Can A Company Be Wound Up On A CIPAA Decision?

• Published date: 14 January 2021
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution, Trials & Appeals & Compensation
• Law Firm: MahWengKwai & Associates
• Author: Christine Toh and Tommy Wong

The Court of Appeal in Likas Bay Precinct Sdn Bhd v Bina Puri Sdn Bhd [2019] 3 MLJ 244, held that a successful claimant in adjudication proceedings is not required to enforce the adjudication decision before issuing a statutory notice of demand. However, in ASM Development (KL) Sdn Bhd v Econpile (M) Sdn Bhd (Case No. WA-24NCC-363-07/2019), the High Court recently allowed the plaintiff's application for a Fortuna Injunction, which restrained the successful party in a CIPAA proceeding from presenting a winding-up petition against the losing party who failed to pay the adjudicated sum pursuant to the CIPAA decision.

This article summarizes the decision of the High Court in ASM Development regarding the nature of an adjudication decision and whether a losing party can resist a winding-up petition if it fails to pay the adjudicated sum.

Background Facts

The background facts of ASM Development (KL) Sdn Bhd v Econpile (M) Sdn Bhd (Case No. WA-24NCC-363-07/2019) are as follows:

1. ASM Development (KL) Sdn Bhd is a building contractor ("ASM Development") that appointed Econpile (M) Sdn Bhd ("Econpile") as the main contractor for a construction project. Disputes arose between the parties and Econpile commenced adjudication proceedings pursuant to CIPAA 2012. Econpile's payment claim was for a total sum of RM74,887,164.34.

2. Simultaneously with the adjudication proceedings, Econpile issued a notice of arbitration to ASM Development. Subsequently, ASM Development also issued a separate notice of arbitration to Econpile, which proposed that the two arbitration proceedings be consolidated and heard before one arbitrator.

3. In relation to the CIPAA proceedings, the Adjudicator decided in favour of Econpile and decided that ASM Development shall pay Econpile the following:

(a) The adjudicated sum of RM67,767,269.32, which was later corrected to RM59,767,269.32;

(b) Legal costs in the sum of RM150,000.00; and

(c) Costs of the adjudication proceedings in the sum of RM203,924.40,

(hereinafter collectively referred to as "the Adjudication Decision").

4. Four days after the delivery of the decision by the Adjudicator, Econpile served on ASM Development a statutory notice of demand under section 466(1)(a) of the Companies Act 2016 for payment of the amount owed to Econpile pursuant to the Adjudication Decision.

5. The statutory notice of demand informed ASM Development that it would be deemed unable to pay its debts should it fail to pay the sum demanded within 21 days from the date of the statutory notice of demand, and winding-up proceedings would be commenced against ASM Development.

6. ASM Development filed an originating summons against Econpile, which prayed for an injunction to prohibit Econpile from the presentation or filing of any winding-up proceedings ("Fortuna Injunction").

7. ASM Development further filed an originating summons to set aside the Adjudication Decision, and Econpile filed an application under section 28 of CIPAA to enforce the Adjudication Decision. ASM Development's application to set aside the Adjudication Decision was dismissed, and Econpile's application to enforce the Adjudication Decision was allowed by the High Court. Econpile obtained the order to enforce the Adjudication Decision five months after its statutory...