A company can be deemed insolvent if it cannot meet its debts as they fall due, irrespective of any alleged set-off against a third party.

[1] This concerns a petition for the winding up of the respondent (documented in encl 1) and an application by the respondent to strike out the petition (encl 5). At the conclusion of the hearing of the striking out application, I dismissed the same and proceeded to hear the petition. I then decided to grant a winding- up order against the respondent, and highlighted the principal grounds for the decision. This judgment contains the full reasons for my decisions on both the striking out and the petition.

Key Background Facts

[2] The petitioner and the respondent are involved in the business of manufacturing and dealing with paint and ink dispensing machines. Following a business dispute between the parties, the matter was referred to the Court and a suit was initiated by the respondent in the High Court of Malaya at Shah Alam MT2-22-933-2001 ("the Suit"). The Suit originally named one Sim Chin Chuan ("Mr Sim") as the defendant. The petitioner was later added as a defendant.

[3] The essence of the claim of the respondent in the Suit was that Mr Sim, despite being the promoter of the respondent and even one of its initial directors and shareholders, and later whilst employed in March 2000 as its Regional Manager responsible for the sales and marketing of the respondent company, had secretly incorporated the petitioner company to divert business from the respondent to the petitioner. Mr Sim has been a Director of the petitioner that was incorporated in 2001, since 18 February 2002.

[4] The Suit against both Mr Sim and the petitioner was initially dismissed by the High Court but allowed on appeal by the Court of Appeal. Ultimately, the Federal Court, on appeal by the petitioner, ruled that the respondent's claim against the petitioner was time-barred. At the same time, Mr Sim's leave application to further appeal was dismissed by the Federal Court.

[5] The petition is based on the sum of RM31,000.00 which arose from various proceedings related to the Suit. After service of the copies of the relevant sealed judgments on the respondent went unheeded, the petitioner proceeded to serve a statutory demand under s 466(1) of the Companies Act 2016 on 20 September 2017. Although the service was never challenged, the same elicited no payment of the demanded sum from the respondent.

[6] This then led to the petitioner presenting a petition to wind up the respondent on 13 December 2017. The respondent reacted by filing an affidavit in opposition, and also sought to strike out the petition altogether. Hence the present proceedings before me.

Evaluation And Findings Of This Court

(A) The Striking Out Application

The Law On Striking Out - A Summary

[7] The starting point of reference must be O 18 r 19(1) of the Rules of 2012 ("RC 2012") which reads as follows:

"19. Striking out pleadings and endorsements (O 18 r 19)

(1) the Court may at any stage of the proceedings order to be struck out or amended any pleading or the endorsement, of any writ in the action, or anything in any pleading or in the endorsement, on the ground that:

(a) it discloses no reasonable cause of action or defence, as the case may be;

(b) it is scandalous, frivolous or vexatious;

(c) it may prejudice, embarrass or delay the fair trial of the action; or

(d) it is otherwise an abuse of the process of the Court, and may order the action to be stayed or dismissed or judgment to be entered accordingly, as the case may be."

[8] There is no dispute that an application to strike out a winding-up petition may be validly made under the RC 2012 (see Ho Num Chon & Anor v. Tech-Lab Manufacturing Sdn Bhd, 2016 MarsdenLR 176 , but see further below).

[9] The respondent relies on limbs (b) and (d). Thus it argued that the petition commenced b