PERUSAHAAN OTOMOBIL NASIONAL SDN BHD v U.C.M. AUTOMOTIVE SYSTEMS SDN BHD

Case Significance

A counterpoint on the Fortuna injunction: it is refused where the debt is admitted and unpaid rather than genuinely disputed, and solvency does not excuse persistent non-payment.

This High Court decision at Shah Alam determines an application by a national vehicle manufacturer for a Fortuna injunction to restrain a component supplier from presenting a winding-up petition. The supplier had issued a statutory notice of demand under section 466 of the Companies Act 2016 for an unpaid sum exceeding one million ringgit for automotive parts supplied, and the manufacturer applied under the court’s equitable jurisdiction, relying on the Specific Relief Act 1950, to prevent the threatened petition. The governing principle is that a company seeking such an injunction must show that the debt on which the petition would be founded is disputed on substantial and bona fide grounds, or that the petition would otherwise have no real chance of success, so as to justify restraining an abuse of the winding-up process. The Court held that the manufacturer had not made out that case. It found no bona fide dispute on substantial grounds, but merely a refusal to pay, distinguishing a genuine controversy over a contestable matter from a bare unwillingness to meet a demand, and it noted that a part payment had been made after the originating summons was filed. Critically, the manufacturer had admitted and verified the sum claimed, so there was no room to dispute it, and the Court observed that a company’s solvency counts for nothing if it persists in non-payment. On the second limb of the Fortuna test, the manufacturer’s reliance on irreparable damage was bound to fail. The Court added that a statutory notice need not specify the exact sum due, so long as a sum exceeding the statutory threshold remained unpaid after demand without a reasonable explanation, and that here the manufacturer had itself admitted and verified the very sum in question. Accordingly, per Noor Hayati binti Haji Mat J, the application for a Fortuna injunction was dismissed with costs of RM8,000, leaving the supplier free to pursue winding-up. The judgment is a useful counterpoint showing when a Fortuna injunction will be refused because the debt is admitted rather than disputed.