Winding Up A Company Based On A CIPAA Adjudication Decision

• Published date: 29 April 2022
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Corporate and Company Law, Trials & Appeals & Compensation
• Law Firm: MahWengKwai & Associates
• Author: Christine Toh

The successful party in adjudication proceedings can commence winding-up proceedings against the losing party based on the adjudication decision. This has recently been confirmed by the Court of Appeal in Sime Darby Energy Solution Sdn Bhd (formerly known as Sime Darby Offshore Engineering Sdn Bhd) v RZH Setia Jaya Sdn Bhd [2022] 1 MLJ 458. Accordingly, a Fortuna Injunction to restrain the winning party from proceeding with the winding-up proceedings is unlikely to be granted by the court.

Earlier Conflicting Cases

We previously published an article titled, " Can a Company be Wound Up on a CIPAA Adjudication Decision?". The previous article examined the Court of Appeal's position in Likas Bay Precinct Sdn Bhd v Bina Puri Sdn Bhd [2019] 3 MLJ 244 and the High Court's position in ASM Development (KL) Sdn Bhd v Econpile (M) Sdn Bhd [2021] 8 MLJ 99 on the issue of whether a Fortuna injunction can be obtained to resist a winding-up petition that is premised on an adjudication decision.

In Likas Bay Precinct Sdn Bhd, the Court of Appeal held that the winning party could commence winding-up proceedings based on an adjudication decision. On the other hand, the High Court In ASM Development (KL) Sdn Bhd took a different position and held that if there is a genuine dispute, an injunction may be allowed to restrain the presentation of a winding-up petition commenced based on an adjudication decision. Although the decisions of the higher courts bind lower courts under the doctrine of stare decisis, several decisions post ASM Development (KL) Sdn Bhd appear to support the High Court's decision in ASM Development (KL) Sdn Bhd rather than follow the Court of Appeal's decision in Likas Bay Precinct Sdn Bhd.

The recent Court of Appeal decision in Sime Darby Energy Solution Sdn Bhd (formerly known as Sime Darby Offshore Engineering Sdn Bhd) v RZH Setia Jaya Sdn Bhd [2022] 1 MLJ 458 has clarified the law on this issue. The Court of Appeal held that whilst it is true that the losing party in the adjudication proceedings may challenge the statutory notice or the petition, the losing party can do so in the winding-up court. The losing party cannot restrain the successful party from commencing winding-up proceedings in the winding-up court based on an adjudication decision. Accordingly, the Court of Appeal allowed the appeal and the Fortuna Injunction granted by the High Court was set aside.

Background Facts

The background facts of Sime Darby Energy Solution Sdn Bhd (formerly...