Chua Ah Meng v Tian Kon Siong (D-02(W)-886-06/2015)

1 DALAM MAHKAMAH RAYUAN MALAYSIA (BIDANG KUASA RAYUAN) RAYUAN SIVIL NO.D-02(W)-886-06/2015 Antara

1. CHUA AH MENG

2. WEBSON SDN BHD … Perayu –Perayu Dan TIAN KON SIONG … Responden (Dalam perkara mengenai Guaman Sivil No. 22-30-2011 Dalam Mahkamah Tinggi Malaya di Kota Bharu Antara Tian Kon Siong … Plaintif

1. Dan

2. Chua Ah Meng Webson Sdn Bhd … Defendan-Defendan) CORAM: ABANG ISKANDAR BIN ABANG HASHIM, JCA BADARIAH BINTI SAHAMID, JCA MARY LIM THIAM SUAN, JCA 2 JUDGMENT OF THE COURT Introduction [1] For ease of reference parties will be referred to as they were in proceedings before the High Court. [2] This is an appeal against part of the decision of the learned High Court Judge delivered on 5 May 2015 after a full trial, where the learned Judge made the following orders:

1. whether the 1st Defendant had paid the entire concession sum of RM16 million to the Plaintiff?

2. whether the transfer of ownership of the Kluang land from the Plaintiff to the 1st Defendant is pursuant to a sale and purchase transaction or is a form of security for a loan transaction? [17] On the issue of whether the 1st Defendant had paid the entire concession sum of RM16 million to the Plaintiff, the learned Judge made the following findings:

1. The 1st Defendant had paid the entire concession sum to the Plaintiff.

2. The Memorandum of Agreement (“MOA”) entered into by the Plaintiff and the 1st Defendant on 27 April 2009 is binding on both parties. The MOA was signed with 8 the consent of both parties. There was no false representation from the 1st Defendant.

3. The terms of the MOA are clear. Para 1 confirms that the Plaintiff had received the payment of RM16 million from the 1st Defendant. The Plaintiff was given until the end of October to transfer the concession to the 1st Defendant in the event that the Plaintiff fails to fulfil his obligations. As a consequence of the Plaintiff’s failure to fulfil his obligations, the 1st Defendant became entitled to the concession in its entirety.

4. The Plaintiff himself had admitted receiving the payment of almost RM16 million. The Plaintiff’s allegation that the RM16 million had not been paid is false.

5. The 1st Defendant had given the first loan to the Plaintiff in the sum of RM3 million and thereafter, RM5 million. Subsequently, the Plaintiff had also received payment from the 1st Defendant which was admitted by the Plaintiff, the total amount being RM 16 million. The loan was valid and was confirmed by the MOA. The issue of illegality of the agreement is not pertinent in this case. 9

6. The 1ST Defendant is the owner of the concession. [18] The second issue is whether the transfer of ownership of the Kluang land from the Plaintiff to the 1st Defendant is pursuant to a sale and purchase transaction or furnished as security for a loan given by the 1st Defendant to the Plaintiff? The learned Judge made the finding that the transfer of the Kluang land was a form of security for loans given by the 1st Defendant to the Plaintiff. [19] The decision of the learned Judge on this issue was premised on the findings as follows:

1. The purchase price of the Kluang land is RM3 million. The first loan given by the 1st Defendant to the Plaintiff is also RM3 million. The transfer of ownership was executed as soon as the 1ST Defendant paid the Plaintiff. The 1st Defendant had entered a caveat on the Kluang land after the payment of the first loan.

2. The 1st Defendant did not send an assessment to the Stamp office. There were two sets of Form 14 A with two different dates. 10

2. The transfer was only remitted to the land office after the Plaintiff filed this writ.

3. The transfer was sent to the land office after 3 police reports were made by the Plaintiff.

4. The Plaintiff had signed both Forms 14A with full knowledge. There were no false representations by the Defendants.

6. The transfer of the Kluang land by the Plaintiff to the 1st Defendant and the signing of the Forms 14 A were done as a security for the loans provided by the 1st Defendant to the Plaintiff. After the MOA was executed, the Defendants were obliged to return the Kluang land to the Plaintiff who was registered in the capacity of trustee. [20] On the grounds stated above, the learned trial judge made the finding that the transfer of the Kluang land was a form of security for loans provided by the 1st Defendant to the Plaintiff. The learned Judge ordered the Defendants to return the Kluang Land to the Plaintiff and for the registration of the 2nd Defendant as the registered owner 11 be cancelled and the Plaintiff be registered as the registered owner. JUDGMENT OF THE COURT [21] Before us we have an appeal against part of the decision of the learned Judge, an appeal against the dismissal of the 1st Defendant’s counterclaim and a cross appeal by the Plaintiff. [22] The appeal by the Appellants/Defendants is against the part of the decision of the learned Judge ordering the Defendants to return the Kluang land to the Plaintiff and that the said land be registered in the name of the Plaintiff. The appeal against the dismissal of the 1st Defendant’s counterclaim is premised on allegations of false representations by the Plaintiff that caused the 1st Defendant to suffer loss and damages. The Plaintiff’s cross appeal before us is against a part of the decision of the learned Judge who dismissed the Plaintiff’s claim for RM16 million against the 1st Defendant. 12 Cross Appeal Preliminary Objection [23] The Defendants/Appellants have raised a preliminary objection (PO) against the Plaintiff/Respondent’s cross appeal on the following grounds. [24] The Defendants submit that it is now settled law that any cross-appeal must be restricted to vary only that part of the decision that was being appealed against and not any other parts of the decision that does not form the subject of the appeal. Rule 8(1) of the Rules of the Court of Appeal 1994; Leisure Farm Corp Sdn Bhd v Kabushiki Kaisha Ngu [2015] 4 MLJ 543 (Court of Appeal); Kabushiki Kaisha Ngu v Leisure Farm Corporation Sdn Bhd [2016] 8 CLJ 149 (Federal Court). Thus the cross appeal of the Plaintiff is wrong in law and ought to be struck out. [25] The Defendants’ appeal is only against a part of the decision of the learned Judge, namely in respect of the learned judge’s findings on the Kluang land as well as the 1st Defendant’s counterclaim. On the other hand, the Plaintiff’s cross appeal is in respect of the learned Judge’s findings on the Plaintiff’s claim for RM16 million against the 13 1st Defendant. Thus, the subject of the Plaintiff’s cross appeal can only be pursued by filing a separate notice of appeal. [26] In response to the Defendants’ objections the Plaintiff had relied on the case of Rajamani Meyappa Chettiar v Eng Beng Development Sdn Bhd & Ors [2016] 4 CLJ 510, in support of their argument that as the issues in the main appeal and cross appeal are inter related, the cross appeal is proper and competent to be brought with the main appeal. [27] After due consideration of learned counsels’ submissions and relevant authorities, we agreed with the submissions of learned counsel for the Defendants that Rajamani’s case (supra) can be distinguished from the instant case. In addition, we are bound by the Federal Court’s decision in Leisure Farms (supra). We therefore allowed the Defendants’ PO. We agreed with the submissions of the Defendants that there was no competent cross appeal before us. The Plaintiff’s cross appeal was struck out. 14 The Main Appeal [28] After careful consideration of learned counsels’ written and oral submissions as well as the Appeal Records, we are of the view that there are merits in this appeal that warrant appellate intervention. We give our reasons as follows. Sale and Purchase or Security for a Loan? [29] The learned Judge had made findings that the Plaintiff had signed both Forms 14 A with full knowledge and there was no evidence that the Plaintiff had been induced by representation by the Defendants. Premised on such findings, the learned judge had taken a position that seems contrary to his findings abovementioned when he concluded that the transfer of the Kluang land to the 1st Defendant was not pursuant to a genuine sale and purchase transaction between the Plaintiff and the 1st Defendant, but was a form of security for loans. [30] There was cogent and credible evidence of a genuine sale and purchase transaction between the parties which the learned judge had failed to appreciate. Among them are these: The Defendants had paid a total amount of RM2,820,000.00 to the Plaintiff. The relevant 15 conveyancing documentation had been prepared by solicitors. They include the following: the Sale and Purchase Agreement, two sets of Form 14A and the Power of Attorney. [31] In addition, the Plaintiff had executed the conveyancing documents in the presence of DW2 (Encik Mohd. Faisul bin Lasri) and DW5 (Mr. Edward Chin Chow Foo), both of whom are practising Advocates and Solicitors of the High Court of Malaya. [32] DW2 had testified that he had witnessed the execution of the SPA and the Forms 14A by the Plaintiff. DW2 had also attested the execution of the Power of Attorney by the Plaintiff, and signed the certificate of authentication. [33] In addition, DW5 had testified that he had explained the contents of the SPA to the Plaintiff, and had witnessed the Plaintiff signing the SPA and Forms 14A. DW5 had also testified that he had explained the contents of the Power of Attorney to the Plaintiff and had witnessed the Plaintiff signing the Power of Attorney. [34] The sale and purchase transaction in respect of the Kluang land was concluded on 29 April 2008, and the IDT of the 16 Kluang land was handed to the 1st Defendant on the same day. [35] From the facts and circumstances of the instant case, we are of the considered view that the transaction between the Plaintiff and the 1st Defendant was pursuant to a sale and purchase transaction in respect of the Kluang land. The MOA entered into between the parties was a separate transaction concerning Alam Rimba. The learned Judge had failed to consider that the MOA made no reference whatsoever to the Kluang land. Thus, the learned Judge had erred in his failure to appreciate that the transaction in respect of the Kluang land was separate and distinct from the MOA. [36] The Plaintiff’s pleaded case was that the signatures of the Plaintiff on the SPA and the Forms 14A were forged. In our view, the learned Judge had made the correct finding that the Plaintiff’s allegation of forgery was unsubstantiated. Other than the 1st Defendant’s testimony that he had witnessed the Plaintiff signing the Forms 14A, DW2 and DW5, two disinterested witnesses had testified to witnessing the signing of the SPA by the Plaintiff. In the case Gan Yook Chin v Lee Ing Chin @ Lee Teck Seng [2005] 2 MLJ 1 at 19B - 20G, the Federal Court had 17 accepted the direct evidence of a disinterested witness as to the genuineness of the execution of a document. [37] To prove the Plaintiff’s allegation of forgery of the Plaintiff’s signatures on the SPA and the Power of Attorney, the Plaintiff’s witness, PW2 (Encik Nor Hisham bin Hashim) testified that the disputed conveyancing documents had been submitted to the Department of Chemistry to verify the signatures on the disputed documents. However, the document Examiner, Encik Iskandar bin Azman was never called as a witness to testify on the authenticity of the signatures on the disputed documents. Neither was a report by Encik Iskandar tendered as evidence. [38] In the circumstances, the learned Judge was right to draw an adverse inference pursuant to section 114(g) of the Evidence Act, 1950 against the Plaintiff when he failed to call Encik Iskandar as a witness or to produce Encik Iskandar’s report. [39] The learned Judge was therefore correct in his finding that the signatures on the disputed conveyancing documents were the genuine signatures of the Plaintiff. 18 [40] Since the learned Judge had made the finding that the Plaintiff’s signatures on the SPA and the Power of Attorney were genuine and there was no evidence of misrepresentation by the 1st Defendant to the Plaintiff, the learned Judge ought to have concluded that the transfer of the Kluang land from the Plaintiff to the 1st Defendant was valid and consequently, the subsequent transfer of the land to the 2nd Defendant was also valid. As a result, the 2nd Defendant had acquired indefeasible title the land pursuant to section 340 of the National Land Code. Illegality [41] The learned Judge had made a finding that the transaction between the Plaintiff and the 1st Defendant was not a genuine sale and purchase transaction in respect of the Kluang land, but rather a loan transaction in which the Plaintiff had transferred the Kluang land to the 1st Defendant as security for loans provided by the 1st Defendant to the Plaintiff. [42] On the assumption that the transaction abovementioned was a security for the loan, as was found by the learned Judge, the transaction would be a money lending transaction. Thus, it would mean that the Plaintiff who is 19 not a licensed moneylender would then run foul of section 15 of the Moneylenders Act, 1951 which provides as follows: “No moneylending agreement in respect of money lent after the coming into force of this Act by an unlicensed moneylender shall be enforceable.” [43] The effect of section 51 abovementioned is that any purported moneylending agreement between the Plaintiff and the 1st Defendant would be void for illegality. However, learned counsel for the Defendants submitted that the learned Judge had failed to appreciate the effect of his finding in relation to the abovementioned provision in the Moneylenders Act, 1951. Learned counsel for the Defendants submitted that if that were the case, since the transaction had been fully executed, the property to the Kluang land would effectively pass to the 1st Defendant notwithstanding the illegality. In the case of Sajan Singh v Sardara Ali (1960) 26 MLJ 52, the Privy Council had made the observation that in respect of illegal agreements, “let the estate lie where it falls”. [44] However, since we have made the finding that the transaction involving the Kluang land is a genuine sale and 20 purchase transaction between the Plaintiff and the 1st Defendant, and not a transaction in which the Kluang land was utilised as a security for loans from the 1st Defendant to the Plaintiff, the issue of moneylending does not arise. [45] We therefore had allowed the appeal of the Defendants and set aside the decision of the learned Judge in respect of the Kluang land. Counterclaim [46] In his counterclaim before the High Court, the 1st Defendant had alleged that the 1st Defendant was induced by the Plaintiff through various representations to invest in Alam Rimba. These representations were discovered to be false or fraudulently made. As a result of the false representations and fraud, the 1st Defendant alleged that he had suffered loss and instituted the counterclaim to seek damages. [47] The learned judge had dismissed the 1st Defendant’s counterclaim on the grounds that the subject had become academic. In his “Grounds of Judgment” it was stated, in sparse terms as follows: 21 “[12] Saya juga menolak tuntutan balas Defendan-defendan atas alasan perkara tersebut telah menjadi akademik.” There was no analysis of the subject matter of the counterclaim or reasons given by the learned Judge as to the basis for arriving at the abovementioned conclusion. [48] According to the submissions of learned counsel for the 1st Defendant, the subject matter of the counterclaim is as follows: In 2008, the Plaintiff had invited the 1st Defendant to invest in a timber logging project. The Plaintiff had represented to the 1st Defendant that:

(ii) the said timber concession was a very lucrative investment because the concession area was filled with good quality timber (“Plaintiff’s second representation”). 22 [49] The 1st Defendant had relied on the Plaintiff’s first and second representations abovementioned and had agreed to invest in the said timber project. Monies were given by the 1st Defendant to the Plaintiff as investment in the timber project. [50] Subsequently, the 1st Defendant was made a director of MTSB and given 25% of the shareholding in MTSB. The 1st Defendant continued to invest monies in the said timber project. [51] It was only later that the 1st Defendant discovered that the timber concession was not given to MTSB but to Alam Rimba. The Plaintiff had explained to the 1st Defendant that he had made a mistake and agreed to make the 1st Defendant and subsequently the 1st Defendant’s wife as partners in Alam Rimba. After the 1st Defendant was made a partner in Alam Rimba, the 1st Defendant made further investment in the timber project. [52] On 27 April 2009, the Plaintiff and the 1st Defendant entered into the MOA wherein the Plaintiff guaranteed among others, that the 1st Defendant could make a profit of not less than RM26 million by October 2009 from the timber concession. 23 [53] The 1st Defendant had suffered loss and damages in reliance on the Plaintiff’s representations on the timber project. In particular, the 1st Defendant had incurred the following expenses:

(ii) payment of RM473,280.00 to the Forestry Department of Kelantan to pave the path leading to the concession area and payment of premiums;

(iii) payment of RM50,000.00 as legal fees for the agreement between Alam Rimba and KPK for the timber concession; and

(iv) purchase of various machineries and equipment for the purpose of extracting timber. [54] In response to the 1st Defendant’s counterclaim, the Plaintiff‘s submissions can be summarised as follows: There was no misrepresentation on the part of the Plaintiff or any inducement by the Plaintiff that was relied on by the 1st Defendant in his decision to invest in the timber project. The 1st Defendant was made a partner of MTSB and later 24 Alam Rimba and was in a position to verify details of the timber concession and the quality of the timber with KPK but had failed to do so. [55] In our considered view, the learned judge had failed to give due consideration to the 1st Defendant’s counterclaim before dismissing it as academic. The learned Judge had failed to evaluate the oral and documentary evidence adduced by the 1st Defendant to support their counterclaim. Had the learned Judge properly evaluated the evidence adduced before him, he would not have dismissed the counterclaim as he did. On the balance of probabilities, we are of the considered view that there is sufficient evidence to prove the 1st Defendant’s counterclaim. We had therefore allowed the counterclaim with costs and interest and order the assessment of damages to be undertaken by the same High Court judge who had conducted the trial. [56] To summarise, we had made the following orders:

(ii) the Defendants/Appellant’s main appeal in respect of the Kluang land is allowed with costs. The decision of the learned Judge is set aside; and

(iii) the counterclaim of the 1st Defendant/1st Appellant is allowed with costs and interest. The decision of the learned Judge is set aside. The case is remitted to the same High Court Judge for assessment of damages. Dated: 24 June 2019. (DATUK DR. BADARIAH SAHAMID) COURT OF APPEAL PUTRAJAYA 26 For the Appellant: Tan Sri Dato’ Cecil Abraham (together with Mr. Sunil Abraham, Mr. Alex Tan Chie Sian and Mr. P L Cheah) Solicitors for the Appellant: Tetuan Wong Kian Kheong Peguambela & Peguamcara D1-U5-01, Solaris Dutamas No. 1, Jalan Dutamas 1 50480 Kuala Lumpur For the Respondent: Mr. Adrian a/l Silvarajoo (together with Mr. Muhamad Atif bin Abdullah) Solicitors for the Respondent: Tetuan Ramli Yusuff & Co. Peguambela & Peguamcara No. 2, Jalan 19/1 46300 Petaling Jaya