Fortuna Injunction Refused: Contractor Cannot Block a Winding Up Over an Enforced CIPAA Decision

Case Background & Strategy

A Fortuna injunction will not stop a creditor in Malaysia from presenting a winding-up petition on a CIPAA adjudication decision that has been enforced as a judgment, even if the debtor deposits the money with its own solicitors and appeals. In Binastra Ablebuild Sdn Bhd v Kumkang Kind (M) Sdn Bhd [2024] MLJU 3910, NZSK acted for Kumkang Kind (M) Sdn Bhd, a supplier of aluminium formwork, and defeated the contractor’s application to restrain a winding-up petition over an unpaid adjudicated debt of about RM1.39 million.

Case at a Glance

The Problem: A Deposit, an Appeal and a Request for an Injunction

Our client, Kumkang Kind (M) Sdn Bhd, supplied an aluminium formwork system to Binastra Ablebuild Sdn Bhd for a project to build serviced apartments and a hotel in Sungai Besi, Kuala Lumpur. When nine invoices went unpaid, it referred the dispute to adjudication under the Construction Industry Payment and Adjudication Act 2012 (CIPAA) and obtained a decision for RM1,240,283.07, with late payment interest of RM45,023.97 and costs of RM23,591.99. In April 2024 the High Court allowed our client’s application to enforce the adjudication decision and dismissed the contractor’s application to set it aside. The contractor appealed both decisions, but it still did not pay.

Our client then served a statutory notice of demand under section 466(1)(a) of the Companies Act 2016 for RM1,393,278.83. The contractor deposited about RM1.39 million in its own solicitors’ client account and applied for a Fortuna injunction to stop any winding-up petition. It argued that the deposit proved its solvency, that its pending appeals made the debt disputed, that an alleged oral undertaking given at a 2019 meeting wiped out the claim, that our client’s Korean shareholders made recovery risky if the appeals succeeded, and that a petition would harm its listed parent company.

Our Strategy: Treat the Enforced Decision as a Judgment Debt

We argued that the contractor could satisfy neither limb of the Fortuna test: it could not show that a petition would have no chance of success, and fear of reputational harm was not irreparable damage the law recognises. The adjudication decision had been enforced by a High Court order that had not been set aside or stayed, and an appeal does not operate as a stay. A unilateral deposit with the debtor’s own solicitors, to be released only if the appeals failed, is not payment. The alleged undertaking had already been rejected by the adjudicator and the High Court, and our client is a company incorporated in Malaysia and subject to Malaysian law, whatever the nationality of its shareholders. Above all, an injunction on these facts would defeat the purpose of CIPAA, which is to keep cash flowing in the construction industry.

The High Court’s Decision

The High Court agreed with our client on every issue and dismissed the originating summons with costs of RM10,000. It held that the deposit, while showing an ability to pay, reinforced the contractor’s refusal to obey a valid court order, and that the offer to release the money only after the appeal was an attempt to create a stay without applying for one. Following Court of Appeal authority, the court held that a pending appeal does not turn an enforced adjudication decision back into a disputed debt, and that a solvent company’s continued refusal to pay still entitles a creditor to petition.

The concern about our client’s foreign shareholders was speculative, and the risk to the parent company’s share price was the kind of fear of losing business that does not justify restraining a creditor. The alleged undertaking had been fully ventilated before the adjudicator and the High Court, and raising it again was an impermissible collateral attack on the adjudication decision and the enforcement order.

The Law in Brief: When Is a Fortuna Injunction Granted?

A Fortuna injunction restrains a creditor from presenting a winding-up petition. The court will usually grant one only where the debt is genuinely disputed on substantial grounds, so that a petition would be an abuse of process, and the applicant must also show that presenting the petition would cause it irreparable damage. Under section 466(1)(a) of the Companies Act 2016, a company that fails to pay a demanded debt above the statutory threshold within the time allowed is presumed unable to pay its debts.

A CIPAA adjudication decision has temporary finality: under section 13 it binds the parties unless it is set aside, the dispute is settled in writing or the dispute is finally decided by arbitration or the court. The Court of Appeal has held that a successful party may rely on an adjudication decision to wind up the paying party, even without first enforcing it under section 28, and that once the decision is enforced and not stayed, the debt is no longer open to dispute in the winding-up court.

Key Takeaways

• An enforced CIPAA adjudication decision can support a statutory notice of demand and a winding-up petition.
• An appeal is not a stay; without a stay order, the adjudicated sum remains payable.
• Depositing the money with your own solicitors is not payment and will not stop a winding up.
• Solvency is no answer to a petition where a company simply refuses to pay a clear debt.
• Fear of reputational harm, even for a listed group, does not justify a Fortuna injunction.
• The proper course is to pay now and pursue the appeal, litigation or arbitration later.

Frequently Asked Questions

Related reading: How we won over RM1.3 million at the full trial of the same payment dispute; Enforcing a CIPAA adjudication decision in Malaysia; Section 466 winding-up notices explained.

Owed money under an adjudication decision, or facing a winding-up notice? Book a consultation with NZSK so we can review your documents and advise on enforcement or the right response. Learn more about our construction law and CIPAA practice.

Messrs Ng, Zainurul, Seke & Khoo (NZSK) is a Malaysian law firm with offices in Mont Kiara, Kuala Lumpur and Puchong, Selangor. Partner Khoo Ai Theng, an Advocate & Solicitor of the High Court of Malaya since 2014, acts in construction payment disputes, CIPAA adjudication and enforcement, and related winding-up proceedings.