs of the enunciated principle in Fortuna Holdings (see Pacific & Orient Insurance Co. Bhd. v Muniamah Muniandy [2011] 1 CLJ 947). Further, in Tan Kok Tong v. Hoe Hong Trading Co Sdn Bhd [2007] 2 CLJ 305, the Court of Appeal held that when deciding whether to grant an injunction to restrain a petition that is based on a statutory demand for a debt, the Court must be satisfied that the debt is bona fide disputed on substantial grounds. It is not enough that there is a serious question to be tried. [14] After careful consideration of whether there was bona fide disputed debt on substantial or reasonable grounds, I find that the assertion of the dispute was not on the entire sum, as the alleged debt was later substantially paid and settled after filing of this application. [15] In this regard, I refer to the case of Tec D (Malaysia) Sdn Bhd & Anor v Refinenetworks Sdn Bhd [2022] MLJU 2238, where it was held as follows: "[36] It is undisputed that the Defendant had acknowledged receiving the products and the Defendant did not raise any objections at the material time when it was received. [37] It is undisputed that the Defendant had continued to keep in possession the products despite having knowledge that the products are not in accordance to the specification, inaccurate and incorrect. Hence, the Defendant cannot now claim goods are not according to specification, inaccurate and incorrect and refuse to pay the Plaintiffs the balance amount. The Defendant's conduct binds them. [38] The Defendant had also not disputed that they have made part payments and the Defendant had made further payments even after the Letter of Demand was issued on 27.02.2020. The said payments were made on 05.03.2020, 06.04.2020 and 01.06.2020, though the Defendant had complained, alleging that the products delivered was not according to specification, inaccurate and incorrect. It is apparent that the Defendant did not dispute the invoices and had made part payments. This to my mind is a clear admission of indebtedness. In the case of Boustead Trading (1985) Sdn Bhd v Arab-Malaysian Merchant Bank Bhd [1995] 3 MLJ 331 where the Federal Court held that: - "(1) A reasonable man in the respondent's position would be entitled to assume that the appellant had agreed to the imposition of the 14-day period as it did not merely remain silent by not objecting to it but had in fact made payment on some invoices. The appellant should not be allowed to question the validity of the indorsement after seven months as it would be unconscionable and inequitable for it to do so." -emphasis added [16] Therefore, I am satisfied that Proton had not forwarded evidence of a prima facie case that there is something which ought to be tried but merely questioning parts of the debt by saying they "disputed the claim" (see Morgan Guaranty Trust Co of New York v Lian Seng Properties Sdn Bhd [1991] 1 MLJ 95 and Kris Heavy Engineering & Construction Sdn Bhd v Lewis & Co (Advocates & Solicitors) [2017] MLJU 906). [17] On the issue of interest, I find merits in UCM's submission that the allegation of dispute (on the imposition of the interest) was a bare denial as all invoices delivered to Proton contain a clause in which UCM reserved its right to charge interest of 10% per annum on late payments. [18] UCM referred to the case of Bangkok Bank Bhd v Tan Ngee Hong Construction Sdn Bhd (Malayan Banking Bhd, proposed intervener) [2019] 12 MLJ 354, where the Court opined, and I quote: "… [28] It is also well established that mere refusal to pay is not a dispute because a true dispute must refer not just to differences arising out of a refusal to do something but must relate to a controversy over some contestable matters (see for example ELF Petroleum SE Asia Pte Ltd v Winelf Petroleum Sdn Bhd [1986] 1 MLJ 177; [1984] 2 MLRH 239) …" -emphasis added [19] Further, it was submitted that Proton had not reported any discrepancies or contesting the invoices or the claim within the stipulated period from the receipt of the invoices. Therefore, Proton cannot now deny the amount or question the invoices submitted (see Wira Nusa v Majlis Perbandaran Selayang [2014] 8 MLJ 528). [20] Reference was also made to a Court of Appeal case of KGN Jaya Sdn Bhd v Pan Reliance Sdn Bhd [1996] 1 MLJ 233, which held as follows: "…But that is not what happened. The appellant remained silent, held onto the accounts, and did nothing about it. The denial by its solicitor's letter of 4 January 1993, came long after the delivery of the account. When asked why his client had kept silent for a rather long period of time, Encik Darshan Singh's response was that his client was a large company and did not do anything until the letter before action was received. We trust that we will be forgiven if we are unable to detect the logic in this response. We are of the view that it would be a travesty of justice if we were to accede to the appellant's arguments. We are left in no doubt that the undisputed facts of this case admit of the conclusion that the respondent was, by the conduct of the appellant, lulled into the belief that the appellant had no challenge to the accounts, leave alone the legal relationship between the parties…" -emphasis added [21] Premised on the above, I find that Proton had failed to satisfy this Court that the intended winding-up petition had no real chance of success and, therefore, failed on the first limb of the Fortuna Injunction test. [22] Regarding whether Proton will suffer irreparable damage due to the admission and partial payment of the amount due, it is irrelevant and immaterial for Proton to invoke the company's solvency in hindering the presentation of the winding-up petition. [23] UCM refers to the case of Bangkok Bank Bhd v Tan Ngee Hong Construction Sdn Bhd (Malayan Banking Bhd, proposed intervener) [2019] 12 MLJ 354, where the Court opined that: "… [24] Can a debtor company refuse to pay and thereby avoid the statutory presumption of insolvency? In my view, it cannot. [25] A neglect to pay is not materially different from a refusal to pay. A 'refusal' connotes a deliberate decision whereas a 'neglect' is suggestive of an omission or a failure to apply the mind. It would be otiose if debtor company which claims to be solvent can defeat a winding up process by conveniently asserting that it can meet the debt claimed but simply refuses to do so. [26] The crux is the failure to make payment following a valid demand: a neglect or refusal to meet the statutory demand will give rise to a presumption of insolvency on the part of the debtor company, which in turn provides a legitimate basis for the company to be wound up. Nonetheless, a neglect or refusal may not be determinative because it will be open to the debtor company to adduce credible evidence to rebut the presumption of insolvency. [27] But it cannot successfully rebut this presumption on grounds that it refuses to pay not that it is unable to pay. In Cornhill Insurance Plc v Improvement Services Ltd and Others [1986] 1 WLR 114, it was held that where a creditor's debt is clearly established, the creditor has the right to present a winding up petition and obtain relief even though the company was solvent. The solvency of a company would count for nothing if it persists in non-payment or that it is nevertheless not ready, willing and able to meet the demand of the creditor. [28] It is also well established that mere refusal to pay is not a dispute because a true dispute must refer not just to differences arising out of a refusal to do something but must relate to a controversy over some contestable matters (see for example ELF Petroleum SE Asia Pte Ltd v Winelf Petroleum Sdn Bhd [1986] 1 MLJ 177; [1984] 2 MLRH 239) …" [24] Based on the foregoing, I agree with UCM that the grounds of irreparable damage, as relied upon by Proton, are bound to fail. Consequently, Proton failed to satisfy the second limb of the Fortuna Injunction test. [25] Lastly, on the debit notes, which are allegedly not part of the subject matter of the Statutory Notice, I refer to the case of Malaysia Air Charter Co. Sdb. Bhd. v Petronas Dagangan Sdn. Bhd. [2000] 4 MLJ 657 whereby the Federal Court held that: "… (2) A notice of demand under s 218 need not specify the exact sum due as at the date of demand. So long the sum due exceeded RM500 and remained unpaid after a demand made without any reasonable explanation to the satisfaction of the Court, there is therefore neglect to pay such sum within the meaning of the section." [26] Based on the above, I agree with UCM that although the sum of RM 1,473,024.00 was not specified in the Statutory Notice, since Proton had admitted and verified the sum of RM 1,473,024.00 to be paid to UCM, they are obliged to pay and there is no room for it to be disputed before this Court (see the case of Ibai Golf & Country Club Bhd v Laman Kejora Sdn Bhd [2019] 12 MLJ 446). Conclusion [27] Based on the above, Proton failed to prove that there was a bona fide dispute on substantial grounds regarding the alleged debt. Accordingly, their application for a Fortuna injunction is dismissed with a cost of RM8000, subject to the allocator. Dated this: 19 April 2025 (NOOR HAYATI BINTI HAJI MAT) Judge Shah Alam High Court NCVC 9 Counsels: For the Plaintiff: S.Y. Liew together with Hee Hui Ting and Ching Hao Yan Messrs. Shearn Delamore & Co. For the Defendant: Kriishand G Krishnan together with Muhammad Thaqif Rusyaidi bin