The court established that a bona fide dispute must be shown to restrain a winding-up petition when an arbitration clause exists, preventing abuse of the court's process.

JUDGMENT

Collin Lawrence Sequerah JCA:

(A) Introduction

[1] The Appellant, who was the Defendant in the High Court, filed this appeal against the decision of the learned Judicial Commissioner given on 6 July 2022 in allowing the Respondent/ Plaintiff's application by way of an Originating Summons to restrain the Appellant from presenting a Winding-up Petition against the Respondent on the grounds that there existed a disputed debt.

[2] The background factual matrix that led to this appeal is that the Appellant alleged that the Respondent, as its appointed distributor and pursuant to a Distributorship Agreement, purchased two medical devices for which payment remains due and owing.

[3] The Respondent, on the other hand, contends that there was no such purchase as alleged, as there were certain other terms and conditions based upon the representations and understandings reached between the parties which went unfulfilled and hence, disputed that they owed the sum claimed.

[4] The legal issue in this appeal revolves around whether in the event a dispute arises between contracting parties who have chosen to resolve disputes through arbitration, and where one party issues a notice under s 466(1)(a) Companies Act 2016 against the party in alleged breach and the latter party applies for an injunction to restrain the filing of a Winding-up Petition on the grounds that the debt is disputed, is the party in alleged breach required to show;

a) a "bona fide dispute" (higher threshold test); or

b) to merely show that there exists a "prima facie dispute" (lower threshold test) given the existence of an arbitration clause?

[5] The injunction to restrain the filing of a winding-up application pursuant to s 466(1)(a) Companies Act 2016 is commonly known as a Fortuna injunction after the name of the case which bears its name.

(B) Factual Matrix

[6] The pertinent facts which transpired that led to the above legal question arising is as hereinafter set out.

[7] The Respondent is a Malaysian company, whilst the Appellant is a foreign company incorporated in Taiwan.

[8] The Respondent and the Appellant entered into a Distributorship Agreement ("DA") between the parties effective from 1 April 2016 for a period of 3 years for medical machines under the brand name of 'Novadaq'.

[9] The DA contained an arbitration clause that stipulated that all disputes in connection with the DA shall be referred to arbitration in Switzerland and in accordance with the Swiss Rules of International Arbitration.

[10] Pursuant to the Appellant's quotation and the Respondent's order, on 24 May 2016, the Respondent received the 2 medical machines which were delivered to the University Malaya Medical Centre ("UMMC").

[11] A dispute arose between the parties when the Appellant demanded for the alleged debt. Due to non-payment, the Appellant terminated the DA through its letter dated 30 August 2017.

[12] Discussions between parties were held but failed to bring a resolution to the dispute. The Appellant contended a settlement was arrived at, and when no payments were made except for a sum of USD20,000.00 paid in December 2017 through their solicitors in Taiwan, they issued a second Notice of Demand dated 12 February 2020 to the Respondent.

[13] When this Notice of Demand went unheeded, the Statutory Notice of Demand was sent, but again, to no avail.

[14] The Respondent then filed an Originating Summons ("OS") to restrain the Appellant from presenting a Winding-up Petition against it on the grounds that there existed a disputed debt where no award or final judgment was obtained.

[15] The High Court, on 6 July 2022, allowed the Fortuna Injunction applied for by the Respondent. Hence this appeal.

(C) Summary Of Parties' Positions

To Place Matters In Perspective And For Contextual Purposes, It Is Perhaps Best To Outline The Arguments Of The Respondent First.

Respondent

[16] The Respondent contends that the Statutory Notice of Demand issued by the Appellant is based on a debt disputed on substantial g