Failure to comply with a statutory demand triggers a presumption of insolvency, which the company must rebut to avoid winding up.

JUDGMENT

Ahmad Murad Abdul Aziz J:

Introduction

[1] Enclosure 1 is a Petition to wind up the Respondent pursuant to s 465(1)(e) read with s 466(1)(a) of the Companies Act 2016 ( CA 2016). This petition is premised on the failure by the Respondent to settle a judgment sum after the expiry of 21 days from service of a statutory notice under s 466(1)(a) of the on the Respondent.

Background Facts

[2] The Petitioner obtained a judgment against the Respondent in Suit No WA-22NCC-549-10/2022 on 13 April 2023 ("the Judgment"). The Judgment is for the sum of RM4,400,298.75 together with interest and costs.

[3] Till the date of hearing of this Petition, the Respondent has not filed any appeal against the Judgment.

[4] The Petitioner issued and served a notice pursuant to s 466(1)(a) of the CA 2016 ("Statutory Notice") on the Respondent on 8 June 2023 demanding payment of the Judgment sum within 21 days of service of the Statutory Notice.

[5] Upon expiry of the 21 days and the failure by the Respondent to pay the Judgment sum, the Petitioner filed this Petition.

The Law

[6] It is trite law that a failure by the Respondent to pay the sums demanded under the statutory notice will trigger a rebuttable presumption of indebtedness.

[7] In SSM Management Sdn Bhd v. Aeon Big (M) Sdn Bhd; [2019] 4 MLJ 826; 2019 MarsdenLR 460 , Harminder Singh (JCA) as he then was, 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, 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." 

The Respondent's Grounds In Opposing The Petition

[8] The Respondent oppose the Petition on the following grounds:

(a) The Respondent has been communicating with the Petitioner and the Respondent possesses full capacity to settle its debt.

(b) The sum of RM4,541,124.40 set out in the Statutory Demand is not a definite and conclusive sum.

(c) The Respondent purportedly possesses ongoing and potential projects exhibiting the Respondent's solvency.

The Court 's Findings

[9] (a) With respect to the first ground concerning "ongoing negotiations" I find that is not a valid ground to oppose the Petitioner. Unless the Respondent can prove that a settlement has been achieved, just saying negotiations are ongoing is not a ground to oppose a petition.

(b) On the other issue raised by the Respondent that it has capacity to settle the outstanding debts, again I find this submission is misconceived. The test for making a winding up order under s 465(1)(e) of the Companies Act 2016 , is "commercial insolvency". Since the Petitioner has proven and it is not disputed that the Respondent has failed to pay judgment sum after the expiry of the Statutory Notice, the burden is on the Respondent to rebut the presumption of commercial insolvency. I find the Respondent has failed to rebut the presumption.

(c) The allegation that the amount claimed in the Statutory Invoice is not a definite and conclusive sum is also not a valid ground to oppose the Petition. I find this averment is also incorrect since the amount due based on the pre and post judgment interest on the principle sum of RM4,400,298.75 is correctly calculated.

(d) In any event it is settled law that even if the amount claimed in the Statutory Notice is incorrect, it will neither nullify the Statutory Notice nor will it defeat a winding-up petition.

(e) In Malaysia Air Charter Company Sdn Bhd v. Petronas Dagangan Sdn Bhd ; 2000 MarsdenLR 1632 ; ; 2000 MarsdenLR 1440 the Federal Court held that;

(a) A notice of demand need not specify the exact amount due as at the date of demand.

(b) So long as the sum due exceeds RM500.00 (the statutory threshold then) and remained unpaid... there is neglect to pay such sum within