Wong Jian on v Tan Swee Leong (WA-22NCC-673-12/2022)

BETWEEN WONG JIAN ON [NRIC NO.: 660601-10-6315]

CHEAH LEAN MING [NRIC NO.: 630113-08-5415]

AND TAN SWEE LEONG [NRIC NO.: 590921-10-6671]

GO YEW KIAT [NRIC NO.: 800911-14-6189]

LINGKARAN EW SDN BHD [COMPANY NO.: 202001041646 (1397967-W)]

LINGKARAN KUALITI SDN BHD [COMPANY NO.: 199501002962 (332156-U)] ...DEFENDANTS GROUNDS OF JUDGMENT A.

The Plaintiffs contend that there was a Joint Venture Agreement between the parties that started since September 2019. The Plaintiffs suggest that this existed by way of an oral agreement entered between the 1st Plaintiff and the 1st Defendant in relation to parts of the Sri Tanjung Penang construction works that was awarded to the 4th Defendant. For ease of reference this project is referred to as the “Penang Project”.

This alleged Joint Venture Agreement was allegedly subsumed into the projects that were obtained after the Penang Project. The Plaintiffs contend that this Joint Venture was subsequently formalised through the formation of the 3rd Defendant, the company on 16-12-2020. This eventually included the 2nd Plaintiff and the 2nd Defendant as additional parties. The shareholders and directors of the 3rd Defendant were the Plaintiffs, 1st and 2nd Defendants.

The Plaintiffs further contend that this alleged Joint Venture Agreement covered not just the Penang Project but also includes the following works:

Banting (“Banting Project”)

(ii) SSP3, Bukit Badong Water Treatment Park at Ijok (“Ijok Project”)

(iii) MRR2 Kepong (“Kepong Project”);

(iv) Construction and Completion of Surau and Kawasan Lapang Awam at Persiaran Setia Eco Glades, Cyber 1, Cyberjaya (“Cyberjaya Project”); and

Rasa Project (“Rasa Project”).

It is also alleged that the terms of the Oral Joint Venture Agreement are as follows: -

That the 1st Plaintiff or his company will provide or keep up all machineries for the Penang Project.

(ii) That the 1st Plaintiff shall identify a site supervisor who will handle the subcontract works for the Penang Project.

(iii) That the 1st Defendant shall be made a joint signatory to the Standard Chartered Bank Account of the 4th Defendant.

(iv) That the profits shall be distributed equally between the 1st Plaintiff and the 1st Defendant.

All the works for the projects will be undertaken through the 4th Defendant and shall be managed by the 1st Defendant. The 1st Defendant will liaise with the relevant parties and take on the day-to-day management of the project.

(vi) The 1st Defendant shall have control of the bookkeeping and full custody of the accounts, cash, chequebooks and bank statements of the Joint Venture.

(vii) The 1st Plaintiff and the 1st Defendant shall contribute funds to the Joint Venture from time to time when needed.

As stated earlier, the Oral Joint Venture was subsequently subsumed into the setting up of the 3rd Defendant, Lingkaran EW Sdn Bhd. On the suggestion of the 1st Plaintiff the additional members of the said Joint Venture and the following persons had shares in the company:- Name Shares (RM) Percentage Directorship Wong Jian On 35.00 35 Yes Cheah Lean Ming 15.00 15 Yes Tan Swee Leong 35.00 35 Yes Go Yew Kiat 15.00 15 Yes The company was set up in December 2020.

The above set up was agreed to after the additional project was obtained that is known as “Supply and Install Prefabricated Vertical Drain (PVD) at Fill Area” in May 2020.

It was allegedly agreed that parties agreed that:-

Payments received and retained in the earlier Standard Chartered Bank joint venture account will be paid over to the 3rd Defendant after the deduction of all management fees due to the 4th Defendant.

(ii) A new account will be opened by the 3rd Defendant with Public Bank Berhad.

It must be noted that the issues concerning the affairs of 3rd Defendant is now subject to the Consent Order dated 29-8-2024 where parties agreed that Crowe Malaysia PLT will undertake an audit concerning the affairs of the said company and that the said firm shall provide an audit on the affairs of the said entity. Parties thereafter shall be entitled to take the appropriate steps concerning the affairs of 3rd Defendant after the findings of the Crowe Malaysia PLT.

I further note that the Defendants have also filed a Counterclaim seeking declarations that there was no such Joint Venture as alleged and that the relationship between the parties were merely that of main contractor with sub-contractors.

The only issue that is alive before this Court are as follows: - whether there exists a Joint Venture between the Plaintiffs and the Defendants before the incorporation of the 3rd Defendant.;

what are the terms of the said Joint Venture; and

(ii) which project would be covered by the Joint Venture. B. Trial of this Action 11.

The following witnesses were produced by the litigants: - 1 Plaintiffs’ witnesses

1st Plaintiff (PW1)

2nd Plaintiff (PW2)

Chang Ah Kow (PW3)

Chin Choi (PW4)

Looi Keng Shing (PW5)

11.2 The Defendants’ witnesses

1st Defendant (DW1)

2nd Defendant (DW2) C. Decision of this Court 12. I find that there was no Joint Venture Agreement as claimed by the Plaintiffs between the 1st Plaintiff and the 1st Defendant at the inception of the Penang Project in September 2019.

I note that there was no written agreement that was executed by parties, but the lack of such instrument is not a mandatory requirement and does not prevent the existence of a valid binding agreement between parties. I refer to the decision of the Court of Appeal in Kwan Chew Holdings Sdn Bhd v Kwong Yik Bank Bhd [2007] 2 CLJ 127 where Gopal Sri Ram JCA (as he then was) held:- “[44] True that there is no formal written joint venture agreement in this case. But I do not regard that as being an impediment. In my judgment it is open to a court on an objective assessment of the proved and admitted facts to conclude that the true relationship between litigating parties was a joint venture. Just as a partnership may be implied by the conduct of parties (see, Mirzamal Bhagwan Das v. Rameshwar AIR [1929] All 536; Jakiuddin v. Vithoba AIR [1939] Nag. 301; Johnson v. Murray [1951] 2 WWR (NS) 447 at 448; Steward v. Donnelly [2001] 108 ACWS (3d) 715), so too may a joint venture.”

This Court cautions itself that the above decision was set aside by the Federal Court due to its facts as seen in RHB Bank Bhd v Kwan Chew Holdings Sdn Bhd [2010] 1 CLJ 665. Nevertheless, I find the principles of law laid down by Gopal Sri Ram JCA (as he then was) remains good law.

In this case, I find that the evidence before me when considered objectively shows that the parties did not agree to a Joint Venture Agreement as alleged by the Plaintiffs in September 2019. The Joint Venture Agreement only existed after December 2020 when parties agreed to set up the 3rd Defendant and to undertake all future works through the said company. Parties had also agreed to include the 2nd Defendant and the 2nd Plaintiff as members of the Joint Venture with their agreed shareholding reflecting the capital injected by each individual into the company.

I am aware that the Plaintiffs suggest the existence of the Joint Venture based on the following evidence: -

The 3rd Defendant’s Minutes of the Extraordinary General Meeting held on 22-7-2022 which states: - “5. Other Matter The Board discussed on Penang Project and Banting Project, which were the partnership between Mr Wong Jian On and Mr Tan Swee Loong. The ratio for profit and liabilities was 50:50. Mr Wong requested to check the project accounts.”

(ii) The 1st Defendant had issued letters on the letterhead of the 3rd Defendant dated 29-7-2022 and 15-8-2022 confirming that the accounts of the Penang projects will be audited by auditors and presented to the partners.

(iii) The 3rd Defendant’s Minutes of Extraordinary General Meeting dated 15-8-2022 that was signed off by the 1st Defendant stating that parties agreed to audit the Penang Project and the Banting project.

(iv) The evidence of Chin Choi (PW4) in Q&A number 13 of his witness statement.

The evidence of 2nd Plaintiff (PW2) in Q&A number 9 to 11 of his witness statement.

(vi) The evidence of the 1st Plaintiff (PW1) in his Q&A number 5 to 12 of his witness statement.

(vii) The alleged capital injection by the 1st Plaintiff into the accounts of the 4th Defendant with Standard Chartered Bank.

(viii) The control of the project by the 1st Plaintiff.

The evidence of the Board Minutes dated 22-7-2022, 29-7-2022 and 15-8-2022 at a single glance may seem persuasive. However, as I consider the overall evidence before this Court, I find that the evidence points to the position that the said Joint Venture did not exist but instead there was only a contractual relationship between the parties at the material time. The 1st Plaintiff had only agreed to provide machineries to the 1st Defendant for the works undertaken at the site and that he will be paid for the rentals of the said machines.

The evidence before me shows that the 1st Plaintiff and / or his own company was paid rentals for all the machines that were provided to the 4th Defendant. There is no evidence that the 1st Plaintiff had agreed to provide machineries to the project as part of the capital for the project. Instead, what is shown to this Court is that the 1st Plaintiff had only agreed to provide the machines and in return rentals will be paid from the said project by the 4th Defendant. It is not disputed that the 1st Plaintiff and / or his company did receive payment for the rentals for the machines provided for the Penang project.

I find it hard to believe that the 1st Plaintiff will continue to receive rentals for the machines provided for his own Joint Venture project. If that is correct, the 1st Plaintiff would have surely only deducted the costs for the said machines from the overall costs of the project and then collect any profits at the end of the Joint Venture. The manner in which the rentals were collected by the 1st Plaintiff throughout the project does not lend credence to the Plaintiffs’ claim.

With regard to the evidence of Chin Choi (PW4), I find that his evidence does not show that there was any form of agreement to create or set up a Joint Venture as suggested by the Plaintiff. I find that Chin Choi’s evidence only show that parties were only discussing the options available to them at the particular time. There was no final decision that was made in the presence of Chin Choi. I therefore find that his evidence is not conclusive as to the existence of any form of Joint Venture as of September 2019 as claimed by the Plaintiffs.

Furthermore, it does not lend credence to the Plaintiffs’ case that it is irrefutable that the costs of retaining the 2nd Plaintiff’s services as a consultant to the said project or as a site supervisor of RM 10,000.00 was paid solely by the 1st Plaintiff or by his company. The 1st Plaintiff did not share any of the financial burdens for the 2nd Plaintiff’s services. This does not reflect the characteristics of an equal partnership or equal joint venture. One would have expected that if such relationship existed, both parties would bear all financial responsibilities for the project and that would include the costs of the 2nd Plaintiff’s services as a site supervisor.

On the issue of payment of monies by the 1st Plaintiff to the 1st Defendant or the 3rd Defendant, I find that the said payments were actually a loan granted to the 3rd Defendant. The 1st Plaintiff had paid to the 1st Defendant the total sum of RM 172,000.00. This was paid into the account of the 3rd Defendant. If there was indeed a Joint Venture Agreement, this would have been part of the capital contributed by the 1st Plaintiff for the said project. This was not so. Instead, the 1st Plaintiff was eventually paid in full of all the sums paid. This shows to me that the said payment was only a friendly loan granted by the 1st Plaintiff to the 1st Defendant and this has since been repaid in full.

I also find that this lend credence to the Defendants’ arguments that the 1st Plaintiff was only made a signatory to the 3rd Defendant’s Standard Chartered Bank to appease the 1st Plaintiff and convince him to provide a friendly loan for the said project. The friendly loan was eventually repaid back to the 1st Plaintiff from the said account.

I further find that the fact that the Penang Project was controlled solely by the 1st Defendant through his own company suggests that there was Joint Venture Agreement at the said inception date in 2019. If there was such a Joint Venture Agreement between the 1st Plaintiff and the 1st Defendant, I would have expected the 1st Plaintiff would have insisted some control over the affairs of the project and not left it solely in the hands of the 1st Defendant.

I only find that there was only a loose agreement to collaborate between the 1st Plaintiff and the 1st Defendant at the material time. Parties only agreed to assist each other at the inception of the project and that the 1st Defendant shall use the services of the 1st Plaintiff for the said project. This is reflected by the fact that the 1st Plaintiff and his own company continued to charge rentals for equipment provided for the project.

As to what was stated in the Board Meetings of the 4th Defendant and whether the said projects will be audited is not conclusive that there existed the alleged Joint Venture Agreement between the 1st Plaintiff and the 1st Defendant as claimed. I do note that the 1st Defendant did sign off the said minutes of the meeting dated 22-7-2022 where it was stated: “The Board Discussed on Penang Project and Banting Project, which were the partnership between 1st Plaintiff and 1st Defendant. The ratio for profit and liabilities was 50:50. The 1st Plaintiff requested to check the project accounts.”

Nevertheless, this was explained by the 1st Defendant in his testimony that he had only agreed to the said audit due to the intense scrutiny he had faced during the meeting and to attempt to appease his co-shareholders in the company. Furthermore, this is one of the factors that have been considered by this Court. Despite the existence of the minutes to the meeting, the scale of justice does not fall in favour of the Plaintiffs. I find the overall evidence shown to me has tilted the scales heavily in favour of the Defendants.

I accept the said explanation and find that the evidence before me shows that, on a balance of probabilities, there was no Joint Venture Agreement at the inception of the Penang Project. Parties had only agreed to a loose relationship to provide mutual assistance to each other for the said Penang Project. There cannot be a 50:50 partnership when the risk of the Penang Project and the Banting project is borne solely by the 1st Defendant. Irrespective of what was allegedly admitted by the 1st Defendant, as suggested by the Plaintiff as contained in the minutes, the characteristics of a 50:50 joint venture/partnership is lacking. After all, the devil is in details.

I also find that there is insufficient evidence before me to show that they agreed as to the essential terms that could have created any form of joint venture as alleged by the Plaintiffs for the Penang Project and the Banting Project. There is no agreement as to (i) who and what contribution each party will bring to the project, (ii) how the joint venture will be funded,

(iii) how the profits and losses are to be ascertained, (iv) who will be responsible for parts of the project and (v) what is the final objective of the joint venture. These are the standard expected terms that should appear in any joint venture agreement. There is no evidence of such discussion or agreement entered into between the 1st Plaintiff and the 1st Defendant.

I refer to the decision of Hadhariah Syed Ismail JC (as she then was) in Sapura Holdings Sdn Bhd & Anor v Norther Telecom (Asia) Ltd & Ors [2010] 8 CLJ 97 where it was stated: - “ …However one thing is certain and that is the word "joint venture" does not appear in any of the agreements. But that does not preclude this court from determining whether there was a joint venture or not. It is open to this court to make an objective assessment of the proved and admitted facts to conclude the true relationship between the parties. I will start off with the definition of the word "joint venture". What is joint venture? A joint venture is defined by Williston on Contract (3rd edn 1959) vol. 2 at pp 555-556 as follows: In summary, then, a working definition of Joint Venture based on the actual judicial decisions may be thus formulated: A joint venture is an association of persons, natural or corporate, who agree by contract to engage in some common, usually ad hoc undertaking for joint profit by combining their respective resources, without however, forming a partnership in the legal sense (of creating that status) or corporation; their agreement also provides for a community of interest among the joint venturers each of whom is both principal and agent as to the others within the scope of the venture over which each venturer exercises some degree of control.”

I do note that the decision of the High Court was overturned by the Court of Appeal on its facts. Nevertheless, I accept the above proposition as being the correct explanation of the characteristics of a Joint Venture as this was also quoted with approval by Gopal Sri Ram JCA (as he then was) in Kwan Chew Holdings Sdn Bhd v Kwong Yik Bank (supra).

When I view objectively the evidence of what was being undertaken at the material time, before the incorporation of the 3rd Defendant, I cannot and do not find the existence of any form of joint venture or partnership for the Penang and Banting projects. What has been shown is merely a loose relationship between parties to assist each other for the said project. The risk of the two projects were not shifted to the 1st Plaintiff but lie solely with the 1st Defendant. Under those circumstances, I find that the Plaintiffs have failed to prove on a balance of probabilities the existence of the alleged Joint Venture for the Penang and Banting project.

Despite the above, I find that a Joint Venture came into being on the date when the company was set up by the litigants. After undertaking work for the Penang and Banting projects, they then agreed to include all future works to be included as part of the Joint Venture. This would only include the Ijok Project, Kepong Project, Cyberjaya Project and Rasa Project. All works undertaken by the litigants after the setting up of the 3rd Defendant will be subject to the said Joint Venture and parties are bound by what they have agreed upon. In this case, parties agreed that the profits and losses for all such works from the date of the inception of the company will be shared in accordance with their shareholding in the company.

This is further supported by the fact that the Plaintiffs did not make any contribution to the Banting project. The evidence before me shows that all the works were undertaken by the 1st Defendant or his company. This also applies to the Penang Project. The contracts in question were awarded to the 1st Defendant or his company. All of the risk relating to the said projects were on the sole shoulders of the 1st Defendant and his company. The 1st Plaintiff did provide machines and capital for these projects, but he was paid in full and received rentals for the said machines. The risk was not shared equally by the 1st Plaintiff despite his claims in this suit.

I therefore dismiss the Plaintiffs’ claim as to the existence of any alleged Joint Venture Agreement for the Penang Project and Banting Project. I only find that there exists a Joint Venture Agreement between parties after the setting up of the 3rd Defendant and all projects awarded or obtained through the said entity will be subject to the said Joint Venture Agreement.

I find that this is a suitable case for the costs of these proceedings to be borne by the 1st to 2nd Defendants. If they had agreed to allow from the outset the audit of the accounts and the affairs of the 3rd Defendant, substantial time and costs could have been saved. Instead, they persisted in their defence to what was obviously in front of them, and this led to the eventual agreement to enter into the Consent Judgment.

I therefore find that the 1st Defendant and 2nd Defendant should bear the costs of RM 30,000.00 to be paid to the Plaintiffs jointly and severally. Despite the above decision, I find that the costs should be borne by the said Defendants. Dated 5th December 2024 Dato’ Indera Mohd Arief Emran bin Arifin Judge High Court of Malaya at Kuala Lumpur NCC 5 Counsel : David Dev Peter together with Vinoshen Raveentharan for the Plaintiffs Messrs. Jerald Gomez & Assoc Advocates & Solicitors Yee Kar Ming together with Julie Ha for the Defendants