1. Bin Sari Specialized Technologies v BSSTECH CP (M) SDN BHD (22NCC-391-11/2016)

1.

BIN SARI METAL CASTINGS LLC … PLAINTIFFS AND BSSTECH CP (M) SDN BHD (Company No: 842233-U) … DEFENDANT BEFORE YA KHADIJAH BINTI IDRIS JUDICIAL COMMISSIONER 2 GROUNDS OF JUDGMENT Introduction [1] The First Plaintiff claim against the Defendant the outstanding sum of USD 71, 283.43 for loan and financial assistance given to the Defendant. Whilst the Second Plaintiff claim against the Defendant a total sum of USD 964,430.86 for amount due and owing for the supply and delivery of raw materials and also loan given to the Defendant. [2] After a full trial, this court allowed the Plaintiff’s claim. The Defendant appealed. Parties [3] The First Plaintiff Bin Sari Specialized Technologies (1st Plaintiff) and Second Plaintiff Bin Sari Metal Casting Llc (2nd Plaintiff), are private companies incorporated in Abu Dhabi, United Arab Emirates. The 2nd Plaintiff is the sister company and the manufacturing unit of the 1st Plaintiff which is in the business of cathodic of protection and corrosion engineering. 3 [4] The Defendant, Besstech CP (M) Sdn Bhd, is a local private company incorporated under the Companies Act 1965 and is in the business of manufacturing cathodic protection. Plaintiffs’ pleaded case [5] Vassem Jaffer Sait (Vaseem) is a shareholder of the Plaintiffs and control the business of the same. Vaseem is also a shareholder and director of the Defendant, besides Syarifah Nazilah binti Syed Abdul Rahman (Syarifah) who is the managing director of the Defendant. Syarifah was in charge of the daily operations and affairs of the Defendant which includes financial aspects and procuring raw materials. [6] Since 2014 the Defendant had made orders and the 2nd Plaintiff had delivered raw materials in respect of which full payment has yet to be made by the Defendant. The Plaintiffs had condoned the late payment because Vaseem was able to persuade the other members of the 2nd Plaintiff from taking legal action to recover the debt from the Defendant. [7] Details of the orders for raw material made by the Defendant can be found at paragraph 10 of the Amended Statement of Claim. The total 4 value of the orders made was USD 709,184.54. The 2nd Plaintiff issued invoices (the details of which is stated at paragraph 11 of the Amended Statement of Claim) in respect of the orders and the total sum was USD 706,044.96 being the sum claim against the Defendant. [8] The 1st Plaintiff is also claiming from the Defendant monies in the amount of USD 477,046.65 advanced to the Defendant for the purchase of equipment and for internal expenses and overheads. The details of the monies advanced which is still due and payable from the Defendant are provided at paragraph 12 of the Plaintiff’s Amended Statement of Claim. [9] Besides the above claim, the 1st Plaintiff is also claiming from the Defendant various miscellaneous charges in the sum USD 2,421.63 incurred by the 1st Plaintiff for a certain project costs. [10] As such the total debt owed by the Defendant is USD 1,185,513.24. The Plaintiffs have consistently demanded for payments. The Plaintiffs submit, by the conduct of the Defendant, the Defendant had admitted and acknowledged that it owes the Plaintiffs under the invoices and the advances when it – 5

requested for more time to make payment;

requested to pay minimal amount due to the Defendant’s financial situation;

proposed a payment schedule in respect of the amount owing (Proposed Payment Schedule) and had assured the Plaintiffs payments would be made accordingly; and

made part payments in respect of the amount due and owing. [11] The Defendant had only made payment of USD 149,798.95 of the debt due to the Plaintiffs leaving a sum of USD 1,035,714.29 as the balance outstanding and owing. Defendant’s defence [12] The Defendant denies owing any money to the Plaintiffs and therefore the Plaintiffs’ claim is fictitious. It is the Defendant’s case that all dealings for the raw materials were done by the Plaintiffs without the Defendant’s request. The orders and invoices were all prepared by the Plaintiffs and the Defendant for “transfer pricing” purposes to evade paying tax. Via the “transfer pricing” the Defendant’s profit would be 6 transferred to the Plaintiffs and the Defendant was left with losses and liability. [13] It is the Defendant’s case that Vaseem had promised to invest RM 2,000,000.00 to RM 3,000,000.00 in the Defendant. However he had dishonestly used the “transfer pricing” through the Plaintiffs to the Defendant. [14] As for the alleged advances made by the Plaintiffs to the Defendant, the Defendant contends that it already had the equipment prior to the engagement of Vaseem. The funds received were in Ringgit Malaysia and there were only one reference, that is, TT-RAK-USD- 15142 which was received in US Dollar. [15] The sum USD 2,421.63 claim by the Plaintiffs is an inconceivable claim as it is for the expenses of the Plaintiff’s own employee one Sidhic Oliyappurath Anathy (Sidhic). Issues [16] The parties agreed the issues to be tried are as follows (Bundle C) – 7

Whether there is a debt due and owing from the Defendant to the 2nd Plaintiff for the supply of raw materials;

Whether there is a debt due and owing from the Defendant to the Plaintiffs for loans and / or financial assistance rendered to the Defendant by the Plaintiffs; and

Whether the Plaintiffs are guilty of transfer pricing. [17] The following facts are agreed by the parties (Bundle D) –

The Defendant company, formerly known as ETC-CP (M) Sdn Bhd, is a private company incorporated under the Companies Act 1965 and is in the business of manufacturing cathodic protection.

Vaseem and Syarifah are directors of the Defendant. Syarifah is in charged of the daily operations and affairs of the Defendant.

Between May 2014 to May 2015 the Defendant ordered and received raw materials from the 2nd Plaintiff; and

the Defendant made part payments amounting to USD 149,798.95. 8 [18] The Plaintiffs called Vaseem (PW1) as their only witness. The Defendant called 2 witnesses – Syarifah (DW1) and one Shameer Navas (DW2) who is the IT cum Finance Manager of the Defendant. Findings of the court Whether there is a debt due and owing from the Defendant to the 2nd Plaintiff for the supply of raw materials Whether the Plaintiffs are guilty of transfer pricing [19] The above issues will be dealt together as the issue of transfer pricing was said to have arose out of the transactions for the supply of raw materials by the 1st Plaintiff to the Defendant. The Plaintiffs has pleaded at paragraph 11 of their Amended Statement of Claim a sum of USD 706,044.96 being the outstanding sum for the raw materials supplied by the 2nd Plaintiff at the request of the Defendant. In his evidence in chief, Vaseem testified that the Defendant through Syarifah would request for materials from the 2nd Plaintiff. Upon the request made the 2nd Plaintiff would quote a price and Syarifah would draw up the relevant purchase order and accept the materials supplied. 9 [20] Based on the Statement of Agreed Facts (Bundle D) it is not disputed by the Defendant that between May 2014 to May 2015 the Defendant ordered and received raw materials from the 2nd Plaintiff. It is also pertinent to note that the Defendant did not deny that it has received the raw materials ordered and supplied. DW1 testified as follows in cross examination – : And the process of buying goods from the Defendants involves documents such as purchase order, delivery order, bill of lading, correct? : Betul. : Or buying goods between the defendant and second Plaintiff involves all these documents, purchase order, invoices, certificates and bill of lading, correct? : Betul dan satu lagi saya kena tambah kena ada quotation. : Ok, and usually the goods are received in Port Klang, correct? : Betul. : And when the goods are received in Port Klang Defendant will pay customs duty to clear the goods, correct? : Betul. : I refer you to CBD4. If you look at pages 11 to 36. 10 YA : This is also part B? D/C : Part B. : Part B now. From 11 to 36 are the delivery notes and bills of lading for the goods shipped by second Plaintiff to the Defendant, correct? : Betul. : Your defence Puan Syarifah in respect of the goods delivered to the Defendant by the second Plaintiff is that there was transfer pricing involved. Correct? : Betul. : There is no denial by the defendant that they received the goods, correct? : Betul. [21] In his evidence in chief PW1 gave details of the invoices issued by the 2nd Plaintiff in respect of the orders made by the Defendant which is as follows – 11 No. Date Ref# Amount (Inv/Advance) (USD) Page No. (CBD 1, Part

B) 10 May 2014

INV/BMJ14102/542/14 56,900.00 35 22 May 2014

INV/BMJ14101/509/14 64,059.25 40 9 July 2014

INV/BMJ14104/635/14 60,624.84 58 7 August 2014

INV/BMJ14106/712/14 60,625.48 66 18 August 2015

INV/BMJ15104/791/15 117,239.52 241 26 August 2014

INV/BMJ14103/763/14 14,124.65 78 26 August 2014

INV/BMJ14107/764/14 7,110.00 79 28 August 2014

9.

10.

INV/BMJ15101/142/15 62,589.08 163 4 May 2015 INV/BMJ15103/491/15 125,615.51 180 Total Amount 706,044.96 [22] According DW1’s testimony, the Defendant objected to the transactions which the Defendant claim to be transfer pricing. DW1 further said, via this transfer pricing mechanism, the Plaintiff supplied the raw materials at a price higher than the market price so as to create a liability / loss on the Defendant. By doing this the tax payable by the Defendant would be less. This is what DW1 said in her evidence in chief – 12 J2 : ... Jadi beliau telah menggunakan Plaintif-Plaintif untuk membekalkan barang-barang pesanan kepada Defendan dan akan membekalkan barang-barang tersebut dengan harga yang lebih tinggi daripada harga pasaran supaya akaun Defendan akan kelihatan dalam kerugian. Ini adalah taktik Vaseem dalam mengurangkan pembayaran cukai Defendan kepada kerajaan Malaysia. ... ... S5 : Sila maklumkan kepada Mahkamah apakah kaedah yang digunakan oleh Vaseem melalui Plaintif-Plaintif dalam mendatangkan kononnya hutang kepada Plaintif-Plaintif? J5 : Kaedah yang digunakan oleh Vaseem melalui Plaintif-Plaintif dalam mendatangkan kononnya hutang kepada Plaintif-Plaintif, melalui Pindahan Harga dengan kadar harga yang tinggi. Di mana kesemua keuntungan dari perniagaan Defendan disalur kepada syarikat-syarikat beliau di UAE and Defendan tidak perlu membayar sebarang cukai kepada Kerajaan Malaysia. Beliau juga tidak membuat sebarang pelaburan kepada Defendan seperti yang dijanjikan untuk perbelanjaan operasi dan perbelanjaan lain yang berkaitan. Sebaliknya, beliau telah membuat satu liabiliti kepada Defendan di mana Defendan telah berhutang kepada Plaintif-Plaintif untuk mengelakkan bayaran cukai berganda dan juga beliau mengelak untuk membuat sebarang pelaburan bagi menampung kos operasi Defendan. 13 [23] It would appear transfer pricing is a method used by Vaseem to evade tax payable by the Defendant and that it is done by inflating the price of the raw materials supplied to the Defendant. It would appear this transfer pricing is in contravention of tax law. Since the Defendant alleges transfer pricing, it is for the Defendant to prove it (section 101 of the Evidence Act 1950). [24] DW1 claimed she had raised the issue of the high price charged by the 1st Plaintiff for the raw materials supplied. According to her she had raised this in her emails (see Notes of Proceedings page 85 line 24 to page 86 line 27). However there were no evidence provided by DW1 to show that the Defendant objected to the price quoted by the 2nd Plaintiff. [25] In her evidence in chief DW1 referred to emails correspondence at pages 379 to 383 of CBD 1 Part B between the Defendant and the Plaintiff, to support her statement that the Defendant had raised the issue of the high price quoted by the 2nd Plaintiff for the raw materials supplied. The relevant emails which relate to the issue of transfer pricing and the high price alleged to have been quoted by the 2nd Plaintiff are the emails from DW1 and DW2. The emails are produced below as 14 the contents is significant for purpose of verifying DW1’s testimony and the Defendant’s defence. [26] The email dated 1 December 2015 which was sent by DW2 to the 2nd Plaintiff reads as follows – Dear Sir, Please find the attached draft audited report for the year 2014. Kindly review and revert. We had discussion with the auditor regarding the finalization of report and they need our confirmation before submitting the report to the SSM (Companies Commission of Malaysia) and Income tax Department. Kindly note that the Auditor has asked the confirmation regarding the material price (transfer pricing) that we have sent from Dubai and also they have noticed that the materials price are high compared to the prevailing market price. So they have informed that we need to confirm the material price and the total payable amount of the materials are reasonable with the market price before qualifying the material purchases of the company and Intercompany transactions in order to submit the report to the Income tax Dept. If there is no adjustments/changes they will qualify the amount. And also they have informed that the Auditor will not be liable for any legal issues from LHDN (INLAND REVENUE BOARD OF MALAYSIA) regarding the transfer pricing and also myself have to be liable for the reports as true and accurate as I am holding the visa position of IT & Finance Manager of the company. 15 Once confirmed, they will send the original copy for Directors’ signature. So we will send the documents by courier for Vaseem sir’s signature. Please advise. I have attached the file for transfer pricing guideline from IRB link for your reference. [27] Subsequently, on 8 December 2015, DW1 sent an email to the 2nd Plaintiff stating the following – Dear Mr Nadeem, First of all, sorry for the late reply as we didn’t receive your earlier email. We only received after Sidhic attached your previous response just now. Regarding the audit report, it is okay if we have accepted the material price and qualify if. What auditor concerns is that the price seems high comparing to the previous audited reports and they just asked us to confirm before they qualify it. Here audited report is one thing, another thing is Income Tax. They are just worried if material pricing is high then it will fall into Transfer Pricing which they would like to avoid. Further, because material comes from Parent company that’s why they need to confirm before submission to income tax. They are just being precautions based from previous experience. So I think the best is just accept it, qualify it and then when they submit to Income Tax later, we just hope that there will be no problem whatsoever. Furthermore, we are behind time, and we need to submit the Audited Report fast as SSM has chased for it, also Petronas. Appreciate your confirmation so that we can despatch via courier for Mr Vaseem’s signature. [28] Having perused the above emails, contrary to what DW1 said, the said emails did not at all raise the issue of the Defendant being charged 16 with high price for the raw materials supplied by the 2nd Plaintiff. No doubt the emails had mentioned regarding transfer pricing and the alleged high price of the raw material, however it was mentioned in the email for the purpose of conveying the auditor’s queries regarding the price imposed, which requires the Defendant’s feedback. It was not an issue raised specifically by the Defendant to put on record its objection to the price of raw materials it bought from the 2nd Plaintiff from May 2014 until May 2015. In fact there was no evidence to show the Defendant had objected to the price when it was quoted by the 2nd Plaintiff to the Defendant who had requested for quotations from time to time for the said period. As can be seen from DW1’s email, she had actually suggested to the 2nd Plaintiff to just accept the price and wait and see what will happen when the matter is submitted to the Income Tax authority. In fact in cross examination DW1 confirmed that she had suggested so (see Notes of Proceedings page 83 line 22 until page 84 line 4). [29] In what appear to be a desperate attempt to neutralize her obvious intention as evident in her email, in cross examination DW 1 said she was merely being cynical when she suggested to the 2nd Plaintiff to just accept the auditor’s report that the price is high and let the auditor qualify it. 17 : That what you are saying to the Plaintiff, correct? : Betul. : Just qualify it and submit it. : Betul tetapi Yang Arif, kalau kita baca balik itu seperti macam satu sindiran, being cynical sebab bila saya cakap benda yang benar mereka tidak mahu terima so saya kata ok kalau macam tu takpa kita teruskan kita lihat apakah consequences nya kemudian. Kalau pada saya... cara bacaan saya, cara kefahaman saya... saya macam being cynical to them. Sebab saya kata kalau dah macam tu teruskan terima sahaja dan kita tengok apa yang akan berlaku, Yang Arif. Itu saya punya maksud bukan kata saya setuju dengan sebulat hati suara saya tapi saya lebih fikir tidak guna bergaduh dengan orang yang tidak faham apa yang saya cuba cakap. Takpa kita buat je dan kita lihat consequences dia kemudian Yang Arif. Itu maksud saya. [30] DW1’s testimony and the contemporaneous evidence as shown in her own email issued in 2015 is simply diametrically opposite. If it is indeed true that DW1 had raised its concern regarding the high price of the raw material supplied by the 2nd Plaintiff, then as a director of the Defendant company who had been dealing with the operations of the Defendant in particular in securing raw materials, DW1 ought to have reminded the 2nd Plaintiff / Nadeem of the high price which she had (allegedly) raised earlier. DW1 ought to have also placed on record via 18 the email (this to my mind is the most sensible way to do so) that what the auditor queried (about the transfer pricing) was the concern she had raised with the 2nd Plaintiff on the high price of the material. But there is nothing to that effect. Instead she conveniently suggested without any reservation whatsoever that it is fine for the Defendant company to confirm the price. I find DW1’s conduct is unacceptable and her testimony not credible. Her purported cynical response is simply unthinkable and defies logic as no director who owe fiduciary duty to act in the interest of the company would have done what DW1 did, especially so when DW1 said in her witness statement (Question and Answer number 8) that the Plaintiffs’ “sememangnya ingin menipu saya dari awal lagi dan mengambil kesempatan ke atas syarikat yang saya telah bina sejak Disember 2008.”. [31] It is my finding that the Defendant did not at any time voiced its objection to the so called high price quoted by the 2nd Plaintiff. Instead DW1’s own evidence supports the 2nd Plaintiff’s position that the raw materials supplied were accepted by the Defendant without any objection to the price and the invoice issued by the 2nd Plaintiff. It is also my finding that the issue of transfer pricing was never raised by the Defendant. The evidence adduced shows the issue of transfer pricing cropped up for the first time when the auditor sought confirmation from 19 the Defendant about the price of the raw materials which the auditor said were high compared to the market value (see DW2’s email dated 8 December 2015 to the Plaintiff reproduced above). [32] PW1 testified in cross examination that the price / rate of the raw materials supplied by the 2nd Plaintiff to the Defendant was based on the London Metal Exchange Rate (London Metal Exchange) plus a premium charged by the booking agent. According to PW1 the Defendant and the 2nd Plaintiff could not buy directly from the London Metal Exchange and had to ordered for the raw material requested by the Defendant through an agent registered with London Metal Exchange. This evidence was not challenged by the Defendant. In fact DW1 had confirmed, when cross examined by learned counsel for the Plaintiffs, that the Defendant did not buy directly from London Metal Exchange but through an agent – : Why don’t you buy your goods direct from the LME [London Metal Exchange] Puan Syarifah? : Defendan memang tidak punya dana sebab… : No, no if you can buy goods… if you say it is LME price what is to stop you from buying…can you buy directly from the LME? 20 : Bukan kita buy directly dari LME maksudnya kita akan beli daripada *inaudible* 1.07.41pm Tapi kami ada beli satu saya boleh bagi satu reference… : Did you buy your goods directly from the LME at any time? : Bukan directly daripada LME… : No, I’m asking you did you at any time… : Tak, kita tidak beli dari LME tapi kita beli daripada agen. [33] DW2 also confirmed that the agent through whom the Defendant bought the raw material imposed a premium on the top of the price quoted by London Metal Exchange – : So, your this other agent that you are, even this other agent that you are referring to, LSPCM Sdn.Bhd is quoting a price higher than the LME price for the same period, correct? DW2 : Ya, Yang Arif the price is including premium. Minimum of 200. : Ya, right. So, the agent’s price will always be higher than the LME price, correct? DW2 : Yes, there will be always the premium including the price. 21 [34] To support its contentions that the price imposed by the 2nd Plaintiff was high, DW2 referred to the price quoted by London Metal Exchange for zinc in April 2016 (see page 844 of CBD 3 Part B) and a price quoted by an agent LSPCM Sdn Bhd for the same material around the same time (see page 496 of CBD 2 Part B). Based on the document it is shown that the price quoted by the agent which includes premium is obviously higher than the price quoted by the said Exchange. However this evidence does not show that the price quoted by the 2nd Plaintiff in supplying zinc in April 2016 to the Defendant is higher than the market price as alleged by the Defendant. [35] DW1, in her evidence in chief had compared the price of zinc quoted by the agent at page 496 of CBD 2 Part B with the price charged by the 2nd Plaintiff in the invoices at pages 26, 27, 31, 32, 34, 85, 86 and 180 of CBD 1 Part B and said there was a big difference in the price charged by the 2nd Plaintiff. I am of the view such comparison is misplaced and untenable as the price / rate quoted by the agent was in April 2016 whereas the price / rate charged by the 2nd Plaintiff was for the period between July 2014 to May 2015. There was no evidence adduced to show the rate quoted by the London Metal Exchange for the period between July 2014 to May 2015 where the transactions of supply and delivery of raw materials to the Defendant took place. 22 [36] At all material times Defendant did not object to the price charged by the 2nd Plaintiff. The Defendant was fully aware that the rate quoted by the 2nd Plaintiff for the supply of raw material would always include the element of premium charged by the agent and therefore higher than the rate quoted by London Metal Exchange. Importantly, the Defendant had agreed and accepted the price (which includes premium of the agent) quoted by the 2nd Plaintiff. As such the Defendant is bound by the agreement it had with 2nd Plaintiff unless there is fraud or misrepresentation (Smallholders Corp. Sdn Bhd v Utusan Transport Sdn Bhd [1995] 1 LNS 223). The Defendant is therefore estopped from now disputing it. [37] The so called high price was never an issue until the 2nd Plaintiff filed this action to recover the outstanding balance of the raw material which the Defendant admitted receiving it from the 2nd Plaintiff. Above all, when the issue on transfer pricing was queried by the auditor, DW1 herself had suggested that the Plaintiffs to just accept the price stated as high and for the auditor to qualify it. Such conduct was certainly inconsistent with the purported concern raised with the 2nd Plaintiff in respect of the high price purportedly charged by the 2nd Plaintiff. 23 [38] It is interesting to note the Defendant relies on transfer pricing to avoid from paying the 2nd Plaintiff for the raw materials supplied. However when asked in cross examination, DW1 could not provide credible evidence that the Defendant is absolved from paying for the raw materials supplied because the transactions carried out were transfer pricing – : And you also agree with me that there is not a single email in the hundreds of emails we have seen in this case where the Defendant say to the Plaintiff that it doesn’t have to pay for the goods because of transfer pricing. : Saya tidak setuju Yang Arif. : Ok. : Sebab saya telah menyuarakan pasal transfer pricing ini, ada dalam beberapa emel. : No, have you in any email said Defendant does not have to pay because of transfer pricing? Please be specific in your answer, my question is very specific. Have you in any email said Defendant does not have to pay because of transfer pricing? : Ok. Saya tidak cakap yang kita tidak akan bayar tetapi saya telah menyuarakan bahawa harga barang-barang material yang telah dihantar adalah tinggi. Dan saya telah memberi bangkangan dalam beberapa emel Yang Arif. 24 : Ok Puan Syarifah. I repeat the question to you I’m sure you understand my question perfectly. In any email have the Defendant said to Plaintiff I don’t have to pay because of transfer pricing? : Saya tidak cakap yang itu tetapi ada… cakap yang lain. [39] Based on DW1’s testimony, this transfer pricing is a mechanism exploited by the 2nd Plaintiff to avoid paying tax to the authority. However no competent witness was called to explain to the court that the transaction carried out between the 2nd Plaintiff and the Defendant amount to transfer pricing. There is also no evidence adduced that the Defendant company had indeed evaded tax. In his written submission learned counsel for the Defendant said the Defendant cannot do more than to enclose in its bundle of authorities the Transfer Pricing Guidelines 2012 (Guideline) published by the Inland Revenue Board. With due respect, I am of the view the Defendant could have done more and it ought to have done so by calling competent witness to testify on the issue of transfer pricing in order to prove its defence. Merely incorporating the Guideline as part of its bundle of authorities does not at all support the Defendant’s defence. The Defendant ought to have tendered the Guideline via competent witness so as to explain transfer pricing and relate it to the transactions carried out between the 2nd Plaintiff and the Defendant. The Defendant had every opportunity to do 25 so but they did not. The Guideline is a hearsay evidence, thus no weight can be given to the Guideline. [40] Having considered the testimony of the Defendant’s witnesses and their failure to adduce evidence to proof transfer pricing, not only there is no merits in the defence, I am compelled to conclude this defence of transfer pricing is a sham defence (Hasil Bumi Perumahan Sdn Bhd & Ors v United Malayan Banking Corp Bhd [1994] 1 MLJ 312; [1994] 1 CLJ 328). Thus the Defendant’s denial of the amount claimed by the 2nd Plaintiff on the ground that the transactions amount to transfer pricing must fall. The Defendant failed to provide evidence to show that the 2nd Plaintiff’s claim against the Defendant for the supply and delivery of goods is not maintainable (Huo Heng Oil Co (E.M.) Sdn Bhd v Tang Tiew Yong [1987] 1 MLJ 139, JCE Designabuild Sdn Bhd v Bunga Kembang Sdn Bhd [2006] MLJU 447, Koay Hean Seng v Kerajaan Malaysia [2017] 7 MLJ 71). [41] It is also noted that the issue of related parties and lifting or piercing the corporate veil was not pleaded but raised in the written submission of the Defendant. As parties are bound by their pleadings, the Defendant cannot go beyond what is pleaded (Samuel Naik Siang Ting v Public Bank Bhd [2015] 6 MLJ 1). 26 Whether there is a debt due and owing from the Defendant to the Plaintiffs for loans and/or financial assistance rendered to the Defendant by the Plaintiffs [42] In PW1’s evidence in chief the amount claim by the Plaintiffs for financial assistance is USD 112,547.53 the breakdown of which is as follows – a) 1st Plaintiff is claiming a total sum of USD 71,283.43; and b) 2nd Plaintiff is claiming a total sum of USD 41,264.20. [43] In his witness statement PW1 has provided the details of the financial assistance given by the Plaintiffs to the Defendant (refer to Question and Answer number 37 – 45). The details (including telex receipts, payment vouchers, emails from Defendant requesting for fund) was not challenged by learned counsel for the Defendant when cross-examining PW1. The questions that were posted to PW1 was essentially in relation to the issue of transfer pricing which is the Defendant’s defence. [44] DW1 was cross-examined on the above loan given to the 1st and 2nd Plaintiff and her testimony is as follows – 27 : Thank you. Puan Syarifah I’m just going to ask you very quickly to look at some documents. You can just quickly go through them CBD 1 page 41 and 42, CBD 1 page 190-192 and CB1 page 183-186. All these documents Puan Syarifah just confirm it please show that there were remittances from the Plaintiffs to the Defendan. : Betul Yang Arif. : And if you look at page 209 now, at the bottom of the page on 11th July 2015 Plaintiffs are asking for the return of the loans. Can you see that? : Ya saya. : And then at the top of the page on 13th July 2015 Defendant reply to say there are cash flow problems. Correct? : Ya betul. [45] The 2st Plaintiff is also claiming from the Defendant sums incurred by the 2nd Plaintiff for supplying raw materials to a company known as Daelim Malaysia Sdn Bhd (Daelim Sdn Bhd) for the Malaysia TNB Fast Track Project. Based on DW1’s evidence, pursuant to a contract entered between the Defendant and Daelim Sdn Bhd., the Defendant was obliged to supply and deliver the raw materials to Daelim Sdn Bhd. However the Defendant was not able to do so and the 2nd Plaintiff had supplied and delivered the same to Daelim Sdn Bhd. The details of the 28 orders made by Daelim Sdn Bhd to the Defendant was provided by PW1 in his witness statement (see question and answer number 32 – 36) is as follows – No. Date Ref Amount (Inv/Advance) (USD) Reference

Part B

22.9.2014 001-A01 278,250 page 93 - 100

29.4.2015 001-A02 31,360 page 88 - 92

4.12.2015 002-A01 34,257 page 278 -

6% GST on total order value 20,632.02 TOTAL 364,499.02 [46] The third column of the above table shows the Purchase Orders issued by Daelim Sdn Bhd to the Defendant. PW1 was not cross-examined at all on the above claim. When DW1 was cross-examined on the above issue, DW1 admitted that the Defendant had requested Daelim Sdn Bhd to pay for the materials direct to the 1st Plaintiff. This can be seen from the email dated 6 August 2015 sent by DW2 to Daelim Sdn Bhd where the Defendant informed Daelim Sdn Bhd they had given the bank account details of the 1st Plaintiff in the tax invoice for payment purposes. However due to the advice from Bank Negara Malaysia (see page 357 – 358 of CBD 1 Part B) the payment which is to be made in 29 USD cannot be made to the 1st Plaintiff which is not a resident, so payment eventually was made to the Defendant who is then supposed to pay to the 1st Plaintiff. DW1 however said not all the payment approved by Bank Negara Malaysia was meant for the 1st Plaintiff as she claims some of the payment is payable to the Defendant as the Defendant had also supplied some goods to Daelim Sdn Bhd. However there was no evidence to support the claim that the Defendant had supplied goods to Daelim Sdn Bhd. [47] In relation to the said Project, it is the 1st Plaintiff’s case that it has incurred expenses and cost for placing one of its employee Sidhic at the Defendant company. In re-examination PW1 said – : You ask about the travel expense claim Mr. Sidhic make at page 152, can you explain to the Court why Mr. Sidhic was claiming the travel expense claim? : Miss Syarifah Nazliah or the Defendant was free to use any of our expert resources in the Plaintiffs office just because of me. So they wanted Sidhic’s advice and help to do the software setup and all those things and few things to be discussed like when we communicate by email or by telephone there are a lot of things which are unattended. So they requested Sidhic to be there at their facility on further service that why Sidhic travel and it solely like Sidhic this expenses well not even his day rates or anything that charged. Only the travel expense boarding and lodging was I assume. 30 : Has the Defendant even disputed this claim to your knowledge? : No My Lady. : And to your knowledge either in their witness statement or in their defence filed in this proceeding, have they disputed the claim? : Not to knowledge. [48] PW1 was not cross-examined on this expenses and neither were there evidence to show the Defendant objected to the invoice (see page 145 – 152 of CBD 1 Part B) amounting to AED 8,911.58 sent by the 1st Plaintiff to the Defendant. [49] DW1 also confirmed during cross examination that not only did the 1st and 2nd Plaintiffs gave loan to the Defendant, DW1 herself had acknowledged the debt and admitted that the Defendant will pay back the loan. : Now, if you look at core bundle (CBD 1) at page 201. Puan Syarifah just to get the context right, the first email was from Plaintiff to you that why it’s says “Dear Syarifa and Shameer” and then you replied and you said “Noted on your email. Upon discussion with Shameer and Haryati we request further clarification for the below notes in blue”. Alright. 31 : Ya betul. : I just want to draw your attention to number 5 where Plaintiff are saying “Please urgently return the Loan amount of USD40,000 which was given last week” and your comment was “Noted”. Correct? : Betul Yang Arif. : And in fact you admit the existence of loans given by the Plaintiff in several emails, correct? : Betul Yang Arif. : I just want to draw your attention to CBD 2 Yang Arif. Starting at 523 is a letter dated 17th August 2015 written by you Puan Syarifah to the 1st Plaintiff, correct? : Betul. : And please look at the second last paragraph or the third last paragraph on page 524. You admit as follows “Also I will be paying back all the loans that we have taken from BSST Dubai for almost RM1.8M “. Correct? : Betul Yang Arif. : And that the position on the 17th August 2015. Correct? : Betul Yang Arif. : So, it is not correct that there were no loans given by the Plaintiffs to the Defendant, correct? 32 : Betul Yang Arif. : So what you say in your witness statement, in answer to soalan 7. Soalan 7 in your witness statement is “Berapakah pinjaman yang diberikan oleh Plaintif-Plaintif?” you say “Defendan tidak menerima apa-apa pinjaman daripada Plaintif-Plaintif” that is not correct isn’t it Puan Syarifah? : Yang Arif boleh saya jelaskan sedikit. : No, please answer my question and then your counsel will ask in re examination. So you say “Defendan tidak menerima apa-apa (anything) pinjaman daripada Plaintif” that not correct isn’t it? : Ya mengikut statement ni tidak betul, tetapi saya ada penjelasan dia selepas ini la Yang Arif. [50] In re-examination DW1 explained as follows – : Ok, pada dasarnya Yang Arif kalau pinjaman kita perlu bayar, tetapi dalam konteks ini, syarikat BssTech (M) adalah anak syarikat kepada Sait Group of Companies dan sebab bila pihak Plaintiff, wakil pihak Plaintiff datang, permulaannya memang saya yang berurusan dengan dia dan dia memang ingin menyuntik dana dia cakap dengan saya masa awalnya, sekarang ni dia deny, tetapi sebab masa tu kita pun memang ada masalah kewangan dan dia pun sangat faham pasal tu Yang Arif, jadi bila saya difahamkan inter company loan kalau ada pun bila seseorang tu tidak membuat apa-apa pelaburan, inter company loan tu kadang-kadang boleh convert kepada 33 investment, itu kefahaman saya. Jadi sebab itu, bila dia janji tetapi dia tidak tunaikan dan dia hanya memberi melalui kita kata bahan-bahan mentah, jadi saya beranggapan yang ok, dia tidak beli apa-apa pelaburan, company tidak ada dana langsung maka duit yang kami dapat tu boleh digunakan untuk menjalankan operasi syarikat. Jadi pada saya, kalau dah memang antara HQ dan subsidiary, tidak perlu kalau memang dalam situasi yang macam ni sebab dia pun katakan dia director kepada Defendan, dan dia juga director kepada Plaintiff. So, dia tahu apa yang berlaku, dia memang sangat arif pasal ketiadaan wang, ketiadaan dana dan kami memang memerlukan dan saya selalu memberitahu bila saya mengharapkan satu investment tetapi tidak ada. Jadi saya rasa ok lah, dia bagi loan dan saya rasa kadang-kadang loan ni memang boleh kita convert kepada investment dan boleh kita kata menangani masalah ketiadaan aliran tunai untuk menjalankan syarikat, Yang Arif. [51] However the evidence adduced did not support the above position taken by the Defendant as –

there is no evidence that the Plaintiffs and the Defendant are part of the same group of companies, namely, Sait Group of Companies. The Defendant is not a subsidiary of the Plaintiffs as both the Plaintiffs do not hold any shares in the Defendant company. The common connection between the Plaintiffs and the Defendant is that PW1 is a director and 34 shareholder in both the Plaintiffs and the Defendant. But this fact does not make the Defendant as part of the Sait Group of Companies; and

there is no evidence to show that there was an agreement between the Plaintiffs and the Defendant that the loan provided would be converted into an investment of the Plaintiffs in the Defendant and that the Defendant need not pay the loan. As submitted by learned counsel for the Plaintiff, such proposition does not make commercial sense since Plaintiffs has no interest in the Defendant. [52] Contrary to DW1’s testimony, there are contemporaneous evidence to show that the financial assistance rendered to the Defendant were meant to be repaid by the Defendant –

It is not disputed that the Defendant had paid a sum of USD 149,798.95 to the 2nd Defendant. DW1 provided the details of the amount repaid in his evidence in chief (see Question and Answer number 47 – 49); 35

Various emails correspondence clearly shows the Defendant had admitted the financial assistance given were loan which were meant to be repaid. The details of the various emails were provided by PW1 in his evidence in chief (see questions and answers to number 52 – 57). Amongst the emails were as follows: Email dated Contents 11 July 2015 Plaintiff enquiring from the Defendant/DW1 about returning the loan 13 July 2015 DW1 replied Defendant has not returned the loan as the Defendant and requesting for time as they were expecting payment of outstanding balance from Sapura Kencana 23 July 2015 Plaintiff referred to the many emails and discussions between the parties and requested Defendant for its repayment plan for the Plaintiff to plan its cash flow. It was stated – “As notice the committed repayment of last payment of USD 40,000/- is still pending and you both have committed to transfer immediately by first week of July and nothing happened till today.”. 25 July 2015 Defendant’s reply attaching email from its clients on expected orders. The Defendant said “We will make a firm repayment plan once we received confirmation from our client when we get the payment for the outstanding invoices…” 36

Via email dated 5 July 2015, the Plaintiff had requested among others, to urgently return the loan amount USD 40,000.00 and the Defendant response was “Noted”;

Via its email dated 18 August 2014 (page 81 of CBD 1 Part B) to the Plaintiffs, the Defendant proposed a repayment schedule where the Defendant proposed to make payment on 10 May 2014 (USD 56,900.00), 22 May 2014 (USD 64,059.25); 9 July 2014 (USD 60,624.84) and 10 August 2014 (USD 60, 625.48);

DW1 via letter dated 17 August 2015 (see page 523 - 524 of CBD 2 Part B) to the 1st Plaintiff had referred to the loan of RM1.8 million taken from the 1st Plaintiff which will be repaid. [53] It is evident the oral testimony given by the Defendant’s witnesses are inconsistent with the contemporaneous evidence adduced. In such a situation contemporaneous documentary takes precedence over the latter (Tindok Besar Estate Sdn Bhd v. Tinjar Co [1979] 1 LNS 119; [1979] 2 MLJ 229, Guan Teik Sdn Bhd v. Hj Mohd Noor Hj Yakob & Ors [2000] 4 CLJ 324; [2000] 4 MLJ 433 and Citibank Bhd v. Pembangunan 37 Cahaya Tulin Sdn Bhd (Receivers and Managers appointed) & Ors and Other Suits [2012] 1 LNS 416; [2012] 9 MLJ 181). Conclusion [54] Premised on the aforesaid reasons, I am of the view the Plaintiffs has proved its case on balance of probabilities. I therefore allowed the Plaintiffs’ claim and ordered that the Defendant pay:

the 1st Plaintiff the sum of USD 71,283.43;

(ii) the 2nd Plaintiff the sum of USD 962,009.23 and AED

8911.58;

(iii) interest at a rate of 5% per annum on the sum USD 1,033,292.66 (USD 71,283.43 + USD 962,009.23) and AED 8,911.58 from the date of judgment to the date of full and final realization; and

(iv) costs of RM25,000.00. ( KHADIJAH BINTI IDRIS ) JUDICIAL COMMISSIONER HIGH COURT (COMMERCIAL DIVISION) DATED 21 NOVEMBER 2018 38 Counsel: Plaintiffs : Mohanadass Kanagasabai of Messrs Mohanadass Partnership Defendant : Bernard Francis of Messrs The Law Offices Of Bernard Francis & Associates