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2022 MarsdenLR 2191
HIGH COURT MALAYA KUALA LUMPUR
KYS COLLEGE SDN BHD – Appellant
Versus
MBSB BANK BERHAD – Respondent
[Originating Summons No: WA-24NCC-153-03-2022]
A creditor with an undisputed judgment can initiate winding-up proceedings despite the debtor's claims of solvency or dispute, as established by the Companies Act 2016.
Headnote:(A) Companies Act 2016 – Section 466 – Originating summons for a Fortuna injunction to restrain winding-up petition based on statutory notice for undisputed debt – Court dismisses application as there is no bona fide dispute of debt and valid judgment entitles creditor to initiate proceedings. (Paras 12, 15, 36, 39)
(B) Injunction principles – Fortuna injunctions prevent abuse of process where winding-up petitions might cause irreparable harm if no chance of success; applicant must establish bona fide dispute which was not satisfied in this case. (Paras 13, 29)
(C) Element of commercial solvency – Debtor must demonstrate immediate availability of assets to pay debts; assertion of solvency based on asset valuations does not suffice where liabilities remain unpaid. (Paras 23, 24)
Facts of the case: The applicant defaulted on a consent judgment debt amounting to RM106,800,801.38 following a facility agreement, leading to statutory demands from the respondent under s 466 of CA 2016, prompting the OS for injunction on grounds of alleged disputes and solvency issues.
Findings of Court: The demanded sum based on a consent judgment, which remains enforceable, cannot be seen as disputed; thus, the respondent retains statutory rights to pursue winding-up despite applicant claims of solvency and irreparable damage.
Issues: The main issues were whether there exists a bona fide dispute regarding the debt and whether the company was solvent despite not paying the demanded sums.
Ratio Decidendi: The court emphasized that a valid judgment establishes a debt, rendering claims of dispute irrelevant if no stay or setting aside has occurred, affirming statutory creditor rights to present a winding-up petition regardless of the applicant's solvency assertions.
Result: The application for a Fortuna injunction was dismissed and costs awarded to the respondent.
JUDGMENT
Introduction
[1] This Originating Summons ("OS") was filed on 11 March 2022 by the Applicant against the Respondent for a Fortuna type injunction to restrain the Respondent from filing and serving any petition for winding-up premised on the Statutory Notice of Demand issued by the Respondent's solicitors pursuant to a s 466 of the Companies Act 2016 (" CA 2016") dated 9 February 2022 and if the winding-up petition has been filed or served, further proceedings on the winding-up petition be stayed and for costs on an indemnity basis.
[2] I had on 9 November 2022 dismissed the OS with costs to the Respondent and given broad reasons for my decision. This judgment contains the full reasons for my decision.
Background
[3] The background facts are culled from the affidavits and submissions of the parties.
[4] Pursuant to a Facility Agreement dated 15 May 2012 ("Facility Agreement"), the Respondent has granted Islamic financing facilities under the concept of Bai' Al-Inah to the Applicant totalling RM77 million ("the Facilities"). The repayment of the Facilities were, among others, secured by a 1st party legal charge dated 4 July 2012 ("the Charge") created on 2 pieces of land belonging to the Applicant in favour of the Respondent ("the Charged Lands").
[5] The Applicant defaulted in repayment whereupon the Respondent commenced Kuala Lumpur High Court Civil Suit No: WA-22M-265-06/2018 ("Suit 265") to recover the amount outstanding under the Facilities.
[6] On 15 October 2018, the parties recorded a Consent Judgment in Suit 265 which obligated the Applicant to make payment of the settlement sum of RM83,633,771.55 ("Settlement Sum") by 30 April 2019, and if the Applicant failed to pay the Settlement Sum by 30 April 2019, the whole Judgment Sum of RM120,239,742.29 as at 17 May 2018 would immediately become due and payable subject to ta'widh at the rate of one percent (1%) per annum to be calculated from 18 May 2018, ibra' (rebate) and part payment.
[7] Despite notices of demand dated 21 July 2020 and 27 October 2021, an outstanding Judgment Sum of RM106,800,801.38 ("Outstanding Judgment Sum") remains payable by the Applicant as at 31 December 2021.
[8] On 9 February 2022, the Respondent caused to be issued a statutory notice under s 466 CA 2016 demanding the Applicant to settle the Outstanding Judgment Sum within 21 days from receipt of the said notice as well as a statutory notice under s 254 of the National Land Code 1965 demanding the Applicant to remedy its breach under the Charge and to pay the Outstanding Judgment Sum within 1 month.
[9] Eight days after expiry of the 21 days stipulated in the statutory notice, on 11 March 2022, the Applicant responded by filing this OS.
Applicant's Case For An Injunction
[10] The Applicant argued that:
10.1 The debt is bona fide disputed; it is an abuse of process to issue a winding up petition on a debt which was bona fide disputed - Multimedia Development Corp Sdn Bhd v. Pembinaan Purcon Sdn Bhd, [2006] 2 MLJ 653 HC;
10.2 The Applicant is a solvent company - the charged lands based on a valuation done by Khong & Jaafar Sdn Bhd has a market value of RM189,050,000-00 as at 4 March 2019 which is substantially more than the amount claimed by the Respondent in the s 466 notice. The Respondent should have proceeded with the foreclosure proceedings in the event where the amount allegedly owing is proven; if it appears that there is a suitable alternative procedure for the Respondent to assert its disputed claim, but the Respondent had opted to proceed with the winding up proceedings which will eventually cause irreparable damage to the Applicant as in the instant case, a Fortuna injunction should be granted - Fortuna Holdings Pty Ltd v. The Deputy Commissioner of Taxation (1976) ACLR 349; [1978] VR 83; Mobikom Sdn Bhd v. Inmiss Communications Sdn Bhd , CA ; and Charles Forte Investment Ltd v. Amanda [1964] 1 Ch 240; [1963] 2 All ER 940;
10.3 The coronavirus has had a financial effec
