Asia Capital Commodities Trade Sdn Bhd v Worldport Corporation Limited, Hong Kong (WA-27NCC-131-12/2020)

The Vessel, “Oriental Dragon” (No. IMO: 7125861) (“the Vessel”), is a passenger ship, which was owned by the Defendant, Worldport Corporation Limited, Hong Kong, at the material time the dispute arose.

(ii) The Vessel has since been sold by the Sheriff by judicial sale in a separate in rem action brought by the crew of the Vessel pursuant to an Order for Sale pendente lite dated 13.08.2021 to Virma Maritime Corp on 15.12.2021 for the sum of RM20,802,988.49. The proceeds of sale are presently in court pending the determination of priorities of claims and distribution. THE PLAINTIFF’S CLAIM [3] The Plaintiff alleges that the Vessel was brought to Penang from Hong Kong in November 2019 to operate as a passenger cruise cum casino business outside Penang port limits in international waters under a joint venture business (“the Joint Venture Business”) between the Defendant and one Mr. Cheah Kah Chye (“Mr. Cheah”). Mr. Cheah is also a director and a substantial shareholder of the Plaintiff. [4] Mr. Cheah went to Hong Kong to meet up with the Defendant’s representative to discuss the proposed Joint Venture Business using the Defendant’s Vessel. Following the discussion, Mr. Cheah entered into a Memorandum of Understanding (“MOU”) with the Defendant on 07.12.2019. [5] The Plaintiff claims it is aware of Mr. Cheah’s business dealings with the Defendant but not the precise terms thereof (see paragraph 59 of the Plaintiff’s closing submission in Enclosure 209). The Plaintiff, however, claims it is not a party to the MOU nor the Joint Venture Business and does not know the specific details of the Joint Venture Business or the terms of the MOU, despite the fact that Mr. Cheah is a director of the Plaintiff and also a 50% shareholder. [6] The Plaintiff alleges that it was appointed by the Defendant via a letter of appointment dated 12.11.2019 as a “Ship Operator” to attend and arrange for the smooth operation of the Vessel at the Penang port. [7] The Plaintiff alleges that its job scope as Ship Operator was to attend to the safe day-to-day operation and maintenance of the Vessel whilst she was in Malaysia. The Plaintiff further allege that its job scope included agency services, supplying the Vessel with goods and materials for her safe operations, maintenance, and paying staff salaries and welfare expenses. [8] During the trial, the Plaintiff called three witnesses namely: i. Mr. Cheah Kah Chye The Defendant’s partner under the MOU dated 7.12.2019 a director of the Plaintiff company, Asia Capital Commodities Trade Sdn Bhd PW1 ii. Mr. Teoh Tian Hoe A director of the Plaintiff company, Asia Capital Commodities Trade Sdn Bhd. PW2 iii. Ms. Tan Chai Lee Finance Manager of the Plaintiff, who maintained a full set of accounts, and performed monitoring of bank accounts, cash flow and all accounting-related works for Plaintiff. PW3 The witnesses called for the Defendant were: i. Mr. Tou Chi Leong The Defendant’s Vice-President who was involved in a business relationship with Mr. Cheah under the MOU. DW1 ii. Mr. Tam Mei Keng Sole director of the Defendant, who signed the MOU dated 7.12.2019. DW2 iii. Mr. Siu Kam Edward, Cheung Administration Manager of the Defendant. DW3 [9] During the first few months of the Vessel operation in Penang the business appeared profitable. Thus, there were no issues between the parties. However, on 18.03.2020, the Malaysian government implemented the first Movement Control Order (“MCO”) to curb the spread of the Covid-19 pandemic. The Vessel’s business had to be closed abruptly. Whatever funds from the revenue of the Joint Venture Business used by the Plaintiff for the running of the ship quickly depleted. Since the Vessel ceased operations during the MCO, there were no more funds to pay the continuing expenses incurred by the Vessel, including salaries of the crew and other operational expenses. [10] The Vessel’s master and crew launched their own in rem actions against the Defendant for, inter alia, unpaid master and crew wages, master’s disbursements and repatriation costs, and have since obtained judgment on their claims. Their judgments have been ranked and ordered to be paid out of the proceeds of sale of the Vessel lying in Court. The Plaintiff alleges that it too suffered as a result of this abandonment. It incurred substantial losses and expenses on account of the Vessel for which it should appropriately be reimbursed. [11] The Plaintiff claims against the Defendant the sum of RM8,130,181.34 for the expenses allegedly incurred by the Plaintiff until the date of the Vessels’s arrest by the Sheriff. DEFENDANT’S CASE [12] The Defendant’s statement of defence (“SOD”) denies it is obliged to reimburse the expenses claimed by the Plaintiff. The Defendant in its SOD essentially further pleads that the Plaintiff is an entity set-up by Mr. Cheah to implement the terms of the MOU between him and the Defendant. Therefore, the Plaintiff is bound by the terms of the MOU between Mr. Cheah and the Defendant. [13] Paragraphs 3, 4 and 5 of the SOD states as follows: “3 Defendan merujuk kepada perenggan-perenggan 3 hingga 5 Pernyataan Tuntutan Terpinda. Fakta-fakta yang terkandung di dalamnya adalah dinafikan. Plaintiff adalah sebuah syarikat yang digunakan oleh Encik Cheah Kah Chye (“Encik Cheah”) selaras dengan Memorandum Persefahaman (“MoU”) bertarikh 07.12.2019 antara beliau dan Defendan. Adalah menurut MoU ini dan perjanjian daripada Encik Cheah yang membawa kepada Defendan bersetuju untuk melayari Vesel tersebut ke Malaysia untuk perniagaan permainan. Defendan akan merujuk kepada terma penuh MoU semasa perbicaraan untuk terma dan kesan penuhnya.” [14] The Defendant pleads that under the terms of the MOU, Mr. Cheah, and/or the Plaintiff as the entity set up pursuant to the MOU to carry out the Joint Venture Business is the entity responsible for all the expenses in running the Vessel. Paragraph 4 of the SOD provides: “4 Encik Cheah bersetuju untuk menyelesaikan semua perbelanjaan, penyelenggaraan Vesel di Malaysia menurut Klausa 2.3 MoU. Butir-butir Klausa 2.3 MoU menyatakan seperti berikut: ‘2.3 Within 3 days after the Vessel has reached the Destination, as determined by Party A, Party B shall (party B refers to Mr. Cheah; added by me for clarity) pay to Party A the sum of HK$3,000,000 as fund for operation and maintenance of the Vessel whilst she is within Malaysian waters.” 5 Plaintiff tidak boleh menafikan kewajipan Encik Cheah dengan menukar fakta kerana Plaintiff adalah instrumen dan alter ego Encik Cheah. Keseluruhan operasi Vesel di Malaysia dan perniagaan, kos dan perbelanjaan yang berkaitan dengan Vesel adalah atas arahan Encik Cheah di bawah MoU tersebut.” ISSUES TO BE TRIED [15] The issues to be tried as agreed by the parties (which I have distilled from the agreed statement of issues to be tried in Enclosure 175) are:

Whether the Vessel was brought into Malaysia to fulfil the MOU;

Whether the Defendant appointed the Plaintiff outside and independently of the MOU;

Whether the Defendant was responsible for expenses incurred to continue the safe operation and maintenance of the Vessel;

Whether the Plaintiff’s suit can be maintained outside the MOU, and

Is the Plaintiff entitled to be repaid the expenses incurred for the Vessel in the sum of RM8,130,181.34 as particularised in the statement of claim (“SOC”); and

Whether all or any of the heads of claim submitted by the Plaintiffs are allowable claims within section 20(2) of the Senior Courts Act 1981). FINDINGS BY THE COURT [16] On the first issue of whether the Vessel was brought to Penang to fulfill the terms as agreed in the MOU or was independently of and outside the MOU, the following evidence is relevant. Pages 13, 14 and 15 of the Notes of Proceedings records as follows: : My instructions are that it was you who started the (Defendant’s discussion because you wanted to persuade my Counsel) client to bring the Vessel from Hong Kong to Penang for the cruise and casino business. Cheah : Yes. At the onset I took the initiative to look for him. [17] The MOU envisaged that a Joint Venture Business entity shall be formed to undertake the business operations of the Vessel. Clause 2.5 of the MOU clearly stipulates as follows: “2.5 Within 7 days after party A has received its further fund under clause 2.4 party B shall to Party A a further sum of not more than HK$4,000,000 as further fund for operation and maintenance of the Vessel whilst she is within Malaysian waters and party A shall be entitled to claim, in accordance with the share apportionment of the joint venture entity, from such fund all its incurred costs and expenses arising from the voyage and operation of the Vessel from Hong Kong to the Destination.” [18] Agreed Notes of Proceedings on 14.02.2023, Page 31. : So the cost of sailing. Alright. Now, if you look Clause 3.2, ok? Line 3, all incurred cost and expenses arising from the operation and maintenance of the vessel, shall be paid and/or borne by Party B in full. Cheah : Definitely. : So it’s not only the cost of sailing back to Hong Kong, it’s all operational cost and maintenance you should bear. Cheah : Yes, Yang Arif. It was to borne by me. [19] Agreed Notes of Proceedings on 14.02.2023, Page 21. : And then when the Vessel was in Penang, did you agree to pay a charter rate, a hire for the Vessel? Cheah : No, Yang Arif. : So while the Vessel was in Penang, it was not going to earn any money by way of charter? Cheah : Yes, Yang Arif, not to earn money by way of charter. [20] (i) During cross examination by the Defendant’s counsel, Mr. Cheah admitted that the Joint Venture Business entity mentioned in Clause 4 of the MOU is in fact the Plaintiff. Agreed Notes of Proceedings on 14.02.2023, Page 33. : Ok, the question is there is a joint venture entity mentioned, is it the company you were going to form to operate the ship? Cheah : Yes. : Is it the Plaintiff? Cheah : Yes, Yang Arif.

(ii)