Ong Keh Keong v Loh Kah Khuen (W-02(NCVC)(W)-130-01/2018)

ONG KEH KEONG

SYED MUHAMAD AKHYARI HABITULLAH BIN SYED HAMID 15 (KEDUA-DUA BERAMAL DI ONG & PARTNERSHIP) DAN 20 LOW KAH KHUEN ... RESPONDEN [Dalam Perkara Mahkamah Tinggi di Kuala Lumpur 25 (Bahagian Sivil) Saman Pemula No. 24 NCVC-144-01/2013] Antara 30 LOW KAH KHUEN

ONG KEH KEONG

SYED MUHAMAD AKHYARI HABITULLAH BIN 35 SYED HAMID (KEDUA-DUA BERAMAL DI ONG & PARTNERSHIP) CORAM 40 HAMID SULTAN ABU BACKER, JCA HANIPAH FARIKULLAH, JCA KAMALUDIN MD SAID, JCA 2 5 GROUNDS OF JUDGMENT Introduction [1] The subject matter in this appeal involved two (2) 10 documents namely, the Power of Attorney dated 6.11.2012 (exhibit P4) and the Stakeholder Letter dated 6.11.2012 (exhibit P9) prepared by the Appellants on the purported instruction of the Respondent to Messrs Ong Partnership which were declared a s void, invalid and unenforceable by the 15 learned High Court judge (“the learned judge”) and the Appellants are prohibited from using or enforcing exhibit P4 and exhibit P9. The High Court had also ordered costs of RM8,000.00 against the Appellants. 20 [2] The grounds of judgment of the learned judge dated 9 January 2018 is at pages 3- 22 of the Supplementary Record of Appeal ("the SRA"). [3] Aggrieved by the decision of the learned judge, the Appellants 25 filed a Notice of Appeal dated 15.1.2018 appealing against the whole decision of the learned judge. [4] For ease of reference, the Appellants shall be referred to as the Defendants and the Respondent shall be referred to as the 30 Plaintiff. 3 The Grounds of Appeal 5 [5] The appeal is grounded on five issues decided by the Learned Judge against the Defendants namely: -

The Learned Judge in her finding that the stakeholder 10 letter and the Power of Attorney is invalid and unenforceable failed to consider that it was proved through the Chemist Report dated 9.8.2017, that it is actually the Plaintiff's signature on the stakeholder's letter and the Power of Attorney.

Her Ladyship in her finding that the stakeholder letter is invalid and unenforceable failed to consider that in accordance with the law, the Stakeholder Letter signed in escrow is accepted as valid and an enforceable document.

Her Ladyship failed to consider that the Power of Attorney as a valid and enforceable document since the Power of Attorney was executed by the Plaintiff before the First Defendant and this fact was informed to the Second 25 Defendant prior to Second Defendant's attestation of the Power of Attorney as the witness.

Her Ladyship failed to consider that the First Defendant witnessed the execution of the Power of Attorney by the 30 Plaintiff, and since the First Defendant is the attorney in the Power of Attorney, the First Defendant is prohibited 4 from attesting the Power of Attorney as a witness. Her 5 Ladyship failed to consider that this fact was informed to the Second Defendant who attested the Power of Attorney.

Her Ladyship failed to consider that at the material time 10 when the Second Defendant attested the Power of Attorney as the witness, the Second Defendant was a partner of the First Defendant and a solicitor. The Plaintiff's Claim 15 (Statement of Claim dated 21 May 2015 at pages 5- 18 of Volume 1 of the Records of Appeal). [6] The Plaintiff was one of the directors at KSU Holdings Sdn Bhd 20 (KSU Holding). [7] Employment Provident Fund (EPF) initiated a legal action against the Plaintiff as one of the directors of KSU Holding Sdn Bhd and claimed for the outstanding contribution from the 25 Company. EPF obtained Judgment against the Plaintiff. [8] Subsequently, EPF commenced bankruptcy proceedings against the Plaintiff and the Plaintiff was adjudicated a bankrupt on 17.2.2010. 30 5 [9] The First Defendant was the solicitor having conduct of the 5 Plaintiff’s application to discharge the Plaintiff as a bankrupt. The First Defendant is a Partner in Messrs Ong Partnership. [10] For this purpose, the First Defendant requested the Plaintiff to sign documents and sometimes on blank papers which the 10 Plaintiff did. [11] On 29.10.2012, the Shah Alam High Court allowed the Plaintiff's application to set aside the bankruptcy orders against him. 15 [12] After the Plaintiff was discharged as a bankrupt, the Plaintiff no longer required the legal services of the First Defendant and on 22.11.2012, the Plaintiff handed to the First Defendant a letter dated 22.11.2012 terminating the legal services of Messrs Ong Partnership. 20 [13] However, the First Defendant refused to accept the termination letter but instead handed to the Plaintiff an undated stakeholder letter which allegedly stated that the Plaintiff was agreeable to pay 20% of the amount received or obtained from the legal 25 actions mentioned in the said stakeholder letter as legal fees to Messrs Ong Partnership. [14] It was also stated that the balance sum after deduction of the agreed legal fees to be paid to Messrs Ong Partnership, was to 30 be paid to Teh Bee Yen, Mandops (M) Sdn. Bhd., Hup Eng Sdn. 6 Bhd., Messrs Bodipalar, Ponnudurai Nathan and Messrs 5 Kamaruddin & Partners. [15] It had come within the Plaintiff's knowledge that after the termination letter, Messrs Ong Partnership issued a letter dated 29.11.2012 to Tricor Investor Services Sdn Bhd. (Tricor) 10 enclosing a letter dated 22.11.2012 allegedly signed by the Plaintiff requesting Tricor to issue a cheque under the name of Messrs Ong Partnership. [16] Tricor vide a letter dated 7.12.2012 informed the Plaintiff that 15 Messrs Ong Partnership forwarded few documents to Tricor which included Power of Attorney dated 6.11.2012 and Stakeholder Letter dated 6.11.2012 allegedly signed by the Plaintiff. 20 [17] The Plaintiff denies signing the Power of Attorney in the presence of Syed Muhamad Akhyari Habitullah bin Syed Hamid who is the Second Defendant. [18] The Plaintiff maintains that he did not sign either the undated 25 stakeholder letter or the Stakeholder Letter dated 6.11.2012. [19] Hence, the Plaintiff filed an action against the Defendants for a declaration that the Stakeholder Letter and Power of Attorney both dated 6.11.2012 is invalid and unenforceable. 30 7 The Defendants' Defence 5 (Amended Statement of Defence dated 26 August 2014 at pages 19-28 of Volume 1 of the Records of Appeal). [20] The Defendants alleged that the Plaintiff executed Power of 10 Attorney dated 6.11.2012 and Stakeholder Letter dated 6.11.2012 to Messrs Ong Partnership. [21] Hence, the Plaintiff is bound by the terms in the Power of Attorney and the Stakeholder Letter. 15 Appellate Intervention [22] It is trite law that to warrant appellate intervention the Defendants have to show that the trial Judge was plainly 20 wrong. Further, the Appellate Court will be slow in interfering with the decision of the trial judge on findings of fact. [23] In Sivalingam a/1 Periasamy v Periasamy & Anor (1995) 25 3 MLJ 395 (CA) it was held that- “It is trite law that an appellate court will not readily interfere with the findings of fact arrived at by the trial court to which the law entrusts the primary task of 30 evaluation of the evidence". 8 [24] It was also held in Lin Wen-Chih & Anor v Mycom Bhd 5

3 MLJ 691 (CA) that- "The specific audio-visual advantage that a trial judge has is in respect of the assessment of the credibility of the oral evidence, being the witness 10 examined and cross-examined before the trial judge, and the assessment of weight of such non-documentary evidence produced and examined before him. The findings of fact by the trial Judge on such evidence is entitled to great weight, and unless 15 that finding flies in the face of the mute evidence, cannot warrant appellate intervention. ..." [25] In OSK Securities Bhd v Probo Pacific Leasing Pte Ltd & Anor (2009) 3 MLJ 712, the Court held that - 20 “To warrant appellate interference it was incumbent upon the appellant to demonstrate that the High Court was 'plainly wrong'. This appeal turns upon question of facts based on the credibility of the witnesses. After careful 25 consideration of the reasoning of the trial judge in arriving at his findings and conclusion, it is clear that he had taken into consideration all relevant matters and did not take into account irrelevant ones. The reasoning of the trial judge in arriving at the findings and the 30 conclusions were cogent and is in accordance with the evidence before him. Having had the audio-visual 9 advantage of having seen and heard the witnesses, 5 considered the evidence and the probabilities of the case taken as a whole, as well as the documents presented, clearly entitled him to arrive at the conclusions he did...” 10 There is a heavy onus on a party who seeks to displace the conclusion formed by the trial judge on questions of fact. Decision of the High Court 15 [26] The issues before the High Court were stated as follow –

Whether the Power of Attorney dated 6.11.2012 is valid and enforceable;

Whether there exists an element of fraud in the issuing of the said Power of Attorney dated 6.11.2012; (c ) Whether the Plaintiff had in fact signed a Power of 25 Attorney and appointed the First Defendant as Stakeholder vide a letter dated 6.11.2012; and

Whether the Plaintiff had in fact signed the Stakeholder Letter dated 6.11.2012. 30 10 [27] The Power of Attorney dated 6.11.2012 is marked as exhibit P4 5 and the Stakeholder Letter dated 6.11.2012 is marked as exhibit P9. [28] The Plaintiff’s pleaded case is that the Plaintiff denied signing P4 and P9 or other letters to Tricor instructing 10 Tricor to issue new cheque to the First Defendant. The evidence in Court was consistent that the Plaintiff vehemently denied signing P4 and P9. However, the Plaintiff admitted signing blank papers at the request of the First Defendant in preparation for application to set 15 aside the bankruptcy notice. [29] The Defendants’ case is that Plaintiff had signed P4 and P9 and denied that the Plaintiff had signed the blank papers. Although, the First Defendant in his evidence 20 alleged that all the documents were verified by the Plaintiff’s daughter who is a lawyer, however, the allegation was not substantiated with evidence because the First Defendant failed to call the Plaintiff’s daughter to confirm the said allegation. 25 [30] The First Defendant pleaded that the Plaintiff terminated the service of the Defendants to avoid paying the Defendants’ legal fees for setting aside the bankruptcy notice. The Defendants made a counterclaim against the 30 Plaintiff to recover the legal fees however, during trial, the Defendants withdrew its counterclaim. 11 [31] The First Defendant stated that P4 and P9 which the First 5 Defendant received from the Plaintiff were not dated because at the material time the Plaintiff was a bankrupt. The instruction given by the Plaintiff to the Defendants was purportedly on reason that the Plaintiff owed money to the said companies. 10 [32] It was the First Defendant’s evidence that, he prepared the undated P4 and P9 on the instruction of the Plaintiff, however, during cross-examination, he admitted putting the date i.e. 6.11.2012 on P4 and P9 after the Plaintiff was 15 discharged from the Bankruptcy Order. [33] Base on the First Defendant’s evidence, the learned judge found the evidence by the Second Defendant in his Statutory Declaration which he denied having seen the 20 Plaintiff’s signing P4, strengthened the Plaintiff’s evidence that the Plaintiff signed the blank papers and not P4 as alleged by the First Defendant. [34] The First Defendant had alleged that the instruction given 25 by the Plaintiff in the undated letter is for the money to be paid to the Plaintiff’s wife, Teh Bee Yen on behalf of the Plaintiff because the Plaintiff is the guarantor to KSU Holdings for the loan of RM 30 million, it took from financial institutions. However, the allegations are not 30 substantiated with evidence by the First Defendant. The First Defendant also failed to put this fact across to the 12 Plaintiff’s wife, Teh Bee Yen when she gave her evidence 5 in Court. [35] The First Defendant contended that P4 dated 6.11.2012 was ‘irrevocable’ which cannot be revoked and he had explained it to the Plaintiff. Having considered the totality 10 of the evidence of Plaintiff’s and Defendants’ witnesses, the learned judge was inclined to believe the Plaintiff’s evidence that the Plaintiff signed the blank papers for the Defendants to prepare cause papers for purpose of discharging the Plaintiff from bankruptcy. 15 [36] The learned judge had also considered the Second Defendant’s evidence in his Statutory Declaration dated 10.12.2013 (P12) which he denied seeing the Plaintiff signing P4 and never met the Plaintiff or witnessing the 20 execution of P4 in his presence. The contents of P12 says as follows- “8. Setelah meneliti Surat Kuasa tersebut, saya menyatakan bahawa saya tidak pernah berjumpa 25 dengan Low Kah Khuen tersebut ataupun menyaksikan perlaksanaan Surat Kuasa tersebut atau pun menyaksikan perlaksanaan Surat Kuasa tersebut oleh beliau di hadapan saya. 30 9. Setelah mengimbau kembali, saya teringat bahawa tidak lama setelah menyertai Tetuan Ong & 13 Partnership, pada kira-kira akhir bulan October atau 5 awal November 2012, Ong Keh Kheong telah mengemukakan beberapa helaian terakhir untuk ditandatangani kepada saya dan meminta saya untuk ditandatangani kepada saya dan meminta saya untuk menandatanganinya. Saya menyedari 10 helaian tersebut masih belum ditandatangani oleh sesiapa pun tetapi Ong Keh Keong menyakinkan saya bahawa beliau akan menyaksikan sendiri tandatangan anak guam kemudian…” 15 [37] Surprisingly, the Second Defendant despite his own evidence in P12 above, contradicted himself by giving evidence in Court denying the contents of P12. The learned judge found the Second Defendant’s changed of mind in giving contradicting evidence was to confuse the 20 Court and in order to save himself from the action brought by the Plaintiff against the Defendants of which he was a partner of the Defendants together with the First Defendant. The learned judge found the Second Defendant’s conduct as a lawyer cannot be tolerated 25 therefore, his evidence should not be entertained. [38] The learned judge found that Defendant’s evidence in P12, in fact, supported the Plaintiff’s evidence that he never signed P4 and P9 but signed on blank papers. 30 14 [39] The learned judge found that based on the facts and the 5 evidence, the First Defendant had taken advantage of the Plaintiff’s status as a bankrupt at the material time because it was impossible for the Plaintiff to issue P4 which was not dated to the Defendants when the Plaintiff’s wife would be able to manage the Plaintiff’s financial 10 affairs in that situation. [40] The learned judge had rejected the evidence of chemist expert regarding the handwriting analysis on P4 and P9 given by the expert because the analysis could not 15 confirm that the analysis was 100% accurate. The learned judge referred to the decision in PP v Muhammad Kassim [1977] 1 MLJ 64. The expert witness’s evidence generally would assist the Court arriving into a fair and just decision however, the final determination, would still rest 20 with the Court. The learned judge found that the issue in the case before her is related to what are the documents the Plaintiff had signed when the Plaintiff had admitted signing a few blank papers but never signed P4 and P9 as alleged by the first Defendant. 25 [41] Based on the facts and evidence, the learned judge was satisfied that the Plaintiff never issued P4 and P9 which was irrevocable as alleged by the First Defendant supported by the facts that the Plaintiff as a businessman 30 was trying to take himself out from being a bankrupt. The learned judge found P4 and P9 dated 6.11.2012 15 respectively, had been manipulated by the First Defendant 5 with the view to cheat the Plaintiff who was a bankrupt during the material time. The Plaintiff’s evidence that he signed blank papers on the belief that the documents were for purpose of application to set aside the bankruptcy notice against him was more probable and reasonable to 10 be accepted by the Court. [42] The learned judge concluded that the First Defendant had failed to prove his allegation on the balance of probabilities against the Plaintiff’s claim (Sinniyah & Sons 15 Sdn. Bhd v Damai Setia Sdn. Bhd [2015] 7 CLJ 584). This appeal [43] The Defendants complained that the learned judge failed to 20 consider that it was proved through the Chemist Report dated 9.8.2017 (exhibit D2), that it is actually the Plaintiff’s signature on the Stakeholder's Letter (P9) and the Power of Attorney (P4). We had considered the complaint and found the complaint had no merit. The result in the Chemist Report (Exhibit D2) on the 25 question signatures “Q2-A” (P4) and “Q3-A” (P9) is not 100% accurate and the term used was 'most probably' which did not show 100% accuracy that the Plaintiff signed P4 and P9 as alleged by the Defendants. 30 [44] It was correctly decided that the Chemist Report (Exhibit D2) is merely an opinion and cannot be relied on absolutely to 16 determine whether the Plaintiff signed P9 and P4. The case 5 of Public Prosecutor v. Mohammed Kasim Bin Yatim [1977] 1 MW 64, the Court held that: "It is settled law that evidence by a handwriting expert can never be conclusive because it is only opinion evidence-see 10 Ishwari Prasad v Mohd Isa AIR 1963 SC 1728. The assessment of evidence of handwriting experts was also dealt with in Indar Datt v Emperor AIR 1931 Lah 408, 413. In that case In re B Venkata Row 1913 ILR 36 Mad 159; 141C 418, 13 CrLJ 226 was cited and also a quotation from Dr 15 Lawson’s work of the Law of Expert and Opinion Evidence, which runs as follows; “The evidence of the genuineness of the signature based upon the comparison of handwriting and of the 20 opinion of experts is entitled to proper consideration and weight. It must be confessed however that it is of the lowest order of evidence or of the most unsatisfactory character. We believe that in this opinion experienced laymen unite with the members of the legal profession. 25 Of all kinds of evidence admitted in a court this is the most unsatisfactory. It is so weak and decrepit as scarcely to deserve a place in our system of jurisprudence.” 30 17 [45] In Srikant v King Emperor [1905] 2 ALJ 444; 2 Cr LJ 5 353 two learned judges of the Allahabad High Court observed that - “To base a conviction upon the evidence of an expert in handwriting is, as a general rule, very unsafe” 10 And this observation was approved by a bench of two other learned judges of the same court in Kali Charan Muketrji v Emperor [1909] 9 CrLJ 498; 2 IC 154. 15 [46] In Dalip Kaur v Pegawai Polis Daerah, Bukit Mertajam [1992] 1 MLJ 1 (SC) it was observed that it was trite law that evidence by a handwriting expert should be viewed with caution. 20 [47] Based on the aforesaid, it is also our view that the Defendants contention that the learned trial judge had erred by failing to consider that the declaratory orders sought by the Plaintiff to declare P4 and P9 as null and void is not supported with any evidences is without merit. The Plaintiff denies signing 25 P4 in presence of the Second Defendant and maintains that he did not sign either the undated stakeholder letter or the stakeholder letter dated 6.11.2012 (P9). It is the Defendants who had alleged that the Plaintiff executed P4 dated 6.11.2012 and P9 dated 6.11.2012 to Messrs Ong Partnership. The 30 Defendants called the handwriting expert to prove the allegation. The learned judge had considered the chemist evidence and 18 examined the report (Exhibit D2). The learned judge found that 5 the First Defendant had failed to prove his allegation on the balance of probabilities against the Plaintiff’s claim. [48] Declaratory orders may be sought under Order 15 rule 16 of the

O 15 r 16 of the Rules of Court 2012 gives the Court the jurisdiction to make an unlimited declaratory order. In Tan Beng Sooi v Penolong Kanan Pendaftar (United Merchant Finance Bhd, Intervener) [1995] 2 MLJ 421, His Lordship Low Hop Bing JC (later FCJ) has held that: 15 “The preliminary objection (irregular, premature and/or abuse of process) had no merit. O. 15 r 16 RHC provides that no action or other proceeding shall be open to objection on the ground that a merely declaratory judgment or order is sought 20 thereby, and that the court may make binding declarations of right whether or not consequential relief is or could be claimed. Thus, the court’s jurisdiction to make a declaratory order is unlimited, subject to its own discretion......”. 25 [49] His Lordship stated in his judgment as follows – “The scope of this rule has received the following commentary in Mallal's Supreme Court Practice by Tan Sri Chang Min Tat and it reads as follows: 30 19 Scope of the rule: The jurisdiction to make a declaration 5 under the rule is not confined to cases in which the plaintiff has a complete and subsisting cause of action apart from the rule, or, in which the plaintiff also seeks relief apart from the declaration: Guaranty Trust Co of New York v Hannay [1915] 2 KB 536, CA. A declaration 10 can be resorted to [to] ascertain and determine the rights of parties or to determine a point of law or in place of an order of certiorari, especially where the time to apply for the prerogative order has expired: Pengarah Tanah dan Galian Wilayah Persekutuan v Sri Lempah 15 Enterprise Sdn Bhd [1979] 1 MLJ 135, FC, Pyx Granite Co Ltd v Ministry of Housing & Local Government [1960] AC 260; [1959] 3 All ER 1, HL(E) followed. Further in the recent well-considered judgment of 20 Zakaria Yatim J in Mahesan a/l Subramaniam & Ors v Ponnusamy a/l P Rajoo & Ors [1994] 3 AMR 44:2296, after referring to and analysing numerous authorities, including the judgment of the Federal Court in Datuk Syed Kechik bin Syed Mohamed v Government of 25 Malaysia & Anor [1979] 2 MLJ 101, pertaining to the powers of the court to grant a declaratory judgment, his Lordship concluded that the court's jurisdiction to make a declaratory order is unlimited, subject only to its own discretion. The court has the power to grant a 30 declaration irrespective of whether the applicant has a cause of action or not. The court has the discretion to 20 grant a declaration even if the cause of action does not 5 exist at the time of the filing of the application”. [50] It is trite that the Court may not grant declaratory relief to the Plaintiff if the Plaintiff is guilty of inequitable conduct (City of London v Horner (1914) 111 LT 512) or where a 'cloaked 10 declaration', that is to say, a declaration for a collateral purpose (Trawnik & Anor v Ministry of Defence [1984] 2 All ER 791) or with an improper motive, is sought”. In the present case, the Plaintiff sought declaratory order that the Power of Attorney dated 6.1.2012 (P4) and the Stakeholder Letter dated 6.11.2012 15 (P9) is declared null and void and not enforceable and the Defendants are prohibited from using or enforcing the said P4 and P9. The learned judge had found the documents P4 and P9 had been manipulated by the First Defendant with the view to cheat the Plaintiff who was a bankrupt during the 20 material time. The learned judge has the power to grant the declaration. [51] It is not disputed that both P4 and P9 were prepared by the Defendants purportedly on the instruction of the 25 Plaintiff to the Defendants when the Plaintiff was a bankrupt at the material time. Stakeholder Letter (P9) which was dated 6.11.2012 after the Plaintiff was discharged from bankrupt stated that the Plaintiff agreed to pay Ong Partnership 20% from the Settlement Sum for the application to set aside 30 the bankruptcy order and the works for the three cases mentioned therein while the balance will be distributed to other 21 parties including his wife, Teh Bee Yen. In the Power of Attorney 5 (P4) which was dated 6.11.2012, the Plaintiff appointed the First Defendant as his attorney in relation to the Settlement Sum to be distributed to the parties stated in the Stakeholder Letter (P9). In the Letter to Tricor dated 22.11.2012 (P10), the Plaintiff had purportedly requested Tricor to issue a new cheque for the 10 Settlement Sum of RM 1,414,880.00 to Messrs Ong Partnership. [52] It was indicated to us that the Plaintiff had not paid the Defendants’ legal fees for the service rendered. We were of 15 the view that upon the Plaintiff being discharged from bankrupt, the Plaintiff could have made payment of the legal fees and any other payment to the parties as stated in the stakeholder letter. The Plaintiff does not require the First Defendant to make such payments and the stakeholder letter is not required. 20 [53] Similarly, the contention of the First Defendant that the other purpose of the stakeholder letter is to secure the payment from Tricor does not make sense as a stakeholder letter is not required because upon the Plaintiff being discharged as a 25 bankrupt, the payment will be made directly to the Plaintiff by Tricor. As such, the Plaintiff does not require the services of Messrs Ong Partnership to secure the payment. [54] Further, the Plaintiff testified that the parties mentioned in the 30 stakeholder letter except for Teh Bee Yen rendered services to KSU Holding and not the Plaintiff personally. As such, the 22 Plaintiff does not owe anything to the parties mentioned in the 5 said letter. The Plaintiff also testified that if the Plaintiff owed the amount to the parties then, the said parties would commence an action against the Plaintiff to recover the debt. However, there is no action taken against the Plaintiff by the parties in the said letter. 10 [55] For the above reasons, there is no necessity for the Plaintiff to execute a stakeholder letter as alleged by the Defendants. The above reasons also prove that the First Defendant manipulated the blank papers signed by the Plaintiff to prepare the 15 stakeholder letter. [56] We are satisfied that the learned judge had reached his decision after considering the evidence of witnesses given in a full trial. The learned judge had made a finding of 20 facts and we did not think that it is appropriate for us to disturb the finding of facts by the learned judge. [57] As alluded to earlier, the Defendants’ case is that P4 and P9 was issued on the instruction of the Plaintiff to the 25 Defendants and the Plaintiff had signed those documents. The documents were said to be irrevocable thus bind the Plaintiff. Assuming for a moment, if the allegation regarding P4 and P9 which instruction comes from the Plaintiff is true, it raises a question in our mind whether 30 can the Plaintiff as a bankrupt enter into agreement to pay Ong Partnership 20% from the Settlement Sum, appointed the 23 First Defendant to distribute the Settlement Sum to the parties 5 stated in P9 and requested Tricor to issue a new cheque for the Settlement Sum of RM 1,414,880.00 to Messrs Ong Partnership. In other words, the legal point is whether a bankrupt has the capacity to enter into a Contract. 10 [58] The Parties are not ready to answer to our question, hence we allowed them to submit further on this particular issue. At the continued hearing of this matter, the Defendants had filed their additional submission. We had read the Defendants’ submission and their position is that a bankrupt has the capacity to enter 15 into a Contract. Capacity of the bankrupt [59] It was submitted that the Courts of Appeal in Gan Hong Hoe 20 v Gan Kim Hee [1939] 1 MLJ 295 held that a debt contracted by an undischarged bankrupt after the receiving and adjudication orders are made could be maintained. The headnotes say as follows: - 25 "There is nothing in the Bankruptcy Enactment (Cap. 55) which would preclude a creditor from maintaining an action on a contract entered into by him with the debtor after the debtor has been adjudged bankrupt." 30 And also: - 24 "The section does not enact that a bankrupt is incapable of 5 making a contract and that is what I understand the argument of the respondent to be. Section 9 (1) protects the bankrupt against actions for debts provable in bankruptcy. The intention is not to deprive 10 creditors of all their rights but to put them all on an equal footing and to prevent dissipation of assets. The creditor may not sue because he can prove in the bankruptcy. Of course, leave of the Court can be given to sue on terms but nothing in this case turns on this power of the Court. 15 This section 9 relates to causes of action accrued before the receiving order, not to debts which do not become provable until after the receiving order, and consequently could not be proved in the bankruptcy. 20 I am confirmed in this view by section 30 (iii): “An order of discharge shall release the bankrupt from all other debts provable in bankruptcy". 25 Debts accrued after bankruptcy are not provable in that bankruptcy and are not released by discharge from a prior bankruptcy. So far as material to this case the Bankruptcy Enactment is the same as the English Bankruptcy Act 1883 and Cohen 30 v Mitchell 25 QBD 262 which established that a bankrupt can contract is applicable in the Federated Malay States." 25 [60] In the case of Re Kwan Chew Shen [1987] 1 CLJ 314, it was 5 held by Justice VC George at page 708 as follows: - “Before concluding, it is perhaps relevant to consider one other aspect of the matter based on the wide behalf that once a person is adjudged bankrupt the right to 10 enter into contracts ceases until such time as he is discharged. This is an erroneous belief. 15 Sections 36 and 38 of the Bankruptcy Act set out the disqualifications and disabilities of a bankrupt. Inter alia he may not hold certain offices, he may not sue without the sanction of the Official Assignee, he may not without the permission of the Official Assignee enter into or carry on 20 any business, become a director (or take part in the management) of any company and so on. While he may not enter into a contract that would amount to his carrying on a business, it is significant that there is no blanket prohibition, express or implied, for a bankrupt to 25 enter into a contract. In the National Land Code (sees. 43) it is seen that while minors are specifically precluded from the classes of persons and bodies who may move the State authority in 30 respect of its powers to dispose of land, bankrupts are not, not even by implication. Again in respect of the 26 creation of charges there does not appear to be any 5 exclusion of bankrupts being chargors. Further, while persons of unsound mind are specifically excluded from being competent persons to enter into contracts by s. 11 of the Contracts Act, bankrupts are not. 10 The upshot of all this is that there appears to be no blanket provision anywhere to the effect that a bankrupt is incapable of making a contract. I agree with Encik Ong See Seng that the provisions of 15 s. 49 of the Bankruptcy Act for there to be a second or subsequent receiving order fortify the view that a bankrupt in fact is competent to enter into contracts other than those that he had specifically been excluded from entering into." 20 [61] These principles in Re Kwan Chew Shen are applied in Hock Hua Bank Bhd v Choo Meng Chiong & Anor [1999] 7 CLJ 300 at page 303 by Justice Tee Ah Sing as follows: - 25 "4. Sections 36, 37 and 38 of the BA and the Contracts Act 1950 do not prohibit a bankrupt from entering into contract to buy or sell land or to borrow money for those purposes. The bankrupt was not prohibited by the BA to enter into the said sale and purchase agreement, the 30 transfer and the charge. (See Re: Kwan Chew Shen case supra). 27

Void transactions are specifically provided in ss. 5 and 53 of the BA and they deal with transactions done before the commencement of bankruptcy and not subsequently thereof. There are no provisions in the BA that state that contracts entered by a bankrupt after he was adjudged bankrupt are void against the official assignee. 10 Therefore, the said sale and purchase agreement, the transfer and the charge were not void against the official assignee." [62] And these are followed in recent cases of Overseas Realty 15 Sdn Bhd v Wong Yau Choy & Ors; Tetuan Tay Ibrahim & Partners (Third Party) [2014] 8 CLJ 107 by Justice Harmindar Singh at page 126 as follows: - “[34] This raises the question of the right of a bankrupt in 20 dealing with real property, a matter which was dealt with at some length by the parties during submissions at the end of the trial. By virtue of s. 24(4) Bankruptcy Act 1967, all his properties at the time of adjudication vested in the Director General of Insolvency. This would not affect the 25 said property as it was acquired by the bankrupt first defendant after his bankruptcy in 2004. In other words, the said property was an "after-acquired" property that is property acquired by or devolves on the bankrupt after his adjudication but before discharge (Hock Hua Bank Bhd v. 30 Choo Meng Chiong & Anor [1999] 7 CLJ 300; Agroco Plantation Sdn Bhd & Anor v. Besharapan Sdn Bhd & 28 Ors [1998] 5 CLJ 19). It is trite law that a bankrupt has 5 the legal capacity to enter into a contract to sell "after-acquired" property unless it is a contract that would amount to his carrying on a business (Kwan Chew Shen v. Citibank, NA [1987] 1 CLJ 314; [1987] CLJ (Rep) 704).” 10 [63] Also in Ixora Resources Son Bhd v Spaz Sdn Bhd [2016] MLJU 1489 by Justice Wan Ahmad Farid as follows: - "[8] The question that arises is whether Rahman has the necessary locus standi to represent the plaintiff and to 15 execute the LOU. Can a bankrupt sign any legal document on behalf of a company? Has he got the necessary capacity to do so? To begin with, there is no doubt that as a general rule, a bankrupt, in his personal capacity can enter into any contract. In Re Kwan Chew 20 Shen t/a Syarikat Kaaf [1987] 1 CLJ 314 VC George J (as he then was) made it very clear in the connotation that, once a person is adjudged bankrupt, the right to enter into contracts ceases until such time as he is discharged, is indeed an erroneous belief. This 25 proposition of law was echoed by Kamalanathan Ratnam J in the case of Chan Dian & Anor v MBF Finance Bhd & Anor [1998] MLJU 259 when he said that “I find myself in agreement with the learned Judge" on the legal capacity of an adjudged bankrupt to enter into any contract." 30 29 [64] Hence, it was submitted that an undischarged bankrupt 5 has the legal capacity to enter into any contract which in the present case includes the Stakeholder Letter (P9) and the Power of Attorney ( P 4 ) which were signed in escrow. [65] And in the case of Pinebrook Holdings Sdn Bhd v Ladas 10 Sualan [2007] 1 LNS 690 where the facts are almost similar with the present case, documents were signed in escrow by the bankrupt which will be used after the discharge of bankruptcy, it was decided that documents signed in escrow by a bankrupt, was held to be valid. 15 "[2] The facts relied upon by the plaintiff for its application as set out in the applicant’s submission are as follows: -

The Defendant had by a Deed dated 20 30.12.2005 and an oral collateral agreement agreed to sell a piece of land held under CL 085311388 measuring 28.43 acres at Kampung Wonod, Telupid in the District of Labuk/Sugut, Sabah (hereinafter referred to 25 as "the said Land”) at the agreed price of RM200,000.00 and on the condition that the Plaintiff was to assist him to discharge of his bankruptcy. 30

Simultaneous with the execution of the Deed, the Defendant also executed a Sale 30 and Purchase Agreement, a Power of 5 Attorney, memorandum of transfer and all related documents (hereafter collectively referred to as the related documents") in escrow to be dated upon the discharge of his bankruptcy (Clause 18 of the Deed)."

Relying on the said Deed, the Plaintiff then paid a sum of RM 66,500.00 to Messrs Tan Pang Tsen & Co. in order to assist the Defendant to apply for the discharge of his bankruptcy within one year."

As the appointed solicitors in assisting the Defendant in discharging himself from bankruptcy (clause 3 of the Deed), Messrs Tan Pang Tsen & Co. thereafter had written to the Insolvency 20 Department to find out the outstanding sum owing to the creditors of the Defendant and also had written to Malayan Banking Berhad as the sole creditor requesting Maybank not to foreclose the said Land.

However, the Defendant had refused to execute the prepared application to discharge by Messrs Tan Pang Tsen & Co. and had on the other hand, engaged Messrs Azman Yong & Partners to file 30 and application to discharge from bankruptcy. 31

Upon the Defendant being discharged from 5 bankruptcy, the Defendant thereafter agreed to date the Sale and Purchase Agreement, the Power of Attorney and the related documents on 26.04.2006. The Memorandum of Transfer is dated 19.05.2006. Thereafter the Plaintiff paid the 10 balance of purchase amounting to RM133,500.00 to Messrs Tan Pang Tsen & Co. as stakeholders to be released upon the registration of the transfer of the said Land in favour of the Plaintiff." 15 And at pg. 10 as follows: - "[22] Given the following fact, namely; (1) that the plaintiff had on his part done the necessary to assist the defendant to obtain a discharge as a bankrupt but 20 it did not materialize due to refusal by the defendant to sign the processing papers and (2), that that the plaintiff had paid the balance of the purchase price to the stakeholder in compliance with the terms in the Deed and Sale and Purchase Agreement, the plaintiff 25 has shown that it has cause of action and that there is serious issue on the existence of the plaintiffs right over the land which has to be tried." [66] The Defendants submitted that in Pinebrook's case, after the 30 bankrupt was discharged from bankruptcy, the escrow documents were dated. However, the discharged bankrupt 32 refused to sign the subsequent processing forms and the 5 Court held that these documents, previously signed in escrow by the bankrupt are enforceable hence, granted an injunction against the discharged bankrupt from disposing the property. Applying Pinebrook's decision to the present case, the Power of Attorney (P4) and the Stakeholder Letter (P9) that 10 were signed in escrow and dated after Plaintiff was discharged from bankruptcy should also be held as enforceable against the Plaintiff. Our view 15 [67] After receiving the Royal Assent on 10 May 2017, the Bankruptcy (Amendment) Bill 2016 (Bill) has finally come into force in Malaysia on 6 October 2017, marking the dawn of the new Malaysian Bankruptcy regime. As highlighted in our 20 previous November 2016 Client Alert, the Bill will rename the existing Bankruptcy Act 1967 to the Insolvency Act 1967 and will also have important implications, specifically to financial institutions and corporates whose loans or debts are secured by personal guarantees. 25 [68] In Section 11 of the Contracts Act 1950 states that: “ Every person is competent to contract who is of the age of the majority according to the law, which he subject, and who 30 is of sound mind, and is not disqualified from contracting by any law to which he is subject.” 33 [69] Although it does not specifically mention that a bankrupt can 5 enter into a contract but it does says “is not disqualified from any contracting by any law to which he is subject”. Also, if we are to look at Section 36, 37 and 38 of the Insolvency Act 1967, it may not specifically stated that the bankrupt person cannot enter into a contract, however cross reference to Section 8(b) 10 of the Insolvency Act 1967 whereby it states that:- “all the property of the bankrupt shall become divisible among his creditors and shall vest in the Director General of Insolvency and the Director General of Insolvency shall be 15 the receiver, manager, administrator and trustee of all properties of the bankrupt”. Which means, a bankrupt is not allowed to deal with his property as provided under Section 8 of the Insolvency Act 1967 because 20 all his assets and properties will be vested upon Director General of Insolvency (DGI). Therefore, any transactions or dealings on his properties can only be made by the DGI. A bankrupt is also not allowed to enter into dealings which involve monetary value. 25 [70] The Defendants had referred some cases to support their contention that a bankrupt can enter into a contract. For example, in the case of Ixora Resouces Sdn Bhd v Spaz Sdn Bhd (supra), the brief facts of the case are as follows. By way 30 of a purported letter of undertaking to pay (“LOU”) dated 16.6.2010, the defendant had appointed the plaintiff to identify, 34 arrange, coordinate and secure the proposed mixed 5 development of hotel, banquet hall, serviced apartment and restaurant (“the Project”) at Bandar Baru Bangi for one Koperasi Permodalan Felda Berhad (“Koperasi Felda”). Koperasi Felda, by way of a letter of intent dated 20.9.2010 (“LOI”), had expressed its intention to appoint the defendant to implement 10 the Project on a design and build basis. It was expressly stated in the LOI that a proper letter of acceptance (“LOA”) would only be issued to the defendant after certain terms and conditions stated therein were met. It was agreed in the purported LOU that the defendant would pay to the plaintiff an amount of RM 15 7.325 million or 5% of the final contract sum as awarded by Koperasi Felda to the defendant. The parties had further agreed that the mode of payment would be as follows:

Upon securing the letter of award from the defendant, 20 the plaintiff would pay the defendant a sum of RM 2 million; and

(ii) The balance of the same would be paid by way of 5 equal instalment payments within a period of 10 months 25 from the date of site possession. There was no mention of any payments to be made by the defendant to the consultant architects or engineers in the purported LOU, either directly or through the plaintiff. At the 30 outset, learned counsel for the defendant had raised a very pertinent preliminary objection to this application. It is this. There 35 are adjudicating and receiving orders made against Rahman on 5 10.10.2007; see exhibit MA-1 of encl 11. This means that at the time of the execution of the purported LOU, which was on 16.6.2010, Rahman was already an adjudged bankrupt. The thrust of the submission in respect of the preliminary objection of the learned counsel for the defendant can be summarised as 10 follows:-

That Rahman was neither the director nor the authorised signatory of the plaintiff to execute the LOU. In any case, Rahman, being an undischarged bankrupt, 15 had no legal capacity to enter into any agreement with any party.

(ii) Being an undischarged bankrupt, Rahman has no legal capacity to depose any affidavit on behalf of the 20 plaintiff’s company and his affidavits ought to be ignored. [71] We noted that the Defendant in the present case has referred to part of the judgment mainly at paragraph (8) of the judgment but 25 purposely omitted to read the subsequent paragraph (9) of the judgment which says that – “[9] However, in the instant case, it is not that Rahman was entering into the LOU in his personal capacity. He 30 was purportedly doing it on behalf of the plaintiff. The problem is that; he was not a director of the plaintiff. The only 36 authority that can remotely be said to assist the plaintiff in 5 this issue would be the case of MBF Finance lwn Sykt Norma Pengangkutan Sdn Bhd & Ors [1999] 4 CLJ 734. In the aforesaid case, it was held that, since one Zulkifli was authorised by way of a resolution of the company to sign the document on behalf of the company, the impugned hire 10 purchase agreement between the plaintiff and defendant was therefore valid. In that case, according to the factual finding of the learned Judicial Commissioner, there was no evidence to establish that the said Zulkifli had acted as a director. With respect, I do not think that this represents the 15 correct proposition of the law. A resolution of a board of directors, no matter how well intended it was, cannot by any stretch of legal imagination, legalise what is clearly prohibited by written law.” 20 [72] Similarly, in another case which the Defendant had referred to in the case of Overseas Realty Sdn Bhd v Wong Yau Choy & Ors; Tetuan Tay Ibrahim & Partners (Third Party) (supra), the Defendant mainly produced the incomplete paragraph (34) of Justice Harmindar Singh’s judgment. The Defendant did not 25 further put these next paragraphs in their written submission regarding this issue which as the following: [34]....However, by virtue of s. 48(1)(b)(i) of the Bankruptcy Act 1967, such "after-acquired" property should be 30 accounted for to the Director General of Insolvency for distribution to the creditors. In other words, there is a legal 37 obligation on the part of a bankrupt to inform the 5 Director General of Insolvency. [35] Now although the bankrupt has the legal capacity to enter into a contract to sell "after-acquired" property, a point which was canvassed strenuously before the 10 court, it is also the law that any such contract is voidable at the option of the Director General of Insolvency and the proceeds of the sale of any such property by the bankrupt shall be deemed to be the property of the Director General of Insolvency by resort 15 to s. 53B(1) Bankruptcy Act 1967. [emphasis added] [36] As alluded to earlier, the Director General of Insolvency can also apply and register itself as proprietor of any such property by recourse to s. 349 NLC. Until such property is 20 registered, the Director General of Insolvency will be vested with an equitable interest in the said property (Koh Thong Chuan v. The Official Assignee of the property of Koh Liang Hee, Bankrupt [2003] 1 CLJ 125; [2003] 1 MLJ 113). It must therefore be the case that any person purchasing from 25 the bankrupt "after-acquired" property or any interest in it with the knowledge of the bankruptcy acts at great risk to losing ownership of such property. [emphasis added] [73] In the present case, the Defendant had also cited the case of 30 Pinebrook Holdings Sdn Bhd v Ladas Sualan (supra), where the Defendant tried to apply this case to the present case. In 38 Pinebrook’s case, the fact that the bankrupt person had 5 possessed the knowledge on what documents he had signed in escrow i.e. the Power of Attorney and the Stakeholder Letter. In the present case, the learned Judge has made a finding that there had involved fraud and manipulation when the documents were procured and Plaintiff’s explanation that when he signed 10 the blank papers it was with the impression for his application to discharge himself from the bankruptcy order. Subsequently, the learned judge decided that the Power of Attorney and Stakeholder Letter were null and void. 15 [74] Be that as it may, on the law, we were of the considered view that Section 8(b) of the Insolvency Act 1967 clearly states that all the property of the bankrupt shall become divisible among his creditors and shall vest in the Director General of Insolvency and the Director General of Insolvency shall be the 20 receiver, manager, administrator and trustee of all properties of the bankrupt. This simply means that the bankrupt has no legal capacity to deal with his property or to enter into contract related to the property. The section uses the words “shall vest in the Director General of Insolvency” which is mandatory in nature. 25 Hence, any transaction to dispose of the property must be approved or sanctioned by the Director General of Insolvency. [75] In the present case, even if the Defendants argued that the Power of Attorney (P4) and the Stakeholder Letter (P9) were 30 signed in escrow to be effective after discharged of bankrupt, the fact still remain that at the time the documents were 39 prepared and undated before discharged of bankrupt, the 5 Insolvency Department was made aware by letter dated 2.8.2011 (page 43 of the Additional Record of Appeal 2) by Tricor that the Plaintiff is entitled for RM 1,414,880.00 and the cheque of the amount was enclosed for the Insolvency Department’s action. The said letter was received by the 10 department on 4.8.2011. The Insolvency Department had knowledge that the money from the bankrupt was to be vested with the department. However, on 22.8.2011, the Insolvency Department returned the cheque to Tricor on reason that the cheque payment must be made under the name of “Ketua 15 Pengarah Insolvensi” (page 41 the Additional Record of Appeal 2). Be that as it may, as far as the money is concerned it belonged to the Plaintiff as a bankrupt and shall vest in the Director General of Insolvency. A bankrupt is not allowed to enter into dealings which involve the distribution of such money. 20 [76] In Teoh Ah Mooi @ Chow Kui Eng Mooi v Causeway Bay Plantations Sdn Bhd [2014] 1 MLJ 263, the Court of Appeal held that – 25 “[8] It is trite law that upon a person being adjudicated a bankrupt the estate of the bankrupt vests in the official assignee. This court recognized this principle in the case of Perwira Affin Bank Bhd v Sardar Mohd Roshan Khan and another appeal [2009] 4 MLJ 201; [2009] 4 CLJ 34 when it 30 pronounced through the judgment of Low Hop Bing JCA (as he then was) that: 40 “In an action based on breach of contract by the 5 defendant (as opposed to an action in respect of an injury to the bankrupt's person, the bankrupt's estate and cause of action are vested in the OA upon adjudication and unless the prior sanction of the OA is obtained to maintain the action, the bankrupt is 10 incompetent to do so in his own name or to employ an advocate and solicitor to act on his own behalf without the sanction: Chin Kon Nam & Anor v Chai Yun Phin Development Sdn Bhd [1996] 4 MLJ 271 at p 446 [1996] 1 CLJ 444 High Court; Sabah Bank Bhd, Tan King 15 Hiang; ss 24(4); s 48; and Re Low Kok Tuan”. (See p 44) [9] In our judgment, the net effect of the estate of the appellant being vested in the official assignee at the time of 20 the execution of the sale and purchase agreement is that the agreement is void as the appellant did not have the capacity to deal with his undivided share in the said land by entering into the said sale and purchase agreement. With respect, this explains why both the High Court and the Court of 25 Appeal rejected the claim of the respondent when they sought to enforce the same against the remaining purchasers i.e. the defendants”. Conclusion 30 [77] We have fully considered the Appellants’ appeal and did not think that there are merits in the appeal. This is our unanimous 41 decision that the appeal be dismissed with costs of 5 RM10,000.00 subject to allocator fees and the deposit if any is refunded to the Defendants. Dated this 13 March, 2019 10 Sgd KAMALUDIN MD. SAID JUDGE 15 COURT OF APPEAL MALAYSIA PUTRAJAYA Parties 20

Ong Keh Keong for the Appellants (Messrs Ong Partnership)

John Fam Sin Nin, Freda Santhiago and Amanda 25 Farhana for the Respondent (Messrs S N Fam & Co.)