Jaffa Roger Dawkins v Pelorus Holding Sdn. Bhd. (B-02(NCvC)(W)-2336-12/2022)

HARRIS LUQMAN GROUP SDN BHD APPELLANTS AND PELORUS HOLDING SDN BHD RESPONDENT CORAM AZIZAH BINTI NAWAWI, JCA SEE MEE CHUN, JCA MOHAMED ZAINI BIN MAZLAN, JCA

This is an appeal against the decision of the High Court, where the court partly allowed the respondent’s claim. The dispute arises from a Joint Venture Cum Shareholders Agreement dated 16 August 2016 (‘the JV agreement’) between the respondent and the first and 18/11/2025 12:03:03 B-02(NCvC)(W)-2336-12/2022 Kand. 122 second appellants, for the establishment and management of a joint venture company known as Pelorus HLG Sdn Bhd (‘the JV company’).

The respondent alleged that the first and second appellants had breached their obligations under the JV agreement and diverted funds belonging to the JV company for the benefit of the third appellant. The respondent also sought repayment of various sums claimed to have been advanced as loans to the appellants, including a loan of RM1,000,000.00 secured by a personal guarantee signed by the first and second appellants.

The appellants denied liability and raised, among other defences, the issue of locus standi, contending that the respondent, as a shareholder in the JV company, had no right to initiate the action in its personal capacity. They further claimed that the personal guarantee was invalid and that the sums claimed were not payable.

The High Court found in favour of the respondent on most heads of claim, holding that the first and second appellants were bound by the personal guarantee and were liable for the sums advanced. The court further found that the first and second appellants had breached their duties under the JV agreement and had diverted funds belonging to the JV company.

Aggrieved, the appellant now appeals to this Court. The issues for determination concern (i) whether the respondent had the requisite locus standi to institute the action, (ii) whether the High Court erred in finding the personal guarantee valid and enforceable, and (iii) whether the findings on the alleged diversion of funds and other sums advanced were plainly wrong in law or fact. Background facts

The respondent is a private limited company founded in 2010. The first and second appellants are shareholders of the third appellant, and both act as directors of the company.

The respondent, together with the first and second appellants, entered into the JV agreement to establish the JV company. The third appellant was not a party to this agreement.

The JV company’s objective, as set out in the JV agreement, stipulates that each party shall employ its own resources to carry out activities including livestock supply, integrated farming and breeding, abattoir operations, the provision of fresh and frozen meat products, fertiliser distribution, and any other activities that support or relate to the business that the parties may pursue in the future.

Under the JV agreement, the Board of Directors shall comprise two directors from the respondent company and two from the first and second appellants. The first appellant was appointed as the Chief Executive Officer of the JV company. He was responsible for the JV company’s daily operations and management, and received a monthly salary of RM10,000.00.

The respondent claimed that it had established an informal business relationship with the first and second appellants before formalising it through the JV agreement. The respondent claimed that they had verbally agreed to the following practices:

To manage income and expense flows in the initial stages and prior to the JV company establishing its own accounts, the first and second appellants would use the third appellant’s bank account for the JV company’s transactions and receive revenue due to it through the third appellant's accounts.

(ii) The first and second appellants would acquire a livestock importing permit for the JV company to support its trading activities.

(iii) The first and second appellants would provide the respondent with Personal Guarantees for loans to themselves and the second appellant, necessary for developing the JV company, with an assurance of profits from these loans.

The respondent provided financial resources to the appellants to develop and operate the JV company. Over time, the relationship between the respondent and the appellants deteriorated. The respondent claimed that the JV company had not been managed in accordance with the JV agreement.

The respondent claimed that the first appellant failed to manage the JV company responsibly, to pay the agreed profit margin, and to utilise the cash generated by the JV company as agreed. The respondent also alleged that the first appellant breached its obligation by failing to terminate the third appellant's business as agreed and instead continuing to operate the third appellant's business in direct competition with the JV company. Furthermore, the respondent asserted that the first and second appellants breached their duties as directors of the JV company under the common law.

Arising from these allegations, the respondent’s claim against: The first and second appellants are as follows:

Repayment of a loan of RM1,000,000.00 advanced to the third appellant pursuant to the Personal Guarantee signed by them; and

(ii) Repayment of monies advanced to the JV company amounting to RM516,972.02 as at 30 June 2018. Against all the appellants, jointly and/or severally, as follows:

Repayment of a sum of RM1,188,691.94 belonging to the JV company and diverted for the benefit of the third appellant.

(ii) Repayment of a sum of RM1,213,060.00 advanced to the appellants to service the third appellant’s loan with Agrobank; and

(iii) The expense associated with financing the respondent's investment in the JV company at a rate of 2.5% monthly. 6 14. The appellants argued that the respondent lacked locus standi to initiate the suit against them, as they had failed to obtain the JV company’s prior consent. They claimed that the respondent, as a shareholder in the JV company, should have commenced any claims against the first and second, who are directors of the JV company, through the JV company itself. The appellants also asserted that the respondent did not come before the court with clean hands, citing the respondent's failure to identify the correct bank account, and contended that the respondent’s witness, Mohd Farha B Razali, did not provide truthful testimony.

The JV company subsequently obtained leave to intervene and filed a counterclaim against the respondent based on the appellants’ defence. The JV company had, among other things, sought a declaration that the respondent could not initiate legal action against any party to the JV agreement without going through the JV company.

The High Court dismissed the appellants’ objection regarding the respondent’s lack of locus standi. It held that the respondent’s claims were directed against the first and second appellants in their personal capacities as guarantors of a loan provided to the third appellant by the respondent. The court also held that the respondent’s other claims stemmed from the breaches of the JV agreement by the first and second appellants, and that the remedies sought were aimed at them.

On the respondent’s claim for the repayment of a RM1,000,000.00 loan advanced to the third appellant, the High Court dismissed the first and second appellants’ allegation that their signatures on the Personal Guarantee were forged and held that the terms of the guarantee bound them. The court ruled that the first and second appellants were liable to pay the RM1,000,000.00 that the respondent had lent to the third appellant as guarantors.

The High Court allowed the respondent’s claim for the repayment of RM516,972.02 that they had advanced to the JV company as of 30 June 2018. The court found that the first and second appellants continued to operate the third appellant, despite the agreement that the third appellant would cease operations by June 2016, so that the JV company could take over its business as intended under the JV agreement. The funds that the respondent had advanced to the first and second appellants for the benefit of the JV company were therefore regarded as loans payable to the respondent.

The respondent’s claim against all three appellants for the repayment of RM1,188,691.94 belonging to the JV company was also allowed. The High Court found that there were payments made by third parties into the third appellant’s account that were meant for the JV company under the joint venture business. The court also found that the first appellant had diverted these payments into the third appellant’s account and failed to disclose the third appellant’s bank statements to justify his claim that the payments were solely for the third appellant’s benefit.

The respondent's fourth claim was for RM1,213,060.00, alleging that it was money advanced to the appellants to settle the third appellant’s loan with Agrobank. The High Court allowed this claim, concluding that the respondent had proven that the first appellant had sought aid to pay the third appellant’s Agrobank loan. The court found that the bank statements confirmed that funds from the JV company’s account were transferred to the third appellant’s account and used to settle the Agrobank loan.

The High Court dismissed the respondent’s claim for interest at 2.5% on expenses related to financing their investment, citing the absence of a contractual or legal basis to substantiate the claim.

Finally, the High Court dismissed the Intervener’s (the JV company) Counterclaim on the grounds that they had no cause of action against the respondent. The court reiterated that the respondent’s claim against the appellants was based on the JV agreement, which the first and second appellants had breached. The claim against the first and second appellants was also founded on the personal guarantee they had signed. The court opined that the Intervener had misunderstood the respondent’s action. The court awarded costs of RM100,000.00 against the appellants and RM50,000.00 against the Intervener. Findings No cause of action/locus standi

The appellants asserted that the respondent did not have the locus standi to commence their suit against the appellants for two broad reasons: that the JV company was given leave to intervene and that Razali Yaacob, one of the directors of the JV company, testified that he did not give any consent for the respondent to sue the appellants.

The appellants contended that as the respondent’s claim was based on the JV agreement, the suit should therefore be taken up by the JV company, particularly as the respondent is one of the directors in the JV company.

The respondent’s claim can essentially be divided into five parts:

RM1,000,000.00 against the first and second appellants based on the Personal Guarantee (‘first claim’);

(ii) RM516,972.02 against the first and second appellants for the repayment of funds advanced to the JV company;

(iii) RM1,188,691.94 against all appellants for repayment of funds belonging to the JV company and diverted for the benefit of the third appellant.

(iv) Repayment of a sum of RM1,213,060.00 from all the appellants for funds advanced to the appellants to service the third appellant’s loan with Agrobank;

Interest of 2.5% per month against all appellants for expenses related to financing the respondent's investment in the JV company.

We shall address each head of claim in turn. RM1,000,000.00 against the first and second appellants based on the

The Personal Guarantee dated 11 April 2017 was entered into between the first and second appellants in favour of the respondent. Under this guarantee, the first and second appellants agree to pay on demand all sums of money payable by the third appellant arising from the RM1,000,000.00 that the respondent had forwarded to the third appellant.

The first and second appellants challenged the validity of the Personal Guarantee by arguing that the witness to their signatures, Hashimah binti Bujai (PW1), did not actually witness their signatures on the document. The High Court was persuaded that the first and second appellants had signed the Personal Guarantee, as they failed to credibly challenge PW1’s testimony and similarly did not provide convincing evidence to prove that their signatures had been forged. The court also found PW1 to be a credible witness.

We find no reason to disturb the High Court's findings of fact, as there is no evidence to suggest that the court was clearly wrong in reaching its conclusions. The Personal Guarantee was not a complicated document, consisting of only five pages and containing standard guarantee terms. The High Court was satisfied that the first and second appellants had signed the Personal Guarantee, as they failed to present a credible challenge to the authenticity of their signatures. We recognise that an appellate court does not have the advantage that a trial court has in observing and hearing witnesses, and that a decision should only be overturned if it was one that was plainly wrong, such that no reasonable judge could have reached, explained, or justified it. The well-known dictum of Lord Thankerton in Thomas v Thomas [1947] AC 484 is most pertinent. "(1) Where a question of fact has been tried by a judge without a jury and there is no question of misdirection of himself by the judge, an appellate Court which is disposed to come to a different conclusion on the printed evidence, should not do so unless it is satisfied that any advantage enjoyed by the trial judge by reason of having seen and heard the witnesses, could not be sufficient to explain or justify the trial judge's conclusion. (2) The appellate Court may take the view that, without having seen or heard the witnesses, it is not in the position to come to any satisfactory conclusion on the printed evidence. (3) The appellate Court, may either because the reasons given by the trial judge are not satisfactorily, or because it unmistakably so appears from the evidence, may be satisfied that he has not taken proper advantage of his having seen and heard the witnesses and the matter will then become at large for the appellate Court.”

We therefore dismiss the appeal on this claim and affirm the High Court’s finding. RM516,972.02 owed by the first and second appellants for the repayment of funds advanced to the JV company

The High Court, in allowing this head of claim, based its decision on the statement of account prepared by the first appellant himself. This statement displayed the third appellant company’s income and expenditure from August 2017 to June 2018.

The High Court also found that the third appellant continued operating despite an agreement by the parties that it would cease operation in June 2016, allowing the JV company to take over as envisaged in the JV agreement. However, the third appellant continued its operations. The respondent’s claim concerns the funds it advanced, which are treated as loans to the first and second appellants.

We are of the considered opinion that the High Court’s finding on this claim was plainly wrong. The High Court erred by relying solely on the statement of account, which allegedly showed a debit balance of RM516,972.02, as the respondent did not provide any details on how this amount was calculated in their Statement of Claim. The respondent in paragraph 7 of their Statement of Claim had merely pleaded as follows: “7. Following the execution of the joint venture agreement, the first and second Appellant obtained further loans in 2017 and 2018, the outstanding balance of which as at 30.06.2018 stands at RM 516,972.02.”

It was insufficient for the respondent to merely state a figure without providing details of the amount they allegedly claimed was a loan to the first and second appellants. The respondent must also support its claim with admissible documents or other credible evidence to substantiate their claim, which they fail to do. Although the statement of account was prepared by the first appellant, the onus was on the respondent to specify and justify the amount claimed, as they could not simply rely on the statement of account. This court in Lim Hock Ling v Tai Lian Development Co [2006] 6 MLJ 712 held: [6] Of course, if there is no evidence apart from the regularly kept books of account, a litigant cannot rely solely upon the entries in his ledger to prove his case against his opponent. And that is what happened in Popular Industries Limited v Eastern Garment Manufacturing Sdn Bhd [1989] 3 MLJ 360 where Edgar Joseph Jr J (as he then was) applied the following passage in the judgment of Wadegaonkar J in Beni v Bisan Dayal & Anor AIR 1925 Nag 445 at p 446: Mere entries in books of account are not by themselves sufficient to charge any person with liability (vide s 34 of the Evidence Act). The reason is that a man cannot be allowed to make evidence for himself by what he chooses to write in his own books behind the back of third parties. There must be independent evidence of the transaction to which the entries ……” (emphasis added)

Having reviewed the notes of evidence, we find that the High Court failed to consider SP1 and SP2’s testimonies, which do not support the respondent’s claim. We are therefore of the view that the High Court was clearly wrong in allowing this claim, and we allow the first and second appellants’ appeal on this claim. RM1,188,691.94 against all the appellants for repayment of funds belonging to the JV company and diverted for the benefit of the third appellant, and repayment of a sum of RM1,213,060.00 against all the appellants for funds advanced to the appellants to service the third appellant’s loan with Agrobank We will address these two claims together, as they concern the issue of whether the JV company should have initiated the claim..

We will address these two claims together, as they concern whether the JV company should have initiated the claim.

These claims are based on the JV company’s entitlement. Therefore, only the JV company has the right to bring an action for these funds. The English Court of Appeal in Prudential Assurance Co. v Newman Industries Ltd [1982] 1 All ER 354 held: " The rule (in FOSS v. HARBOTTLE) is the consequence of the fact that a corporation is a separate legal entity. Other consequences are limited liability and limited rights. The Company is liable for its contracts and torts; the shareholder has no such liability. The Company acquires causes of action for breaches of contract and for torts which damage the Company. No cause of action vests in the shareholder. When the shareholder acquires a share he accepts the fact that the value of his investment follows the fortunes of the Company and that he can only exercise his influence over the fortunes of the Company by the exercise of his voting rights in general meeting. The law confers on him the right to ensure that the Company observes the limitations of its memorandum of association and the right to ensure that other shareholders observe the rule, imposed on them by the articles of association. If it is right that the law has conferred or should in certain restricted circumstances confer further rights on a shareholder the scope and consequences of such further rights require careful consideration." (emphasis added)

We are of the considered opinion that the High Court erred in allowing the respondent’s claim for these items, as such claims should have been pursued by the JV company through a derivative action. There was no resolution by the JV company’s board of directors, nor was there any resolution by the shareholders of the JV company for the respondent to commence the suit. We therefore set aside these claims against the first and second appellants.

We are also of the view that the High Court was plainly wrong in allowing the respondent’s claim against the third appellant. The respondent’s claim for RM1,188,691.94 was based on the transactions the respondent had with the first and second appellants. The third appellant was not a party to the JV agreement between the respondent and the first and second appellants. The High Court had failed to find that there is no nexus between the third appellant and the respondent, as the transactions occurred solely between the respondent and the first and second appellants. The act of diversion can only be attributed to the common directors, not the third appellant, which is a separate entity.

Regarding the claim of RM1,213,060.00 used to repay the third appellant’s loan to Agrobank, we also find that the High Court erred in failing to recognise that there is no nexus between the respondent and the third appellant. The fact that the first and second appellants are directors of the third appellant does not bind the third appellant, as it is a separate entity from its directors.

We are therefore of the considered opinion that the judgment for this claim must be set aside.

For the reasons given, we allow the third appellant’s appeal against the High Court’s judgment and set aside the judgment against them. We also partially allow the first and second appellants’ appeal and set aside the High Court’s judgment under paragraphs 2 (RM516,972.02), 3 (RM1,188,691.94), 4 (RM1,213,060.00), 5, and

However, the first and second appellants’ appeal regarding the judgment on the personal guarantee is dismissed. We order that this suit be remitted to the High Court for the respondent to pay damages suffered by the third appellant, which shall be assessed. We also set aside the RM100,000.00 costs awarded by the High Court and substitute it with RM50,000.00. Furthermore, we award costs of RM50,000.00 to the respondents for this appeal, subject to allocatur. Dated: 28 November 2025 -sgd- (MOHAMED ZAINI MAZLAN) (JUDGE) COURT OF APPEAL MALAYSIA Counsel for the Appellants : Hasshahari bin Johari Mawi, Awang Armadajaya bin Awang Mahmud, Mohd Rosly Khady bin Mohd Ayub Khan and Muhamad Hafizan Shafuan bin Kamarulzaman. Messrs Hasshahari & Partners Counsel for the Respondent : Dharmendran K. Sivalingam, Muhajir Waziinie bin Morchseinie & Fund Yi-Shan Emily