Pujian Development Sdn Bhd v 1. ) Thean Jun Thye (BA-24NCC-29-03/2023)

THEAN JUN THYE

CHIA SIYA HENG

CHEE CHIANG GIN

WONG CHIN MOO

KAN KWONG NAM

YAP KEOW

LAM KOK WENG

YONG GECK JIN

WONG KIANG HOONG

KEE MOOI THONG

KEE LEK CHYE

YEN YEW LOONG

YEN YEW CHUNG

YAP WAI CHOY

PHANG SEW PIN

LIM GEOK KIN

YAP WEE LOY

YAP WEI THIAM

LIM GEOK KIM (NO. K/P: 620430-10-6524) ...DEFENDAN-DEFENDAN JUDGMENT Introduction [1] The Plaintiff in its Originating Summons sought a Fortuna Injunction to restrain the Defendants from presenting a winding up petition against it. [2] This Court allowed the Plaintiff’s application and the Defendants have filed an appeal against that decision. The Pertinent Issues [3] The principal issue for determination is whether the Plaintiff is entitled to the relief sought. [4] Arising from the above dominant issue is the following subsidiary question, namely, whether there is an undisputed debt. The Apposite Background Facts [5] The origin of this case can be traced to as far back as 23 years ago. [6] It involved claims initiated by the Defendants, who were purchasers of commercial properties in a development project developed by the Plaintiff. [7] The Plaintiff had abandoned the construction of the development project and this resulted in the Defendants initiating proceedings vide Civil Suit MT-3-22-573-2003 against the Plaintiff. The Plaintiff had sought to terminate the Sale and Purchase Agreements and for damages to be assessed. [8] On 3 December, 2010, the High Court granted judgment in favour of the Defendants and ordered for damages to be assessed. [9] That decision of the High Court was affirmed by the Court of Appeal on 3 October, 2011. [10] On 29 July, 2011, the Defendants filed an application for assessment of damages. [11] On 17 September, 2019, the learned Senior Assistant ordered the Plaintiff to pay to the Defendants damages for (i) the out-of-pocket expenses; (ii) the total bank loan sum pursuant to the respective Loan Agreements; (iii) pre judgment interest at the rate of 10% per annum under section 11 of the Civil law Act 1956; and (iv) post judgment interest of 5%per annum under Order 42 rule 12 of the Rules of Court 2012, calculated from 4 December, 2010 until full settlement by the Plaintiff. [12] As of the date of the Order made by the learned Senior Assistant Registrar, the total sums payable by the Plaintiff to the Defendants was RM10,365,862.00. [13] It is crucial to note that the Plaintiff had appealed against the decision of the Senior Assistant Registrar’s Order relating to the section 11 of the Civil Law Act 1956 and the Order 42 rule 12 of the Rules of Court 2012 interest claims to the High Court where the High Court allowed the Plaintiff’s appeal on the section 11 of the Civil Law Act 1956 interest claims but dismissed the Plaintiff’s appeal on the Order 42 rule 12 of the Rules of Court 2012 interest claims. Both the Plaintiff and Defendants appealed against the decision of the High Court and on 16 January, 2023, the Court of Appeal reinstated the Senior Assistant Registrar’s Order of 17 July,

[14] It should also be noted that pending the disposal of the abovementioned appeals, the parties had also entered into a Consent Order for a conditional stay of the Senior Assistant Registrar’s Order of 17 July, 2019. [15] One of the key terms of the Consent Order which was dated 19 February, 2020 was that the judgment sum of RM10,365,862.00 be deposited into the fixed deposit joint interest-bearing solicitors’ account to the Defendants. [16] Upon all the appeals having been disposed off (by the Court of Appeal) on 16 January, 2023, the parties agreed for the AmBank Berhad to release the Judgment Sum of RM10,365,862.00 together with the interest accrued in the fixed deposit joint interest-bearing solicitors’ account to the Defendants pursuant to the said Consent Order dated 19 February, 2020. The Plaintiff’s Case for a Fortuna Injunction [17] The Plaintiff disputed the sum of RM1,729,404.82 claimed by the Defendants pursuant to a Section 466 Notice (of the Companies Act 2016). [18] The Plaintiff ’s primary contention is that it “is never indebted to the Defendants for the sum of RM1,729,404.82. [19] The bases of the above assertion are that “the demanded sum is wrongful and never in accordance with the Senior Assistant Registrar’s Order dated 17.9.2019” and that “At all material times, the Judgment Sum has been fully satisfied by the Plaintiff pursuant to the Consent Order. Thus, there shall be no further interest chargeable.” [20] It was further argued by the Plaintiff that: • The demanded sum is wrongful as the same is an interest over interest claim; • The Statutory Notice is invalid and unjustifiable which goes against the provision of Section 466 of the Companies Act 2016; and • The Plaintiff is Solvent. [21] The Plaintiff referred this Court to the case Hock Peng Realty Sendirian Berhad v Ting Sieh Chung @ Ting Sie Chung (“Hock Peng Realty”) [2017] MLJU 1735. The Defendants’ Contentions [22] Predictably, the Defendants challenged the Plaintiff’s application on the grounds that first, “the debt in question is undisputed”. The Defendants emphasised that the Plaintiff “has no bona fide dispute to the said debt” and that the Defendants’ “intended petition in all likelihood will be successful, as a matter of law as well as a matter of fact as the debt in question is premised on a valid and enforceable Order of the Court of Appeal dated 16-1-2023 which has not be [sic] set aside or stayed by P”. [23] Second, counsel for the Defendants drew this Court’s attention to the Order of the Senior Assistant Registrar and argued that the phrase "dan masih berterusan” re the Order 42 rule 12 of the Rules of Court 2012 interest claims suggests that there is a sum owing to the Defendants. [24] In addition to the established cases that have enunciated and applied the principles for the granting of a Fortuna Injunction, the Defendants highlighted the case of SBSK Plantations Sdn Bhd v Dynasty Rangers (M) Sdn Bhd (“SBSK Plantations”) [2001] AMEJ 0132; [2002] 2 CLJ 329; [2002] 1 MLJ 326; [2001] MLRH 496. The Applicable Law and Principles [25] The genesis of Fortuna Injunction can be traced to the case of Fortuna Holdings Pty Ltd v The Deputy Commissioner of Taxation of the Commonwealth of Australia [1978] VR 83. The guiding principles, as enunciated in that case., have been accepted and applied by our courts in cases such as in Pacific & Orient Insurance Co Bhd v Muniammah Muniandy [2011] 1 AMR 685; [2011] 1 CLJ 947; [2010] MLJU 2217; [2010] 3 MLRA 263 and Mobikom Sdn Bhd v Inmiss Communications Sdn Bhd [2007] 3 AMR 195; [2007] 3 CLJ 295; [2007] 3 MLJ 316; [2006] 2 MLRA 700. [26] An applicant seeking a Fortuna Injunction can succeed by basing their application on either of two distinct scenarios. These two situations, often referred to as the two branches, stem from a single overarching principle. First Branch of the Principle [27] An applicant seeking a Fortuna injunction will succeed under the first branch if they can demonstrate to the court that:

the filing of a winding-up petition against the company is likely to cause irreparable harm to the company; and

(ii) the proposed winding-up petition has no reasonable prospect of success. [28] It is essential to note that both conditions outlined in (i) and (ii) must be satisfied for an applicant to succeed under this branch. Second Branch of the Principle [29] Under the second branch, an applicant will succeed if they can convince the court that a more appropriate alternative remedy exists for the would-be petitioner, rendering the winding-up petition unnecessary. [30] However, for this branch to apply, the debt or claim asserted by the intended petitioner must be genuinely disputed. Additionally, the filing of the winding-up petition must be shown to pose a risk of irreparable harm to the company in question. Application of the Principles to the Present Case [31] This Court shall first deal with the Plaintiff’s contention that it is solvent. [32] There is no merit in such a submission. A debtor, once proven to be one, remains a debtor regardless of their financial standing. It is irrelevant whether the debtor is a financially robust company. If the company fails to settle its debts, the creditor has the right to invoke the relevant provisions under the Companies Act 2016 and file a petition to wind up the company. This, of course, is contingent on the existence of an undisputed debt. [33] In HSC Logistics Sdn Bhd v Teong Tiek Wah [2023] 7 AMR 35; [2023] 7 CLJ 916; [2023] MLJU 1184 (“HSC Logistics”) this Court remarked as follows: [2] The very nature of a Fortuna injunction provides companies with an avenue to seek protection from the courts against vile attempts by their adversaries to present unwarranted winding up petitions with their attendant grave consequences”. However, it must be remembered that not every presentation of a petition to wind up a company is without a strong legal basis. … [34] It thus remains incumbent for this Court to consider if the present case is one where the winding up petition is unwarranted or one with strong legal basis. [35] The present case requires this Court to examine and apply the first branch of the principle. [36] The onus is thus on the Plaintiff to satisfy this Court that the filing of a winding-up petition against it is likely to cause irreparable harm to the company and the proposed winding-up petition has no reasonable prospect of success. [37] On the first prerequisite of irreparable harm, this Court in HSC Logistics observed as follows: [24] It is a given, and this has long been recognised by the courts, that the presentation of a petition to wind up a company might cause irreparable damage to a company seeking to stop a winding up petition from being presented. Instances of irreparable damage or detriment are aplenty and varied. In this regard, it would be most surprising if a company seeking a Fortuna injunction is not able to satisfy the court of this requirement mandated in both branches of the principle. [38] The Defendants are not questioning the ability of the Plaintiff in establishing this prerequisite. Hence the question pertaining to irreparable does not arise. [39] That said, this Court in HSC Logistics also went on to state as follows: [25] However, it is imperative for prospective applicants seeking a Fortuna injunction to note that evidence of irreparable damage alone will not entitle such prospective applicants the desired order or injunction. Such is the case whether an applicant intends to rely on the first or second branch of the principle. [40] The core issue in this present application is centred on the second prerequisite under the first branch, that is, whether it can be shown that the proposed winding-up petition has no reasonable prospect of success. [41] A winding up can fail due to various grounds or circumstances. [42] As the Defendants in the present case will be relying on section 465(1)(e) of the Companies Act 2016, that is, the Plaintiff is unable to pay its debts, the central issue is whether there is a disputed or an undisputed debt (of at least RM50,000) due and owing by the Plaintiff to the Defendants. [43] If there is an undisputed debt (of at least RM50,000), the Defendants are entitled to invoke the Statutory Notice in section 466(1)(a) of the Companies Act 2016. The winding up process must be allowed to take its usual course under the Companies Act 2016. The process should not be hindered through the granting of a Fortuna injunction. To do so would be curtailing the legitimate rights of would-be petitioners. To do so would be permitting applicants for Fortuna injunctions to abuse the process of the court. [44] However, the situation is altogether different if the debt is disputed. Under such circumstances, to permit a would-be petitioner such as the Defendants to proceed to file a petition to wind up the Plaintiff company, when together with evidence that the petition will cause irreparable damage to the Plaintiff company, would be to condone an abuse of the process by the would-be petitioners/Defendants. [45] There is no denying that there was a judgment sum entered in favour of the Defendants. As noted by Supang Lian J (as her Ladyship then was) in Hock Peng Realty: Once there is a valid and enforceable judgment, there is no longer a disputed debt and the security of that judgment means that such a petition if filed is not bound to fail. Hence, whether the petition would cause irreparable damage to the company would no longer be a relevant consideration anymore. [46] However, the said judgment sum has been satisfied. [47] The present dispute centres on what the Defendants claim as outstanding interest due and owing on the judgment sum. [48] Is the sum claimed by the Defendants one that is undisputed? That is the central question. [49] If the answer is in the affirmative, the Plaintiff’s application for Fortuna Inunction should be dismissed. [50] If the answer is in the negative, the Plaintiff’s application in Enclosure 1 should be allowed. [51] There is no doubt that the phrase “dan masih berterusan” appears in the Senior Assistant Registrars Order of 17 September, 2019. [52] However, questions have been raised and these include whether the interest have been paid and thus “tidak lagi berterusan” and whether the claim for over RM1.7 million in interest by the Defendants is “interest over interest”. [53] The claim by the Defendants may well be justified but this does not detract from the fact that the debt is one that is disputed. [54] As in Hock Peng Realty, there is a serious and bona fide dispute as to the claim of the Defendants for interest. [55] This Court has considered the case of SBSK Plantations. The High Court correctly noted that as there was in existence a valid and enforceable judgment, which had not been stayed nor set aside on appeal, the defendant in that case was entitled as of right to present a winding-up petition against the plaintiff. However, the factual matrix in the present case differs from those in SBSK Plantations. [56] For the avoidance of doubt, this Court’s finding does not affirmatively state that no sum is due or owing from the Plaintiff to the Defendants. It merely concludes that the debt is disputed. Coupled with the irreparable harm that would be caused to the Plaintiff, the granting of a Fortuna Injunction is justified. [57] The Defendants are not prejudiced in any way. They remain entitled to pursue appropriate legal remedies to enforce the debt they claim is due and owing through other means permitted by law. [58] The effect of this decision is simply to deny the Defendants the use of the winding-up procedure, as it contradicts the rationale and foundation for granting a Fortuna Injunction. [59] The application is Enclosure 1 is allowed with costs. [60] The Defendants to pay costs of RM8,000 to the Plaintiff. Dated: 25 March, 2025 sgd [CHOONG YEOW CHOY] Judicial Commissioner High Court of Malaya Shah Alam Counsel: Ben Lee Kam Foo and Nur Amalin Shahida binti Sabidi for the Plaintiff (Messrs. Ben Lee Sharen) Harwinder Kaur a/p Harbhajan Singh, Keshvinder Kaur a/p Harvinder Singh and Dhanesh a/l Subramaniam Nair for the Defendants (Messrs. A J Ariffin Yeo & Harpal)