Koh Eileen v Azman Bin Ahmad (WA-22NCC-520-10/2022)

Content

1 IN THE HIGH COURT MALAYA OF KUALA LUMPUR IN THE STATE OF WILAYAH PERSEKUTUAN, MALAYSIA CIVIL SUIT NO. WA-22NCC-520-10/2022

Preamble

Pursuant to the Trust Deed, the 1st defendant and PW4 held shares in the 2nd plaintiff on behalf of the 1st plaintiff. [8] The 1st defendant was also appointed as the operations manager of the 2nd plaintiff, responsible for the stocks, inventories and business operations of the 2nd plaintiff. [9] The plaintiffs claimed that the 1st defendant had diverted the earnings, revenue and profits from the 2nd plaintiff for his personal gains by fraudulently invoicing customers of the 2nd plaintiff. The 1st defendant was terminated from his position in the 2nd plaintiff. The plaintiffs sought the return of the amounts misappropriated by the 1st defendant, and an outstanding amount due from the 1st defendant pursuant to a loan the 2nd plaintiff provided to the 1st defendant. [10] The 1st defendant filed a counterclaim against the 2nd plaintiff, seeking unpaid salaries, and forfeiture of the amount outstanding under the loan. C. Issues and Considerations Issues to be tried [11] The facts set out raise the following issues to be tried by this court: a. The status of the Trust Deed; b. Whether the 1st defendant breached his fiduciary duties to the plaintiffs; c. Whether the 1st defendant was wrongly terminated; and d. Whether the 2nd plaintiff provided a loan to the 1st defendant, and if so, whether there is an outstanding amount due under the loan. What is the status of the Trust Deed? [12] The Trust Deed was executed by the 1st defendant and PW4 in favour of the 1st plaintiff. Pursuant to the Trust Deed, the 1st defendant and PW4 agreed to hold all rights, title and interest in the shares in the 2nd plaintiff on trust for the 1st plaintiff. [13] The 1st defendant challenged the validity of the Trust Deed, alleging that he was forced to sign the Trust Deed. However, apart from the bare allegation, the 1st defendant did not produce any evidence to show that he was forced to sign the Trust Deed. [14] I note that the Trust Deed contains the 1st defendant’s signature and initials. There was no challenge on the signature and initials. As such, the bare allegation raised by the 1st defendant is insufficient to prove that the 1st defendant was forced to sign the Trust Deed. [15] Thus, I find the Trust Deed to be valid and binding on the parties. Did the 1st defendant breach his fiduciary duties to the plaintiffs? [16] The basis of the claim for breach of fiduciary duties is the plaintiffs’ allegation that the 1st defendant had fraudulently invoiced customers of the 2nd plaintiff in the total amount of RM211,054, and misappropriated this amount, for his own personal gains. [17] The 1st defendant had signed a statutory declaration dated 20 May 2021 (“SD”) admitting his action. In paragraph 3 of the SD, the 1st defendant stated that: “Pada atau sekitar 18/5/2021, saya mengaku kepada syarikat saya pernah menjual stok milikan Syarikat tersebut sebanyak RM211,054.00 tanpa izin daripada syarikat tersebut. Jualan tersebut tiada record dalam buku jualan harian dan wang jualan stok tersebut tidak masuk ke akaun syarikat tersebut.” [18] However, the 1st defendant is now relying on the plea of non est factum. He claimed he signed the SD without first reading the document, and testified to this effect during re-examination: “ABU BAKAR Tadi rakan bijaksana saya telah bertanya berkenaan dengan Surat Akuan di muka surat B1/84, rujuk pada muka surat 84, di situ ada Surat Akuan kamu tadi kamu jadi kata kamu sebenarnya, adakah kamu membuat Surat Akuan itu? Tidak tuan, semua disediakan oleh Lai Peng. Semua disediakan oleh Lai Peng? Lai Peng. Lai Peng dan kamu tandatangan tak dihadapan Pesuruhjaya Sumpah? Macam ini tuan. Setelah kita bincang dalam office. Okay telah bincang dalam office, okay. Masa perbincangan dia cakap lain bila dia print dia bawa pen drive bila dia print pergi ke Pesuruhjaya Sumpah benda yang lain dan-ABU BAKAR Okay, adakah kamu baca didepan Pesuruhjaya Sumpah atau adakah pesuruhjaya Sumpah menyuruh kamu baca? Tidak. Dua-dua pun tidak? Tidak sebab masa itu sudah 12.30 lebih pejabat dah nak ditutup lepas itu Yang Arif, lepas saya sign Lai Peng tidak beri saya satu copy pun dia terus bawah balik. So, saya tidak dapat baca. Saya hanya dapat daripada polis bukan daripada Lai Peng. ABU BAKAR Jadi kamu menyatakan bahawa kamu sign tanpa sukarelalah. Ya tuan. Sebab kamu tak baca pun apa isi kandungan dalam Surat Akuan tersebut. Ya, sebab tuan dalam perbincangan surat itu lain, bila pergi ke Pejabat Pesuruhjaya Sumpah dia buat surat lain tuan.” (emphasis added) [19] From the above exchange, the 1st defendant’s main contention is that the SD was prepared by PW4, and he had discussed its content with PW4. However, he claimed that the content of the SD he signed before the Commissioner for Oaths is different from the discussions he had with PW4. He further claimed he did not read the final version of the SD before signing. [20] The plea of non est factum was considered in Lin Wen-chih & Anor v Mycom Bhd [2014] 3 MLJ 691, where the Court of Appeal held that: “[22] Non est factum is Latin for 'it is not my deed'. A successful plea of non est factum makes the contract or document signed void ab initio. A plea of non est factum means that they signed the two documents by mistake. Mistake, however, is not so much because one does not know the contents of the documents that one is signing, but that it was or turned out to be of a character entirely different from what is thought to be signed. This may be illustrated by Chin Leong Soon & Ors v Len Chee Omnibus Co Ltd & Anor [1970] 2 MLJ 228; [1969] 1 LNS 28 (FC) where Suffian Ag LP (as he then was) said: Her claim is clearly based on the doctrine of non est factum, which means that if a person, owing to an error, executes a legal document which is of an entirely different character from that which he intended to sign, he is entitled to found his claim on it or to plead it as a defence if he is sued on the document …” (emphasis added) [21] The Court of Appeal then held that the plea of non est factum was not available to the appellants, who were not novice businessmen, and would not have signed the documents without careful consideration. [22] In Saunders (Executrix of the estate of Rose Maud Gallie (deceased)) v Anglia Building Society (formerly Northampton Town and County Building Society), [1970] 3 All ER 961, Lord Reid held: “The plea of non est factum obviously applies when the person sought to be held liable did not in fact sign the document. But at least since the sixteenth century it has also been held to apply in certain cases so as to enable a person who in fact signed a document to say that it is not his deed. Obviously any such extension must be kept within narrow limits if it is not to shake the confidence of those who habitually and rightly rely on signatures when there is no obvious reason to doubt their validity. Originally this extension appears to have been made in favour of those who were unable to read owing to blindness or illiteracy and who therefore had to trust someone to tell them what they were signing. I think that it must also apply in favour of those who are permanently or temporarily unable through no fault of their own to have without explanation any real understanding of the purport of a particular document, whether that be from defective education, illness or innate incapacity. But that does not excuse them from taking such precautions as they reasonably can. The matter generally arises where an innocent third party has relied on a signed document in ignorance of the circumstances in which it was signed, and where he will suffer loss if the maker of the document is allowed to have it declared a nullity. So there must be a heavy burden of proof on the person who seeks to invoke this remedy. He must prove all the circumstances necessary to justify its being granted to him, and that necessarily involves his proving that he took all reasonable precautions in the circumstances. I do not say that the remedy can never be available to a man of full capacity. But that could only be in very exceptional circumstances; certainly not where his reason for not scrutinising the document before signing it was that he was too busy or too lazy. In general I do not think that he can be heard to say that he signed in reliance on someone he trusted. But, particularly when he was led to believe that the document which he signed was not one which affected his legal rights, there may be cases where this plea can properly be applied in favour of a man of full capacity.” (emphasis added) [23] I first made a few observations on the SD. It is written in Bahasa Malaysia, a language that the 1st defendant can fully understand. It is also a one-page document, written in plain language, in a manner that the 1st defendant would on the balance of probabilities have been able to comprehend. These observations cast doubt of the 1st defendant’s version of events, that he did not read the SD prior to signing. [24] Further and in any event, and applying the cases cited above, I am of the view that the 1st defendant would not be able to avail himself to the plea of non est factum. The following passage in Saunders (supra) is of guidance: “The plea cannot be available to anyone who was content to sign without taking the trouble to try to find out at least the general effect of the document. Many people do frequently sign documents put before them for signature by their solicitor or other trusted advisers without making any enquiry as to their purpose or effect. But the essence of the plea non est factum is that the person signing believed that the document he signed had one character or one effect whereas in fact its character or effect was quite different …” (emphasis added) [25] In my view, the nature of the SD – a one-page document written in simple language in Bahasa Malaysia – is such that the 1st defendant should have, in the words of Lord Reid in Saunders (supra), taken the trouble to find out at least the general effect of the document before signing it. As the 1st defendant had failed to do so in this case, he cannot rely on non est factum and argue that the document is not valid. [26] Thus, I accepted the admission in the SD that the 1st defendant had misappropriated funds of the 2nd plaintiff amounting to RM211,054 as a true admission by the 1st defendant. [27] To verify the admission, I examined the invoices of the 2nd plaintiff produced before the court. I note there are two versions of each invoice issued. One version, issued for a higher value, is sent to customers, while a version issued for a lower value is kept in the records of the 2nd plaintiff. Toh Eng Hin (“PW3”), a director of the 2nd plaintiff’s customer Chop Eng Guan, testified that he had received the invoices which contain the higher value, and had made payments towards these invoices. He confirmed that he was not aware of the invoices with the lower value. PW3 stated as follows at Q7 of his witness statement (“WS-PW3”): “Q6: Bolehkah anda menjelaskan kepada Mahkamah, adakah invois-invois yang anda terima berkenaan dengan tempahan belian anda daripada Plaintif Kedua telah dilampirkan dalam Mahkamah? A6: Ya. Sebahagian invois yang saya terima berkenaan dengan tempahan belian saya daripada Plaintif Kedua telah dilampirkan dalam Ikatan Dokumen, pada mukasurat 97, 99, 101, 103, 105, 107, 109, 111, 113, 115, 117, and 119. Q7: Saya merujuk anda kepada Ikatan Dokumen mukasurat 96, 98, 100, 102, 104, 106, 108, 110, 112, 114, 116, dan 118. Secara perbandingan dengan invois-invois yang anda nyatakan dalam Q&A6 di atas, adakah anda cam invois-invois tersebut? A7: Tidak. Sebagai contoh, dalam mukasurat 96 dan 97, walaupun kedua-dua invois tersebut terdapat nombor invois 25188, tetapi salinan yang dikemukan kepada saya hanyalah invois dalam mukasurat 97. Saya tidak berpengetahuan dengan invois-invois yang berwarna kuning. Bayaran yang telah saya buat adalah sepertimana dalam invois-invois mukasurat 97, 99, 101, 103, 105, 107, 109, 111, 113, 115, 117, dan 119.” (emphasis added) [28] The discrepancies between the invoices issued to customers and invoices retained by the 2nd plaintiff support the plaintiffs’ allegation and are consistent with the 1st defendant’s admission that he had misappropriated sums from the invoices for his personal gains. [29] With this finding, what follows is the question of whether the 1st defendant had breached his fiduciary duties as towards the 2nd plaintiff. I first considered the fact that the 1st defendant held a senior position in the 2nd plaintiff, as its director and operations manager. This fact is not in dispute. [30] As a director of the 2nd plaintiff, the 1st defendant owed a fiduciary duty to the 2nd plaintiff. He was placed in a relationship of confidence and trust with the 2nd plaintiff and was obligated by law to be loyal to the 2nd plaintiff (see The Board of Trustees of the Sabah Foundation & Ors v Datuk Syed Kechik bin Syed Mohamed & Anor [2008] 5 MLJ 469). [31] Further, the employment relationship between the 1st defendant and the 2nd plaintiff also gave rise to fiduciary duties of an employee towards an employer. In Wong Kar Juat & Anor v S7 Auto Parts (M) Sdn Bhd [2016] 5 MLJ 527, the Court of Appeal held that an employee’s fiduciary obligation concerns the duty to act in good faith, not to make a profit out of the trust relationship, not to place himself in a position where his duty and his interest may conflict, and not to act for his own benefit or for the benefit of a third person without the informed consent of his employer. [32] The 1st defendant was an employee of the 2nd plaintiff. As such, he owes a fiduciary duty towards the 2nd plaintiff to act in the best interest of the 2nd plaintiff. It is also pertinent to note that the 1st defendant held a senior position as the operations manager of the 2nd plaintiff, and was responsible to control and manage the stocks and inventories, and the business and operations of the 2nd plaintiff. [33] I had found it to have been proven that the 1st defendant had issued two versions of invoices, one of a higher amount to customers and the other of a lower amount to the 2nd plaintiff, and that the 1st defendant had misappropriated the difference in the amounts paid by customers for his personal gains. I further find that this conduct is in breach of the 1st defendant’s fiduciary duties as a director and employee of the 2nd plaintiff. Was the 1st defendant was wrongly terminated? [34] When the plaintiffs discovered that the 1st defendant had misappropriated monies from the 2nd plaintiff, the 1st defendant was terminated from his employment with the 2nd plaintiff. The 1st defendant claimed he was wrongly terminated, and sought the payment of unpaid salaries amounting to RM14,542 from the 2nd plaintiff. [35] However, I am of the view that the issue of wrongful termination must be adjudicated at the Industrial Court under the Industrial Relations Act 1967 (“IRA”), and not in this court. [36] Section 20(1) of the IRA provides that: “Where a workman, irrespective of whether he is a member of a trade union of workmen or otherwise, considers that he has been dismissed without just cause or excuse by his employer, he may make representations in writing to the Director General to be reinstated in his former employment; the representations may be filed at the office of the Director General nearest to the place of employment from which the workman was dismissed.” (emphasis added) [37] Section 20(1A) imposes a timeline of 60 days from the dismissal or the notice of dismissal, to file representations to the Director General of Industrial Relations (“DG”). Section 20(2) then requires the DG to take such steps as he may consider necessary or expedient to arrive at an expeditious settlement of the matter. If the DG is satisfied that there is no likelihood of the representations being settled, he shall refer the representations to the Industrial Court in accordance with section 20(3) of the IRA. [38] In 7-Eleven Malaysia Sdn Bhd v Ashvine Hari Krishnan [2023] 3 MLJ 469, the Court of Appeal held that the filing of a claim for constructive dismissal under in the civil courts is an abuse of the process of the court, and struck out the suit commenced by the respondent. Nantha Balan JCA held as follows: “[67] In our view, on the facts of the present case, the only claim which the plaintiff had was a claim based on a complaint that she was (allegedly) constructively dismissed which ought to have been taken up under s 20(1) of the Act and assuming the plaintiff succeeds in establishing that she was indeed dismissed without just cause or excuse, to then let the Industrial Court decide on the appropriate remedies as the case may be. [68] For the reasons as stated above, we are of the view that the plaintiff’s claim, per Suit 694, is a clear manifestation of an abuse of process. As a matter of principle, if the claim is one for compensation for wrongful dismissal (loss of employment) then it is a claim which ought to be ventilated via the statutory dispute mechanism ie Industrial Court and not the civil court.” [69] In the final analysis, we agree with and endorse the approach taken by the High Court in Ng Siang Teik — a civil suit by a dismissed employee who chooses not to pursue the statutory dispute resolution mechanism/process under the Act and/or seek the requisite statutory remedy under the Act and who seeks instead monetary compensation for loss of employment via a common law action ought to be struck out as being an abuse of process of the court.” (emphasis added) [39] In this case, the 1st defendant testified during cross-examination that he had commenced proceedings at the Industrial Court on his claim for wrongful termination. However, he did not provide any records of these proceedings. [40] Premised on the considerations as set out above, the court finds his allegation of unlawful termination and non-payment of salaries must be adjudicated at the Industrial Court. [41] In this regard, his counterclaim must necessarily fail. Did the 2nd plaintiff provide a loan to the 1st defendant, and is there is an outstanding amount due under the loan? [42] The final issue for this court’s consideration is the loan in the total sum of RM100,000 that was alleged to have been provided by the 2nd plaintiff to the 1st defendant. In the SD, the 1st defendant admitted to receiving the loan, and had also admitted that the amount of RM83,500 is due to the 2nd plaintiff. [43] It is worth setting out paragraph 2 of the SD, which contains this admission. The paragraph states: “Pada atau sekitar bulan Mac 2020, saya pernah menerima wang pinjaman sejumlah RM100,000.00 draipada Syarikat tersebut ("Wang Pinjaman"). Saya mengaku kini baki pinjaman tersebut adalah berjumlah RM83,500.00 pada 20/5/2021.” [44] I had rejected the 1st defendant’s plea of non est factum in relation to the SD, and as such, accepted the SD to be a true and correct account by the 1st defendant of the facts stated therein. [45] The 1st defendant argued that the loan was provided under duress. However, the fact of duress was also not pleaded in his defence. Further, apart from the bare allegation made, the 1st defendant did not provide any evidence to support his argument of duress. [46] On the contrary, it is in evidence that it was the 1st defendant who sought the loan from the 2nd plaintiff. In a WhatsApp message sent by the 1st defendant to PW4 on 28 January 2020, the 1st defendant stated as follows: “Morning Lai Peng Sorry ganggu u k. Minta tlg u nanti jumpa bos, minta loan utk sy Rm200K or Rm150K 1- Rm200K permonth byr Rm2k selama Stahun, last yg ke 5 tahun brp balance i byr semua dpt KWSP 2- Rm150K permonth Rm1500, selama 5 tahun,last yg ke 5 tahun balance brp semua i byr dpt KWSP 3- sebab total siap rumah Rm 250K, kalau bih loan Rm200k, Ig Rm 50k ambik duit simpanan saya. Please help me k,tq” [47] There was a continuous exchange of WhatsApp messages on the loan requested by the 1st defendant. On 5 March 2020, the 1st defendant issued the following WhatsApp message to PW4: “Loan bila nk bnk in ? Insurant dh bnk in” [48] I am of the view that the WhatsApp messages exchange between the 1st defendant and PW4 negate the argument that there was duress involved in the provision of the loan. [49] The 1st defendant also argued that the agreement on the loan was vague and is therefore enforceable. I am unable to agree. I am guided by Tan Aik Teck v Tang Soon Chye [2007] 6 MLJ 97, where the concept of a friendly loan was examined by the Court of Appeal. The following passages in the judgment of the court are of relevance: “[7] … A friendly loan is opposed to the normal borrowing from a moneylender or financial institution. A friendly loan is a loan between two persons based on trust. There may be an agreement such as an IOU or security pledged to repayment but most important there will be no interest imposed. It may be true that the plaintiff met the defendant two or three times before the loan transaction but the evidence shows that both of them have a common friend in the form of the plaintiff's brother-in-law. The evidence shows that the defendant's request for the loan was made through this brother-in-law, Goh Wai Kah. Both parties must have trusted this Goh Wai Kah … [8] In my view, the defendant had been wrongly advised by his solicitors that in order to qualify for a friendly loan, the loan must be between friends. In my view, a friendly loan is a loan given by the lender to the borrower based on mutual trust whereby the borrower was to repay the loan within the specified time with no interests charged. For the reasons I have stated, I see no merit in the contention of the defendant in respect of this.” (emphasis added) [50] The loan in this case is of the same nature as the loan in Tan Aik Teck (supra). It is a loan provided by the 2nd plaintiff to its employee, the 1st defendant, based on trust. No interest was imposed on the loan. [51] Based on the evidence before this court and specifically the WhatsApp messages between the 1st defendant and PW4, and the admission by the 1st defendant in the SD, I found that the loan exists, and that it is a friendly loan provided by the 2nd plaintiff to the 1st defendant. [52] From the admission of the 1st defendant in the SD, I accepted that the amount of RM83,500 is outstanding under the loan. On this basis, there is no justification for any amount outstanding under the loan to be forfeited, as sought by the 1st defendant in his counterclaim. D. Decision [53] Taking into account the totality of the evidence before this court, the court finds that the plaintiffs have proven their claim against the 1st defendant. The prayers in paragraphs 43.1 and 43.7 to 43.11 of the statement of claim dated 21 July 2022 are allowed. [54] The 1st defendant’s counterclaim is dismissed. [55] After hearing brief submissions on costs, the court ordered costs of RM30,000 to be paid by the 1st defendant to the plaintiffs. Dated 8 April 2024 - sgd - ADLIN ABDUL MAJID Judge High Court of Malaya Commercial Division (NCC6) Kuala Lumpur Counsel: Plaintiffs : Guok Ngek Seong (together with Yong Jei Beng) of Messrs. Guok Partnership 1st defendant : Abu Bakar Kuga of Messrs. Abu Bakar Kuga & Co