Dagang Nexchange Berhad v Mohd Ismail Khan Bin Wazir Khan (WA-22NCC-596-11/2022)

DAGANG NEXCHANGE BERHAD

DAGANG NET TECHNOLOGIES SDN BHD

DNEX TELCO SERVICES SDN BHD

PT DAGANG SAMUDERA HUTAMA 9120311280926)

PT DNEX TELCO INDONESIA 0220003102666) … PLAINTIFFS AND ! MOHD ISMAIL KHAN BIN WAZIR KHAN (NRIC NO.: 840427-10-5795) … DEFENDANT GROUNDS OF JUDGMENT A. Introduction [1] The plaintiffs filed a claim against the defendant for breach of the defendant’s duties to the plaintiffs. [2] After a full trial, the court allowed the plaintiffs’ claim. The reasons for this decision are set out below. B. Background Facts The parties [3] The 1st plaintiff and its group of companies (“DNEX Group”) operate in three business divisions, namely technology, energy and information technology. [4] The 1st plaintiff is the controlling mind of the DNEX Group, which includes: a. The 1st plaintiff; b. The 2nd plaintiff, a wholly-owned subsidiary of the 1st plaintiff; ! c. The 3rd plaintiff, a company owned by the 2nd plaintiff and ZKZ Euphoria Sdn Bhd (“ZKZ Euphoria”). The 3rd plaintiff was incorporated pursuant to a joint venture cum shareholders agreement dated 29 May 2017 between the 2nd plaintiff and ZKZ Euphoria (“JVSA”); d. The 4th plaintiff, a special purpose vehicle incorporated in Indonesia to hold the 1st plaintiff’s assets for the business venture which involves the provision of services for infrastructure works for the telecommunications industry in Indonesia (“Indonesian Business Venture”); and e. The 5th plaintiff, a special purpose vehicle incorporated in Indonesia for the purpose of undertaking the DNEX Group’s business of repair and maintenance of submarine fibre optic cables in Indonesia. [5] The defendant was the chief executive officer (“CEO”) of the 3rd plaintiff from 15 May 2017, until his suspension and dismissal on 21 May

The defendant was also the founder and director of ZKZ Euphoria. He held 41% shares in ZKZ Euphoria. The JVSA and the incorporation of the 3rd plaintiff [6] In 2017, the 1st plaintiff was approached by the defendant on a proposal for the Indonesian Business Venture, to be undertaken with ZKZ Euphoria. ! [7] ZKZ Euphoria was a ship brokering and marine services company providing amongst others, ship rental and management, oil and gas, marine supply crew and offshore catering services. ZKZ Euphoria was wound up on 17 June 2020. [8] Following the collaboration between the 1st plaintiff and ZKZ Euphoria on the Indonesian Business Venture, the JVSA was executed, and the 3rd plaintiff was incorporated. [9] The defendant was appointed as the CEO of the 3rd plaintiff to lead the implementation of the Indonesian Business Venture. By virtue of these roles, he was also part of the senior management of the DNEX Group. The acquisition of the refurbished T600 trenching remote operated vehicle (“Secondhand ROV”) [10] On 28 February 2020, the 1st plaintiff, through the 4th plaintiff, acquired a vessel known as “KDDI Pacific Link” to undertake a project for “Submarine Fibre Optic Installation, Repair and Maintenance Work” (“Project”). One of the requirements for the Project is for a remote operated vehicle (“ROV”) to be available, for the repair and maintenance of submarine telecommunication cable systems. [11] The defendant therefore proposed the acquisition of the Secondhand ROV from Merit Corona Sdn Bhd (“Merit Corona”), at a cost of USD4,000,000. Approvals were sought and obtained from the technical committee (“Technical Committee”), the board procurement and tender ! committee (“Board Tender Committee”), and ultimately the board of directors (“Board”) of the 1st plaintiff on the proposal. [12] On 5 June 2020, the 4th plaintiff executed an equipment sales agreement (“ESA”) with Meritco Resources Labuan Ltd (“Meritco Labuan”), to acquire the Secondhand ROV. Allegations of wrongdoings and misconduct by the defendant [13] On 24 February 2022, the 1st plaintiff claimed it received a whistleblower report, detailing wrongdoings and misconduct on the part of the defendant, in relation to the acquisition of the Secondhand ROV. [14] The 1st plaintiff engaged PwC Consulting Associates (M) Sdn Bhd (“PwCCA”), to conduct an investigation into the wrongdoings and misconduct raised in the whistleblower report. PwCCA prepared a forensics report dated 2 September 2022 (“PwCCA Report”), which reported that the defendant had breached the purchasing and tendering policies and procedures of the DNEX Group (“DNEX Purchasing P&P”), by inter alia favouring Merit Corona during the procurement process for the acquisition of the Secondhand ROV, and grossly inflating the purchase price of the Secondhand ROV. The PwCCA Report also found that the defendant had made secret profits from the acquisition of the Secondhand ROV, and had shared confidential information to a third party. [15] The present action was commenced by the plaintiffs following the PwCCA Report. ! [16] The defendant denied any wrongdoing, claiming that the Secondhand ROV was necessary for the Project, and that he had obtained the approvals required for its acquisition. C. The Defendant’s Duties [17] The plaintiffs’ claim gives rise to one main issue for this court to consider, which is whether the defendant had breached his duties to the plaintiffs, in the acquisition of the Secondhand ROV. [18] It is not in dispute that the defendant was the CEO of the 3rd plaintiff, and by virtue of this position, he was also in the top management of the DNEX Group. The defendant’s main role in the DNEX Group was to advise the plaintiffs on the Indonesian Business Venture. [19] The positions and roles held by the defendant gave rise to various duties which the defendant owed to the plaintiffs. These include the following duties imposed on a director under the Companies Act 2016 (“CA 2016”): a. To exercise his powers in accordance with the CA 2016, for a proper purpose and in good faith in the best interest of the company (section 213(1)); b. To exercise reasonable care, skill and diligence with – i. The knowledge, skill and experience which may reasonably be expected of a director having the same responsibilities (section 213(2)(a)); and ! ii. Any additional knowledge, skill and experience which the director in fact has (section 213(2)(b)). [20] Further, a director is required to make business judgments in the manner set out under section 214 of the CA 2016: “(1) A director who makes a business judgment is deemed to meet the requirements of the duty under subsection 213(2) and the equivalent duties under the common law and in equity if the director –

makes the business judgment for a proper purpose and in good faith;

does not have a material personal interest in the subject matter of the business judgment;

is informed about the subject matter of the business judgment to the extent the director reasonably believes to be appropriate under the circumstances; and

reasonably believes that the business judgment is in the best interest of the company.” [21] In view of his position as the CEO of the 3rd plaintiff, the defendant is required to comply with the duties and responsibilities set out in sections 213 and 214 of the CA 2016. ! [22] In Symbion International Sdn Bhd v Mah Chez Yong [2019] MLJU 2091, the court referred to section 210 of the CA 2016, which provides that the definition of a “director” who is bound by the duties in, inter alia, sections 213 and 214 of the CA 2016, includes the CEO of a company. [23] Further, and also due to his position as the CEO of the 3rd plaintiff and his roles in the management team of the DNEX Group, the defendant owes fiduciary duties to all plaintiffs. The Court of Appeal in Soh Chee Gee v Syn Tai Hung Trading Sdn Bhd [2019] 2 MLJ 379 explained that the defendant, who was the CEO of the company, owed fiduciary duties to the company: [43] We have perused the appeal records and considered the submissions of learned counsel. The plaintiff’s claim is essentially premised on breach of fiduciary duty by the CEO of the company. The position in law of CEO is one of a fiduciary. Section 132 of the Companies Act 1965 prior to the recent amendments sets out in statutory form the duties of a director. The defendant in the instant case is not a director of the Board of Directors of the plaintiff. The designation of ‘Executive Director’ denotes in the instant case, the name given to the position to which the defendant was appointed. The defendant however remained an employee at all material times. It appears that learned counsel for both the plaintiff and the defendant failed to appreciate the distinction between an employee who is appointed to a position called ‘Executive Director’ and a director on the Board of Directors. In the circumstances therefore, s 132 which is specifically for directors is not applicable for an employee such as ! the defendant. However, as the defendant in his capacity as the CEO assumes a fiduciary position, the common law in relation to the duties and obligation of a fiduciary remains wholly relevant. As such the authorities relied upon by the parties are inapplicable, strictly speaking. [44] In Concise Principles of Company Law in Malaysia (2nd Ed, 2010, LexisNexis) the learned authors stated as follows: Fiduciary duties are imposed on persons who are involved in the management of a company. This obviously includes directors. The definition of a ‘director’ also includes persons other than directors, to whom the board has delegated managerial duties and other persons who act as a director even though they have not been validly appointed … It is therefore necessary to distinguish between persons involved in management and mere employees. Persons taking part in the management of a company have authority to act in an independent and significant manner and are not subject to the close supervision and control of others more senior in the company hierarchy. At common law, only persons holding a senior management position, owe duties similar to directors: Green v Bestobell Industries Ltd [1982] WAR 1. … ! [48] The defendant, as the plaintiff’s CEO, would certainly fall into the category of very senior employees who are in a position of special trust and responsibility with regard to the management of the organisation and assets. The defendant thus owes fiduciary duties to the plaintiff, which we found that he had breached.” (emphasis added) [24] I am further guided by Gurbachan Singh s/o Bagawan Singh v Vellasamy s/o Pennusamy (on their behalf and for the 213 sub-purchasers of plots of land known as PN35553, Lot 9108, Mukim Hutan Melintang, Hilir Perak) [2015] 1 MLJ 773, involving the duties arising from a solicitor-client relationship. The Federal Court held that the categories of fiduciary relationships are not closed, and the relationships arise based on the circumstances of the case: “[54] 'For a person to be a fiduciary he must first and foremost have bound himself in some way to protect and/or to advance the interests of another. This is perhaps the most obvious of the characteristics of the fiduciary office for Equity will only oblige a person to act in what he believes to be another's interests if he himself has assumed a position which requires him to act for or on behalf of that other in some particular matter' (see Professor PD Finn: Fiduciary Obligations (1977)). Thus, the essential element is that there must be some undertaking on the part of the fiduciary to act with loyalty in the interest of the other party. 'A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in ! circumstances which give rise to a relationship of trust and confidence' (see Bristol and West Building Society v Mothew). [55] The categories of fiduciary relationship are not closed. Indeed it was said that it was doubtful 'if it is fruitful to attempt to make a general statement of the circumstances in which a fiduciary relationship will be found to exist. Fiduciary relations are of different types, carrying different obligations … and a test which might seem appropriate to determine whether a fiduciary relationship existed for one purpose might be quite inappropriate for another purpose. For example, the relation of physician and patient, and priest and penitent, may be described as fiduciary when the question is whether there is a presumption of undue influence, but may be less likely to be relevant when an alleged conflict between duty and interest is in question. Moreover, different fiduciary relationships may entail different consequences, as is shown by the discussion of the respective positions of a trustee and a partner in relation to the renewal of a lease' (see Hospital Products Limited v US Surgical Corporation (1984) 58 ALJR 587). Nevertheless, it is generally accepted that there are two main circumstances in which fiduciary relationships arise, namely, per se fiduciary (status-based fiduciary) and ad hoc fiduciary (fact-based fiduciary).” (emphasis added) [25] Applying the above cases to the facts of the present case, I find that in view of the defendant’s position as the CEO of the 3rd plaintiff and ! his roles in the management team of the DNEX Group, he owed fiduciary duties to all plaintiffs, requiring him to act in the best interest of the plaintiffs. [26] Specifically, I find the defendant’s duties and responsibilities towards the plaintiffs to include the following: a. To act in good faith in the best interest of the plaintiffs; b. To exercise reasonable care, skill and diligence with the knowledge, skill and experience which may be reasonably expected of a director and/or CEO; c. To make business judgment for a proper purpose and in good faith; d. To avoid a situation of conflict of interest; and e. To protect and maintain the confidentiality of sensitive information. D. Allegations of Breaches of the Defendant’s Duties [27] The plaintiffs alleged that in the process of the acquisition of the Secondhand ROV, the defendant had breached his duties to them. Specifically, they alleged that the breaches of duties arise from the following conducts of the defendant: ! a. Failing to disclose the original purchase price of the Secondhand ROV; b. Failing to disclose conflict of interest; c. Failing to comply with the DNEX Group’s policies and procedures; d. Failing to give careful and/or sound and/or reasonable advice; e. Making secret profits; and f. Disclosing confidential information to a third party. [28] The court considered each allegation of breach of duties, and found that these allegations have been made out by the plaintiffs. E. First Allegation of Breach of Duties: Failing to Disclose the Original Purchase Price of the Secondhand ROV [29] The PwCCA Report revealed that: a. The original price paid by Merit Corona to the original vendor of the Secondhand ROV, Romas Marine (Monaco) SRL Ltd (“Romas Marine”), prior to the sale of the Secondhand ROV by Meritco Labuan to the 4th plaintiff, was USD665,000 (“Original Price”); and ! b. The defendant was aware of the Original Price. [30] This is evident from bills of sale dated 7 January 2020 and 20 March 2020 respectively (collectively, the “BOS”), which were forwarded by Merit Corona to several individuals including the defendant, by way of an email dated 8 May 2020 (“May 2020 Email”). The BOS were sent as evidence of the ownership of the Secondhand ROV by Merit Corona. [31] I note that the BOS were redacted to conceal the Original Price, but the redaction was removed by PwCCA when the PwCCA Report was prepared. The removal of the redaction revealed the Original Price of USD665,000, which was paid by Merit Corona for the Secondhand ROV. [32] As the defendant was a recipient of the May 2020 Email, he would have been likely to be aware of the Original Price. However, the defendant did not inform the Technical Committee, the Board Tender Committee or the Board of this price. Instead, he advised the Technical Committee, the Board Tender Committee and the Board to purchase the Secondhand ROV at an inflated sum of USD4,000,000, which is USD3,335,000 more than the Original Price. [33] I find the defendant’s non-disclosure of the Original Price to be a breach of his duties to the plaintiffs. Had the defendant been transparent in his conduct and revealed the Original Price to the Technical Committee, the Board Tender Committee and the Board, the officers and decision-makers of the plaintiffs would have been able to make an informed decision on the purchase price of the Secondhand ROV. This information was however not disclosed. ! [34] The defendant was under a duty to the plaintiffs, to make good business judgment, for a proper purpose and in good faith. The non-disclosure of the Original Price, coupled with his advice for the 4th plaintiff to purchase the Secondhand ROV at an inflated price of USD4,000,000, in my considered view suggests bad faith, and is ultimately a breach of duties on the part of the defendant. F. Second Allegation of Breach of Duties: Failing to Disclose Conflict of Interest [35] The evidence before the court indicates that the defendant had a prior working relationship with and was a friend of the founder and majority shareholder of Merit Corona, Azmi Ahmad (“Azmi”). [36] This was revealed during the examination-in-chief of Mohd Nizam Kamal, the project manager of the 3rd plaintiff (“PW2”). PW2 confirmed that Azmi is a friend of and/or is known to the defendant. [37] PW2’s testimony is consistent with the testimony of Amirul Anwar Kamsani, the finance manager of the 3rd plaintiff (“PW3”), who testified as follows during re-examination: “FOONG Alright just very quickly, I will take to question were asked of you immediately before the re-examination. And you were referred to Q&A 20 [WS-PW3] right. The question is in your Witness statement you say, do you know if DNeX had requested Merit Corona to participate in any way right, and your 2nd paragraph where you say However, the ! Defendant could have personally informed Merit Corona, vide an informal channel, to submit the proposal for the Secondhand ROV. So, the Counsel for the Defendant asked you, you do not have any evidence to support your statement and it is baseless. And you say yes, and you wanted to explain. Would you now like to explain why you said, yes? PW3 Yes, I would, Yang Arif this yes I don’t have any physical evidence towards this but the relationship between the Defendant and also Captain Azmi of Merit Corona is well known as a friend, because this is going back way back when I was in ZKZ Technology, I heard about his name but I never met the guy. But he was always there to help whenever we require, when it comes to the business of ZKZ Euphoria. So, when this surfaces the first thing that okay we know this is Captain Azmi so, that’s why when we look at the trailing of the email, we couldn’t find any official communication between Merit Corona and also DNeX …” (emphasis added) [38] The above testimonies show that it was common knowledge amongst those who work with the defendant, that he and Azmi knew each other. ! [39] I also accepted the evidence of Alex Michael Kwan Yew Tan, the partner of PwCCA who prepared the PwCCA Report (“PW4”), on the connection between the defendant and Azmi. PW4 referred to a chart in the PwCCA Report, which sets out the relationship between the parties involved in the acquisition of the Secondhand ROV. The chart indicates that the defendant and Azmi were friends. The testimony of PW4 on the relationship between the defendant and Azmi is as follows: “ANSON Can you please explain to Court what chart is this? PW4 Okay, this is what we call My Lady a relationship chart. It shows some of the relationships and connections that relate to the matter beforehand. So, on the left-hand side the red boxes there just shows some of the shareholdings Companies involved etcetera. If we come to the center of the relationship chart, you can see the Defendant’s name at the top and below that Captain Azmi being 70% shareholder of Merit Corona. You can see the line between them, we have confirmed that they are both Facebook Friends also during our investigation, we part of the investigation obviously involves discussions and interviews with various staff members, we were advice hence that is why we said there is a relationship with that the Captain Azmi previously worked with the Defendant, and they are personal friends. That to us was somewhat substantiated by the fact that they are Facebook friends …” ! (emphasis added) [40] From available evidence, it is clear that the defendant and Azmi knew each other. This gives rise to a potential conflict of interest in the conduct of the defendant overseeing and advising on the acquisition of the Secondhand ROV. [41] In Dato' See Teow Chuan v Ooi Woon Chee (including Can-One International Sdn Bhd as 15th respondent) [2010] 6 MLJ 459, the Court of Appeal explained the concept of conflict of interest, and held that it is of wide application: “[182] The width and pith of the conflicts rule cannot be doubted. It is universal in its application. It receives its affirmation by Lord Cranworth LC in Aberdeen Rail Co v Blaikie Brothers [1843–60] All ER Rep 249 at p 252 in these words: This, therefore, brings us to the general question, whether a director of a railway company is or is not precluded from dealing on behalf of the company with himself or with a firm in which he is a partner. The directors are a body to whom is delegated the duty of managing the general affairs of the company. A corporate body can only act by agents, and it is, of course, the duty of those agents so to act as best to promote the interests of the corporation whose affairs they are conducting. Such an agent has duties to discharge of a fiduciary character towards his principal, and it is a rule of universal application that no one having such duties ! to discharge shall be allowed to enter into engagements in which he has or can have a personal interest conflicting or which possibly may conflict with the interests of those whom he is bound to protect … [183] Some general statements of the law in regard to the issue of a conflict of interest should be advanced, namely:

It must be remembered that it is 'an inflexible rule of a court of equity' (George Bray v John Rawlinson Ford at p 51).

The law requires that there is a reasonable perception of a conflict of interest arising bearing in mind that it is difficult to determine whether a genuine conflict of interest has occurred.

The remoteness of the possibility of a genuine conflict of interest is not a relevant consideration to determine the liability of a fiduciary.

The duty of disclosure falls on the fiduciary. The fiduciary must disclose his personal interest as soon as a possible conflict arises, or as soon after as is practicable.

The law targets against potential conflict of interest as well as actual conflict of interest.” ! (emphasis added) [42] In the present case, it has been established that the defendant and Azmi had a prior working relationship and were friends. Considering this relationship with their roles in their respective companies – the defendant being the advisor of the plaintiffs on the acquisition of the Secondhand ROV from Merit Corona, and Azmi being a shareholder of Merit Corona – it is likely that the defendant and Azmi would have both been in positions of power and would have been able to influence the outcome of the acquisition of the Secondhand ROV. [43] This relationship therefore gives rise to a potential conflict of interest, which the defendant was under a duty to avoid, pursuant to sections 213 and 214 of the CA 2016, and pursuant to his fiduciary duties to the plaintiffs. The fact that he did not disclose his relationship with Azmi to the Technical Committee, the Board Tender Committee or the Board, and proceeded to advise on the acquisition of the Secondhand ROV is a breach of his duties to the plaintiffs. G. Third Allegation of Breach of Duties: Failing to Comply with the DNEX Group’s Policies and Procedures The policies and procedures [44] There are two policies and procedures that the court finds the defendant had failed to comply with. They are the DNEX Purchasing P&P and DNEX Group’s discretionary limits of authority (“DAL”). ! The DNEX Purchasing P&P [45] The DNEX Purchasing P&P require competitive tendering for the procurement of goods and services exceeding RM5,000,000. [46] Specifically, clause 4.2.2 of the DNEX Purchasing P&P provides that the initiator for the purchase of goods and services is required to submit a tender requisition form to the Board Tender Committee for approval. The preferred tender sourcing method, namely whether by way of open tender, closed tender or the waiver of competition, must be referred to in the form. [47] The defendant admitted that he was aware of the DNEX Purchasing P&P. [48] However, by an email dated 25 December 2019, Merit Corona sent a proposal on the acquisition of the Secondhand ROV directly to the defendant, without complying with the DNEX Purchasing P&P. The email, sent by Syarulzaman Effendi Jumaili to the defendant and Mohamad Khairul Faizal Nordin, and copied to Azmi, reads: “Dear Sirs; Pls find as attached the following; 1) Proposal from Merit Corona for the Trenching ROV System 2) ROV (T600) Specs ! 3) ROV (T600) Track records Do hope above are in order and looking forward to working relationship with your company.” [49] From my observation, there does not appear to be any request for Merit Corona to submit the proposal in accordance with the DNEX Purchasing P&P, and the email appears to be unsolicited. Further, the defendant failed to explain why the proposal was sent to him. [50] I have compared the manner in which other vendors had submitted proposals on the acquisition of the Secondhand ROV, and the contrast is clear. The proposals from other vendors, namely Pharos Offshore Ltd and Soil Machine Dynamics Ltd, were procured through proper channels in accordance with the DNEX Purchasing P&P. [51] In Kontron Asia Pacific Design Sdn Bhd v Quah Sin Chye [2018] 8 CLJ 490, the High Court held that a CEO is presumed to know all the company’s policies and procedures, and to strictly abide by them, The court ruled that the CEO’s failure to comply with policies and procedures is a breach of his fiduciary duties. [52] In the present case, in view of the relationship between the defendant and Azmi, which the defendant had deliberately chosen not to disclose, I find it to have been more likely than not that the defendant had played a role in ensuring the submission of the proposal by Merit Corona. The act of the defendant in procuring the proposal without due compliance with the DNEX Purchasing P&P is in my considered view a breach of the defendant’s duties to the plaintiffs. ! The DAL [53] In addition to the DNEX Purchasing P&P, the 4th plaintiff as the entity acquiring the Secondhand ROV was also required to comply with the DAL. The DAL sets out the levels of approvals that must be obtained by subsidiaries within the DNEX Group in relation to inter alia, the acquisition of assets. The DAL would therefore apply to the 2nd to 5th plaintiffs. [54] The DAL provides that prior to the acquisition of assets exceeding RM5,000,000, all subsidiary companies within the DNEX Group must obtain the prior approval of the Board Tender Committee and the Board. [55] However, the defendant had caused the 4th plaintiff to make payment towards the earnest deposit amounting to USD113,000 to Merit Corona, before the acquisition of the Secondhand ROV was approved by the Board. This is evident from the following: a. The defendant was scheduled to conduct a presentation to the Board, to seek approval for the 4th plaintiff to acquire the Secondhand ROV from Merit Corona, at 9.30 am on 29 May 2020. b. However, at approximately 8.03 am on 29 May 2020, and before the presentation to the Board, the defendant had caused the 4th plaintiff to pay an earnest deposit of USD113,000 to Merit Corona for the acquisition of the Secondhand ROV. ! [56] In causing the payment of the earnest deposit to be made before obtaining approval for the acquisition of the Secondhand ROV from the Board, the defendant was acting in a manner inconsistent with the requirements in the DAL. [57] The defendant’s deliberate non-compliance with internal policies and procedures is in my view a breach of his duties to the plaintiffs. H. Fourth Allegation of Breach of Duties: Failing to Give Careful and/or Sound and/or Reasonable Advice The defendant’s expertise and experience [58] It must again be emphasised that the defendant was the CEO of the 3rd plaintiff and the advisor of the DNEX Group for the Indonesian Business Venture. By the defendant’s own admission, he had the necessary expertise and experience in the telecommunications industry, and in the business of offshore support vessels – both being areas closely connected to the Indonesian Business Venture. [59] Although the defendant professed to have these expertise and experience, he failed to give careful and/or sound and/or reasonable advice to the plaintiffs on the acquisition of the Secondhand ROV. I considered two instances of this failure. ! Failure to advise on a due diligence and physical inspection of the Secondhand ROV [60] First, the defendant failed to advise the Technical Committee, the Board Tender Committee or the Board, to undertake a due diligence and to conduct a physical inspection of the Secondhand ROV prior to its purchase. [61] I accepted the testimony of PW2, who explained that he had advised the defendant to inspect the Secondhand ROV before its purchase, but the defendant did not allow the inspection. This is set out in question 30 of the witness statement of PW2: “Q30 : Did DNeX inspect the Secondhand ROV prior to acquiring the Secondhand ROV? A : At the outset, I had advised the Defendant to inspect the Secondhand ROV before proceeding to purchase the Secondhand ROV from Merit Corona especially during my visit to Port of Blyth in Newcastle ('Port') sometime in January 2020, whereby I was within the vicinity where the Secondhand ROV was stored. However, I was informed by the Defendant that Merit Corona did not allow DNeX to inspect the Secondhand ROV prior to the payment of the earnest deposit, and the Defendant had nevertheless proceeded to recommend DNeX to ! approve the acquisition of the Secondhand ROV without inspecting the Secondhand ROV.” (emphasis added) [62] I also accepted the testimony of PW4, who described the obstructive behaviour of the defendant when the issue of the need for a physical inspection of the Secondhand ROV was raised. PW4 testified as follows during cross-examination: “PW4 So, My Lady if I may explain so, the premise of our investigation is, there is a number of interviews we undertook. The interview that we undertook, and this is the reason why we set out in our Report, where from start we say that the Defendant was the one who got primarily dealt Merit corona if Defendant would regularly block all questions relating to the Merit corona Defendant primarily dealt Merit corona. The other part where we out those statement in our report, where we found it unusual that you have to buy the machine before you can inspect it. Which seems to us to be highly unusual using the vehicle analogy My Lady, you wouldn’t expect to only be able inspect the vehicle after you bought it. And then thirdly the other reason that we make those statements was the apparent friendship between the Defendant and Captain Azmi the 70% shareholder of Merit Corona. And finally, and fourthly undermining everything was these commission ! payments, which were right in the middle of the negotiations in March 2020. So, when you take it in isolation where you say well you wanted a physical inspection, and it was denied because you had to sign certain purchase. That’s just one part of the whole picture around why we said that uhm it appeared to us that the Defendant uh was obstructive.” (emphasis added) [63] The defendant’s conduct in hindering the physical inspection of the Secondhand ROV was explained at page 17 of the PwCCA Report: “One of the key factors that contributed to the significant increase in the ROV refurbishment cost was the condition of the asset. That is, the ROV required much more work than anticipated. According to DTS staff, the less than optimal condition of the ROV was only discovered after the acquisition. This was because there was no physical inspection done prior to signing the S&P with Merit Co. It appears that Merit Co and, to some extent, Ismail may have hindered a physical inspection from taking place prior to the award. Some examples of this are: · On 25 February 2020, Nizam sent an email to Merit Co requesting to inspect the ROV. However, the request was denied by Merit Co, claiming that an inspection ! would only be permitted by the asset owner after the S&P was signed … · At interview, Nizam told us that efforts to physically inspect the asset were impeded by Ismail. Nizam told us that there was an opportunity to inspect the ROV in the UK sometime between late January to February 2020, when he was there to inspect other equipment. However, the inspection did not take place as he was given only a period of seven days to inspect the asset at the time, which he said was insufficient. In addition to time constraints, Nizam was verbally informed by Ismail that DTS had to pay a 5% inspection fee (of the USD4M purchase price) to inspect the asset. Ismail did not want to pay this fee.” (emphasis added) [64] It appears from available evidence that the position taken by Merit Corona and agreed to by the defendant, was that the inspection of the Secondhand ROV would only be allowed after the agreement on the acquisition of the Secondhand ROV had been executed. On this basis, the defendant proceeded to recommend the acquisition of the Secondhand ROV notwithstanding the fact that the 4th plaintiff was not given the opportunity to conduct a due diligence on or inspect the Secondhand ROV. [65] The court finds the conduct of the defendant to be so inconsistent with sound business practices, that he cannot be said to have exercised ! his duties and responsibilities as the CEO of the 3rd plaintiff and a management team member of the GDEX Group for a proper purpose and in good faith, in accordance with sections 213 and 214 of the CA 2016. His conduct is therefore a breach of his duties to the plaintiffs. [66] It later became clear that a due diligence and a physical inspection would have disclosed the following facts which are highly material to the acquisition of the Secondhand ROV: a. The Secondhand ROV was in poor physical condition. The state of the Secondhand ROV was only discovered after the 4th plaintiff executed the ESA dated 5 June 2020 with Meritco Labuan, to acquire the Secondhand ROV. b. Merit Corona was not the owner of the Secondhand ROV when Merit Corona submitted its quotation on the acquisition of the Secondhand ROV on 25 December

This was only revealed in the BOS provided by Merit Corona by email on 8 May 2020. The first bill of sale dated 7 January 2020 shows that the ownership of the Secondhand ROV was only transferred to Merit Corona on 7 January 2020. This was after Merit Corona submitted the proposal for the acquisition of the Secondhand ROV on 25 December 2019. Provision of advice on the execution of a settlement agreement [67] The second instance of the defendant’s failure to give careful and/or sound and/or reasonable advice to the plaintiffs was when the ! defendant advised the 4th plaintiff to execute the settlement and release agreement dated 3 August 2021 (“Settlement Agreement”) with Meritco Labuan, Merit Corona, Romas Marine and Osbit Ltd (“Osbit”). [68] The Settlement Agreement was executed following Merit Corona’s failure to refurbish the Secondhand ROV in accordance with a service level agreement dated 29 July 2020. Romas Marine and Osbit were appointed to undertake the refurbishment, reconditioning and repair works on the Secondhand ROV (“Works”). [69] It is acknowledged in the Settlement Agreement that the Works and the delivery of the Secondhand ROV to the 4th plaintiff were delayed due to contractual disputes between Meritco Labuan and Merit Corona, with Romas Marine. [70] In a board paper dated 14 June 2021, which was recommended by the defendant, the Board was advised to terminate the ESA and to pay a settlement sum of USD1,250,000 in total to Merico Labuan, Merit Corona, Romas Marine and Osbit. Breaches of the defendant’s duties [71] It must again be highlighted that the defendant was appointed as the advisor to the DNEX Group on the Indonesian Business Venture because of his expertise and experience in the telecommunications industry and in the business of offshore support vessels. In this regard, the defendant was duty-bound to give careful and/or sound and/or reasonable advice to the plaintiffs on the acquisition of the Secondhand ROV for the Indonesian Business Venture. ! [72] The defendant had breached his duties, in failing to advise the 4th plaintiff to undertake a due diligence and to conduct a physical inspection of the Secondhand ROV prior to its purchase, and in recommending the 4th plaintiff to execute the Settlement Agreement. [73] It is in my view prudent, reasonable and necessary for a due diligence and inspection of an equipment to be undertaken prior to the purchase of the equipment, as this will allow the purchaser to inspect the equipment to ensure that it meets the specifications and functionalities required by the purchaser. The present case involves the purchase of an equipment in the value of USD4,000,000. Yet, the defendant saw it fit to advise the 4th plaintiff to forgo the due diligence and inspection processes – a decision that runs counter to reasonable conduct in the making of business decisions. [74] The decision to forgo the due diligence and inspection processes resulted in the 4th plaintiff being unaware of the poor physical condition of the Secondhand ROV and the issues between contracting parties in relation to the Works, leading to the settlement amount of USD1,250,000 having to be paid out by the 4th plaintiff. [75] In addition, the Secondhand ROV was procured for the purpose of the Project, which was undertaken by the 5th plaintiff through a consortium. The consortium had executed an agreement dated 17 May 2021 with PT Insfrastruktur Telekomunikasi Indonesia for the procurement of maintenance support services for submarine cable communication system (“Procurement Agreement”). The inability of the 4th plaintiff to provide the Secondhand ROV for the Project had directly ! resulted in the 5th plaintiff not being able to fulfil its contractual obligations under the Procurement Agreement. [76] Parties to the Procurement Agreement had agreed to a standing charge for the provision of the “KDDI Pacific Link” vessel, which would be equipped with an ROV. As the Secondhand ROV could not be provided, the standing charge was reduced, leading to losses amounting to a total of IDR23,764,196,250, incurred by the 5th plaintiff. I. Fifth Allegation of Breach of Duties: Making Secret Profits [77] In the course of PwCCA’s investigation, several documents were discovered, which revealed that commissions were paid to multiple parties in the process of the acquisition of the Secondhand ROV. [78] Two documents are of particular significance. [79] The first is a letter dated 19 January 2020 issued by Merit Corona to Mohd Isya bin Sulaiman (“Mohd Isya”), engaging Mohd Isya as the “introducer agent” for Merit Corona (“January 2020 Letter”). The annexure to the January 2020 Letter provides for the payment of a commission for the sale of the Secondhand ROV amounting to USD1,250,000 (“Commission”) to the designated account of Messrs. Wan Shahrizal Hari & Co (“Messrs. Wan Shahrizal”). [80] The second document is a draft letter dated 17 March 2020 from Mohd Isya to Messrs. Wan Shahrizal (“March 2020 Letter”). The letter appears to have been issued following the receipt of the Commission by ! Messrs. Wan Shahrizal, as it sets out how the amount would be distributed. The March 2020 Letter states: “Selanjutnya saya dengan ini secara tidak boleh batal (irrevocable) mengarahkan pihak Tuan untuk membuat pembayaran bagi jumlah yang patut saya terima dan yang telah/akan didepositkan kepada pihak Tuan sepertimana berikut:

Bayaran pertama sebanyak USD250,000.00 i. RM300,000.00 dibayar oleh Tuan kepada PT Pelayaran Era Indoasia Fortune dan/atau peguamcaranya; ii. RM200,000.00 digunakan sebagai pembayaran penuh yuran guaman pihak Tuan mewakili ZKZ Euphoria Sdn Bhd dalam tindakan saman antara PT Pelayaran Era Indoasia Fortune dan ZKZ Euphoria Sdn Bhd; dan iii. RM500,000.00 dibayar kepada ______________________;

Bayaran Kedua sebanyak USD 400,000.00 i. USD100,000.00 dibayar kepada pihak Tuan sebagai yuran mengendalikan urusan perjanjian antara saya dan Merit Corona Sdn Bhd; ! ii. USD100,000.00 dibayar kepada PT Pelayaran Era Indoasia Fortune dan/atau peguamcaranya; iii. USD200,000 dibayar kepada ______________________________;

Bayaran Ketiga sebanyak USD 600,000.00 i. USD50,000.00 dibayar kepada pihak Tuan sebagai yuran mengendalikan urusan perjanjian antara saya dan Merit Corona Sdn Bhd; ii. USD550,000.00 dibayar kepada _________________________________. Saya dengan ini sekali lagi mengesahkan bahawa perlantikan yang dibuat oleh saya dan arahan pembayaran oleh saya kepada pihak Tuan adalah satu arahan yang tidak boleh dibatalkan samada oleh pewaris-pewaris saya atau wakil-wakil saya atau pemeggang kuasa bagi pihak saya.” (emphasis added) [81] I accept that the January 2020 Letter was signed by Merit Corona, but did not contain the signature of Mohd Isya. The March 2020 Letter was also not signed by Mohd Isya. These facts notwithstanding, I find that both letters – located in the defendant’s computer – are sufficient to prove ! on the balance of probabilities, that the defendant had a role in arranging the Commission, and had ultimately benefited from the acquisition of the Secondhand ROV, by making secret profits from the Commission, either directly to him or to a company owned by him (i.e. ZKZ Euphoria). [82] The March 2020 Letter provides how the Commission benefited ZKZ Euphoria, stating that payments received from the Commission are to be made to: a. PT Pelayaran Era Indonasia Fortune, who is revealed to be ZKZ Euphoria’s creditor; and b. Messrs. Wan Shahrizal, to resolve the outstanding legal fees owed by ZKZ Euphoria to Messrs. Wan Shahrizal. [83] The receipt by the defendant of the secret profit, whether directly or indirectly, is a clear breach of the defendant’s duties to the plaintiffs and specifically his duties under section 213(1) of the CA 2016, which requires the defendant to exercise his powers for a proper purpose and in good faith, in the best interest of the plaintiffs. J. Sixth Allegation of Breach of Duties: Disclosing Confidential Information to a Third Party [84] The final allegation raised by the plaintiffs is that the defendant had breached the duty of trust and confidence by disclosing confidential information of the plaintiffs to a third party, Wan Shahrizal bin Wan Ladin (“Wan Shahrizal”), without proper justification. ! [85] The defendant issued an email dated 7 January 2020 to rastablunk@gmail.com. In the email, he forwarded a board paper dated 31 December 2019, which was presented to the Board, concerning the incorporation of the 5th plaintiff. It is not in dispute that the board paper was marked “Private & Confidential”. [86] The defendant admitted that: a. He had sent the email to rastablunk@gmail.com; b. The email contained the board paper dated 31 December 2019; c. The email address rastablunk@gmail.com belonged to Wan Shahrizal; and d. He did not obtain prior approval of the plaintiffs to disclose the board paper to Wan Shahrizal. [87] As the CEO of the 3rd plaintiff, a member of the management team of the DNEX Group and the advisor of the Indonesian Business Venture – which are all senior positions within the DNEX Group – the defendant has a duty to act in the best interest of the plaintiffs. This must include the duty to protect confidential information from disclosure to third parties. [88] The defendant has failed to do so in this instance, and I find his conduct in disclosing confidential information Wan Shahrizal, without prior approval of the plaintiffs, and without proper justification, is a breach of the defendant’s duty of trust and confidence imposed on him as the CEO ! of the 3rd plaintiff and a member of the management team of the DNEX Group.

[89] With the assessment and considerations as set out, the court finds that the plaintiffs have proven their case against the defendant. [90] The court allowed the following prayers in the statement of claim dated 15 November 2022: a. Prayer 94.1, a declaration that the defendant had breached his fiduciary duty, trust, duty of care, skill and diligence, duty of fidelity and duty of trust and confidence towards the plaintiffs, in regard to the acquisition of the Secondhand ROV; b. Prayers 94.2 and 94.3: i. A declaration that all secret profits and/or other benefits obtained by the defendant in the acquisition of the Secondhand ROV are held on constructive trust for the plaintiffs; and ii. An account of profits in respect of all secret profits and/or other benefits obtained by the defendant in the acquisition of the Secondhand ROV; c. Prayer 94.4, special damages in the sum of USD1,250,000 and IDR23,764,196,250, as elaborated in paragraphs [74] to [76] above; and d. Prayers 94.7 and 94.8, interests. [91] The plaintiffs withdrew their prayers for aggravated and exemplary damages in prayers 94.5 and 94.6. [92] The court ordered costs of RM150,000 to be paid by the defendant to the plaintiffs. Dated 24 September 2025 ADLIN ABDUL MAJID Judge High Court of Malaya Kuala Lumpur Counsel: Plaintiffs : Brian Foong Mun Loong (together with Anson Chee Weng Kian and Herman Goh Hong Mun) of Messrs. Cheang & Ariff Defendant : Wan Shahrizal bin Wan Ladin of Messrs. Wan Shahrizal Hari & Co