Rich Contracts Sdn Bhd v Ong Boon Tiong (WA-22NCC-372-08/2020)

RICH CONTRACTS SDN BHD (No. Pendaftaran Perniagaan:

BIOENERGY FORCE SDN BHD (No. Pendaftaran Perniagaan:

GX CORPORATION SDN BHD (No. Pendaftaran Perniagaan: 200601033062/752821-X) -PLAINTIF

ONG BOON TIONG (No. K/P: 700119-08-5505)

BIO CONCEPT SOLUTION (No. Pendaftaran Perniagaan: 201503282681/002478817-A) S/N iDnBwr/BjUqgj8xn6T/cZg

BIO CONCEPT SOLUTION (M) SDN BHD (No. Pendaftaran Perniagaan:

SIMPANGAN KURNIA SDN BHD (No. Pendaftaran Perniagaan:

SING LEAN HON TRADING SDN BHD (No. Pendaftaran Perniagaan:

TOP BIOMASS RESOURCES (No. Pendaftaran Perniagaan:

TJJ BROTHER TRADING (No. Pendaftaran Perniagaan:

GREAT ORGANIC SDN BHD (No. Pendaftaran Perniagaan:

TME BIO RESOURCES SDN BHD (No. Pendaftaran Perniagaan: 201401015790/1091875-A) S/N iDnBwr/BjUqgj8xn6T/cZg

SGS SUBURA TRADING (No. Pendaftaran Perniagaan:

HOONG CHAN TRADING & TRANSPORT SDN BHD (No. Pendaftaran Perniagaan: 201101029606/957741-V) DEFENDAN-DEFENDAN JUDGMENT A. Introduction [1] This case involves the sale and purchase of palm kernel shells which are by-products in the production of palm oil. PKS are shell fractions (fibrous materials) left after oil palm nuts are extracted in the crushing operation in palm oil mills. They are commonly used as fuel in the production of energy from renewable sources. [2] The 1st and 2nd plaintiffs use PKS as the main source of fuel to generate biomass energy and thermal heat, which would in turn be supplied to the 3rd plaintiff, for glove-manufacturing activities. [3] st defendant, who was employed by the 3rd plaintiff, had breached his duties to the plaintiffs in setting up the 2nd and 3rd defendants as suppliers that sold and delivered PKS to the 1st and 2nd plaintiffs. The plaintiffs also claimed that the 1st defendant, together with the 2nd to 11th defendants had conspired S/N iDnBwr/BjUqgj8xn6T/cZg to defraud and injure the plaintiffs, by acting in concert to fix the pricing and supply of PKS to the 1st and 2nd plaintiffs. [4] Some of the defendants claimed that amounts were due to them from the delivery of PKS to the 1st and 2nd plaintiffs. These defendants filed counterclaims against the 1st and 2nd plaintiffs, seeking the outstanding amounts due. [5] After a full trial, I allowed the majority of the prayers, and dismissed the counterclaims. The grounds for my decision are set out below. B. Background Facts The plaintiffs [6] The plaintiffs are companies within the Smart Glove group of companies Glove The group is in the business of manufacturing and selling gloves. The glove-manufacturing process requires thermal heat which is obtained from the two heat supply companies in the Smart Glove Group, namely the 1st and 2nd plaintiffs. [7] The 1st and 2nd plaintiffs use PKS as the main source of fuel to generate energy and heat, which is then supplied to the 3rd plaintiff, for glove-manufacturing activities. [8] The 1st and 2nd plaintiffs purchase PKS from various suppliers in the market. They also obtain alternative fuel sources such as woodchips S/N iDnBwr/BjUqgj8xn6T/cZg and wood pellets either from specific woodchip suppliers or suppliers of PKS. The defendants [9] The 1st defendant was employed by the 3rd plaintiff as its Global Sourcing Manager. His duties include sourcing and procuring various items for companies within the Smart Glove Group. The major items sourced are PKS and woodchips. [10] The 2nd and 3rd defendants are entities set up and controlled by the 1st defendant. It is undisputed that the 2nd and 3rd defendants were established while the 1st defendant was employed by the 3rd plaintiff. [11] The 2nd to 11th defendants supply PKS, woodchips and/or wood pellets to the plaintiffs and the Smart Glove Group. [12] The 4th to 11th defendants, together with Mega Sold Palms Sdn Bhd, Win M Trading and BML Solutions Sdn Bhd were suppliers frequently used by the plaintiffs [13] The claim against the 11th defendant has been discontinued. As such, unless otherwise indicated, reference to the is a reference to the 1st to 10th defendants only. The claim [14] The plaintiffs claimed that the establishment of the 2nd and 3rd defendants, and their supply of PKS and/or woodchips to the plaintiffs, S/N iDnBwr/BjUqgj8xn6T/cZg while the 1st defendant was employed by the Smart Glove Group is a breach of the 1st rd plaintiff and/or the Smart Glove Group. The plaintiffs also claimed that the defendants had conspired to defraud the plaintiffs. [15] The plaintiffs filed this claim against the defendants, premised on the following causes of action: a. st defendant is for breaches of duties of good faith and fidelity, and/or fiduciary duties; b. ause of action against all defendants is for conspiracy and practices or acts in concert, to defraud and injure the plaintiffs; and c. The 1st and 2nd cause of action against all defendants is for an indemnity against claims brought by the 3rd and Sigma Glove Industries Sdn Bhd companies within the Smart Glove Group, in respect of losses and damages sustained by factories of the 3rd plaintiff, PGI and Sigma flowing from the acts and/or omissions of the defendants. [16] The plaintiffs are seeking, inter alia, damages, a declaration that the plaintiffs are entitled to disgorgement of profits received by the defendants, an account of sums wrongfully received by the defendants and an order of payment of such sums to the defendants. S/N iDnBwr/BjUqgj8xn6T/cZg The counterclaims [17] The 4th, 5th, 7th, 8th and 9th defendants st and 2nd plaintiffs, but had not been paid for such supply. They filed counterclaims against the 1st and 2nd plaintiffs for outstanding amounts due in respect of PKS delivered. C. Issues [18] From the facts as set out, the issues for the consideration of this court are as follows: a. Whether the 1st defendant had breached his duties to the plaintiffs; b. Whether the defendants had conspired to injure and defraud the plaintiffs; c. Whether the 1st and 2nd plaintiffs are entitled to an indemnity against claims brought by the 3rd plaintiff, PGI and Sigma; and d. Whether the Counterclaim Defendants are entitled to their claims for outstanding amounts due in respect of the delivery of PKS. S/N iDnBwr/BjUqgj8xn6T/cZg D. Preliminary Issue: The Status Of The Expert Reports [19] In the course of trial, the defendants objected to the classification prepared by Khong Hen Jun, Jonathan of Vidos Lima Consultancy as expert reports. The First VLC Report, the Second VLC Report and the Third VLC Report are referred to as the [20] VLC Reports, I will address this objection first. [21] The process to admit the evidence of experts of parties in proceedings is provided for in order 40A of the Rules of Court 2012 evidence to be admitted, states as follows: Unless the Court otherwise directs, expert evidence to be given at the trial of any action, is to be given in a written report signed by the expert and exhibited in an affidavit sworn to or affirmed by him testifying that the report exhibited is his and that he accepts full responsibility for the report.

An expert's report shall

give details of the expert's qualifications; S/N iDnBwr/BjUqgj8xn6T/cZg

give details of any literature or other material which the expert witness has relied on in making the report;

contain a statement setting out the issues which he has been asked to consider and the basis upon which the evidence was given;

if applicable, state the name and qualifications of the person who carried out any test or experiment which the expert has used for the report and whether or not such test or experiment has been carried out under the expert's supervision;

where there is a range of opinion on the matters dealt with in the report

summarise the range of opinion; and

(ii) give reasons for his opinion;

contain a summary of the conclusions reached;

contain a statement of belief of correctness of the expert's opinion; and

contain a statement that the expert understands that in giving his report, his overriding duty is to the Court and that he complies with that S/N iDnBwr/BjUqgj8xn6T/cZg (emphasis added) [22] It is not in dispute that order 40A rule 3 of the ROC has not been complied with, as PW3, the maker of the VLC Reports, had not filed any affidavit to exhibit the VLC Reports. Instead, the VLC Reports were tendered in court as part of the agreed bundle of documents, marked as Part B. [23] The defendants contend that compliance with order 40A rule 3 is mandatory. They relied on Tan Siew Hong v Mohd Azli bin Abdul Hamid & Ors and other appeals [2018] MLJU 2008 and Amzed MLJU 2125, where the courts rejected expert reports due to non-compliance with 40A rule 3 of the ROC. However, these cases are in my view distinguishable from the present case, as they involve not only non-compliance with the requirements in order 40A rule 3(1), but also non-compliance with the requirements in rule 3(2)(a) to (h). As such, the reports could not be regarded as expert reports. [24] In this case, the VLC Reports comply with order 40A rule 3(2) of the ROC, in that the qualifications of PW3, opinions on matters dealt with in the reports and the reasons for the opinion, are set out in the reports. The VLC Reports are for all intents and purposes, expert reports under order 40A rule 3(1) of the ROC. [25] I must add that it was open to the defendants to file their own reports to challenge the VLC Reports. They declined to do so, but instead chose to challenge the admission of the VLC Reports as expert reports during trial. S/N iDnBwr/BjUqgj8xn6T/cZg [26] In reaching a finding on the status of the VLC Report, I am guided by the following passage in ADM Ventures (M) Sdn Bhd & Ors v Renew Capital Sdn Bhd & Ors and other cases [2021] MLJU 1466: [88] By virtue of the opening words the Court am of the respectful view that is not mandatory for the written report of the expert to be exhibited in an affidavit form sworn or affirmed by him. Consequentially premised on the authority of Datuk Captain Hamzah (supra), since the non-compliance is not mandatory in nature, in the interest of justice I invoke O.1A ROC 2012 to overcome the technical non- [27] My reasoning is along the same vein as the court in ADM Ventures (supra). The opening words in order 40A rule 3(1) allow the court to direct that the expert report need not be exhibited in an affidavit. As such, I allow the admission of the VLC Reports as expert evidence pursuant to order 40A of the ROC. E. Issue 1: Whether The 1st Defendant Had Breached His Duties To The Plaintiffs The 1st duties to the plaintiffs [28] There are several aspects of the 1st plaintiffs. The first arises from the contractual obligations of the 1st defendant to the plaintiffs, under his letters of employment dated 3 January 2008 Letter of and 28 December 2017 S/N iDnBwr/BjUqgj8xn6T/cZg rd plaintiff. The First Letter of Employment and the Second Letter of Employment shall be referred to as the [29] The First Letter of Employment imposes the following obligations on the 1st defendant: a. To assume and perform all duties and responsibilities for the entirety of global sourcing of the Smart Glove Group, and any other functions as may be assigned by the management from time to time (paragraph 4(a)); b. Not to reveal any trade secrets and any confidential information of the 3rd plaintiff except when disclosure is necessary for the conduct of the 3rd (paragraph 4(b)(ii)); and c. To use his best endeavours to promote and advance the interests of the 3rd plaintiff, and not to conduct any personal business in any way or for any purpose whatsoever for any part of his time during or after office hours, by or with any person or firm other than the 3rd plaintiff (paragraph 4(b)(iii)). [30] In the Second Letter of Employment, the 1st employment was converted from a full-time to a part-time position. His job title as the Global Sourcing Manager remains the same, as set out in the opening paragraph of the Second Letter of Employment. S/N iDnBwr/BjUqgj8xn6T/cZg [31] The Second Letter of Employment contains similar obligations as the First Letter of Employment. Paragraph 3 provides as follows: the period of your employment: i) You shall abide by all the policies, rules and regulations as laid down by the Management from time to time; ii) You shall faithfully and diligently serve the Company and perform your duties and responsibilities to the best of your ability and not do anything which may jeopardize the Company's interests iii) You shall not reveal any trade secrets, intellectual properties and any other confidential information of the Company or of any other party acquired during the course of your employment except when disclosure is necessary discharge of your duties and responsibilities; iv) You shall use your best endeavors to promote and advance the interests of the Company and shall not conduct any personal business in any way or for any purpose whatsoever for any part of your time during and/or after office hours, by or with any person or firm other than the Company, unless with the consent of the company due to your part-time (emphasis added) S/N iDnBwr/BjUqgj8xn6T/cZg [32] In addition, paragraph 16 of the Second Letter of Employment requires the 1st defendant to ensure the confidentiality of the business activities, projects, systems, processes and procedures, and intellectual property of the 3rd plaintiff and its affiliates. [33] The Letters of Employment contain express obligations on the 1st defendant to promote and advance the interests of the 3rd plaintiff, and restrictions against conducting any personal business in any way or for any purpose whatsoever with any person other than the 3rd plaintiff. As the 1st paragraph 4(a) of the First Letter of Employment), these express obligations and restrictions would also extend to other companies within the Smart Glove Group. [34] The second and third aspects of the 1st plaintiffs arise pursuant to the employment relationship between the 1st defendant and the 3rd plaintiff. These are the duties of good faith and fidelity, and fiduciary duties towards the plaintiffs. [35] The duties of good faith and fidelity of the 1st defendant requires him to have regard to the interests of the 3rd plaintiff. In Zaharen bin Hj Zakaria v Redmax Sdn Bhd & other appeals [2016] 7 CLJ 380, the Court of Appeal rejected the argument of the 2nd defendant who claimed that he had followed the instructions of the 1st defendant in making unauthorised payments to third parties, without verification. The Court of Appeal held as follows: [44] Under the law, an employee of a company has a duty of fidelity to be observed at all times during his employment with the S/N iDnBwr/BjUqgj8xn6T/cZg company. What is this duty of fidelity? Every employment contract contains an implied term that an employee will serve his employer with good faith and fidelity (the duty of fidelity). The duty of fidelity is owed by all employees and is to be distinguished from a fiduciary duty. A fiduciary duty requires an employee to act in the interests of his employer, whereas the duty of fidelity requires an employee to have regard to his employer's interests. Inherent in that duty to have regard to his employer's interests must be a duty not to act in a manner which would be to disregard his employer's interests. Such acts must include acts that are inherently detrimental to his company's interests. (emphasis added) [36] Further, the employment relationship between the 1st defendant and the 3rd plaintiff also gives rise to the fiduciary duties of an employee towards an employer. This is recognised by the High Court in Muniandy a/l Nadasan & Ors v Prem Krishna Sahgal & Ors [2016] 11 MLJ 38: [47] Based on Smile Inc Dental Surgeons, Nottingham University, Nagase Singapore Pte Ltd and Canadian Aero Service Ltd, an employee owes fiduciary duties to his or her employer in the following circumstances:

when the employment contract imposes specific contractual obligations on the employee which place the employee in a S/N iDnBwr/BjUqgj8xn6T/cZg situation where Equity imposes fiduciary duties on the employee;

when the employee owes a special duty of minded or exclusive to the employer; and/or

when the employee is in the of the employer with duties similar to those owed by company directors. I must add that the above circumstances where an employee owes fiduciary duties to his or her employer, are not exhaustive. The following considerations are relevant in ascertaining whether an employee owes fiduciary duties to his or her employer:

the position of the employee in the organisation, structure and hierarchy of the employer, namely how senior is the employee; and

(ii) the nature and extent of the duties, functions and responsibilities of the employee. (emphasis added) [37] With these duties established, I considered the actions taken and conduct of the 1st defendant, to assess whether the 1st defendant had breached his duties towards the 3rd plaintiff. S/N iDnBwr/BjUqgj8xn6T/cZg The establishment of the 2nd and 3rd defendants [38] The 1st defendant first joined the 3rd plaintiff as a Global Sourcing Manager in January 2008. He resigned on 16 June 2017 but a few months later in January 2018, he re-joined the 3rd plaintiff on a part-time basis in the same position. He served in that position until 5 December 2019. [39] The 2nd defendant was registered on 11 October 2015, and the 3rd defendant was incorporated on 22 October 2018. The 1st defendant was the sole owner of the 2nd defendant, and a director and 80% shareholder of the 3rd defendant. The other director and remaining shareholder of the 3rd defendant was the 1st not involved in the management of the 3rd defendant. [40] From these facts, it is clear that the 1st defendant was in the 3rd nd and 3rd defendants. I have also noted that although the 2nd defendant was already registered when the 1st defendant signed the Second Letter of Appointment with provisions that prohibited him from conducting his own business, he did not inform the management of the 3rd plaintiff of the registration of the 2nd defendant. [41] The 1st defendant claimed he had informed the Smart Glove business outside his employment that could give rise to a conflict of interest. However, there is no evidence of the 1st defendant informing PW1 or anyone within the Smart Glove Group of his involvement in the 2nd and 3rd defendants. S/N iDnBwr/BjUqgj8xn6T/cZg [42] Further, considering the fact that the Letters of Employment prohibited the 1st defendant from conducting any personal business outside the scope of his employment, I find it to be unlikely that the 3rd plaintiff had known that the 2nd and 3rd defendant were related to the 1st defendant. This is especially so, as the Second Letter of Employment was signed after the 2nd and 3rd defendants were incorporated. Transactions between the plaintiffs and the 2nd and 3rd defendants [43] The 1st provide recommendations to the management of the Smart Glove Group on the total quantity of PKS required by the 1st and 2nd plaintiffs, and on the suppliers of PKS. It is beyond dispute that the recommendations of the 1st defendant were relied on by the management. [44] The PKS suppliers recommended by the 1st defendant included the 2nd and 3rd defendants, and pursuant to the 1st recommendations, the Smart Glove Group transacted with the 2nd and 3rd defendants. These transactions are not in dispute. They are evidenced by invoices identified by the plaintiffs, as listed in Appendix 11 of the First VLC Report. The 1st defendant has not denied the existence of these transactions. Breach of the 1st duties to the plaintiffs [45] The fact that the 1st defendant is the individual behind the 2nd and 3rd defendants, in my considered view, gives rise to a conflict of interest between the 1st personal interests in the 2nd and 3rd defendants. S/N iDnBwr/BjUqgj8xn6T/cZg [46] I therefore find that in recommending the 2nd and 3rd defendants as suppliers of the Smart Glove Group, which resulted in the Smart Glove Group transacting with the 2nd and 3rd defendants: a. the 1st defendant had breached the terms of the Letters of Employment, which required him to promote and advance the interests of the 3rd plaintiff and the Smart Glove Group, and prohibited him from conducting any personal business outside the Smart Glove Group; b. the 1st defendant had breached his duties of good faith and fidelity towards the plaintiffs; and c. the 1st defendant had breached his fiduciary duties to the 1plaintiffs. The nature of his duties in the Smart Glove Group, and the senior position that he held, gave rise to fiduciary duties to the Smart Glove Group. I must stress again that the 1st defendant was responsible for recommending suppliers, and the Smart Glove Group relied on his recommendations. F. Issue 2: Whether The Defendants Had Conspired To Injure And Defraud The Plaintiffs Elements to prove conspiracy to injure [47] To sustain a cause of action for conspiracy to injure and defraud, the plaintiffs would need to prove the following: S/N iDnBwr/BjUqgj8xn6T/cZg a. There was a combination or agreement between the defendants; b. The purpose of the agreement was to injure the plaintiffs; c. Acts had been done by the defendants in the execution of the agreement; and d. The acts had resulted in loss and damage to the plaintiffs (see Renault SA v Inokom Corp Sdn Bhd & Anor and other appeals [2010] 5 MLJ 394 and Cubic Electronic Sdn Bhd (In Liquidation) v MKC Corporate & Business Advisory Sdn Bhd & another appeal [2016] 3 MLJ 797). [48] I will proceed to assess whether the elements of conspiracy to injure have been proven. Element 1: A combination or agreement between the defendants [49] I found there to be sufficient evidence of an agreement between the defendants. This agreement is reflected in the following communications between the 1st defendant with representatives of the Favoured PKS Suppliers, as extracted by VLC and exhibited in the VLC Reports: a. In WhatsApp messages between the 1st defendant and 2016, when Billy asked for the price of PKS for the S/N iDnBwr/BjUqgj8xn6T/cZg following month, the 1st defendant responded, are strategic alliance partner, so . He gave the price of RM225 per metric tonne, to which Billy responded with so and 238 to . b. In the same WhatsApp exchange, the 1st defendant also of PKS that Billy was looking to sell. c. In a WhatsApp message on 30 August 2018 between the 1st defendant and Adam Lim Boon Kian of the 8th st defendant informed DW4 that, . The 1st defendant also added, a lot trader not to take from oil mill where buy high price, I thinks under our alliance monthly purchase more than d. In the same trail of WhatsApp messages on 30 August 2018, the 1st defendant made the following statements: I am the david am the oil mill S/N iDnBwr/BjUqgj8xn6T/cZg e. In a WhatsApp message between the 1st defendant and Tang Tian Tian of the 4th defendant on 10 October 2018, the 1st defendant indicated that he would give priority to the 4th defendant: priority to SK, mainly help tomclear own mill stock, outside also many ask for help, only priority to you first and not helping f. In a WhatsApp exchange between the 1st defendant and Billy on 6 June 2020, the 1st defendant explained how he intentionally purchased PKS at a higher price to protect the 9th and 11th defendants: small trader die, and they arm hoong and TME territory, let this 2 guys, take all local and export Po, but cannot deliver to to mill price gila change, this 2, play the price for last 2 month, goreng and [50] The communications reveal how the defendants had conducted themselves in a manner that reflects the existence of an agreement or arrangement between themselves, with the 1st defendant being the main individual behind the agreement or arrangement. The 1st defendant Suppliers, and described the Favoured PKS Suppliers as his partners. S/N iDnBwr/BjUqgj8xn6T/cZg From the communications, it is also revealed that prices and quantities of PKS are not negotiated, but are determined by the 1st defendant. [51] I am unable to accept that the communications and the statements made by the 1st defendant are only casual or small talk which contains exaggerations. I assessed the communications by taking into account the context within which they were written. The statements made by the 1st defendant to the Favoured PKS Suppliers were made in the course of buying and selling of PKS, and while the supplies and prices of PKS were being determined. Thus, they could not be-bual kosong sahaja, borak- , as described by the 1st defendant during cross-examination. [52] It is essential to highlight that the 2nd to 11th defendants are competitors in the PKS market, and the 1st defendant was the representative of organisations that the 2nd to 11th defendants were competing to supply to. As such, it is out of the ordinary for the 1st defendant to describe the Favoured PKS Suppliers as his partners in a strategic alliance. The fact that he had done so in the course of business transactions with the Favoured PKS Suppliers in my view demonstrates a level of kinship and commitment between the 1st defendant and the Favoured PKS Suppliers. [53] Based on the above, the communications are in my considered view, sufficient evidence of an agreement between the defendants. The first element to prove conspiracy between the defendants has thus been met. S/N iDnBwr/BjUqgj8xn6T/cZg Element 2: The purpose of the agreement was to injure the plaintiffs [54] From the communications between the defendants, it is evident that the main purpose of the agreement and arrangement was for financial gains of the defendants. The defendants achieved this purpose by ensuring their turf was protected, and by controlling the price and supply of PKS. [55] For reasons I will explain below, I find this agreement and the acts done in the execution of the agreement to be unlawful acts of conspiracy. [56] The courts have held that in cases of unlawful acts of conspiracy, it is not necessary to prove that the predominant intention of the parties is to injure the claimant. In Kuwait Oil Tanker Co SAK and another v Al Bader and others [2000] 2 All ER (Comm) 271, the English Court of Appeal distinguished between conspiracy to injure by lawful means and conspiracy to injure by unlawful means: lawful means is actionable where the claimant proves that he has suffered loss or damage as a result of action taken pursuant to a combination or agreement between the defendant and another person or persons to injure him, where the predominant purpose of the defendant is to injure the claimant. (2) A conspiracy to injure by unlawful means is actionable where the claimant proves that he has suffered loss or damage as a result of unlawful action taken pursuant to a combination or agreement between the defendant and another person or persons to injure him by unlawful means, whether or not it is the predominant purpose of the defendant S/N iDnBwr/BjUqgj8xn6T/cZg to do so. We shall call them a 'lawful means conspiracy' and an 'unlawful means (emphasis added) [57] As I have concluded below that the acts done pursuant to the agreement are unlawful acts of conspiracy, the intent to injure the plaintiffs need not be the predominant purpose of the agreement between the defendants. Thus, although the main purpose of the agreement is for financial gains for the defendants, the intent to injure can be inferred from the conduct of the defendants, as it is likely that the defendants would have known that their actions would lead to injury to the plaintiffs. [58] As such, I find the second element to prove conspiracy between the defendants, namely that the purpose of the agreement is to injure the plaintiffs, has been met. Element 3: Acts had been done in the execution of the agreement [59] I further find there to be sufficient evidence to prove that the defendants had acted in furtherance of the agreement. I considered four main activities collectively carried out by the defendants in furtherance of the agreement, namely: a. Controlling market prices of PKS; b. Masking the supply of PKS; c. Delivering and accepting PKS of poor quality; and S/N iDnBwr/BjUqgj8xn6T/cZg d. Providing and accepting illegal commissions. Controlling market prices of PKS [60] I found that the defendants had, through the 1st defendant, dictated the market price for PKS. The prices are not negotiated between the 1st defendant and the Favoured PKS Suppliers, but are determined by the 1st defendant or allowed by the 1st defendant to be determined by the Favoured PKS Suppliers. [61] This is evident in the following WhatsApp messages exchanged between the 1st defendant and the Favoured PKS Suppliers: a. In a WhatsApp broadcast message on 25 September 2018 from the 1st defendant to the Favoured PKS Suppliers, including the 6th defendant, the 11th defendant, Win M Trading and BML Solutions Sdn Bhd, the 1st defendant stated, all value supplier, Due to increase of market PKS stock, GX October delivery pricing at RM238. Thanks you support from . b. In WhatsApp messages between the 1st defendant and DW2, prices were dictated by the 1st defendant: Date / Time Verbatim Tang S/N iDnBwr/BjUqgj8xn6T/cZg (mobile number: +6012 601 9121) 05-Aug- 19/ 15:11:57 hours What is the price offer, this week delivery I will paid on next week Fridays 05-Aug- 19/ 15:14:05 hours haha... boss say depend on you 05-Aug- 19/ 15:19:55 hours No lah, we help and support each 05-Aug- 19/ 15:34:26 hours let me know the price if confirm 05-Aug- 19/ 15:38:38 hours Tee sell me 184, sell me 188 can 05-Aug- 19/ ok S/N iDnBwr/BjUqgj8xn6T/cZg 28 15:40:04 hours 05-Aug- 19/ 15:40:06 hours tq boss 05-Aug- 19/ 15:40:21 hours What is your boss offer 05-Aug- 19/ 15:40:46 hours he say follow you 21-Nov- 19/ 16:11:22 hours What is this month price bill me 21-Nov- 19/ 16:36:00 hours Ok 21-Nov- 19/ 16:36:34 hours hmm... what price u wan to gv us ;-P S/N iDnBwr/BjUqgj8xn6T/cZg 29 22-Nov- 19/ 10:53:36 hours morning mr.ong, can u gv me the November pks price ? 22-Nov- 19/ 13:36:21 hours NoV RM193 DEC - 200 22-Nov- 19/ 13:44:36 hours tq boss (emphasis added) c. In a WhatsApp message dated 13 January 2017 between the 1st defendant and Poo Ah Lam of the 4th defendant the 1st defendant informed DW3 he had changed the price of PKS in a purchase order to RM245 per metric tonne. The price agreed by the management of the Smart Glove Group was RM242 per metric tonne, and there is no evidence that the management had agreed to the RM3 increase in price. d. In a WhatsApp messages on 16 August 2018 between Tan Chee Keong of the 6th st defendant, the 1st defendant allowed a revision of the S/N iDnBwr/BjUqgj8xn6T/cZg price of PKS to RM265. The price agreed by the management of the Smart Glove Group was RM260 per metric tonne, and similar to the case of the 4th defendant, there is no evidence that the management had agreed to the RM5 increase in price. [62] The 1st 1st defendant dictating the price for PKS. The 1st defendant referred to an representative of the plaintiffs to suppliers of PKS, seeking the supply of PKS at the proposed price of RM215 per metric tonne. I compared the email with the WhatsApp messages issued by the 1st defendant, and noted a stark difference in the approaches taken. email contains a proposal on the price of PKS, and is then followed by responses from PKS suppliers, proposing higher prices. The WhatsApp messages contain prices that were determined by the 1st defendant. There were no negotiations on the prices, unlike email. [63] The 1st defendant also argued that it was the plaintiffs who controlled the price of PKS. In my view, this argument must be considered by taking into account the role of the 1st defendant in the Smart Glove Group. As the Global Sourcing Manager, the 1st defendant advised the Smart Glove Group on the prices to offer for the purchase of PKS, and the management of the group relied on his advice. It is evident from the WhatsApp messages that the 1st defendant dictated the prices of PKS and did not seek approval from the management of the Smart Glove Group on the prices. He then relied on the collusion between himself and the Favoured PKS Suppliers to ensure that the prices dictated were accepted. S/N iDnBwr/BjUqgj8xn6T/cZg Thus, it is my considered view that effectively, the defendants controlled the price of PKS, with the 1st defendant as the mastermind. [64] The defendants further argued there was in any event no increase in the price of PKS. However, VLC provided data to show that after the 2nd and 3rd defendants were set up, the average price of PKS per metric tonne purchased by the Smart Glove Group continued to rise consistently, and did not fall below RM200 per metric tonne. This is established in the following table in paragraph 4.3.4 of the First VLC Report: Year Average price per MT % change in the average price per MT from prior years 2012 201.59 3.39% 2013 189.41 -6.04% 2014 173.74 -8.27% 2015 (BCS was established)

222.59 18.99% 2016 242.73 17.41% 2017 239.69 -1.25% 2018 244.45 1.99% 2019 229.47 -6.13% [65] The table shows that there was a spike in the Smart Glove nd and 3rd defendants were established) and by a further 17.41% in 2016. S/N iDnBwr/BjUqgj8xn6T/cZg [66] VLC also compared the average price of PKS per metric tonne charged by the Favoured PKS Suppliers, with the average price of another major PKS supplier, FGV Palm Industries Sdn Bhd for the period between 2015 to 2019. The prices imposed by the Favoured PKS Suppliers were between 37.32% to 54.68% higher than the average market prices by FGV. After factoring in transportation charges of RM35 to RM45 per metric tonne, the prices of PKS supplied by the Favoured PKS Suppliers were still 17.71% to 36.14% higher than the prices by FGV. [67] The defendants argued that that PKS prices are affected by factors such as the shortage of supplies, weather and excessive demands elsewhere, and as such, the increases in prices were not within the control of the Favoured PKS Suppliers. This fact was not disputed by the plaintiffs. However, there is no evidence put forward by the defendants to show how these factors resulted in the spike in prices in 2015 and 2016. [68] The defendants also argued that the source documents that the plaintiffs relied on to support the figures on pricing were not provided by VLC. However, apart from questioning the figures in the VLC Report, the defendants did not file their own expert reports to rebut the figures in the VLC Reports. [69] In the absence of any figures from the defendants to support their res are incorrect, and taking into account that I have admitted the VLC Reports as expert reports, I accepted the figures in the VLC Reports as showing an increase in the prices of PKS during the period between 2015 to 2019. Further, taking into account the communications between the defendants, I find that on the balance of probabilities, the increases in prices were caused by the defendants S/N iDnBwr/BjUqgj8xn6T/cZg unlawfully controlling the price of PKS, with the 1st defendant as the mastermind. Masking the supply of PKS [70] I found the Favoured PKS Suppliers had wrongfully and unlawfully carried out masking of PKS supplies, which involves a Favoured PKS Supplier supplying its PKS to the plaintiffs using the name of another Favoured PKS Supplier. [71] This is evident from the following: a. WhatsApp messages exchanged between 8 to 24 October 2016, between the 1st defendant and Mok Chien confirmation from the 1st defendant before making delivery, on whether PKS should be delivered to the plaintiffs from Win M Trading or from the 2nd and 3rd defendants. b. WhatsApp messages exchanged between 4 to 30 November 2016 between the 1st defendant and Billy, in which the 1st defendant directed Billy to deliver PKS to the 3rd plaintiff, in the name of the 2nd and 3rd defendants. [72] Further, VLC had also identified invoices which reveal that back-to-back arrangements were made between the defendants. These invoices show that the 2nd and 3rd defendants would purchase PKS from the Favoured PKS Suppliers, and the PKS were subsequently sold to the S/N iDnBwr/BjUqgj8xn6T/cZg plaintiffs. The quantity of PKS purchased from the Favoured PKS Suppliers was the same as the quantity that was then sold to the plaintiffs, for a higher price. [73] From my assessment of documents before this court, I find it to be likely that the masking of deliveries and trading of PKS, and the back-to-back arrangements between the defendants, were carried out to unlawfully control the supplies and prices of PKS to the plaintiffs, and to circumvent controls put in place by the plaintiffs, such as quotas imposed for PKS supplies by each of the Favoured PKS Suppliers. Delivering and accepting PKS of poor quality [74] I find there to be sufficient evidence to prove that the 1st defendant had caused the plaintiffs to accept the delivery of PKS that did not meet the technical requirements imposed by the Smart Glove Group. [75] In a document entitled of Palm Kernel circulated by an email dated 27 November 2013 to employees of the Smart Glove Group including the 1st defendant and PW1, it is stated that starting from December 2013, all PKS suppliers are required to fulfil technical specifications for PKS. The specifications imposed include moisture content of 25% or less and impurities of 5% or less. The document states that: a. deliveries that do not fulfil the requirements will be subject to price deduction on a per trip basis, at the end of the month; and S/N iDnBwr/BjUqgj8xn6T/cZg b. the Smart Glove Group has the right to reject PKS if it is not satisfied with impurities, fibre content or water drippings from delivery, upon visual inspection. [76] from 2017 to 2019 carried out by VLC revealed that 2,550 out of 5,333 PKS deliveries had not met the technical specifications imposed, but were still accepted by the 1st and 2nd plaintiffs. This translated to an average failure rate of more than 45%. The analysis conducted also revealed that the 4th to 9th defendants had consistently delivered PKS with a moisture content rate of more than 25%. [77] findings are further supported by the following communications between the 1st defendant and the Favoured PKS Suppliers, which show the 1st defendant coordinating with the Favoured PKS Suppliers to cause the 1st and 2nd plaintiffs to accept low-quality PKS: a. In WhatsApp exchanges between the 1st defendant and DW2 between March to September 2019, the 1st defendant instructed the 4th defendant to divert the delivery of low-quality PKS meant to be delivered to other customers, to the 3rd plaintiff instead. b. In WhatsApp exchanges between the 1st defendant and Tan Keng Hong of the 7th May 2018, the 1st defendant assisted the 7th defendant by accepting low-quality PKS from the 7th defendant. The following WhatsApp exchanges reveal that the management of the plaintiffs had taken notice of the low-S/N iDnBwr/BjUqgj8xn6T/cZg quality PKS delivered by the 7th defendant and as such, the 1st defendant requested DW7 to stop delivering PKS as he was concerned that he could also be implicated, and the 7th account would be banned: Date / Time Verbatim TJJ Tan (mobile number: +6012 6019 383 6532) 09-Apr-18 10:21:10 hours Please stop delivery first 09-Apr-18 10:21:38 AM apa sal? 09-Apr-18 10:21:49 AM palm shell sudah banyak ke 09-Apr-18 10:22:25 Mostly your item many Fiber, they complained 09-Apr-18 10:22:42 So need to mix only can used help me stop first S/N iDnBwr/BjUqgj8xn6T/cZg 37 09-Apr-18 10:28:13 AM saya sudah complain sampai saya penat. 09-Apr-18 10:28:26 AM harta lega pun ada complain saya. 09-Apr-18 10:31:36 Yes, please stop 09-Apr-18 10:31:45 , today trip under your account 09-Apr-18 10:31:58 AM saya adjust cantik sikit punya pergi. 18-Apr-18 19:52:26 PM siapa cakap saya punya palm shell tak boleh pakai ? 18-Apr-18 19:52:45 PM mana 1 india cakap ? 18-Apr-18 21:19:09 Boss, your Pks please on hold, now a top management S/N iDnBwr/BjUqgj8xn6T/cZg are daily check the Pks status, they already complain your Pks very wet and mix with many Fiber 18-Apr-18 21:20:05 You Pks mix with 30% Fiber and adding water I also Tutup Mata, you betul betul untung banyak, 18-Apr-18 21:20:55 PM itu sikit berat sahaja bos,mahu cari makan la, payment pun tak ada mari,koyak. 18-Apr-18 21:20:59 But this time, they every days check very serious, and may onward, will start system like harga lega S/N iDnBwr/BjUqgj8xn6T/cZg 39 18-Apr-18 21:21:32 Potong, potong 18-Apr-18 21:22:06 They want to start last month, I postpone to next month, please lah, 18-Apr-18 21:22:19 Ok 18-Apr-18 21:22:30 If not, next time all we all kena 18-Apr-18 21:23:36 We can help sikit sikit, but not every days like this quality, I wirry the band your account due to bad quality 18-Apr-18 21:25:22 PM ok,saya control sikit. (emphasis added) S/N iDnBwr/BjUqgj8xn6T/cZg c. In WhatsApp exchanges on 30 August 2018 between the 1st defendant and DW4 of the 8th defendant, it appeared that the 1st defendant was aware that the 7th defendant had crushed foreign objects and mixed them into its PKS. d. In the following WhatsApp message dated 28 March 2017, sent by the 1st defendant to a representative of the 9th defendant, it is clear that the 1st defendant has assisted the 9th defendant, in accepting poor quality PKS: my plan, very old stock like decomposed Pks, this lot ! kaw thing, please see the photo, all Pks ash also inside mean from very very (emphasis added) [78] In my view, the tone of the WhatsApp exchanges does not reflect a relationship between a purchaser and suppliers but a relationship between partners collaborating to protect their own interests. [79] allegation that they had delivered poor quality PKS to the plaintiffs. The first is that the requirement for the moisture content of PKS to be 25% or less was uncertain, and was not communicated to suppliers of PKS, including the Favoured PKS Suppliers. The second is that the quality of PKS was in any event irrelevant, as all PKS delivered were accepted and used by the plaintiffs. S/N iDnBwr/BjUqgj8xn6T/cZg [80] The exact requirement of moisture content of PKS delivered to the plaintiffs (whether at 25% of less or any other figure that may have been imposed by the plaintiffs) is in my view irrelevant to my consideration of whether the defendants had colluded to deliver poor quality PKS to the plaintiffs. Similarly, whether or not the Favoured PKS Suppliers were informed of the exact moisture content requirement is also irrelevant. This is because, from the communications between the defendants, it is clear that the defendants were aware that the PKS they had delivered were of poor quality, and the 1st defendant had assisted them by accepting PKS which they knew were of poor quality. With such knowledge, the defendants were likely aware that their actions were wrong, and would lead to injury to the plaintiffs. [81] The second argument, that all PKS delivered were in any event accepted and used by the plaintiffs, is based on two points of indoor management rule or the Turquand rule. [82] Section 42 of SOGA provides as follows: The buyer is deemed to have accepted the goods when he intimates to the seller that he has accepted them, or when the goods have been delivered to him and he does any act in relation to them which is inconsistent with the ownership of the seller, or when, after the lapse of a reasonable time, he retains the goods without intimating to the seller that he has rejected them. (emphasis added) S/N iDnBwr/BjUqgj8xn6T/cZg [83] The defendants argued that as the plaintiffs did not raise any concerns about the technical specifications of PKS delivered to them and had proceeded to use the PKS, the plaintiffs are deemed to have accepted the PKS delivered. The defendants referred to Panglima Aces Sdn Bhd v Highway Brick Works (Serendah) Sdn Bhd [2006] 3 CLJ 628, Wee Lian Construction Sdn Bhd v Ingersoll-Jati Malaysia Sdn Bhd [2010] 4 CLJ 203 and Mukand Ltd v Malaysia Steel Works (KL) Sdn Bhd [2010] 5 CLJ 282, cases involving the plaintiffs proceeding to use goods delivered without complaint. The courts in those cases held that the plaintiffs were deemed to have accepted the goods by usage. [84] Further, the defendants argued that by the indoor management rule, the defendants did not have a duty to conduct an investigation as to the capacity of the 1st defendant in dealing with them. They are entitled to assume that all acts of the plaintiffs were regularly and properly performed. They relied on Pekan Nenas Industries Sdn Bhd v Chang Ching Chuen & Ors [1998] 1 MLJ 465 to support their argument. [85] However, the Federal Court in Pekan Nenas (supra) held at page 507F that: The rule in Turquand's case cannot, however, be invoked by an outsider who knows or ought to know that there is an irregularity. More particularly, outsiders dealing with a company who know that some relevant procedure internal to the company has not been followed cannot invoke the benefit of the indoor management rule (see Howard v Patent Ivory Manufacturing S/N iDnBwr/BjUqgj8xn6T/cZg Co (1888) 38 Ch D 156). This is an exception to the rule in Turquand's case and the burden of establishing it lies on the party invoking the exception and in this case, that would be the Father and his faction. Furthermore, dealing with a company could also be affected by knowledge of facts which would put a reasonable person on inquiry; in other words, they would be deemed to know what a reasonable person would infer from known facts. So, for example, in B Liggett (Liverpool) Ltd v Barclays Bank Ltd [1928] 1 KB 48 at pp 56-56, Wright J (as he then was) said: uand's case, I think it is quite clear on principle and on the authorities I have already referred to that it can never be relied upon by a person who is put on inquiry. The rule proceeds on a presumption that certain acts have been regularly done, and if the circumstances are such that the person claiming the benefit of the rule is really put on inquiry, if there are circumstances which debar that person from relying on the prima facie presumption, then it is clear, I think, that he cannot claim the benefit of the rule ... (emphasis added) [86] A similar finding was made in Kang Hai Holdings Sdn Bhd & Anor v Lee Lai Ban (trading as the sole proprietor under the name , where the Federal Court held that with rapid development in technology and increased access to information, a minimum duty is imposed on the S/N iDnBwr/BjUqgj8xn6T/cZg outsider to make a minimum check on the company, to afford himself protection under the Turquand rule. [87] In the present case, the communications between the 1st defendant and the Favoured PKS Suppliers show that the Favoured PKS Suppliers had knowledge of the irregularities behind the transactions coordinated by the 1st defendant in the sale of PKS to the plaintiffs, or at the minimum, ought to have known of these irregularities. The communications also show that the Favoured PKS Suppliers were involved in the collusion with the 1st defendant in delivering low quality PKS to the plaintiffs. [88] In the circumstance, I hold that the defendants cannot rely on the Turquand rule and argue that they were entitled to assume that all acts related to the purchase of PKS by the plaintiffs were regularly carried out. By the same token, the defendants cannot rely on section 42 of SOGA, and argue that as the PKS had been delivered and used by the plaintiffs, the plaintiffs are deemed to have accepted the PKS. The situation before this court differs from the cases relied on by the defendants, namely Panglima Aces (supra), Wee Lian Construction (supra) and Mukand Ltd (supra), which do not involve allegations of internal irregularities in the sale and purchase of the goods. In the present case, at the point of acceptance and use of the PKS, the plaintiffs were not aware of the conduct of the 1st defendant and the collusion between the defendants. [89] of PKS should be deemed to have been accepted, I find that the defendants as a group had wrongfully caused the plaintiffs to accept the S/N iDnBwr/BjUqgj8xn6T/cZg delivery of PKS that did not meet the technical requirements imposed by the Smart Glove Group. Providing and accepting illegal commissions [90] The plaintiffs provided documentary evidence to show that the 1st defendant had received the following monies from the defendants: a. From the 5th defendant, a total of RM6,000 paid by way of separate transactions between November 2018 to October 2019. These payments are evidenced by WhatsApp communications between Lau Sian Hai of the 5th defendant and the 1st defendant, and receipt of the monies in the 1st the same period. Lau sent identical WhatsApp messages to the 1st defendant on 3 November 2018, 4 August 2019 and 9 October 2019, which read: small bonus rm one k already bank in to your hl bank account b. From the 6th defendant, at least RM9,700, identified as in WhatsApp messages sent by DW6 to the 1st defendant. c. From the 7th defendant, RM3,000 deposited into the 1st bank account with the reference DW7 also sent WhatsApp messages to the 1st S/N iDnBwr/BjUqgj8xn6T/cZg defendant on 25 July 2018, requesting the 1st defendant to settle the collection of RM500,000 from the Smart Glove Group, to which he promised payment of RM5,000 to the 1st defendant. [91] In respect of payments from the 5th defendant, the defendants argued that a tranche of payment amounting to RM3,000, was payment made to introduce transport services to the 5th defendant. A payment voucher with a description of the purpose of this payment was produced as evidence. The defendants also argued that there was no document to show that this payment relates to the plaintiffs. [92] A similar argument was put forward on payments to the 6th defendant. The defendants argued that they are payments made to the 1st defendant for recommending a woodchip buyer, Wear Safe (M) Sdn Bhd. The payments are not related to the plaintiffs. [93] st defendant. These payments must be considered in the context of the 1st position in the Smart Glove Group. He was the Global Sourcing Manager of the 3rd plaintiff, responsible for sourcing and procuring PKS and woodchips for the Smart Glove Group. The payments were made by the main suppliers of PKS and woodchips of the Smart Glove Group, directly into his account. The defendants did not produce any evidence to show that the plaintiffs had approved or were aware of these payments. As such, my finding from the assessment of the evidence is that on the balance of probabilities, the payments were illegitimate and unsanctioned. S/N iDnBwr/BjUqgj8xn6T/cZg [94] In respect of the 7th defendant, the defendants argued that there was no proof that payment of RM5,000 as promised by DW7 had in fact been made to the 1st defendant. I considered the Whatsapp messages sent by DW7 to the 1st defendant on 25 July 2018, which read: Date / Time Verbatim TJJ Tan (mobile number: +6012 6019 383 6532) 25-Jul-18 04:42: 52 hours Bos,u settle bagi saya 500k,nanti saya bank in 5k bagi u,saya mustahak mau pakai banyak duit 25-Jul-18 05:27:39 hours Lagi untuk u sekali bayr saya 500k,saya bagi u 5k saya tak kisah,janji saya senang loading duit. [95] The fact that there is no proof of payment of RM5,000 in this instance is in my view irrelevant to the question of whether or not there was an act of conspiracy by the defendants. This offer of payment implies that the 7th defendant was willing to make payments to the 1st defendant, and such payments were offered to induce the 1st defendant to further the cause of the 7th defendant in ensuring that the 1st defendant would give them priority in dealings with the plaintiffs. I find that this in itself is S/N iDnBwr/BjUqgj8xn6T/cZg sufficient to show an act of conspiracy to injure the plaintiffs, carried out between the 1st and 7th defendants. [96] The evidence before the court overall shows the 1st role as the mastermind who controlled the pricing and supply of PKS of the Favoured PKS Suppliers, which he carried out in return for illegal commissions, bonuses and kick-backs from these suppliers. Element 4: The acts had resulted in loss and damage to the plaintiffs [97] I find the final element to prove conspiracy to injure had been met by the plaintiffs, as the conduct of the defendants resulted in damages to the plaintiffs. The damages arise from the following: a. Excessive gains by the defendants, as they had sold PKS at a higher price than the price they would have been able to sell had it not been for the collusive conduct of the defendants; b. The delivery of PKS with high moisture content, which plaintiffs were entitled to deduct for non-compliance with the technical requirements imposed by the Smart Glove Group; and c. Secret profits of the 1st defendant in receiving illegal commissions and kick-backs. S/N iDnBwr/BjUqgj8xn6T/cZg Finding [98] With all elements of conspiracy to injure having been met, I am of the considered view that the plaintiffs have proven their case in relation to the cause of action for conspiracy to injure against the defendants. [99] I assessed the acts of the defendants as a whole, in controlling market prices of PKS, masking the supply of PKS, delivering and accepting PKS of poor quality and providing and accepting illegal commissions, and found that these acts amount to a combination of action or concerted actions between the defendants to injure the plaintiffs. The intention to injure the plaintiffs can be inferred from the acts of the defendants, as although the acts were principally intended to protect and defendants that the acts would lead to losses and damages to the plaintiffs. G. Issue 3: Whether The 1st And 2nd Plaintiffs Are Entitled To Indemnity Against Claims Brought By The 3rd Plaintiff, PGI and Sigma [100] The 1st and 2nd plaintiffs sought an indemnity against claims brought by 3rd plaintiff, PGI and Sigma against them. This indemnity claim flows from the 1st and 2nd the supply of PKS by the 4th, 5th, 7th and 8th defendants, which the 1st and 2nd defendants claim caused losses to the Smart Glove Group, including the 3rd plaintiff, PGI and Sigma. S/N iDnBwr/BjUqgj8xn6T/cZg [101] I find there to be insufficient legal basis for the defendants to be made liable for losses suffered by the 3rd plaintiff, PGI and Sigma. There are two reasons for my finding. [102] The first reason relates to the premise that forms the 1st and 2nd claim for indemnity, which is the allegation of delays and stoppages of PKS supplies by the 4th, 5th, 7th and 8th defendants. The claim: st Defendant, the 4th, 5th, 7th and 8th Defendants had deliberately stopped supply of PKS to the 1st Plaintiff and/or 2nd Plaintiff in the period of 1.6.2019 until 9.6.2019 (except the 5th Defendant from 2.6.2019 until 9.6.2019) which resulted in loss and damage suffered.

A similar stoppage of supply of PKS took place in October 2019 (which ordinarily would have been the peak period of supply/availability of PKS in the market). Yet. between the period of 17.10.2019 to 20.10.2019, the 5th, 7th and 8th Defendants deliberately stopped supply of PKS to the 1st Plaintiff and/or 2nd Plaintiff which resulted in loss and damage [103] In response to the allegation of stoppages for the period between 1 to 9 June 2019, the 4th, 5th and 7th defendants produced invoices dated 15 June 2019 and 17 June 2019, which contain details of deliveries made in June 2019, and amounts due pursuant to these deliveries. PW1 also S/N iDnBwr/BjUqgj8xn6T/cZg admitted during cross-examination that 5 and 6 June 2019 were Hari Raya holidays, with prohibitions imposed by authorities on movements of lorries on roads. As such, there were days in June 2019, when PKS could not be delivered. [104] In relation to the period between 17 to 20 October 2019. The 7th and 8th defendants produced invoices dated 31 October 2019, which show that deliveries of PKS were made on 17 and 18 October 2019. [105] The documentary evidence provided has not been sufficiently challenged by the 1st and 2nd plaintiffs. [106] To support the allegation of delays in the supply of PKS, the 1st and 2nd plaintiffs provided purchase orders, which contain the agreed dates for delivery of PKS. The PKS was however delivered at later dates, as shown in invoices subsequently issued. Notwithstanding the documents provided, the 1st and 2nd plaintiffs failed to show how the delivery dates were imposed on suppliers of PKS. The 1st and 2nd - examination that timelines on the delivery of PKS were never imposed on suppliers. As such, I am of the view that it is not open to the plaintiffs to now argue that the timelines for deliveries of PKS were not met. [107] Based on my assessment of the evidence before this court, I am of the view that the 1st and 2nd plaintiffs had not proven their allegations of delays and intentional stoppages by the 4th, 5th, 7th and 8th defendants in the delivery of PKS. It therefore follows that the claim for indemnity against the 3rd plaintiff, PGI and Sigma must necessarily fail. S/N iDnBwr/BjUqgj8xn6T/cZg [108] I will nonetheless address the second reason for my finding that there is insufficient legal basis to support the 1st and 2nd claim for indemnity which is that the 1st and 2nd plaintiffs have failed to prove that the 4th, 5th, 7th and 8th defendants are obliged to indemnify them. [109] I first considered that the 4th, 5th, 7th and 8th defendants did not supply directly to the 3rd plaintiff, PGI or Sigma. Purchase orders, delivery orders and invoices were issued from and to the 1st and 2nd plaintiffs, and as such, contracts were entered into between the 1st and 2nd plaintiffs and the 4th, 5th, 7th and 8th defendants. [110] I also considered cases referred to by the 1st and 2nd plaintiffs to support their claim. In Malayan Banking Bhd v Sepakat Computer Consultant Sdn Bhd & Ors (Intercontinental Nominees Sdn Bhd & Anor, third party) [2012] 8 MLJ 660, Lee Swee Seng JC (as His Lordship then was) adopted the ratio in Eastern Shipping Co Ltd v Quah Beng Kee [1924] AC 177, and held that the right to indemnity is not confined to contractual relationships, but would also apply where the relationship between the parties give rise to an obligation in law or in equity for one party to indemnify the other. A similar observation was made by Wong Kian Kheong JC (as His Lordship then was) in Syarikat Duasama Son Bhd v Abdul Aziz bin Ibrahim (t/a Radiant Star Enterprise) (Tiong Sing Trading Co Sdn Bhd & Anor, third parties) [2018] MLJ 5. [111] I do not disagree with the proposition of law put forward by the 1st and 2nd plaintiffs. However, in the present case, the 1st and 2nd plaintiffs failed to show how delays or interruptions in the supply of PKS by the 4th, 5th, 7th and 8th defendants (even if proven) would cause losses to the 3rd plaintiff, PGI and Sigma. Such losses could have arisen if the 4th, 5th, 7th S/N iDnBwr/BjUqgj8xn6T/cZg and 8th defendants had been the only or main suppliers of PKS to the 1st and 2nd plaintiffs, but this fact was not proven by the 1st and 2nd plaintiffs. There is also no proof that the 1st and 2nd plaintiffs were unable to supply thermal heat to the 3rd plaintiff, PGI and Sigma. [112] With these findings, I am of the view that the 1st and 2nd plaintiffs are not entitled to their claim for indemnity against the 4th, 5th, 7th and 8th defendants. H. Issue 4: Whether The Counterclaim Defendants Are Entitled To Their Claims For Outstanding Amounts Due [113] The Counterclaim Defendants filed counterclaims against the 1st and 2nd plaintiffs for the following outstanding amounts due in respect of PKS they had delivered to the 1st and 2nd defendants: a. The 4th defendant claimed RM2,653,836.28 and RM589,573.65 together with interests, against the 1st and 2nd plaintiffs respectively; b. The 5th defendant claimed RM2,033,087.66 and RM750,969.01 together with interests, against the 1st and 2nd plaintiffs respectively; c. The 7th defendant claimed RM414,522.60 and RM1,727,317 together with the interests, against the 1st and 2nd plaintiffs respectively; S/N iDnBwr/BjUqgj8xn6T/cZg d. The 8th defendant claimed RM346,165.78 and RM540,161.17 together with interests, against the 1st and 2nd plaintiffs respectively; and e. The 9th defendant claimed RM427,855.46 and RM130,590.29 together with interests, against the 1st and 2nd plaintiffs respectively. [114] Following my finding that the defendants had conspired to defraud the plaintiffs, by amongst others, dictating the market price for PKS, masking the supply of PKS, causing the plaintiffs to accept the delivery of PKS that did not meet the technical requirements and providing illegal commissions to the 1st defendant, it follows that the Counterclaim Defendants cannot be entitled to their counterclaims. [115] The contractual obligation arising between the 1st and 2nd plaintiffs and the Counterclaim Defendants arises from purchase orders issued for the purchase of PKS, and the subsequent delivery of PKS to the 1st and 2nd plaintiffs by the Counterclaim Defendants. However, the fraudulent acts of the Counterclaim Defendants in conspiring to injure and defraud the plaintiff had in my view resulted in the contract being voidable at the option of the plaintiffs, as the innocent party. [116] Specifically, the fraudulent act of the defendants in controlling the price of PKS had resulted in an inflation in the prices of PKS sold to the 1st and 2nd plaintiffs. The 1st and 2nd plaintiffs would likely have not accepted the delivery of PKS and proceeded with the contracts with the inflated prices, had they known that the prices were artificially controlled by the defendants. Similarly, had the 1st and 2nd plaintiffs known the PKS S/N iDnBwr/BjUqgj8xn6T/cZg delivered did not meet the technical requirements of the Smart Glove Group, or that the 5th, 6th and 7th defendants had paid illegal commissions to the 1st defendant, they would in my view not likely have accepted delivery of the PKS. [117] The defendants argued that the 1st and 2nd plaintiffs had accepted the PKS without any protest. This argument ignores the fact that the fraudulent conducts were only discovered in 2020, after investigations were carried out by the Smart Glove Group on irregularities of transactions involving the Favoured PKS Suppliers. [118] It is essential to highlight again that the 1st defendant was the Global Sourcing Manager of the Smart Glove Group at the material time. He was trusted by the management of the Smart Glove, and the 1st and 2nd plaintiffs had relied on his recommendations on the acceptance of PKS delivered, including their pricing and quality. Thus, I find that there had not been an opportunity by the 1st and 2nd plaintiffs to reject the PKS delivered on the basis of the inflated price or poor quality, as they would not have been aware of the irregularities of the transactions at the material time. [119] In the circumstances, I find this to be a case where the contracts between the 1st and 2nd plaintiffs and the Counterclaim Defendants are voidable or terminable by the 1st and 2nd plaintiffs, given the various fraudulent acts committed by the Counterclaim Defendants. As such, section 34(1) of the Specific Relief Act 1950 would be applicable. S/N iDnBwr/BjUqgj8xn6T/cZg [120] Section 34(1) of the SRA states: person interested in a contract in writing may sue to have it rescinded, and such rescission may be adjudged by the court in any of the following cases, namely a. where the contract is voidable or terminable by the plaintiff; b. where the contract is unlawful for causes not apparent on its face, and the defendant is more to blame than the plaintiff (emphasis added) [121] In Berjaya Times Squares Sdn Bhd (formerly known as Berjaya Ditan Sdn Bhd) v M Concept Sdn Bhd [2010] 1 MLJ 597, the Federal Court held that the right to rescind a contract is exercisable in limited circumstances, including where free consent is vitiated due to fraud: [16] The hallmark of the equitable remedy of rescission is that it is only available to set aside contracts that are voidable by reason of the ingredient of free consent, which is the sine qua non in the making of a contract, having been vitiated by an element external to the contract. Examples of elements that vitiate free consent are fraud, misrepresentation, duress, undue influence and a breach of S/N iDnBwr/BjUqgj8xn6T/cZg fiduciary duty. Whether a court of equity will set aside a contract that is void for common mistake (which is an element that does not vitiate free consent) is one that is debatable after the decision of the English Court of Appeal in Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2002] EWCA Civ 1407; [2003] QB 679; [2002] 4 All ER 689 which sought to overrule Denning LJ's view in Solle v Butcher [1949] 2 All ER 1107; [1950] 1 KB 671. Speaking for myself, I am not prepared to say, in the absence of full argument on the point, that Denning LJ was wrong in Solle v Butcher and that the Court of Appeal in Great Peace Shipping is correct. Be that as it may, the position in equity is that rescission is not a remedy available for the breach of a contract. In short, equity does not restore the parties to a broken contract to their status quo (emphasis added) [122] In this case, in view of the fraudulent acts of the defendants, the contracts between the 1st and 2nd plaintiffs and the Counterclaim Defendants are voidable or terminable by the 1st and 2nd plaintiffs. As such, I ordered the contracts to be rescinded pursuant to section 34(1)(a) of the SRA. Consequent to this order, the Counterclaim Defendants are not entitled to outstanding amounts due in respect of PKS delivered to the 1st and 2nd plaintiffs. [123] The counterclaims of the Counterclaim Defendants are therefore dismissed. S/N iDnBwr/BjUqgj8xn6T/cZg I.

[124] As I found that the 1st defendant had breached his duties to the plaintiffs and the defendants had conspired to defraud the plaintiffs, I and granted the following prayers sought by the plaintiffs: a. An order for damages be assessed by the court, for losses caused by the 1st defendant to the respective plaintiffs resulting from his breach of duties of good faith and fidelity and/or fiduciary duty (paragraph 26(1) of the statement of claim); b. A declaration that the plaintiffs are entitled to disgorgement of all fraudulent and/or secret profits and/or illegal commissions and/or kick-backs and/or fraudulent payments received by the 1st defendant and/or knowingly received or assisted by the 2nd to 10th defendants and/or any monies had and received by the defendants (paragraph 26(2) of the statement of claim); c. An order for an account of all sums received by the 1st defendant and/or knowingly received or assisted by 2nd to 10th defendants in respect of paragraphs (a) and (b) above (paragraph 26(3) of the statement of claim); d. An order for payment by the defendants to the respective plaintiffs of all sums found to be due from defendants to the plaintiffs upon the taking of the account under S/N iDnBwr/BjUqgj8xn6T/cZg paragraph (c) above (paragraph 26(4) of the statement of claim); e. A declaration that the 2nd to 11th defendants are liable to repay illegal and/or excessive gains obtained by them to the 1st and/or 2nd plaintiffs as constructive/resulting trustees (paragraph 26(6) of the statement of claim); f. An order for all necessary accounts and enquiries to be made for the court to assess the illegal and/or excessive gains, and thereafter to be paid by the respective defendants to the 1st and/or 2nd plaintiffs (paragraph 26(8) of the statement of claim); g. A declaration that each of the 2nd to 10th defendants be respectively liable to make refunds, calculated on a per trip basis, for the low or poor quality PKS that each of them had delivered since December 2015 until the date of judgment (paragraph 26(9) of the statement of claim); h. Consequent to paragraph (g), an order that all necessary accounts and enquiries be made for the court to assess these amounts, and thereafter to be paid by the respective defendants to the 1st and/or 2nd plaintiffs (paragraph 26(10) of the statement of claim); i. A declaration that all contracts of purchase of PKS by the 1st and/or 2nd plaintiffs beginning December 2015 from the 5th, 6th and 7th defendants be rescinded pursuant to S/N iDnBwr/BjUqgj8xn6T/cZg section 34(1)(a) and/or (b) of the SRA (paragraph 26(12) of the statement of claim); and j. Consequent to paragraph (i) above, a declaration that the 1st and 2nd plaintiffs shall not be liable for all outstanding sums of the contracts of purchase of PKS by the 1st and/or 2nd plaintiffs from such defendants (paragraph 26(13) of the statement of claim). [125] Although the plaintiffs have not pursued their claim under the Competition Act 2010, I nonetheless found that the acts of the defendants are anti-competitive, and have serious implications on the pricing and supply of PKS in the market. I therefore ordered the defendants to pay exemplary damages. [126] In making such an order, I considered the case of Lembaga Kemajuan Tanah Persekutuan (FELDA) & Anor v Awang Soh bin Mamat & Ors [2009] 4 MLJ 610), where the Court of Appeal affirmed the award of the exemplary damages by the High Court, and held as follows: [38] The amount of exemplary damages awarded by the High Court based on 10% of RM7,146,291 is considered excessive by the defendants and according to them this was made against established principles. Basically, the law sets down that this category of damages, if awarded, should be moderate and the resources of the parties must be taken into account. Other factors to be considered are the quantum of compensatory award as well as the conduct of the parties right down to the time of the judgment. The gravity of the wrong is also another S/N iDnBwr/BjUqgj8xn6T/cZg item to be taken into account. These are spelled out in Cheng Hang Guan & Ors v Perumaham Farlim (Penang) Sdn Bhd (emphasis added) [127] In the present case, the plaintiffs and the Smart Glove Group relied on the 1st and on his recommendations on the purchase of PKS for the Smart Glove Group. Yet, behind the scenes, he had set up the 2nd and 3rd defendants and colluded with the Favoured PKS Suppliers, to advance his own interests and line his own pockets. His conduct and the way he responded to questions during trial indicated that he felt his actions were justified, and were not in any way unlawful. [128] The 1st, 2nd and 3rd defendants then involved the Favoured PKS Suppliers in this fraudulent scheme, all of whom colluded with a similar intention as the 1st defendant, which is to line their own pockets. Their collective actions were carried out without consideration as to not only the impact on the plaintiffs, but to the PKS market as a whole. [129] As the cause of action under the Competition Act 2010 was not pursued, evidence of the impact of the actions of the Favoured PKS Suppliers on the market for PKS was not tendered for the consideration of this court. However, I have taken into consideration that the act of the defendants in colluding to control the market price and supply of PKS is prohibited under section 4(1) of the Competition Act 2010. Further, section 4(2) provides that the act of price fixing is deemed to have the object of significantly preventing, restricting, or distorting competition in any market for goods or services. This means that the acts of the defendants in S/N iDnBwr/BjUqgj8xn6T/cZg manipulating the price of PKS would be likely to have impacted the market for PKS at the material time, which would have resulted in a domino effect on other goods that rely on PKS, such as the gloves produced by the Smart Glove Group. [130] With the far-reaching implications of the fraudulent acts of the defendants, I find that the case before this court, a tale of greed between suppliers who controlled the market for a specific good, is one that justifies an order of exemplary damages. It is based on this reasoning that I awarded exemplary damages in the sum of RM100,000 to be paid by each of the 1st to 3rd defendants, and RM50,000 to be paid by each of the 4th to 10th defendants. [131] I also ordered costs to be paid by the defendants, and interests to be paid in accordance with order 42 rule 12 of the ROC. [132] I dismissed the following claims which, for the reasons described in the main body of this judgment, I found to have not been proven: a. the prayers in paragraphs 26(15) and 26(16) of the statement of claim, which comprise a claim for indemnity by the 1st and 2nd plaintiffs for losses suffered by the 3rd plaintiff, PGI and Sigma; and b. the counterclaims by the Counterclaim Defendants. S/N iDnBwr/BjUqgj8xn6T/cZg Dated 31 January 2024 - sgd - ADLIN ABDUL MAJID Judge High Court of Malaya Commercial Division (NCC6) Kuala Lumpur Counsel: Plaintiffs : Kwan Will Sen (together with Maggie Khon, Tan Jue Ann and Ling Siew Eng) of Messrs. Lim Chee Wee Partnership 1st to 3rd defendants : Chris YH Tan (together with Cheong Chun Shung, Ling Siew Yeng and Ng Yoon Chee) of Messrs. J M Chong Vincent Chee & Co 5th to 7th : R. Krishnamurthy (of The Chambers of R. and 10th defendants Krishna Murthy & Associates) Hor) 4th and 8th defendants : Krishna Dallumah (together with Yong Yoong Hui) of Messrs. Krishna Dallumah & Indran 9th defendant : Ling Yee Siew (together with Ling Daojun and Iqbal Shahruddin of Messrs. Ong &Raymond S/N iDnBwr/BjUqgj8xn6T/cZg