NOVASARA DEVELOPMENT SDN. BHD. v CHEN GUO FEN

Case Significance

One of the related Novasara Fortuna-injunction applications: against a distinct respondent, the court reaffirmed that a debt fixed by a final judgment affirmed on appeal is not disputed on substantial grounds and cannot be reopened by injunction, dismissing the application with indemnity costs.

This High Court decision is one of a set of related applications in which Novasara Development Sdn. Bhd. sought a Fortuna injunction to restrain the presentation of a winding-up petition arising from the same unpaid judgment debt, this application being brought against a different respondent, a natural person referred to here by role. The company invoked the court's quia timet jurisdiction under section 466 of the Companies Act 2016 to pre-empt a petition founded on a statutory demand.

As in the connected matters, the decisive issue was “whether [the] winding-up petition [is] an abuse of process” and, in particular, “whether [a] judgment debt can constitute [a] disputed debt”. The court applied the bona fide dispute test that governs Fortuna relief: an injunction lies only where the debt is disputed on genuine and substantial grounds. Here the debt was founded on a Sessions Court judgment that had been “affirmed on appeal” and was therefore “final and enforceable”. Applying the principle that a “court will not go behind [a] regular judgment”, the court declined to treat the adjudicated debt as disputed.

The court also addressed the argument that payment had been made, holding that a payment by cheque was a “conditional payment” only, so that a “dishonoured cheque” caused a “revival of [the] underlying debt” under section 47 of the Bills of Exchange Act 1949. It considered the “allocation of payments by [the] creditor”, the “validity of [the] statutory notice”, and an estoppel flowing from indemnity costs that had been agreed and paid. Concluding that there was “no genuine dispute on substantial grounds”, the court held that winding-up was a legitimate enforcement mechanism, dismissed the application for an injunction, and ordered costs on the indemnity basis.

The decision reinforces, against a distinct respondent, that the Fortuna injunction is not a route by which a company can reopen a debt already fixed by a final and enforceable judgment.