UnFORTUNAtely, no FORTUNA Injunction for you!

What is Fortuna Injunction?

Fortuna Injunction is one of the creation of English common law in Fortuna Holdings Pty Ltd v. The Deputy Commissioner of Taxation [1978] VR 83 which is a type of prohibitory order granted by the court for restraining a party from presenting a winding up petition against a Company or if the winding up petition had already been presented, restraining the party from advertising the winding up petition against the Company to prevent irreparable damages to the Company.


The Damages of the Winding Up Process on the Company

Indeed, not only the reputation and credibility of the Company might be adversely affected, in some cases, the bank accounts of the Company might also be frozen after the bankers being notified by the advertisement of the Winding Up Petition made by the Petitioner. 

In what kind of circumstance would the Fortuna Injunction be granted by the Court?

According to McGarvie J in  Fortuna Holdings Pty Ltd v. The Deputy Commissioner of Taxation [1978] VR 83, the Court may grant the Fortuna Injunction only if :-

(i) the petition has no chance of success because the petition was incapable of success as a matter of law or through lack of supporting evidence; and/or

(ii) the claim is founded on disputed debt.

The position in Malaysia

Despite that the above principle of Fortuna Injunction had been cited and upheld in the judgment of Court of Appeal of Malaysia i.e. Mobikom Sdn Bhd v. Inmiss Communications Sdn Bhd [2006] 2 MLRA 700, the judgment of Court of Appeal of Malaysia in year 2008 i.e. People Realty Sdn Bhd v. Red Rock Construction Sdn Bhd [2007] 3 MLRA 13 had made a sharp turn on this.

In People Realty Sdn Bhd v. Red Rock Construction Sdn Bhd [2007] 3 MLRA 13, a Company had applied for Fortuna Injunction to restrain the Petitioner from advertising the Winding Up Petition.  

Nevertheless, its application was first dismissed in High Court. Subsequently, the Company made an appeal to Court of Appeal.

However, the Court of Appeal decided against the Appellant and it was held by the Court of Appeal as follows:-

“In our judgment, once a winding-up petition is filed, the court is precluded from granting an injunction against advertisement or gazettal of the petition.

In this regard, we agree with Vincent Ng J (later JCA) in Azman & Tay Associates Sdn Bhd v. Sentul Raya Sdn Bhd [2002] 1 MLRH 553; [2002] 4 MLJ 390; [2002] 4 CLJ 391; [2002] 4 AMR 4161 at p 396 where he said:

I would hold that the court is not empowered to make any order to restrain or injunct the petitioners from carrying out their statutory obligation to comply with r. 24 .”

Therefore, since there is no other subsequent court of appeal judgment or federal court judgment which is decided against the decision of the Court of Appeal in People Realty Sdn Bhd v. Red Rock Construction Sdn Bhd [2007] 3 MLRA 13, hence the current position in Malaysia seems to be that so long the Winding Up Petition had been filed, then the Court would be very reluctant, if not, would not exercise its inherent injunction to restrain the Petitioner from advertising the Winding Up Petition which is part of the Petitioner’s statutory duty provided under Rule 24 of Winding Up Rules 1972.

Recent Development In Malaysia

In the recent judgment of Court of Appeal of Malaysia i.e. RHB Bank Berhad v Malaysia Pacific Corporation Berhad and Another Appeal [2018] MYCA 43, an appeal made by the Appellant for the dismissal of the application for Fortuna Injunction by High Court was dismissed by the Court of Appeal on the basis as follows:-

(i) the Respondent had obtained a valid and enforceable judgment against the Appellant;  and

(ii) the debt in question is undisputed.

As none of the two principles as mentioned in Fortuna Holdings Pty Ltd v. The Deputy Commissioner of Taxation [1978] VR 83 is applicable in this case, I would say that this  is indeed a fair decision.

Conclusion - The Golden Hour for the Application of Fortuna Injunction

In view of the above, in the event that your Company has received a Winding Up Notice which provides you a period for 21 days to repay the debt as stated in the said Notice, kindly consult your solicitors immediately before the lapse of the 21 days and make application for the Fortuna Injunction in the event that any of the two principles as mentioned in Fortuna Holdings Pty Ltd v. The Deputy Commissioner of Taxation [1978] VR 83 applicable to your case.

*The above article is written by Etrus Tan, the Partner of Messrs Esther Ong Tengku Saiful & Sree. Kindly feel free to contact us should you have any query.

*You may contact us at:

Address: 51-1, Jalan USJ 10/1A, Taipan Triangle  47620 Subang Jaya, Selangor Darul Ehsan, Malaysia.
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