The issue here is you did not terminate the contract with something tangible, such as letter or email or something, even though the agent told you, you could do so anytime you want. Furthermore, the contract they asked you to sign is legally binding, and if you signed it willingly, whatever stated on the contract might be upheld by the court of law. Regardless, you may argue that the contract was not as promised and you reserve the right to challenge it.
2nd issue is, since there's no termination, you are considered as "an active member" of the gym and is subjected to the annual fees stated by the agreement.
Even if you pay them the outstanding amount, CTOS will remain there. I guess, this is the darker side of the credit rating system in Malaysia.
Best alternative is to fight the case through court and trying to overturn your case so that CTOS can be removed from your history of credit ratings. Thou IIRC, CTOS can't be eliminated by any normal means, it would stay on as a dark stain in your credit history....