A bona fide dispute over a debt must be established for a Fortuna injunction; failure to comply with statutory demands leads to a presumption of insolvency.

JUDGMENT

Atan Mustaffa Yussof Ahmad J:

Introduction

[1] This judgment concerns an originating summons filed by a company seeking a declaration that a statutory demand issued against it under s 466(1)(a) of the Companies Act 2016 (" CA 2016") is invalid, and for a Fortuna injunction to restrain the presentation of a winding up petition pursuant to that demand. The dispute centres on a long-standing business arrangement between the parties for the consignment and retail of apparel. The Plaintiff contends that the debt claimed in the statutory demand is premised on a letter of intent that was signed by its officer without authority and as part of a conspiracy with the Defendant's director to defraud the Plaintiff. Conversely, the Defendant argues that the debt is undisputed as the Plaintiff had performed the contract and settled invoices without protest for four years, and is therefore estopped from challenging the liability now. The key issues that arise are whether there is a bona fide dispute over the debt on substantial grounds, whether the Plaintiff is deemed unable to pay its debts by reason of its failure to comply with the statutory demand thereby giving rise to a presumption of insolvency, and whether any potential damage to the Plaintiff if a winding up petition is presented is relevant in light of the Plaintiff's challenge to the petition's tenability.

Background Facts

[2] The Defendant, Bambika Sdn Bhd, had been supplying the Plaintiff, Poney Garments Sdn Bhd, with third party consignment loungewear/pyjamas-type baby and children's clothing for retail sale at the Plaintiff's business premises since 2019, and innerwear since around 2021. From 2019 until early 2023, consignment dealings between the parties were coordinated by Patt Woei Sheun, the Chief Operating Officer of the Plaintiff.

[3] In early 2023, there was a change in the management of the Plaintiff company. The Plaintiff's new management began communicating directly with the Defendant via email. The Defendant's emails were signed off by "E H Lim". The Plaintiff also attempted to speak to "E H Lim" by phone. Around March 2023, the Plaintiff spoke with a representative of the Defendant, "Miss Ho", who identified herself as an employee. A physical meeting was arranged between the Plaintiff and the Defendant for 20 March 2023.

[4] On 20 March 2023, the Plaintiff's representative met with the Defendant's representative Ho Karen. Ho Karen introduced herself as the Defendant's employee and admitted to signing off on email correspondence with the Plaintiff as "E H Lim". At this meeting, the Plaintiff discovered that Ho Karen was the wife of Patt Woei Sheun.

[5] On 19 April 2023, in response to the Plaintiff's request for any consignment agreement between the parties, Ho Karen emailed the Plaintiff a copy of a Letter of Intent dated 18 October 2019 ("the Letter of intent'). The Letter of Intent was signed by Patt Woei Sheun (on behalf of the Plaintiff) and Lim Eng Haw (on behalf of the Defendant). It provided for a 30% trade margin for the Defendant and mentioned the possibility of a further formal Concessionaire Agreement. However, no formal agreement materialised in the 4 years thereafter.

[6] On 1 March 2023, Patt Woei Sheun tendered his resignation from the Plaintiff, effective 31 March 2023. He continued to have access to the Plaintiff's office until 30 April 2023 for the purpose of handover.

[7] In June 2023, the Plaintiff proposed to the Defendant to revise the trade margin in the Letter of Intent. The Defendant declined. The parties then agreed to suspend the consignment arrangement effective 1 August 2023.

[8] On 29 August 2023, the Plaintiff discovered that the Defendant was selling the Plaintiff's branded products at Paradigm Mall, Petaling Jaya.

[9] On 30 August 2023, the Plaintiff conducted an SSM search on the Defendant, which revealed that Ho Karen was the sole shareholder and director of the Defendant. The Plaintiff then suspended payments to the Defendant. On