LIM Khai Guan v Cherish Words Sdn Bhd (WA-24NCC-325-06/2025)

LIM KHAI GUAN

LOH SIOW PENG (NO. K/P: 730828-14-5600) …PLAINTIF-PLAINTIF DAN CHERISH WORDS SDN BHD (NO. SYARIKAT: 200801030659 (831990-W)) …DEFENDAN

In this Originating Summons, the Plaintiffs sought to compel the Defendant to transfer 4,000 shares in DS Agriculture Plantation Sdn Bhd (“DSAP Shares”) to the 1st Plaintiff and 1,000 DSAP Shares to the 2nd Plaintiff, the purpose of which is to reverse the sale and transfer of those shares to the Defendant due to the Defendant’s breach as contractually provided. Background facts

The 5,000 DSAP Shares were sold to the Defendant pursuant to a Share Sale Agreement dated 7-2-2023 (as varied by Supplemental Agreement dated 28-3-2023) between the Plaintiffs and Defendant (“SSA”). The original consideration was RM4,900,000 for the 5,000 shares representing the entire issued share capital of DSAP.

The Supplemental Agreement varied the consideration and payment terms for the 5,000 DSAP Shares in clause 3.1(c) of the SSA, such that the 3rd instalment of RM3,000,000 was reduced to RM2,700,000, to be satisfied by a transfer of shares in CN Asia Corporation Berhad (“CNA Shares”) as follows:

After a convoluted litigation between the parties and others named in earlier proceedings, Suit No: WA-22NCC-693- 09/2023 and Suit No: WA-22NCC-107-02/2024 [converted to a writ from OS No: WA-24NCC-415-07/2023], the parties withdrew their respective claims and counterclaims with liberty to refile on 20-11-2024. The Plaintiffs then filed the present action on 13-6-2025.

In the present claim, it is asserted without any challenge that the Defendant had breached a material term of the SSA, namely the obligation to pay the final tranche of consideration of RM2,700,000 according to the SSA i.e. by transferring the Defendant’s CNA Shares of that value to the Plaintiffs or their appointed nominees.

The Plaintiff issued a notice of breach on 2-4-2025 under clause 9.1(a) of the SSA which provides as follows:

On 17-4-2025, the SSA was terminated, and a demand was made for the fulfilment of consequential remedies as contractually provided for in clause 9.2(a)(i) of the SSA as follows:

The only defence raised by the Defendant was that the Plaintiffs had disabled the Defendant from performing the reciprocal promise of transferring the CNA Shares because the Plaintiffs did not provide a Central Depository System (CDS) account required to deal in the CNA Shares, being deposited securities. Analysis and findings Reciprocal promises

The Defendant argued that the Plaintiff was obliged to provide the CDS account details before the Defendant could transfer the CNA Shares and that these are reciprocal promises that must be performed in the order required by the nature of the transaction according to sections 52 and 53 of the Contracts Act 1950.

This Court was not persuaded by the Defendant’s argument because reciprocal promises are substantive obligations owed by each party under a contract, and not the ancillary mechanics for the performance of obligations. The requirement of the law that deposited securities are only transferable between CDS accounts dictates only the mechanics for the transfer.

In this case, the substantive obligation was on the Defendant to transfer the CNA Shares to the Plaintiffs or their nominees. It was not an express or implied term of the SSA that the Plaintiff shall open or designate a CDS Account for this purpose. The Defendant could have independently met its contractual obligation or set up a complete defence by transferring the CNA Shares to a nominee CDS account of a custodian or trustee, or simply make a declaration of trust over those shares when the breach was called out. Act of prevention

The Defendant relied on Lim Yoh v Astana Strategi (M) Sdn Bhd & Anor [1998] 3 MLJ 117 (“Lim Yoh”) for the proposition that a party cannot rely on the non-performance of the other when he himself has waived or failed to perform his own promise. Similarly, so they say, the Plaintiffs in this case had disabled the Defendant from transferring the CNA Shares, whether or not there was a promise to do so.

However, the facts and ratio of Lim Yoh are distinguishable. The ratio of that case is that the termination of a contract for the other party’s failure to meet an essential time stipulation is wrongful when time was rendered at large. The plaintiff was required to give reasonable notice to make time essential again, but failed to do so

In this case, the Plaintiff did not waive or fail to perform a promise under the SSA. On the facts, there was no indication at any material time before the termination of the SSA that the Defendant knew whether or not the Plaintiffs had a CDS account or was in a position to designate one. Validity of termination

More importantly, time was rendered at large in Lim Yoh because the plaintiff was not ready and willing to perform i.e. receive payment tendered on the agreed completion date, because its solicitors’ office was closed (albeit, it was a Sunday). That was not all: a) When the defendants notified the plaintiff’s solicitors that they had attempted payment on 19 May, the solicitors responded only on 21 May at 6.46 pm. The fax stated that the completion date should be treated as 21 May (since 19 May was Sunday and 20 May was a public holiday). Crucially, the fax was deliberately sent late in the evening “so as not to give the defendant time to pay,” showing an intention to obstruct completion. b) The defendants’ letter of 21 May explained the attempted payment on 19 May and the plaintiff’s deliberate silence was treated by the court as evidence of unwillingness to complete. The defendants delivered the cheque for the balance purchase price on 24 May. The plaintiff’s solicitors accepted it “without prejudice” but then returned it with a second termination letter. This refusal to accept payment, despite the defendants’ readiness and willingness, further disabled completion.

In this case, there was no objective proof of the Defendant’s own readiness and willingness to transfer the CNA Shares because the Defendant said nothing at all during the entire cure period. The Defendant only responded to the Plaintiff’s notice of breach on 16-5-2025, well after the 14 days had lapsed and the SSA had been terminated.

The true reason for the Defendant’s failure to cure the breach within 14-days of the notice of breach on 2-4-2025 is unknown, but it was not because they tried to transfer the CNA Shares but were prevented. Unlike the defendant in Lim Yoh there was no redeeming conduct on their part. The Defendant’s letter on 16-5-2025 was a step too late because the SSA had been lawfully terminated according to its terms on 17-4-2025.

For the above reasons, this Court allowed the Originating Summons with costs of RM8,000.00. Bertarikh: 09 JANUARI 2026 ELAINE YAP CHIN GAIK PESURUHJAYA KEHAKIMAN MAHKAMAH TINGGI MALAYA KUALA LUMPUR Peguam Untuk Plaintif: C Mugelendran a/l Chandran Tetuan Gurmit Sodhi Chambers Untuk Defendan: James Au Wei-Wern (Siet Yi Heng bersamanya)