Tutorial 8
1. To promote their latest movie Polis TakEvo 3, Energy Cinematic Sdn Bhd has utilised
the services of an event management company, Suka-Suka Sdn Bhd to do all the
necessary arrangements for the promotional event. After the event was over Suka-
Suka Sdn Bhd invoiced Energy Cinematic Sdn Bhd for the remaining payment of
their services amounting to RM100,550. Despite various attempts requesting for the
amount due under the invoice, Suka-Suka Sdn Bhd has yet to receive any payment
from Energy Cinematic Sdn Bhd.
On 25 May 2023, Suka-Suka Sdn Bhd served on Energy Cinematic Sdn Bhd, at its
business address a statutory notice of demand which demanded a payment of
RM105,500 being the remaining payment for their services for the promotional event
which included the supply of food and beverages. The statutory notice of demand was
signed by the director of Suka-Suka Sdn Bhd, who was authorised to do so by the
company. In the statutory notice of demand, Energy Cinematic Sdn Bhd was warned
that if it does not make payment for the amount claimed in the statutory notice of
demand within 21 days from the date the notice was served on Energy Cinematic Sdn
Bhd, Suka-Suka Sdn Bhd will proceed with winding up petition against Energy
Cinematic Sdn Bhd on the grounds that it was not able to pay its debts.
Since there was not reply or payment from Energy Cinematic Sdn Bhd after the
period stated in the statutory notice of demand, a winding up petition against Energy
Cinematic Sdn Bhd was presented by Suka-Suka Sdn Bhd.
Seven days before the hearing of the petition, Energy Cinematic Sdn Bhd filed and
served on you, as solicitor for Suka-Suka Sdn Bhd an affidavit opposing the petition
where the authorised officer of Energy Cinematic Sdn Bhd, Mr Dell, affirmed that the
company did not pay the remaining balance invoiced by Suka-Suka Sdn Bhd because:
o it did not agree with Suka-Suka Sdn Bhd’s choices of food and beverages
notwithstanding all the food and beverages supplied were utilised during the
promotional event by those who attended the event;
o the amount in the statutory notice of demand was wrong as the amount which
was invoiced to Energy Cinematic Sdn Bhd is RM100,550.
Advise Suka-Suka Sdn Bhd whether Energy Cinematic Sdn Bhd has substantial
grounds to challenge the winding-up petition presented against it.
Ground 1. Misstatement of amount due
Law:
Malaysia Air Charter Co Sdn Bhd v Petronas Dagangan Sdn Bhd [2000] 4 MLJ 657 (FC)
● A statutory notice of demand under s.218(2)(a) was served on the debtor company, Malaysia
Air Charter Co Sdn Bhd, by the petitioning creditor. The debtor company did not pay the
amount claimed in the statutory notice of demand. The amount in the notice was misstated.
● FC held: The court should adopt a liberal interpretation when considering the provisions of
s.218(2)(a) CA1965 (now s.466(1)(a) CA 2016). The adoption of a literal interpretation
would be difficult as it would compel the court not to make a winding up order
notwithstanding the existence of clear evidence that an undisputed sum exceeding the
threshold has remained unpaid after a demand made without reasonable explanation for the
failure to pay.
● As seen in YPJE Consultancy Service Sdn Bhd v Heller Factoring (M) Sdn Bhd (Formerly
known as Matang Factoring Sdn Bhd) [1996] 2 MLJ 482 (COA):
○ The appellant’s counsel opposed the petition on the grounds that
■ (i) the presumption that the appellant was unable to pay off the debt did not
arise as the interest on the principal amount had not been quantified in the
notice; and
■ (ii) that the respondent's petition contravened r 26 of the Companies
(Winding-up) Rules 1972, and was thus defective as the verifying affidavit
and the petition contained similar dates - 10.7.1995.
○ Held: The substantive matter in this appeal is the capability of the appellant in paying
its debts, and there was no evidence that had been forwarded that could show the
capability of the respondent company in paying off its debts.
Application:
● Although the amount stated in the NoD was wrong, Suka-suka never disputed the fact that
there is a debt owing to Energy Cinematic, for RM100,550.
● That amount has exceeded the threshold of winding up - RM50k, but remain unpaid even
after the expiry of 21 days from the service of NoD without showing any evidence explaining
the unpayment.
● So, Energy Cinematic is less likely to succeed on this ground to challenge the WU petition,
unless the court takes a literal appraoch as seen in Jenwatt where the court did not make a
winding up order because the notice did not comply with the requirements under s.218(2)(a)
CA 1965 since the amount due in the notice was mistakenly written as $295,584.46 instead of
$29,584.46.
Ground 2. Debt is disputed on substantial grounds
Law:
Ng Thong Heng Chen v Kedah Marble Sdn Bhd [2003] MLJU 368 (HC)
● A winding-up petition was presented by the petitioner pursuant to a s.218(2) statutory notice
of demand claiming for RM626,1000 in respect of supply of machinery.
● the debtor opposed to the petition on the grounds that:
○ The machinery supplied by the petitioner was old, frequently broke down and are
often not operational. A statutory declaration by an employee of the debtor company
to support this contention was exhibited in court;
○ A police report was lodged by the respondent’s manager regarding the loss of a work
logbook involving 3 of its workers showing the machinery breakdowns; and
● the petitioner provided proofs such as statement of account, invoices, creditor ledger to
support his petition.
● High Court found:
○ The statutory declaration exhibited by the debtor company that the machinery
supplied by the petitioner was old, frequently broke down and are often not
operational was affirmed 1 year and 3 months after the statutory notice of demand
under s.218(a) was served on them.
○ The police report by the debtor company was lodge more than 9 months after the
statutory notice of demand under s.218(a) was served on them.
○ The petitioner on the other hand had exhibited all the invoices, statements, ledger and
documents to show that the debtor company was indebted to the petitioner.
○ The rebuttals by the debtor company to dispute the amount of debt due was
unconvincing and are after thoughts
○ The debtor company failed to establish, on the balance of probabilities, a substantial
bona fide dispute on the petitioner’s claim.
○ Winding up order was made against the debtor company.
●
Application:
● Mr Dell should have disputed the choices of foods and beverages earlier, now it’s too late
since all the food and beverages have already been consumed.
2. Swan Sdn Bhd runs a clothing business selling modest attire, scarves, and women
accessories. Unfortunately, the business was affected by the Covid-19 pandemic and
the company was not able to pay its suppliers. One of its suppliers, Simpul Sdn Bhd
had obtained judgment against Swan Sdn Bhd for RM500,000.00 with interest at 5%
per annum from date of judgment until full realization and cost of RM1500. Simpul
Sdn Bhd subsequently served a statutory notice to Swan Sdn Bhd demanding for
RM500,000.00 with interest at 5% per annum from date of judgment until full
realization and cost of RM1500. The statutory notice was served to Swan Sdn Bhd at
its business address. Swan Sdn Bhd states that the statutory notice was defective as it
did not quantify the interest and the service of the notice is not proper. Advice Swan
Sdn Bhd.
Issue 1:
Whether the statutory notice was defective as it did not quantify the interest and the
service of the notice.
Law:
● UMBC Berhad v Richland Trade & Development [2000] 1 MLJ 385 (FC)
Fact: The statutory notice of demand to the company claimed for 'interest of RM64.69
per day from 26 October 1991 till date of full settlement'. The High Court Judge held
since the amount is not quantified (till date of full settlement'), such mistake is fatal.
Held: The High Court judge ought not to apply principles enunciated in bankruptcy
cases, in cases of winding up. The demand need not exactly quantify the amount
unlike in the bankruptcy notice. Unlike a Bankruptcy notice, there is no prescribed
form of the statutory demand or notice as the whole object of the statutory notice of
demand is to warn the debtor of an impending petition.
: For the notice to be valid, the requirements are that the demand must be in
writing under the hand of the creditor or his authorised agent, it must specify the
sum due (no requirement for quantifying it to the last cent), and the demand
must be served on the company by leaving it at the registered office.
Application:
● Applying here, the SNOD served on Swan Sdn Bhd has demanded for RM500,000.00
with interest at 5% per annum from the date of judgment until full realization and cost
of RM1500.
● This SNOD is valid since it specifies the sum due as it need not quantify the amount
to the exact cent.
Issue 2:
Whether the service of statutory notice was defective as the service of the notice is
improper.
Law:
● S.466(1)(a) of CA provides that a notice of demand is served by leaving it at the
registered office of the company.
● Masboh Trading Sdn Bhd v Mejaris Builders Sdn Bhd [2001] 5 MLJ 369]
Fact: The petitioner in this case sought to wind up the respondent company on the
ground that the company was unable to pay its debts. A statutory demand was served
on the clerk of the respondent company at the business address of the company, not at
the registered office as required by s.466(1)(a) CA. It is not disputed that the company
did receive the demand.
: The issue in this case is whether by the failure of the petitioner to serve the statutory
demand 'by leaving it at the registered office', the company cannot be deemed to be
unable to pay its debts, notwithstanding that the demand was in fact received by the
company.
Held: In deciding whether the service of a statutory notice of demand is valid, the
court should adopt a rational approach and the court ruled that the notice was validly
served, because there is no dispute that the company did receive the demand,
therefore, the notice is validly served.
Application:
● Applying here, even though the SNOD is served to Swan Sdn Bhd’s registered
address instead of its registered office, the SNOD has however been served and
received by the clerk of Swan Sdn Bhd.
● Thus, by adopting a rational approach, the SNOD is valid as there is no dispute that
the company did not receive the demand.
3. Mr A is an avid cyclist. Due to his interest in the cycling sport, Mr A decided to
incorporate a company, Peddler’s Heaven Sdn Bhd that sells bicycles, bicycle
accessories and parts. He had obtained a loan from Coldplay Bank Berhad for
RM1,800,000.00 to purchase a shop lot to be used as the business premise for
Peddler’s Heaven Sdn Bhd.
Peddler’s Heaven Sdn Bhd was incorporated with Mr A and his wife as the
shareholders. Peddler’s Heaven Sdn Bhd’s business profited and Mr A and his wife
decided that a second branch of Peddler’s Heaven Sdn Bhd should be established
specializing in mountain bikes and folding bicycles. For this purpose, Speedy Gears
Sdn Bhd had supplied Peddler’s Heaven Sdn Bhd with the special bicycles for the
price of RM500,000.00.
The business was initially successful, however, because of Mr A’s lack of experience
in managing the business, Peddler’s Heaven Sdn Bhd failed to pay Speedy Gears Sdn
Bhd for the supply of the special bicycles. On 21.3.2022 Speedy Gears Sdn Bhd
served a statutory notice dated 17.3.2022 against Peddler’s Heaven Sdn Bhd
demanding payment of the RM500,000 within 21 days from the date of the statutory
notice. Peddler’s Heaven Sdn Bhd did not make payment to the statutory notice and
on 18.4.2022 a winding up petition under section 465(1)(e) of the Companies Act
2016 was presented on the grounds that Peddler’s Heaven Sdn Bhd was unable to pay
its debts. Peddler’s Heaven Sdn Bhd wish to set aside the winding-up petition on the
grounds that it is able to pay its debts as it is currently pursuing a legal action against
certain debtors who owe the company a sum of RM800,000.00. Peddler’s Heaven Sdn
Bhd is also argued that the petition ought to be set aside because it was advertised 2
weeks before the hearing of the petition.
Based on the relevant provisions of the law and decided cases advice Peddler’s
Heaven Sdn Bhd on whether it has a valid ground to oppose the winding-up petition.
Issue 1:
Whether Peddler’s Heaven Sdn Bhd can set aside the petition by rebutting the
presumption of “unable to pay the debts”.
Law:
● Under S.466(1)(a) of CA 2016, if a claim is not paid within 21 days after service of
the SNOD, there can be a presumption that the company is unable to pay its debts.
● To determine whether the company is able to pay its debts the test applied by the
court is the commercial test of insolvency.
● Gulf Business Construction (M) Sdn Bhd v Israq Holding Sdn Bhd [2010] 5 MLJ
34 (COA)
Held: The test to ascertain commercial insolvency is whether the company is unable
to meet its current debts as they fall due.
Such a company would be categorised as 'unable to pay its debts' even though: (i) it
has substantial wealth which cannot be immediately realised; and (ii) on liquidation it
would be able to meet all its liabilities.
The company's financial potential is not enough. There must be money presently
available to the debtor, to meet the debts as they become due.
· Sri Hartamas Development Sdn Bhd v MBF Finance Bhd
Held: In dealing with 'commercial insolvency' it is not where a company has assets
which if realized will be able to pay off the debts. A company may have investments
but if it does not have assets available to pay off its current liabilities when it becomes
due it is commercially insolvent and can be wound up.
Application:
● In the present case, Peddler’s Heaven Sdn Bhd argued that it is able to pay its debts as
it is currently pursuing a legal action against certain debtors who owe the company a
sum of RM800,000.00.
● However, to fulfill the commercial test of insolvency, Peddler’s Heaven Sdn Bhd
must have money presently available to meet the debts as they become due.
● Merely proving or showing substantial wealth which cannot be immediately real is
insufficient to prove that the company is commercially solvent to pay its debt.
● Hence, the presumption is not rebutted and Peddler’s Heaven Sdn Bhd cannot set
aside the petition by rebutting the presumption of ‘unable to pay debts’.
Issue 2:
Whether Peddler’s Heaven Sdn Bhd can set aside the petition on the ground that the
petition was advertised 2 weeks before the hearing of the petition.
Law:
● R 24 of Companies (Winding Up) Rules 1972 provides that every petition must be
advertised 7 clear days before the hearing or such time as the court directs and such an
advertisement should be in two daily newspaper and the gazette according to R 24(a)
Companies (Winding up) Rules.
● GKM Amal Bhd v. Bank Utama (Malaysia) Bhd [2004] 1 CLJ 769 (COA)
Issue: Whether filing an advertisement more than 7 days earlier without court’s
direction was an irregularity under r.194 of the Rules.
Held: Such a breach was a technicality amounting to a mere irregularity curable under
r. 194(1). The petition was not invalid. The purpose of advertisement is to give notice
of a winding-up petition of a company to the creditors. The appellant cannot be said to
be prejudiced by the advertisement as the object of giving notice to the creditors had
been achieved through advertisement of more than 7 days.
● R 194. Formal defect not to invalidate proceedings
(1) No proceedings under the Act or the Rules shall be invalidated by any formal
defect or any irregularity, unless the Court is of the opinion that substantial
injustice has been caused by the defect or irregularity, and that the unjustice
cannot be remedied by any order of the Court.
(2) No defect or irregularity in the appointment or election of a receiver,
liquidator, or member of a committee of inspection shall vitiate any act done
by him in good faith.
Application:
● In the present case, the advertisement were make two weeks before the hearing of the
petition while according to r 24 of of Companies (Winding Up) Rules 1972 every
petition must be advertised 7 clear days before the hearing.
● However, such irregularity is curable under r 194 of of Companies (Winding Up)
Rules 1972 as no substantial injustice has been caused by the defect or irregularity.
● Hence, Peddler’s Heaven Sdn Bhd cannot set aside the petition on the ground that the
petition was advertised 2 weeks before the hearing of the petition.
