At Glove Engineering Sdn Bhd v 1. ) Hai Hong Capital Sdn Bhd (PA-22NCC-12-04/2021)

HAI HONG CAPITAL SDN BHD (No Syarikat.: 198001005768 (59552-H)

P’NG SIM GUAN (No. K/P: 630331-07-5389)

P’NG LAI HENG (No. K/P: 620223-07-5171)

HAI HONG HOLDINGS SDN BHD (No Syarikat.: 199501018448 (347651-P))

AARON KHOO TENG SOON (No. K/P.: 700725-07-5657) … DEFENDAN-DEFENDAN [Dalam tindakan asal] ANTARA 1. HAI HONG CAPITAL SDN BHD (No Syarikat.: 198001005768 (59552-H))

P’NG SIM GUAN (No. K/P.: 630331-07-5389)

P’NG LAI HENG (No. K/P.: 620223-07-5171)

HAI HONG HOLDINGS SDN BHD (No Syarikat.: 199501018448 (347651-P))

AARON KHOO TENG SOON (No. K/P.: 700725-07-5657) … PLAINTIF-PLAINTIF DAN AT GLOVE ENGINEERING SDN BHD (No Syarikat.: 202001014272 (1370592-K)) … DEFENDAN [Dalam Tuntutan Balas] JUDGEMENT A. BACKGROUND FACTS [1] The Plaintiff is a subsidiary of a listed company by the name of AT Systemization Berhad (ATSB). The Defendants are the shareholders of Pearl Glove (Malaysia) Sdn Bhd (PGM). [2] During a meeting held on 4 June 2020, Choong Lee Aun (PW3), the Managing Director of ATSB, conveyed ATSB’s interest in acquiring the shares of PGM to the 2nd and 5th Defendants. Subsequently, on 10 June 2020, ATSB issued a Letter of Intent, formally proposing to acquire the Defendants’ shareholding in PGM.

(ii) under Clause 10.2(f), where there is a breach of warranties. The Plaintiff contends that both provisions are applicable to the present case. Clause 2.4(c) of the SSA specifically allows for termination where there is a non-fulfilment of the Conditions Precedent. The parties, through a series of correspondence, mutually agreed to extend the Cut-Off Date, with the final extension fixing the new Cut-Off Date as 12.11.2020. During the course of the DDE, material discrepancies were discovered in relation to the Warranties, which led to proposed adjustments by the auditors. These findings caused the Plaintiff to be dissatisfied with the results of the DDE, thereby triggering the right to terminate under Clause 2.4. Additionally, the SSA provides a separate ground for termination under Clause 10.2, in particular Clause 10.2(f), which permits termination where any of the Warranties given by PGM are found to be materially untrue or incorrect. The Plaintiff submits the material discrepancies discovered during DDE constitute breaches of warranty sufficient to justify termination under Clause 10.2(f). [10] According to the Plaintiff, the documentary evidence and conduct of the parties clearly demonstrate that it was their mutual intention to treat the DDE as a crucial component of the SSA. This is particularly evident given that the Plaintiff’s satisfaction with the outcome and findings of the DDE was expressly stipulated as a Condition Precedent under the agreement. The execution of a Non-Disclosure Agreement (“NDA”) between PGM and ATSB on 11.6.2020 further supports this position. The NDA was entered into solely for the purpose of facilitating the due diligence process, as reflected in its terms which state, inter alia, that 'in the case that any confidential information should be exchanged … resulting from the due diligence … both Parties shall agree to … keep all information strictly confidential.' The signing of the NDA underscores the seriousness with which both parties approached the DDE. If the Plaintiff had intended to treat the DDE as a mere formality, there would have been no necessity to enter into such a binding confidentiality arrangement. [11] As for the issue of the alleged representation that there was no need for ATSB to convene an EGM to approve the SSA, the evidence does not support the Defendants’ claim. PW3, in his witness statement, expressly denied making any such representation. Moreover, the Defendants themselves acknowledged that they were in fact aware that an EGM would be required for ATSB to approve the SSA. This further undermines the credibility of the Defendants’ allegation. [12] The Defendants in their defence alleged that ATSB and the Plaintiff has orally represented to the 2nd and 5th Defendants that (i) the DDE on PGM by ATSB will be a “mere formality” and it will be completed within the span of 3 to 4 weeks and (ii) there was no need for ATSB to call for an extraordinary general meeting to approve the share sale agreement. However, the Plaintiff had not once given any indication that the DDE was meant to be a ‘mere formality’, neither was this matter raised at any time before filing of Defence. On the contrary, starting from the Letter of Intent to the SSA, it was clearly documented that the results of the due diligence would have an impact as to whether the Plaintiff continued with the acquisition of the shares. The conduct of the Plaintiff was also consistent, in that there were so many queries after the SSA was signed to properly conduct a due diligence exercise. [13] The Plaintiff issued the Notice of Termination within the final Extended Cut-Off Date and prior to Completion, as required under Clause 10.2 of the SSA. In the said Notice of Termination, the Plaintiff clearly set out the Defendants’ failure to fulfil the Conditions Precedent, as well as material breaches of the SSA, particularly under Clause 10.2(f), relating to the inaccuracy of warranties. It is undisputed that, to date, not a single share has been transferred by the Defendants to the Plaintiff. Given that the termination was lawfully effected in accordance with the terms of the SSA, the Plaintiff is entitled to a full refund of the Deposit and Advances paid. This remedy is expressly provided for under Clause 10.4(a)(1)(A) of the SSA. A failure to refund these sums would clearly result in unjust enrichment of the Defendants, particularly in circumstances where no shares were ever transferred to the Plaintiff, and the transaction was not completed. [14] The total sum of RM4,400,000.00 paid by the Plaintiff pursuant to the SSA comprises of two distinct components: (i) RM687,800.00 as Deposit towards the purchase of shares; and (ii) RM3,712,200.00 as Part Payment of Advances. Clause 4.2 of the SSA expressly stipulates that RM687,800.00, representing 20% of the Purchase Consideration of RM3,439,000.00, is to be treated as the Deposit. In contrast, Clause 4.3 of the SSA clearly provides that the balance sum of RM3,712,200.00 was advanced to PGM as part payment of the Advances, specifically for the purpose of partially repaying existing shareholder advances. Nowhere in the SSA is it stated, whether expressly or impliedly, that the sum of RM3,712,200.00 is to be treated as part of the Purchase Consideration for the shares or as an additional deposit under the SSA. Accordingly, even if the termination of the SSA were to be found invalid (which is denied), there remains no contractual or equitable basis for the Defendants to retain the Advance. The Advance was clearly made in contemplation of the completion of the share sale. As the transaction ultimately did not complete, the Advance has failed for total lack of consideration. In such circumstances, it would amount to unjust enrichment for the Defendants to retain the sum. In the premises, the Plaintiff prays that its claim be allowed in full, and that the Defendants’ counterclaim be dismissed with costs. C. DEFENDANTS’ SUBMISSION [15] The Defendants submit that the Notice of Termination issued by the Plaintiff is invalid due to the Plaintiff's wrongful reliance on Clause 10.2 of the SSA, which is only applicable after the SSA become unconditional. The Defendants submit that since the SSA remained within the conditional period and was subject to the fulfilment of the Conditions Precedent at that material time, 'Completion' had not yet occurred when the Notice of Termination was issued. Clause 10.2 stipulates that the Plaintiff can only issue a termination notice at any time before 'Completion'. As the SSA had not become unconditional, the timeline for the Completion Period had not commenced, and hence there was no 'Completion' per se to begin with. Therefore, the Plaintiff's reliance on Clause 10.2 to terminate the SSA is improper, rendering the Notice of Termination invalid. [16] Instead, clause 2.4 of the SSA provides a termination right specifically for the parties to terminate the SSA if any of the condition precedents cannot be fulfilled at any time prior to the expiry of the cut-off date. The Defendants submit that Clause 2.4 is specific to govern termination events occurring prior to the Cut-Off Date. Since the Plaintiff elected to terminate the SSA on 11.11.2020, a date that falls prior to the Cut-Off Date, the Plaintiff can only invoke Clause 2.4 of the SSA and not Clause 10.2, as it is the appropriate provision for such circumstances. Clause 2.4 of the SSA does not provide for the forfeiture of the deposit of RM 4.4 million paid. The Defendants further submit that there must be strict adherence to the clauses in the SSA related to termination. The Plaintiff’s failure to invoke and rely on the correct and appropriate clauses in the SSA concerning the termination has fundamentally rendered the Notice of Termination Invalid. On this score alone, the Plaintiff’s claim must fall. [17] Even if there were a material breach of any obligations by the Defendants (which is denied), the Plaintiff has failed to provide the requisite notice to remedy the purported breach, thereby rendering the termination invalid and premature under Clause 10.2(a)(2). The Defendants maintain that the purported breaches were capable of remedy and the Plaintiff's failure to issue a 14-day notice of remedy violates the preconditions for termination. The Plaintiff's allegations that the purported material breaches were not capable of remedy is unfounded and unsupported by the facts without even issuing the 14-day notice required by Clause 10.2 (a)(2) of the SSA. It is pertinent to state that despite receiving the Defendants Rebuttal Letter, the Plaintiff failed to reply to the Defendants' contentions stated therein before commencing this suit. Furthermore, by failing to issue the 14-day notice, the 'Plaintiff's termination of the SSA is both invalid and premature. [18] The Defendants further contend that when they granted the final extension of time until 12.11.2020, they did so in the belief that both parties were continuing to engage in good faith, with the Plaintiff actively working to resolve outstanding queries arising from the due diligence exercise. However, on 11.11.2020—just one day before the expiry of the Cut-Off Date—the Plaintiff issued the Notice of Termination. The Defendants assert that the Plaintiff's conduct was abrupt and shocking, especially as they first learned of the termination through a public announcement on the same day, prior to receiving the formal Notice of Termination via email. [19] The Defendants allege that the Plaintiff’s actions were not merely opportunistic but calculated. At the material time, the Plaintiff was allegedly in parallel negotiations with Ripeol Engineering Sdn Bhd for the acquisition of industrial land in Chemor, Perak, with the intention of establishing a glove dipping line—a facility which was initially planned to be located at PGM’s site in Sungai Petani. According to the Defendants, this sequence of events indicates that the Plaintiff’s interest in PGM had waned upon securing alternative arrangements. The Defendants argue that the Plaintiff's termination of the SSA was not driven by genuine dissatisfaction with the due diligence findings, but rather by ulterior motives and a premeditated plan to avoid performing its contractual obligations under the SSA. [20] The Defendants also dispute the Plaintiff’s characterisation of the RM3,712,200.00 as a refundable “Advance.” They submit that the entire sum of RM4.4 million—including both the RM687,800.00 and RM3,712,200.00—constitutes a single composite deposit paid under the SSA. The Defendants maintain that the sum was never intended to operate as a loan or repayable advance due and owing to the Plaintiff. In support of this, they assert the following: [a]

constitutes the entire agreement and understanding between the parties with respect to the matters dealt with in this agreement;

supersedes any other agreement, letters, correspondence (oral or written or expressed or implied) entered into prior to this agreement in respect to the matters dealt with in this agreement; and

was not entered into by the parties in reliance to any agreement, understanding, warranty or representation of either party not expressly contained or referred to in this agreement. Whether the SSA was validly terminated [30] Coming back to the main issue, the question is whether the Notice of Termination dated 11.11.2020 was issued in accordance with the Share Sale Agreement (“SSA”). The Plaintiff relies on Clause 10.2 of the SSA, and specifically contends that the termination was effected pursuant to Clause 10.2(f), with the consequences governed by Clause 10.4 of the SSA. The Plaintiff asserts that the basis for the termination was the non-fulfilment of the Conditions Precedent and breaches of the SSA, as elaborated in the said Notice of Termination. For ease of reference, the relevant provisions of Clauses 10.2 and 10.4 of the SSA are reproduced below - [31] It is pertinent to note that the Plaintiff issued the Notice of Termination prior to Completion and before the expiry of the Extended Cut-Off Date, that is, before the SSA became unconditional. At the material time, no shares had been transferred by the Defendants to the Plaintiff. [32] The Defendants contend that the Notice of Termination is invalid on the basis that the Plaintiff had wrongfully relied on Clause 10.2 of the SSA, which, according to the Defendants, is only operative once the SSA has become unconditional. At the material time, the SSA remained within the conditional period and was still subject to the fulfilment of the Conditions Precedent. Consequently, 'Completion' had not occurred when the Notice of Termination was issued. The Defendants argue that, as the SSA had not yet become unconditional, the timeline for the Completion Period had not commenced, and therefore, there was no operative 'Completion' event to trigger the application of Clause 10.2. [33] Under the SSA, 'Completion' is defined as the completion of the sale and purchase of the Sale Shares through the performance by the parties of their respective obligations under Clause 7.2 of the SSA. It is undisputed that Completion had not occurred at the material time. Clause 10.2 of the SSA expressly provides for a party’s right to terminate 'at any time prior to Completion'. Clearly, this clause contemplates the period between the execution of the SSA and the occurrence of Completion. [34] I am unable to agree with the Defendants’ interpretation that Clause 10.2 only becomes operative after the fulfilment of the Conditions Precedent, whereby the Plaintiff must first cause the SSA to become unconditional before it may exercise its right to terminate. Such an interpretation would effectively render Clause 10.2 redundant during the conditional period, which is contrary to both its plain wording and commercial logic. On this point, I agree with the Plaintiff that the Defendants’ construction of Clause 10.2 lacks commercial sense and undermines the express contractual right to terminate prior to Completion. [35] In light of the foregoing, I find that the Notice of Termination was validly issued by the Plaintiff pursuant to Clause 10.2(f) of the SSA, and that the termination of the agreement was effected in accordance with the terms of the contract. [36] I have also taken cognisance of the Defendants’ submission that the Plaintiff ought to have invoked Clause 2.4 of the SSA, which specifically provides the parties with a right to terminate the agreement in the event that any of the Conditions Precedent cannot be fulfilled at any time prior to the expiry of the Cut-Off Date. For completeness, Clause 2.4 of the SSA is reproduced below: [37]

It is trite law that there is a need for a valid reason to terminate, and that reason must have existed at the time of termination, even if the wrong reason was given at that time. At common law, that usually means repudiatory breach, or breach of condition, or that there is a particular circumstance which gives rise to a contractual right to terminate. However, there appears to be no need for termination, where it happens by notice, to include particularised reasons as a matter of general common law, unless there are circumstances that give rise to a duty to do so, as in the case of a statutory duty or by the terms of a contract upon proper construction. [41] I find that there is no latent ambiguity in the SSA with respect to the parties’ obligations concerning termination. The contractual framework is clear, and the Plaintiff’s termination was rightly executed pursuant to the non-fulfilment of the Conditions Precedent, particularly due to an unsatisfactory outcome of the DDE. The underlying reasons were adequately conveyed to the Defendants in the Notice of Termination, thereby justifying the Plaintiff’s exercise of the right to terminate the SSA. [42] Furthermore, there was no evidence adduced by the Defendants to suggest that the Plaintiff had acted in bad faith. On the contrary, the Plaintiff had demonstrated diligence by actively conducting the DDE, assessing the financial position and operational history of the Defendant, and by making advance payments and deposits under the SSA. Notably, the Plaintiff also sought and obtained several extensions of time to complete the due diligence, which were agreed to by the Defendants. This conduct reflects the Plaintiff’s genuine intention to complete the transaction, subject to satisfactory compliance with the Conditions Precedent. [43] Following the lawful termination of the SSA by the Plaintiff, I now turn to consider the implications arising from such termination. The Plaintiff has elected not to pursue the remedy of Specific Performance as provided under Clause 10.7 of the SSA. Instead, the Plaintiff has invoked Clause 10.4(a)(1)(A), which expressly stipulates that upon termination in the circumstances applicable here, the Vendors are required to return both the Deposit and the Part Payment of the Advance to the Plaintiff. The consequences of termination are clearly outlined in Clause 10.4 of the SSA, which is reproduced below for ease of reference:

10.4 Consequences of termination

Following the giving of a Notice of Termination under clause 10.2 and if the Purchaser elects not to pursue the remedies set out in clause 10.7 –

the Vendors shall, within 14 days after the Notice of

(A) return the Deposit together with the Part Payment of Advances and all moneys received by them as part of the Purchase Consideration or received by the Company by way of loans/advances to the Purchaser, free from interest; [44] For the reasons stated above, and having considered the evidence and submissions in their entirety, I find, on the balance of probabilities, in favour of the Plaintiff. Accordingly, I allow the Plaintiff’s claim as follows: [a] A Declaration that the SSA was validly terminated by the Plaintiff; [b] That the Defendants are required to refund to the Plaintiff the Deposit paid pursuant to the SSA amounting to RM687,800.00; and [c] That the Defendants refund the Advances paid by the Plaintiff pursuant to the SSA amounting to RM3,712,200.00. [d] The Defendants counter claim is dismissed. [e] A global costs of RM50,000.00. Dated on 28th July 2025 SGD (Rozana binti Ali Yusoff) (Hakim) (Mahkamah Tinggi Pulau Pinang) (Kompleks Mahkamah Pulau Pinang) (Pulau Pinang) Lawyers for Plaintif :