[2024] CLJU 98 Legal Network Series

DALAM MAHKAMAH TINGGI DI KOTA BHARU

DALAM NEGERI KELANTAN DARUL NAIM, MALAYSIA
[SAMAN PEMULA NO.: DA-24NCvC-70-03/2023]

Dalam perkara Penghakiman

Persetujuan bertarikh 15/03/2021
Mahkamah Tinggi Kota Bharu Guaman
No. DA-22NCVC-19-03/2020 antara
Majlis Agama Islam dan Adat Istiadat
Melayu Kelantan v. Sem Wah
Development Enterprise Sdn. Bhd;

dan

Dalam Perkara Notis Defendan bawah

Seksyen 465(1)(e) dan 466(1)(a) Akta
Syarikat 2016 bertarikh 15/02/2023
kepada Plaintif;

dan

Dalam Perkara Seksyen 50, 51, 52 dan 53

Akta Relif Spesifik 1950;

dan

Dalam perkara Aturan 29 dan Aturan 92

K 4 Kaedah-kaedah Mahkamah 2012.

ANTARA

SEM WAH DEVELOPMENT ENTERPRISE SDN. BHD.

(No. Syarikat : 30241-D) … PLAINTIF

DAN

MAJLIS AGAMA ISLAM DAN ADAT ISTIADAT MELAYU

KELANTAN … DEFENDAN

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GROUNDS OF JUDGEMENT

Introduction

[1] This is an application by the Plaintiff vis originating Summons

dated 8/3/2023 for a Fortuna Injunction to injunct the Defendant
from issuing, initiating and proceeding with a winding up
proceeding against the Plaintiff.

[2] This application emanates from a Consent Judgement entered on

15/3/2021 between both parties in regard to Kota Bharu Court
Civil Suit No DA-22NCVC-19-03/2022 (“the suit”). In the suit,
the Defendant sued the Plaintiff due to the failure of the Plaintiff
to pay the Defendant the outstanding rental of a leased lands
according to a Lease Agreement entered between both parties.

[3] The Consent Judgement was entered as settlement to the suit in

which the Plaintiff has to pay the Defendant the outstanding sum
of RM6 million within 18 months from 1/4/2021. Pursuant to the
Consent Judgement, the Plaintiff has made part payment totalling
to RM2.6 million.

[4] However, there are still balance of RM3.4 million (excluding

ta’widh) owed by the Plaintiff upon which prompted the
Defendant on 15/2/2023 to issue a Statutory Notice pursuant to
section 465(1)(e) read together with section 466(1)(a) of the
Companies Act 2016 (Act 777) to the Plaintiff. The Statutory
Notice was issued for the Plaintiff to settle the outstanding rental
as agreed in the Consent judgement.

Law on Fortuna Injunction

[5] The law on Fortuna Injunction is a kind of injunction by which an

intended winding-up petition is sought to be restrained. Its name
came from the case of Fortuna Holdings Pty Ltd v. The Deputy
Commissioner of Taxation [1978] VR 83.

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[6] The principle of the Fortuna Injunction is well established and

accepted in our jurisdiction in which the court may grant such
injunction whenever the interest of justice calls for or demand it.
The principle was summarized by Justice Gopal Sri Ram JCA (as
he then was) in Mobikom Sdn Bhd v. Inmiss Communications Sdn
Bhd [2007] 3 MLJ 316 as follows;

“[5] The kind of injunction by which an intended winding

up petition is sought to be restrained is known as a ‘Fortuna
injunction’ taking its name from the case in which the
juridical basis for the relief was first explained. See,
Fortuna Holdings Pty Ltd v. The Deputy Commissioner of
Taxation [1978] VR 83. In that case, McGarvie J discussed
the basis on which a court acts to restrain the presentation
of a winding up petition and the two branches of the
principle that guide courts in the grant of an injunct ion. In
respect of the basis, his Honour said this:

When a court restrains the presentation of a winding up

petition to that court it exercises part of its inherent
jurisdiction to prevent abuse of its process . Mann v.
Goldstein [1968] 1 WLR 1091, at pp 1093-4; [1968] 2 All
ER 769. Usually a court acts against abuse of its process
after proceedings have been commenced. Thus, existing
proceedings may be stayed or dismissed, or documents
delivered as a step in the proceedings may b e struck out.
This is done to relieve a party to the proceedings from an
oppressive and damaging situation in which he has been
placed through abuse of court process. The law has long
recognized that with proceedings to wind up a company,
intervention after the commencement of proceedings would
often be too late to relieve the company of oppression and
damage. The courts have recognized that irreparable
damage may be done to a company merely through public

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knowledge of the presentation of a petition. Usually the

damage flows from the loss of commercial reputation which
results. The courts have also been conscious of the pressure
which may be put on a company, by a person with a disputed
claim against it, threatening to present a winding up petition
unless, the company meets his claim. While that threat
exists, the company, in order to avoid the damage involved
in the presentation of a petition, is pressed to meet the claim
although it may have substantial and genuine grounds for
regarding itself as not required to do so.

The decisions of the courts have established the 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 . The courts
apply this principle similarly to restrain the advertisement
of a petition already presented. The principle enables
companies to be protected from threatened or apprehended
oppression and damage from abuse of court process.

The basis on which the courts have intervened in the

cases cited by counsel, has been that presentation of a
winding up petition might of itself cause irreparable
damage to the company. Given that basis, the
application of the principle which entitles the courts
to intervene to prevent abuse of process, depends on
the existence of different elements in two distinct
situations considered in the authorities.

[emphasize added]

[7] In RHB Bank Bhd v. Malaysia Pacific Corp Bhd and another
appeal [2018] 6 CLJ 55, the COA reiterated the same principle as
follows;

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“[30] In respect of the Fortuna injunction, we agree with

the submissions of the appellant that the conditions for the
grant of such an injunction were not met on the facts and in
law. The two requisite conditions or principles as laid down
in Mobikom Sdn Bhd v. Inmiss Communications Sdn Bhd
[supra] and reiterated by this Court in Pacific & Orient
Insurance Co Bhd v. Muniammah Muniandy [supra] are
described as follows:

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

(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]

[8] Justice Liza Chan J in United Malaya Stores Sdn Bhd v. S. Selapa
Sivalingam & Anor [2022] 6 CLJ 469 had enumerated the
principle and concluded that there exist two branches of principle
relating to the application of Fortuna Injuction as follows;

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First branch of principle

The first branch applies in cases where the presentation of the

petition might produce irreparable damage to the company and
where the proposed petition has no chance of success.

Second branch of principle

The second branch applies 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. It may
apply in cases where the petition, if presented, has a chance of
success. In some cases, both the first and the second branches of
the principle apply.”

Analysis and findings of this court

[9] The thrust of the issue in this application boils down to the
Consent Judgement entered between parties. Basically, a
Consent Judgement is a contract entered between parties with a
force of a judgement. The parties cannot appeal against any
Consent Judgement but it can be set aside if it was obtained by
fraud.

[10] The Federal Court in Tan Geok Lan v. La Kuan [2004] 2 CLJ 301
explained the principle behind a Consent Judgement as follows;

“A consent judgment or order is not the less a contract, and

subject to the incidents of a contract, because there is
superadded the command of the court, and its force and
effect derives from the contract between the parties leading
to, or evidenced by, or incorporated in, the consent
judgment or order. A consent order must be given its full
contractual effect, even if it relates to an interlocutory step
in the action (see para. 390 @ p. 286, Halbury’s Laws of

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England, 4th edn vol. 37). We gather from this proposition

that (i) the agreement on the terms reached between the
parties at the interlocutory stage of an action is a contract
between the parties and (ii) the consent judgment or order
arising out of that contract is also a contract between the
parties except that the latter is superadded with the
command of the court. In short, there are two contracts, one,
before the court makes the order and two, after the order is
made. After the order is made the first contract merges into
the second contract. That being the case, short of the order
being made, the first contract will have to be separately
considered on its binding effect based on incidents of a
contract”.

[11] It was contended by the Plaintiff that summarily, based on the

Consent Judgement, both parties had agreed as follows;

(i) the Plaintiff agreed to pay the agreed outstanding arrears of

rentals as at 31/12/2020 at RM6 million whereas the first
RM1 million to be paid on 31/3/2021, and the balance RM5
million to be paid within 18 months from 1/4/2021 (i.e.
expire on 31/10/2022). In default, the Plaintiff has to pay
5% per annum ta’widh (penalty under Islamic finance) on
the balance sums unpaid;

(ii) the new lease rental with effect from 1/1/2021 to follow the
revised agreed new formula (which is not relevant to this
case);

(iii) both parties shall enter into a fresh and new Lease
Agreement containing the above settlement terms and the
Defendant shall register the sub-lease within 18 months
from the date of the consent judgment dated 15/3/2021 upon
issuance of the titles;

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(iv) the Plaintiff to settle the rentals for 2021 (using new
formula) within 2021 itself;

(v) the Plaintiff is responsible for the illegal settlers within the
areas; and

(vi) the Defendant to pay the Plaintiff the land acquisition

compensation for the 17.648 acres acquired in 2019 to the
Plaintiff.

[12] The Plaintiff was later, in compliance with the Consent

Judgement, performed the following acts:

(i) paid the rentals according to the new agreed rate from
1/1/2021;

(ii) paid RM2.6 million out of the RM6 million between

28/3/2021 to 6/4/2023 to the Defendant;

(iii) the Plaintiff assumed responsibilities to handle the illegal

settlers; and

(iv) entered into a new Lease Agreement dated 30/9/2022.

[13] The Defendant on the other hand, had entered into a new lease
agreement only on 30/9/2023 and later issued a winding up notice
dated 15/2/2023 against the Plaintiff claiming the outstanding
sums of RM3,669.863.02 as at 15/2/2023.

[14] The Plaintiff nevertheless claimed that the Defendant had failed
to register the sublease within 18 months from 15/3/2021 and
there was no extension of time was ever applied by the Defendant.
The Plaintiff argues that the action by the Defendant to pay the
stamping duties for the lease agreement and submitting for
consent were only done after this application was filed.

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[15] It was further argued by the Plaintiff that due to the Defendant ’s
inaction, the Defendant shall now be injuncted from taking further
action of filing a winding up action against the Plaintiff. This
premise on the injustice and inequity the winding up action will
cause the Plaintiff irreparable damage.

[16] This court is of the opinion that the terms of the Consent
Judgment is clear and unambiguous. It does not warrant additional
interpretation or importation of meaning into the terms of the
Consent Judgment beyond the recorded terms. Hence, the words
in the Consent Judgement must be giving its natural and ordinary
meaning.

[17] In the case of Hean Sang Sdn Bhd v. Kompleks Yik Foong
Management Corporation [2015] 5 CLJ 93, Lee Swee Seng J (as
he then was) held that the Consent Judgement is to be interpreted
the same way as a contract and shall be given its natural and
ordinary meaning. His Lordship opined;

“[11] Words are the vehicle for our thoughts.

Communication has evolved from the use of pictorial and
sign language to that of the written word. Every written
language has its own storehouse of words to convey even
delicately different nuances of meaning. T he age-old
principle of giving words its natural and ordinary meaning
when interpreting a written text in trying to ascertain the
intention of the parties, whether in a contract or a consent
judgment which in reality is a contract with the sanction of
the court, still holds true. In Malaysia Discounts Bhd & Ors
v. Pesaka Astana (M) Sdn Bhd & Ors [2008] 5 CLJ 130;;
[2008] 6 MLJ 839 at p. 854, Ramly J (now FCJ) stated as
trite the following:

[41] It is trite law that a consent judgment is to be

interpreted in the same way as a contract. Thus, the usual

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principles of contractual construction apply in the instant

case: the paramount consideration is to ascertain the
intention of the parties to the consent judgment. Such
intention is objectively assessed by the court, in particular
by reviewing the language employed in the consent
judgment... (emphasis added)

... [15] Applying the above principles to the interpretation

of the consent judgment, one can conclude that the words
employed in the consent judgment are clear and
unambiguous.”

[18] Upon perusing the Consent Judgement, it is clear that both parties
have their own duty to be adhered to. There is nowhere in the
Consent Judgement stated that the obligations of the parties
therein are conditional and dependant towards the other
obligations.

[19] If this court is to give a different meaning to the Consent

Judgement, it amounts to this court varying the Consent
Judgement. This court is of the opinion that the only instances the
consent judgement can be varied are only based on the following
reasons:

(a) Upon agreement of the other party or parties affected by it

(see; Zainuddin bin Muhammad v. ATSCO Ltd & anor
[2003] 1 MLJ 369); or

(b) If the Consent Judgement was entered by fraud or irregular

(see; Cheah Theam Kheng v. City Centre Sdn Bhd (in
liquidation) [2011] MLJU 815).

[20] Both instances were never contemplated by the Plaintiff. As such

it is incumbent that both the Plaintiff and the Defendant are duty
bound to obey the terms of the Consent Judgement. This as what

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was set by the COA in the case of Penang Port Commission v.

Kanagawi s/o Seperumaniam [2008] 6 MLJ 686 as follows;

[36] It is trite law that ‘a person against whom an order of

court has been issued is duty bound to obey that order until
it is set aside’ (per Abdul Hamid Omar, Lord President, in
Wee Choo Keong v. MBf Holdings Bhd & Anor and another
appeal [1993] 2 ML 217, SC, at p 220). It follows therefore
that where a party disobeys an order, even if it is an
irregular order, which has not been set aside, that party runs
the risk of being committed for contempt (Grafton Isaacs v.
Emery Robertson 1985] 1 AC 97, PC, and Isaacs v.
Robertson [1984] 3 All ER 140, PC; and Datuk Hong Kim
Sui v. Tiu Shi Kian & Anor [1987] 1 ML 345, PC).

[21] Based on these observations, this court in of the opinion that each
party shall then perform the actions that they are required to and
it in the absence of any specific agreement that the obligations
were conditional and dependent on the other party perfor ming
their duty, each party are obligated to perform their obligation
independently. If either party fails to perform any of the
obligation, it gives right to the other party to exercise his right to
enforce the unperformed obligation.

[22] Moreover, with regard to the registration of new lease, this court
also finds that the Plaintiff has neither raised any issue nor
objection to the Defendant with regard to the registration of new
lease. Further, by virtue of the Plaintiff ’s letter dated 9/8/2022
and 25/8/2022, the Plaintiff has forwarded cheques amounting to
RM300,000.00 and RM1 million respectively as part payment of
the outstanding rental without raising any issue on the registration
of the new lease.

[23] This court also finds that the Plaintiff’s concern on the
registration of the new lease, arises only after the Defendant

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issued the statutory notice. Clearly, the Plaintiff ’s averments on

the registration of lease is merely an afterthought as a defence to
avoid a winding up petition. Hence, the Plaintiff is estopped from
denying the Defendant from pursuing its right of presenting a
winding up petition against the Plaintiff fo r its failure.

[24] This court is of the opinion that on this issue alone, the Plaintiff
has failed to satisfy this court that their inaction which brought
the action of the Defendant in filing the winding up petition shall
be considered as causing injustice and inequity to the Plaintiff
which ought to be injuncted.

[25] This brings this court to the next issue within the first branch of
principle, whether the Defendant has a great chance of success in
the winding up petition. On this issue, the Plaintiff disputed the
alleged amounts demanded in the notice dated 15/2/2023
amounting to RM3,669,863.02. The basis of the dispute is in
regards to the land acquisition compensation of RM571,360.00
which according to the Plaintiff shall be set -off from the total
debt.

[26] As discussed before, the Consent Judgment is crystal clear that

the Defendant has to pay the Plaintiff the land acquisition
compensation and there is no mention about the said amount shall
be set-off. Instead the issue of set off was only arises upon
discussion by parties. This by virtue of the Plaintiff ’s solicitor’s
letter dated 3/4/2023 and the Defendant’s solicitor’s letter dated
10/4/2023 respectively, the parties has agreed for the
Compensation Sum to be set-off against the outstanding rental
owing by the Plaintiff to the Defendant.

[27] Pursuant to the agreement to set-off, the Defendant has issued

letter dated 10/4/2023 informing the Plaintiff of its balance
outstanding (after deducting the Compensation Sum) in the sum
of RM2,941,939.44 as at 6/4/2023. This has yet to be agreed upon

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by the Plaintiff and hence the Defendant is at full liberty and

within its own right in issuing the winding up notice and to
present a winding up petition against the Plaintiff.

[28] That is the only defence by the Plaintiff against the Defendant ’s
claim based on the Plaintiff’s submission in regards to the issue
of chance of success. This court find that it is not a viable defence
to succeed in challenging the winding up petition.

[29] In the case of Lafarge Concrete (M) Sdn Bhd v. Gold Trend
Builders Sdn Bhd [2012] 6 MLJ 817, the COA held that it is not
enough for the plaintiff company to simply claim that it has a
defence to the creditor’s claim, but it must show that it has a
viable defence in law and produce prima facie proof of the facts
in support of its claim in order to succeed in a Fortuna Injunction
application.

[30] It is beyond doubt that the Plaintiff has failed to show why a
petition for winding-up against the Plaintiff has no chance of
success. On the other hand, the Defendant has clearly shown that
the debt owing by the Plaintiff is due to a Consent Judgment
properly recorded in Court and it is never disputed by the
Plaintiff.

[31] The Plaintiff has further argued that the petition might cause an
irreparable damage to the Plaintiff. The was urged to consider that
the Plaintiff has invested in developing the first oil palm
plantation area of about 10,137.8 acres in 2001. The Plaintiff had
incurred huge expenses and if a winding up petition is filed, the
Plaintiff’s bank account may be freeze and will affect the
Plaintiff.

[32] This court is in considered view that in considering irreparable

damage in a Fortuna Injunction, it must be read subject to the
overriding principle of the debt being disputed substantially and,

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therefore, the improper use of the winding up process as a

collateral means to secure the disputed debt. As discussed earlier,
the Defendant had complied with all requirements and as such
shall not be denied of his right to enforce his right as provided
under the law.

Conclusion

[33] In the upshots, the Defendant has shown that there is no bona fide
dispute to the outstanding sum owing by the Plaintiff to the
Defendant under the Consent Judgment. It was also shown that
the Plaintiff is insolvent and unable to pay its debts. Hence, E1
and E3 are therefore dismissed with RM3,000.00 cost subject to
allocator fee.

Dated: 17 JANUARY 2024

(MOHAMAD ABAZAFREE MOHD ABBAS)

Judge
High Court of Malaya

Counsel:

For the applicant - Russell Lua Kok Hiyong; M/s Lua & Mansor
No. 11-1, Jalan PJS 11/28, Bandar Sunway
46150 Petaling Jaya
Selangor Darul Ehsan

For the respondent - Abu Daud Abd Rahim; M/s Azmi & Associates
14 th Floor, Menara Keck Seng
203, Jalan Bukit Bintang
55100 Kuala Lumpur

Date of Hearing : 1 st November, 2023

Date of Decision : 1 st November, 2023

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Cases referred to:

Fortuna Holdings Pty Ltd v. The Deputy Commissioner of Taxation

[1978] VR 83

Mobikom Sdn Bhd v. Inmiss Communications Sdn Bhd [2007] 3 MLJ

316

RHB Bank Bhd v. Malaysia Pacific Corp Bhd and another appeal
[2018] 6 CLJ 55

United Malaya Stores Sdn Bhd v. S. Selapa Sivalingam & Anor [2022]
6 CLJ 469

Tan Geok Lan v. La Kuan [2004] 2 CLJ 301

Hean Sang Sdn Bhd v. Kompleks Yik Foong Management Corporation

[2015] 5 CLJ 93

Zainuddin bin Muhammad v. ATSCO Ltd & anor [2003] 1 MLJ 369

Cheah Theam Kheng v. City Centre Sdn Bhd (in liquidation) [2011]
MLJU 815

Penang Port Commission v. Kanagawi s/o Seperumaniam [2008] 6 MLJ

686

Lafarge Concrete (M) Sdn Bhd v. Gold Trend Builders Sdn Bhd [2012]
6 MLJ 817

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