GAIA PLAS SDN BHD v EXPORT-IMPORT BANK OF MALAYSIA BERHAD

Case Significance

Confirms that an unstayed judgment in default of appearance supports a section 465(1)(e) winding-up notice and cannot be treated as a disputed debt merely because a set-aside appeal is pending; the Fortuna injunction was refused and both applications dismissed.

This High Court decision concerns an application by Gaia Plas Sdn Bhd for a Fortuna injunction to restrain Export-Import Bank of Malaysia Berhad from presenting or continuing a winding-up petition based on a statutory notice under section 465(1)(e) of the Companies Act 2016. The notice demanded an unpaid debt of some RM3.06 million, calculated from a judgment in default of appearance that the bank had obtained against the company in a separate recovery suit following default on two banking facilities.

The court set out the settled test, taking the label from Fortuna Holdings Pty Ltd v Deputy Commissioner of Taxation: for a Fortuna injunction to lie, the applicant must show that the intended petition “has no chance of success as a matter of law as well as a matter of fact”, and that presentation of such a petition “might produce irreparable damage to the company” (citing Pacific & Orient Insurance Co Bhd v Muniammah Muniandy). The company's sole argument was that it had an appeal pending against the dismissal of its application to set aside the default judgment, so that the debt was still disputable.

The court rejected that argument. It reaffirmed that “a judgment, be it a judgment in default, summary judgment or a judgment obtained after a full hearing, was nonetheless a good, enforceable and valid judgment (unless stayed or set aside)”, and that the pending appeal did not alter the validity of the default judgment. There was “no material before this Court for the Plaintiff to make any attempt at establishing the existence of a defence on merits”. Since the debt was not genuinely disputed, the question of irreparable damage did not arise, because that limb “does not apply to cases where the debt in question is undisputed”.

For those reasons the court dismissed both the substantive originating summons and the interim application, ordering costs of RM20,000 on the former and no order as to costs on the latter. The judgment reinforces that an unstayed default judgment supports a winding-up notice and cannot be neutralised merely by a pending set-aside appeal.