Ademco Security Group Pte. Ltd. v Xecuretronix Sdn. Bhd. (WA-22NCC-269-04/2024)

This is a simple claim for an alleged loan unpaid by the Defendant.

Plaintiff is a company and holds 70% of the shares in the Defendant. The shares are held through A Rahim bin MM Abdul Jaabar and Abdul Halim bin Sulaiman.

Allegedly the Plaintiff gave the Defendant a total sum of RM 1, 839,000.00 as a loan. The first RM 350,000.00 loan was provided to enable the Defendant to undertake its business and to expand the business of the company, and was granted without interest. If the Defendant requires further assistance, then any loan will be granted with interest at the rate of 8% per annum.

This loan is allegedly to be repaid when demanded by the Plaintiff.

The sum of RM 1, 839,000.00 was allegedly granted to the Defendant by way of 9 payments into the account of the Defendant.

The Plaintiff issued a letter of demand via letter dated 23-11-2020 to the Defendant. The Defendant did not comply with the said demand. C. Summary of Defence 7. The sum of RM 1, 839, 000.00 was given by the Plaintiff to the Defendant for the purpose of the Defendant’s business and was given as:-

to cover the Plaintiff’s obligation as 70% shareholder of the Defendant.

(ii) to provide working capital for the Defendant.

(iii) payment of the salaries of employees and including statutory payments due.

(iv) payment of the director’s allowance as required under the terms of the Shareholders’ Agreement.

payment for the deposit and renovation costs of the unit No. 43-G, Jalan PJU 14A/41B, Pusat Dagangan NZX, Ara Damansara, 47301 PJ, Selangor Darul Ehsan, where the Defendant needed to rent the said premises from 1-10-2016 to 15-4-2019.

(vi) payment for the installation costs for the CMS (central monitoring system) for the said premises as part of its business that connects the Plaintiff’s system with the Defendant’s system.

The Defendant suggests that the said payments made by the Plaintiff were not for a loan as claimed but were advanced as part of the required working capital of the Defendant.

The Defendant suggests that the Plaintiff did not comply with the terms of the Shareholders Agreement and therefore it is not entitled to rely on the terms appearing in the said agreement.

The Defendant has since left the premises in Ara Damansara. The CMS system has been sent to Jakarta on the instruction of the Plaintiff, and some of the CMS were left at the said premises. These should be deducted from the sums claimed by the Plaintiff.

The Plaintiff also continues to benefit from the renovations done at the said premises and as a result the costs for the said renovation will have to be deducted from the alleged sums claimed.

12.

I note that the Plaintiff has agreed to deduct the sum of RM 190, 00 being the value of the CMS equipment that was sold to the PT Ademco Security Indonesia. The Plaintiff, however, says that some of the equipment was left by the Defendant at the said premises and cannot be used by the Plaintiff.

The Plaintiff had purchased the shares in Xecuretronic Sdn Bhd and did enter into the Shareholders Agreement dated 13-5-2016. This Shareholders Agreement was entered into by the Plaintiff and Jeffrey Fernandez. Jeffrey owns the rest of the shares in the Defendant.

The material terms of the said Shareholders Agreement are as follows: -

As stated earlier, I note that the members of the Defendant at the material time were the Plaintiff and Jeffery Fernandez. Therefore, members of the company agreed that the terms of the Shareholders Agreement will be applicable for any funds that were either invested by the Plaintiff or lent by the Plaintiff to the company.

The Plaintiff released the transfer of the sum of RM 73,000.00 150,000.00, RM 237,000.00, RM 310,000.00, RM 300,000.00, RM 329,000.00, RM 292,000.00, RM 63,000.00, and RM 85,000.00 as advance/loan to the Defendant. I refer to the emails dated 29-6-2016, 5-8-2016, 8-9-2016, 13-10-2016, 9-11-2016, 27-12-2016, 26-1-2017, 6-7-2017 and 6-9-2017.

Jeffrey Fernandez, the executive director of the Defendant, issued an email to an employee of the Plaintiff, Shi Kang Pang, dated 9-8-2018, seeking information as to the “breakdown of loans / working capital extended to the Defendant”. Shi Kang Pang replied 10-8-2018 stating: -

Loan from ASG to XTX for CMS equipment RM 1, 256, 261 (Amount will be reduced after the value of the equipment shipped to Indonesia is confirmed).

Loan from ASG to XTX for working capital RM 582, 739.00

Loan from ASG to XTX for IWK Project RM 91,000.00 Date Total RM Working Capital Renovation / CMS Equipment Disbursement 1 30-6-16 73,000 58, 502.20 14, 497.80 Disbursement 2 5-8-16 150,000 61, 782.67 88, 217.33 Disbursement 3 8-9-16 237,000 87, 120.00 149, 880.00 Disbursement 4 13-10-16 310,000 83, 894.63 226, 105.37 Disbursement 5 10-11-16 300,000 47, 631.83 252, 368.17 Disbursement 6 28-12-16 329,000 95, 807.89 233, 192.11 Disbursement 7 31-1-17 292,000 - 292,000.00 Disbursement 8 7-7-17 63,000 63,000 - Disbursement 9 7-9-17 85,000 85,000 - 1, 838,000 582, 739.22 1, 256,

260.78

This Court has also considered the email dated 1-2-2017 issued by Shi Kang and the table attached to the said email.

I have also considered the emails exchanged between Jeffrey and Tei Chin Hing in May 2018, where the items that were considered to be CMS equipment kept at the Defendant's premises were discussed. It appears in these emails that the 4 servers were the units kept at the Defendant's premises and were identified as CMS equipment. These 4 servers have since been sent to the Indonesian subsidiary of the Plaintiff, and the invoices/delivery orders prepared by the Defendant valued them at S$ 41,000.00 and RM 69,154.00.00.

The Defendant has since left the Ara Damansara premises on 15-4-2019. The Defendant’s witness suggests that the CMS equipment bought using the monies is left at the premises. Furthermore, the said premises are now occupied by ASG Security (M) Sdn Bhd. This company is a related entity to the Plaintiff. The Defendant also suggests that the said equipment is now used by the said company and the Indonesian entity known as PT Ademco. E. Trial 21. The following witnesses appeared before this Court:-

Koh Fuwei Toby – WS-PW1 (Plaintiff’s witness)

(ii) Jeffery Fernandez. – WS-DW1 (Defendant’s witness) F. Issues for Determination 22. I find that the following issues must be determined by this Court. They are as follows: -

Whether the Defendant is bound by the terms of the Shareholders’ Agreement?

(ii) Whether the sum advanced by the Plaintiff is a loan or an advance issued by shareholders to be considered as capital of the company?

(iii) Whether the Defendant is required to pay the sums claimed and how much? - Should the value of the CMS equipment be deducted? - Whether the sums spent on the renovation of the Ara Damansara premises be deducted? - Whether the sums spent on the directors’ fees be deducted?

(iv) Whether the Plaintiff is estopped from instituting this claim due to the previous suit filed?

What would be the sum due and payable by the Defendant? G. Decision of this Court Issue 1: Whether the Defendant is bound by the terms of the Shareholders’ Agreement? Issue 2: Whether the sum advanced by the Plaintiff is a loan or an advanced issued by shareholders to be considered as capital of the company?

I will deal with the above-identified issues together.

It is trite law that a company is a separate legal entity to its shareholders. See section 20 of the Companies Act and Abdul Manaf bin Mohd Ghows & Ors v Nusantara Timur Sdn Bhd [1997] 4 CLJ 437.

In this case, I repeat that the parties to the Shareholders Agreement are the Plaintiff and Jeffrey Fernandez. The company is not a signatory to the said agreement.

Therefore, I cannot hold the Defendant to be bound by the said agreement. The company is not privy to the said agreement and cannot be forced to comply with what was agreed solely between the Plaintiff and Jeffrey Fernandez. Refer to Globalink Telecommunications Ltd v Wilmbury Ltd [2003] 1 BCLC 145, Malayan Banking Ltd v Raffles Hotel Ltd [1966] 1 MLJ 206 and Perdana Petroleum v Tengku Dato Ibrahim & 3 Ors [W-02(NCC)(A)-1194-06/2019.

Nevertheless, this does not mean that the sums provided by the Plaintiff to the Defendant need not be paid. Even though the Defendant is not bound by the said agreement, the purpose of the said advances, its nature, and whether the said advances would be considered as an investment or as a loan by the Plaintiff could be gleaned from the terms of the said Shareholders’ Agreement. The said Shareholders’ Agreement shows the intention of the shareholders at the material time and whether the said company did receive the sums from the Plaintiff as a capital investment or as a loan as claimed in this proceeding.

Firstly, I find clause 12.5 of the agreement by the shareholders states that the Plaintiff shall provide an initial advance of RM 350,000 to fund the operations and expansion of the company. If there are any further sums required, then such advances will be subject to interest at 8% per annum. These sums must be repaid by the company and are not considered as capital investments by the company. If the Plaintiff issues a demand is issued by the Plaintiff, then the said sums must be repaid.

This reinforces the Plaintiff’s claim that the sums advanced to the Defendant were not investments as alleged but are actually loans made which must be repaid in full.

Secondly, I find that there is no document or any contemporaneous documents that support the Defendant’s argument that the advances issued by the Plaintiff, for the purposes of the Defendant’s business, need not be repaid and that the said sums will be automatically converted to capital or shares. There is no documentary evidence that is produced by the Defendant to support the argument that the said sums need not be repaid in any form whatsoever. If this were true then this would have been recorded in an email or any correspondence between parties when the said sums were released to the Defendant. The lack of such documents reinforces the Plaintiff’s claim that the said sums were repayable in accordance with the terms of the Shareholders’ Agreement.

Thirdly, the shareholders had also agreed that any change in the share capital of the corporation must be undertaken after a resolution has been approved by a majority of the members of the company. I repeat that I find no evidence of any such resolution that was passed to increase the share capital to include the said advances made by the Plaintiff. If the Defendant’s contention is to be believed, the shareholders would have ensured that the paid-up capital of the company is increased to include the alleged additional investment by the Plaintiff. As this was not done, I find that the said contention by the Defendant is incorrect.

I also refer to the emails exchanged between Fernandez (Executive Director of the Defendant) and Shi Kang Ping (Group Finance Director – Plaintiff). The emails exchanged shows that parties were aware that the sums that were advanced were given as a loan and were repayable by the Defendant to the Plaintiff. The sums were not considered to be part of the Plaintiff’s investment in the Defendant.

As an example, the following email reinforces this point: -

Email from Shi Kang Pang to Jeffrey Fernandez dated 10-8-2018

“Hi Jeffrey Loan from ASG (Plaintiff) to XTX for CMS Equipment RM 1, 256, 261 (Amount will be reduce after the value of equipment shipped to

Indonesia is confirmed) Loan from ASG to XTX for working capital RM 582, 739.00

Loan from ASG to XTX form IWK project RM 91,000.00”

This email was not rebutted by Jeffrey Fernandez. He did not reply to state that the sums advanced were not loans. If this is true, I expect the Executive Director (Jeffrey Fernandez) of the Defendant would have issued an email to correct this alleged error and state unequivocally that the said sums advanced were in fact an investment by the Plaintiff and need not be repaid. As this was not done, I find that, on a balance of probabilities, the said advances were loans made by the Plaintiff to the Defendant.

For the above reasons, I find that the sums advanced by the Plaintiff are not investments by it into the Defendant or capital investments as claimed by the Defendant but are loans that must be repaid on demand by the Defendant.

I also find that the Plaintiff did issue the requisite notice to the Defendant to demand payment of the sums claimed in this proceeding. This is seen in the letter issued by the Plaintiff’s previous solicitors dated 23-11-2020. Issue 3 - Whether the Defendant is required to pay the sums claimed and how much? - Should the value of the CMS equipment and other equipment left be deducted? - Whether the sums spent on the renovation of the Ara Damansara premises be deducted? - Whether the sums spent on the directors’ fees be deducted?

I will now deal with the issue raised by the Defendants that alleges that, even if the said sums were loans given by the Plaintiff, this Court should deduct the sums that were used to (i) pay the directors of the nominees appointed by Plaintiff, (ii) the sums utilized to pay for the renovation of the Ara Damansara premises and (iii) the CMS equipment and other items that was returned or sent to Indonesia or retained at the Ara Damansara premises when the Defendant left.

On the issue of the payments made to the directors who were on the board as representatives or nominees of the Plaintiff, I find that there is no valid reason why these should be deducted from the amount due to the Defendant.

The Defendant has not shown that these payments were not part and parcel of its business. These are payments that were made to Dato Abd Halim bin Sulaiman and Col ® Mohd Tahril bin Ihsan as directors of the company. The Defendant did not pay these sums on behalf of the Plaintiff or discharge any debt due by the Plaintiff to these individuals. There is no evidence to support the said contention. Therefore, the Defendant had an obligation to pay these sums and in fact did pay for the said directors’ fees that were due to these individuals. As such, I do not find that this is a valid excuse justifying any form of deduction as alleged by the Defendant.

In fact, the emails that I had referred to earlier shows that the payments made by the Plaintiff were made as a loan to assist the Defendant to pay the Defendant’s employees, EPF payments and all sums that had been incurred by the Defendant from September 2016 to August 2018. These are the obligations of the Defendant and not of the Plaintiff. There is no evidence produced that shows that these payments were to pay the financial obligations of the Plaintiff to these individuals. It would have been very easy for Jeffrey Fernandez to have recorded this alleged position in writing and put it to the Plaintiff so that the sums could be deducted from the loans provided. Since this was not done, I find that the payments made by the Defendant to these individuals were payments to discharge the Defendant’s obligation to them. I also find that these payments cannot be attributed to the Plaintiff.

On the issue of the renovation costs of the Ara Damansara premises, the Defendant’s witness suggests that the Defendant had to move to the said premises on the instructions of the Plaintiff and did incur substantial costs at the direction of the Plaintiff.

This allegation appears in the defence of the Defendant and the witness statement of Jeffrey Fernandez. However, the Defendant did not produce any evidence to support the said contention. There is no email or correspondence produced showing that it was the Plaintiff who instructed the said premises to be rented and directed the manner in which the said renovations were to be undertaken. Neither did the Defendant show that the said renovations were controlled by the Plaintiff. Instead, what is shown in the emails is that the Defendant was the only entity that had control over the renovation and the costs incurred. It was part and parcel of its business operations and cannot be attributed to the Plaintiff.

Furthermore, the Defendant did not produce any evidence to show that the Ara Damansara premises, rented by the Defendant, are owned by the Plaintiff or the alleged related company. I do note that the witness for the Plaintiff did admit that his father did own some shares in the said entity, but this does not mean that the Plaintiff owned the Ara Damansara premises. In fact, the Plaintiff’s witness stated that the said company had also entered into a tenancy at part of the same building, but not the same premises occupied by the Defendant at the material time.

I therefore reject the said defence. I find that the Defendant has failed to discharge its onus to prove that the sums expended for the operational costs of the Defendant and the sums expended for the renovation of the Ara Damansara premises should be deducted from the sums claimed against the Defendant.

On the issue of the CMS equipment. I find that the Plaintiff did agree in its pleadings that it would deduct the sum of RM 190,547.00 from the sums that are claimed against the Defendant. This sum should be deducted from the claim herein.

I also find that the evidence before me shows that the records kept by the Defendant and shared in the emails indicate that the sums advanced by the Plaintiff were not used to purchase the CMS equipment. The table produced in the emails, which were prepared by the Defendant and shared in the emails, show that the monies were used to pay (i) salaries, (ii) EPF, (iii) SOCSO, (iv) HDRF, and (v) renovation costs. Despite the denials by the Defendant’s witness, when cross-examined by the Plaintiff’s counsel, he failed to produce any evidence to show the amount that was allegedly spent on CMS equipment.

Furthermore, the only documentary evidence produced by the Defendant is the invoices/delivery orders that show that 4 server racks were sent to Jakarta and the value that was attached to the said equipment. This was confirmed in the email dated 4-5-2018 being the CMS equipment was removed and sent to Jakarta at the direction of the Plaintiff. Therefore, as admitted by the Plaintiff, the sum of RM 190,547.00 will be deducted from the amount claimed against the Defendant, being the value of the CMS equipment sent to Jakarta.

I have considered the allegation by the Defendant that it had left the equipment at the Ara Damansara premises, and this should be deducted from the amount claimed. The witness for the Defendant attempted to persuade this Court by referring to several handwritten documents that indicated that the Defendant had left (i) air conditioning equipment, (ii) tables, (iii) safe door, (iv) chairs, (v) phone systems and (vi) AMAG controller. I do not find any evidence that the Plaintiff agreed to accept these items and that they must be deducted from the amount due to the Plaintiff. There was no such arrangement.

Furthermore, the Defendant has failed to prove the value of the items left at the said premises. This Court cannot accept a list prepared by the litigant to show the alleged value of any items without any other documents shown to substantiate the same. This list is self-serving and cannot be relied on by this Court.

The Defendant has failed to prove that the Plaintiff agreed to accept the aforesaid office furniture to be set off for the sums that are due to the Plaintiff. As such, I do not accept the said contention.

For the above reasons, I reject the Plaintiff’s contention and find that the Defendant has failed to prove its defence. The Defendant did not have any right to any set off for the value of any items as alleged in the Defendants’ Defence. Issue 4 - Whether the Plaintiff is estopped from instituting this claim due to the previous suit filed?

On this issue, I find that the previous order made by the High Court dated 3-10-2022 states that the Plaintiff had the right to withdraw the claim with liberty to file afresh.

Therefore, the Plaintiff is entitled to file this claim again. The Defendant did not raise any issue concerning limitation in its Defence or the defence of laches. As such, this issue raised by the Defendant is a non-starter, and I reject the same. Issue 5 - What is the sum due and payable by the Defendant?

Based on the above, I find that the Defendant owes the Plaintiff the following sums:-

Loan Advance minus (ii) The CMS Equipment Admitted by the Plaintiff = RM 1,839,000 - RM 190,547.00 = Total sums due: - RM 1,648,453.00

I also find that the interest claimed by the Plaintiff based on clause 12.5 is applicable. I will allow interest at 8% per annum from 24-11-2020 to the date of full realization of the said sums claimed.

I will also allow costs of RM 20,000.00 to be paid by the Defendant to the Plaintiff. I have considered the seniority of counsel, the importance of the case and the complexity of the subject matter of the claim.

For the purposes of ensuring completion of the assessment of the evidence before me, I state here that I prefer the evidence from the Plaintiff’s witness. I find the evidence of Koh Fuwei Toby consistent with the contemporaneous documents produced in the common bundle of documents. I also find that the evidence of Jeffrey Fernandez is contrary to the contemporaneous documents at the material time and contradicts the terms of the Shareholders’ Agreement referred to earlier. I therefore reject the evidence presented by the Defendant. I. Orders of this Court

I make the following orders: -

The Defendant to pay the Plaintiff the sum RM, 1, 648, 453.00.

(ii) Interest at 8% per annum on the said sums claimed from 24-11-2020 to the date of full realization of the same.

(iii) Costs at RM 20,000.00 to be paid by the Defendant to the Plaintiff subject to allocator. Dated 3rd June 2025 Dato’ Indera Mohd Arief Emran bin Arifin Judge High Court of Malaya at Kuala Lumpur NCC5 Counsel: Andrew Teh together with Farhanah binti Ahmad Faris For the Plaintiff Wong Lu Peen & Tunku Alina Advocates & Solicitors Mohammad Sofi bin Othman For the Defendant Sofi Othman & Co Advocates & Solicitors