Dirga Niaga (Selangor) Sdn Bhd v LIM Chien Lang (W-02(NCVC)(W)-1972-09/2018)

DIRGA NIAGA (SELANGOR) SDN BHD (No. Syarikat: 032926-U) (Dalam likuidasi – Augustine a/l T.K. James sebagai pelikuidasi)

AUGUSTINE A/L T.K. JAMES (Pelikuidasi Dirga Niaga (Selangor) Sdn Bhd)

3.

RADIANT CONSULTING ASIA SDN BHD (No. Syarikat: 73117-T) ... PERAYU-PERAYU

LIM CHIEN LANG (No. K/P: 531205-10-5264) (Sebagai Pentadbir Harta Pusaka YAP YEW CHONG (si mati) (No. K/P: 540622-10-5745)

YAP YEOW CHIN (No. K/P: 640201-10-7011) ... RESPONDEN-RESPONDEN [Dalam Mahkamah Tinggi Malaya Di Kuala Lumpur Bahagian Sivil

Lim Chien Lang 2 (No. K/P: 531205-10-5264) (Sebagai Pentadbir Harta Pusaka Yap Yew Chong (si mati) (No. K/P: 540622-10-5745)

Yap Yeow Chin (No. K/P: 640201-10-7011) ... Plaintif-Plaintif

Dirga Niaga (Selangor) Sdn Bhd (No. Syarikat: 032926-U) (Dalam likuidasi – Augustine a/l T.K. James sebagai pelikuidasi)

Augustine A/L T.K. James (Pelikuidasi Dirga Niaga (Selangor) Sdn Bhd)

Yoganathan A/L Kanapathipillay

Radiant Consulting Asia Sdn Bhd (No. Syarikat: 773117-T)

CHN Commodity Trade Centre Sdn Bhd (Dahulunya dikenali sebagai Midas Landmark Sdn Bhd) (No. Syarikat: 926490-V)

United Overseas Bank (Malaysia) Bhd (No. Syarikat: 271809-K) ... Defendan-Defendan Dan Dato’ Heng Ji Keng dan Andrew Heng Sebagai Penerima dan Pengurus CHN Commodity Trade Centre Sdn Bhd (No. Syarikat: 926490-V)(Dalam likuidasi) (Penerima dan Pengurus telah dilantik) ... Pencelah) (DI DENGAR BERSAMA DENGAN) 3 DALAM MAHKAMAH RAYUAN MALAYSIA [BIDANG KUASA RAYUAN] RAYUAN SIVIL NO: W-02(NCVC)(W)-1973-09/2018

DIRGA NIAGA (SELANGOR) SDN BHD (No. Syarikat: 032926-U) (Dalam likuidasi – Augustine a/l T.K. James sebagai pelikuidasi)

AUGUSTINE A/L T.K. JAMES (Pelikuidasi Dirga Niaga (Selangor) Sdn Bhd)

3.

RADIANT CONSULTING ASIA SDN BHD (No. Syarikat: 73117-T) ... PERAYU-PERAYU DAN WMS CONSTRUCTION & TRANSPORTATION SDN BHD (No. Syarikat:358297-X) ... RESPONDEN-RESPONDEN [Dalam Mahkamah Tinggi Malaya Di Kuala Lumpur Bahagian Sivil Guaman Sivil No: 22NCVC-317-06/2015 Antara WMS Construction & Transaportation Sdn Bhd (No. Syarikat: 358297-X) ... Plaintif-Plaintif

Dirga Niaga (Selangor) Sdn Bhd (No. Syarikat: 032926-U) (Dalam likuidasi – Augustine a/l T.K. James sebagai pelikuidasi)

Augustine A/L T.K. James 4 (Pelikuidasi Dirga Niaga (Selangor) Sdn Bhd)

Yoganathan A/L Kanapathipillay

Radiant Consulting Asia Sdn Bhd (No. Syarikat: 773117-T)

CHN Commodity Trade Centre Sdn Bhd (Dahulunya dikenali sebagai Midas Landmark Sdn Bhd) (No. Syarikat: 926490-V)

United Overseas Bank (Malaysia) Bhd (No. Syarikat: 271809-K) ... Defendan-Defendan Dan Dato’ Heng Ji Keng dan Andrew Heng Sebagai Penerima dan Pengurus CHN Commodity Trade Centre Sdn Bhd (No. Syarikat: 926490-V)(Dalam likuidasi) (Penerima dan Pengurus telah dilantik) ... Pencelah) CORAM MARY LIM THIAM SUAN, JCA HAS ZANAH MEHAT, JCA VAZEER ALAM MYDIN MEERA, JCA JUDGMENT OF THE COURT Introduction [1] Two suits, namely, Guaman Sivil No: 22NCVC-317-06/2015 (“Suit 317”) and Guaman Sivil No: 22NCVC-318-06/2015 (“Suit 318”), were filed by the respective Plaintiffs (Respondents in the two appeals before this court) in the High Court at Kuala Lumpur against six Defendants, which 5 included the 1st to 4th Appellants in both appeals, who were the 1st to 4th Defendants in both suits. [2] Whilst the Plaintiffs in each of the suits were different, the Defendants in both suits were identical. Both the suits were heard together, and at the conclusion of the trial, the High Court found that the Plaintiffs in both the suits had successfully proven their claim against the 1st to 4th Defendants for negligence. The Plaintiffs’ claim against the remaining defendants were however dismissed with costs. The 1st to 4th Defendants appealed both decisions. [3] The learned High Court judge delivered a single judgment for both suits, and one common grounds of judgment. Hence, both appeals were heard together. [4] Whilst affirming most of the learned trial judge’s findings and decision, we, however, allowed the appeals in part; particularly in respect of aggravated and exemplary damages and costs awarded on an indemnity basis. The following are the reasons for our decision. [5] Reference to the parties shall be according to their description in the court below. In the High Court 6 [6] WCT Engineering Bhd (“WCT”) was appointed by Europlus Corporation Sdn Bhd (“Europlus”) and Maxisegar group of companies as main contractor for a construction project. The Respondents (Plaintiffs) in both suits were sub-contractors appointed by WCT to perform certain sub-contract works for that construction project. [7] As a result of financial difficulties faced by Europlus, WCT was, instead of cash, offered payment in kind for work done in the form of transfer and/or assignment of properties, including commercial properties located in a development known as Pandan Safari Parade. WCT had accepted that offer of settlement by contra of properties. Similar offer was then made to the Plaintiffs by WCT, which they also accepted. [8] The Plaintiffs then entered into separate Settlement Agreements with Europlus and WCT, wherein the Plaintiffs accepted properties in Pandan Safari Parade to set-off (contra) payment of the debt due to the Plaintiffs from WCT. The two Settlement Agreements are:

Settlement Agreement dated 23.1.1998 between the Plaintiff in Suit 317, Europlus and WCT, wherein the Plaintiff in Suit 317 accepted 2 units of commercial properties identified as Units PP-F22 & PP-F23 in Pandan Safari Parade from the 1st Defendant (i.e. the 1st Appellant) as settlement of monies due to them, or as in local parlance contra payment. The Plaintiff also simultaneously entered 7 into 2 separate Sale and Purchase Agreements and Deeds of Mutual Covenants with the 1st Defendant, all of which were dated 23.1.1998.

Settlement Agreement dated 23.1.1998 between the Plaintiffs in Suit 318, Europlus and WCT, wherein the Plaintiffs in Suit 318 accepted 3 units of commercial properties identified as Units PP-F10 & PP-F41 & PP-F42 in Pandan Safari Parade from the 1st Defendant (i.e. the 1st Appellant) as settlement of monies due to them, or as in local parlance contra payment. The Plaintiffs also simultaneously entered into 3 separate Sale and Purchase Agreements and Deeds of Mutual Covenants with the 1st Defendant, all of which were dated 23.1.1998. [9] The respective Sale and Purchase Agreements provided for the 1st Defendant to deliver vacant possession of these settlement units to the respective Plaintiffs free from encumbrances. It was also a term of the Sale and Purchase Agreements that the 1st Defendant shall redeem the properties from existing charges in favour of Amanah Merchant Bank (“Chargee”) within 6 months from the date of the agreements and to deliver respective letters of disclaimer of interest from the Chargee addressed to the respective Plaintiffs. 8 [10] The 1st Defendant delayed the redemption exercise with the Chargee bank, which resulted in late payment interest being imposed by the Chargee. The Plaintiffs settled the late payment interest with the Chargee and subsequently commenced action against the 1st Defendant to claim for the same. The Plaintiffs in Suit 318 obtained judgment against the 1st Defendant for the sum of RM405,623.32 with interest and cost at the High Court vide Civil Suit No: S6-22-533-2004 (“Suit 533”). Whilst, the Plaintiff in Suit 317 obtained judgment against the 1st Defendant for the sum of RM227,685.16 with interest and cost at the Sessions Court vide Suit No: 11-8727-2004 (“Suit 8727”). [11] The 1st Defendant failed to satisfy both judgments and the Plaintiffs in Suit 318 filed a winding-up petition against the 1st Defendant, after having issued the statutory notice under the Companies Act 1965 (“the 1965 Act”). The Plaintiff in Suit 317 supported that petition as supporting creditor. The winding-up court heard the petition and a Winding Up Order was made against the 1st Defendant on 28.3.2006. The Official Receiver was appointed the Provisional Liquidator of the 1st Defendant. [12] Subsequently, on 1.12.2008 the 2nd Defendant (2nd Appellant) was appointed by the court as the liquidator of the 1st Defendant in place of the Official Receiver. The 2nd Defendant’s appointment as liquidator was supported by the Plaintiffs. The 3rd Defendant (3rd Appellant) is the 2nd 9 Defendant’s authorized representative to carry out the liquidation of the 1st Defendant, through the medium of the 4th Defendant (4th Appellant) company, of which the 2nd and 3rd Defendants were co-directors. [13] Sometime in 2014, the Plaintiffs discovered that all their 5 units of properties under both the Settlement Agreements were occupied by third parties, who were strangers to the Plaintiffs. Upon further enquiry, the Plaintiffs found that their respective units under both the Settlement Agreements had been sold off to the 5th Defendant. The Plaintiffs then procured leave from the Winding Up Court and commenced Suit 317 and Suit 318 against the Defendants for recovery and return of their respective properties under the Settlement Agreements or damages in lieu thereof. [14] The 5th Defendant, as purchaser, had in turn charged the properties to the 6th Defendant as security for a loan granted to the 5th Defendant. Before trial commenced, the properties were redeemed from the 6th Defendant and the properties were reassigned to the 5th Defendant. Hence, the 6th Defendant applied to strike out the claim against them, and it was allowed by the High Court. [15] In the course of trial, it was discovered that the 5th Defendant had sold off all the Plaintiffs’ units in Pandan Safari Parade to Paradise Boulevard, a third party, in early 2018. However, the Plaintiffs did not contest that sale nor seek the court’s intervention to stop it, but instead 10 proceeded with both the suits against the 1st to 5th Defendants, essentially seeking damages for negligence and/or conspiracy by the defendants in wrongfully disposing or selling their properties under the Settlement Agreements. The High Court’s decision [16] The learned High Court judge found in favour of the Plaintiffs against the 1st to 4th Defendants in both suits and made the following orders:

a declaration that the Plaintiffs were the beneficial owners of their respective 5 units of property in Pandan Safari Parade;

in lieu of prayers (b) to (f) for specific performance, the 1st to 4th Defendants are to jointly and severally pay the Plaintiffs damages in the following sums: Suit 318 (Civil Appeal 1972) i. Lot PP-F10 - RM266,800.00 iii. Lot PP-F41 - RM290,950.00 i. Lot PP-F42 - RM290,950.00 Suit 317 (Civil Appeal 1973) i. Lot PP-F22 - RM207,575.00 11 ii. Lot PP-F23 - RM207,575.00

the 1st to 4th Defendants are to jointly and severally pay the Plaintiffs in Suit 318 aggravated damages in the sum of RM50,000.00; and

the 1st to 4th Defendants are to jointly and severally pay each of the Plaintiffs in both Suits 317 and 318 aggravated damages in the sum of RM50,000.00 for each suit. Issues in this appeal [16] The 1st to 4th Defendants, i.e. the appellants in both cases have, in challenging the judgment of the High Court, primarily raised issues as regards the alleged failure of the learned trial judge to properly evaluate the evidence in making his findings, particularly as to:

whether the liquidator had knowledge of the Plaintiffs’ beneficial ownership of the 5 units of properties in Pandan Safari Parade arising from the Settlement Agreements;

(ii) whether the Settlement Agreements were invalid and was an act of fraud perpetrated on the 1st Defendant;

(iii) whether the liquidator had failed to comply with the provisions of section 235 of the 1965 Act (now section 485 of the Companies Act 2016); 12

(iv) whether the liquidator had failed to comply with the terms of the Court Order dated 1.12.2008 appointing the 1st Defendant as liquidator;

whether there was inconsistent and evasive testimony by the 3rd Defendant in the course of trial;

(vi) whether the conduct of the 2nd and 3rd Defendants had met the standard of officers of the Court;

(vii) whether the Vesting Order dated 18.12.2012 obtained by the 2nd Defendant entitled and allowed the 2nd Defendant to sell and dispose the Plaintiffs’ 5 units and thus absolving them from liability towards the Plaintiffs; and

(viii) whether the Plaintiffs’ failure to return and deliver the verification process documents to the 1st, 2nd and/or 3rd Defendants shall be taken to mean that the Plaintiffs’ 5 units of properties are part of the assets of the 1st Defendant. [17] Most of the issues raised in both these appeals are in relation to findings of fact by the learned trial judge, and in that regard it is well settled that the Appellants will have to demonstrate that the learned trial judge was plainly wrong in his assessment of the evidence placed before him. See: Gan Yook Chin (P) & Anor v Lee Ing Chin @ Lee Teck Seng & Ors 13 [2005] 2 MLJ 1. However, we find that in coming to his determination of these factual issues, the learned judge had indeed evaluated the evidence in its totality and his findings are well supported by evidence. [18] In coming to that conclusion, we have delved into the issues, one at a time, and evaluated the learned trial judge’s findings against the overall evidence, as follows.

Whether the liquidator, i.e. the 2nd Defendant, had knowledge of the Plaintiffs’ beneficial ownership of the 5 units of strata property in Pandan Safari Parade in accordance to the Settlement Agreements [19] The 2nd Defendant denied knowledge of the Plaintiffs’ beneficial ownership of the 5 units of strata property in Pandan Safari Parade in accordance to the two Settlement Agreements. However, the evidence shows otherwise. [20] The Plaintiffs had taken separate actions against the 1st Defendant, one in the High Court and the other in the Sessions Court, based on their respective beneficial interest in the 5 units of properties. The Plaintiffs in Suit 318 obtained judgment against the 1st Defendant for the sum of RM405,623.32 with interest and cost, whilst the Plaintiff in Suit 317 obtained judgment against the 1st Defendant for the sum of RM227,685.16 14 with interest and cost. The 1st Defendant had defended both actions and at no time did the 1st Defendant deny the Plaintiffs’ beneficial interest in the settlement property, nor did the 1st Defendant challenge the validity of the Settlement Agreements in those proceedings. [21] The winding-up of the 1st Defendant was at the behest of the Plaintiffs, one as the petitioning creditor and the others as supporting creditors. The 2nd Defendant sought to replace the Official Receiver as the liquidator of the 1st Defendant, and the Plaintiffs, upon the request of the 2nd Defendant’s solicitors, supported that application before the Winding-Up Court. Hence, the 2nd Defendant would have known of the Plaintiffs’ interest at and in the winding-up of the 1st Defendant, and in particular that their interest arose from a judgment based on the two Settlement Agreements. Without knowledge of the Winding-up Petition it is inexplicable as to how the 2nd Defendant would have approached the Plaintiffs, and other creditors, to support his application for appointment as liquidator of the 1st Defendant. [22] In this regard, we concur with the findings of the learned trial judge that the testimony of the 2nd and 3rd Defendants that they had no records on the cause of the winding-up nor the Plaintiffs’ ownership of the 5 units of property via the Settlement Agreements was incredible, as the contrary is borne out by evidence. 15 . [23] In fact, documentary evidence shows that the solicitor for the 1st to 4th Defendants, Ms Sabrina Richards, had attended the 1st Defendant’s creditors’ meeting on two occasions, namely, on 1.6.2008 and 3.7.2008, together with the Plaintiffs’ solicitor, Ms Norhakmawati binti Basnan. Hence, the 1st to 4th Defendant’s solicitor had knowledge of the Plaintiffs’ interest in the winding-up of the 1st Defendant. The law is trite in that the knowledge of the solicitor can be imputed to the client. See: T Siva Tharamalingam v Public Bank Berhad [2018] 6 CLJ 1 FC. [24] At the time of the 2nd Defendant’s appointment as the liquidator, there was an appeal by the 1st Defendant pending at the Court of Appeal, which was in respect of one of the judgments obtained by the Plaintiffs in the High Court. The 2nd Defendant had instructed his solicitors, Messrs Hakem Arabi & Associates, to discontinue the appeal. Surely, such instructions could not have been given without the 2nd Defendant having studied the appeal record and taken solicitor’s advice. Hence, it is inconceivable that the 2nd Defendant did not know of the circumstances leading to the two suits by the Plaintiffs and the existence of the Settlement Agreements from which the Plaintiffs derive their interest in pursuing those two suits. The terms of the Settlement Agreements clearly spell out the Plaintiffs’ beneficial interest in the 5 units of property. 16

(ii) Whether the Settlement Agreements were invalid and were an act of fraud perpetrated on the 1st Defendant [25] The 1st to 4th Defendants contend that the Settlement Agreements were invalid and an act of fraud on the 1st Defendant. However, when defending both Suit 533 and Suit 8727, the 1st Defendant had every opportunity to challenge the validity of the Settlement Agreements, but did not. In fact, when the 2nd Defendant took over as the liquidator of the 1st Defendant, there was an appeal pending in the Court of Appeal against the judgment in Suit 533, and the 2nd Defendant instructed the 1st Defendant’s solicitors to withdraw the appeal. If the 2nd Defendant thought that the Settlement Agreement was invalid or that it was a fraud perpetrated on the 1st Defendant, then instructions ought to have been given to the solicitors to proceed with the appeal at the Court of Appeal, instead of withdrawing it. In fact, the 1st Defendant when resisting both Suit 533 and Suit 8727 did not challenge or dispute the Plaintiffs’ ownership of the 5 units in the Settlement Agreements. [26] In this regard, we find that the learned trial judge was correct to reject this argument by invoking the doctrine of res judicata. The cases on res judicata are replete. For convenience we will merely refer to the Federal Court's decision in Government of Malaysia v. Dato Chong Kok Lim [1973] 1 LNS 35; [1973] 2 MLJ 74. 17 [27] In addition to that, the 3rd Defendant had appointed Jova Building Services (“Jova”), as building managers to manage Pandan Safari Parade. Jova had instructed solicitors to issue a notice of demand to the Plaintiff in Suit 317 (Respondent in Appeal 1973) claiming outstanding maintenance charges on the basis that the Plaintiff in Suit 317 was beneficial owner of the 2 units of commercial properties identified as Units PP-F22 & PP-F23, as per the Settlement Agreements. Hence, the 1st to 4th Defendants have acknowledged the validity of the Settlement Agreements and the Plaintiff in Suit 317’s beneficial ownership of Units PP-F22 & PP-F23. Thus, they are now estopped from arguing the contrary. The doctrine of issue estoppel will bar them from doing so.

(iii) Whether the liquidator had failed to comply with the provisions of section 235 of the Companies Act 1965 (now section 485 of the Companies Act 2016) [28] Section 234 of the Companies Act 1965 requires the officers of a wound up company to submit a statement as to the affairs of the company as at the date of the winding up order showing:

the particulars of its assets, debts and liabilities;

the names and addresses of its creditors;

the securities held by them respectively; 18

the dates when the securities were respectively given; and

such further information as is prescribed or as the Official Receiver or the liquidator requires. [29] There is no evidence showing that the officers of the 1st Defendant had submitted the statement of affairs to the Official Receiver or the 2nd Defendant. Nor is there any explanation from the 2nd Defendant as to why the statement of affairs was not procured from the officers of the 1st Defendant when he took over as liquidator. The statement of affairs would have shown who the creditors of the 1st Defendant were, and the Plaintiffs’ beneficial ownership of the 5 units of property in the Settlement Agreements would have been made known. [30] Further, upon receipt of the statement of affairs, section 235 of the Companies Act 1965 imposes a mandatory duty on 2nd Defendant as liquidator of the 1st Defendant to submit a preliminary report to the Winding-up Court. The preliminary report shall contain information:

as to the amount of capital issued, subscribed and paid up and the estimated amount of assets and liabilities;

if the company has failed, as to the causes of the failure; and 19

whether in his opinion further inquiry is desirable as to any matter relating to the promotion, formation or failure of the company or the conduct of the business thereof. [31] The 2nd Defendant may also, if he thinks fit, make further reports stating whether in his opinion any fraud has been committed or whether any officer of the company has contravened or failed to comply with the 1965 Act. Hence, if the 2nd Defendant thought that the officers of the 1st Defendant had committed fraud in entering into the Settlement Agreements, he ought to have first obtained the statement of affairs and then submit the preliminary report to the court as mandated under section 235 of the 1965 Act. Owing to this failure by the 2nd Defendant to submit the preliminary report, the learned trial judge had correctly found that the court was unable to verify the steps taken by the liquidator to identify the creditors of the 1st Defendant before applying to the court for the vesting order wherein the 5 units of property were deemed to be owned by the 1st Defendant.

(iv) Whether the liquidator had failed to comply with the terms of the Court Order dated 1.12.2008 appointing the 1st Defendant as liquidator 20 [32] The 2nd Defendant was appointed the liquidator of the 1st Defendant vide Court Order dated 1.12.2008, and the relevant terms of the Order states as follows: “MAKA ADALAH DIPERINTAHKAN bahawa Encik Augustine a/l T.K. James (No. K/P: 570902-10-6061) dari Tetuan Radiant Consulting Asia Sdn Bhd, Suite 8-11-3U, 11th Floor, Menara Mutiara Bangsar, Jalan Liku Off Jalan Riong, 59100 Kuala Lumpur sebagai Pelikuidasi tersebut diatas dengan satu Jawatankuasa Pemeriksaan...” Clearly the Court Order dated 1.12.2008 directed that the 2nd Defendant carry out his function as liquidator together with a Committee of Inspection. Section 242(1) of the1965 Act provides for the composition of such a committee in the following terms:

The committee of inspection shall consist of creditors and contributories of the company or persons holding-

general powers of attorney from creditors or contributories; or

special authorities from creditors or contributories authorizing the persons named therein to act on such a committee, appointed by the meetings of creditors and contributories in such proportions as are agreed or in case of difference as are determined by the Court. [33] However, no Committee of Inspection was formed by the 2nd Defendant, whose duty it would have been to call for the meeting of creditors and contributories for the formation of the same. Hence, the 2nd and 3rd Defendants had acted as liquidators of the 1st Defendant in clear contravention of the Court Order dated 1.12.2008, which directed them to 21 act together with a Committee of Inspection. Hence, the learned trial judge had made the correct determination that the 2nd to 4th Defendants had deliberately failed to establish the Committee of Inspection, thus depriving the creditors, including the Plaintiffs, a say in the manner in which the liquidation of the 1st Defendant was carried out.

Whether there was inconsistent and evasive testimony by the 3rd Defendants in the course of the trial [34] The learned trial judge had adverted to the inconsistent and evasive testimony of the 3rd Defendant on whether the liquidator had obtained the winding-up documents from the office of the Official Receiver. At the trial, the 3rd Defendant testified that no documents were received from the Official Receiver, whilst in the earlier Sessions Court proceedings in Suit No. A52NCVC-163-04/2014 (“Suit 163”) he had testified to the contrary. When confronted with the Notes of Proceedings from Suit 163, the 3rd Defendant changed his testimony and confirmed that he had in fact received the documents from the Official Receiver’s office. [35] Learned counsel for the Appellants submits that there is no inconsistency or evasive testimony as observed by the learned trial judge as the testimony in the Sessions Court was for an entirely separate claim by the 1st Defendant against the purchaser of another unit for arrears in maintenance charges. We do not find any merit in that contention. The 22 fact of whether the documents pertaining to the winding up of the 1st Defendant were obtained from the Official Receiver, who was the first liquidator appointed by the court is generic to all claims, and the answer must be the same, whether the question is asked in Suit 163 or in any other suit. In this regard, we find that the learned trial judge’s observation on the inconsistent and evasive testimony of the 3rd Defendant, as well as his credibility, is well supported by evidence, and there is no basis for appellate intervention to disturb that finding.

(vi) Whether the conduct of the 2nd and 3rd Defendants had met the standard of officers of the Court [36] The learned trial judge had made the following findings:

the 2nd and 3rd Defendants had failed to comply with not only the provisions of section 235 of the 1965 Act, but also the Court Order dated 1.12.2008 requiring the formation of a Committee of

(ii) the 1st to 4th Defendants failed to call any witnesses from Messrs Susielan & Associates or Jova to explain the issuance of the section 218(2) notice under the 1965 Act to the Plaintiff in Suit 317 for arrears in maintenance charges for the units that are beneficially 23 owned by the Plaintiff in Suit 317 pursuant to the Settlement Agreement;

(iii) the 2nd Defendant had instructed Messrs Hakem Arabi & Associates to withdraw the appeal pending at the Court of Appeal in respect of the judgment in Suit 533 where the Plaintiff had sued the 1st Defendant for late payment interest under the Settlement Agreement. The judgment of the High Court in Suit 533 is reported as Yap Yew Cheong & Anor & Dirganiaga (Selangor) Sdn Bhd [2005] 7 MLJ 660. In paragraphs 2 to 4 of the said judgment the learned judge had stated:

Factually speaking, the appeal centred on three agreements entered into between the plaintiffs and the defendant. These agreements are not the standard sale and purchase agreements under the Housing Developers (Control and Licensing) Regulations 1989 made under the Housing Developers (Control and Licensing) Act

In fact, these three agreements are 'set-off' agreements entered into for purposes of setting-off all the debts due from Europlus Corp Sdn Bhd to WCT Engineering Bhd. The defendant is an associate or a subsidiary to Europlus Corp Sdn Bhd while the plaintiffs are the directors of WCT Engineering Bhd. These three agreements are drafted by the plaintiffs' solicitors and they are, incidentally, the solicitors representing the plaintiffs in this action.

It was a term in these agreements that the defendant shall within six months from 23 January 1998 (the date of the sale and purchase agreements) redeem the said parcels (which will be referred to shortly) and deliver to the plaintiffs a letter of disclaimer failing which the defendant shall pay to the plaintiffs as purchasers 12% interest on daily 24 rests on the purchase price from the expiry of the six months to the date of actual redemption ('the LAD).

The plaintiffs purchased Parcel No F 10 at RM371,200 with LAD at RM146,323.98, Parcel No F 41 at RM328,900 with LAD at RM129,649.67 and Parcel No F 42 at RM328,900 with LAD at RM129,649.67. The total LAD came up to RM405,623.32. It was quite substantial. [Emphasis added] Hence, from the judgment it is clear that the 1st and 2nd Defendants as well as their solicitors, Messrs Hakem Arabi & Associates knew of the existence and nature of the Settlement Agreements and the Plaintiffs’ beneficial interest in the 3 units. Despite that knowledge, the 2nd Defendant discontinued the 1st Defendant’s appeal, which is indicative of the fact that the 1st and 2nd Defendants had accepted the Plaintiffs’ rights and beneficial interest in the said properties pursuant to the Settlement Agreements;

(iv) when there was an application by the 1st Defendant to substitute the Official Receiver with the 2nd Defendant as liquidator, the 2nd Defendant’s solicitors had written to the Plaintiffs’ solicitors, i.e. Messrs Yip & Co, asking for the Plaintiffs’ support for the 2nd Defendant to take over as liquidator, hence the 2nd Defendant and/or their solicitors would have been well aware of the interests of the Plaintiffs in the winding-up of the 1st Defendant as it flowed from the two judgments obtained by the Plaintiffs based on the breaches of 25 the terms of the Settlement Agreement by the 1st Defendant. And when this is compounded by the failure of the 2nd and 3rd Defendants to make proper enquiries from the officers of the 1st Defendant and procure the statement of affairs, the denial of knowledge of the Plaintiffs’ beneficial interest in the 5 Units of property rings hollow. Thus, their application for the Vesting Order to sell the 5 Units without disclosure to the Court of the Plaintiffs’ beneficial interest therein is at best an act of gross negligence. [37] Based on these findings, the learned trial judge found that the conduct of the 2nd and 3rd Defendants did not meet the standards of professional conduct expected of them as officers of the court. And we do not find anything amiss in that finding.

(vii) Whether the Vesting Order dated 18.12.2012 obtained by the 2nd Defendant entitled and allowed the 2nd Defendant to sell and dispose the Plaintiffs’ 5 units and thus absolving the 1st to 4th Defendants from liability towards the Plaintiffs [38] The 2nd Defendant, had some 4 years after his appointment as liquidator, obtained a Vesting Order pursuant to section 233 of the 1965 Act to take into custody and control all the unclaimed units in Pandan Safari Parade and sell them. And that included an order to sell the Plaintiffs’ 5 Units in the Settlement Agreement, which had been listed as 26 unclaimed. The Vesting Order was obtained from the Winding-Up Court in Schedule 1 of the Vesting Order, the Plaintiffs’ 5 Units are listed. [39] Learned counsel for the 1st to 4th Defendants contends that since there is no relief sought by the Plaintiffs in the Amended Writ and Statement of Claim in the present proceedings to set-aside the said Vesting Order, the Vesting Order as an order of the Winding-Up Court is valid and subsisting. Hence, learned counsel submits that the finding by the learned trial judge that the Vesting Order is a nullity and not binding on the Plaintiffs (who were not parties before the court when the Vesting Order was made) is plainly wrong. Learned counsel for the Plaintiffs argues otherwise. [40] Now, it is clear that the Vesting Order was not obtained in accordance to law and it had not been set-aside. In fact, the learned trial judge had been mindful of this when he said in the judgment: “At this juncture, it would be remiss if I fail to state that I make the above finding despite knowing that the Vesting Order obtained by the Defendants has not been set aside...” [41] The 2nd Defendant in applying for the Vesting Order was clearly acting outside his scope of jurisdiction and power under the instrument of his appointment, namely, the Order dated 1.12.2004. Before the 2nd Defendant could have made this application, and obtain the order to dispose of the assets that is alleged to belong to the 1st Defendant, he 27 should have first convened the meeting of creditors and contributories for the purposes of forming the Committee of Inspection, which was a condition mandated by the Court Order dated 1.12.2004. A similar situation arose in Cheah Then Kheng v City Centre Sdn Bhd (In Liquidation) & Others Appeals [2012] 2 CLJ 16 where there was non-compliance of the Order of Court appointing the liquidator, and the Court of Appeal held: [84] Here, the liquidator knew that he was appointed by consent with the committee of inspection. The High Court order dated 26 July 2001 is clear on this and it has not been set aside. Yet the liquidator acted unilaterally and gave RM5 million discount and entered into the SPA with North Plaza for the sale of the lands on 9 January 2007 and then he applied to the High Court by way of encl. 71 to seek approval of that sale. Obedience to the High Court order dated 26 July 2001 is a requirement of the law. Abdul Hamid Omar LP in Wee Choo Keong v. MBf Holdings Bhd & Anor And Another Appeal [1993] 3 CLJ 210; [1993] 3 MLJ 123, SC, at p. 212 aptly said: Obedience to court order It is established law that a person against whom an order of court has been issued is duty bound to obey that order until it is set aside. It is not open for him to decide for himself whether the order was wrongly issued and therefore does not require obedience. His duty is one of obedience until such time as the order may be set aside or varied. Any person who fails to obey an order of court runs the risk of being held in contempt with all its attendant consequences. [85] Continuing at p. 213, Abdul Hamid Omar LP succinctly said: Orders of court must be treated with respect and require strict obedience. 28 [86] In Hadkinson v. Hadkinson [1952] 2 All ER 567, CA, at 569, Romer LJ had this to say: It is the plain and unqualified obligation of every person against, or in respect of, whom an order is made by a court of competent jurisdiction to obey it unless and until that order is discharged. The uncompromising nature of this obligation is shown by the fact that it extends even to cases where the person affected by an order believes it to be irregular or even void. [87] Sir John Donaldson in Howitt Transport Ltd v. Transport and General Workers' Union [1973] ICR 1 at 10, observed that: First, orders of any court must be complied with strictly in accordance with their terms. It is not sufficient, by way of answer to an allegation that a court order has not been complied with, for the person concerned to say that he 'did his best'. The only exception to that proposition is where the court order itself only orders the person concerned to 'do his best'. But if a court order requires a certain state of affairs to be achieved, the only way in which the order can be complied with is by achieving that state of affairs. [88] Was there obedience to the High Court order dated 26 July 2001 by the liquidator? Certainly not and this question was not considered by the learned High Court Judge when approving the sale of the lands to North Plaza. In our judgment, the learned High Court Judge erred in law and in fact, in failing to appreciate the terms and effect of the High Court order dated 26 July 2001 which provides that the liquidator be appointed to act with a committee of inspection. The learned High Court Judge erred in holding that the words "bersama dengan Jawatankuasa Pemeriksaan" which appear in the High Court order dated 26 July 2001 merely echo the provisions of sub-s. 241(1) of the Companies Act 1965. [89] The learned High Court Judge failed to appreciate the provisions of s. 237(1) of the Companies Act 1965 which regulates the exercise and control of the liquidator's power. It provides that the liquidator shall in the 29 administration of the assets of the company and distribution have regard to the directions given by resolution of the creditors/contributories or by the committee of inspection. [Emphasis added] [42] Similarly, in the present case the Winding-Up Court had made a determination that the 2nd Defendant, as liquidator, shall act together with a Committee of Inspection. Hence, the 2nd Defendant is required to do so by the Order of the court appointing him, but chose to willfully disregard that court mandated stipulation. Section 241(1) of the 1965 Act provides that the Committee of Inspection is 'to act with the liquidator'. A liquidator can exercise his powers under section 236(1) of the 1965 Act only with the authority of the Court or of the Committee of Inspection. In that respect the liquidator would have had to have regard to the wishes and directions of the Committee of Inspection as required under section 237 of the 1965 Act. This the 2nd Defendant failed to do. [43] Section 236(2) of the 1965 Act gives the liquidator power to sell immovable property of a company in liquidation. However, that power is subject to control of the court as provided in section 236(3) of the 1965 Act. In this regard, in Cheah Then Kheng v City Centre Sdn Bhd (In Liquidation) & Others Appeals [supra] the court further held: [94] It cannot be denied that the learned High Court Judge failed to appreciate that the liquidator does not have unfettered powers to act as he deems fit. He is limited in the exercise of his powers by the High Court order 30 dated 26 July 2001 as well as the Companies Act 1965, to act with the committee of inspection. [95] By way of encl. 71, the liquidator sought the sanction of the High Court for the sale of the lands. The lands were the only assets of City Centre. The learned High Court judge failed to appreciate that directions of the committee of inspection are mandatory for such sale. It is not an option on the part of the liquidator to act without the committee of inspection. In our judgment, the sale of the lands to North Plaza is tainted and sanction for the same should not have been granted by the learned High Court Judge. And hence the Court of Appeal concluded that: [117] ... Now, the High Court order dated 26 July 2001 mandated the setting up of the committee of inspection and the liquidator has to take into account the wishes of the committee of inspection. The learned High Court judge in granting the approval for the sale failed to recognise the importance of establishing the committee of inspection and the need for the liquidator to have regard to the wishes of the creditors and contributories particularly in the light of the terms of the High Court order dated 26 July 2001. [118] In our judgment, the liquidator acted in breach of the High Court order dated 26 July 2001 and he cannot use the court to legalise his unlawful acts. This court has the jurisdiction to stop the sale to North Plaza when there is lack of good faith and error in law. [Emphasis added] Likewise, in our judgment, we find that the 2nd Defendant, having acted in breach of the Court Order dated 1.12.2004, cannot use the Vesting Order that was obtained in breach of the law as a shield or cover to legitimize his unlawful acts. 31 [44] Additionally, before making the application for the Vesting Order, the 2nd Defendant should have obtained the statement of affairs of the 1st Defendant from the officers of the 1st Defendant, as this would have revealed the true nature of the 1st Defendant’s assets and liabilities. This is the very first thing that any liquidator would have done when taking charge of the liquidation of a company. We find it astounding that the 2nd Defendant, by extension of their relationship, the 3rd and 4th Defendants, did not carry out this very basic task required of a liquidator. [45] Further, the 1st and 2nd Defendants knew of the beneficial interest the Plaintiffs in the 5 Units of property by virtue of Suit 533 and Suit 8727. And despite having that knowledge, the 1st and 2nd Defendants had included these 5 Units as assets belonging to the 1st Defendant when making the application for the Vesting Order. This was at worst a deception on the Winding-Up Court or at the very least gross negligence on the part of the 1st and 2nd Defendants in procuring the Vesting Order. [46] Thus, we find that the learned trial judge was well placed to rule that the Vesting Order was a nullity, even though there was no specific prayer in the Plaintiffs’ Amended Statement of Claim for the Vesting Order to be declared as such or set-aside. The law is settled that a court can order a relief even if it is not expressly prayed for in the pleadings as the court is at liberty to fashion the appropriate remedy to fit the factual matrix of the 32 case, and to grant such relief as merits the ends of justice. See: Hong Leong Equipment Sdn Bhd v Liew Fook Chuan and another appeal [1996] 1 MLJ 481 CA. In any event, where a High Court order is a nullity, a court of coordinate jurisdiction has the power under its inherent jurisdiction to set aside that order in any collateral proceeding. See Imej Muhibbah Sdn Bhd v Pintar Asiamas Sdn Bhd (In Liquidation) [2019] 7 CLJ 590 CA; Ng King Chong & Anor v Ooi Kim Geik & Ors [2019] 2 CLJ 246. Hence, there is nothing untoward in the learned trial declaring the Vesting Order a nullity and disregarding it.

(viii) Whether the Plaintiffs’ failure to return and deliver the verification process documents to the 1st, 2nd and/or 3rd Defendant shall be taken to mean that the Plaintiffs’ 5 Units are part of the assets of the 1st Defendant [47] Learned counsel for the 1st to 4th Defendants submits that prior to applying for the Vesting Order, the 2nd Defendant had undertaken a verification exercise to obtain details of the purchasers and their ownership of the units. In this respect, the 2nd Defendant contends that letters were sent to Plaintiffs and that there was no response from them. There is conflicting evidence as to whether the Plaintiffs received these letters. However, we find that this verification exercise and the lack of response or otherwise from the Plaintiffs does not detract from the fact 33 that the 1st and 2nd Defendants had knowledge of the Plaintiffs’ beneficial ownership of the 5 Units of property. A fact that the 1st and 2nd Defendants had accepted by their decision to discontinue their appeal to the Court of Appeal in respect of the findings of the High Court in Suit 533, where the Settlement Agreements and the beneficial interest of the Plaintiffs are clearly mentioned in the judgment of that High Court. [48] Hence, we find that nothing of importance turns on this issue of verification exercise and it does not absolve the 1st to 4th Defendants of their liability in negligence. [49] Given the disobedience of the Court Order dated 1.12.2004 in respect of the appointment of a Committee of Inspection, and given the glaring evidence of the 1st and 2nd Defendants’ knowledge of the Plaintiffs’ beneficial ownership of the 5 Units flowing from the Settlement Agreements, we find that the learned trial judge was entirely correct in his reasoning that the 2nd, 3rd and 4th Defendants had unlawfully, wrongfully and negligently disposed the Plaintiffs’ 5 Units, giving rise to the Plaintiffs incurring loss. The learned trial judge had applied the correct principles of negligence, and found that the Plaintiffs had established all the required elements of the tort. See Arab-Malaysian Finance Bhd v Steven Phoa Cheng Loon & Ors And Other Appeals [2003] 1 MLJ 578. Damages 34 [50] The amount of damages awarded by the High Court was exactly the amount received by the 2nd Defendant from the 5th Defendant for the sale of the 5 Units. We find the measure of damages to be in accordance to established principles, i.e. fair compensation for the loss of value of the properties. The sale of the 5 Units to the 5th Defendant was found by the learned trial judge to be a bona fide arm’s length transaction at the prevailing market price. Hence, the sale price would be indicative of the actual loss suffered by the Plaintiffs. See Selva Kumar a/l Murugiah v Thiagarajah a/l Retnasamy [1995] 2 CLJ 374 FC. [51] In the final analysis, we do not find any merit in the two appeals lodged except in respect of the grant of exemplary and aggravated damages. The learned judge had made substantial findings of fact relevant to the issues of liability in law for the tort of negligence. Those findings are supported overwhelmingly by both oral and documentary evidence. We concur with those findings. The non-setting aside of the Vesting Order, in our judgment, does not affect the finding of liability with regards to neglect of breach of duty. Glaringly is the failure to set up the committee of inspection, a specific order of the Winding-Up Court made at the time of the 2nd Defendant’s appointment in 1.12.2008. Aggravated and exemplary damages 35 [52] The High Court found that the facts of the case warranted the award of aggravated and exemplary damages and awarded:

the sum of RM50,000 as aggravated damages to the Plaintiffs in

(ii) the sum of RM50,000 as exemplary damages to the Plaintiffs in each of Suit 317 and 318. However, we are of the view that there was no basis for the grant of exemplary and aggravated damages. There is no evidence of aggravation suffered by the Plaintiffs. Neither do the facts of the case bring it within any one of the accepted categories set out in Rookes v. Barnard [1964] 1 All ER 347 for the award of exemplary damages, the principles of which in turn have been incorporated into Malaysian law, for example in Sambaga Valli K R Ponnusamy v. Datuk Bandar Kuala Lumpur & Ors And Another Appeal [2017] 1 LNS 500 and Taz Logistics Sdn Bhd v. Taz Metals Sdn Bhd & Ors [2019] 2 CLJ 48; [2019] 3 MLJ 510. We find that the award of general damages sufficiently compensates the Plaintiffs’ loss. Wherefore, we set-aside the orders for the award for aggravated damages. Consequently, the appeal was allowed in part and the orders

(ii) and (iii) of the Order dated 24.9.2018 were set-aside. 36 Costs [52] As for costs we awarded the sum of RM50,000.00 to the Plaintiffs/Respondents in each appeal subject to allocator as costs here and below. In this regard, order (v) of the Order dated 24.9.2018 in respect of costs was also set-aside. Dated this 16th day of June 2020. sgd Vazeer Alam Mydin Meera Judge Court of Appeal 37 Counsell/Solicitors For W-02(NCvC)(W)-1972-09/2018 : For The Appelants : Ranjan N.Chandran (Sabrina Shanthini Richards, Shobah Veera & Chandni Anantha Krishnan together with him); Messrs Hakem Arabi & Associates Advocates & Solicitors Suite Mutiara Bangsar Jalan Liku off Jalan Riong 59100 Kuala Lumpur Tel: 03-2282 2339/fax:03-2282 2078 [Ref:HAA/KL/LQ/DNSB/WMS/2807/08RC/(COA)] For The Respondents : HC Yap (HH Jee together with him) Messrs Tho, Hock & Chwan Advocates & Solicitors Lot 5.21,5th Floor, Plaza Prima Jalan Kelang Lama 58200 Kuala Lumpur [Ref: LIT/2334/14/YYC/YFT] Counsell/Solicitors For W-02(NCvC)(W)-1973-09/2018 : For The Appelants : Ranjan N.Chandran (Sabrina Shanthini Richards, Shobah Veera & Chandni Anantha Krishnan together with him); Messrs Hakem Arabi & Associates Advocates & Solicitors, Suite Mutiara Bangsar Jalan Liku off Jalan Riong 59100 Kuala Lumpur Tel: 03-2282 2339/fax:03-2282 2078 [Ref:HAA/KL/LQ/DNSB/WMS/2807/08RC/(COA)] For The Respondents : Ravin Woodhull (Ooi Wei Neng & Goh Rhen-Jeat together with him); Messrs Mak, Ng & Lim Advocates & Solicitors B-5-13, Tingkat 5, IOI Boulevard Jalan Kenari 5, Bandar Puchong Jaya 47170 Puchong Selangor Darul Ehsan Tel: 03-8071 1000/Fax: 03-8071 1001 [Ref: MNL/WMSC-DN/21575/15/AO]