GUI CHAI CHERN v MEXLAND SDN. BHD.

Case Significance

Illustrates the presumption of insolvency arising on an unpaid liquidated debt under sections 465(1)(e) and 466(1)(a) of the Companies Act 2016, and the consequences of a company's failure to file any affidavit in opposition to a creditor's winding-up petition.

This High Court decision at Johor Bahru concerns a creditor's petition to wind up a company under the Companies Act 2016. The petitioner, a sole proprietor trading as a management-services business, presented the petition against the respondent company, alleging that it was indebted to him in the sum of RM2,000,000 which remained due and owing, and relying on sections 465(1)(e) and 466(1)(a) of the Act. After several attempts at settlement failed, the parties invited the court to determine the petition on its merits, and the respondent did not file any affidavit in opposition. A further creditor, a company in liquidation asserting a debt of RM8,000,000, gave notice of intention to appear. The petition had complied with all procedural requirements under the Companies (Winding-Up) Rules 1972, including service on the respondent, the Assistant Official Receiver and the Companies Commission of Malaysia, publication of advertisements in the press and the Government Gazette, payment of the statutory deposit, and issuance of the Registrar's certificate. The court, per Dr Noradura binti Hamzah JC, applied the settled principle that once a company neglects to pay a liquidated debt after a statutory demand, a presumption of insolvency arises which the company bears the onus of rebutting with credible evidence. Here the respondent filed no affidavit and produced no proof of solvency, so the presumption stood unrebutted, and its failure to oppose, coupled with its invitation to the court to determine the petition after settlement broke down, amounted to an admission of the debt and of an inability to pay within the meaning of subparagraph 466(1)(a). The court also noted that the winding-up jurisdiction should not be applied with undue technical rigidity but to serve the ends of justice, and found full procedural compliance, no bona fide dispute of the debt and no exceptional circumstance warranting a refusal of the order. It therefore exercised its discretion to grant the winding-up order. The judgment is a useful illustration of the presumption of insolvency on an unpaid liquidated debt and the effect of a company's failure to file any affidavit in opposition.