1. ) Kumpulan Powernet Berhad v 1. ) Woo Wai Mun (WA-22NCC-327-07/2020)

KUMPULAN POWERNET BERHAD

POWERNET INDUSTRIES SDN BHD (COMPANY NO: 47163-W) … PLAINTIFFS

WOO WAI MUN

MOO YONG KONG MENG

AU CHAN CHUN

TAI KEN SIN [REPRESENTATIVE OF TAI TECK SOON (NRIC NO.: 540429-10-5911) DECEASED]

POWERFIT INDUSTRIES SDN BHD

CEPSEL INDUSTRIES SDN BHD (Previously known as Powernet Trading (M) Sdn Bhd) (COMPANY NO: 331275 -T) … DEFENDANTS

FONG WAI @ FOONG AI MING

LEONG SIEW MING (NRIC NO.: 790629-14-5397) … THIRD PARTIES BROAD GROUNDS INTRODUCTION [1] In this action, the Plaintiff claims:

1.1 As against the 1st Defendant (“D1”), 2nd Defendant (“D2”) and 3rd Defendant (“D3”), that they have committed fraud, breach of statutory duties, breach of contractual duties, breach of fiduciary duties and are liable for the loss and damage suffered by the Plaintiffs; and

1.2 as against D3 and 4th Defendant (“D4”), that they have dishonestly assisted D1 and D2 in committing the breach of statutory duties, breach of contractual duties and breach of trust and fiduciary duties and are liable for the loss and damage suffered by the Plaintiffs. [2] During a protracted trial lasting 24 non consecutive, using the Zoom video conferencing platform, the Plaintiff called 8 witnesses whilst D1, D2 and D3 testified in their own defence. D1 also subpoenaed 1 witness, Ahmad Aljafree Bin Mohd Razalli, D5 ‘s Director William Chan testified on behalf of the 5th Defendant (“D5”), the 2nd Third Party (“TP2”) testified. D4 passed away. His son Tai Ken Sin was appointed by Court order to represent the estate of D4. Both D4 and the 6th Defendant (“D6”) did not enter an appearance or appear at the trial. [3] The Third Parties were brought into this action by D1. On 15.9.2022, D1 has withdrawn his claim against the 1st Third Party who passed away in July 2022. [4] The 1st Plaintiff (“P1”) at all material times is an investment holding company listed on Bursa Malaysia since 22.3.2002. [5] The 2nd Plaintiff (“P2”) is P1’s wholly owned subsidiary carrying the business of manufacturing warp-knitted fabric. P2 was awarded with the Manufacturing Licence. The Manufacturing Licence is a compulsory requirement for P2 to be able to engage in manufacturing activities as stipulated under the Industrial Co-ordination Act 1975. With the Manufacturing Licence owned by P2, P2 was able to apply for a Cost Analysis (“CA”) and subsequently a Certificate of Origin (“CO”). At the material time, P2 had been awarded with the CO by MITI and it was able to enjoy the preferential duties for material exported to the other countries. [6] D5 and D6 were subsidiaries of P2 until their disposal on 17.12.2018. D5 was at all material times carrying business of manufacturing and selling slit binding, bone casing, clip hook and eyes fittings, hook, and eye tapes as well as hook and eye tape machine. D6 was at all material times carrying business of investment holding. [7] D1 was appointed as a director of P1 on 25.8.2015. He held the office of Managing Director of P1 from 1.6.2016 until his resignation on 5.7.2018. D1 was a director of P2 from 30.9.2015 until his resignation on 12.2.2019. He was a director of D5 and D6 from 30.9.2015 to 3.4.2019. [8] D2 was appointed as a director of P2 on 9.1.2017 until his resignation on 22.7.2019. D2 was a director of D5 and D6 from 9.1.2017 until 3.4.2019. [9] D3 was the Group Accountant of P1, P2, D5 and D6 from 1.10.2016 until his resignation on 15.2.2019. [10] D4 was a Director of D6 from 3.4.2019. He was also a former director of D5 from 3.4.2019 to 16.6.2020. D4 passed away on 20.6.2020. [11] D2 signed on behalf of P2, Two Share Sale Agreements both dated 17.12.2018 (“the impugned agreements”) to dispose the shares of P2 in D5 and D6 to D4 at a sum of RM10.00 each. [12] P2, D5 and D6’s respective directors’ circular resolution (“DCR”) all dated 15.1.2019 for the sale of P2’s shares in D5 and D6 were signed by D1 and D2. In P2’s DCR dated 15.1.2019, it was resolved that D6 is to be disposed to one Cheong Wai Loon who at the material time of the DCR was the Senior Manager in Sales & Marketing of P2. However, the disposal of D6 was eventually made to the late D4, Tai Teck Soon. [13] D5 obtained a Manufacturing Licence dated 13.2.2018 which has been in force since 16.10.2017 for the purpose of manufacturing products such as Knitted Fabrics, Jacket, Garment & Denim. Plaintiffs’ claim [14] In 2019, there was a change in the composition of the Board of Directors of P1. The new P1 Board has directed the new management to investigate and examine the Plaintiffs’ business dealings by the previous management. [15] The new management discovered that there were irregularities in the previous management in respect of, amongst others, the following:

15.1 illegal and fraudulent disposal of shares belonging to P2 in

15.2 illegal use of Manufacturing Licence belonging to P2; and

15.3 illegal use of information and documents belonging to P2 to obtain Certificate of Origin (“CO”) for D5. [16] Arising from the discovery by the new management, on 28.7.2020 these proceedings were instituted by the Plaintiff against all the Defendants. [17] Further, on 26.11.2020, 27.11.2020 and 16.2.2021 the Plaintiffs have also filed discovery applications against RHB Bank Berhad (“RHB Bank”), United Overseas Bank (Malaysia) Bhd (“UOB Bank”), Alliance Bank Malaysia Berhad (“Alliance Bank”), Citibank Berhad (“Citibank”), Baker Tilly Monteiro Heng PLT (“Baker Tilly”) and Ministry of International Trade and Industry (“MITI”) (collectively referred to as “Discovery Applications”). [18] From the Discovery Orders made pursuant to the Discovery Applications, the Plaintiffs had also discovered that amongst others, the following:

18.1 there were 84 transactions worth RM24,347,200.66 undertaken using P2’s Manufacturing Licence which was never paid and/or declared as dividend to P1 and/or P2;

18.2 the former auditors, Baker Tilly were provided with information by D1 and D3, amongst others, that D5 and D6 were no longer in operations before the disposal of D5 and D6;

18.3 parts of proceeds of the 84 transactions from the sale worth RM24,347,200.66 have been deposited into D5 and D6 bank accounts;

18.4 numerous cash cheques and other cheques were issued from D5’s bank account after the disposal of D5;

18.5 there were also various deposits and withdrawals made from D5 and D6 accounts before and after the disposal;

18.6 fraudulent issuance of various cheques from P1, P2, D5 and D6 to D1, D3 and other individuals and company related to D1 before and after the disposal of D5 and D6. [19] Hence, the Plaintiffs filed this action. [20] D1, D2 and D3 denied the allegations of fraud, breach of statutory duties, breach of contractual duties, breach of trust and fiduciary duties. D3 in addition denied the allegation of dishonest assistance. D4 did not defend the claim notwithstanding that his son Tai Ken Sin was appointed as his representative. ISSUES [21] In my view, from the issues agreed by the parties may be distilled into the following main issues:

21.1 Whether D1, D2 and D3, the Plaintiffs have jointly or severally breached their statutory, fiduciary and contractual duties, breach of trust, and committed fraud by wrongly and unlawfully disposing P2’s shares in D5 and D6 at a nominal value of RM10.00 for each company without the approval of the Board of Directors and shareholders of P1 as the ultimate holding company of D5 and D6 and if so, are liable for the loss and damage suffered by the Plaintiffs?

21.2 Whether D3 and D4 have dishonestly assisted D1 and D2 in committing the breach of statutory duties, breach of contractual duties and breach of trust and fiduciary and are liable for the loss and damage suffered by the Plaintiffs?

21.3 Whether D1, D2 and D3 are liable to account and pay for the 84 transactions worth USD6,077,683.64 (equivalent to RM24,347,200.66 as at 20.7.2020)? Burden of proof [22] It is trite law that the Plaintiffs, have both the “burden of proof” to make out a prima facie case as well as the initial onus of proof to adduce evidence to prove their claim. The onus of proof would only shift to the Defendants if the Plaintiffs have made out a prima facie case. See for e.g., the Federal Court decision in Letchumanan Chettiar Alagappan @ L Allagappan (as executor to SL Alameloo Achi alias Sona Lena Alamelo Acho, deceased) & Anor v Secure Plantation Sdn Bhd [2017] 4 MLJ 697; [2017] 5 CLJ 418 where Jeffrey Tan FCJ held that: “[56] Thus a plaintiff has both the burden of proof as well as the initial onus of proof. In Britestone Pte Ltd v Smith & Associates Far East, Ltd [2007] 4 SLR 855, the Singapore Court of Appeal per VK Rajah JCA, delivering the judgment of the court, explained that at the start of the plaintiff’s case the burden of proof and the onus of proof coincide: … at the start of the plaintiff’s case, the legal burden of proving the existence of any relevant fact that the plaintiff must prove and the evidential burden of some (not inherently incredible) evidence of the existence of such fact coincide. Upon adduction of that evidence, the evidential burden shifts to the defendant, as the case may be, to adduce some evidence in rebuttal. If no evidence in rebuttal is adduced, the court may conclude from the evidence of the defendant. If, on the other hand, evidence in rebuttal is adduced, the evidential burden shifts back to the plaintiff. If, ultimately, the evidential burden comes to rest on the defendant, the legal burden of proof of the relevant fact would have been discharged by the plaintiff. The legal burden of proof — a permanent and enduring burden — does not shift. A party who has the legal burden of proof on any issue must discharge it throughout. Sometimes, the legal burden is spoken of, inaccurately, as ‘shifting’; but what is truly meant is that another issue has been engaged, on which the opposite party hears the legal burden of proof. [57] The rule is that ‘the onus of proof of any particular fact lies on the party who alleges it, not on him who denies it; et incumbit probation qui decit, non qui negat, Actori incibit probation … The plaintiff is bound in the first instance, to show a prima facie case, and if he leaves it imperfect, the court will not assist him. Hence the maxim Potior est condition defendantis. A plaintiff cannot obviously advantage himself by the weakness of the defence. A plaintiff’s case must stand or fall upon the evidence adduced by him. When, however, the defendant, or either litigant party, instead of denying what is alleged against him, relies on some new matter which, if true, is an answer to it, the burden of proof changes sides; and he, in his turn, is bound to show a prima facie case at least and, if he leaves it imperfect, the court will not assist him. Reus excipendo fit actor’ (Woodroffe and Amir Ali, Vol 3 at pp 3190- 3191)..” [23] In the case of Dr Shanmuganathan v Periasamy s/o Sithambaram Pillai [1997] 3 MLJ 61, the Federal Court held: “Sections 101, 102, 103 and 106 of the Evidence Act 1950 deal with the burden of proof. Under s 101, it is provided that whoever desires any court to give judgment as to any legal right or liability, dependent on the existence of facts which he asserts, must prove that those facts exist. Under s 102 the burden of proof lies on that person who would fail if no evidence at all were given on either side. Under s 103, the burden of proof as to any particular fact lies on that person who wishes the court to believe in its existence, unless it is provided by any law that the proof of that fact shall lie on any particular person. Under s 106, when any fact is especially within the knowledge of any person the burden of proving that fact is upon him.” [24] In Sinnaiyah & Sons Sdn Bhd v Damai Setia Sdn Bhd [2015] 5 MLJ 1, the Federal Court has pronounced the position of the law on the standard of proof on fraud in civil cases is that on balance of probabilities at para 49 of the judgment: “… that at law there are only two standards of proof. namely, beyond reasonable doubt for criminal cases “while it is on the balance of probabilities for civil cases. As such even if fraud is the subject in a civil claim the standard of proof is on the balance of probabilities. There is no third standard. ….” Director’s duties and fiduciaries [25] The Federal Court in Board of Trustees of the Sabah Foundation & Ors v Datuk Syed Kechik bin Syed Mohamed & Anor [2008] 5 MLJ 469 at [30] has adopted Millet LJ ‘s definition of a fiduciary in Bristol and West Building Society v Mothew (t/a Stapley & Co) [1998] Ch 1 at p 11 as follows: 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 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 mere core duties of loyalty and fidelity. Breach of fiduciary obligation, therefore, connotes disloyalty or infidelity competence 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.” [26] The law is clear that a director of a company is in fiduciary relationship with his company and as such he is precluded from acting in a manner which will bring his personal interest into conflict with that of his company - per Salleh Abas LP in Avel Consultants Sdn Bhd & Anor v Mohamed Zain Yusof & Ors [1985] 2 MLJ 209 SC. [27] In Ford's Principles of Corporations Law in Chapter 8 at para [8.050] at p 312, a director is subject to the fiduciary's duty of loyalty and the duty to avoid conflicts of interest. Walter Woon on Company Law states that: Firstly, a director must act in what he honestly considers to be the company’s interests and not in the interests of some other person or body. This is a director’s main and overriding duty at common law; Secondly, a director must employ the powers and assets that he is entrusted with for proper purposes and not for any collateral purpose; Thirdly, a director must not place himself in a position whereby his duty to the company and his personal interests may conflict. [28] Section 213(1) Companies Act 2016 (“CA 2016’) requires directors to exercise their powers in good faith and in the best interests of the company whilst s. 213 (2) provides directors must exercise reasonable care, skill and diligence: “Section 213(1) CA 2016:

A director of a company shall at all times exercise his powers in accordance with this Act, for a proper purpose and in good faith in the best interest of the company.

A director of a company shall exercise reasonable care, skill and diligence with:

The knowledge, skill and experience which may reasonably be expected of a director having the same responsibilities; and

Any additional knowledge, skill and experience which the director in fact has.” [29] In Pioneer Haven Sdn Bhd v Ho Hup Construction Co Bhd & Anor and other appeals [2012] 3 MLJ 616 at p 654 the Court of Appeal held that ss 132(1) and 132(1A) [re-enacted as s 213 (1) and (2) CA 2016] do not alter the law in this area but enhance the common law duty of care and equitable fidicuary duties. The Court of Appeal said at para 233: … 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 interests 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 law relating to the duty to act honestly continues to be relevant (see Cheam Tat Pang v Public Prosecutor [1996] 1 SLR 541). It is also recognised that the duty to act in the best interests of the company means different things, depending on the factual circumstances. [30] The statutory no conflict rule encapsulated in s. 221(1) CA 2016 (s. 131 of the CA 1965) mandates disclosure where a director is in any way whether directly or indirectly interested in a transaction with the company. It reads: “Section 221 CA 2016:

Subject to this section, every director of a company who is in any way, whether directly or indirectly, interested in a contract or proposed contract with the company shall, as soon as practicable after the relevant facts have come to the director's knowledge, declare the nature of his interest at a meeting of the board of directors.” [31] Section 221(9) CA 2016 makes plain that interest in the shares of a company include that of a spouse. [32] The learned author Dato’ Loh Siew Cheang in ‘Corporate Powers Accountability’ explained the no-conflict and underlying fiduciary principle as follows: “14-4 The no-conflict principle embodies two fundamental themes. First, directors cannot engage in 'self-dealings' or enter into transactions with a company in which they are directly or indirectly interested. Second, directors cannot make improper use of their office, company's property or information to make profits for themselves directly or indirectly. This is commonly known as the no-profit rule. There are many ways in which directors may misuse their office to benefit themselves-from usurpation of corporate opportunities, receiving bribes or commission and misapplying company's property. The rule prohibiting undisclosed self-dealings and secret profits is a positive rule. 14-5 The underlying fiduciary principle against the abuse of office is well established. In Gurbachan Singh s/o Bagawan Singh & Ors v Vellasamy s/o Pennusamy & Ors (on their behalf and for the 213 sub-purchasers of plots of land known as PN35553, Lot 9108, Mukim Hutan Melintang, Hilir Perak) and other appeals, the Federal Court said: [69] It is trite law that a person in a fiduciary position is not entitled to make a profit and he is not allowed to put himself in a position where his interest and duty are in conflict. In Boardman v Phipps [1966] 3 WLR 1009 Lord Hodson explained the rule as follows: Whether this aspect is properly to be regarded as part of the trust assets is, in my judgment, immaterial. The appellants obtained knowledge by reason of their fiduciary position and they cannot escape liability by saying that they were acting for themselves and not as agents of the trustees. Whether or not the trust or the beneficiaries in their stead could have taken advantage of the information is immaterial, as the authorities clearly show. No doubt it was but a remote possibility that Mr Boardman would ever be asked by the trustees to advice on the desirability of an application to the Court in order that the trustees might avail themselves of the information obtained. Nevertheless, even if the possibility of conflict is present between personal interest and the fiduciary position the rule of equity must be applied. This appears from the observations of Lord Cranworth LC in Aberdeen Railway Co v Blaikie 1 Macq 461,

In the later case of Bray v Ford [1896] AC 44 Lord Herschell ... said: It is an inflexible rule of a Court of Equity that a person in a fiduciary position, such as the respondent's is not, unless otherwise expressly provided, entitled to make a profit; he is not allowed to put himself in a position where his interest and duty conflict. It does not appear to me that this rule is, as has been said, founded upon principles of morality. I regard it rather as based on the consideration that human nature being what it is, there is danger, in such circumstances, of the person holding a fiduciary position being swayed by interest rather than by duty, and thus prejudicing those whom he was bound to protect. It has, therefore, been deemed expedient to lay down this positive rule. But I am satisfied that it might be departed from in many cases, without any breach of morality, without any wrong being inflicted, and without any consciousness of wrong-doing. Indeed, it is obvious that it might sometimes be to the advantage of the beneficiaries that their trustee should act for them professionally rather than a stranger, even though the trustee were paid for his services. [Emphasis added] 14-6 In Furs Ltd v Tomkies, the High Court of Australia explained the rationale as follows: No director shall obtain for himself a profit by means of a transaction in which he is concerned on behalf of the company unless all the material facts are disclosed to the shareholders and by resolution in a general meeting approves of his doing so, or all the shareholders acquiesce. An undisclosed profit which a director so derives from the execution of his fiduciary duties belongs in equity to the company. It is no answer to the application of the rule that the profit is of a kind which the company could not itself have obtained, or that no loss is caused to the company by the gain of the director. It is a principle resting upon the impossibility of allowing the conflict of duty and interest which is involved in the pursuit of private advantage in the course of dealing in a fiduciary capacity with the affairs of the company. If, when it is his duty to safeguard and further the interests of the company, he uses the occasion as a means of profit to himself, he raises an opposition between the duty he has undertaken and his own self interest, beyond which it is neither wise nor practicable for the law to look for a criterion of liability. The consequences of such a conflict are not discoverable. Both justice and policy are against their investigation. [Emphasis added]” [33] The common law no-profit rule is also statutorily embodied in s. 218(1) CA 2016 which stipulates: “Section 218 Prohibition against improper use of property, position, etc.

A director or officer of a company shall not, without the consent or ratification of a general meeting-

use the property of the company;

use any information acquired by virtue of his position as a director or officer of the company;

use his position as such director or officer;

use any opportunity of the company which he became aware of, in the performance of his functions as the director or officer of the company; or

engage in business which is in competition with the company, to gain directly or indirectly, a benefit for himself or any other person, or cause detriment to the company.” [34] Nallini Pathmanathan JCA (now FCJ) in Taz Logistics Sdn Bhd v Taz Metals Sdn Bhd & Ors [2019] 3 MLJ 510; [2019] 2 CLJ 48 explained the ‘no profit rule’ as follows: “[112] The landmark case and starting point for the no profit rule must be Regal (Hastings) Ltd v. Gulliver and Others [1942] 1 All ER 378 more particularly the speech of Lord Russell where he explained the rule: ... The rule of equity which insists on those, who by use of a fiduciary position make a profit, being liable to account for that profit, in no way depends on fraud, or absence of bona fides; or upon such questions or considerations as whether the profit would or should otherwise have gone to the plaintiff or whether the profiteer was under a duty to obtain the source of the profit for the plaintiff, or whether he took a risk or acted as he did for the benefit of the plaintiff, or whether the plaintiff has in fact been damaged or benefited by his action. The liability arises from the mere fact of a profit having, in the stated circumstances, been made. The profiteer, however honest and well-intentioned, cannot escape the risk of being called upon to account.” (emphasis added) [35] As D2 in his submissions had referred to the business judgment rule in s. 214 CA 2016, it is best that this court reproduce it for ease of reference: “214. Business Judgment Rule

A Director who make a business judgment is deemed to meet the requirement of the duty under Section 213(2) and the equivalent duties of the common law and in equity if the director–

Makes the business decision for a proper purpose and in good faith;

Does not have a material personal interest in the subject matter of the business decision;

Is informed about the subject matter of the business judgment to the extent the director reasonably believes to be appropriate under the circumstances;

Reasonably believes the business judgment is in the best interest of the company.

For the purposes of this section, “business judgment” means any decision whether or not to take action in respect of a matter relevant to the business of the company.” [36] In Petra Perdana Berhad v. Tengku Dato’ Ibrahim Petra Tengku Indra Petra & Ors [2014] 11 MLJ 1; Nallini Pathmanathan J (now FCJ) succinctly explained the duties of directors to exercise their powers in good faith and in the best interests of the company and the business judgment rule pursuant to ss132 (1), (1A) and (1B) of the Companies Act 1965, (re-enacted as ss 213(1), (2) and 214 CA 2016 respectively) which I produce in extenso as follows: “[212] In Pioneer Haven Sdn Bhd v. Ho Hup Construction Co Bhd & Anor and Other Appeals [2012] 4 MLRA 210; [2012] 3 MLJ 616 at 654; [2012] 5 CLJ 169 the Court of Appeal held that ss 132(1) and 132(1A) do not alter the law in this area but enhance the common law duty of care and equitable fiduciary duties. At para 233, p 654 this is what the Court 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 interests 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 law relating to the duty to act honestly continues to be relevant (see Cheam Tat Pang v. Public Prosecutor [1996] 1 SLR 541). It is also recognised that the duty to act in the best interests of the company means different things, depending on the factual circumstances." [213] And the test to be adopted in determining whether there was a breach of such statutory duty was defined as follows at para 238 at p 655: “[238] ... 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. [239] 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 the company." [240] The above principle is often referred to as the 'Charterbridge Principle'. ………… [242] 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.” [214] This encapsulates the core of the duties owed by director under statute. [215] Of relevance in the instant case is the statutory business judgment rule in s 132(1B) which states as follows: "A director who makes a business judgment is deemed to meet the requirements of the duty under subsection (1A) and the equivalent duties under the common law and in equity if the director:

Makes the business judgment in good faith for a proper purpose;

Does not have a material personal interest in the subject matter of the business judgment;

Is informed about the subject matter of the business judgment to the extent the director reasonably believes to be appropriate under the circumstances; and

Reasonably believes that the business judgment is in the best interests of the company." [216] The statutory business judgment rule encapsulates the common law business judgment rule as set out in Howard Smith Ltd v. Ampol Ltd [1974] AC 821. In that case there was a challenge to the validity of an issue of shares by the directors of a company. The Court had to decide whether the said directors had been motivated by any purpose or personal gain or advantage or whether they had acted bona fide in the interests of the company. The judge found that the primary purpose of the allotment was to proportionately reduce the shareholdings of certain majority shareholders such that a take-over could be facilitated by another entity. It was found in those circumstances that the directors had improperly exercised their powers. The matter proceeded to the Privy Council where the Judicial Committee found, dismissing the appeal that, although the directors had acted honestly and had power to make the allotment, to alter a majority shareholding was to interfere with an element of the company's constitution which was separate from the directors' powers and accordingly it was unconstitutional for the directors to use their fiduciary powers over the shares in the company for the purpose of destroying an existing majority or creating a new majority. And since the directors' primary object for the allotment of shares was to alter the majority shareholding, the directors had improperly exercised their powers and the allotment was invalid. [217] In so holding the Judicial Committee commented inter alia, in relation to the business judgment rule as follows: ".... In order to assist him in deciding upon the alternative motivations contended for, the judge considered first at some length, the objective question whether Millers was in fact in need of capital. This approach was criticised before their Lordships: it was argued that what mattered was not the actual financial condition of Millers, but what the majority directors bona fide considered that condition to be. Their Lordships accept that such a matter as the raising of finance is one of management, within the responsibility of the directors: they accept that it would be wrong for the 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. There is no appeal on merits from management decisions to courts of law: nor will courts of law assume to act as a kind of supervisory board over decisions within the powers of management honestly arrived at. But accepting all of this, when a dispute arises whether directors of a company made a particular decision for one purpose or another, or whether there being more than one purpose, one or other purpose was the substantial or primary purpose, the court, in their Lordships' opinion, is entitled to look at the situation objectively in order to estimate how critical or pressing or substantial or, per contra, insubstantial an alleged requirement might have been. If it finds that a particular requirement, though real, was not urgent, or critical, at the relevant time, it may have reason to doubt, or discount the assertions of individuals that they acted solely in order to deal with it, particularly when the action they took was unusual or even extreme." [218] …… Fiduciary duties [219] A company director is recognised as having a fiduciary relationship with his company. As stated in Ford's Principles of Corporations Law in Chapter 8 at para [8.050] at p 312, a director is therefore subject to the fiduciary's duty of loyalty and the duty to avoid conflicts of interest. Case-law establishes under the scope of a director's fiduciary duty that he must exercise his powers bona fide and in the best interests of the company as a whole. This is similar to, and captured by the duties imposed by statute (see s 132(1) above). The essence of the fiduciary duty is a duty to act bona fide in the interests of the company and not for a collateral purpose (see In Re Smith and Fawcett, Limited [1942] 1 Ch 304 at pp 306 and 308 and Multi-Pak Singapore Pte Ltd (in receivership v. Intraco Ltd & Ors [1994] 2 SLR 282 at p 287). Although the directors are vested with powers which carry implicitly some degree of discretion, such powers must be exercised bona fide, meaning for the purpose for which they were conferred and not arbitrarily or at the will of the directors, but in the interests of the company. (See Greenhalgh v. Ardene Cinemas Ltd [1951] Ch 287 at 291; Blackwell v. Moray and Anor (1991) 3 ACSR 255). Did Tengku Ibrahim, Lawrence Wong and Tiong who were directors of the Plaintiff at the material time exercise their powers for a proper purpose or for an improper purpose when they decided to undertake the Second and Third Divestments? [220] If the impugned directors exercised their powers for a proper purpose, it then follows that they acted bona fide in the interest of the company. If, however they exercised their powers for an improper purpose as is alleged by the Plaintiff, then they have failed to act in the best interests of the company and would be in breach of their statutory, fiduciary and common law duties as directors. [221] In order to answer this question in relation to the two divestments this Court needs to ascertain the substantial object or purpose for which the board decided to divest of the PEB shares. (see Howard Smith Ltd v. Ampol Ltd (above). [222] In ascertaining the substantial object or purpose for which each of these three directors decided to divest of the PEB shares, it is necessary to ascertain their individual states of mind at the time when the decision to undertake the Divestments was made. In ascertaining the state of mind of the directors, regard may be had to the circumstances surrounding the decision. In Hindle v. John Cotton Ltd (1919) 56 Sc LR 625 at 630-1, Viscount Findlay stated as follows: "Where the question is one of absence of powers, the state of mind of those who acted and motive on which they acted are all important, and you may go into the question of what their intention was, collecting from the surrounding circumstances all the materials which genuinely throw light upon that question of the state of mind of the directors so as to show whether they were honestly acting in the discharge of their powers in the interests of the company or were acting from some bye-motive, possibly of personal advantage or for any other reason."(emphasis added) [37] Her Ladyship Nallini Pathmanathan J (now FCJ) further explained: “[364] Business judgment has been defined to mean ‘any decision on whether or not to take action in respect of a matter relevant to the business of the company’ (see s 132 of the Companies Act). In Australian Securities and Investments Commission v Rich (2009) 75 ACSR 1 Austin J accepted a wide interpretation of the scope of ‘business judgment’. The words ‘in respect of, ‘matter’ and ‘relevant’ were accorded considerable breadth. As such it follows that an issue such as a shortage of cash flow and the disposal of assets falls squarely within this definition. [365] The effect of the statutory business judgment rule in the current context is this: If the impugned directors can show that they made the decisions to affect the second and third divestments, as a business judgment within the scope of s 132(1B) of the Companies Act 1965, then they are deemed to have met their obligations and duties as directors under statute, common law and equity. In other words, the requirements of s 132(1A) of due care and diligence in the exercise of their duties would have been met. [366] How then is this to be ascertained? The courts do not undertake the exercise of assessing the merits of a commercial or business judgment (see Smith (Howard) Ltd v Ampol Petroleum Ltd [1974] AC 821). [367] In the Australian case of Australian Securities and Investments Commission v. Rich [2009] ACSR 1('the Rich case') the enquiry related to the managing director Rich and the finance director, Silberman's failure to advise the board of directors that the company was insolvent. It should be highlighted that the statutory Australian provision equivalent to s 132(1B) is similar to our provision save for the use of the words 'rationally believes' rather than 'reasonably believes' in our section. While it has been argued by the American Law Institute that 'rationally believe' is considerably wider than 'reasonably believe' I am unable to subscribe entirely to that construction. Rational by definition alludes to a decision based on reason or logic. Reasonable as a word has much the same effect, namely a decision premised on logic or sense. The distinction does not therefore appear to be as wide as is suggested. [368] In the Rich case, Austin J. set out a compendium of requirements that need to be satisfied in or order to satisfy this requirement of 'rational' belief. As 'rational' is not entirely dissimilar to 'reasonable' it appears that the criteria set out in Rich's case are applicable under s 132(1B). Austin J. held there that reasonableness should be assessed by reference to:

the importance of the business judgment that is to be made;

the time available for obtaining information;

the costs related to obtaining information;

the director's confidence in exploring the matter;

the state of the company's business at that time and the nature of the competing demands on the board's attention; and

whether or not the information is available to the director. [369] The Supreme Court of Canada in Peoples Department Stores Inc (Trustee of) v. Wise [2004] 3 SCJ No 64 held as follows at para 64: "Business decisions must sometimes be made with high stakes and under considerable time pressure in circumstances in which detailed information is not available. It might be tempting for some to see unsuccessful business decisions as unreasonable or imprudent in light of information that becomes available ex post facto. Because of this risk of hindsight bias, Canadian courts have developed a rule of defence to business decisions called the "business judgment rule". [370] Reference was made to Maple Leaf Foods Inc v. Schenieder Corp (1998) 42 OR (3d) 177: "The law as it has evolved in Ontario and Delaware has the common requirements that the court must be satisfied that the directors have acted reasonably and fairly. The court looks to see that the directors made a reasonable decision not a perfect decision. Provided that the decision taken is within a range of reasonableness, the court ought not to substitute its opinion for that of the board even though subsequent events may have cast doubt on the board's determination. As long as the directors have selected one of several reasonable alternatives, deference is accorded to the board's decision. This formulation of deference to the decision of the Board is known as the "Business judgment rule". The fact that alternative transactions were rejected by the directors is irrelevant unless it can be shown that a particular alternative was definitely available and clearly more beneficial to the company than the chosen transaction." (Emphasis added) [38] The Federal Court in Tengku Dato’ Ibrahim Petra Tengku Indra Petra v. Petra Perdana Berhad & Another Case [2018] 2 MLJ 177 affirmed the High Court decision of Nallini Pathmanathan J (now FCJ), and in its judgment delivered by Azahar Mohamed FCJ ( later CJM) elucidated and held that the true test for breach of duty as a director to act in good faith and in the ‘best interest of the company' is a combination of both the subjective and objective tests: “[165] What then is the true test for breach of duty as a director to act in good faith and in the ‘best interest of the company'? The question is whether it is a subjective or objective test to judge whether directors acted in the best interest of the company. It is to this we now turn. [166] In our judgment, the correct test combines both subjective and objective tests. The test is subjective in the sense that the breach of the duty is determined on an assessment of the state of mind of the director; the issue is whether the director (not the court) considers that the exercise of discretion is in the best interest of the company. In this regard, in Corporate Law by Hans Tjio, Pearlie Koh and Lee Pey Woan at p 361, the learned authors said that the director’s conduct is tested by reference to an essentially subjective barometer. The classic formulation of the subjective element in the test is found, as we have discussed earlier at para 157, in Re Smith & Fawcett, Limited in which Lord Greene MR said that ‘directors must exercise their discretion bona fide in what they consider — not what a court may consider — is in the interest of the company’. The duty is to act in what the director believes, not what the court believes, to be the best interest of the company. The subjective nature of the test can be seen in Regentcrest Plc (in liq) v Cohen [2001] BCC 494 where Jonathan Parker J said: … the question whether the director honestly believed that his act or omission was in the interests of the company. The issue is as to the director’s state of mind. No doubt, where it is clear that the act or omission under challenge resulted in substantial detriment to the company, the director will have a harder task persuading the court that he honestly believed it to be in the company’s interest; but that does not detract from the subjective nature of the test. [167] The test is objective in the sense that the director’s assessment of the company’s best interest is subject to an objective review or examination by the courts. In an article entitled Directors’ Duty to Act in the Interests of the Company: Subjective or Objective? [2015] JBL Issue 2, the writers said that courts have introduced objective elements into the duty to act in good faith and in the best interest of the company to address the problem identified by Browen LJ in Hutton v West Cork Railway Company (1883) 23 Ch D 654 at p 671 where the learned judge said: Bona fides cannot be the sole test, otherwise you might have a lunatic conducting the affairs of the company, and paying away its money with both hands in a manner perfectly bona fide yet perfectly irrational. The test must be what is reasonably incidental to, and within the reasonable scope of carrying on, the business of the company. [168] The Singapore Court of Appeal in Goh Chan Peng and Others v Beyonics Technology Ltd and another and another appeal [2017] 2 SLR 592; [2017] SGCA 40 explained the preferred approach which combines both subjective and objective tests as follows: Indeed, there are both subjective and objective element in the test. The subjective element lies in the court’s consideration as to whether a director had exercised his discretion bona fide in what he considered (and not what the court considers) is in the interests of the company: Re Smith & Fawcett Ltd [1942] Ch 304 at 306, as accepted by this court in Cheong Kim Hock v Lin Securities (Pte) (in liquidation) [1992] 1 SLR (R) 497 at 26 and in Ho Kang Peng v Scintronix Corp Ltd (formerly known as TTL Holdings Ltd) [2014] 3 SLR 329 (‘Ho Kang Peng’) at 37. Thus, a court will be slow to interfere with commercial decisions made honestly but which, on hindsight, were financially detrimental to the company. The objective element in the test relates to the court’s supervision over directors who claim to have been genuinely acting to promote the company’s interest even though, objectively, the transactions were not in the company’s interests. The subjective belief of the directors cannot determine the issue: the court has to assess whether an intelligent and honest man in the position of a 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. This is the test set out in Charterbridge Corporation Ltd v Lloyds Bank Ltd [1970] 1 Ch 62 (at 74) and it has been applied here since adopted by this court in Intraco Ltd v Multi-Pak Singapore Pte Ltd [1994] 3 SLR (R) 1064 (at [28]). [39] The Federal Court at [177] and [178] reaffirmed the Charterbridge Principle exposited by Zainun Ali JCA (later FCJ) in Pioneer Haven Sdn Bhd v Ho Hup Construction Co Bhd & Anor and other appeals 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. Analysis and findings Whether D1, D2 and D3 breached their duties and committed fraud [40] Guided by the instructive principles set out in the preceding paragraphs, I now deal with this issue. [41] D1, D2 and D3’s breaches of statutory and fiduciary duties breach of contractual and trust duties and committed fraud was alleged to arise from:

41.1 the disposal of P2’s shares in D5 and D6 at a nominal value of only RM10.00 for each company to D4 through the impugned agreements without the Plaintiffs’ prior approval;

41.2 the unlawful/wrongful use of P2’s Manufacturing Licence dated 16.10.2017 to export materials worth RM24,347,200.66 to Turkey and Pakistan from 2017 – 2019 (“the 84 Impugned Transactions”) without declaring the revenue or sales proceeds to the Plaintiffs and neither any dividend has been declared to the Plaintiffs; and

41.3 the unlawful use of documents belonging to P2 to obtain the Certificate of origin (“CO”) from the Ministry of International Trade and Industry (MITI) to enjoy preferential duties for exported items, despite the 5th Defendant having ceased to be the 2nd Plaintiffs’ subsidiary. Disposal of P2’s shares in D5 and D6 at a nominal value [42] The Plaintiffs posited that:

42.1 At the material time of the disposal, D1 was a Director of P2, D5 and D6 whilst D3 was the Group Accountant and the person in charge of the accounts and finance of the Plaintiffs, D5 and D6 respectively. D2 was deceived by D1 and D3 to be part of the disposals but given that D2 is also a director of P2, D5 and D6, he owed fiduciary duties to the Plaintiffs, D5 and D6.

42.2 D1 and D3 were the movers of the alleged wrongful Disposal Of Shares and that there is no credible evidence that D4 is the beneficial owner of D5 and D6:

42.2.1 D1 continued to have control over P2, D5 and D6 even though D1 is no longer the shareholder and managing director of P1 as admitted by D3 during cross examination; D2 also testified that P2, D5 and D6 were controlled together by D1 and D3.

42.2.2 D1 continued to be the director of D5 and D6 until 3.4.2019 even after the disposal of D5 and D6 on 17.12.2018;

42.2.3 D3 was the group accountant of the Plaintiffs from 1.10.2016 to 15.2.2019;

42.2.4 That D1 had control of D5 and D6 was also made evident by the fact that the former staff of the Plaintiffs joined D1 in D5 and D6 namely D3, Willam Chan Siew Kei (“William Chan”), Chang Shaw Horng, Cheong Wai Loon and Jainuri Bin Sarip. William Chan was interviewed by D1 whilst D3 was interviewed by D1’s wife. They were both indebted to D1. D1 was also the superior of all these staff who followed D1 in joining D5 and D6 after the Disposal Of Shares and all of them have received monies from D5 and D6;

42.2.5 D4 is not listed as the signatory of any of the bank accounts of D5 and D6;

42.2.6 There were no cheques issued from D5 and D6 to D4. Only a sum of RM12,000.00 was paid to D4’s son, Tai Ken Sin; and

42.2.7 William Chan is a willful nominee of D1 as can be inferred by William Chan’s indebtedness to D1 when he admitted that he has begged D1 for a job at P2 during his job interview in November 2017. [43] D1 admitted under cross-examination that in June 2017, D1 and D3 had informed Baker Tilly that D5 and D6 have ceased operations since 2017 through the Plaintiffs’ Group and Company Summary Review Memorandum for financial year ended 30.6.2017 “the company had ceased operation since January 2017. The company planned to strike off the company in next financial year 2018, expected.” That the companies will be struck out was also captured in Baker Tilly’s Report on D5’s Related Party Transactions dated 24.7.2017 and Baker Tilly’s Report on D6’s Analytical Procedures dated 12.7.2018. [44] In facilitating the sale of both companies at a nominal sum of

44.1 the evidence revealed D1, D2 and D3 have written off cash advance in the sum of RM4,780,942.93 and RM1,208,183.70 respectively from P2 to D5 and D6 during financial year ended 30.6.2017 through P2’s directors’ circular resolution dated 30.6.2017 to ensure that there is no debts due to P2 before the disposal of D5 and D6 to D4; D1 admitted during cross-examination that by writing-off the debts, P2 will not be able to recover these debts from D5 and D6; D1 was not able to show proof that this writing off such big sums was disclosed to P1 and instead blamed the company secretary for advising that disclosure was not necessary; prior P2 writing off the cash advances to D5 and D6, an impairment of RM1,795,419.00 from P1 to P2 was made while D1 was one of the directors of P2. The effect of the impairment will show no debt is owed by P2 to P1 as part of the justification for P2 to write off cash advances from P2 to D5 and D6 that had been undertaken earlier on 30.6.2017;

44.2 D1, D2 and D3 also transferred all fixed assets belonging to D5 and D6 to P2 in order to reduce the value of D5 and D6 before the disposal. [45] In my respectful view, D1and D3’s explanation that the debts were written off due to the fact that D5 and D6 were unable to repay the debts owed to P2 at the material time and that the transfer of the fixed assets of D5 and D6 to P2 was executed for P2’s benefit is unacceptable as the evidence show which I will come to in a while that D5 and D6 were actively carrying on business. [46] The following events also show D1 and D3 engineered the disposal of D5 and D6:

46.1 D3’s brought the D5 Agreement and D6 Agreement for D2 to sign and secured D2’s signature after assuring D2 that everything will be under D1’s responsibility;

46.2 even before P2, D5 and D6’s board of directors have approved the sale, it was D1 and not D4 who procured the assessment of stamp duty for the D5 Agreement and D6 Agreement on 17.12.2018 which is telling of D1’s personal stake in the matter particularly when the agreements provide for stamp duties on the transfer to be paid by D4;

46.3 D1 and D2 only a month later signed the Directors’ Circular Resolution dated 15.1.2019 of P2, D5 and D6 for the sale of P2’s shares in D5 and D6 to the late D4;

46.4 Even without the respective board resolutions approving the disposal of D5 and D6 shares, on 10.1.2019, the company secretaries for D5 and D6 were suddenly replaced by D1. This sudden change of company secretaries was not made known to P1's Board. D1’s testimony that there was oral approval from the late Mr. Fong Wai @ Foong Kai Ming, a director of P1 at the material time to change the company secretary and to dispose D5 and D6 not only was not pleaded, it was also not in his witness statement. I find it a convenient afterthought particularly when P1 is a listed company on Bursa Malaysia and important matters like disposal of subsidiaries have to be announced within strict timelines and Fong Wai @ Foong Kai Ming is dead, a case of 'dead men tell no tales’. Such a tale is also contradicted by their submission that the change of company secretary of D5 and D6 on 10.1.2019 was made following D4’s instructions. D4 is also dead and again can tell no tale and besides, was also not pleaded and ought to be ignored. Added to that, I find such a narrative unbelievable as D4 simply could not have asked for a change of secretary when the sale of shares were not completed on 10.1.2019 and the respective Board of Directors of P2, D5 and D6 have not approved the sale yet;

46.5 On 15.1.2019 at 4.55pm, the newly appointed company secretary of D5 and D6, Ms. Candise of Bizmarc sent an email to the company’s secretary of P1, Ms. Asmaliza of HMC attaching the stamp certificate in respect of the sale of P2’s shares in D5 and D6. Ms. Asmaliza then on the same day of 15.1.2019 at 5.16pm forwarded the draft announcements in relation to the disposals of D5 and D6 to Mr. Foong Kai ming (the 1st Third Party). On 16.1.2019 the next day, Ms. Asmaliza then emailed the draft announcements in relation to the disposals of D5 and D6 to the other directors in the KPB Board seeking for KPB Board’s approval to release the draft announcements in relation to the disposals of D5 and D6 and not to ask for approval regarding the disposal itself and this was when the Board of Directors of P1 were first made aware of the disposal of P2’s shares in D5 and D6 . Kok Pauline (PW- 4), a member of the Board of directors of P1 asserted in her testimony that the fact that the information and the stamp certificate in respect of the sale of P2’s shares in D5 and D6 were sent by Ms. Candise of Bizmarc to Ms. Asmaliza of HMC at 4.55pm on 15.1.2019 already demonstrated bad faith on the part of D1, D2 and D3;

46.6 No documentary evidence has been adduced by D1, D2 and D3 to show that P1’s Board of Directors was aware of the disposals of D5 and D6 prior to the email of Ms. Asmaliza on 16.1.2019;

46.7 at the 79th Board of Directors’ Meeting of P1 held on 16.1.2019 and Emergency Board of Directors’ Meeting of P1 held on 15.4.2019 which were both attended by Mr. Fong, there was no mention of the so-called “oral approval” which D1 claimed has been given by Mr. Fong;

46.8 P1’s board instead took steps to lodge a complaint to the SSM and resolved that a police report would be lodged by the Board of Directors of P1 in respect of the unauthorised disposal of P2’s shares in D5 and D6; a police report was lodged on 25.4.2019 by a Board member, Dato’ Arivalagan Arujunan, regarding the unauthorised disposal of D5 and D6 and stating in the said police report that D1 had in bad faith executed the disposal of P2’s shares in D5 and D6 without prior approval of the Board of Directors of P1 and after the police report was lodged, the Board of Directors then authorised the company secretary to announce the non-recognition of the disposals of D5 and D6 to Bursa Malaysia due to the disposal of D5 and D6 were wrong and undertaken without prior approval of the Board of Directors of P1. [47] I find D1 and D3’s argument that there is also no necessity to conduct a valuation in regard of the value of D5 and D6 because D5 and D6 do not own any real estate and the Percentage Ratios for the disposal of D5 and D6 are less than 25% to be untenable, and I agree with Plaintiffs’ counsel that the analysis of the Percentage Ratios prepared by D3 show that it could not justify the disposal of D5 and D6 at RM10.00 as no proper valuation was undertaken and in any event the Percentage Ratios prepared by D3 were wrong simply because D1 and D3 did not include all the tangible and intangible assets of D5 and D6 in the calculation. The intangible asset of D5 and D6 that have not been taken into account by D1 and D3 in disposing D5 and D6 are the Manufacturing Licence of D5 and unutilised tax losses of D5 and D6. In this regard, D1 agreed during cross-examination (i) that at the time of disposal D5 and D6 had unutilised tax losses of RM2,738,933 and RM822,230 respectively, (ii) D5 had Manufacturing Licence which enable D5 to trade under free trade agreement and that the total income and equity of D5 and D6 is more than RM10.00;(iii) as at 30.6.2018 D5 has total assets of RM101,979, total income of RM62,086 and total equity of RM57,826 which is all more than the value of RM10.00 of which D5 was sold for; (iv) in respect of D6, D1 agreed that as at 30.6.2018 D6 has a net profit of RM13,448, assets of RM51,569, total equity and liabilities about RM51,569, revenue of RM90,000 and gross profit of RM14,000 and cash which is more than the value of RM10.00 of which D6 was sold for. [48] That is not all. The value of the sales proceed collected by D5 for its exports of material to overseas after its disposal indicate plainly that there are still active business and value to D5. After the disposals of D5 and D6 on 17.12.2018 and with the use of the Manufacturing Licence of D5, monies were still deposited into the bank account of D5 from 17.12.2018 to 14.1.2021 a total deposit of RM11,777,543.32 is recorded in D5’s RHB Bank Account. [49] Kok Pauline (PW-4) testified that had the disposal of the D5 and D6 been tabled-up for discussion at a Board of Directors’ meetings of P1, P1 would not have approved it on the basis that the disposal of D5 and D6 for a nominal consideration of only RM10.00 for each company is not the fair value of the companies. [50] D5’s contention that disposal of P2’s shares in D5 were legally passed on the basis of the existence of D5’s Director’s Circular Resolution as well as P2’s Director’s Circular Resolution is misconceived and cannot stand for the simple reason that Board of Directors of P1 as the ultimate holding company of P2, D5 and D6 did not authorize nor had knowledge of disposal P2’s shares in D5 and D6. In any case, fraud unravels all. Procurement of manufacturing licence for D5 [51] Khalilah Hanum (PW-8) from MITI testified that the Manufacturing Licence for D5 was granted based on P2’s factory’s address of P2 at Bentong, Pahang and the application was submitted on 16.10.2017. [52] Although D1 and D3 had informed Baker Tilly that for financial year ended 30.6.2017, D5 has ceased operations and was going to be struck off in the next financial year, D1 and D3 however proceeded to procure a Manufacturing Licence for D5 from 16.10.2017 onwards which was more than a year before disposal of D5 and D6 on 17.12.2018. That it does not make sense to apply for a Manufacturing Licence for D5 if the D5 were to be struck off was admitted by D3 under cross-examination: “AR: Do you agree if the company was to be struck off, and you told Baker Tilly in October 2017, it doesn’t make sense for D5 to apply for this license, correct? DW5: No. “ [53] I find it inherently probable that in obtaining the Manufacturing Licence for D5, D1 and D3 would be able to benefit from the use of the Manufacturing Licence after disposal of D5 and D6 were undertaken and this same Manufacturing Licence was then used by D1 and D3 and the former employees of P1 after the disposal of D5 and D6 on 17.12.2018 to generate income for D5 and D6. With the licence, D5 can engage in manufacturing activities. D5 then can apply for a Cost Analysis (“CA”) and subsequently a Certificate of Origin (“CO”) from MITI enjoy preferential duties based on the free trade agreement between Malaysia and overseas countries like Turkey, India and Pakistan. The inference is irresistible that there was no real intention to strike off D5 and D6 as was told to Baker Tilly but that instead D5 after disposal, will be used to export knitted fabrics to overseas, and the proceeds collected therefrom will be for the personal benefit and interest of D1, D3, D4 and the close associates of D1. This is borne out by the evidence showing D5 was actively applying for CA and CO to MITI using D5’s Manufacturing Licence before the disposal and these applications to MITI continued even after the disposal of D5 and D6. D5 had applied for CA and CO to MITI since 2.4.2018 up until 7.12.2018 using D5’s Manufacturing Licence; there were 21 approvals for CA applied by D5 from 2.4.2018 to 13.11.2018; there were 3 CO transactions under D5 on 25.6.2018 and 27.6.2018 for the export of Knitted Fabrics to Sozteks Kumas Dis. Tic. Ltd in Turkey in the sum of USD88,508.16, USD84,576.61 and USD7,461.16 respectively. I do not believe D1 that these 3 CO transactions “were parked under the name of D5 to sustain the livelihood of D5 at the material time” for between 13.11.2018 to 7.12.2018, there were also 17 other approvals granted by MITI for D5’s application for CA. These applications for CA and CO using D5’s Manufacturing Licence prior to the disposal made plain that D5 was actively running business activities and had not ceased operations. [54] D1 himself admitted plainly in cross-examination that D5 carried on business activities of exporting after D5’s disposal: : Right. So clearly, Mr Woo, that even after the disposal of D5, there were still, there were economic activities, business activities for the exporting, yes? : Yes. [55] Even after the disposal of D5, the same Manufacturing Licence was used to export knitted fabrics overseas is borne out by numerous CO transactions undertaken by D5 from 2019, 2020 up until 2021 as follows:

55.1 38 CO transactions from 13.2.2019 to 26.6.2019 @ CBD-14 (Ecl. 235) @ pgs. 5 – 399];

55.2 37 CO transactions from 26.6.2019 to 16.7.2019 @ CBD-15 (Ecl. 236) @ pgs. 5 – 361];

55.3 43 CO transactions from 16.7.2019 to 2.8.2019 @ CBD-16 (Ecl. 237) @ pgs. 5 – 404];

55.4 44 CO transactions from 2.8.2019 to 3.9.2019 @ CBD-17 (Ecl. 238) @ pgs. 5 – 401];

55.5 44 CO transactions from 3.9.2019 to 27.9.2019 @ CBD-18 (Ecl. 239) @ pgs. 5 – 387];

55.6 50 CO transactions from 1.10.2019 to 19.12.2019 @ CBD- 19 (Ecl. 240) @ pgs. 5 – 444];

55.7 44 CO transactions from 6.1.2020 to 17.12.2020 @ CBD-20 (Ecl. 241) @ pgs. 5 – 330]; and

55.8 6 CO transactions from 15.2.2021 to 8.9.2021 @ CBD-20 (Ecl. 241) @ pgs. 331 – 374]. [56] In my considered view, these active business transactions contained in contemporaneous documents belies D3’s contention that the Manufacturing Licence obtained for D5 is to clear out government documents or the ‘hanging’ application in MITI system for the purpose of striking off D5. [57] The active business activities of D5 also implodes D1 and D3’s ipse dixit assertion that D5 has ceased business. [58] In my respectful view, the fact that D5’s 2018 Audited Accounts shows that D5 has suffered accumulated losses of RM4,504,260.00 during financial year 2017 and RM4,442,174.00 during financial year 2018 and that D6 has suffered accumulated losses of RM27,317.00 during the financial year 2017 and RM13,869.00 during the financial year 2018 as recorded in D6’s 2018 Audited Accounts do not necessarily mean they have ceased operations. In my view, business is cyclical, there will be good and lean times. [59] Syukri Sulaiman (PW-7) in his Supplemental Witness statement Q&A 14 WS-PW7B testified that the total value of invoices that has been issued by D5 to the overseas buyers after the Disposal Of Shares is in the sum of RM99,698,551.53 represented as follows: DESCRIPTION USD MYR Revenue from CO during financial year ended 30.6.2019 3,358,998.90 13,548,575.92 Revenue from CO during financial year ended 30.6.2020 18,542,856.51 76,309,961.88 Revenue from CO during financial year ended 30.6.2021 2,178,014.92 8,935,952.94 Revenue from CO during financial year ended 30.6.2022 63,350.00 264,296.20 GRAND TOTAL 24,143,220.33 99,058,784.94 [60] D1 and D3’s evidence that D5 and D6 had ceased operations simply do not accord with contemporaneous documentary evidence before the court and such evidence ought to be viewed for its veracity rather than plausibility. In this regard, I refer to Tindok Besar Estates Sdn Bhd v Tinjar Co [1979] 2 MLJ 229 where Chang Min Tat FJ said at p 234: “…For myself, I rely in the acts and deeds of a witness which are contemporaneous with the event and to draw the reasonable inferences from them than to believe their subsequent recollection or version of it, particularly if he is a witness with a purpose of his own to serve and if it did not account for the statements in his documents and writings. Judicial perception of the evidence requires that the oral evidence be critically tested against the whole of the other evidence and the circumstances of the case. Plausibility should never be mistaken for veracity.” (own emphasis) [61] I do not accept D1 and D3’s postulation that the 306 CO transactions conducted by D5 after the Disposal Of Shares related to businesses closed by D4, neither do I accept their argument that D5 was under the control of D4 after the disposal of D5 and that D4 is the only person who had the authority to make decisions for D5 and to execute documents for the obtainment of CAs and COs for D5 after the disposal of D5. This is because:

61.1 D1 continued to be the director of D5 and D6 after the disposal before he resigned on 12.2.2019. D3 resigned as Group Accountant of P1 and P2 on 15.2.2019; D1’s argument that D5 and D6 were under the full control of D4 after the Disposal Of Sharesa and that he and D2 were merely helping D4 with some administrative works during the transition period and that they have submitted their resignation letters except that D4 failed to do housekeeping ring hollow to me;

61.2 D4 as purported new owner of D5 and D6 is not even a signatory of D5 and D6’s bank accounts;

61.3 D1 and D3 continued to be the authorised signatories of D5’s RHB Account after the disposal of D5 on 17.12.2018:

61.3.1

61.3.2

61.4 D3 remains as the person in charge of all D5’s submissions of D5’s CO to MITI. PW8 from MITI confirmed by reference to the documents that D3 is the person in charge of submissions and MITI does do not have any records that D3, Au Chan Chun is no longer the authorised person in respect of submissions of CO by D5;

61.5 D3 did not care to update MITI’s records that he was not the person in charge of all D5’s CO submissions to MITI;

61.6 D1 admitted under cross-examination that the MITI documents for the 84 transactions were submitted by D3;

61.7 William Chan testified during cross-examination that after D5 was disposed off to D4, D3 was still responsible for the accounts of D5 and D6 after December 2018. [62] I find D1 and D3’s testimony that the reason D4 appointed “his staff” i.e. Chang Shaw Horng and Cheong Wai Loon, as signatories for the bank accounts of D5 and D6, instead of himself, because D4 wanted to concentrate on sourcing business overseas to be a convenient afterthought for firstly, it overlooks that both of them D1 and D3 were cheque signatories of D5; second, D4 is dead, a case of 'dead men tell no tales'; at any rate, it does not beggar belief that a prudent business man (if D4 is assumed as such) will appoint new staff to be cheque signatories as those who control the bank accounts control the company based on D1’s own evidence: : And if you control the bank account, then effectively, 1 you control the company, you agree? : Yes. “ [63] As can be seen, the narrative relied on by D1 and D3 were blown to smithereens when tested under cross-examination. The importance of oral evidence through cross-examination is underscored by the following authorities:

63.1 Carmarthenshire County Council v Y [2017] 4 WLR 136 at [7] to [9]: 7 ….Oral evidence-in-chief now requires the permission of the judge be given. FPR r 22.11 provides the right to cross-examine a witness on his or her witness statement. Thus, the general rule is that facts in issue are to be proved by written evidence-in-chief and oral evidence given under cross-examination. Of course, facts may also be proved by hearsay evidence pursuant to the Civil Evidence Act 1998 and FPR rr 23.2–23.5, but the general rule is that oral evidence given under cross-examination is the gold standard. 8 Why is this? It is because it reflects the long-established common-law consensus that the best way of assessing the reliability of evidence is by confronting the witness. In Crawford v Washington (2004) 124 S Ct 1354, para 62 Scalia J, when discussing the explicit command to afford cross-examination of witnesses in criminal cases contained within the Sixth Amendment to the US Constitution, stated: “To be sure, the clause’s ultimate goal is to ensure reliability of evidence, but it is a procedural rather than a substantive guarantee. It commands, not that evidence be reliable, but that reliability be assessed in a particular manner: by testing in the crucible of cross-examination. The clause thus reflects a judgment, not only about the desirability of reliable evidence (a point on which there could be little dissent), but about how reliability can best be determined. Cf 3 Blackstone, Commentaries, at 373 (‘This open examination of witnesses … is much more conducive to the clearing up of truth’); M Hale,

(adversarial testing ‘beats and bolts out the truth much better’).” 9 It should not be thought that this consensus or viewpoint is confined to criminal causes. Thus, in Goldberg v Kelly (1970) 397 US 254, a case about the entitlement to receive certain federal welfare benefits, Brennan J stated, at p 269: “In almost every setting where important decisions turn on questions of fact, due process requires an opportunity to confront and cross-examine adverse witnesses.”

63.2 Berezovsky v Abramovich [2012] EWHC 2463 (Comm):

… However, it would not have been practical, given the length and complexity of the factual issues involved, for the court to have required evidence in chief to have been given orally. It was for that reason that cross-examination, in particular of Mr. Berezovsky and Mr. Abramovich, assumed such a critical importance. [64] Evaluating and weighing the evidence, in my view, besides the matters alluded to in the 3 preceding paragraphs, it is inherently improbable that D4 could have been the beneficial owner of D5 and D6 as none of the cheques issued from the bank accounts of P2, D5 or D6 were made payable to D4. Instead, only a paltry sum of RM12,000.00 was paid to the personal representative of D4, Tai Ken Sin after the disposal of D5 and D6 between January 2019 to August 2019. [65] For that matter, neither is William Chan’s bare assertion that he was invited by D4 to join D5 and made a director, with his background as a lorry driver. Of the sum of RM261,866.82 paid to him, he testified that ‘approximately half’ was paid to the late D4 but however was not able to show any documentary proof except for his bare assertion. In any case, if half the money was meant for the late D4, it simply does not make sense to me for D5 to pay William Chan and then, for William Chan to pay D4. [66] As a director of D5, William Chan was a totally dreadful witness; he had not the faintest idea of his duties and glaringly, he did not even know where D5’s factory is when questioned during cross-examination. It can only mean there is no factory. Clearly to me, William Chan was spinning a story, and his evidence appears to be calculated to support D1 and D3’s machinations which are self-serving and a disingenuous opportunistic posturing to explain away their actions to take over D5 and D6 for a paltry sum of RM10.00 for themselves, rather than provide this court with frank disclosure. It is demonstrably clear to me that the central figures of D5 are D1 and D3. I do not find D1 and D3’s testimony that D3, Willam Chan, Chang Shaw Horng, Cheong Wai Loon and Jainuri Bin Sarip, joined D5 and D6 at D4’s request to be convincing at all. D4 is now dead and not able to testify. There is simply no credible evidence adduced to substantiate D1, D3 and William Chan’s testimony that D4 is the owner of D5 and D6; nether is there evidence that D4 had received cash payments or direct payments in his offshore account or any account at all. D1, D3 and William Chan were clearly making up stories as the evidence unfolded in Court depending on which direction the wind was blowing. [67] I find the Plaintiffs’ assertion that the motive for D1 and D3 to dispose off D5 and D6 ostensibly to D4 is purely for financial gain is not without basis from the payments uncovered through the banking documents secured from the discovery applications filed by the Plaintiffs. The Plaintiffs have shown:

67.1 D1 has caused to be issued cheques from P1, P2, D5 and D6 made payable to himself before and even after the disposal of D5 and D6. There are 51 cheques totalling RM1,321,158.40 whereby 33 cheques were issued before D1 resigned as director of P2, D5 and D6 and 18 cheques were issued after D1 resigned as director of P2, D5 and D6. Of these 51 cheques pleaded by the Plaintiffs, D1 has admitted in the Agreed Facts that a total of 44 cheques in the total sum of RM1,267,984.49 have been issued to him from the account of P1, P2, D5 and D6 between 16.10.2018 to 6.4.2020. Out of these admitted 44 cheques, 26 cheques were issued to D1 from P1’s UOB Account, P2’s UOB Account, D5’s RHB Account and D6’s Alliance Account between 16.10.2018 to 28.3.2019 in the total sum of RM559,360.78. The balance of 18 cheques were issued to D1 from D5’s RHB Account, D6’s Alliance Account and D6’s UOB Account between 5.4.2019 to 6.4.2020 in the total sum of RM708,623.71. No documentary evidence or directors’ resolutions adduced during the trial by D1 to justify the purpose of these 44 cheques issued by P1, P2, D5 and D6 that were made payable to him. The only justification given by D1 in D1’s Witness Statement was that these cheques which contained his signature were all issued according to the mandate given to him as the authorised signatory. A company’s bank account cannot by any means be treated as a private ATM machine by its directors or officers. The refusal to explain what the payments were for, can only lead to one irresistible conclusion that these orgy of cheque payments were wrongly and fraudulently issued by D1 to himself for his own personal benefit:

67.2 D1 has also caused to be issued cheques from D5 and D6 to the company and individuals who are related to D1 before and after the disposal of D5 and D6: (i) A total of 5 cheques in the total sum of RM30,367.65 issued between March 2019 to May 2019 and February 2020 from D6’s Alliance Account made payable to Avest Asset, a company belonging to D1;

(ii) A Cheque dated 25.7.2016 in the sum of RM46,000.00 issued from D6’s UOB Account to D1’s wife, Wong Yuet Wan, (iii) 8 cheques in the total sum of RM135,884.86 issued between August 2019 to February 2020 from D5’s RHB Account made payable to D3; (iv) A total of 23 cheques in the total sum of RM1,314,915.60 issued between May 2018 to February 2020 from D5’s RHB Account and D6’s UOB Account made payable to Chang Shaw Horng; (v) 15 cheques in the total sum of RM400,240.27 issued between March 2019 to January 2020 from D5’s RHB Account made payable to Cheong Wai Loon; (vi) 4 cheques in the total sum of RM12,000.00 issued between January 2019 to August 2019 from D5’s RHB Account and D6’s Alliance Account made payable to Tai Ken Sin (D4’s son); (vii) 16 cheques in the total sum of RM261,866.82 issued between March 2019 to June 2020 from D5’s RHB Account and D6’s Alliance Account made payable to William Chan Siew Kei; (viii) 16 cheques in the total sum of RM53,316.39 issued between March 2019 to December 2020 from D5’s RHB Account and D6’s Alliance Account made payable to Jainuri Bin Sarip. [68] D2 testified that Danny Chang Shaw Horng is the right-hand man of D1 and he takes instructions from D1. D2 also testified that D1, D3, Cheong Wai Loon, Chang Shaw Horng and Jainuri Bin Sarip were working together before the disposal of D5 and after D5 and D6 were disposed they left. D1 has admitted in the Agreed Facts that the number of cheques and the total amount of the cheques issued from D5 and D6 to Avest Asset, Wong Yuet Wan, D3, Tai Ken Sin, William Chan Siew Kei and Jainuri Bin Sarip are consistent with the Plaintiffs’ pleaded case. [69] D1 has also admitted during his cross-examination by the Plaintiffs’ counsel that he has issued or caused to be issued cheques that were made payable to Avest Asset, D3, Tai Ken Sin, William Chan Siew Kei, Jainuri Bin Sarip, Chang Shaw Horng and Cheong Wai Loon. However, in respect of the cheques issued to Chang Shaw Horng and Cheong Wai Loon, out of 23 cheques in the total sum of RM1,314,915.60 made payable to Chang Shaw Horng, D1 has only admitted in the Agreed Facts that there were 20 cheques in the total sum of RM469,345.61 issued between May 2018 to February 2020 from D5’s RHB Account, D6’s UOB Account and D6’s Alliance Account made payable to Chang Shaw Horng. Further, out of 15 cheques in the total sum of RM400,240.27 made payable to Cheong Wai Loon, D1 only admitted that there were 14 cheques in the total sum of RM396,609.15 issued between March 2019 to January 2020 from D5’s RHB Account made payable to Cheong Wai Loon. [70] There was no evidence adduced by D1 to justify the purpose of these cheques issued or caused to be issued by him from D5 and D6 that were made payable to the company and individuals related to him. Again, the justification given by D1 in D1’s Witness Statement was that these cheques which contained his signature were all issued according to the mandate given to him as the authorised signatory. [71] D1 has also issued and caused to be issued a total of 28 cheques in the sum of RM413,810.97 from D5’s RHB Account between March 2019 to December 2020 after the disposal of D5 and D6. The details of these 28 Cash Cheques issued from D5’s RHB Account are summarized in Schedule A attached to the Plaintiffs’ Written Submissions. These 28 cash cheques were excluded from the Agreed Facts. However, during cross-examination by the Plaintiffs’ counsel, D1 admitted that these 28 cheques are cash cheques issued from D5’s RHB Account between March 2019 to December

During re-examination, D1 testified that these cash cheques may have been payment to the late D4. Again, D4 is dead and can tell no tale. Without evidence from D1 as to what these cash cheques were for, the irresistible inference must be that they were issued for his own benefit. [72] D1 has issued and caused to be issued a total of 98 cheques in the sum of RM6,458,806.45 from D5’s RHB Account between February 2016 to July 2020. The details of these 98 Cash Cheques issued from D5’s RHB Account are set out in Schedule B attached to the Plaintiffs’ Written Submissions (Encl. 380). These 98 cash cheques were excluded from the Agreed Facts. However, during cross-examination by the Plaintiffs’ counsel, D1 had admitted that these 98 cheques are cheques issued from D5’s RHB Account between February 2016 to July 2020. Again there is no evidence from D1 and there is no Board of Directors’ resolution from D5 to explain the reasons for these 98 cheques. The same irresistible inference must be that all these cheques were wrongly and fraudulently issued or caused to be issued by D1 for his own personal benefit. [73] D3 did not care to explain why he was paid RM135,884.86 between August 2019 to February 2020 from D5’s account. D1 and D3’s arguments that the Plaintiffs have failed to adduce any evidence to show that there is any misfeasance in the withdrawals, that there were overlaps and or inclusion of returned cheques are but bare assertions to me as the burden has shifted to D1 and D3 to explain what the orgy of payments were for. [74] D1 and D3’s conduct throughout the entire saga gave good clues as to whether they are acting honestly and transparently or in a dishonest fashion. Lord Blackburn in Brogden v Metropolitan Railway Company (1876– 77) LR 2 App Cas 666 HL(E) had occasion to say: “…is trite law that the thought of man is not triable, for even the devil does not know what the thought of man is... [75] The concatenation of circumstances and events, the acts and conduct of D1 and D3, the totality of their dealings and the oral evidence pieced together and weighed, I find that there is credible, cogent, convincing, and compelling tangible evidence before the court that the Plaintiffs have sufficiently proven on a balance of probability that P2’s disposal of D5 and D6 ostensibly to D4 was wrongful without first obtaining the approval from P1 as the ultimate shareholder of D5 and D6. The disposal was to enrich D1 and D3 and their cohorts. D1’s actions are patently in breach of his following duties as a director of P2, D5 and D6:

75.1 To exercise powers in accordance with the CA, for a proper purpose and in good faith in the best interest of the company (section 213(1)).

75.2 To exercise reasonable care, skill and diligence (section 213(2)).

75.3 To make business judgments for a proper purpose and in good faith, not to have a material personal interest in the business judgment and to act in the reasonable belief that the business judgment is in the best interest of the company (section 214(1)).

75.4 Not to engage in business to gain a benefit for himself or any other person, without the consent or ratification of a general meeting (section 218(1)(a to e): “Section 218(1) CA 2016: Prohibition against improper use of property, position, etc. A director or officer of a company shall not, without the consent or ratification of a general meeting-

use the property of the company;

use any information acquired by virtue of his position as a director or officer of the company;

use his position as such director or officer;

use any opportunity of the company which he became aware of, in the performance of his functions as the director or officer of the company; or

engage in business which is in competition with the company, to gain directly or indirectly, a benefit for himself or any other person, or cause detriment to the company.” [76] It is clear that D1 and D3 has obtained secret profit by the cheques paid out to them from D5’s accounts. The evidence is undeniable. Their conduct is also dishonest or fraudulent, whether equitable fraud or common law fraud. [77] As for what constitutes dishonesty, this is set out in the judgment of Lord Nicholls in the decision of the Privy Council in Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378; [1995] 3 All ER 97; [1995] 3 WLR 64 where he said: “…Honesty, indeed, does have a strong subjective element in that it is a description of a type of conduct assessed in the light of what a person actually knew at the time, as distinct from what a reasonable person would have known or appreciated. Further, honesty and its counterpart dishonesty are mostly concerned with advertent conduct, not inadvertent conduct. Carelessness is not dishonesty. Thus for the most part dishonesty is to be equated with conscious impropriety. However, these subjective characteristics of honesty do not mean that individuals are free to set their own standards of honesty in particular circumstances. The standard of what constitutes honest conduct is not subjective. Honesty is not an optional scale, with higher or lower values according to the moral standards of each individual. … “All investment involves risk. Imprudence is not dishonesty, although imprudence may be carried recklessly to lengths which call into question the honesty of the person making the decision. This is especially so if the transaction serves another purpose in which that person has an interest of his own.” “…Ultimately, in most cases, an honest person should have little difficulty in knowing whether a proposed transaction, or his participation in it, would offend the normally accepted standards of honest conduct.” [78] To prove equitable fraud, the Plaintiffs do not need to demonstrate that D1 and D3 have an intention to deceive, the Plaintiffs only need to show that there was a relationship of trust and confidence between the parties, and that there has been unconscionable conduct by D1 and D3 - see Takako Sakao (f) v Ng Pek Yuen (f) & Anor [2009] 6 MLJ 751 FC: “[23] The 'fraud' of which Lord Halsbury spoke in Salomon v A Salomon & Co Ltd includes equitable fraud. In the recent Australian case ofThe Bell Group Ltd (In liquidation) v Westpac Banking Corporation (No 9) [2008] WASC 239; 70 ACSR 1, Owen J discussed the distinction between equitable fraud and fraud at common law. His Honour said: 4849One of the leading Australian texts on equitable principles is R Meagher, D Heydon and M Leeming, Meagher, Gummow and Lehane's Equity Doctrines and Remedies (4th Ed, 2002). When I refer to this text from time to time in these reasons I will do so by the shortened phrase 'Meagher, Gummow and Lehane'. At [12-050] the authors set out a non-exhaustive list of factual and legal situations that have traditionally been treated as species of equitable fraud. They include:

misrepresentation by persons under an obligation to exercise skill and discharge reliance and trust (for example in fiduciary relationships), and inducements to contract or otherwise for the representee to act to his detriment in reliance on the representation;

the use of power to procure a bargain or gift, resulting in disadvantage to the other party;

conflict of interest against a duty arising from a fiduciary relationship; and

agreements which are bona fide between the parties but in fraudof third persons. ……….. 4853This, then, marks out a significant difference between common law fraud and equitable fraud. The latter does not require proof of an actual intention to deceive. To summarise, a plea of fraud at common law will not succeed absent proof of an intention to deceive. Such an intention is not an ingredient of equitable fraud which is, essentially speaking, unconscionable conduct in circumstances where there exists or is implied or imposed a relationship of trust or confidence.” See also Ktl Sdn Bhd Ktl Sdn Bhd v Leong Oow Lai [2014] MLJU 1405 at [93]. [79] That there is a relationship of trust or confidence between D1, D3 and the Plaintiffs cannot be disputed. Their disposing off D5 and D6 as shell companies and then take over its business, and make money to pay themselves at the Plaintiffs’ expense is unconscionable to come within equitable fraud. The Privy Council in Hart v O’Connor [1985] 1 AC 1000 at p 1024C described unconscionable conduct as follows: … "Fraud" in its equitable context does not mean, or is not confined to, deceit; "it means an unconscientious use of the power arising out of these circumstances and conditions" of the contracting parties; Earl of Aylesford v. Morris (1873) L.R. 8 Ch. App. 484, 491. It is victimisation, which can consist either of the active extortion of a benefit or the passive acceptance of a benefit in unconscionable circumstances. [80] The Plaintiff will have to show intention for common law fraud - Takako Sakao (supra): [23]…. The term common law fraud is often used to describe the tort of deceit, or the making of fraudulent misrepresentations. The tort of deceit is said to encompass cases where the defendant knowingly or recklessly makes a false statement, with the intention that another will rely on it to his or her detriment…….. In Armitage v Nurse [1997] EWCA Civ 1279; [1998] Ch 241; [1997] 3 WLR 1046, Millett LJ discussed the meaning of 'actual fraud' in the context of an exemption clause. At p 1053, His Lordship described actual fraud as connoting, at least, 'an intention on the part of the trustee to pursue a particular course of action, either knowing that it is contrary to the interests of the beneficiaries or being recklessly indifferent whether it is contrary to their interests or not'….. [81] Once fraud is proved, it vitiates all transactions whatsoever. Fraud unravels all. As cited by the Federal Court in Lai Fee v Wong Yu Vee [2023] 3 MLJ 503 at [63]: [63] In CIMB Bank Bhd v Maybank Trustees Bhd and other appeals, the Federal Court ruled that a party which had committed fraudulent misappropriation of trust monies could not benefit from its own fraud and that that party cannot rely on the exemption clause under the contract as a defence. Ariffin Zakaria CJ writing for the Federal Court referred to the following remarks of Lord Bingham in HIH Casualty and General Insurance Ltd, at para [15]: … fraud is a thing apart. This is not a mere slogan. It reflects an old legal rule that fraud unravels all: fraus omnia corrumpit. It also reflects the practical basis of commercial intercourse. Once fraud is proved, ‘it vitiates judgments, contracts and all transactions whatsoever’: Lazarus Estates Ltd v Beasley [1956] 1 QB 702 at p 712, per Lord Justice Denning: ‘Parties entering into a commercial contract will no doubt recognise and accept the risk of errors and omissions in the preceding negotiations, even negligent errors and omissions. But each party will assume the honesty and good faith of the other; absent such an assumption they would not deal’. [82] In my view, there is sufficient direct as well as circumstantial evidence to prove the allegation of fraud whether equitable fraud or common law fraud. In Ng Pak Cheong v Global Insurance Co Sdn Bhd [1995] 1 CLJ 223; [1995] 1 MLJ 60; [1994] 3 AMR 2663 (HC), Mohamed Dzaiddin J (as he then was) dealt with the reception of circumstantial evidence in proving fraud. The learned judge said, “...it is not the law of evidence that every step in the allegation of fraud had to be proved by calling live and admissible evidence nor is it the law that fraud cannot be inferred in the appropriate case. The inference, however, should not be made lightly; the circumstantial evidence must be so compelling and convincing that bearing in mind the high standard of proof the inference is nevertheless justified...”. [83] In CGU Insurance Berhad v Asean Security Paper Mills Sdn Bhd [2006] 3 MLJ 1; [2006] 2 CLJ 409 (CA) Gopal Sri Ram JCA said: “…While mere suspicion is insufficient, it is not the law that a litigant who alleges fraud must unravel each and every act of the person accused of fraud. Like any other fact, fraud may be inferred from circumstantial evidence with the added proviso that there must be a foundation of evidence and not mere suspicion.” (Emphasis added) [84] It is also useful to refer to s. 17 of the Contracts Act 1950 (“the Act”) where it defines ‘fraud’ as follows: “Fraud’ includes any of the following acts committed by a party to a contract or with his connivance, or by his agent, with intent to deceive another party thereto or his agent, or to induce him to enter into the contracts:

the suggestion, as to a fact, of that which is not true by one who does not believe it to be true;

the active concealment of a fact by one having knowledge or belief of the fact;

a promise made without any intention of performing it;

any other act fitted to deceive; and

any such act or omission as the law specially declares to be fraudulent.” [85] The overarching question is how can it not be said in the given circumstances of this case that there was no fraud committed against the Plaintiffs when there is compelling evidence discussed earlier that D5 was actively trading? [86] Not withstanding D3 is never a director, however as the Group Accountant of P1, P2, D5 and D6, he is bound as an officer or employee to act in the best interest, to act in good faith and to exercise reasonable care, skill and diligence in performing his duties. Instead, in breach of his duties, he rendered dishonest assistance to D1 in the disposal of D5 and D6. [87] As a general rule for dishonest assistance, there must be a breach or trust or fiduciary by someone other than the defendant, the defendant must have helped that person in the breach, and the defendant must have a dishonest state of mind. [88] Dishonest assistance was defined by Lord Selbourne LC in Barnes v Addy (1874) L.R 9 Ch App 244 (Ch App), at pages 251 to 252 which states as follows: “…but on the other hand, strangers are not to be made constructive trustees merely because they act as agents of trustees in transactions within their legal powers …unless those agents receive and become chargeable with some part of the trust property, or unless they assist with knowledge in dishonest and fraudulent design on the part of the trustees.” [89] To establish dishonest assistance, the following elements must be established through an objective test:

89.1 there has been a disposal of the Plaintiff’s assets in breach of trust or fiduciary duty by someone other than the

89.2 the Defendant had assisted or had procured the breach;

89.3 the Defendant had acted dishonestly or had a dishonest state of mind; and

89.4 this resulted in losses suffered by the Plaintiff. [90] The House of Lords in Twinsectra v Yardley [2002] 2 AC 164 (HL), adopted an objective-subjective test. In short, this test comprises of two key elements:

90.1 the Defendant’s behaviour was dishonest by the standards of honest people; and

90.2 the Defendants must be shown to have appreciated that their behaviour contravened ordinary standards of conduct. [91] The Twinsectra tests were upheld in 3 Federal Court t cases:

91.1 CIMB Bank Bhd v Maybank Trustees Bhd & Ors [2014] 3

91.2 CIMB Bank Bhd (formerly known as Bumiputera Commerce Bank Bhd) v Sebang Gemilang Sdn Bhd & Anor [2018] 3 MLJ 689 (FC), and

91.3 Malaysian International Trading Sdn Bhd v RHB Bank Bhd [2016] MLJU 13 [92] As alluded earlier, D1 is in breach of his fiduciary duties to P2, D5 and D6. To successfully demonstrate dishonest assistance, D3 must have assisted in the breach. D3 must have acted dishonestly, resulting in losses suffered by the Plaintiff. The Federal Court in CIMB Bank [2014] supra stated that: [146] ……those principles require more than knowledge of the facts which make the conduct wrongful. They require a dishonest state of mind, that is to say, consciousness that one is transgressing ordinary standards of honest behaviour…” [93] As accountant for D5 and D6 even after disposal of these companies going by William Chan’s testimony, D3 was clearly aware that the disposal of P2’s shares in D5 and D6 for a nominal value of RM10.00 each is not in the best interest of P2, D5 and D6; he was fully aware that the D5 and D6 have not ceased operations and he was aware of the active business that D5 at least was carrying on judging by the numerous CA and CO applied to MITI and he clearly knew that there was no intention to dispose off D5 and D6 at their true value and the disposal at a nominal value was to cheat and defraud the Plaintiffs. He assisted D1 to turn D5 and D6 to be shell companies, he assisted D1 to prepare the Percentage Ratios to justify the valuation of D5 and D6 at the nominal value of RM10.00, and he assisted to procure D2’s signature to the D5 and D6 agreements and the Director’s circular resolution of P2, D5 and D6 authorizing the disposal of the D5 and D6 shares and the Plaintiffs have suffered a loss. Unlawful/wrongful use of P2’s Manufacturing Licence dated 16.10.2017 to export materials worth RM24,347,200.66 to Turkey and Pakistan from 2017 – 2019? [94] The Plaintiffs’ witness, Syukri Sulaiman (PW-7) testified that:

94.1 from June 2017 to January 2019, 84 transactions were allegedly undertaken for or on behalf of P2 using P2’s Manufacturing Licence and CO to enjoy preferential duties;

94.2 Through these 84 transactions, materials worth USD6,077,683.64 (equivalent to RM24,347,200.66 as at 20.7.2020) were exported to Turkey and Pakistan;

94.3 these materials worth USD6,077,683.64 or RM24,347,200.66 as at 20.7.2020 exported to Turkey and Pakistan were not disclosed in P2’s audited accounts for year 2017 or 2018 or 2019. None of the proceeds from the materials exported to Turkey and Pakistan had been declared as revenue or sales proceeds to P2 and no dividend has been declared to P2;

94.4 from the list of the 84 transactions, the sales of goods for the financial year ended 30.6.2017 were recorded at USD8,637.25 (RM35,914.72). The sales of goods for the financial year ended 30.6.2018 were recorded at USD2,814,519.22 (RM9,984,079.63). The sales of goods for the financial year ended 30.6.2019 were recorded at USD3,254,527.17 (RM13,162,858.98); [95] D1 admitted during cross-examination that he is not disputing the 84 transactions and he has directed D3 to undertake the 84 transactions: : Right, ok. Ok. And, you are not disputing these 84 transactions, yes, Mr Woo? : No. AR : Correct. So, your, because you are aware of this, because you directed Mr Au to, you and Mr Au did this, right? You are aware that Mr Au did it, right, these 84 transactions? : Yes.” [96] When questioned by the Plaintiffs’ counsel, D1 alleged that 2 transactions No. 30 and No. 84 are from raw material to finished good namely transaction while the balance of 82 transactions are value added transaction whereby customer will have a preferred supplier. To support its case, the Plaintiff adduced contemporaneous evidence in the form of the CO, documents relating to the 84 transactions as well as P2’s audited reports for financial year ended 30.6.2017, 30.6.2018 and 30.6.2019. [97] Of these 84 unaccounted for transactions in P2’s books, Syukri Sulaiman (PW-7) testified as follows:

97.1 From the documents provided by RHB Bank pursuant to the Discovery Order, the Plaintiffs have discovered that part of the proceeds from the sale worth USD6,077,683.64 (equivalent to RM24,347,200.66 as at 20.7.2020) using P2’s Manufacturing Licence amounting RM3,360,019.64 from “Sozteks Kumas Dis”, “Sertan Gokpinar”, “R.S. Traders” and “Navan Tekstil Dis Ticaret Ltd” were deposited into D5’s RHB Account as appearing in the bank statements of D5’s RHB Account for July 2018, February 2019, March 2019, April 2019, May 2019, September 2019, October 2019 and November 2019;“Sozteks Kumas Dis”, “Sertan Gokpinar”, “R.S. Traders” and “Navan Tekstil Dis Ticaret Ltd” are listed as the buyers in the 84 transactions which were allegedly undertaken for or on behalf of P2 using P2’s Manufacturing

97.2 Plaintiffs have also discovered that part of the proceeds from the sale worth RM24,347,200.66 using P2’s Manufacturing Licence amounting to RM354,854.00 been deposited into D6’s Alliance as appeared in the bank statements of D6’s Bank Account for February and March 2019; “Ali Aslan” was also listed as one of the buyers in the 84 transactions;

97.3 From the sum of RM3,360,019.64 that went into D5’s RHB Account as pleaded by the Plaintiffs, D1 and D3 have admitted in the Agreed Facts that the total amount of payment from overseas buyers that went into D5’s RHB Account is in the sum of RM3,279,726.89;

97.4 D1 and D3 have also admitted in the Agreed Facts (Deposit of Payments by Overseas Payors) that the total amount of payment from overseas buyers that goes into D6’s Alliance Account is in the sum of RM354,854.00; [98] D1 and D3 produced no evidence that the 84 transactions have been accounted for in the books of the P2. D1 and D3 instead argued that

the Plaintiffs have not produced their bank statements to substantiate their allegations that none of the proceeds from the 84 Transactions were paid to P2 or P1; (ii) P2’s 2020 Audited Accounts, P2’s 2021 Audited Accounts and P2’s 2022 Audited Accounts are unqualified audited accounts filed AFTER the commencement of this Suit on 28.7.2020 and these accounts made no mention of any missing proceeds, (iii) the payments made to D5 and the payments made to D6 does not match the amounts in the 84 Transactions as such, the Plaintiffs have failed to discharge their burden in proving that the payments made to D5 and the payments made to D6 were payments made pursuant to the 84 Transactions. [99] With respect to D1 and D3’s contention of that P2’s audited reports of 2020, 2021 and 2022 are unqualified in my view does not bar the Plaintiffs from raising the complaints that the 84 transactions were not reflected in P2’s audited reports for financial year ended 30.6.2017, 30.6.2018 and 30.6.2019. In this regard, the description of the role of an auditor as exposited by the English Court of Appeal in the case of Re City Equitable Fire Assurance Co Ltd [1924] All ER Rep 485 at page 492 is instructive: “But it has been well said that an auditor is not bound to be a detective or to approach his work with suspicion or with a foregone conclusion that there is something wrong. “He is a watchdog, but not a bloodhound.” That metaphor was used by LOPES, LJ, in Re Kingston Cotton Mill Co (No 2) (8). Perhaps, casting metaphor aside, the position is more happily expressed in the phrase used by SARGANT, LJ, who said that the duty of an auditor is verification and not detection.” [100] In addition, given that the role of an auditor in performing a statutory audit is merely to express an opinion on the financial statements of a company, it must follow that any audited financial statement ought not to be automatically regarded as conclusive evidence that the accounts of the company itself is free from inaccuracies or errors. Our own Court of Appeal in the case of Soo Boon Siong v Saw Fatt Seong & Ors [2008] 1 MLJ 27 also inter alia held as follows: - "the fact that the director had signed documents concerning the audited accounts including the directors' reports is not conclusive of the validity or truthfulness of the accounts. Thus, a director who has approved the company's audited accounts is still entitled to challenge the correctness of such audited accounts". [Own Emphasis] [101] In short, the role of an auditor is essentially confirmatory rather than investigatory. Thus, any audited accounts are not and would not act as conclusive evidence of the accuracy or truthfulness of the accounts. As such, the fact the auditor did not raise any issue in the audited financial statement is by no means a declaration of truth by the auditor that all the accounts and financial records of P2 are in order. [102] D1 and D3 did not produce an iota of evidence to rebut P2’s evidence on the 84 transactions. Again, the Tindok Besar principle of contemporaneous documents must weigh heavily against the D1 and D3 particularly when the 84 transactions were not disputed by D1 as alluded to earlier. D2 is not liable [103] Ps allege that the 2nd Defendant has purportedly breached his fiduciary duties as a director of 2nd Plaintiff, 5th and 6th Defendants pursuant to sections 211, 213(2), 214 and 215 of the Companies Act, 2016 and/or under his contractual obligations as an employee of the 2nd Plaintiff, 5th and 6th Defendants. (See page 269.1 at p. 203 of the Plaintiffs’ Written Submissions [Encl. 380]) [104] I have considered that D2 ‘s level of education is only up to Form 5 and after he was appointed as the director of the 2nd Plaintiff, 5th and 6th Defendants, his duties and involvement were limited to the production aspect of the 2nd Plaintiff’s Factory in Bentong; he had no expertise in the accounting and corporate matters of the 2nd Plaintiff, 5th and 6th Defendants and was never been invited or included in any board of directors meeting or in any management meeting of the 2nd Plaintiff, 5th and 6th Defendants. [105] In Q&A-2 of Supplementary Witness Statements (WSDW-3B) (Encl. 350)]: “I relied heavily on the representations made by the 1st and 3rd Defendants when signing the companies’ documents given to me. To be frank, I had difficulties understanding the contents and significance of the companies’ documents as that were outside of my area of expertise. Further, as the 1st Defendant was my superior, I believed that I should have obeyed him.” [106] D2 also testified that D1 is a domineering person; that nobody dares to say no to D1 and that he has signed numerous documents based on D3’s assurance that D1 would bear the responsibilities if anything happened. [107] D1and D3 dispute D2’s testimony in the preceding paragraph on the grounds that there is no evidence to substantiate the same but in my respectful view, evidence includes oral evidence – see section 3 Evidence Act 1950: "evidence" includes— all statements which the court permits or requires to be made before it by witnesses in relation to matters of fact under inquiry: such statements are called oral evidence; and “fact” means and includes—

anything, state of things or relation of things capable of being perceived by the senses;

any mental condition of which any person is conscious; [108] D2 also stated that he has signed the D5 Agreement and the D6 Agreement in the best interest of P2. [109] In applying the ‘Charterbridge Principle’ and weighing the evidence by reference to ascertaining the state of mind of D2 on whether as an intelligent and honest man, he was honestly acting in the discharge of his powers in the interests of P2, D5 and D6 when approving the divestment of D5and D6 and paying due regard to the circumstances surrounding the decision, I accept D2’s evidence and find:

109.1 an honest and intelligent man in the position of D2 acted reasonably when he relied on the representations of D1 and D3 at all times; there was no reason no basis for D2 not to trust D1 and D3 and

109.2 D2 had signed various documents including the D5 Agreement and the D6 Agreement, on the instructions of D1 and D3. [110] D2 was not an executive director of P2, D5 and D6 – he was entitled to rely on what D1 and D3 told him. In AWA Ltd v Daniels Trading As Deloitte Haskins & Sells And Others (1992) 7 ACSR 759, the Supreme Court of New South Wales held at pg. 867 – 868 and 878 – Pg 867 “Another division of function is between the non-executive directors and the chief executive officer or managing director. Generally, a chief executive is a director to whom the board of directors had delegated its powers of management of the corporation’s business. Usually, the chief executive is employed under a contract of service which will either include an express term or, in the absence of an express term, an implied term, that the chief executive will exercise the care and skill to be expected of a person in that position. The degree of skill required of an executive director is measured objectively. In contrast to the managing director, non-executive directors are not bound to give continuous attention to the affairs of the corporation. Their duties are of an intermittent nature to be performed at periodic board meetings, and at meetings of any committee of the board upon which the director happens to be placed. Notwithstanding a small number of professional company directors there is no objective st andard of the reasonably competent company director to which they may aspire. The very diversity of companies and the variety of business endeavours do not allow of a uniform standard. … Pg 868 A director is justified in trusting officers of the corporation to perform all duties that, having regard to the exigencies of business, the intelligent devolution of labour and the articles of association, may properly be left to such officers: Dovey v Cory, supra, 485 –6, 492 –3; Re Brazilian Rubber Plantations & Estates Ltd, supra, 438; Huckerby v Elliot [ 1970] 1 All ER 189 at 193, 195. A director is entitled to rely without verification on the judgment, information, and advice of the officers so entrusted. A director is also entitled to rely on management to go carefully through relevant financial and other information of the corporation and draw to the board’s attention any matter requiring the board's consideration. The business of a corporation could not go on if directors could not trust those who are put into a position of trust for the express purpose of attending to details of management: American Law Institute “Principles of Corporate Governments, Analysis and Recommendations” pp 75, 176. Reliance would only be unreasonable where the director was aware of circumstances of such a character, so plain, so manifest and so simple of appreciation that no person, with any degree of prudence, acting on his behalf, would have relied on the particular judgment information and advice of the officers: Re City Equitable Fire Insurance Co, supra, 428. A non-executive director does not have to turn him or herself into an auditor, managing director, chairman or other officer to find out whether management are deceiving him or her: Graham v Allis-Chalmers Manufacturing Co 188 A 2nd 125 at 130. …… Pg 878 “… the commercial reality of the matter is that, in these days of conglomerates and perhaps transnational conglomerates at that, the opportunity for non-executive directors to exercise meaningful control over management is as slight as the ability of ministers to control a vast bureaucracy. [111] AWA Ltd v Daniels Trading As Deloitte Haskins & Sells And Others’s principles that the non-executive directors' duties cannot be as co- extensive as that of executive directors was accepted and followed in Sime Darby Bhd & Ors v Dato' Seri Ahmad Zubair @ Ahmad Zubir bin Hj Murshid & Ors (Tun Musa Hitam & Ors, third parties) [2012] 9 MLJ 464. [112] I find on the whole, that D2 was a credible witness. If at all, there were discrepancies in his evidence, they were minor or not relevant and does not change the fact that his evidence when analysed, pointed to a reliance on D1 and D3’s representations. He signed what he did bona fide and in the best interests of P2, D5 and D6 and not exercised for an improper purpose in breach of his statutory, fiduciary and common law duties as director. In this regard, it has not escaped my attention that Ps acknowledge that:

D2 was deceived by the 1st and 3rd Defendants in the disposal of the 5th and 6th Defendants;

(ii) D2 is an honest witness; and

(iii) the Plaintiffs are not pursuing other claims or cause of actions against the 2nd Defendant as pleaded in the Plaintiffs’ Amended Statement of Claim dated 11.11.2021 except for the alleged breach of fiduciary and/or contractual duties to the 2nd Plaintiff, 5th and 6th Defendants. [113] Even if I am wrong that notwithstanding D2’s honesty and the reasonableness of his action in making the D5D6 divestment, that there is nevertheless a breach of duties, given the factual matrix of this case and considering all the circumstances, it is certainly arguable and persuasively so that D2 ought fairly to be excused for his default or breach of duty (if any). I thus exercise my discretion to exculpate and relieve D2 wholly for default or breach of duties (if any) under s. 581, CA 2016. Claim by D1 against 2nd TP [114] The issue is whether PP2 ought to be made liable to D1 for the entirety of the Plaintiffs’ claim against the 1st Defendant. [115] The whole basis of D1’ claim is that:

115.1 D2, TP2 and Fong Wai had taken over the management of P2 from D1 when D1 resigned on 12.2.2019;

115.2 D2, TP2 and Fong Wai did not raise any complaint of defective or incomplete handover against D1 at the material time; by dint of fact that D2, TP2 and Fong Wai had taken over the management of P2 after D1 resigned on 12.2.2019 without raising any complaints is sufficient to show that the handover is in order;

115.3 Thereafter, P2’s New Board Of Directors (Syukri and Amirul Afif Bin Abd Aziz) who were appointed on 19.7.2019 took over the management of P2 from D2, TP2 and Fong Wai around July 2019 when D2, TP2 and Fong Wai resigned from P2 on 22.7.2019;

115.4 P2’s New Board Of Directors did not take over P2 from D1 was admitted by Kok Pauline and TP2 during cross-examination;

115.5 As such, if there is any failure in properly keeping all of the documents related to the business dealings of D5 and D6 belonging to P2, the Disposal Of Shares and the 84 Transactions as alleged by P2’s New Board Of Directors, it is the responsibility of D2, TP2 and Fong 111.6 Thus , in the event that this Court allows any of the Plaintiffs' claims against D1 based on the loss of P2’s documents, all reliefs, damages, benefits and/or costs allowed by this Honourable Court against D1 shall jointly or severally be borne by D2 and TP2. [116] It cannot be disputed that P1 had lodged a police report against D1 on 25.4.2019 regarding the Disposal Of Shares and another police report against D1 on 30.4.2019 regarding missing documents belonging to P1. These police reports were suggested by D1 to be afterthoughts as they were made after D1 brought Suit 176 against P2 on 22.3.2019 and after D1 brought Suit 588 against P1 on 4.4.2019. [117] TP2 in summary submitted that:

117.1 TP2 was not empowered with any authority by the Plaintiffs’ board of directors to take any action against D1 in respect of the handover of the management of P2 by D1 and before a complaint could be made, proper investigation need to be carried out;

117.2 The acts upon which the Plaintiffs have predicated this action against the Defendants occurred prior to TP2’s appointment as a director of P2; and

117.3 D3 has confirmed during cross-examination that TP2 should not be liable for the Disposal Of Shares, the Obtainment Of COs and the 84 Transactions. [118] I find there is merit in TP2’s postulation that before a complaint can be made, proper investigation must first be carried out; that to this court is common sense. [119] In analysing this TP claim, it is to be noted that D1’s SOC does not plead material facts as to whether he is seeking a contribution or an indemnity from TP2 except that in para 15(a) relief that if D1 is found liable to the Ps, TP2 and D2 are to be jointly and severally liable to pay the entire claim. [120] This prayer in my view is somewhat contradicted by para 123 of the D1’s submissions in enc 375 and para 43 and 46 of submissions in reply enc 389 where he now seeks “in the event that this Honourable Court allows any of the Plaintiffs' claims against D1 based on the loss of P2’s documents, all reliefs, damages, benefits and/or costs allowed by this Honourable Court against D1 shall jointly or severally be borne by D2 and TP2.” Yet again in the same para 123 of enc 375 and para 46 of enc 389, D1 again asks for prayer 15 (a) to be allowed! [121] Even after a striking out application was made against D1 in enc 199, D1 did not see it fit to amend his SOC against the TPs. [122] Whether for contribution or indemnity, the material facts must be pleaded for the purpose of formulating a claim for contribution or indemnity. I find in any case there is in law no basis for a claim whether for contribution or indemnity. No Common Liability which Gave Rise to Right to Contribution [123] A right to contribution only arises in situations where a common liability exists between parties. Such a common liability usually exists between inter alia joint debtors, joint trustees, joint sureties or joint tortfeasors. In Halsbury’s Laws of England, Volume 9(1) (4th Edition), paragraphs 1116-1117, it is stated as follows: “A right to contribution arises whenever a person, who owes with another a duty to a third party and is liable with that other to a common demand, discharges more than his proportionate share of that duty. The essence of the right to a contribution lies in the liability to a common demand; and where there is such liability, the court will, subject to any contractual provision modifying or limiting any claim to a contribution, make an assessment of contribution. A common liability being the essence of the right of contribution, no such right against one tenant in common existed in favour of the other tenant in common of a house, who had spent money on proper and reasonable repairs…” [124] What is a common liability can be found in Lee Swee Seng J’s decision in Sime Darby Bhd & Ors v Dato’ Seri Ahmad Zubair @ Ahmad Zubir bin Hj Murshid & Ors (Tun Musa Hitam & Ors, third parties) [2012] 9 MLJ 464, in which he held at paragraphs [84] to [87] that: “[84] The third parties also pointed out that a claim for contribution is in effect a claim to a partial indemnity and it usually arises between joint debtors, joint tortfeasors and the like. I agree that the right to contribution depends on whether liability was co-ordinate, in the sense that liability is of the same nature and to the same extent. Parties must be in pari delicto and a party who is guilty of fraud, illegality, wilful misconduct or gross negligence is not entitled to contribution from his fellow directors when it has not been pleaded how they have been a participating party to the fraud, illegality, wilful misconduct or gross negligence. [85] In Burke & Anor v LFOT Pty Ltd (2002) 1 CLR 282 the first appellant, B, was a director of the second appellant, Hanave Pty Ltd (Hanave). Hanave purchased a commercial property from the first respondent, LFOT. During the course of the sale of the property LFOT engaged in misleading and deceptive conduct in contravention of s 52 of the Trade Practices Act 1974 (Cth) (the Act). LFOT's conduct induced Hanave to purchase the property at an inflated price. B was Hanave's solicitor and he acted for Hanave in its purchase of the property. In doing so he breached his duty of care to Hanave by failing to check the accuracy of the representations made by LFOT. [86] The Federal Court assessed Hanave's loss under s 82 of the Act as $750,000, and it ordered LFOT to pay that sum to Hanave. The Federal Court also found that LFOT was entitled to a 50% contribution from B because B was also liable to Hanave. [87] B appealed to the High Court and in allowing the appeal the High Court held, inter alia, at pp 292–293 that: [15] The doctrine of equitable contribution applies both at common law and in equity. It is usually expressed in terms requiring contribution between parties who share 'co-ordinate liabilities' or a 'common obligation' to 'make good the one loss'. More recently, in BP Petroleum Development Ltd v Esso Petroleum Co Ltd the right to contribution was said to depend on whether the liability was 'of the same nature and to the same extent’. The notion of 'co-ordinate liability' is one that depends on common interest and common burden. Perhaps because, at common law, there was no general right of contribution between tortfeasors, the notion of 'co-ordinate liability' has not traditionally been expressed in terms requiring equal or comparable culpability or a requirement that the acts or omissions of the persons in question be of is equal or comparable causal significance to the loss in respect of which contribution is sought. However, the requirement that liability be 'of the same nature and to the same extent', as stated in BP Petroleum, is apt to include notions of equal or comparable culpability and equal or comparable causal significance. [17] Culpability, as a facto bearing on the right to equitable contribution, clearly explains the requirement that for there to be a contribution between co-trustees, the co-trustees must be in pari delicto. So, too, it explains the rule that a person who has been guilty of fraud, illegality, willful misconduct or gross negligence is not entitled to contribution from his partners. “ (Emphasis added.) [125] A common liability is liability that is of the same nature and of the same extent. In the instant case, Plaintiffs’ claim is for breaches of statutory and fiduciary duties and a restoration of the benefit that the Defendants had received. D1’s liability, if so found, will be damages and to restore the benefit he and his cohorts received. These liabilities are not shared by TP2:

125.1 The Plaintiffs are not claiming relief for which D1 and TP2 are commonly liable for.;

125.2 Significantly, a right to contribution only arises if D1 discharge more than his proportionate share of that liability in response to a common demand on a common liability. There is therefore no right to contribution in the instant case. No Obligation to Indemnify [126] Three (3) situations may give rise to a right to indemnity. They are from contract, whether express or implied, from an obligation resulting from the relation of the parties, or by statute. In Halsbury’s Laws of England, Volume 49 (5th Edition), paragraph 1257: “Rights of indemnity may arise from contract, express or implied, from an obligation resulting from the relation of the parties, or by statute. Whether in any particular case any right of indemnity arises, and the extent of any such indemnity, will depend upon the terms of the contract or statute in question, or the nature of the relationship.” [127] None of these grounds are pleaded as a basis for D1’s claim of indemnity. I examine the relationship between D1 and TP2, to determine if such rights to indemnity arises in favour of D1. [128] The categories of relationships which are recognised by law or in equity to give rise to a right to an indemnity are succinctly set out by Lee Swee Seng JC’s (now JCA) in Sime Darby (supra) as follows: “[42] There are certain recognised relationships that by law or in equity, may give rise to a right to an indemnity. [43] As illustrated in Pinsler on Civil Practice in Singapore and Malaysia, Vol 2, Chapter XIII at para 43, an obligation to indemnify in law or equity may arise in the following circumstances: An agent may have the right of an indemnity against his principal in respect of his actions within the scope of his authority. A trustee may be entitled to an indemnity in respect of a breach of trust. A co-guarantor might be entitled to be indemnified by another co-guarantor. [44] Halsbury's Laws of England, (5th Ed), Vol 49, para 1260 at p 595 lists the following in regard to indemnities as incidents of legal relationships: A right of indemnity is an incident of certain legal relationships, for example those of agency or employer and employee, where an agent or employee is liable to be indemnified by his principal or employer against liabilities incurred in the reasonable performance of his agency or employment. Rights of indemnity may also arise under principles of equity. In case of breach of trust a trustee may be indemnified out of the interest of a beneficiary who has instigated the breach or be entitled to contribution or indemnity from a co-trustee. A personal representative is entitled to be indemnified out of the estate for his proper expenses. A receiver is ordinarily entitled to be indemnified out of the assets against liabilities properly incurred by him. A director of a company regulated by the Companies Act 1985 is entitled to be indemnified by the company for all debts, expenses and liabilities incurred in the ordinary course of business, and for money borrowed and applied for those purposes. The trustees or committee of a club are not in general entitled to be indemnified by the members against liabilities incurred on behalf of the club.” [129] It was further expounded in the Privy Council decision of Eastern Shopping Company Limited v Quah Beng Kee [1924] AC 177 that a right to indemnity usually exists between parties where there is an obligation or duty upon one party to indemnify the other. Lord Wrenbury held, at pp.182-183: “A right to indemnity exists where the relation between the parties is such that either in law or in equity there is an obligation upon the one party to indemnify the other. There are, for instance, cases in which the state of circumstances is such that the law attaches a legal or equitable duty to indemnify arising from an assumed promise by a person to do that which, under the circumstances, he ought to do. The right to indemnity need not arise by contract; it may (to give other instances) arise by statute; it may arise upon the notion of a request made under circumstances from which the law implies that the common intention is that the party requested shall be indemnified by the party requesting him; it may arise (to use Lord Eldon's words in Waring v. Ward(1); a case of vendor and purchaser) in cases in which the Court will "independent of contract raise upon his (the purchaser's) conscience an obligation to indemnify the vendor against the personal obligation" of the vendor. These considerations were all dealt with by the Lords Justices in Birmingham and District Land Co. v. London and North Western Ry. Co. (2)” [130] D1 has not pleaded any relationship which the law has recognised to have given rise to a right of indemnity in favour of D1’s against TP2. The Court of Appeal case of BPI International Finance Ltd (formerly known as Ayala Finance (HK) Ltd) v Tengku Abdullah Ibni Sultan Abu Bakar [2009] 4 MLJ 821 speaking through Sulaiman Daud JCA stated: “[23] From the authorities aforesaid, it can be seen that there are many ways in which a right of indemnity may arise. As such, in our view, in order to maintain a claim for indemnity as in the present case, the respondent not only has to plead that the appellant was in breach of its contractual duty or its duty of care to him but also the cause or causes of action for such an indemnity, ie whether founded on an express or implied contract, or on an implied indemnity arising from the relationship between the parties.” [131] As a director at the material time, TP2 also owe no duty to D1. As Abdul Malik Ishak JCA held in Dato' Abul Hasan bin Mohamed Rashid v Multi-Code Electronics Industries & Anor [2012] 5 MLJ 176, at [29]: “Directors owe their duties to the company and not to individual shareholders. In Percival v Wright [1902] 2 Ch 421, a case in point, concerned the directors who purchased shares from existing shareholders without disclosing that they were in the process of negotiating a takeover bid at a higher price. It was held that since the directors owed no fiduciary duties to the shareholders, they could not be liable for the non-disclosure. It must be emphasised that textbook writers have criticised the decision of this case. But the principle still stands: directors owe their duties to the company and not to individual shareholders.” [132] It is therefore clear there is no nexus between D1 and TP2 which would bring them within the ambit of a legal relationships giving rise to a right to indemnity. [133] TP2’s submission that the third party claim is one of indemnity is as such, off the mark. As I see it, the third party claim is made O16 r 1 (b) and

ROC 2012. On the evidence adduced, the TP claim whether under 016 r 1 (b) or (c) is misconceived as TP2 was not privy to the wrong doings , it bears repetition that TP2 was not a director of the 2nd Plaintiff when the disposal of the 5th and 6th Defendants were carried out; TP2 could not have made any decision or sign any documents in respect of D5’s obtainment of the certificate of origin by D5 ; and TP2 was not a director of P2 when the 84 transactions were carried out. In short, TP2 was not privy to any of the wrongdoings alleged against D1. Fact that TP2 with others took over management of P2 for a 6 month’s period does not negate the wrong doings of D1. [134] The Ps did appoint 3 individuals to act on the Plaintiffs’ behalf as regards the Defendants’ wrongdoings and TP2 was not one of these individuals. Given P1 which is the holding company of P2, had lodged a report with the police and the Companies Commission of Malaysia of the wrongdoings around April 2019, there is no need for the Third Parties to make further complaints regarding the handover of P2’s management which was defective or incomplete. [135] As such, in para 15 (a) of D1’s SOC, to claim that if this court allows the Plaintiffs’ claim against D1, then TP2 and D2 ought to JOINTLY OR SEVERALLY bear the same on the sole ground that TP2 did not raise any complaint in respect of the handover of the Plaintiffs’ management and documents by D1 and/or D3 is hopelessly misconceived. There is also no notice issued to co-defendant D2. As such, D1’s TP claim is dismissed with costs. Others [136] The Plaintiffs contended that D1, D3 and D4 have taken away the documents in respect of the business dealings of P1, P2, D5 and D6. Missing documents is not pleaded nor is a claim for the tort of conversion of the documents pleaded. No specific relief is sought for these missing documents. That ends the claim. Evaluation and assessment of the credibility of the witnesses [137] As “evidence” is not confined to documents and the Court is enjoined by s. 3 of the Evidence Act to consider oral statements by witnesses, the evaluation and assessment of the credibility (or otherwise), of the witnesses were crucial to the present case. In assessing credibility of the witnesses, I have taken note that credibility of a witness embraces not only the concept of his truthfulness i.e. whether the evidence of the witness is to be believed but also the objective reliability of the witness i.e. his ability to observe or remember facts and events about which the witness is giving evidence and this court must pay attention to a number of factors which, inter alia, include the following as exposited by Gillen J in Sean Thornton (a minor by his mother and next friend) v Northern Ireland Housing Executive [2010] NIQB 4:

The inherent probability or improbability of representations of fact;

(ii) The presence of independent evidence tending to corroborate or undermine any given statement of fact;

(iii) The presence of contemporaneous records;

(iv) The demeanour of witnesses e.g., does he equivocate in cross examination;

The frailty of the population at large in accurately recollecting and describing events in the distant past;

(vi) Does the witness take refuge in wild speculation or uncorroborated allegations of fabrication;

(vii) Does the witness have a motive for misleading the court; and

(viii) Weigh up one witness against another [138] Sir George Farwell in the Privy Council case of Bombay Cotton Manufacturing Company v Motilal Shivlal ILR 1915 39 Bom 386, PC, in addressing the credit of a witness upon cross-examination, said that ‘it is most relevant in a case where everything depends on the judge’s belief or disbelief in the witness’ story.’ [139] In deciding the matter, I have preferred the evidence of the Plaintiffs’ witnesses whom I viewed as ‘more credible’ in support of the Plaintiffs’ contentions, as compared to the Defendants’ witnesses (except for D2) whom I found ‘evasive’ when troubling questions were put to them, and were not credible at all. The Defendants’ witnesses’ evidence (except for D2) were riddled with contradictions and simply do not add up. Even if there were discrepancies in the Plaintiffs’ witnesses' evidence, if at all, were minor and not relevant, and on the whole, their evidence was comprehensive, compelling, convincing and consistent with the documents and the overall probabilities. In the context of the entirety of the evidence before the court, any lingering doubts that I have, I would resolve in favour of the Plaintiffs. [140] For the 1st question, my answer is in the affirmative, that the Plaintiffs have proven their case on a balance of probabilities as concerns D1. D2 is not liable whilst D3 had breached his contractual duties, breached the trust reposed in him as group accountant and committed fraud. [141] As for the 2nd question, the answer is in the affirmative. The Plaintiffs have suffered losses as a consequence of the D1’s breaches and dishonest assistance was rendered by D3 and D4. [142] As for the 3rd Question whether D1, D2 and D3 are liable to account and pay for the 84 transactions worth USD6,077,683.64 (equivalent to RM24,347,200.66 as at 20.7.2020), the answer is in the affirmative against D1 and D3. Exemplary/aggravated damages [143] In Khaw Cheng Poon & Ors v Khaw Cheng Bok & Ors and another appeal [2005] 6 MLJ 540; [2005] 3 CLJ 753, Gopal Sri Ram JCA (as he then was) delivering the judgment of the Court of Appeal said: … Exemplary damages are only awarded in special circumstances. These circumstances are contained in the speech of Lord Devlin to which we have already referred, that no new categories are admissible to the Devlin list has now been settled in the decision of the House of Lords in Cassell & Co Ltd v Broome [1972] AC 1027. (Emphasis added.) [144] In Rookes v Barnard and others [1964] AC 1129, Lord Devlin stated unlike ordinary damages whose purpose is to compensate, that of exemplary damages is to punish and deter, and there are two categories of cases when it should be awarded, viz:

oppressive, arbitrary or unconstitutional action by the servants of Government;

the defendant’s conduct has been calculated by him to make a profit for himself which may well exceed the compensation payable to the plaintiff. [145] In Big Junkyard Sdn Bhd & Anor v Chan Kah Wai [2023] 1 CLJ 564 the court held: "[41] Thus, aggravated damages are given as additional compensation where there is injury to the feelings of the plaintiff that is caused by or exacerbated as a result of exceptional conduct of the defendant. The conduct must be high-handed or malicious act or an act done in an oppressive manner. Mere wrongful conduct is not sufficient. There must be something exceptional in the act that was done. The matter was lucidly stated by Lord Devlin in Rookes v Barnard [1964] AC 1129 at page 1232 as follows: I doubt whether the facts disclosed in the summing up shows even a case for aggravated damages … present there seems to be no evidence that the Respondents were motivated by malevolence or spite against the appellant ... Again in so far as disclosed in the summing up there was no evidence of offensive conduct or of arrogance or insolence. (Emphasis added.) [42] ………there are two elements relevant to the availability of an award for aggravated damages: firstly, exceptional or contumelious conduct or motive on the part of the defendant in committing the wrong; secondly, intangible loss suffered as a result by the plaintiff, that is injury to feelings or personality. Based on the above principles, the facts of the case at hand does not make out a case for aggravated damages. There is nothing exceptional about the action of the second defendant. There is no evidence of offensive conduct or arrogance or insolence of motive or that the second defendant was motivated by malevolence or spite….." [146] Having regard to the facts and circumstances of the matter before me, it is my considered view that the conduct of the D1 and D3 here does not justify the award of exemplary damages against them. In my view their breach of fiduciary duties, indifference and acting in conflict of interest with their position as director and employee of the Plaintiffs were not so wanton and in contumelious disregard of the Plaintiffs’ rights. In the instant case, there is also no evidence that the D1 and D3 were motivated by malevolence or spite. For the aforesaid reasons, the Plaintiffs’ claim for exemplary and aggravated damages is disallowed. [147] For reasons given, the claim against the 2nd Defendant and D1’s claim against the 2nd Third party are dismissed, there will be judgment for the Plaintiffs together with interest at the rate of 5% per annum on all monetary sums awarded from the date of the Judgment i.e., 14.11.2023 until full and final settlement; costs of this action in the sum of RM300,000 to be paid by the 1st Defendant and/or 3rd Defendant and/or the 4th Defendant or his legal representative jointly and/or severally to the Plaintiffs; the 1st Defendant shall pay the 2nd Third Party the sum of RM85,000.00 as costs of this action; the Plaintiffs shall jointly and/or severally pay the 2nd Defendant the sum of RM85,000.00 as costs of this action; all costs subject to allocator. Dated: 20th November 2023 - sgd - ………………………. Liza Chan Sow Keng Judge High Court of Malaya at Kuala Lumpur COUNSEL: For the Plaintiffs : Abdul Rashid Ismail (together with him, Nadia Jaidi) Messrs Rashid Zulkifli For the 1st & 3rd Defendants : Alfred Lai Choong Wui (together with him, Toh Mei Swan) Messrs Alfred Lai & Partners CASES CITED: Letchumanan Chettiar Alagappan @ L Allagappan (as executor to SL Alameloo Achi alias Sona Lena Alamelo Acho, deceased) & Anor v Secure Plantation Sdn Bhd [2017] 4 MLJ 697; [2017] 5 CLJ 418 Dr Shanmuganathan v Periasamy s/o Sithambaram Pillai [1997] 3 MLJ 61 Sinnaiyah & Sons Sdn Bhd v Damai Setia Sdn Bhd [2015] 5 MLJ 1 Board of Trustees of the Sabah Foundation & Ors v Datuk Syed Kechik bin Syed Mohamed & Anor [2008] 5 MLJ 469 Avel Consultants Sdn Bhd & Anor v Mohamed Zain Yusof & Ors [1985] 2 MLJ 209 Pioneer Haven Sdn Bhd v Ho Hup Construction Co Bhd & Anor and other appeals [2012] 3 MLJ 616 Taz Logistics Sdn Bhd v Taz Metals Sdn Bhd & Ors [2019] 3 MLJ 510; [2019] 2 CLJ 48 Petra Perdana Berhad v. Tengku Dato’ Ibrahim Petra Tengku Indra Petra & Ors [2014] 11 MLJ 1 Tengku Dato’ Ibrahim Petra Tengku Indra Petra v. Petra Perdana Berhad & Another Case [2018] 2 MLJ 177 Tindok Besar Estates Sdn Bhd v Tinjar Co [1979] 2 MLJ 229 Carmarthenshire County Council v Y [2017] 4 WLR 136 Royal Brunei Airlines Sdn Bhd v Tan Kok Ming Philip [1995] 2 AC 378; [1995] 3 All ER 97; [1995] 3 WLR 64 Takako Sakao (f) v Ng Pek Yuen (f) & Anor [2009] 6 MLJ 751 Ktl Sdn Bhd Ktl Sdn Bhd v Leong Oow Lai [2014] MLJU 1405 Ng Pak Cheong v Global Insurance Co Sdn Bhd [1995] 1 CLJ 223; [1995] 1 MLJ 60; [1994] 3 AMR 2663 CGU Insurance Berhad v Asean Security Paper Mills Sdn Bhd [2006] 3 MLJ 1; [2006] 2 CLJ 409 Barnes v Addy (1874) L.R 9 Ch App 244 (Ch App) Twinsectra v Yardley [2002] 2 AC 164 CIMB Bank Bhd v Maybank Trustees Bhd & Ors [2014] 3 MLJ 169 CIMB Bank Bhd (formerly known as Bumiputera Commerce Bank Bhd) v Sebang Gemilang Sdn Bhd & Anor [2018] 3 MLJ 689 Malaysian International Trading Sdn Bhd v RHB Bank Bhd [2016] MLJU 13 Re City Equitable Fire Assurance Co Ltd [1924] All ER Rep 485 AWA Ltd v Daniels Trading As Deloitte Haskins & Sells And Others (1992) 7 ACSR 759 Sime Darby Bhd & Ors v Dato' Seri Ahmad Zubair @ Ahmad Zubir bin Hj Murshid & Ors (Tun Musa Hitam & Ors, third parties) [2012] 9 MLJ 464 Eastern Shopping Company Limited v Quah Beng Kee [1924] AC 177 BPI International Finance Ltd (formerly known as Ayala Finance (HK) Ltd) v Tengku Abdullah Ibni Sultan Abu Bakar [2009] 4 MLJ 821 Dato' Abul Hasan bin Mohamed Rashid v Multi-Code Electronics Industries & Anor [2012] 5 MLJ 176 Khaw Cheng Poon & Ors v Khaw Cheng Bok & Ors and another appeal [2005] 6 MLJ 540; [2005] 3 CLJ 753 Rookes v Barnard and others [1964] AC 1129 Big Junkyard Sdn Bhd & Anor v Chan Kah Wai [2023] 1 CLJ 564 STATUTE/LEGISLATION REFERRED: Section 213, 214, 221, 218, 581 of the Companies Act 2016 Section 17 of the Contracts Act 1950 Section 3 Evidence Act 1950 Order 16 rule 1 (b) and (c) Rules of the Court 2012