1. Urban Domain Sdn Bhd (Co. No.: 652499-P) v 1. Perak Integrated Network Services Sdn Bhd (Company No: 522474-U) (WA-22NCC-481-10/2020)

URBAN DOMAIN SDN BHD

PINS OSC & MAINTENANCE SERVICES SDN BHD (In Liquidation) (COMPANY NO.: 723800-A) … PLAINTIFFS

PERAK INTEGRATED NETWORK SERVICES SDN BHD

PERAK COMMUNICATION TECHNOLOGY SDN BHD

IWAN CHE WAN BIN CHE ISMAIL

WANNIS CHE WAN BIN ABDULLAH FADZIL @ ABDULLAH FATTAH

ZADEY CHE WAN BIN ABDULLAH FADZIL

CHE ISMAIL BIN CHE WAN MOHD YUSOP (NRIC NO.: 470423-08-5795) 2

NG WENG SUM (NRIC NO.: 841114-07-5729) (A Partner in SJ & CO PLT (Chartered Accountants))

LIM SAU JONG (NRIC NO.: 860812-35-5297) (A Partner in SJ & CO PLT (Chartered Accountants))

MAXIS BROADBAND SDN BHD

CELCOM AXIATA BERHAD

U MOBILE SDN BHD

DIGI TELECOMMUNICATIONS SDN BHD

YTL COMMUNICATIONS SDN BHD

SAPURA RESEARCH SDN BHD

WEBE DIGITAL SDN BHD

TELEKOM MALAYSIA BERHAD (COMPANY NO.: 128740-P) … DEFENDANTS (BY ORIGINAL ACTION) 3

PERAK INTEGRATED NETWORK SERVICES SDN BHD

PERAK COMMUNICATION TECHNOLOGY SDN BHD

IWAN CHE WAN BIN CHE ISMAIL

CHE ISMAIL BIN CHE WAN MOHD YUSOP (NRIC NO.: 470423-08-5795) … PLAINTIFFS

URBAN DOMAIN SDN BHD

PINS OSC & MAINTENANCE SERVICES SDN BHD (In Liquidation) (COMPANY NO.: 723800-A) … DEFENDANTS (BY COUNTERCLAIM) GROUNDS OF JUDGMENT Background facts [1] The 1st Plaintiff, Urban Domain Sdn Bhd (‘Urban Domain’) and the 1st Defendant, Perak Integrated Network Services Sdn Bhd (PINS’), are joint venturers in the 2nd Plaintiff, a company named PINS OSC & Maintenance Services Sdn Bhd (‘PINS OSC’). 4 [2] PINS is wholly owned by the 2nd Defendant, Perak Communication Technology Sdn Bhd (‘PCT’). PCT is in turn owned by the 3rd Defendant (‘Iwan’). Iwan and the 6th Defendant (‘Che Ismail’), are directors of both PINS and PCT. PINS, PCT, Iwan and Che Ismail shall collectively be referred to as the ‘PINS Defendants’. [3] Via a common law derivative action, Urban Domain brought an action in Kuala Lumpur High Court, Suit No. 22NCC-1041-07/2012 (‘the Derivative Action’) on and for the behalf of PINS OSC against PINS. [4] The Derivative Action ended with a judgment dated 26.9.2013 in favour of PINS OSC (‘the Derivative Judgment’). Under the Derivative Judgment, an account was ordered to be taken to determine the sums payable by PINS to PINS OSC. More specifically, the Derivative Judgment stipulated, inter alia, that: a. PINS is, liable to pay to PINS OSC the Maintenance Fee calculated at the rate of 20% from the Rental Proceeds and Other Payments received from the Operators (Group A Operators) and Other Telecommunication Providers (Group B Operators) for the 87 Towers which was constructed and maintained by PINS OSC for the period from 21.5.2007 until the expiry of the period as stated in Clause 8.1.1 of the Management Agreement for the Operators (Group A Operators) and the Other Telecommunication Providers (Group B Operators) (which will be determined vide the Account and Inquiry in accordance to (B) below)”; b. An account and inquiry be conducted in order to ascertain the “Maintenance Fee payable by PINS to PINS OSC in accordance to the Judgment herein before the Registrar of the High Court of Kuala Lumpur”; and 5 c. PINS is to file and serve to the Plaintiff’s solicitors, an affidavit affirming and exhibiting PINS’ accounts together with supporting documents within 30 days from the service of the Amended Judgment”. [5] About four (4) years later on 23.6.2017, Urban Domain filed an application under Order 43 of the Rules of Courts 2012 for an account and inquiry (‘Account & Inquiry’) from PINS. The Account & Inquiry proceedings was stayed by consent, pending PINS’ appeal to the Court of Appeal until 10.8.2020, when PINS’ appeal was dismissed by the Court of Appeal. PINS’ motion for leave to appeal to the Federal Court is pending. [6] The Account & Inquiry was set down for hearing on 7.10.2020. This suit was filed just a week before the scheduled hearing. The purpose of this action, according to Urban Domain’s own words in its affidavit filed on 5.10.2020 in the Account & Inquiry, is ‘to obtain whatever information for the Account & Inquiry’ and for ‘fraudulent trading’. [7] This judgment only deals with the Plaintiff’s claim for fraudulent trading as the claims for information for the Account and Inquiry was directed at other defendants in this action which claims have been struck out. Claims against the PINS Defendants [8] The Plaintiffs’ pleaded case against the PINS Defendants is for fraudulent trading under Section 540(1) of the Companies Act 2016 (‘Act’). 6 [9] The Plaintiffs in their Amended Statement of Claim (‘SOC’) pleaded the following facts which they claimed amount to fraudulent trading:

9.1. PINS declared and paid dividends amounting to RM 8,980,000 and RM 10,900,000 in FYE2018 and FYE2019 respectively;

9.2. PINS delayed and frustrated the Account & Inquiry by filing affidavits and documents which are of no assistance whatsoever to the Court conducting the Account & Inquiry; and

9.3. PINS failed to make provisions for the Derivative Judgment in its audited financial statements in FYE2018 and FYE2019 despite knowing that there was an unchallenged sum under the Derivative Judgment. Claims against Wannis and Zadey [10] Plaintiffs’ claim against the 4th Defendant (‘Wannis’) and the 5th Defendant (‘Zadey’) as pleaded in the SOC are as follows –

10.1. That Wannis and Zadey as former directors of the PINS are knowingly parties to the carrying on of business by PINS with intent to defraud PINS’ creditors and the Plaintiffs, and for a fraudulent purpose;

10.2. That Wannis and Zadey are knowingly parties to the purported deliberate and wilful delay and frustration by PINS of the

10.3. That Wannis and Zadey are knowingly parties to PINS’ purported circumvention of the requirement to make provision in its audited accounts for liability under the Derivative 7 Judgment based on the statements appearing in PINS’ financial statements. [11] It is not in dispute that both Wannis and Zadey had resigned as directors of PINS on 5.4.2018 and that the shares held by both of them were transferred to the Iwan on 13.4.2018. [12] Apart from alleging that Wannis and Zadey are persons who are knowingly parties to the carrying on of PINS’ business with the intent to defraud the creditors or for fraudulent purpose, no particulars have been pleaded and evidence adduced to support the allegation. Claims against the Auditors [13] Between 2013 and 2020, PINS had issued 7 audited reports as required by law. [14] The 7th Defendant (‘NWS’) and the 8th Defendant (‘LSJ’) are the partners of one SJ & Co PLT who was the audit firm appointed to audit PINS’ accounts for the financial year ending 31.12.2019 [FY2019] only. NWS and LSJ shall collectively be referred as ‘the Auditors’. [15] It is pertinent to note that the Auditors are PINS’ external auditors with no role in PINS’ internal management. The Auditors played no role in PINS’ decision to declare dividends. As external auditors, the Auditors are to ensure that PINS’ financial statements reflect a true and fair view of PINS’ financial position. 8 [16] The Auditors are not PINS’ accountants. They played no role in the making of any provisions by PINS, which is a decision to be made by PINS’ management. [17] Prior to auditing PINS’ audited account for FY 2019, the previous audited accounts of PINS for financial years 2013 to 2018 had also not make any provision for payment of the Derivative Judgement. The Auditors had for the audited report for FY 2019 continued to with the practice of not making any provision for the same. [18] In the SOC, the Plaintiffs’ claim against the Auditors is to hold Auditors liable for PINS’ debts under the Derivative Judgment on the basis that the Auditors were knowingly parties to the carrying on of business of PINS with intent to defraud the creditors of PINS and for a fraudulent purpose. Striking Out Applications – Enclosures 68, 70 and 84 [19] This judgment deals with the applications filed by the PINS Defendants, Wannis and Zadey and the Auditors to strike out the Plaintiffs’ action against them. The applications are filed under Enclosures 68, 84 and 70 respectively. Court’s Analysis and Deliberation [20] The Plaintiffs anchored their claim for fraudulent trading on the following statement in PINS’ audited accounts for all the financial years, in particular for the years ending 31.12.2018 and 31.12.2019 (‘the Statement’), which reads: 9 ‘Pending resolution of the dispute the charges pertaining to the maintenance services have not been recorded in the financial statements’ [21] Plaintiffs submitted that the non-provision of the quantum due under the Derivative Judgment in PINS’ audited accounts was wrongful and was intentionally done to enable PINS to subsequently make the payments of dividend from PINS to PCT in 2018 of RM 8,980,000.00 and in 2019 of RM 10,900,000.00. [22] Learned counsel for the Plaintiffs drew this Court’s attention to PINS’s audited accounts for the financial years 2010, 2011, 2012 and 2013 where its then auditors, one Messrs Rabin & Associates had qualified the audited accounts. The relevant paragraphs read, “Basis of Qualified Opinion As mentioned in Note 18 to the financial statements, the Company is undergoing a legal dispute with regards to the charges for maintenance services. The matter remains unresolved as at the date of this report. Arising from the dispute, the Company has not recorded any amounts in its financial statements in connection with these services. “ “ Qualified Opinion In our opinion, except for the effects of any adjustments that may be required upon resolution of the dispute as mentioned above, the financial statements have been properly drawn up in accordance with the Private Entity Reporting Standards and Companies Act 1965 in Malaysia so as to give a true and fair view of the financial position of the Company as at 31 December 2010 and of its financial performance and cash flows for the year then ended. “ 10 [23] According to the learned counsel for the Plaintiffs, the wrongful treatment of the accounts, particularly, the non-provisioning of the amounts claimed by the Plaintiffs against PINS under the Derivative Judgment which quantum is being determined in the Accounts and Inquiry proceedings in the Derivative Action was intentional. The Plaintiffs contended that intentional non-provisioning was to enable PINS to declare dividends in 2018 and 2019 to PCT. This, it is alleged, constitutes fraudulent trading by PINS under section 540 of the Act. [24] The Plaintiffs are claiming that the PINS Defendants, Wannis and Zadey as former directors of PINS and the Auditors are personally liable as persons who were knowingly parties to the carrying on of PINS’ business with the intent to defraud the creditors of the company or for fraudulent purpose such that they shall be personally responsible for all or any of the debts of the company. [25] With respect to the learned counsel for the Plaintiff, I find no merits in the Plaintiff’s claim under section 540 of the Act. [26] Firstly, the Statement has been included in the audited financial statement of PINS since year 2013. The Statement is such that it acknowledges the fact that the sums due to PINS OSC arising from the Derivative Judgment remains unascertained when it was made. The Statement is not inconsistent with the status of the Derivative Judgment and prima facie accurately recorded the status of pending matters in Court. What is more significant is that the Statement per se does not in any way show or constitute an intent to defraud PINS’ creditors at all. It certainly cannot be said that the mere non-provisioning of the amounts claimed by the Plaintiffs by PINS in its 11 audited accounts can constitute PINS carrying on its business with the intent to defraud its creditors or for fraudulent purpose. [27] To my mind, the Plaintiffs’ case at its highest is that the declaration of dividends by PINS in 2018 and 2019 were acts that could have been in contravention of section 365 of the Act as the same could amount to PINS declaring dividends when it was not making any profits. [28] However, the said contravention, if at all, cannot be equated to carrying on business with the intent to defraud creditors or with a fraudulent purpose. The Plaintiffs are not even claiming that PINS was insolvent at the time the dividends were declared in 2018 and

There is no evidence that PINS would not have been able to pay the Plaintiffs the amounts found due by the Court from the Accounts and Inquiry in the Derivative Action by reason of the declaration of the dividends in 2018 and 2019. [29] In the case of Siow Yoon Keong v H Rosen Engineering BV [2003] 4 CLJ 68, the Court of Appeal cited English authorities in regards the interpretation of ‘intent to defraud creditors’ or ‘fraudulent purpose’ as follow – ‘In Re William C. Leitch Bros. Ltd. [1932] 2 Ch. 71 Maugham J held at p.77 that “if a company continues to carry on business and to incur debts at a time when there is to the knowledge of the directors no reasonable prospect of the creditors ever receiving payment of those debts, it is, in general, a proper inference that the company is carrying on business with intend to defraud.” 12 In Re Patrick & Lyon Ltd. [1933] Ch. 786 the same judge said at p. 790 that fraud in the context of fraudulent trading connotes “actual dishonesty involving, according to current notions of fair trading among commercial men, real moral blame.” In R v. Grantham [1904] 3 All ER 166, a criminal case, it was held by the Court of Appeal (England) that: “Where a person who takes part in the management of a company’s affairs obtains credit or further credit for the company when he knows that there is no reason for thinking that funds will become available to pay the debt when it becomes due or shortly thereafter he may be found guilty of an offence under section 332 of the Companies Act 1948 of carrying on the company’s affairs with intend to defraud creditors of the company”. In Re Gerald Cooper Chemicals Ltd. [1978] 2 All ER.49, Templeman J, held:

For the purpose of s. 332(1) it did not matter that only one creditor was defrauded and that he was defrauded by one transaction, provided that the transaction could properly be described as a fraud on a creditor perpetuated in the course of carrying on business. C Ltd. carried on its business with intend to defraud H Ltd. if it accepted the purchase price in advance knowing that it could not supply the indigo and would not repay the £125,698.32. In Re a Company (No. 001418 of 1988) [1991] BCL C 198, it was inter alia, held:

A person was knowingly party to the business of a company having been carried on with intent to defraud creditors if (a) at the time when debts were incurred by the company he had no good reason for thinking that 13 funds would be available to pay those debts when they became due or shortly thereafter and (b) there was dishonesty involving real moral blame according to current notions of fair trading.’ [30] Following the case above, it is clear that the Plaintiffs’ claims based on section 540 of the Act simply do not meet the legal requirements necessary to constitute an ‘intent to defraud creditors’ and or for ‘fraudulent purpose’. To my mind, this is indeed a clear and obvious case for striking out the Plaintiffs’ claims against the Defendants herein. [31] The aforesaid is quite apart from the plain fact that the Plaintiffs’ claims against PINS’s former directors, Wannis and Zadey and against the Auditors lack any substance, precision and particulars at all. They had played no role in PINS’ decision to declare the dividends in 2018 and 2019 and there is absolutely nothing to support the allegation that they are persons who are ‘knowingly party’ to PINS’ decision to declare the dividends in 2018 and 2019 or for that matters any fraudulent action by the company. [32] This Court also agrees with the Defendants’ contention that Urban Domain lacks locus standi to initiate and maintain this suit. It is undisputed that:

32.1. Urban Domain is merely a shareholder of PINS OSC;

32.2. Although Urban Domain was a party to the Derivative Suit, it was filed on PINS OSC’s behalf and for the benefit of the latter; 14

32.3. The Derivative Judgment was in favour of PINS OSC and not

32.4. Urban Domain is therefore not a creditor of PINS (or a liquidator or shareholder of PINS for that matter). [33] Hence, Urban Domain does not fall within the group of persons who are entitled to bring an action under Section 540(1) of the Act. Conclusion [34] In the circumstances, this Court orders that the entire suit be struck out and dismissed as against the PINS Defendants, Wannis and Zadey and the Auditors on the ground that it discloses no cause of action, it is frivolous and scandalous for its lack of substance, precision and particulars and that it is an abuse of process. Accordingly, Enclosures 68, 70 and 84 are allowed with costs. Dated: 5 April 2021 ......................................... (ONG CHEE KWAN) Judicial Commissioner High Court of Malaya, Kuala Lumpur, Commercial Division, NCC2. 15

Mr. Leong Kwong Wah with Mr. Vincent Lim and Mr. Steven Tan for Plaintiffs (Messrs. Dennis Nik & Wong (Kuala Lumpur))

Ms. Villie Nethi with Ms. Michelle Teoh for 1st, 2nd, 3rd and 6th Defendants (Messrs. Ranjit Singh & Yeoh (Kuala Lumpur))

Ms. Chai Tze Jing for 4th and 5th Defendants (Messrs. Gan Ho & Razlan Hadri (Kuala Lumpur))

Ms. Lynn Yang Lee Yuen for 7th and 8th Defendants (Messrs. LY Yang & Co. (Kuala Lumpur))

Siow Yoon Keong v H Rosen Engineering BV [2003] 4 CLJ 68

Section 540 of the Companies Act 2016