1. Jemix Co. Ltd. v 1. Jemix Heat Treatment (M) Sdn. Bhd. (WA-22IP-7-03/2016)

JEMIX CO. LTD. (Japanese Co. No.: T05UF1040F)

JEMIX HEAT TREATMENT (S) PTE. LTD. (Singaporean Co. No.: 198102527H) … PLAINTIFFS

JEMIX HEAT TREATMENT (M) SDN. BHD. (Malaysian Co. No.: 150595-T)

IKUMI TERADA (Japanese Passport No.: TZ0782388)

AIZUDDIN BIN ABD. SAMAD (Malaysian NRIC No.: 510101-08-6051)

KEISUKE SAKAGUCHI (Japanese Passport No.: TXZ0806021) … DEFENDANTS JUDGMENT (after trial)

This case concerns a claim for beneficial ownership of shares in a Malaysian company and a trade mark registered under the Trade Marks Act 1976 (TMA) based on an express private trust and constructive trust. 2

The first plaintiff company (1st Plaintiff) is a Japanese company which provides post-weld heat treatment services (Services) since its incorporation on 25.3.1968. The 1st Plaintiff owns a trade mark (Jemix Mark) which is used in the provision of the Services. The Jemix Mark has been registered as a trade mark in Japan on 28.4.1981.

The Hiramatsu family owns and runs the 1st Plaintiff. Mr. Takuya Hiramatsu (SP1) was the President of the 1st Plaintiff from June 1971 to 7.12.2007. Mr. Keita Hiramatsu (SP3) is SP1’s son and has taken over as the 1st Plaintiff’s President with effect from 7.12.2007.

The second plaintiff company (2nd Plaintiff) is incorporated in Singapore on 5.6.1981 and is controlled by the 1st Plaintiff. The 2nd Plaintiff also provides the Services based on the Jemix Mark in South East Asia

The first defendant company (1st Defendant) is incorporated in Malaysia on 8.2.1986 and provides the Services based on the Jemix Mark. On 29.6.1993, the 1st Defendant has registered the Jemix Mark under TMA (Malaysian Jemix Mark).

The second defendant (2nd Defendant) is a Japanese citizen who was initially an employee of the 1st Plaintiff. The 1st Plaintiff then seconded the 2nd Defendant to be the 2nd Plaintiff’s Managing Director (MD) from around 28.10.1994 until 24.6.2013. 3

The 2nd Defendant married Ms. Ikuko Hiramatsu, SP1’s daughter and SP3’s sister (Ms. Hiramatsu). Subsequently, the 2nd Defendant and Ms. Hiramatsu were divorced (Divorce).

The third defendant (3rd Defendant) is a Malaysian national who is a director and majority shareholder of the 1st Defendant.

The fourth defendant (4th Defendant) is a Japanese citizen who is a shareholder in the 1st Defendant pursuant to a sale and purchase agreement dated 16.10.2014 between the 2nd and 4th Defendants (SPA).

In the original action (Original Action), the 1st and 2nd Plaintiffs (Plaintiffs) claim, among others, as follows:

the 2nd Defendant initially held shares in the 1st Defendant (2nd Defendant’s Shares) in trust for the benefit of the 2nd Plaintiff. The 2nd Defendant has wrongfully transferred the 2nd Defendant’s Shares to the 4th Defendant by way of the SPA;

the 3rd and 4th Defendants hold shares in the 1st Defendant in trust for the benefit of the 2nd Plaintiff; and

the 1st Defendant holds the Malaysian Jemix Mark in trust for the benefit of the 1st Plaintiff.

The 2nd Defendant has counterclaimed against the 2nd Plaintiff (2nd Defendant’s Counterclaim) for, among others, the following relief: 4

the SPA is valid; and

the 2nd Defendant was the beneficial owner of shares in the 1st Defendant.

The Plaintiffs have obtained leave of this Court to serve notice of the Plaintiffs’ writ in this case on the 4th Defendant out of jurisdiction (Service Out Of Jurisdiction). The Plaintiffs could not however effect Service Out Of Jurisdiction on the 4th Defendant. Consequently, the 4th Defendant did not appear and participate in the trial of this case (Trial).

Both the Original Action and 2nd Defendant’s Counterclaim are tried together. The Plaintiffs and the 1st to 3rd Defendants have consented to a “split trial”, namely the Court shall first decide on the questions of liability regarding the Original Action and 2nd Defendant’s Counterclaim (Liability Issues). Questions as to the remedy, if any, will be determined after the Court has decided the Liability Issues.

Prior to the commencement of the Trial, the Plaintiffs have filed an application in Court enclosure no. 117 (Enc. 117) to strike out certain answers in the 2nd Defendant’s amended witness statement (WSSD2) on the ground that such answers have not been pleaded by the 2nd Defendant (Objectionable Evidence In WSSD2). To ensure that the Trial is not delayed, I have given the following directions:

the Plaintiffs and 2nd Defendant are directed to file all their affidavits regarding Enc. 117; 5

the submission for Enc. 117 is postponed until the completion of the Trial and shall be made together with the closing submission concerning Liability Issues;

subject to the Court’s decision in Enc. 117 -

the Objectionable Evidence In WSSD2 is admitted;

the Plaintiffs, 1st and 3rd Defendants may cross-examine the 2nd

the 2nd Defendant may be re-examined on the Objectionable Evidence In WSSD2 (if there is any cross-examination on the

if the Court allows Enc. 117, the Court shall expunge -

the Objectionable Evidence In WSSD2; and

all oral evidence adduced at the Trial during the cross-examination and re-examination on the Objectionable Evidence In WSSD2. C. Issues

The following questions arise in this case: 6

is the Objectionable Evidence In WSSD2 required by O 18 rr 7(1) and 12(1) of the Rules of Court 2012 (RC) to be pleaded by the 2nd Defendant?;

whether there is an express trust that the 2nd and 3rd Defendants hold shares in the 1st Defendant as trustees for the 2nd Plaintiff. In this regard -

does article 6 of the 1st Defendant’s articles of association (Article 6) bar the enforcement of any trust concerning the 1st Defendant’s shares?;

is the 2nd Plaintiff estopped from claiming against the 2nd Defendant in this case? This raises a novel question of whether the issue estoppel principle applies to a decision of the

whether the 2nd Plaintiff’s claim is barred by waiver, acquiescence or laches; and

should the Court exercise its discretion to draw an adverse inference under s 114(g) of the Evidence Act 1950 (EA) against the Plaintiffs for not calling certain witnesses?;

does the 1st Defendant hold the Malaysian Jemix Mark in trust for the benefit of the 1st Plaintiff? This issue concerns -

a construction of ss 7 and 34(b) TMA; 7

is there an express trust that the 1st Defendant holds the Malaysian Jemix Mark for the benefit of the 1st Plaintiff or is the 1st Defendant a constructive trustee of the same?; and

whether the 1st Plaintiff’s claim for the Malaysian Jemix Mark is barred by waiver, acquiescence or laches; and

as there is no Service Out Of Jurisdiction on the 4th Defendant, can the Court decide this case under O 35 r 1(2) RC against the 4th Defendant? If “yes”, whether the 4th Defendant holds shares in the 1st Defendant as a constructive trustee for the benefit of the 2nd Plaintiff. D. Enc. 117

I have perused the 2nd Defendant’s Amended Defence and Counterclaim (ADC). The Objectionable Evidence In WSSD2, in my view, does not constitute “material facts” and “necessary particulars” within the meaning of O 18 rr 7(1) and 12(1) RC respectively which have to be pleaded by the 2nd Defendant in the ADC - please see Mohamad bin S. Ahmad & Ors v Lembaga Pengelola Dewan Bahasa & Pustaka [2019] 1 AMR 268, at sub-paragraph 12(a). I reproduce below the relevant parts of O 18 rr 7(1) and 12(1) RC: “O 18 r 7(1) Subject to the provisions of this rule and rules 10, 11 and 12, every pleading shall contain, and contain only, a statement in a summary form of the material facts on which the party pleading relies for his claim or defence, as the case may be, but not the evidence by 8 which those facts are to be proved, and the statement shall be as brief as the nature of the case admits. O 18 r 12(1) Subject to paragraph (2), every pleading shall contain the necessary particulars of any … defence …” (emphasis added). As the 2nd Defendant is not required by O 18 rr 7(1) and 12(1) RC to plead in the ADC the Objectionable Evidence In WSSD2, Enc. 117 is dismissed with costs.

There is another reason to dismiss Enc. 117. O 1A and O 2 r 1(2) RC enable the Court to deal with all cases with regard to the overriding interest of justice. O 1A and O 2 r 1(2) RC provide as follows: “Regard shall be to justice O 1A In administering these Rules, the Court or a Judge shall have regard to the overriding interest of justice and not only to the technical non-compliance with these Rules. O 2 r 1(2) These Rules are a procedural code and subject to the overriding objective of enabling the Court to deal with cases justly. The parties are required to assist the Court to achieve this overriding objective.” (emphasis added). Even if it is assumed that the 2nd Defendant is required by O 18 rr 7(1) and 12(1) RC to plead in the ADC the Objectionable Evidence In 9 WSSD2, I find that no injustice has been caused to the Plaintiffs by such a failure on the 2nd Defendant’s part. This constitutes a second reason to dismiss Enc. 117 with costs.

In view of the dismissal of Enc. 117 -

the Objectionable Evidence In WSSD2; and

all oral evidence adduced at the Trial regarding the Objectionable Evidence In WSSD2 - is admissible in this case. E. Plaintiffs’ case

The following witnesses testified in support of the Original Action:

SP1;

Mr. Toshiyuki Takehara (SP2);

SP3;

Mr. Kok Chee Keong (SP4); and

Mr. Ong Eng Teck (SP5).

SP1 testified as follows, among others:

until SP1’s retirement from the 1st Plaintiff, SP1 was the “directing mind and will” of the latter; 10

the 1st Plaintiff expended money and expertise to incorporate the 2nd Plaintiff in Singapore. This is to enable the 2nd Plaintiff to provide the Services in SEA;

the 1st Defendant is incorporated in Malaysia as a shell company to enable the 2nd Plaintiff to provide the Services in this country. All the shares in the 1st Defendant are held on trust for the 2nd Plaintiff by individuals who are connected to the 2nd Plaintiff. In turn, the shares in the 2nd Plaintiff are owned by individuals on trust for the 1st Plaintiff;

no report regarding the 1st Defendant is received or requested by the 1st Plaintiff because SP1 thought that the reports sent by the 2nd Plaintiff to the 1st Plaintiff included the 1st Defendant’s affairs; and

SP1 only discovered that the 1st Defendant had a substantial business in Malaysia in 2013 when there was a dispute between the 2nd Plaintiff and the 2nd Defendant in Singapore High Court Suit No. 659 of 2013 (Singapore Suit).

SP2 is a director and Tokyo Office Manager of the 1st Plaintiff. According to SP2, among others -

SP2 was the 2nd Plaintiff’s MD from June 1981 (when the 2nd Plaintiff was incorporated) until end of 1984;

when SP2 was the MD for the 2nd Plaintiff, he held shares in the 2nd Plaintiff in trust for the 1st Plaintiff; and 11

Mr. Yasumasa Yakura (Mr. Yakura) assumed the position as the 2nd Plaintiff’s MD from SP2. Consequently, SP2 transferred all his shares in the 2nd Plaintiff to Mr. Yakura without any payment. SP2 explained that the share transfer form (for the transfer of SP2’s shares in the 2nd Plaintiff to Mr. Yakura) stated a sum of money for the purpose of payment of stamp duty only.

SP3 gave the following evidence, among others:

on or about 29.8.2014 the 1st Plaintiff discovered that the 1st Defendant had obtained the registration of the Malaysian Jemix Mark. The 1st Plaintiff claims to be the beneficial owner of the Malaysian Jemix Mark;

the 3rd Defendant was a marketing staff of the 2nd Plaintiff as evidenced in the 2nd Plaintiff’s “Company Profile” (2nd Plaintiff’s Company Profile); and

the 2nd and 3rd Defendants held shares in the 1st Defendant in trust for the 2nd Plaintiff.

Both SP4 and SP5 are directors of the 2nd Plaintiff since 4.2.2002. SP4 and SP5 testified as follows, among others:

Mr. Wong Ti Ti (Mr. Wong) transferred shares in the 2nd Plaintiff to SP4 and SP5. The share transfer forms for these transfers stated that valuable consideration had been provided by SP4 and SP5. However, SP4 and SP5 did not pay any money to Mr. Wong for their 12 shares in the 2nd Plaintiff because they held those shares in trust for the 1st Plaintiff;

upon the 1st Plaintiff’s direction, SP4 and SP5 transferred their shares in the 2nd Plaintiff to the 1st Plaintiff. Once again, the share transfer forms for these transfers stated that sums of money had been paid but SP4 and SP5 did not receive any payment from the 1st Plaintiff; and

sums of money were stated in all the share transfer forms for the purpose of payment of stamp duties. F. Case for 1st and 3rd Defendants

The 3rd Defendant testified in this case on behalf of the 1st Defendant and himself. According to the 3rd Defendant, among others:

the 3rd Defendant worked in the Engineering Department in the Royal Malaysian Air Force (RMAF) for many years. After the 3rd Defendant resigned from RMAF, he started his own company, Xray Engineering (M) Sdn. Bhd. (XESB), to provide the Services jointly with another company, UIS Sdn. Bhd. (UIS). As the 3rd Defendant had a lot of customer contacts, his role was to bring in customers whereby UIS would provide the Services and pay a commission to XESB;

the 3rd Defendant’s brother (not named by the 3rd Defendant) was an executive director and shareholder of JGC (M) Sdn. Bhd., an affiliate 13 company of a large Japanese engineering company, JGC Corporation (JGC). The 3rd Defendant’s brother would recommend business to the 3rd Defendant. The 3rd Defendant was also a “consultant cum coordinator” for JGC’s project in terms of occupational safety and health;

the 3rd Defendant first met Mr. Yakura when both of them were involved in a project in Port Dickson. The 3rd Defendant agreed with Mr. Yakura that the former would recommend jobs to the latter and the latter would pay commission to the former;

sometime in early 1993, Mr. Yakura informed the 3rd Defendant that -

Mr. Yakura was looking for a Bumiputera “partner”;

the 3rd Defendant would be a good “addition” to the 1st Defendant because he would be able to bring in business for the 1st Defendant with his contacts and his brother’s contacts; and

Mr. Yakura would provide a friendly loan for the 3rd Defendant to acquire shares in the 1st Defendant and the 3rd Defendant could repay Mr. Yakura later. At that time, the 3rd Defendant was assisting Mr. Yakura to secure a project in Thailand for the 2nd Plaintiff (Thai Project). According to Mr. Yakura, if the 2nd Plaintiff got the Thai Project, a commission would be paid to the 3rd Defendant and he could use the commission to pay for shares in the 1st Defendant. On that basis, the 3rd Defendant 14 signed a “Friendly Loan Agreement” dated 4.3.1993 with Mr. Yakura (FLA) and agreed to invest in the 1st Defendant;

51,002 shares in the 1st Defendant were allotted to the 3rd Defendant and was paid in the following manner -

RM51,000.00 was a friendly loan from Mr. Yakura by way of the

the 3rd Defendant paid RM2.00 for the above allotment of 51,002 shares. In this regard, the 3rd Defendant claimed that a written acknowledgement of receipt of RM51,002.00 by the 3rd Defendant from Mr. Yakura was erroneous as Mr. Yakura only gave a Friendly Loan of RM51,000.00 to the 3rd Defendant by way of the FLA;

sometime in 1994, Mr. Yakura informed the 3rd Defendant that Mr. Yakura would sell his shares in the 1st Defendant to the 2nd Defendant because he would resign from the 2nd Plaintiff and would set up his own company in Singapore. The 3rd Defendant did not object to Mr. Yakura’s sale of his shares in the 1st Defendant to the 2nd Defendant. Regarding the Friendly Loan, Mr. Yakura stated that he had an arrangement with the 2nd Defendant to “take over” the Friendly Loan and the 3rd Defendant could repay the Friendly Loan to the 2nd Defendant using commission earned by the 3rd Defendant;

on 17.11.2014, Mr. Yakura, 2nd and 3rd Defendants executed a deed of assignment whereby Mr. Yakura assigned the Friendly Loan to 15 the 2nd Defendant for RM10. (Assignment). The 3rd Defendant remembered that he had repaid the Friendly Loan to the 2nd Defendant by way of a cheque after he received a commission from the 2nd Plaintiff for the Thai Project;

the 3rd Defendant denied that he held shares in the 1st Defendant in trust for the 2nd Plaintiff. If the shares in the 1st Defendant are held by the 2nd and 3rd Defendants in trust for the 2nd Plaintiff, the 2nd Plaintiff would not have caused the incorporation of another Malaysian company, Jem Heat Treatment Sdn. Bhd. (JHT). All the shares in JHT are owned by the 2nd Plaintiff. It does not make sense for JHT to compete with the 1st Defendant in Malaysia if the equitable owner of the 1st Defendant’s shares is the 2nd Plaintiff; and

the 1st Defendant does not hold the Malaysian Jemix Mark in trust for the 1st Plaintiff. G. 2nd Defendant’s case

The 2nd Defendant gave the following evidence, among others:

on 23.4.2012, SP1 came to Singapore and requested the 2nd Defendant to approve in secret for the 2nd Plaintiff to pay SP1 a “retirement gift” of ¥100 million (about US$1 million). The 2nd Defendant refused to do so and asked SP1 to follow “proper procedures” and get approval from the 1st Plaintiff’s board of directors. After this incident, SP1 became angry with the 2nd 16 Defendant and the relationship between the 2nd Defendant and the Hiramatsu family became “very bad”;

around May 2013, SP3 and the eventual replacement for the 2nd Defendant as the 2nd Plaintiff’s MD, Mr. Shinji Iwaki (Mr. Iwaki), came to Singapore to demand for the 2nd Defendant to leave the Hiramatsu family and to resign from the 1st and 2nd Plaintiffs. The 2nd Defendant did not give in to such demands;

on 24.6.2013 -

the 2nd Defendant received a notice dated 21.6.2013 from the 1st Plaintiff which suspended the 2nd Defendant as the 2nd Plaintiff’s MD and ordered him to be transferred to the 1st

SP3 and Mr. Iwaki came to the 2nd Defendant’s office with lawyers and a “consultant”. The 2nd Defendant was instructed to leave the 2nd Plaintiff’s office immediately and he was not allowed to take any document. A Japanese lawyer informed the 2nd Defendant that the former would decide what documents belonged to the latter and the former would subsequently send the latter’s personal documents to the latter; and

the 2nd Defendant’s bag was checked before he was escorted to his car. Thereafter the 2nd Defendant was not allowed to re-enter the 2nd Plaintiff’s office; 17

by way of a letter dated 22.8.2013 from the 1st Plaintiff to the 2nd Defendant, the 1st Plaintiff rejected the 2nd Defendant’s resignation and terminated his employment. Hence, the filing of the Singapore Suit wherein -

the 2nd Defendant claimed damages for wrongful dismissal by the 2nd Plaintiff (2nd Defendant’s Claim); and

the 2nd Plaintiff counterclaimed that the 2nd Defendant had caused the 2nd Plaintiff to wrongfully pay money to a Japanese company, Slot-Nankai Co. Ltd. (SN) and the 1st Defendant (2nd Plaintiff’s Counterclaim). The Singapore High Court allowed the 2nd Defendant’s Claim and dismissed the 2nd Plaintiff’s Counterclaim with costs;

despite a request by the 2nd Defendant’s solicitors, the 2nd Plaintiff did not return many of his personal documents, including his letters to SP1;

after the Divorce, the 2nd Defendant went to Thailand and worked with SN. This is because the “principal” in SN is the 4th Defendant, an “old friend” of the 2nd Defendant;

the 2nd Defendant’s Shares were not held in trust for the 2nd Plaintiff due to the following reasons - 18

Mr. Yakura wanted the 2nd Defendant to buy the former’s shares in the 1st Defendant. Consequently, the 2nd Defendant bought 49,001 shares in the 1st Defendant from Mr. Yakura and paid him S$5,000.00 in monthly instalments between 1994 and 1995;

Mr. Yakura and SP1 did not inform the 2nd Defendant that Mr. Yakura was holding shares in the 1st Defendant on trust for the 2nd Plaintiff;

although the 1st Defendant was an agent of the Plaintiffs for the sale of the 1st Plaintiff’s products and provision of the 1st Plaintiff’s Services, the 1st Defendant was “independent” of the Plaintiffs. The 2nd Plaintiff did not pay for the 1st Defendant’s expenses. For the 1st Defendant to secure projects in this country, the 1st Defendant “needed” to have a Bumiputera shareholder (who is the 3rd Defendant);

the fact that the 2nd Defendant was the beneficial owner of shares in the 1st Defendant was never a secret because the records of the 1st Defendant were kept in the 2nd Defendant’s office in the 2nd Plaintiff; and

the 1st Plaintiff directed all shareholders of the 2nd Plaintiff to transfer their shares in the 2nd Plaintiff to the 1st Plaintiff. However, there was no direction by the 2nd Plaintiff to the 2nd Defendant to transfer his shares in the 1st Defendant to the 2nd Plaintiff; 19

the 2nd Defendant’s evidence supported the 3rd Defendant’s testimony regarding the 3rd Defendant’s shares in the 1st Defendant, Friendly Loan and Assignment. After the 2nd Plaintiff paid commission to the 3rd Defendant, the 3rd Defendant repaid RM51,000.00 to the 2nd Defendant. Consequently, the 2nd Defendant repaid RM51,000.00 to Mr. Yakura;

the 2nd Defendant’s Shares were sold to the 4th Defendant by way of the SPA because due to the Divorce, Ms. Hiramatsu wanted half of the 2nd Defendant’s Shares and the 1st Defendant’s management was not “keen” to have Ms. Hiramatsu as a shareholder of the 1st Defendant. Regarding the SPA -

a firm of chartered accountants, “Messrs PCS & Co.” (PCS), valued the 1st Defendant on 20.8.2014 at RM4.578 million, namely about RM18.31 per share of the 1st Defendant (PCS’s

based on PCS’s Valuation, the 2nd Defendant’s Shares were sold to the 4th Defendant for RM2 million; and

the 4th Defendant agreed to purchase the 2nd Defendant’s Shares on the condition that the 2nd Defendant would “look after” the 4th Defendant’s interest in the 1st Defendant by becoming a director of the 1st Defendant; and 20

the 2nd Defendant alleged that his mother-in-law (Madam Hiramatsu) had gambling debts and had, among others, stolen his money. To prevent the 2nd Defendant from taking legal action against Madam Hiramatsu, Ms. Hiramatsu reached an agreement with the 2nd Defendant regarding the Divorce wherein Ms. Hiramatsu agreed to accept payment of only 50% of the nominal value of the 2nd Defendant’s Shares (approximately RM61,000.00). H. What weight should be attached to evidence heard by witness from a person who is not called to testify?

The 2nd and 3rd Defendants had given lengthy evidence regarding what they had been informed by Mr. Yakura. The 2nd Defendant further testified on what he was told by the 4th Defendant.

A party may tender evidence on what a witness has heard from a person (who has not been called to testify) to prove the fact that a statement has been made to the witness - please see the Privy Council’s judgment delivered by LMD De Silva in an appeal from the Federation of Malaya, Subramaniam v Public Prosecutor [1956] 1 MLJ 220, at 222. However, I attach no weight to such evidence because the Plaintiffs have no opportunity to cross-examine Mr. Yakura and the 4th Defendant to ascertain the truth of what had been informed to the 2nd and 3rd Defendants - please see Tenaga Nasional Bhd v Api-api Aquaculture Sdn Bhd [2015] 3 AMR 811, at paragraphs 25-27. I. Credibility of witnesses 21

I find as a fact that all the five witnesses for the Plaintiffs (Plaintiffs’ Witnesses) are credible. This decision is premised on the following evidence and reasons:

the testimonies of the Plaintiffs’ Witnesses regarding the existence of an express trust over the 1st Defendant’s shares are consistent with the probabilities and circumstances of this case - please see paragraphs 34 to 36 below;

the cross-examination of the Plaintiffs’ Witnesses did not reveal any reason to doubt the veracity of the Plaintiffs’ witnesses; and

the testimonies of the Plaintiffs’ Witnesses mutually corroborated each other.

This Court finds as a fact that the 2nd Defendant is not a truthful witness based on the following evidence and reasons:

by a letter dated 13.9.2005, the 1st Plaintiff gave a series of questions to be answered by the 2nd Defendant (Inquiry). The 2nd Defendant answered the Inquiry in writing and in Japanese (2nd Defendant’s Reply). During cross-examination, when the 2nd Defendant was asked whether he wrote the Defendant’s Reply (in Japanese), he answered “I think so”. An honest witness who has written something in his or her own handwriting, would have easily admitted his or her own handwriting. The 2nd Defendant’s above answer shows the 2nd Defendant is less than honest; 22

the conduct of a party or witness is relevant under s 8(2) EA - please see Chang Min Tat FJ’s judgment of the Federal Court in Tindok Besar Estate Sdn Bhd v Tinjar Co [1979] 2 MLJ 229, at 234. The following conduct of the 2nd Defendant shows a lack of probity on his part -

the 2nd Plaintiff introduced “Management Rules” (Rules) in

I reproduce the relevant part of r 12 of the Rules (Rule 12) as follows - “Prohibited matters on the MD The [2nd Plaintiff’s MD] shall not conduct the following acts: … Receiving any compensation from any other companies … ” (emphasis added). The 2nd Defendant’s learned counsel, Mr. Ooi Huey Miin, relied on the dictionary meaning of “compensation” to contend that Rule 12 did not apply to dividends received by the 2nd Defendant from the 1st Defendant when he was the 2nd Plaintiff’s MD on 31.12.2012. I am not able to accept this submission as the word “compensation” in Rule 12 has a wide meaning to include dividends. This is clear from rule 7 of the Rules which provides “compensation” to include the MD’s salary and fees. Accordingly, the 2nd Defendant’s above conduct has breached Rule 12; 23

even if it is assumed that Rule 12 does not apply to the aforesaid conduct by the 2nd Defendant, a MD of a company in Singapore who receives dividends from a competitor company, would have breached his or her fiduciary duty owed to the company (due to a conflict between his or her personal interest and the company’s interest) by not having first obtained the company’s informed consent for such a receipt; and

the Plaintiffs’ solicitors sent two demands dated 15.9.2014 and 17.9.2014 (2 Demands) to the 2nd Defendant for, among others, the return of the 2nd Defendant’s Shares to the 2nd Plaintiff. The 2nd Defendant was initially represented by Messrs “Benjamin Poh Law Office” (Messrs BPL). By a letter dated 29.9.2014 from Messrs BPL, the 2nd Defendant denied the 2 Demands (2nd Defendant’s Denial). The SPA was entered into by the 2nd and 4th Defendants on 16.10.2014, just 17 days after the 2nd Defendant’s Denial! In the English Court of Appeal case of Snook v London and West Riding Investments Ltd [1967] 1 All ER 518, at 528, Diplock LJ (as he then was) decided in the majority judgment that any agreement, document or transaction executed by a person is a “sham” if it is intended to give to third parties or to the Court an appearance of creating between the parties legal rights and obligations which are different from the actual legal rights and obligations which the parties intend to create. This meaning of a “sham” contract, document or transaction in 24 Snook has been accepted by Gopal Sri Ram JCA (as he then was) in the Court of Appeal in Sri Kelangkota-Rakan Engineering JV Sdn Bhd & Ors v Arab-Malaysian Prima Realty Sdn Bhd & Ors [2001] 1 CLJ 779, at 788-789. I find as a fact that the SPA is a sham agreement for the following reasons -

the “unholy haste” in the conclusion of the SPA (17 days after the 2nd Defendant’s Denial) shows a lack of bona fides on the part of the 2nd Defendant;

(ii) there is no documentary evidence of any bona fide negotiation at arm’s length between the 2nd and 4th Defendants prior to the conclusion of the SPA;

(iii) there is no written proof regarding PCS’s valuation fee and its payment by the 2nd and/or 3th Defendants;

(iv) no evidence of offer and acceptance by the 2nd and 4th Defendants (which led to the SPA) has been tendered in this case;

the SPA had been prepared by Messr BPL and yet, no draft SPA has been exchanged and discussed between Messrs BPL (acting for the 2nd Defendant) and the 4th Defendant; 25

(vi) after the execution of the SPA, there was no correspondence between the 2nd and 4th Defendants regarding the completion of the SPA;

(vii) clause 3.1 of the SPA provided that the consideration for the 4th Defendant’s purchase of the 2nd Defendant’s Shares was RM2,000,000.00 (Purchase Consideration) which was “payable wholly in cash”. According to clause 3.2 of the SPA (Clause 3.2), a proof of payment of the Purchase Consideration or written instruction of the 2nd Defendant “shall” be delivered to Messrs BPL before the execution of the transfer of the 2nd Defendant’s Shares to the 4th Defendant. Clause 5.1 of the SPA (Clause 5.1) stated that the “Completion” of the SPA (defined in clause 1.1 of the SPA to mean the completion of the transfer of the 2nd Defendant’s Shares) “shall take place upon the full settlement” of the Purchase Consideration in accordance with Clause 3.2. The 2nd Defendant did not tender any evidence that the 4th Defendant had paid the Purchase Consideration and yet, the 2nd Defendant’s Shares had been transferred to the 4th Defendant! The SPA is clearly a sham contract because the 2nd Defendant’s Shares had been transferred to the 4th Defendant despite a breach of Clauses 3.2 and 5.1 (4th Defendant’s Breach). The 4th Defendant even received 26 interim dividends amounting to RM156,800.00 from the 1st Defendant;

(viii) despite the 4th Defendant’s Breach, the 2nd Defendant did not send any demand for the 4th Defendant to pay the Purchase Consideration; and

(ix) the 2nd Defendant did not terminate the SPA on the ground of the 4th Defendant’s Breach. Nor did the 2nd Defendant counterclaim against the 4th Defendant in this action to invalidate the SPA, claim for the return of the 2nd Defendant’s Shares and the dividends received by the 4th Defendant. Instead, the 2nd Defendant’s Counterclaim prays for, among others, a declaration that the SPA is valid!;

despite Rule 12, the 2nd Defendant testified that an employee of a company is allowed to have a commercial interest in a competitor of the company. Such an answer shows the 2nd Defendant’s lack of credibility; and

the 2nd Defendant gave material evidence which was self-contradictory. The 2nd Defendant stated that as the 2nd Plaintiff’s MD, he “required” Mr. Wong (a director of the 1st Defendant) to report to him regarding the 1st Defendant’s activities. The 2nd Defendant then contradicted himself by testifying that Mr. Wong, as the 1st Defendant’s director, was not “obliged” to report to him on the 1st Defendant’s business. 27

I find as a fact that the 3rd Defendant is not a credible witness. This finding is premised on the following evidence and reasons:

the 3rd Defendant gave the following inconsistent answers -

initially, the 3rd Defendant stated that he had made an agreement with Mr. Yakura for the latter to personally pay commission to the former. Subsequently, the 3rd Defendant changed his sworn testimony and informed the Court that he had entered into an agreement with the 2nd Plaintiff (not Mr. Yakura) for commission to be paid by the 2nd Plaintiff to him;

the 3rd Defendant firstly testified that he did not know Mr. Wong was the 2nd Plaintiff’s General Manager until 2013. The 3rd Defendant later contradicted himself and stated that he knew Mr. Wong was an employee of the 2nd Plaintiff until 2013; and

the 3rd Defendant initially informed the Court that he did not know whether the 2nd Defendant had paid for the 1st Defendant’s allotment of 73,499 shares to the 2nd Defendant in 2011 (2011 Allotment). The Plaintiffs’ learned counsel, Mr. Oon Thian Seng, then informed the 3rd Defendant that the 3rd Defendant would have known whether the 2nd Defendant had paid for the 2011 Allotment because the 3rd Defendant was a director of the 1st Defendant at that time and the 2011 Allotment could only have been made with, among others, a resolution from the 1st Defendant’s directors. Upon hearing Mr. Oon, the 28 3rd Defendant admitted that the 2nd Defendant did not pay for the 2011 Allotment;

the 3rd Defendant’s evidence regarding his background in the private sector (after he had left RMAF) has been credibly undermined by the 2nd Plaintiff’s Company Profile which showed that he was only a marketing staff of the 2nd Plaintiff based in Kuala Lumpur. When there is a conflict between oral and documentary evidence, the court will generally accept documentary evidence - Tindok Besar Estate, at p. 234. Furthermore, the 3rd Defendant did not adduce any documentary evidence to rebut the 2nd Plaintiff’s Company Profile regarding his background. The 3rd Defendant alleged that XESB was his own company and yet, he did not produce any document relating to XESB which showed his background prior to joining the 1st Defendant;

the 3rd Defendant was evasive during his cross-examination. As such, the Court has to remind him that he had taken an oath to tell the truth; and

the 3rd Defendant’s witness statement claimed that his brother would recommend business to him but he lacked the candour to name his own brother. J. Whether 2nd and 3rd Defendants are trustees of 1st Defendant’s shares for 2nd Plaintiff J(1). 3 requirements of an express trust 29

In the Supreme Court case of Yeong Ah Chee @ Yan Hon Wah v Lee Chong Hai & Anor and other appeals [1994] 3 CLJ 20, at 26, Peh Swee Chin SCJ has decided that the three “essentials” of an express trust (3 Certainties) are as follows:

certainty of settlor’s intention to create a trust (1st Certainty);

certainty of subject matter (property) of the trust (2nd Certainty); and

certainty of object or beneficiary of the trust (3rd Certainty).

My understanding of the relevant cases regarding the 3 Certainties is as follows:

the 1st Certainty may be proven by -

a written agreement or document. In Geh Cheng Hooi & Ors v Equipment Dynamics Sdn Bhd and other appeals [1991] 1 MLJ 293, at 300, Gunn Chit Tuan SCJ (as he then was) in the Supreme Court implied a trust even though the agreements in question did not contain an express provision regarding the trust;

oral evidence - please see the decision of Suffian CJ (Malaya) (as he then was) in the Federal Court case of Wan Naimah v Wan Mohamad Nawawai [1974] 1 MLJ 41, at 41-42; 30

conduct of the relevant parties - please refer to the Court of Appeal’s judgment delivered by Gopal Sri Ram JCA (as he then was) in ESPL (M) Sdn Bhd v Radio & General Engineering Sdn Bhd [2004] 4 CLJ 674, at 687;

the relationship between the parties - Geh Cheng Hooi, at p. 300; and/or

all the surrounding circumstances of the case - ESPL, at p. and 687;

the Court may infer the existence of the 1st Certainty based on the matters stated in the above sub-paragraphs (1)(a) to (e) - please see the judgment of Singapore’s Court of Appeal delivered by Sundaresh Menon CJ in Guy Neale & Ors v Nine Squares Pty Ltd [2015] 1 SLR 1097, at paragraph 58;

so long as the 1st Certainty is proven or inferred by the Court -

the creation of an express trust does not require the execution of a trust deed. A declaration of an express trust may be made informally - Wan Naimah, at p. 41; and

an express trust may arise even if there is no use of the word “trust”, “confidence” or the like - please see the judgment of Megarry J (as he then was) in the English High Court case of Re Kayford Ltd [1975] 1 All ER 604, at 607. Re Kayford Ltd has been cited with approval by Zainon Ali JCA (as she then 31 was) in the Court of Appeal in Qimonda Malaysia Sdn Bhd (in liquidation) v Sediabena Sdn Bhd & Anor [2012] 3 MLJ 422, at paragraph 14;

regarding the 2nd Certainty, I refer to Guy Neale, at paragraph 59, as follows - “… The trust must define with sufficient certainty the assets which are to be held on trust and the kind of interest that the beneficiaries are to take in them. The definition will be sufficiently certain if it enables the trustee or the court to execute the trust according to the settlor’s intention (see Snell’s Equity ([50] supra) at para 22-016).” (emphasis added); and

the 3rd Certainty is fulfilled if a beneficiary of an express trust has been ascertained or is capable of ascertainment - please see the judgment of Jenkins LJ (as he then was) in the English Court of Appeal in Inland Revenue Commissioners v Broadway Cottages Trust [1955] Ch 20, at 31. Broadway Cottages Trust has been applied by Winslow J in the Singapore High Court case of Re Chionh Ke Hu Deceased [1964] 1 MLJ 270, at 273.

It is not disputed that the Plaintiffs bear the legal and evidential burden to prove on a balance of probabilities that the 2nd and 3rd Defendants hold shares in the 1st Defendant as express trustees for the 2nd Plaintiff. 32 J(2). Who was beneficial owner of subscription shares in 1st Defendant (Subscription Shares)?

This Court finds as a fact that the Plaintiffs have proven on a balance of probabilities the Subscription Shares are held on an express trust for the 2nd Plaintiff. Such a decision is based on the following evidence and reasons:

the 1st Certainty is proven as follows -

according to SP2, when the 2nd Plaintiff was incorporated, the shares in the 2nd Plaintiff are held by SP2 (as the 2nd Plaintiff’s MD) on trust for the 1st Plaintiff. SP1 testified that the 1st Plaintiff had expended money and expertise to incorporate the 2nd Plaintiff. As such, the 2nd Plaintiff is beneficially owned and controlled by the 1st Plaintiff at all times;

SP1 gave evidence that he was the alter ego of the 1st Plaintiff at the material time. As the 2nd Plaintiff is controlled by the 1st Plaintiff, SP1 has instructed Mr. Masatsugu Aoki (Mr. Aoki), an employee of the 1st Plaintiff, to incorporate the 1st Defendant on 8.2.1986. Mr. Aoki is one of the three subscribers (original shareholders) of the 1st Defendant (3 Subscribers) - please see the meaning of “subscriber” in the then applicable s 16(5) and (6) of the Companies Act 1965 [CA (1965)].

there was no evidence that the 3 Subscribers had paid for the Subscription Shares. Nor was there evidence that the 2nd 33 Plaintiff had paid for the Subscription Shares. In view of the circumstances and reasons stated in this sub-paragraphs (b),

to (f), (5) and (6), I have no hesitation to find as a fact that the 3 Subscribers have not paid for the Subscription Shares;

SP1 stated that the 1st Defendant was incorporated as a shell company to enable the 2nd Plaintiff to provide the Services in

the 1st Defendant’s initial name was “Jemix (M) Sdn. Bhd.”. If the 2nd Plaintiff is not the equitable owner of the Subscription Shares and the 1st Defendant, the 1st Defendant would have committed the tort of passing off by using the “Jemix” name and the Plaintiffs could have obtained an injunction to restrain the 1st Defendant from using the “Jemix” name - please see Singham Sulaiman Sdn Bhd v Appraisal Property Management Sdn Bhd & Anor [2018] 10 MLJ 187, at paragraphs 73-92; and

on 22.4.1987, the Plaintiffs directed the 1st Defendant’s name to be changed to “Jemix Heat Treatment (M) Sdn. Bhd.” (1st Defendant’s Change of Name). The 1st Defendant’s Change of Name is only possible because the Subscription Shares are beneficially owned by the 1st Plaintiff. Furthermore, the 1st Defendant’s Change of Name has the effect that the first three names of both the 2nd Plaintiff and 1st Defendant (Jemix Heat Treatment) are identical. There is no reason why the Plaintiffs 34 directed the 1st Defendant’s Change of Name unless the 2nd Plaintiff is the equitable owner of the Subscription Shares;

the evidence and reasons elaborated in the above sub-paragraphs

(1)(a) to (f) support the inference that the 1st Certainty exists in this case;

the 2nd Certainty is proven because there is sufficient certainty that the subject matter of the above express trust is the Subscription Shares;

there is no doubt that the 3rd Certainty is satisfied in this case because the beneficiary of the express trust regarding the Subscription Shares is the 2nd Plaintiff;

the 2nd Defendant admitted that the 1st Defendant was part of the Jemix group of companies until 1993; and

no trust deed or formal document had been executed by the Plaintiffs because as a matter of Japanese business culture, the Plaintiffs trusted their employees to hold shares in the 2nd Plaintiff and 1st Defendant on trust for the 1st and 2nd Plaintiffs respectively. J(3). Did Mr. Yakura hold 1st Defendant’s shares on trust for 2nd Plaintiff?

On 4.3.1993, there was an allotment of shares in the 1st Defendant as follows - 35

48,998 shares were allotted to Mr. Yakura (Mr. Yakura’s Shares); and

51,002 shares were allotted to the 3rd Defendant. I am satisfied that Mr. Yakura holds Mr. Yakura’s Shares as a trustee for the 2nd Plaintiff. This decision is premised on the following evidence and reasons which prove the 3 Certainties:

there was no evidence that the 2nd Plaintiff had paid for Mr. Yakura’s Shares. Nor was there evidence that Mr. Yakura had paid for Mr. Yakura’s Shares. Nonetheless, I find as a fact that Mr. Yakura did not pay for Mr. Yakura’s Shares because -

if Mr. Yakura had paid for Mr. Yakura’s Shares, he would have a beneficial interest in 48,998 shares of the 1st Defendant and would have breached his fiduciary duties owed as MD to the 2nd Plaintiff (by reason of a conflict between his personal interest in the 1st Defendant’s shares and the 2nd Plaintiff’s interest); and

(ii) Mr. Yakura would not have Mr. Yakura’s Shares save for the reasons that he was the 2nd Plaintiff’s MD at the material time and Mr. Yakura’s Shares were held on trust for the benefit of the 2nd Plaintiff; and

please see the reasons explained in the above sub-paragraphs 34(1)(d) to (f), (5) and (6). 36 J(4). Is 2nd Defendant a trustee of 1st Defendant’s shares for 2nd Plaintiff?

I have no hesitation to find as a fact that the Plaintiffs have discharged the burden to prove on a balance of probabilities that the 2nd Defendant held all the 1st Defendant’s shares in trust for the 2nd Plaintiff. This is because the 3 Certainties have been established based on the following evidence and reasons:

the 3 Subscribers transferred the Subscription Shares to the 2nd Defendant. There was no evidence that the 2nd Defendant had paid for the Subscription Shares. The 2nd Defendant has also not given any explanation on how he came to own the Subscription Shares. I find as a fact that the 2nd Defendant had not paid for the Subscription Shares. This finding is premised on the following evidence and reasons -

as explained in the above paragraph 34, the 3 Subscribers held the Subscription Shares in trust for the 2nd Plaintiff;

there was no reason for the 2nd Defendant to hold the Subscription Shares except for the fact that he was the 2nd Plaintiff’s MD at the material time; and

if the 2nd Defendant had paid for the Subscription Shares, he would have a beneficial interest in the 1st Defendant and would have breached his fiduciary duties owed as MD to the 2nd 37 Plaintiff by reason of a conflict between his personal interest in the 1st Defendant and the 2nd Plaintiff’s interest;

the 2nd Defendant did not produce any documentary evidence to support his averment that he had paid for Mr. Yakura’s Shares by making monthly payments of S$5,000.00 to Mr. Yakura between 1994 and 1995 (2nd Defendant’s Alleged Monthly Payments). If the 2nd Defendant’s Alleged Monthly Payments were true, there would have been at least one piece of documentary evidence in this digital age [such as online banking transfer confirmation, email, message through SMS (Short Message Service), WhatsApp or any other messaging service provider] to substantiate the 2nd Defendant’s Alleged Monthly Payments;

the 1st Plaintiff has sent the following two letters (2 Letters) -

a letter dated 2.3.2009 to the 1st Defendant whereby the 1st Defendant was appointed to be the 1st Plaintiff’s agent for calibration, service and maintenance of the 1st Plaintiff’s products for 10 years from the date of that letter until further written notification; and

by way of the 1st Plaintiff’s letter dated 2.1.2010 to, among others, the 1st Defendant, the 1st Defendant had been appointed as the 1st Plaintiff’s sole agent for the 1st Plaintiff’s products and Services in SEA for 3 years with effect from 1.1.2010 until 1.1.2013. 38 The 2 Letters would not have been sent unless the shares of the 1st Defendant were beneficially owned by the 2nd Plaintiff;

please see the reasons explained in the above sub-paragraphs 34(1)(d) to (f) and (6); and

as explained in the above paragraph 29, the 2nd Defendant is not a credible witness. Hence, this Court cannot attach any weight to the self-serving bare allegations of the 2nd Defendant that he was the equitable owner of shares in the 1st Defendant.

The following allegations by the 2nd Defendant do not negative the 3 Certainties which have created an express trust for the 2nd Defendant’s Shares in favour of the 2nd Plaintiff:

the 2nd Defendant’s claim that SP1 “secretly” requested from the 2nd Defendant for the 1st Defendant to pay a retirement gift to SP1;

the dismissal of the 2nd Defendant as the 2nd Plaintiff’s MD and the consequent Singapore Suit;

the Plaintiffs caused JHT to be incorporated in Malaysia on 22.10.2013;

the transfer of all shares in the 2nd Plaintiff to the 1st Plaintiff;

the 2nd Defendant’s allegations against Madam Hiramatsu; and 39

the agreement concerning the nominal value of the 2nd Defendant’s Shares between the 2nd Defendant and Ms. Hiramatsu in the Divorce. The above averments cannot defeat the 2nd Plaintiff’s claim for an express trust to be imposed on the 2nd Defendant because the above averments arose after the existence of the 3 Certainties regarding the 2nd Defendant’s Shares. Furthermore, I find that the above averments to be an afterthought by the 2nd Defendant to defeat unlawfully the 2nd Plaintiff’s beneficial interest in the 2nd Defendant’s Shares and are contrived as excuses for the 2nd Defendant to breach this express trust.

I have not overlooked the fact that the share transfer form (dated 9.11.1994) of Mr. Yakura’s Shares to the 2nd Defendant stated that the 2nd Defendant had paid RM49,001.00 to Mr. Yakura. As explained by SP2, SP4 and SP5, sums of money were stated in all the share transfer forms for the sole purpose of payment of stamp duty. There was no actual payment of any sum of money for the transfer of shares.

Regarding Mr. Ooi’s contention that the 2nd Plaintiff’s financial statements for the relevant periods of time did not reflect that the 1st Defendant was a subsidiary of the 2nd Plaintiff, there is a short answer to this submission - the fact that the shares of a company (Company X) are held on trust for the benefit of another company (Company Y) may not be reflected in the financial statements of Company X and Company Y. J(5). Whether 3rd Defendant holds 1st Defendant’s shares for 2nd Plaintiff 40

The Plaintiffs have proven on a balance of probabilities that the 3rd Defendant holds all his shares in the 1st Defendant (3rd Defendant’s Shares) on an express trust for the 2nd Plaintiff. The 3 Certainties for this express trust are based on the following evidence and reasons:

there was no evidence that the 2nd Plaintiff provided the Friendly Loan (from Mr. Yakura to the 3rd Defendant). Nonetheless I find as a fact that the 2nd Plaintiff had provided the Friendly Loan because -

at the material time, the 3rd Defendant was a marketing staff of the 2nd Plaintiff (please see the 2nd Plaintiff’s Company Profile) and was intended by the 2nd Plaintiff to hold the 1st Defendant’s shares in trust for the 2nd Plaintiff;

Mr. Yakura was the 2nd Plaintiff’s MD and was holding Mr. Yakura’s Shares in trust for the 2nd Plaintiff - please see the above paragraph 35. There was thus no reason for Mr. Yakura to use his own funds to provide the Friendly Loan without any personal benefit to Mr. Yakura. In fact, Mr. Yakura subsequently assigned the Friendly Loan to the 2nd Defendant for only a nominal value of RM10.00. Such a fact clearly shows that Mr. Yakura did not provide the Friendly Loan; and

if Mr. Yakura has expended his own personal funds to provide the Friendly Loan, Mr. Yakura would have breached his fiduciary duties owed as MD to the 2nd Plaintiff by reason of a conflict between his personal interest in the Friendly Loan and 41 the 2nd Plaintiff’s interest in the 1st Defendant’s shares (through the Friendly Loan);

I find as a fact that the Assignment (which assigned the Friendly Loan from Mr. Yakura to the 2nd Defendant) was concluded because the 2nd Defendant had taken over the position as the 2nd Plaintiff’s MD from Mr. Yakura and to ensure that the 3rd Defendant did not subsequently deny his equitable obligations as a trustee for the 3rd Defendant’s Shares for the benefit of the 2nd Plaintiff (as has happened in this case!). This decision is supported by the following evidence and reasons -

the 2nd Defendant has held the 2nd Defendant’s Shares as a trustee for the 2nd Plaintiff - please see the above paragraph 36; and

the Assignment was only for a nominal consideration of RM10.00. If Mr. Yakura had used his own personal funds for the Friendly Loan, it would only be probable for Mr. Yakura to be paid the Friendly Loan by the 2nd Defendant as consideration for the Assignment;

the 3rd Defendant claimed that he had repaid the Friendly Loan to the 2nd Defendant in the following manner -

the 3rd Defendant had been paid a commission by the 2nd Plaintiff for the Thai Project (Alleged Commission); and 42

the 3rd Defendant used the Alleged Commission to repay the Friendly Loan to the 2nd Defendant by way of a cheque (Alleged Cheque). I reject the above evidence by the 3rd Defendant for the following reasons -

the 3rd Defendant did not adduce any documentary evidence to prove the Alleged Commission and Alleged Cheque;

(ii) the 3rd Defendant did not request the Plaintiffs’ solicitors to produce documents regarding the Alleged Commission. If the Plaintiffs refused to produce any document evidencing the Alleged Commission, the 3rd Defendant could have applied to the Court for an order of discovery under O 24 rr 3 and/or 12 RC to compel the 2nd Plaintiff to produce documents relating to the Alleged Commission; and

(iii) the 3rd Defendant could have easily produced the Alleged Cheque. Even if it is assumed that the 3rd Defendant did not have a copy of the Alleged Cheque, he could have applied to Court for an order of discovery against the following parties to produce a copy of the Alleged Cheque - (iiia) an order to compel the relevant bank which cleared the Alleged Cheque (Relevant Bank) to produce a scanned copy of the Alleged Cheque under the SPICK system (Sistem Penjelasan Imej Cek Kebangsaan). All 43 Malaysian banks are required by Bank Negara Malaysia to record the images of all cheques deposited in the banks’ cheque clearing system. The 3rd Defendant could have applied for an order of discovery against the Relevant Bank (not a party in this case) pursuant to O 24 r 7A(2) RC - please see Billion Prima Sdn Bhd & Anor v Nutech Co Ltd & Anor [2017] 10 MLJ 213, at paragraphs 7(2) and 8 to 11; and (iiib) an order to compel the 2nd Defendant (who received the Alleged Cheque) to produce a copy of the Alleged Cheque under O 24 rr 3 and/or 12 RC. As the 3rd Defendant had not paid for the 3rd Defendant’s Shares, this supports the existence of an express trust over the 3rd Defendant’s Shares in favour of the 2nd Plaintiff;

please see the evidence and reasons elaborated in the above sub-paragraphs 34(1)(d) to (f), (5), (6) and 36(3); and

as explained in the above paragraph 30, the 3rd Defendant is not a credible witness.

Ms. Cindy Goh Joo Seong, learned counsel for the 1st and 3rd Defendants, has contended as follows:

the 1st Defendant is neither a subsidiary nor an agent for the 1st Plaintiff; 44

the 1st Defendant has a “mere business relationship” with the 2nd Plaintiff;

the 1st Defendant has suppliers (other than the 2nd Plaintiff) and sells products to its own customers; and

the 1st Defendant is a legal entity which is separate from the Plaintiffs. With respect to Ms. Cindy Goh, I am of the view that all the above contentions cannot rebut the existence of the 3 Certainties regarding an express trust created over the 3rd Defendant’s Shares. K. Does Article 6 bar enforcement of trust regarding 1st Defendant’s shares?

Article 6 provides as follows: “No person shall be recognized by the [1st Defendant] as holding any share upon any trust, and the [1st Defendant] shall not be bound by or be required in any way to recognize (even when having notice thereof) any equitable, contingent, future or partial interest in any share or any other rights in respect of any share other than an absolute right to the entirety thereof in the registered holder, except only as by these Articles otherwise provided for or as by [CA (1965)] required or pursuant to any order of court.” (emphasis added). 45

Both Ms. Cindy Goh and Mr. Ooi contend that even if the 2nd and 3rd Defendants held shares in the 1st Defendant in trust for the 2nd Plaintiff, such a trust is not recognized by Article 6. I am unable to accede to this submission for the following reasons:

both the 2nd and 3rd Defendants did not plead Article 6. I am of the view that if the above contention regarding Article 6 is correct, Article 6 would have afforded a complete defence for both the 2nd and 3rd Defendants against the Plaintiffs’ claim based on an express trust. As such, the 2nd and 3rd Defendants should have pleaded Article 6 as required by O 18 rr 7(1) and 12(1) RC. The failure of the 2nd and 3rd Defendants to plead Article 6, bars them from relying on Article 6 in this case;

in Qatar Islamic Bank v Asian Finance Bank Bhd & Ors [2015] 7 MLJ 445, at paragraphs 31-33, it was decided as follows - “31. … First, the [Articles of Association (AA) have] statutory effect under s 33(1) [CA 1965)]. Section 33(1) CA (1965) provides as follows: “Subject to this Act the memorandum and articles shall when registered bind the company and the members thereof to the same extent as if they respectively had been signed and sealed by each member and contained covenants on the part of each member to observe all the provisions of the memorandum and of the articles.” (emphasis added). 46

Section 33(1) CA (1965) clearly provides that the AA binds the 1st Defendant (the company in question) and its shareholders, namely, the Plaintiff and 4th to 6th Defendants. This has been decided in the following Malaysian cases:

the Court of Appeal’s judgment in Fairview Schools Bhd. v Indrani a/p Rajaratnam (No. 2) [1998] 1 MLJ 110, at 123;

the High Court decision in Wong Kim Fatt v Leong & Co. Sdn. Bhd. [1976] 1 MLJ 140, at 142;

the High Court’s judgment in Mohamed Yahaya v MS Ally Sdn Bhd& Ors [1985] 1 MLJ 243, at 244-245; and

the High Court case of Ling Beng Hui v Ling Beng Sung [1990] 2 MLJ 186, at 189.

Stirling J in the English High Court in Wood v Odessa Waterworks Co (1889) 42 Ch D 636, at 642, held that the AA constitutes 2 statutory contracts between -

the company and its shareholders (in their capacity as shareholders); and

the company’s shareholders inter se, namely there is a contract binding each shareholder as between or among all the shareholders themselves. This was also decided by Haidar J (as his Lordship then was) in Ling Beng Hui, at p.

189.” (emphasis added). 47 Based on the then s 33(1) CA (1965) as construed in Qatar Islamic Bank, AA have the effect as two “statutory contracts” which govern -

the relationship between a company and its shareholders (qua shareholders); and

the relationship among the company’s shareholders inter se. The AA of a company are not concerned with the beneficial ownership of the company’s shares (which may be the subject matter of a dispute between a company’s shareholder and a claimant). Accordingly, Article 6 does not bar the 2nd Plaintiff’s enforcement of express trust regarding the 1st Defendant’s shares against the 2nd and 3rd Defendants; and

rules of Equity regarding trust are enforceable in this country through s 3(1) of the Civil Law Act 1956 and Malaysian case law. If I have accepted the above contention regarding Article 6, this will have far-reaching repercussions, namely AA can oust the application of rules of Equity regarding trust. Such an outcome is neither just nor desirable.

The following two High Court cases relied on by Ms. Cindy Goh can be distinguished from this case:

in Ng Khi Kung v Ng Khi Fui & Ors [2011] 1 LNS 1396, David Wong Dak Wah J (as he then was) found that no express trust had been created. Hence any dictum regarding AA is merely obiter; and 48

Aboolcader J (as he then was) struck out a suit in Yeng Hing Enterprise Sdn Bhd v Liow Su Fah [1979] 2 MLJ 240 against the second defendant company because the plaintiff claimed for money lent to the first defendant. As such, the plaintiff had no cause of action against the second defendant company. It is to be noted that as a matter of stare decisis, one High Court is not bound by a decision of another High Court - please see Ong Hock Thye FJ’s (as he then was) judgment in the Federal Court case of Sundralingam v Ramanathan Chettiar [1967] 2 MLJ 211, at 213. L. Whether 2nd Plaintiff is estopped from claiming against 2nd Defendant

Mr. Ooi submits that the 2nd Plaintiff is estopped from claiming for the 2nd Defendant’s Shares on the following two grounds:

the 2nd Plaintiff should have counterclaimed for the 2nd Defendant’s Shares in the 2nd Plaintiff’s Counterclaim in the Singapore Suit. Accordingly, the 2nd Plaintiff is now barred by the issue estoppel principle from claiming for the 2nd Defendant’s Shares in this case. Reliance has been placed on the Supreme Court’s judgment delivered by Peh Swee Chin FCJ in Asia Commercial Finance (M) Bhd v Kawal Teliti Sdn Bhd [1995] 3 MLJ 189; and

the conduct of the Plaintiffs in this case estops them from succeeding in this Original Action. The 2nd Defendant has cited the 49 Federal Court’s judgment in Boustead Trading (1985) Sdn Bhd v Arab-Malaysian Merchant Bank Bhd [1995] 4 CLJ 283.

Regarding the application of issue estoppel principle, it is decided in Iradar Sdn Bhd v Nutech Co Ltd & Anor [2017] 1 MLRH 15, at paragraphs 17 and 19, as follows: “17. In Doretti Resources Sdn Bhd v Fitters Marketing Sdn Bhd & Ors [2016] AMEJ 1508, at paragraphs 12-15, I have followed the Supreme Court’s decision in Asia Commercial Finance (M) Bhd and the English High Court’s judgment in Gleeson v J. Wippell & Co Ltd [1977] 1 WLR 510 as follows: “12. In the Supreme Court case of Asia Commercial Finance (M) Bhd v Kawal Teliti Sdn Bhd [1995] 3 MLJ 189, at 197-198, 198 and 199-200 [Asia Commercial Finance (M) Bhd], Peh Swee Chin FCJ explained that the doctrine of res judicata consisted of 2 limbs, namely cause of action estoppel and issue estoppel.

Mr. Niak’s contention is based on the application of the second limb of the res judicata doctrine, namely the issue estoppel principle. Asia Commercial Finance (M) Bhd has decided that the issue estoppel principle has a wide application which may bar any -

party; and

party’s “privy” - from raising any issue in any second and subsequent proceedings which - 50

has been raised; or

can be raised - in the first proceedings between the parties and/or their privies. … …

I am aware that the doctrine of res judicata with its 2 limbs (cause of action estoppel and issue estoppel), is not a mandatory statutory provision intended by Parliament to be applicable in all circumstances. Res judicata doctrine is based on case law and should not be applied indiscriminately so as to cause an injustice. I refer to the following 2 Court of Appeal cases:

Gopal Sri Ram JCA’s (as he then was) judgment in Chee Pok Choy & Ors v Scotch Leasing Sdn Bhd [2001] 4 MLJ 346, at 356, 357 and 358; and

the decision of Idrus Harun JCA in Francis Joseph Puthucheary v Eng Securities Sdn Bhd [2015] 4 CLJ 433, at paragraphs 28 and 29.” (emphasis added).

I have no hesitation to decide that the 2nd Plaintiff is not barred by the issue estoppel principle from filing the Original Action based on express trust because -

I am not able to find any Malaysian case which has applied the two limbs of res judicata doctrine based on a decision of a foreign court. My preliminary view is that res judicata doctrine should only apply to judgments of Malaysian Courts. Consequently, the 2nd Defendant 51 cannot rely on the decision in the Singapore Suit (Singapore Court Decision) to invoke the issue estoppel principle against the 2nd Plaintiff in this case;

even if it is assumed that the issue estoppel principle applies to the Singapore Court Decision, there is no room to apply this principle to estop the 2nd Plaintiff in this case because -

the 2nd Plaintiff’s Counterclaim in the Singapore Suit concerned issues which were not related to the shares in the 1st

any suit based on a claim that the 1st Defendant’s shares are held on trust for the benefit of the 2nd Plaintiff, must necessarily cite the 1st Defendant as a co-defendant. The 1st Defendant was not a party in the Singapore Suit; and

the 2nd Defendant has held the 2nd Defendant’s Shares as a trustee for the 2nd Plaintiff (please refer to the above paragraph 36). The 2nd Defendant has breached this express trust by selling the 2nd Defendant’s Shares to the 4th Defendant by way of a sham SPA. It is unjust and inequitable to allow the 2nd Defendant to rely on the equitable doctrine of issue estoppel in this case - please see the Court of Appeal’s judgment in Chee Pok Choy & Ors v Scotch Leasing Sdn Bhd [2001] 4 MLJ 346, at 356, 357 and 358.

I am of the view that the Plaintiffs have not been guilty of any inequitable conduct which estops them from filing this suit against the 2nd Defendant. 52 M. Whether 2nd Plaintiff’s claim is barred by waiver, acquiescence or laches

Ms. Cindy Goh contends that the 2nd Plaintiff’s claim for beneficial ownership of shares in the 1st Defendant is barred by waiver, acquiescence or laches. I cannot accept this submission because the 2nd Plaintiff did not intend to enforce the express trust until the 2 Demands had been sent in September 2014. The defence of waiver, acquiescence or laches can only operate against a beneficiary of an express trust when –

the beneficiary has expressed an intention, either expressly or by conduct, to enforce the trust; and

the beneficiary’s subsequent omission to enforce the trust -

amounts to a waiver;

constitutes an acquiescence; or

supports a defence of laches. N. Should Court draw adverse inference against Plaintiffs under s 114(g) EA?

Section 114(g) EA provides as follows: “Court may presume existence of certain fact 53

The court may presume the existence of any fact which it thinks likely to have happened, regard being had to the common course of natural events, human conduct, and public and private business, in their relation to the facts of the particular case. ILLUSTRATIONS The court may presume - …

that evidence which could be and is not produced would if produced be unfavourable to the person who withholds it; …” (emphasis added).

In Orix Credit Malaysia Sdn Bhd v Raub Australian Gold Mining Sdn Bhd [2015] 1 LNS 1065, at paragraphs 36-40, it was held as follows: “36. Firstly, the court has a discretion to draw an adverse inference under s 114(g) EA. This is clear from the use of directory term “may”, not once but twice - in the main provision of s 114 EA and in the illustration (g) of s 114 EA. As such, the invocation of an adverse inference under s 114(g) EA is not a matter of course.

Secondly, as the drawing of an adverse inference or not under s 114(g) EA is an exercise of judicial discretion dependent on the particular facts of the matter in question, decided cases on s 114(g) EA are not binding legal precedents from the view point of the stare decisis doctrine - please see Mahadev Shankar JCA’s judgment in the Court of Appeal case of Structural Concrete Sdn Bhd v Wing Tiek Holdings Bhd [1997] 1 CLJ 300, at 306. 54

In Munusamy v Public Prosecutor [1987] 1 MLJ 492, at 494, Mohd. Azmi SCJ delivered the following Supreme Court’s judgment: “It is essential to appreciate the scope of section 114(g) lest it be carried too far outside its limit. Adverse inference under that illustration can only be drawn if there is withholding or suppression of evidence and not merely on account of failure to obtain evidence. It may be drawn from withholding not just any document, but material document by a party in his possession, or for non-production of not just any witness but an important and material witness to the case.” (emphasis added).

Based on Munusamy, courts are “inclined” to exercise discretion to draw an adverse inference under s 114(g) EA against a party who has suppressed material evidence.

The third matter which I wish to highlight about s 114(g) EA is that even if the court draws an adverse inference, such an inference is not irrebuttable - the adverse inference may be rebutted by other evidence. I rely on the Supreme Court’s judgment delivered by Syed Agil Barakbah SCJ in Namasiyiam & Ors v Public Prosecutor [1987] 2 MLJ 336, at 343, as follows: “It was submitted that the absence of Francis at the trial would raise the presumption under section 114(g) of the Evidence Act unfavourable to the prosecution. Be that as it may, in the light of overwhelming prosecution evidence as stated earlier, we do not think that the presence of Francis, had he been available, would have made any difference.” 55 (emphasis added).

Ms. Cindy Goh has invited this Court to draw an adverse inference against the Plaintiffs under s 114(g) EA for the following reasons:

the Plaintiffs did not adduce any evidence to prove that they could not contact Mr. Aoki for the purpose of this suit; and

besides Mr. Aoki, there was no explanation why the Plaintiffs could not call the other two Subscribers (of the Subscription Shares) and Mr. Yakura to give evidence in the present case.

Firstly, SP3 had testified that Mr. Yakura had passed away. Hence, I cannot exercise my discretion to invoke an adverse inference against the Plaintiffs under s 114(g) EA as there is no suppression of Mr. Yakura’s evidence by the Plaintiffs - please see Munusamy.

Secondly, Mr. Wong was not involved in the 3 Certainties regarding the express trust created over the 1st Defendant’s shares in favour of the 2nd Plaintiff. Accordingly, Mr. Wong’s evidence was not material in this case and the fact that the Plaintiffs did not call him to testify in this case, could not attract an adverse inference pursuant to s 114(g) EA - Munusamy.

Lastly, regarding the failure of the Plaintiffs to call the 3 Subscribers to testify in this case, I decline to exercise my discretion to invoke an adverse inference under s 114(g) EA because - 56

as elaborated in the above paragraph 34, there is sufficient evidence to prove the 3 Certainties that the 3 Subscribers held the Subscription Shares in trust for the 2nd Plaintiff; and

even if it is assumed that an adverse inference is drawn against the Plaintiffs for their failure to call the 3 Subscribers to testify in this action, such an inference can be rebutted by evidence regarding the 3 Certainties as explained in the above paragraph 34 - please see Namasiyiam. O(1). Whether 1st Defendant holds Malaysian Jemix Mark in trust for 1st Plaintiff

Sections 7 and 34(b) TMA provide as follows: “Notice of trust 7. Notice of a trust express, implied or constructive shall not be entered in the Register or be received by the Registrar. Powers of registered proprietor Subject to the provisions of this Act, - ...

any equities in respect of a trade mark may be enforced in like manner as in respect of any other personal property.” (emphasis added).

Section 34(b) TMA has expressly recognized equitable ownership of trade marks registered under the TMA. In the Court of Appeal case of 57 Sanmaru Overseas Marketing Sdn Bhd & Anor v PT Indofood Interna Corp & Ors [2009] 2 MLJ 765, Zaleha Zahari JCA (as she then was) (at paragraphs 50-53) and Abdul Malik Ishak JCA (at paragraphs 156-167) [Abu Samah bin Nordin JCA (as he then was) concurred with Abdul Malik Ishak JCA’s judgment (at paragraph 176)] applied the equitable doctrine of bare trust to hold an assignor of a registered trade mark to be a constructive trustee of the registered trade mark for the benefit of the assignee.

In view of s 34(b) TMA and Sanmaru Overseas Marketing, s 7 TMA does not bar the application of Equity regarding beneficial ownership of registered trade marks under TMA.

I am of the view that the Plaintiffs have failed to prove the 1st Certainty of an express trust regarding the Malaysian Jemix Mark. This is because the Plaintiffs admitted that they did not know the 1st Defendant had applied for and registered the Malaysian Jemix Mark under the TMA. Accordingly, it cannot be inferred that the 1st Plaintiff had intended for the 1st Defendant to hold the Malaysian Jemix Mark in trust for the 1st Plaintiff. On this ground alone, the Original Action must be dismissed with costs against the 1st Defendant.

Malaysian case law has recognized constructive trust. In Takako Sakao v Ng Pek Yuen & Anor (No. 1) [2009] 6 MLJ 751, at paragraph 19, Gopal Sri Ram FCJ delivered the following judgment of the Federal Court: 58 “[19] A constructive trust is imposed by law irrespective of the intention of the parties. And it is imposed only in certain circumstances. ... What equity does in those circumstances is to fasten upon the conscience of the holder of the property a trust in favour of another in respect of the whole or a part thereof.” (emphasis added).

Based on Takako Sakao (No. 1), there is nothing in this case which justifies the “fastening upon the conscience” of the 1st Defendant whereby this Court should order that the 1st Defendant owns the Malaysian Jemix Mark as a constructive trustee for the 1st Plaintiff. O(2). Is 1st Plaintiff’s claim for Malaysian Jemix Mark barred by waiver, acquiescence or laches?

Ms. Cindy Goh has submitted as follows:

Mr. Yakura knew about the registration of the Malaysian Jemix Mark by the 1st Defendant on 29.6.1993. Hence, the Plaintiffs had constructive knowledge of the Malaysian Jemix Mark in 1993. Ms. Cindy Goh relies on, among others, the judgment of Shankar J (as he then was) in the High Court case of Cheah Theam Swee & Anor v Overseas Union Bank Ltd & Ors [1989] 1 MLJ 426; and

as the Plaintiffs knew about the Malaysian Jemix Mark in 1993, the 1st Plaintiff’s claim for equitable ownership of the Malaysian Jemix Mark is barred by waiver, acquiescence or laches. 59

I am not able to accept the above contention because the Plaintiffs only knew about the Malaysian Jemix Mark on 29.8.2014. This is clear from a demand dated 26.8.2015 by the Plaintiffs’ solicitors to the 1st Defendant regarding the Malaysian Jemix Mark. In the circumstances, the 1st Plaintiff is not barred by waiver, acquiescence or laches from claiming for equitable ownership of the Malaysian Jemix Mark.

All the cases cited by Ms. Cindy Goh are distinguishable from this case. I should add that Cheah Theam Swee cannot support the above submission by the 1st Defendant because -

Cheah Theam Swee, at p. 429, has decided that a director of a company which has obtained a bank loan, has actual or constructive knowledge of the loan by the company; and

Cheah Theam Swee did not decide that if a director of a company (Company A) knows of the registration of a trade mark by another company (Company B), Company A is deemed to have constructive knowledge or notice of Company B’s registered trade mark. P(1). Whether Court may decide against 4th Defendant

O 35 rr 1 and 2 RC provide as follows: “Failure to appear by both parties or one of them O 35 r 1(1) If, when the trial of an action is called on, neither party appears, the Judge may dismiss the action or make any other order as he thinks fit. 60

If, when the trial of an action is called on, one party does not appear, the Judge may proceed with the trial of the action or any counterclaim in the absence of that party, or without trial give judgment or dismiss the action, or make any other order as he thinks fit. Judgment given in absence of party may be set aside O 35 r 2(1) Any judgment or order obtained where one party does not appear at the trial may be set aside by the Court, on the application of that party, on such terms as it thinks just.

An application under this rule shall be made within fourteen days after the date of the judgment or order sought to be set aside without prejudice, however, to the power of the Court to extend the period.

In considering an application made under this rule, the Court shall have regard to the following matters:

the interest of justice;

whether the absence of the applicant or counsel was deliberate, or due to an accident or mistake;

the prospects of success of the applicant at trial;

whether there is any delay in making the application;

whether the conduct of the applicant has caused prejudice to the other party which cannot be compensated by an order of costs.” (emphasis added). 61

Firstly, O 1A was introduced in the Rules of the High Court 1980 (RHC) with effect from 16.5.2002. Accordingly, cases which have interpreted O 35 rr 1 and 2 RHC before the advent of O 1A, should be read with caution.

Secondly, O 35 rr 1 and 2 RC should be administered with regard to the “overriding interest of justice” (as mandated by O 1A RC).

In this case -

the SPA is a sham contract - please see the above sub-paragraph 29(2)(c);

the 4th Defendant’s Breach (the 4th Defendant’s failure to pay the Purchase Consideration for the 2nd Defendant’s Shares) has been committed and yet -

the 2nd Defendant’s Shares have been transferred to the 4th

the 4th Defendant received dividends from the 1st Defendant;

the Plaintiffs’ solicitors have sent a demand dated 26.8.2015 to the 4th Defendant [Demand (4th Defendant)] which, among others -

stated that as the 2nd Defendant held the 2nd Defendant’s Shares as a trustee for the 2nd Plaintiff, the 2nd Defendant had no right to sell those shares to the 4th Defendant by way of the SPA; and 62

demanded for the 4th Defendant to transfer those shares to the 2nd Plaintiff at no cost;

there was no reply by the 4th Defendant to the Demand (4th Defendant); and

the Plaintiffs could not effect Service Out Of Jurisdiction on the 4th Defendant.

I am of the following view:

based on O 1A and O 35 r 1(2) RC, in the interest of justice, the Court has a discretionary power to proceed with a trial of a claim or counterclaim in the absence of any party (Trial In Absentia) and to give any judgment or order as the Court thinks fit (Decision In Absentia). In the interest of justice, a Trial In Absentia may be conducted and a Decision In Absentia may be given by the Court even though there is no Service Out Of Jurisdiction. If otherwise, a party who is outside the jurisdiction of Malaysian Courts, may evade Service Out Of Jurisdiction and this in turn will defeat the course of justice to be administered in the case in question. Accordingly, I adopt a purposive interpretation of O 35 r 1(2) RC to prevent defendant fraudsters from defeating the course of justice by fleeing the jurisdiction of Malaysian Courts and by subsequently evading Service Out Of Jurisdiction. 63 The discretionary power of the Court to hold a Trial In Absentia and to give a Decision In Absentia is supported by the following considerations -

due to the rapid development in modern telecommunications, many transactions are borderless in nature. Hence, it is not uncommon for a plaintiff to cite a defendant who resides or carries on business outside Malaysia; and

with easy and affordable access to air travel, a defendant may easily abscond and leave the jurisdiction of our Courts; and

any party who is adversely affected by a Decision In Absentia may apply to the Court (which granted the Decision In Absentia) to set aside the Decision In Absentia under O 35 r 2(1) RC. In this manner, any form of injustice arising from a Decision In Absentia may be remedied.

Based on the reasons explained in the above paragraph 68, in the interest of justice, I exercise my discretion under O 35 r 1(2) read with O 1A RC to conduct a trial in the absence of the 4th Defendant. If such a discretion is not exercised, the 2nd and 4th Defendants would have defeated the course of justice in this case by -

entering into a sham SPA;

transferring the 2nd Defendant’s Shares to the 4th Defendant (despite the 4th Defendant’s failure to pay the Purchase Consideration); and 64

defeating the express trust over the 2nd Defendant’s Shares in favour of the 2nd Plaintiff. P(2). Is 4th Defendant a constructive trustee of 1st Defendant’s shares for benefit of 2nd Plaintiff?

In the Federal Court case of CIMB Bank Bhd v Maybank Trustees Bhd and other appeals [2014] 3 MLJ 169, at paragraphs 128 and 129, Arifin Zakaria CJ decided as follows: “[128] We are also in agreement with MTB's stand that Murnina was guilty of having been in 'knowingly receipt' of the revenue from the background facts as adverted to earlier. The trial court in fact made such a finding and this we affirm. Murnina had in our view acted dishonestly when she misapplied the proceeds of the trust monies. This simply means that she had not acted as an honest person would in the circumstances (see Royal Brunei Airlines Sdn Bhd v Tan [1995] 3 All ER 97 which describes such act as a 'conscious impropriety'). Lord Nicholls in that case said, 'Honest people do not knowingly take others' property or participate in a transaction he knows involves a misapplication of trust assets or in such a case deliberately close his eyes or ears, or not ask questions, lest he learn something he would rather not know'. Murnina thus cannot escape liability by playing blind and pleading ignorance. She had participated in committing the breaches of duty by Pesaka and Rafie and must be held liable. [129] In the circumstances, this court must intervene by imputing a constructive trust upon Murnina (as well as Rafie) for her role in misapplying the trust monies. Constructive trust is 'a trust which is 65 imposed by equity in order to satisfy the demands of justice and good conscience, without reference to any express or presumed intention of the parties' (per Arifin Zakaria Chief Justice in Hassan bin Kadir & Ors v Mohamed Moidu bin Mohamad & Anor [2011] 4 MLJ 190; [2011] 4 AMR 677). Equity therefore demands that Murnina (and Rafie) must not be allowed to keep those monies and in the process unjustly enrich herself (see Fernrite Sdn Bhd v Perbadanan Nasional Bhd [2012] 1 MLJ 1; [2012] 5 MLRA 421).” (emphasis added).

There is an express trust over the 2nd Defendant’s Shares in favour of the 2nd Plaintiff - please see the above paragraph 36. The 2nd Defendant has breached this trust by entering into a sham SPA and by transferring the 2nd Defendant’s Shares to the 4th Defendant. The 4th Defendant has therefore “knowingly received” the 2nd Defendant’s Shares without any payment. The 4th Defendant had also received dividends from the 1st Defendant. In such circumstances, based on CIMB Bank, it is just and in accordance with good conscience for this Court to decide that the 4th Defendant holds shares in the 1st Defendant as a constructive trustee for the 2nd Plaintiff. If otherwise, there will be an injustice to the 2nd Plaintiff and an unjust enrichment of the 4th Defendant. Q. Court’s decision

A summary of this decision is as follows:

Enc. 117 is dismissed with costs because the 2nd Defendant is not required by O 18 rr 7(1) and 12(1) RC to plead in the ADC the Objectionable Evidence In WSSD2;

as the 3 Certainties of an express trust have been proven in this case -

the 3 Subscribers;

Mr. Yakura; and

the 2nd and 3rd Defendants hold all the shares in the 1st Defendant as trustees for the 2nd

Article 6 does not bar the enforcement of any trust regarding the 1st Defendant’s shares;

the 2nd Plaintiff is not barred by -

the issue estoppel principle;

estoppel; and

waiver, acquiescence or laches from claiming against the 2nd and 3rd Defendants in this case; 67

the Court declines to exercise its discretion to make an adverse inference under s 114(g) EA against the Plaintiffs for not calling the 3 Subscribers, Mr. Yakura and Mr. Wong to testify in this case. In the alternative, any adverse inference which may be drawn against the Plaintiffs pursuant to s 114(g) EA is rebutted by the evidence in support of an express trust in favour of the 2nd Plaintiff;

the 1st Plaintiff’s claim for the beneficial ownership of the Malaysian Jemix Mark is not barred by waiver, acquiescence or laches. There is however no express trust that the 1st Defendant holds the Malaysian Jemix Mark for the benefit of the 1st Plaintiff. Nor is the 1st Defendant a constructive trustee of the Malaysian Jemix Mark for the 1st Plaintiff; and

notwithstanding that there is no Service Out Of Jurisdiction on the 4th Defendant, in the interest of justice, the Court exercises its discretion under O 35 r 1(2) read with O 1A RC to -

try this case in the absence of the 4th Defendant; and

decide that the 4th Defendant holds shares in the 1st Defendant as a constructive trustee for the 2nd Plaintiff because the 4th Defendant has knowingly received those shares as a result of the 2nd Defendant’s breach of an express trust in favour of the 2nd Plaintiff.

Based on the above evidence and reasons - 68

the Original Action against the 1st Defendant is dismissed with costs;

the Original Action against the 2nd to 4th Defendants is allowed with costs; and

the 2nd Defendant’s Counterclaim is dismissed with costs.

I wish to express my gratitude for the able assistance rendered to me in this case by Mr. Oon, Ms. Cindy Goh and Mr. Ooi.

In closing, if a foreign company has appointed individuals to hold shares in a Malaysian company in trust for the benefit of the foreign company, the Court has no hesitation to enforce such a trust and to prevent any breach thereof. WONG KIAN KHEONG Judge High Court (Commercial Division) Kuala Lumpur DATE: 22 JANUARY 2019 Counsel for Plaintiffs: Mr. Oon Thian Seng & Ms. Lo Ee Yee (Messrs T S Oon & Partners) Counsel for 1st & 3rd Defendants: Ms. Cindy Goh Joo Seong & 69 Mr. Keong Ming Wai (Messrs Chooi & Co.+ Cheang & Arif) Counsel for 2nd Defendant: Mr. Ooi Huey Miin & Encik Abdul Wahab bin Jumrah (Messrs Raja, Darryl & Loh)