Affluent Trade Landmark Sdn Bhd v 1. Eminent Development Sdn Bhd (JA-22NCVC-130-06/2017)

EMINENT DEVELOPMENT SDN BHD

SEAH SAY YOONG

EUGENE YEOH KIM LOONG

TAN POAY MENG

SEAH GEOK MING

SEAH KAZUKO NEE GOTO KAZUKO

SEAH CHIN YEW (SHE JINYAO)

SEOW GEK HONG

OFFICIAL RECEIVER OF SINGAPORE (as Liquidator of Lee Hin Realty Pte Ltd, Company Registration No. 198205438K) DEFENDAN-DEFENDAN Page 2 of 15 DECISIONS (ENCLOSURES 29, 31, 36) CHOO KAH SING Judicial Commissioner High Court Johor Bahru Date: 1.1.2018 Page 3 of 15 Introduction [1] The 1st defendant, the 2nd to 7th defendants and the 8th defendant had respectively filed an interlocutory application to strike out the plaintiff’s amended writ and statement of claim pursuant to Order 18 rules 19(1) of the Rules of Court 2012 (RoC). [2] Enclosure 29 was filed by the 1st defendant; enclosure 31 was filed by the 2nd to 7th defendants; and enclosure 36 was filed by the 8th defendant. On 27.11.2017, this Court allowed all three applications and struck out the plaintiff’s writ and statement of claim. The reasons for the decision are set out as below. Plaintiff’s Case [3] The plaintiff averred that it had purchased 500,000 shares of the 1st defendant company from one Lee Hin Realty Pte Ltd on 15.6.2001. Lee Hin Realty Pte Ltd was a private limited company incorporated in Singapore. The plaintiff also averred that it had paid to Lee Hin Realty Pte Ltd the sum of RM500,000.00 in full as the consideration sum for the purchase of the said shares on 21.8.2001. [4] Before the said shares could be transferred to the plaintiff, Lee Hin Realty Pte Ltd was wound up by the Singapore High Court on 18.1.2002. On 21.5.2009, Lee Hin Realty Pte Ltd was dissolved. In this suit, the plaintiff has brought in the Official Receiver of Singapore, the Liquidator of Lee Hin Realty Pte Ltd, as the 9th defendant. Page 4 of 15 [5] The plaintiff averred that 150,000 shares out of the 500,000 shares were held on trust by one Abdullah Bin Mutalib for Lee Hin Realty Pte Ltd. Abdullah Bin Mutalib gave a power of attorney to Lee Hin Realty Pte Ltd to deal with the shares which he held on trust for Lee Hin Realty Pte Ltd. Abdullah Bin Mutalib later executed a Letter of Consent to the sale of 150,000 shares to the plaintiff. Hence, the plaintiff claimed it was the beneficial owner of the 500,000 shares in the 1st defendant company which amounted to 50% of the issued shares. The Finding of this Court [6] In gist, the plaintiff’s discontentment was that the 2nd to 8th defendants had failed to take the necessary action to effect the transfer of the 500,000 shares in the 1st defendant company despite the defendants having received notification from the plaintiff about the sale of the said shares. The 2nd to 7th defendants are the directors of the 1st defendant company; and the 8th defendant is the company secretary of the 1st defendant company. Enclosure 29 [7] The plaintiff claimed against the 1st defendant company the relief as pleaded in prayer 31(d) of the amended statement of claim which states ‘that the 1st Defendant and 8th Defendant are to lodge to the Companies Commission of Malaysia that the Plaintiff is the new shareholder of the 1st Defendant holding 50% share equity ownership in the 1st Defendant Company.’ Page 5 of 15 [8] As far as the 1st defendant company is concerned, it has no legal duty to ensure the plaintiff’s beneficial interest is secured as averred by the plaintiff. The 1st defendant was merely the targeted company whose shares the plaintiff intended to own. In the present case, the 1st defendant company was merely the subject matter in dispute, not a party to the dispute. The 1st defendant owns no legal obligation to a party who claims who have purchased its shares in the company. [9] The registration of a transfer of company shares was governed by the then Companies Act 1965 (as was applicable in 2002 when the instrument of transfer was executed as claimed by the plaintiff). At present, the applicable law for the transfer of shares in a company is found in Subdivision 2 of Division 1 of Part III of the Companies Act 2016. [10] Based on the affidavits filed by the parties, the plaintiff did not deliver a valid and registrable share transfer form in respect of the 500,000 shares of the 1st defendant company to the 1st defendant nor to the company secretary (the 8th defendant) after it had executed the said transfer form to effect the transfer of shares. Under the previous as well as the present Companies Act, the plaintiff was and still is required to present a valid and registrable share transfer form to the 1st defendant or the 8th defendant to effect a transfer of the 500,000 shares in favour of the plaintiff. But, the plaintiff did not do so. [11] This Court agreed with the 1st defendant’s counsel’ submission that the 1st defendant did not have any obligation to register any shares purportedly claimed by the plaintiff when the plaintiff’s shares transfer form was not lodged with the 1st defendant in the first place. Page 6 of 15 [12] Mere notification of the purchase of the said shares of the 1st defendant company does not create an obligation on the 1st defendant company to ensure the plaintiff’s name will be registered as a shareholder of the company. The 1st defendant is only legally obliged to entertain the plaintiff’s request upon receipt of a valid and registrable share transfer form. Even then, the board of directors in the company have the right and absolute discretion to refuse registration of the same under the previous or the present Companies Act. A refusal by the board of directors to effect the transfer of shares in the 1st defendant company, may give rise to a valid complaint by the plaintiff. This was not the case in the plaintiff’s suit. [13] Two pertinent facts were revealed in the plaintiff’s case. First, based on the SSM search, Lee Hin Realty Pte Ltd is still the shareholder of 350,000 shares in the 1st defendant company and Abdullah bin Mutalib still holds 150,000 shares in the 1st defendant company. Secondly, it was pleaded that the plaintiff’s solicitors had on numerous occasions attempted to resolve its claim over the 1st defendant’s shares with the 9th defendant, the Official Receiver of Singapore, in respect of its beneficial ownership of the shares of the 1st defendant company, but without success. [14] This Court is of the considered view that the plaintiff has to first pursue a claim against Lee Hin Realty Pte Ltd in relation to its beneficial or equitable right over the shares of the 1st defendant company. Since Lee Hin Realty Pte Ltd is still the shareholder of 350,000 shares in the 1st defendant company based on the SSM record, therefore, it would be incumbent upon the plaintiff to obtain a validation order from the Singapore High Court to recognise the plaintiff’s right over the shares Page 7 of 15 held by Lee Hin Realty Pte Ltd. The plaintiff would need to revive Lee Hin Realty Pte Ltd because Lee Hin Realty Pte Ltd had been dissolved by the Singapore High Court on 21.5.2009. [15] The plaintiff ought to have directed its recourse against Lee Hin Realty Pte Ltd at the Singapore High Court before launching its attack against the 1st defendant and other defendants in the Malaysian Court. [16] With regard to the claim of 150,000 shares from Abdullah bin Mutalib, Abdullah bin Mutalib was not made a party in this suit. If what the plaintiff has pleaded is true, the plaintiff could still go after Abdullah bin Mutalib to execute a transfer of shares of 150,000 in favour of the plaintiff. The plaintiff could have brought Abdullah bin Mutablib into this suit. However, the plaintiff did not do so. [17] Based on the above, this Court is of the considered view that the plaintiff’s action is premature for two reasons. First, the plaintiff ought to have sought an order from the Singapore High Court to revive Lee Hin Realty Pte Ltd and recognise the plaintiff’s right in respect of the purchase of the shares of the 1st defendant company from Lee Hin Realty Pte Ltd. Secondly, the plaintiff ought to have lodged a valid and registrable share transfer form with the 1st defendant and/or the 8th defendant. The plaintiff could not circumvent the requirements of the law by bringing this action against the defendants. The defendants did not owe the plaintiff any legal duty if the plaintiff has not first established its beneficial right over the 500,000 shares of the 1st defendant company in the Singapore High Court. Page 8 of 15 Enclosure 31 [18] The plaintiff averred that the 2nd to 7th defendants had failed to take necessary steps or actions to transfer the 1st defendant company’s shares after being notified of the plaintiff’s interest. This Court is of the considered view the 2nd and 7th defendants owed no duty to the plaintiff at this juncture. This Court could not make out a cause of action against the 2nd and 7th defendants. No facts were pleaded that 2nd to 7th defendants had stopped or failed to effect the transfer of 500,000 shares of the 1st defendant company from Lee Hin Realty Pte Ltd to the plaintiff while the transferor was still solvent. The plaintiff’s statement of claim did not disclose any cause of action against the 2nd to 7th defendants as directors of the 1st defendant company. The plaintiff merely pleaded that they had failed to take necessary steps to effect the transfer after being notified of the plaintiff’s interest. Mere notification of the plaintiff’s interest could not impose a duty on the directors to effect the transfer of 500,000 shares of the 1st defendant company to the plaintiff. The transfer of shares was subject to the then Companies Act 1965. Likewise, at present, the transfer of shares is subject to the Companies Act 2016 as mentioned above. [19] The counsel for the 2nd to 7th defendants submitted that no valid and registrable transfer of share form was submitted to the board of directors for consideration to effect the transfer of the 500,000 shares to the plaintiff. How could the directors have been in breach of their duties when no valid and registrable transfer of shares form was submitted to them? Mere notification of the plaintiff’s interest could not impose a duty on the directors to effect the transfer of the 1st defendant’s shares to the plaintiff. Page 9 of 15 Enclosure 36 [20] With regard to the claim against the 8th defendant being the company secretary of the 1st defendant company, the plaintiff’s statement of claim did not reveal any cause of action against the 8th defendant. The plaintiff failed to plead any fact which could suggest the 8th defendant had breached her duty as a company secretary to the 1st defendant company. [21] A company secretary owes a duty to the company and its board of directors, but not to an intended transferee of the company’s shares. In the present case, the plaintiff did not plead any fact that could suggest the 8th defendant owed the plaintiff a duty of care and that the 8th defendant had breached that duty. [22] Even if the plaintiff can argue that the 8th defendant was a nominal defendant in that the orders sought by the plaintiff only require the 8th defendant to issue new share certificates to the plaintiff, but the crucial issue that the plaintiff needs to first clear is that the plaintiff is entitled in law to 500,000 shares. That has to be dealt with in the Singapore High Court between the plaintiff and Official Receiver of Singapore, not in the Malaysian Court. The issue raised in the preliminary objection [23] The plaintiff’s counsel raised a preliminary objection that the defendants in their respective applications did not state which ground they were relying to strike out the plaintiff’s writ and statement of claim, Page 10 of 15 therefore, the application was defective and ought not to be entertained by this Court. [24] This Court is of the considered view that although the defendants’ application omitted to state clearly which ground they were relying to strike out the plaintiff’s writ and statement of claim, the plaintiff was not prejudiced in any manner, because it was pleaded clearly in their application that the plaintiff’s amended statement of claim discloses no reasonable cause of action, and the plaintiff’s claim was an abuse of court process, or otherwise scandalous, frivolous and vexatious, and or to proceed would embarrass the fair trial of this action. In fact, the defendants’ applications (enclosures 29, 31 and 36) had stated clearly they were relying on all the grounds provided under the law of striking out under Order 18 rule 19(1)(a), (b),(c) or (d) of RoC. It is trite law that a party could rely on any of the combination of the grounds or all the grounds for any application to strike out an action. Other Observation [25] This Court was rather perplexed why the plaintiff have waited until now, after a lapse of 16 years, to file this action against the directors and company secretary of the 1st defendant company when the event (the sale and purchase of the 1st defendant company’s shares) happened way back in year 2001. The plaintiff had adopted a lackadaisical attitude towards enforcing its claim over the shares of the 1st defendant company. [26] Likewise, the plaintiff did not explain why the plaintiff did not take any steps or actions against the Liquidator of Lee Hin Realty Pte Ltd. Page 11 of 15 after it was being wound up in 2002 and before it was being dissolved seven years later in 2009. The plaintiff pleaded that it had written to the 9th defendant (Official Receiver of Singapore) to seek assistance, but no avail. This Court is of the opinion that the plaintiff ought to have brought an action against the Official Receiver of Singapore in Singapore to resolve its grievances and to obtain from the Singapore High Court the recognition of its rights over the shares of the 1st defendant company which was owed by Lee Hin Realty Pte Ltd before filing this action in the Malaysian court. [27] The winding up of the transferor company was under the Singapore law and in the jurisdiction of Singapore Courts. Therefore, the plaintiff has to establish its rights first in the Singapore High Court and abide by the Singapore law. The plaintiff could not brush aside the winding up law of Singapore and come to Malaysia to ask the Malaysian court to recognise its rights when its counterpart in the sale and purchase of shares was a foreign company that has been wound up under a foreign law. Whether the transferor company, Lee Hin Realty Pte Ltd, had a legitimate right to sell/dispose the 500,000 shares under the Singapore Companies law has to be determined by the Singapore High Court, not the Malaysian Court. [28] Although the shares of the targeted company is a Malaysia incorporated company, that does not allow the Malaysian court to interfere with the winding up of the vendor/transferor company which was a foreign company. Any dispute between the plaintiff and Lee Hin Realty Pte Ltd (the foreign company which has been dissolved under foreign law) over the rights of the shares of the 1st defendant company has to be dealt with first according to the winding up law in Singapore before the Page 12 of 15 Malaysian court could recognise the plaintiff’s right over the shares in the 1st defendant company. Bare Trustee [29] This Court is of the considered view that whether Lee Hin Realty Pte Ltd and Abdullah bin Mutalib were mere bare trustees of the said shares or otherwise is not properly pleaded as an issue to be determined in the plaintiff’s case. Abdullah bin Mutalib was not named as a party in the suit. The plaintiff ought to prove Lee Hin Realty Pte Ltd and Abdullah Bin Mutalib were bare trustees for the plaintiff at the Singapore High Court and seek for a validation order in respect of the 350,000 and 150,000 shares held in the name of Lee Hin Realty Pte Ltd and Abdullah Bin Mutalib. [30] The plaintiff could not assert its rights as the beneficial owner of the 500,000 shares without first having proved at the Singapore Court that the plaintiff was the legal and rightful owner of the said shares. [31] In the present facts, the plaintiff, without having first established its legal and rightful ownership of the 500,000 shares in the 1st defendant company, has straight away brought this action against the directors to assert its rights over the 500,000 shares of the 1st defendant company. No reasonable director could have acceded the plaintiff’s demand without first ascertaining the plaintiff had the legal right to the transfer of shares, not merely a notification to assert it was the rightful owner of the shares. Page 13 of 15 [32] The parties have in the exchange of affidavits brought up the issue whether the purported transfer of the shares in the 1st defendant company was in contravention of the Articles of Association of the 1st defendant company. This Court is of the opinion that the issue is merely one of the issues that may be dealt with by the plaintiff in order to prove its right over the 500,000 shares before the Singapore High Court. That issue is a question whether Lee Hin Realty Pte Ltd could legitimately dispose its shares in the 1st defendant company while it was still solvent; and whether Lee Hin Realty Pte Ltd had complied with the necessary requirement stipulated in the Articles of Association of the 1st defendant company before disposing the shares in the 1st defendant company. These issues are to be determined in the Singapore High Court. Hence, the parties’ submission on these issues are misplaced. It is an abuse of court process for the plaintiff to initiate a civil suit in Malaysian Court against the Official Receiver of Singapore in Malaysia to assert its right, when the plaintiff ought to have asserted its right in the winding up court of Singapore. [33] As for the issue of undue preference, the applicable law on the principle of undue preference ought to be the Singapore Companies law because the company concerned was a Singapore incorporated company. Hence, the Malaysian Companies Act 1965 or 2016 could not apply to a Singapore incorporated company. The lengthy submission of the plaintiff’s counsel on the issue of undue preference applying the Malaysian Companies Act to a Singapore incorporated company was out of place. [34] On the last note, it is not for the defendants to argue and rely on the issue of undue preference relating to the transfer of the 1st Page 14 of 15 defendant’s shares; rather, it is for the Official Receiver of Singapore to rely on the Singapore Companies law to argue the disposal of the 1st defendant company shares by the Singapore incorporated company, i.e. Lee Hin Realty Pte Ltd to the plaintiff, was against the law against undue preference under the Companies law of Singapore. Conclusion [35] Based on the above analysis and findings, this Court agreed with the defendants that the plaintiff’s writ and amended statement of claim did not disclose any cause of action against the 1st to 8th defendants, and that the claim was clearly an abuse of court process, and the action was also scandalous, frivolous and vexatious and or if allowed to proceed would embarrass the fair trial of this action. Hence, this Court allowed the defendants’ applications and struck out the plaintiff’s writ and amended statement of claim against the 1st to 8th defendants, and this Court also ordered the plaintiff to pay costs of RM3,000.00 for each of the applications to the defendants. [36] It is to be noted that at the time the decision was delivered by this Court on 27.11.2017, the 9th defendant was not present. Subsequently, on 6.12.2017, the plaintiff withdrew its claim against the 9th defendant. -Signed- ………………………………………. (CHOO KAH SING) Judicial Commissioner High Court Johor Bahru Page 15 of 15 Counsel for the plaintiff : Lena Chik (Lau Seow Mui with her) Tetuan Lau Kok Guan, Liana & Kuan Counsel for the 1st and 8th Defendants : Robyn Choi Tetuan Robyn Choi Counsel for the 2nd to 7th Defendants : Mak Wai Chin Tetuan Mak Loo & Co.