EcoFirst Hartz Sdn Bhd

[2019] 1 MLRH v. Poon Mun Cheong & Anor 343

ECOFIRST HARTZ SDN BHD

v.
POON MUN CHEONG & ANOR

High Court Malaya, Kuala Lumpur

Mohd Nazlan Mohd Ghazali J
[Originating Summons No: WA-24NCC-561-12-2017]
3 May 2018

Company Law: Winding-up — Fortuna injunction — Whether debt demanded was

free from any bona fide dispute on substantial grounds — Whether contracts appointing
defendants as marketing agents were void — Whether balance of convenience lay with
granting of Fortuna injunction

The plaintiff was a property developer and a wholly owned subsidiary of a

public listed company. The plaintiff engaged the defendants, who were partners
in a partnership, as the marketing agents for the project known as Liberty@
ARC, in Ampang Ukay, being developed by the plaintiff (“the Project”). The
appointment of the defendants as the marketing agent was documented in two
letters. The defendants had managed to cause the sale of 44 units of properties
in the Project. In return, the plaintiff had made four payments of a total
amount of RM128,596.65 as commission fees to the defendants. After several
requests from the defendants to the plaintiff for what the former claimed to be
the outstanding sum of further commission fees of RM343,847.48 in respect of
32 units at the Project went unheeded, the defendants through their solicitors,
issued a statutory demand in a winding-up notice under s 465(1)(e) and (h)
of the Companies Act 1965 demanding payment of the said sum within the
requisite period of 21 days. The plaintiff disputed the alleged debt owed by it to
the defendants and demanded the withdrawal of the notice by the defendants.
The latter refused. This then led to the plaintiff filing this application to
restrain the service of a winding-up petition against it. The key contention
of the plaintiff was that the contracts appointing the defendants as marketing
agents were void by reason of the latter breaching the provisions of s 22C
of the Valuers, Appraisers and Estate Agent Act 1981 (“the Act”). The main
prohibition was against one carrying on the conduct of estate agency practice
without being a registered estate agent.

Held (allowing the application with costs):

(1) It was settled law that a judgment debt was not considered as capable of
having the status of being disputed. Whatever dispute that existed had been
resolved by the judgment of the court. It could thus no longer be disputed,
unless the judgment was otherwise stayed or set aside. In the instant case
however, there was no judgment debt. But a winding-up petition need not
be premised on a judgment debt. The overarching determination must be
that the debt demanded was free from any bona fide dispute on substantial
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344 v. Poon Mun Cheong & Anor [2019] 1 MLRH

grounds. In the absence of a judgment of a court, it was still open for an

intended petitioner to show on evidence that the debt being claimed was in
any event undisputed. (paras 23-24)

(2) In the instant case, the defendants were claiming for commission fees for
their part in the sale of the units. That much was so patently stated in the
letters of appointments issued to them and their own affidavits as well as
the winding-up notice issued by them. They admitted to have engaged “sub-
agents” who were real estate negotiators. Such arrangement would fall within
the ambit of an estate agency practice. The defendants acted for consideration
in respect of the sale of the units. Reference to “marketing agents” did not
in any manner diminish the form and substance of the wide description of
the meaning of estate agency practice in s 22B. Further, in arguing that the
defendants had merely appointed sub-agents or registered estate negotiators
to help sell the units, the defendants had further fortified the finding on the
existence of an estate agency practice. The defendants could not circumvent
the application of the prohibition in s 22C by appointing others to undertake
the sale. In any event, s 22C(2) itself stated that a negotiator, who was defined
as one who was in the employ of a registered estate agent might assist the
registered real estate agent in the estate agency practice. Clearly, a negotiator
could not assist one who was not a registered estate agent like the defendants
herein. (paras 40-41)

(3) The evidence showed that the defendants did engage in estate agency
practice under subsection 22B(1A)(b) and (d) because they had acted as
agents, as well as holding themselves out to the public in the course of their
marketing efforts and strategy, as ready to act as agents, for a commission,
in respect of the sale of the units in the Project, and in making known of
the availability of the units for such sale. By virtue of the undertaking of
the works as stated in s 22B(1A) without being in possession of a status as
registered estate agents, the defendants had clearly infringed s 22C(1)(c). The
defendants also, in addition and separately, breached s 22C(1)(ba) which
prohibited the offer for sale, or invite offers to purchase any property such as
the units at the Project. And nor could the defendants, under s 22C(1)(d) be
entitled to recover in any court any fees or commissions for any professional
advice or services rendered as an estate agent. (paras 54-55)

(4) In order to oppose a winding-up petition, the respondent company must

be able to raise a bona fide dispute in both a subjective and objective sense, and
that it must be honestly believed to exist and must be based on substantial or
reasonable grounds. The Court ought to be satisfied that there was something
that should be tried, either before the Court itself, or in an action, or by some
other proceeding. However, all these were absent in this case. Importantly, the
illegality of the arrangement upon which the claim for outstanding commission
fees was made in the winding-up notice, and the likelihood for the same to be
void and unenforceable could not but inevitably mean that the debt was nothing
but disputed on grounds which could only be said to be clearly substantial. If
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[2019] 1 MLRH v. Poon Mun Cheong & Anor 345

the engagement of the defendants was not already established as being illegal
and void, it most certainly had given rise to a bona fide dispute over the merits
of the defendants’ demand for the debt stated in the winding-up notice. This
more than fortified the case for the granting of a Fortuna injunction for the
plaintiff. (paras 58-60)

(5) The presentation of such a winding-up petition might also consequent

upon irreparable damage to the company. Its business reputation as a housing
developer would be affected from the publicity accompanying the advertisement
of the petition. Its bank accounts would likely be frozen, adversely interfering
with its business operations. Its banking and credit commitments might be
jeopardized as standard loan agreements usually contain event of default clauses
which were triggered by the presentation of winding-up petition. The Project
itself might be affected, as would the end purchasers who had secured housing
loan financing. Some of these adverse consequences might be immeasurable
and irreparable, and could not be compensated in damages. It should also
be mentioned that the plaintiff itself was a wholly owned subsidiary of a
publicly listed company, a diversified group with core businesses in property
development and property investment and management. In this regard, the
balance of convenience and the justice of the case would lie with the granting
of the Fortuna injunction. (paras 66-67)

(6) Commercial solvency, whilst clearly a critical issue to be determined by

the Courts when assessing whether or not a winding-up order ought to be
granted on the basis of a notice issued under s 218(1)(e) of the Companies
Act 1965 (concerning the company being unable to pay its debts) should also
be a consideration at the injunction application stage, but could not without
more defeat the position of an undisputed debt, especially one grounded on a
judgment debt. If there was no dispute on the debt, the solvency of the debtor
should not be allowed to prevent the grant of a Fortuna injunction. (para 73)

(7) Considering the nature and context of the claim in the statutory demand
made in the winding-up notice by the defendants against the plaintiff, there
was nothing preventing the defendant from pursuing what was probably a
more efficient dispute resolution mechanism, which was to make a claim for
payment in the Civil Courts. At its core, there was no judgment debt in the
instant case. Thus, to allow a winding-up petition to be presented would be an
abuse of process that the court would not countenance. (paras 77-79)

Case(s) referred to:

American Cynamid Co (No 1) v. Ethicon Ltd [1975] 1 All ER 504 (refd)
Bakti Dinamik Sdn Bhd v. Bauer (Malaysia) Sdn Bhd [2016] MLRHU 759 (refd)
BMC Construction Sdn Bhd v. Dataran Rentas Sdn Bhd [1999] 4 MLRH 911 (refd)
Chip Yew Brick Works Sdn Bhd v. Chang Heer Enterprise Sdn Bhd [1988] 1 MLRA
169 (refd)
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346 v. Poon Mun Cheong & Anor [2019] 1 MLRH

Fortuna Holdings Pty Ltd v. The Deputy Commissioner of Taxation of the

Commonwealth of Australia [1978] VR 83 (refd)
Kris Heavy Engineering & Construction Sdn Bhd v. Lewis & Co [2017] MLRHU 667
(refd)
Lafarge Concrete (Malaysia) Sdn Bhd v. Gold Trend Builders Sdn Bhd [2012] 4 MLRA
112 (refd)
Lim Eng Heng v. Lim Sam Keow & Ors [2003] 2 MLRH 124 (refd)
Malayan Flour Mill Bhd v. Raja Lope & Tan Co [2000] 2 MLRH 702 (refd)
Malayan Plant (Pte) Ltd v. Moscow Narodny Bank Ltd [1980] 1 MLRA 488 (refd)
Matad Sdn Bhd v. Ng Chee Keong [2004] 2 CLJ 99; [2003] 2 MLRA 499 (distd)
Mobikom Sdn Bhd v. Inmiss Communications Sdn Bhd [2006] 2 MLRA 700 (refd)
Morgan Guaranty Trust Co New York v. Lian Seng Properties Sdn Bhd [1990] 2
MLRA 43 (refd)
Multimedia Development Corp Sdn Bhd v. Pembinaan Purcon Sdn Bhd [2006] 5
MLRH 774 (refd)
Ng Chee Keong v. Matad Sdn Bhd [1998] 4 MLRH 570 (refd)
Ong Thean Chye & Ors v. Tiew Choy Chai & Anor [2010] 3 MLRA 181 (refd)
Pacific & Orient Insurance Co Bhd v. Muniammah Muniandy [2010] 3 MLRA 263
(refd)
Re Great Britain Mutual Life Assurance Society [1880] 16 Ch D 246 (refd)
Re Lympne Investments Ltd [1972] 2 All ER 385 (refd)
Tan Kok Tong v. Hoe Hong Trading Co Sdn Bhd [2006] 2 MLRA 635 (refd)
Westform Far East Sdn Bhd v. Connaught Heights Sdn Bhd [2009] 3 MLRA 410 (refd)
WWTAI Finance Ltd v. Ies Energy Holdings Sdn Bhd [2016] MLRHU 1564 (refd)

Legislation referred to:

Companies Act 1965, s 218(1)(e)
Companies Act 2016, ss 465(1)(e), (h), 466(1)
Contracts Act 1950, ss 24
Valuers, Appraisers and Estate Agent Act 1981, ss 22B(1A),(a), (b), (d), 22C(1)
(a), (aa), (b), (ba), (c), (d), (2)

Counsel:
For the plaintiff: Ben Lee Kam Foo (Victor Pang Chee Siong with him); M/s Gan
& Zul
For the defendants: Manpal Singh (Alan Loke with him); M/s Manjit Singh Sachdev,
Mohammad Radzi & Partners
 EcoFirst Hartz Sdn Bhd
[2019] 1 MLRH v. Poon Mun Cheong & Anor 347

JUDGMENT

Mohd Nazlan Mohd Ghazali J:

Introduction

[1] This is an application for an injunction filed by the plaintiff to restrain

the defendants from presenting a winding-up petition under s 465 of the
Companies Act 2016 against the plaintiff. At the conclusion of the hearing,
I allowed the application and highlighted the main reasons for the same.
This judgment contains the full reasons for my decision, which reiterates the
principles governing applications of Fortuna injunctions by reference to the
winding-up provisions in the new Companies Act 2016.

Key Background Facts

[2] The plaintiff is a property developer and a wholly owned subsidiary of a

public listed company. The plaintiff engaged the defendants, who are partners
in a partnership, as the marketing agents for the project known as Liberty @
ARC, in Ampang Ukay, being developed by the plaintiff (“the Project”).

[3] The appointment of the defendants as the marketing agents is documented

in two letters. The first was dated 15 October 2015, for a term of appointment
from 15 October 2015 until 31 March 2016. This letter was issued by one
Curah Bahagia Sdn Bhd, the proprietor of the land for the Project, and also
a wholly owned subsidiary of the same listed company. The other letter was
issued by the plaintiff on 1 April 2016, extending the term of appointment
from 1 April 2016 to 31 December 2016.

[4] The defendants had managed to cause the sale of 44 units of properties in
the Project.

[5] In return, the plaintiff had made four payments of a total amount of
RM128,596.65 as commission fees to the defendants.

[6] After several requests from the defendants to the plaintiff for what
the former claimed to be the outstanding sum of further commission fees
of RM343,847.48 in respect of 32 units at the Project went unheeded, the
defendants through their solicitors, issued a statutory demand in a winding-
up notice under s 465(1)(e) and (h) of the Companies Act 2016 dated 28
November 2017 demanding payment of the said sum within the requisite
period of 21 days.

[7] The plaintiff disputed the alleged debt owed by it to the defendants and
demanded the withdrawal of the notice by the defendants. The latter refused.
This then swiftly led to the plaintiff filing an application to restrain the service
of a winding-up petition against it.
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[8] Hence, the proceedings now before me.

Summary Of Contentions Of Parties

[9] The plaintiff anchors its application on a number of grounds which are not
uncommonly proffered by applicants for injunctions intended to prevent the
filing of winding-up petitions. First, the plaintiff contended that there is a bona
fide dispute on the alleged outstanding sum or debt.

[10] The key grounds upon which the plaintiff says the debt is bona fide disputed
are two-fold. Significantly, the plaintiff argued that the contracts appointing
the defendants are illegal under s 22C of the Valuers, Appraisers and Estate
Agent Act 1981, rendering them void and unenforceable pursuant to s 24 of
the Contracts Act 1950.

[11] The other contention raised by the plaintiff as to why there is a bona
fide dispute on the debt is that the alleged outstanding sum is not due and
payable in any event. This the plaintiff attributed to the absence of invoices,
the complication arising from the appointment by a different entity (Curah
Bahagia Sdn Bhd) for the same project, that the alleged sum was based on
speculation and never ascertained and that some of the sales relied on by the
defendants had in fact been cancelled.

[12] Secondly, the plaintiff argued that an injunction should lie against the
defendants for the plaintiff is solvent, and finally, if the defendants are not
restrained by an injunction, the plaintiff contends that defendants’ winding-
up action against the plaintiff would cause severe irreparable damage to the
plaintiff company.

[13] The defendants resist this injunction application which they assert is
entirely misconceived. They in the main maintain the absence of any bona fide
dispute over the debt demanded in the winding-up notice, highlighting the fact
that there had been part payments of the commission fees which amounted to
admission on the part of the plaintiff, and the absence of any complaints by
the plaintiff on the demands prior to the service of the notice. They disagreed
that there is any illegality in the contract governing their appointment as the
marketing agents, took the stand that the contract with the other party, Curah
Bahagia Sdn Bhd, was irrelevant, and emphasised their statutory right to
present the winding-up petition on the basis of the alleged debt.

[14] These arguments of the plaintiff will be examined next in this judgment,
taking into account the stance taken by the defendants, and the affidavit
evidence made available before me. But first, a brief reference to the governing
law.

The Law On Fortuna Injunction - A Summary

[15] An injunction to prevent the filing of a winding-up petition is known as

a Fortuna injunction. The jurisprudential basis of the applicability of Fortuna
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[2019] 1 MLRH v. Poon Mun Cheong & Anor 349

injunctions in this country in large part may be traced to the eponymous

Australian case of Fortuna Holdings Pty Ltd v. The Deputy Commissioner of
Taxation of the Commonwealth of Australia [1978] VR 83, a decision of the
Supreme Court of Victoria.

[16] The landmark decision in Fortuna Holdings had established the important
rule that an injunction would only be granted in circumstances where to
allow the petition would be an abuse of process as the petition has no chance
of success. And that the plaintiff would have to show that the petition, if
presented, would likely be dismissed.

[17] For a Fortuna injunction to be granted, the court will have to be satisfied
that there is a bona fide dispute of the debt demanded in the winding-up notice
which precedes the petition intended to be restrained, based on substantial
grounds. The same principles have been adopted and applied by our Court of
Appeal in Mobikom Sdn Bhd v. Inmiss Communications Sdn Bhd [2006] 2 MLRA
700, where Gopal Sri Ram JCA (as he then was) summarised the position with
trademark lucidity in the following manner:
“The kind injunction by which an intended winding-up petition is sought to
be restrained is known as “Fortuna injunction”. The phrase takes its name
from Fortuna Holdings Pty Ltd v. The Deputy Commissioner of Taxation where
the juridical basis for the relief was first explained. Fortuna Holdings made
it clear that the courts have established a principle that the presentation of a
winding-up petition may be restrained by injunction where its presentation
would amount to an abuse of the process of the court. It was also clear that
two distinct branches emanate from the principle - of which the first applies in
cases where the presentation of the petition may produce irreparable damage
to the company and where the proposed petition has no chance of success,
and the second in cases where a petitioner proposing to present a petition
has chosen to assert a disputed claim, by a procedure which might produce
irreparable damage to the company, rather than by a suitable alternative
procedure”.

[18] The Court of Appeal again had the occasion to consider the application
of a Fortuna injunction, where in the case of Pacific & Orient Insurance Co Bhd v.
Muniammah Muniandy [2010] 3 MLRA 263, Ramly Ali JCA (as he then was),
delivering the judgment of the Court, provided the following explanation:
“[25] An application for an injunction to restrain an intended winding-up
petition against a company is known as a “Fortuna Injunction”, taking its
name from the case of Fortuna Holdings Pty Ltd v. The Deputy Commissioner of
Taxation [1978] VR 83. In that case the court laid down the basis on which a
court acts to restrain the presentation of a winding-up petition and the two
principles that guide courts in the grant of an injunction to that effect. (see
also: Mobikom Sdn Bhd v. Inmiss Communications Sdn Bhd [2006] 2 MLRA 700
(Court of Appeal).

[26] The first principle laid down in that case is that an injunction of that
nature may be granted by court where the presentation of the petition might
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350 v. Poon Mun Cheong & Anor [2019] 1 MLRH

produce irreparable damage to the company and where the proposed petition
has no chance of success. In order to succeed in getting injunction under this
principle, the applicant must satisfy both limbs of the principle ie:

(i) the intended petition has no chance of success, as a matter of law as

well as a matter of fact; and

(ii) the presentation of such petition (which has no chance of success)

might produce irreparable damage to the company.

(see: Re A Company [1894] 1 Ch 349; Charles Forte Investment Ltd v. Amanda

[1964] 1 Ch 240, [1963] 2 All ER 940; and Bryanston Finance Ltd v. De Vries (No
2) [1976] 2 WLR 41, [1976] 1 All ER 25).

[27] This principle is not applicable to the present case. The respondent herein
had obtained a valid and enforceable judgment against the insured as well as
the insurer (appellant). The intended petition if filed is not bound to fail. He
has a good chance to succeed. Therefore whether or not it causes irreparable
damage is of no consequence. Thus the injunction applied for by the appellant
in the present case, cannot be granted by court under this principle.

[28] The second principle established in the Fortuna case is that an injunction
of that nature may be granted in cases where a petitioner proposing to
present a petition has chosen to assert a disputed claim, by a procedure which
might produce irreparable damage to the company, rather than by a suitable
alternative procedure.

[29] This principle applies only to disputed debt. It does not apply to cases
where the debt in question is undisputed. As long as the debt cannot be
disputed, it is not consequence whether or not it will cause irreparable damage
to the company, if presented. A valid and enforceable judgment of court as in
the present case, (unless set aside or stayed) cannot be considered a disputed
debt. The law is settled on this point. Therefore, an order for injunction as
prayed for by the appellant in the present case, also cannot be granted under
this principle.”

[19] The Court of Appeal in an earlier decision in Tan Kok Tong v. Hoe Hong
Trading Co Sdn Bhd [2006] 2 MLRA 635 further explained that the Court
exercises its inherent jurisdiction when issuing such an injunction to restrain
the presentation of a winding-up in order to prevent an abuse of process. The
test when granting the injunction is whether there is bona fide dispute on the
debt. Gopal Sri Ram JCA (as he then was) importantly held:
“[8] When deciding whether to grant an injunction to restrain a petition that
is based on a statutory demand for a debt, the court must be satisfied that the
debt is bona fide disputed on substantial grounds (see Stonegate Securities Ltd v.
Gregory [1980] 1 All ER 241). It is not enough that there is a serious question
to be tried. In other words, this is one of those cases to which the general
test laid down in American Cynamid Co v. Ethicon Ltd [1975] AC 396 does not
apply.”
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[2019] 1 MLRH v. Poon Mun Cheong & Anor 351

[20] Accordingly, in light of the foregoing authorities and other relevant

judicial pronouncements, it should by now be considered settled law that
the courts may grant a Fortuna injunction to prevent the presentation of a
winding-up petition on the basis of either the petition has no chance of success
and might produce irreparable damage to the company, or that an assertion
of a disputed claim is made in the petition by way of a procedure that might
produce irreparable damage. The courts must be satisfied that the plaintiff has
established a prima facie case of an abuse of process by the presentation of a
petition particularly on the basis of a disputed debt; and the serious question
to be tried test established in American Cynamid Co (No 1) v. Ethicon Ltd [1975] 1
All ER 504 is not applicable.

[21] I should further add that case-law authorities on Fortuna injunction in this
country are largely premised on the winding-up provisions in the former s 218
of the Companies Act 1965. The Companies Act 1965 has since been replaced
by the Companies Act 2016. However, these statutory provisions are repeated
and drafted in almost virtually identical fashion in ss 465 and 466 of the new
Companies Act 2016. As such, the jurisprudence and authorities, a number
of which have been and will be highlighted herein, would continue to be of
direct relevance and be applicable to like effect, vis-a-vis the situations which are
subject to the corresponding provisions in the Companies Act 2016.

Evaluation & Findings Of This Court

Whether There Is Bona Fide Dispute On The Debt - Legality Of The

Contracts?

[22] The overarching issue is whether in light of Fortuna Holdings and other,
especially local case law authorities, the intended petition by the defendants,
given the service of the winding-up notice in the statutory demand, is bound
to fail. And that then turns on the primary and most commonly important
question for determination in virtually all Fortuna injunction applications
- which is whether the debt amount as demanded by the defendant in the
winding-up notice can in law be considered to be bona fide disputed on
substantial grounds.

[23] In the first place, it is settled law that a judgment debt is not considered
as capable of having the status of being disputed. Whatever dispute that
existed has been resolved by the judgment of the court. It can thus no longer
be disputed, unless the judgment is otherwise stayed or set aside. This much is
clear from the decision of the Court of Appeal in the case of Pacific & Orient
Insurance Co Bhd v. Muniammah Muniandy [2010] 3 MLRA 263 referred to
earlier, which held as follows:
“[29] This principle applies only to disputed debt. It does not apply to cases
where the debt in question is undisputed. As long as the debt cannot be
disputed, it is not consequence whether or not it will cause irreparable damage
to the company, if presented. A valid and enforceable judgment of court
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as in the present case, (unless set aside or stayed) cannot be considered

a disputed debt. The law is settled on this point. Therefore, an order for
injunction as prayed for by the appellant in the present case, also cannot be
granted under this principle.”

[Emphasis Added]

[24] In the instant case before me however, there is no judgment debt. But it is
no less trite that a winding-up petition need not be premised on a judgment debt
(see the Court of Appeal decision in Lafarge Concrete (Malaysia) Sdn Bhd v. Gold
Trend Builders Sdn Bhd [2012] 4 MLRA 112). The overarching determination
must be that the debt demanded is free from any bona fide dispute on substantial
grounds. In the absence of a judgment of a court, it is still open for an intended
petitioner to show on evidence that the debt being claimed is in any event
undisputed.

[25] Thus in Kris Heavy Engineering & Construction Sdn Bhd v. Lewis & Co [2017]
MLRHU 667, a case cited by the defendants in their written submissions, I had
dismissed an application for a Fortuna injunction, given the finding that the
debt was undisputed, on the basis, among others of an admission on the part
of the applicant, who had previously made part payments to the defendant.

[26] The key contention of the plaintiff is that the contracts appointing the
defendants as marketing agents are void by reason of the latter breaching the
provisions of s 22C of the Valuers, Appraisers and Estate Agent Act 1981 (“the
Act”). The main prohibition is against one carrying on the conduct of estate
agency practice without being a registered estate agent.

[27] Section 22C of the Act states as follows:

22C Restrictions on estate agency practice

(1) No person shall unless he is a registered estate agent and has been issued
with an authority to practise under s 16:

(a) practise or carry on business or take up employment under any

name, style or title containing the words “Estate Agent”, “House
Agent”, “Property Agent”,” Land Agent”, “House Broker”,
“Real Estate Agency Consultant”, or the equivalent thereto,
in any language or bearing any other word whatsoever in any
language which may reasonably be construed to imply that he
is a registered estate agent or that he is engaged in estate agency
practice or business;

(aa) carry on business or take up employment as an estate

agent;

(b) display any signboard or poster or use, distribute or circulate any

card, letter, pamphlet, leaflet, notice or any form of advertisement,
implying either directly or indirectly that he is a registered estate
agent or that he is engaged in estate agency practice or business;
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(ba) offer for sale, rent or lease or invite offers to purchase,

rent or lease any land, building and any interest therein
irrespective of whether such land, building and interest is
located within Malaysia or outside Malaysia:
Provided that where foreign properties are to be marketed in Malaysia,
such offer or invitation shall be made by or through an estate agent
practising and residing in Malaysia on behalf of a principal or an estate
agent practicing or residing outside Malaysia;
(c) undertake any of the work specified in s 22B; or
(d) be entitled to recover in any court any fees, commissions, charges
or remuneration for any professional advice or services rendered
as an estate agent.
(2) Notwithstanding subsection (1):
(a) an owner of any land, building and any interest therein may
sell or rent or lease or sublease or offer to sell or rent or lease or
sublease such land, building and interest;
(b) a licensed auctioneer may sell or offer to sell any land, building
and any interest therein by public auction;
(c) a holder of a power of attorney in respect of any land, building and
any interest therein, acting gratuitously and for no commission,
fee, reward or other consideration, may sell, purchase or rent, or
offer to sell, purchase or rent, such land, building and interest;
and
(d) a negotiator may assist the registered estate agent in the estate
agency practice.
(2A) For the purpose of para (2) (d), “negotiator” means a person who is
employed by a registered estate agent to assist him in the estate agency
practice.
(3) The provisions relating to estate agency practice in subss (1) and (2) shall
apply mutatis mutandis to a firm.

[28] Much of the prohibition is targeted at being engaged in estate agency

practice. It is thus apposite that I refer to s 22B of the Act which sets out the
definition of estate agency practice. It reads:
22B Estate agency practice
(1) Subject to the provisions of this Act, a registered estate agent who has
been issued with an authority to practise by the Board shall be entitled to
practise his profession and shall be authorized to undertake estate agency
practice.
(1A) A person undertakes estate agency practice if he acts as an agent, or holds
himself out to the public or to any individual or firm as ready to act as an
agent, for a commission, fee, reward or other consideration:
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(a) in respect of any sale or other disposal of land and buildings and
of any interest therein;

(b) in respect of any purchase or other acquisition of land and

buildings and of any interest therein;
(c) in respect of any leasing or letting of land and buildings and of
any interest therein;
(d) in making known of the availability of land, building, or any
interest therein for such sale or disposal, purchase or acquisition,
or leasing or letting referred to in para (a), (b) or (c), as the case
may be; and
(e) in respect of any tenancy administration including rental
collection, payment of outgoings, arrangement for minor repairs
and handing over and taking over the possession of a property of
any land and buildings and of any interest therein.
(1B) Subject to subsection (2), no registered estate agent shall carry on property
management.
...

[29] The defendants argued that their action did not fall within the ambit of
s 22 of the Act. They assert in their submissions that their only duty at all times
was as marketing agents who provided marketing services and plans to procure
sale of the units in the Project. They did not hold themselves out as registered
estate agents, and not had they rendered any professional advice to the plaintiff
in the capacity as registered estate agents.
[30] The defendants further contended that neither of the appointment letters
issued to the defendants stated that they had to be registered estate agents. All
44 units had, according to the defendants, been sold by parties “including estate
agents and real estate negotiators that are duly authorised to sell the units”.
[31] Section 22B(1A)(a) and (d) states that a person undertakes estate agency
practice if he acts as an agent or holds himself out as ready to act as an agent,
for a commission or other consideration in respect of any sale of land or in
making known of availability of land or building for sale. It seems to me quite
clear that based on the language of this statutory provision the act of marketing
the availability of the unit for sale by the defendants would squarely come
within the remit of the same. Clearly, the defendants were therefore engaged in
estate agency practice under s 22B of the Act. The prohibitions are contained
in s 22C.
[32] The evidence shows that what the defendants performed in respect of
their role vis-a-vis the units in the Project is beyond pure marketing as they
alleged.
[33] First, the appointment letters, being the contracts governing their
appointments clearly stated in para (b) that commission fees are payable for
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[2019] 1 MLRH v. Poon Mun Cheong & Anor 355

units sold by the defendants, putting paid to any doubt that the objective of
the appointment was for the defendants to sell the units of the Project, for
consideration.

[34] Secondly, the same letters also in para (c) stipulates that the defendants
must reconfirm the availability of units and price changes prior to collection
of deposits from the purchasers. I cannot but agree with the assertion of
the plaintiff in this regard that this more than amply demonstrated that the
defendants were actually undertaking the very activity of selling the units to
the public at large.

[35] Thirdly, it is difficult for the defendants to deny that the debt being
demanded is actually the alleged outstanding commission fees for the sale of
the units at the Project. I say it is difficult because the defendants themselves
admitted as much. The affidavit in reply for the defendants as affirmed by the 1st
defendant himself contained various averments which stated their entitlement
to the outstanding commission fees in respect of the sale of the units, although
in a number of the relevant paras such averments are qualified by reference
to the sale having been made pursuant to the defendants’ marketing strategy
and in a few others, the sales were achieved with the cooperation of registered
estate negotiators. Further, the statutory demand itself, as contained in the
notice dated 28 November 2017 issued by the solicitors for the defendants,
specified that the debt demanded “being the commission fee in respect of the
procurement of the sale of 32 SOHO units ...”.

[36] The appointment letters issued to the defendants, such as the one issued
by the plaintiff to the defendants dated 1 April 2016, despite having the title as
“Appointment as Marketing Agent” for the Project, set out in the body of the
letters clear statements that commissions were payable and capped at a formula
referable to the sales price for the “first 450 units sold by you”. There are other
references to “property sold by you” in the same letter Commissions were also
stated to be payable subject to execution of sales and purchase agreements
by the buyers. And as stated earlier, the defendants were required to confirm
availability of units “prior to collecting any form of deposit/earnest money
from your purchasers”. Surely all these cannot be mere marketing without
actually acting as an agent for the sale of the units of the Project, and thus
squarely falling within s 22B of the Act.

[37] As a result of the defendants’ arrangement with their own agents, the
former were able to produce application forms for the purchase of the units
which had been filled up by the purchasers to the plaintiff as supporting
document for the sale, to justify the defendants’ claim for commission fees.
In addition, the payment vouchers issued by the plaintiff to the defendants in
respect of the sums already paid out to the latter also recorded the description
to be sales commission for the sales of the specific Project units.
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[38] It is apposite to now refer to the Court of Appeal case of Ong Thean
Chye & Ors v. Tiew Choy Chai & Anor [2010] 3 MLRA 181 which is especially
instructive. The appellant, as the purchaser, executed a document with the
respondents agreeing to pay a sum of money to the latter being “professional
fees and charges for negotiating and securing” on behalf of the purchaser, the
purchase of several parcels of land. The purchaser did pay part of the sum but
failed to settle in full. The respondents sued for the balance. The purchaser
argued that the respondents were not licensed nor were they real estate agents
under the Valuers, Appraisers and Estate Agent Act 1981.

[39] The Court of Appeal reversed the decision of the High Court and
held that the document executed between the appellant purchaser and
the respondents showed that the respondents were in the business of land
brokerage or real estate agency and the sum claimed by them was in relation
to that business, Thus, crucially, since the respondents were not registered
agents, the Court of Appeal held that the claim on the basis of that document
violated s 22C(1)(d) of the Act.

[40] In the instant case before me, the evidence as to the role of the defendants
has been stated. The defendants are claiming for commission fees for their
part in the sale of the units. That much is so patently stated in the letters of
appointments issued to them and their own affidavits as well as the winding-
up notice issued by them. They admitted to have engaged “sub-agents” who
were real estate negotiators. Such arrangement would however all too readily
fall within the ambit of an estate agency practice. The defendants acted for
consideration in respect of the sale of the units. Reference to “marketing
agents” does not in any manner diminish the form and substance of the wide
description of the meaning of estate agency practice in s 22B, which as stated
earlier has been shown to be applicable to the defendants by virtue of what
they actually undertook vis-a-vis the sale.

[41] Further, in arguing that the defendants had merely appointed sub-agents
or registered estate negotiators to help sell the units, the defendants have, in
my evaluation, further fortified the finding on the existence of an estate agency
practice. The defendants cannot circumvent the application of the prohibition
in s 22C by appointing others to undertake the sale. In any event, s 22C(2)
itself states that a negotiator, who is defined as one who is in the employ of a
registered estate agent may assist the registered real estate agent in the estate
agency practice. Clearly, a negotiator cannot assist one who is NOT a registered
estate agent like the defendants herein.

[42] In Ong Thean Chye & Ors v. Tiew Choy Chai & Anor [2010] 3 MLRA 181
the Court of Appeal considered a single isolated act may amount to an
estate agency practice if evidence of system is established. It is entirely not
necessary for me to consider this given that the uncontroverted evidence of the
involvement of the defendants in procuring the sale of 44 units of the Project.
And in any event evidence of system is easily shown, given among others,
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[2019] 1 MLRH v. Poon Mun Cheong & Anor 357

primarily the appointment letters, application forms and payment vouchers as

mentioned earlier.

[43] The defendant relied on the Court of Appeal’s decision in Matad Sdn Bhd
v. Ng Chee Keong [2004] 2 CLJ 99; [2003] 2 MLRA 499 which concerned s 22C
of the same Act, where Gopal Sri Ram JCA (as he then was) held, as reported
in the headnote, as follows:
“[1a] In the present instance, the High Court specifically negatived the
existence of such a relationship, but found that the plaintiff had been promised
payment if he introduced a piece of land to the defendant. The High Court
held that since the plaintiff ’s only knowledge was in respect of the existence
of the land for sale and that he could put a prospective purchaser in contact
with the vendors, what he had done did not qualify him to be within the
category of a person who had given professional advice or services to the
defendant as an estate agent. The High Court was correct in point of fact and
in point of law. It was correct on the facts because the documentary and other
evidence amply justified the factual finding it made, and it was correct in law
because the court adopted a contextual approach to the construction of s 22C
of the Act. (p 106 a-e)”

[44] I do not see how this case could assist the defendants. But I should refer to
what I consider to be more pertinent and direct passages from the judgment of
the Court of Appeal, for better context, as follows:
“What we need say for the present is that the word “acting” in the definition
clause must be read contextually, that is to say, in the context of s 22C. That
section contemplates someone who “practises as” or who may “carry on
business” as “an estate agent”. (See s 22C(1a) and (aa)). Special notice
should also be taken of the use of the word “practise” in the opening words
of s 22C(1).

Two points need to be made immediately. First, the section uses language that
requires some system. Words such as “practise”, “carry on business” point to
a course of conduct: not to an isolated act. It is not unlike the Moneylenders
Act cases. There too, a course of conduct or system is called for: see, Hock
Hua Bank Bhd v. Sahari Bin Murid [1980] 1 MLRA 687; Shamsudin v. Vijeyacone
[1969] 1 MLRH 226. It follows that the High Court did not fall into error by
seeking assistance from those cases. Secondly, the section uses the term “estate
agent”. It is thus clear that the Act requires an estate agency relationship to
exist between parties. In the absence of such a relationship the Act has no
application. Whether such a relationship exists in a given case is a question of
fact depending upon the facts and circumstances of each case”.

[45] Plainly therefore, unlike the documentary and other evidence mentioned
in that case which had concluded that the plaintiff ’s mere knowledge
of the existence of the land for sale and that he could put a prospective
purchaser in contact with the vendors would not make him an estate agent,
the documents made available in the case before me suggest a clear system
of arrangement between the plaintiff and the defendants with the objective
of selling the units of the Project, to be procured through the efforts of
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the defendants, who in turn were remunerated for the sales made. In fact,
the defendants admitted 44 units had been sold, precisely the premise of
their claim for the alleged debt being the outstanding commissions from the
plaintiff. The facts in Matad Sdn Bhd and this case are miles apart.

[46] As it has been established that the activities of the defendants fell within
“estate agency practice” under s 22B, the next question must be whether there
have been breaches of s 22C which contain the prohibitions. Although in other
licensing legislation, such as in the Capital Markets and Services Act 2007 and
the Financial Services Act 2013 once a person has been shown to be engaged
in certain prescribed conduct which requires the holding of the license, the fact
that he is not licensed is already a breach of the statutory provision.

[47] In the context of the Valuers, Appraisers and Estate Agent Act 1981
however, the language of the prohibition is less than direct. Even though estate
agency practice under s 22B has been shown, the prohibition set out in s 22C is
only invoked if an unregistered estate agency practice further engages in any of
the conduct or activities stated in s 22C(1)(a), (aa), (b), (ba), (c) or (d).

[48] However, subsection (1)(d) of s 22C has the effect of achieving the same
result of invoking the prohibition against carrying on estate agency practice
without registration in a somewhat roundabout way. This is because that
provision in (d) states the prohibition is against any of the activities set out in
s 22B.

[49] Authorities on this subject also refer to a test to determine whether one
comes within the ambit of the prohibition of s 22C, which was formulated by
the High Court in Ng Chee Keong v. Matad Sdn Bhd [1998] 4 MLRH 570 where
James Foong J (as he then was) held as follows:
“In order to determine whether the act of a person is one of an estate
agency practice, the facts of each case must be considered individually. The
requirement, as laid down under s 2, is whether the person has acted or held
himself out to the public as ready to act for a commission, fee, reward or other
consideration as an agent in respect of a sale, disposal, purchase or acquisition
of landed properties or any interest thereto or in respect of leasing or letting
of such properties or interest thereto. In addition to this, for the applicability
of the prohibition under s 22C(1)(d) of the Act, the claim for the entitlement
of fees, charges and remuneration must be restricted to ‘for any professional
advice or services rendered as an estate agent’".

[50] Two points must be made about this test. Section 22B(1A) sets out the
meaning of estate agency practice by reference to the types of activities.
Previously the same description was found in the definition section of s 2 of
the Act, as referred to in the above case. Secondly, it is sufficient for any of
the situations stated in the subsection of 22B(1A) be met in order to establish
presence of estate agency practice.
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[2019] 1 MLRH v. Poon Mun Cheong & Anor 359

[51] These situations are not to be conjunctively read. As such the reference
by James Foong J (as he then was) in the latter part of the para to the
prohibition under s 22C(1)(d) of the Act concerns an observation on the
applicability of that particular subs 22C(1)(d). That situation stands
independently and is not one that must be shown to exist in assertions of
each and every breach of s 22C.

[52] Based on the above, I cannot but conclude that the test has been plainly met.
The defendants were not registered estate agents. They claimed to be marketing
agents. But they were engaged pursuant to clearly worded appointment letters,
and the marketing efforts included them seeking for potential purchasers,
getting them to fill up application forms, collecting deposits from them, and
pocketing commission fees from the plaintiff based on the sales made.

[53] The defendants argued that they had worked with real estate negotiators,
implying that the latter were the ones which acted as agents for the sale of the
units. But, as stated earlier, these negotiators could only legally undertake their
activities in the employment of registered estate agents under s 22C(2) of the
Act.

[54] I have said the evidence showed that the defendants did engage in estate
agency practice under subs 22B(1A)(b) and (d) because they had acted as
agents, as well as holding themselves out to the public in the course of their
marketing efforts and strategy, as ready to act as agents, for a commission,
in respect of the sale of the units in the Project, and in making known of the
availability of the units for such sale.

[55] By virtue of the undertaking of the works as stated in s 22B(1A) without

being in possession of a status as registered estate agents, the defendants crystal
clearly infringed s 22C(1)(c), as I have explained earlier The defendants also,
in addition and separately, breached s 22C(1)(ba) which prohibits the offer for
sale, or invite offers to purchase any property such as the units at the Project.
And nor can the defendants, under s 22C(1)(d) be entitled to recover in any
court any fees or commissions, like what the defendants now attempt to do, for
any professional advice or services rendered as an estate agent.

Illegality Renders The Contract Void

[56] The consequences of such an arrangement involving the carrying on the

estate agency practice without the requisite licence in breach of the law is free
from doubt. Such activity and the contract which sought to regulate it would be
rendered to be void under the law pursuant to s 24 of the Contracts Act 1950.
In Lim Eng Heng v. Lim Sam Keow & Ors [2003] 2 MLRH 124, the High Court
found thus:
“In my judgment, even if the plaintiff succeeds in proving that there exists an
agreement between the plaintiff and the defendants as averred by the plaintiff
in the said pleadings and the plaintiff ’s affidavits filed in these proceedings,
the agreement is void and unenforceable under s 24 of the Contracts Act 1950
 EcoFirst Hartz Sdn Bhd
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as it clearly contravenes s 22C of the said Act. The reason is because such an
agreement is actually a contract between the plaintiff and defendants whereby
the defendants would pay the plaintiff 4% of the purchase price as commission
in consideration of the plaintiff undertaking estate agency practice in inviting
offers from the said companies to purchase the said lands. On this ground
alone, the court is justified in striking out the said pleadings”.

[57] In respect of the quality of the dispute deserving of being construed as

bona fide, a bona fide dispute does not automatically arise whenever there are
opposing assertions. The issue of whether or not there is a bona fide dispute
entirely depends on evidence (see Chip Yew Brick Works Sdn Bhd v. Chang Heer
Enterprise Sdn Bhd [1988] 1 MLRA 169).

Nature Of Bona Fide Dispute

[58] It has also been said albeit not in identical context that in order to oppose
a winding-up petition, the respondent company must be able to raise a bona fide
dispute in both a subjective and objective sense, and that it must be honestly
believed to exist and must be based on substantial or reasonable grounds (see
BMC Construction Sdn Bhd v. Dataran Rentas Sdn Bhd [1999] 4 MLRH 911).

[59] In this regard, the court ought to be satisfied that there is something that
should be tried, either before the court itself, or in an action, or by some other
proceeding. The Supreme Court in Morgan Guaranty Trust Co New York v. Lian
Seng Properties Sdn Bhd [1990] 2 MLRA 43 held that the debt must be disputed
on substantial grounds, and cited with approval the following part of the
judgment of Jessel MR in Re Great Britain Mutual Life Assurance Society [1880]
16 Ch D 246:
“... in my opinion it is not sufficient for the respondents, upon a petition of
this kind, to say ‘we dispute the claim’. They must bring forward a prima facie
case which satisfies the court that there is something which ought to be tried,
either before the court itself, or in an action, or by some other proceeding”.

[60] It cannot in the slightest be doubted that all these are present in this
case. Importantly, the illegality of the arrangement upon which the claim
for outstanding commission fees is made in the winding-up notice, and the
likelihood for the same to be void and unenforceable cannot but inevitably
mean that the debt is nothing but disputed on grounds which can only be said
to be clearly substantial. If the engagement of the defendants is not already
established as being illegal and void, it most certainly has given rise to a bona
fide dispute over the merits of the defendants’ demand for the debt stated in
the winding-up notice. This more than fortifies the case for the granting of a
Fortuna injunction for the plaintiff.

Bona Fide Dispute - Other Considerations

[61] It is unnecessary to consider the other arguments of the plaintiff, such as

that the statutory demand also referred to alleged outstanding commissions
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[2019] 1 MLRH v. Poon Mun Cheong & Anor 361

due to sales pursuant to the appointment letter issued by Curah Bahagia Sdn
Bhd, and not just vis-a-vis the plaintiff. I wish only to say that even though this
company is also wholly owned by the same parent listed on the stock exchange,
making it and the plaintiff related corporations, it is so rudimentary that that
entity is legally separate from plaintiff. As such this argument is not without
basis, and also renders the debt a disputed one as against the plaintiff.

[62] For completeness, I should add that the argument of the defendants that
the plaintiff had made part payments towards the commission fees which thus
amounted to an admission of indebtedness to the remaining sum, relying on
my decision in Kris Heavy Engineering & Construction Sdn Bhd v. Lewis & Co [2017]
MLRHU 667 is misconceived. There was absolutely no issue of illegality in
that case.

[63] In the instant case, the plaintiff has even asserted that the payments had
been made under the mistaken belief that the defendants were registered estate
agents. The true belief of the plaintiff notwithstanding, an illegality cannot
in any event be a legitimate basis of a claim. Definitely not in respect of this
claim where authorities are clear in holding that contravention of s 22C renders
the arrangement for the sale void under s 24 of the Contracts Act 1950, as
mentioned earlier. In this regard the observation by Abdul Malik Ishak JCA
in Ong Thean Chye & Ors v. Tiew Choy Chai & Anor [2010] 3 MLRA 181 that the
Court will not enforce contracts which are tainted with illegality and not lend
its aid to enforce pretended obligations bears emphasis.

[64] As such, the overriding question of whether the debt is disputed, arising
from the test of whether the petition would be bound to fail, in this case is
readily answered in an unequivocal “Yes”, on both counts. There is also no
judgment debt which reinforces the absence of a bona fide dispute. Thus, there
can be no basis to the assertion that the defendants had the statutory right to
present a winding-up petition. As the debt is disputed the defendants cannot
even be construed as creditors within the meaning of s 466(1) of the CA to
start with.

Fortuna Test - Relevance Of Irreparable Damage

[65] As stated in Pacific & Orient Insurance Co Bhd v. Muniammah Muniandy

[2010] 3 MLRA 263, a Fortuna injunction would be warranted where the
presentation of a winding-up petition might produce irreparable damage to the
company and where the proposed petition has no chance of success, both of
which aspects must be satisfied. It has been demonstrated that given the bona
fide dispute on the debt arising from the doubtful legality of the activity of the
defendants in procuring the sales of the units, a petition, should one be served
by the defendants, would have no chance of success.

[66] Secondly, the presentation of such a petition might also consequent

upon irreparable damage to the company. Its business reputation as a housing
developer would be affected from the publicity accompanying the advertisement
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of the petition. Its bank accounts would likely be frozen, adversely interfering
with its business operations. Its banking and credit commitments may be
jeopardised as standard loan agreements usually contain event of default
clauses which are triggered by the presentation of winding-up petition.

[67] The Project itself may be affected, as would the end purchasers who had
secured housing loan financing. Some of these adverse consequences may be
immeasurable and irreparable, and cannot be compensated in damages. It
should also be mentioned that the plaintiff itself is a wholly owned subsidiary
of a publicly listed company, a diversified group with core businesses in
property development and property investment and management. In this
regard, I would say that the balance of convenience and the justice of the case
would lie with the granting of the Fortuna injunction (see also Malayan Flour
Mill Bhd v. Raja Lope & Tan Co [2000] 2 MLRH 702).
Fortuna - Solvency Of The Plaintiff
[68] Furthermore, it is also observed that the financial solvency of the
plaintiff does not appear to be an issue and in any event not challenged by
the defendants. The plaintiff had also exhibited in the affidavit in support, its
latest bank statement which showed reasonably sizeable cash inflow. This is
pertinent, for commercial solvency is about cash flow solvency, not balance
sheet solvency.
[69] Thus in WWTAI Finance Ltd v. Ies Energy Holdings Sdn Bhd [2016] MLRHU
1564, I stated:
[67] In respect of the first, it is, in any event, now settled law that the issue
on the inability to pay debt is to be considered in commercial context, which
is the neglect to pay current demands regardless of whether the debtor
is in possession of assets which, if realized would permit it to discharge
its liabilities. The test of commercial insolvency simply means that the
respondent company is not able to meet current debts when they fall due (see
System Communication Engineering Sdn Bhd v. Zabidin Sdn Bhd [1999] 5 MLRH
826). It is cash flow solvency that matters. Not balance sheet solvency.
[68] This is why it has been said that a company could be both insolvent but
wealthy at the same time (see, for example, the Privy Council decision in
Malayan Plant (Pte) Ltd v. Moscow Narodny Bank Ltd [1980] 1 MLRA 488 and
the Supreme Court decision in Sri Hartamas Dvpt Sdn Bhd v. MBf Finance Bhd
[1992] 1 MLRA 311).
[69] It is wholly insufficient that the assets might be realizable at some future
date after the debts have become due and payable (see the Supreme Court
decision in Lian Keow Sdn Bhd (In Liquidation) & Anor v. Overseas Credit Finance
(M) Sdn Bhd & Ors [1987] 1 MLRA 672 and the Court of Appeal decision
in Lafarge Concrete (Malaysia) Sdn Bhd v. Gold Trend Builders Sdn Bhd [2012] 4
MLRA 112).
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[2019] 1 MLRH v. Poon Mun Cheong & Anor 363

[70] There are cases which suggest that a solvency of the respondent would
operate to prevent the issuance of an injunction against the respondent, even
though the debt from the respondent is undisputed.
[71] In Tan Kok Tong, a Court of Appeal case referred to earlier, Gopal Sri Ram
JCA (as he then was), said this:
“In Molop Corporation Sdn Bhd v. Uniperkasa (Malaysia) Sdn Bhd [2003] 4
MLRH 816, Low Hop Bing J (as he then was) correctly held as follows (at
p 821):

“In Natseven TV Sdn Bhd v. Television New Zealand Ltd [2001] 2 MLRH 306,
I had the occasion to consider and determine the burden of proof cast on
the plaintiff in an application for interlocutory injunction to restrain the
presentation of a winding-up petition, in the following words:

I agree with the reasons given by the English and New Zealand Court
of Appeal respectively and by Abdul Malik J and hold that for the
purpose of obtaining an interim injunction to restrain the defendant
from proceeding with the winding-up petition, the burden of proof
cast on the plaintiff is only discharged by reference to the standard
of proof or test in adducing evidence to establish a prima facie case
and that the principle relating to the test of ‘serious question to be
tried’ in American Cynamid Co v. Ethicon Ltd [1975] AC 396; [1975] 1
All ER 504 as applied in Keet Gerald Francis Noel John v. Mohd Noor
Harun Abdullah & Ors [1994] 1 MLRA 454 is not applicable as the
applications there were not applications to restrain winding-up
petitions or proceedings, such as in the instant case before me.

Illustration of a prima facie case may be provided by necessary evidence

that there is a bona fide dispute by the plaintiff in relation to the statutory
demand or that the plaintiff is solvent”.

[72] In yet another Court of Appeal’s decision involving an application

for Fortuna injunction, Tan Kok Tong was referred to, and the question of
commercial solvency taken into consideration. Suriyadi JCA (as he then was)
concluded the findings of the majority decision of the Court of Appeal in
Westform Far East Sdn Bhd v. Connaught Heights Sdn Bhd [2009] 3 MLRA 410 as
follows:
“[40] From the totality of the evidence there was clearly a genuine dispute
as to the debts in question as explained above, let alone the insolvency of
the respondent was never established adequately. I was thus satisfied that the
learned judge had exercised his discretion correctly in granting the order, not
only for the ex parte, but also the inter partes applications. As said above, an
appellate court will rarely interfere with an exercise of discretion unless the
trial judge has erred in law or if the trial judge has failed to take into account
highly relevant considerations. Here I failed to detect that error”.

[73] In my view, commercial solvency, whilst clearly a critical issue to be

determined by the courts when assessing whether or not a winding-up order
ought to be granted on the basis of a notice issued under s 218(1)(e) of the
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Companies Act 1965 (concerning the company being unable to pay its debts)
should also be a consideration at the injunction application stage, but cannot
without more defeat the position of an undisputed debt, especially one
grounded on a judgment debt. I think it is more correct in principle that if there
is no dispute on the debt, the solvency of the debtor should not be allowed to
prevent the grant of a Fortuna injunction.

[74] On this aspect, I had occasion to say the following in Bakti Dinamik Sdn
Bhd v. Bauer (Malaysia) Sdn Bhd [2016] MLRHU 759:
[64] Otherwise, an unsatisfactory, and almost dysfunctional scenario may
present itself, should the excuse of the solvency of a judgment debtor
be accepted as of right to be a basis justifying the grant of an injunction
preventing a judgment creditor from exercising its statutory right to present a
winding-up petition against the judgment debtor for the debtor’s failure to pay
on the winding-up notice. I would think it correct in principle that as a general
rule, a debtor cannot legitimately hide behind the shield of solvency to stave
off threat of winding-up but at the same time conveniently refuse settlement
of an undisputed debt.

[75] Nevertheless, in the instant case before me, the debt has been shown to
be bona fide disputed. Thus the issue of the solvency of the plaintiff is of little
consequence. It is worthy of emphasis that it was also not challenged by the
defendants.

Fortuna - Alternative Procedure

[76] It would also be relevant for me to refer to the High Court case of
Multimedia Development Corp Sdn Bhd v. Pembinaan Purcon Sdn Bhd [2006] 5
MLRH 774 where Abdul Malik Ishak J (as he then was) allowed an injunction
to restrain the presentation of a winding-up petition, having determined the
debt to be bona fide disputed. Reference in that case was made to the leading
English High Court authority of Re Lympne Investments Ltd [1972] 2 All ER 385
which had held the following:
“That Companies court must not be used as a debt-collecting agency, not as a
means of bringing improper pressure to bear on a company. The effects on a
company of the presentation of a winding-up petition against it are such that
it would be wrong to allow the machinery designed for such petitions to be
used as a means of resolving disputes which ought to be settled in ordinary
litigation, or to be kept in suspense over the company’s head while that
litigation is fought out.”

[77] In my view, considering the nature and context of the claim in the
statutory demand made in the winding-up notice by the defendants against
the plaintiff, there is nothing preventing the defendant from pursuing what
is probably a more efficient dispute resolution mechanism, which is making
a claim for payment in the Civil Courts. The aspects on the illegality and
invalidity of the document in the appointment letters upon which the debt
demanded by the defendants is based must further mean that the matter
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[2019] 1 MLRH v. Poon Mun Cheong & Anor 365

ought to be more properly adjudicated not before a winding-up court but

instead a civil court.

[78] This could be the more suitable alternative procedure for the defendants
to assert its claim, particularly given its disputed nature, instead of bringing
undue pressure via a winding-up notice through the medium of the winding-
up court that could occasion irreparable damage to an otherwise commercially
solvent company by any account. Additionally and at its core, there is also no
judgment debt in the instant case.

[79] Therefore, the defendants’ pursuit of the winding-up notice may also be
construed as falling within the second principle of Fortuna injunction given the
defendants’ choice of instituting the winding-up process as they did, and in the
process risking irreparable damage to the otherwise solvent plaintiff, instead
of trying to resolve the matter as a civil claim. In short, in all situations, in the
instant case, allowing a winding-up petition be presented would be an abuse of
process that the court will not countenance.

Conclusion

[80] On the basis of the foregoing analysis and reasons, it is my judgment that
the plaintiff has successfully established its case for the grant of a Fortuna
injunction to restrain the presentation of a winding-up petition against it. I
therefore allow encl 1, with costs.