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2020 MarsdenLR 2315
HIGH COURT MALAYA KUALA LUMPUR
MAJU HOLDINGS SDN BHD – Appellant
Versus
SPRING ENERGY SDN BHD – Respondent
[Originating Summons No: WA-24NCC-134-03/2020]
A judgment under s 28(2) of CIPAA is an undisputed debt capable of forming the basis for a winding up petition, despite being derived from an adjudication decision.
Headnote:(A) Construction Industry Payment and Adjudication Act 2012 – Section 28(2) – Companies Act 2016 – Section 466 – The nature of judgments under CIPAA and their enforceability as judgments of the High Court - The court holds that an adjudication decision, enforceable under CPIAA, constitutes an undisputed debt and may serve as the basis for a winding up petition. (Paras 14, 44, 57)
(B)
The distinction between a court judgment and adjudication decision - A judgment issued under s 28(2) of CIPAA retains the status of an adjudication decision despite enforcement, thus may not be treated as a disputed debt for winding up proceedings. (Paras 14, 18, 25)
(C)
Cross-claim or counterclaim – The court recognized the company's entitlement to challenge the winding up petition based on a bona fide cross claim - The Plaintiff demonstrated a likelihood that its cross claim exceeds the judgment amount, thus justifying the injunction against winding up. (Paras 57)
(D)
Result:
Injunction granted to restrain winding up petition. Parties involved: Plaintiff, Defendant.
[1] This judgment deals with the issue whether a judgment under s 28(2) of the Construction Industry Payment and Adjudication Act 2012 (CIPAA) which is relied upon as a debt in the statutory demand under s 466 of the Companies Act 2016 ( CA 2016) is a disputed debt. It also looks at whether a cross claim or counterclaim for a sum equivalent to or more than the judgment debt is an answer to the statutory demand for the Court to grant an injunction to restrain the presentation of a winding up petition.
Background Facts
[2] By way of a Letter of Acceptance dated 31 July 2018 and Subcontract Agreement dated 22 January 2019 (collectively referred to as the Subcontract), the Plaintiff appointed the Defendant as its subcontractor for a project known as "PAVEMENT WORKS (WP700) FOR PROPOSED LEBUHRAYA PUTRAJAYA TO KLIA (MEX II) - COMMENCING FROM PUTRAJAYA INTERCHANGE AND TERMINATING AT KLIA".
[3] In breach of the Subcontract, the Plaintiff failed to pay the Defendant a total sum of RM 8,848,865.04 under Interim Payment Certificates No. 2 to 7, all of which were certified and issued by the Plaintiff to the Defendant for works done pursuant to the Subcontract.
[4] Because of the Plaintiffs repeated non-payments, and after the service of the Payment Claim by the Defendant on 22 April 2019 and the Payment Response by the Plaintiff on 7 May 2019, the Defendant commenced an adjudication proceeding under the CIPAA against the Plaintiff and the Notice of Adjudication was sent by the Defendant to the Plaintiff on 21 May 2019.
[5] On 4 July 2019, in the course of the adjudication proceeding, the Defendant elected to accept the Plaintiffs repudiation of the Subcontract for repeated breaches of its payment obligations under the Subcontract.
[6] In the light of the various issues arising between the parties, the Plaintiff issued an Arbitration Notice dated 20 August 2019 to the Defendant. The Arbitration proceedings between the parties is currently at the stage where an arbitrator is to be appointed by the Asian International Arbitration Centre (AIAC).
[7] On 21 August 2019, the learned Adjudicator delivered his decision (the Adjudication Decision) in favour of the Defendant.
[8] Due to the Plaintiffs failure to comply with the Adjudication Decision, the Defendant had sought to enforce the Adjudication Decision in the Construction High Court at Kuala Lumpur (the Construction High Court) pursuant to s 28 of the CIPAA.
[9] On 4 February 2020, the Construction High Court allowed the Defendants Originating Summons No. WA-24C-191-09/2019 (OS 191) to enforce the Adjudication Decision as if it is a judgement or order of the High Court with interests and costs (the Judgment). At the same time, the Plaintiffs Originating Summonses No. WA-24C-198-10/2019 and WA-24C-199-10/2019 (OS 198 & 199) to set aside and to stay the Adjudication Decision pursuant to ss 15 and 16 of the CIPAA were both dismissed by the Construction High Court.
[10] The Plaintiff did not appeal against the decisions of the Construction High Court.
[11] On 20 February 2020, the Defendant by way of its solicitors issued to the Plaintiff the Statutory Notice pursuant to s 466(1) of the CA 2016 claiming for the sum of RM 9,222,205.75. (the Statutory Notice) This Statutory Notice was premised on the Judgment.
[12] The present Originating Summons is filed by the Plaintiff for what is now known as a Fortuna Injunction to restrain the Defendant from, inter alia, commencing a winding up petition against the Plaintiff pursuant to the Statutory Notice.
The Issues
[13] The legal issues for consideration are as follow:
(a) Whether a judgment issued by the High Court pursuant to s 28(2) of the CIPAA is a disputed debt where there is concurrent arbitration or Court proceedings?
(b) If the debt under the Statutory Notice is undisputed, whether the company can raise cross claim or counterclaim of an amount equivalent to or more than the debt in answer to the demand to justify the grant of an injunc
