Kulim (Malaysia) Berhad v Ahamad Bin Mohamad (WA-22NCC-679-12/2022)

KULIM (MALAYSIA) BERHAD (Company No.: 197501001832 (23370-V))

KULIM ENERGY NUSANTARA SDN BHD (Company No.: 201401011500 (1087576-K)) … PLAINTIFFS

AHAMAD BIN MOHAMAD (NRIC No. 531125-01-5859)

ABDUL RAHMAN BIN SULAIMAN (NRIC No. 580809-01-5025)

ZULKIFLY BIN ZAKARIAH (NRIC No. 600715-01-6073) S/N solN4Cs0wEuyQ1PQMatf0g

JAMALUDIN BIN MD ALI (NRIC No. 581204-01-5297)

AZLI BIN MOHAMED (NRIC No. 681127-01-5047)

SHAHROM BIN MOHD SAAD (NRIC No. 661211-06-5313) … DEFENDANTS GROUNDS OF JUDGMENT (DECISION AFTER TRIAL) A1. Introduction

This is a case that reinforces the importance of corporate governance and the consequences where short cuts have been taken. At the same time, this case also exemplifies that modern justice is not a sword. It must be delivered with understanding and compassion. Even Parliament has found it appropriate to include such consideration as seen with the powers laid down under Section 581 of the Companies Act. This Court believes that the facts of this case justify the invocation of the equitable powers and does so in favor of the Defendants. S/N solN4Cs0wEuyQ1PQMatf0g A2. Summary of this Court’s Decision

1.1 This Court finds that any shortcomings on the part of the 1st to 4th Defendants in relation to Projects Barut and AMARA arise, at their highest, from a failure to exercise reasonable care and diligence in the evaluation and implementation of the investments.

1.2 The Court expressly finds that such shortcomings do not amount to dishonesty, disloyalty, bad faith, fraud, or breach of fiduciary duty. There is no evidence that the Defendants acted for any improper purpose or in pursuit of personal gain.

1.3 The Court finds no breach of fiduciary or statutory duty in relation to the SWBB investment. The Defendants’ decisions were made in good faith, informed by professional input, and protected by the business judgment rule.

1.4 I find that the 1st to 4th Defendants were overzealous and did not exercise sufficient due care in the discharge of their duties to S/N solN4Cs0wEuyQ1PQMatf0g the Plaintiffs. They were negligent but not dishonest and did not commit any of the cardinal sins that lead to a finding of breaches of fiduciary duties. The thin line between negligence and potential breaches of fiduciary duties was not crossed in this case. This Court holds that they were servants of the Plaintiffs who had acted loyally but were incompetent.

1.5 In this regard, it is important to emphasize that this is not a case involving concealment for personal gain, diversion of corporate assets, conflict of interest, or deliberate suppression of material information from the board. The evidence does not disclose any conduct amounting to disloyalty or infidelity. What is shown is inadequate process and over-zealous execution, which in law falls on the negligence side of the line described in Bristol and West BS v Mothew (supra). They were not unfaithful and are not guilty of breaching their fiduciary duties.

1.6 This Court exercises its power to relieve the 1st to 4th Defendants from liability under Section 581 of the Companies Act. These Defendants were honest, and in the circumstances S/N solN4Cs0wEuyQ1PQMatf0g of this case, this Court finds it reasonable to exercise the discretionary power provided under Section 581 of the Companies Act and / or the common law business judgment rule defence. The Defendants’ liability stems not from a defect of character, but from a defect of procedure. The Court finds that the 1st to 4th Defendants genuinely believed that the Barut and AMARA investments would benefit the Plaintiffs and enhance long-term value. The investments were not undertaken for any collateral or improper purpose, and no Defendant derived any personal benefit from the transactions.

1.7 Taken cumulatively, the evidence does not disclose dishonesty, bad faith, concealment for personal gain, or any intention to mislead the board or the company.

1.8 In respect of the 1st to 4th Defendants, the Court finds that while their conduct in the inception of the Barut and Amara projects was characterized by an earnest desire to advance the company's interests, it nonetheless fell short of the procedural rigor required of directors in such high-stakes ventures. They S/N solN4Cs0wEuyQ1PQMatf0g were, in essence, servants of the company who acted with loyalty but lacked the necessary circumspection, leading to the finding of negligence.

1.9 As their failures were born of commercial over-zeal rather than any deficit of integrity or personal gain, this Court finds it a fit and proper case to invoke the statutory 'safety valve' of Section 581 and under the common law. To do otherwise would be to penalize honest commercial misjudgment with the same severity as moral turpitude, a result that would stifle the very spirit of corporate enterprise.

1.10 This Court does not find any wrongdoing by the 5th and 6th Defendants and dismisses the claim against them. They have acted in accordance with their duties and based on the instructions of their superiors. They did not act unlawfully and have at all material times acted honestly and within their powers. S/N solN4Cs0wEuyQ1PQMatf0g

1.11 The decisions made by them to release payments for these projects were based on approved budgets and the instructions of their superiors. The dismissal of the claims against the 5th and 6th Defendants is not premised merely on their subordinate status. I find there is absent decision-making authority, discretion, or evidence that they ignored red flags or acted outside approved mandates. A.3 The Structure of this Judgment

1.12 To resolve the competing claims of negligence and the subsequent plea for judicial excuse, my analysis is structured into five principal parts:

1.13 First, I establish the Factual Matrix, identifying the specific Board mandates and project parameters for the Barut and Amara ventures that serve as the benchmark for the Defendants' conduct.

1.14 Second, I address the Standard of Care expected of the 1st to 4th Defendants, determining whether their departure from S/N solN4Cs0wEuyQ1PQMatf0g Board-mandated procedures (specifically regarding land rights and valuations) constituted actionable negligence, fraud and breach of fiduciary duties alleged by the Plaintiff for the 3 projects, Amara, Barut and SWBB.

1.15 Third, I evaluate the Reliance Defense raised by the 5th and 6th Defendants, analyzing whether their status as subordinate officers executing approved budgets shields them from liability.

1.16 Fourth, I apply the "Safety Valve" of Section 581 of the Companies Act 2016 and the business judgment rule defence. This involves a two-step inquiry: (i) whether the Defendants acted with subjective honesty and (ii) whether, in the context of honest commercial over-zeal, they ought fairly to be excused. This Court also deals with the issue of whether the transactions could be considered as a genuine business decision that should excuse these directors from liability. S/N solN4Cs0wEuyQ1PQMatf0g

1.17 Fifth, I set out the Final Orders of this Court that I believe should be made based on the facts of this case. B. Background Facts - The Roles and Reporting Structures of the Defendants (B.1) Parties 2. The Plaintiff’s claim is against the former directors and senior officers of the company. It is important to note that the 1st Plaintiff is a company owned by Johor Corp and the 2nd Plaintiff is a company wholly owned by the 1st Plaintiff.

The 1st Plaintiff had made several substantial investments in Indonesia. The Plaintiff further claims that these investments were made at the time when the Defendants were either members of the board of directors or were members of the senior management of the 2 entities. The claim arises from the Defendants’ alleged conduct in relation to KMB’s and KENSB’s investments in Indonesian plantation and oil and gas assets between 2013 and 2020, which allegedly resulted in significant financial losses to the Plaintiffs. S/N solN4Cs0wEuyQ1PQMatf0g

The 1st Plaintiff is a subsidiary of Johor Corp (JC). It is the Plaintiffs’ case that the Defendants, being members of the board and senior management of the 2 entities, knew and understood that investments to be undertaken by the companies within the JC group must be presented to the board of directors of JC and the progress of such investments must also be presented to the members of the board of JC. (B.2) Identities of the Defendants and their roles in the Plaintiffs Ahamad bin Mohamad (D1)

D1 was the Managing Director of the 1st Plaintiff for over 20 years. He was the Managing Director of the 1st Plaintiff from 1993 to 2016. Thereafter, he was appointed as the Corporate Advisor and a Non-Independent Non-Executive Director of the 1st Plaintiff.

D1 reports to the board of directors of the 1st Plaintiff and allegedly to the President and Chief Executive Officer of JCorp. S/N solN4Cs0wEuyQ1PQMatf0g Abdul Rahman bin Sulaiman (D2)

The 2nd Defendant was the Executive Director of the 1st Plaintiff’s Oil & Gas / Plantation Operations from 1-9-2013 to his retirement on 31- 12-2016. He was also a director of the 2nd Plaintiff from 1-12-2014 to 1-3-2017.

The 2nd Defendant reported to the 1st Defendant and the board of directors of the 1st Plaintiff. He was allegedly responsible for and oversaw and / or led the overall proposals of the operations and managements of the 1st Plaintiff’s plantation and oil & gas divisions including the activities of the 2nd Plaintiff. Zulkifly bin Zakariah (D3)

The 3rd Defendant was the Vice President of the 1st Plaintiff’s Estate Operations from 1-1-2013 to 31-12-2016. He was also an employee of the 1st Plaintiff and was stationed in Indonesia from 1999 to 2005. On 1-1-2017, the 3rd Defendant was appointed as the Executive Director of the 1st Plaintiff until his departure from the 1st Plaintiff from S/N solN4Cs0wEuyQ1PQMatf0g 17-9-2020. The 3rd Defendant was an Executive Director of the 1st Plaintiff.

The 3rd Defendant was also the President Director of PT Wisesa Inspirasi Nusantara (“PT WIN”), a company that was part of the Indonesian investments undertaken by the 1st Plaintiff. The 1st Plaintiff holds 100% of the equity interest in PT WIN.

The 3rd Defendant was also a director of the 2nd Plaintiff from 1-3-2017 to 18-11-2020.

The 3rd Defendant reported to the 1st and 2nd Defendant and to the members of the board of directors of the 1st Plaintiff. He was in charge of the plantation operations of the 1st Plaintiff’s investments in Malaysia and Indonesia. Jamaludin bin Md Ali (D4)

The 4th Defendant was the Executive Director of the 1st Plaintiff’s Business Development division on 4-12-2012 and was appointed a S/N solN4Cs0wEuyQ1PQMatf0g Non-Independent Non-Executive Director of the 1st Plaintiff on 1-7-

He resigned from the position on 1-1-2017.

The 4th Defendant reported to the board of directors of the 1st Plaintiff. Azli bin Mohamed (D5)

The 5th Defendant was appointed as the 1st Plaintiff’s Chief Financial Officer on 1-6-2011. He was thereafter appointed as Vice President of Finance on 1-1-2012 and continued until his departure on 1-10-

Shahrom bin Mohd Saad (D6)

The 6th Defendant was appointed as the Deputy General Manager of the 1st Defendant’s Finance Department from 1-1-2013 to 9-10-2017. The 6th Defendant was appointed as the Chief Financial Officer and / or Head of the Finance Division on 9-10-2017. In 2020, the 6th Defendant was appointed as the General Manager of the 1st Defendant’s Group Finance & Advisory Department. He retired on 30- S/N solN4Cs0wEuyQ1PQMatf0g 9-2020. He was also a director of the 2nd Plaintiff from 16-1-2018 to 18-11-2020.

It is the Plaintiffs’ case that the 1st to 6th Defendants were all part of their senior management and held senior positions in the companies. These Defendants did hold contractual, common-law duties and fiduciary duties to the Plaintiffs to ensure that all decisions taken (i) were properly authorized, (ii) that all information and relevant facts were disclosed to the board of directors, (iii) that all important steps to ascertain the viability of such investments were undertaken and (iv) to ensure that the investments were viable and not cause losses.

As the 1st Plaintiff is a subsidiary of JCorp, the Defendants knew that all investments of the 1st Plaintiff must be presented and approved by the directors of JCorp.

It is the Plaintiffs’ case that the claims against the Defendants arise from the alleged breach of (i) fiduciary, common law, equitable and / S/N solN4Cs0wEuyQ1PQMatf0g or contractual duties and / or fraud of the Defendants in relation to the investments undertaken by the Plaintiffs. The Plaintiffs further claims that between 2013 and 2020, KMB, under the direction of the Defendants, the companies embarked upon several investment projects in Indonesia involving palm oil plantations and oil and gas ventures.

The Plaintiffs claim that these projects were executed through a series of transactions characterized by serious governance lapses, undisclosed risks, and poor due diligence.

The Statement of Claim asserts that these transactions were undertaken without proper disclosure to KMB’s and JC’s Boards. It is alleged that the Defendants concealed material facts, misrepresented the viability of the projects, and approved inflated or unjustifiable investment sums. The alleged misconduct remained undiscovered until new management assumed control in 2020 and initiated an internal review. S/N solN4Cs0wEuyQ1PQMatf0g

The Plaintiffs claim that the fraud carried out by the Defendants could not have been discovered or uncovered with any reasonable and / or ordinary diligence and / or acted upon so long as the 1st to 6th Defendants remained in office and / or employed by the Plaintiffs. The wrongs and fraudulent conduct allegedly came to light after the new board of directors was appointed to their role from 1-1-2020. A review and investigations undertaken by the Plaintiffs then had caused the above to be uncovered and caused the initiation of this suit. (B.3) Investments undertaken by the Plaintiffs in Indonesia – (i) Project Barut, (ii) Project Amara, (iii) Project SWBB PSC

The investments undertaken by the Plaintiffs were made from October 2013 to 2020. A summary of the Plaintiffs’ investment is as follows: - Project Barut

(i) Purchase 75% of the shares in PT WIN from PT Graha Sumber Berkah (PT GSB) for the sum of USD 43.44 million via the Share Sale S/N solN4Cs0wEuyQ1PQMatf0g Agreement dated 3-10-2013. The investment was intended to invest in an Indonesian company (PT WIN) which owned land and / or estates located in North Barito Regency, Central Kalimantan Province, Indonesia (“Barut Investment”). Project Amara

(i) the Defendants had failed to disclose material facts or withheld material facts from the board of directors of the companies or JCorp. These material facts and information were essential to enable members of the board of the Plaintiffs and JCorp to make informed decisions in respect of the investments and steps to be taken for the investments.

(v) the Defendants had caused payments to be made for the investments without the authority of the Board of Directors of the Plaintiffs and of JCorp.

(x) the Defendants had failed, refused and / or neglected to take all reasonable steps required of them before the investments were undertaken and before the 1st Plaintiff issued the Kulim Support Letter.

(i) A declaration that the 1st to 6th Defendants have acted in breach of their fiduciary and / or common law and / or equitable and / or express and / or implied contractual duties towards the 1st and 2nd Plaintiffs.

(v) Interest and costs. (B.6) Defendants’ Defence

(i) 1st to 4th Defendants 26. The Directors of the Plaintiffs and / or JCorp did have full access to the information and / or documents relating to the business transactions and / or investments undertaken by the companies. S/N solN4Cs0wEuyQ1PQMatf0g

The Defendants aver that all investment proposals were presented to the Board of Directors and Teraju of the Plaintiffs and JCorp. Teraju is a committee that is made up of senior management officers of the company or senior members of the management of the group of companies within the JCorp family. All of the investments have been approved by Teraju and by the board of directors of the aforesaid companies.

All of the relevant and necessary information concerning the investments has been disclosed to members of Teraju and to the board of directors of the companies, as well as JCorp. This included individuals such as the Chairman of the 1st Plaintiff and the Chief Executive Officer of JCorp.

All material information or material matters have been disclosed to members of the Board of Directors of the Plaintiffs. JCorp and members of the Teraju committee. Members of such bodies have access to such information and such documents at all times. S/N solN4Cs0wEuyQ1PQMatf0g

At the time when D1 to D4 held positions in the Plaintiffs, no queries were raised by any audit committee or any auditors or any persons that had carried out audits annually on the affairs of the companies and all related investments.

The investments in Indonesia were made in accordance with the standard procedures and practices adopted by the Plaintiffs and JCorp at all times.

The investments were undertaken in good faith, properly, within the mandate given to the Defendants. The 1st to 4th Defendants performed their duties and obligations in good faith and acted in the best interests of the companies.

The investments made concerning Project Barut, Project Amara and Project SWBB PSC were made under the scrutiny and review of members of the board of directors. At all times, these projects were undertaken with the consent of the board of directors, members of Teraju and senior management of the Plaintiffs and JCorp. S/N solN4Cs0wEuyQ1PQMatf0g

All decisions were taken with due regard to the interests of the company, and all decisions, including any changes in the structure of the investments and changes to the nature of the investments, were made with due scrutiny, sufficient review and were executed in accordance with the mandate granted to the 1st to 4th Defendants.

The Defendants have also acted in accordance with the advice received from experts, such as Malaysian solicitors and have been disclosed to members of the board of the companies and JCorp.

Changes to the proposed terms of the agreements, the structure of the transactions, the purchase price and all other transactions were only undertaken with the approval of the Board of Directors of the Plaintiffs and/or JCorp and within the mandate given to the Defendants.

The 1st to 4th Defendants had also engaged the services of consultants and/or advisors with experience and expertise in all related fields concerning the investments including among others, S/N solN4Cs0wEuyQ1PQMatf0g Azhar bin Nordin, Abu Samad bin Nordin, Mariah Mohd Said, the firm of solicitors in Malaysia, legal experts in Malaysia and Indonesia as well as experts from the oil and gas industry.

The 1st to 4th Defendants contend that all investments and decisions taken about the investment in Indonesia were only undertaken after permission was obtained from the board of the companies and/or from the board or senior management of JCorp.

The 1st to 4th Defendants further stress that the actions taken in relation to the investments are carried out from time to time in the interests of the companies / Plaintiffs and were taken to protect the interests of the Plaintiffs in good faith.

The claim by the Plaintiffs is barred by limitation, is an abuse of process and is mala fide. The 1st to 4th Defendants have been scapegoats for the losses suffered by the Plaintiffs in the Indonesian investments. S/N solN4Cs0wEuyQ1PQMatf0g

The 5th Defendant refers to the letters of appointment dated 25-5- 2011, 24-2-2012,18-6-2014 and 9-2-2017, and states that he was only required to report to the 1st Defendant or the designated Managing Director of the 1st Plaintiff. He was not required to report to the board of directors of the 1st or 2nd Plaintiffs.

At all times, the 5th Defendant was required to report to the 1st Defendant or the 3rd Defendant.

The 5th Defendant was only responsible for the finance department and was allegedly not involved in any investment decisions and was not involved in the affairs of the 2nd Plaintiff.

The 5th Defendant states that he had authorized payments to be made for any investments based on the directions given by the senior management of the companies and based on the terms of the agreements executed by the parties, as well as documents presented by persons responsible for the investments. At all times, the 5th S/N solN4Cs0wEuyQ1PQMatf0g Defendant had acted lawfully and allegedly acted in accordance with the terms of his duties owed to the 1st Plaintiff.

He was later appointed as the Acting General Manager of the Finance Division sometime in October 2017 and formally appointed as the General Manager of the Finance Division sometime in early 2018. He was not the Chief Finance Officer of the 1st Plaintiff and was not the General Manager of the 1st Plaintiff’s Group Finance & Advisory, as alleged, and such a division did not exist.

The 6th Defendant admitted that he was appointed to the board of directors of the 2nd Plaintiff. However, he alleges that this was merely a nominee director and had no control over the company. He also said that there was (i) no effective board of directors, (ii) there were S/N solN4Cs0wEuyQ1PQMatf0g no formal board of directors’ meetings of the 2nd Plaintiff, (iii) he did not have any duties or obligations put to him as a director, and (iv) there were no employees of the 2nd Plaintiff.

All investments undertaken by the 2nd Plaintiff were undertaken before the time he was appointed as a director of the 2nd Plaintiff and before he was appointed a Deputy General Manager of the 1st Plaintiff.

He also avers that he did not have any involvement in any management or any decision to invest in any ventures and acted in accordance with the instructions of the 5th Defendant and/or the 3rd Defendant.

The 6th Defendant alleges that the scope of his duties was limited to the accounts and financial matters of the company, but this does not relate to the investments and any decision-making relating to the investments. The issues raised by the Plaintiffs in this suit concerning the alleged investments, disposal of investments, the alleged S/N solN4Cs0wEuyQ1PQMatf0g representations and failure to disclose or consider all alleged material facts were not within the job scope of the 6th Defendant.

The 6th Defendant further claims that he was merely an employee carrying out the very specific and restricted duties of handling the financial accounts and general budgetary requirements of the Plaintiffs.

All expenses incurred and payments made for the operations of the estates as part of the investments or for the oil and gas projects were made in accordance with the approved budget and were approved in accordance with the internal procedures of the Plaintiffs. All such payments made were undertaken in accordance with the instructions received from the 5th and/or 3rd Defendants.

The acquisition of the Indonesian companies and investments made in Indonesia were undertaken before the 6th Defendant was employed by the 1st Plaintiff. S/N solN4Cs0wEuyQ1PQMatf0g

It is alleged that the Plaintiffs do not have a valid cause of action against the 6th Defendant as he was (i) acting within the scope of his duties to the company, (ii) acting in accordance with the mandate and directions given by his superiors, (iii) only discharging his duties and

I refer to the summary of the chronology of events as agreed by solicitors for the litigants filed in these proceedings. D. Trial of this Claim 56. The trial of this claim took place from 11-8-2025 to 28-8-2025. The following witnesses were produced: - (D.1) Plaintiffs witnesses

56.1 Mohd Faris Adli Shukery – Managing Director of JCorp

56.2 Rozaini bin Mohd Sani – Non-Independent and Non-Executive Director of the 1st Plaintiff S/N solN4Cs0wEuyQ1PQMatf0g

56.3 Idham Jihaidi bin Abu Bakar – Company Secretary for the 1st Plaintiff

56.4 Azmil Majid – Senior Manager of Corporate Planning Department

56.5 Nina Sapura binti Rahmat – General Manager of the Portfolio Management Department

56.6 Mahmud bin Saidoo – General Manager of Special Projects

56.7 Nur Muhammad Habil bin Omar – Corporate Finance Department and Finance Manager of PT WIN (D.2) Defendants witnesses

56.8 Ahamad bin Mohamad

56.9 Abdul Rahman bin Sulaiman

56.10 Zulfkily bin Zakariah

56.11 Jamaludin binti Md Ali

56.12 Azli bin Mohamed

56.13 Shahrom bin Mohd Saad S/N solN4Cs0wEuyQ1PQMatf0g E. Applicable Laws 57. It is well established, that the Defendants, who were senior management of the Plaintiffs, owe fiduciary duties to the Plaintiffs to act in the best interests of the companies. At all times, when exercising any powers given to them, they must act honestly in the best interests of the company and must act following the mandate given to them and within the limits of the powers reposed to them. They also owe a duty of care to act in the best of the company and must exercise their powers carefully. Statutory and Case Law Directors Duty of Fidelity and Duty of Care 58. I refer to the decision of the Court of Appeal in Soh Chee Gee v Syn Tai Hung Trading Sdn Bhd [2019] 2 MLJ 379, where Nallini Pathmanathan JCA (as she then was) held: - “[45] In Labour Law by Simon Deakin and Gillian S Morris (5th Ed., 2009, Hart Publishing), the learned authors stated as follows:

(i) Employees as Fiduciaries S/N solN4Cs0wEuyQ1PQMatf0g

4.110 The implied duty of fidelity operates as a term of the contract of employment, which arises as an incident of the employment relationship; it must therefore be distinguished from the separate notion of a fiduciary obligation which may [added: be] incurred by an employee to his or her employer. Only employees who undertake particular duties and responsibilities, normally associated with a senior position, will become fiduciaries and thereby assume the wide-ranging legal duties which are attached to that status. In particular, fiduciaries come under an open-ended duty of disclosure which is not part of the employee's general duty of fidelity under the contract of employment. ….. [46] In the Queen’s Bench Division case of University of Nottingham v Fishel and Another [2000] ICR 1462 (‘Fishel’), Elias J considered the position of employees and in what situations they owed fiduciary duties. His Lordship cautioned against conflating and confusing the regular S/N solN4Cs0wEuyQ1PQMatf0g duties owed by employees to the company with the fiduciary duties owed by certain employees….. ….. [48] The defendant, as the plaintiff’s CEO, would certainly fall into the category of very senior employees who are in a position of special trust and responsibility with regard to the management of the organisation and assets. The defendant thus owes fiduciary duties to the plaintiff, which we found that he had breached. …. [57] On fiduciary obligations, the Federal Court in the case of The Board of Trustees of the Sabah Foundation & Ors v Datuk Syed Kechik bin Syed Mohamed & Anor [2008] 5 MLJ 469; [2008] 1 LNS 100 cited the following passage by Millet LJ in the English case of Bristol and West Building Society v Mothew [1988] Ch 1 (‘Bristol and West Building Society’): A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and S/N solN4Cs0wEuyQ1PQMatf0g confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty. The principal is entitled to the single-minded loyalty of his fiduciary. This core liability has several facets. A fiduciary must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of his principal. This is not intended to be an exhaustive list, but it is sufficient to indicate the nature of fiduciary obligations. They are the defining characteristics of the fiduciary. The nature of the obligation determines the nature of the breach. The various obligations of a fiduciary merely reflect different aspects of his core duties of loyalty and fidelity. Breach of fiduciary obligation, therefore, connotes disloyalty or infidelity. Mere incompetence is not enough. A servant who loyally does his incompetent best for his master is not unfaithful and is not guilty of a breach of fiduciary duty. (Emphasis added.)” S/N solN4Cs0wEuyQ1PQMatf0g

It is further trite that the Defendants owed a duty to act at all times in the best interest of the company. The duty owed by the Defendants requires them to act with honesty and to fully disclose all relevant information to the company and members of the board. This is to enable the board and the company to make all decisions with full knowledge of the material facts.

Not all employees owe such obligations, but the duty may arise when dealing with senior employees and those who exercise management powers, senior positions and where there clearly exists a relationship of trust and confidence. Refer to the decision of the Court of Appeal in Soh Chee Gee v Syn Tai Hung Trading Sdn Bhd [2019] 2 MLJ

379.

I further refer to the decision of the Federal Court in Tengku Dato’ Ibrahim Petra Tengku Indra Petra v Petra Perdana Bhd & Another appeal [2018] 2 CLJ 641, where Azahar Mohamad FCJ (as he then was) held: - S/N solN4Cs0wEuyQ1PQMatf0g “[172] One of the important principles of law that can be distilled from the case of Charterbridge Corporation Ltd v. Lloyds Bank Ltd (supra) was that the test for breach of duty of a director and acting in "the interest of the company" has an objective element: whether an honest and intelligent man in the position of a director of the company concerned could, in the whole of the existing circumstances, have reasonably believed that the transaction was for the benefit of the company. [173] This principle has come to be known as the "Charterbridge principle" (per Zainun Ali JCA (as Her Ladyship then was) in Pioneer Haven Sdn Bhd v. Ho Hup Construction Co Bhd & Anor). As correctly stated by Pearlie MC Koh on Company Law (supra), at p. 112, it is an objective element in the test in the sense that this was done by reference to what an honest and intelligent man in the position of the directors would have done. Elsewhere at p. 301, the learned writer stated that "the tension between commercial reality and the requirements of the S/N solN4Cs0wEuyQ1PQMatf0g law is alleviated somewhat by the adoption of an objective formulation of the test for breach of directors' duty". [174] The Singapore Court of Appeal in the case of Intraco Ltd v. Multi-Pak Singapore Pte Ltd [1994] 3 SLR (R) 1064 accepted Pennycuick J's formulation in Charterbridge Corporation Ltd v. Lloyds Bank Ltd (supra). The Singapore Court of Appeal in applying the objective element in the test had this to say: Counsel for the appellants relied on this dicta and submitted that the circumstances here were not such as to lead to an inference of dishonesty on the part of the directors of the respondents, but were such that a reasonable man could have inferred that the transactions were entered into bona fide by the directors in the interests of the respondents. He contended that as the directors of the respondents were also the directors of City Carton, they had considered the group as an economic entity and therefore acted for the benefit of the group as a S/N solN4Cs0wEuyQ1PQMatf0g whole. At the same time, he submitted that the directors would have reasonably regarded the equity participation of the appellants as beneficial to the respondents. We accepted this submission. We were of the opinion that an honest and intelligent man in the position of the directors, taking an objective view, could reasonably have concluded that the transactions were in the interests of the respondents. There was clearly no evidence that the directors of the respondents had acted in breach of their duties to the respondents. [175] In Spedley Securities Ltd (in liq.) v. Greater Pacific Investments Pty Ltd (in liq) [1992] 7 ACSR 155, a "round robin" of transactions was effected by Mr. Yuill (a director of Spedley Securities Ltd (in liq) (Spedley)) and others, essentially with the purpose of "cleaning up" the balance sheet of Spedley. An action was brought to determine the validity of the various transactions. Cole J applied the objective element in the test as follows: S/N solN4Cs0wEuyQ1PQMatf0g The test to be applied in considering the actions of Mr Yuill in effectively denuding GPIL of substantial assets by transferring them to GPl and P152 so that the funds could be returned ultimately to SSL and thus improve its balance sheet is that enunciated in Charterbridge Corp Ltd v. Lloyds Bank Ltd [1970] Ch 62 at 74: "As an intelligent and honest man in the position of a director of GPIL, do I, in the whole of the existing circumstances, reasonably believe that the transactions are for the benefit of GPIL. [176] A principal error of the Court of Appeal in the present case was its failure to consider Pioneer Haven Sdn Bhd v. Ho Hup Construction Co Bhd & Anor (supra), which applied the objective element in the test. In delivering the judgment of the Court of Appeal, this was what Zainun Ali JCA (as Her Ladyship then was) said: The prior provision of s. 132(1) requires a director to act honestly. The current s. 132(1) of the Act, requires a director to act in good faith in the best S/N solN4Cs0wEuyQ1PQMatf0g interest of the company. It is accepted that for all intents and purposes, the scope of the directors' duties to act honestly under the old s. 132(1) and the new s. 132(1) are the same. Thus the old case laws relating to the duty to act honestly continue to be relevant. [177] Her Ladyship further said: The test is nicely condensed in Ford's Principles of Corporations Law (para 8.060), that there will be a breach of duty if the act or decision is shown to be one which no reasonable board could consider to be within the interest of the company. This test is adopted in Charterbridge Corpn Ltd v. Lloyds Bank Ltd. [1970] Ch. 62 at p 74, in that, to challenge a decision of the directors, the test is whether:... an intelligent and honest man in the position of the director of the company concerned, could in the whole of the existing circumstances have reasonably believed that the transactions were for the benefit of S/N solN4Cs0wEuyQ1PQMatf0g the company. The above principle is often referred to as the 'Charterbridge Principle'. [178] In our judgment, the above passage from the judgment of Pioneer Haven Sdn Bhd v. Ho Hup Construction Co Bhd & Anor And Other Appeals (supra) states correctly the objective element in the test of whether a director acted in the "best interest of the company". It is against this benchmark that one must assess the decision of the defendants in the present appeals in the divestments of a substantial portion of the plaintiff's shareholding in PEB.”

I also refer to Pioneer Haven Sdn Bhd v Ho Hup Construction Co Bhd & Anor [2012] 3 MLJ 616, Bristol and West BS v Mothew [1998] CH 1, Ng Pak Cheong v Global Insurance Co Sdn Bhd [1995] 1 CLJ 223 and Acumen Scientific Sdn Bhd v Yeo Liang Ming [2021] 2 CLJ 369. S/N solN4Cs0wEuyQ1PQMatf0g

I must not forget the business judgment rule defence. This is available to any directors of the company if it is found that they have acted honestly pursuing what they believe were actions in the best interests of the company.

An application of such principle can be seen in the decision Liza Chan J in WRP Asia Pacific Sdn Bhd v Lee Son Hong & Ors [2024] 1

The application of the defence is also explained by of Zainun Ali JCA (as she then was) in Pioneer Haven Sdn Bhd v Ho Hup Construction Company Bhd [2012] 5 CLJ 169: - “[228] The prior provision of s. 132(1) requires a director to act honestly. The current s. 132(1) of the Act, requires a director to act in good faith in the best interest of the company. It is accepted that for all intents and purposes, the scope of the directors' duties to act honestly under the old s. 132(1) and the new s. 132(1) are the same. Thus S/N solN4Cs0wEuyQ1PQMatf0g the old case laws relating to the duty to act honestly continues to be relevant. (See Cheam Tat Pang v. PP [1996] 1 SLR 541). [229] It is also recognised that the duty to act in the best interest of the company means different things, depending on the factual circumstances. [230] Consequentially, depending on the type of dispute or issue, the directors must place a higher priority on the interest of the persons who are truly affected. [231] In these appeals, who are the persons truly affected by the actions of the directors? In view of Ho Hup's imminent de-listing, it stands to reason that the directors were motivated to rescue Ho Hup from being de-listed. Thus in this scenario, the shareholders are most affected, not so much the company. As such, the directors must act for the best interest of the shareholders. [232] What then, is the test whether there is breach of such duty? Or putting it in another way in order for the decision of the directors to be challenged, what is the test? S/N solN4Cs0wEuyQ1PQMatf0g [233] The test is nicely condensed in Ford's Principles of Corporations Law (para. 8.060), that there will be a breach of duty if the act or decision is shown to be one which no reasonable board could consider to be within the interest of the company. [234] This test is adopted in Charterbridge Corporation Ltd v. Lloyds Bank Ltd [1970] Ch 62 at 74, in that, to challenge a decision of the directors, the test is whether: ... an intelligent and honest man in the position of the director of the company concerned, could in the whole of the existing circumstances have reasonably believed that the transactions were for the benefit of the company. [235] The above principle is often referred to as the "Charterbridge Principle". [236] Thus it boils down to this: that whether in all the circumstances that existed on 16 March 2010, there were grounds upon which a reasonable board could have considered that the JDA was in the best interest of the shareholders. S/N solN4Cs0wEuyQ1PQMatf0g [237] It is important to note, following high authority, such as Howard Smith Ltd v. Ampol Petroleum Ltd [1974] AC 821, that the court does not substitute its own decision with that of the directors, since the decision of the directors to enter into the JDA is a management decision.”

It is trite that there is an inherent duty that any decision by officers of companies must be made with skill, care and diligence. I refer to the decision of the Singapore Court of Appeal in BIT Baltic Investments & Trading Pte Ltd v Wee See Boon [2023] SGCA 17, where Judith Prakash JCA held: - “30 It has long been accepted that a director is a fiduciary of their company and has an overriding duty to act in good faith in the interests of the company. Several specific duties have been recognised in this regard as falling into the categories of: (a) the fiduciary duties; and (b) the duties of skill, care and diligence. We must emphasise the importance of the distinction between the fiduciary duties and the duties of care, skill and diligence given the different S/N solN4Cs0wEuyQ1PQMatf0g remedial consequences that follow depending on the type of duty that is breached. As the Judge rightly pointed out at [12] of the Judgment, the breach of fiduciary duties would typically entitle a claimant to the relieve of equitable compensation while the breach of the duties of care, skill and diligence would only allow the claimant to obtain compensatory damages by reference to the losses suffered. We now turn to consider the two categories of directors’ duties in greater detail. 31 A director’s fiduciary duties to the company are: (a) the duty to act honestly and in good faith in the best interests of the company; (b) the duty not to exercise his powers for an improper purpose such as to profit personally from his office; and (c) the duty not to place himself in a position which will result in a conflict of interest between his duties to the company and his personal interests: DM Divers Technics Pte Ltd v Tee Chin Hock [2004] 4 SLR(R) 424 at [80]–[81]. S/N solN4Cs0wEuyQ1PQMatf0g 32 The duty to act honestly and in good faith in the best interests of the company represents the overarching duty of “single-minded loyalty” owed to the company. It is the distinguishing obligation of a director as a fiduciary of the company: Hans Tjio, Pearlie Koh & Lee Pey Woan, Corporate Law (Academy Publishing, 2015) at para 9.003. As the learned authors also state at para 09.043, the duty obliges the director to exercise his discretion in a manner that he thinks best serves or advances the company’s interests. While the company is solvent, generally the interests of the shareholders would be the interests of the company. When it is in an insolvent situation, however, the interests of the company’s creditors as a group have to be considered as well and should not be prejudiced. 33 The high standard of loyalty required of directors is exacted through the specific duties not to profit personally from the office and not to put themselves in a conflict of interest with the company. The relationship between these S/N solN4Cs0wEuyQ1PQMatf0g duties and the standard of loyalty expected were described by Millett LJ in Bristol and West Building Society v Mothew [1998] Ch 1 at 18 in the following terms: The principal is entitled to the single-minded loyalty of his fiduciary. This core liability has several facets. A fiduciary must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of his principal. 34 On the other hand, the duty to act with due care, skill and diligence is a related but distinct duty owed by directors to their company. It is not a fiduciary duty because it is not imposed to exact loyalty from a director: Ho Yew Kong v Sakae Holdings Ltd and other appeals and other matters [2018] 2 SLR 333 (“Sakae Holdings”) at [135]. Instead, it S/N solN4Cs0wEuyQ1PQMatf0g relates to the standard of care and diligence expected of a director that is assessed objectively: Lim Weng Kee v PP [2002] 2 SLR(R) 848 (“Lim Weng Kee”) at [28]. 35 The difference between the fiduciary duties and the duties of care, skill and diligence was explained at paragraphs 134 and 135 of Sakae Holdings and we reproduce these paragraphs below: Section 157(1) of the Companies Act provides that “[a] director shall at all times act honestly and use reasonable diligence in the discharge of the duties of his office”. The duty under s 157(1) to “act honestly” enshrines in statute a director’s common law duty to act bona fide in the best interests of the company: see Ho Kang Peng v Scintronix Corp Ltd [2014] 3 SLR 329 at [35] and Townsing Henry George ([92] supra) at [59]. In contrast, the duty under s 157(1) to “use reasonable diligence in the discharge of the duties of [a director’s] office” encapsulates a S/N solN4Cs0wEuyQ1PQMatf0g director’s separate common law duty to exercise due care, skill and diligence: see Lim Weng Kee v PP [2002] 2 SLR(R) 848 (“Lim Weng Kee”) at [22] and Falmac Ltd v Cheng Ji Lai Charlie [2013] SGHC 113 at [65]. These two duties are “conceptually distinct” and are “different aspects of a director’s bundle of duties even though they may overlap on certain facts”: see Lim Weng Kee at [32]. Although a company director is a quintessential example of a fiduciary (see Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134), not all the duties which he owes his company are fiduciary duties. Fiduciary duties in the classic sense encompass the two distinct rules proscribing a fiduciary from making a profit out of his fiduciary position (namely, the no-profit rule) and putting himself in a position where his own interests and his duty to his principal are in conflict (namely, the no-conflict rule): see Bray v Ford [1896] AC 44 and Chan v Zacharia (1984) 154 CLR S/N solN4Cs0wEuyQ1PQMatf0g

Although conceptually distinct, these two rules share a common foundation in a director’s duty of loyalty to his company. The duty of care, skill and diligence is not a fiduciary duty because it is not imposed to exact loyalty from a director, and accordingly does not encompass either of the two aforementioned rules that are the hallmarks of a fiduciary obligation: see Hans Tjio, Pearlie Koh & Lee Pey Woan, Corporate Law (Academy Publishing, 2015) at para 9.097. As Millett LJ aptly put it in Bristol and West Building Society v Mothew [1998] Ch 1 (at 18): … Breach of fiduciary obligation … connotes disloyalty or infidelity. Mere incompetence is not enough. A servant who loyally does his incompetent best for his master is not unfaithful and is not guilty of a breach of fiduciary duty.” S/N solN4Cs0wEuyQ1PQMatf0g

I also note that directors and executive officers of the company also owe a common law duty to exercise their powers for an appropriate purpose and must exercise due care when doing so. I refer to Byers and others (Appellants) v Chen Ningning (Respondent) (British Virgin Islands) [2021] UKPC and Re Park House Properties Ltd [1997] 2 BCLC 530.

It is clear from the decision of the Privy Council in Byers that the Court provides important guidance as to the duties of directors concerning the assets of companies. In that case, one Miss Chen, who was found to be the de facto controller of the corporation even after the date of the winding-up of the company, had continued to have control of the assets and accounts of the company, and was found to have not acted in the best interest of the company.

The Privy Council found that the sums held in the accounts of the company were wrongly released and Miss Chen did not act in the best S/N solN4Cs0wEuyQ1PQMatf0g interest of the company. Thus, breaching her fiduciary duties to the corporation.

Delivering judgment on behalf of the Privy Council, Lord Kitchin held:- “93. The judge found that Mr Chen was responsible for repaying the Zenato loan and that by this time he was in charge of PFF’s affairs as sole de facto director. He also found that banking transactions were in practice conducted electronically by PFF’s staff without Miss Chen having to sign anything, and that the payments to Zenato were made in this way. However, Miss Chen was, on the judge’s findings, aware of these payments. What is more, Miss Chen had a fiduciary duty to PFF to take all reasonable steps to intervene to prevent a payment being made from a trading account of which she was sole signatory for an improper purpose. The repayment of the whole of the Zenato loan was undoubtedly improper. It was made at a time when PFF was insolvent and without any proper S/N solN4Cs0wEuyQ1PQMatf0g reason. Yet Miss Chen took no steps to prevent it. Moreover, given Miss Chen’s position in relation to PFF as de jure director and sole beneficial owner and given further that she was the sole signatory on the account, there can be no doubt that, had she intervened, the payments would not have been made. She was, as the judge described, “ultimately the boss”. In these circumstances the Board is satisfied that her inaction amounted to a breach of her fiduciary duty to PFF.”

It must also be noted that the directors of a company are also entitled to rely on section 214 of the Companies Act 2016, which also appears in section 132 of the Companies Act 1965. This is what is commonly referred to as the business judgment rule. When it is shown that the decision is made for (i) a proper purpose and in good faith, (ii) he or she did not have any material personal interest in the subject matter, (iii) he or she is informed that the decision is appropriate under the circumstances, and (iv) he reasonably believes S/N solN4Cs0wEuyQ1PQMatf0g that the decision is in the best interests of the company, then the defence would be applicable.

The employees of the companies are also entitled to the business judgment rule defence available in common law that protects directors and executives of a company for decisions that were in good faith and with reasonable care, skill and diligence. This defence is to enable directors to make decisions that are financially risky but were honestly made.

It is trite that the Courts will not second-guess these kinds of decisions as long as the fiduciary duties are not breached, they were not honestly, diligently undertaken and within the powers of directors and executives of the company. This can be seen in the decision of the Court of Appeal in Pioneer Haven Sdn Bhd v Ho Hup Construction Bhd & Anor (supra), where the Court of Appeal held: - “[238] The test is nicely condensed in Ford's Principles of Corporations Law (para 8.060), that there will be a breach S/N solN4Cs0wEuyQ1PQMatf0g of duty if the act or decision is shown to be one which no reasonable board could consider to be within the interest of the company."

I also refer to the statutory duties that are enshrined under section 213 of the Companies Act. This proviso codified the above duties, and the directors are statutorily required to exercise their powers for a proper purpose and in good faith in the best interest of the company, and they must exercise such duties with reasonable care, skill and diligence.

I further refer to the decision of the Court of Appeal in Iris Corporation Berhad v Tan Sri Razali bin Ismail [W-02(NCC)(WW)- 1736-09/2022], where Ahmad Fairuz bin Zainol Abidin JCA explained the application of the defence available to directors of a company under section 214 and section 518 of the Companies Act. For the Defence to be available, it must be shown to this Court that the director did: - S/N solN4Cs0wEuyQ1PQMatf0g

(i) the decision taken was undertaken for business purposes and was made for a proper purpose and in good faith.

I also note the following caution made by the Court of Appeal in the earlier cited case: - “[42] In considering the subjective element, the test requires assessment of whether the directors genuinely believed the decision would benefit the company. The High Court's finding that the decision was "honestly arrived at, bona fide and in the best interests of the company as a whole" addresses this subjective component. It would be S/N solN4Cs0wEuyQ1PQMatf0g wrong for a court to substitute its opinion for that of the management, or indeed to question the correctness of the management's decision on such a question, if bona fide arrived at. (See Howard Smith Ltd v. Ampol Ltd (supra)). [43] In considering the objective element, the court must evaluate whether such belief was reasonable in the circumstances….. [44] Crucially, the requirement does not demand successful outcomes or perfect directors' judgment. The test focuses on reasonableness of belief at the time the decision was made, not whether subsequent events vindicated their judgment….. [45] The business judgment rule serves important policy objectives in encouraging competent individuals to serve as directors and in promoting legitimate business risk-taking. If directors faced personal liability for every S/N solN4Cs0wEuyQ1PQMatf0g business decision that ultimately proved unsuccessful, qualified individuals would be deterred from serving on company boards and those who did serve would adopt excessively conservative approaches that could stifle business growth and innovation. [46] The learned Judicial Commissioner's application of the business judgment rule in this case properly recognised these policy considerations while ensuring that directors who act honestly and in the best interest of the company receive appropriate legal protection. …. [54] In evaluating the Respondents' decision to approve the BCS Investment, this Court is mindful of the principle that business decisions must not be assessed with the benefit of hindsight. The dangers of hindsight bias in the evaluation of commercial decisions have been recognized across multiple jurisdictions and form a cornerstone of the business judgment rule. S/N solN4Cs0wEuyQ1PQMatf0g ….. [64] The business judgment rule exists, in part, to protect directors from the unfair application of hindsight bias in judicial review of their decisions. This protective principle is essential to maintaining an environment where qualified individuals will serve as directors and where legitimate business risk-taking is encouraged rather than penalized through retrospective judicial scrutiny. [65] Accordingly, it is this Court's finding that the BCS Investment decision was made strictly within the timeline of the information and circumstances available to the Respondents at the material time, without reference to subsequent developments or information that became available only after the investment decision was made.” Statutory Defence of Business Judgment Rule 77. I have also considered Section 215 of the Companies Act and Section 581 of the Companies Act 2016. The above defences are S/N solN4Cs0wEuyQ1PQMatf0g also available to officers of a company. Essentially, honest errors in business decisions should not lead to personal liability unless the facts justify the imposition of such liability due to factors such as (i) lack of bona fides, (ii) failure to act diligently or (iii) breach of fidelity. Even if the Defendants did commit errors or mistakes or breach their duties to the company, but if it is shown that the actions were taken

(i) honestly, (ii) reasonably and (iii) that it is justifiable based on the facts of the case, then the Court may relieve such Defendants from such liability. This is what I call the “safety valve” prerogative provided to our Courts under section 581 of the Companies Act. This power must be exercised reasonably and only when the requirements are fulfilled based on the facts of each case. Duty of Disclosure Concerning Reports and Opinions from Third parties 78. It is also important that I address the issue of whether directors who hold executive positions, such as Chief Executive Officers of a corporation, owe a duty to disclose the whole reports prepared by independent consultants or by a committee appointed by a S/N solN4Cs0wEuyQ1PQMatf0g corporation, should be reported or provided to members of the board for their deliberation or whether a summary of such report would be sufficient.

This is not a straightforward area, and the answer to each case will depend on the peculiar facts of the dispute before the court. This could be seen from the following decisions from various jurisdictions, explained in the following paragraphs.

I refer to the decision of the Federal Court of Australia in Australian

Securities and Investments Commission v Healey [2011] FCA That case concerns proceedings commenced by the Australian Commission (ASIC) against 2 former executive directors (i.e. the former Chief Executive Officer and Managing Director) and 6 non-executive directors of a listed entity known as the Centro entities.

ASIC sought declarations that each of the defendants had breached their statutory duties of care and fiduciary duties owed to the corporation involved. These directors had allegedly approved S/N solN4Cs0wEuyQ1PQMatf0g consolidated financial statements incorrectly that contained material errors and material non-disclosures. These included the incorrect classification of a $1.5 billion debt as non-current liabilities and alleged failure to disclose US$ 1.75 billion guarantees.

The Australian Court was tasked to determine whether directors of public listed corporations are required to apply their own minds and are required to undertake a careful review of the proposed financial statements and the proposed directors reports to ensure that the reports are consistent with the directors’ knowledge of the corporation affairs and that they disclose all material facts that the directors are aware or ought to be aware of. The case concerns the sections, 180(1), 601FD(1) and 344(1) of the Australian Corporations Act 2001.

Justice Middleton of the Australian Federal Court found that there is a duty owed by directors of corporations to ensure that: -

(i) they take all reasonable steps to focus and consider for themselves that the contents of the financial statements are correct. S/N solN4Cs0wEuyQ1PQMatf0g

For our purposes, I quote the relevant part of Justice Middleton’s judgment concerning the duties of directors and whether they could rely on opinions or advice or even delegate the preparation of reports to others: - “Directors are entitled to delegate to others the preparation of books and accounts and the carrying on of the day-to-day affairs of the company. What each director is expected to do is to take a diligent and intelligent interest in the information available to him or her, to understand that information, and apply an enquiring mind to the S/N solN4Cs0wEuyQ1PQMatf0g responsibilities placed upon him or her. Such a responsibility arises in this proceeding in adopting and approving the financial statements. Because of their nature and importance, the directors must understand and focus upon the content of financial statements, and if necessary, make further enquiries if matters revealed in these financial statements call for such enquiries.” … “I do consider that all that was required of the directors in this proceeding was the financial literacy to understand basic accounting conventions and proper diligence in reading the financial statements. The directors had the required accumulated knowledge of the affairs of Centro, based upon the documents placed before them and discussion at board meetings. Each director then needed to formulate his own opinion, and apply that opinion to the task of approving the financial statements.” ….. S/N solN4Cs0wEuyQ1PQMatf0g “Directors cannot substitute reliance upon the advice of management for their own attention and examination of an important matter that falls specifically within the Board’s responsibilities, as with the reporting obligations. The Act places upon the Board and each director the specific task of approving the financial statements. Consequently, each member of the board was charged with the responsibility of attending to and focusing on these accounts and, under these circumstances, could not delegate or “abdicate” that responsibility to others.”

The same can be gleaned from the decision of the Singapore Court in Ho Kang Peng v Scintronix Corp Ltd [2014] SGCA 22. The case concerns a claim by the corporation against its former Chief Executive Officer, who had approved payments to a Taiwanese company known as Bontech Enterprise Co Ltd. The payments were made allegedly pursuant to a consulting agreement between the corporation and S/N solN4Cs0wEuyQ1PQMatf0g Bontech for unspecified services. The High Court of Singapore found that the former CEO breached his duties to the corporation and found that it was wrong for him to merely rely on the explanation and reports made by his subordinates. He owed a duty to the company to ensure all such payments were made for proper purposes.

The decision was confirmed by the Singapore Court of Appeal. Justice Chao Hick Tin delivering the decision of the Singapore Court of Appeal held: - “44 In our view, it does not lie in the mouth of a man who was the CEO of the Company to deflect his duty to exercise reasonable diligence by arguing that he was simply following what was told to him by subordinate officers of the Company to be an established practice, especially in relation to a payment of the kind such as the present which is prima facie improper and indeed illegal. As stated in Ong Chow Hong (alias Ong Chaw Ping) v Public Prosecutor and another appeal [2011] 3 SLR 1093 at [33], “each director of a listed company has a solemn and non-S/N solN4Cs0wEuyQ1PQMatf0g delegable duty of due diligence to ensure compliance with market rules and practices”. It was incumbent upon the Appellant, when he took over as the CEO, to apprise himself of transactions which the Company was involved in, and in particular, to determine the appropriateness of even a long-standing practice where the possible impropriety would have been evident to any reasonable businessman or director. The making of payments to an unidentified individual based on absent documentation was, on its face, a matter which called out for at least some inquiry (see Secretary of State for Trade and Industry v Swan [2005] BCC 596 at [217]). This the Appellant did not do. Neither did he bring it up to the Board for discussion. We therefore have no hesitation in finding that, despite what appeared to be a measure to promote the Company’s immediate financial position, the Appellant did not exercise the diligence and care that a reasonable director of a company ought to have exercised, bearing in mind the possible implications for the Company. Moreover, as the S/N solN4Cs0wEuyQ1PQMatf0g incoming CEO, he did not even consider whether the illegal payment achieved the sales target to Pioneer (see [25]– [26] above). He simply sanctioned a new way to effect the bribe without much thought. We therefore hold that the Appellant was in breach of his duties to the Company.”

My understanding of the above case laws suggests that there is no bright line in determining what is and what is not necessary to be provided to the board of directors by those in executive positions, such as CEO’s or CFO’s. The Board of Directors has a duty to ensure that they make informed decisions and is required to investigate and make reasonable inquiries as to whether any proposals to be deliberated are undertaken in the best interest of the company. It is no defence to the board to only say that they rely on the disclosures made by their subordinates if no such inquiry was undertaken.

As a corollary to this duty, those making such proposals must ensure that adequate information and sufficient disclosures are made to the S/N solN4Cs0wEuyQ1PQMatf0g board to enable it to make such informed decisions. Therefore, this requires sufficient information that is reasonably capable of affecting or influencing the decision of the board to be disclosed. To what extent such information and reports must be disclosed to the board is a question that could only be decided based on the facts of each case. Those who have control of the information must ensure that all information and material facts are disclosed to the board. If they chose not to do so, a reasonable explanation must be afforded. To merely say that the information may be voluminous is not a good justification. For avoidance of doubt, the requirement that a decision be ‘informed’ does not demand exhaustive or flawless due diligence. It requires that the decision be made on the basis of information reasonably available and considered material at the time, without the benefit of hindsight.

Summary of the Applicable Law

(A) Based on the aforesaid, I summarize the applicable law to be as follows: - S/N solN4Cs0wEuyQ1PQMatf0g

(B) Applicable Law on the test of dishonesty

This Court must determine the following issues as identified below.

As stated earlier, between 2013 and 2020, KMB (1st Plaintiff), under the direction of the Defendants, the Plaintiffs embarked upon several investment projects in Indonesia involving palm oil plantations and an oil and gas venture. The Plaintiffs claim that these projects were executed through a series of transactions allegedly characterized by serious governance lapses, undisclosed risks, and poor due diligence.

The Plaintiffs assert that these transactions were undertaken without proper disclosure to KMB’s and JCorp’s Boards. It is alleged that the Defendants concealed material facts, misrepresented the viability of the projects, and approved inflated or unjustifiable investment sums. The alleged misconduct remained undiscovered until new management assumed control in 2020 and initiated an internal review. S/N solN4Cs0wEuyQ1PQMatf0g The Barut Investment (2013–2014)

The first major transaction was the “Barut Investment,” involving the acquisition of equity in PT Wisesa Inspirasi Nusantara (“PT WIN”) from PT Graha Sumber Berkah (“PT GSB”). PT WIN owned several Indonesian plantation companies (PT HBS, PT SSR, and PT WSK), which were to develop oil palm plantations in Central Kalimantan.

The Plaintiffs allege that the Defendants, particularly D1, D2, D3 and D4, failed to disclose serious legal and commercial risks identified in the due diligence conducted by the Indonesian law firm AKSET. These included invalid or overlapping land permits, potential conflicts with mining concessions, and uncertainty in obtaining cultivation rights (HGU). Despite these warnings, the Defendants proceeded with the investment and executed a Share Sale Agreement (“SSA”) in October 2013 for USD 43.44 million.

Subsequently, in February 2014, the Defendants executed a revised Shareholders Agreement (“SHA”) without proper board approval. The SHA altered key terms of the investment, reducing KMB’s S/N solN4Cs0wEuyQ1PQMatf0g shareholding from 75% to 74%, introducing an additional “Investment Obligation” committing KMB to inject further funds, and eliminating protective clauses. The Plaintiffs allege these revisions were made unilaterally, contrary to representations made to KMB and JC, and exposed KMB to increased financial risk.

The Plaintiffs further claim that the Defendants misrepresented the valuation of PT WIN, failed to obtain independent assessments, and relied instead on conflicted valuations prepared by PT GSB’s appointees. The investments ultimately failed, resulting in heavy financial losses. Project AMARA (2015–2016)

Notwithstanding the failure of the Barut Investment, the Defendants proceeded with another major Indonesian acquisition, known as “Project AMARA.” This involved PT WIN acquiring several plantation companies (PT RAJ, PT TPR, PT SPS, and PT NPI) through Conditional Share Purchase Agreements (CSPAs) executed in February 2016. S/N solN4Cs0wEuyQ1PQMatf0g

The Plaintiffs allege that despite due diligence reports warning of poor plantation conditions, overlapping land rights, and persistent financial losses, the Defendants misled the KMB Board into believing the projects were sound. Reports by Indonesian consultants and accountants (including Piesta and Nugroho & Rekan) indicated that key estates were unproductive, loss-making, and poorly maintained, but these findings were not disclosed.

The Plaintiffs assert that D1, D2, D3, D4 and D5, acting in concert, deliberately withheld adverse reports from the Boards of KMB and JC, thereby inducing the companies to approve and fund an unviable transaction. The acquisitions of PT RAJ and PT TPR, the weakest entities, were executed despite express concerns over their profitability and legality.

SWBB Block PSC Investment (2015–2017) The third major transaction was the SWBB Block Production Sharing Contract (“SWBB PSC Investment”), involving an oil and gas exploration block in Indonesia known as the South West Bukit Barisan S/N solN4Cs0wEuyQ1PQMatf0g Block. The transaction was implemented through a Joint Operating Agreement (JOA), Conditional Subscription and Share Purchase Agreement (CSSPA), and other supporting documents executed between KENSB and Indonesian counterparties linked to PT GSB and PT CSE.

The Plaintiffs allege that the Defendants approved and executed these agreements without adequate due diligence or disclosure to the Boards of KMB and JC. The Defendants allegedly agreed to major contractual variations, including substituting the original partner (PT RBB) with PT CSE, a financially unstable and related company, without proper board approval. The data used to evaluate the block’s viability—derived primarily from the Sinamar-1 well—was incomplete, and the independent consultant GCA’s assessment was based on limited information supplied by the counterparties.

The Plaintiffs contend that further drilling (Sinamar-3) was required to confirm the resource potential but that this was neither undertaken nor properly disclosed. Subsequent studies, including one by LAPI-S/N solN4Cs0wEuyQ1PQMatf0g ITB, showed that the block was likely a gas discovery rather than an oil-producing field, rendering the initial investment assumptions inaccurate. Nonetheless, the Defendants proceeded with the transaction, exposing KMB/KENSB to substantial financial risk.

Additionally, the Defendants caused KMB/KENSB to issue a Kulim

Support Letter committing to significant financial exposure (up to USD 6 million) without proper corporate approval or security. Despite numerous extensions of the Conditions Precedent under the CSSPA, KENSB ultimately never acquired any effective interest in the SWBB Block PSC, leaving the Plaintiffs with losses and unfulfilled commitments.

Payments and Settlements Across the Barut, AMARA, and SWBB transactions, KMB and KENSB made multiple payments and capital injections totaling tens of millions of ringgits. These were allegedly approved by the Defendants despite unresolved conditions, outstanding red flags, and the absence of independent valuations. S/N solN4Cs0wEuyQ1PQMatf0g

Subsequent settlement agreements and share transfers—executed in 2017 and 2018—were to have been concluded on terms grossly unfavorable to KMB and without proper enforcement of existing security rights. The Plaintiffs aver that these settlements effectively disposed of KMB’s investments for minimal or no value, compounding the financial loss caused by the Defendants’ earlier misconduct.

Nature of Breaches The Plaintiffs contend that the Defendants collectively and individually breached their fiduciary, statutory, and contractual duties, including:

106.1. Failing to act in good faith and in the best interests of KMB and KENSB;

106.2. Failing to exercise reasonable skill, care, and diligence = expected of senior management;

106.3. Concealing material information and misrepresenting the viability of investments;

106.4. Acting recklessly and/or dishonestly in approving and executing transactions; S/N solN4Cs0wEuyQ1PQMatf0g

106.5. Entering into agreements without proper corporate authority or oversight;

106.6. Permitting self-dealing and conflicts of interest by relying on counterparties’ valuations; and 106.7. Failing to ensure accurate financial reporting and prudent governance.

The Plaintiffs further allege that the Defendants’ conduct amounted to fraud and deceit, in that they deliberately withheld information necessary for informed decision-making and misled the Plaintiffs’ boards. The losses were not discoverable until the Defendants’ departure and the appointment of new management in 2020.

Remedies Sought by the Plaintiffs The Plaintiffs sought the following remedies:

108.1 General and special damages for losses arising from the Indonesian investments; S/N solN4Cs0wEuyQ1PQMatf0g

108.2 Equitable compensation for breaches of fiduciary and statutory duties;

108.3 Declarations that the Defendants acted fraudulently and in breach of duty;

108.4 An account of profits derived by the Defendants (if any);

108.5 Aggravated or exemplary damages;

108.6 Interest and costs; and

108.7 Such further remedies as the Court deems just and proper.

The Plaintiffs maintain that the losses resulted directly from the Defendants’ wrongful acts, omissions, and breaches of duty, which collectively amounted to gross mismanagement and negligence in the execution of KMB’s foreign investment strategy.

As stated earlier, the Defendants deny such wrongdoing. The Defences raised by the Defendants have been reiterated earlier. S/N solN4Cs0wEuyQ1PQMatf0g F. Summary of the Evidence Presented by the Witnesses

This Court summarizes the evidence presented by the Plaintiffs’ and the Defendants’ witnesses in the preceding paragraphs. (F.1) Plaintiffs Witnesses

(i) Mohd Faris Adli Shukery – Managing Director of Johor Plantations Group Berhad (former Managing Director of Kulim (Malaysia) Berhad)

Mohd Faris Adli Shukery is the main witness produced by the Plaintiff. He claims that the Plaintiffs became aware of the wrongs allegedly done by the Defendants after they received the notice from PT RBB, the company that owns 51% participating interest in the SWBB, wrote to the 1st Plaintiff for a cash requisition by letters dated 16-7-2020 and 21-9-2020.

These 2 notices were not adhered to by the 1st Plaintiff and caused the companies to undertake an audit of the 3 Indonesian projects, and S/N solN4Cs0wEuyQ1PQMatf0g found that the decision-making process was not in accordance with the internal requirements and corporate governance of the companies and JCorp.

Mohd Faris alleged that the Defendants: -

114.1 Had failed to properly disclose all due diligence reports and valuation reports.

114.2 Failed to undertake a proper diligence/valuation report or failed to undertake a proper independent valuation.

114.3 Failed to disclose that the payment structure for the project was not undertaken in accordance with the requirement laid down by the Board that payment must be linked to “Hak Guna Usaha” to be delivered by PT GSB.

114.4 Misled the Board of Directors concerning the valuation reports, the viability of the projects and did not disclose the full terms of the agreements executed by the Plaintiffs with the Indonesian counterparts. S/N solN4Cs0wEuyQ1PQMatf0g

114.5 Failed to disclose all internal and external advice given relating to the projects and failed to structure the projects properly.

114.6 Failed to undertake proper due diligence relating to the 3 projects in Indonesia.

114.7 Failed to disclose to the Board of Directors the issuance of the Kulim Support Letter.

114.8 Caused the Plaintiffs to enter into the 3 projects without proper care and caused substantial losses.

114.9 Failed to enforce the Settlement Agreement and failed to appropriately have the execution of the project with due care and with adequate oversight.

114.10 Had caused the release of monies to the Indonesian companies without adequate care and failed to safeguard the interest of the Plaintiffs.

114.11 Had proceeded with the SWBB project despite knowing that the project would not be able to produce any oil from any of the wells, despite repeated reminders by the Board of Directors of the Plaintiffs and Johor Corp. S/N solN4Cs0wEuyQ1PQMatf0g

114.12 Had proceeded with the Amara Project and Barut Project despite being warned of the risk and the real possibility that the project would fail due to the failure to obtain the HGU and the viability of the plantation for the Amara project.

114.13 Mislead the Board of the Plaintiffs that JCorp had approved the investments when the decision was only made after the board meeting.

114.14 Did not act in the best interests of the Plaintiffs. These allegations were substantially overlapping and were advanced as different aspects of the same core complaint concerning disclosure and governance.

Rozaini explained that the decisions made by the Board of Directors of the Plaintiffs are dependent on the information provided by the 1st to the 4th Defendants. From time to time, the Defendants were also S/N solN4Cs0wEuyQ1PQMatf0g required to present their proposals to the Board of Johor Corp, as all investments must be approved by the Board of Johor Corp.

He explained that all investment papers were prepared by Kulim’s Corporate Affairs Department under the supervision of the 1st Defendant. The 1st Defendant was responsible for presenting all proposals, including the 3 projects in Indonesia, as well as the updates for the projects.

The 2nd Defendant was, on the other hand, tasked to present the progress of the SWBB Project.

He stressed that the Boards of Kulim and JCorp relied primarily on management presentations without independent verification or full access to due diligence documents. Therefore, he believes that the Defendants have a duty to disclose all material information, including

(i) all reports, (ii) all draft agreements, (iii) all due diligence reports and

Rozaini further alleged that: -

119.1 That there was a failure to disclose key documents (JOA, CSSPA, Supplementary Agreements, valuation and due diligence reports) to the Board of Directors.

119.2. That the Defendants, as senior management, had driven the decision-making process and had kept the Board in the dark about all material information.

119.3 Mislead the Board of the Plaintiffs that JCorp had approved the investments when the decision was only made after the board meeting.

119.4 That the Defendants did not act in the best interests of the companies.

119.5 Failure to disclose to the Board the change in the structure of the investments and the change in the proposed price. S/N solN4Cs0wEuyQ1PQMatf0g

Rozaini’s testimony supports the Plaintiffs’ claim that the Defendants breached their fiduciary and statutory duties. His evidence indicates that key investment decisions were made based on incomplete or misleading information, with critical reports withheld from the Board. The testimony substantiates claims of negligence and failure to exercise reasonable diligence.

Idham explained that the Board of Directors was not furnished with the alleged material information and the opinion of third parties, such as solicitors and experts appointed by the companies. As an example, he refers to Messrs AKSET report, the report by Gaffney, Cline & Associates, PIESTA report and the Daemeter correspondence, which all deal with the viability of the projects as well as how to structure the projects. S/N solN4Cs0wEuyQ1PQMatf0g

Idham’s statement documents a consistent pattern: board approvals and ratifications were recorded, but comprehensive supporting due diligence, valuations and drafted transaction documents were, in his view, not provided in board materials or were not tabled for full board scrutiny.

The witness links the lack of documentary disclosure and the / implementation choices to the Plaintiffs’ later financial losses and the need to rationalize or exit the three projects. The evidence in the statement, therefore, supports the claim that senior management / Defendants’ decisions were made and executed without full board access to material independent reports and draft agreements, undermining informed board oversight.

Azmil Majid was an Executive in the Corporate Affairs Department from 2012 to 2016. He was subsequently transferred to the Business Development and Investment Department of the 1st Plaintiff. S/N solN4Cs0wEuyQ1PQMatf0g

He explained the role of the Corporate Affairs Department and why the 1st to the 4th Defendants were responsible for the presentation of projects to be put to the Board of Directors. He also explained that the Corporate Affairs Department will undertake a preliminary assessment, compile all necessary information and prepare the board papers to be utilised by the 1st or 2nd Defendants to be considered by the Board of Directors.

He explained that the Corporate Affairs Department did highlight that there were issues with the proposed investments and implied that these should be put to the board of directors for their consideration. Among others: -

126.1 The failure to tie the payments schedule to PT GSB for the deliveries of the HGU.

126.2 The valuation of the lands about the Barut project. This may have been overvalued and should have been reduced as HGU was not obtained at that time. S/N solN4Cs0wEuyQ1PQMatf0g

126.3 Warnings by AKSET that the lands did not have HGU and may be difficult to obtain HGU. Also, AKSET’s warning that there were overlapping claims, overlapping concessions, expiry of permits (IUPs and IL) and the uncertainty of obtaining any approvals from the Indonesian authorities.

126.4 The lack of oil that is proven and probable for the SWBB project and the failure to disclose the LAPI-ITB and CGA reports to the boards.

126.4 That the SWBB project may have been overvalued.

126.5 The issuance of the letter of financial support for the SWBB by the 1st Plaintiff without authorisation.

126.6 Failure to comply with the proposals by solicitors for the AMARA project to be interconnected.

126.7 Failure to exercise the right to declare an event of default pursuant to the breach of the Settlement Agreement. Wrong decision to extend the timeframe for deliverables of condition precedents. Wrong decisions to pursue the 3 S/N solN4Cs0wEuyQ1PQMatf0g projects despite failure by PT GSB and its counterpart to deliver obligations to the Plaintiffs.

126.8 Failure to disclose all material facts and information to the board of directors.

126.9 Failure to link payment milestones to deliveries of HGU. The deletion of termination clauses for non-deliverables and non-enforcement of the default by PT GSB for the Barut project.

126.10 Failure to rely on the data and reports prepared by PT GSB for Barut, Amara and SWBB projects.

126.11 Failure to undertake an independent assessment of the 3 projects.

126.12 Decision to make payments and disburse monies for the 3 projects without adequate protection and safeguards to ensure that the payments are made based on an appropriate basis, such as deliveries of HGUs, SWBB valuation and proper plantation projects. S/N solN4Cs0wEuyQ1PQMatf0g

126.13 Wrongful decision to fund and make payments for large cash payments to 3 projects without an adequate economic basis.

126.14 Wrong decisions to proceed with the project despite ample warning being given by solicitors and experts. Failure to disclose these warnings to the board of directors.

The following takeaways could be derived from the evidence of this witness: -

127.1 The 1st Defendant, as the Managing Director, is responsible and central across all three projects. He had executed all material agreements, directed the CAD, directed and allowed removal of protections, and led negotiations. He is responsible for the reports provided to the Board of Directors and the decision to table only reports that are allegedly in favor of pursuing the 3 projects, and did not paint an appropriate full picture on S/N solN4Cs0wEuyQ1PQMatf0g the board to enable them to consider the projects appropriately.

127.2 The 2nd Defendant is responsible for the SWBB project and is guilty of the same wrongs as alleged against the 1st Defendant, but limited to the SWBB project.

127.3 The 3rd Defendant was responsible for the plantation business and should have ensured that all information was made available to the Board of Directors. He was also responsible for the operations of the plantations and the eventual exit from the projects. He should have ensured that the Plaintiffs enforce the terms of the Settlement against PT GSB and related parties.

127.4 The 4th Defendant was also responsible for the business development and oversight, had approved CAD drafts and was aware of risks. He should have taken appropriate steps to ensure that all of the above issues are disclosed to the board of directors. He was the gatekeeper and should have ensured that all risks and information were disclosed in the CAD reports to the board of directors. S/N solN4Cs0wEuyQ1PQMatf0g

127.5 The 5th & 6th Defendants had finance and oversight roles. They should have ensured that the monies paid for the projects are paid for appropriate purposes. They have allegedly failed in their duties and are liable for authorising disbursements and collective nondisclosure for the Indonesian projects.

(v) Nina Sapura binti Rahmat – General Manager of the Portfolio Department Investment Division of JCorp and former Senior Manager of the Corporate Department of the 1st Plaintiff

Nina repeats what was said by Azmil Majid. She was his superior at the time.

Essentially, Nina alleges several key failures by the Defendants: -

129.1 Failure to undertake an independent valuation commissioned by the 1st Plaintiff. Should not have relied on Piesta, CGA and Lapi IITB or any party appointed by the sellers. S/N solN4Cs0wEuyQ1PQMatf0g

129.2 Failure to obtain updated valuation of projects despite a change in the area of plantation and the lack of oil for the SWBB project.

129.3 Failure to disclose the AKSET, Piesta, Daemeter or any other reports by solicitors or opinions by solicitors or the draft agreements to the Boards. Only snippets of such reports were disclosed and presented to the board of directors (e.g. Daemeter). As a result, the boards of the Plaintiffs and JCorp approved the investment (Aug–Oct 2013) based on incomplete information.

129.4 Failure to disclose the disparity of about USD26m between SSA and SHA consideration, with only 1% equity difference, Failure to disclose to the Board and to provide an explanation why this change was agreed to.

129.5 Failure to ensure that the settlement sum is paid by a single cash payment by PT GSB instead of being tied to the PT CSE sale and valuation.

129.6 Failure to ensure that all capital payments will be tied to HGU milestones. S/N solN4Cs0wEuyQ1PQMatf0g

129.7 The 1st Defendant (MD) and 4th Defendant (Biz Dev) had wrongfully controlled the information provided to the Board of Directors. They had also failed to disclose red flags as warned by parties such as AKSET, Piesta, Daemeter and Messrs ISCO. They had caused CAD to present overly favourable papers.

129.8 The 2nd Defendant (Oil & Gas) and 3rd Defendant (Plantations) failed to ensure risks were highlighted to the board concerning the 3 projects. The Defendants did not disclose full information concerning the legal opinion, valuation reports, and business risks of the 3 projects to the Board of Directors.

129.9 The Defendants are collectively guilty of financial imprudence.

Mahmud bin Saidoo was seconded to Indonesia (2014–2018) to oversee Barut, AMARA, and SWBB PSC projects. He reported S/N solN4Cs0wEuyQ1PQMatf0g directly to the 1st Defendant (MD), 2nd Defendant (Oil & Gas Head), and 3rd Defendant (Plantations Head), depending on the project. He also liaised with PT GSB through its representative, Mr Priyo.

He explained the complexity of the Indonesian investments and the existence of the issues highlighted by the earlier witnesses, such as overlapping claims, the problems with the Barito lands, failure to obtain HGU by PT GSB, failure to ensure that the exit from the projects is undertaken based on proper terms, and failure to ensure that the settlement agreements are enforced.

He also explained that the SWBB project was not viable due to various factors such as technical risks and financial risks.

Essentially, the witness confirmed that the 3 projects had failed and provided no real returns for the Plaintiffs. S/N solN4Cs0wEuyQ1PQMatf0g

Nur Muhammad explained that all cash requisitions raised by PT WIN or any of the Indonesian subsidiaries will have to be approved by the 3rd Defendant. Any payments will be made once approved by the 1st, 2nd, 3rd, 4th and 5th Defendants.

He explained that for the 3 projects, the following sums were paid by the Plaintiffs and the following losses were incurred: -

135.1 Barut Project

(i) Payments Made - RM56.84m for 74% equity in PT WIN. - RM28.69m cash advances (before Dec 2017). - RM2.19m further advances (after Dec 2017).

135.2 Project Amara

(v) Total paid - RM155.39m for acquisition of PT RAJ and PT TPR. - Additional cash advances of RM38.52m (before Dec 2017) and RM67.76m (after Dec 2017). - PT GSB (26% shareholder): Contributed nothing to acquisition costs despite the agreements requiring contribution based on shareholding.

135.3 Project SWBB

He summarized that (i) the defendants had directly approved the flow of funds into the 3 projects, (ii) these payments continued despite the clear economic failure of the projects and no real returns projected or shown and (iii) no real reason for the decision for the projects to continue. (F.2) Defendants Witnesses

(i) Ahamad bin Mohamad (D1)

Ahamad (D1) denies that the Defendants have committed any wrongs as alleged against them.

He claims that all the internal processes of the Plaintiffs were complied with when the projects were assessed and the papers presented to the Board of Directors. He points out that he had assured that all relevant information concerning the 3 Indonesian projects was presented to Teraju, a body responsible for assessing potential investments and business for JCorp and its affiliated companies. S/N solN4Cs0wEuyQ1PQMatf0g

Ahamad also claims that the (i) decision to invest in the 3 projects, (ii) put in additional capital, (iii) the price agreed for the projects and (iv) the eventual exits were all presented to the board of directors and Teraju of JCorp.

He also suggests that all relevant information was disclosed to the board of directors and that the directors did have access to all relevant information and documents at the time. There was no alleged non-disclosure of any information or any document, as alleged by the Plaintiffs. The documents were not kept by any of the Defendants and have always been in the possession and control of the Plaintiffs.

Ahamad has also referred to various Board of Directors meetings and the resolutions authorizing the investments and the 3 Indonesian projects to be undertaken as suggested. He also claims that material information and documents prepared by Teraju or by CAD are to be presented to the board for consideration and approval. This information was also disclosed to the members of the board of directors of JCorp. S/N solN4Cs0wEuyQ1PQMatf0g

The Defendant also claims that he had considered all relevant information and opinions obtained from third parties and advisors when dealing with the projects. He also highlighted that all of these investments were made by the senior management based on the information made available to them at the material time. They had collectively informed the board of directors of all risks involved and that the projects were risky.

The letter of support issued by the Plaintiff, executed by the Defendants for the SWBB project, was within the knowledge of the Board of Directors and was issued in the best interests of the companies to ensure that the SWBB project is successfully pursued. These 3 projects were also within the knowledge of the audit committee and the other risk committees set up by the Plaintiffs internally at the time.

He also claims that the defendants have: -

(i) acted with due care.

(v) acted within the mandate provided by the board of directors.

The above Defendants repeated what was by Ahamad bin Mohamad D1). Their witness statements and testimony during cross-examination are similar or almost similar to the evidence of Ahamad bin Mohamad.

Azli was the Chief Financial Officer of the 1st Plaintiff from 1-6-2011 and eventually as the Vice President of Finance from 1-1-2012 to 1- 10-2017. S/N solN4Cs0wEuyQ1PQMatf0g

He claims that he only has purview of the financial side of the business of the 1st Plaintiff. He reports to the 1st Defendant or the Managing Director of the company. He is not involved in the business and the investments to be undertaken by the company.

Azli further suggests that he had limited direct oversight over the affairs of the Indonesian entities or the setting up of the PT WIN accounting or financial systems. His limited access to the accounts of PT WIN is only to ascertain its finances from time to time and ensure that accounts are audited from time to time. After all, this is an Indonesian entity and has internal officers responsible for the accounts.

Azli also claims that all payments’ approvals were made in accordance with the directions given by his superiors and based on documents made available to him. He had only released payments if there were sufficient documents to support, and these were authorised by the senior management, such as the 1st, 2nd and 3rd Defendants. S/N solN4Cs0wEuyQ1PQMatf0g

He further alleges that all of his actions were (i) made in accordance with the decisions of his superiors, (ii) based on the documents made available to him, and (iii) that he had acted in what he believed was in the best interests of the companies based on what information was available at the time.

(v) Shahrom bin Mohd Saad (D6)

Shahrom explained that he was the former General Manager of the Finance Division of the 1st Plaintiff until he retired on 30-9-2020. He denied that he was appointed as Chief Financial Officer of the 1st Plaintiff.

He claims that he is not part of the senior management of the company but was only: -

152.1 Managing accounts, budgets, treasury, loans, and cash flow.

152.2 Reporting to superiors within the organisation, initially 5th Defendant Azli and later 3rd Defendant (Zulkifly). S/N solN4Cs0wEuyQ1PQMatf0g

152.3 Attending management committees of the 1st Plaintiff for operational issues and not investment related.

Shahrom agreed that he was appointed as a director of the 2nd Plaintiff, but did not have any real role. The company did not have any staff, and he had only agreed to sign the accounts of the entity.

He also claims that (i) he was not involved in any of the investment decisions made by the Plaintiffs, (ii) he did not undertake role in any proposals or any approvals process or monitor any investments to be undertaken by the Plaintiffs, (iii) did not partake in any confidential investment plans, (iv) was only aware of the 3 projects after the board had agreed and investments were undertaken and (v) released payments, if any, based on the obligations of the company and instructions of the senior management and his bosses.

He also points out that he did not attend any board meetings of either Plaintiff, and all decisions made about the 3 projects were made in his absence, and he was not involved. He also claims that all of the S/N solN4Cs0wEuyQ1PQMatf0g agreements executed for the 3 projects were made before he joined the company, and he is not involved.

He stresses that all payments released by him were made bona fide and honestly by him. He believed that the payments were authorized by his superiors, and it is not his responsibility or any knowledge as to the business of the company and whether these projects were profitable.

These payments were budgeted and approved by his superiors, and he had a duty to act on what he believed were appropriate payments. He was essentially acting in an administrative capacity, and all payments were made based on documents available to him that showed that they were authorized.

Azli also claims and refers to a series of emails that indicate that the payments were made in accordance with documents referred to and made available to him. These emails also show that the payments were approved by his superiors. S/N solN4Cs0wEuyQ1PQMatf0g

Evaluation of Witnesses Before turning to the specific allegations and the issues that arises in this case, I must address the weight to be attached to the testimony of the 1st to 3rd Defendants.

I observed that their witness statements were largely identical in phrasing and content. This even extends to grammatical errors. They were “cut and paste” products and therefore less than satisfactory.

As such, I find that less weight should be attributed to their written testimony, as it suggests a rehearsed narrative rather than an independent recollection.

I caution myself from making too much of any reliance on the demeanor of witnesses alone. I have carefully weighed these factors and considered them as part of the global consideration of the facts of this case. S/N solN4Cs0wEuyQ1PQMatf0g

The weight of the documents that record contemporaneously what was discussed and reported at the board meetings play a crucial role in my determination of the issues before me.

I refer to Leggatt J’s judgment in Gestmin v Credit Suisse [2013] EWCA 3560, where the Court nowadays will usually treat the contemporaneous documents as the “primary anchor” in a civil case.

For the above reasons, I have decided to treat the written testimony of the 1st to 3rd Defendants with caution and anchor my finding on the contemporaneous documents before me and the overall evidence presented by the litigants. H. Decision of this Court (H.1) Summary of Findings

For reasons explained in the following paragraphs, I find that the Plaintiffs have successfully proven that the 1st to the 4th Defendants have breached their duty of care owing to the 1st Plaintiff for the inception of the Amara and Barut projects but not for the other claims. S/N solN4Cs0wEuyQ1PQMatf0g I do not find that they were dishonest. As stated by Nallini Pathmanathan JCA (as she then was) in the earlier case: “A servant who loyally does his incompetent best for his master is not unfaithful and is not guilty of a breach of fiduciary duty”

I find that the Defendants have failed to exercise due care, skill and diligence in their duties to the company. Nonetheless, I find that their decisions were made honestly and what they believed in the interests of the company. Their conduct shows that the 1st to 4th Defendants had taken short cuts and rushed the decision to invest in the Amara and Barut projects. Nonetheless, the Defendants are not guilty of fraud or deceit as alleged.

Despite the finding, I am not satisfied, on the evidence, that the losses claimed were caused by the Defendant’s conduct. Even if I am wrong, I am satisfied that the relief provided under section 581 of the Companies Act should be utilised in favor of the Defendants. S/N solN4Cs0wEuyQ1PQMatf0g

I further find that the Plaintiffs have failed to prove the claims against the 5th and 6th Defendants. I find that the decisions and actions of the 5th and 6th Defendants were genuine business decisions and were honestly made. As such, they are entitled to the defences outline below.

The reasons for the aforementioned decision, will be explained below. (H.2) Claim against the 1st to 4th Defendants Issue 1 - Did the 1st to the 4th Defendants breach their duties to the 1st Plaintiff

I will first deal with the claim against the 1st to 4th Defendants, as they were all directors of the Plaintiffs at various instances during the lifetime of these investments and were considered by the Plaintiffs to be the senior management of the company. As seen earlier, the Plaintiffs blame the losses suffered by them on the imprudence of the Defendants and the breaches of their duties to the companies. S/N solN4Cs0wEuyQ1PQMatf0g

A summary of the claim against the 1st to 4th Defendants is summarized as follows: - Barut Project

172.1 Failure to fully disclose material facts and key considerations to the Board of Directors of the 1st Plaintiff and JCorp.

172.2 Failure to verify, independently assess or validate the investment: Failure to obtain a revised or updated valuation despite a change of circumstances.

172.3 Misrepresenting or falsely informing the Board of Directors of the 1st Plaintiff and JCorp.

172.4 Failure to properly advise the Board of Directors of the 1st Plaintiff and JCorp.

172.5 Failure to inform or highlight to the Board of Directors of the 1st Plaintiff and JCorp of a change in investment structure.

172.6 Negotiating, finalizing and agreeing to terms which are unfavourable and placed the 1st Plaintiff at a disadvantage; and S/N solN4Cs0wEuyQ1PQMatf0g

172.7 Approving payments in the sum of around RM93 million for the Barut Investment. Exit from Barut Project

172.8 Failure to take remedial steps and address PT GSB’s failure to obtain HGU at the earliest opportunity and in the best interests of the 1st Plaintiff.

172.9 Failure to conduct any due diligence on the rationalisation of the Barut Investment.

172.10 Causing or permitting PT WIN’s interest in PT HBS, PT SSR and PT WSK to be sold to PT GSB for a purchase consideration of RM2.23 million.

172.11 Extending the period for PT GSB to settle the Agreed Settlement Sum.

172.12 Approving payments and cash advances even after the disposal of the Barut Investment. Project Amara

172.13 Misrepresenting to the 1st Plaintiff’s Board of Directors.

172.14 Failure to disclose various due diligence reports. S/N solN4Cs0wEuyQ1PQMatf0g

172.15 Concluding four (4) independent CSPAs instead of four

172.16 Completing the purchase of PT RAJ and PT TPR, despite being the least promising estates at the 1st Plaintiff’s expense, and

172.17 Approving payments and cash advances for operational expenses. Project SWBB

172.18 Failure to disclose various assessment reports and due diligence reports to the Board of Directors of the Plaintiffs and JCorp.

172.19 Failure to obtain further reports or assessments or explain the absence of the same.

172.20 Failure to conduct independent valuation or assessment.

172.21 Failure to disclose the issuance of the Kulim Support Letter. S/N solN4Cs0wEuyQ1PQMatf0g

172.22 Failure to inform the Plaintiffs’ and JCorp’s Board of Directors of the change in investment structure and implications of the same.

172.23 Failure to conduct any due diligence on the proposed change in investment structure.

172.24 Failure to table the Notification and Request for Approval of Transfer and Acceptance Form before the 1st Plaintiff or JCorp’s Board of Directors before the same being issued.

172.25 Keeping the SWBB PSC Investment alive through multiple extensions of the CP Period; and

172.26 Approving payments in the sum of around USD77 million for SWBB PSC Investment.

The crux of the Plaintiffs claim against the 1st to 4th Defendants lies with the allegation that the 1st to the 4th Defendants failure to disclose material information and material documents to the Board of Directors and the decisions taken by the 1st to 4th Defendants as Directors and S/N solN4Cs0wEuyQ1PQMatf0g Senior Management to agree to the agreements, the structure of the investments and the release of the monies to the counterparts and for the implementation of the 3 projects including payments made after exit from the projects. (H. 3) Liability of the 1st, 2nd, 3rd and 4th Defendants

Roles of the Defendants I must first reiterate the roles of the 1st to 4th Defendants concerning the projects at the material time. 1st Defendant

As stated earlier, the 1st Defendant did hold an important position in the 1st Plaintiff for a substantial period of time. As he held out in his defence, during his tenure, the company had been successful, and he was given substantial recognition for his work in the company, internally and externally. S/N solN4Cs0wEuyQ1PQMatf0g

The 1st Defendant was appointed to the Board of Directors of the 1st Plaintiff from 24-1-1991 to 1-3-2020. He held the position of CEO / Managing Director of the company from 10-11-1994 to his retirement on 31-12-2016.

It is not disputed that he was the person responsible for the management of the company and was responsible for leading the officers of the corporation. Any business decision must be undertaken after obtaining his approval, subject to ratification by the board of directors. He is also answerable to the board of directors of the 1st Plaintiff. 2nd Defendant

The 2nd Defendant was the Executive Director of Plantation and Oil and Gas of the 1st Plaintiff from 1-9-2013 to his retirement on 3-12-

He was responsible for the overall functions and activities of the 1st Plaintiff and for the oil and gas investments undertaken by the 2nd Plaintiff. S/N solN4Cs0wEuyQ1PQMatf0g

The 2nd Defendant reported to the 1st Defendant and is also answerable to the Board of Directors, as he was also one of the Executive Directors of the companies at the material time. 3rd Defendant

The 3rd Defendant was the Vice President of the Plantation Operations for the 1st Plaintiff from 1-3-2014 to 31-12-2016. He was appointed as Executive Director from 1-1-2017 to 17-9-2020.

When he was the VP of the Plantation operations, he reported to the 2nd Defendant and the 1st Defendant.

It was only when he was appointed as the Executive Director on 1-1- 2017 that he effectively took over the role of the 1st Defendant, and he was answerable directly to the Board of Directors. Before the date, he was a subordinate of the 1st and 2nd Defendants, and as stated earlier, he reported to them. S/N solN4Cs0wEuyQ1PQMatf0g 4th Defendant

The 4th Defendant was the Executive Director for the Business Development Division from 4-12-2012 to 1-1-2017. The 4th Defendant was the head of the CAD, and the division reported and acted in accordance with the directions of the 4th Defendant.

The CAD, as stated earlier, was in charge of preparing documents and papers to be presented to the Board. The 4th Defendant would review these documents after they were prepared by the employees from the division, such as Encik Shukor and Encik Faizal Abdullah.

These papers, once approved by the 4th Defendant, would then be reviewed by the 1st and by the 2nd Defendants. The board papers will be approved by the 1st Defendant and the 2nd Defendant before they are remitted back to the CAD, and the papers will eventually be forwarded to the board for their consideration. The 4th Defendant reports to the 1st and 2nd Defendants and is also answerable to the board of directors of the Plaintiffs. S/N solN4Cs0wEuyQ1PQMatf0g (H.4) Were the Disclosures for the Barut Project Adequate? Directives of the Board concerning the Barut Project

It is clear to this Court that the Board of Directors did state clearly that the approval for the Barut Project is subject to the following conditions: -

The above approval is based on the representation contained in the paper proposed to the Board of Directors and recorded in the Board S/N solN4Cs0wEuyQ1PQMatf0g of Directors meeting dated 13-6-2013. Material parts are reproduced below:- - Paper attached to the Board Minutes S/N solN4Cs0wEuyQ1PQMatf0g S/N solN4Cs0wEuyQ1PQMatf0g S/N solN4Cs0wEuyQ1PQMatf0g - Board Minutes 13-6-2013 S/N solN4Cs0wEuyQ1PQMatf0g

Similar recommendations were also presented to the board of directors of JCorp by the 1st Defendant as seen in the minutes of the meeting dated 18-7-2013 and 3-10-2013. I reproduce material parts of the minutes of the meeting dated 3-10-2013: S/N solN4Cs0wEuyQ1PQMatf0g S/N solN4Cs0wEuyQ1PQMatf0g S/N solN4Cs0wEuyQ1PQMatf0g

JCorp’s board has approved the proposal to invest in the Barut project based on the condition that payment to be made to PT GSB for the shares in PT WIN or any related party must be attached or related to the deliveries of HGU. The valuation of the company was also premised on the lands being delivered with HGU.

I also note that the Board of Directors of the 1st Plaintiff and JCorp directed from the outset that the senior management of the company is required to obtain a valuation report over the lands and the Barut project. That was the requirement of the project as mandated by the Board of Directors.

Based on the aforementioned documents, I find that the 1st to the 4th Defendants is aware of the requirement or, at the very least, cannot feign ignorance of the same, as this directive appears repeatedly in the minutes of the board meetings. S/N solN4Cs0wEuyQ1PQMatf0g

As seen in the resolutions reproduced in the preceding paragraphs, the Board was informed by the 1st Defendant and the resolutions as well as papers represented to the Board, prepared under the control of the 1st, 2nd and 4th Defendants, that the Barut project is proposed based on the following premise: -

192.1 That the 1st Plaintiff would acquire 70% of the equity interest in PT WIN, and the remainder would be held by

192.2 That the interim valuation of PT WIN was about USD 45 million based on the assumption that the land held by PT WIN is to be valued at US 1500.00 per hectare.

192.3 A proper valuation will be undertaken on the actual value of PT WIN and the lands to confirm the purchase price.

192.4 The estimated total costs of development would be RM

485.25 million.

192.5 The shareholders of PT WIN each shall bear their fair share of the development costs. S/N solN4Cs0wEuyQ1PQMatf0g

192.6 That the project included risks that could be managed by tying the delivery of the lands with HGU (Hak Guna Kuasa) to the amounts to be paid by the 1st Plaintiff for the shares in PT WIN.

Therefore, these Defendants, in particular the 1st to 4th Defendants, are aware of the directives of the board and are under a duty to ensure that the directive of the board is followed concerning the Barut project. It was wrong for them to ignore the directives, and failure to act accordingly is a breach of their duty of care to the company. They were negligent in not complying with the decision made by the board. (H.5) Alleged Failure to Disclose the Full Extent of the Reports to the Board of Directors

Despite the above approval for the Barut project, it is the Plaintiffs' contention that the approval was made under the wrong pretext. The full contents of the reports prepared by experts that contained material risks were not disclosed. As a result, the Plaintiffs claim that S/N solN4Cs0wEuyQ1PQMatf0g the board was misled and was not given full information about the facts to enable members of the board to make an informed decision on the Barut project.

After considering the facts and evidence produced by the litigants, I find that the 1st Defendant failed to disclose the material contents of the following reports that were available to the Defendants concerning the Barut project: -

195.1 GSB Plantation Project Preliminary Legal Due Diligence Report dated 5-8-2013, prepared by Messrs Arfidea Kadri Sahetapy Engl Tisnadisastra (AKSET).

195.2 Memorandum dated 9-1-2014 issued by AKSET.

195.3 Due Diligence and Status of Conditions of Precedent of the Acquisition / Joint Venture in PT WIN dated 3-2-2014, prepared by AKSET.

195.4 Diameter Consulting dated 3-9-2014 issued to the 1st and 2nd Defendants. S/N solN4Cs0wEuyQ1PQMatf0g

195.5 Piesta Reports on the subsidiaries of PT WIN.

195.6 Due diligence reports and status of condition prepared by AKSET on PT WIN dated 3-2-2014.

I do note that the counsel for the 1st to 3rd Defendants and counsel for the 4th Defendant suggest that it is not important for the full extent of the reports to be made available to the board. The contention is that what is important is that important facts were disclosed to the board and based on the same, the board could and did make an informed decision as to whether the Barut project should proceed or otherwise.

The Defendants also contend that the reports were made available to the Board of Directors and that the members of the board had access to the reports as they were kept within the organization.

As I have stated earlier, I do not believe that there exists any general rule that requires the full contents of reports or even the draft agreements to be disclosed to the board. This will depend on the facts S/N solN4Cs0wEuyQ1PQMatf0g of each case. This must be looked at objectively based on the subjective facts of each case.

If the risks of the project are substantial and involve substantial funds to be utilised, then it is more likely than not that the full report and all material facts should be disclosed to the board to enable the body to make an informed decision.

What is crucial is whether the material parts of the reports and opinions were disclosed to the board and whether the eventual decision of the board was complied with. To have the full report to be presented at all board meetings will cause the death of the business of an enterprise that needs to be agile in today’s digital age.

Having considered the facts of this case, I find that risk relating to the acquisition of PT WIN and the risks related to the Barut Project were not disclosed fully to the board of directors. S/N solN4Cs0wEuyQ1PQMatf0g

I do, however, find that the issues raised by these consultants’ reports, relating to the difficulties in obtaining the rights relating to the land, i.e. IUP and HGUs, were summarized and disclosed to the board. Nevertheless, I agree with the contention of the Plaintiffs' counsel that the full extent of the risk and how the risks will have an impact on the plantation business for the Barut project was not fully disclosed.

I do note that despite the failure to disclose the risks of the Barut project, the Board directed that the project be approved subject to the condition that any capital payments made must be linked to the deliveries of HGUs. This direction is sacrosanct and should be abided by the 1st to the 4th Defendants. If there are any changes to this requirement, then they must immediately inform the Board of such changes and obtain the Board’s consent.

I further note that the papers presented show that the Board was also informed as to the status of the land and the need for further S/N solN4Cs0wEuyQ1PQMatf0g investments to be undertaken. The Board was informed that the investments require substantial capital investments to bring the proposed plantation up to specification. Substantial risk factors concerning the HGUs, political risks and the difficulties of obtaining these approvals, as well as the need for capital investments, were disclosed to the board of directors. As stated earlier, this caused the Board to require that the payment structure for the shares must be linked to the deliveries of HGU’s for the land.

This is seen in the report to the Board of Directors of the 1st Plaintiff and noted in the board meeting dated 19-5-2015:- S/N solN4Cs0wEuyQ1PQMatf0g

It is worth repeating that there is no general rule that the full contents of reports and opinions obtained by external experts or even internal experts need to be disclosed to the board. Sometimes, this is not necessary, and there could be instances where a summary of such reports that contain all material facts has been disclosed to the board. What is important is that the board is told of all material issues to enable them to make an informed decision, or at the very least be able to identify and seek such a report internally before making any such decision.

This will depend on the facts of each case. Factors such as (i) the risk factors, (ii) the amount to be invested, (iii) where the investments are undertaken and (iv) whether it is a new venture and not familiar to the S/N solN4Cs0wEuyQ1PQMatf0g company are of relevance. This list is not exhaustive and will depend on the facts of each case. I again reiterate that what is important is not whether the full report was disclosed but the contents of what was actually told to the board.

In this case, I hold that the reports made by CAD and disclosed by the Defendants, as identified by the Plaintiff in its claim, were not satisfactory and did not disclose the full extent of the risks that would be faced in investing in the Barut project.

The Plaintiffs have shown to me that there were material risks that were not fully disclosed by the Defendants. There were material risks that were highlighted in the reports, such as the possible inability to obtain licenses, the overlapping claims, and the possible reduction in the land size of the plantations in Barut. These risks would have an impact on the commerciality of the project and the fairness of the purchase price suggested by the Defendants to the board. S/N solN4Cs0wEuyQ1PQMatf0g

I believe if the full extent of the risks contained in the reports were disclosed, it may have led to a different set of inquiry and decision by the board. The disclosure of the full risks and facts as contained in the reports would have enabled the Board to make an informed decision as to whether the plantations held by PT WIN are viable, whether the purchase price offered was justifiable and whether to proceed with the proposed investment.

I also agree with the argument put forth by counsel for the Plaintiffs. The issues raised by the external advisors appointed by the 1st Plaintiff have indicated that these are grave issues that must be considered and addressed by the company before making any decisions concerning the Barut Project. There are red flags that were raised that indicate that the project is subject to serious risks. This would have indicated to a reasonable and prudent senior director and executive officer of the company that the full reports should have been disclosed to the board. S/N solN4Cs0wEuyQ1PQMatf0g

An example can be found in the report provided by AKSET that highlighted the risks of the Barut project: -

The AKSET report also contained proposed steps that they believe will offset the risks. Therefore, I find that the contents of these reports should have been produced to the Board by the 1st Defendant to enable the Board to make an informed decision whether (1) to proceed with the project proposed and (2) what steps to be taken to offset the risks involved. It may not have been necessary to produce S/N solN4Cs0wEuyQ1PQMatf0g the full reports, but the Defendants should have ensured that the risks identified were disclosed in full.

This issue was put to the 1st Defendant during cross-examination by counsel for the Plaintiffs. He admitted that these reports were not disclosed to the board in full for their consideration. I reproduce material parts of the notes of evidence: - …. S/N solN4Cs0wEuyQ1PQMatf0g S/N solN4Cs0wEuyQ1PQMatf0g …

I believe that a reasonable Chief Executive Officer or any senior person having the same scope of responsibility as the 1st to the 4th Defendants, knowing the existence of these reports and the contents of the reports, would ensure that the full extent of the reports would S/N solN4Cs0wEuyQ1PQMatf0g have been disclosed to the board of directors. The risks involved, the fact that this is an investment in Indonesia, involve plantations that the company is not familiar with and involve foreign law as well as a foreign joint venture partner, would have required the board to be made aware of all facts and all material risks, as well as opinions from the external experts, for the due consideration of the board.

I find that this is not a normal investment for the company and the fact that these foreign experts have highlighted “red flags” and real risks, should have alerted the 1st Defendant of the need to disclose the full extent of the risks contained in the reports not only to the board of the 1st Plaintiff but also to the CEO of the JCorp and the board of JCorp.

This can also be seen from the following samples extracted from the notes of evidence: - S/N solN4Cs0wEuyQ1PQMatf0g

Therefore, I find that it is wrong for the 1st to the 3rd Defendants not to have disclosed the details of the reports fully to the board of directors.

The 2nd Defendant, who is aware and should have been aware of the wrongs committed, should not have kept quiet. He was also a director and senior personnel in the corporation. He was in charge of the management of the plantation and oil and gas investments. He should have ensured that all of these risks and information were disclosed to the board. Failure to disclose these facts and risks shows that the 2nd Defendant breached his duties owed to the company. He was negligent.

I refer to the decision of the English Court in Dickinson v NAL Realisations (Staffordshire) Ltd [2018] BCC 506. In that case, the Court found that passive directors may be held liable for breach of their duties owed to the company if, being aware of the wrong or willfully closing their eyes to the wrong, did not intervene to stop and allowed the wrong to continue unabated. This is, of course, not an automatic rule but will depend on the facts of each case. I believe that S/N solN4Cs0wEuyQ1PQMatf0g the facts of this case warrant the application of the rule against the 4th Defendant.

I find that the board should be fully aware of the risks and potential viability of the Barut project. The failure to disclose the reports in full shows objectively that the Defendants did not act appropriately as required by law and their duties to the company. As such, the Defendants were negligent in not disclosing these reports to the board in full. (H.6) Alleged Failure to Obtain Fresh Valuation Reports

I also note that the Defendants had also not directed and did not undertake any fresh independent valuation as to the value of PT WIN and the plantations in issue. This was clearly directed by the board, and the Defendants should have complied with the direction.

As seen in the resolution of the 1st Plaintiff and JCorp, the 1st to 4th Defendants were directed to undertake a valuation report over the project. Although the Board of Directors did authorize the 1st and 2nd S/N solN4Cs0wEuyQ1PQMatf0g Defendant to undertake the project, it was still mandatory for a valuation report to be undertaken and a report of the same to be produced to the board for its consideration. The evidence before me shows that no such valuation report was procured by the Defendants.

More so when the internal valuation undertaken by the 1st Plaintiff assessed the land based on whether the land has the required HGU. The value falls if the plantation did not have the required HGU. A valuation report should have then been procured in accordance with the directions of the Board.

I do agree that a report by Piesta was prepared on 19-9-2013. This Court notes, however, that the reports were made by Piesta on the instructions of PT GSB. The reports also indicated that the reports were only pro forma and were based on assumptions that the land was purchased with HGU rights. As shown earlier, this assumption is not correct as the HGU rights were not obtained by PT WIN until the end of the project. S/N solN4Cs0wEuyQ1PQMatf0g

The 1st Defendant claims that he is entitled to rely on the Piesta report. However, I do note that even the reports were not disclosed to the board in full.

Furthermore, it was a clear directive of the board that an independent valuation report be undertaken to ensure that the purchase price is fair in the circumstances of this case. Therefore, the senior management of the company, including the 1st to 4th Defendants, should have adhered to this direction.

I find that the 1st Defendant did indicate to the board that a fresh valuation report was being processed to verify the purchase price. This was not undertaken, and no explanation was forthcoming from the 1st Defendant.

The other Defendants should have raised this issue either with the 1st Defendant or with the board. They should have informed and cajoled the 1st Defendant that there is a clear need to obtain direction from the board. Or at least, warn or notify the 1st Defendant of the need to S/N solN4Cs0wEuyQ1PQMatf0g do so. This was not done. They kept quiet, and as such, the 2nd to the 4th Defendants did commit a breach of their duty of care owing to the 1st Plaintiff. They should not have remained silent and acted to ensure that the board’s directions are complied with.

This is an important directive of the board and should have been undertaken. It would have impacted the valuation of the lands and the price payable for the shares in PT WIN. I believe that the 1st to 4th Defendants, as directors and senior officers of the company, should have ensured that this step was taken. I do not, however, find the Directors to be dishonest. They did not put themselves in a position of conflict of interest and they did not misuse company’s assets. Nevertheless, as they have failed to disclose these material facts, I find that they were negligent and as such breached their duties owed to the corporation. I have assessed the evidence of the Defendants and considered them objectively considering all relevant facts. I find that they were not dishonest but were imprudent and as such were negligent in pursuing what they believed were genuine business decisions in the best interest of the Plaintiffs. S/N solN4Cs0wEuyQ1PQMatf0g (H.6) Allegation of Failure to Ensure that the Purchase Price is linked to deliveries of HGU rights

It is clear to this Court that the Board of Directors of the 1st Plaintiff and JCorp had directed that the purchase price for the shares must be structured based on the status of the plantation land, i.e. whether the land has the required HGUs.

Even the 1st Plaintiff’s own internal CAD and Messrs Ishak & Co in its written opinion dated 19-8-2013 had warned the senior management that the draft Share Sale Agreement did not comply with the directive of the board. Messrs Ishak & Co had raised concerns about: -

The directive of the board of directors was disregarded. The issues raised by Messrs. ISCO were also not brought to the attention of the board of directors. The payment structure, as directed by the board, was disregarded. Instead, the Share Sale Agreement provided for the following terms: -

233.1 Recital E - The Purchaser accepts that the purchase of the shares is on the assumption that the Seller (PT GSB) can procure the HGUs.

233.2 Clause 2.1 The Purchase Price is fixed at US 17, 735,

738.00 for the shares in PT WIN.

233.3 Clause 2.2 USD 10,000,000.00 is to be paid as downpayment on the execution of the agreement.

233.4 Clause 2.3 Balance purchase price of USD 7, 735, 738 is to be paid upon closing of the agreement. This payment S/N solN4Cs0wEuyQ1PQMatf0g is to be made upon delivery of documents by PT GSB to the 1st Plaintiff.

This is a total contrast to the directive given by the board earlier. In view of the risk highlighted by the external experts and the solicitors, in Malaysia and Indonesia, the 1st Defendant should not bow to the demands of PT GSB and agree to the above terms.

He should have ensured that the directives of the board that the payments of the purchase price are linked to the deliveries of HGUs were set in the agreement. If he wanted to change this due to the demands of PT GSB, then this should have been disclosed to the board of directors and had them deliberate on this issue.

It is only after the board has been presented with this demand and agrees to the proposal that the 1st Defendant agrees to the terms as suggested by PT GSB. The same applies to the other Defendants. The decision should have been disclosed to the board, and the body S/N solN4Cs0wEuyQ1PQMatf0g should be given the opportunity, with all information disclosed, to decide whether to proceed or not with the Barut project.

Therefore, the decision by the 1st Defendant to enter into the Memorandum of Understanding and the eventual Share Sale Agreement with PT GSB on 3-10-2013 is contrary to the directive of the board, and as a result, he did commit a breach of his duties to the 1st Plaintiff. Due to the failure to alert the board of this material change, I also find liability against the 2nd to 4th Defendants.

I do agree that the terms of the Agreements, as a general rule, need not be disclosed to the board. This is usually left in the hands of the management. However, in this case, as there is a clear directive as to what should be contained in the Share Sale Agreement, the management must comply with the same. Failure to do so is a clear breach of the duty of care owed by the Defendants to comply with the directives of the board. I do not find that their actions fall into the category of deceit or dishonesty as suggested by the Plaintiffs. S/N solN4Cs0wEuyQ1PQMatf0g Nonetheless, as this directive was breached, I find that they have failed to discharge their duties and as such did act negligently. (H.7) Allegation on the removal of material clauses that protected the 1st Plaintiff in the Shareholders Agreement and failure to disclose concerns raised by Messrs ISCO and AKSET

I also note that the original draft of the Shareholders Agreement contained a clause that allowed for the termination of the agreement in clause 19.3 if PT GSB fails to procure the HGUs within the earlier agreed time frame. This is in line with the directive of the board and the risks involved in the investment.

For reasons not explained by the 1st to 4th Defendants, this clause was removed. There was an instruction given to solicitors on 9-2-2014 to remove this clause from the terms of the relevant agreement. The 1st Defendant, being aware of the directive of the board, did not insist that this clause and the need for the HGU be linked to the amount to be paid by the 1st Plaintiff. No reasonable reason was afforded by the Defendants why the protections were removed. S/N solN4Cs0wEuyQ1PQMatf0g

The 1st Defendant contends that this directive came from one of his subordinates. Even if that is the case, the 1st Defendant should have ensured that the directives of the board were complied with. He should have ensured that the clause in the Share Sale Agreement complies with the directive of the board.

The same applies to the 2nd to 4th Defendants. They should have been wary of this requirement and taken all steps to ensure that the directive of the board was adhered to. The failure to do so shows that the Defendants had breached their duty of fidelity to follow the instructions of the board.

On 9-1-2014, AKSET issued a Memorandum to the 1st Plaintiff notifying the company that there is a risk concerning the IUP deliverables and how the Share Sale Agreement had not provided clauses for the sanction or remedies against PT GSB if they failed to deliver the required license. S/N solN4Cs0wEuyQ1PQMatf0g

This was followed by a Due Diligence Report issued on 3-2-2014 on the issue of overlapping claims and the risk that the plantation area may be substantially diminished. Thus, causing a reduction in the value of PT WIN and possible overpayment by the 1st Plaintiff to PT

It is clear to this Court that the 1st to 4th Defendants were aware of the series of reports by solicitors and their concerns as to the progress of the project and how the rights of the 1st Plaintiff may not be fully protected.

Instead of addressing these concerns and raising these issues with the Board of Directors, the 1st Defendant chose to ignore them and proceeded with the execution of the agreements and complied with the demands of PT GSB. The other Defendants failed to disclose this fact to the board.

Even when told that there is a risk that the terms of the Shareholders Agreement will cause the 1st Plaintiff to incur a further obligation of S/N solN4Cs0wEuyQ1PQMatf0g investing further substantial sums, possibly an additional USD 25.7 million, as seen in the email dated 20-1-2014, from AKSET to ISCO that was carbon copied to the 1st Defendant, the concern was ignored. The obligation was agreed to without even raising an eyebrow. I believe that the 1st Defendant should have been cognizant of his duties to the 1st Plaintiff and raised this issue with the board.

The 1st Defendant had then agreed to the following terms as seen in the Shareholders Agreement: -

248.1 Clause 1 – PT GSB Procurement to obtain the HGUs for PT WIN land.

248.2 Clause 1 – The 1st Plaintiff is required to procure the sum of USD 25, 716, 091 as additional investments into PT WIN. (Note that the 1st Plaintiff had earlier paid USD 17 million for the shares that are valued based on the lands having HGUs).

248.3 Clause 3 – The 1st Plaintiff shall be required to provide funding for the acquisition of lands for PT WIN plantation and the development of the existing and future plantation. S/N solN4Cs0wEuyQ1PQMatf0g

248.4 Clause 8 – The 1st Plaintiff shall be required to inject further investment into PT WIN when required.

248.5 Clause 9.5 - PT GSB must provide the HGUs within 4 years.

248.6 Clause 19.2(c) – Put option proviso in the event of default.

This Court notes that the terms of the Shareholders Agreement did cause a change in the obligation of PT GSB. The hectares of the plantation land in the name of PT WIN were reduced from 44, 443 hectares to 40,000 hectares and the Plaintiff’s equity was reduced to 74% instead of 75%. The timeline for the deliveries of the HGUs was extended to 4 years from the original 2-year period. As noted earlier, the 1st Plaintiff was also required to invest further sums into the project.

The 1st to 4th Defendants contends that this is merely a valid business decision undertaken by the Defendants, considering the demands of their business partner and local considerations. S/N solN4Cs0wEuyQ1PQMatf0g

The Defendants also alleged that the Board of Directors were also apprised and was informed that there would be a requirement for additional capital to be infused into PT WIN and its subsidiaries to develop the plantation land, plant new trees, and even to build new factories.

The Defendants’ defence relies on their contention that (i) they had obtained approvals from the Plaintiffs and JCorp, (ii) all information and reports were disclosed to the board, Teraju and CAD, (iii) that the board knew or had access to this information and reports.

Having carefully considered the above, I reject the defenses and find that they are without any merit. I find that the Defendants, in particular the 1st Defendant as the CEO / Managing Director, should have ensured that these material changes, their implications and the opinion of the solicitors are fully disclosed to the board. More so when these changes affect the structure of the investments and enlarge the risks of the sums that must be expended for the Barut project. This should have been disclosed to the board. S/N solN4Cs0wEuyQ1PQMatf0g

I also find that the failure by the 1st Defendant to obtain approval for the changes and for the expenses breaches his duties to the company. A reasonable, prudent executive director would have tabled a paper to the board explaining the changes, the additional investments and disclosed the opinion to the board for their consideration.

I have carefully considered the general proposition that the general day-to-day business of a company is best left to the executives of the corporation. The Board should not be inundated with the day-to-day business affairs of the corporation.

However, when the senior executives find themselves in a situation such as those facing the 1st to the 4th Defendants, they should ensure that all these issues and facts are disclosed and discussed by the board. The risks involved and the amount of investments to be undertaken, as well as the obligations of the 1st Plaintiff to PT GSB and vice versa warrants a full and frank discussion at the board level. S/N solN4Cs0wEuyQ1PQMatf0g

Even in the notes of the meeting of the board held on 23-2-2014, the 1st Defendant did not find it appropriate to disclose such information to the board. He had only informed the board that the Shareholders Agreement was signed but failed to highlight the above issues.

I find that these red flags and issues highlighted by these consultants should have been specifically mentioned and brought to the attention of the board. This would have enabled the board to understand the risks involved and deliberate accordingly.

I therefore find it is wrong for the 1st, 2nd and 3rd Defendants not to ensure that the agreements were structured in the manner directed by the board. The payments to be released to PT GSB or any party should be linked specifically to the deliveries of HGUs. It was also wrong for the 4th Defendant not to ensure that these serious risks were not disclosed in the reports prepared by the CAD department and presented to the board of directors of the 1st Plaintiff. S/N solN4Cs0wEuyQ1PQMatf0g

This will ensure that the basis of the valuation of the share price, which assumes that the lands came with HGUs, would be correct. If this was not agreed to by PT GSB, this should have been brought back to the Board of Directors for their deliberation and reconsideration. The Defendants should not have ignored this clear limitation imposed by the board. They should have also appointed valuers as directed by the board of directors. This was mandated by the board of directors, as indicated earlier.

I hold that the failure to address the above issues and not informing the board of directors of the decision not to link the HGUs to the payment obligations and for the changes in the structure of PT WIN and the investments, are glaring breaches of duties by the 1st to the 4th Defendants.

Furthermore, as the Defendants were involved in the decision to (i) suggest the Barut project, (ii) part of the parties who had prepared all papers to the board and what they contain and (iii) the implementation of the board decision, I find that he should have ensured that the S/N solN4Cs0wEuyQ1PQMatf0g mandate be complied with and that the failure should have been disclosed to the board. At the very least, they should disclose all facts and have the agreements and structure adopted be retroactively confirmed by the Board. As this was not done, I find that they have breached their duties of care to the company. I do not find that they were dishonest, but their actions fall short of the standards expected of directors. They were overzealous in their business dealings with PT GSB and should have taken a step back and decided in accordance what was in the best interests of the company. Again I reiterate that I have applied the objective test in making this determination taking into account all relevant facts known to the Defendants. Summary on the liability of the 1st to 4th Defendants concerning the inception of the Barut project

I find the decisions by the 1st to the 4th Defendants were negligent of their duties to the company. I do not find that there was dishonesty on the part of the Defendants. They did disclose parts of the information and opinions made available to them but I believe the facts of this S/N solN4Cs0wEuyQ1PQMatf0g case warrants that the full report should have been made available to the board.

(a) For the above reasons, I find that the 1st Defendant was over zealous and rushed the process and failed to disclose these material issues and material reports with the assistance or at least the wrongful silence of the other Defendants. The 1st to the 4th Defendants were so focused on successfully pursuing the deal with the PT GSB that they overlooked the need for full disclosure and to act in accordance with the directions of the board. There is no evidence of malintent or fraud on the part of the Defendants, but these actions prove the existence of the duty of care owed by Defendants to the Plaintiffs.

(b) This Court is mindful of the realities of commercial ventures. Decisions are often required to be made in conditions of uncertainty, and errors of judgment honestly made may result in substantial financial losses. The mere fact that an investment results in multi-S/N solN4Cs0wEuyQ1PQMatf0g million Ringgit losses does not, without more, justify the imposition of personal liability.

(c) The Court finds that the failure of the Barut project reflects the inherent commercial and regulatory difficulties of plantation investments in Indonesia, including land tenure issues, regulatory uncertainty and operational challenges. Such risks are an inseparable part of commercial enterprise, and the assumption of risk is often accompanied by the prospect of substantial upside.

(d) On the evidence, the Court is satisfied that these ventures were honestly pursued by the Defendants in what they believed to be the best interests of the Plaintiffs. There is no evidence of dishonesty, bad faith, self-interest or improper purpose.

(e) Nevertheless, the Court finds that the Defendants were negligent in the discharge of their duties, in that they allowed commercial enthusiasm to override the discipline required by established S/N solN4Cs0wEuyQ1PQMatf0g governance safeguards, and failed to exercise the degree of care and diligence reasonably expected in the circumstances.

(f) I have assessed the evidence of the Defendants and considered them objectively considering all relevant facts. I find that they were not dishonest but were imprudent and as such were negligent in pursuing what they believed were genuine business decisions in the best interest of the Plaintiffs.

(g) Fraud and dishonesty are serious allegations which must be strictly proved. They require evidence of intentional deception, knowledge of falsity, or recklessness as to the truth, directed at securing an improper advantage. Mere negligence, errors of judgment, failure to adhere to internal procedures, or even serious incompetence, without more, do not meet this threshold. Having considered the evidence in its totality, I find no basis to conclude that any of the Defendants knowingly misrepresented material facts, deliberately concealed information, or acted with a dishonest state of mind. The Plaintiffs’ case rests substantially on inference drawn from S/N solN4Cs0wEuyQ1PQMatf0g the eventual failure of the investments and from procedural shortcomings in their implementation. That, in law, is insufficient. Suspicion, however strongly felt, cannot substitute proof, and the allegation of fraud is therefore not made out. I hold that they were overzealous and were negligent. (H.8) Whether Sufficient Disclosure was made relating to the Exit from Barut, whether it is appropriate and whether it was a failure to ensure that the rights of the Plaintiffs were enforced

It is not disputed that the IUPs in respect of the lands related to the Barut Project expired. This caused the issuance of the Notice of Default dated 8-6-2017 by Messrs Ishak Sharif & Co. PT GSB was notified that it had failed to obtain the required HGUs and the extension of the IUPs and ILs for the plantation lands.

The notice of default was issued in accordance with clause 19.2(a) of the SHA, which had occurred, and the 1st Plaintiff shall rely on the remedies pursuant to clause 19.2 (c) contained in the SHA. The Plaintiffs had caused PT GSB to purchase their shares in PT WIN in S/N solN4Cs0wEuyQ1PQMatf0g accordance with the terms of the SHA due to PT GSB’s failure to obtain HGUs.

I do note that Messrs Ishak Sharif & Co did notify the 1st and the 3rd Defendants via email dated 24-10-2016 that the obligations under the SHA were not complied with by PT GSB. The Defendants had then directed that reminders be issued to PT GSB via letters dated 23-11- 2016, 30-11-2016 and 19-12-2016. This eventually led to the issuance of the demand dated 8-6-2017 from the firm referred to earlier.

The Plaintiffs contend that the 1st and 3rd Defendants did not direct their solicitors to enforce the rights as contained in the SHA. The 1st Plaintiff could have either forced the sale of their shares in PT WIN to GSB or directed PT GSB to replace the lands with plantations that had HGUs or to reduce its investment sum. The Plaintiffs now believe that the 1st and 3rd Defendants should have ensured that the options were exercised. S/N solN4Cs0wEuyQ1PQMatf0g

Instead, the 1st Plaintiff had entered into (i) the Settlement Agreement dated 6-12-2017, (ii) the pledge of shares agreement dated 6-12- 2017, (iii) Share Transfer Agreement 3-12-2017, and (iv) A Variation of the Supplemental Agreement concerning the SSPA dated 6-12-

2017.

The material terms of the agreements are as follows: -

(i) Settlement Agreement – PT GSB agrees that it will refund the 1st Plaintiff the sum of RM 56.52 million as full and final settlement due to the failure to obtain HGUs.

The Plaintiffs' complaint that the Defendants did not undertake a proper due diligence process before the above transactions were entered. The 1st,2nd and 3rd Defendants should have ensured that the agreements were the best possible position that they should have taken instead of proceeding with the claim for breach of the Share Sale Agreement and Shareholders Agreement against PT GSB.

The Plaintiffs further claim that the 1st, 2nd and 3rd Defendants had also failed to exercise any of the rights provided to the Plaintiffs under the Settlement Agreement and the Pledge of Shares Agreement.

The shares in PT SSR, PT HBS and PT WSK were fully transferred to PT GSB on 6-12-2017. Nevertheless, the Plaintiffs claim that the 1st, 3rd and 6th Defendants continued to allow payments to be made to PT WIN as follows after the disposal of the plantations land to the sum of RM 2, 197, 989.82 to PT WIN after 28-12-2017. According to Nur Muhammad Habil, these payments were to cover the monthly capital and operational expenses of PT WIN, i.e. salaries of staff or planting expenditure. S/N solN4Cs0wEuyQ1PQMatf0g

Having considered the evidence presented before me, I find that the Defendants are not liable for the manner in which the exit from the Barut project was undertaken.

I find that the material information concerning the failure to obtain the HGUs and all required licenses, the options available to the 1st Plaintiff were disclosed to the Board of Directors, and based on these disclosures, the Board of Directors decided that the best method to deal with the losses was to enter into the above agreements as suggested by the 1st and 3rd Defendants. At the end of the day, this is a business decision that was made by the board of directors in accordance with the information provided to the body.

The above finding is supported by evidence that can be seen in the Minutes of the 289th Board Meeting dated 13-8-2017 and the minutes of the meeting produced below.

I see no wrongdoing on the part of the 1st Defendant. The decisions were taken by the board of directors to resolve the issues concerning S/N solN4Cs0wEuyQ1PQMatf0g the project and to reduce the damages from the failed project. It must be noted that at the time, the structure of the investments was laid down below: -

It was decided that the Indonesian entity, PT WIN, which was substantially owned by the 1st Plaintiff to exit from the Barut project and concentrate on the Amara investments. S/N solN4Cs0wEuyQ1PQMatf0g

The Board decided to exit from PT HBS, PT WSK and PT SSR. Thus, the company continued to invest in PT Raj and PT TPR at that time. This was a business decision agreed to by the 1st Plaintiff’s Board. Sufficient information was disclosed to enable the board to decide whether it should exit or not. This can be seen in the diagram below. S/N solN4Cs0wEuyQ1PQMatf0g

To support the above finding, I refer to the following excerpts from the minutes of the board of directors meeting of the 1st Plaintiff: -

(i) Board of Directors meeting 13-8-2017 S/N solN4Cs0wEuyQ1PQMatf0g

This decision was also disclosed to the Board of Directors of JCorp, as seen in the minutes of the board meeting held on 5-3-2018.

This may not seem the best deal in hindsight that should have been made on behalf of the Plaintiffs, but as the material information and sufficient disclosures were made to the Board of Directors of the 1st Plaintiff and JCorp, I find that the 1st to the 4th Defendants have not S/N solN4Cs0wEuyQ1PQMatf0g committed any wrongdoing as claimed by the Plaintiffs. The decision to exit was made with sufficient information disclosed to the board. Unlike the inception of the Barut project, I find full material facts were disclosed to the board to enable it to make an informed decision concerning the exit from Barut.

I also find that the evidence points to the 1st to the 4th Defendants believing that this was in the best interest of the company. This is understandable rather than a long-fought battle with a venture partner. More so when they were still in the same bed with the venture partner for another project. I repeat, I cannot see this retrospectively in view of what now appears to be 3 failed projects. I must see this from their point of view when the decision was made.

I also find that there is no requirement that the Defendants undertake any fresh due diligence before the decision to exit was proposed to the board. Furthermore, that was not directed by the Board of Directors. S/N solN4Cs0wEuyQ1PQMatf0g

At that stage, it was proven that Project Barut had failed due to the failure to deliver HGUs and the licenses necessary to continue with the Barut project. I do find that despite their earlier shortcomings, the 1st to the 4th Defendants were trying their best to extricate the 1st Plaintiff from the project with minimal losses suffered by the 1st Plaintiff.

I see no wrong in the actions taken by the Defendants. This Court must see the events as they appear to a reasonable person at that time and not with 2020 hindsight.

Do note that the above finding does not absolve the 1st to the 4th Defendants of their obligations to the company for any of the earlier wrongs. This, however, does not mean that they should be liable for the decision to exit the Barut project and the decision not to enforce the agreements to the full extent as now claimed by the 1st Plaintiff.

In coming to the above decision, I have considered the emails exchanged between PW6 and the 1st Defendant on 21-6-2017. The S/N solN4Cs0wEuyQ1PQMatf0g 1st Defendant may have indicated that any decision by the company should not gravely constrain PT GSB financially, but I find that at the end of the day, the 1st Defendant did not put PT GSB’s interest or Pak Sandjojo’s interest above the 1st Plaintiff. All details concerning the exit and the affairs of the companies were disclosed to the board, and the decision to exit was made after all factors were duly considered by the board.

I have also considered the contention by the Plaintiffs that it was wrong for the 3rd Defendant to keep silent and not alert the board of the failing Barut project. Allegedly, the emails received from Mahmud Saidoo, and Sandjojo of PT GSB as to the progress of the Barut projects and the failure to obtain the required licenses to enable the plantation to progress further.

I am, however, not convinced by the contention. I believe that at that time, the obligation to deliver the licenses and HGUs was still alive. The agreements did allow PT GSB to provide the licenses within 4 years. The 3rd Defendant had followed up and sought Sandjojo’s S/N solN4Cs0wEuyQ1PQMatf0g confirmation as to what is being done in Indonesia in view of the substantial sums expended for the project. He was also not a director at the material time and was only a Vice President answerable to the 1st and 2nd Defendants. He has no executive powers to stop the project and cannot be blamed for the decision to continue with the project at that time.

Therefore, I do not find any wrongdoing on the part of the Defendants concerning the decision to exit the Barut project. This decision was made with sufficient disclosure made to the board. It is now open for the 1st Plaintiff to enforce the Settlement Agreement against PT GSB and recoup part of the losses suffered by the 1st Plaintiff.

The board knew and was informed that PT GSB had breached the terms of the agreements. They were also told the amount that has been expended with regard to the project. Therefore, the decision to exit was made with full knowledge of the facts. I cannot then impose liability for the decision against the 1st to the 4th Defendants. S/N solN4Cs0wEuyQ1PQMatf0g

There is also another factor that must be considered by this Court. The terms of the Settlement Agreement between PT GSB and the 1st Plaintiff clearly indicate that the terms were to encompass the full and final settlement in respect of all claims that the 1st Plaintiff may have against PT GSB for the failure to obtain the required licenses.

This appears in clause 2.1 of the Settlement Agreement. Therefore, all losses suffered by the 1st Plaintiff were agreed to be encapsulated in the sum of RM 56.52 million. It is therefore for the 1st Plaintiff to seek those damages now against PT GSB.

I also note that it is also alleged that the 3rd Defendant had failed to seek the pledging of the 1650 shares that were required to be provided by PT GSB as security. This appears in clause 2.3 of the Settlement Agreement. I agree that there was no security provided, and the 3rd Defendant, as the Executive Director, should have caused the shares to be pledged by PT GSB. S/N solN4Cs0wEuyQ1PQMatf0g

Nevertheless, it is still viable for the Plaintiffs to now seek the enforcement of the Settlement Agreement against PT GSB, including the shares referred to in the aforementioned clause 2.3.

Therefore, as the avenue is still available to the 1st Plaintiff, it cannot now attribute the losses to breaches of the Settlement Agreement on the Defendants. The 1st Plaintiff has agreed to the terms of the Settlement and should now enforce it against PT GSB. (H.9) Should the Defendants have put a stop to the failing project?

I have carefully considered the Plaintiffs’ contention that the 1st to 4th Defendants, as the CEO, Senior Directors and Directors responsible for the management of the company, should have put a stop to the project.

As I found earlier, they have failed to exercise due care and discharge their duties to the 1st Plaintiff in failing to make the appropriate disclosure and to follow the specific directives of the board of directors. S/N solN4Cs0wEuyQ1PQMatf0g

This does not mean that the payments made and released to PT WIN for the Barut project were not made appropriately. I believe that all of them genuinely believed that the payments were made for proper business purposes of the 1st Plaintiff and the project.

I find that the decision to release payments and allow for the Barut project to continue was made honestly and was a business decision made by the directors, especially that of the 1st Defendant and the 3rd Defendant. They may have been under a mistaken belief that the project would succeed and that PT GSB would be able to deliver what they promised, but this was done honestly and was a business decision.

I find that the 1st to the 4th Defendants were negligent but not dishonest. The above disclosures should have been made, and the directive should have been followed. I find that the non-disclosures were intended to downplay the risks and to promote the investments. As a result, the board relied on the proposals for the investments in Barut and Amara as suggested by the Defendants. S/N solN4Cs0wEuyQ1PQMatf0g (H.10) Whether the Payments made for the Barut project during and after the company’s exit were wrongfully released Payments made during the lifetime of the Barut project

The Plaintiffs contend that it was wrong for the 1st to the 3rd Defendants and the 5th as well as the 6th Defendants to have released payments for the Barut project during its lifetime.

Counsel for the Plaintiffs argues that the writing was clearly on the wall. The project had failed miserably from the start and should have been stopped.

On this issue, I side with the Defendants. I find that at the time when the payments were made during the lifetime of the project, these were made in accordance with what was agreed with PT GSB. The Defendants would have worked based on their belief that PT GSB would deliver what it has promised to the 1st Plaintiff. There is no evidence that the payments to PT GSB or PT WIN were made with any other ulterior motive. S/N solN4Cs0wEuyQ1PQMatf0g

Therefore, I find that these payments were made as part of the progress of the Barut project; they represent genuine business transactions and business decisions by the Defendants. The Defendants cannot be blamed for making these payments or authorizing these payments on behalf of the 1st Plaintiff. Payments made after the Settlement Agreement

The Plaintiffs blame the failure to supervise these payments on the 3rd Defendant. They contend that the Defendant did not verify and inspect payments to be released by the company for the period after the Settlement Agreement was executed.

On this issue, I do not find any wrong with the decision by the 3rd and 6th Defendants to release the sum of RM 2, 197, 989.82 to PT WIN after 28-12-2017.

As explained by the Plaintiffs’ witness, Nur Muhammad, the sums were paid to cover the expenses of staff and plantation of PT WIN remaining after the exit from the Barut project. S/N solN4Cs0wEuyQ1PQMatf0g

At the time, PT WIN was still running and had staff and expenses that must be incurred and paid. It must be borne in mind that the 1st Plaintiff had sold its interests in the plantations in the Barut project, but remains the shareholder of PT WIN. The Amara project was still continuing despite the exit from Barut.

Therefore, I find this is a legitimate business expense and that the Defendants reasonably believed it to be so at the material time. There is no evidence to contradict this fact, and I therefore reject the Plaintiffs’ claim on this issue against the 1st Defendant.

I do note that the evidence of the 3rd Defendant may not have been the best evidence, as he could not recall why the payments were made. This is not surprising as he has since left the company, and these transactions were made some time back. He had also approved such payments after discussing with the Plaintiff’s representative in PT WIN, Mahmud, as to whether the payments were legitimate. I do not find that he had breached his duties and did act reasonably in accordance with his duties to the 1st Plaintiff. S/N solN4Cs0wEuyQ1PQMatf0g

I do note that PT GSB did not provide its fair share of the costs. However, that avenue is still available to the Plaintiffs to pursue against PT GSB and not against the Defendants. This could be claimed as part of the proceedings for any allegation of breach of the terms of the agreements, and that includes the Settlement Agreement referred to earlier. (H.11) Project Amara

I hold that the Defendants did breach their duties to the 1st Plaintiff concerning the proposal in relation to Project Amara, save as they have failed to disclose the opinion of Messrs Ishak & Co in full.

I find that if the opinion was shown to the board, there could have been a discussion as to whether it was more appropriate to have the agreement interconnected or not. I agree that this does not mean that the transaction to purchase the plantations for the Project Amara could have proceeded solely based on the proposal laid down by Messrs Ishak & Co, but what is important is that the information should have been disclosed. S/N solN4Cs0wEuyQ1PQMatf0g

The failure to disclose renders the Board bereft of the opinion and would have been unable to know of all the risks relating to the project.

I agree that the Defendants have shown that the vendors did not agree to the proposal. This was also confirmed in the testimony of Mohd Faris. This does not mean that the opinion should not be disclosed.

I also note again that the reports referred to by the Plaintiffs were not disclosed in full detail in the report to the board of directors.

This shows a repeated manner in which the important facts concerning the Amara project were not shared in detail. The risks and factors identified in the reports by external experts, including (i) Piesta, (ii) Sagita, Ridjab Syah and Partners, and (iii) Nugroho Rakan were not fully disclosed even in the CAD reports presented to the board of directors. The required materials and risks were identified, but I find that these should have been disclosed in full to the board. S/N solN4Cs0wEuyQ1PQMatf0g

Similarly, with regard to the Barut project, this is a new venture in Indonesia. This is a risky investment as seen in the reports provided by these experts and involve issues of commerciality and the viability of these transactions. Therefore, it is not sufficient for the reports to be merely summarized without sufficient details. I find that it is more appropriate for the reports to have been forwarded to members of the board for their consumption and due consideration.

I reproduce examples of the summary of such reports that show the details of these issues were not fully disclosed to the board of directors: -

(i) Minutes of the Board of Directors meeting dated 5-11-2015 S/N solN4Cs0wEuyQ1PQMatf0g Report issued by CAD to the Board of Directors. S/N solN4Cs0wEuyQ1PQMatf0g S/N solN4Cs0wEuyQ1PQMatf0g S/N solN4Cs0wEuyQ1PQMatf0g

Having considered the documents filed before this Court, I find that the essential risks and information were not fully disclosed to the board of directors to consider. I find that they were negligent in the performance of their duties but were not dishonest and are not guilty of fraudulent conduct. S/N solN4Cs0wEuyQ1PQMatf0g

My finding is also buttressed by the following evidence gleaned from the notes of evidence: -

I therefore find, similarly to the Barut project, that the risks relating to the proposed acquisition of the companies have not been sufficiently disclosed to the board. I believe the essential facts and essential risks were not disclosed.

I find that the Defendants should have brought these issues to the attention of the board. They should have also ensured that the CAD clearly highlighted these risks in detail and even provided the full reports to the board.

The failure to disclose is further exacerbated by the decision not to disclose the opinion of Messrs Ishak & Co dated 29-11-2015 that there may be a need for the plantation to be purchased as a linked transaction was wrong.

I accept, as stated earlier, that the vendor was not agreeable to the same and that the decision to continue was a commercial decision by the company. Nevertheless, this issue should have been brought to the attention of the board of directors for their due consideration. S/N solN4Cs0wEuyQ1PQMatf0g

I therefore find that the 1st, 2nd, 3rd and 4th Defendants did breach their duty of care owed to the company by failing to disclose (i) fully to the board the facts and risks relating to the Amara project and (ii) failure to disclose and highlight the opinion of Messrs Ishak & Co only in relation to the decision not to link all of the 4 contracts for purchase of the plantations. This should have been specifically disclosed to the board despite the inclination of the vendors.

I repeat that if the opinion of Messrs Ishak & Co was disclosed, the board could have agreed not to continue with the proposal. This is material information, and the Defendants should have disclosed it. Therefore, the board was not fully disclosed with this important opinion.

(a) On the issue of whether the Defendants misrepresented that JCorp had agreed to the proposal to proceed with the Amara project, I find that the Defendants did erroneously present that the consent letter had been issued and received by the Senior Management on 28-1-2016. The letter confirming the consent was received from S/N solN4Cs0wEuyQ1PQMatf0g JCorp on 3-2-2016. However, I do not find that this is a material misrepresentation or fraudulent in nature. At the end of the day, JCorp did agree to the proposal, and the letter dated 3-2-2016 did confirm the fact. I therefore find that they Defendants were negligent. I believe that they were overzealous and had taken short cuts in their roles as senior management of the company. I do not find dishonesty or fraudulent conduct on the part of the Defendants.

(b) I reiterate that I have assessed the evidence of the Defendants and considered them objectively considering all relevant facts. I find that they were not dishonest but were imprudent and as such were negligent in pursuing what they believed were genuine business decisions in the best interest of the Plaintiffs. (H.12) Should Project Amara have been stopped?

With regard to the payments made by the Plaintiffs for Project Amara amounting to RM38, 521, 652.44 and RM 67, 757, 221.93, I do not agree that the Defendants committed this wrong as alleged by the Plaintiffs. S/N solN4Cs0wEuyQ1PQMatf0g

The Plaintiffs contend that the Defendants, in particular the 1st, 2nd and 3rd Defendants, should have continuously assessed the project and once believed that it was not viable to put a stop to it. I agree that such a duty exists, but I believe that they genuinely believed that this was the appropriate step to take. Again, I find that this is a genuine business decision undertaken by them.

I do not believe that the Defendants have committed any wrong. The decision to continue with the project was a business decision, and there is no evidence that the decision was not undertaken in good faith. I find that the Defendants genuinely believed that Project Amara was a genuinely good project for the company, but this eventually failed.

To view this business decision with 2020 vision in hindsight would be wrong. I find that the claim and the evidence before me do not show that the Defendants had committed any wrongs as claimed by the Plaintiffs in relation to the payments released to PT WIN for Project Amara. S/N solN4Cs0wEuyQ1PQMatf0g

As highlighted earlier, there was a breach for failure to disclose all material facts and material reports and the failure to disclose the opinion of Messrs Ishak & Co. This, I find, constitutes clear breaches of the duty of care owed by the Defendants to the Plaintiff. This does not mean that the decision to make payments for what they believe were for the genuine operations of the company is wrong.

More so when I consider the minutes of the meeting of the board, these expenses were disclosed in full. The board did not choose to stop the project despite the continued increase in expenditure. If there was such an intention, I am confident that the board would have directed that the senior management relook at the investments.

(a) The decision by the Defendants may have been foolhardy in hindsight, but I believe that they genuinely believed that there was light at the end of the tunnel. This was a genuine business decision to continue with the project, and as such, I do not find liability on this issue against them. S/N solN4Cs0wEuyQ1PQMatf0g

(b) I reiterate my finding that the Defendants were overly zealous in pursuing the Amara project. They failed to adhere strictly to certain corporate governance which were intended as safeguards rather than inflexible rules, and whose breach does not, of itself, establish dishonesty or automatic liability. The same considerations that I have stated concerning Project Barut also applies for Project Amara. (H.13) Project SWBB PSC

This project was first presented at the Board Meeting of the 1st Plaintiff on 13-2-2014. The following excerpts appear in the minutes of the meeting of the board of directors:- S/N solN4Cs0wEuyQ1PQMatf0g

The paper presented to the Board of Directors made the following recommendation:- S/N solN4Cs0wEuyQ1PQMatf0g

The minutes of the Board of Directors meeting dated 7-4-2014 mention the following:- S/N solN4Cs0wEuyQ1PQMatf0g

The paper presented to the Board of Directors at the meeting also states as follows:-

The minutes of the meeting of the Board of Directors of the 1st Plaintiff on 20-5-2014 record as follows: - S/N solN4Cs0wEuyQ1PQMatf0g S/N solN4Cs0wEuyQ1PQMatf0g

There was no evidence produced to show that the contents of the CGA report, or at least a summary of the report, were presented to the Board of Directors by any of the 1st to 4th Defendants before the Joint Operating Agreement was executed on 24-10-2014. CGA suggested that drilling should first proceed before any report could be undertaken to confirm the potential of the oil well. No such report was disclosed in full to the board.

At no material time did the 1st Defendant or the 3rd Defendant disclose the CGA report before the decision was made to proceed by way of a circular resolution dated 27-10-2014. I produce material parts of the circular resolution dated 27-10-2014: - S/N solN4Cs0wEuyQ1PQMatf0g

The full report was not disclosed at the risk and issues management committee meeting held on 28-10-2014: - S/N solN4Cs0wEuyQ1PQMatf0g

However, as seen above, important facts were summarized and reported to the board for their consideration. S/N solN4Cs0wEuyQ1PQMatf0g

I also note that the 1st Defendant then caused the issuance of the letter of support to SKK Migas to confirm that the 1st Plaintiff, as the parent company of the 2nd Plaintiff, will undertake to support the 2nd Plaintiff in its financial commitment for up to USD 53.6 million for the project in the manner and on the terms as agreed in the Joint Operating Agreement.

This was disclosed to Teraju of JCorp on 5-11-2014 as seen in the following minutes: - S/N solN4Cs0wEuyQ1PQMatf0g

The issuance of the letter of undertaking was subsequently disclosed to the Board of Directors at the meeting held on 19-11-2014: - The updates were agreed by the Board of Directors as seen in the following excerpts: - S/N solN4Cs0wEuyQ1PQMatf0g

The tests undertaken on one of the oil well Sinarmas 2, were also disclosed to the board.

The material details of the production test results of the wells were produced in summary to the board of directors at the meeting held on 3-12-2014. I reproduce material parts from the minutes of the board meeting:- S/N solN4Cs0wEuyQ1PQMatf0g S/N solN4Cs0wEuyQ1PQMatf0g

Based on the report, the senior management suggested the following:- S/N solN4Cs0wEuyQ1PQMatf0g

The same information was also disclosed to the Board of Directors of JCorp on 8-1-2015: - S/N solN4Cs0wEuyQ1PQMatf0g

The Plaintiffs contend that despite the disclosures, the Defendants should have ensured that the contents of the following reports should have been disclosed in full to the 1st Plaintiff’s board: -

(i) CGA Resources Assessment Report dated 27-5-2014

(v) E& P, Tax due diligence and Audit reports by Messrs Crowe Howarth.

The Plaintiffs suggest that it was wrong for the Defendants to misrepresent the potential of the project, and it was wrong for them to obtain a second report from CGA to confirm the contents of the oil well. S/N solN4Cs0wEuyQ1PQMatf0g

I do note that the Plaintiffs’ contention that the Defendants should have undertaken a second report from CGA or from a third party to confirm the existence of oil and gas at the wells before any agreement to enter the SWBB project is executed.

I also note that during the lifetime of the project, senior management continued to inform the board of directors that experts and advisers were appointed for implementation of the project and updated the board from time to time as to SWBB’s project updates.

(i) Minutes of the board of directors meeting on 23-2-2015 S/N solN4Cs0wEuyQ1PQMatf0g S/N solN4Cs0wEuyQ1PQMatf0g

My reading of the minutes recording the decision of the board of directors of JCorp on 18-5-2015, is that it was agreed that this SWBB project is speculative in nature and that the report presented by UPN and CGA is not conclusive but will depend on the outcome of further drillings to be undertaken at the proposed well. S/N solN4Cs0wEuyQ1PQMatf0g

Therefore, I find that the board of directors of JCorp and the 1st Plaintiff knew of the risk and agreed to proceed with the proposed plan as contained in the CSSPA and JOA, subject to further tests being undertaken.

Essentially, they knew that this was a risky project and that it was possible that the project might fail despite the reports by CGA, UPN or Lapi ITB. After all, they were dealing with an oil well deep within the earth core. Only the Almighty really knows what is kept within the belly of Mother Earth.

I also note that the report of UNPAD (Universitas Padjadjaran Bandung) was also presented to the Board of Directors of JCorp on 28-6-2015. In the meeting, it was recorded as follows: - S/N solN4Cs0wEuyQ1PQMatf0g S/N solN4Cs0wEuyQ1PQMatf0g S/N solN4Cs0wEuyQ1PQMatf0g

Therefore, it cannot be that there was no form of investigation or due diligence undertaken by the Defendants. They did have the report by Rystad Energy and from UPN, a renowned Indonesian university, that estimated that there were probable oil and gas reserves at the site.

Again, it must always be borne in mind that the investments to be undertaken are in an oil and gas reserve that lies in Central Sumatra and will only be known once the well is drilled and produces real-known production qualities of the wells at SWBB. S/N solN4Cs0wEuyQ1PQMatf0g

These are the best estimates, and the directors and senior management are required to interpret these estimates before any business decisions are undertaken. All of the complaints made by the Plaintiffs are viewed from the rear mirror of what is subsequently found and cannot be the basis for any wrongdoing against the Defendants.

I also refer to the minutes of the board meeting of the 1st Plaintiff held on 24-8-2015 that show that even after the board found that there were no probable oil reserves but only gas, it was decided to continue with the SWBB project. This is shown from the minutes of the meeting produced below: - S/N solN4Cs0wEuyQ1PQMatf0g S/N solN4Cs0wEuyQ1PQMatf0g

I find that at all material times, the risk of the SWBB project was sufficiently disclosed to the Board of Directors at the meeting. This was discussed and shared by the senior management that the SWBB will be more than likely produce gas instead of oil. I produce relevant parts of the report:- S/N solN4Cs0wEuyQ1PQMatf0g S/N solN4Cs0wEuyQ1PQMatf0g S/N solN4Cs0wEuyQ1PQMatf0g

I find that the senior management did explain to the board of directors that the investment is risky and there is a real risk that the estimation of the oil and even gas reserves may not come to fruition as estimated earlier.

I find that the estimation is a moving target depending on the development of the project, and as a result, it was decided that senior management be given authority to renegotiate the terms of the project with the Indonesian counterparts.

This was disclosed again to the board of directors of JCorp on 12-9-

The difference between the earlier report made by CGA and LAPI ITB was disclosed to the board of directors of JCorp. The Defendants produced to the board the essential parts of LAPI ITB report that indicates that there was likely no oil that could be produced from the wells at SWBB sites. S/N solN4Cs0wEuyQ1PQMatf0g

Despite the finding, the Board of Directors of JCorp did not object and chose to continue with the project with the caveat that the Senior Management renegotiate the terms and appoint consultants for future decisions concerning the SWBB project.

I reproduce parts of the minutes of the meeting with the board of directors of JCorp: - S/N solN4Cs0wEuyQ1PQMatf0g S/N solN4Cs0wEuyQ1PQMatf0g S/N solN4Cs0wEuyQ1PQMatf0g

It was decided by the board of directors of JCorp, as follows on 12-9- 2015:-

The minutes of the board of directors of the 1st Plaintiff held on 5-11- 2015 also show that the restructuring of the investment structure was also disclosed to the board of directors. I reproduce material parts from the minutes of the board of directors: - S/N solN4Cs0wEuyQ1PQMatf0g

The change in the purchase price and the subscription price apportionment was also disclosed to the board at the meeting. It was also put to the board of directors whether to continue with the SWBB project despite the delays in complying with the condition precedents S/N solN4Cs0wEuyQ1PQMatf0g under the terms of the CSSPA. The Board, having considered the above disclosures, agreed to the proposal and made the following decision:- S/N solN4Cs0wEuyQ1PQMatf0g

I find that the board paper presented contained all relevant material for consideration to be considered by the members of the board of directors. I reproduce material parts of the paper presented to the board. S/N solN4Cs0wEuyQ1PQMatf0g S/N solN4Cs0wEuyQ1PQMatf0g S/N solN4Cs0wEuyQ1PQMatf0g

I do note that the Plaintiffs now complain that the repercussions of the changes should have been disclosed to the board. They complain S/N solN4Cs0wEuyQ1PQMatf0g that, as a result of the change, ultimately it was PT WIS and PT CSE who own the SWBB block. Despite the complaint, I fail to see how this is not apparent from the change in the structure disclosed to the board. The board would have known what was being proposed to them, and it is obvious that the PT WIS and PT IES would now collectively hold 35% of the shares in PT CSE and that the 2nd Defendant will only have to pay in total USD 80 million compared to USD 133.55 million in the original CSSPA.

This eventually led to the amendment to the CSSPA, and this was disclosed to the board at the meeting of the 1st Plaintiff on 14-12-2015. I reproduce what was discussed at the meeting: - S/N solN4Cs0wEuyQ1PQMatf0g

Again, the senior management highlighted the material risks of the project. I do find that the senior management did disclose sufficient material information and the risks involved. I find that the members of the board approving the decision proposed knew the risks of the project. S/N solN4Cs0wEuyQ1PQMatf0g S/N solN4Cs0wEuyQ1PQMatf0g S/N solN4Cs0wEuyQ1PQMatf0g

All of the risks and changes to the structure were disclosed to the board of the 1st Defendant, and it was agreed to. The board did not seek any further investigation or any form of due diligence to be undertaken further on this new structure.

Neither did the board direct, due to the changes or changes in risk, that the proposed project should be shelved and no further continuance be granted to the counterparty. Having considered what was presented by the senior management, i.e. the 1st to the 4th Defendants, the board did agree to the proposal, and the project continued subject to the changes to the structure of investments and the extension of time.

This trend of disclosing important facts for the SWBB project again appears in the meeting of the board of directors of the JCorp on 13- 3-2016. As instructed earlier, the senior management / the 1st to the 4th Defendants, did appoint the nominated consultant for the project:- S/N solN4Cs0wEuyQ1PQMatf0g

The change in the structure of investment and the change in the total investments was also disclosed to the board of directors of JCorp: S/N solN4Cs0wEuyQ1PQMatf0g

The deviation in the results of the actual oil and gas was also reported subsequently at the meeting held on 27-3-2017, and despite the S/N solN4Cs0wEuyQ1PQMatf0g same, the board chose not to raise any issue and continued with the project. S/N solN4Cs0wEuyQ1PQMatf0g

The status of the projects was presented to the board of the JCorp and the 1st Plaintiff as seen in the minutes dated 27-7-2016, 22-11- 2016, 22-1-2017, 15-4-2017,18-6-2017, 1-10-2017, 30-11-2017, 5-3- 2018, 14-3-2018, 24-6-2018, 1-7-2018, 22-4-2019, 26-5-2019, 8-7- 2019, 8-9-2019, 6-10-2019, and 24-11-2019.

I further find that despite hurdles to the SWBB project, the issue as to the oil reserves and the disclosures made as highlighted earlier, JCorp’s board agreed to invest in the project as seen in the minutes dated 22-1-2017:- S/N solN4Cs0wEuyQ1PQMatf0g This can also be seen in the minutes dated 22-4-2019:- S/N solN4Cs0wEuyQ1PQMatf0g

It is clear to this Court that as of 18-6-2017, the board of directors had wanted to dispose of the 2nd Plaintiff’s interests by way of the sale of the shares in PT CSE, knowing all of the issues highlighted earlier. In other words, it was not seen as a hindrance that there were issues with the SWBB project; to continue with the investments, and it was still possible to sell the shares in PT CSE to recoup the investments made eventually.

The 1st Plaintiff had also agreed to the extension of time for the completion of the condition precedents. I reproduce material parts of some of the reports that show this agreement:-

(i) Minutes of meeting 18-6-2017 S/N solN4Cs0wEuyQ1PQMatf0g

Eventually, the board of directors of the 1st Plaintiff decided to exit the SWBB project, as seen in the minutes of the meeting held on 30-9-

3 option was put to the board of directors as follows: - S/N solN4Cs0wEuyQ1PQMatf0g S/N solN4Cs0wEuyQ1PQMatf0g

It was only at this juncture that the board finally decided that the 1st Plaintiff should exit. This is after considering the (i) potential costs and time frame to develop the SWBB project, (ii) Kulim’s current change in investments and its decision, and (iii) reducing risk and maximizing returns.

It was not caused by any alleged misrepresentation or fraud by any of the Defendants. It was only found that at this stage, to continue with the venture is too capital-intensive beyond the risk acceptable to the company.

There may have been a need for further financing, but the board decided that their appetite for such risks has changed, and it is no longer acceptable for this venture to continue, but to try to put an end to it and find potential buyers. This will require keeping the venture sufficiently alive to attract potential interest from third parties. S/N solN4Cs0wEuyQ1PQMatf0g

I therefore do not find any evidence of any deception or negligence by the previous management for the SWBB project. They had disclosed the progress of the project honestly to the board. The decisions taken by them were above board. Unlike the Barut and Amara projects, the risks and facts were disclosed, and they did act in accordance with the directives of the board.

I reproduce the following excerpts from the minutes that show this: - S/N solN4Cs0wEuyQ1PQMatf0g

The same can be seen in the minutes of the board of directors of JCorp dated 7-10-2018: -

Despite the decision to exit the SWBB project, the board of directors of the 1st Plaintiff continued to agree to provide capital for the investment pending the exit or sale from PT CSE. This can be seen in the minutes dated 25-11-2018 and 28-2-2019. I reproduce material parts of the minutes:- S/N solN4Cs0wEuyQ1PQMatf0g

(i) Minutes 25-11-2018

It is to be noted that the following Defendants, on those dates, were no longer part of the Senior Management of the Plaintiffs: -

(i) Ahamad bin Mohamad (D1) left the employment of the 1st Plaintiff on 31-12-2016. He was only a corporate advisor of the 1st Plaintiff until 31-12-2019 and was no longer on the board of directors of the Plaintiff after 31-12-2016.

It was on 10-5-2020 that the board of directors of the 1st Plaintiff finally decided to stop any further investment in the SWBB project. This can be seen in the minutes of the meeting: - S/N solN4Cs0wEuyQ1PQMatf0g

Therefore, I find that the Plaintiffs have failed to prove that the 1st to the 4th Defendants are guilty of any of the alleged wrongs for the SWBB project. I find that the Defendants did act in accordance with their duties to the Plaintiffs and did disclose all important facts to the board of directors for their consideration to enable them to make an informed decision on the SWBB project. S/N solN4Cs0wEuyQ1PQMatf0g

I do agree that in the initial phases of the SWBB project, the Defendants had failed to disclose in full the details of the CGA report and failed to ensure that the project continued only if the oil well is proven and probable as claimed by the Plaintiffs. However, this error has since been overtaken by the events as they unfold. The board clearly knew that this was a risky venture. All of the important facts were disclosed to the board throughout the venture, and even though the board was told that there was only gas play involved, they chose to continue to invest.

I also find that the Defendants are not guilty of not obtaining any new independent reports as claimed by the Plaintiffs. I find that the board of directors did not direct the same, and there is no indication that there is anything wrong with the reports issued by CGA or by Lapi ITB at the time when the reports were delivered to the Defendants. The material parts of the reports were disclosed to the directors and were from reputable experts in the oil and gas industry in Indonesia. There is no evidence that these entities did not act independently of PT GSB or contain any material errors that warrant a new report. S/N solN4Cs0wEuyQ1PQMatf0g

I must remind myself that we are dealing with the discovery of oil deep within earth. This requires estimation based on available evidence from time to time. This changes once drilling exercises are undertaken and once new data is shown, the viability of investments may change. At the end of the day, the board realized that they were investing in a new and risky business. They were drilling for oil and gas deep in the ocean, and this venture is clearly speculative.

Therefore, just because the reports by CGA, LAPI, ITB or UPN may have been procured by PT GSB, this does not mean that they are faulty or require further investigations unless this is required by the Board. No such indication was made, and there is no reason to suspect that these reports were wrong.

I also find that the decision to summarize and rely on the initial report of CGA or even the report by UPN or Lapi ITB and present it to the board is reasonable. For the SWBB project, they were dealing with a prospective oil and gas-producing well. This is speculative in nature and would depend on the reports presented to them. The reports by S/N solN4Cs0wEuyQ1PQMatf0g CGA, UPN or LAPI ITB may have been procured by PT GSB, but at that time, there was no indication or any finding that these were erroneous.

I again stress that I must remember that the Defendants were dealing with drilling for oil in Central Sumatra. It is only when the drilling starts and oil is produced, or otherwise would the viability of the investment would be known.

At all times, the board of directors of the Plaintiffs and JCorp were told that (i) this is a new business for the company, (iii) it is risky and (iii) that as the project progressed, the findings changed. Despite the risk factor and the summary of the reports presented, the board agreed to invest and even after finding merely gas play, continue to invest.

As shown by the board’s own decisions, seen in the minutes produced earlier, even after it was proven that only gas could be produced from one of the wells, it was decided that the Project should continue. S/N solN4Cs0wEuyQ1PQMatf0g

As such, I do not find that the Defendants are guilty of any wrongdoing as claimed by the Plaintiffs. There is nothing wrong with the Defendants relying on the reports by these experts, even though they were appointed by PT GSB.

On the issue of the Kulim Support Letter, I find that the said letter was only issued by the 1st Defendant to enable the SWBB project to proceed. It was issued to any persons who may be interested and was for the purpose of obtaining the approval from the authorities in Indonesia. In any event, the expenses incurred for the project were disclosed at all times to the board of directors and were approved by the board of directors. Therefore, even if I am wrong on the issuances of the said letter, this has since been overtaken by events as the board knew from the beginning to the end the extent of the capital investment required and actually spent by Kulim for the SWBB project. I agree with the Defendants’ contention that the Support Letter was issued in accordance with the approved Work Programme and Budget for the SWBB project. S/N solN4Cs0wEuyQ1PQMatf0g

This is simply a case of a failed business decision. It was a wrong commercial project in hindsight, but as I could see from the minutes of the board meetings, the Defendants had acted as they believed were in the best interests of the company.

I do accept that the steps taken by them concerning the project were far from perfect, but I do not see any basis to justify the Plaintiffs’ claim for (i) fraud, (ii) negligence, (iii) breach of fiduciary duty or (iv) misrepresentation as alleged against the Defendants for the SWBB project.

I also find that the claims for the release of payments for the SWBB project are without any basis. I find that the minutes of the board meetings show that the payments for the projects were approved by the board and were made within the mandate granted to the senior management of the company. There is no basis to justify the claims made against the Defendants. S/N solN4Cs0wEuyQ1PQMatf0g

With regard to the 5th and 6th Defendants, I find that they were not involved in the deliberations to invest in the 3 Indonesian projects. Therefore, the claims for the losses relating to the decision to invest in Indonesia, as claimed by the Plaintiffs against them, are also dismissed. (H.13) Finding of Liability for the Barut, Amara and SWBB project against the 1st to 4th Defendants

For the aforementioned reasons, I find that the 1st to 4th Defendants, by reason of their positions, had actual knowledge or should have known or should have exercised due care and diligence, the existence of these reports, legal risks and material weaknesses for the Barut and Amara Project, or at the very least ought to have known of them, and disclosed them to the board of directors.

I find that the undisclosed material was material, in that a reasonable board would have considered it relevant and potentially decisive, restructuring, or declining the investments. The failure to disclose was not inadvertent or accidental but was repeated for the 2 projects. They S/N solN4Cs0wEuyQ1PQMatf0g were conscious decisions to present the investments in a more favorable light while withholding adverse facts.

As senior directors and managers of the corporation, the Defendants owed a duty of candor to the Board of the 1st Plaintiff and JCorp. I find that this duty was breached when material risks, adverse opinions and structural changes for the projects were not fully disclosed.

The 1st Defendant, as the CEO / Managing Director, had ultimate responsibility for ensuring full compliance with the duties owed to the board, and all decisions were undertaken in the best interests of the company. He should also ensure that the directives of the board are complied with.

The 2nd Defendant, being the head of the plant operations and answerable to the board, had operational knowledge and direct involvement in the Indonesian project. He should have ensured that all information relating to the Amara and Barut was disclosed and S/N solN4Cs0wEuyQ1PQMatf0g warned the board of the full risks. He cannot feign ignorance and rely on the broad shoulders of the 1st Defendant. The same applies to the 3rd Defendant.

The 4th Defendant also participated in the approval process, the structuring and the inception. Therefore, the 4th Defendant should have ensured that all material information, risks and opinions from third parties, such as Messrs Ishak & Co, be disclosed fully to the board.

I must stress, that the Defendants are not guilty of fraud or dishonesty. They were negligent in the exercise of their duties to the company and failed to disclose all important facts and act as directed by the board for the Amara and Barut projects. The evidence shows that they were overzealous and took short cuts. I find that the evidence does not show ill intent or malice or any fraudulent conduct on the part of the 1st to 4th Defendants in their discharge of their duties to the Plaintiffs. S/N solN4Cs0wEuyQ1PQMatf0g

The finding does not extend to the SWBB investment. The investment is clearly speculative and risky. The board was well informed of this fact and knew of the risks involved. I find, unlike the Amara and Barut projects, that sufficient materials and information were disclosed to the board.

I therefore find that Board knew the risks they were taking. They were drilling for oil in Central Sumatra conditions, and the outcome of which was inherently uncertain. Even when they found that there was at best “gas play”, the board agreed to continue. The minutes indicate that sufficient disclosures were made. I cannot fault the Defendants for the business deal that went sour.

I also find that the decisions by the 1st to 4th Defendants to release payments and continue with the Amara and Barut projects were genuine business decisions taken by the Defendants. The inception of the 2 projects may have been processed wrongly in breach of their duties; this does not mean that their attempt to make the ventures successful was wrong. S/N solN4Cs0wEuyQ1PQMatf0g

The above has been assessed objectively by this Court based on the facts known and should have been known at the material time, without the benefit of hindsight.

For the above reasons, I find that no liability should be imposed against the Defendants relating to the SWBB project. (H.14) Summary Findings on Disclosure, Board Knowledge and Good Faith – Barut, Amara, and SWBB projects

Having carefully considered the documentary evidence and the testimony of all witnesses, this Court finds that the investments in question were not undertaken in a vacuum, nor were they concealed from the corporate governance framework of the Plaintiffs. I do find errors by the Defendants relating to the Barut and Amara projects but I find that the board knew of the material risks and all material information concerning the SWBB project. S/N solN4Cs0wEuyQ1PQMatf0g

The evidence demonstrates that the proposals relating to Project Barut, Project Amara and the SWBB PSC were presented through established internal processes, including deliberations at management level, the Teraju committee, and the Boards of the 1st Plaintiff and JCorp.

While the Plaintiffs have criticized the adequacy and completeness of the information presented, which I accept for Barut and the Amara projects, I am not persuaded that the Defendants deliberately suppressed or concealed material facts from the decision-making bodies. I find that the Defendants were overzealous and made material judgment errors leading to a finding of negligence against them. They were honest but reckless in their decision and the processes undertaken to pursue the Barut and Amara projects.

For the SWBB project, this Court finds that the documentary record shows that the Boards were aware that these were high-risk overseas investments, that legal and commercial issues existed, and that further capital injections might be required. The fact that the S/N solN4Cs0wEuyQ1PQMatf0g investments ultimately failed does not, without more, establish that the Defendants acted dishonestly or in breach of their duties at the material time. (H.14) Did the Plaintiffs suffer any damages due to the breaches of duty to the board and failure to comply with the directions of the board

I will now deal with the losses claimed against the 1st to 4th Defendants for the Barut and Amara projects. This is not an easy area to deal with. (H.15.1) Applicable Law on Damages and How to Assess

As a starting point, I must distinguish between the losses that may be recovered for breach of fiduciary duties and for negligence. I first refer to the decision of Chong Siew Fai CJ (Sabah and Sarawak) in Newacres Sdn Bhd v Sri Alam Sdn Bhd [2000] 2 CLJ 833 on the issue of damages that may be awarded for breach of fiduciary duties, his Lordship explained that the purpose of such an award is to put the Plaintiffs in a position as if the breach had not occurred. S/N solN4Cs0wEuyQ1PQMatf0g

His Lordship stated: - “As to the contention for the developer that disgorgement of profits is the only remedy for breach of fiduciary duty, I am in agreement with counsel for the landowner that this is not so. In Nocton v. Lord Ashburton, supra, Viscount Haldane LJ spoke of "the old bill in Chancery to enforce compensation for breach of a fiduciary obligation" (p. 946). In Day v. Mead, supra, the issue of whether monetary compensation is available for breach of a fiduciary duty was called in question. The Court of Appeal in New Zealand accepted that courts, with the mingling of law and equity, must always have had the power to compensate by an award of money. In that case, compensation was awarded. See also Re Dawson [1966] 2 NSWR 211 (at 216) and Commonwealth Bank of Australia v. Smith [1991] 102 ALR 453 (at 479-480) where the Courts in Australia accepted that compensation might be given for breach of fiduciary duty. S/N solN4Cs0wEuyQ1PQMatf0g Another objection of the developer was the awards by the Court of Appeal of what might strictly be regarded as contractual entitlements under the JVA for the developer's breaches of fiduciary duties. I do not consider anything objectionable in this regard. The measure of compensation is to put a plaintiff in a position he would have been had the breach not been committed. In our present case, as the pleading shows, the landowner relied on the JVA to establish the fiduciary duty. In the circumstance there is no reason why the measure of compensation cannot be that in the JVA. The Court of Appeal, in my view, was not precluded from relying on the provisions in the JVA when assessing compensation for any breach on the part of the developer. Given the circumstances, this seems a fair way of determining compensation due to the landowner.”

I also refer to Kuan Pek Seng @ Alan Kuan v Robert Doran & Ors [2012] CLJU 775, where Jeffrey Tan FCJ held: S/N solN4Cs0wEuyQ1PQMatf0g “[100] Four authorities (Target Holdings, Newacres [2000], Day v. Mead [1987] 2 NZLR 443, and Chirnside and Anor v. Fay [2006] NZSC 68) were cited by the respondents to support the argument that the respondents were entitled to recover the full measure of their investment. But we do not perceive that those four authorities would lend such support. In Target Holdings, the House of Lords held that a trustee could not be liable to compensate the beneficiary for losses which the beneficiary would in any event have suffered if there had been no such breach, that the defendant's wrongful act had to cause the damage complained of, and that the plaintiff was to be put in the same position as he would have been if he had not sustained the wrong for which he was being compensated. That the award of damages is to compensate losses caused by the wrongful act was also upheld in Day v. Mead, where the Court of Appeal of New Zealand held that the plaintiff who was partly the author of his own loss was not entitled to the full sum invested. In Chirnside and Anor S/N solN4Cs0wEuyQ1PQMatf0g v. Fay, the Supreme Court of New Zealand held that the appropriate remedy where a fiduciary profited from breach of duty was disgorgement of the profit through an account. However, in Newacres [2000], the Federal Court held that disgorgement of profits is not the only remedy for breach of fiduciary duty, and that the measure of compensation, which is to put a plaintiff in a position he would have been had the breach not been committed, could be as provided in the joint venture agreement. None of those four authorities that the respondents should be entitled to the full measure of their investment.”

Further reference is made to the decision of Lord Browne-Wilkinson In Target Holdings Limited v Redferns [1996] 1 AC 421 where he explained the issue of damages in relation to breaches of duties owed by fiduciaries: - “The equitable rules of compensation for breach of trust have been largely developed in relation to such traditional trusts, where the only way in which all the beneficiaries' S/N solN4Cs0wEuyQ1PQMatf0g rights can be protected is to restore to the trust fund what ought to be there. In such a case the basic rule is that a trustee in breach of trust must restore or pay to the trust estate either the assets which have been lost to the estate by reason of the breach or compensation for such loss. Courts of Equity did not award damages but, acting in personam, ordered the defaulting trustee to restore the trust estate: see Nocton v. Lord Ashburton [1914] AC 932, 952, 958, per Viscount Haldane L.C. If specific restitution of the trust property is not possible, then the liability of the trustee is to pay sufficient compensation to the trust estate to put it back to what it would have been had the breach not been committed: Caffrey v. Darby (1801) 6 Ves. 488; Clough v. Bond (1838) 3 My. and Cr. 490. Even if the immediate cause of the loss is the dishonesty or failure of a third party, the trustee is liable to make good that loss to the trust estate if. but for the breach, such loss would not have occurred: see Underhill and Hayton, Law of Trusts and Trustees 14th ed. (1987) pp. 734-736; In re Dawson S/N solN4Cs0wEuyQ1PQMatf0g decd.; Union Fidelity Trustee Co. Ltd. v. Perpetual Trustee Co. Ltd. [1966] 2 N.S.W.R. 211; Bartlett v. Barclays Bank Trust Co. Ltd. (Nos. 1 and 2) [1980] Ch. 515. Thus the common law rules of remoteness of damage and causation do not apply. However there does have to be some causal connection between the breach of trust and the loss to the trust estate for which compensation is recoverable viz. the fact that the loss would not have occurred but for the breach: see also In re Miller's Deed Trusts (1978)75 L.S.G. 454; Nestle v. National Westminster Bank Plc. [1993] 1 W.L.R.1260”

This is to be contrasted with the losses that may be recovered for acts of negligence by directors. On this issue I refer to the decision of the Court of Appeal in Soh Chee Gee v Syn Thai Hung Trading Sdn Bhd [2019] 2 MLJ 379 where Nallini Pathmanathan JCA held that for a claim based on the alleged losses suffered due to negligence, damages must still be shown: - S/N solN4Cs0wEuyQ1PQMatf0g “[66] However, we are not convinced that the defendant can be said to be solely responsible for the losses of the company stated to be RM16m plus. This case is unlike other cases where the employee acted in breach of his fiduciary duties and appropriated the company’s funds for himself. In such an event, the losses are clearly attributable directly to the acts of the employee and should be ordered to be disgorged. That is not the case here. Several factors go into assessing the cause for the losses stated to be suffered by the plaintiff company, particularly the role played by Cosmo and the benefit received by it. [67] As an employee, unless it can be established that he acted dishonestly and enjoyed pecuniary gains as a result of his misconduct, there is no legal basis to hold him liable for the totality of the losses that was not the thrust of the charges preferred against him; neither were such clear findings of fact made against him by the domestic inquiry panel. In the absence of such evidence, the defendant’s liability for the entirety of the losses is not made out. On S/N solN4Cs0wEuyQ1PQMatf0g liability alone, this aspect of the claim for damages is not established.”

Therefore, I find that the above case suggests that in cases concerning negligence, causation must be proved before any claim for damages is sustainable against a defendant. This is also seen in England and Wales, as seen in Barrofen Properties Limited v Girish Dahyabhai Patel & Ors [2025] EWCA Civ 39 where Lord Justice Snowden stated concerning a claim for breaches of such duties: - “As I have indicated, as a matter of principle, British Westinghouse requires an overall assessment to be made of losses suffered and benefits obtained by the claimant, in each case caused by the breaches of contract or breaches of duty in question. Focusing on the issue of causation naturally requires an assessment of what would have occurred in the counterfactual in which there had been no such breaches.” S/N solN4Cs0wEuyQ1PQMatf0g

I have found the 1st to the 4th Defendants liable in negligence. The Plaintiffs must therefore establish, on a balance of probabilities, that but for the negligent acts or omissions of the Defendants, they would not have entered into the projects and suffered the losses claimed. On the evidence before this Court, such causation is not made out. At its highest, the Plaintiffs’ case discloses only a claim for loss of opportunity said to have arisen from the Defendants’ negligence. However, even on that footing, the Plaintiffs have failed to prove, on a balance of probabilities, the existence or value of any such lost opportunity.

I am grateful to the Plaintiffs counsels for referring to me the decision of the Singapore Court of Appeal in Sim Poh Ping v Winsta Holdings [2020] SGCA 35. I find that the decision of the case does not apply to the facts at hand. S/N solN4Cs0wEuyQ1PQMatf0g (H.15.2) Application of the law to the facts –Damages for Amara and Barut Projects

In this case, I find that the breaches complained of by the Plaintiffs and which I have found liability relating to the failure of the 1st to the 4th Defendants relate solely to the failure to disclose material information and for their failure to ensure that the directives of the board is complied with, need not automatically lead to the losses that are claimed by the Plaintiffs in full for the failure of the projects in total.

The losses for the Barut project to be awarded must relate to the failure of the Defendants to (i) disclose material facts, (ii) ensuring that the Share Sale Agreement contains the clause to ensure payments will be made based on the delivery of the HGUs and licenses, and that (ii) fresh valuations are undertaken by the company as to the fair value of the lands held by PT WIN.

Furthermore, I must consider the fact that the 1st Plaintiff has since entered into a Settlement Agreement with PT GSB, which had S/N solN4Cs0wEuyQ1PQMatf0g reduced the damages claimable against PT GSB’s failure to deliver its promise for the deliveries of the HGU’s and licenses. The right continues to exist, and the Plaintiffs could enforce the Settlement Agreement.

As the 1st Plaintiff entered into a Settlement Agreement with PT GSB for its failure to deliver the HGUs for the plantations, any losses claimable for the failure of the project have since been subsumed by the Settlement Agreement. The 1st Plaintiff has agreed to the Settlement Agreement with PT GSB, and this represents the losses claimable for the project.

Therefore, it is for the 1st Plaintiff to now pursue the claims against PT GSB and not against the Defendants. This does not absolve the Defendants of the breaches of their duty of care owed by the 1st to the 4th Defendants to the Plaintiff. S/N solN4Cs0wEuyQ1PQMatf0g

With regard to the Amara project, it must be shown that the losses were caused by the failure to disclose the material facts at the inception of the project. This included the failure to disclose the opinion of Messrs Ishak & Co. This burden lies with the Plaintiffs.

It must also be noted that I cannot discount the real probability that the Amara and Barut projects may have continued even if the disclosures were made. I also cannot discount that the board may have even agreed to continue with the structure suggested by the management and agreed to by PT GSB. There is a possibility that the project could have proceeded even if all the information, risks and all actions were correctly taken by the Defendants.

I have also found that the expenditures undertaken by the Plaintiffs for the Barut and Amara projects was made for a genuine business transaction and was honestly undertaken by the Defendants. The Defendants cannot then be found liable for the whole of the expenses S/N solN4Cs0wEuyQ1PQMatf0g undertaken for the 2 projects. I therefore hold to make such a finding would be inequitable.

Nevertheless, I find that there is a possibility the board may have attempted to renegotiate the price or even the structure of the projects if the information and the investment structure were fully disclosed. I also find that if the board’s directives had been followed, the risks faced by the company for the failed projects may have been reduced. It is these losses that must be quantified and proved by the Plaintiffs.

However, I find that the Plaintiffs have not shown the value of this loss of opportunity and the value of the reduced risks. There is no evidence before me to show the amount of losses suffered by the Plaintiffs for the loss of opportunity. I find that this Court cannot find the Defendants to be liable for the whole project and the whole sums incurred. S/N solN4Cs0wEuyQ1PQMatf0g

Even if this Court were to assume that certain governance lapses occurred, the Plaintiffs must still establish that the losses claimed were caused by those breaches. This they have failed to do.

The evidence does not demonstrate that the investments would not have been undertaken, or that the losses would have been avoided, had the alleged disclosures been made differently or had further approvals been obtained. The Plaintiffs’ losses flowed from the commercial risks inherent in the investments, including regulatory uncertainty, operational challenges, and adverse market conditions. The evidence of the board member produced only shows his views in hindsight of what has since occurred to the project. I find that there is no objective evidence produced to support the Plaintiffs’ contention that if these disclosures were made the projects would have stopped. Instead, what was shown in the minutes was that the board was eager to continue with the project even when the amount of investment had to be increased. S/N solN4Cs0wEuyQ1PQMatf0g

Courts do not award damages for commercial disappointment. To do so would convert directors into insurers against business failure, which the law does not permit. The Court cannot assess such hypothetical outcomes without descending into speculation, which equity does not permit

For these reasons, this Court declines to award any damages against the 1st to the 4th Defendants. Although the Court has found that the Defendants were negligent in the discharge of their duties to the company, the Plaintiffs bear the burden of proving the loss caused by that negligence.

The Court finds that the Plaintiffs have failed to adduce evidence capable of valuing the alleged loss of opportunity or of quantifying the extent to which any identifiable risk would have been reduced. There is no evidential basis upon which the Court can assess what financial outcome would probably have ensued had the Defendants acted differently. The assessment of damages for breach of duty must be proportionate to the nature and gravity of the breach. In Target S/N solN4Cs0wEuyQ1PQMatf0g Holdings Ltd v Redferns [1996] AC 421, the House of Lords emphasized that a trustee (or fiduciary) is liable to make good only the loss actually caused by the breach, not to restore the beneficiary to the position that would have obtained if no investment had been made at all.

I find that the relevant inquiry is not "what was the total amount invested?" but rather "what loss flowed from the procedural defects?". As such the recoverable loss would, at most, comprise:

(i) Loss of opportunity to negotiate more favorable terms or to decline the investment - this is inherently a matter of valuation and probability, not a certain sum equal to the entire investment.

None of these heads of loss would approach the total sums invested. No evidence of such losses was produced by the Plaintiffs.

In these circumstances, the Court cannot hold the Defendants liable for the losses of the projects as a whole, nor can it isolate any portion of the sums incurred as being attributable to the Defendants’ negligence. The Plaintiffs have therefore failed to prove, on a balance of probabilities, that any compensable loss was caused by the negligence found.

The Court must guard against hindsight. The law does not permit working backwards from outcome to liability. The evidence does not establish that any quantum of loss was caused by procedural failures as distinct from inherent commercial risks.

Accordingly, no damages are recoverable. The Plaintiffs established governance failures; they did not establish what financial difference compliance would have made. S/N solN4Cs0wEuyQ1PQMatf0g (H.14.3) Relief available to the 1st to 4th Defendants – Honesty and Reasonable Facts to exercise powers under section 581 Companies Act and Business Judgment Rule

I find that the 1st to the 4th Defendants have acted contrary to their duties to the company. The Defendants deprived the Board of the opportunity to manage risks by withholding material facts, opinions from counsel, reports and risks. It is important to distinguish between the establishment of a breach of the duty of care and the consequences that ought to flow from such breach. A finding of negligence does not inexorably compel the imposition of liability where Parliament has expressly conferred upon the Court a discretionary power to relieve an honest director from the consequences of such breach. Section 581 is engaged precisely in cases of this nature — where fault is established, but (i) the Defendants have shown that they were honest in pursuing a legitimate business opportunity and (ii) it is reasonable to relieve them of the obligations based on the overall circumstances of the case at hand. S/N solN4Cs0wEuyQ1PQMatf0g

Nonetheless, I find that this is a suitable case to exercise the powers reposed under Section 581 of the Companies Act and the common law defence as laid down earlier to relieve the Defendants from the claims made against them.

The Plaintiffs established that there were deficiencies in governance and documentation in relation to the Barut and Amara projects. Certain processes were imperfect, and some information might have been presented more fully or more clearly. However, those matters did not amount to disloyalty, bad faith, conflict of interest, or conduct falling outside the range of reasonable commercial judgment.

The evidence demonstrates that the Defendants believed, at the time, that these projects were commercially promising and aligned with the Plaintiffs’ broader investment strategy. Therefore, even if I am wrong on the issue of damages, I find that this is a suitable case to relieve the Defendants of their liability to the Plaintiffs. Like I stated earlier, S/N solN4Cs0wEuyQ1PQMatf0g they were overzealous and were negligent but I do not hold they were dishonest.

Although the 1st to 4th Defendants did act in breach of their duties, these were undertaken honestly and what they believed were in the best interests of the corporation. It is clear that they were negligent, took short cuts and were overzealous in the pursuits of the deals with PT GSB. That does not tantamount to fraudulent conduct.

However, I reiterate their actions were not dishonest and they were not undertaken with ill will or contained any form of deceit. I find that they genuinely believed that the investments were in the best interests of the company but failed to exercise due care when proposing the projects to the board for their consideration. This also extends to their decisions to release monies for the projects. They genuinely wanted the projects to succeed. Their actions may be far from perfect but I believe that they did act honestly. S/N solN4Cs0wEuyQ1PQMatf0g

I refer to the decision of the Court of Appeal in Pioneer Haven Sdn Bhd v Ho Hup Construction Co Bhd & Anor [2012] 5 CLJ 169 in the context of the previous section 354 of the Companies Act: - “[289] Even if the defendant directors' (D4 –D8) were to be liable for breach of their directorial duties, they could rely on the protection afforded them under s. 354 of the Act to relieve them of their liabilities. [290] Our s. 354(1) of the Act is in pari materia with s. 365(1) of the Australia Companies Act 1961. Both these statutory provisions have their roots in the UK Judicial Trustees Act 1896. ….. [292] The word ' Honestly' in the context of s. 365(1) of the Australian Companies Act 1961 (which is in pari materia with our s. 354(1) of the Act) was discussed in a couple of Australian cases. One such case is Dominion Insurance Co of Australia Ltd (in liquidation) and Anor v. Finn [1989] 7 ACLC 25, where the word 'Honestly' is stated to suggest S/N solN4Cs0wEuyQ1PQMatf0g ‘a subjective state, free from any intention to deceive or defraud’. [293] As regards the word ' reasonably' in the context of s. 365(1) of the Australian Companies Act 1961 (which is in pari materia with s. 354(1) of our Companies Act), courts in Australia had discussed the construction to be given thereto. One such authority is Maelor Jones Investments (Noarlunga) Pty Ltd and Ors v. Heywood-Smith [1989] 7 ACLC 1232 where the term 'Reasonably' was stated to suggest that it is: ... unlimited except by relevance and therefore the inquiry is whether in relation to their duty or circumstances relevantly connected with their breach of duty. The relevance of reasonableness is in a context of being excused for fault. Many of the considerations going to whether the defendants acted reasonably also comprise circumstances of the case to be taken into consideration on the question of whether the discretion to excuse should be exercised... S/N solN4Cs0wEuyQ1PQMatf0g [294] Thus, s. 354 of Act could be invoked too, if need be, to relieve the defendant directors from the alleged liabilities since they had acted honestly and reasonably at all material times.”

Considering their personal history with the company and how they have worked throughout the company’s history to make it a successful enterprise, I believe it is reasonable for the Defendants to be relieved of liability from the Plaintiffs’ claims.

The purpose of section 581 of the Companies Act is to provide an equitable umbrella for directors and officers of corporations who have acted honestly and reasonably for any errors that they may have made in the course of the management of the business affairs of the company. I reproduce what was said by Clarke and Sheller JJAs of the Australian Court in Daniels v Anderson [1995] 37 NSWLR 438 that the purpose of relief under the Australian Corporation Act is:- “to excuse company officers from liability in situations where it would be unjust and oppressive not to do so, recognising that such officers are businessmen and S/N solN4Cs0wEuyQ1PQMatf0g women who act in an environment involving risk in commercial decision-making.”

The proviso balances the need to make directors and officers accountable for their conduct but at the same time not to deter talented and honest individuals from offering their services due to the risks of being sued for any mistakes or errors in the management of the corporation.

I find that if a Defendant / Director has shown to this Court he “has acted without deceit or conscious impropriety, without intent to gain improper benefit or advantage for himself, herself or for another, and without carelessness or imprudence to such a degree as to demonstrate that no genuine attempt at all has been to carry out the duties and obligations of his or her office imposed by the Corporations Act or the general law,” then he or she may be granted relief under section 581 of the Companies Act. See the decision of Justice Palmer in Hall v Poolman [2007] NSWC 1330. S/N solN4Cs0wEuyQ1PQMatf0g

This Court is satisfied that the requirements for relief under section 581 of the Companies Act 2016 are met. I find that the test laid down by Ahmad Fairuz JCA in Iris Corporation Berhad v Tan Sri Razali bin Ismail [W-02(NCC)(WW)-1736-09/2022] is also satisfied. It has been shown to this Court that the directors honestly believed that:

(i) the decisions were undertaken for business purposes and were made for a proper purpose and in good faith;

(v) although the investments in question involved substantial sums, the magnitude of a transaction cannot, in itself, preclude the S/N solN4Cs0wEuyQ1PQMatf0g application of section 581 to afford relief for an honest but flawed commercial decision.

I find that the Defendants acted honestly, without personal gain, and in the genuine belief that their actions were in the best interests of the Plaintiffs. They were negligent, as I have found earlier, but I believe that they genuinely believed that the investments were in the best interests of the company. The decisions made and their actions were also made honestly. There is no evidence that they profited personally from these investments and had put their interests first to those of the company.

This Court must balance the need to ensure that directors and officers are accountable and act in the best interests of the company but at the same time that officers and directors of corporations are willing and able to take risks. This Court must also take cognizance of the pressure of the corporate world but at the same time protect shareholders, creditors and those who deal with such companies. S/N solN4Cs0wEuyQ1PQMatf0g This is not an easy task and no hard rule could be laid down that could be used in all cases. The exercise of the powers under section 581 of the Companies Act will depend on the facts of each case.

An example of the application of this statutory relief can be seen from the Australian case of Hall v Poolman (supra). In that case, the claim against the Chairman and Deputy Chairman of the company for insolvent trading due to the claims by the tax authorities. The argument pursued was that the two directors knew of the claims by the tax authorities and if those claims were considered it would have been clear that the companies in the group of companies were insolvent and should not continue to trade.

The Australian Court found that the directors had allowed the company to trade during a time when a reasonable director would have been aware of grounds to suspect that it was insolvent. Despite the finding, the Court exercised its powers under section 1318 of the S/N solN4Cs0wEuyQ1PQMatf0g Australian Corporation Act to relieve the directors from liability. Justice Palmer stated: - “….it is sometimes a difficult decision for a director of a trading corporation suffering from liquidity problems to decide whether, and when, to abandon hope of a change in the company’s fortunes and to summon the administrators. There are often pressing interests involved in the decision: the jobs of employees will be lost, the investment of shareholders will evaporate, and a promising venture in which a great deal of personal effort may have been expended will end in failure. On the other hand, the livelihood of creditors whose businesses depend on reasonably prompt payment may also be ruined if a company continues to trade while insolvent. When confronted with the necessity of making a decision involving these factors, a director cannot afford to procrastinate or to avoid confronting realities. He or she must ask and honestly answer [hard questions S/N solN4Cs0wEuyQ1PQMatf0g regarding how, and when, the company will be able to pay its debts]. … Experienced company directors such as Mr Irving would appreciate that, in some cases, it is not commercially sensible to summon the administrators or to abandon a substantial trading enterprise to the liquidators as soon as any liquidity shortage occurs. In some cases a reasonable time must be allowed to a director to assess whether the company’s difficulty is temporary and remediable or endemic and fatal. The commercial reality is that creditors will usually allow some time for payment beyond normal trading terms, if there are worthwhile prospects of an improvement in the company’s position. …Mr Irving’s] judgment was made in very difficult circumstances; it was made in the knowledge that a large and potentially profitable public company could be placed in liquidation simply because the ATO did not S/N solN4Cs0wEuyQ1PQMatf0g seem to be dealing with a commercial settlement proposal with any degree of expedition. What if the [the company were placed into voluntary administration] and the Reynolds Group collapsed, only to be told days later that the ATO agreed to settle the dispute on favourable terms? It is not hard to envisage the directors’ sense of frustration in such circumstances.”

Therefore, this Court must assess the decisions made by these Defendants and see whether: -

(i) the decisions were honestly made in what they believed to be in the best interests of the company.

Taking the above factors into consideration and the evidence presented by the litigants in this case, I hold that it would be unjust and disproportionate to impose personal liability for what were, at most, errors of commercial judgment in a complex cross-border investment environment against the directors. I agree that they were negligent and did breach their duties owed to the company. However, I do not find any evidence of dishonesty and I find that they were acting in what they believed were in the best interest of the company.

I find that they were wrongly overzealous in pursuing the business in Indonesia and had wrongly not followed the strict rules of corporate governance in place. I have to consider the realities of commercial ventures and how sometimes errors in judgments that were made honestly could lead to multi million Ringgit losses. I also find that the failure of these projects reflects the commercial difficulty of investments in plantation assets in Indonesia and the inherent risks there. Taking of risks is part and parcel of commercial venture and in certain instances, the upside may be substantial. I find that these S/N solN4Cs0wEuyQ1PQMatf0g ventures were honestly pursued by the Defendants to benefit the Plaintiffs but they were negligent in the discharge of their duties.

In my judgment, the failure of the 1st to 4th Defendants lies not in a lack of bona fides, but in a specific lapse of the procedural rigor expected of directors in transactions of this magnitude. While I accept that they were motivated by a desire to pursue the Indonesian investments, they fell into error by prioritizing commercial expediency over the strictures of corporate governance. The Defendants’ liability stems not from a defect of character, but from a defect of procedure.

They assumed, wrongly, that the (i) information provided was sufficient, (ii) that the broad mandate of the Board covered all decisions taken by them and (iii) that there was no need to inform the board of any changes in the business decisions or structure of the investments concerning Amara and Barut. This constituted a breach of their duties to the company. They believed that the project was in S/N solN4Cs0wEuyQ1PQMatf0g the best interests of the companies. To them it was a genuine business opportunity.

I am aware that it may seem contradictory to find the Defendants negligent on one hand yet excuse them for acting 'reasonably' on the other. However, Section 581 allows this Court to take a wider view. I must look at the reality of the situation, not just the technical breach. In the heat of the corporate decisions being made, they made mistakes, but they made them honestly.

However, since there is no evidence before me that they acted for collateral purpose or personal gain and the overall evidence shows that they were honest, this Court believes that this is a suitable case for a section 581 relieve be invoked in favour of the Defendants. I am not condoning such wrongs, but merely affording the Defendants the defense as intended by the legislator prescribed in section 581 of the Companies Act. I further hold that the common law defence available to directors in cases such as ours is applicable to the facts S/N solN4Cs0wEuyQ1PQMatf0g of this case. Accordingly, this Court exercises its statutory discretion to relieve the Defendants from liability.

I refer to the decision of the English Court of Appeal in Neil Leslie Humphrey & Anor v Paul Craig Bennett & Anor [2023] EWCA Civ 1433 where Lord Justice Snowden stated: - “85. Depending on the facts, I accept that a failure to use the routes that Parliament has specified to avoid a breach of duty may provide some support for an argument that the director had not acted reasonably. However, in the same way as Hoffmann LJ held in Re D'Jan of London Limited [1994] 1 BCLC 561 that someone who has been found to have acted negligently, which involves a failure to take reasonable care, can nevertheless obtain relief on the basis that they have acted reasonably for the purposes of section 1157, so also it may be that a director who has failed to use, or has insufficiently used, the mechanisms provided by the 2006 Act to avoid a breach of duty under S/N solN4Cs0wEuyQ1PQMatf0g sections 175 and 177 might nevertheless be found to have acted reasonably for the purposes of section 1157.”

I am satisfied that the Defendants’ conduct, while falling short of the high threshold of procedural perfection required by law, was 'reasonable' in the commercial context of the time. Accordingly, having acted honestly and with the intent to benefit the company, I find that they ought fairly to be excused.

Even if the Plaintiffs had succeeded in proving causative loss, which they have not, the Court would in any event have exercised its discretion under section 581 of the Companies Act 2016 to relieve the Defendants from liability, as the Court is satisfied that they acted honestly and reasonably and ought fairly to be excused.

I find that section 581 of the Companies Act exists precisely to provide a safety valve for cases where directors, acting honestly and in difficult circumstances, make errors of judgment that do not reflect moral culpability. S/N solN4Cs0wEuyQ1PQMatf0g

The purpose of the provision is not to excuse dishonesty or disloyalty, but to ensure that directors who act bona fide, without personal gain, and in pursuit of what they reasonably believe to be the company’s interests are not retrospectively penalised by the outcome of their decisions. To hold otherwise would risk deterring legitimate commercial risk-taking and would improperly substitute judicial hindsight for business judgment. This is such a case.

For the avoidance of doubt, the business judgment rule does not operate to absolutely excuse a proven failure to exercise reasonable care and diligence. Where negligence is established, the rule does not negate such breach. It could only be invoked if it is shown that the directors were honest and the facts of the case reasonably justifies its application. I hold that the Defendants have shown that they were honest and the facts justifies the reliance on the said defence.

The above considerations also apply to the SWBB project. Even if I am wrong on the issue of liability, I also find for the same reasons that the Defendants should be afforded to the defence provided for under S/N solN4Cs0wEuyQ1PQMatf0g section 581 of the Companies Act. The facts in this case justify the invocation of the said principle. I. The liability of the 5th and 6th Defendants for the inception of the Barut Amara and SWBB projects

I will now deal with the liability of the 5th and 6th Defendants concerning the inception of the Barut, Amara and SWBB projects.

I find that these 2 Defendants are not liable as they had no role in the inception of the projects. They were not actively involved in the preparation of papers and had no role with regard to the structuring of the investments and the agreements entered into with the Indonesian counterparts.

There is no evidence that they were party to the decisions made, as revealed in the minutes of the board meetings and the papers presented to the board. S/N solN4Cs0wEuyQ1PQMatf0g

Therefore, I find that the 5th and 6th Defendants are not liable for the claims relating to the inception of the Barut, Amara and SWBB projects.

I have also considered the argument by the Plaintiffs that the 2 Defendants should have alerted the board and their superiors of the need to evaluate independently the prospects of the projects, the plantations and even the business plan or proposals for the Barut, Amara and SWBB projects.

I find that the allegations put obligations that do not fall on the shoulders of the 5th and 6th Defendants.

It is important to remind oneself that the 5th Defendant was the Chief Financial Officer of the company and reported to the 1st to the 3rd Defendants. As seen even from the pleaded case of the Plaintiffs, the obligation to plan the business affairs of the companies resides with the 1st to 4th Defendants. S/N solN4Cs0wEuyQ1PQMatf0g

Therefore, I find that the 5th Defendant did not bear any such responsibility for the overall inception and even the project management of the Barut, Amara and SWBB projects. The obligation lies on the broad shoulders of the 1st to 4th Defendants.

The same consideration applies to the 6th Defendant. He was an accounts executive and rose to become the Deputy General Manager of the 1st Plaintiff in 2013. Eventually, he was appointed as the General Manager in early 2018 and reported directly to the 3rd Defendant.

I find that the 6th Defendant had no role in regard to the inception and any business decision-making process concerning the 3 projects. The obligation lies with the 1st to 4th Defendants.

I agree that the 5th and 6th Defendants hold fiduciary duties to the Plaintiffs and must act in the best interests of the company. However, I find that both the Defendants are not liable for any such alleged wrongs claimed against them relating to the inception and business S/N solN4Cs0wEuyQ1PQMatf0g planning of the 3 projects. I also find that they were not negligent and did not commit any of the wrongs complained by the Plaintiffs. J. Claim against the 5th and 6th Defendants for release of payments for the Indonesian Projects – Post Inception

With regard to the claim against the 5th and 6th Defendants for the release of payments during the lifetime of the projects, I find that they did act within the terms of the mandate given to them by the Board of Directors and directives given by the superiors.

These payments were made when the projects were still alive and running. The 5th and 6th Defendants were also not privy of any of the discussions or decisions of the board that were referred to earlier.

I have carefully considered the Plaintiffs’ contention against the 5th and 6th Defendants. The Plaintiffs contend that the payments released by these Defendants were made without them taking due care to ensure that the payments were made for appropriate purposes and S/N solN4Cs0wEuyQ1PQMatf0g that the payments were made with supporting documents. The Plaintiffs suggests that they should have put a stop to these payments as the projects were not profitable and that there were no supporting documents to the request for payments.

I do not find that the Defendants had breached their duties owed to the Plaintiffs when they decided to release and approve the payments to be released to the Indonesian companies for the Barut, Amara and SWBB projects.

In the majority of the payment vouchers, the payments were released for cash requisition for the operations of the Indonesian company. They were meant for the use of the plantation in Indonesia, capital expenses, salaries, geological expenditure and oil well drilling expenses for SWBB and office expenditure.

These payments may not have been accompanied by all supporting documents, but as explained by the Defendants, these were expected S/N solN4Cs0wEuyQ1PQMatf0g for the operations in Indonesia and were budgeted for the years. The payments were made after obtaining their bosses approvals and they were assured that there were representatives of the 1st Plaintiff on the ground in Indonesia who would oversee the business and the expenses of the Indonesian companies involved. The Defendants also had no direct role in the Indonesian companies. I find that they did not follow instructions blindly; based on the financial data available to them at the time, there were no obvious 'red flags' to suggest the payments were improper

Therefore, to the 5th and 6th Defendant, the request for payments was not abnormal and did not raise any warning signs that indicated that the payments should not have been allowed.

I accept their explanation that they genuinely and honestly believed that these payments were approved, budgeted and required to complete the projects in Indonesia. I also accept the Defendants’ defence that these expenses were also approved by their superiors, S/N solN4Cs0wEuyQ1PQMatf0g i.e. the 1st and 3rd Defendants. They did not follow these instructions blindly; they relied on the approvals because, based on the operational data available to the Finance Department at the time, such as the budgets allocated for the project. Therefore, I find that in their eyes there were no obvious red flags to suggest the transactions were improper.

I do note that the Plaintiffs also claim that the release of payments was also wrong because the Defendants did not seek request that payments be contributed equally by PT GSB. I reiterate that the 5th and 6th Defendants were not responsible for the business of the Indonesian entities. They therefore cannot be made liable for the failure by PT GSB to remit their fair share of the expenses of Amarut, Barut and SWBB projects.

The Plaintiffs contend that the 6th Defendant, who was also a director of the 2nd Plaintiff, should have acted proactively and monitored the SWBB project. I find that argument to be misplaced. S/N solN4Cs0wEuyQ1PQMatf0g

At no material time did the 6th Defendant play any active role in the 2nd Plaintiff. Information was not shared with him at any time as to the business and affairs of the corporation.

Therefore, I find the 6th Defendant was merely a nominee director appointed due to his employment with the 1st Plaintiff and was never given any active role in the 2nd Plaintiff. He therefore cannot be held liable for the transactions as alleged by the Plaintiffs. The same can be of the 5th Defendant. He had no power to force PT GSB to contribute. The 5th and 6th Defendants also had no power to stop the Indonesian projects.

I am aware that the law requires that even nominee directors act honestly and diligently to ensure that the company is protected at all times. Nevertheless, the facts relating to this case do not indicate that he had acted dishonestly or failed to disclose material facts such as those appearing in Barut and the Amara projects. S/N solN4Cs0wEuyQ1PQMatf0g

The 6th Defendant was not given access to the material information and at no time was he given any real power to govern the 2nd Defendant. As such, the facts of this case do not show that the 6th Defendant is liable for the alleged claims levelled by the Plaintiffs against him. He was not in any position to control the 2nd Plaintiff and cannot now bear the burden of shouldering the losses for the failed project.

As such, I reject the Plaintiffs’ claims against the 5th and 6th Defendants. I accept their defence that they have acted honestly and diligently when dealing with the payments requested for the Indonesian projects.

I note that the Plaintiffs refer to the decision of the Court of Appeal in Ranjeet Singh Sidhu v Zavarco [2021] CLJU 1012. I agree that there is no absolute duty to follow the directives of a superior, but this will depend on the facts of each case. S/N solN4Cs0wEuyQ1PQMatf0g

The facts of Zavarco show that the directive given to the CFO was to deposit monies wrongly from the accounts of the company and then to allow for the sums to be withdrawn without the board’s knowledge and approval.

The same can be in the decision of the Court of Appeal in Zaharen Hj Zakaria v Redmax Sdn Bhd [2016] 7 CLJ 380. The instructions given by the wrongdoers, such as Zaharen, in withdrawing monies wrongfully from the accounts of the company need not be followed. This will depend on the facts of each case.

In Zaharen, Abang Iskandar JCA held: - “[44] Under the law, an employee of a company has a duty of fidelity to be observed at all times during his employment with the company. What is this duty of fidelity? Every employment contract contains an implied term that an employee will serve his employer with good faith and fidelity (the duty of fidelity). The duty of fidelity is owed by all employees and is to be distinguished from a fiduciary S/N solN4Cs0wEuyQ1PQMatf0g duty. A fiduciary duty requires an employee to act in the interests of his employer, whereas the duty of fidelity requires an employee to have regard to his employer's interests. Inherent in that duty to have regard to his employer's interests must be a duty not to act in a manner which would be to disregard his employer's interests. Such acts must include acts that are inherently detrimental to his company's interests. [45] In the context of this case, of course, ordinarily being a subordinate must necessarily mean that the second defendant would have to obey instructions emanating from the first defendant. But the law does not impose absolute duty to obey in all situations. Only lawful and reasonable directives or instuctions must be obeyed by the subordinate. Definitely instructions given which are dubious and plainly unlawful, ought not to be obeyed to the tee, if at all. To do so would in fact make a subordinate an accomplice. The law does not impose such an onerous duty on an employee in the discharge of his obligations to S/N solN4Cs0wEuyQ1PQMatf0g his employer. As such, with such a duty of fidelity, blind loyalty and subservience to a superior's instructions cannot be condoned. Such a defence could not hold water, much less be sustained, definitely not in the circumstances obtaining in this appeal before us.”

The facts of this case did not show that there was any form of wrongdoing by the 5th and 6th Defendants. They honestly believed that the payments to be released were for appropriate purposes. It did not appear to be unlawful to the 5th and 6th Defendants, as these transactions were approved by the board, they were budgeted, appeared to be in the ordinary course of events and were in accordance with the directives of their superiors.

I therefore find that the 5th and 6th Defendants only acted in accordance with the directions of their superiors and based on the documents presented to them. To them the expenses were genuine business transactions and were undertaken by them honestly. S/N solN4Cs0wEuyQ1PQMatf0g

The Defendants were not involved directly with the Indonesian projects and would rely on the information made available to them. They have also acted in accordance with the directives and instructions of the 1st, 2nd and 3rd Defendants and therefore cannot be made liable for these decisions.

As an example, the Plaintiffs complained that payments to PT WIN were made after the decision to stop the Barut project. Even after the Barut project ended, the Amara project was still alive and required payments to be made to undertake the project in Indonesia and keep payments for PT WIN’s obligations. The minutes of the board of directors meeting indicate that these transactions were authorised by the board of directors.

I hold that, unlike Zavarco, where the instruction was to misappropriate funds (a plainly unlawful act), the instructions here were to release payments for operational expenses that had been formally budgeted and approved by the Board. The illegality lay in the procurement of the investment (due to D1-D4’s non-disclosure), not S/N solN4Cs0wEuyQ1PQMatf0g in the execution of the payments. D5 and D6, not being privy to the non-disclosure, were entitled to rely on the facial validity of the Board's budget approvals.

I have carefully considered the arguments raised by counsel for the Plaintiffs. Counsel urged this Court to find the 5th and 6th Defendants liable on the principle that 'blind loyalty' is no defence. I accept that principle as good law; a CFO and those in the positions of the Defendants, cannot simply rubber-stamp fraud because the MD orders it. However, the facts here differ materially. The 5th and 6th Defendants were not shutting their eyes to obvious impropriety. They were executing instructions that appeared, on the information available to their specific department, to be part of a legitimate restructuring exercise sanctioned by the leadership. Their reliance on the 1st and 2nd Defendants was not 'blind loyalty,' but a reasonable adherence to the corporate hierarchy in the absence of any 'red flags' that would have alerted a reasonable finance manager to inquire further. I see no wrongs in their actions and find no liability should be imputed against them. S/N solN4Cs0wEuyQ1PQMatf0g

For the above reasons, I find that there is nothing wrong with the Defendants’ decision to release payments for the projects until these projects are fully stopped in May 2020. As such, I do not find that the 5th and 6th Defendants committed any wrongdoing as alleged. K. Defence under sections 214, 215 and 581 of the Companies Act 2016, section 132 of the Companies Act 1965 and Charterbridge Defence –

The 5th and 6th Defendants Assuming I am wrong on the above, I do find that the 5th and 6th Defendants should not be held liable for the claims lodged by the Plaintiff. I find that the Defendants are entitled to rely on either section 214, 215 or 581 of the Companies Act, Section 132 of the Companies Act 1965 and the common law defence laid down in the earlier referred cases.

The Plaintiffs have not proven that there was any conflict of interest or dishonesty on the part of any of the 5th and 6th Defendants. They S/N solN4Cs0wEuyQ1PQMatf0g had acted objectively reasonable as seen from the evidence presented to this Court. I find that a reasonably knowledgeable director or even a knowledgeable Senior Manager in the same position as the Defendants would not have acted differently.

The 5th and 6th Defendants genuinely believed that the payments were made for appropriate purposes based on the instructions of their superiors, and based on the facts known to them, they were correct in their eyes.

I must remind myself that Section 214 (business judgment rule) and Pioneer Haven caution against judging with hindsight. The analysis undertaken by the Plaintiffs and their witnesses’ stresses hindsight and relies substantially on the eventual project failure to establish negligence or bad faith. I do not accept the 1st Plaintiff's position and therefore reject the same. S/N solN4Cs0wEuyQ1PQMatf0g

One could easily criticize and claim that further investigations should have been undertaken. However, I do not find that the decisions by the 5th and 6th Defendants were objectively wrong.

The Defendants did act in what they bona fide believed to be in the best interests of the company and are therefore entitled to rely on the defence laid down under the above statutory provisions under the Companies Act and under the common law.

Closing Remarks This Court is mindful that it is not its function to second-guess commercial decisions with the benefit of hindsight. The business judgment rule exists to protect directors and senior executives who make bona fide decisions in circumstances involving commercial risk.

I found the 1st to 4th Defendants were negligent and as such were in breach of their common law and statutory duties to the 1st Plaintiff at the inception stage of the Barut and Amara projects. Nonetheless, S/N solN4Cs0wEuyQ1PQMatf0g applying the objective test articulated in Charterbridge and adopted by our apex courts, I am satisfied that an honest and intelligent person in the position of the Defendants could, at the material time and based on the information then available, have reasonably believed that the investments were undertaken in the interests of the Plaintiffs.

The fact that the investments later proved unsuccessful does not, of itself, render the decisions unreasonable or unlawful. As the 1st to the 4th Defendants were honest and genuinely believed that the transactions were in the best interests of the company, this is a suitable case to relieve them of liability under Section 581 of the Companies Act. I also hold that the common law defence is also applicable to the facts of this case to relieve the Defendants of liability for such losses as they were made honestly and for what they believe were a genuine business for the company.

For completeness, I emphasised that even if this Court were to assume that one or more of the pleaded governance lapses were S/N solN4Cs0wEuyQ1PQMatf0g established, the Plaintiffs were still required to prove, on the evidence, that the losses claimed were caused by those breaches.

This they have failed to do. What is presented is, in substance, a claim that commercial failure should itself attract legal compensation. That is not the law. In the absence of proof of disloyalty, fraud, or misuse of position, the Court cannot convert directors or senior officers into insurers against business risk. Accordingly, the Plaintiffs’ claims fail not as a matter of discretion, but for want of proof of causation and legally recoverable loss.

I repeat that, even if this Court were wrong in its conclusions on liability or causation, I am satisfied that this is a proper case for relief under section 581 of the Companies Act 2016 and the common law defence of business judgment rule. The evidence establishes that the Defendants acted honestly, without personal gain, and in the genuine belief that they were acting in the interests of the Plaintiffs. S/N solN4Cs0wEuyQ1PQMatf0g

The matters complained of, at their highest, concern errors of judgment and deficiencies in governance, rather than disloyalty, fraud, or abuse of position. In such circumstances, it would be unjust and disproportionate to impose personal liability.

Although I have found the 1st to 4th Defendants negligent in the inception of the Barut and Amara projects, this does not preclude relief. Admittedly, their exercise of power and governance over the project’s implementation was imperfect. However, when weighed against the complexity of the structure, and the practical realities of cross-border transactions, I find that their conduct remained 'reasonable' within the curative intent of Section 581 and under the business judgment rule defence.

This Court is invited to exercise a discretion that is as much a matter of conscience as it is of law. The power to excuse a director from the consequences of their default is not a license for incompetence, nor is it a judicial erasure of loss. Rather, it is an acknowledgment that in S/N solN4Cs0wEuyQ1PQMatf0g the complex theater of commercial life, a director may act with honesty yet still find themselves on the wrong side of a catastrophic outcome.

In the present instance, having found that the Defendants’ failures were born of a misapprehension of procedural rigor rather than a deficit of integrity, the question becomes one of fairness. To visit the full weight of these losses upon individuals who acted in good faith— and who sought, however imperfectly, to preserve the company’s precarious position—would, in my view, exceed the bounds of what is 'just and equitable' in a commercial society.

In evaluating the conduct of the 1st to 4th Defendants, the Court must guard against the clarity of hindsight. While the failure to observe the full rigor of the 'Amara' and 'Barut' procedural safeguards constitutes a departure from the required standard of care, it is a departure characterized by an excess of zeal rather than a deficit of integrity. The evidence suggests that these directors were operating under the S/N solN4Cs0wEuyQ1PQMatf0g shadow of significant commercial pressures and a genuine, albeit misplaced, urgency to secure what they perceived as pivotal assets for the company.

Their errors were not born of a desire to circumvent the law for personal gain, but from a flawed attempt to navigate a challenging Indonesian investment landscape. To hold that such 'commercial over-reach'—conducted in good faith and without a shred of dishonesty—precludes the relief afforded by Section 581 and the common law would be to ignore the very existence of these statutory and equitable 'safety valves.' Justice must not ignore commercial reality. To do so would bring the machinery of commerce to a complete halt. If every honest but mistaken decision resulted in personal ruin, directors and officers would be perpetually fixated on the rear-view mirror of liability rather than pursuing the genuine business opportunities that drive corporate growth. S/N solN4Cs0wEuyQ1PQMatf0g

It bears reiteration that a finding of negligence, even gross negligence, does not automatically translate into a breach of fiduciary duty unless accompanied by disloyalty, bad faith, or improper purpose. I hold that the 1st to the 4th Defendants did not pass the line that renders them potentially liable for breach of fiduciary duties as alleged by the Plaintiffs.

With regard to the SWBB project, I do not find that the Defendants had breached their duties. The project was inherently risky from the start and all material facts were disclosed.

The 5th and 6th Defendants did act in accordance with their duties to the company. I find no wrong proven against them. The claim against them is dismissed.

This case, therefore, does not involve moral blameworthiness. It concerns the consequences of honest but flawed commercial judgment exercised in a challenging environment. While the 1st to 4th S/N solN4Cs0wEuyQ1PQMatf0g Defendants fell short of the standard of care required in certain respects, the law must be careful not to convert negligent over-enthusiasm into a finding of personal wrongdoing divorced from commercial reality. Accordingly, for the reasons stated, they are entitled to the relief sought.

Orders For the reasons detailed above, I make the following orders: -