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1 DALAM MAHKAMAH TINGGI MALAYA DI KUALA LUMPUR DALAM WILAYAH PERSEKUTUAN (BAHAGIAN DAGANG) GUAMAN NO.: WA-22NCC-352-10/2016
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WA-22NCC-352-10/2016
High Court of Malaysia18 Aug 2023
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“sed by the plaintiffs on or around 18 May 2016. [29] The second argument raised is that the damages sought do not satisfy the remoteness test. The 1st to 4th defendants referred to section 74 of the Contracts Act 1950, which provides that: “(1) When a contract has been broken, the party who suffers by the breach is ent”
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1 DALAM MAHKAMAH TINGGI MALAYA DI KUALA LUMPUR DALAM WILAYAH PERSEKUTUAN (BAHAGIAN DAGANG) GUAMAN NO.: WA-22NCC-352-10/2016
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WU SOR HWA
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ARTISAN PESONA SDN BHD
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PRIMARY CAPITAL SDN BHD (NO. SYARIKAT: 71362-U) … PLAINTIF-PLAINTIF
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DATO’ SRI DR ABDULLAH FADZIL BIN CHE WAN (NO. K/P:450730-08-5105) (dibela dan disaman melalui anaknya dan “wakil litigasi” WANNIS CHE WAN BIN ABDULLAH FADZIL @ ABDULLAH FATTAH (NO. K/P 730705-08-5177) menurut Perintah Mahkamah bertarikh 04.10.2016 bagi Saman Pemula No. WA-24NCVC-160- 01/2016)
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LOKE YEU LOONG (NO. K/P: 640605-05-5705) S/N lh0ikS5h0GY7Dklag2DtQ
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CHOY CHENG CHOONG
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TEO JOO MENG
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SWIFTLET ECO PARK HOLDINGS SDN BHD
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ROYAL BIRD’S NEST (CAYMAN) LIMITED (NO. SYARIKAT: HS 309328) … DEFENDAN-DEFENDAN GROUNDS OF JUDGMENT A. Introduction [1] Following a judgment dated 31 October 2018 obtained by the plaintiffs against the defendants (“Judgment”), the plaintiffs applied to this court for damages to be assessed. [2] For the reasons elaborated below, the court awarded general damages of RM144,322,499 to the plaintiffs. B. Background Facts [3] The plaintiffs claimed that the defendants had breached a shareholders’ agreement dated 19 November 2010 (“Shareholders’ Agreement”), which was executed between the 1st plaintiff, the 3rd plaintiff S/N lh0ikS5h0GY7Dklag2DtQ and the 1st to 4th defendants. The Shareholders’ Agreement governed their relationship as shareholders of the 5th defendant. [4] The plaintiffs claimed the 1st to 4th defendants had breached the Shareholders’ Agreement by, amongst others, transferring the 1st to 4th defendants’ shares in the 5th defendant (“Impugned Shares”) to the 6th defendant without the plaintiffs’ consent and in breach of the right of first refusal provided for under the Shareholders’ Agreement. [5] The court found that there had been a breach of the Shareholders’ Agreement, and the Judgment was awarded in favour of the plaintiffs, with damages to be assessed. C. Terms of the Judgment [6] In assessing damages, I considered the terms of the Judgment which contain amongst others, the following declarations: a. That the Shareholders’ Agreement is terminated (paragraph (1)); b. That the 1st to 4th defendants and the 6th defendant have breached clauses 6.1, 6.2. 6.4 and 6.5 of the Shareholders’ Agreement, for inter alia, transferring the Impugned Shares without the prior written consent of the plaintiffs (paragraph (2)); and c. That an offer is deemed made by the 1st to 4th defendants and the 6th defendant to the plaintiffs pursuant to clause S/N lh0ikS5h0GY7Dklag2DtQ
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12.2 of the Shareholders’ Agreement to purchase the Impugned Shares valued at net tangible assets divided by the total number of ordinary shares issued amounting to a total of RM1 (paragraph (3)). As a consequence of this declaration, the court ordered the Impugned Shares to be transferred to the plaintiffs (paragraph (4)). [7] Further, in paragraph (6) of the Judgment, the court awarded general damages for breach of the Shareholders' Agreement to be paid by the 1st to 4th defendants to the plaintiffs, whereby such damages are to be assessed by the court. The plaintiff’s application for damages to be assessed relates to this paragraph. D. Assessment and Findings [8] As a matter of principle, an award of damages should place a plaintiff in a position as close as possible to that as if the contract for which the damages are sought had not been breached and had been performed (see the judgment of the Federal Court in Tan Sri Khoo Teck Puat & Anor v Plenitude Holdings Sdn Bhd [1994] 3 MLJ 777, at page 787H). [9] To put this principle into effect, I first considered the provisions of the Shareholders’ Agreement which the court declared the 1st to 4th defendants and the 6th defendant had breached. These clauses are reproduced below: a. Clause 6.1: “For so long as PC [3rd defendant] and PM [Pesona Metro Sdn Bhd] shall hold any share in the Company [5th defendant] (including without limitation any S/N lh0ikS5h0GY7Dklag2DtQ Ordinary Shares, Preference Shares or Conversion Shares), the other Shareholders (including VS [1st and 2nd defendants]) shall not sell, transfer or otherwise dispose of any shares in the Company held by them without the prior written consent of PC and PM. The other Shareholders (including VS) shall not mortgage, charge, or otherwise encumber all or any part of their interest in their shares in the Company except with the prior written consent of PC and PM.” b. Clause 6.2: “Subject to Clause 6,1, if any other Shareholders of the Company (including VS) wishes to sell and/or transfer its Shares to a third party, VS shall ensure that PC and PM be given the first right of refusal to purchase these shares or be entitled (but not obliged) to sell and/or transfer up to a proportionate number (as it bears to the entire issued share capital of the Company) of its holding of Ordinary Shares (include Preference Shares and Conversion Shares, if any) to the third party on no less favourable terms and conditions as are applicable to such other Shareholder(s). Upon any exercise by PC and PM of either of the foregoing entitlement, the other Shareholders shall not transfer or sell any of its shares to the third party unless the relevant shares of PC and PM are so purchased by the third party.” c. Clause 6.4: “All third parties which acquire shares in the Company shall (unless PC and/or PM directs otherwise) S/N lh0ikS5h0GY7Dklag2DtQ enter into a deed of adherence and accession under which the third party shall agree to be bound by the obligations, and shall be entitled to the benefit, of this Agreement (in place of the transferor of those Shares, where applicable).” d. Clause 6.5: “The Company and VS shall ensure that the restrictions on sales, transfers and disposal of the Shares in the Company, as elaborated in this Clause 6, shall be expressly endorsed on each share certificate issued by the Company at the point of issue of that share certificate and documentary evidence of such compliance shall be forwarded to PC and/or PM within 14 days after the date of this Agreement or the issue of each share certificate (whichever is later).” (emphasis added) [10] Essentially, these clauses require the 1st to 4th defendants to seek the consent of the plaintiffs and to give the plaintiffs the first right of refusal to purchase the 1st to 4th defendants’ shares in the 5th defendant, before the shares can be transferred to a third party (in this case, to the 6th defendant). [11] By the Judgment, the court found that the 1st to 4th defendants had breached the Shareholders’ Agreement as they had transferred the Impugned Shares on 18 May 2016 without the consent of the plaintiffs and without giving the plaintiffs the first right of refusal to purchase the shares. The court ordered these shares to be transferred to the plaintiffs. The S/N lh0ikS5h0GY7Dklag2DtQ Impugned Shares were transferred to the plaintiffs pursuant to the Judgment, on 28 February 2019. [12] If the Shareholders’ Agreement had not been breached, the plaintiffs would have been given the first right of refusal and been able to purchase the Impugned Shares around about 18 May 2016, which is the date the shares were transferred to the 6th defendant. However, the Impugned Shares were only transferred to the plaintiffs pursuant to the Judgment on 28 February 2019. [13] As such, the court finds that to put the plaintiffs in a position as close as possible to that as if the Shareholders’ Agreement had not been breached, the plaintiffs should be entitled to damages calculated in the following manner: a. The value of the Impugned Shares on 18 May 2016, the date the shares were transferred to the 6th defendant; LESS b. The price paid by the 6th defendant for the transfer on 18 May 2016, which would have been the consideration paid by the plaintiffs for the Impugned Shares had the shares been transferred to the plaintiffs; LESS c. The value of the Impugned Shares on 28 February 2019, being the date these shares were transferred to the plaintiffs pursuant to the Judgment. S/N lh0ikS5h0GY7Dklag2DtQ [14] In assessing the value of the Impugned Shares on 18 May 2016, I relied on the following: a. Two valuation reports of HVS Advisory Sdn Bhd (“HVS”) one dated 20 November 2014 which valued the 5th defendant at RM201,058,771, and the other dated 20 August 2018 which valued the 5th defendant at RM423,680,281. These reports were relied on by the defendants during the trial of this matter. b. The testimony of the 2nd defendant during the trial, supporting the HVS valuation report dated 20 November 2014, and agreeing that the valuation of the 5th defendant is RM200,000,000, based on the advice of consultants. c. An article dated 5 September 2016 in the Star newspaper, which quoted the chief group executive director and chief executive officer of the 5th defendant valuing the 5th defendant at RM200,000,000, based on historical data, sales, turnover and profit. [15] From the above evidence, I find the valuation of the 5th defendant at RM200,000,000 as at 18 May 2016, to be fair and reasonable. The value of the Impugned Shares, which is 75% of the share of the 5th defendant is therefore RM150,000,000. [16] I then took into account the price the Impugned Shares were transferred to the 6th defendant on 18 May 2016. This amount, derived from share transfer forms is RM5,677,500. This is the consideration that S/N lh0ikS5h0GY7Dklag2DtQ would have been paid by the plaintiffs for the Impugned Shares had the shares been transferred to them. [17] Finally, I considered the value of the Impugned Shares on 28 February 2019, the date the shares were transferred to the plaintiffs pursuant to the Judgment. To determine the value of these shares, there is a need to determine the value of the 5th defendant. [18] Under paragraph (4) of the Judgment, the court ordered that: a. An independent receiver and manager and manager shall be appointed over the undertakings and assets of the 5th defendant, and to manage the 5th defendant (paragraph
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(4)(a)); and b. An independent auditor nominated by the plaintiffs shall be appointed to determine the price per share of the ordinary shares of the 5th defendant at net tangible assets / total number of ordinary shares issued (paragraph
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(4)(b)). [19]
Preamble
Pursuant to paragraph (4) of the Judgment, Anthony Joseph Skelchy of PKF Covenant Sdn Bhd (“PKF”) was appointed as an independent receiver and manager over the entire undertakings and assets of the 5th defendant, pending the purchase and transfer of the Impugned Shares to the plaintiffs. [20] According to PKF’s report dated 15 April 2019 on the administration of the 5th defendant for the period between 26 December S/N lh0ikS5h0GY7Dklag2DtQ 2018 to 28 February 2019, the 5th defendant had insufficient cash to meet its expenses. [21] In addition to PKF’s report, the plaintiffs also produced a special audit report dated 21 July 2020 and a valuation report dated 11 November 2021 by Vearsa Advisory Sdn Bhd, together with the 5th defendant’s audited financial statements for the years ended 2018 and 2019. These reports and financial statements, read together with the PKF report, valued the 5th defendant at a nominal value of RM1, with the future acquirer having to bear the net liabilities of the 5th defendant. [22] The reports also show that between the date of the Judgment until the Impugned Shares were transferred to the plaintiffs on 28 February 2019, the ecosystem of the 5th defendant and its subsidiaries had been destroyed, with these companies not having any employees, management, office premises or audit records. [23] The 1st to 4th defendants countered the reports produced by the plaintiffs with a report dated 30 December 2021 from Moore. However, this report does not contain a valuation of the 5th defendant. Instead, it merely provides a commentary from an accounting perspective as to whether the financial statements of the 5th defendant can be relied upon by valuers as a basis of valuation. I find the report fails to rebut the plaintiffs’ claim that the 5th defendant had a nominal value at the time the Impugned Shares were transferred to the plaintiffs. [24] Further and in any event, as PKF is an independent receiver and manager appointed pursuant to the Judgment, I am of the view that PKF’s S/N lh0ikS5h0GY7Dklag2DtQ findings on the financial status of the 5th defendant cannot be challenged by the 1st to 4th defendants. [25] With the above considerations, I find that general damages awarded to the plaintiffs can be fairly calculated in the following manner: a. The value of the 5th defendant as at 18 May 2016 (RM200,000,000) x 75% (the percentage of the Impugned Shares in the 5th defendant) = RM150,000,000; b. Less the price the Impugned Shares were transferred to the 6th defendant on 18 May 2016, which is the consideration that would have been paid by the plaintiffs for the Impugned Shares had the shares been transferred to them (RM5,677,500); and c. Less the value of the Impugned Shares as at 28 February 2019 (the nominal value of RM1, based on the finding that the 5th defendant is valued nominally at RM1). [26] The above calculation results in an amount of damages of RM144,322,499. [27] I am unable to agree with the 1st to 4th defendants’ arguments that nominal damages should be awarded. The first argument raised by the 1st to 4th defendants is that the sale of the Impugned Shares to the 6th defendant was merely a share swap exercise. It was contended that after the share swap, the 1st to 4th defendants owned the shares in the 5th defendant through their ownership of the 6th defendant. As such, the S/N lh0ikS5h0GY7Dklag2DtQ transfer of the Impugned Shares did not have any material effect on the ownership of the 5th defendant. [28] I find this argument to be irrelevant to the issue of the calculation of general damages due to the plaintiffs. This argument ignores the implication of the breach, which is that the Impugned Shares were not first offered to the plaintiffs. Whether the transfer was via a share swap or otherwise, under the Shareholders’ Agreement, the 1st to 4th defendants are obligated to offer shares to the plaintiffs before the shares could be transferred to a third party. Had the shares been offered to the plaintiffs, the plaintiffs would have been able to purchase the shares. Hence, damages to be awarded must reflect a scenario in which the Impugned Shares had been purchased by the plaintiffs on or around 18 May 2016. [29] The second argument raised is that the damages sought do not satisfy the remoteness test. The 1st to 4th defendants referred to section 74 of the Contracts Act 1950, which provides that: “(1) When a contract has been broken, the party who suffers by the breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from the breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it.
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Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach.” (emphasis added) S/N lh0ikS5h0GY7Dklag2DtQ [30] The 1st to 4th defendants stressed that the plaintiffs must be able to show a causal connection between the breach and the damages suffered. I do not disagree. [31] In Karun Klasik Sdn Bhd v Tenaga Nasional Bhd [2023] 2 MLJ 566, the Court of Appeal found that the measure of the appellant’s damages is the profit suffered by the appellant as a result of the unlawful disconnection of its electricity supply by the respondent: “[44] In our considered view, the appellant rightly contended that the correct approach to assessment that the LJ should have adopted was to apply the principle that the measure of damages should be as defined in Livingstone v Rawyards Coal Co (1880) 5 App Cas 25 at p 38 as ‘that sum of money which will put the party who has been injured, or who has suffered, in the same position as he would have been if he had not sustained the wrong for which he is now getting his compensation or reparation’. [45] Following the FC decision, the liability of TNB for the wrongful disconnection of electricity supply to the appellant’s factory was a non-issue. Likewise, that the appellant had suffered damages that required assessment as a result of that incident. We are in concurrence with the appellant that the measure of damages should be the profit that the appellant’s business could have obtained from a sale of the products or the market value thereof. The entitlement should be for the appellant to be put into the position that it would have been in had the products in the cold rooms not spoiled as a result of TNB’s disconnection S/N lh0ikS5h0GY7Dklag2DtQ of the electricity supply (see The Clyde [1856] Swab, 23 at p 24).” (emphasis added) [32] Similarly, in the present case, the measure of damages that would arise directly from the breach would be the value of the Impugned Shares that the plaintiffs would have been able to purchase on 18 May 2016 (instead of 28 February 2019). These damages arose directly as a consequence of the 1st to 4th defendants’ breach of the Shareholders’ Agreement. There is therefore a direct causal connection between the breach committed by the 1st to 4th defendants in not offering the Impugned Shares to the plaintiffs, with the damages suffered by the plaintiffs. Further, the damages suffered by the plaintiffs would have been within the reasonable contemplation of the parties when they entered into the Shareholders’ Agreement. E. Decision [33] Thus, general damages awarded to the plaintiffs are RM144,322,499, based on the calculation in paragraph [25] above. The damages shall be paid jointly and severally by the 1st to 4th defendants. S/N lh0ikS5h0GY7Dklag2DtQ Dated 21 February 2025 ADLIN ABDUL MAJID Judge High Court of Malaya Kuala Lumpur Counsel: Plaintiffs : Steven How (together with Daryl Chang and S. Shahman) of Messrs. Kumar Jaspal Quah & Aishah 1st to 4th defendants : George Miranda (together with Sam Jia Qian) of Messrs. Miranda & Samuel S/N lh0ikS5h0GY7Dklag2DtQ
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