1. Casa Bangsar Sdn Bhd v 1. Amanah International Finance Sdn Bhd (22M-263-05/2019)

CASA BANGSAR SDN BHD

AZMAN BIN AWANG

ANIE BINTI ATTAN (NRIC NO: 520727-71-5066) … PLAINTIFFS

AMANAH INTERNATIONAL FINANCE SDN BHD

LIM SAN PEEN (NRIC NO: 580910-03-5477) ... DEFENDANTS 2 GROUNDS OF JUDGMENT (Enclosure 3) Introduction [1] The plaintiffs filed this writ action 22M-263-05/2019 (“Suit) seeking for various declaratory reliefs in relation to Islamic financing facilities granted by the defendant to the first plaintiff. The plaintiffs also seek for injunctive relief against the second defendant to restrain the second defendant from acting as the receiver and manager of the first plaintiff. [2] Simultaneously with the filing of the Suit, the plaintiff filed an application for interim injunction (“Application for Interim Injunction”). Via the said application the plaintiff sought for the following order pending the disposal of this Suit –

the second defendant be restrained from acting or holding himself out as the receiver and manager of the first plaintiff;

the second defendant be restrained from exercising any power as the receiver and manager of the first plaintiff including disposing the first plaintiff’s assets; and 3

the first defendant be restrained from appointing any person as the receiver and manager of the first plaintiff pursuant to the debenture dated 18 August 2017. [3] On the hearing date of the Application for Interim Injunction, the first and second defendants raised a preliminary objection in respect of the locus of the second and third plaintiffs to institute this writ action. It is the defendants’ contentions that both the second and third plaintiffs has no locus to do so given that receiver and manager of the first plaintiff has already been appointed. [4] After considering the submission of all the parties, on 16 August 2019 this court allowed the preliminary objection and accordingly dismissed the Application for Interim Injunction. The grounds for the said dismissal is set out below. Parties [5] The first plaintiff, Casa Bangsar Sdn Bhd (“1st Plaintiff”) is a private company incorporated in Malaysia. 4 [6] The second plaintiff, Azman bin Awang (“2nd Plaintiff”) and the third plaintiff, Anie binti Attan (“3rd Plaintiff”) are individuals. At all material time both the 2nd Plaintiff and 3rd Plaintiff are directors and shareholders of the 1st Plaintiff company. [7] The first defendant, Amanah International Financa Sdn Bhd (“1st Defendant”) is a company incorporated in Malaysia and a licensed financial institution under the Financial Services Act 2013. [8] The second defendant, Lim San Peen (“2nd Defendant”) is an individual. The 2nd Defendant was appointed as the 1st Plaintiff’s receiver and manager on or about 28 January 2019 pursuant to the debenture dated 18 August 2017 executed by the 1st Plaintiff in favour of the 1st Defendant. Factual Background [9] Via letter dated 27 April 2015 (“Letter of Award”), the State Government of Johor accepted the 1st Plaintiff’s proposal to develop land held under Lot 428 and Lot 745 (“Said Lands”) measuring approximately 47.87 acres subject to the 1st Plaintiff entering into a development agreement with the State Government of Johor. Via letter dated 28 April 5 2015 (“Letter of Acceptance”) the 1st Plaintiff accepted the State Government of Johor’s offer. [10] On 28 April 2015 the 1st Plaintiff entered into a Musharakah Agreement with the 1st Defendant for a sum of RM 5 million out of which RM 3 million was utilised for the working capital of the Project and RM 2 million for payment to the State Government of Johor. [11] On 4 June 2015 the State Government of Johor and Casa Bangsar executed a privatisation agreement (“Privatisation Agreement”) to develop and complete a mix development project consisting of residential, commercial and industrial (“Project”) on the Said Lands. [12] It is the Plaintiffs’ position that pursuant to the terms and conditions of the Musharakah Agreement and the consultancy agreements executed thereto (the Management Agreement, Consultancy Agreement and Agency Agreement) both the 1st Plaintiff and the 1st Defendant entered into the Musharakah Agreement as partners for purpose of developing the Project on the Said Lands. 6 [13] On 29 June 2015 the 2nd Plaintiff entered into an Equity Secured Financing-i Agreement with the 1st Defendant for a sum of RM 20 million for (“ESF-i Facility”) the following purpose –

RM 5 million to increase the paid-up share capital of Casa

(ii) RM 10 million to finance Azman Awang’s purchase of 19% of the share capital of Casa Bangsar; and

(iii) RM 5 million to defray all fees, deposit, profits and costs chargeable to Azman Awang in relation to the said financing. [14] A few years later, pursuant to a Letter of Offer dated 31 July 2017 and a Master Facility Agreement (Commodity Murabahah for Term Facility) dated 18 August 2017 (“Murabahah Facility Agreement”), executed by the 1st Defendant and the 1st Plaintiff, the 1st Plaintiff was granted a Commodity Murabahah Term Financing Facility under the concept of Tawarruq of up to RM 34,000,000.00 (“Murabahah Facility”). [15] As security for the Murabahah Facility, the 2nd Defendant and 3rd Defendant executed a Guarantee and Indemnity dated 18 August 2017 (“Guarantee and Indemnity Agreement”) wherein both the said 7 defendants agreed to jointly and severally guaranteed and agreed to unconditionally and irrevocably pay on demand the aggregate indebtedness under the Murabahah Facility including all costs, charges, fees and expenses including legal costs on a solicitor client basis. [16] Besides the Guarantee and Indemnity Agreement as security for the Murabahah Facility, the 1st Plaintiff executed, inter alia, a Debenture dated 18 August 2017 in favour of the 1st Defendant (“Debenture”).

the appointment of the 2nd Defendant as the R&M is premature and / or unlawful as there was no event of default under the Murabahah Facility Agreement and/or that the said agreement is an illegal agreement and thus unenforceable;

the appointment of the R&M over the 1st Plaintiff amounts to an unlawful interference with the 1st Plaintiff ’s trade or business; and / or

the R&M is aiding and abetting the 1st Defendant’s breach of fiduciary duties owed by the 1st Defendant to the 1st Plaintiff. Preliminary objection [19] The crucial issue for determination is whether the 2nd Plaintiff and 3rd Plaintiff being directors of the 1st Plaintiff has the locus to commence 9 this writ action against the Defendants in the name of the 1st Plaintiff in light of the appointment of the 2nd Defendant as R&M of the 1st Plaintiff. 2nd Defendant’s contentions [20] The 2nd Defendant’s position is as follows –

the Plaintiffs have not been authorized by the 2nd Defendant to institute this writ action;

the Plaintiffs may only exercised its power as directors to pursue a right of action if it is shown that –

It would be in the interest of the company and would not impinge prejudicially upon the position of the debenture holders by threatening or imperilling the assets which are the subject of the charge. In other words, the directors must show and justify that the action would benefit the company; and

(ii) the directors must provide satisfactory indemnity for costs. 10 [21] It is the 2nd Defendant’s contentions that the Plaintiffs failed to show and justify that this instant Suit is in the interest and benefit of the 1st Defendant. The 2nd Plaintiff who has provided the purported indemnity failed to produce any evidence or proof of their financial standing and / or any form of security to support their “indemnity” in their Letter of Indemnity dated 3 May 2019 for the purposes of the main action herein, let alone the Application for Interim Injunction. There was no affidavit filed by the Plaintiffs to reply to the 2nd Defendant’s averment (see affidavit enclosure 10 at paragraph 14) that the indemnity provided by the 2nd Plaintiff through its Letter of Indemnity is worthless. [22] It is the 2nd Defendant’s contentions that the filing of Application for Interim Injunction is in itself an interference with the functions of the 2nd Defendant as the R&M as it is an attempt on the part of the Plaintiffs to remove the 2nd Defendant and stop them from realizing the assets of the 1st Plaintiff for the benefit of the 1st Defendant who is the debenture holder. [23] Learned counsel for the 2nd Defendant argued that the 2nd Plaintiff and 3rd Plaintiff ought to have sued the 1st Defendant alone and seek damages without involving the 2nd Defendant. 11 1st Defendant’s contentions [24] It is contended that the 2nd Plaintiff is not a man of means as the undertakings given as to damages are bare assertions unsupported by evidence. The 1st Defendant will suffer substantial loss and damages if the 2nd Defendant is not allowed to exercise his rights and duties as the R&M to protect the interests of the 1st Defendant in relation the financing facility granted by the 1st Defendant to the 1st Plaintiff. [25] In this instant Suit, the Plaintiffs are challenging the appointment of the R&M but not as to the validity of the Debenture. Thus the Plaintiffs are not disputing the validity of the Debenture but only the enforcement of the said debenture. Learned counsel for the 1st Defendant referred to the case of Paramount Acceptance Co Ltd v Souster [1981] 2 NZLR 38) where it was held by the court the challenge is against the validity of the Debenture mounted by the directors in the name of the company need no consent of the receiver as the said action would not stultify the receiver’s function of gathering in the assets of the company. 12 Plaintiffs’ contentions [26] It is argued on behalf of the Plaintiffs that –

the 2nd Plaintiff and 3rd Plaintiff as directors of the 1st Plaintiff has the residual power to institute this instant Suit and the Application for Interim Injunction. Thus there is no need for the 2nd Plaintiff and 3rd Plaintiff to obtain the 2nd Defendant’s consent before filing this instant Suit and the Application for Interim Injunction on behalf of the 1st Plaintiff. The Plaintiffs relied on the case Ali bin Tan Sri Abdul Kadir & Ors v Simpang Empat Plantation Sdn Bhd [2008] 4 MLJ 813 and argued that the appointment of receivers and managers pursuant to a debenture does not, in itself, prevent the directors of the company creating the debenture from pursuing a right of action;

the directors of a company in receivership have the residual powers to bring an action without the receivers and managers’ consent or when the receivers and managers decline to pursue the claim so long as the company is 13 indemnified against any liability for costs that the company may incur. [27] Therefore the 2nd and 3rd Plaintiffs as directors of the 1st Plaintiff have the power to institute this instant Suit and the Application for Interim Injunction by reason of the following –

vide the 1st Plaintiff’s Directors’ Circular Resolution dated 3 May 2019, the Plaintiffs have agreed to commence the instant Suit and the Application for Interim Injunction;

the 2nd Plaintiff and 3rd Plaintiff as directors of the 1st Plaintiff have given an indemnity to the 1st Defendant against any liability as to costs that may be awarded against the 1st Plaintiff arising out of the present suit (“Letter of Indemnity”); (see Exhibit A-26 of Plaintiffs’ affidavit enclosure 6 for the Directors’ Circular Resolution and Letter of Indemnity both dated 3 May 2019).

as to the Letter of Indemnity, it is argued by the Plaintiffs that if this court is not satisfied with the adequacy of the said 14 indemnity, this court has the discretion to order the 2nd Plaintiff to fortify the indemnity. On this point the Plaintiffs cited the Newhart Development’s case to support their proposition; and

the Plaintiffs are challenging the appointment of the 2nd Defendant as the R&M which was made by the 1st Defendant pursuant to the Debenture. It is argued by the Plaintiffs that based on the decision of the Court of Appeal in the case of Score Option Sdn Bhd & Anor v Duar Tuan Kiat & Ors [2012] 4 CLJ 384; [2011] 1 LNS 752; [2012] 7 MLJ 768 a challenge on the appointment of receiver and manager is an exception and the Plaintiffs are not required to obtain consent from the 2nd Defendant and are therefore entitled to commence this instant Suit. The law [28] In the High Court case of Score Option Sdn Bhd, the court dealt with the same issue, namely, whether director of a company in receivership has the locus standi to commence an action against the debenture holders. In that case, in consideration for the grant of several 15 loan facilities to them, the first and second plaintiffs executed debentures over their assets and charges over a piece of land in favour of the third defendant bank. Due to the plaintiffs' default on the loan facilities, the third defendant bank exercised its right under the debentures to appoint the first and second defendants as receivers and managers for the plaintiffs. When the receiver and manager entered into a sale and purchase agreement with the fourth defendant for sale of the plaintiffs' assets, which included the land, the directors of the plaintiff companies filed an action in the name of the companies, inter alia, for various injunctive reliefs. Essentially, the directors wanted to prevent the sale of the land to the fourth defendant. The receiver and manager entered conditional appearance and applied to set aside the writ and statement of claim on the ground the directors lacked locus standi to bring and maintain the action against them. It was the stand of the receiver and manager that the directors' action, inter alia: (i) interfered with their main function of collating and realising the assets of the companies to protect the interests of the debenture holder; (ii) prejudiced the debenture holder's position as it threatened the very assets that were subject to the charge; and (iii) failed to provide for an indemnity to the plaintiff companies for costs in the event they failed in their claim. 16 [29] The learned High Court Judge in the Score Option case considered a string of authorities cited by both parties including Newhart Development Ltd v. Co-operative Commercial Bank Ltd [1978] 2 All ER 896 as the leading case and said – Applying the principles as set out in Newhart Development to our instant case, the court is satisfied that the Directors would have locus standi to commence this action against the 1st and 2nd defendants as the appointed receivers and managers of the plaintiffs if the following conditions are satisfied:

If the Directors' actions did not interfere with the receivers and managers' function in getting in the plaintiff's assets or prejudicially affect the 3rd defendant as debenture holder by imperilling the assets;

(ii) If the Directors' actions did not in any way threaten the interests of the 3rd defendant as debenture holder; and

(iii) If the Directors have provided an indemnity for the plaintiffs against any possible liability to costs. [30] On the facts, the learned Judge allowed the application of the first and second defendants (receivers and managers) to strike out the writ and statement of claim of the first and second plaintiffs. The court made the following findings – [42] In conclusion, the court finds that the Directors have not satisfied the court that they have locus standi to bring a case in the names of the plaintiffs against the 1st and 2nd defendants as the receivers and managers appointed for the plaintiffs. The court finds that in the 17 circumstances of this case, the action commenced by the Directors which is essentially to stop the sale of the impugned land to the 4th defendant and to secure the return of the said land to the plaintiffs would definitely and undeniably interfere with the functions of the 1st and 2nd defendants in getting in the plaintiff's assets, namely the impugned land. The actions of the Directors to stop the sale also clearly threaten the interests of the 3rd defendant as debenture holder since the sale and realisation of the assets of the plaintiffs would have enabled the 3rd defendants to be repaid. And lastly, the absence of a clear indemnity against costs and damages by competent directors to the plaintiff would have placed an inordinate and additional financial burden on the plaintiffs which would have a direct impact on its assets. [43] The court is thus satisfied that the actions of the Directors in commencing an action in the name of the plaintiffs against inter alia the 1st and 2nd defendants without giving a proper indemnity to the plaintiffs would run afoul of the principles laid out in Newhart Development and followed in Simpang Empat. On that basis, the court finds that the Directors have no locus standi to commence this action. [31] The plaintiffs appealed and the appeal was dismissed. The Court of Appeal agreed with the decision of the High Court in that the action is not a bona fide action against the actions of the receivers and managers. It was held since such an action would interfere with the functions of the receivers and managers as well as impact upon the assets of the company, the consent of the receiver and manager is necessary if the directors seek to conduct legal proceedings on behalf of the company against a third party. Thus, the case does not fall within the category of actions which the directors of the companies may 18 commence without consent of the receivers and managers such as exercising their residual authority to take action against the receiver and manager, the party appointing the receiver and manager for any misconduct of the receivers and managers. Findings of the court Whether the 2nd and 3rd Defendants action in filing this Suit and the Application for Interim Injunction in the name of the 1st Plaintiff interfere with the receivers and managers' function in getting in the Plaintiff's assets or prejudicially affect the 1st Defendant as debenture holder by imperiling the assets. [32] In their Statement of Claim the Plaintiffs is seeking, inter alia, for –

declaration that certain provision in the Musharakah Agreement and the Murabahah Facility Agreement (which the Plaintiffs referred to as “2nd Tawarrruq Agreement” in their pleadings) is illegal and unenforceable;

declaration that the 1st Defendant has breached its fiduciary duties to the 1st Plaintiff and 2nd Plaintiff;

declaration there was no event of default under the Murabahah Facility Agreement and therefore the 19 appointment of the 2nd Defendant as the R&M is null and void and unenforceable; and

an injunction to restrain the 2nd Defendant from acting and holding himself out as the R&M of the 1st Plaintiff. The prayers sought in the Application for Interim Injunction is as set out in paragraph 2 above. [33] Having considered the affidavit evidence, it is obvious to this court that this instant Suit and the Application for Interim Injunction would interfere with the functions of the 2nd Defendant as the R&M appointed under the Debenture. This finding is based on the following reasons –

the 2nd Defendant who is appointed by the 1st Defendant as the R&M is duty bound under the Debenture to bring in the assets of the 1st Plaintiff, realise it and distribute the proceeds to the 1st Defendant (debenture holder) in satisfaction of its claims. Any surplus from the proceed would be returned to the 1st Plaintiff company;

the injunctive relief sought by the Plaintiffs in the Statement of Claim and the Application for Interim Injunction if granted 20 would obviously barred the 2nd Defendant from commencing all or any necessary actions to perform his duties under the Debenture which essentially concerned the realization of the 1st Plaintiff’s assets for purpose of satisfying the 1st Defendant’s claim under the Debenture;

the Plaintiffs failed to justify the instant Suit is for the benefit of the 1st Plaintiff. On the contrary, the 1st Plaintiff would be engaged in a protracted “battle” with the R&M who is tasked to manage the assets of the 1st Plaintiff for purpose of paying of the indebtedness incurred by the 1st Plaintiff under the

any order restraining the 2nd Defendant from realizing the 1st Plaintiff’s assets will undoubtedly be detrimental to the 1st Defendant as the recovery process of the financing facilities granted to the 1st Plaintiff would come to a halt or be delayed. It is obvious such a situation would not be in the interest of the 1st Defendant. On the contrary, the 1st Defendant’s interest would obviously be threatened by this instant Suit and the Application for Interim Injunction; and 21

there is no allegation whatsoever of impropriety on the part of the 2nd Defendant as the R&M of the 1st Plaintiff. [34] Based on the authorities cited, the right of directors of a company which is under receivership to exercise their residual power to commence action is not without limitation. Such power may only be exercised if by doing so would not interfere with the functions of the receivers and managers or that it would not impinge on the assets of the debenture holder or the challenge relate to the impropriety of the receivers and managers. As it is this court’s findings that this instant Suit and the Application for Interim Injunction would completely hamper the 2nd Defendant from performing its functions under the Debenture and that the 1st Defendant’s assets would be imperilled by the same, the Plaintiff’s contentions that they need not obtain consent from the 2nd Defendant to initiate this instant Suit is untenable. [35] In the case of Newhart Development, the plaintiff company sued the defendant bank for breach of contract and claimed damages. There was a contract entered between the plaintiff company and the defendant bank where it was agreed the defendant bank will provide financing to the plaintiff company to develop a project. In consideration of the financing granted, the plaintiff company issued a mortgage debenture in 22 favour of the defendant bank. Subsequently the defendant company refused to provide further financing when the plaintiff company owed a substantial amount of money. The defendant bank then appointed receivers and managers. It was held, on the facts, the action against the defendant bank did not stultify the function of the receivers and managers gathering in the assets and as such the directors were entitled to pursue the action without the consent of the receivers and managers. [36] It is to be noted in Newhart Development’s case, the action was brought against the debenture holder for breach of contract and unlike in this instant Suit, the appointed receivers and managers were not named as a party. Importantly, no injunctive relief were sought against the receivers and managers in Newhart Development’s case. [37] In the case of Paramount Acceptance, two directors of a company which is under receivership issued a writ on behalf of the company against the receiver and debenture holder seeking, inter alia, declaration that the debenture and guarantee was invalid on the ground that the seal of the company was affixed to the debenture without the approval of the board of directors having been previously obtained as required under the company’s articles. The receiver’s application to strike out on the ground, inter alia, that the director has no authority to issue the writ was 23 allowed. The directors’ appealed. In considering the directors’ appeal, the court discussed the status of a company in receivership and the position of the directors vis-à-vis the receiver. The court said when a receiver and manager is appointed over the whole of a company’s undertaking, the director will for most practical purposes become functus officio. The court then said – But the directors still retain residual powers, and if the receiver does not wish to cause the company to bring an action then the directors may do so without his consent so long as the company is indemnified against any liability for costs. Newhart Developments Ltd v Co-operative Commercial Bank Ltd [1978] QB 814, 819; [1978] 2 All ER 896, 900. On the facts the court was satisfied with the director’s ability to provide indemnity. [38] In deciding whether the action was properly authorized by the directors, the court in Paramount Acceptance case took into consideration the nature of the action mounted against the receiver and debenture holder and it said – A further consideration on this case is that the action here concerns the validity of the contract made between the company and the debenture holder which has appointed the receiver. The receiver of the appellant should not be put in the uncomfortable and untenable position in determining whether those adversary proceedings should continue, 24 and the company must have the right, independently of the receiver, to take such action as it thinks fit on all matters in dispute in respect of the alleged contract with the debenture holder (Toronto Dominion Bank v Fortin, Keller, Lucy, Merrifield Chimo Structures Ltd [1978] 2 WWR 761). It appears from the papers filed in this action, and we were told by counsel for the receiver from the Bar, that the receiver does not wish to bring the action, but that does not prevent the directors from doing so. [39] Thus by reason of the issue (whether the debenture was validly executed) sought to be determined in the writ issued on behalf of the company (as plaintiff), the court of appeal in Paramount Acceptance took the position the directors must be given the right to pursue the matter independently of the receiver. Moreover it is evident that the receiver did not wish to bring the action. It is clear that the court’s ruling that the directors ought to pursue the matter independently of the receiver is to avoid placing the receiver in an uncomfortable position having to determine whether action should be mounted in respect of the validity of the debenture pursuant to which the receiver was appointed by the debenture holder. [40] In the instant case the Plaintiffs are not challenging the validity of the Debenture. What is disputed by the Plaintiffs is the 1st Defendant’s action in enforcing its right under the Debenture to appoint the 2nd Defendant as the R&M. In this respect this court agree with learned 25 counsel for the 2nd Defendant’s suggestion that the Plaintiffs ought to have sued the 1st Defendant alone for damages (perhaps for wrongful appointment or breach of the terms of the Debenture) and leave the 2nd Defendant out of this action, in particular the injunctive relief to restrain the 2nd Defendant from performing his functions. [41] As stated above, it is contended by the Plaintiffs that based on the Court of Appeal decision in the case of Score Option the Plaintiffs has the authority to commence this instant Suit to challenge the appointment of 2nd Defendant as the R&M without having to obtain consent of the 2nd Defendant. With respect, this court is of the view such contentions is misconceived. The reason is set out below –

the Plaintiffs’ place reliance on the judgment of the Court of Appeal. The relevant and significant passage of the judgment is bold – [6] The directors have residual authority to take action against the receiver and manager, the party appointing the receiver and manager for any misconduct or if the appointment of receiver and manager is contested. See Tudor Grange Holdings Ltd and Others v. Citibank NA and Another [1991] 4 All ER 1. … 26 [9] The action sought to be commenced under the writ stems from the directors' disagreement with the action of the receivers and managers to sell the companies' charged property to the fourth respondent on the grounds that the companies' problems with the third respondent resulted from the breach by the fourth respondent of a joint venture agreement dated 22 August 2002 with the companies before the receivers and managers were appointed. The basis of objection has nothing to do with the propriety or otherwise of their actions as the receivers and managers of the companies to realise the security for the third respondent. It is not a challenge as to the appointment of the receivers and managers themselves or of any impropriety on their part. We agree with the learned judge, that the action is not a bona fide action against the actions of the receivers and managers but an interference with the functions of the receivers and managers and does not fall within the category of actions which the directors of the companies may commence without consent. (emphasis added)

as clearly stated by the Court of Appeal in Score Option’s case, the action was commenced due to the directors’ disagreement with the decision of the receivers and managers to sell the companies charged property to the fourth respondent. Whereas in the instant Suit, the Plaintiffs sought for an order to restrain the 2nd Defendant from performing his duties as receiver and manager; 27

at paragraph 6 of the judgment, the court referred to the case Tudor Grange Holdings and Others v. Citibank NA and Another [1991] 4 All ER 1. To appreciate the relevance of Tudor Grange case in so far as the Score Option case and the instant Suit is concerned, one need to consider the facts of Tudor Grange case. In that case the plaintiff group of companies, without the consent of the receivers, commenced proceedings for damages against the defendant banks (the debenture holder who appointed the receivers), claiming that the first defendant bank had induced the companies to, inter alia, enter into a deed of release (whereupon the plaintiffs companies agreed to release the banks of all claims made by the plaintiffs companies) by misrepresentation. The court held, inter alia, since the action commenced by the directors of the plaintiffs companies in the plaintiffs companies’ name could directly impinge on the property subject to the receivers’ powers, the directors had no power to commence legal proceedings on behalf of the company;

thus in Tudor Grange’s case, the appointment of receivers and managers was never an issue and thus the same was 28 not discussed by the court as can be seen from the judgment of the court. In Score Option’s case, the appointment of receivers and managers was also not challenged and certainly not discussed. As such, there is no basis to support the Plaintiffs’ contentions that the Court of Appeal in Score Option found favour with actions by directors of companies challenging the appointment of receivers and managers without the consent of receivers and managers. [42] With regards to the requirement of providing an indemnity, the Plaintiffs produced a Letter of Undertaking (Exhibit A-26 of enclosure 6) signed by the 2nd Plaintiff and 3rd Plaintiff which was addressed to the 2nd Defendant. The relevant part of the said letter read as follows –

… we [2nd Plaintiff and 3rd Plaintiff] hereby, jointly and severally offer to indemnify the Company [1st Plaintiff] and keep the Company indemnified against any and all orders pertaining to costs awarded against the 1st Plaintiff arising out or resulting from the above Civil Suit including but not limited to appeals to the Court of Appeal and Federal Court. [43] Having considered the said letter this court is compelled to agree with the Defendants that the indemnity is worthless. The said letter merely reflect the intention of the 2nd Plaintiff and 3rd Plaintiff to offer an undertaking to indemnify the 1st Plaintiff. There is no evidence adduced 29 in respect of the financial capability of both the 2nd Plaintiff and 3rd Plaintiff in order to convince this court that both the said plaintiffs would be in an adequate position to indemnify the 1st Plaintiff for any liability on costs, if any, pertaining to this instant Suit. It is without doubt such offer to indemnify is extremely inadequate to be considered as an indemnity in the context of the authorities cited by both parties. [44] Learned counsel for the Plaintiffs urged this court to consider directing the 2nd Plaintiff and 3rd Plaintiff to fortify the said undertaking / indemnity by either providing a bank guarantee or for a certain sum of money to be deposited with the solicitor. Learned counsel argued it is well within the discretion of this court to do so. While this court agree that it has the discretionary power to seek fortification from the 2nd Plaintiff and 3rd Plaintiff, I am of the view there is no necessity for this court to do so. This is because there is cogent evidence to show both the 2nd and 3rd Plaintiff are not in the position to indemnify the 1st Plaintiff against any order as to costs in the event this instant Suit is not successful. [45] The cogent evidence is the 2nd Plaintiff’s own admission made in his averment in the Plaintiffs’ affidavit enclosure 4 at paragraph 40.6. In the said affidavit it was expressly admitted by the 2nd Plaintiff (who has 30 also deposed the affidavit on behalf of the 3rd Plaintiff) that they have no capacity to repay the demand made by the 1st Defendant to the 1st Plaintiff under the ESF-I Facility and the Murabahah Facility. [46] Currently there is a pending civil action Kuala Lumpur High Court Suit No. WA-22M-556-11/2018 (“Suit 556”) filed by the 1st Defendant against the 1st Plaintiff in respect of the Murabahah Facility and against the 2nd Plaintiff and 3rd Plaintiff who stood guarantor for the Murabahah Facility. The claim mounted by the 1st Defendant was for, inter alia, the outstanding Sale Price of RM 17,250,000.00. The 1st Defendant’s application for summary judgment was dismissed by this court on the ground, inter alia, there are bona fide triable issues. The 1st Defendant’s appeal is pending in the Court of Appeal. [47] Besides Suit 556, there is also a pending civil action Kuala Lumpur High Court Suit No. WA-22M-576-11/2018 (“Suit 576”) filed by the 1st Defendant against the 2nd Plaintiff, in respect of the ESF-i Facility. Summary judgment for the sum of, inter alia, RM 8,661429.09 was entered against the 2nd Plaintiff. The 2nd Plaintiff’s appeal against the said judgment is also pending in the Court of Appeal. 31 [48] Although the issue of the Plaintiffs’ liability under the Murabahah Facility and ESF-i Facility is pending in the Court of Appeal, this cannot in any way nullify the admission made by the 2nd Plaintiff and 3rd Plaintiff of their own financial standing. It is pertinent to bear in mind that such admission were made in this proceedings in respect of the Application for Interim Injunction which was filed very much later after the disposal of the summary judgment application in Suits 556 and Suit 576. As such this court finds both the Plaintiffs are not in a position to provide adequate indemnity for the benefit of the 1st Plaintiff who would be liable to pay costs in the event this instant Suit is not successful. Any order for costs against the 1st Plaintiff would directly impinge on the 1st Plaintiff’s assets which is at the moment already subject to the Debenture. [49] In Paramount Acceptance case, the court accepted the indemnity offered by the director (of the appellant company) who stated on oath that his net assets to be approximately $ 200,000. Other than the value of the director’s net assets, the facts of that case did not indicate the director had financial liabilities. In the instant case, not only evidence in respect of the financial standing of 2nd Plaintiff and 3rd Plaintiff were not adduced, both the said Plaintiffs stated on oath they are incapable of paying the indebtedness under the ESF-i Facility and the Murabahah Facility. 32 [50] In Tudor Grange’s case, the court held that the plaintiffs companies has no locus standi to start the proceedings. However the court did not outright struck out the action on that ground alone, as there was an offer made by the directors to provide indemnity in the sum of £ 200,000. What had transpired was clearly set out by Browne-Wilkinson V-C in his judgment as follows – … In my judgment the directors had no power to start the proceedings in those circumstances. When this was pointed out, Mr Sheridan [counsel for the plaintiffs companies] took instructions and has obtained instructions that it may be possible within 28 days to provide an indemnity against all liabilities of the companies in costs to the defendants to the sum of £200,000. Given the possibility of such an indemnity now being forthcoming, if the case is otherwise appropriate to go on, I would not strike out on this ground alone, but wait to see whether this £200,00 was available and the terms offered at that stage. [51] In this instant Suit, learned counsel merely urged this court to allow the 2nd Plaintiff and 3rd Plaintiff to provide fortification. However this court was not informed as to the amount of fortification that both the Plaintiffs are prepared to offer or the worth of their financial standing. In any event, in view of the financial liabilities of both the Plaintiffs (as stated above), this court is satisfied of the financial inability of the 2nd Plaintiff and 3rd Plaintiff to indemnify the 1st Plaintiff against costs. 33 [52] Furthermore, if both the Plaintiffs has the financial means to do so, they ought to have made such proposition when their ability to provide indemnity was challenged by the 2nd Defendant in his affidavit enclosure

The Plaintiffs’ stand (in their affidavit enclosure 17, paragraph 10.2) that their inability to repay the ESF-i Facility and the Murabahah Facility does not concern their indemnity is simply untenable. Their inability to pay the indebtedness under the said facilities speak volume about their inability to provide indemnity. In fact it was their inability to repay the ESF-i Facility which resulted in the appointment of the 2nd Defendant as the R&M under the Debenture. Conclusion [53] Premised on the reasons stated above, it is the finding of this court that the 2nd Plaintiff and 3rd Plaintiff has no locus to commence this instant Suit and by extension the Application for Interim Injunction in the name of the 1st Plaintiff without the consent of the 2nd Defendant, the R&M. Even if the 2nd Plaintiff and 3rd Plaintiff have locus standi to do so, based on the affidavit evidence this court finds there is no satisfactory evidence to substantiate the indemnity offered by both the said Plaintiffs. Thus the question raised by the Defendants in their preliminary objection namely whether this instant Suit was properly brought by 1st Defendant 34 and 2nd Defendant in the name of the 1st Plaintiff is answered in the negative. This court is therefore compelled to dismiss the Application for Interim Injunction without going into the merits. [54] For the record, as a result of the said ruling by this court, the Defendants subsequently filed their respective applications to strike out this instant Suit and their applications was allowed. The Plaintiffs had also appealed against such decision. ( KHADIJAH BINTI IDRIS ) JUDGE HIGH COURT (COMMERCIAL DIVISION) DATED 29 NOVEMBER 2019 Counsel: Plaintiff : Yeoh Cho Kheong and together with Elizabeth Lau and Tan Yan Yong of Messrs Ranjit Singh & Yeoh Defendant : Datin Jeyanthini Kannaperan and together with Pauline Koh Xiu Yi of Messrs Shearn Delamore & Co.